Aclarion, Inc. — Q2 2022 Form 10-Q Summary
Business context and reporting period
Aclarion is an early-stage healthcare technology company using magnetic resonance spectroscopy and a proprietary biomarker to support clinical treatment decisions. The filing covers the quarter and six months ended June 30, 2022; the financial statements are unaudited. Its revenue comes from delivering Nociscan reports to medical professionals. The company completed its IPO in April 2022 and trades on Nasdaq as ACON and ACONW.
Financial results and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $10,676 | $25,620 | $19,702 | $37,450 |
| Gross margin | $(3,573) | $5,316 | $(11,279) | $581 |
| Operating expenses | $2.36 million | $631,940 | $3.13 million | $1.09 million |
| Net loss | $(3.71) million | $(465,844) | $(4.64) million | $(983,703) |
| Net loss per share, basic and diluted | $(0.49) | $(0.75) | $(1.16) | $(1.56) |
| Cash used in operations | Not separately stated | Not separately stated | $3.08 million | $738,669 |
At June 30, cash was $3.79 million, restricted cash $10,000, current assets $4.39 million, current liabilities $1.38 million, and total assets $5.62 million. The balance sheet reported no promissory note payable or preferred dividends payable; the $2.0 million secured notes were repaid with IPO proceeds. Six-month investing cash outflow was $120,957, primarily for patents and licenses. Financing provided $6.55 million, including IPO proceeds and note repayment. The filing cites IPO net proceeds of approximately $8.5 million, with slightly differing amounts in its discussion and cash-flow disclosures.
Changes versus the prior comparable periods
- Revenue declined 58.3% in Q2 and 47.4% for the first half, which management attributed to fewer medical professionals ordering reports; it reported no material price changes.
- Gross margin moved from positive to negative in both comparisons, as revenue fell while cost of revenue remained greater than revenue.
- Operating expenses increased substantially. Q2 general and administrative expense rose to $1.88 million, primarily reflecting Executive Chairman option vesting, management compensation, IPO-related bonuses, and higher directors’ and officers’ insurance costs. Research and development also increased, including approximately $123,000 for a UCSF milestone payment.
- Interest expense rose to $1.34 million in Q2 and $1.50 million for the first half, largely because approximately $1.3 million of beneficial conversion value on accrued note interest was expensed in connection with the IPO. This was a significant unusual, IPO-related item.
Outlook, risks, and notable items
Management said existing cash and IPO proceeds were expected to fund current operating plans into the second quarter of 2023, but warned estimates could be wrong and additional financing may be needed sooner. Recurring operating losses and dependence on additional financing raised substantial doubt about the company’s ability to continue as a going concern. The company said it had no committed external funding source.
- Revenue is very limited, and Nociscan reports are not reimbursable under third-party payment arrangements. The company depends on growing its customer base and developing and commercializing its technology.
- Management said COVID-19 was not then disrupting marketing or development activities, but its longer-term effects remained uncertain. The filing discusses possible customer and economic impacts.
- The April IPO included 2,165,000 units at $4.35 each, each containing one share and one warrant; the underwriters also purchased additional warrants. Preferred shares and accrued dividends converted into common shares. A 1-for-7.47 reverse split took effect before the IPO.
- IPO-related costs included vesting of 1,204,819 Executive Chairman options, management and director bonuses, and a $123,828 UCSF milestone payment. The company reported 7,821,515 common shares outstanding as of August 15, 2022, plus 3,089,718 shares issuable upon outstanding warrants and 2,448,688 options outstanding at June 30.
- The current office lease and sublease expired June 30, 2022. The company reported no material legal proceedings and no material changes to the risk factors in its IPO prospectus.
Important facts for investors to verify
- Whether report orders and revenue recover, and whether the company can improve gross margins.
- Actual cash burn and runway versus management’s estimate of funding into Q2 2023, including the timing and terms of any additional financing.
- The extent to which IPO-related compensation, bonuses, and the beneficial conversion interest charge affect future-period expenses.
- Potential dilution from warrants, options, and any future equity financing; confirm current shares outstanding and warrant exercise terms in subsequent filings.
- Customer adoption, reimbursement prospects, development milestones, and risks under the UCSF license and other commercial relationships.