Aclarion, Inc. — 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. Its revenue comes from delivering Nociscan reports to medical professionals. This unaudited report covers the three months ended March 31, 2022, with comparison to the same period in 2021.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $9,026 | $11,830 |
| Cost of revenue | $16,732 | $16,565 |
| Operating expenses | $765,394 | $455,807 |
| Operating loss | $773,100 | $460,542 |
| Net loss | $936,088 | $517,860 |
| Net loss allocable to common stockholders | $1,223,403 | $730,779 |
| Loss per share allocable to common stockholders | $1.35 | $0.81 |
| Cash and restricted cash at quarter-end | $60,449 | $63,890 |
| Cash used in operating activities | $259,427 | $246,468 |
Cost of revenue exceeded revenue in both periods. The resulting gross loss was $7,706 in Q1 2022 versus $4,735 in Q1 2021. Q1 2022 cash use also included $132,654 of investing outflows, primarily for patents and licenses; there were no financing cash flows during the quarter.
At March 31, 2022, total assets were $1.81 million, current liabilities were $8.74 million, and stockholders’ equity was negative $14.03 million. Current liabilities included $2.0 million of secured promissory notes bearing 33% interest, and $4.14 million of preferred dividends payable. The notes were repaid with IPO proceeds after quarter-end.
Changes versus the prior comparable period
- Revenue declined $2,804, or 23.7%, attributed to fewer medical professionals ordering reports; management reported no material price changes.
- Operating expenses rose $309,588. General and administrative expense increased $269,095, mainly reflecting higher payroll and year-end audit costs; research and development expense increased $37,052, including personnel and quality and regulatory costs.
- Interest expense increased $105,526, primarily because of the 33% interest rate on the $2.0 million notes.
- Net loss increased $418,229. Management attributed the higher loss chiefly to payroll, quality and regulatory expenses, and interest.
Outlook, risks and subsequent events
- The company reported substantial doubt about its ability to continue as a going concern, citing recurring operating losses and the need for additional financing. It estimated that existing cash and net IPO proceeds would fund current operating plans into the second quarter of 2023; this depends on assumptions and spending could be higher than anticipated.
- On April 26, 2022, Aclarion completed an IPO, receiving approximately $8.6 million in net proceeds. It used $2.0 million to repay the secured promissory notes on April 27. The IPO also followed conversion of preferred shares, accrued preferred dividends, and note interest into common shares and warrants.
- The company identifies limited operating history, competition, funding access, key-person dependence, commercialization execution, and COVID-19-related customer and economic impacts as risks. It cautions that actual results may differ materially from forward-looking statements. No specific revenue or earnings guidance was provided.
- After the IPO, the company paid a $123,828 University of California–San Francisco indexed milestone payment and disclosed IPO-related bonuses. The UC license also carries a minimum annual royalty of $50,000 and a 4% royalty on net sales.
- Management concluded disclosure controls were effective at a reasonable assurance level as of March 31, 2022, and reported no material quarterly change in internal control over financial reporting. No material legal proceedings or material changes to prospectus risk factors were reported.
Important facts for investors to verify
- Post-IPO cash balance, actual spending and operating runway compared with management’s estimate into Q2 2023.
- Whether Nociscan report orders and revenue grow sufficiently to cover recurring operating costs.
- Terms and effects of preferred-share, dividend and note conversions, including resulting dilution and warrants.
- Progress on commercialization, customer adoption, regulatory and quality activities, and the impact of COVID-19 on customers.
- Future royalty and other obligations under the University of California license, and any further financing needs.