Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the unaudited condensed financial statements and related notes included elsewhere in this Quarterly Report and our audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on April 9, 2025. This discussion and analysis and other parts of this Quarterly Report contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under Part II, Item 1A, "Risk Factors" and elsewhere in this Quarterly Report. You should carefully read the "Risk Factors" section of this Quarterly Report and of our Annual Report on Form 10-K for the year ended December 31, 2024, which was as filed with the SEC on April 9, 2025, to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled "Special Note Regarding Forward-Looking Statements."

Overview

Corporate Information

The Company currently operates as a Delaware corporation, under the name Aclarion, Inc.

Results of operations

For the Three Months Ended September 30, 2025, and 2024:

The following table summarizes our results of operations for the three months ended September 30, 2025, and 2024.

		Three Months Ended September 30,
		2025				2024				$ Change
Revenue
Revenue		$	18,942			$	14,407			$	4,535
Cost of revenue			14,556				21,332				(6,776	)
Gross profit (loss)			4,386				(6,925	)			11,311
Operating expenses:
Sales and marketing			632,409				232,775				399,634
Research and development			302,037				195,797				106,240
General and administrative			900,904				860,461				40,443
Total operating expenses			1,835,350				1,289,033				546,317
Loss from operations			(1,830,964	)			(1,295,958	)			(535,006	)
Other income (expense):
Interest expense			-				(71,527	)			71,527
Loss on exchange of debt			-				(6,585	)			6,585
Gain (loss) on extinguishment of debt			-				-				-
Changes in fair value of warrant and derivative liabilities			1				7,591				(7,590	)
Penalties and settlements			-				-				-
Other, net			124,669				303				124,366
Total other income (expense)			124,670				(70,218	)			194,888
Loss before income taxes			(1,706,294	)			(1,366,176	)			(340,118	)
Income tax provision			-				-				-
Net loss		$	(1,706,294	)		$	(1,366,176	)		$	(340,118	)
Dividends accrued for preferred stockholders			-				(12,142	)			12,142
Net loss allocable to common stockholders		$	(1,706,294	)		$	(1,378,318	)		$	(327,976	)
Net loss per share allocable to common shareholders		$	(2.93	)		$	(1,321.49	)		$	(0.56	)
Weighted average shares of common stock outstanding, basic and diluted			582,371				1,043				581,328

Total Revenues.

Total revenues for the three months ended September 30, 2025 were $18,942, an increase of $4,535 or 31.5%, compared to $14,407 for the three months ended September 30, 2024. This increase in revenues was driven primarily by the growing volume of NOCISCAN ® reports sold into the UK market following recent local coverage decisions. We expect this increase in revenue to continue as we bring on more insurance payors, and our scan volumes increase.

Cost of Revenue.

Direct cost of revenue is comprised of hosting and software costs, field support, UCSF royalty cost, partner fees (Radnet), and credit card fees. Total cost of revenue was $14,556 for the three months ended September 30, 2025, compared to $21,332 for the same period ended September 30, 2024, a decrease of $6,776 or 31.8%. This decrease was primarily due to a reduced allocation of hosting fees to cost of revenue and a change in revenue mix that reduced partner fees.

Sales and Marketing.

Sales and marketing expenses include post-market clinical and reimbursement consulting, salaries, website support, press releases, conferences, travel, and shared-based compensation. Sales and marketing expenses were $632,409 for the three months ended September 30, 2025, compared to $232,775 for the same period in 2024, an increase of $399,634 or 171.7%. For the three months ended September 30, 2025, post-market clinical expenses were $197,227, compared to $78,657 for the same period in 2024, an increase of $118,570, primarily due to initiation the Clarity trial with the first patient enrolled in June 2025. Product marketing consulting expenses were $190,242 for the three months ended September 30, 2025, compared to $10,755 for the same period in 2024, an increase of $179,487, reflecting expanded use of external consultants. Bonus expense increased by $53,245 for the three months ended September 30, 2025, compared to $0 for the same period in 2024, due to accruals for incentive-based performance payouts. Travel expenses $35,087 for the three months ended September 30, 2025, compared to $13,381 for the same period in 2024, an increase $21,706, primarily to support the local coverage decisions in the UK market. These increases were partially offset by a $17,091 decrease in restricted stock vesting expense for the three months ended September 30, 2025, as no restricted stock expense was recognized, compared to $17,091 for the corresponding period in 2024, resulted from the expiration of previously granted restricted stock awards.

Research and Development.

Research and development expenses were $302,037 for the three months ended September 30, 2025, compared to $195,797 for the three months ended September 30, 2024, representing an increase of $106,240 or 54.3%. For the three months ended September 30, 2025, patent maintenance fees were $29,951, compared to $0 for the same period in 2024, an increase of $29,951, as the Company advanced protection of its intellectual property portfolio. For the three months ended September 30, 2025, bonus expense was $44,343, compared to a reversal of $1,451 for the same period in 2024, an increase of $45,794, due to accruals for incentive-based performance payouts. Quality system and regulatory consulting expenses were $45,377 for the three months ended September 30, 2025, compared to $26,229 for the same period in 2024, and increase of $19,148, driven by expanded regulatory compliance and documentation activities.

General and Administrative.

General and administrative expenses were $900,904 for the three months ended September 30, 2025, compared to $860,461 for the same period in 2024, an increase of $40,443 or 4.7%. For the three months ended September 30, 2025, the Company accrued $138,739 in bonus under its 2025 incentive program, compared to no bonus accrual for the corresponding period in 2024. In addition, for the three months ended September 30, 2025, the Company incurred $99,375 in insurance costs related to directors and officers ("D&O") coverage, compared to $72,434 for the same period in 2024, an increase of $26,941, primarily due to expanded policy coverage and higher renewal premiums. These increases were partially offset by $141,959 decrease in investor relations expenses, which totaled $31,009 for the three months ended September 30, 2025, compared to $172,968 for the same period in 2024, primarily attributable to reduced retail marketing and external communications consulting.

Other Income (Expense).

For the three months ended September 30, 2025, the Company recognized $124,755 in interest income on money market deposits, attributable to funds raised during the first quarter ended March 31, 2025. No interest income was recognized during the comparable period in 2024.

For the three months ended September 30, 2025, the Company did not recognize any interest expense or discount amortization, compared to $11,300 and $60,277, respectively, for the same period in 2024. The decrease was primarily due to the absence of debt obligations in 2025, as the related borrowings were incurred in by the Company in 2024.

For the Nine Months Ended September 30, 2025, and 2024:

The following table summarizes our results of operations for the nine months ended September 30, 2025, and 2024.

		Nine Months Ended September 30,
		2025				2024				$ Change
Revenue
Revenue		$	57,251			$	35,492			$	21,759
Cost of revenue			52,214				64,102				(11,888	)
Gross profit (loss)			5,037				(28,610	)			33,647
Operating expenses:
Sales and marketing			1,278,759				638,869				639,890
Research and development			770,659				636,940				133,719
General and administrative			3,015,016				2,402,408				612,608
Total operating expenses			5,064,434				3,678,217				1,386,217
Loss from operations			(5,059,397	)			(3,706,827	)			(1,352,570	)
Other income (expense):
Interest expense			-				(535,199	)			535,199
Loss on exchange of debt			-				(1,073,317	)			1,073,317
Gain (loss) on extinguishment of debt			73,272				(111,928	)			185,200
Changes in fair value of warrant and derivative liabilities			11,767				330,632				(318,865	)
Penalties and settlements			(672,500	)			-				(672,500	)
Other, net			302,371				93,284				209,087
Total other income (expense)			(285,090	)			(1,296,528	)			1,011,438
Loss before income taxes			(5,344,487	)			(5,003,355	)			(341,132	)
Income tax provision			-				-				-
Net loss		$	(5,344,487	)		$	(5,003,355	)		$	(341,132	)
Dividends accrued for preferred stockholders			(6,683	)			(12,142	)			5,459
Net loss allocable to common stockholders		$	(5,351,170	)		$	(5,015,497	)		$	(335,673	)
Net loss per share allocable to common shareholders		$	(11.60	)		$	(5,893.65	)		$	(0.73	)
Weighted average shares of common stock outstanding, basic and diluted			461,341				851				460,490

Total revenues.

Total revenues for the nine months ended September 30, 2025, were $57,251, which was an increase of $21,759 or 61.3%, from $35,492 for the nine months ended September 30, 2024. This increase in revenue was driven primarily by the growing volume of NOCISCAN ® reports sold into the UK market following recent local coverage decisions. We expect this increase in revenue to continue as we bring on more insurance payors and our scan volumes increase.

Cost of Revenue.

Direct cost of revenue is comprised of hosting and software costs, field support, UCSF royalty cost, partner fees (Radnet), and credit card fees. Total cost of revenue was $52,214 for the nine months ended September 30, 2025, compared to $64,102 for the nine months ended September 30, 2024, a decrease of $11,888 or 18.5%. This decrease was primarily due to a reduced allocation of hosting fees to cost of revenue and a change in revenue mix that reduced partner fees.

Sales and Marketing.

Marketing expenses include post-market clinical and reimbursement consulting, salaries, website support, press releases, conferences, travel, and share-based compensation. Sales and marketing expenses totaled $1,278,759 for the nine months ended September 30, 2025, compared to $638,869 for the nine months ended September 30, 2024, representing an increase of $639,890 or 100.2%. The increase was primarily driven by higher post-market clinical expenses, which was $488,279 for the nine months ended September 30, 2025, compared to $149,882 for the same period in 2024, an increase of $338,394, primarily related to costs associated with the initiation of the Clarity trial, for which the first patient enrolled in June 2025. Product marketing consulting expenses increased by $141,718, to $213,253 for the nine months ended September 30, 2025, compared to $71,535 for the same period in 2024, reflecting expanded use of external marketing consultants. Bonus expense increased by $71,995 for the nine months ended September 30, 2025, compared to $0 for the same period in 2024, due to accruals for incentive-based performance payouts. Travel expenses increased to $103,387 for the nine months ended September 30, 2025, from $37,661 in the prior-year period, an increase of $65,726, primarily related to activities supporting local coverage determinations in the United Kingdom. These increases were partially offset by a $57,824 decrease in share-based compensation expense, due to the expiration of previously granted restricted stock awards. Share-based compensation expense was $0 for the nine months ended September 30, 2025, compared to $57,824 for the same period in 2024.

Research and Development.

Research and development expenses were $770,659 for the nine months ended September 30, 2025, compared to $636,940 for the nine months ended September 30, 2024, representing an increase of $133,719 or 21.0%. The increase was primarily attributable to higher patent maintenance fees, which totaled $41,970 for the nine months ended September 30, 2025, compared to $0 for the same period in 2024, reflecting the Company's efforts to advance protection of its intellectual property portfolio. In addition, bonus expense increased by $71,800, to $70,349 for the nine months ended September 30, 2025, compared to a reversal of $1,451 in the corresponding period in 2024, due to accruals for incentive-based performance payouts. Quality system and regulatory consulting expenses were $158,842 for the nine months ended September 30, 2025, compared to $136,185 for the same period in 2024, an increase of $22,657, primarily resulting from expanded regulatory compliance and documentation activities. We expect to see research and development expenses to continue to increase in the coming quarters as our enrollment in the CLARITY Trial continues to expand.

General and Administrative.

General and administrative expenses were $3,015,016 for the nine months ended September 30, 2025, compared to $2,402,408 for the nine months ended September 30, 2024, representing an increase of $612,608 or 25.5%. The increase was primarily driven by higher accruals under the Company's 2025 incentive bonus program, which totaled $293,427 for the nine months ended September 30, 2025, compared to a reversal of $5,309 for the same period in 2024, an increase of $298,736, due to incentive-based performance payout accruals. Insurance expenses, primarily related to directors and officers ("D&O") coverage, increased to $273,245 for the nine months ended September 30, 2025, from $217,365 in the prior-year period, an increase of $55,880, reflecting expanded policy coverage and higher renewal premiums. The Company also incurred litigation and financial accounting advisory expenses of $100,534 and $269,009, respectively, for the nine months September 30, 2025, compared to $0 and $166,142, respectively, for the same period in 2024, representing increases of $100,534 and $102,867 respectively. These increases were partially offset by a $50,570 decrease in investor relations expenses, which totaled $237,398 for the nine months ended September 30, 2025, compared to $287,968 for the same period in 2024. The decrease was primarily attributable to lower retail marketing activities and reduced use of external communications consultants.

Other Income (Expense).

Interest Expense

Interest expense was $0 for the nine months ended September 30, 2025, compared to $535,199 for the same period in 2024. The decrease was attributable to the retirement of all unsecured non-convertible notes in 2024.

Loss On Exchange of Debt and Gain (Loss) On Extinguishment Of Debt

During the nine months ended September 30, 2024, the Company incurred losses on two transactions undertaken to reduce outstanding debt. The first transaction occurred between January 22 and January 29, 2024, when the Company entered into a series of exchange agreements with investors to issue an aggregate of 644,142 shares of common stock (71 adjusted for 2025 Stock Splits) in exchange for $1,519,779 of principal and accrued interest on the notes. This transaction accelerated the recognition of the related note discounts, resulting in a charge of $1,073,317. The second transaction occurred on March 6, 2024, when the Company repaid $300,974 of principal and accrued interest on the notes. This transaction also accelerated the recognition of the related note discounts and resulted in a charge $111,928.

The Company recognized a gain of $73,272 during the nine months ended September 30, 2025, in connection with the retirement of an obligation associated with commitment shares.

Changes In Fair Value Of Warrant And Derivative Liabilities

The Company's warrant and derivative liabilities are measured at fair value at each reporting date. For the nine months ended September 30, 2025, the Company recorded a favorable fair value adjustment of $11,766, compared to a favorable adjustment of $330,632 for the nine months ended September 30, 2024. The derivative liability was fully retired in 2024 in connection upon the settlement of all unsecured non-convertible notes.

Penalties And Settlements

In the nine months ended September 30, 2025, the Company recorded $672,500 in Penalties and Settlements. In March 2025 the Company paid $687,500 to settle a dispute under the "fee tail" provision of an investment banking agreement that the Company had previously entered into. This was netted against a $15,000 favorable accounts payable settlement.

Other, Net

Other net income was $302,371 for the nine months ended September 30, 2025, primarily reflecting interest income on money market deposits following the Company's fundraising activities in the first quarter of 2025. In comparison, other net income of $92,985 for the nine months ended September 30, 2024, primarily reflected $117,985 favorable discounts on accounts payable, partially offset by a $25,000 penalty paid to investors related to the untimely registration of certain commitment shares.

Critical Accounting Policies and Use of Estimates

Our Management's Discussion and Analysis of Financial Condition and Results of Operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates.

While our significant accounting policies are described in more detail in the notes to our financial statements, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

The Company derives its revenues from one source, the delivery of Nociscan reports to medical professionals. Revenues are recognized when a contract with a customer exists, and the control of the promised services are transferred to our customers. The amount of revenue recognized reflects the consideration the Company expects to receive in exchange for those services. Substantially all of our revenues are generated from contracts with customers in the United Kingdom and the United States.

Equity-Based Compensation

Certain of our employees and consultants have received grants of common stock options and RSUs in our company. These awards are accounted for in accordance with guidance prescribed for accounting for equity-based compensation. Based on this guidance and the terms of the awards, the awards are equity classified.

Until our April 2022 initial public offering, we were a private company with no active public market for our common equity. Therefore, we had periodically determined the overall value of our company and the estimated per share fair value of our common equity at their various dates using contemporaneous valuations performed in accordance with the guidance outlined in the American Institute of CPA's Practice Aid. Since a public trading market for our common stock has been established in connection with the completion of our initial public offering, it will no longer be necessary for us to estimate the fair value of our common stock in connection with our accounting for equity awards we may grant, as the fair value of our common stock will be its public market trading price.

For financial reporting purposes, we performed common stock valuations as a private company with the assistance of a third-party specialist. Subsequent to the initial public offering, the fair value of the Company's common stock underlying its equity awards is based on the quoted market price of the Company's common stock on the grant date.

Liquidity and capital resources

Sources of liquidity

To date, we have financed our operations primarily through private placements and public offerings of our equity and debt securities.

As of September 30, 2025, we had cash and cash equivalents of $11,366,336, including $25,000 of restricted cash.

During the nine months ended September 30, 2025, the Company raised an aggregate of $20,058,913 of gross proceeds through a combination of a public offering of units ($14,554,545) consisting of common shares, A warrants, and B warrants, two registered direct offerings ($5,167,927) of common stock, and the exercise of Series C Preferred warrants ($336,441).

On October 14, 2025, the Company sold, in a registered direct public offering, an aggregate of (i) 64,000 shares of the Company's common stock, and (ii) pre-funded warrants (the "Pre-funded Warrants") to purchase up to 236,000 shares of common stock, at an offering price of $8.36 per share. The Pre-funded Warrants were immediately exercisable, with exercise price of $.00001 per share.

The aggregate gross proceeds to the Company from this offering were approximately $2.5 million, before deducting the placement agent fees of 7% of the aggregate gross proceeds and other offering expenses payable by the Company.

We believe our current cash will fund our operating expenses and capital expenditure requirements through the first quarter of 2027. Management is actively managing our cash position and continually working to secure additional long-term funding.

Cash flows

The following table summarizes our sources and uses of cash for each of the periods presented:

		Nine Months Ended September 30,
		2025				2024
Net cash used in operating activities		$	(5,536,766	)		$	(4,348,747	)
Net cash used in investing activities			(162,441	)			(261,220	)
Net cash provided by financing activities			16,601,882				4,900,996
Net increase in cash and cash equivalents		$	10,902,675			$	291,029

Operating activities

During the nine months ended September 30, 2025, the Company used $5,536,766 in cash for operating activities, representing an increase in cash use of $1,188,019, compared to $4,348,747 used during the same period in 2024. The increase in cash used in operating activities was primarily attributable to a higher net loss after adjustments for non-cash items. For the nine months ended September 30, 2025, the Company recognized a net loss after non-cash adjustments of $4,982,799, representing an increase of $1,766,305, compared to an adjusted net loss of $3,216,494 for the same period in 2024. The year-over-year increase in adjusted net loss was primarily due to the absence of non-cash adjustment related to loss on exchange of debt in 2025, compared to non-cash addback of $1,073,317 recorded in 2024.

During the nine months ended September 30, 2025, the Company used $164,100 in cash related to prepaid and other current assets, representing a decrease in cash used of $165,206, compared to $329,306 used during the same period in 2024. The decrease was primarily attributable to lower advance payments made to vendors and service providers, as well as a reduction in clinical prepayments, compared to the same period in 2024.

During the nine months ended September 30, 2025, the Company used $214,007 in cash related to accounts payable, representing a decrease in cash used of $229,061 compared to $443,068 used during the same period in 2024. This decrease was primarily due to the timing of vendor payments and lower outstanding payables balances compared to the prior-year period.

Investing activities

During the nine months ended September 30, 2025, cash used in investing activities was $162,441, a decrease in cash used of $98,779, compared to cash used of $261,220 during the same period in 2024, mainly due to lower expenditures related to patent and license filings, partially offset by purchases of computer equipment.

Financing activities

During the nine months ended September 30, 2025, the Company raised an aggregate of $20,058,913 of gross proceeds through a combination of a public offering of units ($14,554,545) consisting of common shares, A warrants, and B warrants, two registered direct offerings ($5,167,927) of common stock, and the exercise of Series C Preferred warrants ($336,441).

January 2025 Registered Direct Public Offerings

On January 3, 2025, the Company sold in a registered direct offering an aggregate of 3,380,276 shares (374 shares post-2025 Stock Splits) of its common stock at a price of $0.142 per share ($1,284.39 post-2025 Stock Splits). The net proceeds to the Company of this offering were approximately $450,000.

On January 30, 2025, the Company sold in a registered direct offering an aggregate of 506,803 shares (18,770 shares post-Second 2025 Stock Split) of its common stock at a price of $9.25 per share ($249.75 post-March 2025 stock split). The net proceeds to the Company of this offering were $4.4 million.

October 2025 Registered Direct Public Offering

On October 14, 2025, the Company sold, in a registered direct public offering, an aggregate of (i) 64,000 shares of the Company's common stock, and (ii) pre-funded warrants (the "Pre-funded Warrants") to purchase up to 236,000 shares of common stock, at an offering price of $8.36 per share.

The Pre-funded Warrants were immediately exercisable, with exercise price of $.00001 per share. A holder of Pre-funded Warrants may not exercise the warrant if the holder, together with its affiliates, would beneficially own more than either 4.99% or 9.99% of the number of shares of the common stock outstanding immediately after giving effect to such exercise. A holder of Pre-funded Warrants may increase or decrease this percentage not in excess of 9.99% by providing at least 61 days' prior notice to the Company.

The aggregate gross proceeds to the Company from this offering were approximately $2.5 million, before deducting the placement agent fees of 7% of the aggregate gross proceeds and other offering expenses payable by the Company. The Company intends to use the net proceeds from the offering to fund market development and clinical evidence, product development and quality, and general and administration support, and other general corporate purposes.

As of November 10, 2025, 25,000 Pre-funded Warrants have been exercised.

Units Offering Of Common Stock And Warrants

On January 15, 2025, the Company sold, in an underwritten public offering, an aggregate of (i) 100,000 shares (11 shares post-2025 Stock Splits) of the Company's common stock, (ii) 143,900,000 pre-funded warrants (the "Pre-Funded Warrants) (15,909 pre-funded warrants post-2025 Stock Splits) to purchase up to an aggregate of 143,900,000 common shares (15,909 shares post-2025 Stock Splits), (iii) 144,000,000 Series A Common Warrants (the "Series A Common Warrants") (15,920 warrants post-2025 Stock Splits), and (iv) 144,000,000 Series B Common Warrants (the "Series B Common Warrants" and, together with the Series A Common Warrants, the "Common Warrants") Each share or Pre-Funded Warrant, as applicable, was sold together with one Series A Common Warrant to purchase one share of Common Stock and one Series B Common Warrant to purchase one share of Common Stock.

The public offering price for each Unit (consisting of a common share (or Pre-Funded Warrant in lieu thereof) and accompanying Common Warrants was $0.10 ($904.50 post-2025 Stock Splits). In addition, the Company granted the underwriter an option to purchase up to an additional 21,000,000 shares (2,322 shares post-2025 Stock Splits) of our common stock (or Pre-Funded Warrants in lieu of shares of Common Stock), at the public offering price, less underwriting discounts and commissions, and up to an additional 21,000,000 (2,322 shares post-2025 Stock Splits) Series A Common Warrants and up to an additional 21,000,000 (2,322 post-2025 Stock Splits) Series B Common Warrants at a nominal price within 45 days from January 15, 2025, to cover over-allotment sales. The underwriter exercised its option to purchase 21,000,000 (2,322 post-2025 Stock Splits) Series A Common Warrants and 21,000,000 (2,322 post-2025 Stock Splits) Series B Common Warrants. The net proceeds to the Company of this offering were $13.4 million.

The Pre-Funded Warrants had an exercise price of $0.00001 ($.09 post-2025 Stock Splits) per share, were immediately exercisable and expired when exercised in full. All Pre-Funded Warrants have been exercised as of March 31, 2025. Each Series A Common Warrant will have an exercise price per share of $0.20 ($1,809.00 post-2025 Stock Splits) and will be exercisable beginning on the first trading day following the date on which Stockholder Approval is received and deemed effective (the "Initial Exercise Date" or the "Stockholder Approval Date"). The Series A Common Warrants will expire on the five-year anniversary of the Initial Exercise Date. The Series B Common Warrants will have an exercise price per share of $0.20 ($1,809.00 post-2025 Stock Splits) and will be exercisable beginning on the Initial Exercise Date. The Series B Common Warrants will expire on the two and one-half year anniversary of the Initial Exercise Date.

On March 5, 2025, the Company convened a Special Meeting of Stockholders. Stockholders approved the full issuance of shares of common stock issuable by the Company upon exercise of the Series A Common Warrants and the Series B Common Warrants. Following March 5, 2025, holders of Series B warrants have exercised substantially all of our outstanding Series B warrants using the alternative cashless exercise ("ACE") feature included in those warrants. The Company has issued approximately 14.7 million common shares (544 thousand shares adjusted for the Second 2025 Stock Split) in such Series B warrant exercises. No Series A warrants have been exercised as of September 30, 2025.

Redemption Of Series B Preferred Stock

On January 22, 2025, the Company redeemed all Series B Preferred Stock and related accrued dividends with a cash payment of $1,213,590.

Series C Preferred Stock and Warrants

During the fourth quarter of 2024, certain holders converted 126 shares of C Preferred Stock and related accrued dividends into 739,050 shares of common stock (equivalent to 82 common shares following the 2025 Stock Splits). There were 874 C Preferred shares remaining at December 31, 2024.

During the nine months ended September 30, 2025, certain holders converted the remaining 874 shares of C Preferred Stock and related accrued dividends into 6,211,618 shares of common stock (equivalent to 687 common shares following the 2025 Stock Splits).

During the nine months ended September 30, 2025, holders of the Series C warrants exercised 5,685,049 warrants (629 post-2025 Stock Splits). 4,548,039 (503 post-2025 Stock Splits) warrants were exercised at $0.03 per share ($271.35 post-2025 Stock Splits), and 1,137,010 (126 post-2025 Stock Splits) warrants were exercised at $0.1759 per share ($1,591.02 post-2025 Stock Splits). The Company received payments of $336,411 as part of the warrant exercises.

During the nine months ended September 30, 2024, net cash provided by financing activities was $4,900,996 which included gross proceeds of $1,754,032 from our equity line, $2,691,391 from a February 27, 2024 public offering, $1,000,000 from sales of C-series preferred stock and warrants, and $529,254 from common stock and warrant RegA+ offering. Cash issuance costs related to all financing activities totaled $772,707. The Company used cash in the year 2024 to retire $300,974 of outstanding promissory debt.

Funding requirements

Developing medical technology products is a time-consuming, expensive and uncertain process that takes years to complete, and the Company may never generate meaningful revenues. Accordingly, we may need to obtain substantial additional funds to achieve our business objectives.

Adequate additional funds may not be available to us on acceptable terms, or at all. To the extent that the Company raises additional capital through the sale of equity securities, the ownership interest of existing stockholders may be diluted. Any debt or preferred equity financing, if available, may involve agreements that include restrictive covenants that may limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, which could adversely impact our ability to conduct our business, and may require the issuance of warrants, which could potentially dilute existing stockholders' ownership interests.

If we raise additional funds through licensing agreements and strategic collaborations with third parties, we may have to relinquish valuable rights to our technology, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds, we may be required to delay, limit, reduce and/or terminate development of our product candidates or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual obligations and commitments

The Company does not have any contractual obligations, not otherwise on our balance sheet as of September 30, 2025.

Off-balance sheet arrangements

The Company did not have, during the periods presented, and we do not currently have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.

Recently issued accounting pronouncements

The Company reviewed all recently issued standards and has determined that, other than the two new standards as disclosed in Note 4 to our condensed financial statements appearing in this quarterly report, there have been no other recent accounting pronouncements not yet effective that have significance, or potential significance, to our Condensed Financial Statements.

Emerging growth company and smaller reporting company status

The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to "opt out" of this extended transition period and, as a result, we will not adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for public entities. Accordingly, our financial statements may not be comparable to other public companies that do not elect the extended transition period.

We are also a "smaller reporting company" meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.