# Aclarion, Inc.: Form 10-Q for the period ended Jun 30, 2024

- Company: [Aclarion, Inc.](/companies/acon.md) (CIK 1635077)
- Form: 10-Q
- Filed: 2024-08-14
- Accepted by EDGAR: Aug 14, 2024, 15:34 ET
- Period: 2024-06-30
- Accession: 0001683168-24-005682
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1635077/000168316824005682/aclarion_i10q-063024.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1635077/000168316824005682/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $11.0k | us-gaap:Revenues |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $21.1k | us-gaap:Revenues |
| Cost of revenue | 3 months, 2024-04-01 to 2024-06-30 | $23.3k | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2024-01-01 to 2024-06-30 | $42.8k | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-04-01 to 2024-06-30 | −$12.3k | us-gaap:GrossProfit |
| Gross profit | 6 months, 2024-01-01 to 2024-06-30 | −$21.7k | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-04-01 to 2024-06-30 | $202.1k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2024-01-01 to 2024-06-30 | $441.1k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | −$1.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | −$2.4m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | −$1.2m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | −$3.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.15 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.53 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.15 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.53 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 8,217,024 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 6,829,825 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | −$3.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2024-06-30 | $1.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $1.9m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $3.1m | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $1.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $1.4m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-06-30 | $1.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 25,425 characters.

*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, 2023, which was filed with the SEC on March 28, 2024. 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, 2023, which was as filed with the SEC on March 28, 2024, 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 June 30, 2024, and 2023:

The following table summarizes our results of operations for the three months ended June 30, 2024, and 2023.

| Revenue | Three Months Ended June 30, 2024 | 2023 | $ Change |
| --- | ---: | ---: | ---: |
| Revenue | $10,971 | 17,072 | (6,101) |
| Cost of revenue | 23,294 | 19,301 | 3,993 |
| Gross profit (loss) | (12,323) | (2,229) | (10,094) |
| **Operating expenses:** |  |  |  |
| Sales and marketing | 225,037 | 207,790 | 17,247 |
| Research and development | 202,102 | 250,006 | (47,904) |
| General and administrative | 696,099 | 946,175 | (250,076) |
| Total operating expenses | 1,123,238 | 1,403,971 | (280,733) |
| **(Loss) from operations** | (1,135,561) | (1,406,200) | 270,639 |
| Other income (expense): |  |  |  |
| Loss on exchange of debt | – | – | – |
| Loss on extinguishment of debt | – | – | – |
| Interest expense | (127,848) | (47,139) | (80,709) |
| Changes in fair value of warrant and derivative liabilities | 25,357 | (11,800) | 37,157 |
| Other, net | (25) | 583 | (608) |
| Total other (expense) | (102,516) | (58,356) | (44,160) |
| (Loss) before income taxes | (1,238,077) | (1,464,557) | 226,480 |
| Income tax provision | – | – |  |
| **Net income (loss)** | $(1,238,077) | (1,464,557) | 226,480 |
| Net (loss) allocable to common stockholders | $(1,238,077) | (1,464,557) | 226,480 |
| Net (loss) per share allocable to common stockholders | $(0.15) | (2.83) | 2.68 |
| Weighted average shares of common stock outstanding, basic and diluted | 8,217,024 | 517,979 | 7,699,045 |

24

*Total revenues*. Total revenues for the quarter ended June 30, 2024 were $10,971, which was a decrease of $6,101, or 36%, from $17,072 for the quarter ended June 30, 2023. The decrease in revenues was driven primarily by the conclusion of certain clinical activity at customer sites utilizing NOCISCAN ® reports.

*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 $23,294 for the quarter ended June 30, 2024, compared to $19,301 for the quarter ended June 30, 2023, an increase of 21%. This increase was primarily due to a change in revenue mix that increased partner fees.

*Sales and Marketing*. Marketing expenses include post-market clinical and reimbursement consulting, salaries, website support, press releases, conferences, travel, and shared-based compensation for Key Opinion Leaders. Sales and marketing expenses were $225,037 for the quarter ended June 30, 2024, compared to $207,790 for the quarter ended June 30, 2023, an increase of $17,247, or 8%. Post-market clinical expenses increased as the Company focused on the initiation of the Clarity trial. Marketing expenses also increased with the number of press releases year-over-year.

*Research and Development*. Research and development expenses were $202,102 for the quarter ended June 30, 2024, compared to $250,006 for the quarter ended June 30, 2023, a decrease of $47,904, or 19%. There was no accrued bonus expense in the quarter ended June 30, 2024, along with a general decrease in required regulatory and quality system work.

*General and Administrative*. General and administrative expenses were $696,099 for the quarter ended June 30, 2024, a decrease of $250,076 or 26%, from $946,175 for the quarter ended June 30, 2023. For the quarter ended June 30, 2024, there was no accrued bonus expense, D&O insurance premiums were reduced, and legal fees were less compared to the quarter ended June 30, 2023, when the Company issued debt. These reductions in expense were somewhat offset by increased investment in investor relations during the quarter ended June 30, 2024.

*Other Income (Expense).*

Interest expense was $127,848 for the quarter ended June 30, 2024, an increase of $80,709 from the $47,139 incurred during the quarter ended June 30, 2023. This increase in interest expense was due to the increase in debt taken on by the Company in 2023. In May, September and November 2023 the Company issued $2,594,118 aggregate principal amount of unsecured non-convertible notes to certain accredited investors. (see Note 9 to the condensed financial statements).

The Company’s warrant and derivative liabilities are recorded at fair value as of each reporting date (see Note 3 to the condensed financial statements). For the quarter ended June 30, 2024, the Company recorded a favorable adjustment in fair value of $25,357.

### For the Six Months Ended June 30, 2024, and 2023:

The following table summarizes our results of operations for the six months ended June 30, 2024, and 2023.

| Revenue | Six Months Ended June 30, 2024 | 2023 | $ Change |
| --- | ---: | ---: | ---: |
| Revenue | $21,085 | 42,542 | (21,457) |
| Cost of revenue | 42,770 | 36,754 | 6,016 |
| Gross profit (loss) | (21,685) | 5,788 | (27,473) |
| **Operating expenses:** |  |  |  |
| Sales and marketing | 406,094 | 385,074 | 21,020 |
| Research and development | 441,143 | 454,405 | (13,262) |
| General and administrative | 1,541,947 | 1,753,774 | (211,827) |
| Total operating expenses | 2,389,184 | 2,593,253 | (204,069) |
| **(Loss) from operations** | (2,410,869) | (2,587,464) | 176,596 |
| Other income (expense): |  |  |  |
| Loss on exchange of debt | (1,066,732) | – | (1,066,732) |
| Loss on extinguishment of debt | (111,928) | – | (111,928) |
| Interest expense | (463,672) | (48,519) | (415,153) |
| Changes in fair value of warrant and derivative liabilities | 323,041 | (11,800) | 334,841 |
| Other, net | 92,980 | (234) | 93,213 |
| Total other (expense) | (1,226,311) | (60,552) | (1,165,759) |
| (Loss) before income taxes | (3,637,180) | (2,648,017) | (989,163) |
| Income tax provision | – | – | – |
| **Net income (loss)** | $(3,637,180) | (2,648,017) | (989,163) |
| Net (loss) allocable to common stockholders | $(3,637,180) | (2,648,017) | (989,163) |
| Net (loss) per share allocable to common stockholders | $(0.53) | (5.22) | 4.69 |
| Weighted average shares of common stock outstanding, basic and diluted | 6,829,825 | 507,499 | 6,322,326 |

*Total revenues*. Total revenues for the six months ended June 30, 2024 were $21,085, which was a decrease of $21,457, or 50%, from $42,542 for the six months ended June 30, 2023. The decrease in revenues was driven primarily by the conclusion of certain clinical activity at customer sites utilizing NOCISCAN ® reports.

*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 $42,770 for the six months ended June 30, 2024, compared to $36,754 for the six months ended June 30, 2023, an increase of 16%, was driven by a price increase related to hosting costs and a change in revenue mix that increased partner fees.

*Sales and Marketing*. Marketing expenses include post-market clinical and reimbursement consulting, salaries, website support, press releases, conferences, travel, and shared-based compensation for Key Opinion Leaders. Sales and marketing expenses were $406,093 for the six months ended June 30, 2024, compared to $385,074 for the six months ended June 30, 2023, an increase of $21,020, or 6%. Increased post-market clinical expense related to the Clarity trial, greater marketing expense, and increased benefits costs were offset in part by a reduction in restricted stock vesting expense related to the Company’s engagement of Key Opinion Leaders.

*Research and Development*. Research and development expenses were $441,143 for the six months ended June 30, 2024, compared to $454,405 for the six months ended June 30, 2023, a decrease of $13,262, or 3%. There was no accrued bonus expense in the six month period ended June 30, 2024, along with a general decrease in required regulatory and quality system work.

*General and Administrative*. General and administrative expenses were $1,541,947 for the six months ended June 30, 2024, a decrease of $211,827 or 12%, from $1,753,774 for the six months ended June 30, 2023. The decrease was driven by reduced bonus accruals, lower personnel expense, and decreased D&O insurance premiums, offset in part by higher legal and audit costs related to the February 2024 public offering and increased investment in investor relations.

*Other Income (Expense).*

Interest expense was $463,672 for the six months ended June 30, 2024, an increase of $415,153 from the $48,519 incurred during the six months ended June 30, 2023. This increase in interest expense was due to the increase in debt taken on by the Company in 2023. In May, September and November 2023 the Company issued $2,594,118 aggregate principal amount of unsecured non-convertible notes to certain accredited investors. (see Note 9 to the condensed financial statements).

The Company incurred losses for the six months ended June 30, 2024, on two transactions to reduce debt. The first transaction took place between January 22 and January 29, 2024, whereby the Company entered into a series of exchange agreements with investors to issue an aggregate of 644,142 post-split shares of common stock in exchange for $1,519,779 principal and accrued interest on the notes. This transaction accelerated the recognition of the related note discounts and resulted in a $1,066,732 charge. The second transaction was on March 6, 2024, whereby the Company paid $300,974 of principal and accrued interest on the notes. This transaction accelerated the recognition of the related note discounts and resulted in a $111,928 charge.

The Company’s warrant and derivative liabilities are recorded at fair value as of each reporting date (see Note 3 to the condensed financial statements). For the six months ended June 30, 2024, the Company recorded a favorable adjustment in fair value of $323,041.

Other net income of $92,980 for the six months ended June 30, 2024, included a favorable discount to accounts payable of $117,985, offset in part by a $25,000 penalty paid to investors related to a failure to timely register 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 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.

### Going Concern

The Company believes that the net proceeds from the February 2024 initial public offering, and subsequent funding from the April 2024 equity line agreement described in Note 11, will be sufficient to fund current operating plans into the third quarter of 2024, approaching our final maturity repayment of our unsecured non-convertible note, which is due in September 2024. The Company has based these estimates, however, on assumptions that may prove to be wrong, and could spend available financial resources much faster than we currently expect. The Company will need to raise additional funds to continue funding our technology development. Management plans to secure such additional funding.

As a result of the Company’s recurring losses from operations and the need for additional financing to fund its operating and capital requirements, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern.

### Liquidity and capital resources

### Sources of liquidity

To date, the Company has financed operations primarily through private placements of preferred shares and debt financing, PPP loans that were forgiven, an equity line, an initial public offering on April 21, 2022, and a secondary public offering on February 27, 2024.

During the six months ended June 30, 2024, the Company completed a public offering of 5,175,000 units (“Units”) at a price of $0.58 per Unit, for gross proceeds of approximately $3.0 million, before deducting offering expenses. Additionally, the Company raised approximately $1.4M of net proceeds from an equity line in January 2024 and $0.3M in April 2024.

As of June 30, 2024, the Company had cash, including $10,000 of restricted cash, of $1,182,687. The Company believes that this cash will be sufficient to fund current operating plans into the third quarter of 2024, approaching the maturity repayment of our unsecured non-convertible note, which is due in September 2024. The Company has based these estimates, however, on assumptions that may prove to be wrong, and could spend available financial resources much faster than we currently expect. The Company will need to raise additional funds to continue funding our technology development. Management plans to secure such additional funding.

### Cash flows

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

|  | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Cash used in operating activities | $(3,293,096) | $(1,960,653) |
| Cash used in investing activities | (157,523) | (72,634) |
| Cash provided by financing activities | 3,602,237 | 1,165,000 |
| Net increase (decrease) in cash | $151,618 | $(868,287) |

### Operating activities

During the six months ended June 30, 2024, operating activities used $3,293,096 of cash. The Company significantly reduced accounts payable, primarily legal expenses that had accrued over time, and significantly reduced accrued expenses including payroll, bonuses, board compensation, and audit fees. During the six months ended June 30, 2023, operating activities used $1,960,653 of cash. This use of cash consisted primarily of employee compensation and benefit expense, general liability insurance, contractor compensation, and audit and legal fees.

### Investing activities

During the six months ended June 30, 2024, and 2023, investing activities used $157,523 and $72,634 of cash, respectively. These investing activities consisted almost entirely of patent and license maintenance.

### Financing activities

During the six months ended June 30, 2024, the Company completed a public offering of 5,175,000 units (“Units”) at a price of $0.58 per Unit, for gross proceeds of approximately $3.0 million, before deducting offering expenses. Each Unit was comprised of (i) one share of common stock or, in lieu of common stock, one prefunded warrant to purchase a share of common stock, and (ii) two common warrants, each common warrant to purchase a share of common stock. The prefunded warrants are immediately exercisable at a price of $0.00001 per share of common stock and only expire when such prefunded warrants are fully exercised. The common warrants are immediately exercisable at a price of $0.58 per share of common stock and will expire five years from the date of issuance.

During the six months ended June 30, 2024, and pursuant to the Equity Line Purchase Agreement, the Company issued to White Lion 452,343 newly issued common shares for proceeds of $1,449,532 between January 4 and January 8, 2024, and 1,050,000 newly issued common shares for proceeds of $304,500 on April 26, 2024. Equity line issuance costs were $262,744.

During the six months ended June 30, 2024, the Company paid $300,973 of principal and accrued interest on certain unsecured non-convertible notes. Following this payment, the remaining outstanding balance of principal and interest on the notes was $898,380.

During the six months ended June 30, 2024, the Company entered into a series of exchange agreements (the “Exchange Agreements”) with accredited investors to exchange principal and accrued interest on these notes for shares of common stock. Pursuant to the Exchange Agreements, the Company issued an aggregate of 644,142 post-split shares of common stock in exchange for $1,519,779 principal and accrued interest on the notes. Following these exchanges, the remaining outstanding balance of principal and interest on the notes was $1,145,037.

During the six months ended June 30, 2023, the Company sold one (1) share of the Company’s newly designated Series A preferred stock to Jeffrey Thramann, the Company’s Executive Chairman, for a purchase price of $1,000. The share of Series A preferred stock had proportional voting rights that were limited to the proposal to approve a reverse stock split of the Company’s common stock. Following the March 24, 2023, special meeting, the Company redeemed the one outstanding share of Series A preferred stock on March 28, 2023, in accordance with its terms. The redemption price was $1,000. No Series A preferred stock remains outstanding.

During the six months ended June 30, 2023, the Company issued an unsecured promissory note in the amount $1,250,000, net of $203,576 of issuance costs.

### 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 June 30, 2024.

### 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, as disclosed in Note 4 to our condensed financial statements appearing in this quarterly report, there have been no recent accounting pronouncements not yet effective that have significance, or potential significance, to our Consolidated 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.

## Market risk

As filed, 153 characters.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

## Controls and procedures

As filed, 3,445 characters.

### Evaluation of Disclosure Controls and Procedures

We have adopted and maintain disclosure controls and procedures (as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under the Exchange Act), that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC’s rules and forms and that the information is gathered and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), to allow for timely decisions regarding required disclosure.

As required by Exchange Act Rule 13a-15, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15 as of the end of the period covered by this report. Based on the foregoing evaluation, our Chief Executive Officer and Chief Financial Officer concluded that due to our limited resources our disclosure controls and procedures are not effective in providing material information required to be included in our periodic SEC filings on a timely basis and to ensure that information required to be disclosed in our periodic SEC filings is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure about our internal control over financial reporting discussed below.

During the six months ended June 30, 2024, the Company worked with an outside firm to establish best practices to improve our required disclosure about our internal control over financial reporting.

### Changes in Internal Control over Financial Reporting

Our Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting was not effective as of December 31, 2023, due to material weaknesses related to (1) a limited segregation of duties due to our lack of formal control documentation, limited resources, and the small number of employees, and (2) a lack of adequate accounting resources to properly account for complex accounting transactions. Management determined that these control deficiencies constitute material weaknesses, which could result in material misstatements of significant accounts and disclosures that could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected. In addition, due to limited staffing, we are not always able to detect minor errors or omissions in reporting.

The Company did engage an outside firm in the third quarter of 2023 to provide accounting support and increased segregation of duties. During the six months ended June 30, 2024, the Company continued to work with the outside firm to establish best practices over time that enhance internal control over financial reporting.

**Other than the applicable remediation efforts described above, there were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.**

## Risk factors

As filed, 652 characters.

In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors disclosed in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 28, 2024. There have been no material changes to our risk factors from those included in such Annual Report except as noted below. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

Filed Aug 14, 2024.
Source: SEC EDGAR, the filing index for accession 0001683168-24-005682. Last ingested by Listed: Oct 24, 2026, 15:07 ET. No prices; not investment advice.