Aclarion Inc. Warrant

Company Overview

Business Model: Aclarion, Inc. is a healthcare technology company that leverages Magnetic Resonance Spectroscopy (MRS), proprietary signal processing techniques, biomarkers, and augmented intelligence algorithms to optimize clinical treatments. The company's initial focus is on the chronic low back pain market with its NOCISCAN platform, a cloud-based SaaS solution designed to noninvasively help physicians distinguish between painful and nonpainful discs in the lumbar spine. Revenue is generated from the delivery of NOCISCAN reports to medical professionals, with the majority currently derived from the United Kingdom and direct patient payments in the United States.

Market Position: Aclarion, Inc. addresses the U.S. low back and neck pain market, which is valued at $134.5 billion annually and is identified as the most costly healthcare condition in the United States. The company positions its NOCISCAN technology as a non-invasive, objective, quantitative, and pain-free diagnostic alternative to the invasive Provocation Discogram test (PD Test). Its technology is currently compatible with certain MR scanner models from SIEMENS and PHILIPS, with an estimated 1,500 compatible scanners in the United States and 4,320 worldwide. Aclarion, Inc. holds 28 U.S. Patents, 24 Foreign Patents, 7 pending U.S. patent applications, and 12 pending Foreign patent applications as of December 31, 2025, including exclusively licensed intellectual property from the Regents of the University of California.

Recent Strategic Developments:

• AI Integration: Aclarion, Inc. is utilizing Artificial Intelligence (AI) for quality control processes to flag spectroscopy data indicative of poor MRS studies and is building databases of raw and post-processed spectral data to train machine learning algorithms to associate MRS data with clinical outcomes. This AI application is in early development, with aspirational plans to expand into brain, breast, and prostate tumor diagnosis.
• Clinical Evidence Advancement: In April 2023, Aclarion, Inc. published 2-year outcomes from the Gornet Study in the European Spine Journal, demonstrating that 85% of patients improved when discs identified as consistent with pain by its technology were included in surgical treatment, compared to 63% when not treated or when non-painful discs were treated.
• NIH Collaboration: Aclarion, Inc.'s technology was selected for the NIH's $150 million Back Pain Consortium (BACPAC) Research Program and subsequently included in the prospective randomized Biomarkers for the Evaluation of Spinal Treatments (BEST) study.
• Expanded Scanner Compatibility: In the first quarter of 2025, Aclarion, Inc. engaged its first customer using PHILIPS MRS capabilities with its NOCISCAN platform, expanding compatibility beyond SIEMENS.
• Strategic Partnership: On January 8, 2024, Aclarion, Inc. executed a strategic partnership agreement with ATEC Spine, Inc., a subsidiary of Alphatec Holdings, Inc., to evaluate and potentially co-market NOCISCAN in targeted markets, with Aclarion, Inc. providing ATEC Spine, Inc. certain exclusive distribution rights for an integrated procedural solution.
• Reimbursement Progress: Aclarion, Inc. secured four Category III CPT codes for its technology in January 2021, and CMS assigned Ambulatory Payment Classification (APC) pricing for three of these codes. Three insurance providers in the United Kingdom reimburse for the NOCISCAN scan.

Geographic Footprint: Aclarion, Inc. generates revenue primarily in the United Kingdom and the United States. Approximately 74% of the company's revenues were generated from contracts with customers outside the United States during the year ended December 31, 2025, compared to 35% in 2024. The company is prioritizing commercial operations in the NYC Metropolitan Area, San Francisco and Southern, CA, Chicago, IL, Phoenix, AZ, Miami, FL, Denver & Colorado Springs, CO, Detroit, MI, Indianapolis, IN, and London, United Kingdom.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 9.0%
• Operating Margin: -9314.4%
• Net Margin: -9551.9%

Investment in Growth:

• R&D Expenditure: $1.03 million (1364.9% of revenue)
• Capital Expenditures: $0.20 million (cash used in investing activities)
• Strategic Investments: Not explicitly detailed as "strategic investments" with amounts, but R&D and clinical trial costs (CLARITY Trial) are key growth investments.

Business Segment Analysis

Nociscan Segment

Financial Performance:

• Revenue: $75,730 (+65.6% YoY)
• Operating Margin: Not directly provided for the segment, but the company operates in a single segment, so overall operating margin applies (-9314.4%).
• Key Growth Drivers: The increase in revenue was primarily driven by the growing volume of NOCISCAN reports sold into the UK market following recent local coverage decisions. The company expects this increase to continue with more insurance payors and increased scan volumes.

Product Portfolio:

• NOCISCAN: A software application that uses the existing MRS capabilities of commercially available scanners to non-invasively analyze the chemical makeup of intervertebral discs in the spine.
• NOCICALC: A software product within the NOCISCAN Post-Processor Suite that receives raw unprocessed MRS data and calculates values from it, identifying biomarker peaks and leveraging calculation tables to evaluate ratios of biomarker peaks. It is registered with the FDA as a Class I "exempt" medical device.
• NOCIGRAM: A software product within the NOCISCAN Post-Processor Suite that further processes NOCICALC results to generate a final diagnostic report, identifying discs as painful or not. Aclarion, Inc. believes NOCIGRAM meets the Clinical Decision Support software (CDS) definition under the 21st Century Cures Act and is not regulated by the FDA.

Market Dynamics:

• Competitive Positioning: Aclarion, Inc. believes its NOCISCAN product suite is superior to standard lumbar MRI (which cannot reliably identify specific pain-causing discs) and Provocation Discogram (PD) tests (which are invasive, subjective, painful, and carry risks of degeneration). NOCISCAN offers a non-invasive, objective, quantitative, and pain-free diagnostic that enhances MRI value and provides a "Virtual Discogram."
• Key Customer Types: Spine surgeons, imaging centers, and clinicians treating chronic discogenic low back pain patients.
• Market Trends: The market is driven by the high cost of low back and neck pain, the lack of objective and noninvasive diagnostics, and the need for improved surgical outcomes.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: Not disclosed for the period.
• Dividend Payments: Aclarion, Inc. has never declared or paid any cash dividends on its common stock and does not anticipate paying any in the foreseeable future.
• Dividend Yield: Not applicable.
• Future Capital Return Commitments: Not disclosed.

Balance Sheet Position:

• Cash and Equivalents: $12,015,789 (as of December 31, 2025)
• Total Debt: $0 (all unsecured non-convertible notes were retired in 2024)
• Net Cash Position: $12,015,789
• Credit Rating: Not disclosed.
• Debt Maturity Profile: Not applicable as no debt outstanding.

Cash Flow Generation:

• Operating Cash Flow: $(7,164,204) (Net cash used in operating activities for 2025)
• Free Cash Flow: Not explicitly calculated, but given significant operating cash outflow and capital expenditures, it would be negative.
• Cash Conversion Metrics: Not explicitly detailed.

Operational Excellence

Production & Service Model: Aclarion, Inc. operates a cloud-based SaaS platform. The NOCISCAN process involves:

1. MRS Exam Protocol: A proprietary software protocol and technique for using commercially available MRS pulse sequences on MR scanners, extending a standard lumbar MRI by approximately 30 minutes for 5 lumbar discs.
2. Data Transfer: Secure transfer of MRS exam data from MR imaging centers to Aclarion, Inc.'s cloud-based post-processor technology via a licensed, proprietary data transfer platform provided by Intelerad’s AMBRA® Healthcare.
3. Post-Processor Suite: The NOCISCAN Post-Processor Suite (comprising NOCICALC and NOCIGRAM) processes the MRS exam data to identify biomarker peaks, evaluate ratios of biomarker peaks, and generate a diagnostic report.

Supply Chain Architecture: Key Suppliers & Partners:

• MR Scanner Vendors: SIEMENS and PHILIPS (for compatible MR scanner models and operating configurations). Aclarion, Inc. has a collaborative relationship with SIEMENS since 2011, formalized by a Strategic Collaboration Agreement (December 31, 2017) for phased commercialization in the EU. Aclarion, Inc. engaged its first customer using PHILIPS MRS capabilities in Q1 2025.
• Data Transfer Platform: Intelerad’s AMBRA® Healthcare (licensed, proprietary data transfer platform).
• Clinical Research: Key Opinion Leader (KOL) surgeons and clinical sites for generating additional clinical data (e.g., CLARITY Trial, Gornet Study).
• Strategic Partnership: ATEC Spine, Inc. (subsidiary of Alphatec Holdings, Inc.) for evaluating and co-marketing NOCISCAN, with Aclarion, Inc. providing exclusive distribution rights for an integrated procedural solution.

Facility Network:

• Principal Executive Offices: 8181 Arista Place, Suite 100, Broomfield, Colorado 80021.
• Manufacturing: Not explicitly detailed, but the company's products are software-based, implying a software development and hosting infrastructure.
• Research & Development: R&D activities primarily explore the use of AI, post-processing technologies, and clinical registry data.
• Distribution: Cloud-based delivery of software and reports.

Operational Metrics: Not explicitly detailed beyond revenue and cost of revenue.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Aclarion, Inc. is transitioning to broader commercial operations in the United States and the United Kingdom, with Directors of Commercial Operations in the NYC Metropolitan Area, Southern CA, and the United Kingdom.
• Channel Partners: RadNet, Inc. (operates three fully operational imaging centers for NOCISCAN, leveraging its extensive relationship with commercial payers). ATEC Spine, Inc. (strategic partnership for evaluating and co-marketing NOCISCAN, with exclusive distribution rights for an integrated procedural solution).
• Digital Platforms: Cloud-based SaaS platform for data transfer and report delivery.

Customer Portfolio: Enterprise Customers:

• Tier 1 Clients: RadNet, Inc. (a leading provider of outpatient imaging centers in the United States, operating 430 centers across ten states).
• Strategic Partnerships: ATEC Spine, Inc. (medical device company focused on spine surgery).
• Customer Concentration: Not explicitly detailed, but reliance on RadNet, Inc. for initial commercialization in the New York/New Jersey area is noted.

Geographic Revenue Distribution:

• Outside United States: 74% of total revenue (2025)
• United States: 26% of total revenue (2025)
• Growth Markets: United Kingdom (three insurance providers reimburse for NOCISCAN), NYC Metropolitan Area, San Francisco and Southern, CA, Chicago, IL, Phoenix, AZ, Miami, FL, Denver & Colorado Springs, CO, Detroit, MI, Indianapolis, IN, and London, United Kingdom.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The low back and neck pain market is characterized by its significant cost ($134.5 billion annually in the U.S.) and a critical need for objective, cost-effective, and noninvasive diagnostics. Current diagnostic methods often lead to suboptimal surgical outcomes (41-57% success rates) and reliance on invasive procedures like the PD Test. The diagnostic imaging market is growing, with MRI being a widely accepted standard for spine and low back pain.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Standard Lumbar MRI: Useful for showing abnormal structures and tissue dehydration but cannot reliably identify specific discs causing pain.
• Provocation Discogram (PD) Test: Highly accurate when performed properly but is invasive, subjective, painful, and has been shown to increase the rate of degeneration in previously normal discs.
• Other Diagnostic Imaging Procedures: X-ray, CT-Scan, PET, nuclear medicine, ultrasound, mammography, and fluoroscopy.

Emerging Competitive Threats: Not explicitly detailed beyond general industry competition and potential enhancements to existing platforms and techniques.

Competitive Response Strategy: Aclarion, Inc. aims to establish NOCISCAN as the standard protocol for assisting in the treatment plan of patients with low back pain undergoing surgical intervention by demonstrating superior clinical outcomes. The company is pursuing payer contracts for its Category III CPT codes, with the goal of conversion to Category I codes, expanding MR scanner compatibility, and evolving product adaptations for broader applications (e.g., neck pain, conservative/regenerative therapies).

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Limited Spectroscopy Deployment & Compatibility: Current reliance on a limited number of SIEMENS and PHILIPS MR scanner models (estimated 1,500 in U.S., 4,320 worldwide) and the lack of widespread spectroscopy software deployment.
• Adoption Challenges: Potential reluctance of surgeons, physicians, clinicians, patients, and imaging facilities to adopt new technologies or change current practices.
• Competition: Intense competition from established diagnostic standards (X-ray, lumbar MRI, PD Test) and potential for new, more effective competitive products.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Scanner Compatibility Dependency: Reliance on SIEMENS and PHILIPS to maintain scanner compatibility and performance, with risks of incompatibility due to changes by vendors or owners.
• Third-Party Service Providers: Dependence on third parties (e.g., Intelerad’s AMBRA® Healthcare, clinical consultants) to fulfill contractual, regulatory, and other obligations.
• Growth Management: Expected increase in organizational size (managerial, operational, sales, marketing, financial, other personnel) may lead to difficulties in managing growth effectively.

Financial & Regulatory Risks

Market & Financial Risks:

• Funding Requirements: Need for substantial additional funding beyond Q1 2028, with risks that capital may not be available on acceptable terms or at all, potentially delaying or terminating product development/commercialization.
• Reimbursement Uncertainty: Dependence on adequate financial coverage and reimbursement from third-party payers. Risk of failure to obtain wide coverage or adequate reimbursement for Category III CPT codes, or successful conversion to Category I codes at adequate levels.
• Pricing and Margins: Potential for price competition and pressure to reduce prices, which could negatively impact gross margins.

Regulatory & Compliance Risks:

• FDA Classification Disagreement: Risk that the FDA may disagree with Aclarion, Inc.'s self-classification of NOCICALC (Class I 510(k)-exempt) and NOCIGRAM (not a medical device under the 21st Century Cures Act), potentially requiring premarket clearance/approval and leading to fines or marketing cessation.
• CE Mark Recertification: NOCISCAN's transition from Class I under MDD to expected Class II(a) under MDR requires re-certification by a Notified Body by December 31, 2028. Failure to comply could result in loss of CE mark and inability to sell in the EU.
• UKCA Mark: Requirement for UKCA marking after June 30, 2028, following Brexit, with risks of non-compliance.
• Fraud and Abuse Laws: Exposure to federal and state anti-fraud and abuse, anti-kickback, false claims, and data privacy laws (HIPAA, HITECH, GDPR, CCPA, CPRA), with risks of substantial penalties and reputational harm for non-compliance.
• Clinical Study Delays: CLARITY Trial and other future clinical studies may be delayed, suspended, or terminated, increasing expenses and delaying reimbursement/label expansion.

Geopolitical & External Risks

Geopolitical Exposure:

• Foreign Data Transfer Concerns: Reluctance of potential EU customers to transfer private patient information to the U.S. due to GDPR concerns and U.S. government data seizure rights.
• International Operations: Risks associated with differing regulatory/reimbursement policies, economic weakness, compliance with tax/employment laws, foreign currency fluctuations, staffing difficulties, and geopolitical instability in countries where Aclarion, Inc. may expand.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas:

• Artificial Intelligence (AI) and Machine Learning: Researching the application of AI and machine learning platforms to analyze raw and post-processed spectroscopy data to more efficiently and effectively associate MRS data with clinical outcomes.
• Proprietary Signal Processing: Development of proprietary software to transform spectroscopy data into clear biomarkers.
• Biomarkers: Exclusively licensed from the Regents of the University of California, these biomarkers are key data inputs for algorithms determining if an intervertebral disc is consistent with pain.
• Nociscan 3.0 Product: Ongoing development.

Innovation Pipeline:

• Expanded Indications: Plans to extend intended indications for use to include disc MRS along the thoracic or cervical spine.
• Integrated Imaging: Incorporating certain MRI image post-processing along with MRS data post-processing.
• Real-time Processing: Development of real-time post-processing of MRS exam data during the exam itself via software installed and operated within the MR scanner software environment.
• CLARITY Trial: Building clinical registries to correlate NOCISCAN results to outcomes for conservative and regenerative treatment plans, aiming to train AI models for optimal treatment pathways.

Intellectual Property Portfolio:

• Patent Strategy: As of December 31, 2025, Aclarion, Inc. holds 28 issued U.S. patents, 24 issued foreign patents, 7 pending U.S. patent applications, and 12 pending foreign patent applications. The portfolio includes patents exclusively assigned to Aclarion, Inc., exclusively licensed from the Regents of the University of California, and jointly assigned/licensed.
• Core Patent Groups: Includes inventions for signal processing techniques (leveraging AI), novel diagnostic systems and methods based on MRS-based chemical biomarkers, enhancements to MRS exam efficiency and reliability, and other novel diagnostic systems (e.g., molecular imaging, gene expression testing).
• Licensing Programs: Exclusive License Agreement with the Regents of the University of California (amended December 9, 2014, further amended March 31, 2017) for intellectual property and patents related to systems, materials, and methods to localize and evaluate pain and degenerative properties of tissue, molecular markers, and MRS systems for diagnosing discs. The agreement includes a royalty fee of 4% of net sales (minimum 2%), 10% of sub-licensee gross revenues, and a minimum annual royalty of $50,000.

Technology Partnerships:

• Regents of the University of California (UCSF): Exclusive license for proprietary biomarkers and ongoing collaboration in spine research.
• SIEMENS: Collaborative relationship since 2011, formalized by a Strategic Collaboration Agreement (December 31, 2017) for supporting NOCISCAN compatibility and early commercial users in the EU.
• PHILIPS: Engaged with first customer using PHILIPS MRS capabilities in Q1 2025, expanding compatibility beyond SIEMENS.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: Not explicitly detailed, but the company is growing its organization and expects to need additional managerial and operational personnel.

Board Composition: The board of directors consists of seven members. Five directors are independent according to Nasdaq and SEC rules. William Wesemann serves as Lead Independent Director. The board has an Audit Committee (Steve Deitsch - Chairman, Bill Wesemann, Scott Breidbart), a Compensation Committee (Bill Wesemann - Chairman, Amanda Williams, Scott Breidbart), and a Nominating and Governance Committee (Amanda Williams - Chairman, Bill Wesemann, Scott Breidbart). Steve Deitsch is an "audit committee financial expert."

Human Capital Strategy

Workforce Composition:

• Total Employees: 11 total employees as of January 1, 2026.
• Geographic Distribution: Not explicitly detailed, but sales and marketing personnel are being hired in the United States and the United Kingdom.
• Skill Mix: 2 employees engaged in full-time research and development, 5 in strategy and business development, and 4 in general administration.

Talent Management: Acquisition & Retention:

• Hiring Strategy: Planning to hire additional sales and marketing personnel.
• Retention Metrics: Not explicitly detailed, but the company uses stock options that vest over time to induce valuable employees to remain.
• Employee Value Proposition: Compensation includes salary, cash incentives, and stock options.

Diversity & Development: Not explicitly detailed.

Culture & Engagement: Aclarion, Inc. states that it maintains good relations with its employees.

Environmental & Social Impact

No material information explicitly stated in the filing.

Business Cyclicality & Seasonality

Demand Patterns: Not explicitly detailed. Economic Sensitivity: Aclarion, Inc.'s operating results may fluctuate due to a variety of factors, including general economic conditions and consumer confidence. Industry Cycles: Not explicitly detailed.

Planning & Forecasting: Aclarion, Inc.'s ability to accurately forecast demand for its products could be negatively affected by many factors, including potential failure to accurately manage or execute its expansion strategy, new product introductions by competitors, and unanticipated changes in general market conditions.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• United States FDA:
  • NOCICALC: Classified as a Class I 510(k)-exempt medical device, registered with the FDA (Product Code JQP, Regulation Number 21 CFR 862.2100, Registration Number 3015426626).
  • NOCIGRAM: Aclarion, Inc. believes it meets the Clinical Decision Support software (CDS) definition under the 21st Century Cures Act and is therefore not regulated as a medical device by the FDA.
  • Post-market Requirements: Subject to pervasive and continuing FDA regulations including Quality Management System Regulation (QMSR), labeling, advertising, promotion, Medical Device Reporting (MDR), and recall requirements.
• European Union (EU):
  • CE Mark: The NOCISCAN product suite was initially commercialized as a Class I medical device under the Medical Device Directive (MDD) via self-certification.
  • MDR Transition: Under the new EU Medical Devices Regulation (MDR), NOCISCAN is expected to be considered a Class II(a) device, requiring re-certification for CE mark by a Notified Body (TUV SUD engaged) prior to December 31, 2028. Aclarion, Inc. is compliant with new MDR requirements for post-market surveillance effective May 2021.
• United Kingdom (UK):
  • Post-Brexit Regulations: Subject to local regulatory requirements separate from EU regulations. The CE Mark still applies for the UK, but the UKCA marking system is being introduced.
  • UKCA Mark: Required after June 30, 2028. Aclarion, Inc. believes that meeting all requirements of the CE mark under MDR will satisfy all requirements for UKCA marking.

Trade & Export Controls: Not explicitly detailed beyond general mention of international compliance.

Legal Proceedings: Aclarion, Inc. is not currently a party to any material legal proceedings that would have a material adverse effect on its operations or financial position.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: 0% for both 2025 and 2024.
• Geographic Tax Planning: Not explicitly detailed.
• Tax Reform Impact: Not explicitly detailed.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: Aclarion, Inc. carries product liability insurance in the amount of $5 million in the aggregate. It also maintains a cybersecurity insurance policy and business interruption coverage.
• Risk Transfer Mechanisms: Not explicitly detailed beyond insurance.