ACON 10-K & 10-Q changes, risk factors and insider trading

We have identified a material weakness in our internal internal control over financial reporting.reporting as of December 31, 2024, which was remediated in fiscal 2025. Failure to maintain effective internal controls could cause our investors to lose confidence in us and adversely affect the market price of our common stock. If our internal controls are not effective, we may not be able to accurately report our financial results or prevent fraud.

If we continue to have material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, we may be late with the filing filing of our periodic reports, investors may lose confidence in the accuracy and completeness of our financial reports and the market price price of our common stock could be negatively affected.

We believe our current cash resources will be sufficient to fund our current operating plans into the thirdfirst quarter of 2026.2028. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue to invest in clinical studies, sales, marketing, and engineering resources to bring our products to market.

The medical device industry is intensely competitive, subject to rapid change and significantly affected by new product introductions and other market activities of industry participants. Our current competition primarily resides with the diagnostic standards over which our products are intended to improve –improve, in particular, X-ray, lumbar MRI, and PD. Our products are positioned for synergistic use with lumbar MRI, and to enhance the diagnostic value of lumbar MR exams. However, the existing reliance on lumbar MRI as a standard of care for our DLBP indication, and on PD in some medical practices, and the potential for other enhancements to those platforms and techniques, nonethelessnonetheless, also represents a competitive threat. To the extent extent that these other platforms represent our primary competitors, they are mainly provided by large, well-capitalized companies with significant significant market share and resources. Most of our competitors have more established sales and marketing programs than us and have greater name recognition. These competitors also have long operating histories and may have more established relationships with potential customers. Also, there can be no assurance that other companies or institutions will not succeed in developing or marketing devices and products that are more accurate, useful, effectiveeffective, or safer than our technology or that would render our technology obsolete or noncompetitive.

Our ability to increase sales of our technology depends, in significant part, on the availability of adequate financial coverage and reimbursement from third-party payors, which include: (i) governmental payors such as the Medicare and Medicaid programs in the United States; (ii) private managed care organizations; and (iii) private health insurers. Third-party payers determine which services and treatments they will cover and establish reimbursement rates for those treatments. While we have secured certain reimbursement codes againstin whichthe United States for billing the use of our products can potentially beproducts, billed, we do not yet currently bill any third-party payers directly for our technology. In the United Kingdom, we are reimbursed by certain third-party payors. The cost of our customers using our technology is currently being paid for by either: (i) billing patients to pay directly (ii) allocation at least in part against payments received by healthcare providers for other procedures conducted in association with the use of our technology, or (c) third-party payer reimbursement payments to one of our customers for approximately 20 patients throughin the dateUnited of this filing.Kingdom. A failure to obtain wide coverage and adequate reimbursement for using our technology in conducting our new diagnostic procedures, or for clinicians providing ongoing patient care based on or related to our diagnostic results could diminish our sales and affect our ability to sell our technology.

On January 1, 2021, our Category III CPT Codes became effective (see “Business”, “Reimbursement” above). Category III codes represent the first step in the reimbursement process (See “Business” “Reimbursement” above). The effectiveness of our Category III codes commenced a five-year period in which, in order to maintain our Category III status, we are required to demonstrate that the medical community needs (“Clinical Needs”) the NOCISCAN product. Clinical Needs would be demonstrated to the CPT Committee based on the volume at which our Category III codes are billed by imaging centers and physicians. In addition to demonstrating that there is Clinical Needs, we also are required to show that NOCISCAN is clinically effective as indicated by patients having better outcomes when NOCISCAN reports are used to help guide surgical treatments. We expect to show clinical effectiveness through a combination of clinical registries and our CLARITY Trial, as well as other clinical studies that build upon our published clinical studystudy, the CPT committee used to create our Category III CPT codes. However, if we are not able to demonstrate Clinical Needs, nor that NOCISCAN is clinically effective, our revenue would be limited to a direct patient payment model, which will severely limit our ability to market our products and generate sufficient revenue to continue market marketing our technology.

As of December 31, 2024,2025, we had 510 full-time employees, 1 part-time employee,1employee, 1 full-time consultant, and 2 part-time consultants. As our sales and marketing strategies develop, and as we transition into operating as a public company, we expect to need additional managerial, operational, sales, marketing, financial and other personnel. Future growth would impose significant added responsibilities on members of management, including:

We believe that one of our products under the NOCISCAN Suite, NOCICALC, is a Class I 510(k)-exempt medical device, which only requires registration and no pre-market review with the FDA, and which we registered as such with the FDA. We also believe the other of our products in the suite, NOCIGRAM, is “Clinical Decision Support Software” under the 21st Century Cures Act and as such, is not considered a medical device, and thus is not regulated by the FDA. Accordingly, we believe that our current products do not require FDA clearance or approval under eitherthe 510(k), De Novo, or PMA approval pathways. However, there can be no assurance that in the future, the FDA will not determine that PMA approval, De deNovo novo classification, or 510(k) clearance is required for our products. If the FDA were to make such a determination, we would not be able to sell or market our products without or until securing such approval or clearance and may be subject to potential fines and other penalties penalties or remedial actions for illegally marketing or selling an unapproved medical device, which would affect our sales, business, financial financial condition, and results of operation.

If we initiate a correction or removal of certain of our products from the market to reduce a risk to health posed by the device, we would likely be required to submit a Correction and Removal Removal report to the FDA and, in many cases, similar reports to other regulatory agencies. ThisAny reportfield couldaction bereported classified byto the FDA as a devicecould recall which could lead to increased scrutiny by the FDA and our customers regarding the quality and safety of our products. Furthermore, the submission of these reports could be used by competitors against us and could harm our reputation, which could cause customers to delay purchase decisions, cancel orders or decide not to purchase our products and could cause patients to lose trust in our technology.

For commercialization outside the United States, in particular the European Union (“EU”) and United Kingdom (“UK”), the Company, in conjunction with our regulatory consultants, determined NOCISCAN to be a Class I medical device, for which we secured a CE mark via self-certification. As such, we self-certified our product for the CE mark under a Declaration of Continuity (“DOC”) filed by us as part of a dossier with a qualified EU Representative. Since self-certification was completed by the Company, the EU adopted Medical Device Regulation (EU) 2019/1020, known as MDR, that went into effect on July 16, 2021. Under these new regulations, we believe NOCISCAN to be considered a Class II(a) device that requires re-certification for CE mark by a Notified Body prior to MayDecember 2024.31, 2028. Notified Bodies carry out tasks related to conformity assessment procedures set out in the applicable legislation, when a third party is required. Class II(a) device certification is subject to additional requirements for approval beyond our existing submissions, including requiring pre-market review and CE mark approval by a Notified Body, and which maywill require submission and approval of supportive clinical data. We are currently seeking to identify, but have notengaged yetTUV engaged,SUD aas our Notified Body for this purpose.purpose The available number of Notified Bodies, and those engaging new company applicants, has been significantly reduced in recent years andwith the abilityunderstanding for conducting athat Notified Body review and CE mark approval can typically take more than a year. Certain aspects of the new MDR also place new requirements on Class I medical devices that are not subject to the extended 20242028 grace period and became effective as of May 2021. ThisWe appliesare tocompliant with the new required policies and practices for post-market surveillance of our products. While we are not currently compliant with these new requirements, we are in the process of updating our policies and practices and taking the corrective actions to achieve and maintain ongoing compliance. We believe the actions we are taking are sufficient to support the continuance of our commercial activities in the EU under our CE mark without adverse penalties or other consequences. However, there is a risk that one or more regulatory body or agency in the EU may determine otherwise, either with respect to our prior non-compliance that has since been corrected or with respect to the sufficiency of our corrective actions, and which could result in us incurring certain penalties or other consequences.

If we are unable to engage or receive CE mark approval from a Notified Body under the MDR by the MayDecember 20242028 grace period deadline, or are determined to be non-compliant with MDR regulations regulations not subject to the grace period and therefore applicable to us as of May 2021, we could lose our CE mark, and may become unable to continue promoting or selling our products for commercial use in the EU, UK, or other countries that relate their medical device regulations to to a CE mark.

In conjunction with Brexit, medical devices in the UK are no longer directly governed by CE regulations. As such, theThe UK has introduced the UKCA marking system which largely follows the CE marking regulations but continues to includebe permittingrevised. useIn ofaddition, until 30 June 2028, medical devices compliant with the sameEU submissionsmedical fordevices approval.directive (EU TheMDD) majorwith differencea post-Brexitvalid isdeclaration thatand CE marking iscan regulated bybe placed on the EUUK andmarket, provided the company identifies a UK Responsible Person (UKRP). After this date, a UKCA markingmark iswill regulatedbe by the UK. The only practical implication to the Company is the requirement of a Notifying Body within both the EU and the UK.required. If the Company is successful in meeting all requirements of the CE mark under MDR set forth above, the company Company believes it will meet all requirements for UKCA marking. WhileIn we are not currently compliant with new requirements in the UK, we are in the process of updatingaddition, our policiesNotified andBody practices(TUV andSUD) takingis whatan we believe are corrective actions to achieve and maintainApproved ongoing complianceBody in the UK. WeOur believepolicies ourand activitiesprocedures are sufficientconsistent to supportwith the continuancecurrent of our commercial activities in the UK under our CE mark without adverse penalties or other consequences.regulations. However, there is a risk that one or more regulatory body or agency in the UK may determine otherwise, either with respect to our prior non-compliance that we believe has been corrected or with respect to the sufficiency of those corrective actions and which could result in us incurring certain penalties or other adverse consequences to our business. There can be no assurance that we can obtain a UKCA mark and if we are not able to secure a UKCA mark, we will lose our ability to conduct business in the UK.

FutureOur current CLARITY Trial or other future clinical studies may be delayed, suspended or terminated for many reasons, including those conducted to support reimbursement coverage and certain potential label expansions for additional indications, which will increase our expenses and delay the time it takes to secure reimbursement coverage or support label expansion for additional indications.

Failure to comply with applicable U.S. requirements regarding promoting, manufacturing, labeling, and establishing and complying with appropriate quality assurance policies, systems, and practices for our products may subject us to a variety of administrative or judicial actions and sanctions. We currently offer the NOCISCAN product suite via two interactive products, NOCICALC, which is listed with the FDA as a Class I, 510(k)-exempt product, and NOCIGRAM, a type of medical software that we have concluded is exempt from medical device regulation by the FDA pursuant to the 21st Century Cures Act. This product suite is also self-certified and CE Marked as a Class I medical device under MDD requirements, while we believe it is considered a Class II medical device and requiring Notified Body review and certification under newer MDR regulations (subject to a grace period until December 31, 2028). These products are marketed and sold with certain labeling and related instructions for use and and are promoted by various marketing and sales materials and related human interactions via our personnel and our target customers. We have have also established, and operate under, certain quality assurance systems, policies, and procedures under our QMSquality management system intended to be compliant with applicable requirements for all relevant territories and jurisdictions related to our commercial activities. In the event that our establishment, maintenance, marketing, promotion, labeling, or execution of these products, or these systems, policies, practices, or procedures, are determined to be inadequate or non-compliant with applicable regulatory requirements, such defect could result in certain potential enforcement actions or other adverse consequences, and our business would be negatively affected.

FDA’s Medical Device Reporting (“MDR”) regulation requires, medical device manufacturers to report to the FDA information of which the manufacturer becomes aware that a device has or may have caused or contributed to a death or serious injury or has malfunctioned in a way that would likely cause or contribute to death or serious injury if the malfunction of the device or a similar device marketed by the manufacturer were to recur. If we fail to report events required to be reported to the FDA within the required timeframes, or at all, the FDA could take enforcement action and impose sanctions against us. Any such adverse event involving our products also could result in the need to take corrective and preventative actions, such as changes to design or manufacturing processes, corrections, removals, or recalls or customer notifications, or agency action, such as inspection or enforcement action. Risk of harm to patients, including without limitation serious injury or death, associated with using our products could also result in product liability actions against us. Any field corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, would be costly, distract management from operating our business, could be used by competitors against us, and may harm our reputation, business, financial condition and results of operations.

The FDA’s investigational device exemption (“IDE”) regulations impose requirements on the conduct of certain clinical investigations conducted with medical devices. The requirements depend on whether the study is considered to be exempt, a nonsignificant risk or a significant risk.risk study. In general, clinical investigations with medical devices, including those that are IDEnonsignificant exempt,risk, must comply with requirements for the protection of human subjects, which include review and approval by an institutional review board (“IRB”) and informed consent of subject participants. Significant risk device studies also must submit an IDE to FDA for approval.approval (nonsignificant risk studies are exempt from this requirement). The IDE regulations specify the responsibilities of sponsors and investigators to ensure compliance with IDE requirements, including compliance with Good Clinical Practice (“GCP”) requirements. Failure to comply may result in FDA placing a temporary or permanent clinical hold on the study, issuance of warning letters, or other regulatory actions.

From time to time, we engage consultants to help design, monitor and analyze the results of certain clinical studies and trials that we sponsor. The consultants we engage may interact with clinical investigators to enroll patients in our clinical studies. We depend on these consultants and clinical investigators to conduct clinical studies and trials and monitor and analyze data from these studies and trials under the investigational plan and protocol for the study or trial and in compliance with applicable regulations and standards. We may face delays in, or be prevented from, completing our clinical studies if these parties do not fulfill their obligations in a timely, compliant or competent manner. Such roles, functions, and related risks, also apply to certain employees of the Company. If these third parties or employees do not successfully carry out their duties, comply with Good Clinical Practice (GCP) guidelines and other applicable requirements, or meet expected deadlines, or if the quality, completeness or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical study protocols or for other reasons, our clinical studies or trials may need to be extended, delayed or terminated by us or be placed on clinical hold by FDA,FDA or the IRB, or may otherwise prove to be unsuccessful, and we may have to conduct additional studies, which would significantly increase our costs.

We are increasingly dependent on complex information technology systems for the efficient functioning of our business, including the manufacture, distribution and maintenance of our products, as well as for accounting, data storage, compliance, purchasing and inventory managementpurchasing purposes. Further, our products collect, use, store, disclose, transfer, and otherwise process sensitive patient data, such as detailed recordings of MRIs to help clinicians make more informed treatment decisions and optimize their patients’ care. These data are recorded by our technology and can be viewed by the physician during regular patient visits using the Physician Tablet or on demand through a secure website. We also collect, use, store, disclose, transfer, and otherwise process a growing volume of other personal information and confidential, proprietary and sensitive data, which may include procedure-based information and sensitive healthcare data, credit card, and other financial information, insurance information, and other potentially personally identifiable information. Our information technology systems or those of our service providers may be subject to computer viruses, phishing, social engineering, denial or degradation of service attacks, ransomware, malware attacks or other threats, cyberattacks, or dishonest acts by computer hackers or terrorists, failures during the process of upgrading or replacing software, databases or components thereof, power outages, damage or interruption from fires or other natural disasters, hardware failures, telecommunication failures and user errors, among other malfunctions. Technological interruptions or threats would disrupt our operations, including the ability of our clinicians to use our products as intended to treatevaluate patients, the ability of patients to safely and securely upload their data using and into our products, as well as our ability to adequately manufacture our products, timely ship and track product orders, project inventory requirements, manage our supply chain and otherwise adequately service our customers. Additionally, any of these incidents could result in the theft, unauthorized access, acquisition, use, disclosure, modification, or misappropriation of personal information of patients that use our products, trial participants, employees, third parties with whom we conduct business, as well as other confidential, proprietary, and sensitive data, and can also result in fraudulent activity, system disruptions or shutdowns.

We currently maintain a cybersecurity insurance policy and business interruption coverage in order to mitigate certain potential losseslosses, but this insurance is limited in amount, and we we cannot be certain that such potential losses will not exceed our policy limits, or will cover all potential claims to which we are exposed exposed and may not be adequate to indemnify us for all liability that may be imposed. Therefore, failure to maintain or protect our information systems and data integrity effectively could harm our business, financial condition, and results of operations.

We may maintain, use, and share sensitive health information that we receive directly from patients that use our technology, throughout the clinical study process, in the course of our research collaborations, and from healthcare providers in the course of using our products and systems. Most healthcare providers, including hospitals from which we obtain patient health information, are subject to privacy and security regulations promulgated under HIPAA, as amended by the HITECH, and also under GDPR. We believe that we are not currently classified or regulated under HIPAA or GDPR as a Covered Entity, but we believe we are considered and regulated as a Business Associate. Accordingly, we are subject to HIPAA and GDPR requirements or penalties as applied to Business Associates. However, in certain situations, any person may be prosecuted under HIPAA’s criminal provisions either directly or under aiding-and-abetting or conspiracy principles. Consequently, depending on the facts and circumstances, we could face substantial criminal penalties if we knowingly receive, maintain, use, or transfer individually identifiable health information from a Covered Entity, as defined under HIPAA, that has not satisfied HIPAA’s requirements for disclosure of individually identifiable health information. Furthermore, certain health privacy laws, data breach notification laws, consumer protection laws and genetic testing laws may apply directly to our operations or those of our collaborators and may impose restrictions on our collection, use and dissemination of individuals’ health information As such, we may be subject to state laws requiring notification of affected individuals and state regulators in the event of a breach of personal information, including certain health information, which is a broader class of information than the health information protected by HIPAA. To the extent we engage in clinical studies and commercial uses of our products outside the United States, we may implicate foreign data privacy and security laws and regulations, including the GDPR and legislation of the European Union member states implementing it.

We have encountered potential customers in the EU who have been reluctant, and indeed refused, to become customers due to concerns about transferring of any private patient information from their practice in the EU into the United States. Certain such customers have indicated their opinion that such a transfer is, on its face, non-compliant with GDPR requirements due to certain rights of the US Federal Government to seize such data from US domiciled companies or storage facilities. We may need to expand our operations to host at least one foreign instance of our cloud-based post-processing software products within a foreign country, such as within the European Union, in order to overcome such concerns and reach and engage more customers to grow our business in the related territory. If we are unable to sufficiently dissuade these concerns held by certain potential customers outside of the United States, or do not establish certain changes in our private patient health information data privacy practices, such as moving the hosting of EU-based information to an EU-based instance of our products and storage of related patient health information we receive via use of our products, our sales, business, financial condition, and results of operations could be harmed. We could also encounter delays if a clinical study is suspended or terminated by us, by the IRBs or the Ethics Committees of institutions at which such studies are being conducted, by the Data Safety Monitoring Board for such trial or by the FDA or other regulatory authorities. Such authorities may suspend or terminate a clinical study due to a number of factors, including failure to conduct the clinical study in accordance with regulatory requirements, including GC.

The patent prosecution process is expensive, time-consuming and complex and we may not be able to file, prosecute, maintain, enforce or license all necessary or desirable patents or patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output in time to obtain patent protection in one, several, or all geographies. Although we enter into non-disclosure and confidentiality agreements with parties who have access to our confidential information or patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, suppliers, consultants, advisors and other third parties, any of these parties may breach the agreements and publicly disclose such confidential information or research and development output. If such unauthorized public disclosure occurs before a patent application is filed, it could compromise or diminish our ability to seek patent protection. Such third parties could also breach obligations with respect to limited uses of our confidential information, which may include (i) breaching restrictions against making or inventing improvements or modifications to, or derivations of, our confidential technologies, and (ii) further separately applying, on their own behalf, for patent protections for such improvements, modifications, or derivations. Such breaches may compromise our ability to obtain or enforce our own patent protections for such improvements, modifications, or derivations. In addition, our ability to obtain and maintain valid and enforceable patents depends on whether the differences between our inventions and the prior art allow our inventions to be patentable over the prior art. Furthermore, the publication of discoveries in scientific literature often lags behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. As such, we cannot be certain that we were the first to make the inventions claimed in any of our patents or pending patent applications, or that we were the first to file for patent protection of such inventions. Moreover, in some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, relating to technology that we license from or license to third parties, including by way of our license from the Board of Regents of the University of California, and we are therefore reliant on our licensors or licensees. Therefore, Therefore, these and any of our patents and patent applications may not be prosecuted and enforced in a manner consistent with the best interests interests of our business. Furthermore, our license agreements may be terminated by the licensor. Defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the future, for example, with respect to proper priority claims, inventorship inventorship and the like, although we are unaware of any such defects that we believe are of importance. If we or any of our current or future licensors or licensees fail to obtain, maintain, protect, enforce or defend such patents and other intellectual property rights, such rights may be reduced or eliminated. If any of our current or future licensors or licensees are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised. If there are material defects in the form, preparation or prosecution of our patents or patent applications, such patents or applications may be invalid and/or unenforceable. Any of these outcomes could impair our ability to prevent competition from third parties, which may harm our business.

Patents have a limited lifespan. In the United States, the natural expiration of a utility patent is generally 20 years after its effective filing date and the natural expiration of a design patent is generally 14 years after its issue date, unless the filing date occurred on or after May 13, 2015, in which case the natural expiration of a design patent is generally 15 years after its issue date. However, the actual protection afforded by a patent varies from country to country, and depends upon many factors, including the type of patent, the scope of its coverage, any terminal disclaimers filed or to be filed, overlap in claimed subject matter with other patents in the portfolio, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Without patent protection for our technology, we may be open to competition. Further, if we encounter delays in our development efforts, the period of time during which we could market our technology under patent protection would be reduced and, given the amount of time required for the development, testing and regulatory review of planned or future technology and products, patents protecting such technology and products might expire before or shortly after such products are commercialized. For information regarding the expiration dates of patents in our patent portfolio, see “Business—Intellectual Property.” Our U.S. issued patents are expected to expire between January 3,30, 2026 and MarchJune 15,16, 2033,2037, without taking into account all possible patent term adjustments, extensions, or abandonments, and assuming payment of all appropriate maintenance, renewal, annuity, and other governmental fees. As our patents expire, the scope of our patent protection will be reduced, which may reduce or eliminate any competitive advantage afforded by our patent portfolio. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

We rely on a License from the Regents of the University of California, as well as other aspects of our own patented technology and intellectual property, in order to be able to use and sell various proprietary technologies that are material to our business, as well as technologies which we intend to use in our future commercial activities. Our rights to use these licensed technologies and the inventions claimed in the licensed patents, are subject to the continuation of, and our compliance with the terms of the license. The License provides that for so long as we pay patent prosecution costs, the Regents of the University of California will diligently prosecute and maintain the United States and foreign patents comprising the Patent Rights using counsel of its choice, and the UCSF Regents' counsel will take instructions only from The Regents of the University of California. The Regents of the University of California has the right to terminate the agreement upon advanced notice in the event of a default by us. The agreement will expire upon the expiration or abandonment of the last of the licensed patents. The patents subject to the agreement expire between 20252026 and 2029.2037, without considering any possible patent term adjustment or extensions and assuming payment of all appropriate maintenance, renewal, annuity, or other governmental fees. The loss of this license would materially negatively affect our ability to pursue our business objectives and result in material harm to our business operations.

We may find it necessary or prudent to acquire, obtain, or maintain licenses to intellectual property or proprietary rights held by third parties that we may identify as necessary or important to our business operations. However, we may be unable to acquire, secure, or maintain such licenses to any intellectual property or proprietary rights from third parties that we identify as necessary for our technology or any future products we may develop. The acquisition or licensing of third-party intellectual property or proprietary rights is a competitive area, and our competitors may pursue strategies to acquire or license third party intellectual property or proprietary rights that we may consider attractive or necessary. Our competitors may have a competitive advantage over us due to their size, capital resources and greater development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to acquire or license third party intellectual property or proprietary rights on terms that would allow us to make an appropriate return on our investment or at all. We have an existing license with the Board of Regents of the University of California, and which covers multiple patents patents and patent applications for inventions that are incorporated into our products, and if we are unable to maintain this license, we may not be able to legally market or sell our current or future products, which would harm our sales, business, financial condition, and results of operations. If we are unable to successfully acquire or license third-party intellectual property or proprietary rights that we require for making, using, or selling our products or services, or to maintain the existing licenses to intellectual property rights we have, we may have to abandon the development, manufacturing, marketing, or selling of our related products that require those rights, which could harm our sales, business, financial condition, and results of operations.

We have limited intellectual property rights outside the United States.States, the United Kingdom, and the European Union. Filing, prosecuting and defending patents on our products in all countries throughout the world would be prohibitively expensive, and the laws of foreign countries may not protect our rights to the same extent as the laws of the United States.States, the United Kingdom, and the European Union. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection protection, but enforcement is not as strong as in the United States. While we do not currently operate or sell our products outside of the United States, the United States,Kingdom, and the European Union, these products may compete with our products, and our patents or other intellectual intellectual property rights may not be effective or sufficient to prevent them from competing. Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries, which may impede on our ability to grow outside of the United States.States, the United Kingdom, and the European Union.

The medical device industry is highly competitive and dynamic. Due to the focused research and development that is taking place by several companies, including us and our competitors in this field, the intellectual property landscape is in flux and it may remain uncertain in the future. As such, we may be subject to claims that current or former employees, collaborators or other third parties have an interest, either as an owner, co-owner, or otherwise, in our patents, trade secrets or other intellectual property as an inventor or co-inventor. Additionally, we could become subject to significant intellectual property-related litigation and proceedings relating to our or third-party intellectual property and proprietary rights. For example, we may have inventorship disputes arise from conflicting obligations of employees, consultants or others who are involved in developing our products, or could face third-party claims of intellectual property infringement, misappropriation or other violations, including by a licensor from whom we’vewe have licensed certain intellectual property. These risks apply to our existing license from the Regents Regents of the University of California, both in relation to patent rights we co-own with them as a result of joint invention between our and their respective inventors, and in relation to co-existent license rights that we share with another third-party company in some of those patent rights, as further summarized above.

In addition, our patents or the patents of our licensing partners may also may become involved in inventorship, priority or validity disputes. For example, although we try to ensure that our employees, consultants and advisors are not in breach of any past contractual obligations and do not use the proprietary information or know-how of others in the work that they do for us, we may in the future become subject to claims that we or these individuals have, inadvertently or otherwise, used or disclosed intellectual property, including trade secrets or other proprietary information, of their former university or employer. Additionally, we may be subject to claims from third parties challenging intellectual property rights we regard as our own, based on claims that our agreements with employees or consultants obligating them to assign intellectual property to us are ineffective or in conflict with prior or competing contractual obligations to assign inventions to a previous employer, or to another person or entity. Furthermore, while it is our policy to require all employees and contractors to execute agreements assigning relevant intellectual property to us, we may also be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. These assignment agreements may not be self-executing or adequate in scope, and may be breached or challenged, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property. We may not have adequate remedies for any such breaches, and such claims could harm our business, financial condition and results of operations.

In addition to patent protection, we also rely on other proprietary rights, including protection of trade secrets, know-how and other confidential or proprietary information that is not patentable or that we elect not to patent. However, such information can be difficult to protect, and some courts, for instance, are less willing or unwilling to protect trade secrets. To maintain the confidentiality of our trade secrets and proprietary information, we rely heavily on confidentiality provisions that we have in contracts with our employees, consultants, collaborators, suppliers, customers, and others upon the commencement of their relationship with us. We cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes. Furthermore, we may not be able to prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by such third parties, despite the existence generally of these confidentiality restrictions. These contracts may not provide meaningful protection or equitable remedies for our trade secrets, know-how, or other proprietary information in the event of any unauthorized use, misappropriation, or disclosure of such trade secrets, know-how, or other proprietary information. There can be no assurance that such third parties will not breach their agreements with us, that we will have adequate remedies for any breach, or that our trade secrets will not otherwise become known or independently developed by competitors. Despite the protections we do place on our intellectual property or other proprietary rights, monitoring unauthorized use and disclosure of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual property or other proprietary rights have or will be adequate. Trade secret violations are often a matter of state law, and the criteria for protection of trade secrets can vary among different jurisdictions. In addition, the laws of many foreign countries will not protect our our intellectual property or other proprietary rights to the same extent as the laws of the United States. Consequently, we may be unable to prevent our proprietary technology from being exploited abroad, which could affect our ability to expand to foreign markets or require costly efforts to protect our products.

The trading market for our common stock will rely, in part, on the research and reports that industry or financial analysts publish about us or our business. We do not currently have,have only one securities analyst publishing research on us, and we have no guarantee that he will continue to cover us in the future. If he drops his coverage of us, we may never obtain,obtain research coverage by industry or financial analysts.analysts again. If no, or few, analysts commence coverage of us, the trading price of our stock would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our stock could decline. If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.

We cannot predict whether investors will find our common stock less attractive as a result of our reliance on these exemptions. If some investors find our common stock less attractiveattractive, as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Provisions in our corporate charter and our bylaws discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also could limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:

Since our inception we have incurred significant operating losses. As of December 31, 2024,2025, we had an accumulated deficit of $51.3 million.$58,495,940. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful commercialization and continued development of our SaaS platform. We expect that our expenses and capital requirements will increase substantially in connection with our ongoing activities, particularly if and as we:

Our primary near-term growth strategy is to secure payer contracts (including insurance companies, self- insured employers, Medicare, Medicaid, workmen’s compensation boards et. al.) to cover our Category III CPT codes and convert them into Category I CPT codes. We believe that with favorable payer coverage, the Company has the opportunity to more efficiently engage physicians and imaging centers that will adopt our technology.

As of December 31, 2024, 2025, we had cash and cash equivalents and restricted cash of approximately $0.46 million.$12,040,789. Subsequent to December 31, 2024,2025, the Company raised additional capital withthrough twoa registered direct offerings and one underwritten public offering (refer to Note 1716 – Subsequent Events to our financial statements). We believe our current cash and cash equivalents and restricted cash will fund our operating expenses and capital expenditure requirements intothrough the thirdfirst quarter of 2026.2028. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “Liquidity and capital resources.” To finance our operations beyond that point, we will need to raise additional capital, which cannot be assured. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back, or discontinue the commercialization or further development of our SaaS platform.

Cost of Revenue. Cost of Revenuerevenue is comprised of hosting and software costs, field support, UCSF royalty cost, NuVasive commission of 6% (expired in 2023), partner fees (Radnet), and credit card fees. Total Costcost of Revenuerevenue was $68,902 for the year ended December 31, 2025, compared to $84,658 for the year ended December 31, 2024, compareda to $75,728 for the year ended December 31, 2023, an increasedecrease of 11.8%.$15,756 Whileor Nociscan18.6%. reportThis volumes decreased from the year 2023 to 2024, the increase in Cost of Revenuedecrease was primarily primarily due to a higherreduced allocation of hosting fees to cost of revenue and a change in revenue mix ofthat Nociscan volume in Radnet accounts, which are subject toreduced partner fees.

Net income (loss). The Company experiencedreported a net loss of $7,233,629 for the year ended December 31, 2025, compared to a net loss of $6,992,927 for the year ended December 31, 2024, comparedrepresenting toan aincrease in net loss of $4,911,374$240,702 foror the year ended December 31, 2023, an increase of $2,081,552 (42%).3.4%.

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 wethe expectCompany 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.

As of December 31, 2024,2025, we had cash and cash equivalents of $463,661,$12,040,789, including $10,000$25,000 of restricted cash.

SubsequentDuring tothe year ended December 31, 2024,2025, the Company raised an aggregate of $20.1 million of gross proceeds of $22,566,911 through a combination of financing transactions, including a registered direct public offering of units ($14.6 million)totaling $14,554,545 consisting of common shares, Series A warrants, and Series B warrants, warrants; two registered direct offerings ($5.2 million) of common stock,stock totaling $5,702,968; a registered direct offering of pre-funded warrants totaling $1,972,957; and the exercise of Series C Preferred warrants ($0.3totaling million). See Note 17 – Subsequent Events to our financial statements for more information.$336,441.

We believe our current cash will fund our operating expenses and capital expenditure requirements into the thirdfirst quarter of 2026.2028. Management is actively managing ourthe cash position and continually working to secure long-term funding.position.

Results ofOf operationsOperations:

For the Three Months Ended MarchJune 31,30, 2026, and and 2025:

The following table summarizes our results of operations operations for the three months ended MarchJune 31,30, 2026, and 2025.

Total revenues for the three months ended MarchJune 30, 31, 2026 were $21,140,$25,208, which was an increase of $2,149$5,889 or 11.3%,30.5%, from $18,991$19,319 for the three months ended MarchJune 31,30, 2025. This increase in in revenue was driven primarily by the growing volume of NOCISCAN® reports sold into the UK market following recent local coverage decisions. decisions. We expect this increase in revenue to continue as we bring on more insurance payors, and our scan volumes increase.

Direct cost of revenue is comprised of hosting and and software costs, field support, UCSF royalty cost, partner fees (Radnet), and credit card fees. Total cost of revenue was $17,390$16,911 for the the three months ended MarchJune 31,30, 2026, compared to $23,479$14,179 for the same period ended MarchJune 31,30, 2025, aan decreaseincrease of $6,089$2,732 or 25.9%.19.3%. The gross margin increased to 17.7% in 2026 as compared to (23.6%) in 2025. This increase was primarily dueattributable to athe reducedgrowth allocationin ofour sales as well as higher hosting fees tosoftware costcosts, ofpartially revenueoffset andby a change reduction in revenue mix that reduced partner fees.

Sales and marketing expenses primarily consist of of post-clearance clinical services related to the CLARITY Trial, product marketing consulting, travel and entertainment costs, and salaries and benefits. Sales and marketing expenses totaled $908,797$877,160 for the three months ended MarchJune 31,30, 2026, compared to $302,584$343,765 for the three months ended MarchJune 31,30, 2025, representing an increase of $606,213$533,395 or 200.3%.155.2%.

SalariesThe and benefits increased by $228,171 to $303,844 for the three months ended March 31, 2026, compared to $75,673 for the same periodincrease in 2025, primarily due to accruals for incentive-based performance payouts and hiring of additional sales and marketing personnelexpenses was primarily driven by increased salaries and benefits due to adding three new salespeople in the United States and the United Kingdom. The increase was $286,804 to $382,014 for the three months ended June 30, 2026, compared to $95,210 for the same period in 2025, primarily due to increased salary expense and accruals for incentive-based performance payouts. We expect salaries and benefits to continue toat increasethis higher asrate a result of planned hiring within our sales and marketing functions duringthrough 2026.

TravelProduct andmarketing entertainmentconsulting expenses increased by $23,982 $89,336 to $65,595$101,374 for the three months ended MarchJune 31,30, 2026, compared to $41,613$12,038 for the same period in 2025, primarilyreflecting dueexpanded use toof activitiesexternal supporting localmarketing coverage determinations in the United Kingdom and increased travel by salespeople.consultants.

Research and development expenses increased by $26,636, $117,227, or 59.1%,9.8% to $315,417$297,070 for the three months ended MarchJune 31,30, 2026, compared to $198,190$270,434 for the three months ended MarchJune 31,30, 2025.

InThe addition,increase was primarily driven by higher quality system and regulatoryconsulting consulting expenses increased by $16,109$26,516 to $60,681$130,640 for the three months ended MarchJune 31,30, 2026, compared to $44,572$104,124 for the same period in 2025, primarily as a result of expanded regulatory compliance and documentation activities. We expect research and development expenses to continue to increase as we continue the development of the Nociscan 3.0 product.

General and administrative expenses were $1,766,477$1,733,789 for the three months ended MarchJune 31,30, 2026, compared to $986,663$1,127,449 for the three months ended MarchJune 31,30, 2025, representing an increase of $779,814$606,340 or 79.0%.53.8%.

ForThe theincrease threewas monthsprimarily endeddriven March 31, 2026,by legal expenses which were $215,492$250,871 compared to $88,805$99,483 in the same period in 2025, an increase of $126,687$151,388 primarily due to increased legal and advisory fees fees associated with corporate governance and shareholder-related matters.

DelawareInvestor franchiserelations taxexpenses expensealso increased to $205,648 $237,000 for the three months ended MarchJune 31,30, 2026, fromcompared $8,947to $155,297 in the corresponding prior-year period, representing an increase of $50,351 primarily reflecting expanded investor outreach activities and increased use of $228,053,third-party primarilyinvestor duerelations toservice changes in the Company’s capital structure and the methodology used to calculate the Company’s Delaware franchise tax obligation.providers.

TheseThe increasesincrease werewas partiallyprimarily offsetdriven by ahigher decreasequality ofsystem $51,203and inconsulting stock-based compensation expense,expenses which totaledincreased $4,694by $63,216 to $238,107 for the threesix months ended MarchJune 31,30, 2026, compared to $55,897$174,891 for the same period in 2025, primarily attributableas a result of expanded regulatory compliance and documentation activities. We expect research and development expenses to stockcontinue optionsto thatincrease vestedas inwe continue the priordevelopment year.of the Nociscan 3.0 product.

Gain on extinguishment of debt was $0 for the six three months ended MarchJune 31,30, 2026, compared to $73,272 in the corresponding prior-year period, reflecting the absence of debt extinguishment activity in the current period. The prior-year gain primarily related to the retirement of an obligation associated with commitment shares.

The Company’s warrant liabilities are measured at fair value at each reporting date. For the threesix months ended MarchJune 31,30, 2026, remeasurement of the Companyoutstanding recordedwarrants resulted in a favorable fairadjustment value adjustment of $18, compared to $11,721a favorable adjustment of $11,766 for the same period in the corresponding prior-year period, representing2025, a decrease of $11,703,$11,748. The decrease was primarily dueattributable to thea settlement of warrantsreduction in the priornumber period, resulting in fewerof outstanding warrant liabilitieswarrants subject to remeasurement in the current period.remeasurement.

Penalties and settlements expense were $0 for the the threesix months ended MarchJune 31,30, 2026, compared to $672,500 infor the correspondingsame prior-yearperiod period,in 2025, reflecting the absence of settlement-related charges charges in the current period. The prior-year expense primarily related to a payment to settle a dispute under the “fee tail” provision provision of a previously executed investment banking agreement, partially offset by a favorable accounts payable settlement.

Interest income was $133,035$290,381 for the threesix months ended MarchJune 31,30, 2026, compared to $42,163$178,028 for the same period in the corresponding prior-year period, representing2025, an increase of $90,872,$112,353, primarily reflecting higher average cash balances following the Company’s fundraising activities and related interest earned on money market deposits.

As of MarchJune 31,30, 2026, we had cash and cash equivalents of $19,029,976,$16,310,462, including $25,000 of restricted cash.

During the threesix months ended MarchJune 31,30, 2026, the Company completed a registered direct public offering of (i) 200,000 shares of the Company’s common stock, and (ii) pre-funded warrants (the “Pre-funded Warrants”) to purchase up to 1,800,000 shares of common stock, at an offering price of $5.18 per share. The purchase price of each Pre-funded Warrant was $5.17999, which represents the offering price per share of common stock, minus the exercise price of $.00001 per share. The Pre-funded Warrants are immediately exercisable. The aggregate gross proceeds to the Company from this offering were approximately $10.4 million, before deducting placement agent fees of 6% of the aggregate gross proceeds and other offering expenses payable by the Company.

During the threesix months ended MarchJune 31,30, 2026, the Company used $2,641,845$5,298,896 in cash for operating activities, compared to $2,510,782$4,376,394 for the same period in 2025, representing an increase in cash used of $131,063.$922,502. The increase was primarily driven by a higher net loss after adjusting for non-cash items, partially offset by favorable changes in working capital.