NOTE 13. STOCK BASED COMPENSATION

2022 Aclarion Equity Incentive Plan

The Company’s 2022 Equity Incentive Plan (the “2022 Plan”) became effective on April 21, 2022. The compensation committee of the Board of Directors administers the 2022 Plan.

The 2022 Plan provides for an annual automatic increase in the number of shares available for issuance on January 1 of each year through 2032, equal to 5% of the Company’s outstanding capital stock as of the preceding December 31, unless the Board determines otherwise.

Pursuant to the 2022 Plan’s automatic annual increase provision, the number of shares available for issuance increased by 68 shares on January 1, 2025, resulting in a total of 256 shares. On January 1, 2026, the share reserve increased by an additional 42,718 shares under the same provision.

As of March 31, 2026, 42,974 shares remained available for future grants under the 2022 Plan.

Awards granted under the 2022 Plan may include stock options and restricted stock awards. Stock options may be classified as either incentive stock options or nonqualified stock options, generally have contractual terms of up to ten years, and vest in accordance with the terms specified in the applicable award agreements.

No stock options were granted under the 2022 plan during the three months ended March 31, 2026 or 2025.

All share amounts presented herein have been retroactively adjusted to reflect the 2025 Stock Splits.

Inducement Grant Outside the 2022 Plan

On September 2, 2025, the Company granted a stock option to its incoming Chief Financial Officer as an inducement award in accordance with Nasdaq Listing Rule 5635(c)(4). This award was not granted pursuant to the 2022 Plan but was structured to mirror the terms and conditions of the 2022 Plan. The inducement grant provides for an option to purchase 17,000 shares of the Company’s common stock at an exercise price of $7.15 per share, equal to the fair market value on the date of grant. The option vests over a four-year period and expires on September 2, 2035, ten years from the date of grant.

Determining Fair Value of Stock Options

The fair value of each grant of stock options was determined by the Company using the methods and assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment to determine.

Valuation and Amortization Method —The Company estimates the fair value of its stock options using the Black-Scholes-Merton option-pricing model. This fair value is then amortized over the requisite service periods of the awards.

Expected Term—The Company estimates the expected term of stock option by taking the average of the vesting term and the contractual term of the option, as illustrated by the simplified method.

Expected Volatility—The expected volatility is derived from the Company’s expectations of future market volatility over the expected term of the options.

Risk-Free Interest Rate—The risk-free interest rate is based on the 10-year U.S. Treasury yield curve on the date of grant.

Dividend Yield—The dividend yield assumption is based on the Company’s history and expectation of no dividend payouts.

Stock Award Activity

A summary of option activity under the Company’s 2015 and 2022 incentive plans are as follows:

The aggregate intrinsic value of options outstanding at March 31, 2026 is $0. The aggregate intrinsic value of vested and exercisable options at March 31, 2026 is $0.

As of March 31, 2026, there was approximately $64,238 of total unrecognized compensation cost related to non-vested stock options.

Restricted Stock Units

No restricted stock units were granted during the three months ended March 31, 2026 and 2025. Accordingly, there was no share-based compensation expense related to RSUs recognized during the three months ended March 31, 2026 and 2025.

There were no RSUs outstanding as of March 31, 2026 and 2025.

As of March 31, 2026 and December 31 2025, there was no unrecognized compensation cost related to non-vested RSUs.

Stock-based Compensation Expense

The following table summarizes the total stock-based compensation expense included in the Company’s statements of operations for the periods presented: