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 share reserve of 256 shares. On January 1, 2026, the share reserve increased by an additional 42,718 shares, resulting in 42,974 shares available for future grants under the 2022 Plan.

During the three months ended June 30, 2026, the Company’s stockholders approved an amendment to the 2022 Plan increasing the aggregate number of shares authorized for issuance under the Plan by 457,026 shares, from 42,974 shares to 500,000 shares.

Awards granted under the 2022 Plan may include incentive 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.

On June 11, 2026, the Compensation Committee approved grants of an aggregate of 499,000 Restricted Stock Units (“RSUs”) under the Company’s amended 2022 Equity Incentive Plan to executive officers, employees, consultants, and non-employee directors. The RSUs vest in full on June 1, 2027, subject to each recipient’s continued service through the vesting date, and provide for accelerated vesting upon a qualifying Change in Control.

As of June 30, 2026, 996 shares remained available for future grants under the 2022 Plan, reflecting the 500,000 shares authorized less the 499,000 RSUs granted on June 11, 2026 and 4 shares underlying stock options granted in 2022 and 2023.

No stock options were granted under the 2022 Plan during the six months ended June 30, 2026 or 2025.

All share amounts presented herein have been retroactively adjusted to reflect the Company’s 2025 reverse stock splits.

Inducement Grants Outside the 2022 Plan

On September 2, 2025, the Company granted a stock option to its incoming Chief Financial Officer, Gregory Gould, as an inducement award in accordance with Nasdaq Listing Rule 5635(c)(4). The award was granted outside of the Company’s 2022 Equity Incentive Plan (the “2022 Plan”), but otherwise substantially mirrors the terms and conditions of the 2022 Plan. The option provides for the purchase of 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 grant date. The option vests over a four-year service period and expires on September 2, 2035.

On May 5, 2026, the Company granted a second inducement award to Dan Keefe, Commercial Director–West, in connection with the commencement of his employment, also in accordance with Nasdaq Listing Rule 5635(c)(4). The award, which was granted outside of the 2022 Plan, provides for a nonqualified stock option to purchase 17,000 shares of the Company’s common stock at an exercise price of $3.20 per share, equal to the closing market price on the grant date. The option vests over four years, with 25% vesting on the first anniversary of the vesting commencement date and the remaining 75% vesting in equal monthly installments over the following 36 months, subject to continued service. The option expires on May 5, 2036.

The Company accounts for both inducement awards in accordance with ASC 718, Compensation—Stock Compensation. Because these awards were granted outside of the 2022 Plan, they do not reduce the shares available for future issuance under the Plan.

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 U.S. Treasury yield curve in effect on the date of grant, for a term consistent with the expected term of the award.

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 June 30, 2026 is $0. The aggregate intrinsic value of vested and exercisable options at June 30, 2026 is $0.

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

During the three and six months ended June 30, 2026, the Company recognized $12,128 and $16,822, respectively, of stock-based compensation expense related to stock options. During the three and six months ended June 30, 2025, the Company recognized $28,360 and $84,257, respectively, of stock-based compensation expense related to stock options.

As of June 30, 2026, there was approximately $145,720 of total unrecognized compensation cost related to non-vested stock options.

Restricted Stock Units

On June 11, 2026, the Compensation Committee approved grants of an aggregate of 499,000 Restricted Stock Units (“RSUs”) under the Company’s amended 2022 Equity Incentive Plan to executive officers, employees, consultants, and non-employee directors. The RSUs vest in full on June 1, 2027, subject to each recipient’s continued service through the vesting date, and provide for accelerated vesting upon a qualifying Change in Control.

A summary of restricted stock units activity is as follows:

During the three and six months ended June 30, 2026, the Company recognized $89,989 of stock-based compensation expense related to RSUs. No stock-based compensation expense related to RSUs was recognized during the three and six months ended June 30, 2025, as no RSUs were outstanding.

As of June 30, 2026, total unrecognized compensation cost related to nonvested RSUs was $1,511,801, which is expected to be recognized over a weighted-average period of approximately 0.92 years. There was no unrecognized compensation cost related to nonvested RSUs as of December 31, 2025.

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: