UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission file number 001-41775

NEURAXIS, INC.

(Exact name of registrant as specified in its charter)

Delaware

45-5079684

(State or other jurisdiction of

incorporation or organization)

(I. R. S. Employer

Identification No.)

11611 N. Meridian Street, Suite 330

Carmel, IN

46032

(Address of principal executive offices)

(Zip Code)

(812) 689-0791

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		NRXS		NYSE American LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding as of August 8, 2024 was 6,841,621 shares.

TABLE OF CONTENTS

PART I		3

ITEM 1:	FINANCIAL STATEMENTS	3
	Condensed Balance Sheets as of June 30, 2024 (Unaudited) and December 31, 2023	3
	Condensed Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited)	4
	Condensed Statements of Stockholders’ Deficit for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited)	5
	Condensed Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (Unaudited)	6
	Notes to Condensed Financial Statements (Unaudited)	7
ITEM 2:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	24
ITEM 3:	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	27
ITEM 4:	CONTROLS AND PROCEDURES	28

PART II		29

ITEM 1:	LEGAL PROCEEDINGS	29
ITEM 1A:	RISK FACTORS	29
ITEM 2:	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	29
ITEM 3:	DEFAULTS UPON SENIOR SECURITIES	29
ITEM 5:	OTHER INFORMATION	29
ITEM 6:	EXHIBITS	30
SIGNATURES		31

PART I

ITEM 1. FINANCIAL STATEMENTS

NeurAxis, Inc.

Condensed Balance Sheets

	June 30, 2024			December 31,
	(Unaudited)			2023
Assets

Current Assets:
Cash and cash equivalents	$	1,765,274		$	78,560
Accounts receivable, net		147,131			73,167
Inventories		42,710			21,220
Prepaids and other current assets		156,446			69,663
Total current assets		2,111,561			242,610

Property and Equipment, at cost:		460,034			436,626
Less - accumulated depreciation		(364,538	)		(348,074	)
Property and equipment, net		95,496			88,552

Other Assets:
Operating lease right of use asset, net		323,450			70,263
Intangible assets, net		102,831			108,073
Total Assets	$	2,633,338		$	509,498

Liabilities

Current Liabilities:
Accounts payable	$	1,118,317		$	1,204,219
Accrued expenses		1,310,792			401,088
Current portion of operating lease payable		48,247			49,127
Notes payable		38,797			148,062
Notes payable - convertible notes, net of unamortized debt discount of $206,464 and $0 as of June 30, 2024 and December 31, 2023, respectively		4,728,538			—
Customer deposits		82,122			74,947
Share liability		257,131			—
Warrant liabilities		9,933			8,225
Total current liabilities		7,593,877			1,885,668

Non-current Liabilities:
Operating lease payable, net of current portion		297,843			27,071
Total non-current liabilities		297,843			27,071

Total liabilities		7,891,720			1,912,739

Commitments and contingencies (see note 12)		-			-

Stockholders’ Deficit
Convertible Series A Preferred stock, $0.001 par value; 1,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively		—			—
Convertible Series Seed Preferred stock, $0.001 par value; 120,000 shares authorized; 0 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively		—			—
Preferred stock, value		—			—

Common stock, $0.001 par value; 100,000,000 shares authorized; 6,841,621 and 6,508,897 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively		6,842			6,509
Additional paid in capital		48,331,248			47,148,361
Accumulated deficit		(53,596,472	)		(48,558,111	)

Total Stockholders’ Deficit		(5,258,382	)		(1,403,241	)

Total Liabilities and Stockholders’ Deficit	$	2,633,338		$	509,498

The accompanying notes are an integral part of these unaudited condensed financial statements

NeurAxis, Inc.

Condensed Statements of Operations (Unaudited)

	2024			2023			2024			2023
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2024			2023			2024			2023

Net Sales	$	611,500		$	646,021		$	1,258,135		$	1,451,131
Cost of Goods Sold		73,458			67,813			148,539			163,713

Gross Profit		538,042			578,208			1,109,596			1,287,418

Selling Expenses		62,274			78,791			142,304			186,723
Research and Development		54,312			109,789			59,882			126,586
General and Administrative		2,628,288			1,507,169			4,946,362			2,987,923

Operating Loss		(2,206,832	)		(1,117,541	)		(4,038,952	)		(2,013,814	)

Other (Expense) Income:
Financing charges		—			—			(230,824	)		(2,772	)
Interest expense		(80,697	)		(194,690	)		(107,257	)		(356,378	)
Change in fair value of warrant liability		7,576			(36,050	)		(1,708	)		198,757
Change in fair value of derivative liability		—			860			—			192,157
Amortization of debt discount and issuance cost		(63,817	)		(887,937	)		(85,500	)		(3,550,592	)
Extinguishment of debt liabilities		—			—			—			1,129,498
Other income		2,961			2			2,961			1,552
Other expense		(576,901	)		(258	)		(577,081	)		(7,430	)
Total other (expense) income, net		(710,878	)		(1,118,073	)		(999,409	)		(2,395,208	)

Net Loss	$	(2,917,710	)	$	(2,235,614	)	$	(5,038,361	)	$	(4,409,022	)

Per-Share Data
Basic and diluted loss per share	$	(0.42	)	$	(1.21	)	$	(0.73	)	$	(2.39	)

Weighted Average Shares Outstanding
Basic and diluted		6,921,004			2,003,322			6,902,841			2,003,322

The accompanying notes are an integral part of these unaudited condensed financial statements

NeurAxis, Inc.

Condensed Statements of Stockholders’ Deficit (Unaudited)

	Shares		Amount		Shares		Amount		Shares		Amount		in Capital		Deficit			Deficit
	For the Three and Six Months Ended June 30, 2023
	Convertible Series A Preferred Stock				Convertible Series Seed Preferred Stock				Common Stock				Additional Paid		Accumulated			Stockholder’s
	Shares		Amount		Shares		Amount		Shares		Amount		In Capital		Deficit			Deficit
Balance, January 1, 2023		506,637	$	507		115,477	$	115		1,963,322	$	1,963	$	28,355,230	$	(33,931,428	)	$	(5,573,613	)
Net loss		-		-		-		-		-		-		-		(2,173,408	)		(2,173,408	)
Balance, March 31, 2023		506,637	$	507		115,477	$	115		1,963,322	$	1,963	$	28,355,230		(36,104,836	)		(7,747,021	)
Net loss		-		-		-		-		-		-		-		(2,235,614	)		(2,235,614	)
Balances, June 30, 2023		506,637	$	507		115,477	$	115		1,963,322	$	1,963	$	28,355,230	$	(38,340,450	)	$	(9,982,635	)

	For the Three and Six Months Ended June 30, 2024
	Convertible Series A Preferred Stock				Convertible Series Seed Preferred Stock				Common Stock				Additional Paid		Accumulated			Stockholder’s
	Shares		Amount		Shares		Amount		Shares		Amount		In Capital		Deficit			Deficit
Balance, January 1, 2024		-	$	-		-	$	-		6,508,897	$	6,509	$	47,148,361	$	(48,558,111	)	$	(1,403,241	)
Warrants exercised		-		-		-		-		11,000	$	11		26,169		-			26,180
Additional paid in capital from warrants issued under consulting agreement		-		-		-		-		-		-		15,543		-			15,543
Additional paid in capital form warrants issued as debt discount		-		-		-		-		-		-		97,465		-			97,465
Common stock issued from agreements		-		-		-		-		75,000		75		200,175		-			200,250
Net loss		-		-		-		-		-		-		-		(2,120,651	)		(2,120,651	)
Balance, March 31, 2024		-	$	-		-	$	-		6,594,897	$	6,595	$	47,487,713		(50,678,762	)		(3,184,454	)
Balance		-	$	-		-	$	-		6,594,897	$	6,595	$	47,487,713		(50,678,762	)		(3,184,454	)
Additional paid in capital from warrants issued under consulting agreement		-		-		-		-		-		-		44,853		-			44,853
Common stock issued from agreements		-		-		-		-		246,724		247		798,682		-			798,929
Net loss		-		-		-		-		-		-		-		(2,917,710	)		(2,917,710	)
Balances, June 30, 2024		-	$	-		-	$	-		6,841,621	$	6,842	$	48,331,248	$	(53,596,472	)	$	(5,258,382	)
Balances		-	$	-		-	$	-		6,841,621	$	6,842	$	48,331,248	$	(53,596,472	)	$	(5,258,382	)

The accompanying notes are an integral part of these unaudited condensed financial statements

NeurAxis, Inc.

Condensed Statements of Cash Flows (Unaudited)

	2024			2023
	For the Six Months Ended June 30,
	2024			2023
Cash Flows from Operating Activities
Net Loss	$	(5,038,361	)	$	(4,409,022	)
Adjustments to reconcile net loss to net cash used by operating activities:
Amortization of debt discount and issuance cost		85,500			3,550,592
Depreciation and amortization		21,707			20,060
Provisions for losses on accounts receivable		20,001			3,927
Non-cash lease expense		31,152			15,559
Stock-based compensation		227,000			—
Extinguishment of derivative liability		—			(1,129,498	)
Issuance of common stock for non-cash consideration		831,382			—
Fair value of warrants issued for non-cash consideration		60,396			—
Finance charges		—			2,772
Change in fair value of derivative liabilities		—			(192,157	)
Change in fair value of warrant liabilities		1,708			(198,757	)
Changes in operating assets and liabilities:
Accounts receivable		(93,964	)		(66,698	)
Inventory		(21,490	)		3,928
Prepaids and other current assets		13,342			(20,607	)
Accounts payable		(85,902	)		846,001
Accrued expenses		1,007,508			340,318
Customer deposits		7,175			2,143
Operating lease liability		(14,449	)		(16,698	)
Net cash used by operating activities		(2,947,295	)		(1,248,137	)

Cash Flows from Investing Activities
Additions to property and equipment		(23,408	)		(12,067	)
Additions to intangible assets		—			(1,000	)
Net cash used by investing activities		(23,408	)		(13,067	)

Cash Flows from Financing Activities
Offering costs paid		—			(204,407	)
Proceeds from exercised warrants		26,180			—
Principal payments on notes payable		(109,263	)		(2,724,479	)
Proceeds from notes payable		—			159,831
Proceeds from convertible notes, net of fees		4,740,500			3,828,000
Net cash provided by financing activities		4,657,417			1,058,945

Net Increase (Decrease) in Cash and Cash Equivalents		1,686,714			(202,259	)

Cash and Cash Equivalents at Beginning of Period		78,560			253,699

Cash and Cash Equivalents at End of Period	$	1,765,274		$	51,440

Supplemental Disclosure of Non-Cash Operating Activities
Cash paid for interest	$	27,670		$	57,202
Cash paid for income taxes		—			—
Supplemental Schedule of Non-Cash Investing and Financing Activities
Recognition of right of use asset	$	284,339		$	—
Fair value of warrant liabilities from convertible notes		—			1,881,257
Fair value of derivative liabilities of conversion feature from convertible notes		—			1,860,984
Fair value of warrants from debt discount in convertible notes classified as additional paid in capital		97,465			—

The accompanying notes are an integral part of these unaudited condensed financial statements

1. Basis of Presentation, Organization and Other Matters

NeurAxis, Inc. (“we,” “us,” the “Company,” or “NeurAxis”) was established in 2011 and incorporated in the state of Indiana on April 17, 2012, under the name of Innovative Health Solutions, Inc. The name was changed to NeurAxis, Inc. in March of 2022. Additionally, the Company filed a Certificate of Conversion to become a Delaware corporation on June 23, 2022. The authorized shares were increased, and a par value established.

On January 10, 2023, the Company’s board of directors authorized a 1-for-2 reverse stock split. All per share information has been adjusted for this reverse stock split. The reverse split became effective on January 12, 2023. All share and per share amounts for the common stock have been retroactively restated to give effect to the splits.

As part of the conversion to a Delaware corporation, the total number of shares of all classes of stock which the Corporation shall have authority to issue is (1) 100,000,000 shares of Common Stock, par value $0.001 per share (“Common Stock”) and (ii) 1,120,000 shares of Preferred Stock, par value $0.001 per share (“Preferred Stock”), 1,000,000 of which is hereby designated as “Series A Preferred Stock” and 120,000 of which is hereby designated as “Series Seed Preferred Stock” with the rights, preferences, powers, privileges and restrictions, qualifications and limitations set forth in this Article IV of the Delaware Certificate of Incorporation. All share amounts have been retroactively restated to give effect to these changes.

On August 9, 2023, the Company consummated an initial public offering, conducted on a firm commitment basis, pursuant to which it sold 1,098,667 shares of its common stock at a price of $6.00 per share, resulting in gross proceeds to the Company of $6,592,002. Net proceeds to the Company, after deducting underwriting discounts and commissions, 2022 deferred offering costs totaling $736,736 and offering expenses paid by the Company, were $4,110,721. All shares sold in our IPO were registered pursuant to a registration statement on Form S-1 (File No. 333- 269179), as amended, declared effective by the SEC on August 9, 2023. Alexander Capital L.P. (“Alexander”) acted as sole book-running manager for the offering and Spartan Capital Securities, LLC acted as co-manager for the offering. The underwriters did not exercise their option to purchase up to an additional 164,801 shares of common stock. The Company paid the underwriters an underwriting discount of seven percent (7%) of the amount raised in the offering. In addition, we also paid the underwriters a non-accountable expense allowance in the amount of 1% (such 8% in commissions and fees amounted to a total of $527,000) at closing, as well as $175,000 for the reimbursement of certain of the underwriters’ expenses. Additionally, as partial consideration for services rendered in connection with the offering, the Company issued Alexander unregistered warrants to purchase an aggregate of 65,921 shares of Company common stock, representing 6.0% of the aggregate shares sold in the offering. The warrants have an initial exercise price of $7.20 per share (equal to 120% of the offering price per share), have a term of five years from the commencement of sales in the offering, and are exercisable at any time.

The Company is headquartered in Carmel, Indiana. The Company specializes in the development, production, and sale of medical neuromodulation devices.

The Company has developed three FDA cleared products, the IB-STIM (DEN180057, 2019), the NSS-2 Bridge (DEN170018, 2017), and the original 510(K) clearance (K140530, 2014).

	●	The IB-STIM is a percutaneous electrical nerve field stimulator (PENFS) device that is indicated in patients 11-18 years of age with functional abdominal pain associated with irritable bowel syndrome. The IB-STIM currently is the only product marketed and sold by the Company.

	●	The NSS-2 Bridge is a percutaneous nerve field stimulator (PNFS) device indicated for use in the reduction of the symptoms of opioid withdrawal. The NSS-2 Bridge device was licensed to Masimo Corporation in April 2020, and the Company received a one-time licensing fee of $250,000 from Masimo. Masimo markets and sells this product as its Masimo Bridge, and the Company will not receive any further licensing payments or other revenue from this product.

	●	The original 510(K) device was the EAD, an electroacupuncture device, now called NeuroStim. The EAD is no longer being manufactured, sold or distributed but reserved only for research purposes.

The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and following the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These interim financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments which are necessary for a fair presentation of the Company’s financial information. These unaudited interim results are not necessarily indicative of the results to be expected for the year ending December 31, 2024, or any other interim period or for any other future year. These unaudited financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2023.

2. Summary of Significant Accounting Policies

Use of Estimates and Critical Accounting Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience, and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. The Company uses estimates in accounting for, among other items, revenue recognition, allowance for credit losses, stock-based compensation, income tax provisions, excess and obsolete inventory reserve, and impairment of property and equipment, and intellectual property. Actual results could differ from those estimates.

Fair Value Measurements

The Company accounts for financial instruments in accordance with ASC 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:

Level 1 – Quoted prices (unadjusted) for identical unrestricted assets or liabilities in active markets that the reporting entity has the ability to access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities: quoted prices in markets that are not active; or financial instruments for which all significant inputs are observable or can be corroborated by observable market date, either directly or indirectly.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These unobservable inputs reflect that reporting entity’s own assumptions about assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value require significant management judgment or estimation.

The Company’s Level 1 assets/liabilities include cash, accounts receivable, accounts payable, prepaids, and other current assets. Management believes the estimated fair value of these accounts on June 30, 2024 approximate their carrying value as reflected in the balance sheets due to the short-term nature of these instruments or the use of market interest rates for debt instruments.

The Company’s Level 3 assets/liabilities include derivative and warrant liabilities. Inputs to determine fair value are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models. The valuation techniques involve management’s estimates and judgment based on unobservable inputs. The fair value estimates may not be indicative of the amounts that would be realized in a market exchange. Additionally, there may be inherent uncertainties or changes in the underlying assumptions used, which could significantly affect the current or future fair value estimates. Unobservable inputs used in the models are significant to the fair values of the assets and liabilities.

There were no transfers between any of the levels during the periods ended June 30, 2024 and December 31, 2023. In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company’s assets and liabilities are also subject to nonrecurring fair value measurements. As of June 30, 2024 and December 31, 2023, the Company had no assets that were measured on a nonrecurring basis.

Basic and Diluted Net Income (Loss) per Share

Earnings or loss per share (“EPS”) is computed by dividing net income (loss), net of preferred stock dividends, by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed by dividing net income (loss) by the weighted average of all potentially dilutive shares of common stock that were outstanding during the periods presented. As of June 30, 2024 and December 31, 2023, there were no preferred stock dividends declared or paid.

Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for June 30, 2024 and 2023 presented in these financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.

The Company had the following potentially dilutive common stock equivalents at June 30, 2024 and 2023:

	2024		2023

Convertible Series A Preferred Stock		—		1,013,270
Convertible Series Seed Preferred Stock		—		230,954
Options		1,319,394		1,319,394
Pre-Funded Warrants for Common Stock		289,779		289,779
Warrants		1,880,307		854,795
Convertible Bridge Debt		—		1,285,877
Totals		3,489,480		4,994,069

The following table presents the calculation of the basic and diluted net loss per share and the effect of preferred stock dividends:

	2024			2023			2024			2023
	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Numerator:
Net loss	$	(2,917,710	)	$	(2,235,614	)	$	(5,038,361	)	$	(4,409,022	)
Preferred stock dividends		-			(190,699	)		-			(379,303	)
		(2,917,710	)		(2,426,313	)		(5,038,361	)		(4,788,325	)
Denominator:
Weighted average shares of common stock outstanding - basic and diluted		6,921,004			2,003,322			6,902,841			2,003,322
Basic and diluted net loss per share	$	(0.42

SEC Form 10-Q filed by Neuraxis Inc.