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 March 31, 2025

☐ 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 March 31, 2025 was 7,215,864 shares.

TABLE OF CONTENTS

PART I		3

ITEM 1:	FINANCIAL STATEMENTS	3
	Condensed Balance Sheets as of March 31, 2025 (Unaudited) and December 31, 2024	3
	Condensed Statements of Operations for the Three Months Ended March 31, 2025 and 2024 (Unaudited)	4
	Condensed Statements of Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2025 and 2024 (Unaudited)	5
	Condensed Statements of Cash Flows for the Three Months Ended March 31, 2025 and 2024 (Unaudited)	6
	Notes to Condensed Financial Statements (Unaudited)	7
ITEM 2:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	22
ITEM 3:	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	25
ITEM 4:	CONTROLS AND PROCEDURES	26

PART II		27

ITEM 1:	LEGAL PROCEEDINGS	27
ITEM 1A:	RISK FACTORS	27
ITEM 2:	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	27
ITEM 3:	DEFAULTS UPON SENIOR SECURITIES	27
ITEM 5:	OTHER INFORMATION	27
ITEM 6:	EXHIBITS	28
SIGNATURES		29

PART I

ITEM 1. FINANCIAL STATEMENTS

NeurAxis, Inc.

Condensed Balance Sheets

	March 31, 2025			December 31, 2024
	(Unaudited)
Assets

Current Assets:
Cash and cash equivalents	$	2,005,370		$	3,696,870
Accounts receivable, net of credit losses of $5,000 and $5,000 as of March 31, 2025 and December 31, 2024, respectively		243,708			244,618
Inventories, net of reserves of $4,454 and $4,454 as of March 31, 2025 and December 31, 2024, respectively		37,421			44,328
Prepaids and other current assets		254,527			280,367
Total current assets		2,541,026			4,266,183

Property and Equipment, at cost:		481,012			464,402
Less - accumulated depreciation		(377,297	)		(374,420	)
Property and equipment, net		103,715			89,982

Other Assets:
Operating lease right of use asset, net		270,938			284,656
Intangible assets, net		93,967			96,588
Security Deposit		20,163			20,163
Total Assets	$	3,029,809		$	4,757,572

Liabilities

Current Liabilities:
Accounts payable	$	535,017		$	596,946
Accrued expenses		1,370,960			1,577,780
Current portion of operating lease payable		65,900			62,754
Notes payable		84,307			154,152
Customer deposits		37,684			32,527
Warrant liabilities		7,335			9,166
Total current liabilities		2,101,203			2,433,325

Non-current Liabilities:
Operating lease payable, net of current portion		238,530			256,499
Other non-current liabilities		431,597			—
Total non-current liabilities		670,127			256,499

Total liabilities		2,771,330			2,689,824

Commitments and contingencies (see note 14)		—			—

Stockholders’ Equity
Convertible Series B Preferred stock, $0.01 par value; 5,000,000 shares authorized, 4,280,939 shares issued and outstanding as of March 31, 2025 and December 31, 2024		4,281			4,281
Common stock, $0.001 par value; 100,000,000 shares authorized; 7,215,864 and 6,990,227 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively		7,216			6,990
Additional paid in capital		59,325,278			58,856,089
Accumulated deficit		(59,078,296	)		(56,799,612	)

Total stockholders’ equity		258,479			2,067,748

Total Liabilities and Stockholders’ Equity	$	3,029,809		$	4,757,572

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

NeurAxis, Inc.

Condensed Statements of Operations (Unaudited)

	2025			2024
	For the Three Months Ended March 31,
	2025			2024

Net Sales	$	895,655		$	646,635
Cost of Goods Sold		139,475			75,081

Gross Profit		756,180			571,554

Selling Expenses		133,954			80,030
Research and Development		60,556			5,570
General and Administrative		2,856,768			2,318,074

Operating Loss		(2,295,098	)		(1,832,120	)

Other income (expense):
Financing charges		—			(230,824	)
Interest expense		(2,237	)		(26,560	)
Change in fair value of warrant liability		1,831			(9,284	)
Amortization of debt discount and issuance cost		—			(21,683	)
Other income		16,820			—
Other expense		—			(180	)
Total other income (expense), net		16,414			(288,531	)

Net loss		(2,278,684	)		(2,120,651	)
Preferred stock dividends		(213,543	)		—
Net loss available to common stockholders	$	(2,492,227	)	$	(2,120,651	)

Per-Share Data
Basic and diluted loss per share	$	(0.33	)	$	(0.32	)

Weighted Average Common Shares Outstanding
Basic and diluted		7,463,578			6,550,567

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

NeurAxis, Inc.

Condensed Statements of Stockholders’ Equity (Deficit) (Unaudited)

	Shares		Amount		Shares		Amount		Capital			Deficit			(Deficit)
	Convertible Series B Preferred Stock				Common Stock				Additional Paid In			Accumulated			Stockholder’s Equity
	Shares		Amount		Shares		Amount		Capital			Deficit			(Deficit)
Balances at 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 advisory agreement		-		-		-		-		15,543			-			15,543
Additional paid in capital from 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	)
Balances at March 31, 2024		-	$	-		6,594,897	$	6,595	$	47,487,713		$	(50,678,762	)	$	(3,184,454	)

Balances at January 1, 2025		4,280,939	$	4,281		6,990,227	$	6,990	$	58,856,089		$	(56,799,612	)	$	2,067,748
Balances		4,280,939		4,281		6,990,227		6,990		58,856,089			(56,799,612	)		2,067,748
Warrants exercised		-		-		186,166		186		(186	)		-			-
Common stock issued from agreements		-		-		39,471		40		112,453			-			112,493
Issuance of restricted stock awards		-		-		-		-		356,922			-			356,922
Net loss		-		-		-		-		-			(2,278,684	)		(2,278,684	)
Balances at March 31, 2025		4,280,939	$	4,281		7,215,864	$	7,216	$	59,325,278		$	(59,078,296	)	$	258,479
Balances		4,280,939	$	4,281		7,215,864	$	7,216	$	59,325,278		$	(59,078,296	)	$	258,479

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

NeurAxis, Inc.

Condensed Statements of Cash Flows (Unaudited)

	2025			2024
	For the Three Months Ended March 31,
	2025			2024
Cash Flows from Operating Activities
Net Loss	$	(2,278,684	)	$	(2,120,651	)
Adjustments to reconcile net loss to net cash used by operating activities:
Amortization of debt discount and issuance cost		—			21,683
Depreciation and amortization		6,356			10,737
Provisions for losses on accounts receivable		—			13,634
Loss on disposal of property and equipment		533			—
Non-cash lease expense		13,719			17,316
Stock-based compensation		105,811			227,000
Issuance of common stock for non-cash consideration		—			50,062
Issuance of warrants for non-cash consideration		—			15,543
Change in fair value of warrant liabilities		(1,831	)		9,284
Changes in operating assets and liabilities:
Accounts receivable		910			(31,001	)
Inventory		6,907			1,026
Prepaids and other current assets		25,840			4,497
Accounts payable		(61,931	)		32,821
Accrued expenses		156,784			415,394
Customer deposits		5,157			10,807
Operating lease liability		(14,823	)		(10,312	)
Other non-current liabilities		431,597			—
Net cash used in operating activities		(1,603,655	)		(1,332,160	)

Cash Flows from Investing Activities
Additions to property and equipment		(18,000	)		(14,722	)
Net cash used in investing activities		(18,000	)		(14,722	)

Cash Flows from Financing Activities
Proceeds from exercised warrants		—			26,180
Principal payments on notes payable		(69,845	)		(51,606	)
Proceeds from convertible notes, net of fees		—			1,375,500
Net cash (used in) provided by financing activities		(69,845	)		1,350,074

Net (Decrease) Increase in Cash and Cash Equivalents		(1,691,500	)		3,192

Cash and Cash Equivalents at Beginning of Period		3,696,870			78,560

Cash and Cash Equivalents at End of Period	$	2,005,370		$	81,752

Supplemental Disclosure of Operating Activities
Cash paid for interest	$	2,237		$	16,889
Cash paid for income taxes		—			—
Supplemental Schedule of Non-Cash Investing and Financing Activities
Recognition of right of use asset	$	—		$	284,339
Common stock issued for services		112,493			200,250
Common stock issued upon cashless exercise of warrants		186			—
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 in 2012 under the name of Innovative Health Solutions, Inc. The name was changed to NeurAxis, Inc. in 2022 when the Company filed a Certificate of Conversion and became a Delaware corporation.

The Company is headquartered in Carmel, Indiana, and specializes in the development, production, and sale of medical neuromodulation devices. The Company has developed four FDA cleared products: (i) the IB-STIM (DEN180057, 2019), (ii) the Rectal Expulsion Device (“RED”) (K242304,2024), (iii) the NSS-2 Bridge (DEN170018, 2017) and (iv) the original 510(K) clearance (K140530, 2014).

	●	The IB-STIM is a percutaneous electrical nerve field stimulator (PENFS) device that is indicated in patients 8-21 years of age with functional abdominal pain associated with irritable bowel syndrome. The IB-STIM currently is one of two products marketed and sold by the Company.

	●	RED is indicated to evaluate the neuromuscular function of a patient’s ability to expel its contents from the rectum and as a qualitative test for rectal hypersensitivity patients who experience desire or urge to defecate at lower volumes of distention. RED is intended to be used in a clinical setting by trained health care providers in adult populations.

	●	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 is licensed to Masimo Corporation. Masimo markets and sells this product as its Masimo Bridge.

	●	The original 510(K) device was an Electroacupuncture Device (“EAD”), 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, 2025, 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, 2024.

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.

Accounts Receivable and Allowance for Credit Losses

Trade accounts receivable are stated at the amount management expects to collect from outstanding balances, net of an allowance for credit losses. Management evaluates many factors when determining the collectability of specific customer accounts, including, but not limited to, creditworthiness, past transaction and payment history, current economic industry trends and changes in payment terms. Management used assumptions and judgment based on the best available facts and circumstances to estimate and record an allowance. The Company estimates credit losses on accounts receivable by utilizing an aging schedule. The allowance for credit losses was $5,000 and $5,000 as of March 31, 2025 and December 31, 2024, respectively. The Company recorded credit losses for the three months ended March 31, 2025 and 2024 of $0 and $13,634, respectively.

Inventories

Inventories are valued at the lower of cost or net realizable value. Cost is determined using the weighted average method. The inventory is comprised of finished medical devices on hand. Certain components within the devices have an expiration date that are removed from current inventory and expensed at the date of expiration. For the three months ended March 31, 2025 and 2024, there was no expired inventory expensed. Inventory reserves totaled $4,454 and $4,454 as of March 31, 2025 and December 31, 2024, respectively.

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 accounts include cash, accounts receivable, accounts payable, prepaids, and other current assets. Management believes the estimated fair value of these accounts on March 31, 2025 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 accounts include 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 March 31, 2025 and December 31, 2024. In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company had no assets that were measured on a nonrecurring basis as of March 31, 2025 and December 31, 2024.

Basic and Diluted Net Income (Loss) per Share

Basic earnings or loss per share (“EPS”) is computed by dividing net income (loss), net of preferred stock dividends, by the weighted average number of common shares outstanding during the period. Diluted EPS is determined using the weighted average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents that were outstanding for the periods presented. In periods when losses are reported, which is the case for the three month periods ended March 31, 2025 and 2024 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:

	March 31,
	2025		2024

Options		1,319,394		1,319,394
Restricted Stock Units		842,214		—
Warrants		2,139,883		1,857,618
Series B Preferred Stock		4,280,939		—
Undeclared Cumulative Series B Preferred Stock Dividends		178,492		88,768
Totals		8,760,992		3,265,780

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

	2025			2024
	Three Months Ended March 31,
	2025			2024
Numerator:
Net loss	$	(2,278,684	)	$	(2,120,651	)
Preferred stock dividends		(213,543	)		-
		(2,492,227	)		(2,120,651	)
Denominator:
Weighted average shares of common stock outstanding - basic and diluted		7,463,578			6,550,567
Basic and diluted net loss per share	$	(0.33	)	$	(0.32	)

Stock-Based Compensation

The Company accounts for all stock-based awards at fair value. The Company recognizes its stock-based compensation expense using the straight-line method. Compensation cost is not adjusted for estimated forfeitures, but instead is adjusted upon actual forfeiture.

The Company accounts for the granting of stock options and restricted stock units to employees and non-employees using the fair value method whereby all awards are measured at fair value on the date of the grant. The fair value of all employee stock options and restricted stock units is expensed over the requisite service period with a corresponding increase to additional paid-in capital. Upon exercise of stock options, the consideration paid by the option holder is recorded in additional paid-in capital, while the par value of the shares received is reclassified from additional paid-in-capital to common stock. Upon vesting of restricted stock units, the par value of the shares issued are reclassified from additional paid-in-capital to common stock.

Stock-based awards to non-employees are measured based on the fair value of the equity instrument issued. Compensation expense for non-employee stock awards is recognized over the requisite service period following the measurement of the fair value on the grant date.

The Company uses the Black-Scholes option-pricing model to calculate the fair value of stock options. The use of the Black-Scholes option-pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected term of the option, risk-free interest rates, the value of the common stock and expected dividend yield of the common stock. Changes in these assumptions can materially affect the fair value estimate.

Revenue Recognition

In accordance with FASB’s ASC 606, Revenue from Contracts with Customers, (“ASC 606”), the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to be entitled in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, it performs the following five steps:

	(i)	identify the contract(s) with a customer;
	(ii)	identify the performance obligations in the contract;
	(iii)	determine the transaction price;
	(iv)	allocate the transaction price to the performance obligations in the contract; and
	(v)	recognize revenue when (or as) the entity satisfies a performance obligation.

The Company applies the five-step model to contracts when it determines that it is probable it will collect substantially all the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price, after consideration of variability and constraints, if any, that is allocated to the respective performance obligation when the performance obligation is satisfied.

The Company offers a Patient Assistance Program for patients without insurance coverage for IB-Stim. This program extends potential self-pay discounts for IB-Stim devices, based upon household income and size.

Also, the Company offers providers an opt-in program to address adequate insurance claim payments on IB-Stim devices. This program may extend a rebate or invoice credit where the insurance payment and patient responsibility (i.e., deductible, co-payment, and/or co-insurance amounts required by the Payer) are less than the acquisition cost of the IB-Stim device. The Company recognizes revenue at such a time that collection of the amount due is assured.

Certain economic factors affect the nature, amount, timing, and uncertainty of the Company’s revenue and cash flows. All of the Company’s products are sold to healthcare customers including hospitals, clinics and physician offices. Sales to healthcare customers lack seasonality and have a mild correlation with economic cycles. All of the Company’s sales are to customers located within the United States. Sales contracts consist of purchase orders that are short-term (i.e., less than or equal to one year).

The Company typically satisfies its performance obligations for goods at a point in time as they are received at the customer’s destination (rather than over time). Goods are shipped by common carrier to customers under FOB destination terms. As such, ownership of goods in transit is transferred to the customer upon receipt as the Company bears the associated risks (e.g., loss, damage, delay). Management typically relies on shipping information from common carriers to evaluate when the customer has obtained control of the goods. Shipping and handling costs are recorded as Cost of Goods Sold in the Statements of Operations.

The Company’s contracts with customers typically do not involve variable consideration. The information that the Company uses to determine the transaction price for a contract is similar to the information that the Company’s management uses in establishing the prices of goods to be sold.

Orders may not be cancelled after shipment. Customers may return devices within 10 days of delivery if the goods are found to be defective, nonconforming, or otherwise do not meet the stated technical specifications. At the option of the customer, the Company shall either:

	●	Refund the price paid for any defective or nonconforming products.
	●	Supply and deliver to the customer replacement conforming products.
	●	Reimburse the customer for the cost of repairing any defective or nonconforming products.

At the time revenue is recognized, the Company estimates expected returns and excludes those amounts from revenue. The Company also maintains appropriate accounts to reflect the effects of expected returns on the Company’s financial position and periodically adjusts those accounts to reflect its actual return experience. Estimated returns totaled $6,587 and $5,000 as of March 31, 2025 and December 31, 2024, respectively.

Payment for goods sold by the Company is typically due after an invoice is sent to the customer, within 30 days. The Company does not offer discounts if the customer pays some or all of an invoiced amount prior to the due date. None of the Company’s contracts have a significant financing component.

Medical devices that the Company contracts to sell and transfer to customers are manufactured by two third-party manufacturers located in Indiana and Michigan. In no case does the Company act as an agent (i.e., the Company does not provide a service of arranging for another party to transfer goods to the customer).

Going Concern

As of March 31, 2025, we had stockholders’ equity of $258,479 and short-term outstanding borrowings of $84,307. Additionally, we had cash of $2,005,370 and a working capital surplus of $439,823 as of March 31, 2025. However, we have incurred losses and negative cash flows from operations since inception and have funded our operations primarily with a combination of sales, debt, and the sale of capital stock.

Our future capital requirements will depend upon many factors, including progress with developing, manufacturing, and marketing our technologies, the time and costs involved in preparing, filing, prosecuting, maintaining, and enforcing patent claims and other proprietary rights, our ability to establish collaborative arrangements, marketing activities and competing technological and market developments, including regulatory changes and overall economic conditions in our target markets. Our ability to generate revenue and achieve profitability requires us to successfully market and secure purchase orders for our products from customers currently identified in our sales pipeline and to new customers as well. The primary activity that will drive all customers and revenues is the adoption of insurance coverage by commercial insurance carriers nationally, which is a top priority of the Company. These activities, including our planned research and development efforts, will require significant uses of working capital through the rest of 2025 and beyond.

Management evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date the financial statements are issued.

While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenues and in its ability to raise additional funds by way of a public or private offering of its debt or equity securities, there can be no assurance that it will be able to do so on reasonable terms, or at all. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenues and its ability to raise additional funds by way of a public or private offering. Neither future cash generated from operating activities, nor management’s contingency plans to mitigate the risk and extend cash resources through the evaluation period, are considered probable. As a result, substantial doubt is deemed to exist about the Company’s ability to continue as a going concern. As we continue to incur losses, our transition to profitability is dependent upon achieving a level of revenues adequate to support its cost structure. We may never achieve profitability, and unless and until doing so, we intend to fund future operations through additional dilutive or nondilutive financing. There can be no assurances, however, that additional funding will be available on terms acceptable to us, if at all.

The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic (220-40): Disaggregation of Income Statement Expenses, which requires disclosures that disaggregate, in a tabular presentation, each relevant expense caption on the face of the income statement that includes inventory purchases, employee compensation, depreciation and intangible amortization expense. Additional disclosures are also required to provide a qualitative description of the amounts in an expense caption that are not separately disaggregated quantitatively and the total amount of selling expenses including a definition. Public business entities are required to adopt the standard for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Disclosures are required for all prior periods presented in the financial statements. Although the standard requires enhanced disclosures, the adoption is not expected to have a material impact on the Company’s financial statements.

In December 2023, the FASB issued ASU 2023-19, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires the enhancement of income tax disclosures to provide better insight into how an entity’s operations and related tax risks, planning and opportunities affect its tax rate and prospects for future cash flows. The enhanced disclosures require (i) specific categories in a tabular rate reconciliation including both amounts and percentages and (ii) additional information for reconciling items and income tax paid that meet a quantitative threshold. Public business entities are required to adopt the standard for annual periods beginning after December 15, 2024. All other entities are required to adopt the standard for annual periods beginning after December 15, 2025. The adoption of the standard is not expected to have a material impact on the Company’s financial statements.

3. Related Party Transactions

The Company has two demand notes receivable from shareholders related to the sale of common stock on January 1, 2016. Both notes’ principal balances are $506,400, with interest calculated monthly based on applicable federal rates. No payments have been received on the notes. Since repayment is not assured, the Company provided an allowance for the entire balance of principal and interest as of December 31, 2019. The current allowance is $1,012,800 as of March 31, 2025. The current loan balances are as follows:

Schedule of Related Party Transactions

	Loan			Interest			Interest
	Receivable			Receivable			Income
March 31, 2025
Shareholder 1	$	506,400		$	99,640		$	5,289
Shareholder 2		506,400			99,505			5,289
Principal Balance		1,012,800			199,145			10,578
Allowance for Collection Risk		(1,012,800	)		(199,145	)		(10,578	)
Net Balance	$	—		$	—		$	—

	Loan			Interest			Interest
	Receivable			Receivable			Income
December 31, 2024
Shareholder 1	$	506,400		$	94,351		$	23,413
Shareholder 2		506,400			94,216			23,413
Principal Balance		1,012,800			188,567			46,826
Allowance for Collection Risk		(1,012,800	)		(188,567	)		(46,826	)
Net Balance	$	—		$	—		$	—

The Company was granted an exclusive, worldwide non-transferable, royalty-free license for the auricular portion of certain patents owned by a limited liability company in which the Company’s President and Chief Executive Officer and Chief Regulatory, Compliance and Privacy Officer both maintain an ownership interest. The license allows for the development, marketing and sales of electro-therapy treatments by stimulation of cranial nerves, cranial nerve branches, auricular nerves, auricular nerve branches, auricular nerve bundles and auricular anatomical structures in human patient. The exclusive license agreement expires on October 18, 2037, may be terminated by either party upon 60 days prior written notice and requires the Company to pay costs associated with the maintenance, prosecution and continuation of patent filings. The Company’s Board of Directors pre-approved the reimbursement of up to $10,000 for the year ending December 31,2025. The license costs totaled $1,317 and $0 for the three months ended March 31, 2025 and 2024, respectively. The Company owed the limited liability company $210 and $0 that are included in accounts payable in the Condensed Balance Sheets as of March 31, 2025 and December 31, 2024, respectively.

From time to time, a member of the Company’s Board of Directors purchases IB-STIM devices from the Company at cost to conduct research and development activities. The Company’s Board of Directors pre-approved the sale of these IB-STIM devices up to $10,000 for the year ended December 31,2025. The Company sold IB-STIM devices for a total of $1,957 and $0 for the three months ended March 31, 2025 and 2024, respectively.

The Company’s former Chief Financial Officer is contracted for services through a third-party public accounting firm. He is the firm’s managing partner and majority shareholder. The firm is engaged by the Company to provide accounting and tax services on a continuous basis. The services totaled $21,871 and $62,987 for the three months ended March 31, 2025 and 2024, respectively. The Company owed the firm $2,710 and $4,173 that are included in accounts payable as of March 31, 2025 and December 31, 2024, respectively. On June 28, 2024, the Company also issued 20,000 common shares with a fair value $55,600 to the former Chief Financial Officer for services rendered during the IPO process.

4. Prepaids and Other Current Assets

Prepaids and other current assets consisted of the following:

	March 31, 2025		December 31, 2024
Prepaid insurance	$	115,506	$	186,028
Prepaid software subscriptions		46,003		39,834
Other		93,018		54,505
Total prepaids and other current assets	$	254,527	$	280,367

5. Accrued Expenses

Accrued expenses consisted of the following:

Schedule of Accrued Expenses

	March 31, 2025		December 31, 2024
Compensation and benefits	$	961,461	$	1,261,317
Settled litigation		187,500		-
Interest		66,648		66,648
Advisory fees		-		176,750
Other		155,351		73,065
Total accrued expenses	$	1,370,960	$	1,577,780

6. Notes Payable

Promissory Notes

On August 9, 2024, the Company entered into a $210,000 promissory note to finance the premiums of a business insurance policy, bearing interest at a rate of 7.40% per annum and maturing on June 9, 2025. On November 1, 2024, the Company entered into a second promissory note with a principal balance of $64,328 to finance premiums of other business insurance policies, bearing interest at a rate of 7.65% per annum and maturing on September 1, 2025 (collectively referred to as the “2024 Promissory Notes”). The principal outstanding on 2024 Promissory Notes was $84,307 and $154,152 as of March 31, 2025 and December 31, 2024, respectively.

2024 Convertible Notes

On November 8, 2023, the Company entered into a Securities Purchase Agreement (“SPA”) with a shareholder for the issuance 1,260,504 shares of Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”), for an aggregate purchase price of $3,000,000 paid in 15 monthly installments of $200,000 each, commencing on the later of January 10, 2024 or a date after stockholder approval of an amendment to the Company’s Certificate of Incorporation to authorize the creation of the Series B Preferred Stock. The Series B Preferred Stock was convertible at any time into shares of common stock of the Company without any further consideration. Following the issuance of the Series B Preferred Stock, it would rank senior to the common stock with respect to payments upon the liquidation, dissolution and winding up of the Company. Due to a delay in the stockholder approval, the Company amended the SPA on February 12, 2024 to issue a convertible promissory note, due and payable on the earlier of 15 months or 12 months if the Series B Preferred Stock has not been authorized, convertible into Series B Convertible Preferred Stock with identical funding amounts and terms (the “$3,000,000 Convertible Promissory Note”). The shareholder funded $800,000 of the $3,000,000 commitment in 2024.

The Company then proceeded to enter into a series of incremental convertible promissory notes with other investors totaling $1,135,000 with terms identical to the $3,000,000 Convertible Promissory Note (collectively referred to as the “Original 2024 Convertible Promissory Notes”) for an aggregate principal amount of $1,935,000.

The 2024 Original Convertible Promissory Notes earned interest at 8.5% per annum payable quarterly in either cash or common stock at the election of the Company. At any time following the date of shareholder approval to authorize the creation of Series B Preferred Stock prior to the maturity date, the investor may elect to convert all or part of the principal into the Company’s Series B Preferred Stock at a conversion price per share equal to $2.38. Without limiting the forgoing, all principal amounts outstanding on the maturity date will automatically convert into the Company’s Series B Preferred Stock. The Series B Preferred Stock is entitled to cumulative dividends at 8.5% per annum (whether or not declared) payable quarterly in either cash or common stock at the $2.38 conversion price at the election of the Company. Upon conversion to Series B Preferred Stock, the investor may elect, at its option at any time, to convert all or part of the Series B Preferred Stock plus accrued but unpaid dividends into an equivalent amount of common stock at the $2.38 conversion price.

Subsequently, the Company entered into three convertible promissory notes with related institutional accredited investors with terms similar to the Original 2024 Convertible Promissory Notes (collectively referred to as the “Amended 2024 Convertible Promissory Notes”) for an additional principal amount of $3,000,000. Certain provisions to the SPA and Certificate of Designation previously issued on February 12, 2024 changed, including (i) the number of shares of preferred stock to be designated as Series B Preferred Stock was increased to 4,000,000 shares, (ii) the stated value of the Series B Preferred Stock was changed to $2.38 per share, (iii) the right to receive dividends will expire automatically on June 30, 2025, (iv) the liquidation rights will automatically expire on June 30, 2025, and (v) the number of shares of the common stock that a holder of Series B Preferred Stock is entitled to receive shall not exceed the maximum percentage chosen by the holder, which is initially set at between 4.99% and 19.99% until shareholder approval is obtained, of the number of outstanding shares of the common stock at the time of the conversion of the Series B Preferred Stock shares.

The maturity date was on the earlier of (i) June 21, 2025, (ii) upon written demand occurring on or after March 21, 2025 in the event that the Series B Preferred Stock has not been duly authorized on or before such date, or (iii) immediately upon the occurrence of an event of default. Automatic conversion into shares of Series B Preferred Stock (at a conversion price of $2.38 per share) would occur following the date of shareholder approval. In the event the Company failed to obtain shareholder approval before August 15, 2024, rights existed to convert the outstanding amount into shares of the common stock, at a price per share of $2.38.

As of August 15, 2024, the Company received $4,935,000 of the principal amount of the Amended 2024 Convertible Notes with the remainder due in monthly installments through March of 2025 resulting in an effective interest rate of 12.5%. On August 15, 2024, the Company’s shareholders authorized 5,000,000 shares of preferred stock of which 4,000,000 shares were designated as $0.001 par value Series B preferred stock. Pursuant to the terms of the Amended 2024 Convertible Promissory Notes, the outstanding principal balance of $4,935,000 was mandatorily converted into 2,073,524 Series B Preferred Shares at a conversion price of $2.38 on August 15, 2024. Amortization of the debt discount on the Amended 2024 Convertible Notes totaled $21,683 for the three months ended March 31, 2024. There was no amortization of the debt discount for the three months ended March 31, 2025 as the unamortized debt discount of $165,577 was reclassified to Additional Paid-In-Capital in the Statements of Stockholders’ Equity (Deficit) on August 15, 2024 upon mandatory conversion.

Interest expense totaled $2,237 and $26,560 for the three months ended March 31, 2025 and 2024, respectively. The Company’s accrued interest totaled $66,648 as of March 31, 2025 and December 31, 2024.

7. Leases

The Company’s leases are comprised of operating leases for office space. At the inception of the lease, the Company determines whether the lease contract conveys the right to control the use of identified property for a period of time in exchange for consideration. Leases are classified as operating or finance leases at the commencement date of the lease. Operating leases are recorded as operating lease right-of-use assets, other current liabilities, and operating lease liabilities in the Balance Sheets. The Company did not have any finance leases at March 31, 2025 and December 31, 2024.

The Company has two leases primarily consisting of office space in Versailles and Carmel, Indiana. The lease in Versailles started January 1, 2022 and had a term of one year, with automatic one year renewal, unless 60 day notice of vacating is given, commencing on the execution hereof and continuing through December 31^st of each year. The current monthly lease payment for this lease is $1,800 with a 4% per annum increase. A new lease in Carmel, Indiana commenced January 1, 2024. The initial term is five years and five months. The monthly lease payment started at $6,721 with an annual increase of 2.5%. As long as the Company is not in default, it is only obligated to pay an amount equal to 50% of the monthly base rent for the first 10 months of the term.

The Company recognized operating lease expense of $25,523 and $25,756 for the three months ended March 31, 2025 and 2024, respectively, including short-term lease expense and variable lease costs.

The following table presents information related to the Company’s operating leases:

Schedule of Operating Leases

	March 31, 2025			December 31, 2024
Operating lease right-of-use assets	$	270,938		$	284,656

Other current liabilities		65,900			62,754
Operating lease liabilities		238,530			256,499
Total	$	304,430		$	319,253

Weighted-average remaining lease term (in years)		3.88			2.75
Weighted-average discount rate		15.0	%		15.0	%

As of March 31, 2025, the maturities of the Company’s operating lease liabilities were as follows:


2026	$	105,874
2027		102,794
2028		87,399
2029		89,586
2030		15,210
Total lease payments		400,863
Less: imputed interest		(96,433	)
Total present value of lease payments	$	304,430

8. Common Stock and Warrants

The Company authorized 100,000,000 shares of common stock, of which 7,215,864 and 6,990,227 shares were issued and outstanding as of March 31, 2025 and December 31, 2024, respectively.

On January 17, 2025, the Company issued (i) 39,471 shares of common stock with a fair value of $112,493 to its Board of Directors for their service from April 1, 2024 through December 31, 2024, which was recorded as general and administrative expense in the Condensed Statements of Operations and (ii) 186,166 shares of common stock to an investor in exchange for 502,647 warrants in a cashless exercise transaction with $186 reclassified from additional paid in capital to common stock in the Condensed Statements of Stockholders’ Equity (Deficit).

During the three months ended March 31, 2024, the Company issued (i) 11,000 common shares upon the exercise of warrants for $26,180, (ii) 75,000 shares as payment to a vendor for services.

The following is a summary of warrant activity for common stock during the three months ended March 31, 2025 and year ended December 31, 2024:

Number of

Weighted-Avg.<

SEC Form 10-Q filed by Neuraxis Inc.