[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I) This section presents NeurAxis, Inc.'s unaudited condensed financial statements and management's discussion for H1 2025 [ITEM 1: FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201%3A%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed financial statements of NeurAxis, Inc. and related notes for H1 2025 and FY 2024 [Condensed Balance Sheets](index=3&type=section&id=Condensed%20Balance%20Sheets%20as%20of%20June%2030%2C%202025%20%28Unaudited%29%20and%20December%2031%2C%202024) This section details the company's financial position, including assets, liabilities, and equity, for H1 2025 and FY 2024 Condensed Balance Sheet Highlights | Metric | June 30, 2025 (USD) | December 31, 2024 (USD) | Change (USD) | % Change | | :-------------------------- | :-------------- | :---------------- | :----- | :------- | | Total Assets | $7,087,999 | $4,757,572 | $2,330,427 | 49.0% | | Total Liabilities | $2,834,705 | $2,689,824 | $144,881 | 5.4% | | Total Stockholders' Equity | $4,253,294 | $2,067,748 | $2,185,546 | 105.7% | | Cash and cash equivalents | $5,988,456 | $3,696,870 | $2,291,586 | 62.0% | [Condensed Statements of Operations](index=4&type=section&id=Condensed%20Statements%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024%20%28Unaudited%29) This section outlines the company's financial performance, including net sales, gross profit, and net loss for Q2 and H1 2025 and 2024 Statements of Operations Highlights (Three Months Ended June 30) | Metric | 2025 (USD) | 2024 (USD) | Change (USD) | % Change | | :-------------------------- | :------------ | :------------ | :------------ | :------- | | Net Sales | $894,086 | $611,500 | $282,586 | 46.2% | | Gross Profit | $747,443 | $538,042 | $209,401 | 38.9% | | Operating Loss | $(1,717,858) | $(2,206,832) | $488,974 | -22.2% | | Net Loss | $(1,690,418) | $(2,917,710) | $1,227,292 | -42.1% | | Basic and diluted loss per share | $(0.22) | $(0.42) | $0.20 | -47.6% | Statements of Operations Highlights (Six Months Ended June 30) | Metric | 2025 (USD) | 2024 (USD) | Change (USD) | % Change | | :-------------------------- | :------------ | :------------ | :------------ | :------- | | Net Sales | $1,789,741 | $1,258,135 | $531,606 | 42.3% | | Gross Profit | $1,503,623 | $1,109,596 | $394,027 | 35.5% | | Operating Loss | $(4,012,955) | $(4,038,952) | $25,997 | -0.6% | | Net Loss | $(3,969,102) | $(5,038,361) | $1,069,259 | -21.2% | | Basic and diluted loss per share | $(0.56) | $(0.73) | $0.17 | -23.3% | [Condensed Statements of Stockholders' Equity (Deficit)](index=5&type=section&id=Condensed%20Statements%20of%20Stockholders'%20Equity%20(Deficit)%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024%20%28Unaudited%29) This section details changes in stockholders' equity, including common stock issuances, warrant exercises, and net loss for H1 2025 and 2024 Stockholders' Equity (Deficit) Changes (Six Months Ended June 30, 2025) | Item | Amount (USD) | | :------------------------------------------------ | :------------- | | Balances at January 1, 2025 | $2,067,748 | | Warrants exercised | $1,002,991 | | Common stock issued from agreements | $112,493 | | Vesting of restricted stock awards | $529,964 | | Issuance of common stock pursuant to shelf registration statement | $4,999,999 | | Offering costs | $(490,799) | | Net loss | $(3,969,102) | | Balances at June 30, 2025 | $4,253,294 | - The number of common shares outstanding increased significantly from **6,990,227** as of December 31, 2024, to **9,858,716** as of June 30, 2025, primarily due to the issuance of common stock through a shelf registration statement and warrant exercises[7](index=7&type=chunk)[12](index=12&type=chunk) [Condensed Statements of Cash Flows](index=7&type=section&id=Condensed%20Statements%20of%20Cash%20Flows%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024%20%28Unaudited%29) This section summarizes cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Cash Flow Summary (Six Months Ended June 30) | Activity | 2025 (USD) | 2024 (USD) | Change (USD) | % Change | | :-------------------------- | :------------ | :------------ | :------------ | :------- | | Net cash used in operating activities | $(3,071,145) | $(2,947,295) | $(123,850) | 4.2% | | Net cash used in investing activities | $(25,288) | $(23,408) | $(1,880) | 8.0% | | Net cash provided by financing activities | $5,388,019 | $4,657,417 | $730,602 | 15.7% | | Net Increase in Cash and Cash Equivalents | $2,291,586 | $1,686,714 | $604,872 | 35.9% | | Cash and Cash Equivalents at End of Period | $5,988,456 | $1,765,274 | $4,223,182 | 239.2% | - The increase in cash from financing activities in 2025 was primarily driven by proceeds from the issuance of common stock (**$4,999,999**) and exercised warrants (**$1,002,991**), contrasting with 2024's primary source being convertible notes[13](index=13&type=chunk)[151](index=151&type=chunk) [Notes to Condensed Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Financial%20Statements%20%28Unaudited%29) This section provides detailed explanations and disclosures supporting the condensed financial statements [1. Basis of Presentation, Organization and Other Matters](index=10&type=section&id=1.%20Basis%20of%20Presentation%2C%20Organization%20and%20Other%20Matters) This note describes the company's business, medical devices, and the basis for preparing interim financial statements - NeurAxis, Inc. specializes in medical neuromodulation devices, with four FDA-cleared products: IB-STIM, Rectal Expulsion Device (RED), NSS-2 Bridge (license terminated July 1, 2025), and the original 510(K) Electroacupuncture Device (NeuroStim, now for research only)[15](index=15&type=chunk)[17](index=17&type=chunk)[116](index=116&type=chunk) - The company's financial statements are prepared in accordance with U.S. GAAP for interim reporting, and the unaudited interim results are not necessarily indicative of future performance[16](index=16&type=chunk) [2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines key accounting principles, estimates, and judgments, including revenue recognition and going concern - Management makes estimates for revenue recognition, credit losses, stock-based compensation, income tax, inventory reserves, and impairment, which are subject to change[18](index=18&type=chunk)[21](index=21&type=chunk) Allowance for Credit Losses and Inventory Reserves | Metric | June 30, 2025 (USD) | December 31, 2024 (USD) | | :-------------------------- | :-------------- | :---------------- | | Allowance for credit losses | $5,000 | $5,000 | | Inventory reserves | $17,195 | $4,454 | - The company's Level 3 financial instruments, warrant liabilities, are valued using model-based techniques with unobservable inputs, reflecting management's estimates and judgment[29](index=29&type=chunk) - Revenue is recognized when customers obtain control of goods, typically at the point of receipt, with provisions for patient assistance programs and provider rebates/credits[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk)[41](index=41&type=chunk) - Substantial doubt exists about the Company's ability to continue as a going concern due to accumulated losses and negative cash flows, with future viability dependent on generating sufficient revenue and raising additional funds[48](index=48&type=chunk)[51](index=51&type=chunk) - Recently issued accounting pronouncements (ASU 2024-03 and ASU 2023-09) are not expected to have a material impact on the Company's financial statements, though they require enhanced disclosures[53](index=53&type=chunk)[54](index=54&type=chunk) [3. Related Party Transactions](index=17&type=section&id=3.%20Related%20Party%20Transactions) This note discloses transactions with related parties, including demand notes, licensing, and services - The Company has two demand notes receivable from shareholders totaling **$1,012,800** in principal, with an allowance for the entire balance due to repayment uncertainty[55](index=55&type=chunk) - An exclusive, royalty-free license for auricular patent portions is held from an LLC co-owned by the CEO and Chief Regulatory Officer, with license costs of **$1,317** incurred in H1 2025[55](index=55&type=chunk) - Sales of IB-STIM devices to a Board member for R&D totaled **$6,351** for the six months ended June 30, 2025[56](index=56&type=chunk) - Accounting and tax services from a firm previously managed by the former CFO amounted to **$31,679** for H1 2025, a decrease from **$91,168** in H1 2024[57](index=57&type=chunk) [4. Prepaids and Other Current Assets](index=18&type=section&id=4.%20Prepaids%20and%20Other%20Current%20Assets) This note details the composition of prepaid expenses and other current assets Prepaids and Other Current Assets | Item | June 30, 2025 (USD) | December 31, 2024 (USD) | | :-------------------------- | :-------------- | :---------------- | | Prepaid insurance | $44,985 | $186,028 | | Prepaid software subscriptions | $176,940 | $39,834 | | Other | $148,400 | $54,505 | | Total | $370,325 | $280,367 | [5. Accrued Expenses](index=19&type=section&id=5.%20Accrued%20Expenses) This note itemizes accrued liabilities, such as compensation, litigation settlements, and legal fees Accrued Expenses | Item | June 30, 2025 (USD) | December 31, 2024 (USD) | | :-------------------------- | :-------------- | :---------------- | | Compensation and benefits | $1,040,099 | $1,261,317 | | Settled litigation | $375,000 | - | | Legal fees | $107,045 | $43,891 | | Interest | $66,648 | $66,648 | | Advisory fees | - | $176,750 | | Other | $63,996 | $29,174 | | Total | $1,652,788 | $1,577,780 | [6. Notes Payable](index=19&type=section&id=6.%20Notes%20Payable) This note describes outstanding promissory notes and the conversion of convertible notes into Series B Preferred Shares - The Company had outstanding promissory notes of **$121,433** as of June 30, 2025, down from **$154,152** at December 31, 2024, including a new note for software subscription fees[60](index=60&type=chunk) - In 2024, the Company issued convertible promissory notes totaling **$4,935,000**, which mandatorily converted into **2,073,524 Series B Preferred Shares** on August 15, 2024, at a conversion price of **$2.38 per share**[61](index=61&type=chunk)[62](index=62&type=chunk)[64](index=64&type=chunk)[66](index=66&type=chunk) Interest Expense | Period | 2025 (USD) | 2024 (USD) | | :-------------------------- | :------------ | :------------ | | Three Months Ended June 30 | $(13,434) | $(80,697) | | Six Months Ended June 30 | $(15,672) | $(107,257) | [7. Leases](index=20&type=section&id=7.%20Leases) This note details the company's operating lease arrangements for office space - The Company holds operating leases for office space in Indiana, with a new lease in Carmel commencing January 1, 2024, and the Versailles lease terminated effective July 31, 2025, due to relocation[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) Operating Lease Liabilities | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Operating lease right-of-use assets | $256,656 | $284,656 | | Operating lease liabilities | $219,880 | $256,499 | | Weighted-average remaining lease term | 3.66 years | 2.75 years | [8. Common Stock and Warrants](index=21&type=section&id=8.%20Common%20Stock%20and%20Warrants) This note provides information on changes in common stock outstanding and warrant activity - Common stock outstanding increased from **6,990,227 shares** at December 31, 2024, to **9,858,716 shares** at June 30, 2025[72](index=72&type=chunk) - Key issuances in H1 2025 include **1,538,461 shares** for **$4,999,999** via a shelf registration statement, **720,359 shares** from warrant exercises, and **426,048 shares** from Series B Preferred Stock conversions[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) Warrant Activity Summary | Metric | Outstanding as of Jan 1, 2024 | Outstanding as of Dec 31, 2024 | Outstanding as of June 30, 2025 | | :-------------------------- | :---------------------------- | :----------------------------- | :------------------------------ | | Number of Warrants for Common Stock | 1,822,358 | 2,642,530 | 1,419,524 | | Weighted-Avg. Exercise Price | $4.69 | $2.41 | $2.44 | [9. Preferred Stock](index=24&type=section&id=9.%20Preferred%20Stock) This note describes Series B Preferred Stock, including its authorization, outstanding shares, and dividend rights - As of June 30, 2025, **3,896,907 shares of Series B Preferred Stock** were issued and outstanding, authorized with **5,000,000 shares**, carrying an **8.5% cumulative dividend** and **1:1 convertibility** to common stock[81](index=81&type=chunk)[84](index=84&type=chunk) - Series B Preferred Stock maintains priority preference over other capital stock classes upon liquidation, dissolution, or winding up of the Company[86](index=86&type=chunk) Undeclared Cumulative Series B Preferred Stock Dividends | Period | Amount (USD) | Per Share (USD) | | :-------------------------- | :----------- | :-------------- | | Three Months Ended June 30, 2025 | $207,465 | $0.02 | | Six Months Ended June 30, 2025 | $421,008 | $0.05 | [10. Stock-Based Compensation](index=25&type=section&id=10.%20Stock-Based%20Compensation) This note details stock-based compensation arrangements, including RSUs and stock options - The Company granted **852,214 Restricted Stock Units (RSUs)** in H1 2025, subject to a three-year cliff-vesting period, with total stock-based compensation expense related to RSUs amounting to **$278,854** for the six months ended June 30, 2025[88](index=88&type=chunk)[89](index=89&type=chunk) - As of June 30, 2025, **1,319,394 stock options** were outstanding and fully vested/exercisable, with a weighted-average exercise price of **$6.94**, and no related compensation expense recorded in H1 2025[90](index=90&type=chunk) [11. Warrant Liabilities](index=26&type=section&id=11.%20Warrant%20Liabilities) This note explains the valuation and changes in warrant liabilities using a Black-Scholes model - Warrant liabilities decreased from **$9,166** at December 31, 2024, to **$7,454** at June 30, 2025, primarily due to changes in fair value[93](index=93&type=chunk) - The fair value of warrant liabilities is computed using a Black-Scholes option-pricing model, with inputs including an exercise price of **$8.76**, expected remaining term, estimated volatility (**75.0% to 89.9%**), and risk-free interest rates (**3.80% to 4.38%**)[92](index=92&type=chunk) [12. Segment Information](index=26&type=section&id=12.%20Segment%20Information) This note clarifies the company operates as a single reportable segment, IB-STIM, and its performance evaluation - The Company operates as a single reportable segment, IB-STIM, focusing on a PENFS device for functional abdominal pain associated with irritable bowel syndrome in patients aged 8-21[94](index=94&type=chunk) - The CEO, as the Chief Operating Decision Maker (CODM), evaluates segment performance based on net sales and operating loss to allocate resources and monitor cost structure[94](index=94&type=chunk) Segment Operating Loss (Six Months Ended June 30) | Metric | 2025 (USD) | 2024 (USD) | Change (USD) | % Change | | :-------------------------- | :------------ | :------------ | :------------ | :------- | | Net Revenue | $1,789,741 | $1,258,135 | $531,606 | 42.3% | | Gross Profit | $1,503,623 | $1,109,596 | $394,027 | 35.5% | | Segment Operating Loss | $(4,012,955) | $(4,038,952) | $25,997 | -0.6% | [13. Settled Litigation](index=27&type=section&id=13.%20Settled%20Litigation) This note provides details on a settled lawsuit, including the settlement amount and financial impact - A lawsuit initiated in 2019 by Ritu Bhambhani, M.D., against the Company was dismissed by the Court in 2022, and the plaintiff's appeal was denied by the Fourth Circuit in June 2024[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) - A related 2022 lawsuit by business entities owned by the same plaintiffs, alleging RICO Act violations and misrepresentation regarding NeuroStim device billing, resulted in a tentative **$750,000 settlement** executed on May 15, 2025, payable in 12 monthly installments starting January 2026[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk) - The Company recorded a charge of **$630,568** for the six months ended June 30, 2025, related to the settlement, with **$375,000** accrued as current expenses and **$267,540** as non-current liabilities[103](index=103&type=chunk) [14. Commitments and Contingencies](index=28&type=section&id=14.%20Commitments%20and%20Contingencies) This note outlines the company's various contractual commitments and potential litigation - The Company has a manufacturing services agreement for its IB-STIM device, which automatically renews annually[104](index=104&type=chunk) - An advisory agreement for debt, equity, and public securities market services was terminated on December 31, 2024, with a payment of **$180,000** for services rendered in Q1 2025[105](index=105&type=chunk) - Settlement agreements in 2024 included resolving a convertible note dispute for **$230,824** (paid in common shares) and settling claims with pre-IPO Series A Preferred Stock shareholders for **$286,458** (paid in common shares) and an additional **$290,171** accrued[106](index=106&type=chunk)[107](index=107&type=chunk) - Executive employment agreements include provisions for special bonuses contingent on stock option exercise and a successful IPO, totaling **$14,821,830**, to be recorded when paid[109](index=109&type=chunk)[110](index=110&type=chunk)[112](index=112&type=chunk) - The Company is involved in threatened litigation regarding a patent interest claim valued at **$2,000,000**, which it intends to vigorously defend[115](index=115&type=chunk) [15. Subsequent Events](index=30&type=section&id=15.%20Subsequent%20Events) This note discloses significant events occurring after the reporting period, such as license terminations and an ESPP - On July 1, 2025, the NSS-2 Bridge license with Masimo was terminated, allowing NeurAxis to recapture trademark and patent application rights in exchange for **$200,000** payable in two installments[116](index=116&type=chunk) - The NeurAxis, Inc. 2025 Employee Stock Purchase Plan (ESPP) was adopted on July 1, 2025, offering eligible employees a **15% discount** on common stock purchases via payroll deductions, subject to shareholder approval[117](index=117&type=chunk) [ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION](index=31&type=section&id=ITEM%202%3A%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATION) This section analyzes NeurAxis's financial performance, liquidity, and capital resources for H1 2025 compared to 2024 [Overview](index=31&type=section&id=Overview) This section introduces NeurAxis as a growth-stage neuromodulation therapy company, highlighting its financial performance and outlook - NeurAxis is a growth-stage company developing neuromodulation therapies for chronic conditions in children, with FDA-cleared IB-Stim (for IBS in children) and RED (for chronic constipation in adults) devices[120](index=120&type=chunk) - The Company incurred net losses of **$1.69 million** (Q2 2025) and **$3.97 million** (H1 2025), and expects continued losses as it pursues widespread insurance coverage for IB-Stim and FDA clearance for new indications[121](index=121&type=chunk) [Factors Affecting our Business and Results of Operations](index=31&type=section&id=Factors%20Affecting%20our%20Business%20and%20Results%20of%20Operations) This section discusses key drivers influencing revenue, gross margin, and operating expenses - Revenue is primarily from IB-Stim device sales to healthcare providers, with sales generally non-seasonal and mildly correlated with economic cycles, and the IB-Stim device sells for **$1,195**, with **3-4 devices** used per patient[122](index=122&type=chunk) - Gross margin is influenced by average selling prices, production volume, customer mix, third-party manufacturing costs, and cost-reduction strategies, with expected increases in gross profit driven by broader insurer acceptance and new product approvals[125](index=125&type=chunk) - Expenses include cost of goods sold (contract manufacturing, shipping, expired inventory), selling expenses (commissions), research and development (clinical trials for new indications), and general and administrative (wages, professional fees, facility costs)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) This section provides a detailed comparative analysis of net sales, gross profit, and expenses for Q2 and H1 2025 and 2024 Net Sales Performance | Period | 2025 (USD) | 2024 (USD) | Change (USD) | % Change | | :-------------------------- | :------------ | :------------ | :------------ | :------- | | Three Months Ended June 30 | $894,086 | $611,500 | $282,586 | 46.2% | | Six Months Ended June 30 | $1,789,741 | $1,258,135 | $531,606 | 42.3% | - Net sales increases were driven by volume growth from fully insured customers, financial assistance programs, and sales from the RED product launch in 2025[131](index=131&type=chunk) Gross Profit and Gross Margin Performance | Period | Gross Profit 2025 (USD) | Gross Profit 2024 (USD) | % Change Gross Profit | Gross Margin 2025 (%) | Gross Margin 2024 (%) | Change in Margin (pp) | | :-------------------------- | :---------------- | :---------------- | :-------------------- | :---------------- | :---------------- | :--------------- | | Three Months Ended June 30 | $747,443 | $538,042 | 38.9% | 83.6% | 88.0% | -4.4 pp | | Six Months Ended June 30 | $1,503,623 | $1,109,596 | 35.5% | 84.0% | 88.2% | -4.2 pp | - Gross margin decreased due to higher discounting in financial assistance programs and expired RED inventory, despite increased sales volume[132](index=132&type=chunk)[133](index=133&type=chunk) Expense Performance (Three Months Ended June 30) | Expense Category | 2025 (USD) | 2024 (USD) | Change (USD) | % Change | | :-------------------------- | :------------ | :------------ | :------------ | :------- | | Selling Expenses | $142,253 | $62,274 | $79,979 | 128.4% | | Research and Development | $58,319 | $54,312 | $4,007 | 7.4% | | General and Administrative | $2,264,729 | $2,628,288 | $(363,559) | -13.8% | Expense Performance (Six Months Ended June 30) | Expense Category | 2025 (USD) | 2024 (USD) | Change (USD) | % Change | | :-------------------------- | :------------ | :------------ | :------------ | :------- | | Selling Expenses | $276,206 | $142,304 | $133,902 | 94.1% | | Research and Development | $108,012 | $59,882 | $48,130 | 80.4% | | General and Administrative | $5,132,360 | $4,946,362 | $185,998 | 3.8% | - Selling expenses increased due to higher sales volume and a temporary commission structure[134](index=134&type=chunk) - R&D expenses rose due to medical research and RED device development[135](index=135&type=chunk) - G&A expenses decreased in Q2 2025 due to the absence of one-time costs in 2024 but increased in H1 2025 due to a lawsuit settlement and internal control enhancements[136](index=136&type=chunk)[137](index=137&type=chunk) Operating Loss and Net Loss Performance | Period | Operating Loss 2025 (USD) | Operating Loss 2024 (USD) | % Change Operating Loss | Net Loss 2025 (USD) | Net Loss 2024 (USD) | % Change Net Loss | | :-------------------------- | :------------------ | :------------------ | :---------------------- | :------------ | :------------ | :---------------- | | Three Months Ended June 30 | $(1,717,858) | $(2,206,832) | -22.2% | $(1,690,418) | $(2,917,710) | -42.1% | | Six Months Ended June 30 | $(4,012,955) | $(4,038,952) | -0.6% | $(3,969,102) | $(5,038,361) | -21.2% | - Operating loss decreased in both periods due to higher sales volume and lower G&A (Q2 2025), partially offset by lower gross margin and higher selling/R&D costs (H1 2025)[138](index=138&type=chunk)[139](index=139&type=chunk) - Net loss decreased significantly due to higher sales and the absence of one-time 2024 settlements[142](index=142&type=chunk)[143](index=143&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet financial obligations, focusing on cash, working capital, and future capital needs Liquidity and Working Capital | Metric | June 30, 2025 (USD) | December 31, 2024 (USD) | | :-------------------------- | :-------------- | :---------------- | | Cash on hand | $5,988,456 | $3,696,870 | | Working capital surplus | $4,271,446 | $1,832,858 | - The increase in working capital was primarily due to proceeds from common stock issuance and warrant exercises in H1 2025[145](index=145&type=chunk) - Future capital requirements depend on technology development, manufacturing, marketing, patent enforcement, collaborative arrangements, and achieving widespread insurance coverage for IB-Stim[147](index=147&type=chunk) Cash Flow Activities (Six Months Ended June 30) | Activity | 2025 (USD) | 2024 (USD) | Change (USD) | % Change | | :-------------------------- | :------------ | :------------ | :------------ | :------- | | Net cash used in operating activities | $(3,071,145) | $(2,947,295) | $(123,850) | 4.2% | | Net cash used in investing activities | $(25,288) | $(23,408) | $(1,880) | 8.0% | | Net cash provided by financing activities | $5,388,019 | $4,657,417 | $730,602 | 15.7% | - Operating cash outflow increased due to higher inventory purchases and 2024 incentive program payments, partially offset by increased cash collections[149](index=149&type=chunk)[150](index=150&type=chunk) - Investing cash outflow increased due to capital expenditures for the RED device[149](index=149&type=chunk) - Financing cash inflow increased significantly from common stock issuance and warrant exercises[151](index=151&type=chunk) [ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK](index=26&type=section&id=ITEM%203%3A%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURE%20ABOUT%20MARKET%20RISK) This section states that no quantitative and qualitative disclosures about market risk are applicable to the Company - The Company has no applicable quantitative and qualitative disclosures about market risk[152](index=152&type=chunk) [ITEM 4: CONTROLS AND PROCEDURES](index=27&type=section&id=ITEM%204%3A%20CONTROLS%20AND%20PROCEDURES) This section details management's evaluation of internal control effectiveness, material weaknesses, and remediation efforts [Evaluation of Internal Control Over Financial Reporting](index=36&type=section&id=Evaluation%20Of%20Internal%20Control%20Over%20Financial%20Reporting) This section discusses management's assessment of internal controls, highlighting identified material weaknesses and remediation - Management identified material weaknesses in internal control over financial reporting as of June 30, 2025, including ineffective approval processes, inadequate contract management, misapplication of U.S. GAAP, and ineffective disclosure controls[155](index=155&type=chunk)[158](index=158&type=chunk) - Remediation efforts are underway, including hiring accounting personnel, implementing a documented internal control framework, documenting business policies, completing a formal monthly close process, and engaging a third-party firm for segregation of duties[155](index=155&type=chunk) - Remediation efforts are expected to continue through fiscal year 2025, with management committed to maintaining a strong internal control program[155](index=155&type=chunk)[156](index=156&type=chunk) [Changes in Internal Control Over Financial Reporting](index=36&type=section&id=Changes%20In%20Internal%20Control%20Over%20Financial%20Reporting) This section reports on any material changes in internal controls over financial reporting during the quarter - Other than the described remediation efforts, there were no material changes in internal controls over financial reporting during the quarter ended June 30, 2025[157](index=157&type=chunk) [PART II - OTHER INFORMATION](index=28&type=section&id=PART%20II) This section provides additional information including legal proceedings, risk factors, equity sales, and other disclosures [ITEM 1: LEGAL PROCEEDINGS](index=28&type=section&id=ITEM%201%3A%20LEGAL%20PROCEEDINGS) This section updates on legal proceedings, including a dismissed lawsuit, a settled lawsuit, and threatened patent litigation - A lawsuit initiated by Ritu Bhambhani, M.D., against the Company was dismissed by the Court in 2022, and the plaintiff's appeal was denied by the Fourth Circuit in June 2024[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk) - A related 2022 lawsuit by business entities, alleging RICO Act violations and misrepresentation, was tentatively settled for **$750,000** on May 15, 2025, payable in 12 equal monthly installments starting January 2026[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) - Dr. Arturo Taca asserted a **$2,000,000** interest in the Company's U.S. Patent No. 10,413,719 in January 2024, which the Company denies and intends to vigorously defend[166](index=166&type=chunk) [ITEM 1A: RISK FACTORS](index=28&type=section&id=ITEM%201A%3A%20RISK%20FACTORS) This section refers to previously disclosed risk factors, noting no material changes since December 31, 2024 - There have been no material changes to the risk factors previously disclosed in the Form 10-K for the period ended December 31, 2024[167](index=167&type=chunk) [ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=29&type=section&id=ITEM%202%3A%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section details unregistered equity sales during Q2 2025, including warrant exercises and Series B conversions - On June 30, 2025, **289,779 common shares** were issued upon warrant exercise for **$29**[168](index=168&type=chunk) - On June 9, 2025, **42,016 common shares** were issued upon conversion of Series B Preferred Stock[168](index=168&type=chunk) - On May 21, 2025, **430,580 common shares** were issued upon warrant exercise for **$1,002,963**[169](index=169&type=chunk) - On May 20, 2025, **342,016 common shares** were issued upon conversion of Series B Preferred Stock[169](index=169&type=chunk) - On May 15, 2025, **10,000 restricted stock units (RSUs)** were issued to an employee at a fair value of **$2.36 per RSU**, subject to three-year pro rata annual vesting[170](index=170&type=chunk) - These issuances were made in reliance upon exemptions provided by Section 4(a)(2) of the Securities Act, Regulation D, or Securities Act Rule 701[171](index=171&type=chunk) [ITEM 3: DEFAULTS UPON SENIOR SECURITIES](index=29&type=section&id=ITEM%203%3A%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[172](index=172&type=chunk) [ITEM 5: OTHER INFORMATION](index=29&type=section&id=ITEM%205%3A%20OTHER%20INFORMATION) This section confirms no director or officer adopted or terminated Rule 10b5-1 trading arrangements in Q2 2025 - No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[174](index=174&type=chunk) [ITEM 6: EXHIBITS](index=30&type=section&id=ITEM%206%3A%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including various agreements and certifications - Exhibits include the Settlement Agreement and Mutual Release (May 15, 2025), Form of Securities Purchase Agreement (May 22, 2025), Termination Agreement with Masimo Corporation (July 1, 2025), and the Neuraxis, Inc. 2025 Employee Stock Purchase Plan[175](index=175&type=chunk) - Certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 from the Chief Executive Officer and Chief Financial Officer are filed/furnished[175](index=175&type=chunk) [SIGNATURES](index=31&type=section&id=SIGNATURES) This section contains the required signatures for the Form 10-Q by authorized officers - The report is signed by Brian Carrico, Chief Executive Officer, and Timothy Henrichs, Chief Financial Officer, on August 12, 2025[178](index=178&type=chunk)

Core Viewpoint - NeurAxis, Inc. is set to release its financial results for the second quarter of 2025 on August 12, 2025, before market opening, followed by a conference call to discuss the results [1]. Financial Results Announcement - The financial results will cover the period ended June 30, 2025 [1]. - A conference call is scheduled for August 12, 2025, at 9:00 a.m. Eastern Time to review the results [1]. Conference Call Details - Interested parties can access the conference call via a live webcast available on the Company's Investor Relations website [2]. - Participants can submit questions through the webcast portal or via email [2]. - Call-in participants must register to receive dial-in information and a unique PIN [3]. Company Overview - NeurAxis, Inc. focuses on neuromodulation therapies for chronic and debilitating conditions in both children and adults [4]. - The company is advancing its proprietary IB-Stim™ therapy, which is FDA cleared for treating functional abdominal pain associated with irritable bowel syndrome (IBS) in adolescents aged 8-21 [4]. - Additional clinical trials for PENFS technology are ongoing for various pediatric and adult conditions with significant unmet healthcare needs [4].

Core Insights - NeurAxis, Inc. announced medical policy coverage for its Percutaneous Electrical Nerve Field Stimulation (PENFS) technology, IB-Stim, with two health insurers, impacting approximately 700,000 members in Connecticut and Massachusetts, bringing total national coverage to about 53 million [1][3] Company Overview - NeurAxis, Inc. is a medical technology company focused on neuromodulation therapies for chronic and debilitating conditions in both children and adults [4] - The company's IB-Stim technology is FDA-cleared for treating functional abdominal pain associated with irritable bowel syndrome (IBS) and Pediatric Functional Dyspepsia in adolescents aged 8-21 [2][4] Technology and Market Position - IB-Stim is a non-surgical device that delivers gentle electrical impulses to cranial nerve bundles in the ear, addressing a significant gap as there are currently no FDA-approved drug therapies for children with abdominal pain-related disorders [2] - The technology has been incorporated into treatment guidelines by a leading pediatric academic society, which is expected to enhance policy coverage and reimbursement [3] Future Developments - The activation of a Category I CPT code for PENFS, effective January 1, 2026, is anticipated to improve reimbursement and encourage broader adoption in children's hospitals [3] - NeurAxis is currently conducting additional clinical trials for PENFS across various pediatric and adult conditions with significant unmet healthcare needs [4]

Core Insights - NeurAxis, Inc. has announced that its PENFS technology is now included in clinical practice guidelines for treating Functional Abdominal Pain (FAP) in Irritable Bowel Syndrome (IBS), which is a significant milestone for the company [1][6] - The inclusion of IB-Stim in these guidelines is expected to enhance insurance coverage and drive growth, with an estimated addressable market exceeding $3 billion in the U.S. alone [2][3] - The guidelines were developed collaboratively by pediatric gastroenterology societies and emphasize evidence-based recommendations, positioning IB-Stim as a top-tier treatment option [2][6] Company Developments - NeurAxis's CEO highlighted the recognition of IB-Stim as part of the standard care for FAP in IBS, indicating a strong growth strategy and potential for substantial revenue generation [2] - The company has recently received FDA expanded clearances for IB-Stim and is set to implement a new Category I CPT code, further enhancing its market position [2] - The company aims to address the needs of over 600,000 children in the U.S. suffering from FAP, leveraging the new guidelines to expand treatment options [2][3] Market Context - The global market for abdominal pain in IBS presents a multi-billion-dollar opportunity, with IB-Stim being the only FDA-cleared pediatric treatment for FAP in IBS [3] - The guidelines recommend PENFS among other therapies, which elevates NeurAxis's profile and supports broader adoption of IB-Stim within the healthcare industry [2][6] - The rigorous GRADE approach used in developing the guidelines underscores the efficacy and safety of PENFS, enhancing its credibility as a treatment option [2][6]

Summary of Neuraxis Investor Conference Call Company Overview - Neuraxis is a growth-stage med tech company focused on neuromodulation therapies for chronic gastrointestinal (GI) conditions in pediatrics, with plans to expand into the adult market later in 2025 [3][4] - The company has developed proprietary neuromodulation technology targeting disorders of gut-brain interaction [3] Financial Performance - Neuraxis reported revenue of approximately $2.7 million last year, representing only 0.1% of the total market for their therapies [4] - Gross margins were at 88% last year, with expectations for improvement as insurance coverage increases [5] - Recent revenue growth was reported at 40% in Q3, 43% in Q4, and 39% in Q1, attributed to increased insurance coverage and guideline responses [7] Market Potential - The total addressable market includes approximately 1 million children in the U.S. suffering from functional abdominal pain and functional dyspepsia, with a potential revenue of $5,000 per patient [13][14] - Neuraxis has secured a category one CPT code, effective January 1, 2026, which is expected to enhance reimbursement and revenue growth [25][38] Product Development and Indications - Neuraxis has recently expanded its indications to include functional dyspepsia and nausea symptoms, effectively doubling its addressable market [8][33] - The company is also in the research stage for cyclic vomiting syndrome [14] Competitive Advantage - Neuraxis is the first to market with its technology and has established significant intellectual property (IP) protections, with U.S. patents running through 2039 [24] - The technology offers a non-pharmacological alternative to existing treatments, which often have serious side effects [16][21] Insurance and Reimbursement - The company currently has coverage for 51 million lives and expects this to increase to over 100 million by the end of December [4] - The upcoming publication of academic society guidelines is anticipated to facilitate broader insurance policy coverage [36][37] Capital Structure and Financial Health - Neuraxis recently raised $5 million, enhancing its cash position to $6.8 million, which is expected to sustain operations for over a year at the current burn rate [30][40] - The management team is focused on executing business operations without the need for immediate capital raising [41][42] Conclusion - Neuraxis is positioned for significant growth with a clear path to profitability, driven by expanding market opportunities, strong financial performance, and a robust product pipeline [12][26]

Company Overview - NeurAxis, Inc. is a medical technology company focused on neuromodulation therapies for chronic and debilitating conditions in both children and adults [4] - The company is advancing its proprietary IB-Stim™ therapy, which utilizes Percutaneous Electrical Nerve Field Stimulation (PENFS) technology, and is FDA cleared for treating functional abdominal pain associated with irritable bowel syndrome (IBS) in adolescents aged 8-21 [4] - NeurAxis is conducting additional clinical trials of PENFS for various pediatric and adult conditions with significant unmet healthcare needs [4] Upcoming Events - NeurAxis will participate in the Lytham Partners Spring 2025 Investor Conference, with a webcast presentation scheduled for May 29, 2025, at 9:30 a.m. ET [1][2] - The webcast will be accessible via the conference homepage and will be available for replay after the event [2] - Management will also engage in virtual one-on-one meetings with investors during the conference [3]

Core Viewpoint - NeurAxis, Inc. has successfully closed a registered direct offering, raising approximately $5.0 million to strengthen its balance sheet and support growth initiatives, particularly for its IB-Stim therapy targeting chronic abdominal pain in pediatric patients [1][2]. Group 1: Financial Details - The offering consisted of 1,538,461 shares of common stock priced at $3.25 per share, resulting in gross proceeds of about $5.0 million before expenses [1]. - In addition to the offering, NeurAxis secured over $1 million from warrant exercises, further enhancing its financial position [2]. Group 2: Product and Market Impact - The recent FDA clearance for expanded indications of the IB-Stim treatment for Pediatric Functional Abdominal Pain (FAP) is a significant milestone for the company, addressing a critical need in pediatric care [2]. - The IB-Stim therapy is FDA cleared for functional abdominal pain associated with irritable bowel syndrome (IBS) in adolescents aged 8-21, with ongoing clinical trials for various pediatric and adult conditions [5]. Group 3: Future Outlook - The funds raised will be utilized to drive revenue growth for IB-Stim and prepare for the implementation of a CPT Category I code effective January 1, 2026, which is expected to enhance reimbursement and adoption of the therapy [2].

Core Viewpoint - NeurAxis, Inc. has announced a registered direct offering of 1,538,461 shares of its common stock at a price of $3.25 per share, aiming to raise approximately $5.0 million for working capital and general corporate purposes [1][2]. Company Overview - NeurAxis, Inc. is a medical technology company focused on neuromodulation therapies for chronic and debilitating conditions in both children and adults [5]. - The company is advancing its proprietary IB-Stim™ therapy, which is FDA cleared for treating functional abdominal pain associated with irritable bowel syndrome (IBS) in adolescents aged 8-21 [5]. - NeurAxis is conducting additional clinical trials of its Percutaneous Electrical Nerve Field Stimulation (PENFS) technology for various pediatric and adult conditions with significant unmet healthcare needs [5]. Offering Details - The offering is expected to close on or about May 22, 2025, pending customary closing conditions [2]. - Craig-Hallum Capital Group is serving as the exclusive placement agent for this offering [2]. - The gross proceeds from the offering are anticipated to be around $5.0 million before deducting fees and expenses [2]. Regulatory Information - A shelf registration statement on Form S-3 was filed with the SEC on December 13, 2024, and was declared effective on February 11, 2025 [3]. - The offering will be conducted through a prospectus supplement and accompanying prospectus that are part of the shelf registration statement [3].

Core Insights - NeurAxis, Inc. has received FDA 510(k) clearance for IB-Stim™ to treat Pediatric Functional Abdominal Pain (FAP) associated with Functional Dyspepsia, marking a significant expansion of its product indications [1][3] - The new indication is expected to nearly double the company's total addressable market, reinforcing its leadership in non-invasive, pediatric-focused neuromodulation therapies [1][6] - The commercial rollout for this expanded indication will begin immediately, leveraging existing reimbursement and provider infrastructure [2][3] Company Overview - NeurAxis, Inc. specializes in neuromodulation therapies aimed at chronic and debilitating conditions in both children and adults [4] - The company's IB-Stim™ technology is FDA-cleared for functional abdominal pain associated with irritable bowel syndrome (IBS) in adolescents aged 8-21 years [4] - There are currently no FDA-approved drug therapies for children with abdominal pain-related disorders of gut-brain interaction, highlighting the unique position of NeurAxis in the market [3][4] Market Strategy - The new indication for IB-Stim™ utilizes the same CPT code and insurance coverage as the existing IBS indication, supporting a seamless and capital-efficient go-to-market strategy [2][3] - The company anticipates significant revenue growth driven by the expanded clinical impact and increased insurance coverage, including a new CPT Category I code effective January 2026 [3]

Core Viewpoint - NeurAxis, Inc. (NRXS) has demonstrated significant revenue growth in Q1 2025, with a notable stock performance compared to the S&P 500, despite reporting a net loss that widened year over year [1][3]. Revenue and Earnings Performance - In Q1 2025, NeurAxis reported revenues of $0.9 million, a 38.5% increase from $0.6 million in the same quarter of the previous year [2]. - Unit sales increased by 46% year over year, driven by higher patient volumes with full insurance reimbursement and financial assistance [2]. Profitability Metrics - The company reported a net loss of $2.3 million, compared to a $2.1 million loss in Q1 2024, resulting in a per-share loss of $0.33 versus $0.32 a year ago [3]. - Gross margin decreased to 84.4% from 88.4% due to a higher proportion of discounted sales and increased manufacturing and shipping costs [3]. Operating Expenses - Operating expenses rose by 26.9% to $3.1 million in Q1 2025 from $2.4 million in the same quarter last year [4]. - Excluding a one-time legal settlement, operating expenses remained relatively flat, indicating effective cost controls [4]. Cash Position and Financial Health - As of March 31, 2025, NeurAxis had cash and cash equivalents of $2 million, down from $3.7 million as of December 31, 2024, with no long-term debt reported [5]. - Net cash used in operations for Q1 2025 was $1.6 million, compared to $1.3 million a year ago [5]. Management Insights - CEO Brian Carrico noted that Q1 2025 marked the third consecutive quarter of robust revenue growth, attributing this to improved billing practices and expanding insurance coverage [6]. - CFO Tim Henrichs indicated that while operating expenses may rise in the short term due to sales and marketing efforts, they are expected to decrease as a percentage of sales [7]. Market Dynamics - Revenue growth was supported by the adoption of NeurAxis' proprietary technology, but pricing pressure from financial assistance patients constrained gross margin expansion [8]. - A one-time legal settlement of $750,000 impacted operating and net losses, but without this charge, net loss would have improved by 22% year over year [9]. Future Outlook - Management is optimistic about revenue acceleration in upcoming quarters, driven by the publication of academic guidelines and the implementation of a permanent CPT code for IB-Stim [11]. - FDA clearance is pending for expanding IB-Stim's indication, which could double the addressable market [12]. Regulatory Developments - NeurAxis achieved regulatory milestones, including a broadened FDA label for IB-Stim and 510(k) clearance for its rectal expulsion device [13]. - The company settled a legacy lawsuit for $750,000, payable over 12 months starting January 2026 [14].