Neuraxis, INC: Form 10-Q for the period ended Mar 31, 2026

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited financial statements and the related notes appearing in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks, uncertainties, and assumptions. You should read the “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” sections of our Form 10-K for the period ended December 31, 2025 (the “2025 Annual Report”) for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a growth stage company focused on developing neuromodulation therapies to address chronic and debilitating conditions in children. Our mission is to advance drug-free neuromodulation therapies that improve patient outcomes and reduce medication burden in complex disorders, while expanding access to effective care for populations with significant unmet needs. Our IB-Stim device is a PENFS system with FDA indications for patients 8 years and older with functional abdominal pain associated with IBS, functional dyspepsia (FD) and associated FD nausea symptoms. Our RED device is an easy-to-use, office-based, point-of-care test that identifies patients with chronic constipation due to pelvic floor dyssynergia and has FDA market clearance for adults. Other indications in our pipeline are comprised of post-concussion syndrome, cyclic vomiting syndrome, post-operative pain and fibromyalgia pain.

Since our inception, we have incurred significant operating losses. Our net loss was $1,761,432 and $2,278,684 for the three months ended March 31, 2026 and 2025, respectively. Although we had stockholders’ equity of $5,747,550 as of March 31, 2026, our auditors have expressed substantial doubt about our ability to continue as a going concern in their audit opinion. We expect to incur significant expenses and operating losses for the foreseeable future as we continue to pursue widespread insurance coverage of our IB-Stim and RED devices and seek FDA clearance of our device for other indications. There are a number of milestones and conditions that we must satisfy before we are able to generate sufficient revenue to fund our operations, including FDA clearance of our IB-Stim device to treat future indications.

Factors Affecting our Business and Results of Operations

Revenue

Our revenue is derived from the sale of our IB-Stim device to healthcare companies, primarily hospitals and clinics. Sales generally are not seasonal and only mildly correlated with economic cycles. Our IB-Stim device sells for $1,195 per device, and each patient being treated for functional abdominal pain associated with IBS, functional dyspepsia (FD) and/or associated FD with nausea symptoms will use four devices.

Our sales typically are made on a purchase order basis rather than through long-term purchase commitments. We enter into sales agreements with customers for IB-Stim devices based on purchase orders and standard terms, which vary slightly based on the customer’s form, and conditions of sale. Standard payment terms generally are that payment is due within 30 days.

Inflation did not have a material impact on our operations for any applicable period and we do not expect inflation to have a material impact on our operations for the foreseeable future.

Gross Profit and Gross Margin

Our management uses gross profit and gross margin to evaluate the efficiency of operations and as a key component to determining the effectiveness and allocation of resources. We calculate gross profit as net sales less cost of goods sold, and gross margin as gross profit divided by net sales. Our gross margin has been and will continue to be affected by a variety of factors, primarily the average selling price of our IB-Stim device, production volume, order flows, change in mix of customers, third-party manufacturing costs related to components of our devices, and cost-reduction strategies. We expect our gross profit to increase for the foreseeable future as our net sales grows, both through broader insurer acceptance of our IB-Stim device in the near term and approval of our technology for the treatment of other indications over the longer term. Our gross margin may fluctuate from quarter to quarter due to changes in average selling prices and the mix of patient healthcare coverage (e.g., discounts are provided to lower income patients without healthcare insurance), particularly as we introduce enhancements to our IB-Stim device and new products to address other indications, and as we adopt new manufacturing processes and technologies.

Expenses

We have four categories of expenses: cost of goods sold, selling, research and development (“R&D”), and general and administrative (“G&A”).

Costs of goods sold consist of costs paid for the IB-Stim and RED devices to our contract manufacturers along with shipping and handling costs and expired inventory charges. Expired inventory expense is related to the FDA clearance period from the date our devices are manufactured, and if the device is not sold in such period, a charge is recorded. Expired inventory charges totaled $758 and $0 for the three months March 31, 2026 and 2025, respectively. We have fixed-priced contracts with the manufacturers of our devices.

Our selling expenses primarily consist of advertising, marketing and promotion of the Company’s products including salaries, commissions and other related personnel costs including travel expenses. The Company reclassified $366,165 of general and administrative expenses to selling expenses in the Condensed Statements of Operations for the three months ended March 31, 2025, to conform to current year presentation.

Our research and development expenses primarily consist of clinical research studies, new product development, costs of materials and supplies used in research and development activities and salaries and other related personnel costs for employees engaged in research and development activities to have our IB-Stim and RED devices cleared by the FDA for other indications. The Company reclassified $57,311 of general and administrative expenses to research and development expenses in the Condensed Statements of Operations for the three months ended March 31, 2025, to conform to current year presentation. We expect future R&D expenses for other indications, such as post-concussion syndrome, cyclic vomiting syndrome, post-operative pain and fibromyalgia pain.

General and administrative expense primarily consists of wages and benefits, professional fees including legal and audit, insurance, investor relations, facility costs, utilities and travel.

Results of Operations

The following table presents our statements of operations for the three months ended March 31, 2026 and 2025, respectively:

(Unaudited)

24

Net Sales

Net sales increased $712,228, or 79.5%, from $895,655 for the three months ended March 31, 2025, to $1,607,883 for the three months ended March 31, 2026, due to volume growth from customers with full insurance reimbursement coverage that is a function of IB-Stim’s Category I CPT code effective date of January 1, 2026 and broader insurance coverage year over year.

Gross Profit and Gross Margin

Gross profit increased $633,337, or 83.8%, from $756,180 for the three months ended March 31, 2025, to $1,389,517 for the three months ended March 31, 2026, due to higher unit volume from customers with full insurance reimbursement coverage. The increase in gross margin from 84.4% for the three months ended March 31, 2025, to 86.4% for the three months ended March 31, 2026, was due to higher growth from the Company’s undiscounted full reimbursement customers compared to the Company’s financial assistance programs that are discounted to patients without insurance coverage, partially offset by higher device manufacturing costs.

Selling Expenses

Selling expenses increased $324,217, or 64.8%, from $500,119 for the three months ended March 31, 2025, to $824,336 for the three months ended March 31, 2026, due to commission from higher sales volume and additional sales reps and marketing personnel to facilitate growth resulting from the IB-Stim Category I CPT code and broader insurance coverage.

Research and Development

Research and development expenses declined $18,300, or 15.5%, from $117,867 for the three months ended March 31, 2025, to $99,567 for the three months ended March 31, 2026, due to non-recurring RED device development costs in 2025 and proceeds received for devices used in 2026 clinical research studies.

General and Administrative

General and administrative expenses declined $226,999, or 9.3%, from $2,433,292 for the three months ended March 31, 2025, to $2,206,293 for the three months ended March 31, 2026, primarily due to a one-time, non-recurring charge in 2025 to settle a lawsuit partially offset by incremental stock compensation expense from the third year of a three-year vesting plan, higher benefit costs and consulting fees incurred to secure a Federal Supply Schedule agreement with the Veterans Administration.

Operating Loss

Our operating loss improved $554,419, or 24.2%, from $2,295,098 for the three months ended March 31, 2025, to $1,740,679 for the three months ended March 31, 2026, primarily due to higher sales volume and the corresponding gross profit and the absence of a one-time, non-recurring charge in 2025 to settle a lawsuit, partly offset by higher selling expenses.

Other (Expense) Income, Net

Other expense increased $37,167, or 226.4%, from $16,414 of income for the three months ended March 31, 2025, to $20,753 of expense for the three months ended March 31, 2026, primarily due to the change in fair value of warrants and interest expense associated with the settlement of the lawsuit.

Net Loss

Our net loss improved $517,252, or 22.7%, from $2,278,684 for the three months ended March 31, 2025, to $1,761,432 for the three months ended March 31, 2026, due to higher sales volume and the corresponding gross profit and the absence of a one-time, non-recurring charge in 2025 to settle a lawsuit, partly offset by higher selling expenses.

Liquidity and Capital Resources

We had cash on hand of $7,078,659 and $4,965,072 as of March 31, 2026, and December 31, 2025, respectively. We maintained a working capital surplus of $5,328,867 and $2,941,091 as of March 31, 2026, and December 31, 2025, respectively. The increase in working capital was primarily due to (i) proceeds from the issuance of common stock pursuant to the At The Market capital facility and the exercise of warrants and (ii) higher accounts receivable driven by IB-Stim device sales.

We have incurred losses since inception and have funded our operations primarily with a combination of sales, debt, and the sale of capital stock. As of March 31, 2026, we had stockholders’ equity of $5,747,550 and short-term borrowings of $100,735.

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, so this 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 2026 and beyond.

Additionally, we have to meet all the financial disclosure and reporting requirements associated with being a publicly reporting company. Our management will have to spend additional time on policies and procedures to make sure it is compliant with various regulatory requirements, especially that of Section 404 of the Sarbanes-Oxley Act. This additional corporate governance time required of management could limit the amount of time our management has to implement our business plan and may delay our anticipated growth plans.

The following table summarizes our cash flow from operating, investing and financing activities for the three months ended March 31, 2026 and 2025:

(Unaudited)

Operating Activities – Net cash used in operating activities decreased $373,898, or 23.3%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily due to a lower operating loss attributable to growth from the Category I CPT code and increased payor coverage as well as more efficient working capital utilization during the three months ended March 31, 2026.

Investing Activities – Net cash used in investing activities decreased $18,000, or 100.0%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, due to capital expenditures to manufacture the RED device in 2025 that did not recur in 2026 once the device was launched.

Financing Activities – Net cash provided by (used in) financing activities increased $3,413,189, or 4,886.8%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, primarily due to proceeds from the issuance of common stock pursuant to the At The Market capital facility and the exercise of warrants during the three months ended March 31, 2026.

Critical Accounting Estimates

There have been no material changes to the critical accounting estimates previously described in our Form 10-K for fiscal year ended December 31, 2025.

Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e), promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our Company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive officer and principal financial officer, evaluated our Company’s disclosure controls and procedures as of the end of the period covered by this Form 10-Q. Based on this evaluation, and in light of the material weaknesses in our internal control over financial reporting described below, our principal executive officer and principal financial officer concluded that as of March 31, 2026, our disclosure controls and procedures were not effective.

Evaluation of Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act. Under the supervision and with the participation of our principal executive officer and principal financial officer and oversight of the Audit Committee of the Board of Directors, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in the framework set forth in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Our management, including our principal executive officer and principal financial officer, recognizes that internal controls over financial reporting, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.

Based on our evaluation, management concluded that our internal control over financial reporting was not effective as of March 31, 2026.

The following material weaknesses in our internal control over financial reporting were identified:

• Ineffective approval processes governing (i) timely Board of Directors authorization and (ii) segregation of duties and roles and responsibilities configurations within the Company’s financial reporting system;
• Inadequate contract management process to capture all executed agreements prior to the commencement of services in order to ensure accuracy within the proper accounting period;
• Misapplication of U.S. GAAP; and
• Ineffective disclosure controls and procedures a result of (i) lack of segregation of duties, (ii) lack of internal control structure review and (iii) misapplication of U.S. GAAP.

In order to remediate the identified material weaknesses, management, with the oversight of the Audit Committee of the Board of Directors, undertook measures to enhance the Company’s internal control environment, including the (i) hiring of a principal financial officer and other accounting personnel to ensure the appropriate application of U.S. GAAP, (ii) hiring of a dedicated internal control manager who reports directly to the Audit Committee and whose sole responsibility is to develop, document, implement and maintain our internal control framework including walk throughs, narratives, flow charts, risk control matrices and independent testing of our financial and IT controls, (iii) documentation and communication of business policies such as a delegation of authority over company transactions as well as invoice and journal entry approvals, (iv) completion of a formal monthly close process including account reconciliations with supporting documentation, (v) engagement of a third-party firm that implemented controls to segregate duties and approvals with the proper assignment of roles and responsibilities within the Company’s financial system and (vi) the adoption and implementation of the Information System Audit and Control Association (“ISACA”) Control Objectives for Information and Related Technologies (“COBIT”) 2019 framework to design, develop, govern and manage enterprise IT. However, management has not fully implemented the remediation steps, in particular testing, and expects remediation efforts to continue through the remainder of fiscal year 2026.

While these remediation efforts are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of the Company’s internal controls over a sustained period of financial reporting cycles, management is committed to maintaining a strong internal control program over financial reporting and will take further actions and implement additional enhancements or improvements as necessary.

Changes in Internal Control Over Financial Reporting

Other than the remediation efforts described above, there were no changes in our internal controls over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act, during the quarter ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

For information regarding the risk factors that could affect the Company’s business, results of operations, financial condition and liquidity, see the information under Part I, Item 1A. “Risk Factors” in the Form 10-K, which is accessible on the SEC’s website at www.sec.gov (http://www.sec.gov). There have been no material changes to the risk factors previously disclosed in the Form 10-K.