Neuraxis, INC: Form 10-Q for the period ended Jun 30, 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 $2,085,746 and $1,690,418 for the three months ended June 30, 2026 and 2025, respectively, and $3,847,178 and $3,969,102 for the six months ended June 30, 2026 and 2025, respectively. Although we had stockholders’ equity of $6,735,053 as of June 30, 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 and incremental payor coverage.

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 $2,092 and $6,633 for the three months ended June 30, 2026 and 2025, respectively, and $2,850 and $6,633 for the six months ended June 30, 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 $391,760 and $757,925 of general and administrative expenses to selling expenses in the Condensed Statements of Operations for the three and six months ended June 30, 2025, respectively, 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 $56,878 and $114,189 of general and administrative expenses to research and development expenses in the Condensed Statements of Operations for the three and six months ended June 30, 2025, respectively, 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, market access, facility costs, utilities and travel.

Results of Operations

The following table presents our statements of operations for the three and six months ended June 30, 2026 and 2025, respectively:

(Unaudited)

(Unaudited)

24

Net Sales

Net sales increased $1,034,609, or 115.7%, from $894,086 for the three months ended June 30, 2025, to $1,928,695 for the three months ended June 30, 2026, and increased $1,746,837 or 97.6%, from $1,789,741 for the six months ended June 30, 2025, to $3,536,578 for the six months ended June 30, 2026. The increases were due to unit volume growth from broader insurance coverage attributable to IB-Stim’s Category I CPT code effective date of January 1, 2026 and an increase in the average selling price as more units were sold to patients with full reimbursement insurance coverage compared to the Company’s discounted financial assistance program.

Gross Profit and Gross Margin

Gross profit increased $908,679, or 121.6%, from $747,443 for the three months ended June 30, 2025, to $1,656,122 for the three months ended June 30, 2026, and increased $1,542,016, or 102.6%, from $1,503,623 for the six months ended June 30, 2025, to $3,045,639 for the six months ended June 30, 2026. The increases were due to higher unit volume from more customers with full reimbursement insurance coverage. Gross margin increased from 83.6% for the three months ended June 30, 2025, to 85.9% for the three months ended June 30, 2026, and increased from 84.0% for six months ended June 30, 2025, to 86.1% for the six months ended June 30, 2026, due to higher growth from the Company’s patients with full reimbursement insurance coverage compared to patients that pay through the Company’s discounted financial assistance program, partially offset by higher device manufacturing costs.

Selling Expenses

Selling expenses increased $327,374, or 61.3%, from $534,013 for the three months ended June 30, 2025, to $861,387 for the three months ended June 30, 2026, and increased $651,593 or 63.0%, from $1,034,131 for the six months ended June 30, 2025, to $1,685,724 for the six months ended June 30, 2026. The increases were due to commissions from higher sales volume, additional sales reps and marketing personnel including recruiting fees and higher travel expenses to facilitate growth resulting from the IB-Stim Category I CPT code and broader insurance coverage.

Research and Development

Research and development expenses increased $159,147, or 138.2%, from $115,197 for the three months ended June 30, 2025, to $274,344 for the three months ended June 30 2026, and increased $151,710, or 68.3%, from $222,201 for the six months ended June 30, 2025 to $373,911 for the six months ended June 30, 2026. The increases were due to more clinical research studies in 2026 as the Company continues its expansion of IB-Stim’s FDA indications, partially offset by non-recurring RED device development costs in 2025.

General and Administrative

General and administrative expenses increased $829,012, or 45.6%, from $1,816,091 for the three months ended June 30, 2025, to $2,645,103 for the three months ended June 30, 2026, primarily due to (i) incremental stock compensation expense from the third year of a three-year vesting plan, (ii) higher market access advisory costs and additional headcount, including recruiting fees, as the Company pursues incremental insurance payor coverage and (iii) higher benefit costs.

General and administrative expenses increased $591,149, or 13.9%, from $4,260,246 for the six months ended June 30, 2025, to $4,851,395 for the six months ended June 30, 2026, primarily due to (i) incremental stock compensation expense from the third year of a three-year vesting plan, (ii) higher market access advisory costs and additional headcount, including recruiting fees, as the Company pursues incremental insurance payor coverage, (iii) higher benefit costs and (iv) consulting fees incurred to secure a Federal Supply Schedule agreement with the Veterans Administration, partly offset by a one-time non-recurring charge in 2025 to settle a lawsuit.

Operating Loss

Our operating loss increased $406,854, or 23.7%, from $1,717,858 for the three months ended June 30, 2025, to $2,124,712 for the three months ended June 30, 2026, primarily due to higher operating expenses from selling costs that are a function of the higher sales, research and development costs as the Company continues its pursuit of additional IB-Stim FDA indications and stock compensation expense, partly offset by higher gross profit as the Company’s sales increased from the Category I CPT code and broader payor coverage.

Our operating loss decreased $147,564, or 3.7%, from $4,012,955 for the six months ended June 30, 2025, to $3,865,391 for the six months ended June 30, 2026, primarily due to higher gross profit as the Company’s sales increased due to the Category I CPT code and broader payor coverage and the absence of a one-time non-recurring charge in 2025 to settle a lawsuit, partly offset by higher operating expenses due to selling costs that are a function of the higher sales, research and development costs as the Company continues its pursuit of additional IB-Stim FDA indications and stock compensation expense.

Other Income, Net

Other income increased $11,526, or 42.0%, from $27,440 for the three months ended June 30, 2025, to $38,966 for the three months ended June 30, 2026, primarily due to higher interest income on the Company’s cash balances.

Other income decreased $25,640, or 58.5%, from $43,853 for the six months ended June 30, 2025, to $18,213 for the six months ended June 30, 2026, primarily due to the change in fair value of warrants and higher interest expense associated with the settlement of the lawsuit, partly offset by higher interest income on the Company’s cash balances.

Net Loss

Our net loss increased $395,328, or 23.4%, from $1,690,418 for the three months ended June 30, 2025, to $2,085,746 for the three months ended June 30, 2026, due to a higher operating loss partly offset by higher interest income.

Our net loss decreased $121,924, or 3.1%, from $3,969,102 for the six months ended June 30, 2025, to $3,847,178 for the six months ended June 30, 2026, due to a lower operating loss partly offset by the change in fair value of warrants and higher interest expense.

Liquidity and Capital Resources

We had cash on hand of $8,322,258 and $4,965,072 as of June 30, 2026, and December 31, 2025, respectively. We maintained a working capital surplus of $6,317,762 and $2,941,091 as of June 30, 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, partly offset by higher accounts payable related market access and clinical research study costs incurred.

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 June 30, 2026, we had stockholders’ equity of $6,735,053 and short-term borrowings of $42,726.

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 six months ended June 30, 2026 and 2025:

(Unaudited)

Operating Activities – Net cash used in operating activities decreased $811,840 or 26.4%, for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, primarily due to (i) a lower operating loss excluding non-cash stock compensation expense and (ii) inventory purchased and market access advisory services rendered and accrued in June, partly offset by higher accounts receivable resulting from sales growth due the Category I CPT code and increased payor coverage.

Investing Activities – Net cash used in investing activities decreased $18,985 or 75.1%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, due to nonrecurring capital expenditures to manufacture the RED device in 2025.

Financing Activities – Net cash provided by financing activities increased $234,775, or 4.4%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily due to lower offering costs from the issuance of common stock pursuant to the At The Market capital facility and proceeds from the issuance of common stock subject to the Employee Stock Purchase Plan.

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 June 30, 2026, our disclosure controls and procedures were not effective.

Material Weaknesses in Internal Control Over Financial Reporting

As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, management identified the following material weaknesses in our internal control over financial reporting, which continued to exist as of June 30, 2026:

• 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.

During the fiscal year ended December 31, 2025, and the three months ended March 31, 2026, management, with the oversight of the Audit Committee, undertook measures to enhance the Company’s internal control environment by implementing numerous controls previously disclosed in our Annual Report on Form 10-K to remediate the material weaknesses. During the three months ended June 30, 2026, management continued those remediation efforts by (i) implementing customer acceptance procedures, (ii) developing standard vendor contract templates, (iii) enhancing disaster recovery and backup procedures and services on critical IT systems and (iv) continuing independent control testing of the material weaknesses that is expected to continue through the remainder of 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 June 30, 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.