UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
☒ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended: December 31, 2024
or
☐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)
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
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 such files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 pursuant to Section 13(a) of the Exchange Act. ☒
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The
aggregate market value of the registrant’s outstanding common equity held by non-affiliates as of the last business day of the
registrant’s most recently completed second fiscal quarter, based upon the closing price for the registrant’s common stock
on that day as reported by the NYSE American, was approximately $16.4 million.
The
registrant had 7,215,864 shares of its common stock, par value $0.001, issued and outstanding as of March 13, 2025.
TABLE
OF CONTENTS
Page
PART I
Item 1. Business 5
Item 1A. Risk Factors 36
Item 1B. Unresolved Staff Comments 61
Item 1C. Cybersecurity 61
Item 2. Properties 62
Item 3 Legal Proceedings 63
Item 4. Mine Safety Disclosures 64
PART II
Item 6. Reserved 64
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 69
Item 8. Financial Statements and Supplementary Data 69
Item 9A. Controls and Procedures 69
Item 9B. Other Information 70
Item 9C. Disclosures Regarding Foreign Jurisdictions that Prevent Inspections 70
PART III
Item 10. Directors, Executive Officers and Corporate Governance 71
Item 11. Executive Compensation 76
Item 14. Principal Accounting Fees and Services 87
PART IV
Item 15. Exhibits and Financial Statement Schedules 88
Signatures 92
FORWARD-LOOKING
STATEMENTS
This
Annual Report on Form 10-K (“Annual Report”) contains forward-looking statements within the meaning of the federal securities
laws. All statements contained in this Annual Report, other than statements of historical fact, including statements regarding our future
operating results and financial position, our business strategy and plans, potential growth or growth prospects, future research and
development, sales and marketing and general and administrative expenses, and our objectives for future operations, are forward-looking
statements. Words such as “believes,” “may,” “will,” “estimates,” “potential,”
“continues,” “anticipates,” “intends,” “expects,” “could,” “would,”
“projects,” “plans,” “targets,” and variations of such words and similar expressions are intended
to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections
about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term
and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks,
uncertainties and assumptions, including those described in the “Risk Factors” in this Annual Report. Readers are urged to
carefully review and consider the various disclosures made in this Annual Report and in other documents we file from time to time with
the Securities and Exchange Commission (the “SEC”) that disclose risks and uncertainties that may affect our business. Moreover,
we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict
all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors,
may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks,
uncertainties, and assumptions, the future events and circumstances discussed in this Annual Report may not occur and actual results
could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You
should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking
statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable,
we cannot guarantee future results, performance, or achievements. In addition, the forward-looking statements in this Annual Report are
made as of the date of this filing, and we do not undertake, and expressly disclaim any duty, to update such statements for any reason
after the date of this Annual Report or to conform statements to actual results or revised expectations, except as required by law.
You
should read this Annual Report and the documents that we reference herein and have filed with the SEC as exhibits to this Annual Report
with the understanding that our actual future results, performance, and events and circumstances may be materially different from what
we expect.
This
Annual Report also contains or may contain estimates, projections and other information concerning our industry, our business and the
markets for our products, including data regarding the estimated size of those markets and their projected growth rates. Information
that is based on estimates, forecasts, projections or similar methodologies is inherently subject to uncertainties and actual events
or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated,
we obtained these industry, business, market and other data from reports, research surveys, studies and similar data prepared by third
parties, industry and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources
from which these data are derived.
PART
I
ITEM
1. BUSINESS
Overview
Neuraxis,
Inc. (“we”, “us”, the “Company” or “Neuraxis”) is a medical technology company focused
on developing neuromodulation therapies to address chronic and debilitating conditions in children and adults. We are dedicated to advancing
science with our proprietary IB-Stim therapy, based on our Percutaneous Electrical Nerve Field Stimulation (PENFS) technology, which
was developed internally by the Company. We believe that superior science and evidence-based research, are necessary for adoption by
the medical and scientific community. With one FDA indication (functional abdominal pain associated with IBS in adolescents 8-21 years
old) on the market, additional clinical trials of PENFS in multiple pediatric conditions are underway focused on unmet healthcare needs
in children, see “Our Pipeline” for more information.
Our
first product, IB-Stim, is a PENFS system intended to be used in patients 8-21 years of age with functional abdominal pain associated
with IBS. IB-Stim is a US FDA Class II medical device that has received one regulatory clearance: IB-Stim (DEN180057, 2019), under the
regulation name of “non-implanted nerve stimulator for functional abdominal pain relief.”
Our
second product, Rectal Expulsion Device (“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. RED (K242304, 2024) helps identify
patients with rectal hypersensitivity who experience a desire or urge to defecate at lower volumes of distension. RED is intended to
be used in a clinical setting by trained health care providers in adult populations.
Our
Mission
Our
mission is to provide solutions that create value and provide better and safer patient outcomes. We believe in improving lives and minimizing
suffering; particularly in the pediatric population, where research and therapeutics are usually lacking. The Company already has market
clearance for its IB-Stim ® that targets functional abdominal pain associated with IBS, in children, with a total addressable market
of up to 6 million children. Through innovation and research, we are reimagining the future of patient care.
Our
Corporate History
Neuraxis,
Inc. was established in 2011 and incorporated in the state of Indiana on April 17, 2012, under the name of Innovative Health Solutions,
Inc. The name was changed to Neuraxis, Inc. in March of 2022. Additionally, the Company filed a Certificate of Conversion to become a
Delaware corporation on June 23, 2022. The authorized shares were increased, and a par value established. On September 7, 2021, the Company’s
board of directors authorized a 4-for-1 stock split. They also increased the number of authorized common stock shares from 2,700,000
to 10,800,000. Furthermore, on September 9, 2021, the board authorized an increase of authorized shares of common stock from 10,800,000
to 13,400,000 in anticipation of a capital offering.
As
part of the conversion to a Delaware corporation, the total number of shares of all classes of stock which the Corporation shall have
authority to issue was 101,120,000 shares, consisting of (i) 100,000,000 shares of common stock, par value $0.001 per share, and (ii)
1,120,000 shares of Preferred Stock, par value $0.001 per share (“Preferred Stock”), 1,000,000 of which was designated as
“Series A Preferred Stock” and 120,000 of which was designated as “Series Seed Preferred Stock”.
Furthermore,
on January 10, 2023, the Company’s board of directors authorized a 1-for-2 reverse stock split. All per share information has been
adjusted for this reverse stock split. The reverse split became effective on January 12, 2023.
On
August 9, 2023, the Company consummated an initial public offering (“IPO”), conducted on a firm commitment basis, pursuant
to which it sold 1,098,667
shares of its common stock at a price of $6.00
per share, resulting in gross proceeds to the
Company of $6,592,002.
Net proceeds to the Company, after deducting underwriting discounts and commissions and other offering expenses paid by the Company,
were $4,110,721.
All shares sold in our IPO were registered pursuant to a registration statement on Form S-1 (File No. 333- 269179), as amended, declared
effective by the SEC on August 9, 2023.
On
August 15, 2024, the Company’s shareholders (i) authorized 5,000,000 shares of preferred stock of which 4,000,000 were designated
at $0.001 par value “Series B Preferred Stock” inclusive of cumulative dividends, due and payable quarterly at the Company’s
discretion either in cash or common stock when declared, at a rate of 8.5% per annum through June 30, 2025, (ii) retired 1,000,000 shares
of Series A Preferred Stock and (iii) retired 120,000 shares of Series Seed Preferred Stock. On November 11, 2024, the holders of a majority of the then-outstanding shares of Series B Preferred
Stock authorized (i) an increase in the number of designated Series B Preferred Stock to 5,000,000 shares and (ii) an extension
of the 8.5% cumulative dividend period to December 31, 2026. The stated value of the Series B Preferred Stock is $2.38 per share. As of March 13, 2025, there are 4,280,939 shares of Series B Preferred
Stock issued and outstanding, which are convertible (based on the stated value of each share and the conversion price both equalling $2.38)
into 4,280,939 shares of common stock, subject to a maximum ownership cap of between 4.99% and 19.99% of the shares outstanding (following
conversion by the holder) set at the discretion of each holder of Series B Preferred Stock.
Each
holder of Series B Preferred Stock is entitled to cast the number of votes equal to the number of whole shares of common stock into
which the shares of Series B Preferred Stock held by such holder. Solely for purposes of voting rights, the conversion price is
$3.80 per share. The 4,280,939 shares of Series B Preferred Stock outstanding therefore represent 2,681,208 votes of common stock,
subject to a maximum voting percentage cap of between 4.99% and 19.99% of the votes outstanding (inclusive of all 2,681,208 votes plus the shares
outstanding on the record date for any particular shareholder meeting) set at the discretion of each holder of Series B Preferred
Stock.
We
have developed three FDA cleared products, the IB-Stim (DEN180057, 2019), the RED (K242304, 2024), the NSS-2 Bridge (DEN170018, 2017),
and the original 510(K) clearance (K140530, 2014), all of which were developed internally by the Company.
Pediatrics
Industry Overview
Pediatric
providers, as a whole, had expressed concern about the lack of attention given to children with functional abdominal pain disorders (including
IBS) and the limited treatment options available for a population that suffers from significant disabilities. With 20% of the United
States population under age 18, our Company focus is on opportunities in pediatrics industry. The pediatrics industry has multi-billion-dollar
market opportunities. The following points clearly outline the unmet need in children:
Our
Opportunity
For
years, physicians and qualified healthcare professionals have resorted to the use of off-label medications without proper evidence of
efficacy or safety. This is despite a technical report from the American Academy of Pediatrics and NASPGHAN which found very little evidence
to endorse the use of any drugs in the treatment of FAPDs in children. Medications including tricyclic antidepressants, SSRIs and gabapentinoids
continue to be used off-label despite lack of evidence to support efficacy or safety. Not only have the most commonly used medications
(amitriptyline and citalopram) failed to beat placebo in clinical trials, but new studies also suggest significant risks with the potential
for serious side effects with these drugs. The absence of conclusive data to support treatments based on scientific evidence, and the
fact no drug therapies have been approved by the FDA for the treatment of FAPDs or IBS in children, presents a unique market opportunity
for Neuraxis. Below are the current standard treatments in children with functional abdominal pain and IBS.
Our
Solutions
We
entered the pediatric market with clinical evidence, key opinion leaders and society endorsement, including a signed letter from the
American Academy of Pediatrics and NASPGHAN supporting our request for insurers to pay for our IB-Stim device. Our IB-Stim® is a
non-drug alternative to reduce functional abdominal pain in patients with IBS. In June 2019, the FDA cleared IB-Stim, a non-surgical,
neuromodulation device for children and adolescents who suffer from IBS, through a de novo process (DEN180057, 2019). The FDA created
a new classification of PENFS for the IB-Stim device. This is based on pre-clinical and clinical studies demonstrating the mechanism
of action and efficacy. Based on this new class of devices, the IB-Stim falls under 21 CFR Part 876, Subpart F – Therapeutic Devices,
876.5340, Product Code QHH. As a PENFS device, it is non-implantable and provides field stimulation to cranial nerves V, VII, IX and
X in the ear to access the CNS. It stimulates remotely from the source of pain to modulate central pain regions, such as the limbic system,
and relieve functional abdominal pain associated with IBS. Studies have demonstrated long-term benefits in functional disability, psychological
co-morbidities, and pain. For example, the table below is from a recently published study of IB-Stim in a population of patients with
chronic functional abdominal pain. The follow-up was done at 6-12 months post-treatment and shows improvements in validated questionnaires
compared to baseline (API), functional disability index (FDI), pain catastrophizing scale (PCS), Screen for Childhood Anxiety Related
Disorders (SCARED) and the Promis Anxiety.
Santucci
NR, King C, El-Chammas KI, Wongteerasut A, Damrongmanee A, Graham K, Fei L, Sahay R, Jones C, Cunningham NR, Coghill RC. Effect of
percutaneous electrical nerve field stimulation on mechanosensitivity, sleep, and psychological comorbidities in adolescents with functional
abdominal pain disorders. Neurogastroenterol Motil. 2022;34:e14358.
We
have only submitted one FDA De Novo request and two 510(k) submissions and plan to submit additional 510(k) premarket notifications from
our pipeline indications in the future.
Compliance
with treatment so far has been outstanding with the four weeks of therapy required to sustain long-term benefits. Compliance has been
an issue with non-pharmacological treatment for children, particularly with some of the psychological approaches such as cognitive behavioral
therapy or guided imagery, which sometimes requires 8-12 weeks of treatment. In fact, 95% of adolescents who used IB-Stim said that they
would recommend this treatment to family and friends. Many children’s hospitals across the country are already treating children
with IB-Stim successfully since it provides a better alternative for therapy in children with IBS and disability and allows them to treat
them safely and effectively.
We
have concentrated our marketing focus on the 260 children’s hospitals within the United States. To date, we have sold our IB-Stim
product to approximately 77 children’s hospitals within our target market.
Competition
The
competitive landscape for therapies includes off-label drugs and drugs with FDA approved only for adults with IBS while there is no FDA
indicated treatments for patients 8-21 years of age with functional abdominal pain associated with IBS and prescriptions often contain
FDA black box labels. Psychological treatments such as cognitive behavioral therapy (CBT) or guided imagery have been shown to be some
of the most effective treatments for these conditions, however, these are limited by access to trained therapists. It also includes devices
that could theoretically be used, but do not have supporting data or FDA clearance for functional bowel disorders or IBS. Digital therapeutics
that offer CBT for IBS have been developed for adults with IBS with limited success in terms of reaching large numbers of patients. Virtual
reality could potentially be used in the future to also deliver CBT to patients with IBS. Our method patents also limit other devices
from targeting IBS through stimulation of cranial nerve branches in the ear.
Approved
drugs for Adults with IBS
1. Rifaximin: an intraluminal antibiotic approved for IBS-diarrhea
Devices
The
neurostimulation market is predominantly comprised of surgically implanted, invasive technologies that are not directly competitive with
our technology. Several neurostimulation companies are large, publicly traded companies that have a history in the market, have significantly
easier access to capital and other resources and have an established product pipeline. The combined clinical research and product development
done by the industry, including by us and all our competitors, is uncovering the beneficial effects of neurostimulation which now establishes
neuromodulation as a valid and scientifically supported approach to the treatment of neurological conditions, and accordingly, we expect
for competition in the non-implanted space to grow in the future.
While
many companies have joined the neuromodulation space, there are no companies targeting the CNS or the brain-gut axis through auricular
nerves for functional bowel disorders or IBS. Currently, the Neuraxis method patents protect access to the brain, particularly the limbic
systems through branches of cranial nerves in the ear.
Our
Competitive Strengths
We
believe that the following competitive strengths will enable us to compete effectively:
● First to market
● Strong portfolio of device and method patents
● Large Market Opportunities
● Strong pediatric pipeline
● Academic Society Support
● Strong clinical data carried out in leading academic institutions in the U.S.
Our
Growth Strategies
● List price of our product is $1,195 per device and $4,780 per patient
● Strong gross margin
● Direct sales force
● Target customers are children’s hospitals and pediatric clinics
Our
Pipeline
The
IB-Stim device is to be used for the indication of functional abdominal pain associated with IBS and functional nausea in children. The
same underlying technology will be used for the remaining pipeline indications, but we may use a name other than “IB-Stim”
for marketing and commercialization purposes.
With
one FDA indication—functional abdominal pain associated with IBS in adolescents 8-21 years old—on the market, additional
clinical trials of PENFS in multiple pediatric conditions are underway focused on unmet healthcare needs in children. These indications
consist of chronic nausea, post-concussion syndrome, chemotherapy-induced nausea and vomiting, cyclic vomiting syndrome.
The
chart below shows our status in the FDA review process for IB-Stim and each of the following pediatric indications:
1.
Functional dyspepsia (nausea): RCT completed, and data being analyzed. ClinicalTrials.gov Identifier: NCT03675321, Defining
Adolescent Nausea Through Brain-Gut Physiology and Non-Invasive Neurostimulation Response. A randomized, double blind, placebo-controlled
trial to evaluate the efficacy of IB-Stim in children with functional nausea. The primary endpoint was to measure improvements in nausea
using the Nausea Severity Scale after IB-Stim therapy compared to a placebo device. The study enrolled 110 participants and was conducted
at Children’s Wisconsin/Medical College of Wisconsin.
2.
Post-concussion: RCT currently enrolling patients. ClinicalTrials.gov Identifier: NCT04978571, A Prospective Study
on the Effect of Auricular Percutaneous Electrical Nerve Field Stimulation (PENFS) in Patients with Post-Concussion Syndrome (PCS).
A randomized, double blind, placebo-controlled trial to evaluate the efficacy of IB-Stim in children with post-concussion symptoms. The
primary endpoint will be to measure improvements in validated measures, including the Immediate Post-Concussion Assessment, Post-Concussion
Symptom Scale, and Balance Error Scoring Symptom compared to placebo. The study will enroll 100 participants and is being conducted at
Children’s Hospital of Orange County.
3.
Chemotherapy-induced nausea and vomiting: RCT currently enrolling patients. ClinicalTrials.gov Identifier: NCT05143554, Efficacy
of Auricular Neurostimulation for Children Adolescents and Young Adults with Chemotherapy Induced Nausea and Vomiting. Subject will
be randomized to five days of active vs placebo device during administered chemotherapy known to cause moderate to severe nausea/vomiting.
With the next scheduled identical chemotherapy cycle, each subject will cross over to the other device (active vs placebo). The primary
endpoint will be to measure improvements in validated measures of nausea and vomiting including the Baxter Retching Faces Scale, Rhodes
Index of Nausea, Vomiting and Retching, and also assessment of rescue medication. The study will enroll 50 participants and is being
conducted at Children’s Wisconsin/Medical College of Wisconsin.
4.
Cyclic vomiting syndrome: Pilot study completed, see ClinicalTrials.gov Identifier: NCT03434652. Auricular Neurostimulation
for Children with Cyclic Vomiting Syndrome: A randomized, placebo-controlled trial. RCT anticipated to begin enrolling patients in
the second half of 2023. This will be a double blind, placebo-controlled trial to evaluate efficacy of IB-Stim in pediatric patients
with cyclic vomiting syndrome. The primary endpoint will be to measure decreases in the frequency and severity of cyclic vomiting episodes
compared to a placebo device. The study will include a minimum of 120 patients and the site is yet to be finalized.
Each
step in the FDA review process differs in duration and cannot be predicted with accuracy. Timing of FDA review and approval, if ever
received, cannot be assured and the process and any approval is within the sole control and discretion of the FDA.
Products
The
IB-Stim is a percutaneous PENFS system intended to be used in patients 8-21 years of age with functional abdominal pain associated with
IBS. IB-Stim already has market clearance from FDA for functional abdominal pain associated with IBS in children. FDA has classified
the non-implanted nerve stimulator for functional abdominal pain relief as Class II devices.
The
IB-Stim is intended to be used for 120 hours per week, using one (1) device per week, for four (4) consecutive weeks, through application
to branches of Cranial Nerves V, VII, IX and X, and the occipital nerves identified by transillumination, as an aid in the reduction
of pain when combined with other therapies for IBS (DEN180057, 2019). In published studies, patients treated with IB-Stim demonstrated
significant improvement in pain, disability and global symptoms with no serious adverse events, and minimal to no side effects, including
localized skin irritation. The following table presents a summary of IB-STIM studies performed to date:
Author DGBI N= Ages # of devices Outcomes Major adverse events
The
ability of the IB-Stim to produce systemic effects by modulating the central nervous system has been demonstrated in a pre-clinical animal
model of IBS (see Business—Pre-Clinical Data). In patients with IBS, the largest effect on all pain measures, including
composite pain scores, worst pain, disability and global symptoms, was seen after completing three consecutive weeks of treatment (see
Business—Clinical Data). A fourth consecutive week of treatment was included in clinical testing; no safety concerns were
identified with this extra consecutive week of treatment. In the trial of 115 subjects, 10 patients reported side-effects and only three
discontinued the study because of side-effects. Of such 10 patients, six experienced ear discomfort (three in the PENFS group, three
in the sham group), three experienced adhesive allergies (one in the PENFS group, 2 in the sham group), and one experienced syncope due
to needle phobia (in the sham group). There were no serious adverse events.
Medical
providers are trained to place the IB-Stim through IB-Stim Training and Certification. Once the provider is trained, the device can be
placed in the outpatient clinic and can be removed by the provider in the clinic or the patient at home. IB-Stim stays on for a total
of five-days to allow delivery of gentle electrical pulses to nerves below the skin that access the central nervous system. A study in
adolescents showed greater improvement in functional abdominal pain and global symptom improvement with every week of treatment (up to
four weeks). At the end of the four-week study, 95% of adolescents stated they would recommend the treatment to family or friends. Safety
of percutaneous electrical nerve field stimulation has also been reported in a separate study of over 1200 adult patients with no serious
adverse events and minimal to no side-effects.
When
wearing our IB-Stim device and following an easy-to-learn and efficient procedure, patients can still attend school and extracurricular
activities, exercise or play non-contact sports, shower, wear ear buds or headphones, and travel.
Our
IB-Stim device costs $1,195 per device, and each patient will use four (4) devices. Potential patients with other indications are expected
to use six (6) or more devices per patient.
Technology
A
maladaptive central nervous system can process pain and emotions differently. This often occurs in children following a traumatic event,
viral infections, inflammation or trauma. Changes in brain pathways are known to be involved in the pathophysiology of functional bowel
disorders and IBS. The IB-Stim works by sending gentle electrical impulses into cranial nerve bundles located in the ear. This stimulation
targets brain areas that process pain and helps reduce functional abdominal pain associated with IBS. An animal model of IBS demonstrated
that the firing of neurons in the amygdala could be reduced by more than 50% in just 15 minutes of stimulation with the IB-Stim technology.
A recent human study in adults with pain related to fibromyalgia suggested that the IB-Stim technology exerts its effect by modulating
emotional and executive control centers related to pain processing, see Feasibility of Auricular Field Stimulation in Fibromyalgia:
Evaluation by Functional Magnetic Resonance Imaging, Randomized Trial, Woodbury et.al., Pain Med. 2021;22:715-726. The field
of art pertains to an electrical stimulation device, including a stimulator containing a generator to deliver electrical pulses with
defined parameters, and a power supply for supplying the electrical energy through four separate needles, and at least one of which is
a needle array.
Pre-Clinical
Data
In
an animal model of IBS, extracellular, electrophysiologic recordings were performed from neurons in the rat amygdala before and 15
minutes after PENFS treatment. There was a 65% decrease in the spontaneous firing of these neurons after 15 minutes of PENFS. This
dampening of neurons in the CNS likely accounts for the modulation of pain responses in a model of post-inflammatory visceral and
somatic hyperalgesia.
Clinical
Data
We
have over 700 published patients specific to our first FDA indication which is functional abdominal pain associated with irritable bowel
syndrome in patients 8-21 years of age. A published patient is defined as a patient who went through a study, the study was analyzed
and now the study has been published in a peer-reviewed journal.
A
randomized, controlled study in children 11-18 year of age used primary endpoint of improvements in abdominal pain. The Pain Frequency-Severity-Duration
(“PFSD”) questionnaires was completed at baseline by all subjects and after each week of treatment (weeks 1–3), as
well as at extended follow-up occurring in the 8–12 weeks following the end of treatment. The PFSD scale incorporates multiple
aspects of the pain experience and was administered weekly during treatment and at extended follow-up appointments. The PFSD scale validated
for chronic pain in children (aged 8–18 years). The PFSD was also used to rate weekly worst abdominal pain on a numerical rating
scale (0 for no pain, 10 for worst pain). Patients were followed up for a median of 9.2 weeks from the last week of treatment.
For
the active PENFS group, median worst pain at follow-up remained lower (baseline: 8.0 vs. follow-up: 6.0), whereas there was no difference
at follow-up in the control group (baseline: 7.5 vs. follow-up: 7.0). The between-group differences in worst pain ratings after 3 weeks
of treatment showed that the PENFS group improved to a greater extent, with the control group reporting significantly higher worst pain
(median 7.0) than the PENFS group (median 5.0).
At
long-term follow-up, median PFSD composite scores were 12.6 (IQR 3.6–22.5) in the PENFS group and 16.8 (4.8–33.6) in the
control group. A comparison of changes in PFSD composite scores (baseline to follow-up) showed that patients in the PENFS group reported
significantly greater improvement in pain (median –8.4) than those in the control group (median 0.0). This study was published
in the Lancet Gastroenterology Hepatology, (Kovacic K, et.al. Lancet Gastroenterol Hepatol. 2017;2:727-737).
A
secondary endpoint in the same study used the functional disability index (FDI) to assess functional disability in those treated with
PENFS and compared to sham treatment. Those treated with PENFS changed from moderate disability to minimal at the 2–3-month follow-up
while the sham device group had no change.
A
separate published paper looked at 51 pediatric patients with IBS and used the symptoms response scale (SRS) to assess global symptoms
improvement following PENFS treatment compared to sham. Global symptom improvement was assessed with a validated pediatric questionnaire,
Symptom Response Scale (SRS). Symptoms were recorded as better, worse, or no change based on a 15-point scale across individual domains
for both improvement and deterioration of overall symptoms. Findings from several studies that used the SRS have shown that using 7-point
scale response options in disease-specific measures, a change score of 0.5 represents the minimal clinically important difference (Juniper
et.al. J Clin Epidemiol 1994; 47: 81–87 and Guyatt GH et.al.1987; 42: 773–78). As previously noted, a minimum change in score
of ≥ 2 was chosen for this study as a more stringent criterion for global improvement before and after PENFS treatment and to compare
between groups. Patients and providers were blinded in terms of those who received active PENFS or sham. At the end 3 weeks of therapy
using the change of ≥ 2, 81% of the PENFS group compared with 26% of the sham group (*p≤ 0.001, #p=0.002) reported overall symptom
improvement. When applying an even more stringent criteria with a change ≥ 3 on the SRS, 67% of the PENFS group compared with 22%
of the sham group reported symptoms improvement (p=0.002) (Krasaelap A et.al. Efficacy of Auricular Neurostimulation in Adolescents With
Irritable Bowel Syndrome in a Randomized, Double-Blind Trial. Clin Gastroenterol Hepatol. 2020;18:1987-1994).
Recently,
the largest, prospective, multicenter registry for any drug or device in pediatric patients with pain associated DGBIs was published.
It evaluated outcomes of pediatric patients (8-18 years) following a 4-week course of IB-Stim in a real-world clinical setting. Overall,
292 patients met Rome IV Diagnostic criteria for any pain associated disorder of the gut-brain interaction (DGBIs). In this cohort, 92%
had failed medication therapy and 61% of patients had failed 4 or more medications when they entered the study. Patients were asked to
fill out several validated pediatric measures, including the abdominal pain index (API) and a validated questionnaire that assesses frequency,
duration, and intensity of abdominal pain episodes. Data were collected weekly for the first 3 weeks and at 3, 6, 9 and 12 months. Compared
to baseline scores, there were significant improvements in the API after 4 weeks of IB-Stim treatment at every time point, including
6 month (p<0.001) and 12 months (p<0.001). Although there were many dropouts by the end of the 12 months, the results were still
significant and sustained. No serious adverse effects were recorded during the entire 12 month follow-up. (Chogle, A. et. al. A multicenter
registry study on percutaneous electrical nerve field stimulation for pediatric disorders of gut-brain interaction. J Pediatr Gastroenterol
Nutr. 2024 Mar 7.).
Abdominal Pain Index (API)
Time point n Median (IQR) p Value
An
open-label study of 20 patients treated with PENFS in a “real-world” clinical setting at Cincinnati Children’s Hospital
demonstrated that after PENFS, abdominal pain (p < 0.0001), nausea (p=0.001), pain catastrophizing (p = 0.001), functional disability
(p<0.0001), and anxiety (p = 0.03) exhibited significant improvements, and were sustained 6-12 months after treatment (Santucci et.al.
Effect of percutaneous electrical nerve field stimulation on mechanosensitivity, sleep, and psychological comorbidities in adolescents
with functional abdominal pain disorders. Neurogastroenterol Motil. 2022;34:e14358). Validated questionnaires included the abdominal
pain index (API), nausea severity scale (NSS), functional disability index (FDI), as well as psychological measures of catastrophizing
(PCS-C) and anxiety (SCARED). The table below summarizes the results pre, during and post PENFS results at long-term follow-up (Santucci
et.al. Effect of percutaneous electrical nerve field stimulation on mechanosensitivity, sleep, and psychological comorbidities in adolescents
with functional abdominal pain disorders. Neurogastroenterol Motil. 2022;34:e14358).
A
clinically meaningful endpoint is the number needed to treat (NNT) used in treatment for abdominal pain-related functional gastrointestinal
disorders in adolescents. NNT means the number of patients that need to be treated for one patient to get the targeted improvement (≥30%
improvement).
PENFS
Reimbursement
The
American Medical Association (AMA) assigned a procedure-specific Category III CPT Code (0720T) to PENFS, which was published on December
30, 2021 and became effective for utilization on July 1, 2022. Category III CPT Codes are temporary codes issued to define and track
the utilization of new procedural technology. To expand patient access to PENFS procedures and IB-Stim technology, we launched our internal
Prior Authorization team under our Guidance & Patient Support function in 2023. This continues to address the Prior Authorization
process barriers for providers and children’s hospitals and streamlines a patient’s access to our Patient Advocacy and Financial
Assistance offerings, if needed. In September of 2024, the AMA’s CPT Editorial Panel accepted addition of Category I CPT Code (placeholder
64X11) for PENFS and deletion of Category III CPT Code 0720T. The finalized Category I CPT Code for PENFS, and associated valuations,
will be announced publicly in Q4 of 2025. The new code will become effective for utilization on January 1, 2026. Sixteen (16) commercial
health insurers, including certain Blue Cross Blue Shield licensees, have instituted formal medical policy coverage for PENFS. The total
membership of these health insurers is approximately 45,000,000 covered lives. An additional health insurer, with approximately 6,000,000
members, will institute formal medical policy coverage for PENFS beginning the second quarter of 2025, bringing the total number of covered
lives to approximately 51,000,000 across seventeen (17) commercial health insurers. Patients who are appropriate clinical candidates
may have policy-covered access to PENFS and IB-Stim technology under their specific health plan. We continue to actively leverage clinical
evidence and peer-reviewed publications to expand patient access to IB-Stim technology. In addition, we anticipate academic medical society
support in the form of a position paper and an update to treatment guidelines to support the use of PENFS as a potential standard of
care.
Marketing
We
market our products through search engine optimization, or SEO, internet channels and to physicians via the academic society. We plan
to extensively ramp-up our marketing efforts to patients and physicians as we gain additional indications.
Patients/Customers
Our
current patient base is children 8-21 years of age and suffering from functional abdominal pain. Our customers are primarily children’s
hospitals who serve these children.
Rectal
Expulsion Device (RED)
The
Rectal Expulsion Device (RED) enables comprehensive constipation care for every gastroenterology practice. The mission is to develop
the best tool for clinical decision making with the physician and patient in mind. RED was designed to be the most efficient, accurate,
and cost-effective diagnostic tool for patients with chronic constipation. The goal is for every Gastroenterologist practice to be able
to safely and confidently perform meaningful anorectal testing without it impacting clinical workflow or requiring a large capital expense.
Eight (8) million patients each year present with constipation. Of those eight million patients, 700,000 patients present to the Emergency
Room.
Clinical
Background
Constipation
is one of the most encountered gastrointestinal complaints in clinical practice. A recent systematic review reported that the prevalence
of chronic constipation (CC) in North America is between 10-15%. This condition causes significantly reduced quality of life, reduced
work-related productivity and billions of dollars in health expenditures. Clinical practice guidelines recommend empiric treatment of
chronically constipated patients with fiber supplements or laxative therapies. Approximately 40% of patients do not adequately respond
to empiric laxative therapy. In these patients, anorectal physiology testing is essential.
There
is a clinical need for an easy-to-use, office-based, point-of-care, anorectal function test that can measure rectal sensitivity and be
used as a rectal expulsion device to assess pelvic floor dysfunction. Current testing methods typically require elaborate volumetric
testing equipment to assess sensation and expulsion, which makes them not practical in the clinical setting. The current standard is
to refer patients to specialized motility centers for evaluation, resulting in sub-optimal number of patients with constipation undergoing
anal-rectal testing. In the current clinical setting, only about 2% of all patients with constipation are referred for anal-rectal testing
and thus, a large number with pelvic floor dysfunction and rectal hypersensitivity are missed and/or fail to get proper treatment. The
design of RED allows for it to be used as a self-inflating expulsion device and as a balloon to assess patients who experience rectal
hypersensitivity. When it is opened to atmospheric pressure, RED safely self inflates and contains a specially selected foam that mimics
the “feel” of stool. This provides an alternative to sensation and expulsion testing in the office without affecting clinical
workflow.
Rectal
Sensation Testing
Rectal
sensation is an important metric to guide clinical care, particularly rectal hypersensitivity. For example, a patient that reports an
immediate perceived immediate need to defecate or discomfort (max tolerated) to low volumes of distension would have rectal hypersensitivity.
This diagnosis is important because it would impact how a patient is treated. Rectal hypersensitivity is addressed by pelvic floor physical
therapists who deliver education and re-training to help the patient align the desire to defecate according to the actual volume of stool
contained within the rectal vault. The basis of sensory re-training during physical therapy involves inflating a balloon in the rectum
until urge threshold is reached. With repeated inflations, the patient learns to associate a given sensory intensity with the inflated
volume. Over time, the balloon is inflated with decreasing volumes and the patient is asked to closely monitor and attend to sensations
experienced. Eventually, new sensory thresholds are established. Unfortunately, because of the difficulty in performing hypersensitivity
testing in routine clinical care, only a small percentage of all patients with constipation undergo anorectal testing in the clinical
setting.
In
a recent study, 60 adult patients (mean±standard deviation age of 46.4±17.6 years; 93.3% women) that underwent evaluation
with RED and answered the questions were included in the analysis. One patient did not undergo rectal sensation testing due to suspected
anal fissure and overall, 58 patients were included in the analysis.
As
outlined in the figure below, 18 of 58 patients, or 31.%, had rectal hypersensitivity on RED when defined on a single yes/no question
of “do you feel you have to poop right now” that evaluates the patient perception to defecate.
These
data suggest that approximately 31% of patients with chronic constipation reported urge to defecate with RED baseline distension volume,
thus meeting the London criteria for hypersensitivity.
Balloon
Expulsion Testing
RED
can be used as a rectal expulsion device and in a recent prospective trial of 60 adults with functional constipation (defined by Rome
IV criteria), it was demonstrated to be safe in a clinical setting. It can be quickly performed in the left lateral position (i.e., the
patient lying on their left side) immediately after a rectal examination. Further, it proved to be effective for patients who fail a
trial of laxative therapy. In those patients with constipation who failed laxative treatment, RED was able to reliably identify patients
for whom pelvic floor physical therapy was unlikely to provide substantial benefit (i.e, patients who might be more likely to benefit
from intensifying medical therapy). Patients with an abnormal RED in the left lateral position or commode were likely to respond to pelvic
floor therapy (48.8% to 71.4%, respectively). Also, RED showed very high sensitivity (>95%) to broadly detect evacuation disorders
as a simple screening tool as noted in the table below.
RED
Benefits Over Predicates
4. RED finds people that are willing to try physical therapy but don’t need it.
5. Fits clinical workflow.
There
is an urgent need to better identify patients with pelvic floor abnormalities and/or rectal hypersensitivity. Making the right diagnosis
can impact care and ensure that patients are properly assessed and treated. The figure below demonstrates how RED can impact clinical
decision making.
Overall,
RED is a point-of-care device designed to be used in the office. Rectal sensation is an important component of evaluating pelvic floor
function among patients with chronic constipation. Currently, 98% of clinically appropriate patients do not receive anorectal testing.
The study findings demonstrate that RED impacts clinical decision making by identifying patients who would benefit from physical therapy
or who would require optimization of laxatives. It is also sufficient to qualitatively assess for rectal hypersensitivity which was evident
in almost one-third of patients with chronic constipation failing a trial of fiber/laxatives. It is critical to assess rectal sensation
and balloon expulsion in patients with constipation and/or fecal incontinence.
RED
Safety
RED
Reimbursement
RED
is billable under CPT 91120. The documentation is Rectal Hypersensitivity at 52-60mL: present/absent.
Intellectual
Property
Our
intellectual property consists of patents, trademarks, and trade secrets. Our trade secrets consist of product formulas, research, and
development, and unpatentable know-how, all of which we seek to protect, in part, by confidentiality agreements. To protect our intellectual
property, we rely on a combination of laws and regulations, as well as contractual restrictions. Federal trademark law protects our registered
trademarks. We also rely on the protection of laws regarding unregistered copyrights for certain content we create and trade secret laws
to protect our proprietary technology. To further protect our intellectual property, we enter into confidentiality agreements with our
executive officers and directors.
Trademarks
The
Company has seven (7) registered trademarks, and two (2) allowed pending applications for registration:
Country Trademark Reg. No. Reg. Date Class/Goods Status
Country Trademark App. No. App. Date Class/Goods Status
The
Company has no core trademarks that are currently unregistered.
Patents
The
Company has twelve (12) granted patents in the United States and seven (7) applied for patent applications in the United States and one
(1) granted foreign patent and two (2) applied for foreign patent applications.
License
Agreements
TKBMN
Exclusive License Agreement