Item 1A. Risk Factors 36
Item 1B. Unresolved Staff Comments 61
Item 1C. Cybersecurity 61
Item 2. Properties 63
Item 3 Legal Proceedings 63
Item 4. Mine Safety Disclosures 63
PART II
Item 6. Reserved 64
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 70
Item 8. Financial Statements and Supplementary Data 70
Item 9A. Controls and Procedures 70
Item 9B. Other Information 71
Item 9C. Disclosures Regarding Foreign Jurisdictions that Prevent Inspections 71
PART III
Item 10. Directors, Executive Officers and Corporate Governance 72
Item 11. Executive Compensation 78
Item 14. Principal Accounting Fees and Services 89
PART IV
Item 15. Exhibits and Financial Statement Schedules 90
Signatures 94
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 first-to-market growth-stage medical
technology company focused on neuromodulation therapies for chronic and debilitating conditions in gastrointestinal (GI) digestive system,
specifically from disorders of the gut-brain interaction (DGBIs) in pediatrics and adults. With several indications in the market and
additional clinical trials of Percutaneous Electrical Nerve Field Stimulation (PENFS) in multiple pediatric and adult conditions underway,
we are focused on unmet GI healthcare needs in children and adults. We are dedicated to advancing science with our proprietary IB-Stim®
therapy, based on our 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. Additional clinical trials of PENFS in multiple pediatric
and adult conditions are underway, focused on unmet healthcare needs in children and adults. See “Our Pipeline” for
more information.
Our
first product, IB-Stim, is a PENFS technology intended to be used in patients 8 years and older with functional abdominal pain associated
with irritable bowel syndrome (IBS), functional dyspepsia (FD) and associated FD nausea symptoms. IB-Stim is a US FDA Class II medical
device that has received regulatory clearances: IB-Stim (DEN180057, 2019; K252024, 2025), under the regulation name of “non-implanted
nerve stimulator for functional abdominal pain relief.”
Our
second product, REDTM (Rectal Expulsion Device), 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.
The
Company’s product portfolio has achieved several key milestones, including:
Our
Mission
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
Corporate History
Neuraxis,
Inc. was established in 2011 and incorporated in the state of Indiana in 2012, under the name of Innovative Health Solutions, Inc. The
name was changed to Neuraxis, Inc. in 2022 when the Company filed a Certificate of Conversion to become a Delaware corporation. On August
9, 2023, the Company consummated an initial public offering (“IPO”) pursuant to a registration statement on Form S-1 (File
No. 333- 269179), as amended.
In
2024, the Company’s shareholders authorized 5,000,000 shares of preferred stock of which all 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 December 31, 2026. The stated value of the Series B
Preferred Stock is $2.38 per share.
We
have developed four FDA cleared products: (i) IB-Stim (DEN180057, 2019), (ii) RED (K242304, 2024), (iii) NSS-2 Bridge (DEN170018, 2017),
and (iv) the original 510(k) clearance (K140530, 2014), all of which were developed internally by the Company.
Pediatrics
Industry Overview
Pediatric
providers, as a whole, expressed concern about the lack of attention given to children with functional abdominal pain disorders (including
IBS and FD) 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 began with opportunities in the 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.
Pharmacological Treatment Options for Functional Abdominal Pain Disorders
Mild Pain (No Disability) Pain (With Disability)
Peppermint oil Tricyclic antidepressants (amitriptyline)* Rifaximin
Iberogast Selective serotonin reuptake inhibitors (citalopram)* Constipation
Probiotics Gabapentin Linaclotide
Cyproheptadine* Plecanatide
*
Increased risk of dementia based on anticholinergic burden
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 provide coverage for PENFS procedures with IB-Stim.
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). Most
recently, FDA cleared 510(k) 252024, expanding the indications for use. The FDA created a new classification of PENFS for IB-Stim. This
is based on pre-clinical and clinical studies demonstrating the mechanism of action and efficacy. Based on this new class of devices,
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 central nervous system. 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 submitted one FDA De Novo request and three 510(K) submissions and plan to submit additional 510(k) premarket notifications from
our pipeline indications in the future. Most recently, FDA cleared 510(k) 252024, expanding the indications for use.
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, in a survey included in the randomised, sham controlled
trial (Kovacic, K, Hainsworth, M., et al. Neurostimulation for abdominal pain-related functional gastrointestinal disorders in adolescents:
a randomised, double-blind, sham-controlled trial. Lancet Gastroenterol Hepatol. 2017 Oct;2(10):727-737), 95% of adolescents who used
IB-Stim said that they would recommend this treatment to family and friends. Many children’s hospitals and pediatric providers
across the country are currently treating children with IB-Stim due to the safety, efficacy, and patient outcomes with this non-drug
alternative.
We
have concentrated our marketing focus on the 260 children’s hospitals within the United States. To date, IB-Stim is established
in approximately 80 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. As a result, the Company
is addressing this challenge by providing access to guided-imagery audio with IB-Stim at a low associated cost to the patient. Competition
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 limit other devices from targeting IBS through stimulation of cranial nerve branches in the ear.
Approved
drugs for children with IBS
Approved
drugs for adults with IBS
1. Rifaximin: an intraluminal antibiotic approved for IBS-diarrhea
Approved
drugs for children or adults with functional dyspepsia
1. None
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
● Category I CPT code (64567) effective January 1, 2026
● 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
Our
Pipeline
IB-Stim
is to be used for the indication of functional abdominal pain associated with IBS, functional dyspepsia (FD), and associated FD nausea
symptoms. The same underlying technology will be used for the remaining pipeline indications, but we may use different branding strategies
for marketing and commercialization purposes.
With
one FDA indication—functional abdominal pain associated with IBS, functional dyspepsia (FD), and associated FD nausea symptoms
for 8 years and older—on the market, additional clinical trials of PENFS in multiple pediatric conditions are underway focused
on unmet healthcare needs in children and adults. These indications consist of post-concussion syndrome, cyclic vomiting syndrome, post-operative
pain and fibromyalgia pain.
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): Sub-analysis of the RCT completed, and data was analyzed and presented to FDA. The data
looked only at those patients who met criteria for functional dyspepsia and those that improved in abdominal pain scores by 30% or more
as well as improvements in a validated measure of nausea. The sub-analysis was used for FDA purposes and there is no plan to publish
in peer reviewed journal since the entire cohort of patients with DGBIs was already published in 2017.
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.
Cyclic vomiting: Successful pilot study completed and published, Karrento K, et.al.. Electrical Nerve Field Stimulation
for Drug-Refractory Pediatric Cyclic Vomiting Syndrome. J Pediatr Gastroenterol Nutr. 2023;77:347-353. A new study, Auricular Neurostimulation
for Children with Cyclic Vomiting Syndrome: A randomized, placebo-controlled trial. RCT anticipated to begin enrolling patients early
in 2026. 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 is being conducted at Children’s Wisconsin/Medical College of Wisconsin.
4.
Post-operative pain (opioid sparing): RCT currently enrolling patients and plans to include almost 300 patients total. ClinicalTrials.gov
Identifier: NCT05506878. Reduction of Opioid Requirement Associated With Auriculo-Nerve Stimulation Following Open Surgery. The primary
outcome measure is opioid consumption. Assess how the use of the NSS-2 BRIDGE Device over a 5 day stimulation period affects the participant’s
total opioid consumption using morphine equivalent following an open abdominal or pelvic surgery. Other measures will include post-operative
pain ratings, sleep, somatization, as well as length of hospital stay. The study is being conducted at University of Pittsburgh Medical
Center.
5.
Fibromyalgia in adults: RCT currently enrolling patients. ClinicalTrials.gov Identifier: NCT06415591. Auricular Neuromodulation
in Veterans with Fibromyalgia: The proposed Merit, a randomized, sham-controlled trial of auricular
PENFS, evaluates the clinical utility of PENFS for fibromyalgia as compared to sham placebo control, acute and longitudinal PENFS-related
neural changes visualized on rs-fcMRI and effects of PENFS on HRV as a potential vagal mechanism of pain relief. For Aim 1, 240 total
participants meeting 2016 diagnostic criteria for fibromyalgia (male and female, age 18-60 years old) will be randomized to either true
(n=120) or sham (n=120) auricular PENFS. The study is being conducted at Emory University and VA medical center.
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
IB-Stim
is a PENFS technology intended to be used in patients 8 years and older with functional abdominal pain associated with IBS, functional
dyspepsia (FD), and associated FD nausea symptoms. The FDA has classified the non-implanted nerve stimulator for functional abdominal
pain relief as a Class II device.
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; K252024, 2025). 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
Kolacz et.al.,2025 Chronic Nausea 84 11-18 4 Cardiac vagal effeciency None
The
ability of 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. Since that study, numerous other studies have confirmed the
safety and efficacy in children with chronic DGBIs (see table above).
Medical
providers are trained to place IB-Stim through NeurAxis’ IB-Stim Training and Certification process. 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 by 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 IB-Stim 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 earbuds or headphones, and travel.
IB-Stim
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. 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 IB-Stim. A recent
human study in adults with pain related to fibromyalgia suggested that IB-Stim 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
There
are 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).
PENFS
Reimbursement
Previously,
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, 64567 and associated valuations, was publicly announced in Q4 of 2025. CPT 64567 became effective
for utilization and reporting PENFS procedures on January 1, 2026. Twenty-four (24) 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 approaching 100,000,000 covered lives. 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, peer-reviewed
publications, and academic medical society clinical practice guidelines to expand patient access to IB-Stim technology. The
finalized CPT code (1/1/2026) will strengthen PENFS access as Fee Schedules and claim payments become more transparent, allowing
both commercial and Medicaid payer entities to more-effectively process covered claims.
Marketing
NeurAxis
markets its products through a direct sales team, online channels, and to clinicians via affiliated academic societies. Our main goal
is to raise educational awareness among clinicians and hospitals about the unmet needs of patients with functional abdominal pain and
NeurAxis’ FDA-cleared, drug-free product solutions. Our primary focus is with the 260 children’s hospitals within the United
States. As our FDA-indications expand, so will our outreach and education to adult gastroenterology providers. Direct-to-patient marketing
efforts will be considered in the future.
Patients/Customers
IB-Stim
is indicated for patients 8 years and older suffering from functional abdominal pain, functional dyspepsia (FD),and associated FD nausea
symptoms. Customers are currently primarily children’s hospitals who serve these patients, but is currently expanding to adult
gastroenterologists and adult pain physicians.
REDTM
(Rectal Expulsion Device)
RED
enables comprehensive constipation for every gastroenterology practice. The mission is for every gastroenterology practice to be able
to safely and confidently differentially screen root causes of chronic constipation with the patient and physician in mind. RED can be
implemented in a GI practice with minimal impact to clinical workflow and does not require 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 proprietary foam technology 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. Easily integrates with 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. Shah et.al., An Office-Based, Point-of-Care Test Predicts Treatment Outcomes
With Community-Based Pelvic Floor Physical Therapy in Patients With Chronic Constipation. Clin Gastroenterol Hepatol. 2023;21:1082-1090.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
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 nine (9) registered trademarks, and three (3) pending applications for registration:
Country Trademark Reg. No. Reg. Date Class/Goods Status
Country Trademark App. No. App. Date Class/Goods Status
Patents
The
Company has fifteen (15) granted patents in the United States and one (1) applied for patent application in the United States and one
(1) granted foreign patent and two (2) applied for foreign patent applications.
License
Agreements
TKBMN
Exclusive License Agreement
On
May 7, 2020, the Company entered into an exclusive license agreement with TKBMN, LLC to obtain an exclusive license under certain patent
rights (the “Patent Rights”) owned by TKBMN. Dr. Thomas Carrico, our Chief Regulatory Officer, is the manager of TKBMN. Brian
Carrico, our Chief Executive Officer, and Matt Carrico, our National Sales Director, are members of TKBMN. TKBMN owns the Patent Rights
set forth in the patents listed in the following table (the “TKBMN Patents”) by virtue of an assignment from Dr. Carrico,
who is the sole inventor listed on the TKBMN Patents. TKBMN has assigned the auricular portion of the TKBMN Patent Rights to the Company.
Licensed
TKBMN Patents
*
If all maintenance fees remain paid
Pursuant
to the exclusive license agreement, TKBMN agreed to grant an exclusive, worldwide, non-transferable, royalty-free license under Patent
Rights, which including three patents applications filed by TKBMN in connection with systems and methods for elector-therapy treatment,
to the Company to develop, market, and sell licensed products, in the field of electro-therapy treatment by stimulation of cranial nerves,
cranial nerve branches, auricular nerves, auricular nerve branches, auricular nerve bundles, and/or auricular anatomical structures in
human patients (the “Field”), in consideration of a one-time license fee of $1.00. The Company has the right to grant sublicenses
to the Patents Rights in the Field. The exclusive license agreement expires upon the expiration of the last to expire valid claim within
the Patent Rights and may be terminated by the Company upon 60 days prior written notice. Upon expiration or termination of the exclusive
license agreement, all rights in the Patent Rights will revert to TKBMN. There are no royalties or any other form of committed revenue
to TKBMN or any of its members Under the agreement, the Company has agreed to cover fees and expenses associated with maintenance, prosecution,
and additional associated/continuation patent filings for the TKBMN Patents.
Masimo
License and Collaboration Agreement
On
April 9, 2020, the Company entered into a license and collaboration agreement with Masimo. As consideration, in part, Masimo entered
into a Series A Preferred Stock purchase agreement with the Company. Under the license and collaboration agreement, the Company grants
an exclusive, fully paid-up, royalty-free license to specifically identified patents and trademarks in a limited Field of use. At all
times, the Company remains the owner of all licensed intellectual property rights, and there is a possibility of joint ownership of collaboratively
developed products and methods. The licensed patents are generally directed to a device and the treatment of opioid withdrawal symptoms.
The licensed trademarks are generally directed to the NSS-2 Bridge mark. The license agreement includes a collaboration component to
efficiently develop, obtain regulatory approval, and commercialize products for the limited field of use. The term of the agreement is
in effect until the expiration or lapse of the last intellectual property rights. Masimo paid a one-time fee of $250,000. The license
and collaboration agreement may not be terminated by the Company for any reason, and the sole remedy for any breach or default by Masimo
shall be to seek monetary damages and equitable remedies. The license and collaboration agreement may be terminated by Masimo if there
is material breach by the Company that remain uncured for thirty (30) days or without cause by providing thirty (30) days prior written
notice.
On
July 1, 2025, The Company terminated the NSS-2 Bridge license with Masimo in exchange for $200,000 of consideration payable in equal
installments on December 31, 2025 and June 30, 2026. The termination agreement allowed the Company to recapture the rights to the trademark
(U.S. Registration No. 7,394,465) and two patent applications (Application No. 18/821/255 and Application No. 29/960.608) that
were originally licensed to Masimo on April 9, 2020. See”—Our Corporate History” for more information.
Implications
of Being a Smaller Reporting Company
We
are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage
of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We
will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our shares held by non-affiliates
equals or exceeds $250 million as of the prior June 30th, or (2) our annual revenues equal or exceed $100 million during such
completed fiscal year and the market value of our shares held by non-affiliates equals or exceeds $700 million as of the prior June 30th.
Such reduced disclosure and corporate governance obligations may make it more challenging for investors to analyze our results of operations
and financial prospects.
For
additional information, see “Risk Factors – Because the Company is a ‘smaller reporting company,’ we may take
advantage of certain scaled disclosures available to us, resulting in holders of our securities receiving less Company information than
they would receive from a public company that is not a smaller reporting company” and “As a smaller reporting company,”
we may at some time in the future choose to exempt our Company from certain corporate governance requirements that could have an adverse
effect on our public stockholders.”
Implications
of Being an Emerging Growth Company
We
are an “emerging growth company” as defined in the JOBS Act. We will remain an emerging growth company until the earlier
of (1) December 31, 2028, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion,
(3) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under
the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur on the date on which we have issued more than
$1.0 billion in non-convertible debt securities during the prior three-year period. An emerging growth company may take advantage of
specified reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable
to public companies. As an emerging growth company, we may:
● provide reduced disclosure about our executive compensation arrangements; and
In
addition, under the JOBS Act, an emerging growth company can delay the adoption of certain accounting standards until those standards
would otherwise apply to private companies. We have elected not to take advantage of the extended transition period for complying with
new or revised accounting standards provided to emerging growth companies under the JOBS Act.
Government
Regulation
Our
products and our operations are subject to extensive regulation by the U.S. Food and Drug Administration, or FDA, and other federal,
state, and local authorities in the United States, as well as comparable authorities in foreign jurisdictions. Our products are subject
to regulation as medical devices in the United States under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations.
United
States Regulation
The
FDA regulates, among other things, the development, design, non-clinical and clinical testing, manufacturing, safety, effectiveness,
labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, adverse event reporting, advertising,
promotion, marketing and distribution, and import and export and post-marketing surveillance of medical devices in the United States
to ensure that medical devices distributed domestically are safe and effective for their intended uses and otherwise meet the requirements
of the FDCA.
FDA
Premarket Clearance and Approval Requirements
Unless