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Item 7. Management’s Discussion and Analysis

2026-03-19 compared with 2025-03-20 · 161 added, 103 removed, 78 unchanged (77% of the section changed)

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are a growth stage company focused on developing neuromodulation therapies to address chronic and debilitating conditions in children.

Our mission is to provide solutions that create value and provide better and safer patient outcomes.

Our IB-Stim device is a PENFS system

intended to be used in patients 8-21 years of age with functional abdominal pain associated with IBS.

Our device already has market clearance

from FDA for functional abdominal pain associated with IBS in children.

Other indications in our pipeline are comprised of functional

nausea in children, post-concussion syndrome in children, and cyclic vomiting syndrome in children.

Our mission is to advance drug-free neuromodulation therapies that improve patient outcomes and reduce medication burden in complex disorders,

while expanding access to effective care for populations with significant unmet needs.

Our IB-Stim device is a PENFS system with FDA

indications for patients 8 years and older with functional abdominal pain associated with IBS, functional dyspepsia (FD), and associated

FD nausea symptoms.

Our RED device is an easy-to-use, office-based, point-of-care test that identifies patients with chronic constipation

due to pelvic floor dyssnergia and has FDA for adults.

Other indications in our pipeline are comprised of post-concussion syndrome, cyclic

vomiting syndrome, post-operative pain and fibromyalgia pain.

our inception, we have incurred significant operating losses.

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31, 2025 and 2024, respectively.

Our auditors have expressed substantial doubt about our ability to continue as a going concern in their

audit opinion.

We expect to incur significant expenses and operating losses for the foreseeable future as we continue to pursue widespread

insurance coverage of our IB-Stim and RED devices and seek FDA clearance of our device for other indications.

There are a number of milestones

and conditions that we must satisfy before we will be able to generate sufficient revenue to fund our operations, including FDA clearance

of our IB-Stim device to treat future indications.

Although we had stockholders’ equity of $3,399,372, our auditors have expressed substantial doubt

about our ability to continue as a going concern in their audit opinion.

We expect to incur significant expenses and operating losses

for the foreseeable future as we continue to pursue widespread insurance coverage of our IB-Stim and RED devices and seek FDA clearance

of our device for other indications.

There are a number of milestones and conditions that we must satisfy before we will be able to generate

sufficient revenue to fund our operations, including FDA clearance of IB-Stim to treat future indications.

Affecting our Business and Results of Operations

revenue is derived from the sale of our IB-Stim device to healthcare companies, primarily hospitals and clinics.

Sales generally are

not seasonal and only mildly correlated with economic cycles.

Our IB-Stim device sells for $1,195 per device, and each child being treated

for functional abdominal pain associated with IBS will use four.

revenue is derived from the sale of IB-Stim to healthcare companies, primarily hospitals and clinics.

Sales generally are not seasonal

and only mildly correlated with economic cycles.

IB-Stim sells for $1,195 per device, and each patient being treated for functional abdominal

pain associated with IBS, functional dyspepsia (FD), and/or associated FD nausea symptoms will use four devices.

sales typically are made on a purchase order basis rather than through long-term purchase commitments.

We enter into sales agreements

with customers for IB-Stim devices based on purchase orders and standard terms, which vary slightly based on the customer’s form,

and conditions of sale.

Standard payment terms generally are that payment is due within 30 days.

Our largest sales were to three customers

representing approximately 40% and 45% of total sales for the years ended December 31, 2024 and 2023, respectively.

with customers for IB-Stim based on purchase orders and standard terms, which vary slightly based on the customer’s form, and conditions

Standard payment terms generally are net 30 days.

Our largest sales were to two customers representing approximately 28% and

35% of total sales for the years ended December 31, 2025 and 2024, respectively.

did not have a material impact on our operations for any applicable period, and we do not expect inflation to have a material impact

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Our gross margin has been and will continue to be affected by a variety of factors, primarily the average selling price

of our IB-Stim device, production volume, order flows, change in mix of customers, third-party manufacturing costs related to components

of our IB-Stim device, and cost-reduction strategies.

We expect our gross profit to increase for the foreseeable future as our net sales

grows, both through broader insurer acceptance of our IB-Stim device in the near term and approval of our technology for the treatment

of other indications over the longer term.

Our gross margin may fluctuate from quarter to quarter due to changes in average selling prices,

particularly as we introduce enhancements to our IB-Stim device and new products to address other indications, and as we adopt new manufacturing

processes and technologies.

of IB-Stim, production volume, order flows, change in mix of customers, third-party manufacturing costs related to components of our

devices and cost-reduction strategies.

We expect our gross profit to increase in the foreseeable future as our net sales grows, both

through broader insurer acceptance of IB-Stim in the near term and approval of our technology for the treatment of other indications

over the longer term.

Our gross margin may fluctuate from quarter to quarter due to changes in average selling prices and the mix of

patient healthcare coverage (e.g., discounts are provided to lower income patients without healthcare insurance), particularly as we

introduce enhancements to IB-Stim and new products to address other indications, and as we adopt new manufacturing processes and technologies.

have four categories of expenses:

cost of goods sold, selling, research and development (“R&D”), and general and administrative

of goods sold consist of costs paid for the IB-Stim device to our contract manufacturer along with shipping and handling costs and expired

inventory charges.

Expired inventory expense is related to our FDA clearance for our device in the treatment of functional abdominal

pain associated with IBS in children.

Specifically, a certain component of our IB-Stim device is cleared for a two-year period after

the date the device is manufactured, and if the device is not sold in such period, we must take the device out of inventory and write

The cost of expired inventory was $25,008 for the year ended December 31, 2023, representing 8.2% of our costs of goods sold.

The Company did not have any expired inventory in the year ended December 31, 2024.

We have a fixed-price contract with the manufacturer

of our IB-Stim device to produce the device.

We expect production costs to remain relatively constant and only nominal inventory expirations

in the foreseeable future.

core selling expenses primarily consist of commissions.

and development expense is attributable to our clinical trials and related efforts to have our IB-Stim device cleared by the FDA for

other indications.

We expect future R&D expenses for other indications, such as functional nausea, post-concussion syndrome and cyclic

vomiting syndrome in children.

of goods sold consist of costs paid for the IB-Stim and RED devices to our contract manufacturers along with shipping and handling costs

and expired inventory charges.

Expired inventory expense is related to the FDA clearance period from the date our devices are manufactured,

and if the device is not sold in such period, a reserve is recorded.

Expired inventory charges totaled $19,973 and $0 for the

years ended December 31, 2025 and 2024.

We have fixed-price contracts with the manufacturers of our devices.

selling expenses primarily consist of advertising, marketing and promotion of the Company’s products including salaries, commissions

and other related personnel costs including travel expenses.

The Company reclassified $1,144,176 of general and administrative expenses

to selling expenses in the Consolidated Statements of Operations for the year ended December 31, 2024, to conform to current year presentation.

and development expenses consist primarily of clinical research studies, new product development, costs of materials and supplies used

in research and development activities and salaries and other related personnel costs for employees engaged in research and development

activities to have our IB-Stim and RED devices cleared by the FDA for other indications.

The Company reclassified $227,507 of general

and administrative expenses to research and development expenses in the Consolidated Statements of Operations for the year ended December

31, 2024, to conform to current year presentation.

We expect future R&D expenses for other indications, such as post-concussion syndrome,

cyclic vomiting syndrome, post-operative pain and fibromyalgia pain.

and administrative expense primarily consists of wages and benefits, professional fees including legal and audit, insurance, investor

relations, advertising, facility costs, utilities and travel.

relations, facility costs, utilities and travel.

of Operations

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Operating loss

Other (expense) income, net:

Other income (expense), net:

Financing charges

Interest expense, net

Interest expense

Change in fair value of warrant liability

Change in fair value of derivative financial instruments

Amortization of debt discount and issuance costs

Extinguishment of debt liabilities

Other (expense) income, net

Total other (expense) income, net

Other income (expense), net

Total other income (expense), net

$ (7,800,555 )

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sales increased $883,357, or 32.9%, from $2,685,925 for the year ended December 31, 2024, to $3,569,282 for the year ended December 31,

2024, primarily due to volume growth from our financial assistance programs that provide discounts to patients without insurance coverage.

2025, primarily due to volume growth from (i) both patients with health insurance coverage and those participating our financial assistance

programs that provide discounts to patients without health insurance coverage and (ii) device sales from the Company’s launch of

the RED product in 2025.

Although unit growth from the discounted financial assistance programs outpaced the full health insurance reimbursement

programs, the Company’s overall growth was function of new customers (both hospitals and private physical practices), new insurance

carrier coverage in certain locations across the United States and higher prior authorization approval rates of the Company’s Category

III CPT Code.

Profit and Gross Margin

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31, 2025, due to higher sales volume.

Despite the increase in sales volume, the decrease in gross margin from 87.7% for the year ended December

31, 2023, to 86.5% for the year ended December 31, 2024, was due to higher growth in the Company’s financial assistance programs

that are discounted to patients without insurance coverage compared to the Company’s undiscounted full reimbursement customers.

expenses increased $1,139, or 0.4%, from $323,569 for the year ended December 31, 2023, to $324,708 for the year ended December 31, 2024,

due to higher sales volume.

Despite the increase in sales volume, the decrease in gross margin from 86.5% for the year ended

December 31, 2024, to 84.2% for the year ended December 31, 2025, was due to higher discounting in the Company’s financial assistance

programs provide to patients without insurance coverage, a higher unit growth rate of the discounted financial assistance programs compared

to the full reimbursement health insurance programs and expired RED inventory.

expenses increased $811,090, or 55.2%, from $1,468,884 for the year ended December 31, 2024, to $2,279,974 for the year ended

December 31, 2025, due to higher commissions from higher sales volume, a higher temporary commission structure to facilitate growth

and adoption in new states, incremental sales and marketing headcount and increased advertising and marketing costs focused on

health insurance carriers due to the January 1, 2026 effective date of IB’Stim’s new Category I CPT Code

and Development

and development expenses increased $59,997, or 13.8%, from $433,614 for the year ended December 31, 2024, to $493,611 for the year ended

December 31, 2024, due to costs to bring the RED product to market and higher costs on a medical research project.

December 31, 2025, due to costs to higher year-over-year spending on a medical research project, improved IB-Stim design features and

costs to develop the RED device.

and Administrative

and administrative expenses increased $621,610, or 7.5%, from $8,328,315 for the year ended December 31, 2023, to $8,949,925 for the year

ended December 31, 2024, due to (i) higher legal, insurance, investor relations, board of directors

and stock exchange listing costs as a publicly held entity that the Company did not incur prior to its 2023 IPO, (ii) incremental headcount

to build out the market access, sales and finance teams, (iii) severance charges related to the Company’s prior Chief Operating

Officer, (iv) one-time advisory costs, (v) expenses related to the introduction of an annual short-term incentive program

and (vi) higher advertising costs in order to expand market awareness, partially offset by the non-recurrence of 2023 post-IPO consulting

and recruiting services and the payment of incentive bonuses contingent upon the 2023 IPO.

and administrative expenses increased $484,447, or 6.4%, from $7,578,242 for the year ended December 31, 2024, to $8,062,689 for the

year ended December 31, 2025, primarily due to a $630,568 one-time, non-recurring charge to settle a lawsuit, headcount and related costs

incurred to improve and enhance the Company’s internal control environment and the introduction of annual short-term and long-term

incentive plans in 2024 that were not outstanding for the full fiscal year, partially offset by the absence of certain one-time non-recurring

severance, hiring, consulting and advisory costs incurred in 2024 and lower legal, accounting and insurance costs as new hires in 2024

have internally absorbed certain services.

operating loss increased $673,091, or 9.4%, from $7,156,817 for the year ended December 31, 2024, to $7,829,908 for the year ended December

31, 2024, primarily due to higher general and administrative expenses partially offset by higher sales volume.

(Expense) Income

expense decreased $6,877,504 or 86.4%, from $7,962,188 for the year ended December 31, 2023, to $1,084,684 for the year ended

December 31, 2024, due to the full conversion of the convertible notes upon the IPO on August

9, 2023, that eliminated any further debt discount, issuance cost, debt extinguishment and fair value derivative valuation net

charges and lower interest expense and issuance cost amortization from a lower debt burden in 2024, partially offset by financing

charges incurred to settle a 2023 convertible note dispute and other expense to settle certain claims of pre-IPO Series A Preferred

Stock shareholders.

31, 2025, primarily due to higher selling and general and administrative expenses partially offset by higher gross profit from sales

Income (Expense)

income increased $1,114,037, or 102.7%, from $1,084,684 of expense for the year ended December 31, 2024, to $29,353 of income for the

year ended December 31, 2025, due to the absence of one-time, non-recurring 2024 settlements relating

to a 2023 convertible note dispute and certain pre-IPO Series A Preferred Stock shareholder claims and the conversion of convertible

notes into Series B Preferred Stock in 2024 which eliminated any related debt discount and interest charges.

net loss decreased $440,946, or 5.4%, from $8,241,501 for the year ended December 31, 2024, to $7,800,555 for the year ended December

31, 2024, primarily due to (i) higher sales volume, (ii) the elimination of debt discount, issuance

cost and fair value derivative valuation net charges as a result of the conversion of notes upon the 2023 IPO and (iii) lower interest

expense and issuance cost amortization from a lower debt burden in 2024, partially offset by (iv) financing charges incurred to settle

a 2023 convertible note dispute and other expense to settle certain claims of pre-IPO Series A Preferred Stock shareholders and (v) higher

general and administrative expenses due to the absence of 2023 post-IPO consulting and recruiting services and the payment of incentive

bonuses relating to the 2023 IPO.

31, 2025, primarily due to higher sales volume and the absence of one-time, non-recurring 2024 settlements relating to a 2023 convertible

note dispute and certain pre-IPO Series A Preferred Stock shareholder claims, partially offset by higher selling expenses and the one-time

non-recurring settlement of a lawsuit in 2025.

and Capital Resources

had cash on hand of $4,965,072 and $3,696,870 as of December 31, 2025 and 2024, respectively.

We maintained a working capital surplus of

$1,832,858 and negative working capital of $1,643,058 as of December 31, 2024 and 2023, respectively.

The increase in working capital

was primarily due to the issuance of $5,000,000 of Convertible Series B Preferred Stock in November 2024 that significantly improved

We maintained a working capital

surplus of $2,941,091 and $1,832,858 as of December 31, 2025 and 2024, respectively.

The increase in working capital was primarily

due to the sale and issuance of 3,108,170 shares of common stock pursuant to the shelf registration statement and warrant exercises

for gross proceeds of $8,826,615 offset by cash used in operations of $6,432,843 for the year ended December 31, 2025 which improved

the Company’s liquidity position.

have incurred losses since inception and have funded our operations primarily with a combination of sales, debt, and the sale of capital

As of December 31, 2024, we had stockholders’ equity of $2,067,748, short-term outstanding borrowings of $154,152 and no

long-term debt.

have incurred losses since inception and have funded our operations primarily with a combination of sales, debt, the exercises of warrants

and the sale of capital stock.

As of December 31, 2025, we had stockholders’ equity of $3,399,372, short-term outstanding borrowings

of $148,293 and long-term debt of $9,999.

future capital requirements will depend upon many factors, including progress with developing, manufacturing, and marketing our technologies,

24 unchanged sentences

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Activities – Net cash used in operating activities declined 595,714, or 8.9% from $6,693,978 for the year ended December

31, 2023, to $6,098,264 for the year ended December 31, 2024, primarily due to more issuances of common stock instead of cash for

certain services in 2024 than in 2023 and lower interest payments in 2024 due to the conversion of debt in the 2023 IPO, partially

offset by payments to past due vendors in 2024 for 2023 services.

Activities – Net cash used in investing activities decreased $44,005, or 61.3%, from $71,781 for the year ended December 31,

2023, to $27,776 for the year ended December 31, 2024, primarily due to the purchase of the Company’s trademark in 2023 that did

not recur in 2024.

Activities – Net cash provided by financing activities increased $3,153,730, or 47.9%, from $6,590,620 for the year ended

December 31, 2023, to $9,744,350 for the year ended December 31, 2024, primarily due to principal repayments on notes payable in

2023 that did not recur in 2024 and the Company subsequently raised capital from the IPO in 2023 to retire the notes payable and

issued Convertible Series B Preferred Stock in 2024.

Activities – Net cash used in operating activities increased $334,579, or 5.5% from $6,098,264 for the year ended December

31, 2024, to $6,432,843 for the year ended December 31, 2025, primarily due to the payment of the 2024 short-term incentive program in

2025 (no program existed previously) and higher inventory purchases as the Company prepared for the January 1, 2026 effective date of

the Category I CPT code for the IB-Stim device, partially offset by better receivable collections.

Activities – Net cash used in investing activities increased $103,374, or 372.2%, from $27,776 for the year ended December

31, 2024, to $131,150 for the year ended December 31, 2025, primarily due to the $100,000 installment payment to Masimo pursuant to the

July 1, 2025 NSS-2 Bridge license termination agreement that allowed the Company to recapture the rights to a trademark and two patent

applications.

Activities – Net cash provided by financing activities decreased $1,912,155, or 19.6%, from $9,744,350 for the year ended December

31, 2024, to $7,832,195 for the year ended December 31, 2025, primarily due to (i) gross financing proceeds of $10,214,846 for the year

ended December 31, 2024 from the issuance of Series B preferred stock and convertible notes in addition to the exercise of warrants compared

to gross financing proceeds of $8,826,615 for the year ended December 31, 2025 through the issuance of common stock and the exercise

of warrants and (ii) higher financing fees, offering costs and legal fees paid in 2025 versus 2024.

Accounting Estimates

considers its allowance for credit losses, reserve for sales returns and reserve for excess and expired inventory to be the most critical

accounting estimates and assumptions in understanding our financial statements because they involve significant judgments and uncertainties.

Actual results could differ from management’s estimates.

See Note 2 for further information on our most significant accounting policies.

for Credit Losses

Company sells its IB-Stim and RED devices primarily to hospitals and private physician practices with payment generally due within 30

The Company does not offer discounts if the customer pays some or all of an invoiced amount prior to the due date.

an allowance for credit losses to reflect our estimate of expected losses on accounts receivable from the sale of our medical devices.

The estimate of expected credit losses is a considered a critical accounting estimate because it requires significant judgment and the

use of assumptions about future customer payment behavior and economic conditions.

estimating the allowance for credit losses, management regularly reviews its past due account receivable balances and evaluates many

factors including, but not limited to, creditworthiness, past transaction and payment history, historical loss experience, current economic

industry trends and payment terms.

The Company performs that review by utilizing an aging schedule to assess the collectability of accounts.

Actual credit losses may differ from estimated amounts.

Differences between estimated and actual credit losses are recognized in earnings

in the period in which such changes are identified.

A change in the past due account balance by 10 percentage points as of December 31,

2025, would increase or decrease the allowance for credit losses by $558.

for Sales Returns

recognize revenue net of estimated product returns upon customer receipt under FOB destination terms.

Customers may return devices if

the goods are found to be defective, nonconforming or otherwise do not meet the technical specifications.

Historically, the Company has

also allowed returns at the request of physicians, on a case-by-case basis, as long as the devices are returned in their original, unopened

As a result, we record an allowance for sales returns which is considered a critical accounting estimate because it requires

significant judgment and is sensitive to changes in assumptions.

establishing the allowance for sales returns, management evaluates historical return rates by product and adjusts those rates to reflect

current trends and conditions.

Estimates are reassessed each reporting period based on actual return activity and updated information.

Actual product returns may differ from estimated amounts.

Differences between estimated and actual returns are recognized as adjustments

to revenue in the period in which they become known.

A change in the return rate of one percentage point as of December 31, 2025, would

have increased or decreased the allowance by $5,593.

for Excess and Expired Inventory

are valued at the lower of cost or net realizable value.

An allowance for excess and expired inventory is recorded to reflect inventory

quantities that are not expected to be sold or that are expected to be sold below cost.

The determination of this allowance is considered

a critical accounting estimate because it requires significant judgment regarding future product demand and the timing of orders.

estimating the allowance for excess and expired inventory, management considered a number of factors including, but not limited to, historical

sales trends, product shelf life and expiration dates, regulatory and clinical requirements, backlog and anticipated demand and future

Actual inventory usage and obsolescence may differ from management’s estimates.

Differences between estimated and actual

inventory usage are recognized as adjustments to earnings in the period in which they become known.

A change in the forecasted demand

of 20 percentage points as of December 31, 2025, would have increased or decreased the allowance by $758.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis