Neuraxis, INC 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2026 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) Delaware 45-5079684 (State or other jurisdiction of incorporation or organization) (I. R. S. Employer Identification No.) 11611 N. Meridian Street , Suite 330 Carmel , IN 46032 (Address of principal executive offices) (Zip Code) (812) 689-0791 (Registrant’s telephone number, including area code) 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 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 and post such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 to Section 13(a) of the Exchange Act. ☒ Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes ☐ No ☒ The number of shares of the registrant’s common stock outstanding as of August 6, 2026 was 12,557,765 shares. TABLE OF CONTENTS PART I 3 ITEM 1: FINANCIAL STATEMENTS 3 Condensed Balance Sheets as of June 30, 2026 (Unaudited) and December 31, 2025 3 Condensed Statements of Operations for the Three and Six Months Ended June 30, 2026 and 2025 (Unaudited) 4 Condensed Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2026 and 2025 (Unaudited) 5 Condensed Statements of Cash Flows for the Six Months Ended June 30, 2026 and 2025 (Unaudited) 6 Notes to Condensed Financial Statements (Unaudited) 7 ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 23 ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 26 ITEM 4: CONTROLS AND PROCEDURES 27 PART II 28 ITEM 1: LEGAL PROCEEDINGS 28 ITEM 1A: RISK FACTORS 29 ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 29 ITEM 3: DEFAULTS UPON SENIOR SECURITIES 29 ITEM 4: MINE SAFETY DISCLOSURES 29 ITEM 5: OTHER INFORMATION 29 ITEM 6: EXHIBITS 29 SIGNATURES 30 2 PART I ITEM 1. FINANCIAL STATEMENTS NeurAxis, Inc. Condensed Balance Sheets June 30, 2026 December 31, 2025 (Unaudited) Assets Current Assets: Cash and cash equivalents $ 8,322,258 $ 4,965,072 Accounts receivable, net of credit losses of $ 19,019 and $ 7,326 as of June 30, 2026 and December 31, 2025, respectively 432,925 195,703 Inventories, net of reserves of $ 10,926 and $ 34,524 as of June 30, 2026 and December 31, 2025, respectively 277,308 257,132 Prepaids and other current assets 381,654 315,283 Total current assets 9,414,145 5,733,190 Property and Equipment, at Cost: 388,768 382,465 Less - accumulated depreciation ( 323,305 ) ( 306,901 ) Property and equipment, net 65,463 75,564 Other Assets: Operating lease right of use asset, net 228,545 261,565 Intangible assets, net 258,214 274,778 Other non-current assets 29,793 58,939 Total Assets $ 9,996,160 $ 6,404,036 Liabilities Current Liabilities: Accounts payable $ 791,587 $ 139,365 Accrued expenses 2,113,097 2,393,229 Current portion of operating lease payable 71,942 65,752 Notes payable 42,726 148,293 Customer deposits 31,174 28,660 Warrant liabilities 45,857 16,800 Total current liabilities 3,096,383 2,792,099 Non-Current Liabilities: Operating lease payable, net of current portion 164,724 202,566 Other non-current liabilities — 9,999 Total liabilities 3,261,107 3,004,664 Commitments and contingencies (see note 15) - - Stockholders’ Equity Convertible Series B Preferred stock, $ 0.001 par value; 5,000,000 shares authorized, 3,796,907 shares issued and outstanding as of June 30, 2026 and December 31, 2025 3,797 3,797 Common stock, $ 0.001 par value; 100,000,000 shares authorized; 12,468,059 and 10,652,812 shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively 12,468 10,653 Additional paid in capital 76,381,397 67,985,089 Accumulated deficit ( 69,662,609 ) ( 64,600,167 ) Total stockholders’ equity 6,735,053 3,399,372 Total Liabilities and Stockholders’ Equity $ 9,996,160 $ 6,404,036 The accompanying notes are an integral part of these unaudited condensed financial statements 3 NeurAxis, Inc. Condensed Statements of Operations (Unaudited) 2026 2025 2026 2025 For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Net Sales $ 1,928,695 $ 894,086 $ 3,536,578 $ 1,789,741 Cost of Goods Sold 272,573 146,643 490,939 286,118 Gross Profit 1,656,122 747,443 3,045,639 1,503,623 Selling Expenses 861,387 534,013 1,685,724 1,034,131 Research and Development 274,344 115,197 373,911 222,201 General and Administrative 2,645,103 1,816,091 4,851,395 4,260,246 Operating Loss ( 2,124,712 ) ( 1,717,858 ) ( 3,865,391 ) ( 4,012,955 ) Other Income (Expense): Interest expense ( 19,794 ) ( 13,434 ) ( 45,983 ) ( 15,672 ) Change in fair value of warrant liability 2,449 ( 119 ) ( 29,057 ) 1,712 Other income 56,311 40,993 93,253 57,813 Total other income, net 38,966 27,440 18,213 43,853 Loss Before Income Taxes ( 2,085,746 ) ( 1,690,418 ) ( 3,847,178 ) ( 3,969,102 ) Income tax expense (benefit) - - - - Net Loss ( 2,085,746 ) ( 1,690,418 ) ( 3,847,178 ) ( 3,969,102 ) Preferred stock dividends ( 191,503 ) ( 207,465 ) ( 380,902 ) ( 421,008 ) Net Loss Available to Common Stockholders $ ( 2,277,249 ) $ ( 1,897,883 ) $ ( 4,228,080 ) $ ( 4,390,110 ) Per-Share Data Basic and diluted loss per share $ ( 0.19 ) $ ( 0.22 ) $ ( 0.37 ) $ ( 0.56 ) Weighted Average Common Shares Outstanding Basic and diluted 12,119,822 8,520,596 11,537,209 7,903,716 The accompanying notes are an integral part of these unaudited condensed financial statements 4 NeurAxis, Inc. Condensed Statements of Stockholders’ Equity (Unaudited) Shares Amount Shares Amount Capital Deficit Equity Convertible Series B Preferred Stock Common Stock Additional Paid In Accumulated Stockholders’ Shares Amount Shares Amount Capital Deficit Equity Balances at January 1, 2025 4,280,939 $ 4,281 6,990,227 $ 6,990 $ 58,856,089 $ ( 56,799,612 ) 2,067,748 Warrants exercised - - 186,166 186 ( 186 ) - - Common stock issued from agreements - - 39,471 40 112,453 - 112,493 Stock-based compensation - - - - 105,811 - 105,811 Additional paid in capital from restricted stock units - - - - 251,111 - 251,111 Net loss - - - - - ( 2,278,684 ) ( 2,278,684 ) Balances at March 31, 2025 4,280,939 4,281 7,215,864 7,216 59,325,278 ( 59,078,296 ) 258,479 Warrants exercised - - 720,359 720 1,002,271 - 1,002,991 Conversion of Series B Preferred Stock to common stock ( 384,032 ) ( 384 ) 384,032 384 - - - Issuance of common stock pursuant to shelf registration statement - - 1,538,461 1,539 4,998,460 - 4,999,999 Offering costs - - - - ( 490,799 ) - ( 490,799 ) Stock-based compensation - - - - 173,042 - 173,042 Net loss - - - - - ( 1,690,418 ) ( 1,690,418 ) Balances at June 30, 2025 3,896,907 $ 3,897 9,858,716 $ 9,859 $ 65,008,252 $ ( 60,768,714 ) 4,253,294 Balances at January 1, 2026 3,796,907 $ 3,797 10,652,812 $ 10,653 $ 67,985,089 $ ( 64,600,167 ) 3,399,372 Warrants exercised - - 213,040 213 506,822 - 507,035 Common stock issued from agreements - - 86,392 86 399,909 - 399,995 Issuance of common stock pursuant to shelf registration statement - - 495,456 495 2,989,866 - 2,990,361 Offering costs - - - - ( 110,431 ) - ( 110,431 ) Common stock issued under the 2022 Omnibus Securities and Incentive Plan - - 2,345 3 ( 6,787 ) - ( 6,784 ) Stock-based compensation - - - - 329,434 - 329,434 Net loss - - - - - ( 1,761,432 ) ( 1,761,432 ) Balances at March 31, 2026 3,796,907 3,797 11,450,045 11,450 72,093,902 ( 66,361,599 ) 5,747,550 Balance 3,796,907 3,797 11,450,045 11,450 72,093,902 ( 66,361,599 ) 5,747,550 Warrants exercised - - 183,586 184 436,751 - 436,935 Issuance of common stock pursuant to declaration of Series B Preferred Stock dividends - - 510,605 511 1,214,728 ( 1,215,264 ) ( 25 ) Issuance of common stock pursuant to the 2025 Employee Stock Purchase Plan - - 43,885 44 85,971 - 86,015 Issuance of common stock pursuant to shelf registration statement - - 252,455 252 2,070,405 - 2,070,657 Offering costs - - - - ( 66,133 ) - ( 66,133 ) Common stock issued under the 2022 Omnibus Securities and Incentive Plan - - 27,483 27 ( 94,030 ) - ( 94,003 ) Stock-based compensation - - - - 639,803 - 639,803 Net loss - - - - - ( 2,085,746 ) ( 2,085,746 ) Balances at June 30, 2026 3,796,907 $ 3,797 12,468,059 $ 12,468 $ 76,381,397 $ ( 69,662,609 ) $ 6,735,053 Balance 3,796,907 $ 3,797 12,468,059 $ 12,468 $ 76,381,397 $ ( 69,662,609 ) $ 6,735,053 The accompanying notes are an integral part of these unaudited condensed financial statements 5 NeurAxis, Inc. Condensed Statements of Cash Flows (Unaudited) 2026 2025 For the Six Months Ended June 30, 2026 2025 Cash Flows from Operating Activities Net Loss $ ( 3,847,178 ) $ ( 3,969,102 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 32,968 19,241 Provisions for losses on accounts receivable 13,036 — Provisions for losses on inventory 4,015 12,174 Loss on disposal of property and equipment — 168 Non-cash lease expense 33,020 28,001 Stock-based compensation 969,237 278,854 Issuance of common stock for non-cash consideration 100,002 — Change in fair value of warrant liabilities 29,057 ( 1,712 ) Changes in operating assets and liabilities: Accounts receivable ( 250,258 ) 116,100 Inventory ( 24,191 ) ( 99,278 ) Prepaids and other current assets 38,040 32,295 Accounts payable 652,222 ( 132,430 ) Accrued expenses 19,863 407,812 Customer deposits 2,514 ( 600 ) Operating lease liability ( 31,652 ) ( 30,208 ) Other non-current liabilities — 267,540 Net cash used in operating activities ( 2,259,305 ) ( 3,071,145 ) Cash Flows from Investing Activities Additions to property and equipment ( 6,303 ) ( 25,288 ) Net cash used in investing activities ( 6,303 ) ( 25,288 ) Cash Flows from Financing Activities Proceeds from issuance of common stock 5,061,018 4,999,999 Proceeds from exercised warrants 943,970 1,002,991 Proceeds from Employee Stock Purchase Plan common stock issuance 86,015 — Fractional shares of preferred dividends declared settled in cash ( 25 ) — Offering costs paid ( 151,831 ) ( 459,999 ) Principal payments on notes payable ( 115,566 ) ( 154,972 ) Repayment of license acquisition payable ( 100,000 ) — Taxes paid related to net share settlement of restricted stock units ( 100,787 ) — Net cash provided by financing activities 5,622,794 5,388,019 Net Increase in Cash and Cash Equivalents 3,357,186 2,291,586 Cash and Cash Equivalents at Beginning of Period 4,965,072 3,696,870 Cash and Cash Equivalents at End of Period $ 8,322,258 $ 5,988,456 Supplemental Disclosure of Operating Activities Cash paid for interest $ 4,691 $ 3,701 Cash paid for federal income taxes — — Cash refunded for state income taxes — 12,977 Supplemental Schedule of Non-Cash Investing and Financing Activities Issuance of common stock pursuant to declaration of Series B Preferred Stock dividends $ 1,215,239 $ — Common stock issued for services 399,995 112,493 Common stock issued upon cashless exercise of warrants — 186 Common stock issued upon vesting of restricted stock units, net of shares withheld for payment of payroll taxes 30 — Deferred offering costs reclassified to additional paid in capital upon completion of stock offering 24,733 — The accompanying notes are an integral part of these unaudited condensed financial statements 6 1. Basis of Presentation, Organization and Other Matters NeurAxis, Inc. (“we,” “us,” the “Company,” or “NeurAxis”) 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 and became a Delaware corporation. The Company is headquartered in Carmel, Indiana, and specializes in the development, production, and sale of medical neuromodulation devices. The Company has developed four FDA cleared products: (i) the IB-STIM (DEN180057, 2019), (ii) the Rectal Expulsion Device (“RED”) (K242304,2024), (iii) the NSS-2 Bridge (DEN170018, 2017) and (iv) the original 510(K) clearance (K140530, 2014). ● The IB-STIM is a percutaneous electrical nerve field stimulator (PENFS) device that is indicated in patients 8-21 years of age with functional abdominal pain associated with irritable bowel syndrome and in patients 8 years and older with functional abdominal pain associated with functional dyspepsia and related nausea symptoms. ● 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 patients who experience desire or urge to defecate at lower volumes of distention. RED is intended to be used in a clinical setting by trained health care providers in adult populations. ● The NSS-2 Bridge is a percutaneous nerve field stimulator (PNFS) device indicated for use in the reduction of the symptoms of opioid withdrawal and was licensed to Masimo Corporation (“Masimo”). Masimo marketed and sold this product as its Masimo Bridge. On July 1, 2025, the Company terminated the NSS-2 Bridge license with Masimo in exchange for $ 200,000 of consideration paid in equal installments on December 31, 2025 and June 30, 2026. The termination agreement allowed the Company to recapture its rights to the trademark (U.S. Registration No. 7,394,465) and two patent applications (Application No. 18/821,225 and Application No. 29/960,608) that were licensed to Masimo on April 9, 2020. ● The original 510(K) device was an Electroacupuncture Device (“EAD”), now called NeuroStim. The EAD is no longer being manufactured, sold or distributed but reserved only for research purposes. The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and following the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These interim financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments which are necessary for a fair presentation of the Company’s financial information. These unaudited interim results are not necessarily indicative of the results to be expected for the year ending December 31, 2026, or any other interim period or for any other future year. These unaudited financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2025. 7 2. Summary of Significant Accounting Policies Use of Estimates and Critical Accounting Estimates and Assumptions The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. These significant accounting estimates or assumptions bear the risk of change due to uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. The Company uses estimates in accounting for, among other items, revenue recognition, allowance for credit losses, allowance for sales returns, warrant liabilities, stock-based compensation, income tax provisions, excess and obsolete inventory reserve, impairment of property and equipment and intellectual property. There were no material changes to the Company’s critical accounting estimates disclosed in the 2025 Form 10-K. Actual results could differ from those estimates. Reclassification of Prior Year Amounts Certain prior year amounts have been reclassified to conform to current period presentation. The Company reclassified $ 391,760 and $ 757,925 of general and administrative expenses to selling expenses in the Condensed Statements of Operations for the three and six months ended June 30, 2025, respectively. The Company also reclassified $ 56,878 and $ 114,189 of general and administrative expenses to research and development expenses in the Condensed Statements of Operations for the three and six months ended June 30, 2025, respectively. These reclassifications had no impact on previously reported net loss, total assets, total liabilities or total equity. Accounts Receivable and Allowance for Credit Losses Trade accounts receivable is stated at the amount management expects to collect from outstanding balances, net of an allowance for credit losses. Management evaluates many factors when determining the collectability of specific customer accounts, including, but not limited to, creditworthiness, past transaction and payment history, current economic industry trends and changes in payment terms. Management used assumptions and judgment based on the best available facts and circumstances to estimate and record an allowance. The Company monitors accounts receivable and estimates the allowance for lifetime expected credit losses. Estimates of expected credit losses are based on historical collection experience, aging schedule and other factors, including those related to current and forecasted market conditions and events. The allowance for credit losses was $ 19,019 and $ 7,326 as of June 30, 2026 and December 31, 2025, respectively. The Company recorded $ 13,036 and $ 0 credit loss expense for the three months ended June 30, 2026 and 2025, respectively, and $ 13,036 and $ 0 for the six months ended June 30, 2026 and 2025, respectively. Inventories Inventories are valued at the lower of cost or net realizable value. Cost is determined using the weighted average method. The inventory is comprised of finished medical devices on hand. Certain components within the devices have an expiration date that are removed from current inventory and expensed at the date of expiration. The Company has reserved for expired inventory as charges to cost of goods sold of $ 2,092 and $ 6,633 for the three months ended June 30, 2026 and 2025, respectively, and $ 2,850 and $ 6,633 for the six months ended June 30, 2026 and 2025, respectively. The Company has reserved for research devices recorded as charges to research and development expenses of $ 1,165 and $ 5,541 for the three months ended June 30, 2026 and 2025, respectively, and $ 1,165 and $ 5,541 for the six months ended June 30, 2026 and 2025, respectively. Inventory reserves totaled $ 10,926 and $ 34,524 as of June 30, 2026 and December 31, 2025, respectively. 8 Selling Expenses Selling expenses consist primarily of advertising, marketing and promotion of the Company’s products including salaries and related personnel costs and travel expenses. Advertising expenses are expensed as incurred and amounted to $ 15,872 and $ 77,108 for the three months ended June 30, 2026 and 2025, respectively, and $ 45,693 and $ 162,456 for the six months ended June 30, 2026 and 2025, respectively. Research and Development Research 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 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. Research and development costs are expensed as incurred. Intangible Assets Intangible assets consist of software, patents, and a trademark. Intangible assets are stated at their historical cost and amortized on a straight-line basis over their expected useful lives. Capitalized patent costs, net of accumulated amortization, includes legal costs incurred for patent applications. In accordance with ASC 350, once a patent is granted, we amortize the capitalized patent costs over the remaining life of the patent using the straight-line method. If the patent is not granted, we write off any capitalized patent costs at that time. The Company purchased a trademark related to the Company’s name for $ 50,000 . The trademark does not have a determinate life and therefore the cost is not being amortized. The Company tests for impairment annually or upon the occurrence of an impairment indicator. On July 1, 2025, the Company terminated the NSS-2 Bridge license with Masimo in exchange for $ 200,000 of consideration paid 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. 18/821,225 and Application No. 29/960,608) that were licensed to Masimo on April 9, 2020 for use in the reduction of the symptoms of opioid withdrawal. The intellectual property is amortized over its remaining trademark life of approximately nine years. Fair Value Measurements The Company accounts for financial instruments in accordance with Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures , which establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described as follows: Level 1 – Quoted prices (unadjusted) for identical unrestricted assets or liabilities in active markets that the reporting entity has the ability to access as of the measurement date. Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or financial instruments for which all significant inputs are observable or can be corroborated by observable market data, either directly or indirectly. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These unobservable inputs reflect that reporting entity’s own assumptions about what market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. Management believes the estimated fair value of certain accounts including cash, accounts receivable, accounts payable and other current assets on June 30, 2026, and December 31, 2025, approximate their carrying value as reflected in the balance sheets due to the short-term nature of these instruments or the use of market interest rates for debt instruments. 9 The Company’s Level 3 accounts include warrant liabilities and the floating lookback option provision in the NeurAxis, Inc. Employee Stock Purchase Plan. Inputs to determine fair value are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing and discounted cash flow models. The valuation techniques involve management’s estimates and judgment based on unobservable inputs. The fair value estimates may not be indicative of the amounts that would be realized in a market exchange. Additionally, there may be inherent uncertainties or changes in the underlying assumptions used, which could significantly affect the current or future fair value estimates. Unobservable inputs used in the models are significant to the fair values of the assets and liabilities. There were no transfers between any of the levels during the periods ended June 30, 2026 and December 31, 2025. In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company had no assets that were measured on a nonrecurring basis as of June 30, 2026 and December 31, 2025. Basic and Diluted Net Income (Loss) per Share Basic earnings or loss per share (“EPS”) is computed by dividing net income (loss), net of preferred stock dividends, by the weighted average number of common shares outstanding during the period. Diluted EPS is determined using the weighted average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents that were outstanding for the periods presented. In periods when losses are reported, which is the case for the three and six month periods ended June 30, 2026 and 2025 presented in these financial statements, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. Pursuant to the Company’s Board of Directors declaration of dividends on Series B Preferred Stock to holders of record as of April 21, 2026, the Company issued 510,605 shares of common stock on April 28, 2026, based on the 8.5 % per annum cumulative dividend rate. The Company had the following potentially dilutive common stock equivalents: Schedule of Dilutive Common Stock Equivalents 2026 2025 June 30, 2026 2025 Options 1,319,394 1,319,394 Restricted Stock Units 1,265,443 852,214 Warrants 982,898 1,419,524 Series B Preferred Stock 3,796,907 3,896,907 Undeclared Cumulative Series B Preferred Stock Dividends 80,456 265,662 Totals 7,445,098 7,753,701 The following table presents the calculation of the basic and diluted net loss per share and the effect of preferred stock dividends: Schedule of Basic and Diluted Net Loss Per Share 2026 2025 2026 2025 Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Numerator: Net loss $ ( 2,085,746 ) $ ( 1,690,418 ) $ ( 3,847,178 ) $ ( 3,969,102 ) Preferred stock dividends ( 191,503 ) ( 207,465 ) ( 380,902 ) ( 421,008 ) Net loss available to common stockholders ( 2,277,249 ) ( 1,897,883 ) ( 4,228,080 ) ( 4,390,110 ) Denominator: Weighted average shares of common stock outstanding - basic and diluted (retroactively adjusted to January 1, 2025) 12,119,822 8,520,596 11,537,209 7,903,716 Basic and diluted net loss per share $ ( 0.19 ) $ ( 0.22 ) $ ( 0.37 ) $ ( 0.56 ) 10 Stock-Based Compensation The Company accounts for all stock-based awards at fair value. The Company recognizes its stock-based compensation expense using the straight-line method. Compensation cost is not adjusted for estimated forfeitures, but instead is adjusted upon actual forfeiture. The Company accounts for the granting of stock options and restricted stock units to employees and non-employees using the fair value method whereby all awards are measured at fair value on the date of the grant. The fair value of all employee stock options and restricted stock units is expensed over the requisite service period with a corresponding increase to additional paid-in capital. Upon exercise of stock options, the consideration paid by the option holder is recorded in additional paid-in capital, while the par value of the shares received is reclassified from additional paid-in-capital to common stock. Upon vesting of restricted stock units, the par value of the shares issued are reclassified from additional paid-in-capital to common stock. Stock-based awards to non-employees are measured based on the fair value of the equity instrument issued. Compensation expense for non-employee stock awards is recognized over the requisite service period following the measurement of the fair value on the grant date. The Company uses the Black-Scholes option-pricing model to calculate the fair value of stock options and the Monte Carlo simulation model to calculate the fair value of the floating lookback option with the NeurAxis, Inc. 2025 Employee Stock Purchase Plan. The use of these option-pricing models requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected term of the option, risk-free interest rates, the value of the common stock and expected dividend yield of the common stock. Changes in these assumptions can materially affect the fair value estimate. Revenue Recognition In accordance with ASC 606, Revenue from Contracts with Customers , the Company recognizes revenue when its customer obtains control of promised goods, in an amount that reflects the consideration which the Company expects to be entitled in exchange for those goods. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, it (i) identifies the contract(s) with a customer, (ii) identifies the performance obligations in the contract, (iii) determines the transaction price, (iv) allocates the transaction price to the performance obligations in the contract and (v) recognizes revenue when (or as) the entity satisfies a performance obligation. The Company applies the five-step model to contracts when it determines that it is probable it will collect substantially all the consideration it is entitled to in exchange for the goods it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods promised within each contract and determines those that are performance obligations and assesses whether each promised good is distinct. The Company then recognizes as revenue the amount of the transaction price, after consideration of variability and constraints, if any, that is allocated to the respective performance obligation when the performance obligation is satisfied. The Company offers a patient assistance program for patients without insurance coverage for IB-Stim. This program extends potential self-pay discounts for IB-Stim devices, based upon household income and size. Certain economic factors affect the nature, amount, timing, and uncertainty of the Company’s revenue and cash flows. All of the Company’s products are sold to healthcare customers including hospitals, clinics and physician offices. Sales to healthcare customers lack seasonality and have a mild correlation with economic cycles. All of the Company’s sales are to customers located within the United States. Sales contracts consist of purchase orders that are short-term (i.e., less than or equal to one year). 11 The Company typically satisfies its performance obligations for goods at a point in time as they are received at the customer’s destination (rather than over time). Goods are shipped by common carrier to customers under FOB destination terms. As such, ownership of goods in transit is transferred to the customer upon receipt as the Company bears the associated risks (e.g., loss, damage or delay). Management typically relies on shipping information from common carriers to evaluate when the customer has obtained control of the goods. Shipping and handling costs are recorded as cost of goods sold in the Condensed Statements of Operations. The Company’s contracts with customers typically do not involve variable consideration. The information that the Company uses to determine the transaction price for a contract is similar to the information that the Company’s management uses in establishing the prices of goods to be sold. Orders may not be cancelled after shipment. Customers may return devices if the goods are found to be defective, nonconforming, or otherwise do not meet the stated technical specifications. At the option of the customer, the Company shall either: ● Refund the price paid for any defective or nonconforming products. ● Supply and deliver to the customer replacement conforming products. ● Reimburse the customer for the cost of repairing any defective or nonconforming products. At the time revenue is recognized, the Company estimates expected returns and excludes those amounts from revenue. The Company also maintains appropriate accounts to reflect the effects of expected returns on the Company’s financial position and periodically adjusts those accounts to reflect its actual return experience. Estimated returns totaled $ 24,147 and $ 13,824 as of June 30, 2026 and December 31, 2025, respectively. Payment for goods sold by the Company is typically due after an invoice is sent to the customer, within 30 days. The Company does not offer discounts if the customer pays some or all of an invoiced amount prior to the due date. None of the Company’s contracts have a significant financing component. Customer deposits are contract liabilities under ASC 606. As of June 30, 2026 and December 31, 2025, the Company had customer deposits of $ 31,174 and $ 28,660 , respectively. Medical devices that the Company contracts to sell and transfer to customers are manufactured by two third-party manufacturers located in Indiana and Michigan. In no case does the Company act as an agent (i.e., the Company does not provide a service of arranging for another party to transfer goods to the customer). Going Concern As of June 30, 2026, the Company had stockholders’ equity of $ 6,735,053 and short-term outstanding borrowings of $ 42,726 . Additionally, the Company had cash of $ 8,322,258 and a working capital surplus of $ 6,317,762 as of June 30, 2026. However, we have incurred losses and negative cash flows from operations since inception and have funded our operations primarily with a combination of sales, debt, and proceeds from the issuance of capital stock. Our future capital requirements will depend upon many factors, including progress with developing, manufacturing, and marketing our technologies, the time and costs involved in preparing, filing, prosecuting, maintaining, and enforcing patent claims and other proprietary rights, our ability to establish collaborative arrangements, marketing activities and competing technological and market developments, including regulatory changes and overall economic conditions in our target markets. Our ability to generate revenue and achieve profitability requires us to successfully market and secure purchase orders for our products from customers currently identified in our sales pipeline and to new customers as well. The primary activity that will drive all customers and revenues is the adoption of insurance coverage by commercial insurance carriers nationally, which is a top priority of the Company. These activities, including our planned research and development efforts, will require significant uses of working capital through the rest of 2026 and beyond. 12 Management evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date the financial statements are issued. While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenues and in its ability to raise additional funds by way of a public or private offering of its debt or equity securities, there can be no assurance that it will be able to do so on reasonable terms, or at all. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenues and its ability to raise additional funds by way of a public or private offering. Neither future cash generated from operating activities, nor management’s contingency plans to mitigate the risk and extend cash resources through the evaluation period, are considered probable. As a result, substantial doubt is deemed to exist about the Company’s ability to continue as a going concern. As the Company continues to incur losses, the transition to profitability is dependent upon achieving a level of revenues adequate to support its cost structure. We may never achieve profitability, and unless and until doing so, we intend to fund future operations through additional dilutive or nondilutive financing. There can be no assurances, however, that additional funding will be available on terms acceptable to us, if at all. The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Recently Adopted Accounting Standards In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326) , which allows registrants to elect a practical expedient when estimating expected credit losses on accounts receivable. Under the practical expedient, an entity may assume that the current conditions as of the balance sheet date persist for the remaining life of the asset, thereby removing the requirement to generate forward-looking forecasts. All entities are required to adopt the standard prospectively for fiscal years beginning after December 15, 2025, and interim periods within those annual reporting periods. The Company adopted the provisions of ASU 2025-05 as of January 1, 2026, on a prospective basis. The Company did not elect the practical expedient and the adoption of the standard did not have a material impact on the Company’s financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which requires the enhancement of income tax disclosures to provide better insight into how an entity’s operations and related tax risks, planning and opportunities affect its tax rate and prospects for future cash flows. The enhanced disclosures require (i) specific categories in a tabular rate reconciliation including both amounts and percentages and (ii) additional information for reconciling items and income tax paid that meet a quantitative threshold. Public business entities are required to adopt the standard for annual periods beginning after December 15, 2024. The Company adopted the disclosure provisions of ASU 2023-09 as of December 31, 2025, on a prospective basis. The adoption of this standard did not have a material impact on the Company’s financial statements. Recently Issued Accounting Standards In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270), which provides a comprehensive list of interim disclosures that are required by U.S. GAAP to provide clarity on current requirements. Public business entities are required to adopt the standard for interim periods with annual reporting periods beginning after December 15, 2027. The adoption is not expected to have a material impact on the Company’s financial statements. In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvement to the Accounting for Internal-Use Software , which replaces project stage milestones with required capitalization when management has authorized and committed to funding the software project and it is probable that the project will be completed and the software will be used to perform the function intended. Depreciation expense and accumulated depreciation for internal-use software are also required to be disclosed for all periods presented. All entities are required to adopt the standard for fiscal years beginning after December 15, 2027 and interim periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. The adoption is not expected to have a material impact on the Company’s financial statements. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic (220-40): Disaggregation of Income Statement Expenses , which requires disclosures that disaggregate, in a tabular presentation, each relevant expense caption on the face of the income statement that includes inventory purchases, employee compensation, depreciation and intangible amortization expense. Additional disclosures are also required to provide a qualitative description of the amounts in an expense caption that are not separately disaggregated quantitatively and the total amount of selling expenses including a definition. Public business entities are required to adopt the standard for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with prospective or retrospective adoption, including disclosures, at the Company’s election. Although the standard requires enhanced disclosures, the adoption is not expected to have a material impact on the Company’s financial statements. 13 3. Related Party Transactions The Company has two demand notes receivable from shareholders related to the sale of common stock on January 1, 2016. The total note principal balance is $ 1,012,800 as of June 30, 2026, and December 31, 2025, respectively, with interest calculated monthly based on applicable federal rates. The total interest receivable balance is $ 247,039 and $ 228,759 as of June 30, 2026, and December 31, 2025, respectively. No payments have been received on the notes. Since repayment is not assured, the Company has fully reserved for the entire balance of principal and interest. The current allowance is $ 1,259,839 and $ 1,241,559 as of June 30, 2026, and December 31, 2025, respectively. The Company also has interest payable to certain shareholders related to the issuance of convertible notes in 2017, which have since been converted into common stock. The interest payable totaled $ 66,648 as of June 30, 2026, and December 31, 2025, and is included in accrued expenses in the Condensed Balance Sheets. The Company was granted an exclusive, worldwide non-transferable, royalty-free license for the auricular portion of certain patents owned by a limited liability company in which the Company’s President and Chief Executive Officer and Chief Regulatory, Compliance and Privacy Officer both maintain an ownership interest. The license allows for the development, marketing and sales of electro-therapy treatments by stimulation of cranial nerves, cranial nerve branches, auricular nerves, auricular nerve branches, auricular nerve bundles and auricular anatomical structures in human patients. The exclusive license agreement expires on October 18, 2037, may be terminated by either party upon 60 days prior written notice and requires the Company to pay costs associated with the maintenance, prosecution and continuation of patent filings. The Company’s Board of Directors pre-approved the reimbursement of up to $ 20,000 for the year ending December 31, 2026. License costs totaled $ 2,929 and $ 0 for the three months ended June 30, 2026 and 2025, respectively, and $ 3,382 and $ 1,317 for the six months ended June 30, 2026 and 2025, respectively. The Company owed the limited liability company $ 2,929 and $ 0 that are included in accounts payable in the Condensed Balance Sheets as of June 30, 2026 and December 31, 2025, respectively. From time to time, a member of the Company’s Board of Directors purchases NeuroStim devices from the Company at cost to conduct research and development activities. The Company’s Board of Directors pre-approved the sale of these NeuroStim devices up to $ 20,000 for the year ended December 31, 2026. The Company sold NeuroStim devices totaling $ 3,030 and $ 4,394 for the three months ended June 30, 2026 and 2025, respectively, and $ 4,545 and $ 6,351 for the six months ended June 30, 2026 and 2025, respectively, under this program. 4. Prepaids and Other Current Assets Prepaids and other current assets consisted of the following: Schedule of Prepaids and Other Current Assets June 30, 2026 December 31, 2025 Prepaid software subscriptions $ 115,142 $ 103,390 Prepaid insurance 30,061 141,299 Other 236,451 70,594 Total prepaids and other current assets $ 381,654 $ 315,283 14 5. Other Non-Current Assets Other non-current assets consisted of the following: Schedule of Other Non-Current Assets June 30, 2026 December 31, 2025 Security deposit $ 20,163 $ 20,163 Deferred offering costs 9,630 23,864 Prepaid software subscriptions — 14,912 Total other non-current assets $ 29,793 $ 58,939 6. Accrued Expenses Accrued expenses consisted of the following: Schedule of Accrued Expenses June 30, 2026 December 31, 2025 Compensation and benefits $ 1,313,405 $ 1,359,993 Settled litigation 358,975 692,683 Legal fees 150,244 65,714 Interest 66,648 66,648 Research and development fees 59,242 2,143 Tariffs 57,802 32,000 NSS-2 Bridge lease termination fee - 100,000 Other 106,781 74,048 Total accrued expenses $ 2,113,097 $ 2,393,229 7. Notes Payable On August 9, 2025, the Company entered into a $ 170,000 note payable to finance the premiums of a business insurance policy, bearing interest at an annual interest rate of 7.45 % and maturing on June 9, 2026 , to replace the $ 210,000 note payable entered into on August 9, 2024, with an annual interest rate of 7.40 % that matured on June 9, 2025 in conjunction with the annual renewal period. On May 26, 2025, the Company also entered into a note payable with a principal balance of $ 122,253 to finance subscription fees on certain software arrangements maturing on March 1, 2027. The outstanding principal was $ 42,726 and $ 158,292 , of which $0 and $ 9,999 is included in other non-current liabilities in the Condensed Balance Sheets, as of June 30, 2026 and December 31, 2025, respectively. Interest expense totaled $ 19,794 and $ 13,434 for the three months ended June 30, 2026 and 2025, respectively, and $ 45,983 and $ 15,672 for the six months ended June 30, 2026 and 2025, respectively. The Company’s accrued interest totaled $ 66,648 and $ 66,648 as of June 30, 2026 and December 31, 2025, respectively. 8. Leases The Company’s leases are comprised of operating leases for office space. At the inception of the lease, the Company determines whether the lease contract conveys the right to control the use of identified property for a period of time in exchange for consideration. Leases are classified as operating or finance leases at the commencement date of the lease. Operating leases are recorded as operating lease right-of-use assets, other current liabilities, and operating lease liabilities in the Condensed Balance Sheets. The Company did not have any finance leases at June 30, 2026 and December 31, 2025. The Company has two leases consisting of office space in Batesville and Carmel, Indiana. The lease in Batesville, Indiana commenced on August 1, 2025, and has an initial term of three years, with automatic one-year renewals subject to an annual 4% rent escalation, unless 60-day notice of vacating is given. On May 19, 2025, the Company terminated its prior lease in Versailles, Indiana, with a monthly lease payment of $ 1,800 , effective July 31, 2025, without penalty due to relocation of the office space to Batesville, Indiana, with the same landlord. The current monthly lease payment is $ 2,000 with no escalations during the initial lease term. On June 13, 2025, the Company prepaid $ 25,200 towards the monthly lease payments which will be amortized over the initial lease term. The lease in Carmel, Indiana commenced January 1, 2024, with an initial term of five years and five months. The monthly lease payment started at $ 6,721 with an annual increase of 2.5 %. The Company was only obligated to pay an amount equal to 50% of the monthly base rent for the first 10 months of the term. The Company recognized operating lease expense of $ 26,116 and $ 25,558 for the three months ended June 30, 2026 and 2025, respectively, and $ 52,231 and $ 51,082 for the six months ended June 30, 2026 and 2025, respectively, including short-term lease expense and variable lease costs. 15 The following table presents information related to the Company’s operating leases: Schedule of Operating Leases June 30, 2026 December 31, 2025 Operating lease right of use asset, net $ 228,545 $ 261,565 Current portion of operating lease payable 71,942 65,752 Operating lease payable, net of current portion 164,724 202,566 Total operating lease payable $ 236,666 $ 268,318 Weighted-average remaining lease term (in years) 2.82 3.31 Weighted-average discount rate 15.0 % 15.0 % As of June 30, 2026, the maturities of the Company’s operating lease liabilities were as follows: Schedule of Maturities Operating Lease Liabilities Remainder of 2026 $ 50,173 2027 102,456 2028 98,127 2029 38,025 Total lease payments 288,781 Less: imputed interest ( 52,115 ) Total present value of lease payments $ 236,666 9. Common Stock and Warrants The Company has authorized 100,000,000 shares of common stock, of which 12,468,059 and 10,652,812 shares were issued and outstanding as of June 30, 2026 and December 31, 2025, respectively. On January 22, 2026, the Company issued 43,196 shares of common stock with a fair value of $ 199,995 to its Board of Directors for their services for the year ending December 31, 2026. The Company recorded $ 50,000 and $ 100,000 as general and administrative expense in the Condensed Statements of Operations for the three and six months ended June 30, 2026, respectively, and $ 99,995 as prepaids and other current assets in the Condensed Balance Sheets as of June 30, 2026. On January 22, 2026, the Company issued another 43,196 shares of common stock with a fair value of $ 200,000 to its Board of Directors for their service during the year ended December 31, 2025. The Company recorded $ 50,000 and $ 100,000 as general and administrative expense in the Condensed Statements of Operations for the three and six months ended June 30, 2025, respectively. On April 10, 2026, the Company’s Board of Directors declared a dividend on the Series B Preferred Stock. Holders of record of the Company’s Series B Preferred Stock as of the record date of April 21, 2026 received a stock dividend on April 28, 2026, of the Company’s par value $ 0.001 common stock for every share of Series B Preferred Stock. The Company issued 510,605 shares of common stock based on the 8.5 % per annum cumulative dividend rate. Additionally, during the six months ended June 30, 2026, the Company issued (i) 747,911 shares of common stock to investors pursuant to the 2025 At The Market Offering Agreement for gross proceeds of $ 5,061,018 with such shares registered pursuant to the Company’s effective Registration Statement on Form S-3 (File No. 333-283798), previously filed with the Securities and Exchange Commission (“SEC”) on December 13, 2024, and declared effective on February 11, 2025, and the related prospectus supplements filed with the SEC on August 29, 2025, October 23, 2025, and April 21, 2026, (ii) 396,626 common shares upon the exercise of warrants for gross proceeds of $ 943,970 (iii) 29,828 common shares pursuant to the 2022 Omnibus Securities and Incentive Plan and (iv) 43,885 common shares pursuant to the NeurAxis Inc. 2025 Employee Stock Purchase Plan for gross proceeds of $ 86,015 . During the six months ended June 30, 2025, the Company issued (i) 39,471 shares of common stock with a fair value of $ 112,493 to its Board of Directors for their service from April 1, 2024 through December 31, 2024, which was recorded as general and administrative expense in the Condensed Statements of Operations (ii) 186,166 shares of common stock to an investor in exchange for 502,647 warrants in a cashless exercise transaction with $ 186 reclassified from additional paid in capital to common stock in the Condensed Statements of Stockholders’ Equity (iii) 720,359 common shares upon the exercise of warrants for gross proceeds of $ 1,002,991 (iv) 384,032 common shares to certain investors upon conversion of an equivalent amount of Series B Preferred Stock and (v) 1,538,461 common shares pursuant to a securities purchase agreement with certain institutional investors for gross proceeds of $ 4,999,999 offered by the Company pursuant to its shelf registration statement on Form S-3 (File No. 333-283798) which was declared effective by the Securities and Exchange Commission on February 11, 2025, a base prospectus dated February 11, 2025 and a prospectus supplement dated May 20, 2025. 16 The following is a summary of warrant activity for common stock during the six months ended June 30, 2026 and year ended December 31, 2025: Schedule of Warrant Activity for Common Stock Number of Weighted-Avg. Weighted-Avg. Warrants for Exercise Remaining Common Stock Price Contractual Life Outstanding as of January 1, 2025 2,642,530 $ 2.41 2.93 Exercised ( 1,263,006 ) 1.82 2.12 Outstanding as of December 31, 2025 1,379,524 2.44 2.26 Exercised ( 396,626 ) 2.38 1.93 Outstanding as of June 30, 2026 982,898 $ 2.46 1.79 The following table summarizes the Company’s warrants outstanding and exercisable as of June 30, 2026: Schedule of Warrants outstanding and Exercisable Number of Warrants Exercise Expiration Outstanding Price Date Investor Warrant 12,852 $ 8.76 September 18, 2028 2022 Convertible Notes 134,504 $ 2.38 Various in 2027 2023 Convertible Notes 742,510 $ 2.38 Various in 2028 Underwriter Warrants 16,520 $ 2.38 August 8, 2028 Advisory Agreement Warrants 76,512 $ 2.38 Various in 2029 982,898 10. Preferred Stock The Company’s shareholders authorized 5,000,000 shares of preferred stock of which 5,000,000 shares were designated as $ 0.001 par value Series B Preferred Stock with 3,796,907 shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively. Series B Preferred Stock shareholders vote with Common Stock shareholders on an as-converted basis and not as a separate class. Cumulative dividends accrue at 8.5 % per annum and are due and payable in either cash or common shares at the Company’s discretion on a quarterly basis through December 31, 2026. Series B Preferred Stock converts to common stock on a 1:1 basis, subject to adjustments for stock dividends, splits, combinations and similar events as well as unpaid dividends thereon, solely at the election of the holder at any time. Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the Series B Preferred Stock shareholders maintain priority preference over all other classes of capital stock. A merger or consolidation (other than one in which stockholders of the Company own a majority by voting power of the outstanding shares of the surviving or acquiring corporation) and a sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Company will be treated as a liquidation event, thereby triggering payment of the liquidation preferences. Preferred stock dividends of $ 1,215,264 and $ 0 were declared and issued as common stock as of June 30, 2026 and December 31, 2025, respectively. Series B Preferred Stock undeclared cumulative dividends totaled $ 191,503 and $ 1,025,865 as of June 30, 2026 and December 31, 2025, respectively. Pursuant to the Company’s Board of Directors declaration of dividends on Series B Preferred Stock to holders of record as of July 21, 2026 and April 21 2026, the Company issued 80,456 and 510,605 shares of common stock on July 29, 2026, and April 28, 2026, respectively, based on the 8.5 % per annum cumulative dividend rate. 17 11. Stock-Based Compensation Restricted Stock Units Pursuant to the NeurAxis, Inc. 2022 Omnibus Securities and Incentive Plan, the Company initiated grants of restricted stock units (“RSUs”) to certain employees as follows: Schedule of Restricted Stock Units Six Months Ended June 30, 2026 2025 Number of RSUs Weighted Average Fair Value Number of RSUs Weighted Average Fair Value Outstanding as of Beginning of Period 831,346 $ 2.32 — $ — Granted 477,431 4.87 852,214 2.31 Vested ( 43,334 ) 7.11 — — Outstanding as of End of Period 1,265,443 $ 3.12 852,214 $ 2.31 Of the RSUs granted during the six months ended June 30, 2026, 437,431 are subject to a pro rata annual vesting period over three years and 40,000 immediately vested whereas the RSUs granted during the six months ended June 30, 2025 are subject to a three-year cliff vesting period. The RSUs are payable in shares of the Company’s common stock and fully vest upon (i) death or disability or (ii) change of control. Dividend equivalents accrue on RSUs and are paid upon vesting; there were no accrued dividends on unvested RSUs as of June 30, 2026. Total stock-based compensation expense related to RSUs is classified in the Company’s Condensed Statements of Operations as (i) selling expenses totaling $ 67,566 and $ 30,859 for the three months ended June 30, 2026 and 2025, respectively, and $ 129,022 and $ 51,143 for the six months ended June 30, 2026 and 2025, respectively, and (ii) general and administrative expense totaling $ 552,304 and $ 142,183 for the three months ended June 30, 2026 and 2025, respectively, and $ 782,953 and $ 227,710 for the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026, total unrecognized stock-compensation expense relating to unvested stock awards granted under the Company’s share-based compensation plans amounted to $ 2,544,703 . Stock Options The following is a summary of the Company’s outstanding stock options as of June 30, 2026 and December 31, 2025: Schedule of Stock Option Activity Number of Options Weighted Avg. Remaining Contractual Life (in years) Weighted Avg. Exercise Price Aggregate Intrinsic Value Outstanding as of December 31, 2025 1,319,394 3.69 $ 6.94 $ — Outstanding as of June 30, 2026 1,319,394 3.44 $ 6.94 $ — Vested and Exercisable as of June 30, 2026 1,319,394 3.44 $ 6.94 $ — On April 9, 2026, the Company’s Board of Directors approved the cancelation of 1,319,394 stock options issued under the 2017 Innovative Health Solutions, Inc. Stock Compensation Plan and the grant of an equivalent amount of RSUs with immediate vesting under the NeurAxis, Inc. 2022 Omnibus Securities and Incentive Plan which was approved by the Company’s shareholders on June 10, 2026. The stock option cancelation and RSU grant will be treated as a modification under ASC 718, Compensation—Stock Compensation , whereby the Company will recognize incremental compensation cost as the excess of the fair value of the granted RSUs over the fair value of the stock options upon the exchange on July 24, 2026. The Company estimates $ 3,400,000 of incremental compensation cost will be recorded upon execution of the stock option cancellation and RSU grant agreements. There was no stock-based compensation expense related to stock options recorded for the three and six months ended June 30, 2026 and 2025. 18 Employee Stock Purchase Plan On July 1, 2025, the Compensation Committee of the Board of Directors (“Board”) of the Company adopted the NeurAxis, Inc. 2025 Employee Stock Purchase Plan (the “ESPP”) subsequently approved by the Shareholders on June 10, 2026. The purpose of the ESPP is to provide eligible employees an opportunity to acquire common stock of the Company at a 15% discount using payroll deductions. The maximum number of shares of the Company’s common stock that may be issued under the ESPP is 100,000, subject to an annual increase on January 1st of each year from 2026 through 2035 by the lesser of (i) 1% of the Company’s outstanding capital stock as of the prior December 31st or (ii) 100,000 shares. The Board may reduce or eliminate this annual increase before February 1st of any given year. Total stock-based compensation expense related to the ESPP is classified in the Company’s Condensed Statements of Operations as (i) selling expenses totaling $ 7,008 and $ 0 for the three months ended June 30, 2026 and 2025, respectively, and $ 15,421 and $ 0 for the six months ended June 30, 2026 and 2025, respectively, and (ii) general and administrative expense totaling $ 12,925 and $ 0 for the three months ended June 30, 2026 and 2025, respectively, and $ 41,841 and $ 0 for the six months ended June 30, 2026 and 2025, respectively. Employee withholdings of $ 53,214 and $ 13,611 are included in accrued expenses in the Condensed Balance Sheets as of June 30, 2026 and December 31, 2025, respectively. 12. Fair Value Measurement of Financial Instruments Warrants The Company utilizes a Black-Scholes option-pricing model to compute the fair value of the warrant liability and to mark to market the fair value of the warrant at each balance sheet date. The inputs utilized in the application of the Black-Scholes option-pricing model included (i) an exercise price of $ 8.76 per share, (ii) an expected remaining term of each warrant based on the remaining contractual maturity of each warrant, (iii) estimated volatility ranging from 89.1 % to 94.7 % based on historical stock prices of comparable companies with a look back period commensurate with the period to maturity, (iv) a risk-free interest rate ranging from 3.72 % to 4.22 % based on the interest rates of U.S. Treasury Notes consistent with the expected remaining contract term and (v) a 0 % expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring dividends in the near future. The following are the changes in the warrant liabilities during the six months ended June 30, 2026 and year ended December 31, 2025: Schedule of Changes in Warrant Liabilities Level 3 Warrant liabilities as of January 1, 2025 $ 9,166 Changes in fair value of warrant liabilities 7,634 Warrant liabilities as of December 31, 2025 16,800 Changes in fair value of warrant liabilities 29,057 Warrant liabilities as of June 30, 2026 $ 45,857 ESPP Floating Lookback Option The Company utilizes a Monte Carlo simulation model to compute the fair value of the ESPP floating lookback option which is expensed pro rata over each six-month offering period. The inputs utilized in the application of the Monte Carlo simulation model included (i) a stock price ranging from $ 2.72 to $ 7.40 subject to a 15% discount, (ii) an expected remaining term of 6 months, (iii) estimated volatility ranging from 89.1 % to 90.9 % based on historical stock prices of comparable companies with a lookback period commensurate with the offering period, (iv) a risk-free interest rate ranging from 3.69 % to 3.94 % based on interest rates of U.S. Treasury Notes consistent with the offering period and (v) a 0 % expected dividend yield as the Company has not paid dividends and does not anticipate declaring dividends in the near future. The Company recorded the fair value of the ESPP floating lookback option as stock-based compensation expense totaling $ 19,935 and $ 0 for the three months ended June 30, 2026 and 2025, respectively, and $ 57,264 and $ 0 for the six months ended June 30, 2026 and 2025, respectively. 13 . Segment Information The Company evaluates the following factors to identify its reportable segments: (i) nature of products and services, (ii) type of customer for the products and services, (iii) sales, production and distribution methods of the products and services and (iv) the nature of the regulatory environment, if applicable. Based on an evaluation of these factors, management concluded that the Company’s operations are managed through one reportable segment, IB-STIM, that derives its revenues in the United States from a PENFS device that is used to treat patients 8 years of age and older with functional abdominal pain associated with irritable bowel syndrome and with functional abdominal pain associated with functional dyspepsia and related nausea symptoms. The accounting policies of the IB-STIM segment are the same as those described in the Summary of Significant Accounting Policies (see Footnote 2). The Chief Operating Decision Maker (“CODM”) regularly evaluates the performance of the IB-STIM segment for the purpose of allocating resources based on net sales and operating loss, both of which are reported in the Condensed Statements of Operations. The CODM uses net sales to evaluate IB-STIM’s adoption and utilization by insurance carriers and physicians. As NeurAxis is an emerging growth company, operating loss is used to monitor the Company’s cost structure in order to achieve future segment profitability. Both net sales and operating loss are measured against the budget on a periodic basis to assess achievement toward annual compensation incentive targets. The Company’s CODM is its Chief Executive Officer. 19 The following reconciles the reportable segment net sales and operating loss to the Company’s reported net loss: Schedule of Reconciles the Company’s Net Sales and Operating Loss 2026 2025 2026 2025 Three months ended June 30, Six months ended June 30, 2026 2025 2026 2025 Net Sales $ 1,928,695 $ 894,086 $ 3,536,578 $ 1,789,741 COGS 272,573 146,643 490,939 286,118 Gross Profit 1,656,122 747,443 3,045,639 1,503,623 Selling Expenses (a) 861,387 534,013 1,685,724 1,034,131 Research & Development (a) 274,344 115,197 373,911 222,201 Compensation and Benefits (a) 1,798,108 1,161,026 3,210,773 2,235,013 Professional Services (a) (b) 462,286 283,730 898,589 701,308 Legal Settlement - 11,471 - 630,568 Depreciation 8,370 10,264 16,404 13,998 Amortization 8,280 2,621 16,564 5,243 Other Operating Expenses (a) (c) 368,059 346,979 709,065 674,116 Segment Operating Loss ( 2,124,712 ) ( 1,717,858 ) ( 3,865,391 ) ( 4,012,955 ) Interest Expense ( 19,794 ) ( 13,434 ) ( 45,983 ) ( 15,672 ) Change in Fair Value of Warrant Liability 2,449 ( 119 ) ( 29,057 ) 1,712 Other Income 56,311 40,993 93,253 57,813 Total Other Income, Net 38,966 27,440 18,213 43,853 Net Loss $ ( 2,085,746 ) $ ( 1,690,418 ) $ ( 3,847,178 ) $ ( 3,969,102 ) (a) The significant expense categories and amounts align with the segment-level information provided on a regular basis to the CODM. (b) Professional services include legal, audit, market access and investor relations expenses. (c) Other operating expenses include rent and utilities, insurance, travel, software subscription fees, board fees and bad debt expense. Total segment assets for IB-STIM amounted to $ 9,996,160 and $ 6,404,036 as of June 30, 2026 and December 31, 2025, respectively. Total segment capital expenditures for IB-STIM amounted to $ 106,303 and $ 7,288 for the three months ended June 30, 2026 and 2025, respectively, and $ 106,303 and $ 25,288 for the six months ended June 30, 2026 and 2025, respectively. Total segment depreciation and amortization amounted to $ 16,650 and $ 12,885 for the three months ended June 30, 2026 and 2025, respectively, and $ 32,968 and $ 19,241 for the six months ended June 30, 2026 and 2025, respectively. Significant segment non-cash charges settled in common stock include (i) consulting and advisory fees totaling $ 399,995 and $ 112,493 for the six months ended June 30, 2026 and 2025, respectively, (ii) RSU grants totaling $ 300,400 and $ 0 for the three months ended June 30, 2026 and 2025, respectively, and $ 305,934 and $ 0 for the six months ended June 30, 2026 and 2025, respectively. 14. Settled Litigation On February 6, 2019, plaintiffs Ritu Bhambhani, M.D. and Sudhir Rao initiated a lawsuit against Innovative Health Solutions, Inc. and others in the United States District Court for the District of Maryland, later as amended as the Third Amended Complaint (“Complaint”), asserting claims under the RICO Act, as well as of fraudulent misrepresentation, intentional misrepresentation by concealment, and civil conspiracy related to Medicare and insurance reimbursement of the Company’s NeuroStim device, seeking damages in excess of $ 5 million. The Court granted the Company’s motion for summary judgment and dismissed the Complaint on June 14, 2022, and the Fourth Circuit Court of Appeals affirmed the dismissal on June 3, 2024, with no further appeal sought by the plaintiffs. On July 14, 2022, related entities owned or partially owned by the same plaintiffs Ritu Bhambhani, LLC; Box Hill Surgery Center, LLC; Pain and Spine Specialists of Maryland, LLC; and SimCare ASC, LLC initiated a lawsuit against the Company and others in the United States District Court for the District of Maryland (the “2022 Lawsuit”), asserting the same claims and seeking damages in excess of $ 75,000 . The Court dismissed the RICO claims on May 25, 2023, and the parties subsequently pursued mediation of the remaining claims. On April 25, 2025, the parties reached a $ 750,000 settlement payable in 12 equal monthly installments beginning in January 2026, with $ 375,000 remaining as of June 30, 2026. The Company recorded a charge of $ 11,471 and $ 630,568 classified as general and administrative expense in the Condensed Statements of Operations during the three and six months ended June 30, 2025, respectively, while interest expense was recorded as incurred. As of June 30, 2026, the Company maintained a liability of $ 358,975 classified as accrued expenses in the Condensed Balance Sheets. 20 15 . Commitments and Contingencies Manufacturing Services Agreement The Company is party to two separate manufacturing services agreements for the manufacture and supply of the Company’s IB-Stim and RED devices based on the Company’s product specifications that expire in March and August, 2027, respectively, and automatically renew annually unless either party provides a written termination notice to the other party within 180 days prior to the end of the then-current term. The Company’s IB-Stim and RED devices are manufactured in Indiana and Michigan, respectively. The Company provides the necessary equipment to the manufacturers and retains ownership. The manufacturers bear the risk of loss of and damage to the equipment and consigned materials. Performance under the agreement is initiated by orders issued by the Company and accepted by the manufacturers. The Company also entered into quality agreements with the manufacturers to perform quality assurance services on product provided by the Company. Executive Employment Agreements The Company, as authorized by the board of directors, entered into employment agreements with certain employees to provide incentives to improve shareholder value and to contribute to the growth and financial success of the Company. The agreements had an employment start date of October 1, 2022, with initial terms from 2 two to five years and optional one-year renewals . There are nine key employees and two non-employees that have stock options of the Company totaling 1,319,394 shares. These key employees have a provision in their agreements whereas the Company will pay a special bonus equal to the aggregate of the strike price or exercise price of all their stock options plus a tax gross-up payment. The special bonus shall be paid in twenty percent ( 20 %) installments starting January 2, 2024, and the same date each of the next four years. As a condition of the payment, the key employee must exercise at least 20 % of their stated number of stock options. There are additional provisions to cover termination and change of control events. None of the key employees have exercised any of the stock options as of June 30, 2026. 21 On April 9, 2026, the Company’s Board of Directors approved the cancelation of 1,319,394 stock options issued under the 2017 Innovative Health Solutions, Inc. Stock Compensation Plan and the grant of an equivalent amount of RSUs with immediate vesting under the NeurAxis, Inc. 2022 Omnibus Securities and Incentive Plan with shareholder approval received on June 10, 2026. The stock option cancelation and RSU grant will be treated as a modification under ASC 718, Compensation—Stock Compensation , whereby the Company will recognize incremental compensation cost as the excess of the fair value of the granted RSUs over the fair value of the stock options upon the exchange which occurred on July 24, 2026. The Company estimates (i) $ 3,400,000 of incremental stock compensation expense will be recorded upon execution of the stock option cancellation and RSU grant agreements and (ii) $ 3,000,000 of cash taxes paid related to net share issuance of the RSUs. Threatened Litigation From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As of the date of issuance, other than those described below and in note 14, there were no pending or threatened legal proceedings that could reasonably be expected to have a material effect on the results of the Company’s operations. There are also no proceedings in which any of the Company’s directors, officers or affiliates is an adverse party to the Company or has a material interest adverse to the Company’s interest. Legal fees are expensed as incurred. In January 2024, Dr. Arturo Taca served notice to the Company of claims asserting an interest in U.S. Patent No. 10,413,719 and seeking compensation of approximately $2,000,000 based on his alleged contributions to certain neurostimulation technology. The Company disputes both the asserted ownership interest and the related compensation claim and intends to defend the matter vigorously. The Company does not believe that a material loss is probable, and accordingly, no liability has been recorded as of June 30, 2026. Because the matter remains in its early stages, the ultimate outcome cannot be predicted. 16. Subsequent Events On April 9, 2026, the Company’s Board of Directors approved the cancelation of 1,319,394 stock options issued under the 2017 Innovative Health Solutions, Inc. Stock Compensation Plan and the grant of an equivalent amount of RSUs with immediate vesting under the NeurAxis, Inc. 2022 Omnibus Securities and Incentive Plan with shareholder approval received on June 10, 2026. The stock option cancelation and RSU grant will be treated as a modification under ASC 718, Compensation—Stock Compensation , whereby the Company will recognize incremental compensation cost as the excess of the fair value of the granted RSUs over the fair value of the stock options upon the exchange which occurred on July 24, 2026. The Company estimates (i) $ 3,400,000 of incremental stock compensation expense will be recorded upon execution of the stock option cancellation and RSU grant agreements and (ii) $ 3,000,000 of cash taxes paid related to net share issuance of the RSUs. On July 9, 2026, the Company’s Board of Directors declared a dividend on the Series B Preferred Stock. Holders of record of the Company’s Series B Preferred Stock as of the record date of July 21, 2026, received a stock dividend on July 29, 2026, of the Company’s par value $ 0.001 common stock for every share of Series B Preferred Stock. The Company issued 80,456 shares of common stock based on the 8.5 % per annum cumulative dividend rate. On July 16, 2026, the Company issued 9,250 shares of common stock upon exercise of an equivalent amount of common stock warrants for gross proceeds of $ 22,015 . On August 6, 2026, the Company’s Compensation Committee approved the issuance of 142,345 RSUs to the Board of Directors and 833,958 RSUs to employees when granted pursuant to the NeurAxis, Inc. 2022 Omnibus Securities and Incentive Plan, as amended on August 15, 2024, with varying vesting periods up to three years . The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q and determined that there have been no other events that have occurred that would require adjustments to our disclosures in the condensed financial statements. 22 ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited financial statements and the related notes appearing in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks, uncertainties, and assumptions. You should read the “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” sections of our Form 10-K for the period ended December 31, 2025 (the “2025 Annual Report”) for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Overview We are a growth stage company focused on developing neuromodulation therapies to address chronic and debilitating conditions in children. Our mission is to advance drug-free neuromodulation therapies that improve patient outcomes and reduce medication burden in complex disorders, while expanding access to effective care for populations with significant unmet needs. Our IB-Stim device is a PENFS system with FDA indications for patients 8 years and older with functional abdominal pain associated with IBS, functional dyspepsia (FD) and associated FD nausea symptoms. Our RED device is an easy-to-use, office-based, point-of-care test that identifies patients with chronic constipation due to pelvic floor dyssynergia and has FDA market clearance for adults. Other indications in our pipeline are comprised of post-concussion syndrome, cyclic vomiting syndrome, post-operative pain and fibromyalgia pain. Since our inception, we have incurred significant operating losses. Our net loss was $2,085,746 and $1,690,418 for the three months ended June 30, 2026 and 2025, respectively, and $3,847,178 and $3,969,102 for the six months ended June 30, 2026 and 2025, respectively. Although we had stockholders’ equity of $6,735,053 as of June 30, 2026, our auditors have expressed substantial doubt about our ability to continue as a going concern in their audit opinion. We expect to incur significant expenses and operating losses for the foreseeable future as we continue to pursue widespread insurance coverage of our IB-Stim and RED devices and seek FDA clearance of our device for other indications. There are a number of milestones and conditions that we must satisfy before we are able to generate sufficient revenue to fund our operations, including FDA clearance of our IB-Stim device to treat future indications and incremental payor coverage. Factors Affecting our Business and Results of Operations Revenue Our revenue is derived from the sale of our IB-Stim device to healthcare companies, primarily hospitals and clinics. Sales generally are not seasonal and only mildly correlated with economic cycles. Our IB-Stim device sells for $1,195 per device, and each patient being treated for functional abdominal pain associated with IBS, functional dyspepsia (FD) and/or associated FD with nausea symptoms will use four devices. Our sales typically are made on a purchase order basis rather than through long-term purchase commitments. We enter into sales agreements with customers for IB-Stim devices based on purchase orders and standard terms, which vary slightly based on the customer’s form, and conditions of sale. Standard payment terms generally are that payment is due within 30 days. 23 Inflation did not have a material impact on our operations for any applicable period and we do not expect inflation to have a material impact on our operations for the foreseeable future. Gross Profit and Gross Margin Our management uses gross profit and gross margin to evaluate the efficiency of operations and as a key component to determining the effectiveness and allocation of resources. We calculate gross profit as net sales less cost of goods sold, and gross margin as gross profit divided by net sales. Our gross margin has been and will continue to be affected by a variety of factors, primarily the average selling price of our IB-Stim device, production volume, order flows, change in mix of customers, third-party manufacturing costs related to components of our devices, and cost-reduction strategies. We expect our gross profit to increase for the foreseeable future as our net sales grows, both through broader insurer acceptance of our IB-Stim device in the near term and approval of our technology for the treatment of other indications over the longer term. Our gross margin may fluctuate from quarter to quarter due to changes in average selling prices and the mix of patient healthcare coverage (e.g., discounts are provided to lower income patients without healthcare insurance), particularly as we introduce enhancements to our IB-Stim device and new products to address other indications, and as we adopt new manufacturing processes and technologies. Expenses We have four categories of expenses: cost of goods sold, selling, research and development (“R&D”), and general and administrative (“G&A”). Costs of goods sold consist of costs paid for the IB-Stim and RED devices to our contract manufacturers along with shipping and handling costs and expired inventory charges. Expired inventory expense is related to the FDA clearance period from the date our devices are manufactured, and if the device is not sold in such period, a charge is recorded. Expired inventory charges totaled $2,092 and $6,633 for the three months ended June 30, 2026 and 2025, respectively, and $2,850 and $6,633 for the six months ended June 30, 2026 and 2025, respectively. We have fixed-priced contracts with the manufacturers of our devices. Our selling expenses primarily consist of advertising, marketing and promotion of the Company’s products including salaries, commissions and other related personnel costs including travel expenses. The Company reclassified $391,760 and $757,925 of general and administrative expenses to selling expenses in the Condensed Statements of Operations for the three and six months ended June 30, 2025, respectively, to conform to current year presentation. Our research and development expenses primarily consist of clinical research studies, new product development, costs of materials and supplies used in research and development activities and salaries and other related personnel costs for employees engaged in research and development activities to have our IB-Stim and RED devices cleared by the FDA for other indications. The Company reclassified $56,878 and $114,189 of general and administrative expenses to research and development expenses in the Condensed Statements of Operations for the three and six months ended June 30, 2025, respectively, to conform to current year presentation. We expect future R&D expenses for other indications, such as post-concussion syndrome, cyclic vomiting syndrome, post-operative pain and fibromyalgia pain. General and administrative expense primarily consists of wages and benefits, professional fees including legal and audit, insurance, investor relations, market access, facility costs, utilities and travel. Results of Operations The following table presents our statements of operations for the three and six months ended June 30, 2026 and 2025, respectively: (Unaudited) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Net sales $ 1,928,695 $ 894,086 $ 3,536,578 $ 1,789,741 Cost of goods sold 272,573 146,643 490,939 286,118 Gross profit 1,656,122 747,443 3,045,639 1,503,623 Selling expenses 861,387 534,013 1,685,724 1,034,131 Research and development 274,344 115,197 373,911 222,201 General and administrative 2,645,103 1,816,091 4,851,395 4,260,246 Operating loss (2,124,712 ) (1,717,858 ) (3,865,391 ) (4,012,955 ) Other (expense) income: Interest expense, net (19,794 ) (13,434 ) (45,983 ) (15,672 ) Change in fair value of warrant liability 2,449 (119 ) (29,057 ) 1,712 Other income 56,311 40,993 93,253 57,813 Total other income, net 38,966 27,440 18,213 43,853 Net loss $ (2,085,746 ) $ (1,690,418 ) $ (3,847,178 ) $ (3,969,102 ) 24 Net Sales Net sales increased $1,034,609, or 115.7%, from $894,086 for the three months ended June 30, 2025, to $1,928,695 for the three months ended June 30, 2026, and increased $1,746,837 or 97.6%, from $1,789,741 for the six months ended June 30, 2025, to $3,536,578 for the six months ended June 30, 2026. The increases were due to unit volume growth from broader insurance coverage attributable to IB-Stim’s Category I CPT code effective date of January 1, 2026 and an increase in the average selling price as more units were sold to patients with full reimbursement insurance coverage compared to the Company’s discounted financial assistance program. Gross Profit and Gross Margin Gross profit increased $908,679, or 121.6%, from $747,443 for the three months ended June 30, 2025, to $1,656,122 for the three months ended June 30, 2026, and increased $1,542,016, or 102.6%, from $1,503,623 for the six months ended June 30, 2025, to $3,045,639 for the six months ended June 30, 2026. The increases were due to higher unit volume from more customers with full reimbursement insurance coverage. Gross margin increased from 83.6% for the three months ended June 30, 2025, to 85.9% for the three months ended June 30, 2026, and increased from 84.0% for six months ended June 30, 2025, to 86.1% for the six months ended June 30, 2026, due to higher growth from the Company’s patients with full reimbursement insurance coverage compared to patients that pay through the Company’s discounted financial assistance program, partially offset by higher device manufacturing costs. Selling Expenses Selling expenses increased $327,374, or 61.3%, from $534,013 for the three months ended June 30, 2025, to $861,387 for the three months ended June 30, 2026, and increased $651,593 or 63.0%, from $1,034,131 for the six months ended June 30, 2025, to $1,685,724 for the six months ended June 30, 2026. The increases were due to commissions from higher sales volume, additional sales reps and marketing personnel including recruiting fees and higher travel expenses to facilitate growth resulting from the IB-Stim Category I CPT code and broader insurance coverage. Research and Development Research and development expenses increased $159,147, or 138.2%, from $115,197 for the three months ended June 30, 2025, to $274,344 for the three months ended June 30 2026, and increased $151,710, or 68.3%, from $222,201 for the six months ended June 30, 2025 to $373,911 for the six months ended June 30, 2026. The increases were due to more clinical research studies in 2026 as the Company continues its expansion of IB-Stim’s FDA indications, partially offset by non-recurring RED device development costs in 2025. General and Administrative General and administrative expenses increased $829,012, or 45.6%, from $1,816,091 for the three months ended June 30, 2025, to $2,645,103 for the three months ended June 30, 2026, primarily due to (i) incremental stock compensation expense from the third year of a three-year vesting plan, (ii) higher market access advisory costs and additional headcount, including recruiting fees, as the Company pursues incremental insurance payor coverage and (iii) higher benefit costs. General and administrative expenses increased $591,149, or 13.9%, from $4,260,246 for the six months ended June 30, 2025, to $4,851,395 for the six months ended June 30, 2026, primarily due to (i) incremental stock compensation expense from the third year of a three-year vesting plan, (ii) higher market access advisory costs and additional headcount, including recruiting fees, as the Company pursues incremental insurance payor coverage, (iii) higher benefit costs and (iv) consulting fees incurred to secure a Federal Supply Schedule agreement with the Veterans Administration, partly offset by a one-time non-recurring charge in 2025 to settle a lawsuit. Operating Loss Our operating loss increased $406,854, or 23.7%, from $1,717,858 for the three months ended June 30, 2025, to $2,124,712 for the three months ended June 30, 2026, primarily due to higher operating expenses from selling costs that are a function of the higher sales, research and development costs as the Company continues its pursuit of additional IB-Stim FDA indications and stock compensation expense, partly offset by higher gross profit as the Company’s sales increased from the Category I CPT code and broader payor coverage. Our operating loss decreased $147,564, or 3.7%, from $4,012,955 for the six months ended June 30, 2025, to $3,865,391 for the six months ended June 30, 2026, primarily due to higher gross profit as the Company’s sales increased due to the Category I CPT code and broader payor coverage and the absence of a one-time non-recurring charge in 2025 to settle a lawsuit, partly offset by higher operating expenses due to selling costs that are a function of the higher sales, research and development costs as the Company continues its pursuit of additional IB-Stim FDA indications and stock compensation expense. Other Income, Net Other income increased $11,526, or 42.0%, from $27,440 for the three months ended June 30, 2025, to $38,966 for the three months ended June 30, 2026, primarily due to higher interest income on the Company’s cash balances. Other income decreased $25,640, or 58.5%, from $43,853 for the six months ended June 30, 2025, to $18,213 for the six months ended June 30, 2026, primarily due to the change in fair value of warrants and higher interest expense associated with the settlement of the lawsuit, partly offset by higher interest income on the Company’s cash balances. Net Loss Our net loss increased $395,328, or 23.4%, from $1,690,418 for the three months ended June 30, 2025, to $2,085,746 for the three months ended June 30, 2026, due to a higher operating loss partly offset by higher interest income. Our net loss decreased $121,924, or 3.1%, from $3,969,102 for the six months ended June 30, 2025, to $3,847,178 for the six months ended June 30, 2026, due to a lower operating loss partly offset by the change in fair value of warrants and higher interest expense. 25 Liquidity and Capital Resources We had cash on hand of $8,322,258 and $4,965,072 as of June 30, 2026, and December 31, 2025, respectively. We maintained a working capital surplus of $6,317,762 and $2,941,091 as of June 30, 2026, and December 31, 2025, respectively. The increase in working capital was primarily due to (i) proceeds from the issuance of common stock pursuant to the At The Market capital facility and the exercise of warrants and (ii) higher accounts receivable driven by IB-Stim device sales, partly offset by higher accounts payable related market access and clinical research study costs incurred. We have incurred losses since inception and have funded our operations primarily with a combination of sales, debt, and the sale of capital stock. As of June 30, 2026, we had stockholders’ equity of $6,735,053 and short-term borrowings of $42,726. Our future capital requirements will depend upon many factors, including progress with developing, manufacturing, and marketing our technologies, the time and costs involved in preparing, filing, prosecuting, maintaining, and enforcing patent claims and other proprietary rights, our ability to establish collaborative arrangements, marketing activities and competing technological and market developments, including regulatory changes and overall economic conditions in our target markets. Our ability to generate revenue and achieve profitability requires us to successfully market and secure purchase orders for our products from customers currently identified in our sales pipeline and to new customers as well. The primary activity that will drive all customers and revenues is the adoption of insurance coverage by commercial insurance carriers nationally, so this is a top priority of the Company. These activities, including our planned research and development efforts, will require significant uses of working capital through the rest of 2026 and beyond. Additionally, we have to meet all the financial disclosure and reporting requirements associated with being a publicly reporting company. Our management will have to spend additional time on policies and procedures to make sure it is compliant with various regulatory requirements, especially that of Section 404 of the Sarbanes-Oxley Act. This additional corporate governance time required of management could limit the amount of time our management has to implement our business plan and may delay our anticipated growth plans. The following table summarizes our cash flow from operating, investing and financing activities for the six months ended June 30, 2026 and 2025: (Unaudited) Six Months Ended June 30, 2026 2025 Net cash used in operating activities $ (2,259,305 ) $ (3,071,145 ) Net cash used in investing activities (6,303 ) (25,288 ) Net cash provided by financing activities 5,622,794 5,388,019 Net increase in cash and cash equivalents 3,357,186 2,291,586 Cash and cash equivalents at beginning of period 4,965,072 3,696,870 Cash and cash equivalents at end of period $ 8,322,258 $ 5,988,456 Operating Activities – Net cash used in operating activities decreased $811,840 or 26.4%, for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, primarily due to (i) a lower operating loss excluding non-cash stock compensation expense and (ii) inventory purchased and market access advisory services rendered and accrued in June, partly offset by higher accounts receivable resulting from sales growth due the Category I CPT code and increased payor coverage. Investing Activities – Net cash used in investing activities decreased $18,985 or 75.1%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, due to nonrecurring capital expenditures to manufacture the RED device in 2025. Financing Activities – Net cash provided by financing activities increased $234,775, or 4.4%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily due to lower offering costs from the issuance of common stock pursuant to the At The Market capital facility and proceeds from the issuance of common stock subject to the Employee Stock Purchase Plan. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 26 ITEM 4. CONTROLS AND PROCEDURES Disclosure Controls and Procedures We maintain “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e), promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our Company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive officer and principal financial officer, evaluated our Company’s disclosure controls and procedures as of the end of the period covered by this Form 10-Q. Based on this evaluation, and in light of the material weaknesses in our internal control over financial reporting described below, our principal executive officer and principal financial officer concluded that as of June 30, 2026, our disclosure controls and procedures were not effective. Material Weaknesses in Internal Control Over Financial Reporting As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, management identified the following material weaknesses in our internal control over financial reporting, which continued to exist as of June 30, 2026: ● Ineffective approval processes governing (i) timely Board of Directors authorization and (ii) segregation of duties and roles and responsibilities configurations within the Company’s financial reporting system; ● Inadequate contract management process to capture all executed agreements prior to the commencement of services in order to ensure accuracy within the proper accounting period; ● Misapplication of U.S. GAAP; and ● Ineffective disclosure controls and procedures a result of (i) lack of segregation of duties, (ii) lack of internal control structure review and (iii) misapplication of U.S. GAAP. During the fiscal year ended December 31, 2025, and the three months ended March 31, 2026, management, with the oversight of the Audit Committee, undertook measures to enhance the Company’s internal control environment by implementing numerous controls previously disclosed in our Annual Report on Form 10-K to remediate the material weaknesses. During the three months ended June 30, 2026, management continued those remediation efforts by (i) implementing customer acceptance procedures, (ii) developing standard vendor contract templates, (iii) enhancing disaster recovery and backup procedures and services on critical IT systems and (iv) continuing independent control testing of the material weaknesses that is expected to continue through the remainder of 2026. While these remediation efforts are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of the Company’s internal controls over a sustained period of financial reporting cycles, management is committed to maintaining a strong internal control program over financial reporting and will take further actions and implement additional enhancements or improvements as necessary. Changes in Internal Control Over Financial Reporting Other than the remediation efforts described above, there were no changes in our internal controls over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act, during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 27 PART II - OTHER INFORMATION ITEM 1: LEGAL PROCEEDINGS From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As of the date of issuance, other than those described below, there were no pending or threatened legal proceedings that could reasonably be expected to have a material effect on the results of the Company’s operations. There are also no proceedings in which any of the Company’s directors, officers or affiliates is an adverse party to the Company or has a material interest adverse to the Company’s interest. Legal fees are expensed as incurred. On February 6, 2019, plaintiffs Ritu Bhambhani, M.D. and Sudhir Rao initiated a lawsuit against Innovative Health Solutions, Inc. and others in the United States District Court for the District of Maryland, later as amended as the Third Amended Complaint (“Complaint”), asserting claims under the RICO Act, as well as of fraudulent misrepresentation, intentional misrepresentation by concealment, and civil conspiracy related to Medicare and insurance reimbursement of the Company’s NeuroStim device, seeking damages in excess of $5 million. The Court granted the Company’s motion for summary judgment and dismissed the Complaint on June 14, 2022, and the Fourth Circuit Court of Appeals affirmed the dismissal on June 3, 2024, with no further appeal sought by the plaintiffs. On July 14, 2022, related entities owned or partially owned by the same plaintiffs Ritu Bhambhani, LLC; Box Hill Surgery Center, LLC; Pain and Spine Specialists of Maryland, LLC; and SimCare ASC, LLC initiated a lawsuit against the Company and others in the United States District Court for the District of Maryland (the “2022 Lawsuit”), asserting the same claims and seeking damages in excess of $75,000. The Court dismissed the RICO claims on May 25, 2023, and the parties subsequently pursued mediation of the remaining claims. On April 25, 2025, the parties reached a $750,000 settlement payable in 12 equal monthly installments beginning in January 2026, with $375,000 remaining as of June 30, 2026. In January 2024, Dr. Arturo Taca asserted an interest in U.S. Patent No. 10,413,719 and sought compensation of approximately $2,000,000 based on his alleged contributions to certain neurostimulation technology. The Company disputes both the asserted ownership interest and the related compensation claim and intends to defend the matter vigorously. Although the Company does not believe that a material loss is probable, the matter remains in its early stages and the ultimate outcome cannot be predicted. 28 ITEM 1A: RISK FACTORS For information regarding the risk factors that could affect the Company’s business, results of operations, financial condition and liquidity, see the information under Part I, Item 1A. “Risk Factors” in the Form 10-K, which is accessible on the SEC’s website at www.sec.gov. There have been no material changes to the risk factors previously disclosed in the Form 10-K. ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3: DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ITEM 5: OTHER INFORMATION. Insider Trading Arrangements and Policies During the quarter ended June 30, 2026, no director or officer of the Company adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K. ITEM 6: EXHIBITS Exhibit Number Exhibit Description 31.1* Certification pursuant to 18 U.S.C. Section 1350 Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer 31.2* Certification pursuant to 18 U.S.C. Section 1350 Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Financial Officer 32.1** Certification pursuant to 18 U.S.C. Section 1350 Section 906 of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer 32.2** Certification pursuant to 18 U.S.C. Section 1350 Section 906 of the Sarbanes-Oxley Act of 2002 - Chief Financial Officer 101.INS* Inline XBRL Instance Document 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104* Cover Page Interactive Data File (embedded within the Inline XBRL document) * Filed herewith. ** Furnished herewith 29 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NEURAXIS, INC. Date: August 11, 2026 By: /s/ Brian Carrico Brian Carrico Chief Executive Officer (Principal Executive Officer) Date: August 11, 2026 /s/ Timothy Henrichs Timothy Henrichs Chief Financial Officer (Principal Financial and Principal Accounting Officer) 30