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, stock-based compensation, income tax provisions, excess and obsolete inventory reserve, impairment of property and equipment and intellectual property. 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 $366,165 of general and administrative expenses to selling expenses in the Condensed Statements of Operations for the three months ended March 31, 2025. The Company also reclassified $57,311 of general and administrative expenses to research and development expenses in the Condensed Statements of Operations for the three months ended March 31, 2025. 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 factor, including those related to current and forecasted market conditions and events. The allowance for credit losses was $7,220 and $7,326 as of March 31, 2026 and December 31, 2025, respectively. The Company recorded no credit loss expense for the three months ended March 31, 2026 and 2025.

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 $758 and $0 for the three months ended March 31, 2026 and 2025, respectively. There was no reserve for research devices recorded as charges to research and development expenses for the three months ended March 31, 2026 and 2025, respectively. Inventory reserves totaled $28,048 and $34,524 as of March 31, 2026 and December 31, 2025, respectively.

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 $29,821 and $85,348 for the three months ended March 31, 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, a trademark and a license. 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.

On July 1, 2025, the Company terminated the NSS-2 Bridge license with Masimo in exchange for $200,000 of consideration payable in equal installments on December 31, 2025, and June 30, 2026. The termination agreement allowed the Company to recapture the rights to the trademark (U.S. Registration No. 7,394,465) and two patent applications (Application No. 18/821,225 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 require significant management judgment or estimation.

Management believes the estimated fair value of certain accounts including cash, accounts receivable, account payable and other current assets on March 31, 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.

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 three months ended March 31, 2026 and 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 March 31, 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 month periods ended March 31, 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. Preferred stock dividends (neither declared nor paid) were $1,215,264 and $1,025,865 as of March 31, 2026 and December 31, 2025, respectively.

The Company had the following potentially dilutive common stock equivalents:

 Schedule of Dilutive Common Stock Equivalents

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

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 or services, in an amount that reflects the consideration which the Company expects to be entitled in exchange for those goods or services. 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 or services 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 or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service 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).

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 within 10 days of delivery 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:

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 $33,261 and $13,824 as of March 31, 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.

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 March 31, 2026, the Company had stockholders’ equity of $5,747,550 and short-term outstanding borrowings of $100,735. Additionally, the Company had cash of $7,078,659 and a working capital surplus of $5,328,867 as of March 31, 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.

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 continue 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 within 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 probably 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. Disclosures are required for all prior periods presented in the financial statements. Although the standard requires enhanced disclosures, the adoption is not expected to have a material impact on the Company’s financial statements.