NRXS 10-K & 10-Q changes, risk factors and insider trading

Almost all of our revenues have been derived from sales and royalties from sales of IB-Stim, and we expect to develop, market, and sell other neuromodulation therapy devices for the treatment of chronic and debilitating conditions in children.children and adults. The commercial success of our products and our ability to generate and maintain revenues from the sale of our products will depend on a number of factors, including:

Third-party payers, healthcare systems, government agencies or other groups often issue reimbursement codes to facilitate billing for products and and physician services used in the delivery of healthcare. Our IB-STIMIB-Stim technology specifictechnology-specific CAT III CPT Code (0720T) was published on December December 30, 2021 and effective on July 1, 2022. In September of 2024, the AMA’s CPT Editorial Panel accepted the addition of Category I CPT Code (placeholder 64X1164567) for PENFS and deletion of Category III CPT Code 0720T. The finalized Category I CPT Code for PENFS, and associated associated valuations, will bewere announced publicly in Q4 of 2025. The new code will becomebecame effective for utilization on January 1, 2026. RED is billable under CategoryCAT I CPT Codecodes 91120.changed on January 1, 2026. We may not be able to maintain the CPT code for physician services related to our products. Our future revenues and results may be affected by the absence of CPT codes, as physicians may be less likely to prescribe the therapy when there is no certainty that adequate reimbursement will be available for the time, effort, skill, practice expense and malpractice costs required to provide the therapy to patients.

We currently do not own a manufacturing facility and rely on acontract sole manufacturermanufacturers for the production of our product.products. Any significant significant disruption to the solecontract manufacturer’s operations or facilities could have a material adverse effect on our business, financial financial condition and results of operations.

We rely on atwo sole manufacturermanufacturers for the production of our products. We do not have control over the operations of the facilities of the third-party manufacturermanufacturers that we use. A significant disruption to our manufacturermanufacturers could have a material adverse effect on our business, financial condition and results of operations. Our reliance on our manufacturermanufacturers poses a number of risks, including lack of control over the manufacturing process and ultimately over the quality and timing of delivery of our product. A change in our relationship with our manufacturermanufacturers could result in a material adverse effect on our business, financial condition and results of operations. A decision to change manufacturers would result in longer times for design and production as we secure any necessary licenses or clearances, develop quality control measures, and implement manufacturing processes.

Our data on the available market for our current products and future products is based on a number of internal and third-party research reports, estimates and assumptions. While we believe that such research, our assumptions and the data underlying our estimates are reasonable, these assumptions and estimates may not be correct. In addition, the statements in this prospectusdocument relating to, among other things, the expected growth in the market for our IB-Stim are based on a number of internal and third-party data, estimates and assumptions, and may may prove to be inaccurate. If the actual number of consumers who would benefit from our products, the price at which we can sell future products or the available market for our products is smaller than we estimate, it could have a material adverse effect on our business, financial condition and results of operations.

We are heavily dependent on customers who use our IB-Stim device to provide good reviews and word-of-mouth recommendations to contribute to our growth. Customers who are dissatisfied with their experiences with our products or services may post negative reviews. We may also be the subject of blog, forum or other media postings that include inaccurate statements and/or create negative publicity. In addition, any negative news regarding similar products may adversely impact our business. Any negative reviews or publicity, whether real or perceived, disseminated disseminated by word-of-mouth, by the general media, by electronic or social networking means or by other methods, could harm our reputation and brand and could severely diminish consumer confidence in our products.

Even as we received regulatory clearance to market the IB-Stim, the manufacturing, labeling, packaging, adverse event reporting, storage, advertising, advertising, promotion, and record keeping related to IB-Stim will remain subject to extensive regulatory requirements. If we fail to comply with the regulatory requirements of the FDA and other applicable domestic and foreign regulatory authorities or discover any previously unknown unknown problems with any approved product, manufacturer, or manufacturing process, we could be subject to administrative or judicially imposed imposed sanctions, including:

If securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our common stock could be negatively affected.

Any trading market for our common stock may be influenced in part by any research reports that securities industry analysts publish about us. We do not currently have and may never obtain research coverage by securities industry analysts. If noone securitiesor industrymore of security analysts commence downgrade our securities, or otherwise reports on us unfavorably, or discontinues coverage of us, the market price and market trading volume of our common stock could be negatively affected. In the event we are covered by analysts, and one or more of such analysts downgrade our securities, or otherwise reports on us unfavorably, or discontinues coverage of us, the market price and market trading volume of our common stock could be negatively affected.

We are a growth stage company focused on developing neuromodulation therapies to address chronic and debilitating conditions in children. Our mission is to provideadvance solutionsdrug-free neuromodulation therapies that createimprove valuepatient outcomes and providereduce bettermedication andburden saferin patientcomplex outcomes.disorders, while expanding access to effective care for populations with significant unmet needs. Our IB-Stim device is a PENFS system with FDA intendedindications to be used infor patients 8-218 years ofand ageolder with functional abdominal pain associated with IBS.IBS, functional dyspepsia (FD), and associated FD nausea symptoms. Our RED device alreadyis an easy-to-use, office-based, point-of-care test that identifies patients with chronic constipation due to pelvic floor dyssnergia and has market clearance from FDA for functional abdominal pain associated with IBS in children.adults. Other indications in our pipeline are comprised of functional nausea in children, post-concussion syndromesyndrome, incyclic vomiting children,syndrome, post-operative pain and cyclicfibromyalgia vomiting syndrome in children.pain.

Since our inception, we have incurred significant operating losses. Our net loss was $8,241,501$7,800,555 and $14,626,683$8,241,501 for the years ended December 31, 20242025 and 2023,2024, respectively. OurAlthough we had stockholders’ equity of $3,399,372, our auditors have expressed substantial doubt about our ability to continue as a going concern in their audit opinion. We expect to incur significant expenses and operating losses for the foreseeable future as we continue to pursue widespread insurance coverage of our IB-Stim and RED devices and seek FDA clearance of our device for other indications. There are a number of milestones and conditions that we must satisfy before we will be able to generate sufficient revenue to fund our operations, including FDA clearance of our IB-Stim device to treat future indications.

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 childpatient being treated for functional abdominal pain associated with IBSIBS, functional dyspepsia (FD), and/or associated FD nausea symptoms will use four.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 withinnet 30 days. Our largest sales were to threetwo customers representing approximately 40%28% and 45% 35% of total sales for the years ended December 31, 20242025 and 2023,2024, respectively.

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,IB-Stim, production volume, order flows, change in mix of customers, third-party manufacturing costs related to components of our IB-Stim device, devices and cost-reduction strategies. We expect our gross profit to increase forin 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,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.

Costs of goods sold consist of costs paid for the IB-Stim deviceand RED devices to our contract manufacturermanufacturers along with shipping and handling costs and expired inventory charges. Expired inventory expense is related to ourthe FDA clearance for our device in the treatment of functional abdominal pain associated with IBS in children. Specifically, a certain component of our IB-Stim device is cleared for a two-year period after from the date theour devicedevices isare manufactured, and if the device is not sold in such period, wea mustreserve takeis therecorded. device out ofExpired inventory charges totaled $19,973 and write it off. The cost of expired inventory was $25,008$0 for the year years ended December 31, 2023,2025 representing 8.2% of our costs of goods sold. The Company did not have any expired inventory in the year ended December 31,and 2024. We have a fixed-price contractcontracts with the manufacturer manufacturers of our IB-Stim device to produce the device. We expect production costs to remain relatively constant and only nominal inventory expirations in the foreseeable future.devices.

General and administrative expense primarily consists of wages and benefits, professional fees including legal and audit, insurance, investor relations, advertising, facility costs, utilities and travel.

Gross profit increased $167,219,$682,443, or 7.8%,29.4%, from $2,156,704 for the year ended December 31, 2023, to $2,323,923 for the year ended December 31, 2024, to $3,006,366 for the year ended December 2024,31, 2025, due to higher sales volume. Despite the increase in sales volume, the decrease in gross margin from 87.7%86.5% for the year ended December December 31, 2023,2024, to 86.5%84.2% for the year ended December 31, 2024,2025, was due to higher growthdiscounting in the Company’s financial assistance programs programs that are discountedprovide to patients without insurance coveragecoverage, a higher unit growth rate of the discounted financial assistance programs compared to the Company’s undiscounted full reimbursement customers.health insurance programs and expired RED inventory.

Research and development expenses increased $36,792,$59,997, or 21.7%,13.8%, from $169,315$433,614 for the year ended December 31, 2023,2024, to $206,107$493,611 for the year ended December 31, 2024,2025, due to costs to bring the RED product to market and higher costsyear-over-year spending on a medical research project.project, improved IB-Stim design features and costs to develop the RED device.

Our operating loss increased $492,322,$673,091, or 7.4%,9.4%, from $6,664,495$7,156,817 for the year ended December 31, 2023,2024, to $7,156,817$7,829,908 for the year ended December 31, 2024,2025, primarily due to higher selling and general and administrative expenses partially offset by higher gross profit from sales volume.

Other Income (Expense) Income

We had cash on hand of $3,696,870$4,965,072 and $78,560$3,696,870 as of December 31, 20242025 and 2023,2024, respectively. We maintained a working capital surplus of $1,832,858 $2,941,091 and negative working capital of $1,643,058$1,832,858 as of December 31, 20242025 and 2023,2024, respectively. The increase in working capital was primarily due to the sale and issuance of $5,000,0003,108,170 shares of Convertiblecommon Seriesstock Bpursuant Preferredto Stockthe shelf registration statement and warrant exercises for gross proceeds of $8,826,615 offset by cash used in Novemberoperations 2024of that$6,432,843 significantlyfor the year ended December 31, 2025 which improved the Company’s liquidity position.

We have incurred losses since inception and have funded our operations primarily with a combination of sales, debt, the exercises of warrants and the sale of capital stock. As of December 31, 2024,2025, we had stockholders’ equity of $2,067,748,$3,399,372, short-term outstanding borrowings of $148,293 and long-term debt of $154,152 and no long-term debt.$9,999.

Investing Activities – Net cash used in investing activities decreasedincreased $44,005,$103,374, or 61.3%,372.2%, from $71,781$27,776 for the year ended December 31, 31, 2023,2024, to $27,776$131,150 for the year ended December 31, 2024,2025, primarily due to the purchase$100,000 ofinstallment payment to Masimo pursuant to the July 1, 2025 NSS-2 Bridge license termination agreement that allowed the Company’sCompany to recapture the rights to a trademark inand 2023two that didpatent not recur in 2024.applications.

Since our inception, we have incurred significant operating losses. Our net loss was $1,761,432$2,085,746 and $2,278,684$1,690,418 for the three months ended MarchJune 31,30, 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 $5,747,550$6,735,053 as of MarchJune 31,30, 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.indications and incremental payor coverage.

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 $758$2,092 and $0$6,633 for the three months ended June 30, 2026 and 2025, respectively, and $2,850 and $6,633 for the six months March 31,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 $366,165$391,760 and $757,925 of general and administrative expenses expenses to selling expenses in the Condensed Statements of Operations for the three and six months ended MarchJune 31,30, 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 $57,311$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 March 31,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.

The following table presents our statements of operations for the three and six months ended MarchJune 31,30, 2026 and 2025, respectively:

Net sales increased $712,228,$1,034,609, or 79.5%,115.7%, from $895,655$894,086 for the three months ended MarchJune 31,30, 2025, to $1,607,883$1,928,695 for the three months ended MarchJune 31,30, 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 customers with fullbroader insurance reimbursement coverage thatattributable is a function ofto IB-Stim’s Category Category I CPT code effective date of January 1, 2026 and broaderan increase in the average selling price as more units were sold to patients with full reimbursement insurance coverage yearcompared overto year.the Company’s discounted financial assistance program.

Gross profit increased $633,337,$908,679, or 83.8%,121.6%, from $756,180$747,443 for the three months ended MarchJune 31,30, 2025, to $1,389,517$1,656,122 for the three months ended MarchJune 31,30, 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 reimbursement coverage. The increase in gross Gross margin increased from 84.4% 83.6% for the three months ended MarchJune 31,30, 2025, to 86.4%85.9% for the three months ended MarchJune 31,30, 2026, wasand 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 Company’spatients undiscountedwith full reimbursement customersinsurance coverage compared to patients that pay through the Company’s discounted financial assistance programs that are discounted to patients without insurance coverage,program, partially offset by higher device manufacturing costs.

Selling expenses increased $324,217,$327,374, or 64.8%,61.3%, from $500,119$534,013 for the three months ended MarchJune 31,30, 2025, to $824,336$861,387 for the three months ended MarchJune 31,30, 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 commissioncommissions from higher sales volume andvolume, 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.

General and administrative expenses declinedincreased $226,999,$829,012, or 9.3%,45.6%, from $2,433,292$1,816,091 for the three months ended MarchJune 31,30, 2025, to $2,206,293$2,645,103 for the three months ended MarchJune 31,30, 2026, primarily due to a one-time, non-recurring charge in 2025 to settle a lawsuit partially offset by(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 and consulting fees incurred to secure a Federal Supply Schedule agreement with the Veterans Administration.costs.

Our operating loss improvedincreased $554,419,$406,854, or 24.2%,23.7%, from $2,295,098$1,717,858 for the three months ended MarchJune 31,30, 2025, to $1,740,679$2,124,712 for the three months ended MarchJune 31,30, 2026, primarily due to higher salesoperating volumeexpenses 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 thestock correspondingcompensation gross profit and the absence of a one-time, non-recurring charge in 2025 to settle a lawsuit,expense, partly offset by higher sellinggross expenses.profit as the Company’s sales increased from the Category I CPT code and broader payor coverage.

Other (Expense) Income, Net

Other expenseincome increased $37,167,$11,526, or 226.4%,42.0%, from $16,414 of income$27,440 for the three months ended MarchJune 31,30, 2025, to $20,753 of expense$38,966 for the three months ended March 31,June 30, 2026, primarily due to the change in fair value of warrants andhigher interest expenseincome associated withon the settlement ofCompany’s thecash lawsuit.balances.

Our net loss improvedincreased $517,252,$395,328, or 22.7%,23.4%, from $2,278,684$1,690,418 for the three months ended MarchJune 31,30, 2025, to $1,761,432$2,085,746 for the three months ended MarchJune 31,30, 2026, due to a higher salesoperating volume and the corresponding gross profit and the absence of a one-time, non-recurring charge in 2025 to settle a lawsuit,loss partly offset by higher sellinginterest expenses.income.

We had cash on hand of $7,078,659$8,322,258 and $4,965,072 as of MarchJune 31,30, 2026, and December 31, 2025, respectively. We maintained a working capital surplus of $5,328,867$6,317,762 and $2,941,091 as of MarchJune 31,30, 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.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 MarchJune 31,30, 2026, we had stockholders’ equity of $5,747,550$6,735,053 and short-term borrowings of $100,735.$42,726.

The following table summarizes our cash flow from operating, investing and financing activities for the threesix months ended MarchJune 31,30, 2026 and and 2025:

Operating Activities – Net cash used in operating activities decreased $373,898,$811,840 or 23.3%,26.4%, for the threesix months ended MarchJune 31, 30, 2026, compared to the threesix months ended MarchJune 31,30, 2025, primarily due to (i) a lower operating loss attributableexcluding tonon-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 fromdue the Category I CPT code and increased payor coverage as well as more efficient working capital utilization during the three months ended March 31, 2026.coverage.

Investing Activities – Net cash used in investing activities decreased $18,000,$18,985 or 100.0%,75.1%, for the threesix months ended MarchJune 31,30, 2026 compared compared to the threesix months ended MarchJune 31,30, 2025, due to nonrecurring capital expenditures to manufacture the RED device in 2025 that did not recur in 2026 once the device was launched.2025.

Financing Activities – Net cash provided by (used in) financing activities increased $3,413,189,$234,775, or 4,886.8%,4.4%, for the threesix months ended March 31,June 30, 2026 compared to the threesix months ended MarchJune 31,30, 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 pursuant subject to the AtEmployee TheStock MarketPurchase capital facility and the exercise of warrants during the three months ended March 31, 2026.Plan.