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Common Stock and Warrants

12 Months Ended

Dec. 31, 2023

9. Common Stock and Warrants

The Company authorized 100,000,000 shares of common stock, of which 6,508,897 and 1,963,322 shares were issued and outstanding as of December 31, 2023 and 2022, respectively. In conjunction with 1,098,667 common shares issued upon the completion of the initial public offering on August 8, 2023, the Company also issued (i) 1,244,228 common shares upon conversion of 506,637 shares of Convertible Series A Preferred Stock and 115,477 shares of Convertible Series Seed Preferred Stock, (ii) 1,649,900 common shares upon conversion of convertible notes, (iii) 425,000 commons shares as payment to vendors for services and (iv) 127,780 common shares upon the exercise of warrants. On January 10, 2023, the Company’s board of directors authorized a 2-for-1 reverse stock split. All share information in these financial statements has been adjusted for this reverse stock split.

On January 10, 2023, the Company’s board of directors authorized a 2-for-1 reverse stock split. All share information in these financial statements has been adjusted for this reverse stock split.

On August 9, 2023, the Company consummated an initial public offering, conducted on a firm commitment basis, pursuant to which it sold 1,098,667 shares of its common stock at a price of $6.00 per share, resulting in gross proceeds of $6,592,002. See Note 1.

Neuraxis, Inc.

Notes to Financial Statements

In connection with a bridge loan, the Company issued a warrant on September 18, 2018 that allows the holder to purchase common stock from the Company at a share price of $4.38 per share. The number of shares was based on a formula tied to the final amount of loans made by the holder of $375,000, multiplied by 150%, and divided by $70.03. The number of shares based on this formula is 12,852. The warrant contains certain rights in the event of liquidation, merger, or consolidation of the Company. If the fair market value of one share is greater than the warrant price, the holder may elect to receive a number of shares equal to the value of the warrant. If the exercise is in connection with the sale of the Company, the holder may, at its option, condition its exercise of the warrant upon the consummation of such transaction. The warrant expires on September 18, 2028 and can be exercisable either in whole or from time to time in part prior to the expiration date.

The Company issued a second warrant on September 6, 2019, under similar terms but is a penny warrant that allows the holder to purchase 40,000 shares of common stock and is subject to adjustment for certain equity events. The warrant contains certain rights in the event of liquidation, merger, or consolidation of the Company. The warrant expires on September 6, 2029. This warrant was converted to 39,924 shares of common stock on December 28, 2023. The fair market value of the stock on that day was calculated as the average of the daily closing prices per share for the 30 consecutive trading day period ending on the second trading day prior to such date or $2.61 per share. Since the fair value was greater than the warrant price of $0.01 per share the holder elected to receive the number of shares equal to 40,000 times the difference between the fair market value and the exercise price divided by the fair market value, resulting in 39,924.

The Company issued a third warrant to Masimo Corporation on April 9, 2020. This warrant was pre-funded in the amount of $2,734,340. The warrant allows the holder to purchase 289,779 shares of Series A Preferred Stock at $9.44 per share and is subject to adjustment for certain equity events. The warrant contains certain rights in the event of liquidation, merger, or consolidation of the Company. There will be no additional purchase price for the Warrants. In the event that all outstanding shares of Series A Preferred Stock are converted, automatically or by action of the holders thereof, into Common Stock, including, without limitation, in connection with the Company’s initial, underwritten public offering and sale of its Common Stock pursuant to an effective registration statement under the Act, then from and after the date on which all outstanding shares of Series A Preferred Stock have been so converted, this Warrant shall be exercisable for such number of shares of Common Stock into which the Warrant Shares would have been converted had the Warrant Shares been outstanding on the date of such conversion, and the Exercise Price shall equal the Exercise Price in effect as of immediately prior to such conversion divided by the number of shares of Common Stock into which one share of Series A Preferred Stock would have been converted, all subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant. On August 14, 2023, the 144,890 Series A Preferred Stock warrants were converted to 289,779 common stock warrants after giving effect to the 2-for-1 common stock split.

During 2022, the Company issued 793,655 five-year warrants to purchase common stock equal to one hundred percent (100%) of the shares into which the 2022 convertible notes can be converted at issuance. The warrants have an exercise price of $5.25 per share.

From March to June of 2023, the Company issued 505,570 one-year warrants to purchase common stock equal to fifty percent (50%) of the shares into which the 2023 convertible notes can be converted at issuance. The warrants have an exercise price of $5.25 per share.

On August 9, 2023, the Company issued 122,202 five-year warrants to purchase common stock pursuant to an advisory agreement with a consulting firm upon closing of the Company’s initial public offering. The warrants have an exercise price of $6.00 per share.

On August 14, 2023, the Company issued 186,156 five-year warrants to purchase common stock pursuant to an agreement with an underwriter upon closing of the Company’s initial public offering. The warrants have an exercise price of $7.20 per share.

The following is a summary of warrant activity for common stock during the years ended December 31, 2023 and 2022:

	Number of Warrants for Common Stock			Weighted-Avg. Exercise Price		Weighted-Avg. Remaining Contractual Life
Outstanding as of January 1, 2022		52,852		$	2.13		7.45
Granted		793,655			5.25		4.42
Cancelled/Expired		—			—		—
Exercised		—			—		—
Outstanding as of December 31, 2022		846,507		$	5.06		4.72
Granted		813,928		$	5.81		4.38
Converted Prefunded Warrants		289,779			0.01		—
Exercised		(127,856	)		—		—
Outstanding as of December 31, 2023		1,822,358		$	4.69		3.05

Neuraxis, Inc.

Notes to Financial Statements

The following is a summary of warrant activity for preferred stock during the years ended December 31, 2023 and 2022:

	Number of			Weighted-Avg.
	Warrants for			Exercise
	Preferred Stock			Price
Outstanding as of January 1, 2022		144,890		$	0.01
Granted		—			—
Cancelled/Expired		—			—
Exercised		—			—
Outstanding as of December 31, 2022		144,890		$	0.01
Granted		—			—
Cancelled/Expired		—			—
Converted to Common Stock Warrant		(144,890	)		(0.01	)
Outstanding as of December 31, 2023		—		$	—

The following table summarizes the Company’s warrants outstanding and exercisable as of December 31, 2023.

	Number of
	Warrants		Exercise		Expiration
	Outstanding		Price		Date
Investor Warrant W-01		12,852	$	8.76	September 18, 2028
Investor Warrant PSA-01		289,779	$	0.01	None
2022 Convertible Notes		793,655	$	2.38	Various
2023 Convertible Notes		417,714	$	2.38	Various
Consulting Agreement Warrants		122,202	$	2.38	August 8, 2028
Underwriter’s Warrants		186,156	$	2.38	August 8, 2028
		1,822,358