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Restatement of Interim Financial Statements (Unaudited)

12 Months Ended

Dec. 31, 2023

Accounting Changes and Error Corrections [Abstract]

Restatement of Interim Financial Statements (Unaudited)

19. Restatement of Interim Financial Statements (Unaudited)

In connection with the preparation of the Company’s financial statements as of and for the year ended December 31, 2023, management identified a material accounting error in the unaudited interim financial statements as of and for the three and nine month periods ended September 30, 2023 relating to the improper classification of the reduction of the fair value of warrant liabilities as a reduction to the extinguishment of debt charge on the Statement of Operations rather than an increase to additional paid in capital on the Balance Sheet.

Upon the consummation of the Company’s IPO, the exercise price of certain warrants issued prior to the IPO became known. As a result of the exercise price becoming known, our warrant liability was reduced by $3,721,007. This warrant liability reduction should have triggered a reclassification to additional paid in capital instead of an extinguishment of debt charge. This accounting error resulted in a (i) $3,721,007 understatement of the extinguishment of debt expense on the Statement of Operations, (ii) $3,721,007 understatement of the net loss on the Statement of Operations, and (iii) $3,721,007 understatement of additional paid in capital on the Balance Sheet as of and for the three and nine month periods ended September 30, 2023.

The Board of Directors of the Company, upon the recommendation of the Audit Committee and after discussion with management, concluded that the Company’s previously issued unaudited financial statements as of and for the three and nine month periods ended September 30, 2023 should no longer be relied upon and should be restated due to identification of the material accounting error.

The following tables present the amounts previously reported, the restatement impact and the restated amount in the respective unaudited financial statements.

NeurAxis, Inc.

Balance Sheet


	(Unaudited)
	As of September 30,
	As Reported			Adjustments			As Restated
Assets
Current assets:
Cash and cash equivalents	$	761,249		$	-		$	761,249
Accounts receivable, net		132,382			-			132,382
Inventories		34,530			-			34,530
Prepaid and other current assets		38,693			-			38,693
Total current assets		966,854			-			966,854
Property and equipment, at cost		420,586			-			420,586
Less - accumulated depreciation		(340,260	)		-			(340,260	)
Property and equipment, net		80,326			-			80,326
Operating lease right of use asset, net		78,043			-			78,043
Intangible assets		110,695			-			110,695
Total assets	$	1,235,918		$	-		$	1,235,918

Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	566,649		$	-		$	566,649
Accrued expenses		280,063			-			280,063
Notes payable		194,249			-			194,249
Current portion of operating lease payable		45,194			-			45,194
Customer deposits		68,972			-			68,972
Share liabilities		934,256			-			934,256
Warrant liabilities		168,269			-			168,269
Total current liabilities		2,257,652			-			2,257,652
Operating lease payable, net of current portion		39,353			-			39,353
Total liabilities		2,297,005			-			2,297,005
Stockholders’ deficit:
Convertible Series A preferred stock		-			-			-
Convertible Series Seed preferred stock		-			-			-
Common stock		5,149			-			5,149
Additional paid in capital		42,178,570			3,721,007			45,899,577
Accumulated deficit		(43,244,806	)		(3,721,007	)		(46,965,813	)
Total stockholders’ deficit		(1,061,087	)		-			(1,061,087	)
Total liabilities and stockholders’ deficit	$	1,235,918		$	-		$	1,235,918

NeurAxis, Inc.

Statements of Operations


	(Unaudited)									(Unaudited)
	For the Three Months Ended September 30, 2023									For the Nine Months Ended September 30, 2023
	As Reported			Adjustments			As Restated			As Reported			Adjustments			As Restated
Net sales	$	477,460		$	-		$	477,460		$	1,928,590		$	-		$	1,928,590
Cost of goods sold		67,287			-			67,287			231,000			-			231,000
Gross profit		410,173			-			410,173			1,697,590			-			1,697,590
Selling expenses		64,210			-			64,210			250,933			-			250,933
Research and development		44,950			-			44,950			171,536			-			171,536
General and administrative		3,323,352			-			3,323,352			6,316,411			-			6,316,411
Operating loss		(3,022,339	)		-			(3,022,339	)		(5,041,290	)		-			(5,041,290	)
Other (expense) income, net:
Financing charges		-			-			-			(2,772	)		-			(2,772	)
Interest expense		(102,628	)		-			(102,628	)		(453,869	)		-			(453,869	)
Interest income		2,103			-			2,103			2,103			-			2,103
Change in fair value of warrant liability		592,853			-			592,853			791,610			-			791,610
Change in fair value of derivative financial instruments		6,394			-			6,394			198,551			-			198,551
Amortization of debt discount and issuance cost		(1,331,030	)		-			(1,331,030	)		(4,881,622	)		-			(4,881,622	)
Extinguishment of debt liabilities		(1,058,062	)		(3,721,007	)		(4,779,069	)		71,436			(3,721,007	)		(3,649,571	)
Other income		9,931			-			9,931			11,483			-			11,483
Other expense		(1,578	)		-			(1,578	)		(9,008	)		-			(9,008	)
Total other (expense) income, net		(1,882,017	)		(3,721,007	)		(5,603,024	)		(4,272,088	)		(3,721,007	)		(7,993,095	)
Net loss	$	(4,904,356	)	$	(3,721,007	)	$	(8,625,363	)	$	(9,313,378	)	$	(3,721,007	)	$	(13,034,385	)

NeurAxis, Inc.

Statements of Cash Flows


	(Unaudited)
	For the Nine Months Ended September 30, 2023
	As Reported			Adjustments			As Restated
Cash flows from operating activities
Net loss	$	(9,313,378	)	$	(3,721,007	)	$	(13,034,385	)
Adjustments to reconcile net loss to net cash used by operating activities:
Amortization of debt discount and issuance cost		4,881,622			-			4,881,622
Depreciation and amortization		30,290			-			30,290
Provision for losses on accounts receivable		6,380			-			6,380
Non-cash lease expense		23,339			-			23,339
Non-cash interest expense		260,777			-			260,777
Stock based compensation		-			-			-
Extinguishment of derivative liability		(71,436	)		3,721,007			3,649,571
Issuance of common stock for non-cash consideration		2,550,000			-			2,550,000
Finance charges		2,772			-			2,772
Change in fair value of derivative liabilities		(198,551	)		-			(198,551	)
Change in fair value of warrant liabilities		(791,610	)		-			(791,610	)
Changes in operating assets and liabilities:
Accounts receivable		35,637			-			35,637
Inventory		13,603			-			13,603
Prepaids and other current assets		(37,967	)		-			(37,967	)
Accounts payable		(1,025,467	)		-			(1,025,467	)
Accrued expenses		(415,181	)		-			(415,181	)
Customer deposits		9,798			-			9,798
Operating lease liability		(25,047	)		-			(25,047	)
Net cash used by operating activities		(4,064,419	)		-			(4,064,419	)
Cash flows from investing activities
Additions to property and equipment		(14,741	)		-			(14,741	)
Additions to intangible assets		(41,000	)		-			(41,000	)
Net cash used by investing activities		(55,741	)		-			(55,741	)
Cash flows from financing activities
Proceeds from issuance of common stock, net of issuance costs		5,464,642			-			5,464,642
Offering costs in advance of sale of common stock		(2,417,185	)		-			(2,417,185	)
Principal payments on notes payable		(3,487,578	)		-			(3,487,578	)
Proceeds from notes payable		159,831			-			159,831
Proceeds from convertible notes, net of fees		4,908,000			-			4,908,000
Net cash provided by financing activities		4,627,710			-			4,627,710
Net decrease in cash and cash equivalents		507,550			-			507,550
Cash and cash equivalents at beginning of period		253,699			-			253,699
Cash and cash equivalents at end of period	$	761,249		$	-		$	761,249