Business Context and Reporting Period
Neuraxis, Inc. filed a Form 8-K reporting events beginning May 21, 2024. The company is an emerging growth company, and its common stock trades on NYSE American under the symbol NRXS.
Material Financing and Key Terms
- On May 21, 2024, Neuraxis entered into a securities purchase agreement with three related institutional accredited investors for approximately $3.0 million of convertible promissory notes.
- The notes bear interest at 8.5% annually, payable quarterly in cash or common stock at a conversion price of $2.38 per share.
- The notes mature on the earliest of June 21, 2025, an investor demand made on or after March 21, 2025 if the Series B Preferred Stock has not been authorized, or an event of default.
- The notes will automatically convert into Series B Convertible Preferred Stock at $2.38 per share after stockholder approval and filing of the Certificate of Designation.
- If stockholder approval is not obtained before August 15, 2024, the investors may convert the notes into common stock at $2.38 per share.
Related Preferred Stock Financing
- The company previously agreed to issue up to $5.0 million of Series B Preferred Stock to Flagstaff International at $2.38 per share, payable in monthly installments of $200,000, subject to stockholder approval.
- Convertible promissory notes totaling $1.135 million were issued to nine accredited investors in February and March 2024 and are intended to convert into Series B Preferred Stock.
- The company also issued a substantially similar convertible note to Flagstaff in February 2024.
- As of the filing, the company had not sought the required stockholder approval.
Changes to Preferred Stock Terms and Investor Protections
- The authorized Series B Preferred Stock amount was increased from 1.5 million to 4.0 million shares.
- The stated value was changed from $1.00 to $2.38 per share.
- Dividend and liquidation rights will automatically expire on June 30, 2025.
- Until stockholder approval is obtained, conversion is subject to holder ownership limits initially ranging from 4.99% to 19.99% of outstanding common stock.
- The investors received registration rights, including rights to request an S-1 or S-3 resale registration statement and piggyback registration rights.
Warrants and Other Unusual Items
- Holders of more than 70% of each outstanding group of 2023 warrants and placement-agent warrants agreed to waive provisions that would otherwise increase the number of warrant shares following a reduction in exercise price.
- The company incurred a new direct financial obligation through the issuance of the convertible notes. The filing does not provide a clear statement of the notes’ aggregate principal amount beyond approximately $3.0 million or disclose related fees.
Financial Metrics and Outlook
This Form 8-K does not provide revenue, net income, operating cash flow, cash balances, liquidity ratios, margins, total debt, or quantitative operating guidance. Management commentary regarding business outlook, revenue expectations, and risks is not included beyond the financing terms and the need to obtain stockholder approval.
Most Important Facts to Verify
- Whether the company obtains stockholder approval and files the Certificate of Designation for the Series B Preferred Stock.
- The final amount funded under the approximately $3.0 million note financing and the outstanding principal, accrued interest, and repayment terms.
- The potential dilution from conversion of the new notes, prior convertible notes, the Flagstaff financing, and outstanding warrants.
- Whether the company can meet quarterly interest obligations and any obligations due by June 21, 2025.
- Whether the investors exercise their common-stock conversion rights if approval is not obtained by August 15, 2024.
- The company’s cash position, operating cash burn, and ability to fund operations, which are not disclosed in this filing.