8-K: Neuraxis Secures $5 Million Investment Through Series B Preferred Stock Issuance

Neuraxis, Inc. has entered into agreements to issue $5 million worth of Series B Convertible Preferred Stock to related investors.

Summary

• Neuraxis, Inc. has secured approximately $5 million through the issuance of 2,100,840 shares of Series B Convertible Preferred Stock to three related investors.
• The company will amend its Certificate of Designation to increase the authorized Series B Preferred Stock from 4,000,000 to 5,000,000 shares.
• The right to receive dividends on the Series B Preferred Stock has been extended from June 30, 2025, to December 31, 2026.
• The transaction closed on November 13, 2024.
• The Series B Preferred Stock is convertible into common stock at any time without further consideration and ranks senior to common stock in liquidation.
• The stated value of the Series B Preferred Stock is $2.38 per share.
• Neuraxis will file a resale registration statement with the SEC within 30 days and aim for it to be effective within 60 to 90 days of the transaction closing.
• Failure to meet filing deadlines will result in liquidated damages of 1% of the subscription amount per month, up to a maximum of 6%, plus 18% annual interest on late payments.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. The company has secured funding, which is positive, but there are risks associated with meeting registration deadlines and potential penalties. The reliance on related investors is a slight concern.

Positives

• The company has successfully raised $5 million in capital.
• The extension of dividend rights may make the Series B Preferred Stock more attractive to investors.
• The conversion feature of the Series B Preferred Stock provides potential upside for investors.
• The company has secured funding from related investors, indicating confidence in the company's prospects.

Negatives

• The company faces penalties for failing to meet registration deadlines, which could impact its financial position.
• The liquidated damages and interest on late payments could be a significant financial burden if deadlines are missed.
• The company is relying on related investors for this funding round.

Risks

• The company may face challenges in meeting the deadlines for filing and effectiveness of the resale registration statement.
• Failure to meet the deadlines could result in significant financial penalties.
• The company's reliance on related investors for funding may raise concerns about its ability to attract external capital.
• The company's ability to maintain its listing on the NYSE American is dependent on meeting ongoing requirements.

Future Outlook

The company is required to file a resale registration statement with the SEC and ensure its effectiveness within a specified timeframe. The company also needs to obtain stockholder approval for the issuance of more than 1,395,347 Conversion Shares by May 30, 2025.

Management Comments

• Brian Carrico, President and Chief Executive Officer, signed the report on behalf of Neuraxis, Inc.

Industry Context

This capital raise is a common method for companies to secure funding for operations and growth. The use of convertible preferred stock is a typical structure for private investments, offering investors potential upside while providing the company with capital.

Comparison to Industry Standards

• The use of convertible preferred stock is a common practice in private placements, similar to companies like Rocket Pharmaceuticals and Agenus, which have also used this method to raise capital.
• The liquidated damages clause for failing to meet registration deadlines is a standard protection for investors, similar to terms seen in deals involving companies like BioXcel Therapeutics and Krystal Biotech.
• The registration rights agreement is a standard document in private placements, ensuring investors have a path to liquidity, similar to agreements seen in deals involving companies like CRISPR Therapeutics and Editas Medicine.
• The timeline for filing and effectiveness of the registration statement is typical for such transactions, comparable to timelines seen in deals involving companies like Intellia Therapeutics and Beam Therapeutics.

Related Party Transactions

• The securities purchase agreements were entered into with three related investors.

Stakeholder Impact

• Shareholders may experience dilution due to the conversion of preferred stock into common stock.
• Employees may benefit from the company's increased financial stability.
• Customers and suppliers may see no immediate impact, but the funding could support future growth and operations.
• Creditors may view the company more favorably due to the increased capital.

Next Steps

• The company must file a resale registration statement with the SEC within 30 days.
• The company must ensure the resale registration statement is declared effective within 60 to 90 days.
• The company must obtain stockholder approval for the issuance of more than 1,395,347 Conversion Shares by May 30, 2025.

Key Dates

Keywords

Series B Preferred Stock, capital raise, convertible stock, registration rights, securities purchase agreement, liquidated damages, Neuraxis, investment