[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's financial statements, management's analysis, market risk, and internal controls assessment [Item 1. Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) Nexalin Technology reported a significant Q1 2025 revenue decrease and wider net loss, with reduced assets and going concern doubts despite a May 2025 public offering Condensed Consolidated Balance Sheet Summary | Metric | March 31, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $2,620,591 | $3,961,141 | | **Total Assets** | $2,900,111 | $4,222,732 | | **Total Current Liabilities** | $574,736 | $546,694 | | **Total Stockholders' Equity** | $2,325,375 | $3,676,038 | Condensed Consolidated Statement of Operations Summary | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | **Revenues, net** | $41,015 | $78,671 | | **Gross profit** | $27,457 | $69,515 | | **Loss from operations** | $(2,011,225) | $(1,073,712) | | **Net loss** | $(1,988,337) | $(1,041,157) | | **Net loss per share** | $(0.15) | $(0.14) | Condensed Consolidated Statement of Cash Flows Summary | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | **Net cash used in operating activities** | $(1,426,214) | $(763,289) | | **Net cash provided by investing activities** | $1,473,758 | $729,314 | | **Cash and cash equivalents - end of period** | $622,029 | $546,255 | [Note 1: Nature of the Organization and Business](index=8&type=section&id=NOTE%201%20%E2%80%94%20NATURE%20OF%20THE%20ORGANIZATION%20AND%20BUSINESS) The company develops neurostimulation products, focusing on Gen-2/3 FDA pre-submission, managing a joint venture, and addressing Nasdaq compliance - The company designs and develops neurostimulation products for mental health, with its Gen-1 device facing U.S. marketing restrictions following a 2019 FDA reclassification[23](index=23&type=chunk)[24](index=24&type=chunk) - The company is now focused on developing its next-generation devices, Gen-2 (SYNC) and Gen-3 (HALO), which use a more powerful 15 milliamp waveform and are currently in the FDA's pre-submission process[26](index=26&type=chunk) - A joint venture was formed on May 31, 2023, with Wider Come Limited to develop, market, and sell the Gen-2 SYNC device in China and other Asian countries, with Nexalin owning **48%** of the JV and accounting for it using the equity method[40](index=40&type=chunk)[43](index=43&type=chunk) - The company has faced and regained compliance with Nasdaq's minimum bid price and minimum stockholder equity requirements, highlighting ongoing risks to its stock listing[48](index=48&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk) [Note 2: Liquidity](index=13&type=section&id=NOTE%202%20%E2%80%94%20LIQUIDITY) The company faces substantial going concern doubt due to accumulated deficit, operating losses, and negative cash flow, despite a recent public offering - The company's financial statements were prepared on a going concern basis, but significant factors raise substantial doubt about its ability to continue, including an accumulated deficit of approximately **$86.7 million**, a Q1 operating loss of **$2.0 million**, and negative operating cash flow of **$1.4 million** as of March 31, 2025[54](index=54&type=chunk) - Management believes that a public offering completed on May 6, 2025, provides sufficient cash for the next twelve months, though these plans were deemed insufficient to overcome the presumption of substantial doubt about the company's ability to continue as a going concern[56](index=56&type=chunk) [Note 7: Commitments and Contingencies](index=24&type=section&id=NOTE%207%20%E2%80%94%20COMMITMENTS%20AND%20CONTINGENCIES) The company settled the Sarah Veltz lawsuit and is in discussions with the California EDD regarding worker classification issues - The company entered into a confidential settlement agreement on May 12, 2025, to resolve the Sarah Veltz lawsuit, with the settlement amount not expected to have a material effect on the company's financials[119](index=119&type=chunk) - The company is in settlement discussions with the California Employment Development Department (EDD) regarding worker classification issues, with the potential liability reduced to approximately **$40,000**, which has been accrued[120](index=120&type=chunk) [Note 8: Concentration of Credit Risk](index=25&type=section&id=NOTE%208%20%E2%80%94%20CONCENTRATION%20OF%20CREDIT%20RISK) The company faces significant customer concentration risk, with a few customers accounting for a large portion of revenues and accounts receivable - The company has significant customer concentration risk, with two customers accounting for **50%** of revenues for the three months ended March 31, 2025[122](index=122&type=chunk) - As of March 31, 2025, three customers accounted for **90%** of accounts receivable[123](index=123&type=chunk) [Note 10: Subsequent Events](index=27&type=section&id=NOTE%2010%20%E2%80%94%20SUBSEQUENT%20EVENTS) A public offering completed on May 6, 2025, raised approximately $5.005 million in gross proceeds for the company - On May 6, 2025, the company completed a public offering of **3,850,000** shares of common stock, raising aggregate gross proceeds of approximately **$5,005,000**[130](index=130&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q1 2025 revenue declined 48% with net loss widening 91% due to higher operating expenses, highlighting liquidity concerns despite a recent $5 million equity offering and Gen-2 device approvals [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Q1 2025 revenue declined due to lower device sales, while operating expenses increased significantly, leading to a wider net loss Comparison of Operations (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Revenues, net** | $41,015 | $78,671 | $(37,656) | (48%) | | **Gross Profit** | $27,457 | $69,515 | $(42,058) | (61%) | | **Total Operating Expenses** | $2,038,682 | $1,143,227 | $895,455 | 78% | | **Loss from Operations** | $(2,011,225) | $(1,073,712) | $(937,513) | 87% | | **Net Loss** | $(1,988,337) | $(1,041,157) | $(947,180) | 91% | - The decrease in revenue was primarily due to the sale of devices to a new overseas customer in Q1 2024, which was not repeated in Q1 2025[155](index=155&type=chunk) - The significant increase in operating expenses was driven by higher professional fees (approximately **$140,000**), R&D costs (approximately **$301,000**), and stock compensation (approximately **$475,000**)[157](index=157&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) The company continues to incur operating losses and negative cash flows, funding operations through equity sales, with a recent offering expected to cover the next twelve months - As of March 31, 2025, the company had an accumulated deficit of **$86.7 million** and cash of approximately **$622,000**, continuing to incur operating losses and negative cash flows, funding these primarily through equity sales[163](index=163&type=chunk) - Management believes the capital raised from the May 2025 public offering will be sufficient to satisfy cash requirements for the next twelve months, but acknowledges this is not sufficient to overcome the substantial doubt about the company's ability to continue as a going concern[165](index=165&type=chunk) [Recent Developments](index=31&type=section&id=Recent%20Developments) The company received regulatory approvals for its Gen-2 device in the Sultanate of Oman and Brazil, expanding its international market access - The company received conditional approval for its Gen-2 device from the Ministry of Health in the Sultanate of Oman, with the first device shipped in January 2024[152](index=152&type=chunk) - On June 13, 2024, the Gen-2 device was granted regulatory approval by the Brazilian Health Regulatory Agency[153](index=153&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company, as a smaller reporting company, is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Nexalin is not required to provide the information for this item[180](index=180&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of March 31, 2025, due to material weaknesses in segregation of duties and IT controls, with remediation efforts underway - Management identified material weaknesses in internal control over financial reporting and concluded that disclosure controls and procedures were not effective as of March 31, 2025[181](index=181&type=chunk)[182](index=182&type=chunk) - The specific material weaknesses include: (i) lack of adequate segregation of duties related to financial reporting, and (ii) insufficient IT controls, particularly regarding user access to the financial reporting system[181](index=181&type=chunk) - The company intends to engage an outside firm and implement new controls to remediate the material weaknesses, but no material changes to internal controls were made during the quarter[182](index=182&type=chunk)[184](index=184&type=chunk) [PART II. OTHER INFORMATION](index=37&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, unregistered equity sales, and a list of exhibits filed with the report [Item 1. Legal Proceedings](index=37&type=section&id=ITEM%201.%20Legal%20Proceedings) This section states there are no material pending legal proceedings - The report states there are no material pending legal proceedings under this item[185](index=185&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=ITEM%201A.%20Risk%20Factors) The company reports no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes from the risk factors previously disclosed in the company's 2024 Form 10-K[186](index=186&type=chunk)[187](index=187&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds from registered securities during the period - None reported for the period[188](index=188&type=chunk) [Item 6. Exhibits](index=38&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including underwriting agreements, corporate governance documents, material contracts such as employment and joint venture agreements, and officer certifications - The report includes a list of exhibits filed, such as an Underwriting Agreement dated May 4, 2025, various employment and consulting agreements, and certifications from the Principal Executive Officer[193](index=193&type=chunk)

Core Insights - Nexalin Technology, Inc. has reconstituted its Scientific Advisory Board (SAB) to enhance its focus on Alzheimer's disease, reflecting a strategic prioritization within its clinical development pipeline [1][3] - The newly appointed members of the SAB include Dr. Mingxiong Huang, Dr. David Owens, and Dr. Abe Scheer, who bring extensive expertise in neurology and neuroimaging [2][3] - The company plans to initiate new Alzheimer's-focused clinical studies in Q3 2025, incorporating cognitive testing and imaging biomarkers to assess treatment efficacy [11][12] Company Developments - The restructuring of the SAB aims to provide scientific and clinical oversight for Nexalin's initiatives in neurodegenerative and neuropsychiatric disorders [2][3] - Nexalin's proprietary Deep Intracranial Frequency Stimulation (DIFS™) technology is designed to penetrate deep brain structures associated with cognitive decline and mental illness [3][12] - The company emphasizes the potential of DIFS™ to promote neuroplasticity and functional recovery, particularly in memory and executive function areas [3][12] Advisory Board Expertise - Dr. Mingxiong Huang specializes in magnetoencephalography (MEG) and neuroimaging, with over 25 years of experience in advanced imaging techniques for neurological disorders [4][5] - Dr. Abe Scheer has over four decades of experience in neurology and psychiatry, and has previously served on Nexalin's SAB [6][7] - Dr. David Owens, the Chief Medical Officer, is a board-certified neuroradiologist with expertise in advanced imaging techniques and clinical research on transcranial stimulation therapies [8][10] Future Directions - The SAB will guide the scientific direction and clinical strategy for Nexalin's Alzheimer's initiatives, ensuring adherence to regulatory standards and scientific rigor [11][12] - The company aims to leverage the combined expertise of the SAB members to advance its technology through clinical trials addressing Alzheimer's disease [3][11]

Core Viewpoint - Nexalin Technology, Inc. has successfully closed a public offering of 3,850,000 shares at a price of $1.30 per share, raising approximately $5.0 million in gross proceeds before expenses [1]. Company Overview - Nexalin Technology, Inc. specializes in developing innovative neurostimulation products aimed at addressing the global mental health crisis. The company's products are designed to be non-invasive and are believed to provide relief for mental health issues [5]. - The company utilizes bioelectronic medical technology to treat mental health disorders, with a focus on penetrating deep brain structures associated with these conditions. Nexalin's next-generation devices are expected to enhance patient response without adverse side effects [5]. - The Nexalin Gen-2 15 milliamp neurostimulation device has received approval in China, Brazil, and Oman [5]. Offering Details - The public offering was conducted under an effective shelf registration statement filed with the U.S. Securities and Exchange Commission (SEC) on April 23, 2025, and declared effective on April 29, 2025 [3]. - Maxim Group LLC served as the sole book-running manager for the offering [2].

Company Overview - Nexalin Technology, Inc. is a leader in Deep Intracranial Frequency Stimulation (DIFS™) technology aimed at addressing mental health issues through innovative neurostimulation products [5] - The company's products are designed to be non-invasive and are believed to provide relief for individuals suffering from mental health disorders [5] Public Offering Details - Nexalin announced a public offering of 3,850,000 shares of common stock priced at $1.30 per share, with expected gross proceeds of approximately $5.0 million [1] - The offering is set to close on or about May 6, 2025, subject to customary closing conditions [1] - An additional 577,500 shares may be purchased by underwriters within a 45-day option period at the public offering price [1] Use of Proceeds - The net proceeds from the offering will be utilized for working capital and general corporate purposes, including sales and marketing, product development, and capital expenditures [2] Regulatory Compliance - A shelf registration statement for the shares was filed with the SEC on April 23, 2025, and was declared effective on April 29, 2025 [3] - The offering is being conducted through a written prospectus and prospectus supplement available on the SEC's website [3]

Core Viewpoint - Nexalin Technology, Inc. is initiating formal regulatory engagement with the FDA for its Gen-2 SYNC system, aimed at treating Alzheimer's disease, dementia, and mild cognitive impairment (MCI) [1][2]. Regulatory Engagement - The company plans to submit a Q-Submission ("Q-Sub") to the FDA to facilitate structured dialogue regarding clinical trial design [1][2]. - This decision follows recent publications, encouraging internal data, and preliminary feedback from the FDA, marking a critical step in advancing Gen-2 SYNC as a non-invasive therapeutic option [2]. Product Development - The Gen-2 SYNC system features technical enhancements over prior generations, including a redesigned enclosure and a proprietary 15 milliamp advanced waveform [3]. - The company is rebranding the device to clearly differentiate it from earlier versions, marketing it as "Gen-2 SYNC" [3]. Company Focus - Nexalin is committed to progressing regulatory engagement and advancing its neuromodulation platform as a promising therapeutic alternative for cognitive and neuropsychiatric disorders [3]. - The company designs and develops innovative neurostimulation products aimed at addressing the global mental health epidemic, utilizing bioelectronic medical technology [5].

Core Insights - Nexalin Technology, Inc. has received IRB approval in Brazil for a clinical trial of its Gen-2 neurostimulation device aimed at treating anxiety disorders and chronic insomnia [1][3] - The Phase II clinical trial will involve 30 adult participants and will assess the efficacy of the device in reducing anxiety symptoms and improving sleep quality [2][3] - The study is being conducted in collaboration with the prestigious Instituto de Psiquiatria do Hospital das Clínicas da Faculdade de Medicina da Universidade de São Paulo [1][3] Company Developments - The first Nexalin device has been shipped to São Paulo, with more units and disposable electrodes to follow, supporting the launch of the clinical trial [2] - The trial's primary endpoint is a reduction in anxiety symptoms measured by the Hamilton Anxiety Rating Scale (HAM-A), with secondary endpoints including assessments of depressive symptoms and sleep quality [3][4] - Dr. Andre Russowsky Brunoni, a recognized expert in neuromodulation, is leading the study, which is seen as a significant step in Nexalin's global strategy [4][5] Industry Context - Anxiety and insomnia are prevalent conditions that often occur together, significantly impacting quality of life, highlighting the need for innovative treatment options [5] - Nexalin's non-invasive neurostimulation technology aims to provide a safe and effective alternative for improving mental health, addressing the ongoing global mental health epidemic [6]

Core Insights - Nexalin Technology, Inc. has successfully completed and launched phases one through five of its proprietary virtual clinic and digital research ecosystem, which supports data capture, remote monitoring, and virtual treatment with its HALO™ headset [1][2][3] Group 1: Virtual Clinic Launch - The virtual clinic was launched at the University of California, San Diego (UCSD) to facilitate patient recruitment for a military study on TBI/PTSD [1] - The platform enables real-time data capture and clinical oversight, allowing patients to receive treatment in their homes while ensuring compliance with research protocols [1][2] Group 2: Digital Infrastructure - Nexalin has established a comprehensive digital infrastructure that includes an AI-integrated Electronic Data Capture (EDC) platform and a Patient Monitoring System (PMS) [2][7] - This infrastructure enhances capabilities for remote research studies and streamlines patient care using non-invasive DIFS™ technology [2][4] Group 3: Clinical Research and Treatment - The virtual clinic facilitates clinical research on the HALO™ device, focusing on mental health disorders, traumatic brain injury, addiction, and neurodegenerative conditions [3][4] - The system allows for remote monitoring of treatment adherence and tracking of patient outcomes, optimizing clinical protocols [4][7] Group 4: Future Prospects - The completion of the virtual clinic positions Nexalin to expand research collaborations, advance regulatory approvals, and accelerate commercialization efforts for HALO™ and future DIFS™ technology applications [4]

"The Health Tech Investment Act reflects a shift in national health policy toward supporting intelligent, patient- centered innovations," said Mark White, CEO of Nexalin. "Our Gen-3 HALO Clarity™ device exemplifies that approach — combining precision neurostimulation with AI-driven tools that improve care coordination, monitoring, and adherence. This legislation provides a reimbursement path that recognizes and supports this model of care." Proposed bipartisan legislation would expand Medicare reimbursement ...

Core Viewpoint - Nexalin Technology, Inc. has received a patent for its Deep Intracranial Frequency Stimulation (DIFS™) technology, which aims to provide a non-invasive and drug-free treatment for substance use disorders, including opioid use disorder and alcohol use disorder [1][2][3] Company Overview - Nexalin Technology focuses on developing innovative neurostimulation products to address the global mental health crisis, utilizing bioelectronic medical technology to treat mental health issues [5] - The company's DIFS™ technology is designed to regulate neural pathways associated with addiction and withdrawal symptoms, potentially improving treatment outcomes for individuals with substance use disorders [1][2] Patent Significance - The patent granted by the USPTO for the "Alternating Current Dynamic Frequency Stimulation Method for Opioid Use Disorder and Substance Use Disorder" enhances Nexalin's intellectual property portfolio and validates the innovative nature of its DIFS™ technology [1][3] - This patent is seen as a significant achievement for the company, reinforcing its position as a pioneer in non-invasive brain stimulation for addiction and mental health therapy [2][3] Market Context - Substance use disorders, including opioid dependency and alcoholism, represent a major public health challenge globally, with traditional treatment methods often facing issues of accessibility and side effects [2] - Nexalin's DIFS™ technology offers a forward-thinking alternative to conventional therapies, aiming to alleviate withdrawal symptoms and support long-term recovery without the risks associated with pharmaceutical treatments [2][3]

Core Viewpoint - Nexalin Technology, Inc. has successfully enrolled the first patients in a clinical trial for its Deep Intracranial Frequency Stimulation (DIFS™) technology, aiming to treat mild traumatic brain injury (mTBI) and post-traumatic stress disorder (PTSD) [1][2][3] Company Overview - Nexalin Technology focuses on developing innovative neurostimulation products to address the global mental health crisis, utilizing non-invasive bioelectronic medical technology [5] - The company's DIFS™ technology is designed to penetrate deep brain structures associated with mental health disorders, potentially offering enhanced patient responses without adverse side effects [5] Clinical Trial Details - The clinical trial is being conducted in collaboration with the University of California, San Diego (UCSD) and the VA San Diego Healthcare System, marking a significant step in evaluating the efficacy of Nexalin's HALO™ Clarity devices [2][3] - The trial aims to gather comprehensive data on the impact of DIFS™ technology on mental health conditions, particularly for underserved populations such as veterans [3][4] Technology and Devices - The HALO™ Clarity device is currently under evaluation and is not yet approved for marketing in the U.S., with its safety and efficacy still being assessed by the FDA [6] - Nexalin's HALO™ Clarity devices provide non-invasive, at-home neurostimulation therapy, integrated with AI for remote monitoring of patient adherence and treatment progress [4]