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What changed in Nexalin Technology, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Nexalin Technology, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+422 added−437 removedSource: 10-K (2024-03-27) vs 10-K (2023-03-27)

Top changes in Nexalin Technology, Inc.'s 2023 10-K

422 paragraphs added · 437 removed · 235 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

228 edited+56 added−54 removed396 unchanged
Biggest changeAn additional 3,362,567 shares of our common stock (including an aggregate of 1,704,438 shares held by officers, directors and affiliates) will be available for sale in the public market beginning 180 days after the date of public offering (March 20, 2023) following the expiration of lock-up agreements between our stockholders and the underwriters, subject in certain circumstances to the volume, manner of sale and other limitations under Rule 144 and Rule 701.
Biggest changeAs of March 20, 2023, the expiration of the 180-day lock-up period after the public offering, an additional 3,362,567 shares of our common stock (including an aggregate of 1,704,438 shares held by officers, directors and affiliates) are now eligible for future sale in the public market, subject in certain circumstances to the volume, manner of sale and other limitations under Rule 144 and Rule 701. 45 There can be no assurances that our shares and warrants will not be subject to potential delisting from the Nasdaq Stock Market if we do not continue to maintain the listing requirements of Nasdaq, which could negatively impact the price and value of our securities and your ability to sell them.
Our original Gen-1 devices are cranial electrotherapy stimulation (CES) devices that emit waveform at 4 milliamps during treatment and are presently classified by the U.S. Food and Drug Administration (“FDA”) as a Class II device. Medical professionals in the United States have utilized the Gen-1 device to administer to patients in clinical settings.
Our original Gen-1 devices are cranial electrotherapy stimulation (CES) devices that emit waveform at 4 milliamps during treatment and are presently classified by the U.S. Food and Drug Administration (the “FDA”) as a Class II device. Medical professionals in the United States have utilized the Gen-1 device to administer to patients in clinical settings.
After diagnosis, the physician can prescribe the Nexalin Gen-3 headset to the patient for treatment. Next, the Gen-3 device will be shipped to the patient’s home. After patient receives the device, they will pair the headset device with an app in the patient’s smart phone.
After diagnosis, the physician can prescribe the Nexalin Gen-3 headset to the patient for treatment. Next, the Gen-3 device will be shipped to the patient’s home. After the patient receives the device, they will pair the headset device with an app in the patient’s smart phone.
Current market conditions present an opportunity to introduce a technology that provides a safe, effective and drug-free alternative for those suffering from insomnia. We believe we have the ability to decrease the number of potentially addictive insomnia prescriptions needed by patients and offer physicians a non-pharmaceutical option to provide their patients.
Current market conditions present an opportunity to introduce technology that provides a safe, effective and drug-free alternative for those suffering from insomnia. We believe we have the ability to decrease the number of potentially addictive insomnia prescriptions needed by patients and offer physicians a non-pharmaceutical option to provide their patients.
Additionally, there will be an app that the patients will install on their phones that will communicate with the outpatient headset. The app will upload user information that is HIPAA compliant to the IT management platform. Modules will be designed and implemented in the platform to collect biometric data. The biometric data will be utilized to evaluate patient response.
Additionally, there will be an app that the patients will install on their phones that will communicate with the outpatient headset. The app will upload user information that is HIPAA compliant to the IT management platform. Modules will be designed and implemented in the platform to collect biometric data. Biometric data will be utilized to evaluate patient response.
While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all.
While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or hedge our exposure at all.
Also, according to Article 19, the operator(s) will be assumed to have a dominant market position if it has following situation: a) an operator has 50% or higher market share in a relevant market; b) two operators have 66% or higher market share in a relevant market; c) three operators have 75% or higher market share in a relevant market.
Also, according to Article 19, the operator(s) will be assumed to have a dominant market position if it has following situation: a) an operator has 50% or higher market share in a relevant market; b) two operators have 66% or higher market share in a relevant market; c) three operators have 75% or higher market share in a relevant market.
We may not be aware of all third-party intellectual property rights potentially relating to our current and future our products. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until eighteen months after filing, or in some cases not at all.
We may not be aware of all third-party intellectual property rights potentially relating to our current and future products. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until eighteen months after filing, or in some cases not at all.
A tax authority may take the position that material income tax liabilities, interest and penalties are payable by us, in which case, we expect that we might contest such assessment. Contesting such an assessment may be lengthy and costly and if we were unsuccessful in disputing the assessment, the implications could increase our anticipated effective tax rate, where applicable.
A tax authority may take the position that material income tax liabilities, interest and penalties are payable by us, in which case, we expect that we might contest such an assessment. Contesting such an assessment may be lengthy and costly and if we were unsuccessful in disputing the assessment, the implications could increase our anticipated effective tax rate, where applicable.
The success of our products and preclinical program will depend on several additional factors, including: ● successful completion of preclinical studies and requisite clinical trials; ● performing preclinical studies and clinical trials in compliance with the FDA or any comparable regulatory authority requirements; 17 ● receipt of marketing approvals from applicable regulatory authorities; ● the ability of collaborators to manufacture sufficient quantity of product for development, clinical trials or potential commercialization; ● obtaining and maintaining patent, trademark and trade secret protection, and regulatory exclusivity for our products and preclinical program; ● making arrangements with third parties for manufacturing capabilities; ● launching commercial sales of products, if and when approved, whether alone or in collaboration with others; ● acceptance of the therapies, if and when approved, by healthcare providers, physicians, clinicians, patients and third-party payors; ● competing effectively with other therapies; ● obtaining and maintaining healthcare coverage and adequate reimbursement; and ● protecting our rights in our intellectual property portfolio.
The success of our products and preclinical program will depend on several additional factors, including: ● successful completion of preclinical studies and requisite clinical trials; ● performing preclinical studies and clinical trials in compliance with the FDA or any comparable regulatory authority requirements; ● receipt of marketing approvals from applicable regulatory authorities; ● the ability of collaborators to manufacture sufficient quantity of product for development, clinical trials or potential commercialization; ● obtaining and maintaining patent, trademark and trade secret protection, and regulatory exclusivity for our products and preclinical program; ● making arrangements with third parties for manufacturing capabilities; ● launching commercial sales of products, if and when approved, whether alone or in collaboration with others; ● acceptance of the therapies, if and when approved, by healthcare providers, physicians, clinicians, patients and third-party payors; ● competing effectively with other therapies; ● obtaining and maintaining healthcare coverage and adequate reimbursement; and ● protecting our rights in our intellectual property portfolio.
The applicable federal, state and foreign healthcare laws that may affect our ability to operate include the following: ● the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under federal and state healthcare programs such as Medicare and Medicaid; ● federal civil and criminal false claims laws, including the federal False Claims Act, which impose criminal and civil penalties, including through civil whistle blower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; ● the civil monetary penalties statute, which imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent; ● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of whether the payor is public or private, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters; ● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, which impose obligations on “covered entities,” including certain healthcare providers, health plans, and healthcare clearinghouses, as well as their respective “business associates” that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; ● the federal Physician Payments Sunshine Act, created under Section 6002 of Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA, and its implementing regulations, created annual reporting requirements for manufacturers of products, devices, biologicals and medical supplies for certain payments and “transfers of value” provided to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and 36 ● analogous state and foreign laws, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state and foreign laws that require companies to comply with voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or to adopt compliance programs as prescribed by state laws and regulations, or that otherwise restrict payments that may be made to healthcare providers; state and foreign laws that require manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus complicating compliance efforts.
The applicable federal, state and foreign healthcare laws that may affect our ability to operate include the following: ● the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under federal and state healthcare programs such as Medicare and Medicaid; ● federal civil and criminal false claims laws, including the federal False Claims Act, which impose criminal and civil penalties, including through civil whistle blower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; ● the civil monetary penalties statute, which imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent; ● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of whether the payor is public or private, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters; ● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, which impose obligations on “covered entities,” including certain healthcare providers, health plans, and healthcare clearinghouses, as well as their respective “business associates” that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; 38 ● the federal Physician Payments Sunshine Act, created under Section 6002 of Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the “ACA,” and its implementing regulations, created annual reporting requirements for manufacturers of products, devices, biologicals and medical supplies for certain payments and “transfers of value” provided to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and ● analogous state and foreign laws, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state and foreign laws that require companies to comply with voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or to adopt compliance programs as prescribed by state laws and regulations, or that otherwise restrict payments that may be made to healthcare providers; state and foreign laws that require manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus complicating compliance efforts.
We will be deemed to be a “large accelerated filer” at such time that we (a) have an aggregate worldwide market value of common equity securities held by non-affiliates of $700 million or more as of the last business day of our most recently completed second fiscal quarter, (b) have been required to file annual and quarterly reports under the Exchange Act, for a period of at least twelve months and (c) have filed at least one annual report pursuant to the Exchange Act.
We will be deemed to be a “large accelerated filer” at such time that we 48 (a) have an aggregate worldwide market value of common equity securities held by non-affiliates of $700 million or more as of the last business day of our most recently completed second fiscal quarter, (b) have been required to file annual and quarterly reports under the Exchange Act, for a period of at least twelve months and (c) have filed at least one annual report pursuant to the Exchange Act.
Regardless of merit or eventual outcome, liability claims may result in: ● reduced resources of our management to pursue our business strategy; 21 ● decreased demand for any products or products that we may develop; ● injury to our reputation and significant negative media attention; ● withdrawal of clinical trial participants; ● initiation of investigations by regulators; ● product recalls, withdrawals or labelling, marketing or promotional restrictions; ● significant costs to defend the resulting litigation; ● substantial monetary awards paid to clinical trial participants or patients; ● loss of revenue; and ● the inability to commercialize any products that we may develop.
Regardless of merit or eventual outcome, liability claims may result in: ● reduced resources of our management to pursue our business strategy; ● decreased demand for any products or products that we may develop; ● injury to our reputation and significant negative media attention; ● withdrawal of clinical trial participants; ● initiation of investigations by regulators; ● product recalls, withdrawals or labelling, marketing or promotional restrictions; ● significant costs to defend the resulting litigation; ● substantial monetary awards paid to clinical trial participants or patients; ● loss of revenue; and ● the inability to commercialize any products that we may develop.
If any such actions are instituted against us, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting or oversight obligations if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with the law and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate. 35 Our current and future relationships with healthcare professionals, principal investigators, consultants, customers and third-party payors in the United States and elsewhere may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, physician payment transparency, health information privacy and security and other healthcare laws and regulations, which could expose us to penalties.
If any such actions are instituted against us, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting or oversight obligations if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with the law and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate. 37 Our current and future relationships with healthcare professionals, principal investigators, consultants, customers and third-party payors in the United States and elsewhere may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, physician payment transparency, health information privacy and security and other healthcare laws and regulations, which could expose us to penalties.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for: ● any derivative action or proceeding brought on our behalf; ● any action asserting a breach of fiduciary duty; ● any action asserting a claim against us or any of our directors, officers, employees or agents arising under the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws; ● any action or proceeding to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws; and ● any action asserting a claim against us or any of our directors, officers, employees or agents that is governed by the internal-affairs doctrine.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for: ● any derivative action or proceeding brought on our behalf; ● any action asserting a breach of fiduciary duty; ● any action asserting a claim against us or any of our directors, officers, employees or agents arising under the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws; 47 ● any action or proceeding to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws; and ● any action asserting a claim against us or any of our directors, officers, employees or agents that is governed by the internal-affairs doctrine.
We anticipate that our expenses will increase significantly as we: ● continue our ongoing and planned preclinical and clinical development of our existing and next Generation devices; ● initiate preclinical studies and clinical trials for any additional products that we may pursue in the future; ● seek to discover and develop additional treatment indications; ● seek regulatory approvals for any products that successfully complete clinical trials; ● ultimately establish sales, marketing and distribution infrastructure and scale up external manufacturing capabilities to commercialize any product for which we may obtain regulatory approval and intend to commercialize on our own; ● maintain, expand and protect our intellectual property portfolio; ● engage additional clinical, scientific, manufacturing and controls personnel; ● add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; and ● incur additional legal, accounting and other expenses associated with operating as a public company. 15 To become and remain profitable, we and our collaborators must succeed in developing and eventually commercializing future and existing products that generate significant revenue.
We anticipate that our expenses will increase significantly as we: ● continue our ongoing and planned preclinical and clinical development of our existing and next Generation devices; ● initiate preclinical studies and clinical trials for any additional products that we may pursue in the future; ● seek to discover and develop additional treatment indications; ● seek regulatory approvals for any products that successfully complete clinical trials; ● ultimately establish sales, marketing and distribution infrastructure and scale up external manufacturing capabilities to commercialize any product for which we may obtain regulatory approval and intend to commercialize on our own; ● maintain, expand and protect our intellectual property portfolio; ● engage additional clinical, scientific, manufacturing and controls personnel; ● add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; and ● incur additional legal, accounting and other expenses associated with operating as a public company. 16 To become and remain profitable, we and our collaborators must succeed in developing and eventually commercializing future and existing products that generate significant revenue.
In light of the recent statements by the Chinese government indicating its intention to exert more oversight and control over overseas offerings of China-based companies and the proposed CAC review for certain data processing operators in China, we may adjust our business operations in the future, to comply with PRC laws regulating our industry and our business operations through the potential Joint Venture.
In light of the recent statements by the Chinese government indicating its intention to exert more oversight and control over overseas offerings of China-based companies and the proposed CAC review for certain data processing operators in China, we may adjust our business operations in the future, to comply with PRC laws regulating our industry and our business operations through the Joint Venture.
Accordingly, this concentration of ownership may harm the market price of our common stock by: ● delaying, deferring or preventing a change in control; 42 ● entrenching our management and/or the board of directors; ● impeding a merger, consolidation, takeover or other business combination involving us; or ● discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.
Accordingly, this concentration of ownership may harm the market price of our common stock by: ● delaying, deferring or preventing a change in control; ● entrenching our management and/or the board of directors; ● impeding a merger, consolidation, takeover or other business combination involving us; or ● discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.
If the FDA accepts the application for review, it has 180 days under the FDCA to complete its review of a PMA, although in practice, the FDA’s review often takes significantly longer, and can take up to several years. On December 20, 2019, the FDA issued new rulings related to CES devices for the treatment of anxiety, depression, and insomnia.
If the FDA accepts the application for review, it has 180 days under the FDCA to complete its review of a PMA, although in practice, the FDA’s review often takes significantly longer, and can take several years. On December 20, 2019, the FDA issued new rulings related to CES devices for the treatment of anxiety, depression, and insomnia.
Further, we are a United States’ company with no physical presence in China, and we do not believe that the formation of the potential Joint Venture in Hong Kong and any resultant exposure to China regulatory actions will adversely impact our ability to accept foreign investments or list our securities on a United States or other foreign exchange.
Further, we are a United States’ company with no physical presence in China, and we do not believe that the formation of the Joint Venture in Hong Kong and any resultant exposure to China regulatory actions will adversely impact our ability to accept foreign investments or list our securities on a United States or other foreign exchange.
For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. There is no way of knowing with certainty whether we have experienced any data security incidents that have not been discovered.
For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. 24 There is no way of knowing with certainty whether we have experienced any data security incidents that have not been discovered.
If the potential Joint Venture is subject to regulatory inspection and/or review by the CAC or other PRC authorities or are required by them to take any specific actions, it could cause suspension or termination of the future offering of our securities, disruptions to our operations, result in negative publicity regarding our company, and divert our managerial and financial resources.
If the Joint Venture is subject to regulatory inspection and/or review by the CAC or other PRC authorities or are required by them to take any specific actions, it could cause suspension or termination of the future offering of our securities, disruptions to our operations, result in negative publicity regarding our company, and divert our managerial and financial resources.
If the potential Joint Venture becomes subject to cybersecurity inspection and/or review by the CAC or other PRC authorities or are required by them to take any specific actions, it could cause suspension or termination of the future offering of our securities, disruptions to our operations, result in negative publicity regarding our company, and divert our managerial and financial resources.
If the Joint Venture becomes subject to cybersecurity inspection and/or review by the CAC or other PRC authorities or are required by them to take any specific actions, it could cause suspension or termination of the future offering of our securities, disruptions to our operations, result in negative publicity regarding our company, and divert our managerial and financial resources.
In addition, given the amount of time required for the development, testing and regulatory review of new products, patents protecting such candidates might expire before or shortly after such candidates are commercialized. 31 We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming and unsuccessful.
In addition, given the amount of time required for the development, testing and regulatory review of new products, patents protecting such candidates might expire before or shortly after such candidates are commercialized. We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming and unsuccessful.
Historically, according to the CDC, only one-third of people with severe depression have taken anti-depressants. 7 Any decline in the depression medication market should indirectly accelerate the growth of the neurostimulator market. Management believes that, based on the market data and current trends, the depression market — like the anxiety and insomnia market — creates enormous potential for our products.
Historically, according to the CDC, only one-third of people with severe depression have taken anti-depressants. Any decline in the depression medication market should indirectly accelerate the growth of the neurostimulator market. Management believes that, based on the market data and current trends, the depression market — like the anxiety and insomnia market — creates enormous potential for our products.
Additional design and implementation of modules related to social media marketing, bio-metric data collection and user experience will eventually complete the design of the IT management platform. Manufacturing In December 2021, we entered into a quality assurance agreement with Apical Instruments, an FDA-registered manufacturer, to ensure quality assurance of our products.
Additional design and implementation of modules related to social media marketing, bio-metric data collection and user experience will eventually complete the design of the IT management platform. 12 Manufacturing In December 2021, we entered into a quality assurance agreement with Apical Instruments, an FDA-registered manufacturer, to ensure quality assurance of our products.
We are dependent upon the success of our current and any future collaborators in performing their responsibilities in connection with the relevant collaboration. If we fail to maintain these collaborative relationships for any reason, we would need to perform the activities that we currently anticipate would be performed by our collaborators on our own at our sole expense.
We are dependent upon the success of our current and any future collaborators in performing their responsibilities in connection with the relevant collaboration. If we fail to maintain these collaborative relationships for any reason, we will need to perform the activities that we currently anticipate would be performed by our collaborators on our own at our sole expense.
Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. Risks Related to Our Business and Managing Our Growth Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. 23 Risks Related to Our Business and Managing Our Growth Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
Because of issues related to Covid-19 in China, this trial was paused. Additionally, results of this trial will dictate additional testing strategies to determine specific treatment protocols for complex Alzheimer’s and dementia patients. A final area of study includes the evaluation of chemical changes within the brain following transcranial stimulation.
Because of issues related to Covid-19 in China, this trial was paused. Additionally, results of this trial will dictate additional testing strategies to determine specific treatment protocols for complex Alzheimer’s and dementia patients. 11 A final area of study includes the evaluation of chemical changes within the brain following transcranial stimulation.
We believe we have not conducted any monopolistic practices in China, and that recent statements and regulatory actions by the Chinese government do not impact our ability to conduct business, accept foreign investments, create the potential Joint Venture with Wider or list on a U.S. or other foreign stock exchange.
We believe we have not conducted any monopolistic practices in China, and that recent statements and regulatory actions by the Chinese government do not impact our ability to conduct business, accept foreign investments, create the Joint Venture with Wider or list on a U.S. or other foreign stock exchange.
We or our current licensees, or any future licensors or licensees may also fail to identify patentable aspects of our research and development before it is too late to obtain patent protection. Therefore, these and any of our 30 patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.
We or our current licensees, or any future licensors or licensees may also fail to identify patentable aspects of our research and development before it is too late to obtain patent protection. Therefore, these and any of our patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.
We will work to seek reimbursement for conditions in sequence with the home based and the clinic-based unit that will maximize value of treatment from a financial standpoint as well as monitoring the response by the patient community. 9 Research Research is the fundamental core of any pharmaceutical or medical device company.
We will work to seek reimbursement for conditions in sequence with the home based and the clinic-based unit that will maximize value of treatment from a financial standpoint as well as monitoring the response by the patient community. Research Research is the fundamental core of any pharmaceutical or medical device company.
In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts against the potential Joint Venture predicated upon the civil liability provisions of the securities laws of the United States or any state. It may be difficult for us to enforce our rights with respect to the potential Joint Venture.
In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts against the Joint Venture predicated upon the civil liability provisions of the securities laws of the United States or any state. It may be difficult for us to enforce our rights with respect to the Joint Venture.
We continue to evaluate the effect that the ACA and its possible repeal and replacement has on our business. It is uncertain the extent to which any such changes may impact our business or financial condition. 37 In addition to the ACA, other federal health reform measures have been proposed and adopted in the United States.
We continue to evaluate the effect that the ACA and its possible repeal and replacement has on our business. It is uncertain the extent to which any such changes may impact our business or financial condition. In addition to the ACA, other federal health reform measures have been proposed and adopted in the United States.
More generally, if the business environment in China deteriorates from the perspective of domestic or international investment, our business in China may also be adversely affected. 25 Uncertainties with respect to the PRC legal system could adversely affect us. The PRC legal system is a civil law system based on written statutes.
More generally, if the business environment in China deteriorates from the perspective of domestic or international investment, our business in China may also be adversely affected. Uncertainties with respect to the PRC legal system could adversely affect us. The PRC legal system is a civil law system based on written statutes.
The PRC government imposes controls on the conversion of the Renminbi into foreign currencies and, in certain cases, the remittance of foreign currency out of China. To date, the payments we have received from Wider have been in United States dollars, although in the future, payments from Wider or from the potential Joint Venture may be in Renminbi.
The PRC government imposes controls on the conversion of the Renminbi into foreign currencies and, in certain cases, the remittance of foreign currency out of China. To date, the payments we have received from Wider have been in United States dollars, although in the future, payments from Wider or from the Joint Venture may be in Renminbi.
However, such efforts may not be completed in a liability-free manner or at all. We cannot guarantee that we will not be subject to PRC regulatory inspection and/or review relating to cybersecurity, especially when there remains significant uncertainty as to the scope and manner of the regulatory enforcement.
However, such efforts may not be completed in a liability-free manner or at all. We cannot that we will not be subject to PRC regulatory inspection and/or review relating to cybersecurity, especially when there remains significant uncertainty as to the scope and manner of the regulatory enforcement.
Our future capital requirements will depend on many factors, including: ● the timing, progress and results of our ongoing clinical trials of our products; ● the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials of other products that we may pursue; 16 ● the number and development requirements of other products that we may pursue; ● our ability to establish collaborations on favorable terms, if at all; ● the costs, timing and outcome of regulatory review of our products; ● the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our products for which we receive marketing approval; ● the revenue, if any, received from commercial sales of our products for which we receive marketing approval; ● the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; and ● the costs of operating as a public company.
Our future capital requirements will depend on many factors, including: ● the timing, progress and results of our ongoing clinical trials of our products; ● the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials of other products that we may pursue; ● our ability to establish collaborations on favorable terms, if at all; ● the costs, timing and outcome of regulatory review of our products; ● the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our products for which we receive marketing approval; ● the revenue, if any, received from commercial sales of our products for which we receive marketing approval; ● the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; and ● the costs of operating as a public company.
However, the determination of safety and efficacy of medical devices in the United States is subject to clearance by the FDA. Additionally, we are currently designing clinical trial strategies for the use of Gen-3 for the treatment of substance use disorders including opiate, cocaine, and alcohol abuse.
However, the determination of safety and efficacy of medical devices in the United States is subject to clearance by the FDA. 1 Additionally, we are currently designing clinical trial strategies for the use of Gen-3 for the treatment of substance use disorders including opiate, cocaine, and alcohol abuse.
Clinical versions of DC stimulators, known as transcranial direct current stimulation (tDCS), were developed by researchers; many of these devices are still in research settings without industry support. In 1992, a new neurostimulation technique emerged called trans-cranial magnetic stimulation (TMS).
Clinical versions of DC stimulators, known as transcranial direct current stimulation (tDCS), were developed by researchers; many of these devices are still in research settings without industry support. 7 In 1992, a new neurostimulation technique emerged called trans-cranial magnetic stimulation (TMS).
Our marketing team will drive consumers with quality-of-life struggles related to mental health issues into the virtual clinic and then to the provider in the consumer’s state of residence. These initial state physicians providing mental health services in the virtual clinic, will also have ability to offer treatment in their clinic.
Our digital marketing team will drive consumers with quality-of-life struggles related to mental health issues into the virtual clinic and then to the provider in the consumer’s state of residence. These initial state physicians providing mental health services in the virtual clinic, will also have the ability to offer treatment in their clinic.
In the event the potential Joint Venture becomes subject to cybersecurity inspection and/or review by the CAC or other PRC authorities or are required by them to take any specific actions, we and the potential Joint Venture will take any and all actions to remain in compliance with any such laws or regulations or detailed implementations and interpretations thereof.
In the event the Joint Venture becomes subject to cybersecurity inspection and/or review by the CAC or other PRC authorities or are required by them to take any specific actions, we and the Joint Venture will take any and all actions to remain in compliance with any such laws or regulations or detailed implementations and interpretations thereof.
However, there can be no assurance that regulators in China will not promulgate new laws and regulations or adopt new series of interpretations or regulatory actions which may require the potential Joint Venture to meet new requirements on the issues mentioned above.
However, there can be no assurance that regulators in China will not promulgate new laws and regulations or adopt new series of interpretations or regulatory actions which may require the Joint Venture to meet new requirements on the issues mentioned above.
In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment by us against Wider or the potential Joint Venture if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security, or the public interest.
In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment by us against Wider or the Joint Venture if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security, or the public interest.
However, there can be no assurance that regulators in China will not promulgate new laws and regulations or adopt new series of regulatory actions which may require us or the potential Joint Venture to meet new requirements on the issues mentioned above.
However, there can be no assurance that regulators in China will not promulgate new laws and regulations or adopt new series of regulatory actions which may require us or the Joint Venture to meet new requirements on the issues mentioned above.
Although we do not have a VIE structure, due to our potential Joint Venture, any future Chinese, U.S. or other rules and regulations that place restrictions on capital raising or other activities may adversely affect our business and results of operations.
Although we do not have a VIE structure, due to our Joint Venture, any future Chinese, U.S. or other rules and regulations that place restrictions on capital raising or other activities may adversely affect our business and results of operations.
We will leverage this physician / patient community to establish a national network of physicians that offer mental health evaluations and the Nexalin treatment in either a clinical setting or in the privacy of the patient home with medical supervision through the future Nexalin app.
We will leverage this physician / patient community to establish a national network of physicians that offer mental health evaluations and the Nexalin treatment in either a clinical setting or in the privacy of the patient’s home with medical supervision through the future Nexalin app.
As part of our hiring practices and as described in out Code of Ethics which is binding on all employees, our employees, consultants, and advisors are prohibited from disclosing confidential information and are required to assign to us the ideas, developments, discoveries and inventions important to our business.
As part of our hiring practices and as described in our Code of Ethics which is binding on all employees, our employees, consultants, and advisors are prohibited from disclosing confidential information and are required to assign to us the ideas, developments, discoveries and inventions important to our business.
A material portion of our research is expected to be conducted in China through the potential Joint Venture, which we believe confers clinical, commercial and regulatory advantages, but may subject the potential Joint Venture (and also potentially us) to significant regulatory, liquidity, and enforcement risks.
A material portion of our research is expected to be conducted in China through the Joint Venture, which we believe confers clinical, commercial and regulatory advantages, but may subject the Joint Venture (and also potentially us) to significant regulatory, liquidity, and enforcement risks.
Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, could materially and adversely affect our business and impede our ability to continue our operations. Restrictions on foreign currency may limit our ability to receive and use our revenue effectively.
Such uncertainties, including uncertainty over the scope and effect of our contractual property (including intellectual property) and procedural rights, could materially and adversely affect our business and impede our ability to continue our operations. 27 Restrictions on foreign currency may limit our ability to receive and use our revenue effectively.
The PRC government may also amend or enforce existing rules and regulation, or adopt ones, which could materially increase our compliance costs of the potential Joint Venture, change the relevant industry landscape, or cause significant changes to the potential Joint Venture business operations in China.
The PRC government may also amend or enforce existing rules and regulation, or adopt ones, which could materially increase our compliance costs of the Joint Venture, change the relevant industry landscape, or cause significant changes to the Joint Venture business operations in China.
We may take advantage of certain of the scaled disclosures available to smaller reporting companies until the fiscal year following the determination that our voting and non-voting common stock held by non-affiliates is more than $250 million measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700 million measured on the last business day of our second fiscal quarter. 14 ITEM 1A RISK FACTORS Investing in our common stock and warrants to acquire common stock is speculative and involves a high degree of risk including the risk of a loss of your entire investment.
We may take advantage of certain of the scaled disclosures available to smaller reporting companies until the fiscal year following the determination that our voting and non-voting common stock held by non-affiliates is more than $250 million measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700 million measured on the last business day of our second fiscal quarter. 15 ITEM 1A RISK FACTORS Investing in our common stock and warrants to acquire common stock is speculative and involves a high degree of risk including the risk of a loss of your entire investment.
For example, the ACA, which was enacted in the United States in March 2010, includes measures to change health care delivery, decrease the number of individuals without insurance, ensure access to certain basic health care services, and contain the rising cost of care.
For example, the ACA, which was enacted in the United States in March 2010, includes measures to change health care delivery, decrease the number of individuals without insurance, ensure access 39 to certain basic health care services and contain the rising cost of care.
Furthermore, recent changes in patent laws in the United States, including the America Invents Act of 2011, may affect the scope, strength and enforceability of our patent rights or the nature of proceedings that may be brought by us related to our patent rights.
Furthermore, changes in patent laws in the United States, including the America Invents Act of 2011, may affect the scope, strength and enforceability of our patent rights or the nature of proceedings that may be brought by us related to our patent rights.
However, if any of the following events occur prior to the end of such five-year period, (i) our annual gross revenue exceeds $1.07 billion, (ii) we issue more than $1.0 billion of non-convertible debt in any three-year period or (iii) we become a “large accelerated filer,” (as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), we will cease to be an emerging growth company prior to the end of such five-year period.
However, if any of the following events occur prior to the end of such five-year period, (i) our annual gross revenue exceeds $1.235 billion, (ii) we issue more than $1.0 billion of non-convertible debt in any three-year period or (iii) we become a “large accelerated filer,” (as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), we will cease to be an emerging growth company prior to the end of such five-year period.
If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed. We may not be able to protect our intellectual property rights throughout the world.
If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed. 34 We may not be able to protect our intellectual property rights throughout the world.
Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license. 33 Risks Related to Regulatory Approval of Our Products and Other Legal Compliance Matters Even if we complete the necessary preclinical studies and clinical trials, the regulatory approval process is expensive, time-consuming and uncertain and may prevent us or any future collaborators from obtaining approvals for the commercialization of some or all of our products.
Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license. 35 Risks Related to Regulatory Approval of Our Products and Other Legal Compliance Matters Even if we complete the necessary preclinical studies and clinical trials, the regulatory approval process is expensive, time-consuming and uncertain and may prevent us or any future collaborators from obtaining approvals for the commercialization of some or all of our products.
Among other things, these provisions: ● establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors; ● require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent; ● limit who may call stockholder meetings; and ● require the approval of the holders of at least 66.66% of the votes that all our stockholders would be entitled to cast to amend or repeal certain provisions of our charter or bylaws or remove a director.
Among other things, these provisions: ● establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors; ● require that stockholder actions must be affected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent; ● limit who may call stockholder meetings; and ● require the approval of the holders of at least 66.66% of the votes that all our stockholders would be entitled to cast to amend or repeal certain provisions of our charter or bylaws or remove a director.
In the event any existing or new laws or regulations or detailed implementations and interpretations are modified or promulgated, we and the potential Joint Venture will take all actions to remain in compliance with any such laws or regulations or detailed implementations and interpretations thereof.
In the event any existing or new laws or regulations or detailed implementations and interpretations are modified or promulgated, we and the Joint Venture will take any and all actions to remain in compliance with any such laws or regulations or detailed implementations and interpretations thereof.
The legislative intent for this law mainly includes regulating data processing activities, ensuring data security, promoting data development and utilization, protecting the data related legitimate rights and 5 interests of individuals and organizations, and safeguarding national sovereignty, security and development interests.
The legislative intent for this law mainly includes regulating data processing activities, ensuring data security, promoting data development and utilization, protecting the data related legitimate rights and interests of individuals and organizations, and safeguarding national sovereignty, security and development interests.
However, if such other adverse regulations or policies are adopted in China, the potential Joint Venture may be materially and adversely affected, which may significantly disrupt our operations and adversely affect our business.
However, if such other adverse regulations or policies are adopted in China, the Joint Venture may be materially and adversely affected, which may significantly disrupt our operations and adversely affect our business.
As of the date Form 10-K, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk.
As of the date of this Form 10-K, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk.
We do not have any operations in China and will not have any operations other than the potential Joint Venture following its formation, of which there can be no assurance.
We do not have any operations in China and will not have any operations other than the Joint Venture following its formation, of which there can be no assurance.
The potential Joint Venture may also be subject to fines or other penalties, which could materially and adversely affect our business, financial condition, and results of operations.
The Joint Venture may also be subject to fines or other penalties, which could materially and adversely affect our business, financial condition, and results of operations.
We prioritize the safety and well-being of our employees even after they have faced both mental and physical challenges related to the COVID-19 pandemic. 13 Implications of Being an Emerging Growth Company and a Smaller Reporting Company We qualify as an “emerging growth company,” as defined in the Jumpstart Our Business Start-ups Act of 2012, as amended, or the JOBS Act.
We prioritize the safety and well-being of our employees even after they have faced both mental and physical challenges related to the COVID-19 pandemic. 14 Implications of Being an Emerging Growth Company and a Smaller Reporting Company We qualify as an “emerging growth company,” as defined in the Jumpstart Our Business Start-ups Act of 2012, as amended, or the JOBS Act.
Our hypothesis is that the current pilot study design at the University California San Diego (see below) will provide a source of validation for this treatment modality in addiction treatment. Chronic Pain Market Originally, our waveform was designed as an electro-analgesic for pain. This refers to the ability to electrically interrupt the pain signalling process in the brain.
Our hypothesis is that the current pilot study design at The University California, San Diego (see below) will provide a source of validation for this treatment modality in addiction treatment. Chronic Pain Market Originally, our waveform was designed as an electro-analgesic for pain. This refers to the ability to electrically interrupt the pain signaling process in the brain.
However, because of our intended potential Joint Venture, there is a risk that the Chinese government may in the future seek to affect operations of any company with any level of operations in Hong Kong or China, including its ability to offer securities to investors, list its securities on a U.S. or other foreign exchange, conduct its business or accept foreign investment.
However, because of our Joint Venture, there is a risk that the Chinese government may in the future seek to affect operations of any company with any level of operations in Hong Kong or China, including its ability to offer securities to investors, list its securities on a U.S. or other foreign exchange, conduct its business or accept foreign investment.
In the event that there are changes, we and the potential Joint Venture will take any and all actions to remain in compliance with any such laws or regulations or detailed implementations and interpretations thereof. 24 There may be difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us based on foreign laws.
In the event that there are changes, we and the Joint Venture will take any and all actions to remain in compliance with any such laws or regulations or detailed implementations and interpretations thereof. There may be difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us based on foreign laws.
According to Research and Markets, the global chronic pain treatment market is predicted to progress at a CAGR of 6.5% from 2020 to 2030 and generate revenue of $151.7 billion in 2030. Currently, we own an electrostimulation patent for a device that will apply electrodes to the brain, spine, and the place of injury.
According to Research and Markets, the global chronic pain treatment market is predicted to progress at a CAGR of 5.8% from 2020 to 2030 and generate revenue of $151.7 billion in 2030. Currently, we own an electrostimulation patent for a device that will apply electrodes to the brain, spine, and the place of injury.
From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights, most notably our rights with respect to the potential Joint Venture.
From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights, most notably our rights with respect to the Joint Venture.
In addition to clinical trial work in China and current studies in the United States required by the FDA, an additional study is planned with the 15 milliamp Gen-2 and Gen-3 devices to evaluate a large cohort of patients with depression. This trial will include a double-blind study design with active and sham groups.
In addition to clinical trials in China and current studies in the United States required by the FDA, an additional study is planned with the 15 milliamp Gen-2 and Gen-3 devices to evaluate a large cohort of patients with depression. This trial will include a double-blind study design with active and sham groups.
Moreover, we may be subject to a third-party pre-issuance submission of prior art to the U.S. Patent and Trademark Office, or USPTO, or become involved in opposition, derivation, re-examination, inter partes review or interference proceedings, in the United States or elsewhere, challenging our patent rights or the patent rights of others.
Moreover, we may be subject to a third-party pre-issuance submission of prior art to the U.S. Patent and Trademark Office (the “USPTO”), or become involved in opposition, derivation, re-examination, inter partes review or interference proceedings, in the United States or elsewhere, challenging our patent rights or the patent rights of others.
We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market. 34 The U.S. FDA, Chinese National Medical Products Administration and other comparable foreign regulatory authorities may not accept data from trials conducted in locations outside of their jurisdiction.
We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market. 36 The U.S. FDA, Chinese National Medical Products Administration and other comparable foreign regulatory authorities may not accept data from trials conducted in locations outside of their jurisdiction.
The issuance of this code is the first time that a reimbursement code from CMS has been designated specifically for CES. The code does not guarantee reimbursement and is considered at this time, experimental. The Nexalin consulting team plans to continue preparing clinical data and durability data to pursue long term clinical reimbursement.
The issuance of this code is the first time that a reimbursement code from CMS has been designated specifically for CES. The code does not guarantee reimbursement and is considered at this time, experimental. The Nexalin executive team plans to continue preparing clinical data and durability data to pursue long term clinical reimbursement.
The People’s Republic of China, or PRC, authorities have become increasingly vigilant in enforcing laws in the medical industry and any failure by us or our partners to maintain compliance with applicable laws and regulations or obtain and maintain required licenses and permits may result in the suspension or termination of our business activities in China.
The PRC authorities have become increasingly vigilant in enforcing laws in the medical industry and any failure by us or our partners to maintain compliance with applicable laws and regulations or obtain and maintain required licenses and permits may result in the suspension or termination of our business activities in China.
The Nexalin regulatory team has made a strategic decision to develop strategies for pilot trials in various mental health disease states. In addition, a new PMA application in the United States is in development for the treatment of depression utilizing both Gen-2 and Gen-3.
The Nexalin regulatory team has made a strategic decision to develop strategies for pilot trials and/or pivotal trials in various mental health disease states. In addition, a new PMA application in the United States is in development for the treatment of depression utilizing both Gen-2 and Gen-3.
In the event any of the foregoing were to occur, we and the potential Joint Venture will take any and all actions to remain in compliance with any such regulations or policies. 29 We may be subject to anti-monopoly concerns as a result of our doing business in China.
In the event any of the foregoing were to occur, we and the Joint Venture will take any and all actions to remain in compliance with any such regulations or policies. We may be subject to anti-monopoly concerns as a result of our doing business in China.
Other areas of research that will be designed and funded relate to the treatment of substance use disorders, Alzheimer’s disease, and dementia. Additional research in China is being performed with the goal of publishing the findings in a peer reviewed journal.
Other areas of research that will be designed and funded relate to the treatment of substance use disorders, TBI, PTSD, Alzheimer’s disease, and dementia. Additional research in China is being performed with the goal of publishing the findings in a peer reviewed journal.
If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our consolidated financial statements. 46 ITEM 1B UNRESOLVED STAFF COMMENTS None
If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our consolidated financial statements. 50 ITEM 1B. UNRESOLVED STAFF COMMENTS None
We will use our best efforts to register or qualify such shares under the blue sky laws of the state of residence in those states in which the warrants were offered by us in our recently completed public offering.
We will use our best efforts to register or qualify such shares under the blue sky laws of the state of residence in those states in which the warrants were offered by us in our public offering.

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Item 2. Properties

Properties — owned and leased real estate

3 edited+1 added−12 removed0 unchanged
Biggest changeOur lease payments for fiscal year 2022 were $54,000. Our lease costs for 2023 will also be $54,000 for the year. The sub-leases are due to expire in 2024. We sublease our space from an entity controlled by our Chief Executive Officer. We do not have any increase from the primary lease payments for the sub-lease arrangements.
Biggest changeWe sublease our space and will continue to sublease our space from an entity controlled by our Chief Executive Officer. We do not have any increase from the primary lease payments for the sub-lease arrangements.
We do not own or operate manufacturing facilities for the production of any of our products, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We believe our current premises are sufficient for our needs at this time and for the foreseeable future.
We do not own or operate manufacturing facilities for the production of any of our products, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We believe our current premises are sufficient for our needs at this time and for the foreseeable future. 51
ITEM 2. PROPERTIES Our principle executive office is located at 1776 Yorktown, Suite 550, Houston, Texas 77056. Under ASC 842 “ Leases ”, we have two separate sub-leases totalling approximately 4,000 square feet of office space under operating leases. Our lease payments totalled approximately $48,000 in 2021. Management and supporting staff are hosted at this location.
ITEM 2. PROPERTIES Our principle executive office is located at 1776 Yorktown, Suite 550, Houston, Texas 77056. Under ASC 842 “ Leases ”, we have two separate sub-leases totaling approximately 4,000 square feet of office space under operating leases. Management and supporting staff are housed at this location.
Removed
ITEM 3 LEGAL PROCEEDINGS There are no material pending legal proceedings in which the Company or any of its subsidiaries is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of its voting securities, or security holder is a party adverse to us or has a material interest adverse to the Company other than the following: Sarah Veltz v.
Added
Our lease payments for each of fiscal years 2023 and 2022 were $54,000. The sub-leases are due to expire in 2024. We have entered into a new one year sublease for 4,000 square feet of office space under an operating lease.
Removed
Nexalin Technology, Inc. et al. Plaintiff, Sarah Veltz, filed a lawsuit in this matter on January 20, 2021 in Orange County Superior Court (Case No. 30-2021-01180164-CU-WT-CJC) (the “Complaint”) naming the Company and others as defendants.
Removed
In her Complaint, Plaintiff contends that she was employed by defendants, including Nexalin, and has not been paid all wages, including overtime wages and other benefits allegedly due her. Plaintiff also contends that, during her employment, she was subjected to sexual harassment by the Company’s then Chief Executive Officer. Plaintiff seeks both compensatory and punitive damages.
Removed
On March 12, 2021, the Company filed its answer to the Complaint. Although the parties are seeking mediation, the court has set a jury trial in this matter for April 24, 2023.
Removed
Management’s intent is to contest the allegations vigorously and, as of the date of this report, is unable to provide an evaluation of the potential outcome of the litigation within the probable or remote range or to provide an estimate of the amount of or a range of potential loss that might be incurred by the Company.
Removed
Employment Development Department The Company is currently engaged in settlement discussions with the Employment Development Department (EDD) of the state of California. This matter involves issues related to our previous management’s classification of certain work provided to or on behalf of the Company’s business as contract labor instead of employee labor. The total amount involved is approximately $300,000.
Removed
Management has petitioned for reassessment and believe the hired workers at issue were indeed actual contractors and not employees. We have no business in California other than one part time and one full time worker residing in California. An initial hearing before an EDD magistrate was held on April 15, 2022. A second hearing was held in June of 2022.
Removed
We are now in negotiations with the EDD for a final settlement. The Company believes its potential exposure to be approximately $300,000 and, as such, has accrued this amount on the audited consolidated balance sheets at December 31, 2022 and 2021 and believes it has adequately accrued for this matter.
Removed
Demand Letter from The University of Arizona On December 8, 2022, the Company received a demand letter from the University of Arizona seeking payment of $111,094 purportedly due on an Investigator Initiated Cooperative Study Agreement, dated as of September 25, 2017 (the “2017 Study”) The Company believes that the 2017 Study was not completed and no payment was due.
Removed
In fact, for a number of months prior to receipt of the demand letter, the Company had had discussions with the person at the University of Arizona who were to conduct the 2017 Study concerning updating the 2017 Study and completing an updated study and related work.
Removed
After receipt of the demand letter, the Company has had discussions with the University of Arizona concerning resuming an updated study and receipt of credit for some or all the monies claimed to be due for the 2017 Study. Such discussions are ongoing, and no resolution has been reached but the Company hopes to achieve a consensual resolution.
Removed
We cannot guarantee that a mutually amicable resolution will be reached by the parties. ITEM 4 MINE SAFETY Not Applicable 47 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+11 added−135 removed1 unchanged
Biggest changeWe do not intend to pay any cash dividends at this time or in the foreseeable future. Recent Sales of Unregistered Securities We completed our initial public offering on September 16, 2022. We issued an aggregate of 6,601 restricted securities to a consultant during the fourth quarter (October 1, 2022 to December 31, 2022).
Biggest changeWe do not intend to pay any cash dividends at this time or in the foreseeable future. Recent Sales of Unregistered Securities None. Repurchase of Equity Securities None. Securities Authorized for Issuance under Equity Compensation Plans Nexalin’s 2023 Equity Incentive Plan (the “2023 Plan”) was approved by our stockholders on November 10, 2023.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Principal Market Our common stock is currently traded on The Nasdaq Capital Market under the symbol “NXL.” Our common stock warrants are listed for trading on The Nasdaq Capital Market under the symbol “NXLIW” Equity Holders As of March 22, 2023, the number of shareholders of our common stock of record was approximately 900 persons and the last reported closing price per share of our common stock on such date was $1.09.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Principal Market Our common stock is currently traded on The Nasdaq Capital Market under the symbol “NXL.” Our common stock warrants are listed for trading on The Nasdaq Capital Market under the symbol “NXLIW” Equity Holders As of March 22, 2024, the number of stockholders of our common stock of record was approximately 878 persons and the last reported closing price per share of our common stock on such date was $0.484.
We expect to seek stockholder approval of a stock based equity plan in calendar year 2023. See Item 11. “Executive Compensation” for a discussion of certain stock related compensation agreements with certain of our executive officers.
The December 12, 2023 awards are subject to shareholder approval to amend our 2023 Equity Incentive Plan so as to provide for additional shares to be available for the grant of awards. See Item 11. “Executive Compensation” for a discussion of certain stock related compensation agreements with certain of our executive officers.
Removed
These shares were issued pursuant to agreements which were in place prior to our initial public offering and represented payment for services.
Added
The Plan provides that maximum number of shares of Common Stock available for the grant of awards under the Plan shall be 1,500,000, subject to adjustment for stock dividends, stock splits or similar events.
Removed
All of such shares were issued pursuant to an exemption from registration under the Securities Act of 1933 as amended including Regulation D promulgated thereunder and are restricted securities which may not be sold without registration or only pursuant to an exemption therefrom such as Rule 144. Repurchase of Equity Securities None.
Added
The 2023 Plan is administered by the Compensation Committee of the Board of Directors, which may in turn delegate administrative authority to one or more of our executive officers. Under the terms of the 2023 Plan, the Compensation Committee may grant equity awards, including nonqualified stock options and restricted stock to employees, officers, directors, consultants, agents, advisors and independent contractors.
Removed
Securities Authorized for Issuance under Equity Compensation Plans We did not have any equity compensation plan in effect during the year ended December 31, 2022 and we do not have any equity compensation plan as of the date of filing of this Report on Form 10-K.
Added
The Board has granted certain awards in accordance with the 2023 Plan to Mr. White, Dr. Owens and Mr. Michael Nketiah (“Awards”). Mr. White was awarded a sign on/retention bonus of 447,427 vested stock options and 939,597 performance based stock option exercisable at $.894 per share.
Removed
ITEM 6 [RESERVED] 48 ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Special Note Regarding Forward-Looking Statements You should read the following discussion and analysis of financial condition and operating results together with our financial statements and the related notes and other financial information included elsewhere in this annual report on Form 10-K.
Added
The performance based options may be awarded over three years based on annual performance based criteria and subject to vesting and continued employment. The 2023 performance criteria was met and 313,199 options were approved by the Board. The exercise of these options is subject to vesting. 53 Dr.
Removed
References in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “us,” “we,” “our,” and similar terms refer to Nexalin Technology, Inc.
Added
Owens was awarded a sign on/retention bonus of 139,821 vested stock options and 654,362 performance based stock option exercisable at $.894 per share. The performance based options may be awarded over three years based on annual performance based criteria and subject to vesting and continued employment. The 2023 performance criteria was met and 218,121 options were approved by the Board.
Removed
This discussion contains forward-looking statements as that term is defined within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections.
Added
The exercise of these options is subject to vesting. Mr. Nketiah was awarded 100,671 performance based stock option exercisable at $.894 per share. The performance based options may be awarded over three years based on annual performance based criteria and subject to vesting and continued employment. The 2023 performance criteria was met and 33,557 options were approved by the Board.
Removed
The events described in forward-looking statements contained in this discussion may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions that may be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results.
Added
The exercise of these options is subject to vesting. On December 12, 2023, various consultants, Board members and employees were awarded shares of common stock and/or stock options for 2023 services with a value of $642,029.
Removed
The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions, are intended to identify forward-looking statements.
Added
Reverse Stock Split We have filed a definitive proxy statement requesting stockholders approve a Reverse Stock Split Amendment, pursuant to which the Board will be authorized, in its discretion, to proceed with a Reverse Stock Split.
Removed
We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based.
Added
The exact ratio of the Reverse Stock Split, within the 1-for-4 to 1-for-14 range, would be determined by our Board and publicly announced by us prior to the effective time of the Reverse Stock Split.
Removed
Reference is made to “Risk Factors” in this annual report on Form 10-K Our actual results may differ materially from those anticipated in these forward-looking statements. For convenience of presentation some of the numbers have been rounded in the text below.
Added
The sole purpose for the proposed Reverse Stock Split is to increase the per share market price of our Common Stock to meet the Nasdaq Minimum Bid Price Rule for continued listing on The Nasdaq Capital Market. The proposed Reverse Stock Split was approved by stockholders on March 7, 2024.
Removed
Overview We design and develop innovative neurostimulation products to uniquely and effectively help combat the ongoing global mental health epidemic. We developed an easy-to-administer medical device — referred to as Generation 1 or Gen-1 — that utilizes bioelectronic medical technology to treat anxiety and insomnia, without the need for drugs or psychotherapy.
Added
The filing of the Reverse Stock Split Amendment and the Reverse Stock Split will only be implemented if our Board determines they are necessary to regain and maintain compliance with the Nasdaq Minimum Bid Price Rule. ITEM 6. [RESERVED]
Removed
Our original Gen-1 devices are cranial electrotherapy stimulation (CES) devices that emit waveform at 4 milliamps during treatment and are presently classified by the U.S. Food and Drug Administration (“FDA”) as a Class II device. Medical professionals in the United States have utilized the Gen-1 device to administer to patients in clinical settings.
Removed
While the Gen-1 device had been cleared by the FDA to treat depression, anxiety, and insomnia, three prevalent and serious diseases, because of the FDA’s December 2019 reclassification of CES devices, the Gen-1 device was reclassified as a Class II device for the treatment of anxiety and insomnia.
Removed
We are required to file a new application under Section 510(k) of the Federal Food, Drug and Cosmetic Act (“510(k) Application”) to be approved by the FDA for the sales and marketing of our devices for the treatment of anxiety and insomnia.
Removed
In the FDA’s December 2019 reclassification ruling, the treatment of depression with our device will require a Class III certification and require a new PMA (premarket approval) application to demonstrate safety and effectiveness.
Removed
While we continue providing services to medical professionals to support patients’ use of the Gen-1 devices which were in operation prior to December 2019, we are not making new sales or new marketing efforts of Gen-1 devices in the United States.
Removed
We continue to derive revenue from devices which we sold or leased prior to the FDA’s December 2019 reclassification announcements. This revenue consists of monthly licensing fees and payments for the sale of electrodes and patient cables.
Removed
We have suspended marketing efforts for new sales of devices related to the Gen-1 device for treatment of anxiety and insomnia in the United States until the Nexalin regulatory team makes a decision on a new 510(k) application at 4 milliamps based on FDA comments expected to be received in April 2023.
Removed
Our regulatory team continues to inform the FDA of the suspension of the marketing and sale of the Gen-1 products to new providers.
Removed
We are analyzing whether to proceed with an amended application with the FDA for Gen-1 devices for the treatment of insomnia and anxiety. 49 We have designed and developed a new advanced waveform technology to be emitted at 15 milliamps through new and improved medical devices referred to as Generation 2 or Gen-2 and Generation 3 or Gen-3.
Removed
Gen-2 is a clinical use device with a modern enclosure to emit the new 15 milliamp advanced waveform. Gen-3 is a new patient headset that will be prescribed by licensed medical professionals in a virtual clinic setting similar to existing Tele-health platforms.
Removed
The Nexalin research team believes that the new 15 milliamp Gen-2 and Gen-3 devices can penetrate deeper into the brain and stimulate associated structures of mental illness, which we believe will generate enhanced patient response without any risk or unpleasant side effects.
Removed
The Nexalin regulatory team has made a strategic decision to develop strategies for pilot trials in various mental health disease states. In addition, a new PMA application in the United States is in development for the treatment of depression utilizing both Gen-2 and Gen-3.
Removed
The new Gen-3 device is also scheduled for additional pilot trials for anxiety and insomnia in the United States and China beginning in the third quarter of 2023. Preliminary data provided by the University of California San Diego supports the safety of utilizing our 15 milliamp waveform technology.
Removed
However, the determination of safety and efficacy of medical devices in the United States is subject to clearance by the FDA. Additionally, we are currently designing clinical trial strategies for the use of Gen-3 for the treatment of substance use disorders including opiate, cocaine, and alcohol abuse.
Removed
Recently the Gen-2 device was tested in pilot trials in China for the treatment of Alzheimer’s disease and dementia. Continued pilot testing for Alzheimer’s and dementia is planned in China in 2023.
Removed
In part due to increasing incidence attributed to the devastating impacts of the COVID-19 pandemic, mental health and cognitive disorders are widespread across the globe and cause substantial health, social and economic losses, and hardships accordingly. Our focus is on the continued development of our innovative bioelectronic medical technologies and rapid regulatory approval.
Removed
We intend to help reverse these losses, and hardships of these losses, by safely and effectively treating various mental health disorders associated with post Covid and long Covid mental disease states. All our products are non-invasive, safe, undetectable to the human body and can provide relief to those afflicted with mental health issues without adverse side effects.
Removed
We have a proprietary design that eliminates voltage while stabilizing currents, electromagnetic fields, and various frequencies — referred to collectively as waveform - particularly our proprietary, 15 milliamp patented symmetrical waveform. Our devices generate a high frequency carrier wave that is charge balanced.
Removed
It is applied to the brain with an array of electrodes on the forehead and behind each ear at the mastoid. The features of this proprietary waveform and the array of electrodes allow the application of the waveform to the entire brain rather than a small, targeted area of the brain.
Removed
To ensure deeper penetration into the brain, we have eliminated the voltage from the waveform which allows the increase of the power from Currently, the waveform that comprises the basis of Gen-2 and new Gen-3 headset devices has been tested in research settings to develop safety data that has been submitted for review by the FDA for safety evaluation and eventual marketing in the United States and around the world.
Removed
Determinations of the safety and efficacy of our devices in the United States are solely within the authority of the FDA.
Removed
We recognize that an additional barrier to treatment in today’s mental health treatment landscape -- beyond the concerns about safety, efficacy and side-effects that have been associated with conventional mental health treatments such as ECT (shock therapy), drugs and psychotherapy -- is stigma.
Removed
We have received industry reports and feedback that many patients that struggle with mood disorders have the stigma of embarrassment associated with psychiatrists and psychotherapy (e.g., counselling with a therapist). Additional stigmas and other issues are associated with the side effects of medication prescribed by psychiatrists.
Removed
When we researched the current pharmaceuticals model, public information highlighted the many side effects associated with these medications. Frequently, patients would stop taking the medication because of the uncomfortable side effects.
Removed
Additional public information mentions dependency and withdrawal issues associated with medication for psychiatric disorders. 50 To address the embarrassment stigma, we are developing a new virtual clinic that will allow the physician to diagnose a mental health issue in the privacy of a tele-psychiatry virtual platform.
Removed
After diagnosis, the physician will prescribe the Nexalin Gen-3 headset to the patient for treatment. Next, the Gen-3 device will be shipped to the patient’s home. After patient receives the device, they will pair the headset device with an app in the patient’s smart phone.
Removed
The app will communicate with the Nexalin cloud servers to authorize the device for treatment according to the protocol designed by the physician. The physician will monitor treatment compliance and other health related issues in a private physician dashboard that connects through the Nexalin app and cloud servers.
Removed
We believe that to preserve product safety and integrity for home use, the headset device will require physician oversight that will include a prescription for use with a monthly authorization provided by the physician after a monthly virtual visit. All appointments will be in a virtual setting to provide privacy and convenience for the physician and patient.
Removed
The Nexalin virtual clinic will be provided in a proprietary virtual platform currently in the design stage. Our China Gen-2 15 milliamp device was recently approved in China by the NMPA for the treatment of insomnia and depression in China. This device and all other clinical devices will include a single use electrode for long term revenue streams.
Removed
The USA Gen-2 device will have a fresh and modern appearance that meets the technology standards of the digital tech world of 2023. Early adopters of the Gen-1 device will be able to access additional firmware upgrades which are planned to enhance the previously purchased devices to the new symmetric15-milliamp waveform.
Removed
Our Gen-2 device will be equipped with RFID technology that exchanges electrode usage data with a reader in the main device. The purpose of RFID is to track and maintain control of the proprietary single use electrode.
Removed
Our electrode chip will be programmed to exchange data with the device and allow activation for a single treatment with a new electrode only. This ensures a recurring revenue stream on the device and protects against any generic knockoffs designed to avoid treatment costs.
Removed
This upgrade in technology also ensures the proprietary nature of the electrodes that support treatment outcomes are sustained. Overall, we believe that our advanced waveform, technological upgrades and the development of a modern headset monitored with our IT management platform will position us with the opportunity to disrupt the traditional mental health treatment model.
Removed
Our mission is to remove the stigma of expensive psychotherapy or pharmaceuticals with the attendant side effects and dependency issues and replace such stigma with clinically proven and cost-effective technology that is easily accessible in the privacy of the patient’s home and monitored by licensed healthcare providers.
Removed
Since our inception, we have generated significant losses; we expect to continue to incur significant expenses and increasing operating losses for at least the next two years. Our net losses may fluctuate significantly from period to period, depending on the timing of our planned clinical trials and expenditures for other research and development activities.
Removed
We expect our expenses will increase substantially over time as we: ● Continue the ongoing and planned preclinical and clinical development of our products; ● review and analyze the value of amending our previous 510(k) Application for anxiety and insomnia in accordance with the FDA and seek other regulatory approvals for any future products that successfully complete clinical trials; ● arrange for a sales, marketing and distribution infrastructure and scale up external manufacturing capabilities to commercialize any product candidate for which we may obtain regulatory approval and intend to commercialize on our own; ● maintain, expand and protect our intellectual property portfolio; ● engage additional clinical, scientific, manufacturing and controls personnel; ● add additional operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; ● seek to discover and develop additional products; and ● initiate preclinical studies and clinical trials for any additional products that we may pursue in the future.
Removed
Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company. 51 Recent Developments Completion of Initial Public Offering The Company completed its initial public offering on September 16, 2022.
Removed
The initial public offering consisted of 2,315,000 units consisting of 2,315,000 shares of its Common Stock and 2,315,000 accompanying warrants to purchase up to 2,315,000 shares of common stock.
Removed
Each share of common stock was sold together with one warrant, each to purchase one share of common stock with an exercise price of $4.15 per share at a combined offering price of $4.15, for gross proceeds of $9,607,250 before deducting underwriting discounts and offering expenses.
Removed
In addition, Nexalin granted the underwriters a 45-day option to purchase up to an additional 347,250 shares of common stock and/or warrants to purchase up to 347,250 shares of common stock to cover over-allotments at the initial public offering price, less the underwriting discount. The underwriters exercised their option to purchase 347,250 warrants for net proceeds of $3,473.
Removed
The registration statement on Form S-1 (File No. 333-261989) for our initial public offering was filed with the Securities and Exchange Commission (“SEC”) and became effective on September 15, 2022. A final prospectus relating to the offering was filed with the SEC and is available on the SEC’s website at http://www.sec.gov .
Removed
The offering was being made only by means of a prospectus forming part of the effective registration statement. The shares and warrants began trading on the Nasdaq Capital Market tier of the Nasdaq Stock Market (“Nasdaq”) in September 2022, under the symbols “NXL” and “NXLIW”, respectively.
Removed
Impact of COVID-19 Pandemic We continue to monitor how the COVID-19 pandemic is affecting our employees, business and clinical trials. Such pandemic has delayed our clinical trials and our receipt of marketing approvals from the FDA.
Removed
Such pandemic also might have reduced, and continue to reduce, participation in our clinical trials, due to both travel restrictions and a general unwillingness of subjects to travel.
Removed
We cannot presently predict the scope and severity of any other potential business shutdowns or disruptions, but if we or any of the third parties with whom we engage, including the suppliers, clinical trial sites, regulators and other third parties with whom we conduct business, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted.
Removed
We continue to be indirectly impacted because of our current dependence upon our distributor relationship with Wider Come Limited (Wider”.) Wider acts as a distributor for the Company’s devices in China and Asia.
Removed
Because of significant restrictions imposed by the Chinese government during the Covid pandemic, Wider’s ability to market and sell the Company’s devices has been negatively impacted, resulting in decreased revenue to the Company. Patients and salespeople are restricted in their movements resulting in a significant slowdown in the medical and other sectors.
Removed
Fortunately, our Chinese distributor continues our strategy of multiple clinical studies in the major institution in Beijing in an array of brain related diseases. Very significant efforts and funds expended by our Chinese distributor has led to regulatory approval in China in both depression and insomnia thus far which has allowed for sales of our devices in China this year.
Removed
The extent of future impact will depend on future developments, including future activities by the Chinese government and other possible events which are highly uncertain and not in the Company’s control, including new information which may emerge concerning the spread and severity of COVID-19, or any of its variants, and actions taken to address its impact, among others.
Removed
In addition, the spread of an infectious disease, including COVID-19, may also result in the inability of our suppliers to deliver components or raw materials on a timely basis. Such events may result in a period of business and manufacturing disruption, and in reduced operations, any of which could materially affect our business, financial condition and results of operations.
Removed
The extent to which the coronavirus impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain the coronavirus or treat its impact, among other things. 52 Potential Joint Venture; China Related Activities In September 2018, we entered into an agreement with Wider Come Limited, a company formed under the laws of the People’s Republic of China (“Wider”), pursuant to which we and Wider have agreed to investigate the formation of a joint venture entity to be domiciled in Hong Kong (the “potential Joint Venture”) to conduct additional clinical research and implement a business distribution plan for our devices in China, Macau, Hong Kong, and Taiwan.
Removed
We do not have any existing operations in China and will not in the future. We do have current distribution in China through Wider, our potential Joint Venture partner.
Removed
As of the date of this Annual Report on Form 10-K, (i) our operations are carried on outside of China; and (ii) the potential Joint Venture does not maintain any variable interest entity structure or operate any data center in China.
Removed
However, because of the intended formation of the potential Joint Venture, we may become subject to laws of The People’s Republic of China (PRC or China) relating to, among other topics, data security and restrictions over foreign investments.
Removed
Further, as a result of the complexity and vagaries of the legal system in the PRC and recent statements and regulatory actions by the PRC government relating to data security, our ability to operate the potential Joint Venture may be adversely affected or subject to change and adversely impact our ability to offer or continue to offer securities to investors, with the result that our securities may significantly decline or be worthless.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

0 edited+119 added−1 removed0 unchanged
Removed
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 49 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 59 Item 8. Financial Statements and Supplemental Data 59 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 60 Item 9A. Controls and Procedures 60
Added
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Special Note Regarding Forward-Looking Statements You should read the following discussion and analysis of financial condition and operating results together with our financial statements and the related notes and other financial information included elsewhere in this annual report on Form 10-K.
Added
References in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “us,” “we,” “our,” and similar terms refer to Nexalin Technology, Inc.
Added
This discussion contains forward-looking statements as that term is defined within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections.
Added
The events described in forward-looking statements contained in this discussion may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions that may be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results.
Added
The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions, are intended to identify forward-looking statements.
Added
We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based.
Added
Reference is made to “Risk Factors” in this annual report on Form 10-K. Our actual results may differ materially from those anticipated in these forward-looking statements.
Added
For convenience of presentation some of the numbers have been rounded in the text below. 54 Overview We design and develop innovative neurostimulation products to uniquely and effectively help combat the ongoing global mental health epidemic.
Added
We developed an easy-to-administer medical device — referred to as “Generation 1” or “Gen-1” — that utilizes bioelectronic medical technology to treat anxiety and insomnia, without the need for drugs or psychotherapy. Our original Gen-1 devices are cranial electrotherapy stimulation (CES) devices that emit waveform at 4 milliamps during treatment and are presently classified by the U.S.
Added
Food and Drug Administration (the “FDA”) as a Class II device. Medical professionals in the United States have utilized the Gen-1 device to administer to patients in clinical settings.
Added
While the Gen-1 device had been cleared by the FDA to treat depression, anxiety, and insomnia, three prevalent and serious diseases, because of the FDA’s December 2019 reclassification of CES devices, the Gen-1 device was reclassified as a Class II device for the treatment of anxiety and insomnia.
Added
We are required to file a new application under Section 510(k) of the Federal Food, Drug and Cosmetic Act (“510(k) Application”) to be approved by the FDA for the sales and marketing of our devices for the treatment of anxiety and insomnia.
Added
In the FDA’s December 2019 reclassification ruling, the treatment of depression with our device will require a Class III certification and require a new PMA (premarket approval) application to demonstrate safety and effectiveness.
Added
While we continue providing services to medical professionals to support patients’ use of the Gen-1 devices which were in operation prior to December 2019, we are not making new sales or new marketing efforts of Gen-1 devices in the United States.
Added
We continue to derive revenue from devices which we sold or leased prior to the FDA’s December 2019 reclassification announcements. This revenue consists of monthly licensing fees and payments for the sale of electrodes and patient cables.
Added
We have suspended marketing efforts for new sales of devices related to the Gen-1 device for treatment of anxiety and insomnia in the United States until the Nexalin regulatory team decides on a new 510(k) application at 4 milliamps based on FDA comments expected to be received in April 2023.
Added
Our regulatory team continues to inform the FDA of the suspension of the marketing and sale of the Gen-1 products to new providers. We are analyzing whether to proceed with an amended application with the FDA for Gen-1 devices for the treatment of insomnia and anxiety.
Added
We have designed and developed a new advanced waveform technology to be emitted at 15 milliamps through new and improved medical devices referred to as “Generation 2” or “Gen-2” and “Generation 3” or “Gen-3.” Gen-2 is a clinical use device with a modern enclosure to emit the new 15 milliamp advanced waveform.
Added
Gen-3 is a new patient headset that will be prescribed by licensed medical professionals in a virtual clinic setting similar to existing Tele-health platforms.
Added
The Nexalin research team believes that the new 15 milliamp Gen-2 and Gen-3 devices can penetrate deeper into the brain and stimulate associated structures of mental illness, which we believe will generate enhanced patient response without any risk or unpleasant side effects.
Added
The Nexalin regulatory team has made a strategic decision to develop strategies for pilot trials and/or pivotal trials in various mental health disease states. In addition, a new PMA application in the United States is in development for the treatment of depression utilizing both Gen-2 and Gen-3.
Added
The new Gen-3 device is also scheduled for additional pilot trials and/or pivotal trials for anxiety and insomnia in the United States and China beginning in the third quarter of 2023. Preliminary data provided by The University of California, San Diego supports the safety of utilizing our 15 milliamp waveform technology.
Added
However, the determination of safety and efficacy of medical devices in the United States is subject to clearance by the FDA. Additionally, a new pre-submission document in preparation of a new 510(k) and/or de novo for our Gen-3 Halo headset at 15 milliamps was filed with the FDA in January of 2023.
Added
Formal comments to our pre-submission document filing were received in March of 2023. A formal meeting to address FDA comments took place on May 9, 2023. Minutes of the meeting with the FDA were filed with the FDA on May 16, 2023. A new updated pre-sub filing is planned for filing in January 2024.
Added
This filing will contain final clinical protocol designs and the results of usability testing on our Gen-3 headset. 55 In part due to increasing incidence attributed to the devastating impacts of the COVID-19 pandemic, mental health and cognitive disorders are widespread across the globe and cause substantial health, social and economic losses, and hardships accordingly.
Added
Our focus is on the continued development of our innovative bioelectronic medical technologies and rapid regulatory approval. We intend to help reverse these losses, and hardships of these losses, by safely and effectively treating various mental health disorders associated with post Covid and long Covid mental disease states.
Added
All our products are non-invasive and undetectable to the human body and can provide relief to those afflicted with mental health issues without adverse side effects. We have a proprietary design that stabilizes currents, electromagnetic fields, and various frequencies — referred to collectively as waveform - particularly our proprietary, 15 milliamp patented symmetrical waveform.
Added
Our devices generate a high frequency carrier wave that is charge balanced. It is applied to the brain with an array of electrodes on the forehead and behind each ear at the mastoid.
Added
The features of this proprietary waveform and the array of electrodes allow the application of the waveform to the entire brain rather than a small, targeted area of the brain.
Added
To ensure deeper penetration into the brain, we have created a waveform that is undetectable to the brain which allows the increase of the power from Currently, the waveform that comprises the basis of Gen-2 and new Gen-3 headset devices has been tested in research settings to develop safety data that has been submitted for review by the FDA for safety evaluation and eventual marketing in the United States and around the world.
Added
Determinations of the safety and efficacy of our devices in the United States are solely within the authority of the FDA.
Added
We recognize that an additional barrier to treatment in today’s mental health treatment landscape -- beyond the concerns about safety, efficacy and side-effects that have been associated with conventional mental health treatments such as ECT (shock therapy), drugs and psychotherapy -- is stigma.
Added
We have received industry reports and feedback that many patients that struggle with mood disorders have the stigma of embarrassment associated with psychiatrists and psychotherapy (e.g., counselling with a therapist). Additional stigmas and other issues are associated with the side effects of medication prescribed by psychiatrists.
Added
When we researched the current pharmaceuticals model, public information highlighted the many side effects associated with these medications. Frequently, patients would stop taking the medication because of the uncomfortable side effects. Additional public information mentions dependency and withdrawal issues associated with medication for psychiatric disorders.
Added
To address the embarrassment stigma, we are developing a new virtual clinic that will allow the physician to diagnose a mental health issue in the privacy of a tele-psychiatry virtual platform. After diagnosis, the physician will prescribe the Nexalin Gen-3 headset to the patient for treatment. Next, the Gen-3 device will be shipped to the patient’s home.
Added
After the patient receives the device, they will pair the headset device with an app in the patient’s smart phone. The app will communicate with the Nexalin cloud servers to authorize the device for treatment according to the protocol designed by the physician.
Added
The physician will monitor treatment compliance and other health related issues in a private physician dashboard that connects through the Nexalin app and cloud servers.
Added
We believe that to preserve product safety and integrity for home use, the headset device will require physician oversight that will include a prescription for use with a monthly authorization provided by the physician after a monthly virtual visit. All appointments will be in a virtual setting to provide privacy and convenience for the physician and patient.
Added
The Nexalin virtual clinic will be provided in a proprietary virtual platform currently in the design stage. 56 Our China Gen-2 15 milliamp device was approved in China by the NMPA for the treatment of insomnia and depression in China. This device and all other clinical devices will include a single use electrode for long term revenue streams.
Added
The USA Gen-2 device will have a fresh and modern appearance that meets the technology standards of the digital tech world of 2023. Early adopters of the Gen-1 device will be able to access additional firmware upgrades which are planned to enhance the previously purchased devices to the new symmetric15-milliamp waveform.
Added
Our Gen-2 device will be equipped with RFID technology that exchanges electrode usage data with a reader in the main device. The purpose of RFID is to track and maintain control of the proprietary single use electrode.
Added
Our electrode chip will be programmed to exchange data with the device and allow activation for a single treatment with a new electrode only. This ensures a recurring revenue stream on the device and protects against any generic knockoffs designed to avoid treatment costs.
Added
This upgrade in technology also ensures the proprietary nature of the electrodes that support treatment outcomes are sustained. Overall, we believe that our advanced waveform, technological upgrades and the development of a modern headset monitored with our IT management platform will position us with the opportunity to disrupt the traditional mental health treatment model.
Added
Our mission is to remove the stigma of expensive psychotherapy or pharmaceuticals with the attendant side effects and dependency issues and replace such stigma with clinically proven and cost-effective technology that is easily accessible in the privacy of the patient’s home and monitored by licensed healthcare providers.
Added
Since our inception, we have generated significant losses; we expect to continue to incur significant expenses and increasing operating losses for at least the next two years. Our net losses may fluctuate significantly from period to period, depending on the timing of our planned clinical trials and expenditures for other research and development activities.
Added
We expect our expenses will increase substantially over time as we: ● Continue the ongoing and planned preclinical and clinical development of our products; ● review and analyze the value of amending our previous 510(k) Application for anxiety and insomnia in accordance with the FDA and seek other regulatory approvals for any future products that successfully complete clinical trials; ● arrange for a sales, marketing and distribution infrastructure and scale up external manufacturing capabilities to commercialize any product candidate for which we may obtain regulatory approval and intend to commercialize on our own; ● maintain, expand and protect our intellectual property portfolio; ● engage additional clinical, scientific, manufacturing and controls personnel; ● add additional operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; ● seek to discover and develop additional products; and ● initiate preclinical studies and clinical trials for any additional products that we may pursue in the future.
Added
Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company. 57 Recent Developments Formalized Joint Venture; China Related Activities On May 31, 2023, the Company formalized an agreement related to the formation of a joint venture established to engage in the clinical development, marketing, sale and distribution of Nexalin’s second generation transcranial Alternating Current Stimulation (“tACS”) devices (“Gen-2 devices”) in China and other countries in the region.
Added
The Joint Venture is registered in Hong Kong. As of the date of this Annual Report on Form 10-K, (i) our operations are carried on outside of China; and (ii) the Joint Venture does not maintain any variable interest entity structure or operate any data center in China.
Added
Under the Joint Venture Agreement, Wider is obligated to fund all operations for the initial 12-month period of the Joint Venture, after which Nexalin and Wider plan to jointly fund the Joint Venture’s operating expenses in accordance with their pro rata ownership.
Added
The Joint Venture is controlled by a Board of Directors in which Wider is to have sole representation but neither the Company nor Wider has exclusive decision-making ability over day-to-day or significant operational decisions. Wider and Nexalin own 52% and 48% of the Joint Venture, respectively.
Added
In accordance with ASC 323 and ASC 810, the company plans to recognize the equity method results of the Joint Venture on a one-quarter reporting lag. Therefore, no operating activity in the Joint Venture was recorded through the year ended December 31, 2023. The investment in the Joint Venture is accounted for using the equity method of accounting.
Added
The Company invested $96,000 in the joint venture in September 2023 which is recorded on the consolidated balance sheet at December 31, 2023 as an Equity Method Investment. Wider invested $104,000.
Added
In accordance with ASC 323, Investments - Equity Method and Joint Ventures (“ASC 323”), the Company uses the equity method of accounting for its investment in the Joint Venture, an unconsolidated entity over which it does not have a controlling interest.
Added
The equity method of accounting requires the investment to be initially recorded at cost and subsequently adjusted for the Company’s share of equity in the unconsolidated entity’s earnings or losses. The Company evaluates the carrying amount of this investment in the Joint Venture for impairment in accordance with ASC 323.
Added
If the Company determines that a loss in the value of the investment is other than temporary, the Company writes down the investment to its estimated fair value. Any such losses are recorded to equity in income of unconsolidated entities in the Company’s consolidated statements of income.
Added
The Company has made an election to classify distributions received from the Joint Venture using the nature of the distribution approach. Distributions received are classified as cash inflows from operating activities based on the nature of the activities of the unconsolidated entity.
Added
Under the preceding terms of the collaborative arrangement between the Company and Wider, Wider served as an authorized distributor of the Company’s Gen-2 devices in Asia.
Added
As part of the consideration for Wider’s performance of its obligations to the Company prior to the recent formalization of the Joint Venture, the Company and certain designated Wider shareholders entered into stock issuance agreements for the issuance of 450,000 shares of the Company’s common stock, and simultaneously with the execution of this service agreement, Wider invested $200,000 to the Company.
Added
During the year ended December 31, 2020, the Company issued 150,000 shares to affiliates of Wider in satisfaction of the obligation. Under the terms of the collaborative agreement, designated shareholders of Wider are entitled to an additional 300,000 shares upon Wider’s achievement of certain milestones.
Added
The fair value of the 150,000 shares issued during the year ended December 31, 2020 (less the invested $200,000 in cash) resulted in a charge to stock-based compensation of $550,000 and was recorded in selling, general and administrative expenses on the consolidated statement of operations and comprehensive loss.
Added
During the twelve months ended December 31, 2023, the Company issued an additional 150,000 shares to affiliates of Wider in satisfaction of obligations pursuant to the collaborative agreement and also recognized its obligation to issue an additional 150,000 shares.
Added
The grant date fair value of the 300,000 shares issued and to be issued resulted in a charge to research and development of $1,500,000 and was recorded in selling, general and administrative expenses on the consolidated statement of operations and comprehensive loss. 58 In September of 2021, the China National Medical Products Administration (the “NMPA”), the equivalent of the FDA, approved the Gen-2 device for marketing and sale in China for the treatment of insomnia and depression.
Added
These treatment indications and clearances from the NMPA have allowed Wider to market and sell the Gen-2 device in China for the treatment of insomnia and depression. Our participation in the Joint Venture with Wider in China is subject to general, as well as industry-specific, economic, political and legal developments and risks in China.
Added
The Chinese government exercises significant control over the Chinese economy, including but not limited to controlling capital investments, allocating resources, setting monetary policy, controlling and monitoring foreign exchange rates, implementing and overseeing tax regulations, providing preferential treatment to certain industry segments or companies and issuing necessary licenses to conduct business.
Added
In addition, we could face additional risks resulting from changes in China’s data privacy and cybersecurity requirements. Accordingly, any adverse change in the Chinese economy, the Chinese legal system or Chinese governmental, economic or other policies could have a material adverse effect on our business and operations of the Joint Venture in China and our prospects generally.
Added
We face additional risks in China due to China’s historically limited recognition and enforcement of contractual and intellectual property rights. We may experience difficulty enforcing our intellectual property rights in China.
Added
If we cannot adequately monitor the use of our technologies and devices or enforce intellectual property rights related to our devices in China or contractual restrictions relating to use of our intellectual property by Chinese companies, our revenue could be adversely affected. The Joint Venture with Wider is subject to laws and regulations applicable to foreign investment in China.
Added
There are uncertainties regarding the interpretation and enforcement of laws, regulations and policies in China. Because many of the laws, regulations and policies applicable to our operations in China are relatively new, the interpretations of such laws, regulations and policies are not always uniform.
Added
Moreover, the interpretation of statutes and regulations may be subject to government policies reflecting domestic political agendas. Enforcement of existing laws or contracts may be uncertain.
Added
As a result of the foregoing, it may be difficult for us to obtain timely or equitable enforcement of laws ostensibly designed to protect companies like ours, which could have a material adverse effect on our business and results of operations.
Added
Our ability to monetize the Joint Venture in China may also be limited. 59 Results of Operations Comparison of the Years ended December 31, 2023 and 2022 Our financial results for the years ended December 31, 2023 and 2022 are summarized as follows: Years Ended December 31, 2023 2022 Change $ Change (1) % Revenues, net $ 110,748 $ 1,321,357 $ (1,210,609 ) (92 %) Cost of revenues 25,688 363,212 (337,524 ) (93 %) Gross profit 85,060 958,145 (873,085 ) (91 %) Operating expenses: Professional fees 574,598 605,329 (30,731 ) (5 %) Salaries and benefits 1,387,916 694,108 693,808 100 % Selling, general and administrative 3,818,842 1,491,739 2,327,103 156 % Total operating expenses 5,781,356 2,791,176 2,990,180 107 % Loss from operations (5,696,296 ) (1,833,031 ) (3,863,265 ) 211 % Other income (expense), net: Interest income (expense), net (38,835 ) (59,382 ) 20,547 (35 %) Gain on sale of short-term investments 231,880 - 231,880 100 % Other income 239,542 171,681 67,861 40 % Gain on extinguishment of debt 615,000 - 615,000 100 % Other income - PPP loan forgiveness - 22,916 (22,916 ) (100 %) Total other income (expense), net 1,047,587 135,215 912,372 675 % Net loss $ (4,648,709 ) $ (1,697,816 ) $ (2,950,893 ) (174 %) Other comprehensive income (loss): Unrealized gain (loss) from short-term investments (36,718 ) 36,313 (73,031 ) (201 %) Comprehensive loss $ (4,685,427 ) $ (1,661,503 ) $ (3,023,924 ) (182 %) (1) Percentages may not foot due to rounding.
Added
Revenues For the years ended December 31, 2023 and 2022, we generated $110,748 and $1,321,357, respectively, of revenue primarily from the sale of devices, supplies and from the reimbursement of costs. In addition, we generated income from licensing and treatment fee agreements with our customers by charging a monthly licensing fee for the duration of the agreement.
Added
We also generated revenue from treatment fee agreements by collecting fees based on the number of treatments per month the customer performs. In addition, we derive revenue from equipment by selling electrodes and patient cables to customers for use with our device.
Added
The decrease in revenue for 2023 compared to 2022 was primarily due to lack of device sales, royalties and expense reimbursements in 2023, relative to 2022. Our distribution partner’s customer was forced shut down operations as a result of the Covid related downturn in China.
Added
This resulted in no new device sales in 2023. 60 Cost of Revenues and Gross Profit For the years ended December 31, 2023 and 2022, cost of revenues were $25,688 and $363,212, respectively, yielding a gross profit of $85,060 and $958,145, respectively, or 77% and 73%, respectively.
Added
Such increase in gross margin was due to the change in our sources of revenue. In 2023 our revenue was from licensing fees and the sales of electrodes and patient cables. The licensing fees have no related costs.
Added
Our cost of revenue in 2022 included costs to produce devices, the cost of the electrodes and patient cables and shipping supplies, In 2022 our revenue was primarily from sales of equipment. The equipment has higher related costs of revenue and related shipping costs.
Added
Operating Expenses Total operating expenses for the years ended December 31, 2023 and 2022 were $5,781,356 and $2,791,176, respectively.
Added
The increase is primarily due to an increase in salaries and benefits of approximately $694,000, an increase in insurance of approximately $193,000, an increase in travel of $122,000, an increase in regulatory and compliance of approximately $33,000 an increase in research and development of approximately $1,411,000, an increase in stock compensation of approximately $680,000 and an increase in taxes of approximately $40,000.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed1 unchanged
Biggest changeThe Company has no foreign operations and therefore is not materially subject to fluctuations in foreign exchange rates, commodity prices or other market rates or prices from market sensitive instruments. ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA See attached Consolidated Financial Statements beginning on page F-1 attached to this Report on Form 10-K. 59
Biggest changeThe Company has no foreign operations and therefore is not materially subject to fluctuations in foreign exchange rates, commodity prices or other market rates or prices from market sensitive instruments. ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA See attached Consolidated Financial Statements beginning on page F-1 attached to this Report on Form 10-K.

Other NXL 10-K year-over-year comparisons