Form 10-Q - Quarterly report [Sections 13 or 15(d)]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______.

Commission file number: 001-41507

NEXALIN TECHNOLOGY, INC.

(Exact name of Registrant as specified in its charter)

Delaware

27-5566468

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

1776 Yorktown, Suite 550

Houston, TX 77056

77056

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (832) 260-0222

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.001 per share	NXL	The Nasdaq Capital Market
Warrants, exercisable for one share of Common Stock	NXLIW	The Nasdaq Capital Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-Accelerated Filer	☒	Smaller Reporting Company	☒
		Emerging Growth Company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of August 8, 2023, there were 7,436,562 shares of the Registrant’s common stock outstanding.

NEXALIN TECHNOLOGY, INC. AND SUBSIDIARY

FORM 10-Q

For the Quarter Ended June 30, 2023

		Page
PART I. FINANCIAL INFORMATION		1

ITEM 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets at June 30, 2023 (unaudited) and December 31, 2022	1

	Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) for the three and six months ended June 30, 2023 and 2022	2

	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (unaudited) for the three and six months ended June 30, 2023 and 2022	3

	Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2023 and 2022	4

	Notes to Unaudited Condensed Consolidated Financial Statements	5

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	34

ITEM 4.	Controls and Procedures	34

PART II. OTHER INFORMATION		36

ITEM 1.	Legal Proceedings	36

ITEM 1A.	Risk Factors	36

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

ITEM 3.	Defaults Upon Senior Securities	36

ITEM 4.	Mine Safety Disclosures	36

ITEM 5.	Other Information	36

ITEM 6.	Exhibits	37

SIGNATURES		38

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

NEXALIN TECHNOLOGY, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,			December, 31
	2023			2022
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	231,722		$	162,743
Short-term investments		4,464,922			6,831,192
Accounts receivable (Includes related party of $10,207 and $0, respectively)		14,322			4,875
Inventory		160,007			154,370
Prepaid expenses and other current assets		240,911			272,282
Total Current Assets		5,111,884			7,425,462
ROU Asset		3,397			6,171
Equipment, net of accumulated depreciation of $2,449 and $2,181, respectively		234			503
Patent, net of amortization		60,106			-
Total Assets	$	5,175,621		$	7,432,136

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable (Includes related party of $0 and $260,000, respectively)	$	48,501		$	658,367
Accrued expenses		603,633			539,822
Lease liability, current portion		30,487			50,797
Loan payable - officer		-			200,000
Note payable		500,000			500,000
Total Current Liabilities		1,182,621			1,948,986
Long-term Liabilities:
Lease liability, net of current portion		-			4,463
Total Liabilities		1,182,621			1,953,449

Commitments and Contingencies (Note 8)

Stockholders’ Equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 7,286,562 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively		7,287			7,287
Accumulated other comprehensive income		33,089			36,313
Additional paid in capital		77,912,815			77,824,427
Accumulated deficit		(73,960,191	)		(72,389,340	)
Total Stockholders’ Equity		3,993,000			5,478,687
Total Liabilities and Stockholders’ Equity	$	5,175,621		$	7,432,136

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

NEXALIN TECHNOLOGY, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Revenues, net (Includes related party of $10,207 and $362,868 for the three months ended and $10,207 and $663,367 for the six months ended respectively)	$	35,540		$	414,288		$	66,100		$	737,610
Cost of revenues		9,374			123,032			16,484			169,047
Gross profit		26,166			291,256			49,616			568,563

Operating expenses:
Professional fees		120,147			183,109			278,747			478,565
Salaries and benefits		303,334			167,260			602,657			305,854
Selling, general and administrative		479,545			385,990			824,498			604,364
Total operating expenses		903,026			736,359			1,705,902			1,388,783

Loss from operations		(876,860	)		(445,103	)		(1,656,286	)		(820,220	)

Other income (expense), net:
Interest income (expense), net		(5,518	)		(17,302	)		(14,355	)		(35,434	)
Gain on sale of short-term investments		58,878			-			97,650			-
Other income		1,063			-			2,140			-
Other income - PPP loan forgiveness					-			-			22,916
Total other income (expense), net		54,423			(17,302	)		85,435			(12,518	)

Net loss		(822,437	)		(462,405	)		(1,570,851	)		(832,738	)

Other comprehensive income (loss):
Unrealized loss from short-term investments		(7,980	)		-			(3,224	)		-
Comprehensive loss	$	(830,417	)	$	(462,405	)	$	(1,574,075	)	$	(832,738	)

Net loss per share attributable to common stockholders - Basic and Diluted	$	(0.11	)	$	(0.09	)	$	(0.22	)	$	(0.17	)

Weighted Average Shares Outstanding - Basic and Diluted		7,286,562			4,896,717			7,286,562			4,896,717

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

NEXALIN TECHNOLOGY, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)


	Common Stock				Accumulated Other Comprehensive Gain (Loss) on		Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		ST Investments		Capital		Deficit			Deficit
Balance as January 1, 2022		4,879,923	$	4,880	$	-	$	69,004,703	$	(70,691,524	)	$	(1,681,941	)
Stock issued for cash		850		1		-		5,099		-			5,100
Stock compensation		24,390		24		-		97,476		-			97,500
Net loss		-		-		-		-		(393,249	)		(393,249	)
Balance as of March 31, 2022		4,905,163	$	4,905	$	-	$	69,107,278	$	(71,084,773	)	$	(1,972,590	)
Stock compensation		-		-		-		171,600		-			171,600
Net loss		-		-		-		-		(439,489	)		(439,489	)
Balance as of June 30, 2022		4,905,163	$	4,905	$	-	$	69,278,878	$	(71,524,262	)	$	(2,240,479	)

	Common Stock				Accumulated Other Comprehensive Gain (Loss) on			Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		ST Investments			Capital		Deficit			Equity
Balance as of January 1, 2023		7,286,562	$	7,287	$	36,313		$	77,824,427	$	(72,389,340	)	$	5,478,687
Other comprehensive gain		-		-		4,756			-		-			4,756
Net loss		-		-		-			-		(748,414	)		(748,414	)
Balance as of March 31, 2023		7,286,562	$	7,287	$	41,069		$	77,824,427	$	(73,137,754	)	$	4,735,029
Other comprehensive loss		-		-		(7,980	)		-		-			(7,980	)
Stock compensation		-		-		-			88,388		-			88,388
Net loss		-		-		-			-		(822,437	)		(822,437	)
Balance as of June 30, 2023		7,286,562	$	7,287	$	33,089		$	77,912,815	$	(73,960,191	)	$	3,993,000

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

NEXALIN TECHNOLOGY, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	Six Months Ended June 30,
	2023			2022
Cash flows from operating activities:
Net Loss	$	(1,570,851	)	$	(832,738	)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad Debt		-			11,175
Stock compensation		88,388			269,100
Depreciation		268			268
Amortization		1,352			-
Forgiveness of PPP Loan		-			(22,916	)
Non-cash lease expense		2,774			2,536
Gain on sale of short-term investments		(97,650	)		-
Changes in operating assets and liabilities:
Accounts receivable		(9,447	)		(18,560	)
Prepaid assets		31,371			(64,052	)
Inventory		(5,637	)		(93,016	)
Accounts payable - related party		(260,000	)		58,099
Accounts payable		(349,866	)		229,061
Accrued expenses		63,811			(12,050	)
Deferred revenue		-			130,000
Lease liability		(24,773	)		(22,450	)
Net cash used in operating activities		(2,130,260	)		(365,543	)

Cash flows from investing activities:
Sale of short-term investments		21,155,143			-
Purchase of short-term investments		(18,694,446	)		-
Purchase of patents		(61,458	)		-
Net cash provided by investing activities		2,399,239			-

Cash flows from financing activities:
Sale of common stock for cash, net of financing fees		-			5,100
Payments on loan payable - shareholder		-			(10,000	)
Payments on notes payable - officer		(200,000	)		-
Net cash used in financing activities		(200,000	)		(4,900	)

Net increase (decrease) in cash and cash equivalents		68,979			(370,443	)
Cash and cash equivalents - beginning of period		162,743			661,778
Cash and cash equivalents - end of period	$	231,722		$	291,335

Non-cash investing and financing activities:
Unrealized loss on short-term investments	$	(3,224	)	$	-
ROU asset and lease liability recorded	$	-		$	11,359

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

NEXALIN TECHNOLOGY, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — NATURE OF THE ORGANIZATION AND BUSINESS

Corporate History

Nexalin Technology, Inc. (“NV Nexalin”) was formed on October 19, 2010 as a Nevada corporation. The Company’s principal offices are located at 1776 Yorktown, Suite 550, Houston, Texas 77056.

On September 6, 2019, Neuro-Health International, Inc. (“Neuro-Health”), a Nevada corporation and wholly owned subsidiary of NV Nexalin, was formed. Neuro-Health had no activity from December 6, 2019 (Inception) through June 30, 2023.

On November 22, 2021, NV Nexalin entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Nexalin Technology, Inc., a Delaware corporation (“Nexalin”, or the “Company”). Pursuant to the Merger Agreement, NV Nexalin merged with and into Nexalin with all shareholders of NV Nexalin receiving one common share of Nexalin in exchange for twenty shares of NV Nexalin held at the time of the Merger Agreement. NV Nexalin treated the transaction as a corporate reorganization with the historical consolidated financial statements of NV Nexalin becoming the historical consolidated financial statements of Nexalin. Nexalin had nominal assets and liabilities and did not conduct any operations prior to the reorganization other than its incorporation. NV Nexalin has retroactively applied the 20-for-1 exchange, effective on November 22, 2021, to share and per share amounts on the unaudited condensed consolidated financial statements for the six months ended June 30, 2023 and 2022. NV Nexalin’s authorized shares of common stock were not affected as a result of the Merger Agreement. As a result of the Merger Agreement, NV Nexalin was dissolved, and Neuro-Health became a subsidiary of Nexalin. The Company completed its initial public offering on September 16, 2022.

The initial public offering consisted of 2,315,000 units consisting of 2,315,000 shares of Common Stock and 2,315,000 accompanying warrants to purchase up to 2,315,000 shares of common stock. 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. In addition, the underwriters purchased 347,250 warrants for net proceeds of $3,473.

Our shares and warrants began trading on the Nasdaq Capital Market tier of the Nasdaq Stock Market (“Nasdaq”) on September 16, 2022, under the symbols “NXL” and “NXLIW”, respectively.

Throughout this report, the terms “Nexalin,” “our,” “we,” “us,” and the “Company” refer to Nexalin Technology, Inc.

Business 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. 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.

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. 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. 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 final decision on amending our existing 510(k) application at 4 milliamps. A new pre-sub document in preparation of a new 510(k) for our Gen-3 Halo headset at 15 milliamps was filed with the FDA in January of 2023. Formal comments to our pre-sub 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. No additional comments have been received from the FDA at this time.

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. 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, cognition and memory, and neurotransmitter changes is planned in China in 2023.

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 the greater Asia Pacific region. In connection with the formation of the joint venture, to be conducted through a company formed under the laws of Hong Kong (the “JV”), the Company entered into a Joint Venture Agreement (“JV Agreement”) with Wider Come Limited (“Wider”). Under the JV Agreement, the Company was issued a 48% minority interest in the JV. The investment in the JV is accounted for using the equity method of accounting. There has been no activity in the joint venture through June 30, 2023. The Incorporation Form (Company Limited by Shares) filed with the Companies Registry in Hong Kong currently reflects a 50%-50% ownership interest in the JV. We have requested that Wider take the necessary action to amend such form to properly reflect the 52%-48% ownership formalized in the JV agreement.

Emerging Growth Company

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated financial statements with another public company which is neither an emerging growth company, nor an emerging growth company which has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.

Risks and Uncertainties

Management continues to evaluate the impact of the economy and the capital markets and has concluded that, while it is reasonably possible that events could have negative effects on the Company’s financial position and results of its operations, the specific impacts are not readily determinable as of the date of these unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of uncertainties.

The current challenging economic climate may lead to adverse changes in cash flows, working capital levels and/or debt balances, which may also have a direct impact on the Company’s operating results and financial position in the future. The ultimate duration and magnitude of the impact and the efficacy of government interventions on the economy has and may continue to indirectly impact the Company because of its current dependence upon its joint venture relationship with Wider Come Limited. Wider Come Limited, as part of its obligations under the JV Agreement, acts as a distributor for the Company’s devices in China and Asia. Because of significant restrictions imposed by the Chinese government during the COVID-19 pandemic through calendar year 2022 and into 2023, 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 have been restricted in their movements resulting in a significant slowdown in the medical and other sectors. 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 in 2022, and into 2023. The extent of future impact is dependent 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. The repercussions of this health crisis could have a material adverse effect on the Company’s business, financial condition, liquidity and operating results.

On May 10, 2023, we received a notice from The NASDAQ Stock Market LLC (or “NASDAQ”) notifying us that we are not in compliance with the requirement of NASDAQ Listing Rule 5450(a)(1) for continued listing on the NASDAQ Global Market as a result of the closing bid price of our common stock being below $1.00 per share for 30 consecutive business days. In accordance with NASDAQ Listing Rule 5810(c)(3)(A), we have 180 calendar days, or until November 6, 2023, to regain compliance with NASDAQ Listing Rule 5450(a)(1). To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive business days. If we do not regain compliance during such period, we may be eligible for an additional compliance period of 180 calendar days, provided that we meet NASDAQ’s continued listing requirement for market value of publicly held shares and all other initial listing standards for the NASDAQ Capital Market, other than the minimum bid price requirement, and provide written notice to NASDAQ of our intention to cure the deficiency during the second compliance period. If we do not regain compliance during the initial compliance period and are not eligible for an additional compliance period, NASDAQ will provide notice that our common stock will be subject to delisting from the NASDAQ Stock Market. In that event, we may appeal such determination to a hearings panel. There can be no assurance that we will satisfy these conditions and that our common stock will remain listed on the NASDAQ Stock Market.

Any delisting of our common stock from The NASDAQ Stock Market could adversely affect our ability to attract new investors, decrease the liquidity of our outstanding shares of common stock, reduce our flexibility to raise additional capital, reduce the price at which our common stock trades, and increase the transaction costs inherent in trading such shares with overall negative effects for our stockholders. In addition, delisting of our common stock could deter broker-dealers from making a market in or otherwise seeking or generating interest in our common stock, and might deter certain institutions and persons from investing in our securities at all. Furthermore, the delisting of our common stock from The NASDAQ Stock Market could adversely affect our business, financial condition and results of operations.

NOTE 2 — LIQUIDITY

The accompanying unaudited condensed consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At June 30, 2023, we had a significant accumulated deficit of approximately $74.0 73,960,191 million. For the three and six months ended June 30, 2023, we had a loss from operations of approximately $.9 876,860 million and $1.7 1,656,286 million, respectively and negative cash flows used in operations of approximately $2.1 2,130,260 million. While we had a working capital surplus as of June 30, 2023 of approximately $3.9 million our operating activities consume most of our cash resources.

We expect to continue to incur operating losses as we execute our development plans, as well as undertaking other potential strategic and business development initiatives through 2023 and through the twelve months from the date of this report. In addition, we have had and expect to have negative cash flows from operations, at least into the near future. We have previously funded these losses primarily through the sale of equity and issuance of convertible notes. We have no convertible notes outstanding at this time. The accompanying unaudited consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.

Our ability to continue as a going concern will be dependent upon our ability to execute on our business plan, including the ability to generate revenue from the joint venture and obtain U.S. approval for the sale of our devices in the United States, and, if necessary, our ability to raise additional capital. Although no assurances can be given as to our ability to deliver on our revenue plans or that unforeseen expenses may arise, management has evaluated the significance of the conditions as of June 30, 2023 and has concluded that due to the receipt of the net proceeds from the completion of the Initial Public Offering, we have sufficient cash and short-term investments on hand to satisfy its anticipated cash requirements for the next twelve months from the issuance of these financial statements.

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS

Basis of Presentation

The accompanying unaudited condensed consolidated financial information has been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) for interim financial information. In the opinion of management, such financial information includes all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the Company’s financial position and the operating results and cash flows. Operating results for the three and six months ended June 30, 2023 and 2022 are not necessarily indicative of the results that may be expected for the entire year or for any other subsequent interim period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to the rules of the U.S. Securities and Exchange Commission (the “SEC”). These unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2022.

Principles of Consolidation

The consolidated financial statements include the accounts of Nexalin and its wholly owned subsidiary Neuro-Health. Intercompany accounts and transactions have been eliminated in consolidation.

The Company accounts for investments in unconsolidated entities where it exercises significant influence, but does not have control, using the equity method. Under the equity method of accounting, the Company recognizes its share of the investee’s net income or loss. Losses are only recognized to the extent the Company has positive carrying value related to the investee. Carrying values are only reduced below zero if the Company has an obligation to provide funding to the investee. The Company’s equity method investments are required to be reviewed for impairment when it is determined there may be another than-temporary loss in value. The Company’s equity method investment is its interest in the newly formed joint venture. There has been no activity in the joint venture through June 30, 2023.

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity-based transactions, revenue and expenses and disclosure of contingent liabilities at the date of the financial statements. The Company bases its estimates and assumptions on historical experience, known or expected trends and various other assumptions that it believes to be reasonable. As future events and their effects cannot be determined with precision, actual results could differ from these estimates, which may cause the Company’s future results to be affected.

Revenue

The Company recognizes revenue when its performance obligations with its customers have been satisfied. At contract inception, the Company determines if the contract is within the scope of ASC Topic 606 and then evaluates the contract using the following five steps: (1) identify the contract with the customer; (2) identify the performance obligations; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only recognizes revenue to the extent that it is probable that a significant revenue reversal will not occur in a future period.

The Company has existing licensing and treatment fee agreements with its customers for the use of the Nexalin device in their practices. These agreements generally have terms of one year with automatic renewal if certain requirements are met and amounts due per these agreements are billed monthly. The Company also sells products related to the provision of services. The Company sells its devices in China to its acting distributor and sells products relating to the use of the devices. The Company has a Royalty Agreement whereby the manufacturer of the Company’s electrodes will pay a royalty to the Company for a three-year period beginning January 1, 2022. The amount of the Royalty is equal to 20% of the amount that the manufacturer invoices to the acting distributor for the sale of the electrodes.

Revenue Streams

The Company derives revenues from its license agreements by charging a monthly licensing fee for the duration of the agreement. The Company derives revenues from equipment by selling additional individual electrodes to customers for use with the Nexalin device. The Company receives revenue from the sale in China of its devices to its acting distributor and from the sale of products relating to the use of those devices. The Company derives revenue as a royalty fee from the China-based manufacturer for electrodes ordered in connection with the Company’s China sales.

Performance Obligations

Management identified that subsequent licensing revenue has one performance obligation. That performance obligation is satisfied as long as the licensing contract remains valid and is not terminated. The licensing revenue is invoiced monthly and is recognized at a point in time in which the invoice is sent to the customer.

Management identified that the Company’s equipment and device revenue has one performance obligation. That performance obligation is satisfied when the equipment and devices are shipped. The Company recognizes revenue at a point in time in which the electrodes and devices are shipped to the customer. The Company does not offer a warranty on the electrodes and devices.

Management identified that treatment fee revenue has one performance obligation. The performance obligation is satisfied upon the completion of individual treatments on patients by customers.

Management identified that royalty revenue has one performance obligation. The performance obligation is satisfied at the time the Electrode manufacturer invoices the acting distributor for the sale to the acting distributor.

Practical Expedients

As part of ASC 606, the Company has adopted several practical expedients including:

●

Significant Financing Component — the Company does not adjust the promised amount of consideration for the effects of a significant financing component since the Company expects, at contract inception, that the period between when the Company transfers a promised goods or services to the customer and when the customer pays for that service will be one year or less.

●

Unsatisfied Performance Obligations — all performance obligations related to contracts with a duration of less than one year, the Company has elected to apply the optional exemption provided in ASC Topic 606 and therefore, is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.

●

Shipping and Handling Activities — the Company elected to account for shipping and handling activities as a fulfilment cost rather than as a separate performance obligation.

●

Right to Invoice — the Company has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date the Company may recognize revenue in the amount to which the entity has a right to invoice.

Disaggregated Revenues

Major Revenue Streams

Revenue consists of the following by service offering:

Schedule of disaggregation of revenue	Three Months Ended
	June 30, 2023		June 30, 2022
Device Sales	$	9,600	$	380,000
Licensing Fee		20,033		19,305
Equipment		5,100		6,095
Other		807		8,888
Total	$	35,540	$	414,288

	Six Months Ended
	June 30, 2023		June 30, 2022
Device Sales	$	9,600	$	644,500
Licensing Fee		43,903		39,448
Equipment		11,500		14,095
Other		1,097		39,567
Total	$	66,100	$	737,610

Major Geographic Locations

	Three Months Ended
	June 30, 2023		June 30, 2022
U.S. Sales	$	25,333	$	41,718
China Sales		10,207		372,570
Total	$	35,540	$	414,288

	Six Months Ended
	June 30, 2023		June 30, 2022
U.S. Sales	$	55,892	$	64,541
China Sales		10,208		673,069
Total	$	66,100	$	737,610

Contract Modifications

There were no contract modifications during the six months ended June 30, 2023 and 2022. Contract modifications are not routine in the performance of the Company’s contracts.

Deferred Revenue

The Company receives payment for equipment and devices in advance of shipping. The Company recognizes the revenue as being earned upon shipment. No deferred revenue was recognized as of June 30, 2023 and December 31, 2022.

Cash and Cash Equivalents

Cash held at financial institutions may at times exceed insured amounts. The Company believes it mitigates such risk by investing in or through, as well as maintaining cash balances, with major financial institutions.

Short-Term Investments

The appropriate classification of marketable securities is determined at the time of purchase and evaluated as of each reporting balance sheet date. Investments in marketable debt and equity securities classified as available-for-sale are reported at fair value. Fair value is determined using quoted market prices in active markets for identical assets or liabilities or quoted prices for similar assets or liabilities or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Unrealized holding gains and losses for equity securities are recognized in earnings. Unrealized holding gains and losses for available for sale debt securities are recognized in other comprehensive income. Realized gains and losses and interest and dividends earned are included in other income (expense), net. For individual debt securities classified as available-for-sale securities, the company determines whether a decline in fair value below the amortized cost basis has resulted from a credit loss or other factors. If the decline below amortized cost is a result of credit loss or the company will more likely than not be required to sell the security before recovery of its amortized cost basis, the company will recognize an impairment relating to the decline through an allowance for credit losses. There were no impairments recognized for the three and six months ended June 30, 2023.

Accounts Receivable

Accounts receivables are reported at their outstanding unpaid principal balances, net of allowances for credit loss. The Company periodically assesses its accounts and other receivables for collectability on a specific identification basis. The Company provides for an allowance for credit loss based on management’s estimate of uncollectible amounts considering age, collection history, and any other factors considered appropriate. Payments are generally due within 30 days of invoice. The Company writes off accounts receivable against the allowance for credit loss when a balance is determined to be uncollectible. During the six months ended June 30, 2023 and 2022, the Company wrote off accounts receivable of $0 and $11,175, respectively. The Company did not record an allowance for credit loss on June 30, 2023 and December 31, 2022, respectively.

Inventory

Inventory consists of finished goods and components stated at the lower of cost or net realizable value with cost determined on a first-in first-out basis. The Company reviews the composition of inventory at each reporting period in order to identify obsolete, slow-moving, quantities in excess of demand, or otherwise non-saleable items.

Equipment

Equipment is recorded at cost. Depreciation is computed using straight-line method over the estimated useful lives of the related assets, generally five years.

Maintenance and repairs are charged to expense as incurred. The Company capitalizes costs attributable to the betterment of property and equipment when such betterment enhances the functionality of the asset or extends the useful life of the asset. Should an asset be disposed of before the end of its useful life, the cost and accumulated depreciation at that date is removed from the consolidated balance sheets, with the resulting gain or loss, if any, reflected in operations in that period.

Patents

Patents are amortized over their useful lives and are reviewed for impairment when warranted by economic conditions. Amortization expense was $1,352 and $0 for the six months ended June 30, 2023 and 2022, respectively. Amortization expense was $691 and $0 for the three months ended June 30, 2023 and 2022, respectively.

The following table summarizes the gross carrying amount, amortization and the net carrying value at June 30, 2023 and December 31, 2022.

Schedule of patents	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
June 30, 2023
Patents	$	61,458	$	1,352	$	60,106
Total June 30, 2023	$	61,458	$	1,352	$	60,106
December 31, 2022
Patents	$	-	$	-	$	-
Total December 31, 2022	$	-	$	-	$	-

Income Taxes

The Company accounts for income taxes pursuant to the asset and liability method which requires the recognition of deferred income tax assets and liabilities related to the expected future tax consequences arising from temporary differences between the carrying amounts and tax bases of assets and liabilities based on enacted statutory tax rates applicable to the periods in which the temporary differences are expected to reverse. Any effects of changes in income tax rates or laws are included in income tax expense in the period of enactment.

The Company records valuation allowances against deferred tax assets when it is more likely than not that all or a portion of a deferred tax asset will not be realized. At June 30, 2023 and December 31, 2022, the Company had a full valuation allowance applied against its net tax assets.

Fair Value Measurements

As defined in ASC 820, Fair Value Measurements and Disclosures, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement.

●

Level 1: Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

●

Level 2: Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

●

Level 3: Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. The significant unobservable inputs used in the fair value measurement for nonrecurring fair value measurements of long-lived assets include pricing models, discounted cash flow methodologies and similar techniques.

Fair Value of Financial Instruments

The carrying value of cash, short-term investments, accounts receivable, inventory, prepaids, accounts payable and accrued expenses, and other current liabilities approximate their fair values based on the short-term maturity of these instruments. The carrying amount of the loans payable approximates the estimated fair value for this financial instrument as management believes that such debt and interest payable on the note approximates the Company’s incremental borrowing rate.

The following table summarizes the amortized cost, unrealized gains and the fair value at June 30, 2023 and December 31, 2022.

	Amortized Cost		Unrealized Gain		Fair Value
June 30, 2023
Short-term investments	$	4,431,833	$	33,089	$	4,464,922
Total June 30, 2023	$	4,431,833	$	33,089	$	4,464,922
December 31, 2022
Short-term investments	$	6,794,879	$	36,313	$	6,831,192
Total December 31, 2022	$	6,794,879	$	36,313	$	6,831,192

The unrealized loss of $3,224 for six months ended June 30, 2023 is included in the table above as a reduction in the total unrealized gain.

The following table provides the carrying value and fair value of the Company’s financial assets measured at fair value as of June 30, 2023 and December 31, 2022.

	Carrying Value		Level 1		Level 2		Level 3
June 30, 2023
U.S. Treasury Notes	$	4,464,922	$	4,464,922	$	-	$	-
December 31, 2022
U.S. Treasury Notes	$	6,831,192	$	6,831,192	$	-	$	-

Net Loss per Common Share

Net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. The dilutive effect, if any, of warrants is calculated using the treasury stock method. These shares were included in the basic and diluted net loss per common share on the unaudited condensed consolidated statements of operations and comprehensive loss.

The following table summarizes the securities that would be excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive due to the Company’s net loss position even though the exercise price could be less than the most recent fair value of the common shares:

Schedule of antidilutive shares
	Three Months Ended June 30,
	2023		2022
Warrants		2,662,250		21,600
Total		2,662,250		21,600

	Six Months Ended June 30,
	2023		2022
Warrants		2,662,250		21,600
Total		2,662,250		21,600

Stock-Based Compensation

The Company applies the provisions of ASC 718, Compensation — Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all stock-based awards made to employees, including employee stock options, in the condensed consolidated statements of operations and comprehensive loss.

For stock options issued to employees and members of the board of directors for their services, the Company estimates the grant date fair value of each option using the Black-Scholes option pricing model. The use of the Black-Scholes option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the common stock. For awards subject to service-based vesting conditions, including those with a graded vesting schedule, the Company recognizes stock-based compensation expense equal to the grant date fair value of stock options on a straight-line basis over the requisite service period, which is generally the vesting term. Forfeitures are recorded as they are incurred as opposed to being estimated at the time of grant and revised.

Pursuant to ASU 2018-07 Compensation — Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting, the Company accounts for stock options issued to non-employees for their services in accordance with ASC 718. The Company uses valuation methods and assumptions to value the stock options that are in line with the process for valuing employee stock options noted above.

Warrant Accounting

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all its financial instruments, including issued private and public warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC Topic 480, Distinguishing Liabilities from Equity, and ASC Topic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity (“ASC 815-40”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is assessed as part of this evaluation. During the reporting periods the Public Warrants were outstanding, they were precluded from liability classification, being equity-classified.

Research and Development

All research and development costs are charged to operations as incurred. For the six months ended June 30, 2023 and 2022, the Company recorded $211,834 and $41,105, respectively, in selling, general and administrative expenses on the unaudited condensed consolidated statements of operations and comprehensive loss. For the three months ended June 30, 2023 and 2022, the Company recorded $146,000 and $29,540 respectively, in selling, general and administrative expenses on the unaudited condensed consolidated statements of operations and comprehensive loss.

Leases

A lease is defined as an agreement that conveys the right to control the use of identified property, plant or equipment (right of use asset or “ROU asset”) for a period of time in exchange for consideration. The Company accounts for its leases in accordance with ASC 842, Leases, which requires that an ROU asset identified in a lease to be recorded as a noncurrent asset with a related liability. The Company does not record ROU assets for those agreements of a twelve-month duration or less. The Company recognized a ROU asset and corresponding lease liability on its balance sheets related to its office lease agreement. See Note 9, Leases, for further discussion, including the impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.

ROU assets include any initial direct costs and prepaid lease payments and exclude any lease incentives. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The lease terms may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option.

Recent Accounting Pronouncements

In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842), which amends the effective date of the original pronouncement for smaller reporting companies. ASU 2016-13 and its amendments are in effect for the Company for interim and annual periods in fiscal years beginning after December 15, 2022. The adoption on January 1, 2023 modified the way the Company analyzes financial instruments, but it did not have a material impact on our consolidated financial statements.

All other newly issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to the Company.

NOTE 4 — ACCRUED EXPENSES

Accrued expenses consist of the following amounts:

Schedule of accrued expenses	June 30, 2023		December 31, 2022
Accrued interest	$	105,001	$	111,501
Accrued – other		52,653		2,321
Accrued settlement liabilities		336,000		336,000
Accrued research and development expense		109,979		90,000
Total	$	603,633	$	539,822

NOTE 5 — NON-CONSOLIDATED JOINT VENTURE AND RELATED PARTY TRANSACTIONS

Formalized Joint Venture

On December 21, 2018, the Company entered into the first of a series of preliminary agreements providing for the establishment of a joint venture (“JV”) agreement (the “JV Agreement”) with Wider Come Limited, a China company (“Wider”) for the purpose of marketing, sale and distribution of the Company’s proprietary devices for the treatment of (i) anxiety, depression and insomnia (“ADI”) and (ii) Alzheimer’s and dementia (“AD”) in the applicable territories. Wider has an experienced medical technology team in China. The parties formalized the JV on May 31, 2023. The joint venture is to be conducted through a company formed under the laws of Hong Kong.

The JV will design and implement a comprehensive business model and distribution plan for our devices in China, Hong Kong, Macau and Taiwan. The embodiment of the agreed-upon terms and conditions of the JV in the formalized JV Agreement follows Wider’s completion of certain funding, clinical study, and publication milestones, as well as the resolution of certain regulatory concerns in China.

The Company granted the JV a license to commercialize and exploit certain of the Company’s products and technologies in specified designated territories., and the JV will design and implement a comprehensive business model and distribution plan for these products and devices in such designated territories.

Under the JV Agreement, Wider is obligated to fund all operations for the initial 12-month period of the JV, after which Nexalin and Wider plan to jointly fund the JV’s operating expenses in accordance with their pro rata ownership.

The JV entity 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 will own 52% and 48% of the JV, respectively. There has been no activity in the joint venture through June 30, 2023. The Incorporation Form (Company Limited by Shares) filed with the Companies Registry in Hong Kong currently reflects a 50%-50% ownership interest in the JV. We have requested that Wider take the necessary actions to amend such form to properly reflect the 52%-48% ownership formalized in the JV Agreement.

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. As part of the consideration for Wider’s performance of its obligations to the Company prior to the recent formalization of the JV, 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 contributed $200,000 to the Company. During the year ended December 31, 2020, the Company issued 150,000 shares to affiliates of Wider in satisfaction of the obligation. The fair value of the 150,000 shares issued (less the contributed $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 condensed consolidated statement of operations and comprehensive loss.

During the six months ended June 30, 2023 and 2022, the Company recorded $10,207 and $663,367 in revenue, respectively, from Wider on the unaudited condensed consolidated statements of operations and comprehensive loss. During the three months ended June 30, 2023 and 2022, the Company recorded $10,207 and $362,868 in revenue, respectively, from Wider on the unaudited condensed consolidated statements of operations and comprehensive loss.

U.S. Asian Consulting Group, LLC

On May 9, 2018, the Company entered into a five-year consulting agreement with U.S. Asian Consulting Group, LLC (“U.S. Asian”). On March 4, 2021, the contract was extended for an additional eight years. The two members of U.S. Asian are shareholders in the Company and include Leonard Osser and Marilyn Elson, who is the Chief Financial Officer of the Company. Pursuant to the consulting agreement, U.S. Asian will provide consulting services to the Company with regard to, among other things, corporate development and financing arrangements. Pursuant to the contract extension, Mr. Osser was given the title of Director of Chinese Operations. The Company is to pay U.S. Asian $10,000 per month for services rendered and, on October 24, 2018, the Company issued 249,750 shares of the Company’s common stock to U.S. Asian. The Company recorded consulting expenses related to the consulting agreement of $60,000 for each of the six months ended June 30, 2023 and 2022, respectively, and $30,000 for each of the three months ended June 30, 2023 and 2022, respectively, on the Company’s unaudited consolidated statements of operations. At June 30, 2023 and December 31, 2022, U.S. Asian was owed $0 and $260,000, respectively, for accrued and unpaid services.

On December 22, 2021, the Company entered into a one-year agreement with Leonard Osser to serve on the Company’s Board of Advisors. The agreement may be, but has not yet been, extended for an additional one-year term upon agreement of both parties. As consideration Mr. Osser was entitled to $80,000 in shares of the Company’s common stock, which was waived by Mr. Osser.

Officers

On January 11, 2022, the Company entered into an employment agreement with Marilyn Elson to serve as Chief Financial Officer of the Company for a three-year term with an option for the Company and Ms. Elson to extend the term for an additional two years. Ms. Elson is the spouse of Leonard Osser.

On July 1, 2023, the Company entered into a new employment agreement with Mark White to serve as Chief Executive Officer, a new services agreement with David Owens, M.D. to serve as Chief Medical Officer and a new employment agreement with Michael Nketiah to serve as Senior Vice President, Quality, Regulatory and Clinical Affairs. Each of the foregoing agreements are governed by three-year terms and provide compensation in the form of performance-based stock option awards, subject to and contingent upon approval and adoption of the Board of Directors, as well as approval of the stockholders and, in all cases, based on the closing price of the Company's publicly-traded common stock on the applicable date of grant. Under the terms of his employment agreement, Mr. White is entitled to (i) a sign-on/retention bonus consisting of a one-time lump-sum payment of $50,000 and a grant of nonqualified stock options to purchase shares of the Company's common stock with an exercise price equal to $400,000, and (ii) stock option grants to purchase shares of the Company's common stock with an exercise price equal to $840,000. Under the terms of his service agreement, Mr. Owens is entitled to (i) a sign-on/retention bonus consisting of a grant of nonqualified stock options to purchase shares of the Company's common stock with an exercise price equal to $125,000 and (ii) stock option grants to purchase shares of the Company's common stock with an exercise price equal to $585,000. Under the terms of his employment agreement Mr. Nketiah is entitled to stock option grants to purchase shares of the Company's common stock with an exercise price equal to $90,000. In addition to the payments stock and option grants described above, each of Messrs. White, Owens and Nketiah are receiving cash compensation and are eligible for additional cash bonuses.

Loan Payable – Officer

On November 1, 2021, the Company received $200,000 as a loan from the Company’s Chief Executive Officer. The loan had a principal of $200,000, an interest rate of 9%, and a maturity date of the earlier of (i) October 31, 2022 or (ii) the date of the consummation of the initial public offering. The note was amended as of January 1, 2023 to extend the due date to March 17, 2023 and to provide that interest payable on the maturity date will be $39,000 less any interest payments previously made. Total interest expense on this note was $18,000 and $4,500 for the six months ended June 30, 2023 and 2022, respectively. The December 31, 2022 outstanding principal balance of $200,000 was satisfied by a payment on March 17, 2023. The March 31, 2023 outstanding interest balance of $34,500 was satisfied by a payment on April 26, 2023.

Leases

Our principle executive office is located at 1776 Yorktown, Suite 550, Houston, Texas 77056. Under ASC 842 “Leases”, we have two separate sub-leases (through IIcom Strategic Inc. controlled and owned by our Chief Executive Officer) totaling approximately 4,000 square feet of office space under operating leases. Management and supporting staff are hosted at this location. Our lease payments for fiscal year 2022 were $54,000. Our lease costs for each of the six months ended June 30, 2023 and 2022 were $27,000. The sub-leases are due to expire in 2024. Pursuant to the sublease, we pay the third-party landlord (not the sub landlord) all direct and indirect rent costs under the primary lease directly for the leased premises. No additional payments are made to the Chief Executive Officer or the entity controlled by him.

NOTE 6 — LOANS PAYABLE

Legacy Ventures International, Inc.

On September 11, 2017, the Company issued a promissory note (the “Promissory Note”) in favor of Legacy Ventures International, Inc. (“Legacy”) as part of a commercial transaction with Legacy that was never consummated. The Promissory Note was issued in the original principal amount of $500,000, with interest at 4% per annum and a maturity date of December 31, 2017. As of June 30, 2023, this promissory note is in default. The Company recorded $10,000 and $10,000 of interest expense for the six months ended June 30, 2023 and 2022, respectively. The Company recorded $5,000 and $5,000 of interest expense for the three months ended June 30, 2023 and 2022, respectively. The amount outstanding at June 30, 2023 and December 31, 2022 was $500,000.

NOTE 7 — STOCKHOLDERS’ EQUITY (Deficit)

Issuance of Common Stock

During the six months ended June 30, 2022, the Company issued 850 shares of common stock to an investor for cash proceeds of $5,100 with a fair value of $6.00 per share.

During the six months ended June 30, 2022, the Company issued 24,390 shares of common stock to a consultant for services rendered in lieu of cash for an aggregate compensation charge of $150,000, of which $37,500 was expensed during the six months ended June 30, 2022, in the unaudited condensed consolidated statement of operations and comprehensive loss. In addition, $231,600 was expensed as stock compensation related to shares not yet issued in the unaudited condensed consolidated statement of operations and comprehensive loss.

During the six months ended June 30, 2023, the Company issued no shares of common stock.

Warrants

The issuance of warrants to purchase shares of the Company’s common stock are summarized as follows:

Schedule of warrants	Number of warrants		Weighted Average Exercise Price
Outstanding December 31, 2022		2,662,250	$	4.15
Issued		-		-
Exercised		-		-
Expired or cancelled		-		-
Outstanding June 30, 2023		2,662,250	$	4.15

The following table summarizes information about warrants to purchase shares of the Company’s common stock outstanding and exercisable at June 30 2023:


Exercise Price		Outstanding Number of Warrants		Weighted Average Remaining Life In Years		Weighted Average Exercise Price		Exercisable Number of Warrants
$	4.15		2,315,000		2.25	$	4.15		2,135,000
$	4.15		347,250		2.25		4.15		347,250
			2,662,250		2.25	$	4.15		2,662,250

The compensation expense attributed to the issuance of the warrants, if required to be recognized on the nature of the transaction, was recognized as they vested/earned. These warrants are exercisable up to three years from the date of grant. All are currently exercisable.

NOTE 8 — COMMITMENTS AND CONTINGENCIES

Legal Claims

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. 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. 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. On March 12, 2021, the Company filed its answer to the Complaint. Although the parties are seeking mediation, the court has set a trial in this matter for March 18, 2024. 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.

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. Management has petitioned for reassessment and believes 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. 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 unaudited condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022 and believes it has adequately accrued for this matter.

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. 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 was to conduct the 2017 Study concerning updating the 2017 Study and completing an updated study and related work. 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. The Company received follow-up correspondence from the University of Arizona on June 29, 2023, pursuant to which the University of Arizona may proceed with referring the matter to collections if, and in the event that, an agreement may not be reached within sixty days thereof. Discussions with the University of Arizona are ongoing, and no resolution has been reached but the Company hopes to achieve a consensual resolution.

NOTE 9 — LEASES

With the adoption of ASC 842, operating lease agreements are required to be recognized on the balance sheet as ROU assets and corresponding lease liabilities.

On January 1, 2022, the Company exercised its right to lease an additional 400 square feet of office space and an increase of monthly rent of $500. In accordance with ASC 842 management accounted for this as a separate lease and, as a result, recorded an ROU asset and lease liability of $11,359.

When measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease payments using its estimated incremental borrowing rate at January 1, 2022. The weighted average incremental borrowing rate applied was 9%.

Operating leases are included in the consolidated balance sheets as follows:

Schedule of Operating leases	Classification	June 30, 2023		December 31, 2022
Lease assets
Operating lease cost ROU assets	Assets	$	3,397	$	6,171
Total lease assets		$	3,397	$	6,171

Lease liabilities
Operating lease liabilities, current	Current liabilities	$	30,487	$	50,797
Operating lease liabilities, non-current	Liabilities		-		4,463
Total lease liabilities		$	30,487	$	55,260

The components of lease costs, which are included in income from operations in our unaudited condensed consolidated statements of operations, were as follows:

Schedule of lease cost
	Three Months Ended June 30,
	2023		2022
Leases costs
Operating lease costs	$	13,500	$	13,500
Total lease costs	$	13,500	$	13,500

	Six Months Ended June 30,
	2023		2022
Leases costs
Operating lease costs	$	27,000	$	27,000
Total lease costs	$	27,000	$	27,000

Future minimum payments under non-cancellable leases for operating leases for the remaining terms of the leases following the six months ended June 30, 2023:


Fiscal Year	Operating Leases
Remainder of 2023	$	26,901
2024		4,496
Total future minimum lease payments		31,397
Amount representing interest		910
Present value of net future minimum lease payments	$	30,487

Additional information related to leases is presented as follows:

	June 30, 2023			December 31, 2022
Leases
Weighted average remaining lease term		0.5			1.00
Weighted average discount rate		9.9	%		9.9	%

NOTE 10 — CONCENTRATION OF CREDIT RISK

Revenues

Three customers accounted for 65% and 54% of revenues for the three and six months ended June 30, 2023, respectively as set forth below:

Concentration of credit risk	Three Months Ended June 30, 2023			Six Months Ended June 30, 2023
Customer A - related party		29	%		15	%
Customer B		21	%		23	%
Customer C		15	%		16	%

One customer, a related party, accounted for 88% and 90% of revenue for the three and six months ended June 30, 2022, respectively.

Accounts Receivable

Two customers accounted for 85% of accounts receivable at June 30, 2023, as set forth below:

	June 30, 2023
Customer A - related party		71	%
Customer B		14	%

Four customers accounted for 84% of accounts receivable at December 31, 2022, as set forth below:

	December 31, 2022
Customer A		29	%
Customer B		20	%
Customer C		20	%
Customer D		15	%

NOTE 11 — SUBSEQUENT EVENTS

Management evaluated subsequent events and transactions that occurred after the balance sheet date, up to the date that the unaudited financial statements were issued. Subsequent to period end and through August 8, 2023, the Company issued an additional 150,000 shares on July 13, 2023 to certain designated Wider shareholders pursuant to the terms of the collaborative agreement between the Company and Wider.

Management did not identify any additional subsequent events that would have required adjustment or disclosure in the unaudited consolidated condensed financial statements.

ITEM 2. 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 quarterly report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in included in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission, or SEC on March 27, 2023. 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. 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. 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. 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. 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. Reference is made to “Risk Factors “in this quarterly report on Form 10-Q as well as the risk factors set forth in the section titled “Risk Factors” included in our Registration Statement for our initial public offering as filed with the Securities and Exchange Commission (SEC File number 333-26198), 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.

Overview

Medical professionals in the United States have utilized the Gen-1 device to administer to patients in clinical settings. 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. 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. 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.

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. 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. 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 amending our existing 510(k) application at 4 milliamps. A new pre-sub document in preparation of a new 510K for our Gen-3 Halo headset at 15 mAmps was filed with the FDA in January of 2023. Formal comments to our pre-sub 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. No additional comments have been received from the FDA at this time.

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. 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. 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. 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 new Gen-3 device is also scheduled for additional pilot trials for anxiety and insomnia in the United States and China beginning in the fourth quarter of 2023. Preliminary data provided by the University of California San Diego supports the safety of utilizing our 15 milliamp waveform technology. 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. 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.

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 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.

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. 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. 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. By increasing the power, our waveform can penetrate deeper into the brain and stimulate deep mid-brain structures associated with mental illness. Our research and clinical teams believe that a more powerful waveform will create a stronger response in the brain. A stronger response creates a higher level of efficacy. This entire proprietary technique allows Nexalin to provide a safe and comfortable treatment that is more powerful than any stimulation device in the market. Current pilot study protocols and randomized clinical trials have been designed and submitted to the FDA to provide feedback on final reports and data sets for the purpose of safety and efficacy evaluations in the future. Determinations of the safety and efficacy of our devices are solely within the authority of the FDA.

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. Determinations of the safety and efficacy of our devices in the United States are solely within the authority of the FDA.

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. 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. 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.

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. 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. 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. 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. 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. 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. 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. 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. 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. 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.

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. 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 information systems including personnel to support our product development and planned future commercialization efforts;

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.

Recent Developments

Completion of Initial Public Offering

The Company completed its initial public offering on September 16, 2022. 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. 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. 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.

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. 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.

Impact of COVID-19 Pandemic

We continue to be indirectly impacted by the Covid-19 pandemic 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. 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. 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 the past year. 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.

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. 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.

Formalization of the Joint Venture; China Related Activities

The Company granted the JV a license to commercialize and exploit certain of the Company’s products and technologies in specified designated territories, and the JV will design and implement a comprehensive business model and distribution plan for these products and devices in such designated territories.

The JV entity 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 will own 52% and 48% of the JV, respectively. The Incorporation Form (Company Limited by Shares) filed with the Companies Registry in Hong Kong currently reflects a 50%-50% ownership interest in the JV. We have requested that Wider take the necessary actions to amend such form to properly reflect the 52%-48% ownership formalized in the JV Agreement.

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. As part of the consideration for Wider’s performance of its obligations to the Company prior to the recent formalization of the JV, 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 contributed $200,000 to the Company. During the year ended December 31, 2020, the Company issued 150,000 shares to affiliates of Wider in satisfaction of the obligation. The fair value of the 150,000 shares issued (less the contributed $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 statement of operations. On July 13, 2023, the Company issued an additional 150,000 shares to certain designated Wider shareholders pursuant to the terms of the collaborative agreement between the Company and Wider. Under the terms of the collaborative agreement, designated shareholders of Wider are entitled to an additional 150,000 shares upon Wider’s achievement of certain milestones.

Results of Operations

Comparison of the three months ended June 30, 2023 and 2022

Our financial results for the three months ended June 30, 2023 and 2022 are summarized as follows:

	Three Months Ended June 30,
	2023			2022			Change			Change⁽¹⁾
							$			%
Revenues, net	$	35,540		$	414,288		$	(378,748	)		(91	)%
Cost of revenues		9,374			123,032			(113,658	)		(92	)%
Gross profit		26,166			291,256			(265,090	)		(91	)%

Operating expenses:
Professional fees		120,147			183,109			(62,962	)		(34	)%
Salaries and benefits		303,334			167,260			136,074			81	%
Selling, general and administrative		479,545			385,990			93,555			24	%
Total operating expenses		903,026			736,359			166,667			23	%
Loss from operations		(876,860	)		(445,103	)		(431,757	)		97	%
Other income (expense), net:
Interest income (expense), net		(5,518	)		(17,302	)		11,784			(68	)%
Gain on sale of short-term investments		58,878			-			58,878			100	%
Other income		1,063			-			1,063			100	%
Other income - PPP loan forgiveness		-			-			-			100	%
Total other income (expense), net		54,423			(17,302	)		71,725			(415	)%
Net loss	$	(822,437	)	$	(462,405	)	$	(360,032	)		78	%

Other comprehensive income (loss):
Unrealized loss from short-term investments		(7,980	)		-			(7,980	)		100	%
Comprehensive loss	$	(830,417	)	$	(462,405	)	$	(368,012	)		80	%

(1)

Percentages may not foot due to rounding.

Revenues

For the three months ended June 30, 2023 and 2022, we generated $35,540 and $414,288 respectively, of revenue primarily from the sale of devices, supplies and from licensing and treatment fee agreements with our customers for which we charge a monthly licensing fee for the duration of the agreement. 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 derived revenue from equipment by selling electrodes and patient cables to customers for use with our device. We also derive revenue as a royalty fee from the China-based manufacturer for electrodes ordered in connection with the Company’s China sales. The decrease in revenue for 2023 compared to 2022 was primarily due to the decrease in device sales as a result of the difficulties encountered by our distribution network given the Covid restrictions in China.

Cost of Revenues and Gross Profit

For the three months ended June 30, 2023 and 2022, cost of revenues was $9,374 and $123,032, respectively, yielding a gross profit of $26,166 and $291,256 respectively, or 74% and 70%, respectively. Such increase in gross margin was due to the change in our sources of revenue. Our revenue for the quarter ended June 30, 2023 was primarily from license fees which have a greater gross margin than our other revenues.

Operating Expenses

Total operating expenses for the three months ended June 30, 2023 and 2022 were $903,026 and $736,359, respectively. The increase in selling, general and administrative expenses was due primarily to an increase in research and development costs of approximately $116,000, an increase in insurance of approximately $77,000, an increase in travel of approximately $34,000 and an increase in salaries and benefits of approximately $134,000. The increases in research and development and consulting costs are attributable to the development of our Gen-2 and Gen-3 devices. The increase in insurance is a result of being a public company. The increase in salaries and benefits is primarily due to the hiring of our Senior VP and other staff.

These amounts were offset by a decrease in professional fees of approximately $63,000 primarily due to large fees in 2022 relating to the public offering, a reduction in consulting fees of approximately $41,000 primarily due to an increase in staff and a reduction in stock compensation of $83,000.

Other Income (Expense), Net

Other income (expense), net for the three months ended June 30, 2023 and 2022 was $54,423 and $(17,302), respectively, consisting of interest and dividend income and gain on the sale of short-term investments offset by interest expense.

Comparison of the Six Months ended June 30, 2023 and 2022

Our financial results for the six months ended June 30, 2023 and 2022 are summarized as follows:

	Six Months Ended June 30,
	2023			2022			Change			Change⁽¹⁾
							$			%
Revenues, net	$	66,100		$	737,610		$	(671,510	)		(91	)%
Cost of revenues		16,484			169,047			(152,563	)		(90	)%
Gross profit		49,616			568,563			(518,947	)		(91	)%

Operating expenses:
Professional fees		278,747			478,565			(199,818	)		(42	)%
Salaries and benefits		602,657			305,854			296,803			97	%
Selling, general and administrative		824,498			604,364			220,134			36	%
Total operating expenses		1,705,902			1,388,783			317,119			23	%
Loss from operations		(1,656,286	)		(820,220	)		(836,066	)		102	%
Other income (expense), net:
Interest income (expense), net		(14,355	)		(35,434	)		21,079			(59	)%
Gain on sale of short-term investments		97,650			-			97,650			100	%
Other income		2,140			22,916			(20,776	)		(91	)%
Other income - PPP loan forgiveness		-			22,916			(22,916	)		(100	)%
Total other income (expense), net		85,435			(12,518	)		97,953			(782	)%
Net loss	$	(1,570,851	)	$	(832,738	)	$	(738,113	)		89	%

Other comprehensive income (loss):
Unrealized loss from short-term investments		(3,224	)		-			(3,224	)		100	%
Comprehensive loss	$	(1,574,075	)	$	(832,738	)	$	(741,337	)		89	%

(1)

Percentages may not foot due to rounding.

Revenues

For the six months ended June 30, 2023 and 2022, we generated $66,100 and $737,610, 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. We also generated revenue from treatment fee agreements by collecting fees based on the number of treatments per month the customer performs. We also derive revenues from equipment by selling electrodes to customers for use with our device and from royalties from the manufacturer of our electrodes. We also derive revenue as a royalty fee from the China-based manufacturer for electrodes ordered in connection with the Company’s China sales. The decrease in revenue for 2023 compared to 2022 was primarily due to the decrease in device sales as a result of the difficulties encountered by our distribution network given the Covid restrictions in China.

Cost of Revenue and Gross Profit

For the six months ended June 30, 2023 and 2022, cost of revenues were $16,484 and $169,047, respectively, yielding a gross profit of $49,616 and $568,563, respectively, or 75% and 77%, respectively. Such decrease in gross margin was due to the change in our sources of revenue. In 2022 our revenue included royalties and billable expense income which have no related costs.

Operating Expenses

Total operating expenses for the six months ended June 30, 2023 and 2022 were $1,705,902 and $1,388,783, respectively. The increase of approximately $297,000 in salaries and benefits was due to the hiring of our Senior VP and other staff. There was an increase in research and development costs of approximately $150,000, an increase in regulatory and compliance costs of approximately $14,000, an increase in insurance of approximately $152,000 an increase in travel of approximately $77,000 and an increase in taxes of approximately $40,000. The increases in research and development and consulting costs are attributable to the development of our Gen-2 and Gen-3 devices. The increase in insurance is a result of being a public company. The increase in travel is primarily due to team members traveling to the home office and the cost of trips to work with and solidify our relationship with our JV partner. The increase in taxes is due to the Delaware Franchise Tax. These amounts are offset by a decrease in professional fees of approximately $200,000 primarily due to large fees in 2022 relating to the public offering, a reduction in consulting fees of approximately $89,000 primarily due to an increase in staff and a reduction in stock compensation of $180,000.

Other Income (Expense), Net

Other income (expense), net for the six months ended June 30, 2023 and 2022 was $85,435 and $(12,518), respectively, consisting of interest and dividend income and gain on the sale of short-term investments offset by interest expense net of the PPP loan forgiveness.

Liquidity and Capital Resources

Working Capital

	June 30, 2023		December 31, 2022
Current assets	$	5,111,884	$	7,425,462
Current liabilities		1,182,621		1,948,986
Working capital	$	3,929,263	$	5,476,476

Current assets decreased for the six months ended June 30, 2023 primarily a result of funding operations and the paydown of debt. Cash and cash equivalents increased approximately $69,000. Short-term investments decreased approximately $2.4 million, and prepaid and other current assets decreased approximately $31,000.

Current liabilities decreased for the six months ended June 30, 2023 primarily as a result of the reduction of accounts payable and repayment of a loan payable to an officer of the Company. Accounts payable decreased approximately $610,000, accrued expenses increased approximately $64,000, lease liability – current portion decreased approximately $20,000, and loan payable - officer decreased by $200,000.

Cash Flows

The following table summarizes our consolidated cash flows for the six months ended June 30, 2023 and 2022:

	June 30, 2023			June 30, 2022
Net cash used in operating activities	$	(2,130,260	)	$	(365,543	)
Net cash provided by investing activities	$	2,399,239		$	-
Net cash used in financing activities	$	(200,000	)	$	(4,900	)

Net Cash Used In Operating Activities

Net cash used in operating activities was $2,130,260 for the six months ended June 30, 2023, as compared to $365,543 for the respective period in 2022, primarily due to the net loss of $1,570,851, as well as decrease in accounts payable of approximately $897,000.

Net Cash Provided By Investing Activities

Net cash provided by investing activities during the six months ended June 30, 2023, and 2022 was $2,399,239 and $0 respectively, which was due to the net sales of $21,155,143 offset by purchases of $18,694,446 of short-term investments and the purchase of patents of $61,458.

Net Cash used In Financing Activities

Net cash used in financing activities during the six months ended June 30, 2023 and 2022 was $200,000 and $4,900 respectively, which was primarily due to payment of note payable to an officer of the Company of $200,000 in the current period.

Uses and Availability of Additional Funds

Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, manufacturing development costs, legal and other regulatory expenses, and general administrative costs. Although we have produced Gen-2, which is selling in China where it is approved for certain utilizations by medical practitioners, the successful development of our future products is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the clinical development of Gen-3 and obtain regulatory approvals. We are also unable to predict when, if ever, net cash inflows from revenues will enable us to be cash flow positive. This is due to the numerous risks and uncertainties associated with developing products, including, among others, the uncertainty of:

	●	successful enrolment in, and completion of clinical trials;

	●	performing preclinical studies and clinical trials in compliance with the FDA or any comparable regulatory authority requirements;

	●	the ability of collaborators to manufacture sufficient quantity of product for development, clinical trials and/ or potential commercialization;

	●	obtaining and maintaining patent, trademark and trade secret protection for our products;

	●	making arrangements with third parties for manufacturing;

	●	scaling the commercial sales of products, if and when approved, whether alone or in collaboration with others;

	●	acceptance of existing therapies, and future 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;

	●	protecting our rights in our intellectual property portfolio; and

	●	maintaining a continued acceptable safety profile of our products following approval.

Liquidity and Capital Resources

As of June 30, 2023, the Company had a significant accumulated deficit of $74.0 million. For the six months ended June 30, 2023, the Company had a loss from operations of $1.7 million and negative cash flows from operations of $2.1 million. The Company’s operating activities consume the majority of its cash resources. The Company will continue to service existing customers in the United States. The Company sold devices in China to its acting distributor. The Company anticipates that it will continue to incur operating losses as it executes its development plans through 2023, as well as other potential strategic and business development initiatives. In addition, the Company has had and expects to have negative cash flows from operations, at least into the near future. The Company previously funded these losses primarily through the sale of equity and issuance of convertible notes. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. As of the June 30, 2023, the Company had cash and cash equivalents on hand of approximately $232 thousand and short-term investments of approximately $4.46 million.

At the closing on September 16, 2022, the Company sold 2,315,000 Units and 347,250 of Warrants in an Initial Public Offering (the “Initial Public Offering”) at a price of $4.15 per Unit and $0.01 per Warrant for a total of $9,610,723. The Company incurred offering costs of $1,067,078, consisting of $878,858 of underwriting fees and expenses and $188,220 of costs related to the Initial Public Offering.

Although no assurances can be given as to the Company’s ability to deliver on its revenue plans or that unforeseen expenses may arise, management has evaluated the significance of the conditions and has concluded that because of the completion of our initial public offering in September 2022, the Company has sufficient cash and investments on hand to satisfy its anticipated cash requirements for the next twelve months from the issuance date of these financial statements.

Critical Accounting Policies and Significant Judgments and Estimates

Our unaudited condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our unaudited condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our unaudited condensed consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 3 to our unaudited condensed consolidated financial statements appearing elsewhere in this Form 10-Q, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our unaudited condensed consolidated financial statements.

Revenue Recognition

Revenue Streams

The Company derives revenues from its license agreements by charging a monthly licensing fee for the duration of the agreement. The Company derives revenues from equipment by selling additional individual electrodes and patient cables to customers for use with the Nexalin device. The Company receives revenue from the sale in China of its devices to its acting distributor and from the sale of products relating to the use of those devices. The Company derives revenue as a royalty fee from the China-based manufacturer for electrodes ordered in connection with the Company’s China sales.

Performance Obligations

Management identified that our equipment revenue has one performance obligation. That performance obligation is satisfied when the electrodes and devices are shipped to the customer. We do not offer a warranty on the electrodes or devices.

Management identified that treatment fee revenue has one performance obligation. The performance obligation is satisfied upon the completion of individual treatments on patients by customers.

Management identified that our royalty fee has one performance obligation. The performance obligation is satisfied as long as the royalty agreement remains valid and is not terminated. The royalty revenue is invoiced when the manufacturer advises the Company that the invoice has been sent to the customer.

See Note 8 to the consolidated financial statements contained in this report for more information regarding our commitments and contingencies.

Practical Expedients

As part of ASC 606, the Company has adopted several practical expedients including:

	●	Significant Financing Component — we do not adjust the promised amount of consideration for the effects of a significant financing component since we expect, at contract inception, that the period between when we transfer a promised goods or services to the customer and when the customer pays for that service will be one year or less.

	●	Unsatisfied Performance Obligations — for all performance obligations related to contracts with a duration of less than one year, we have elected to apply the optional exemption provided in ASC Topic 606 and therefore, are not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.

	●	Shipping and Handling Activities — we elected to account for shipping and handling activities as a fulfilment cost rather than as a separate performance obligation.

	●	Right to invoice — we have the right to consideration from a customer in an amount that corresponds directly with the value to the customer of our performance completed to date we may recognize revenue in the amount to which the entity has a right to invoice.

Recent Accounting Pronouncements

All other newly issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to the Company.

Contractual Obligations

See Note 8 – Commitments and Contingencies in the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for a summary of our contractual obligations.

Emerging Growth Company Status

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we intend to take advantage of some of the exemptions from reporting requirements that are applicable to other public companies that are not emerging growth companies. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our share price may be more volatile. We may take advantage of these exemptions until the last day of our fiscal year following the fifth anniversary of the completion of this offering. 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 Exchange Act), we will cease to be an emerging growth company prior to the end of such five-year period. 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. Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are emerging growth companies. As a result, changes in rules of U.S. generally accepted accounting principles or their interpretation, the adoption of new guidance or the application of existing guidance to changes in our business could significantly affect our financial position and results of operations.

Continued Nasdaq Listing. On May 19, 2023, the Company received a notice from the Nasdaq Stock Market (“Nasdaq”) notifying the Company that, for the last 30 consecutive business days, the closing bid price for the Company’s common stock listed on Nasdaq has been below the minimum $1.00 per share required for continued listing on the Nasdaq Global Select Market pursuant to Nasdaq Listing Rule 5450(a)(1) (the “Bid Price Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided a period of 180 calendar days, or until November 6, 2023, to regain compliance with the Bid Price Requirement.

If we do not regain compliance with the Minimum Bid Price Requirement by the Compliance Date, we may be eligible for an additional 180 calendar day compliance period. To qualify, we would need to transfer the listing of our common stock to The Nasdaq Capital Market, provided that we meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and would need to provide written notice to Nasdaq of our intention to cure the deficiency during the additional compliance period. To effect such a transfer, we would also need to pay an application fee to Nasdaq and provide written notice to the Staff of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split if necessary. As part of its review process, the Staff will make a determination of whether it believes we will be able to cure the deficiency. Should the Staff conclude that we will not be able to cure the deficiency, the Staff will provide written notification to us that our common stock will be subject to delisting. At that time, we may appeal the Staff’s delisting determination to a Nasdaq Listing and Hearing Review Panel. However, there can be no assurance that, if we receive a delisting notice and appeal the delisting determination by the Staff to the panel, such appeal would be successful.

We intend to monitor the closing bid price of our common stock and may, if appropriate, consider available options to regain compliance with the Minimum Bid Price Requirement, which could include seeking to effect a reverse stock split. However, there can be no assurance that we will be able to regain compliance with the Minimum Bid Price Requirement, secure a second period of 180 days to regain compliance, or maintain compliance with any of the other Nasdaq continued listing requirements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not Applicable. As a smaller reporting company, we are not required to provide the information required by this Item.

Item 4. Disclosure Controls and Procedures

We have adopted and maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the SEC. Our disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. As required under Exchange Act Rule 13a-15, our management, including our Chief Executive Officer and our Chief Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, management identified material weaknesses in our internal control over financial reporting. The material weaknesses identified to date include: (i) lack of sufficient resources necessary to provide adequate segregation of duties related to the preparation and review of financial information used in financial reporting and review of controls over the financial reporting process, including documentation of review/approval of journal entries and reconciliations; and (ii) insufficient IT controls which are effectively designed and implemented, specifically related to user/superuser access to the Company’s financial reporting system.

As of June 30, 2023, based on evaluation of these disclosure controls and procedures, management concluded that our disclosure controls and procedures were not effective. To address our material weakness, we intend to engage an outside firm to advise on our financial reporting processes and intend to implement new financial accounting controls and processes. We intend to continue to take steps to remediate the material weakness described above through implementing enhancements and controls within our accounting systems, subject to budget limitations. We will not be able to remediate these control deficiencies until these steps have been completed and have been operating effectively for a sufficient period of time and management has concluded, through testing, that the controls are operating effectively. The redesign and implementation of improvements to our accounting and proprietary systems and controls may be costly and time consuming and the cost to remediate may impair our results of operations in the future.

In light of the conclusion that our disclosure controls and procedures were not effective at June 30, 2023, we have applied particular procedures and processes as necessary to ensure the reliability of our financial reporting with respect to this quarterly report. Accordingly, we believe, based on our knowledge that: (i) this quarterly report does not contain any untrue statement of material fact or omit a statement of material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading with respect to the period covered by this report; and (ii) the consolidated financial statements, and other financial information included in this quarterly report, fairly present in all material respects our financial condition, results of operations, and cash flows as of and for the periods presented in this quarterly report.

Changes in Internal Control

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fiscal quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings

None

Item 1A.

Risk Factors.

Our material risk factors are disclosed in “Risk Factors” in our Registration Statement on Form S-1 (SEC File Number 333-261989) as declared effective by the Securities and Exchange Commission on September 15, 2022 and the Prospectus contained therein, as updated in our Form 10-K filed on March 27, 2023.

There have been no material changes from the risk factors previously disclosed in such filings.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities

None

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

None.

Item 6.

Exhibits

Exhibits and Financial Statement Schedules.

(a)

Exhibits.

Exhibit Number		Description of Document
1.1**		Underwriting Agreement dated as of September 15, 2022 between the Registrant and maxim Group LLC
3.1*		Certificate of Incorporation, as amended and as currently in effect.
3.2*		Amended and Restated Bylaws.
4.1*		Form of Specimen stock certificate evidencing shares of common stock.
4.2***		Warrant Agreement between the Company and Continental Stock Transfer and Trust company as warrant agent dated as of September 16, 2022
4.3*		Form of Warrant Certificate (filed as part of Exhibit 4.2)
5.1*		Opinion of Warshaw Burstein, LLP as to legality of the shares.
10.1*****		Joint Venture Agreement between the Company and Wider Come Limited dated as of May 31, 2023.
10.2*****		Employment Agreement between the Company and Mark White dated as of July 1, 2023.
10.3*****		Services Agreement between the Company and David Owens, M.D. dated as of July 1, 2023.
10.4*		Quality Assurance Agreement between the Company and Apical Instruments dated December 31, 2020.
10.5*		Advisor Agreement with Leonard Osser dated as of December 22,2021.
10.6*		Advisor Agreement with Tucker Anderson dated as of December 24, 2021.
10.7*		Advisor Agreement with Gian Domenico Trombetta dated December 24, 2021.
10.8*		Employment Agreement between the Company and Marilyn Elson dated as of January 11, 2022
10.9*		Amendment and Deferral Agreement dated as of March 30, 2022 to Consulting Agreement between the Company and US Asian Consulting Group LLC
10.11*****		Employment Agreement between the Company and Michael Nketiah dated as of July 1, 2023.
10.12*		Form of Lock-Up Agreement.
10.13*		Consulting Agreement dated as of May 9, 2018 as amended between the Company and US Asian Consulting Group, LLC, as amended on January 2, 2019 and March 4, 2021
10.14****		Amended and Restated Promissory Note in favor of Mark White dated as of January 1, 2023.
10.15*		Distribution Authorization Agreement dated as of May 1, 2019 with Wider Come Limited.
23.1**		Consent of Friedman LLP, independent registered public accounting firm.
23.2*		Consent of Warshaw Burstein, LLP (included in Exhibit 5.1).
31.1*****		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2*****		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
32.1*****		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*****		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1*		Code of Ethics
99.2*		Audit Committee Charter
99.3*		Compensation Committee Charter
99.4*		Nominating and Corporate Governance Committee Charter

*	Previously filed as an exhibit to Form S-1 as declared effective by the SEC on September 15, 2022 (SEC File Number 333-261989).
**	Previously filed as an exhibit to Form 8-K as filed with the SEC on September 20, 2022
***	Previously filed as an exhibit to Form 8-K/A as filed with the SEC on September 20, 2022.

****	Previously filed as an exhibit to Form 10-Q as filed with the SEC on May 10, 2023.

*****

Filed as an exhibit to this Form 10-Q.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized on the 10^th day of August, 2023.

	NEXALIN TECHNOLOGY, INC.

	By:	/s/ Mark White
		Mark White
		Chief Executive Officer
		Principal Executive Officer

	By:	/s/ Marilyn Elson
		Marilyn Elson
		Chief Financial Officer
		Principal Accounting Officer

Exhibit 10.1

JOINT VENTURE AGREEMENT

JOINT VENTURE AGREEMENT (this “Agreement”) dated as of May 31, 2023 (the “Effective Date”), by and between Nexalin Technology, Inc., a Nevada corporation (“Nexalin”), and Wider Come Limited, a company formed under the laws of the People’s Republic of China (“Wider”, and together with Nexalin, collectively, the “parties” and each, a “party”).

RECITALS:

WHEREAS, on September 21, 2018, Nexalin entered into an agreement with Wider for the purpose of marketing, selling and distributing A&D and AD&I devices in the applicable territories (the “Preliminary Agreement”).

WHEREAS, on May 22, 2019, Nexalin and Wider formally supplemented the Preliminary Agreement (the “Supplementary Agreement”), pursuant to which Wider was obligated to fund the Joint Venture (as hereinafter defined) with certain cash contributions. Within thirty days of such agreed-upon capital contributions by Wider, Nexalin was to issue 5% percent of its non-diluted common stock (subject to adjustment for a subsequent stock split) to the shareholders of Wider.

WHEREAS, the parties to the Supplementary Agreement subsequently determined not to proceed with the pain management scope of the Joint Venture, and terminated the Supplementary Agreement.

WHEREAS, on April 6, 2020, Nexalin entered into a three-year service agreement with Wider, pursuant to which Wider agreed to conduct clinical trials associated with the formation of the Joint Venture (the “Preliminary Services Agreement”). In connection with the Preliminary Services Agreement, Nexalin and certain designated shareholders of Wider entered into stock issuance agreements for the issuance of 450,000 shares of Nexalin common stock (subject to adjustment for a subsequent stock split) and Wider contributed USD $200,000 to the capital of Nexalin.

WHEREAS, under the Preliminary Services Agreement, Nexalin is obligated to issue an additional 300,000 shares of its common stock (prior to adjustment for a subsequent stock split) upon the completion by Wider of: (i) the fourth of four clinical trials satisfying the requirements set forth in the Preliminary Services Agreement and (ii) the submission of all four trial results for publication in international medical journals satisfactory to the Nexalin.

WHEREAS, the parties wish to enter into this Agreement to memorialize the precise nature of Nexalin’s obligations and Wider’s obligations as such obligations relate to the marketing, sale and distribution of Nexalin Products (as hereinafter defined) in the Territories (as hereinafter defined) and the undertaking of a clinical development program with respect to such Nexalin Products (as hereinafter defined).

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:

ARTICLE 1

CERTAIN DEFINTIONS

Section 1.1. Certain Definitions: For purposes of this Agreement, the following terms shall have the following meanings:

“A&D” means Alzheimer’s and Dementia.

“A&D Distribution Agreement” means, collectively or individually as the context requires, one or more distribution agreements to be entered into between the JV and Nexalin at such time that the JV obtains all necessary Permits in any of the applicable Territories, pursuant to which Nexalin will provide to the JV with Nexalin A&D Products for the promotion, marketing, distribution and sale in any such applicable Territory.

“A&D Clinical Trials” means the clinical trials of Nexalin A&D Products for the treatment of A&D in the Territory to be sponsored by the JV.

“AD&I” means Anxiety, Depression and Insomnia.

“AD&I Distribution Agreement” means, collectively or individually as the context requires, one or more distribution agreements to be entered into between the JV and Nexalin at such time that the JV obtains all necessary Permits in any of the applicable Territories, pursuant to which Nexalin will provide the JV with Nexalin AD&I Products for the promotion, marketing, distribution and sale in any such applicable Territory.

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. Notwithstanding the foregoing, for purposes of this Agreement, (a) any Person which owns directly or indirectly 15% or more of the Equity Interests having ordinary voting power for the election of the board of directors or equivalent governing body of a Person or 10% or more of the partnership or other ownership interests of a Person (other than as a limited partner of such Person) shall be deemed an Affiliate of such Person, and (b) each director (or comparable manager) of a Person shall be deemed to be an Affiliate of such Person.

“Americas” shall mean the United States, Canada, and Latin America.

“Commercialize” means, with respect to the New A&D Technology, to import, have imported, export, have exported, distribute, have distributed, sell, have sold, offer for sale, or have offered for sale, including to market, promote or otherwise exploit the New A&D Technology.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

“Distribution Agreements” means, the A&D Distribution Agreement(s), the AD&I Distribution Agreement(s) and the PM Distribution Agreement(s), collectively or individually as the context requires.

“Effective Date” means the date of this Agreement first set forth in the Preamble above.

“Equity Financing” means the sale or issuance by the JV on or after Effective Date, in a single transaction or series of related transactions, of Equity Interests to one or more investors for cash for financing purposes and in which the JV receives aggregate gross cash proceeds of $250,000 or more.

“Equity Interests” means any equity interest in the Company or an Affiliate of the Company.

“Fair Market Value” means the pro rata percentage price paid by investors for Equity Interests in the JV in the most recently-completed Equity Financing.

“Governmental Authority” means the government of any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Joint Venture” or “JV” means a newly-established JV company to be formed by Wider under the laws of Hong Kong and to be owned 52%:48% (Wider:Nexalin).

“JV Documents” means, collectively, this Agreement, the Organizational Documents of the JV, the Distribution Agreements, the Services Agreements and any agreement executed and delivered by the JV and/or the Shareholders in connection with any of the foregoing or this Agreement.

“New A&D Technology” means medical devices, therapeutic products and/or related apparatuses and disposables for the treatment of A&D excluding any Nexalin A&D Product(s).

“Nexalin A&D Product(s)” means Nexalin’s current platform of medical devices, therapeutic products and related apparatuses and disposables for the treatment and prevention of A&D that utilize existing technology related to transcranial alternating current stimulation, including any A&D Device.

“Nexalin AD&I Product(s)” means Nexalin’s existing transcranial alternating current stimulation devices and related disposables for the treatment of AD&I.

“Nexalin PM Product(s)” means Nexalin’s existing medical devices and therapeutic products for the treatment of PM.

“Nexalin Products” means, collectively or individually as the context requires, the Nexalin A&D Products, the Nexalin AD&I Products and the Nexalin PM Products.

“NMPA Approval” shall mean the approval of the China National Medical Products Administration, formerly the China National Drug Administration, and local counterparts thereto, and any successor agency(ies) or regulatory authority thereto having substantially the same function in mainland China.

“Organizational Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

“Patent Rights” means patents and patent applications, including all divisions, continuations, continuing prosecution applications, continuations in part, reissues, renewals, reexaminations, and extensions thereof and any counterparts claiming priority therefrom; utility models, design patents, patents of importation/confirmation, and certificates of invention and like statutory rights.

“Permit” means, collectively, all licenses, leases, powers, permits, franchises, certificates, authorizations, approvals and clearances issued by a Governmental Authority.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Restrictive Period” means the last day of the calendar year in which the third (3^rd) anniversary of the Effective Date occurs.

“PM” means pain management.

“PM Clinical Trials” means the clinical trials of Nexalin PM Products for the treatment of PM in the Territory to be sponsored by the JV.

“PM Distribution Agreement” means, collectively or individually as the context requires, one or more distribution agreements to be entered into between the JV and Nexalin at such time that the JV obtains all necessary Permits in any of the applicable Territories, pursuant to which Nexalin will provide the JV with Nexalin PM Products for the promotion, marketing, distribution and sale in any such applicable Territory.

“Secondment” and “Second” means each assignment of any personnel to the JV from a Shareholder in accordance with the terms of this Agreement.

“Shareholders” shall mean each of Nexalin and Wider and/or any of their respective Affiliates designated by them to be the owner of record of the Equity Interests of the JV.

“Territory(ies)” means collectively or individually (i) in the context of Nexalin AD&I Products, China, Hong Kong, Taiwan Macau and such other countries and territories agreed by the parties from time to time, (ii) in the context of Nexalin A&D Products, worldwide excluding the Americas and (iii) in the context of Nexalin PM Products, worldwide excluding the Americas and Europe. The term “Territory”, collectively, means each such geographical area or nation designated as a distinct territory in the applicable Distribution Agreement(s) and, in the context of Permits, the geographical area for which a Governmental Authority has jurisdiction over any such Permits.

“Year 1 Budget” means a detailed, written budget for the costs, fees, expenses, disbursements and other payment obligations anticipated to be incurred in the performance of the activities of the JV for the first full twelve- (12-) month period beginning on the Effective Date, including but in no way to limited to, costs attributable to scientific, medical, technical and other employees, contractors and/or consultants to be engaged in performing, implementing and administrating the clinical studies for the A&D Products.

ARTICLE 2

SCOPE OF JOINT VENTURE

Section 2.1. Formation of Joint Venture. As soon as practical following the Effective Date, Wider shall establish the Joint Venture consistent with Hong Kong law. Wider will own Fifty Two (52%) percent of the Equity Interests in the Joint Venture and Nexalin will own Forty Eight (48%) percent of the Equity Interests in the Joint Venture.

Section 2.2. Funding of Joint Venture. No later than December 1, 2023, the parties will establish an initial multi-year capital plan for the JV (the “Initial Operating Budget”), which will, among other things, set out the JV’s anticipated capital needs for the A&D Clinical Trials and for the prosecution of all necessary regulatory Permits for the marketing, sale and distribution of Nexalin A&D Products in the applicable Territories. Within a commercially reasonable time following the execution of this Agreement, the parties shall work together in good faith to formulate and develop the Year 1 Budget. Notwithstanding anything elsewhere in this Agreement to the contrary, within ten (10) days of the parties’ agreement on the Year 1 Budget, Wider shall be required to contribute to the capital of the JV an amount equal to the Year 1 Budget. After the expiration of the twelve (12-)-month beginning on the Effective Date, the parties shall jointly fund the JV’s operating expenses going-forward in accordance with their pro rata, proportionate Equity Interests (i.e., the parties will share such funding obligation 48%:52% as between Nexalin:Wider)

Section 2.3. A&D Clinical Trials & Permits.

(a) Wider agrees to fund and execute the A&D Clinical Trials; it being understood and agreed that the JV will be the clinical trial sponsor of record. Wider also shall be responsible for the prosecution of any and all necessary Permits for the marketing, sale and distribution of Nexalin A&D Products in the applicable Territories; provided, however, that Nexalin shall reasonably cooperate with any and all such efforts including, without limitation, (i) the granting to the JV of a license to exploit the Nexalin A&D Products in connection with the prosecution of any Permits, and (ii) timely responding to document and/or information requests.

(b) The protocol of the A&D Clinical Trials must be jointly approved by Nexalin and Wider. The end results must be tailored by Nexalin’s marketing team to assure relevance to the commercial rollout in the Territories. The amount of patients enrolled must consider the drop off rate that will ensue given nature of the patient pool. The amount of sessions and timing of those sessions must be strictly adhered to in order to maximize success for the enrolled group. Time of completion of the study, statistical analysis and submission for publication will be the responsibility of Wider. Financing and management of the study by Wider are principal inducements for Nexalin entering the JV. A double or triple blind study will be required.

(c) Based on any invention patents obtained by A&D Clinical Trials, the JV shall have the right to register, authorize, produce and sell the intellectual property within the corresponding Territory governing A&D Products pursuant to this Agreement.

(d) Nexalin shall have a fully paid up and royalty free license in regards to any patents and related intellectual property created and owned by the JV for products, treatments, devices, inventions, patents, know-how and techniques not covered by this Agreement. For the avoidance of doubt, Wider approves and confirms that it and any Affiliate is not, and shall not be, entitled during the term of the Agreement, to any fees, payments, royalties or the like, from Nexalin or any of its Affiliates in connection with and with respect to the grant of the License to the Nexalin.

ARTICLE 3

OTHER AGREEMENTS

Section 3.1. Distribution Agreements.

(a) Under each Distribution Agreement, Nexalin will grant the JV a license to exploit the Nexalin Products solely in connection with the marketing, sale and distribution of the Nexalin Products in the applicable Territories. Nexalin further agrees that it will charge the JV a cost-plus price.

(b) Each AD&I Distribution Agreement will provide that the JV shall be the sole and exclusive distributor of Nexalin AD&I Products in the applicable Territories covered thereby; provided, however, that if the JV fails to meet certain minimum sales thresholds in any applicable Territory following the eighteen (18) month anniversary of the NMPA Approval, the JV would no longer retain such exclusivity in respect of such Territory and Nexalin would be permitted to develop and exploit new distributions partnerships (on an exclusive or non-exclusive basis) with third parties in any such Territory; it being understood and agreed that the AD&I Distribution Agreement will not have any minimum sales thresholds during the first eighteen (18) months of the term thereof.

(c) The A&D Distribution Agreement will provide that the JV shall be the sole and exclusive distributor of Nexalin A&D Products in the applicable Territories covered thereby; provided, however, that if the JV fails to meet certain minimum sales thresholds in any applicable Territory during any period specified in the A&D Distribution Agreement(s), the JV would no longer retain such exclusivity in respect of such Territory and Nexalin would be permitted to develop and exploit new distributions and/or partnerships (on an exclusive or nonexclusive basis) with third parties in any part or all of the Territory.

Section 3.2. Services Agreements.

The parties shall mutually determine, as part of the development of the initial Annual Plan (defined below), the personnel and other resources required by the JV including, but limited to, distributor services, clinical trial services, finance services (accounting, cash collections etc.) and IT services. Such resources may be provided to the JV by the Shareholders under the one or more services agreements to be entered into by the JV and such Shareholder (“Services Agreements”) or acquired directly by the JV, with cost implications as follows:

(a) Costs for resources directly engaged by the JV will be borne directly by the JV;

(b) Costs for discrete resources seconded from a Shareholder to the JV (e.g., a Nexalin brand manager seconded to the JV) will be re-charged from the Shareholder to the JV under the Services Agreement with such Shareholder; and

(c) Costs of the Shareholders managing their interest in the JV (e.g., attending board meetings) will be borne by the Shareholders and not recharged.

Section 3.3. Restrictive Covenants.

(a) Except as otherwise provided in this Agreement or any of the other JV Documents, Nexalin may not sell the Nexalin Products in the Territory other than through the JV and the JV may not sell the Nexalin Products outside of the Territory.

(b) Wider, either directly or indirectly through any Wider Affiliate, may not distribute, market or sell any other line of neurostimulators for the treatment of AD&I, A&D or PM and/or any other medical device or product of Nexalin whether or not related to AD&I, A&D or PM.

Section 3.4. A&D Device. Nexalin shall have the first right to design, produce and manufacture the Nexalin A&D Products for the treatment of A&D (the “A&D Device”); provided, however, that if Nexalin chooses not to exercise any such rights, it shall assign such rights to the JV. Notwithstanding the foregoing, if any new patented inventions for the treatment of A&D are developed in connection with any A&D Device, the JV shall be the record owner of any such invention described in such patent.

Section 3.5. New A&D Technology. The JV and/or its Shareholders and Affiliates thereof shall develop and apply for Patent Rights relating to the New A&D Technology. Nexalin agrees to convey, transfer, assign and quitclaim to the JV all of its right, title and interest in and to the Patent Rights for the New A&D Technology, and as part of the consideration in exchange thereof, Wider shall be responsible for and obligated to incur and reimburse the JV for all costs and expenses of the JV to maintain such Patent Rights.

Section 3.6. New A&D Technology Distribution Rights. Outside of the scope of the Territory applicable to Nexalin A&D Products, each of Nexalin and Wider shall the right, but shall not be obligated, to Commercialize New A&D Technology. Notwithstanding anything in this Agreement to the contrary, the JV shall grant a no-royalty license with respect to the Patent Rights to Nexalin and Wider for the Commercialization of the New A&D Technology outside of the Territory applicable to Nexalin A&D Products.

ARTICLE 4

GOVERNANCE

Section 4.1. Board of Directors.

(a) The JV will be managed by a Board of Directors (the “Board”) consisting of at least three (3) representatives. Wider will have the sole right and discretion to nominate and appoint all of the representatives to the Board.

(b) Nexalin shall be entitled to appoint one or more observers (each such observer, collectively, the “Observer”) to attend all meetings of the Board (either in person or remotely). The Board shall provide to the Observer any notices of Board meetings, as applicable, and a copy of all meeting current materials and notices substantially contemporaneously with the delivery of such notices and meeting materials to the other representatives of the Board. In furtherance of the foregoing, copies of the minutes of each meeting of the Board, along with copies of all papers considered by the Board at the meeting, shall be delivered to Nexalin within seven (7) calendar days of the meeting. The Observer shall not have any voting rights or count towards any quorum with respect to any action brought before the Board.

(c) The Board will meet in-person or via video conference on a relatively regular basis; provided that the Board may meet less frequently until such time that the A&D Clinical Trials have been completed and the JV obtains all necessary Permits for the marketing, sale and distribution of Nexalin Products in one or more Territories. A quorum for Board meetings will require a majority of the directors then in office. The Board may also act by written consent, approved by a majority of the directors.

(d) The Board will be responsible for setting and monitoring achievement of the strategic objectives of the JV and, at such time that the JV obtains all necessary Permits for the marketing, sale and distribution of Nexalin Products in any of the Territories, will delegate implementation of those objectives to a general manager.

Section 4.2. General Manager. At such time that the JV obtains all necessary Permits for the marketing, sale and distribution of Nexalin Products in any of the Territories, the Board will appoint a general manager of the JV who will have responsibility for the operations of the JV, selection of the JV’s management team, execution of the strategic/business plan and who will have authority for all matters which are not specifically reserved for the Board and not set forth in Reserved Matters.

Section 4.3. Reserved Matters – Nexalin and Wider Approval.

Certain matters (“Reserved Matters”) will require the approval and unanimous consent of Nexalin and Wider in their respective capacities as Shareholders of the JV. Reserved Matters will include the following:

(a) A&D Clinical Trial protocols and any amendments thereto.

(b) any merger, consolidation, conversion or reorganization of the JV or adoption of any plan or agreement to do any of the foregoing;

(d) the creation of any subsidiary of the JV;

(e) any sale, lease, transfer, pledge or other disposition of all or substantially all of the properties or assets of the JV, other than sales, leases, transfers, pledges or other dispositions of assets in the ordinary course of business;

(f) any sale, lease, transfer or license relating to any intellectual property licensed from Nexalin, except in the ordinary course of business and as contemplated under this Agreement;

(g) the lending of money by the JV to, or the guarantee by the JV of any obligation of, any Person or the granting of any lien upon the JV’s assets;

(h) any material amendment to any Distribution Agreement and/or Services Agreement with Nexalin to the extent such amendment negatively and disproportionately affects any party’s economic interests or governance rights,

(i) any transaction with any Affiliate of Wider that is on terms and conditions less favorable than an arm’s length transaction;

(j) any investment in any joint venture or similar arrangement with, or equity issued by, a third party;

(k) any issuance of Equity Interests (or securities convertible into or exchangeable for equity securities); and

(m) the approval, payment, remittance and/or distribution of funds by or from the JV that shall be allocable to unbudgeted expenditures and expenses, including but not limited to all unbudgeted salaries and fee arrangements of the JV or any Affiliate with employees, professionals and/or contractors.

Section 4.4. Annual Planning. Following the completion of the A&D Clinical Trials and/or successful prosecution of necessary Permits for the marketing, sale and distribution of Nexalin A&D Products in the applicable Territories, the JV shall prepare, in consultation with the Shareholders, an annual plan (an “Annual Plan”) for marketing and distribution of the Nexalin A&D Products in any such Territory.

ARTICLE 5

DISTRIBUTIONS

Section 5.1. Distribution of Cash from Operations. The timing and amount of any distributions of cash from operations to be made shall be subject to the prior unanimous written consent of the Shareholders. Subject to the foregoing and there being available cash and reasonable required reserves as determined by the Shareholders, available cash from operations will be distributed to the Shareholders in accordance with their pro rata proportionate Equity Interest (48%:52%) percentages, respectively, as between Nexalin:Wider.

Section 5.2. Distributions Upon Termination and Liquidation. Upon any termination of the JV as described in the Section 7.1 below, the Board will first distribute all intangible assets to the Shareholders who initially contributed such assets and thereafter liquidate the tangible assets of the JV and apply and distribute the proceeds of such liquidation as follows:

(a) First, to the payment of the debts and liabilities of the JV, including debts owed to any Shareholder;

(b) Second, to the setting up of such reserves as Shareholders, pursuant to written unanimous consent, may deem reasonably necessary for any contingent or unforeseen liabilities or obligations of the JV; and

(c) Thereafter, to the Shareholders in accordance with their pro rata proportionate Equity Interest (48%:52%) percentages, respectively, as between Nexalin: Wider.

ARTICLE 6

TRANSFERABILITY

Section 6.1. General Restriction on Transferability.

Subject to Section 9.9 of this Agreement, no Shareholder will be allowed to transfer its ownership interest in the JV without the prior written consent of the other Shareholder; provided, that no such consent will be required for any transfers to an Affiliate of a Shareholder (a “Permitted Transfer”) or as part of any divestiture required by any court or other regulatory authority (a “Required Divestiture”). Notwithstanding anything herein to the contrary, in no event would Nexalin, Wider or the JV be obligated to partner with a proposed transferee who is wholly- or partially-owned, directly or indirectly, by a competitor of Nexalin or who does not pass Nexalin’s background and anti-bribery, and foreign corrupt practices act checks.

Section 6.2. Sale by a Shareholder of Equity Interests in the JV.

(a) In the event of a proposed sale of its Equity Interests in the JV by either Shareholder (the “Selling Shareholder”) as part of a Required Divestiture (which shall not include any Permitted Transfer), the Selling Shareholder must offer to sell its Equity Interests in the JV (an “Offer to Sell”) to the other Shareholder (the “Remaining Shareholder”) for a price equal to equal to the product of eighty (80%) percent of the Fair Market Value of such Equity Interests.

(b) If Wider is the Remaining Shareholder, then Nexalin must continue to provide the Nexalin Products under the Distribution Agreements for up to 7 years.

(c) If Nexalin is the Remaining Shareholder, then Wider must continue to provide the services under the Services Agreement for up to 7 years.

(d) Any third party purchaser of the Selling Shareholder’s interest will be bound by all of the terms of this Agreement in lieu of such Selling Shareholder.

ARTICLE 7

TERMINATION; EVENTS OF DEFAULT

Section 7.1. Termination of JV. Subject to Section 7.2, the JV may be terminated as follows:

(a) after the Restrictive Period by Nexalin;

(b) by the mutual written agreement of the Shareholders;

(d) upon the entry of a decree of judicial dissolution or as otherwise required under applicable law.

Section 7.2. Extension Periods. If neither Shareholder timely provides a termination notice, the JV shall automatically renew for an additional six- (6-) month period beginning at the end of the Restrictive Period (each such period, an “Extension Period”). All other Extension Period(s) commencing after the expiration of the initial Extension Period set forth in the immediately preceding clause shall continue every five- (5-) years until one Shareholder provides a termination notice.

Section 7.3. Events of Default. The following events (and such other events as may be mutually agreed upon by the Shareholders under any other JV Documents) will constitute an “Event of Default”:

(a) a breach by a Shareholder of any material provision of this Agreement, any Distribution Agreement or any Services Agreement;

(b) any act or omission by a Shareholder that constitutes fraud, willful misconduct or gross negligence related to the operation of the JV or the willful misapplication or misappropriation of the JV’s funds;

(d) a Shareholder (or Affiliate thereof) becoming convicted of a criminal indictment which has had or would reasonably be expected to have, directly or indirectly, a material adverse effect on the business, condition or results of operations of such Shareholder.

Section 7.4. Rights Upon Event of Default. Upon the occurrence of an Event of Default with respect to a Shareholder (a “Defaulting Shareholder”), the other Shareholder (the “Non-Defaulting Shareholder”) will have the right to purchase or to require that the JV purchase the Equity Interests of the Defaulting Shareholder in an amount equal to the product of eighty (80%) percent of the Fair Market Value of such Equity Interests of the Defaulting Shareholder.

ARTICLE 8

CONFIDENTIAL INFORMATION

Section 8.1. Definition. By virtue of this Agreement and the other JV Documents, each party may have access to information that is confidential to the other party or to the JV (“Confidential Information”). Confidential Information shall include the intellectual property of a party and its technical information, client lists, business plans, organization policies, software, in both source code and object code forms, concepts, design architectures, specifications, processes, techniques, algorithms, know-how, source materials, training materials, maintenance information and materials, and other information that is labeled or otherwise designated as confidential or that by its nature would reasonably be expected to be kept confidential.

Section 8.2. Nondisclosure. The parties agree that, for the period beginning on the Effective Date and expiring on the tenth (10^th) anniversary of the termination date of this Agreement, to hold each other’s (and the JV’s) Confidential Information in strict confidence. The parties agree not to make each other’s Confidential Information available in any form to any third party or to use each other’s Confidential Information for any purpose other than the implementation of this Agreement and/or in connection with such party’s performance of its obligations and/or enjoyment of its rights under this Agreement. Each party agrees to use the same degree of care that it uses to protect its own confidential information of a similar nature and value, but in no event less than a reasonable standard of care, to ensure that Confidential Information is not disclosed or distributed by its employees or agents in violation of the provisions of this Agreement. The parties represent that each has, with each of its employees who may have access to any Confidential Information, an appropriate agreement sufficient to enable it to comply with all of the terms of this Section.

ARTICLE 9

MISCELLANEOUS PROVISIONS

Section 9.1. Amendments. The Agreement may only be amended or waived by an instrument in writing signed by the party to be charged.

Section 9.2. Governing Law. This Agreement and all other Organizational Documents of the JV shall be governed by, and construed in accordance with, the internal laws of Hong Kong without regard to conflicts of laws principles. The Distribution Agreements will be governed by New York law without regard to conflicts of laws principles. Disputes among the parties with respect to the JV will be subject to the exclusive jurisdiction of Hong Kong courts.

Section 9.3. Notices. All written communications hereunder shall in writing and shall be mailed, emailed or delivered to the respective addresses specified on the signature pages hereto, or as to each party, to such other address as shall be designated by such party in a written notice to the other party. Written communications shall be effective upon receipt unless such communication is mailed in which case it shall be effective three Business Days after deposit in first class mail.

Section 9.4. Costs and Expenses. All costs and expenses (including legal expenses) incurred by either party in connection with the formation of the JV and/or the negotiation of this Agreement or any of the other JV Documents will be borne by such party.

Section 9.5. Rights of Access. Each Shareholder will have the right to reasonably inspect the books and records of the JV.

Section 9.6. JV Documents. All JV Documents (other than this Agreement) shall be drafted in both English and Chinese.

Section 9.7. Severability of Provisions. If one or more of the provisions of this Agreement shall be for any reason whatever held invalid, such provisions shall be deemed severable from the remaining covenants and provisions of this Agreement, and shall in no way affect the validity or enforceability of such remaining provisions, the rights of any parties hereto. To the extent permitted by law, the parties hereto waive any provision of law which renders any provision of this Agreement prohibited or unenforceable in any respect.

Section 9.8. Binding Effect. All provisions of this Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto.

Section 9.9. Assignment. Neither this Agreement nor any of the rights, interest or obligations hereunder may be assigned by any party hereto without the prior written consent of the other party, which shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, (i) Nexalin may assign this Agreement in whole to an Affiliate of Nexalin or to a successor of Nexalin in the event of a sale of its business, a merger, an acquisition or another change in control of Nexalin, and (ii) Wider may assign this Agreement in whole to an Affiliate of Wider or to a successor of Wider in the event of a sale of its business, a merger, an acquisition or another change in control of Wider, provided that Wider shall not assign this Agreement without the prior written consent of Nexalin to any entity that, in Nexalin’s reasonable judgment, is not financially or otherwise capable of performing Wider obligations hereunder. This Agreement shall bind and inure to the benefit of the parties and their respective successors and permitted assigns.

Section 9.10. Counterparts. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. Each of the parties hereto respectively agrees that faxed or electronically transmitted copies of the signature pages of this Agreement, whether sent to any other party hereto or to such other party’s respective counsel, shall be deemed definitively executed and delivered, and with the same force and effect as if manually signed and delivered, and for all purposes whatsoever.

Section 9.11. Entire Agreement. This Agreement constitutes the entire understanding and agreement between the parties and supersedes and replaces any prior understanding, agreement or statement of intent, in each case, written or oral, of any and every nature with respect thereto. In the event of any inconsistency between this Agreement and any document executed or delivered to effect the purposes of this Agreement, including the Organizational Documents of any Person, this Agreement shall govern as among the parties hereto. Each of the parties hereto shall exercise all voting and other rights and powers available to it so as to give effect to the provisions of this Agreement.

[signature page follows]

IN WITNESS WHEREOF, Nexalin and Wider have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the date and year first above written.

WIDER COME LIMITED

By:	/s/ Zhu Yun
Name:	Zhu Yun
Title:	President

Address for Notices:


Attn:
Tel:
Email:

NEXALIN TECHNOLOGY, INC.

By:	/s/ Mark White
Name:	Mark White
Title:	CEO

Address for Notices:

Nexalin Technology, Inc.

1776 Yorktown, Suite 550

Houston, TX 77056

Attn: Mark White, President and CEO

Email: Mark@nexalin-usa.com

Tel.: (281) 830-8900

Joint Venture Agreement Signature Page

Exhibit 10.2

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (this “Agreement”) dated as of July 1, 2023 (“Effective Date”) between MARK WHITE (the “Executive”) and NEXALIN TECHNOLOGY INC. (the “Company”).

WHEREAS, the Company and Executive have previously entered into an Employment Agreement dated as of February 15, 2021 (“February 2021 Agreement”) whereby the Executive and the Company delineated the terms of Executive’s employment by the Company as its Chief Executive Officer;

WHEREAS, the Company completed its initial public offering on September 20, 2022;

WHEREAS, in light of the continued efforts of Executive to improve the operations and expansion of the Company and to execute on its business plan despite the (i) continuing effects of the COVID pandemic during the 2021 and 2022 years in the United States and People’s Republic of China, (ii) recent downturn of the United States’ stock market and capital markets which has had a negative effect upon the Company, and (iii) continued restrictions, up until relatively recently, imposed by the government of the People’s Republic of China upon the economy in People’s Republic of China as a result of COVID that have had a severely adverse impact the Company’s ability to complete its proposed joint venture to establish sales and revenue in Asia, the Company and the Executive have determined that the February 2021 Agreement does not adequately or accurately reflect the Executive’s efforts with respect to the Company.

WHEREAS, the Company and the Executive desire to terminate the February 2021 Agreement and enter in this new Employment Agreement to provide for the terms and conditions of the future employment of the Executive by the Company.

WHEREAS, the terms and conditions of the Company’s 2023 Equity Incentive Plan are being submitted contemporaneously herewith to the Board of Directors for adoption and approval and remain subject to the approval of the shareholders of the Company.

NOW, THEREFORE, in consideration of the premises and covenants herein contained, the parties hereto agree as follows:

1. Employment Term. Subject to the terms and conditions hereof, the Company employs the Executive and the Executive accepts such employment for the three (3) year period commencing as of the Effective Date and ending on the third anniversary of the Effective Date (the “Termination Date”), unless the Employment Term is extended or terminated as provided in Sections 2 and 7, respectively (the “Employment Term”).

2. Renewal. The Employment Term shall be extended for one additional year unless prior to Termination Date, either party notifies the other that he or it chooses not to extend the Employment Term. By way of example, if neither party makes an election prior to the Termination Date, then the Employment Term shall automatically be extended by one additional year beginning on the day which immediately follows the Termination Date.

3. Duties and Responsibilities. During the Employment Term, the Executive shall serve as the Chief Executive Officer of the Company and as the holder of such other senior executive positions consistent therewith as the Board may determine. He shall report to, and be subject to, the direction of the Company’s Board of Directors with such duties and responsibilities as are commensurate with his title and position. The Executive shall work on a full-time basis and shall devote his time, energy and attention to the business of the Company; it being understood that Executive’s employment hereunder shall not preclude his working on other non-competitive business matters that do not interfere with his duties hereunder.

4. Compensation

(a) Basic Compensation. In payment for services to be rendered by the Executive hereunder, the Executive shall be entitled to annual Basic Compensation in cash, less any withholding required by law; of $300,000 per annum, payable monthly or on such more frequent schedule as the Company may elect.

(b) Bonus.

(i) Annual Bonus. The Executive shall be entitled to an annual cash bonus during each year of his Employment Term in the aggregate amount of the sum of (A) $90,000 for the achievement of certain targets set by the Compensation Committee of the Board of Directors of the Company (“Compensation Committee”), subject to review and adjustment on annual basis by the Compensation Committee (the “Target Bonus”), plus (B) $30,000 to be determined in the good faith discretion of the Compensation Committee based upon the Executive’s achievement of objectives and milestones using the same criteria as the Target Bonus (the “Discretionary Bonus”, and together with the Target Bonus, collectively, the “Annual Bonus”). Each earned Annual Bonus will be payable in the year following the year for which it is earned as soon as practicable after the end of the year for which it is earned (and, in all events, prior to the later of (i) date that is two and a half months after the end of the year for which it is earned or (ii) 30 days after the completion of the audited financial statements and results of operations for such year).

(ii) Target Bonus. The target milestones for the 2023 year are as set forth and described in Exhibit A annexed hereto. The Company acknowledges and agrees that, under the leadership and stewardship of Executive, two of the milestones enumerated in Exhibit A have been achieved as of the Effective Date and that, based on the projected performance of the Company, the remaining milestone(s) is expected to be attained on or before November 1, 2023. Prior to November 1 of each year of the Term following 2023, the Compensation Committee and the Executive shall work together in good faith to establish new or additional target milestones for such year.

(iii) Discretionary Bonus. The actual annual Discretionary Bonus, if any, will be awarded in the Compensation Committee’s discretion and may be based on, among other things, the financial performance of the Company, the Executive’s own job performance and the achievement, in whole or in part, of performance targets and goals that are the same as or similar to those established by the Compensation Commission, after consultation with the Executive, applicable to the Target Bonus. The Executive’s receipt of a Discretionary Bonus in one year does not guarantee receipt of any bonus in any subsequent year. Any Discretionary Bonus earned will be paid as soon as practicable after the end of the year in which it is earned (and, in all events, prior to the later of (i) date that is two and a half months after the end of the year for which it is earned or (ii) 30 days after the completion of the audited financial statements and results of operations for such year).

(iv) Performance Based Stock Options. In addition to the Annual Bonus earned by the Executive in any year, the Executive shall also be entitled to stock options (the “Bonus Options”). The terms and conditions applicable to the Bonus Options are more fully set forth in Exhibit B hereof.

(vi) Investment Representations. The Executive acknowledges the shares issuable under this Section 4(b) into which the Bonus Options shall be exercisable (the “Bonus Shares”) will be taken by him for investment and not for distribution thereof and will not be sold or otherwise disposed of in violation of the Securities Act of 1933 as amended and the rules and regulations promulgated thereunder (the “Securities Act”) and shall contain restrictions as are customary in grants of this kind and shall be taxable to the Executive in accordance with applicable federal and state tax laws. All certificates representing Bonus Shares shall have affixed thereto legends in substantially the following form:

The shares of stock represented by this certificate are subject to restrictions on transfer set forth in a certain Employment Agreement between the corporation and the registered owner of this certificate (or his predecessor in interest), and such Agreement is available for inspection without charge at the office of the Secretary of the Corporation.

In furtherance of the foregoing, the Executive acknowledges that the Executive has been advised and understands, that:

(A) the grant of Bonus Shares and/or the right to purchase Shares pursuant to the Bonus Options and the issuance of any shares pursuant to this Agreement may be subject to, or may become subject to, applicable reporting, disclosure and holding period restrictions imposed by Rule 144 under the Securities Act and Section 16 of the Securities Exchange Act of 1934 (“Section 16”); and

(B) shares acquired could be subject to Section 16(a) reporting requirements as well as the short swing trading prohibition contained in Section 16(b) which precludes any profit taking with respect to any stock transactions which occur within any six-month period.

(c) Sign-On/Retention Bonus. The Executive shall receive a one-time sign-on bonus in the lump-sum amount of $50,000 payable on the Company’s first payroll date following the date of execution of this Agreement, subject to all applicable taxes and withholdings. In addition to the foregoing, following the Effective Date, the Board shall approve the grant of nonqualified stock options to purchase shares of Common Stock with an exercise price equal to $400,000. Such stock options granted pursuant to this Section 4 shall be vested upon grant, and with the exception of performance based vesting conditions, shall be subject to such other terms of the conditions as set forth in Exhibit B hereof.

(d) Specified Employee. If the Executive is a “specified employee” of the Company within the meaning of Section 409A(a)(2)(B)(i) of the Internal Revenue Code (the “Code”) (or any successor provision), no payment under this Section 4 in connection with the Executive’s termination of employment (other than a payment of salary through the date of such termination, and payments on account of termination of employment by reason of death) shall be made until the date which is six (6) months after the date of the termination of the employment of the Executive (or, if earlier, the date of death of the Executive); provided further, if the Company determines based upon written advice of counsel that any such payment if made during the calendar year that includes the termination date would not be deductible in whole or in part by reason of Code § 162(m), such payment shall be made on January 2 of the following calendar year (or such later date as may be required under the preceding proviso if the Executive is a “specified employee”).

5. Expenses. During the Employment Term, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him (in accordance with the policies and procedures established from time to time by the Board of Directors of the Company) in performing services hereunder, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company.

6. Other Benefits. The Executive shall be entitled to the following additional benefits:

(a) four (4) weeks of paid vacation during each year of the term; it being understood and agreed that Executive shall be entitled to take such additional paid vacation time as does not interfere with the performance of his duties hereunder and as are not reasonably objected to by the Company’s Board of Directors.

(b) Paid holidays in accordance with the Company’s usual holiday schedule plus eight additional paid holiday, or personal days, to be taken at such time as the Executive determines; it being understood and agreed that Executive shall be entitled to take such additional paid holidays or paid personal days as do not interfere with the performance of his duties hereunder and as are not reasonably objected to by the Company’s Board of Directors.

(c) Such major medical, health and dental coverage benefits and long-term disability group plan coverage generally available to the Company’s officers. To the extent the Executive qualifies, the Executive may participate in, or benefit under, any employee benefit plan, arrangement or perquisite made available by the Company to its key executives. Family medical, health and dental coverage benefits and long-term disability group plan coverage may be obtained for the Executive’s family at his sole cost and expense.

(d) The Company shall reimburse the Executive for such ordinary and necessary business- related expenses as shall be incurred by the Executive in the course of the performance of his duties under this Agreement.

(e) A monthly car allowance in the amount of the monthly rental cost of a luxury sedan or its equivalent plus expenses for business use, with such rental cost and expenses not to exceed the aggregate sum of $1,500.

7. Termination. The Executive’s employment hereunder may be terminated under the following circumstances:

(a) The Company shall have the right to terminate the employment of the Executive under this Agreement for disability in the event the Executive suffers an injury, or physical or mental illness or incapacity of such character as to substantially disable him from performing his duties hereunder for a period of more than one hundred eighty (180) consecutive days upon the Company giving at last thirty (30) days written notice of termination; provided, however, that if the Executive is eligible to receive disability payments pursuant to a disability insurance policy or policies paid for by the Company, the Executive shall assign such benefits to the Company for all periods as to which he is receiving payment under this Agreement.

(b) This Agreement shall terminate upon the death of Executive.

(c) The Company may terminate this Agreement at any time for “Cause” because of (i) the conviction of a felony or a misdemeanor, excluding a petty offense, involving fraud or dishonesty, (ii) a material breach of the employment/consulting services agreement, provided that such breach is not cured within twenty (20) days after delivery a notice from the Board requesting cure, or (iii) the willful or intentional material misconduct by the Executive in the performance of his duties.

(d) The Executive may terminate his employment for “Good Reason” on five (5) days written notice if:

(i) he is assigned, without his express written consent, any duties inconsistent with his positions, duties, responsibilities, authority and status with the Company as of the date hereof, or a change in his reporting responsibilities or titles as in effect as of the date hereof, except in connection with the termination of his employment by him without Good Reason;

(ii) his compensation is reduced; or

(iii) any purchaser or purchasers of substantially all of the business or assets of the Company do not agree, at or prior to the closing of any such transaction, by agreement in form and substance satisfactory to the Executive to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no sale was consummated.

(e) Upon termination of Executive’s employment by Executive or by the Company, for any reason or for no reason, Executive shall deliver promptly to the Company all records, manuals, books, blank forms, documents, letters, memoranda, notes, notebooks, reports, data, tables, and calculations, and copies thereof, in whatever medium, which are the property of the Company or its affiliates or which relate in any relevant, meaningful way to the business, products, practices, techniques, customers, suppliers, functions or operations of the Company or its affiliates, and all other property and Confidential Information of the Company or its affiliates, including, but not limited to, all documents which in whole or in part contain any Confidential Information of the Company or its affiliates, which in any of these cases are in his possession or under his control.

8. Nondisclosure; Noncompetition.

(a) The Executive agrees not to use or disclose, either while in the Company’s employ or at any time thereafter, except with the prior written consent of the Board of Directors, any trade secrets, proprietary information, or other information that the Company considers confidential relating to processes, suppliers (including but not limited to a list or lists of suppliers), customers (including but not limited to a list or lists of customers), compositions, improvements, inventions, operations, processing, marketing, distributing, selling, cost and pricing data, or master files utilized by the Company, not presently generally known to the public, and which is, obtained or acquired by the Executive while in the employ of the Company.

(b) During his employment and for a period of two years thereafter, the Executive shall not, directly or indirectly; (i) in any manner, engage in any business which competes with any business conducted by the Company (including any subsidiary) and will not directly or indirectly own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be employed by or connected in any manner with any corporation, firm or business that is so engaged (provided, however, that nothing herein shall prohibit the Executive from owning not more than three percent (3%) of the outstanding stock of any publicly held corporation), (ii) persuade or attempt to persuade any employee of the Company to leave the employ of the Company or to become employed by any other entity, or (iii) persuade or attempt to persuade any current client or former client with leaving, or to reduce the amount of business it does or intends or anticipates doing with the Company.

(c) During his employment with the Company, and for two years thereafter, the Executive shall not take any action which might divert from the Company any opportunity learned about by him during his employment with the Company (including without limitation during the Employment Term) which would be within the scope of any of the businesses then engaged in or planned to be engaged in by the Company.

(d) In the event that this Agreement shall be terminated, then notwithstanding such termination, the obligations of the Executive pursuant to this Section 8 of this Agreement shall survive such termination.

9. Inventions.

(a) The Executive acknowledges and agrees that all ideas, methods, inventions, discoveries, improvements, work products, developments, software, know-how, processes, techniques, methods, works of authorship and other work product, whether patentable or unpatentable, (A) that are reduced to practice, created, invented, designed, developed, contributed to, or improved with the use of any Company resources and/or within the scope of the Executive’s work with the Company or that relate to the business, operations or actual or demonstrably anticipated research or development of the Company, and that are made or conceived by the Executive, solely or jointly with others, during his employment with Company, or (B) suggested by any work that the Executive performs in connection with the Company, either while performing the Executive’s duties with the Company or on the Executive’s own time, but only insofar as the Inventions are related to the Executive’s work as an employee or other service provider to the Company, shall belong exclusively to the Company (or its designee), whether or not patent or other applications for intellectual property protection are filed thereon (the “Inventions”). The Executive will keep full and complete written records (the “Records”), in the manner prescribed by the Company, of all Inventions, and will promptly disclose all Inventions completely and in writing to the Company. The Records shall be the sole and exclusive property of the Company, and the Executive will surrender them upon the termination of his employment or upon the Company’s request. The Executive irrevocably conveys, transfers and assigns to the Company the Inventions and all patents or other intellectual property rights that may issue thereon in any and all countries, whether during or subsequent to his term of employment, together with the right to file, in the Executive’s name or in the name of the Company (or its designee), applications for patents and equivalent rights (the “Applications”). The Executive will, at any time during and subsequent to his term of employment, make such applications, sign such papers, take all rightful oaths, and perform all other acts as may be requested from time to time by the Company to perfect, record, enforce, protect, patent or register the Company’s rights in the Inventions, all without additional compensation to the Executive from the Company. The Executive will also execute assignments to the Company (or its designee) of the Applications, and give the Company and its attorneys all reasonable assistance (including the giving of testimony) to obtain the Inventions for the Company’s benefit, all without additional compensation to the Executive from the Company, but entirely at the Company’s expense.

(b) In addition, the Inventions will be deemed Work for Hire, as such term is defined under the copyright laws of the United States, on behalf of the Company and the Executive agrees that the Company will be the sole owner of the Inventions, and all underlying rights therein, in all media now known or hereinafter devised, throughout the universe and in perpetuity without any further obligations to the Executive. If the Inventions, or any portion thereof, are deemed not to be Work for Hire, or the rights in such Inventions do not otherwise automatically vest in the Company, the Executive hereby irrevocably conveys, transfers and assigns to the Company, all rights, in all media now known or hereinafter devised, throughout the universe and in perpetuity, in and to the Inventions, including, without limitation, all of the Executive’s right, title and interest in the copyrights (and all renewals, revivals and extensions thereof) to the Inventions, including, without limitation, all rights of any kind or any nature now or hereafter recognized, including, without limitation, the unrestricted right to make modifications, adaptations and revisions to the Inventions, to exploit and allow others to exploit the Inventions and all rights to sue at law or in equity for any infringement, or other unauthorized use or conduct in derogation of the Inventions, known or unknown, prior to the date hereof, including, without limitation, the right to receive all proceeds and damages therefrom. In addition, the Executive hereby waives any so-called “moral rights” with respect to the Inventions. To the extent that the Executive has any rights in the results and proceeds of the Executive’s service to the Company that cannot be assigned in the manner described herein, the Executive 5 agrees to unconditionally waive the enforcement of such rights. The Executive hereby waives any and all currently existing and future monetary rights in and to the Inventions and all patents and other registrations for intellectual property that may issue thereon, including, without limitation, any rights that would otherwise accrue to the Executive’s benefit by virtue of the Executive being an employee of or other service provider to the Company.

10. Successors; Binding Agreement.

(a) The Company shall require any purchaser or purchasers of the Company or any purchaser or purchasers of substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Executive, to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such purchase had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business or assets which executes and delivers the agreement provided for in this Section 9(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

(b) This agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would still be payable hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee or other designee or, if there be no such designee, to the Executive’s estate.

11. Amendment; Waiver. No provisions of this Agreement may be modified, supplemented, waived or discharged unless such waiver, modification or discharge is agreed to in a writing signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or in compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement.

12. Applicable Law. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the State of Delaware without regard to its conflict of laws principles.

13. Severability of Covenants. In the event that any provision of this Agreement, including any sentence, clause or part hereof, shall be deemed contrary to law or invalid or unenforceable in any respect by a court of competent jurisdiction, the remaining provisions shall not be affected, but shall remain in full force and effect and any invalid and enforceable provisions shall be deemed, without further action on the part of the undersigned, modified, amended and limited solely to the extent necessary to render the same valid and enforceable.

14. Remedies.

(a) In the event of a breach or threatened breach of any of the Executive’s covenants under Section 8, the Executive acknowledges that the Company will not have an adequate remedy at law. Accordingly, in the event of any such breach or threatened breach, the Company will be entitled to such equitable and injunctive relief as may be available to restrain the Executive from the violation of the provisions thereof.

(b) Nothing herein shall be construed as prohibiting the Company, on the one hand, and the Executive, on the other hand, from pursuing any remedies available at law or in equity for any breach or threatened breach of the provisions of this Agreement by the other party, including the recovery of damages.

(c) If the Company terminates this Agreement at any time without Cause (as defined above in Section 7(c)) or the Executive terminates his employment for a Good Reason (as defined above in Section 7(d)), after the first anniversary of the date hereof, the Executive shall be entitled under this Section 14(c) to receive an amount equal to the amount of the compensation payments that, but for his termination of employment, would have been payable to the Executive under Section 4(a) as follows:

Termination under Section 14(c)		Compensation under Section 4(a)
Within the first full calendar year of the Executive’s employment		an amount equal to the amount of compensation payments for 6 months
Within the second full calendar year of the Executive’s employment		an amount equal to the amount of compensation payments for 12 months
Within or after the third full calendar year of the Executive’s employment		an amount equal to the amount of compensation payments for one 18 month period

Notwithstanding anything herein to the contrary, the Executive shall also be entitled to the amounts of any of the Annual Bonus payments under Section 4(b) for the year of termination to the extent that targets were achieved prior to the date of termination.

(d) The above amounts shall be deemed liquidated damages, and not a penalty. The Executive shall not be required to mitigate the amount of any payment received pursuant to this paragraph nor shall the amount payable under this paragraph be reduced by any compensation earned by the Executive after the date of his termination of employment.

15. Notices. Any notice, request, instruction or other document to be given hereunder by any party to the other party shall be in writing and shall be deemed to have been duly given when delivered personally or five (5) days after dispatch by registered or certified mail, postage prepaid, return receipt requested, to the party to whom the same is so given or made:

If to the Company

	addressed to:	Nexalin Technology Inc.1776 Yorktown Suite 550 Houston, TX 77056 Attention:

	with a copy to:	Warshaw Burstein LLP 575 Lexington Avenue New York, New York 10022 Attention: Martin Siegel, Esq.

If to the Executive

	addressed to:	Mr. Mark White

or to such other address as the one party shall specify to the other party in writing.

16. Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto; and any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and canceled.

17. Acknowledgment. Executive acknowledges that Executive has had the opportunity to consult with independent counsel of Executive’s own choice concerning this Agreement and that Executive has taken advantage of that opportunity to the extent that Executive desires. Executive further acknowledges that Executive has read and understands this Agreement, is fully aware of its legal effect, and has entered into it voluntarily based on Executive’s own judgment.

[Signature Page follows]

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date:

	NEXALIN TECHNOLOGY INC.

	By:	/s/ Alan Kazden
	Title:	Head of Compensation committee

	By:	/s/ Mark White
		Mark White

Signature Page (Employment Agreement)

EXHIBIT A

Terms of Compensation

The performance milestones applicable to the Target Bonus for 2023 are as follows:

1) The execution of a joint venture agreement with Wider Com Limited, a company formed under the laws of China.

2) The development of the Gen-3 Halo headset, a new headset design to emit waveform technology for the treatment of mental health conditions.

3) The publication of a “white paper” case study analyzing one of Company’s devices.

4) The attainment of such other milestones and/or performance objectives, as determined in the discretion of the Compensation Committee.

A-1

EXHIBIT B

Bonus Options

Contemporaneous with the execution date of the Employment Agreement, the Executive shall be granted stock options covering shares of Common Stock of the Company with an exercise price on the date of grant equal to $840,000. The Bonus Options shall be granted at the closing price of the Company’s publicly- traded Common Stock on the date of the grant, and shall be nonqualified stock options subject to performance- based vesting conditions set forth below.

This grant of the Bonus Options shall be construed in accordance and consistent with, and subject to, the provisions of the Nexalin Technology, Inc. 2023 Equity Incentive Plan (the “Plan”) (the provisions of which are incorporated herein by reference) and, except as otherwise expressly set forth herein, the capitalized terms used in this Agreement shall have the same definitions as set forth in the Plan.

Subject to (a) any acceleration provisions in this Employment Agreement, including but not limited to those set forth in Section 7(f) above, and (b) the Executive’s continued employment with or provision of services to the Company through each vesting date set forth below, each of the three (3) tranches of Bonus Options covering one-third (33%) of the underlying shares of Common Stock shall vest and become exercisable in three (3) equal annual installments of shares of Common Stock, beginning on the first anniversary of the Effective Date upon the achievement of the following “Milestone Targets” (as hereinafter defined).

The Milestone Targets for the first (2023) tranche of Bonus Options shall be the attainment of three (3) out of the four (4) of the performance based criteria set forth in Exhibit A hereof. The Milestone Targets for the second (2024) tranche and the third (2025) tranche of Bonus Options shall be mutually established by the Executive and the Committee, working together in good faith, prior to November 1 of each of the second and third anniversary of the Effective Date, respectively. It being understood and agreed that the Milestone Targets for both the second and third tranches shall each comprise four (4) performance based criteria which are similar in nature to those enumerated in Exhibit A, and that the achievement of the Milestone Targets for the second and third tranches shall be attained by the satisfaction of three (3) out of the four (4) of such performance based criteria.

B-1

Exhibit 10.3

SERVICES AGREEMENT

SERVICES AGREEMENT (this “Agreement”) dated as of July 1, 2023 (the “Effective Date”) between DAVID OWENS, M.D. (the “Consultant”) and NEXALIN TECHNOLOGY, INC. (the “Company”).

WHEREAS, the Company and the Consultant have previously entered into that certain Agreement dated as of February 15, 2021, as amended by that certain Amendment No. 1 to such agreement, dated as of March 2022 (the “Prior Agreement”), whereby the Consultant and the Company delineated the terms of the Consultant’s services to the Company including such general duties of a “Chief Medical Officer”;

WHEREAS, the Company completed its initial public offering on September 20, 2022;

WHEREAS, the Company and the Consultant desire to terminate the Prior Agreement and to enter into this new Consulting Agreement to provide for the terms and conditions of the future services of the Consultant to the Company.

NOW, THEREFORE, in consideration of the premises and covenants herein contained, the parties hereto agree as follows:

1. Engagement of Services. Subject to the terms and conditions hereof, the Company appoints the Consultant and the Consultant accepts appointment as consultant to the Company to serve as chief medical officer for the Company and to perform such duties as are consistent with such position for the three (3) year period commencing as of the Effective Date and ending on the third-anniversary of the Effective Date (the “Termination Date”), unless the Term is extended or terminated as provided in Sections 2 and 7, respectively (the “Term”).

2. Renewal. The Term shall be extended for one additional year unless prior to the Termination Date, either party notifies the other that he or it chooses not to extend the Term. By way of example, if neither party makes an election prior to the Termination Date, then the Term shall automatically be extended by one additional year.

3. Duties and Independent Contractor Relationship. The Consultant will at all times retain sole and absolute discretion and judgment in the manner and means of carrying out the services. The Consultant shall perform his services under this Agreement in good faith and in a professional, diligent, competent and timely manner. Without limiting the foregoing, the Consultant shall provide services to the Company in accordance with generally accepted professional standards as applied to similar projects performed under similar conditions prevailing in the industry at the time such Services are rendered to the Company. The Consultant’s relationship with Company will be that of an independent contractor, and nothing in this Agreement is intended to, or should be construed to, create a partnership, agency, joint venture or employment relationship. The Consultant will not be entitled to any of the benefits that Company may make available to its employees, including, but not limited to, group health insurance or retirement benefits, paid vacation, holidays or sick leave. The Consultant will be solely responsible for obtaining any business or similar licenses required by any federal, state or local authority for the Consultant to perform the services. No part of the Consultant’s compensation will be subject to withholding by the Company for the payment of any social security, federal, state or any other employee payroll taxes. The Consultant will be solely responsible for, and will file on a timely basis, all tax returns and payments required to be filed with, or made to, any federal, state or local tax authority with respect to the performance of services and receipt of fees under this Agreement.

4. Compensation. In payment for services to be rendered by the Consultant hereunder, the Consultant shall be entitled to the following compensation:

(i) As of the Effective Date of this Agreement, and subject to the approval of the Board of Directors, Consultant will be granted stock options to purchase shares of the Company’s outstanding common stock (the “Stock Options”) with an exercise price equal to $585,000. The per share exercise price of the Stock Options will be equal to the closing price of the Company’s publicly-traded common stock on the applicable date of grant. The vesting of the Stock Options will be split into three equal tranches, with the first such tranche to vest and become exercisable on the first anniversary of the Effective Date upon the achievement of certain performance milestones (the “Milestone Targets”) and the other two tranches shall continue to vest on the same schedule; provided that, in all cases, the Consultant remains a consultant to, the Company through the applicable vesting date.

The Milestone Targets for the first (2023) tranche of Stock Options shall be the attainment of the following two (2) performance based criteria: (i) The completion of the evaluation of the new 15 mA digital waveform for safety; and (ii) the completion of the evaluation for efficacy of the neurostimulation stimulation device in opioid use management disorder. The Milestone Targets for the second (2024) tranche and the third (2025) tranche of Bonus Stock shall be mutually established by the Consultant and the Compensation Committee, working together in good faith, prior to November 1 of each of the second and third anniversary of the Effective Date, respectively. It being understood and agreed that the Milestone Targets for both the second and third tranches shall each comprise at least two (2) performance based criteria which are similar in nature to those applicable to the first tranche of Stock Options.

(ii) Sign-On/Retention Bonus. Subject to the approval of the Board of Directors, Consultant will be granted nonqualified stock options to purchase shares of the Common Stock of the Company with an exercise price equal to $125,000. The per share exercise price of the Stock Options will be equal to the closing price of the Company’s publicly-traded common stock on the applicable date of grant. The stock options shall be fully vested immediately upon grant.

(iii) The grant of the Stock Options under this Section 4 shall be construed in accordance and consistent with, and subject to, the provisions of the Nexalin Technology, Inc. 2023 Equity Incentive Plan (the “Plan”) (the provisions of which are incorporated herein by reference) and, except as otherwise expressly set forth herein, the capitalized terms used in this Agreement shall have the same definitions as set forth in the Plan.

(iv) Discretionary Bonus. The Compensation Committee may, in its sole discretion, grant an award to receive a cash-denominated payment (a “Cash-Based Award”) to the Consultant in such number or amount and upon such terms, and subject to such conditions, as the Compensation Committee shall determine at the time of grant and specify in an applicable award grant and/or agreement. The Compensation Committee shall determine the amount of cash which may be payable pursuant to the Cash- Based Award, the conditions upon which the Cash-Based Award shall become vested or payable, and such other provisions as the Compensation Committee shall determine. Each Cash-Based Award shall specify a cash-denominated payment amount, formula or payment ranges as determined by the Compensation Committee. Payment, if any, with respect to a Cash-Based Award shall be made in accordance with the terms of the Award and may be made in cash or in shares of stock and/or stock options, as the Compensation Committee determines.

(v) Investment Representations. The Consultant acknowledges the shares issuable under this Section 4 into which the Stock Options shall be exercisable (the “Shares”) will be taken by him for investment and not for distribution thereof and will not be sold or otherwise disposed of in violation of the Securities Act of 1933 as amended and the rules and regulations promulgated thereunder (the “Securities Act”) and shall contain restrictions as are customary in grants of this kind and shall be taxable to the Consultant in accordance with applicable federal and state tax laws. All certificates representing Shares shall have affixed thereto legends in substantially the following form:

The shares of stock represented by this certificate are subject to restrictions on transfer set forth in a certain Services Agreement between the corporation and the registered owner of this certificate (or his predecessor in interest), and such Agreement is available for inspection without charge at the office of the Secretary of the Corporation.

In furtherance of the foregoing, the Consultant acknowledges that the Consultant has been advised and understands, that:

(A) the grant of Shares and/or the right to purchase Shares pursuant to the Stock Options and the issuance of any shares pursuant to this Agreement may be subject to, or may become subject to, applicable reporting, disclosure and holding period restrictions imposed by Rule 144 under the Securities Act and Section 16 of the Securities Exchange Act of 1934 (“Section 16”); and

5. Expenses. During the Term, the Consultant shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by him (in accordance with the policies and procedures established from time to time by the Board of Directors of the Company) in performing services hereunder, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company.

6. Car Allowance. The Consultant shall be entitled to a monthly car allowance in the amount of the monthly rental cost of a luxury sedan or its equivalent plus expenses for business use, with such rental cost and expenses not to exceed the aggregate sum of $1,300.

7. Termination. The Consultant’s engagement hereunder may be terminated under the following circumstances:

(a) The Company shall have the right to terminate the engagement of the Consultant under this Agreement for disability in the event the Consultant suffers an injury, or physical or mental illness or incapacity of such character as to substantially disable him from performing his duties hereunder for a period of more than one hundred eighty (180) consecutive days upon the Company giving at last thirty (30) days written notice of termination.

(b) This Agreement shall terminate upon the death of the Consultant.

(d) The Consultant may terminate his employment for “Good Reason” on five (5) days written notice if:

(i) his compensation is reduced; or

(ii) any purchaser or purchasers of substantially all of the business or assets of the Company do not agree, at or prior to the closing of any such transaction, by agreement in form and substance satisfactory to the Consultant to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no sale was consummated.

(e) Upon termination of the Consultant’s engagement by the Consultant or by the Company, for any reason or for no reason, the Consultant shall deliver promptly to the Company all records, manuals, books, blank forms, documents, letters, memoranda, notes, notebooks, reports, data, tables, and calculations, and copies thereof, in whatever medium, which are the property of the Company or its affiliates or which relate in any relevant, meaningful way to the business, products, practices, techniques, customers, suppliers, functions or operations of the Company or its affiliates, and all other property and Confidential Information of the Company or its affiliates, including, but not limited to, all documents which in whole or in part contain any Confidential Information of the Company or its affiliates, which in any of these cases are in his possession or under his control.

8. Nondisclosure; Noncompetition.

(a) The Consultant agrees not to use or disclose, either while in the Company’s employ or at any time thereafter, except with the prior written consent of the Board of Directors, any trade secrets, proprietary information, or other information that the Company considers confidential relating to processes, suppliers (including but not limited to a list or lists of suppliers), customers (including but not limited to a list or lists of customers), compositions, improvements, inventions, operations, processing, marketing, distributing, selling, cost and pricing data, or master files utilized by the Company, not presently generally known to the public, and which is, obtained or acquired by the Consultant while in the employ of the Company.

(b) During his engagement and for a period of two years thereafter, the Consultant shall not, directly or indirectly; (i) in any manner, engage in any business which competes with any business conducted by the Company (including any subsidiary) and will not directly or indirectly own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be employed by or connected in any manner with any corporation, firm or business that is so engaged (provided, however, that nothing herein shall prohibit the Consultant from owning not more than three percent (3%) of the outstanding stock of any publicly held corporation), (ii) persuade or attempt to persuade any employee of the Company to leave the employ of the Company or to become employed by any other entity, or (iii) persuade or attempt to persuade any current client or former client with leaving, or to reduce the amount of business it does or intends or anticipates doing with the Company.

(c) During his engagement with the Company, and for two years thereafter, the Consultant shall not take any action which might divert from the Company any opportunity learned about by him during his employment with the Company (including without limitation during the Term) which would be within the scope of any of the businesses then engaged in or planned to be engaged in by the Company.

(d) In the event that this Agreement shall be terminated, then notwithstanding such termination, the obligations of the Consultant pursuant to this Section 8 of this Agreement shall survive such termination.

9. Inventions.

(a) The Consultant acknowledges and agrees that all ideas, methods, inventions, discoveries, improvements, work products, developments, software, know-how, processes, techniques, methods, works of authorship and other work product, whether patentable or unpatentable, (A) that are reduced to practice, created, invented, designed, developed, contributed to, or improved with the use of any Company resources and/or within the scope of the Consultant’s work with the Company or that relate to the business, operations or actual or demonstrably anticipated research or development of the Company, and that are made or conceived by the Consultant, solely or jointly with others, during his engagement with Company, or (B) suggested by any work that the Consultant performs in connection with the Company, either while performing the Consultant’s duties with the Company or on the Consultant’s own time, but only insofar as the Inventions are related to the Consultant’s work as an employee or other service provider to the Company, shall belong exclusively to the Company (or its designee), whether or not patent or other applications for intellectual property protection are filed thereon (the “Inventions”). The Consultant will keep full and complete written records (the “Records”), in the manner prescribed by the Company, of all Inventions, and will promptly disclose all Inventions completely and in writing to the Company. The Records shall be the sole and exclusive property of the Company, and the Consultant will surrender them upon the termination of his employment or upon the Company’s request. The Consultant irrevocably conveys, transfers and assigns to the Company the Inventions and all patents or other intellectual property rights that may issue thereon in any and all countries, whether during or subsequent to his term of employment, together with the right to file, in the Consultant’s name or in the name of the Company (or its designee), applications for patents and equivalent rights (the “Applications”). The Consultant will, at any time during and subsequent to his term of employment, make such applications, sign such papers, take all rightful oaths, and perform all other acts as may be requested from time to time by the Company to perfect, record, enforce, protect, patent or register the Company’s rights in the Inventions, all without additional compensation to the Consultant from the Company. The Consultant will also execute assignments to the Company (or its designee) of the Applications, and give the Company and its attorneys all reasonable assistance (including the giving of testimony) to obtain the Inventions for the Company’s benefit, all without additional compensation to the Consultant from the Company, but entirely at the Company’s expense.

(b) In addition, the Inventions will be deemed Work for Hire, as such term is defined under the copyright laws of the United States, on behalf of the Company and the Consultant agrees that the Company will be the sole owner of the Inventions, and all underlying rights therein, in all media now known or hereinafter devised, throughout the universe and in perpetuity without any further obligations to the Consultant. If the Inventions, or any portion thereof, are deemed not to be Work for Hire, or the rights in such Inventions do not otherwise automatically vest in the Company, the Consultant hereby irrevocably conveys, transfers and assigns to the Company, all rights, in all media now known or hereinafter devised, throughout the universe and in perpetuity, in and to the Inventions, including, without limitation, all of the Consultant right, title and interest in the copyrights (and all renewals, revivals and extensions thereof) to the Inventions, including, without limitation, all rights of any kind or any nature now or hereafter recognized, including, without limitation, the unrestricted right to make modifications, adaptations and revisions to the Inventions, to exploit and allow others to exploit the Inventions and all rights to sue at law or in equity for any infringement, or other unauthorized use or conduct in derogation of the Inventions, known or unknown, prior to the date hereof, including, without limitation, the right to receive all proceeds and damages therefrom. In addition, the Consultant thereby waives any so-called “moral rights” with respect to the Inventions. To the extent that the Consultant has any rights in the results and proceeds of the Consultant’s service to the Company that cannot be assigned in the manner described herein, the Consultant agrees to unconditionally waive the enforcement of such rights. The Consultant hereby waives any and all currently existing and future monetary rights in and to the Inventions and all patents and other registrations for intellectual property that may issue thereon, including, without limitation, any rights that would otherwise accrue to the Consultant’s benefit by virtue of the Consultant being a service provider to the Company.

10. Successors; Binding Agreement.

(a) The Company shall require any purchaser or purchasers of the Company or any purchaser or purchasers of substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to the Consultant, to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such purchase had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business or assets which executes and delivers the agreement provided for in this Section 9(a) or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

(b) This agreement shall inure to the benefit of and be enforceable by the Consultant’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Consultant should die while any amount would still be payable hereunder if the Consultant had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Consultant’s devisee, legatee or other designee or, if there be no such designee, to the Consultant’s estate.

11. Amendment; Waiver. No provisions of this Agreement may be modified, supplemented, waived or discharged unless such waiver, modification or discharge is agreed to in a writing signed by the Consultant and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or in compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement.

14. Remedies.

(a) In the event of a breach or threatened breach of any of the Consultant ’s covenants under Section 8, the Consultant acknowledges that the Company will not have an adequate remedy at law. Accordingly, in the event of any such breach or threatened breach, the Company will be entitled to such equitable and injunctive relief as may be available to restrain the Consultant from the violation of the provisions thereof.

(b) Nothing herein shall be construed as prohibiting the Company, on the one hand, and the Consultant, on the other hand, from pursuing any remedies available at law or in equity for any breach or threatened breach of the provisions of this Agreement by the other party, including the recovery of damages.

If to the Company

	addressed to:	Nexalin Technology Inc. 1776 Yorktown Suite 550 Houston, TX 77056 Attention:

	with a copy to:	Warshaw Burstein LLP 575 Lexington Avenue New York, New York 10022 Attention: Martin Siegel, Esq.

If to the Consultant

	addressed to:	Dr. David Owens

or to such other address as the one party shall specify to the other party in writing.

17. Acknowledgment. The Consultant acknowledges that Consultant has had the opportunity to consult with independent counsel of Consultant’s own choice concerning this Agreement and that Consultant has taken advantage of that opportunity to the extent that Consultant desires. The Consultant further acknowledges that Consultant has read and understands this Agreement, is fully aware of its legal effect, and has entered into it voluntarily based on Consultant’s own judgment.

[Signature Page follows]

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date:

	NEXALIN TECHNOLOGY INC.

	By:	/s/ Mark White
	Title:	CEO

	By:	/s/ David Owens
		David Owens, MD

Signature Page

Exhibit 10.11

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (this “Agreement”) dated as of July 1, 2023 (the “Effective Date”), by and between MICHAEL NKETIAH (the “Executive”) and NEXALIN TECHNOLOGY, INC. (the “Company”).

WHEREAS, the Company has offered the Executive employment on the terms set out in this Agreement, and the Executive has accepted the Company’s offer, effective as of the Effective Date (as defined below.

NOW, THEREFORE, in consideration of the premises and covenants herein contained, the parties hereto agree as follows:

1. Employment Term. Subject to the terms and conditions hereof, as of the Effective Date the Executive will continue to be employed full-time by the Company for the three- (3-) year period commencing as of the Effective Date and ending on the third anniversary of the Effective Date (the “Termination Date”), unless the Employment Term is extended or terminated as provided in Sections 2 and 6, respectively (the “Employment Term”).

3. Duties and Responsibilities. During the Employment Term, the Executive shall serve in the position of Senior Vice President, Quality, Regulatory and Clinical Affairs (“VP QR&CA”). The Executive will carry out those duties, responsibilities and reporting requirements which are ordinarily expected of a VP QR&CA, and such other reasonable duties as may from time to time be assigned by the CEO and/or the Board of Directors. The Executive shall work on a full-time basis and shall devote his time, energy and attention to the business of the Company.

4. Compensation

(a) Basic Compensation. In payment for services to be rendered by the Executive hereunder, the Executive shall be entitled to annual Basic Compensation in cash, less any withholding required by law; of $250,000 per annum, payable monthly or on such more frequent schedule as the Company may elect.

(b) Bonus.

(i) Annual Bonus. The Executive shall be entitled to an annual cash bonus during each year of his Employment Term in the aggregate amount $30,000 to be determined in the good faith discretion of the Compensation Committee based upon the Executive’s achievement of objectives and milestones using the same criteria as the Target Bonus (the “Annual Bonus”). The Compensation Committee shall determine the amount of Annual Bonus payment on or before April 5th of each year of the term, following completion of the Company’s audited financial statements and results of operation for the prior fiscal year and the public announcement of such results, in accordance with the following terms and conditions. The actual Annual Bonus, if any, will be awarded in the Compensation Committee’s discretion and may be based on, among other things, the financial performance of the Company, the Executive’s own job performance and the achievement, in whole or in part, of performance targets and goals that are the same as or similar to those established by the Compensation Commission, after consultation with the Executive, applicable to the Target Bonus. The Executive’s receipt of a Discretionary Bonus in one year does not guarantee receipt of any bonus in any subsequent year. Any Annual Bonus earned will be paid as soon as practicable following Committee’s determination of the amount, if any, thereof, and in any event on or before the March 15th following the end of the year to which the Discretionary Bonus relates.

(ii) Performance Based Options. In addition to the Annual Bonus earned by the Executive in any year, the Executive shall also be entitled to stock options (the “Bonus Options”). Within a reasonable time following the Effective Date above, and subject to the approval of the Board or the Compensation Committee of the Board, the Executive shall be granted Bonus Options having an exercise price equal to $90,000. The exercise price of the Bonus Options shall equal the closing price of the Company’s publicly-traded Common Stock on the date of the grant, and the Bonus Options shall be nonqualified stock options. Subject to the Executive’s continued employment with or provision of services to the Company through each vesting date set forth below, each of the three (3) tranches of Bonus Options covering one-third (33%) of the underlying shares of Common Stock shall vest and become exercisable in three (3) equal annual installments of shares of Common Stock, beginning on the first anniversary of the Effective Date upon the achievement of certain “Milestone Targets” (as hereinafter defined). The Milestone Targets shall comprise specific significant Company-based milestones as determined, and adjusted, by the Compensation Committee on an annual or similar periodic basis. This grant of the Bonus Options shall be construed in accordance and consistent with, and subject to, the provisions of the Nexalin Technology, Inc. 2023 Equity Incentive Plan (the “Plan”) (the provisions of which are incorporated herein by reference) and, except as otherwise expressly set forth herein, the capitalized terms used in this Agreement shall have the same definitions as set forth in the Plan.

(iii) Investment Representations. The Executive acknowledges the shares of Common Stock of the Company issuable under this Section 4(b) into which the Bonus Options shall be exercisable (the “Bonus Shares”) will be taken by him for investment and not for distribution thereof and will not be sold or otherwise disposed of in violation of the Securities Act of 1933 as amended and the rules and regulations promulgated thereunder (the “Securities Act”) and shall contain restrictions as are customary in grants of this kind and shall be taxable to the Executive in accordance with applicable federal and state tax laws. All certificates representing Bonus Shares shall have affixed thereto legends in substantially the following form:

In furtherance of the foregoing, the Executive acknowledges that the Executive has been advised and understands, that:

(c) Specified Employee. If the Executive is a “specified employee” of the Company within the meaning of Section 409A(a)(2)(B)(i) of the Internal Revenue Code (the “Code”) (or any successor provision), no payment under this Section 4 in connection with the Executive’s termination of employment (other than a payment of salary through the date of such termination, and payments on account of termination of employment by reason of death) shall be made until the date which is six (6) months after the date of the termination of the employment of the Executive (or, if earlier, the date of death of the Executive); provided further, if the Company determines based upon written advice of counsel that any such payment if made during the calendar year that includes the termination date would not be deductible in whole or in part by reason of Code § 162(m), such payment shall be made on January 2 of the following calendar year (or such later date as may be required under the preceding proviso if the Executive is a “specified employee”).

5. Other Benefits. The Executive shall be entitled to the following additional benefits:

(a) two (2) weeks of paid vacation during each year of the term; it being understood and agreed that Executive shall be entitled to take such additional paid vacation time as does not interfere with the performance of his duties hereunder and as are not reasonably objected to by the Company’s Board of Directors.

(c) major medical, health and dental coverage benefits and long-term disability group plan coverage generally available to the Company’s officers. To the extent the Executive qualifies, the Executive may participate in, or benefit under, any employee benefit plan, arrangement or perquisite made available by the Company to its key executives. Family medical, health and dental coverage benefits and long-term disability group plan coverage may be obtained for the Executive’s family at his sole cost and expense.

6. Termination. The Executive’s employment hereunder may be terminated under the following circumstances:

(b) This Agreement shall terminate upon the death of Executive.

(d) The Executive may terminate his employment for “Good Reason” on five (5) days written notice if:

(ii) his compensation is reduced; or

7. Nondisclosure; Noncompetition.

(d) In the event that this Agreement shall be terminated, then notwithstanding such termination, the obligations of the Executive pursuant to this Section 7 of this Agreement shall survive such termination.

8. Inventions.

9. Successors; Binding Agreement.

10. Amendment; Waiver. No provisions of this Agreement may be modified, supplemented, waived or discharged unless such waiver, modification or discharge is agreed to in a writing signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or in compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement.

11. Applicable Law. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the State of Delaware without regard to its conflict of laws principles.

12. Severability of Covenants. In the event that any provision of this Agreement, including any sentence, clause or part hereof, shall be deemed contrary to law or invalid or unenforceable in any respect by a court of competent jurisdiction, the remaining provisions shall not be affected, but shall remain in full force and effect and any invalid and enforceable provisions shall be deemed, without further action on the part of the undersigned, modified, amended and limited solely to the extent necessary to render the same valid and enforceable.

13. Remedies.

(a) In the event of a breach or threatened breach of any of the Executive’s covenants under Section 7, the Executive acknowledges that the Company will not have an adequate remedy at law. Accordingly, in the event of any such breach or threatened breach, the Company will be entitled to such equitable and injunctive relief as may be available to restrain the Executive from the violation of the provisions thereof.

(c) If the Company terminates this Agreement at any time without Cause (as defined above in Section 6(c) or the Executive terminates his employment for a Good Reason (as defined above in Section 6(d), after the first anniversary of the date hereof, the Executive shall be entitled under this Section 13(c) to receive an amount equal to the amount of the compensation payments that, but for his termination of employment, would have been payable to the Executive under Section 4(a) as follows:

Termination under Section 13(c)		Compensation under Section 4(a)
Within the first full calendar year of the Executive’s employment		an amount equal to the amount of compensation payments for 6 months
Within the second full calendar year of the Executive’s employment		an amount equal to the amount of compensation payments for 12 months
Within or after the third full calendar year of the Executive’s employment		an amount equal to the amount of compensation payments for one 18 month period

14. Notices. Any notice, request, instruction or other document to be given hereunder by any party to the other party shall be in writing and shall be deemed to have been duly given when delivered personally or five (5) days after dispatch by registered or certified mail, postage prepaid, return receipt requested, to the party to whom the same is so given or made:

If to the Company

	addressed to:	Nexalin Technology Inc. 1776 Yorktown Suite 550 Houston, TX 77056 Attention:

	with a copy to:	Warshaw Burstein LLP 575 Lexington Avenue New York, New York 10022 Attention: Martin Siegel, Esq.

If to the Executive

	addressed to:	Mr. Michael Nketiah [_______________]

or to such other address as the one party shall specify to the other party in writing.

15. Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto; and any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and canceled.

16. Acknowledgment. Executive acknowledges that Executive has had the opportunity to consult with independent counsel of Executive’s own choice concerning this Agreement and that Executive has taken advantage of that opportunity to the extent that Executive desires. Executive further acknowledges that Executive has read and understands this Agreement, is fully aware of its legal effect, and has entered into it voluntarily based on Executive’s own judgment.

[Signature Page follows]

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date:

	NEXALIN TECHNOLOGY INC.

	By:	/s/ Mark White
	Title:	CEO

	By:	/s/ Michael Nketiah
		MICHAEL NKETIAH

Signature Page (Employment Agreement)

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

I, Mark White, certify that:

I have reviewed this quarterly report on Form 10-Q of Nexalin Technology, Inc.:

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) (Paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313);

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2023	NEXALIN TECHNOLOGY, INC.

	By:	/s/ Mark White
		Mark White
		Chief Executive Officer
		Principal Executive Officer

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

I, Marilyn Elson, certify that:

I have reviewed this quarterly report on Form 10-Q of Nexalin Technology, Inc.:

(b) (Paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313);

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2023	NEXALIN TECHNOLOGY, INC.

	By:	/s/ Marilyn Elson
		Marilyn Elson
		Chief Financial Officer
		Principal Accounting Officer

Exhibit 32.1

CERTIFICATIONS OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned hereby certifies, in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of NEXALIN TECHNOLOGY, INC., that, to his or her knowledge, the Quarterly Report Nexalin Technology, Inc. on Form 10-Q for the period ended June 30, 2023 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operation of the company.

A signed original of this written statement required by Section 906 has been provided to NEXALIN TECHNOLOGY, INC and will be retained by NEXALIN TECHNOLOGY, INC and furnished to the Securities and Exchange Commission or its staff upon request.

Date: August 10, 2023	NEXALIN TECHNOLOGY, INC.

	By:	/s/ Mark White
		Mark White
		Chief Executive Officer
		Principal Executive Officer

Exhibit 32.2

CERTIFICATIONS OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned hereby certifies, in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of NEXALIN TECHNOLOGY, INC., that, to his or her knowledge, the Quarterly Report of Nexalin Technology, Inc. on Form 10-Q for the period ended June 30, 2023 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operation of the company.

Date: August 10, 2023	NEXALIN TECHNOLOGY, INC.

	By:	/s/ Marilyn Elson
		Marilyn Elson
		Chief Financial Officer
		Principal Accounting Officer

Cover - shares	6 Months Ended
Cover - shares	Jun. 30, 2023	Aug. 08, 2023
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2023
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2023
Current Fiscal Year End Date	--12-31
Entity File Number	001-41507
Entity Registrant Name	NEXALIN TECHNOLOGY, INC.
Entity Central Index Key	0001527352
Entity Tax Identification Number	27-5566468
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	1776 Yorktown
Entity Address, Address Line Two	Suite 550
Entity Address, City or Town	Houston
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77056
City Area Code	(832)
Local Phone Number	260-0222
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		7,436,562
Common stock, par value $0.001 per share
Title of 12(b) Security	Common stock, par value $0.001 per share
Trading Symbol	NXL
Security Exchange Name	NASDAQ
Warrants, exercisable for one share of Common Stock
Title of 12(b) Security	Warrants, exercisable for one share of Common Stock
Trading Symbol	NXLIW
Security Exchange Name	NASDAQ

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Current Assets:
Cash and cash equivalents	$ 231,722	$ 162,743
Short-term investments	4,464,922	6,831,192
Accounts receivable (Includes related party of $10,207 and $0, respectively)	14,322	4,875
Inventory	160,007	154,370
Prepaid expenses and other current assets	240,911	272,282
Total Current Assets	5,111,884	7,425,462
ROU Asset	3,397	6,171
Equipment, net of accumulated depreciation of $2,449 and $2,181, respectively	234	503
Patent, net of amortization	60,106
Total Assets	5,175,621	7,432,136
Current Liabilities:
Accounts payable (Includes related party of $0 and $260,000, respectively)	48,501	658,367
Accrued expenses	603,633	539,822
Lease liability, current portion	30,487	50,797
Loan payable - officer		200,000
Note payable	500,000	500,000
Total Current Liabilities	1,182,621	1,948,986
Long-term Liabilities:
Lease liability, net of current portion		4,463
Total Liabilities	1,182,621	1,953,449
Stockholders’ Equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 7,286,562 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	7,287	7,287
Accumulated other comprehensive income	33,089	36,313
Additional paid in capital	77,912,815	77,824,427
Accumulated deficit	(73,960,191)	(72,389,340)
Total Stockholders’ Equity	3,993,000	5,478,687
Total Liabilities and Stockholders’ Equity	$ 5,175,621	$ 7,432,136

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Accounts receivable related party	$ 10,207	$ 0
Accumulated depreciation	2,449	2,181
Accounts payable related party	$ 0	$ 260,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	7,286,562	7,286,562
Common stock, shares outstanding	7,286,562	7,286,562

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE GAIN (LOSS) (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Income Statement [Abstract]
Revenues, net (Includes related party of $10,207 and $362,868 for the three months ended and $10,207 and $663,367 for the six months ended respectively)	$ 35,540	$ 414,288	$ 66,100	$ 737,610
Cost of revenues	9,374	123,032	16,484	169,047
Gross profit	26,166	291,256	49,616	568,563
Operating expenses:
Professional fees	120,147	183,109	278,747	478,565
Salaries and benefits	303,334	167,260	602,657	305,854
Selling, general and administrative	479,545	385,990	824,498	604,364
Total operating expenses	903,026	736,359	1,705,902	1,388,783
Loss from operations	(876,860)	(445,103)	(1,656,286)	(820,220)
Other income (expense), net:
Interest income (expense), net	(5,518)	(17,302)	(14,355)	(35,434)
Gain on sale of short-term investments	58,878		97,650
Other income	1,063		2,140
Other income - PPP loan forgiveness				22,916
Total other income (expense), net	54,423	(17,302)	85,435	(12,518)
Net loss	(822,437)	(462,405)	(1,570,851)	(832,738)
Other comprehensive income (loss):
Unrealized loss from short-term investments	(7,980)		(3,224)
Comprehensive loss	$ (830,417)	$ (462,405)	$ (1,574,075)	$ (832,738)
Net loss per share attributable to common stockholders - Basic	$ (0.11)	$ (0.09)	$ (0.22)	$ (0.17)
Net loss per share attributable to common stockholders - Diluted	$ (0.11)	$ (0.09)	$ (0.22)	$ (0.17)
Weighted Average Shares Outstanding - Basic	7,286,562	4,896,717	7,286,562	4,896,717
Weighted Average Shares Outstanding - Diluted	7,286,562	4,896,717	7,286,562	4,896,717

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE GAIN (LOSS) (Unaudited) (Parenthetical) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Income Statement [Abstract]
Revenue from related parties	$ 10,207	$ 362,868	$ 10,207	$ 663,367

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (Unaudited) - USD ($)	Common Stock [Member]	AOCI Attributable to Parent [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Beginning balance, value at Dec. 31, 2021	$ 4,880		$ 69,004,703	$ (70,691,524)	$ (1,681,941)
Beginning balance, shares at Dec. 31, 2021	4,879,923
Stock issued for cash	$ 1		5,099		5,100
Stock issued for cash, shares	850
Stock compensation	$ 24		97,476		97,500
Stock compensation, shares	24,390
Net loss				(393,249)	(393,249)
Ending balance, value at Mar. 31, 2022	$ 4,905		69,107,278	(71,084,773)	(1,972,590)
Ending balance, shares at Mar. 31, 2022	4,905,163
Stock compensation			171,600		171,600
Net loss				(439,489)	(439,489)
Ending balance, value at Jun. 30, 2022	$ 4,905		69,278,878	(71,524,262)	(2,240,479)
Ending balance, shares at Jun. 30, 2022	4,905,163
Beginning balance, value at Dec. 31, 2022	$ 7,287	36,313	77,824,427	(72,389,340)	5,478,687
Beginning balance, shares at Dec. 31, 2022	7,286,562
Other comprehensive loss		4,756			4,756
Net loss				(748,414)	(748,414)
Ending balance, value at Mar. 31, 2023	$ 7,287	41,069	77,824,427	(73,137,754)	4,735,029
Ending balance, shares at Mar. 31, 2023	7,286,562
Other comprehensive loss		(7,980)			(7,980)
Stock compensation			88,388		88,388
Net loss				(822,437)	(822,437)
Ending balance, value at Jun. 30, 2023	$ 7,287	$ 33,089	$ 77,912,815	$ (73,960,191)	$ 3,993,000
Ending balance, shares at Jun. 30, 2023	7,286,562

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Cash flows from operating activities:
Net Loss	$ (1,570,851)	$ (832,738)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad Debt		11,175
Stock compensation	88,388	269,100
Depreciation	268	268
Amortization	1,352	(0)
Forgiveness of PPP Loan		(22,916)
Non-cash lease expense	2,774	2,536
Gain on sale of short-term investments	(97,650)
Changes in operating assets and liabilities:
Accounts receivable	(9,447)	(18,560)
Prepaid assets	31,371	(64,052)
Inventory	(5,637)	(93,016)
Accounts payable - related party	(260,000)	58,099
Accounts payable	(349,866)	229,061
Accrued expenses	63,811	(12,050)
Deferred revenue		130,000
Lease liability	(24,773)	(22,450)
Net cash used in operating activities	(2,130,260)	(365,543)
Cash flows from investing activities:
Sale of short-term investments	21,155,143
Purchase of short-term investments	(18,694,446)
Purchase of patents	(61,458)
Net cash provided by investing activities	2,399,239
Cash flows from financing activities:
Sale of common stock for cash, net of financing fees		5,100
Payments on loan payable - shareholder		(10,000)
Payments on notes payable - officer	(200,000)
Net cash used in financing activities	(200,000)	(4,900)
Net increase (decrease) in cash and cash equivalents	68,979	(370,443)
Cash and cash equivalents - beginning of period	162,743	661,778
Cash and cash equivalents - end of period	231,722	291,335
Non-cash investing and financing activities:
Unrealized loss on short-term investments	(3,224)
ROU asset and lease liability recorded		$ 11,359

NATURE OF THE ORGANIZATION AND BUSINESS

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

NATURE OF THE ORGANIZATION AND BUSINESS

NOTE 1 — NATURE OF THE ORGANIZATION AND BUSINESS

Corporate History

Nexalin Technology, Inc. (“NV Nexalin”) was formed on October 19, 2010 as a Nevada corporation. The Company’s principal offices are located at 1776 Yorktown, Suite 550, Houston, Texas 77056.

Our shares and warrants began trading on the Nasdaq Capital Market tier of the Nasdaq Stock Market (“Nasdaq”) on September 16, 2022, under the symbols “NXL” and “NXLIW”, respectively.

Throughout this report, the terms “Nexalin,” “our,” “we,” “us,” and the “Company” refer to Nexalin Technology, Inc.

Business Overview

Emerging Growth Company

Risks and Uncertainties

LIQUIDITY

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

LIQUIDITY

NOTE 2 — LIQUIDITY

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS

Basis of Presentation

Principles of Consolidation

The consolidated financial statements include the accounts of Nexalin and its wholly owned subsidiary Neuro-Health. Intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

Revenue

Revenue Streams

Performance Obligations

Management identified that treatment fee revenue has one performance obligation. The performance obligation is satisfied upon the completion of individual treatments on patients by customers.

Practical Expedients

As part of ASC 606, the Company has adopted several practical expedients including:

●

Shipping and Handling Activities — the Company elected to account for shipping and handling activities as a fulfilment cost rather than as a separate performance obligation.

●

Disaggregated Revenues

Major Revenue Streams

Revenue consists of the following by service offering:

Schedule of disaggregation of revenue	Three Months Ended
	June 30, 2023		June 30, 2022
Device Sales	$	9,600	$	380,000
Licensing Fee		20,033		19,305
Equipment		5,100		6,095
Other		807		8,888
Total	$	35,540	$	414,288

	Six Months Ended
	June 30, 2023		June 30, 2022
Device Sales	$	9,600	$	644,500
Licensing Fee		43,903		39,448
Equipment		11,500		14,095
Other		1,097		39,567
Total	$	66,100	$	737,610

Major Geographic Locations

	Three Months Ended
	June 30, 2023		June 30, 2022
U.S. Sales	$	25,333	$	41,718
China Sales		10,207		372,570
Total	$	35,540	$	414,288

	Six Months Ended
	June 30, 2023		June 30, 2022
U.S. Sales	$	55,892	$	64,541
China Sales		10,208		673,069
Total	$	66,100	$	737,610

Contract Modifications

There were no contract modifications during the six months ended June 30, 2023 and 2022. Contract modifications are not routine in the performance of the Company’s contracts.

Deferred Revenue

Cash and Cash Equivalents

Short-Term Investments

Accounts Receivable

Inventory

Equipment

Equipment is recorded at cost. Depreciation is computed using straight-line method over the estimated useful lives of the related assets, generally five years.

Patents

The following table summarizes the gross carrying amount, amortization and the net carrying value at June 30, 2023 and December 31, 2022.

Schedule of patents	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
June 30, 2023
Patents	$	61,458	$	1,352	$	60,106
Total June 30, 2023	$	61,458	$	1,352	$	60,106
December 31, 2022
Patents	$	-	$	-	$	-
Total December 31, 2022	$	-	$	-	$	-

Income Taxes

Fair Value Measurements

●

Fair Value of Financial Instruments

The following table summarizes the amortized cost, unrealized gains and the fair value at June 30, 2023 and December 31, 2022.

	Amortized Cost		Unrealized Gain		Fair Value
June 30, 2023
Short-term investments	$	4,431,833	$	33,089	$	4,464,922
Total June 30, 2023	$	4,431,833	$	33,089	$	4,464,922
December 31, 2022
Short-term investments	$	6,794,879	$	36,313	$	6,831,192
Total December 31, 2022	$	6,794,879	$	36,313	$	6,831,192

The unrealized loss of $3,224 for six months ended June 30, 2023 is included in the table above as a reduction in the total unrealized gain.

The following table provides the carrying value and fair value of the Company’s financial assets measured at fair value as of June 30, 2023 and December 31, 2022.

	Carrying Value		Level 1		Level 2		Level 3
June 30, 2023
U.S. Treasury Notes	$	4,464,922	$	4,464,922	$	-	$	-
December 31, 2022
U.S. Treasury Notes	$	6,831,192	$	6,831,192	$	-	$	-

Net Loss per Common Share

Schedule of antidilutive shares
	Three Months Ended June 30,
	2023		2022
Warrants		2,662,250		21,600
Total		2,662,250		21,600

	Six Months Ended June 30,
	2023		2022
Warrants		2,662,250		21,600
Total		2,662,250		21,600

Stock-Based Compensation

Warrant Accounting

Research and Development

Leases

Recent Accounting Pronouncements

All other newly issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to the Company.

ACCRUED EXPENSES

6 Months Ended

Jun. 30, 2023

Payables and Accruals [Abstract]

ACCRUED EXPENSES

NOTE 4 — ACCRUED EXPENSES

Accrued expenses consist of the following amounts:

Schedule of accrued expenses	June 30, 2023		December 31, 2022
Accrued interest	$	105,001	$	111,501
Accrued – other		52,653		2,321
Accrued settlement liabilities		336,000		336,000
Accrued research and development expense		109,979		90,000
Total	$	603,633	$	539,822

NON-CONSOLIDATED JOINT VENTURE AND RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2023

NON-CONSOLIDATED JOINT VENTURE AND RELATED PARTY TRANSACTIONS

NOTE 5 — NON-CONSOLIDATED JOINT VENTURE AND RELATED PARTY TRANSACTIONS

Formalized Joint Venture

U.S. Asian Consulting Group, LLC

Officers

Loan Payable – Officer

Leases

LOANS PAYABLE

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

LOANS PAYABLE

NOTE 6 — LOANS PAYABLE

Legacy Ventures International, Inc.

STOCKHOLDERS’ EQUITY (Deficit)

6 Months Ended

Jun. 30, 2023

Equity [Abstract]

STOCKHOLDERS’ EQUITY (Deficit)

NOTE 7 — STOCKHOLDERS’ EQUITY (Deficit)

Issuance of Common Stock

During the six months ended June 30, 2022, the Company issued 850 shares of common stock to an investor for cash proceeds of $5,100 with a fair value of $6.00 per share.

During the six months ended June 30, 2023, the Company issued no shares of common stock.

Warrants

The issuance of warrants to purchase shares of the Company’s common stock are summarized as follows:

Schedule of warrants	Number of warrants		Weighted Average Exercise Price
Outstanding December 31, 2022		2,662,250	$	4.15
Issued		-		-
Exercised		-		-
Expired or cancelled		-		-
Outstanding June 30, 2023		2,662,250	$	4.15

The following table summarizes information about warrants to purchase shares of the Company’s common stock outstanding and exercisable at June 30 2023:


Exercise Price		Outstanding Number of Warrants		Weighted Average Remaining Life In Years		Weighted Average Exercise Price		Exercisable Number of Warrants
$	4.15		2,315,000		2.25	$	4.15		2,135,000
$	4.15		347,250		2.25		4.15		347,250
			2,662,250		2.25	$	4.15		2,662,250

COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2023

Commitments and Contingencies (Note 8)

COMMITMENTS AND CONTINGENCIES

NOTE 8 — COMMITMENTS AND CONTINGENCIES

Legal Claims

Sarah Veltz v. Nexalin Technology, Inc. et al.

Employment Development Department

Demand Letter from The University of Arizona

LEASES

6 Months Ended

Jun. 30, 2023

Leases

LEASES

NOTE 9 — LEASES

With the adoption of ASC 842, operating lease agreements are required to be recognized on the balance sheet as ROU assets and corresponding lease liabilities.

Operating leases are included in the consolidated balance sheets as follows:

Schedule of Operating leases	Classification	June 30, 2023		December 31, 2022
Lease assets
Operating lease cost ROU assets	Assets	$	3,397	$	6,171
Total lease assets		$	3,397	$	6,171

Lease liabilities
Operating lease liabilities, current	Current liabilities	$	30,487	$	50,797
Operating lease liabilities, non-current	Liabilities		-		4,463
Total lease liabilities		$	30,487	$	55,260

The components of lease costs, which are included in income from operations in our unaudited condensed consolidated statements of operations, were as follows:

Schedule of lease cost
	Three Months Ended June 30,
	2023		2022
Leases costs
Operating lease costs	$	13,500	$	13,500
Total lease costs	$	13,500	$	13,500

	Six Months Ended June 30,
	2023		2022
Leases costs
Operating lease costs	$	27,000	$	27,000
Total lease costs	$	27,000	$	27,000

Future minimum payments under non-cancellable leases for operating leases for the remaining terms of the leases following the six months ended June 30, 2023:


Fiscal Year	Operating Leases
Remainder of 2023	$	26,901
2024		4,496
Total future minimum lease payments		31,397
Amount representing interest		910
Present value of net future minimum lease payments	$	30,487

Additional information related to leases is presented as follows:

	June 30, 2023			December 31, 2022
Leases
Weighted average remaining lease term		0.5			1.00
Weighted average discount rate		9.9	%		9.9	%

CONCENTRATION OF CREDIT RISK

6 Months Ended

Jun. 30, 2023

Risks and Uncertainties [Abstract]

CONCENTRATION OF CREDIT RISK

NOTE 10 — CONCENTRATION OF CREDIT RISK

Revenues

Three customers accounted for 65% and 54% of revenues for the three and six months ended June 30, 2023, respectively as set forth below:

Concentration of credit risk	Three Months Ended June 30, 2023			Six Months Ended June 30, 2023
Customer A - related party		29	%		15	%
Customer B		21	%		23	%
Customer C		15	%		16	%

One customer, a related party, accounted for 88% and 90% of revenue for the three and six months ended June 30, 2022, respectively.

Accounts Receivable

Two customers accounted for 85% of accounts receivable at June 30, 2023, as set forth below:

	June 30, 2023
Customer A - related party		71	%
Customer B		14	%

Four customers accounted for 84% of accounts receivable at December 31, 2022, as set forth below:

	December 31, 2022
Customer A		29	%
Customer B		20	%
Customer C		20	%
Customer D		15	%

SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2023

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 11 — SUBSEQUENT EVENTS

Management did not identify any additional subsequent events that would have required adjustment or disclosure in the unaudited consolidated condensed financial statements.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS (Policies)

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of Nexalin and its wholly owned subsidiary Neuro-Health. Intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

Use of Estimates

Revenue

Revenue

Revenue Streams

Performance Obligations

Management identified that treatment fee revenue has one performance obligation. The performance obligation is satisfied upon the completion of individual treatments on patients by customers.

Practical Expedients

As part of ASC 606, the Company has adopted several practical expedients including:

●

Shipping and Handling Activities — the Company elected to account for shipping and handling activities as a fulfilment cost rather than as a separate performance obligation.

●

Disaggregated Revenues

Major Revenue Streams

Revenue consists of the following by service offering:

Schedule of disaggregation of revenue	Three Months Ended
	June 30, 2023		June 30, 2022
Device Sales	$	9,600	$	380,000
Licensing Fee		20,033		19,305
Equipment		5,100		6,095
Other		807		8,888
Total	$	35,540	$	414,288

	Six Months Ended
	June 30, 2023		June 30, 2022
Device Sales	$	9,600	$	644,500
Licensing Fee		43,903		39,448
Equipment		11,500		14,095
Other		1,097		39,567
Total	$	66,100	$	737,610

Major Geographic Locations

	Three Months Ended
	June 30, 2023		June 30, 2022
U.S. Sales	$	25,333	$	41,718
China Sales		10,207		372,570
Total	$	35,540	$	414,288

	Six Months Ended
	June 30, 2023		June 30, 2022
U.S. Sales	$	55,892	$	64,541
China Sales		10,208		673,069
Total	$	66,100	$	737,610

Contract Modifications

There were no contract modifications during the six months ended June 30, 2023 and 2022. Contract modifications are not routine in the performance of the Company’s contracts.

Deferred Revenue

Cash and Cash Equivalents

Cash and Cash Equivalents

Short-Term Investments

Short-Term Investments

Accounts Receivable

Accounts Receivable

Inventory

Inventory

Equipment

Equipment

Equipment is recorded at cost. Depreciation is computed using straight-line method over the estimated useful lives of the related assets, generally five years.

Patents

Patents

The following table summarizes the gross carrying amount, amortization and the net carrying value at June 30, 2023 and December 31, 2022.

Schedule of patents	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
June 30, 2023
Patents	$	61,458	$	1,352	$	60,106
Total June 30, 2023	$	61,458	$	1,352	$	60,106
December 31, 2022
Patents	$	-	$	-	$	-
Total December 31, 2022	$	-	$	-	$	-

Income Taxes

Income Taxes

Fair Value Measurements

Fair Value Measurements

●

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The following table summarizes the amortized cost, unrealized gains and the fair value at June 30, 2023 and December 31, 2022.

	Amortized Cost		Unrealized Gain		Fair Value
June 30, 2023
Short-term investments	$	4,431,833	$	33,089	$	4,464,922
Total June 30, 2023	$	4,431,833	$	33,089	$	4,464,922
December 31, 2022
Short-term investments	$	6,794,879	$	36,313	$	6,831,192
Total December 31, 2022	$	6,794,879	$	36,313	$	6,831,192

The unrealized loss of $3,224 for six months ended June 30, 2023 is included in the table above as a reduction in the total unrealized gain.

The following table provides the carrying value and fair value of the Company’s financial assets measured at fair value as of June 30, 2023 and December 31, 2022.

	Carrying Value		Level 1		Level 2		Level 3
June 30, 2023
U.S. Treasury Notes	$	4,464,922	$	4,464,922	$	-	$	-
December 31, 2022
U.S. Treasury Notes	$	6,831,192	$	6,831,192	$	-	$	-

Net Loss per Common Share

Net Loss per Common Share

Schedule of antidilutive shares
	Three Months Ended June 30,
	2023		2022
Warrants		2,662,250		21,600
Total		2,662,250		21,600

	Six Months Ended June 30,
	2023		2022
Warrants		2,662,250		21,600
Total		2,662,250		21,600

Stock-Based Compensation

Stock-Based Compensation

Warrant Accounting

Warrant Accounting

Research and Development

Research and Development

Leases

Leases

Recent Accounting Pronouncements

Recent Accounting Pronouncements

All other newly issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to the Company.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS (Tables)

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Schedule of disaggregation of revenue

Schedule of disaggregation of revenue	Three Months Ended
	June 30, 2023		June 30, 2022
Device Sales	$	9,600	$	380,000
Licensing Fee		20,033		19,305
Equipment		5,100		6,095
Other		807		8,888
Total	$	35,540	$	414,288

	Six Months Ended
	June 30, 2023		June 30, 2022
Device Sales	$	9,600	$	644,500
Licensing Fee		43,903		39,448
Equipment		11,500		14,095
Other		1,097		39,567
Total	$	66,100	$	737,610

Major Geographic Locations

	Three Months Ended
	June 30, 2023		June 30, 2022
U.S. Sales	$	25,333	$	41,718
China Sales		10,207		372,570
Total	$	35,540	$	414,288

	Six Months Ended
	June 30, 2023		June 30, 2022
U.S. Sales	$	55,892	$	64,541
China Sales		10,208		673,069
Total	$	66,100	$	737,610

Schedule of patents

Schedule of patents	Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
June 30, 2023
Patents	$	61,458	$	1,352	$	60,106
Total June 30, 2023	$	61,458	$	1,352	$	60,106
December 31, 2022
Patents	$	-	$	-	$	-
Total December 31, 2022	$	-	$	-	$	-

Schedule of amortized cost, unrealized gains

	Amortized Cost		Unrealized Gain		Fair Value
June 30, 2023
Short-term investments	$	4,431,833	$	33,089	$	4,464,922
Total June 30, 2023	$	4,431,833	$	33,089	$	4,464,922
December 31, 2022
Short-term investments	$	6,794,879	$	36,313	$	6,831,192
Total December 31, 2022	$	6,794,879	$	36,313	$	6,831,192

Schedule of fair value, assets measured on recurring basis

	Carrying Value		Level 1		Level 2		Level 3
June 30, 2023
U.S. Treasury Notes	$	4,464,922	$	4,464,922	$	-	$	-
December 31, 2022
U.S. Treasury Notes	$	6,831,192	$	6,831,192	$	-	$	-

Schedule of antidilutive shares

Schedule of antidilutive shares
	Three Months Ended June 30,
	2023		2022
Warrants		2,662,250		21,600
Total		2,662,250		21,600

	Six Months Ended June 30,
	2023		2022
Warrants		2,662,250		21,600
Total		2,662,250		21,600

ACCRUED EXPENSES (Tables)

6 Months Ended

Jun. 30, 2023

Payables and Accruals [Abstract]

Schedule of accrued expenses

Schedule of accrued expenses	June 30, 2023		December 31, 2022
Accrued interest	$	105,001	$	111,501
Accrued – other		52,653		2,321
Accrued settlement liabilities		336,000		336,000
Accrued research and development expense		109,979		90,000
Total	$	603,633	$	539,822

STOCKHOLDERS’ EQUITY (Deficit) (Tables)

6 Months Ended

Jun. 30, 2023

Equity [Abstract]

Schedule of warrants

Schedule of warrants	Number of warrants		Weighted Average Exercise Price
Outstanding December 31, 2022		2,662,250	$	4.15
Issued		-		-
Exercised		-		-
Expired or cancelled		-		-
Outstanding June 30, 2023		2,662,250	$	4.15

Summary information about warrants to purchase


Exercise Price		Outstanding Number of Warrants		Weighted Average Remaining Life In Years		Weighted Average Exercise Price		Exercisable Number of Warrants
$	4.15		2,315,000		2.25	$	4.15		2,135,000
$	4.15		347,250		2.25		4.15		347,250
			2,662,250		2.25	$	4.15		2,662,250

LEASES (Tables)

6 Months Ended

Jun. 30, 2023

Leases

Schedule of Operating leases

Schedule of Operating leases	Classification	June 30, 2023		December 31, 2022
Lease assets
Operating lease cost ROU assets	Assets	$	3,397	$	6,171
Total lease assets		$	3,397	$	6,171

Lease liabilities
Operating lease liabilities, current	Current liabilities	$	30,487	$	50,797
Operating lease liabilities, non-current	Liabilities		-		4,463
Total lease liabilities		$	30,487	$	55,260

Schedule of lease cost

Schedule of lease cost
	Three Months Ended June 30,
	2023		2022
Leases costs
Operating lease costs	$	13,500	$	13,500
Total lease costs	$	13,500	$	13,500

	Six Months Ended June 30,
	2023		2022
Leases costs
Operating lease costs	$	27,000	$	27,000
Total lease costs	$	27,000	$	27,000

Future minimum payments under non-cancelable leases for operating leases


Fiscal Year	Operating Leases
Remainder of 2023	$	26,901
2024		4,496
Total future minimum lease payments		31,397
Amount representing interest		910
Present value of net future minimum lease payments	$	30,487

Schedule of additional information related to leases

	June 30, 2023			December 31, 2022
Leases
Weighted average remaining lease term		0.5			1.00
Weighted average discount rate		9.9	%		9.9	%

CONCENTRATION OF CREDIT RISK (Tables)

6 Months Ended

Jun. 30, 2023

Risks and Uncertainties [Abstract]

Concentration of credit risk

Concentration of credit risk	Three Months Ended June 30, 2023			Six Months Ended June 30, 2023
Customer A - related party		29	%		15	%
Customer B		21	%		23	%
Customer C		15	%		16	%

One customer, a related party, accounted for 88% and 90% of revenue for the three and six months ended June 30, 2022, respectively.

Accounts Receivable

Two customers accounted for 85% of accounts receivable at June 30, 2023, as set forth below:

	June 30, 2023
Customer A - related party		71	%
Customer B		14	%

Four customers accounted for 84% of accounts receivable at December 31, 2022, as set forth below:

	December 31, 2022
Customer A		29	%
Customer B		20	%
Customer C		20	%
Customer D		15	%

NATURE OF THE ORGANIZATION AND BUSINESS (Details Narrative) - USD ($)		1 Months Ended
	Apr. 06, 2020	Sep. 20, 2022	Jun. 30, 2023	Dec. 31, 2022
Subsidiary, Sale of Stock [Line Items]
Shares issued during the period	450,000
Warrant to purchase		2,315,000	2,662,250	2,662,250
Exercise price		$ 4.15	$ 4.15	$ 4.15
Proceeds from issuance of equity		$ 9,607,250
Common Stock [Member]
Subsidiary, Sale of Stock [Line Items]
Shares issued during the period		2,315,000
Warrant [Member]
Subsidiary, Sale of Stock [Line Items]
Shares issued during the period		2,315,000
IPO [Member]
Subsidiary, Sale of Stock [Line Items]
Shares issued during the period		2,315,000
Over-Allotment Option [Member]
Subsidiary, Sale of Stock [Line Items]
Shares issued during the period		347,250
Proceeds from issuance of warrants		$ 3,473

LIQUIDITY (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
LIQUIDITY (Details Narrative) - USD ($)	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accumulated deficit	$ 73,960,191		$ 73,960,191		$ 72,389,340
Loss from operation	876,860	$ 445,103	1,656,286	$ 820,220
Cash flows from operations			2,130,260	$ 365,543
Working capital deficit	$ 3,900,000		$ 3,900,000

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Product Information [Line Items]
Total	$ 35,540	$ 414,288	$ 66,100	$ 737,610
UNITED STATES
Product Information [Line Items]
Total	25,333	41,718	55,892	64,541
CHINA
Product Information [Line Items]
Total	10,207	372,570	10,208	673,069
Device Sales [Member]
Product Information [Line Items]
Total	9,600	380,000	9,600	644,500
Licensing Fee [Member]
Product Information [Line Items]
Total	20,033	19,305	43,903	39,448
Equipment [Member]
Product Information [Line Items]
Total	5,100	6,095	11,500	14,095
Other [Member]
Product Information [Line Items]
Total	$ 807	$ 8,888	$ 1,097	$ 39,567

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS (Details 1) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Finite-Lived Intangible Assets [Line Items]
Carrying Amount	$ 61,458
Accumulated Amortization	1,352
Net Carring Value	60,106
Patents [Member]
Finite-Lived Intangible Assets [Line Items]
Carrying Amount	61,458
Accumulated Amortization	1,352
Net Carring Value	$ 60,106

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS (Details 2) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Schedule of Investments [Line Items]
Amortized Cost	$ 4,431,833	$ 6,794,879
Unrealized Gain	33,089	36,313
Fair Value	4,464,922	6,831,192
Short-Term Investments [Member]
Schedule of Investments [Line Items]
Amortized Cost	4,431,833	6,794,879
Unrealized Gain	33,089	36,313
Fair Value	$ 4,464,922	$ 6,831,192

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS (Details 3) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Platform Operator, Crypto-Asset [Line Items]
Financial assets	$ 4,464,922	$ 6,831,192
Fair Value, Inputs, Level 1 [Member]
Platform Operator, Crypto-Asset [Line Items]
Financial assets	4,464,922	6,831,192
Fair Value, Inputs, Level 2 [Member]
Platform Operator, Crypto-Asset [Line Items]
Financial assets
Fair Value, Inputs, Level 3 [Member]
Platform Operator, Crypto-Asset [Line Items]
Financial assets

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS (Details 4) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Total	2,662,250	21,600	2,662,250	21,600
Warrant [Member]
Total	2,662,250	21,600	2,662,250	21,600

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Accounting Policies [Abstract]
Deferred revenue	$ 0		$ 0		$ 0
Writeoff accounts receivable			0	$ 11,175
Allowance for doubtful accounts	0		0		$ 0
Amortization expense	691	$ 0	1,352	(0)
Reduction in total unrealized gain			3,224
Research and development costs	$ 146,000	$ 29,540	$ 211,834	$ 41,105

ACCRUED EXPENSES (Details) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Payables and Accruals [Abstract]
Accrued interest	$ 105,001	$ 111,501
Accrued – other	52,653	2,321
Accrued settlement liabilities	336,000	336,000
Accrued research and development expense	109,979	90,000
Total	$ 603,633	$ 539,822

NON-CONSOLIDATED JOINT VENTURE AND RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)					1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	Jul. 01, 2023	Nov. 02, 2021	Apr. 06, 2020	May 09, 2018	Dec. 22, 2021	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022	Dec. 31, 2020	May 17, 2023	Apr. 26, 2023	Mar. 17, 2023	Sep. 21, 2018
Related Party Transaction [Line Items]
Issuance of common stock			450,000
Related party contribution															$ 200,000
Shares issued											150,000
Stock-based compensation									$ 231,600		$ 550,000
Revenue from related parties						$ 10,207	$ 362,868	$ 10,207	663,367
New service agreement description	Under the terms of his employment agreement, Mr. White is entitled to (i) a sign-on/retention bonus consisting of a one-time lump-sum payment of $50,000 and a grant of nonqualified stock options to purchase shares of the Company's common stock with an exercise price equal to $400,000, and (ii) stock option grants to purchase shares of the Company's common stock with an exercise price equal to $840,000. Under the terms of his service agreement, Mr. Owens is entitled to (i) a sign-on/retention bonus consisting of a grant of nonqualified stock options to purchase shares of the Company's common stock with an exercise price equal to $125,000 and (ii) stock option grants to purchase shares of the Company's common stock with an exercise price equal to $585,000. Under the terms of his employment agreement Mr. Nketiah is entitled to stock option grants to purchase shares of the Company's common stock with an exercise price equal to $90,000. In addition to the payments stock and option grants described above, each of Messrs. White, Owens and Nketiah are receiving cash compensation and are eligible for additional cash bonuses
Interest payable														$ 39,000
Outstanding amount												$ 200,000
Outstanding interest													$ 34,500
Lease payments										$ 54,000
Lease costs						13,500	13,500	27,000	27,000
Loans Payable Officer [Member]
Related Party Transaction [Line Items]
Interest expense								18,000	4,500
Chief Executive Officer [Member]
Related Party Transaction [Line Items]
Loans from related party		$ 200,000
Principal amount		$ 200,000
Interest rate		9.00%
Maturity date		Mar. 17, 2023
US Asian Consulting Group LLC [Member]
Related Party Transaction [Line Items]
Issuance of common stock				249,750
Monthly payment				$ 10,000
Balance owed for accrued,unpaid services and expenses						0		0		$ 260,000
US Asian Consulting Group LLC [Member] \| Consulting Agreement [Member]
Related Party Transaction [Line Items]
Consulting expenses								30,000
Wider [Member]
Related Party Transaction [Line Items]
Revenue from related parties						$ 10,207	$ 362,868	$ 10,207	$ 663,367
Mr Osser [Member]
Related Party Transaction [Line Items]
Consideration paid					$ 80,000
Wider [Member]
Related Party Transaction [Line Items]
Ownership percentage						52.00%		52.00%
Nexalin [Member]
Related Party Transaction [Line Items]
Ownership percentage						48.00%		48.00%

LOANS PAYABLE (Details Narrative) - Legacy Ventures International Inc [Member] - USD ($)		3 Months Ended		6 Months Ended
	Sep. 11, 2017	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Face Amount	$ 500,000
Interest rate	4.00%
Maturity date	Dec. 31, 2017
Interest expense		$ 5,000	$ 5,000	$ 10,000	$ 10,000
Outstanding amount		$ 500,000		$ 500,000		$ 500,000

STOCKHOLDERS' EQUITY (DEFICIT) (Details)	6 Months Ended
STOCKHOLDERS' EQUITY (DEFICIT) (Details)	Jun. 30, 2023 $ / shares shares
Equity [Abstract]
Number of warrants outstanding at beginning \| shares	2,662,250
Weighted average exercise price, warrants outstanding at beginning \| $ / shares	$ 4.15
Warrants issued \| shares
Weighted average exercise price, warrants issued \| $ / shares
Warrants exercised \| shares
Weighted average exercise price, warrants exercised \| $ / shares
Warrants expired or cancelled \| shares
Weighted average exercise price, warrants expired or cancelled \| $ / shares
Number of warrants outstanding at end \| shares	2,662,250
Weighted average exercise price, warrants outstanding at end \| $ / shares	$ 4.15

STOCKHOLDERS' EQUITY (DEFICIT) (Details 1) - $ / shares	6 Months Ended
STOCKHOLDERS' EQUITY (DEFICIT) (Details 1) - $ / shares	Jun. 30, 2023	Dec. 31, 2022	Sep. 20, 2022
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price	$ 4.15	$ 4.15	$ 4.15
Outstanding Number of Warrants	2,662,250	2,662,250	2,315,000
Weighted Average Remaining Life In Years	2 years 3 months
Weighted Average Exercise Price	$ 4.15
Exercisable Number of Warrants	2,662,250
Range 1 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price	$ 4.15
Outstanding Number of Warrants	2,315,000
Weighted Average Remaining Life In Years	2 years 3 months
Weighted Average Exercise Price	$ 4.15
Exercisable Number of Warrants	2,135,000
Range 2 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price	$ 4.15
Outstanding Number of Warrants	347,250
Weighted Average Remaining Life In Years	2 years 3 months
Weighted Average Exercise Price	$ 4.15
Exercisable Number of Warrants	347,250

STOCKHOLDERS’ EQUITY (Deficit) (Details Narrative) - USD ($)		6 Months Ended		12 Months Ended
	Apr. 06, 2020	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2020
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Number of common stock issued	450,000
Proceeds from issuance of common stock			$ 5,100
Stock compensation expenses			$ 231,600	$ 550,000
An Investor [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Number of common stock issued			850
Proceeds from issuance of common stock			$ 5,100
Share price			$ 6.00
Various Consultants [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Stock issued for services rendered, shares			24,390
Stock issued during period, value, issued for services			$ 150,000
Stock compensation expenses			$ 37,500

COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Commitments and Contingencies (Note 8)
Accrued amount	$ 300,000	$ 300,000

LEASES (Details) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Leases
Operating lease cost ROU assets	$ 3,397	$ 6,171
Total lease assets	3,397	6,171
Operating lease liabilities, current	30,487	50,797
Operating lease liabilities, non-current		4,463
Total lease liabilities	$ 30,487	$ 55,260

LEASES (Details 1) - USD ($)	3 Months Ended		6 Months Ended
LEASES (Details 1) - USD ($)	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Leases
Operating lease costs	$ 13,500	$ 13,500	$ 27,000	$ 27,000
Total lease costs	$ 13,500	$ 13,500	$ 27,000	$ 27,000

LEASES (Details 2) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Leases
Remainder of 2023	$ 26,901
2024	4,496
Total future minimum lease payments	31,397
Amount representing interest	910
Present value of net future minimum lease payments	$ 30,487	$ 55,260

LEASES (Details 3)	Jun. 30, 2023	Dec. 31, 2022
Leases
Weighted average remaining lease term	6 months	1 year
Weighted average discount rate	9.90%	9.90%

LEASES (Details Narrative) - USD ($)	6 Months Ended
LEASES (Details Narrative) - USD ($)	Jun. 30, 2023	Jan. 02, 2022
Leases
Lease liability		$ 11,359
Weighted average incremental borrowing rate	9.00%

CONCENTRATION OF CREDIT RISK (Details) - Customer Concentration Risk [Member]	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2023	Jun. 30, 2023	Dec. 31, 2022
Customer A [Member] \| Revenue Benchmark [Member]
Concentration Risk [Line Items]
Revenue, percentage	29.00%	15.00%
Customer A [Member] \| Accounts Receivable [Member]
Concentration Risk [Line Items]
Revenue, percentage		71.00%	29.00%
Customer B [Member] \| Revenue Benchmark [Member]
Concentration Risk [Line Items]
Revenue, percentage	21.00%	23.00%
Customer B [Member] \| Accounts Receivable [Member]
Concentration Risk [Line Items]
Revenue, percentage		14.00%	20.00%
Customer C [Member] \| Revenue Benchmark [Member]
Concentration Risk [Line Items]
Revenue, percentage	15.00%	16.00%
Customer C [Member] \| Accounts Receivable [Member]
Concentration Risk [Line Items]
Revenue, percentage			20.00%
Customer D [Member] \| Accounts Receivable [Member]
Concentration Risk [Line Items]
Revenue, percentage			15.00%

CONCENTRATION OF CREDIT RISK (Details Narrative) - Customer Concentration Risk [Member]	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Three Customer [Member] \| Accounts Receivable [Member]
Concentration Risk [Line Items]
Revenue, percentage	65.00%		54.00%
One Customer [Member] \| Revenue Benchmark [Member]
Concentration Risk [Line Items]
Revenue, percentage		88.00%		90.00%
Two Customer [Member] \| Revenue Benchmark [Member]
Concentration Risk [Line Items]
Revenue, percentage			85.00%
Four Customer [Member] \| Accounts Receivable [Member]
Concentration Risk [Line Items]
Revenue, percentage					84.00%