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 March 31, 2024

☐ 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. Yes ☐ No ☒

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 May 9, 2024, 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 March 31, 2024

		Page
PART I. FINANCIAL INFORMATION

ITEM 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets at March 31, 2024 (unaudited) and December 31, 2023	1

	Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) for the three months ended March 31, 2024 and 2023	2

	Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the three months ended March 31, 2024 and 2023	3

	Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2024 and 2023	4

	Notes to Unaudited Condensed Consolidated Financial Statements	5

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	33

ITEM 4.	Controls and Procedures	33

PART II. OTHER INFORMATION

ITEM 1.	Legal Proceedings	35

ITEM 1A.	Risk Factors	35

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

ITEM 3.	Defaults Upon Senior Securities	35

ITEM 4.	Mine Safety Disclosures	35

ITEM 5.	Other Information	35

ITEM 6.	Exhibits	36

SIGNATURES		37

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

NEXALIN TECHNOLOGY, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS


	March 31,			December 31,
	2024			2023
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	546,255		$	580,230
Short-term investments		1,597,687			2,368,203
Accounts receivable (Includes related party of $100 and $3,614, respectively)		3,666			9,369
Inventory		153,668			156,420
Prepaid expenses and other current assets		261,977			315,670
Total Current Assets		2,563,253			3,429,892
ROU Asset		-			496
Intangible assets, net		169,174			105,528
Equity method investment		101,783			96,000
Total Assets	$	2,834,210		$	3,631,916

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	151,510		$	159,534
Accrued expenses		355,713			261,284
Lease liability, current portion		-			4,463
Total Current Liabilities		507,223			425,281
Total Liabilities		507,223			425,281

Commitments and Contingencies (Note 7)

Stockholders’ Equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 7,436,562 shares issued and outstanding at March 31, 2024 and December 31, 2023		7,437			7,437
Accumulated other comprehensive income (loss)		(245	)		(405	)
Additional paid in capital		80,399,001			80,237,652
Accumulated deficit		(78,079,206	)		(77,038,049	)
Total Stockholders’ Equity		2,326,987			3,206,635
Total Liabilities and Stockholders’ Equity	$	2,834,210		$	3,631,916

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 March 31,
	2024			2023
Revenues, net (Includes related party of $300 and $0 for the three months ended March 31, 2024 and March 31, 2023, respectively)	$	78,671		$	30,560
Cost of revenues		9,156			7,110
Gross profit		69,515			23,450

Operating expenses:
Professional fees		227,829			158,600
Salaries and benefits		326,417			299,323
Selling, general and administrative		588,981			344,953
Total operating expenses		1,143,227			802,876

Loss from operations		(1,073,712	)		(779,426	)

Other income (expense), net:
Interest income (expense), net		304			(8,837	)
Gain on sale of short-term investments		24,946			38,772
Other income		1,522			1,077
Total other income (expense), net		26,772			31,012

Loss before equity in net earnings of affiliate		(1,046,940	)		(748,414	)
Equity in net earnings of affiliate		5,783			-

Net loss		(1,041,157	)		(748,414	)

Other comprehensive income (loss):
Unrealized gain from short-term investments		160			41,069
Comprehensive loss	$	(1,040,997	)	$	(707,345	)

Net loss per share attributable to common stockholders - Basic and Diluted	$	(0.14	)	$	(0.10	)

Weighted Average Shares Outstanding - Basic and Diluted		7,436,562			7,286,562

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 (Unaudited)


	Common Stock				Accumulated Other Comprehensive		Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Gain (Loss)		Capital		Deficit			Equity
Balance as 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

	Common Stock				Accumulated Other Comprehensive			Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Gain (Loss)			Capital		Deficit			Equity
Balance as of January 1, 2024		7,436,562	$	7,437	$	(405	)	$	80,237,652	$	(77,038,049	)	$	3,206,635
Other comprehensive gain		-		-		160			-		-			160
Stock compensation		-		-		-			161,349		-			161,349
Net loss		-		-		-			-		(1,041,157	)		(1,041,157	)
Balance as of March 31, 2024		7,436,562	$	7,437	$	(245	)	$	80,399,001	$	(78,079,206	)	$	2,326,987

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)


	Three Months Ended March 31,
	2024			2023
Cash flows from operating activities:
Net loss	$	(1,041,157	)	$	(748,414	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock compensation		161,349			-
Depreciation		-			134
Amortization		2,662			660
Non-cash lease expense		496			1,371
Gain on sale of short-term investments		(24,946	)		(38,772	)
Share of net income from equity method investment		(5,783	)		-
Changes in operating assets and liabilities:
Accounts receivable		100			1,325
Accounts receivable - related party		5,603			-
Prepaid assets		53,693			30,952
Inventory		2,752			(3,900	)
Accounts payable - related party		-			(250,000	)
Accounts payable		(8,024	)		(353,609	)
Accrued expenses		94,429			57,838
Lease liability		(4,463	)		(12,234	)
Net cash used in operating activities		(763,289	)		(1,314,649	)

Cash flows from investing activities:
Sale of short-term investments		6,235,053			11,599,356
Purchase of short-term investments		(5,439,431	)		(10,022,293	)
Purchase of patents		(47,593	)		(50,196	)
Purchase of trademarks		(18,715	)		-
Net cash provided by investing activities		729,314			1,526,867

Cash flows from financing activities:
Payments on notes payable - officer		-			(200,000	)
Net cash used in financing activities		-			(200,000	)

Net (decrease) increase in cash and cash equivalents		(33,975	)		12,218
Cash and cash equivalents - beginning of period		580,230			162,743
Cash and cash equivalents - end of period	$	546,255		$	174,961

Non-cash investing and financing activities:
Unrealized gain on short-term investments	$	160		$	41,069

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, a wholly owned subsidiary of NV Nexalin, was formed. Neuro-Health had no activity from December 6, 2019 (Inception) through March 31, 2024.

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. 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.

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 decides on a new 510(k) application at 4 milliamps based on FDA comments expected to be received in 2024. Our regulatory team continues to inform the FDA of the suspension of the marketing and sale of the Gen-1 products to new providers. We are currently analyzing whether to proceed with an amended application with the FDA for Gen-1 devices for the treatment of insomnia and anxiety.

The waveform that comprises the basis of Gen-2 and new Gen-3 headset devices has been submitted for review by the FDA for safety evaluation and eventual marketing in the United States. Determinations of the safety and efficacy of our devices in the United States are solely within the authority of the FDA. We plan to conduct decentralized clinical trials for the Gen-3 device in the U.S. and we have consulted with the FDA as part of the pre-submission meetings.

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 and/or pivotal trials in various mental health disease states. In addition, a new PMA application in the United States is in development for the treatment of depression utilizing both Gen-2 and Gen-3. The new Gen-3 device is also scheduled for additional pilot trials and/or pivotal trials for anxiety and insomnia in the United States beginning in the late second quarter or early third quarter of 2024. Preliminary data provided by The University of California, San Diego and recent published data from China 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 and/or pivotal 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 2024.

On May 31, 2023, the Company formalized an agreement related to the formation of a joint venture established to engage in the clinical development, marketing, sale and distribution of Nexalin’s second generation transcranial Alternating Current Stimulation (“tACS”) devices (“Gen-2 devices”) in China and other countries in the region. The Joint Venture is registered in Hong Kong.

As of the date of this Quarterly Report on Form 10-Q, (i) our operations are carried on outside of China; and (ii) the Joint Venture does not maintain any variable interest entity structure or operate any data center in China.

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

The investment in the Joint Venture is accounted for using the equity method of accounting. As of March 31, 2024 and December 31, 2023 the Company had an Equity Method Investment of $101,783 and $96,000, respectively, recorded on the condensed consolidated balance sheets. The Company invested $96,000 in the joint venture in September 2023 and Wider invested $104,000. In accordance with ASC 323, Investments - Equity Method and Joint Ventures (“ASC 323”), the Company uses the equity method of accounting for its investment in the Joint Venture, an unconsolidated entity over which it does not have a controlling interest. The equity method of accounting requires the investment to be initially recorded at cost and subsequently adjusted for the Company’s share of equity in the unconsolidated entity’s earnings or losses. The Company evaluates the carrying amount of this investment in the Joint Venture for impairment in accordance with ASC 323. If the Company determines that a loss in the value of the investment is other than temporary, the Company writes down the investment to its estimated fair value. Any such losses are recorded to equity in income of unconsolidated entities in the Company’s condensed consolidated statements of operations and comprehensive loss. The Company has made an election to classify distributions received from the Joint Venture using the nature of the distribution approach. Distributions received are classified as cash inflows from operating activities based on the nature of the activities of the unconsolidated entity.

Emerging Growth Company

The Company is 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 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 Joint Venture 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 years 2022 and 2023, and other issues, 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 had 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. 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.

Continued Nasdaq Listing

Our common stock is currently listed on The Nasdaq Stock Market. In order to maintain that listing, we must satisfy minimum financial and other continued listing requirements and standards, including the Minimum Bid Price Rule (as discussed below) and those regarding director independence and independent committee requirements, minimum stockholders’ equity, and certain corporate governance requirements. There can be no assurances that we will be able to comply with the applicable listing standards.

We are required to maintain a minimum bid price of $1.00 per share. On May 10, 2023, the Company received written notice from The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that it was no longer in compliance with the minimum bid price requirement for continued listing on Nasdaq, as the closing bid price for the Company’s common stock was below $1.00 per share as set forth in the Nasdaq listing rules. The Company was afforded 180 calendar days, or until November 6, 2023, to regain compliance with the Nasdaq listing rules. The Company was unable to regain compliance with the bid price requirement by November 6, 2023.

On November 7, 2023, the Company submitted a letter to NASDAQ requesting a second 180-day period in order to regain compliance with NASDAQ Rule 5550(a)(2). The Company stated in that letter that it believed it will be able to cure the deficiency and increase its stock price to above $1.00 per share pursuant to its plan to do so.

On November 7, 2023, the Company received written notice from the Nasdaq Listing Qualifications Department (the “Staff”) that the Company was not eligible for an additional 180 calendar day compliance period because the Company no longer complied with Nasdaq’s $5 million minimum stockholders’ equity initial listing requirement.

On January 18, 2024, the Nasdaq Hearing Panel granted the Company a temporary exception to regain compliance with the Minimum Bid Price Rule until March 27, 2024.

On March 6, 2024, the Nasdaq Hearing Panel granted the Company a temporary exception to regain compliance with the Minimum Bid Price Rule until April 25, 2024.

On March 7, 2024, The Company’s stockholders approved a proposed amendment to Nexalin’s Certificate of Incorporation (the “Amendment”), pursuant to which Nexalin’s Board of Directors is authorized, in its discretion, to proceed with a reverse stock split. The exact ratio of the reverse stock split would be within the 1-for-4 to 1-for-14 range, and, if enacted, will be determined by our Board and publicly announced by the Company prior to the effective time of the reverse stock split. The sole purpose for the proposed reverse stock split was to increase the per share market price of the Company’s Common Stock to meet the Nasdaq Minimum Bid Price Rule for continued listing on The Nasdaq Capital Market. The filing of the Amendment and the reverse stock split was only to be implemented if Nexalin’s Board determined they were necessary to regain and maintain compliance with the Nasdaq Minimum Bid Price Rule. The Company regained compliance with Nasdaq’s Minimum Bid Price Rule without the necessity of a reverse stock split and the Board did not exercise the authority given to it to file the proposed Amendment.

On April 23, 2024, the Company received notice from Nasdaq notifying the Company that it has regained compliance with Nasdaq’s minimum bid price requirement under Nasdaq Rule 5550(a)(2).

NOTE 2 — LIQUIDITY AND GOING CONCERN

The accompanying unaudited condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At March 31, 2024, the Company had a significant accumulated deficit of approximately(78,079,206) $78.1 million. For the three months ended March 31, 2024, the Company had a loss from operations of approximately (1,073,712) $1.1 million and negative cash flows from operations of approximately (763,289) $0.8 million. While the Company had a working capital surplus as of March 31, 2024 of approximately $2.1 million, the Company’s operating activities consume most of its cash resources.

The Company expects to continue to incur operating losses as it executes its development plans, as well as undertaking other potential strategic and business development initiatives through 2024 and through the twelve months from the date of this report. 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. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period.

The Company’s 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. These plans require the Company to place reliance on several factors, including favorable market conditions, to access additional capital in the future. These plans were therefore determined not to be sufficient to overcome the presumption of substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements are issued. Additionally, management does not believe we have sufficient cash for the next twelve months from the issuance of the financial statements. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”). 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 months ended March 31, 2024 and 2023 are not necessarily indicative of the results that may be expected for any other subsequent interim period. Certain information and footnote disclosures normally included in consolidated 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, 2023.

Principles of Consolidation

The unaudited condensed 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

The preparation of the unaudited condensed consolidated 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 consolidated 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 Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, 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 our 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. We receive revenue from the sale in China of our Devices to our distributor and from the sale of products relating to the use of those Devices. We derive revenue as a royalty fee from the China-based manufacturer for electrodes ordered in connection with our China sales.

Performance Obligations

Management identified that subsequent licensing revenue has one performance obligation. That performance obligation is satisfied if 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 equipment and Devices are shipped to the customer. The Company does not offer a warranty on the equipment 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 royalty revenue has one performance obligation. The performance obligation is satisfied at the time the Electrode manufacturer notifies the Company that it has invoiced the distributor for the sale to the 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 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 March 31,
	2024		2023
Device sales	$	55,500	$	-
Licensing fee		21,558		23,870
Equipment		1,513		6,400
Other		100		290
Total	$	78,671	$	30,560

Major Geographic Locations

	Three Months Ended March 31,
	2024		2023
U.S. sales	$	23,171	$	30,560
International sales		55,500		-
Total	$	78,671	$	30,560

Contract Modifications

There were no contract modifications during the three months ended March 31, 2024 and 2023. 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 March 31, 2024 and December 31, 2023.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. Cash and cash equivalents 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, 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 deemed permanent impairments at March 31, 2024 and December 31, 2023, respectively.

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 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 did not record an allowance for credit loss on March 31, 2024 and December 31, 2023, respectively.

Inventory

Inventory consists of finished goods and components stated at the lower of cost or net realizable value (NRV) 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 quantities in excess of demand, or otherwise non-saleable items. At March 31, 2024 and 2023, the Company did not write down inventory.

Patents and Trademarks

Patents and trademarks are amortized over their useful lives and are reviewed for impairment when warranted by economic conditions. Amortization expense was $2,662 and $660 for the three months ended March 31, 2024 and 2023, respectively.

The following table summarizes the gross carrying amount, amortization and the net carrying value at March 31, 2024 and December 31, 2023.

Schedule of patents
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Value
March 31, 2024
Patents	$	146,563	$	(5,680	)	$	140,883
Trademarks		29,288		(997	)		28,291
Total March 31, 2024	$	175,851	$	(6,677	)	$	169,174
December 31, 2023
Patents	$	98,970	$	(3,751	)	$	95,219
Trademarks		10,573		(264	)		10,309
Total December 31, 2023	$	109,543	$	(4,015	)	$	105,528

Advertising and Marketing Costs

The Company expenses advertising and marketing costs as they are incurred. Advertising and marketing expenses were $2,304 and $2,817 for the three months ended March 31, 2024 and 2023, respectively. All advertising and marketing expenses are recorded in selling, general and administrative expenses on the unaudited condensed consolidated statements of operations and comprehensive loss.

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 March 31, 2024 and December 31, 2023, 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 gain (loss) and the fair value at March 31, 2024 and December 31, 2023.


	Amortized Cost		Unrealized Gain (Loss)			Fair Value
March 31, 2024
Short-term investments	$	1,597,932	$	(245	)	$	1,597,687
Total March 31, 2024	$	1,597,932	$	(245	)	$	1,597,687
December 31, 2023
Short-term investments	$	2,368,608	$	(405	)	$	2,368,203
Total December 31, 2023	$	2,368,608	$	(405	)	$	2,368,203

The following table provides the carrying value and fair value of the Company’s financial assets measured at fair value as of March 31, 2024 and December 31, 2023.


	Carrying Value		Level 1		Level 2		Level 3
March 31, 2024
U.S. Treasury Notes	$	1,597,687	$	1,597,687	$	-	$	-
December 31, 2023
U.S. Treasury Notes	$	2,368,203	$	2,368,203	$	-	$	-

Net Loss per Common Share

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 for the three months ended March 31, 2024 and 2023.

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 March 31,
	2024		2023
Warrants		2,662,250		2,662,250
Stock options		2,281,879		-
Total		4,944,129		2,662,250

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 and restricted shares 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

Research and development costs are charged to operations as incurred. For the three months ended March 31, 2024 and 2023, the Company recorded $105,668 and $65,833 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 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 be recorded as a noncurrent asset with a related liability. The Company has made an accounting policy election not to recognize right-of-use assets and lease liabilities that arise from short-term leases for any class of underlying asset.

Equity Method Investments

The Company accounts for its investments in common stock or in-substance common stock that give it the ability to exercise significant influence over as an equity method investment in accordance with the guidance in ASC 323, Equity Method and Joint Ventures. Specifically, the Company initially recognizes its investment in investees as an asset at cost. Further, the Company subsequently measures its investment by recognizing its share of earnings or losses of the investee on a one-quarter reporting lag.

Recent Accounting Pronouncements

In August of 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, requires disclosures about significant segment expenses and additional interim disclosure requirements. This standard also requires a single reportable segment to provide all disclosures required by ASC 280. ASU 2023-07 became effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2023. The adoption of this guidance did not have a material impact on our consolidated financial statements and related disclosures.

In August of 2023, the FASB issued ASU 2023-05, Business Combinations—Joint Venture (“JV”) Formations: Recognition and Initial Measurement. The guidance requires newly formed JVs to apply a new basis of accounting to all of its contributed net assets, which results in the JV initially measuring its contributed net assets under ASC 805-20, Business Combinations. The new guidance would be applied prospectively and is effective for all newly formed joint venture entities with a formation date on or after January 1, 2025, with early adoption permitted. The Company is evaluating the accounting and disclosure requirements of this update and does not expect them to have a material effect on the consolidated financial statements.

In December of 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, establishes incremental disaggregation of income tax disclosures pertaining to the effective tax rate reconciliation and income taxes paid. This standard is effective for fiscal years beginning after December 15, 2024, and requires prospective application with the option to apply it retrospectively. Early adoption is permitted. The Company is currently evaluating the potential impact of adopting this standard on our disclosures.

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
	March 31, 2024		December 31, 2023
Accrued – other		116,383		21,954
Accrued settlement liabilities		89,330		89,330
Accrued bonuses		150,000		150,000
Total	$	355,713	$	261,284

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

Formalized Joint Venture

The Joint Venture is controlled by a Board of Directors in which Wider is to have sole representation but neither the Company nor Wider has exclusive decision-making ability over day-to-day or significant operational decisions. Wider and Nexalin own 52% and 48% of the Joint Venture, respectively. In accordance with ASC 323 and ASC 810, the Company recognizes the equity method results of the Joint Venture on a one-quarter reporting lag; the Company recognized $5,783 and $0 of equity method investment income from the Joint Venture on a one-quarter reporting lag for the three months ended March 31, 2024 and 2023, respectively, on the condensed consolidated statements of operations and comprehensive loss. The investment in the Joint Venture is accounted for using the equity method of accounting. The Company invested $96,000 in the joint venture in September 2023 which is recorded on the consolidated balance sheet at December 31, 2023 as an Equity Method Investment. Wider invested $104,000. In accordance with ASC 323, Investments - Equity Method and Joint Ventures (“ASC 323”), the Company uses the equity method of accounting for its investment in the Joint Venture, an unconsolidated entity over which it does not have a controlling interest. The equity method of accounting requires the investment to be initially recorded at cost and subsequently adjusted for the Company’s share of equity in the unconsolidated entity’s earnings or losses. The Company evaluates the carrying amount of this investment in the Joint Venture for impairment in accordance with ASC 323. If the Company determines that a loss in the value of the investment is other than temporary, the Company writes down the investment to its estimated fair value. Any such losses are recorded to equity in income of unconsolidated entities in the Company’s consolidated statements of income. The Company has made an election to classify distributions received from the Joint Venture using the nature of the distribution approach. Distributions received are classified as cash inflows from operating activities based on the nature of the activities of the unconsolidated entity.

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”). The consulting agreement was extended for an additional period of eight years upon the closing of our initial public offering. The two members of U.S. Asian are shareholders in the Company. Marilyn Elson is the Company’s Controller.

Pursuant to the consulting agreement, U.S. Asian provides consulting services to the Company with regard to, among other things, corporate development and financing arrangements. The Company pays U.S. Asian $10,000 per month for services rendered pursuant to the consulting agreement. The Company recorded consulting expenses related to the consulting agreement of $30,000 for each of the three months ended March 31, 2024 and 2023 on the Company’s unaudited consolidated statements of operations and comprehensive loss.

Officers

On September 22, 2023, Marilyn Elson provided the Company notice that she was stepping down as Chief Financial Officer effective November 1, 2023. Since such date, Ms. Elson has continued as Controller for Nexalin Technology. Ms. Elson is the spouse of the other member of U.S. Asian.

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-and service-based stock option awards 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 1,387,024 shares of the Company’s common stock with an exercise price of $.894 per share subject to certain time and performance- and time-based vesting conditions.

Under the terms of his service agreement, Dr. Owens is entitled to (i) a sign-on/retention bonus consisting of a grant of nonqualified stock options to purchase 654,362 shares of the Company’s common stock with an exercise price of $.894 per share subject to certain time- and performance-based vesting conditions.

Under the terms of his employment agreement Mr. Nketiah is entitled to nonqualified stock option grants to purchase 100,671 shares of the Company’s common stock with an exercise price of $.894 subject to certain time and performance-based vesting conditions.

A portion of the nonqualified stock options granted to Messrs. White, Owens and Nketiah that are subject to future vesting are contingent upon the approval of the stockholders to increase the 2023 Plan capacity so as to authorize additional shares of common stock reserved for issuance under the 2023 Plan.

In addition to the retention payments, stock awards and nonqualified option grants described above, Messrs. White and Nketiah are receiving cash compensation and each of Messrs. White and Nketiah are eligible for performance-based cash bonuses. The 2023 performance-based milestones regarding Mr. White’s incentive compensation have been met for 2023, and he was awarded a cash bonus of $120,000 and 313,199 nonqualified stock options with a vesting date of July 1, 2024. The 2023 performance-based milestones regarding Mr. Nketiah’s incentive compensation have been met for 2023, and he was awarded a cash bonus of $50,000 and 218,121 nonqualified stock options with a vesting date of July 1, 2024.

The reported amounts are calculated in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 718, “Compensation — Stock Compensation (“ASC 718”). ASC 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions, such as the options issued under our 2023 Plan.

Leases

Our principal 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 costs for each of the three months ended March 31, 2024 and 2023 were $9,500 and $13,500, respectively. The initial sub-leases expired in January of 2024. The Company has entered into a new one year sublease for 4,000 square feet of office space under an operating lease. Pursuant to the sublease, we pay and will 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 — STOCKHOLDERS’ EQUITY

Issuance of Common Stock

The Company did not issue any shares of common stock during the three months ended March 31, 2024 and March 31, 2023.

Options

Nexalin’s 2023 Equity Incentive Plan (the “2023 Plan”) was approved by our stockholders on November 10, 2023. The Plan provides that maximum number of shares of Common Stock available for the grant of awards under the Plan shall be 1,500,000, subject to adjustment for stock dividends, stock splits or similar events. The 2023 Plan is administered by the Compensation Committee of the Board of Directors, which may in turn delegate administrative authority to one or more of our executive officers. Under the terms of the 2023 Plan, the Compensation Committee may grant equity awards, including nonqualified stock options and restricted stock to employees, officers, directors, consultants, agents, advisors and independent contractors.

On July 1, 2023, the Company entered into amended employment agreements with the three executives. In addition to the cash compensation included in their employment contracts, the three executives were granted one-time bonus stock options (that were immediately vested) and performance-based stock options that would be triggered based on certain performance criteria being achieved. The amount expensed during the three months ended March 31, 2024 and 2023 in the unaudited condensed consolidated statements of operations and comprehensive loss was $40,060 and $0 respectively.

The following table presents a summary of stock option award activity during the three months ended March 31, 2024:

Schedule of stock option award activity
	Number of options		Weighted Average Exercise Price		Weighted Average Remaining Life In Years
Outstanding December 31, 2023		2,281,879	$	0.89		9.25
Issued
Exercised		-		-		-
Expired or cancelled		-		-		-
Outstanding March 31, 2024		2,281,879	$	0.89		9.25

The following table provides additional information about stock options that are outstanding and exercisable at March 31, 2024:


Exercise Price		Number of Options		Weighted Average Remaining Life in Years		Exercisable Number of Options
$	0.89		2,281,879		9.25		587,248
			2,281,879		9.25		587,248

The fair value of these stock option awards is estimated as of the grant date using a Black-Scholes option pricing model and the following assumptions: A risk-free interest rate based on the U.S. Treasury yield curve at the date of grant; an expected or contractual term; and expected volatility based on an evaluation of comparable public companies’ measures of volatility. The Company does not anticipate declaring dividends on common shares now or in the near future and has therefore assumed no dividend rate. The following table discloses the assumptions, utilized for stock options as follows:

Schedule of assumptions
	March 31, 2024			December 31, 2023
Volatility		99.0	%		99.0	%
Expected dividends	$	-		$	-
Risk-free interest rate		4.61	%		4.61	%
Expected term (years)		9.25			9.5

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, 2023		2,662,250	$	4.15
Issued		-		-
Exercised		-		-
Expired or cancelled		-		-
Outstanding March 31, 2024		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 March 31, 2024:


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		1.5	$	4.15		2,135,000
$	4.15		347,250		1.5		4.15		347,250
			2,662,250		1.5	$	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 7 — COMMITMENTS AND CONTINGENCIES

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 November 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 was 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. The EDD approved a significant downward adjustment in our outstanding employment tax liability to approximately $40,000 as reflected on its Statement of Account dated November 30, 2023. We plan to further negotiate with the EDD and proceed with a settlement offer. The Company has accrued $40,000 and $40,000 on the consolidated balance sheets as of March 31, 2024 and December 31, 2023, respectively. The reduction in the amount accrued was recognized as other income on the consolidated statement of operations and comprehensive loss for the year ended December 31, 2023. The Company 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. The Company and the University of Arizona agreed on the terms of a settlement for the amounts claimed by the University, whereby the Company paid an aggregate of approximately $69,000 (in three equal monthly payments) in full satisfaction of amounts the University claims it is owed. The settlement amount was paid in full as of December 31, 2023.

NOTE 8 — CONCENTRATION OF CREDIT RISK

Revenues

One customer accounted for 71% of revenues for the three months ended March 31, 2024.

Six customers accounted for 94% of revenues for the three months ended March 31, 2023, as set forth below:

Concentration of credit risk
Customer A	25	%
Customer B	17	%
Customer C	16	%
Customer D	14	%
Customer E	12	%
Customer F	10	%

Accounts Receivable

Two customers accounted for 88% of the accounts receivable as of March 31, 2024, as set forth below:

Customer A			54	%
Customer B			34	%

Five customers accounted for 97% of accounts receivable at December 31, 2023.

Customer A – related party	39	%
Customer B	21	%
Customer C	15	%
Customer D	12	%
Customer E	10	%

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, 2023, which was filed with the Securities and Exchange Commission, or SEC on March 27, 2024. 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

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.

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 is designed to 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 and/or pivotal trials in various mental health disease states. In addition, a new PMA application in the United States is in development for the treatment of depression utilizing both Gen-2 and Gen-3. The new Gen-3 device is also scheduled for additional pilot trials and/or pivotal trials for anxiety and insomnia in the United States and China beginning in the late second or early third quarter of 2024. Preliminary data provided by The University of California, San Diego and recent published data from China 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, a new pre-submission document in preparation of a new 510(k) and/or de novo for our Gen-3 Halo headset at 15 milliamps was filed with the FDA in January of 2023. Formal comments to our pre-submission document filing were received in March of 2023. A formal meeting to address FDA comments took place on May 9, 2023. Minutes of the meeting with the FDA were filed with the FDA on May 16, 2023.

A second FDA pre-submission document was submitted on February 13, 2024. FDA comments to this second pre-submission document were received on April 26, 2024. A formal teleconference was held with the FDA on April 30, 2024. The Nexalin regulatory team and the FDA came to a consensus on the Anxiety and Insomnia Clinical research protocols.

In part due to increasing incidence attributed to the devastating impacts of the COVID-19 pandemic, mental health and cognitive disorders are widespread across the globe and cause substantial health, social and economic losses, and hardships accordingly. Our focus is on the continued development of our innovative bioelectronic medical technologies and rapid regulatory approval. 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 stabilizes currents, electromagnetic fields, and various frequencies — referred to collectively as a waveform - particularly our proprietary, 15 milliamp patented waveform. Additionally, our devices generate a high frequency carrier wave for deeper penetration into the brain. 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. To ensure deeper penetration into the brain, we have created a waveform that is undetectable to the brain which allows the increase of the power from < 4 mAmps to 15 mAmps, more than a 400% increase without incurring any patient discomfort, risk, or adverse side effects. 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 non-invasive 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 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 an outsourced sales, marketing and distribution model and scale up external manufacturing capabilities to commercialize any product candidate for which we may obtain regulatory approval and intend to commercialize;

●

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;

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

Formalized Joint Venture; China Related Activities

In September of 2021, the China National Medical Products Administration (the “NMPA”), the equivalent of the FDA, approved the Gen-2 device for marketing and sale in China for the treatment of insomnia and depression. These treatment indications and clearances from the NMPA have allowed Wider to market and sell the Gen-2 device in China for the treatment of insomnia and depression.

Our participation in the Joint Venture with Wider in China is subject to general, as well as industry-specific, economic, political and legal developments and risks in China. The Chinese government exercises significant control over the Chinese economy, including but not limited to controlling capital investments, allocating resources, setting monetary policy, controlling and monitoring foreign exchange rates, implementing and overseeing tax regulations, providing preferential treatment to certain industry segments or companies and issuing necessary licenses to conduct business. In addition, we could face additional risks resulting from changes in China’s data privacy and cybersecurity requirements. Accordingly, any adverse change in the Chinese economy, the Chinese legal system or Chinese governmental, economic or other policies could have a material adverse effect on our business and operations of the Joint Venture in China and our prospects generally.

We face additional risks in China due to China’s historically limited recognition and enforcement of contractual and intellectual property rights. We may experience difficulty enforcing our intellectual property rights in China. If we cannot adequately monitor the use of our technologies and devices or enforce intellectual property rights related to our devices in China or contractual restrictions relating to use of our intellectual property by Chinese companies, our revenue could be adversely affected.

The Joint Venture with Wider is subject to laws and regulations applicable to foreign investment in China. There are uncertainties regarding the interpretation and enforcement of laws, regulations and policies in China. Because many of the laws, regulations and policies applicable to our operations in China are relatively new, the interpretations of such laws, regulations and policies are not always uniform. Moreover, the interpretation of statutes and regulations may be subject to government policies reflecting domestic political agendas. Enforcement of existing laws or contracts may be uncertain. As a result of the foregoing, it may be difficult for us to obtain timely or equitable enforcement of laws ostensibly designed to protect companies like ours, which could have a material adverse effect on our business and results of operations. Our ability to monetize the Joint Venture in China may also be limited.

Results of Operations

Comparison of the three months ended March 31, 2024 and 2023

Our financial results for the three months ended March 31, 2024 and 2023 are summarized as follows:

	Three Months Ended March 31,
	2024			2023			Change			Change⁽¹⁾
							$			%
Revenues, net	$	78,671		$	30,560		$	48,111			157	%
Cost of revenues		9,156			7,110			2,046			29	%
Gross profit		69,515			23,450			46,065			196	%

Operating expenses:
Professional fees		227,829			158,600			69,229			44	%
Salaries and benefits		326,417			299,323			27,094			9	%
Selling, general and administrative		588,981			344,953			244,028			71	%
Total operating expenses		1,143,227			802,876			340,351			42	%

Loss from operations		(1,073,712	)		(779,426	)		(294,286	)		38	%

Other income (expense), net:
Interest income (expense), net		304			(8,837	)		9,141			103	%
Gain on sale of short-term investments		24,946			38,772			(13,826	)		(36	)%
Other income		1,522			1,077			445			41	%
Total other income (expense), net		26,772			31,012			(4,240	)		(14	)%

Loss before equity in net earnings of affiliate		(1,046,940	)		(748,414	)		(298,526	)		40	%
Equity in net earnings of affiliate		5,783			-			5,783			100	%

Net loss	$	(1,041,157	)	$	(748,414	)	$	(292,743	)		39	%

Other comprehensive income:
Unrealized gain (loss) from short-term investments		160			41,069			(40,909	)		(100	)%
Comprehensive loss	$	(1,040,997	)	$	(707,345	)	$	(333,652	)		47	%

(1)

Percentages may not foot due to rounding.

Revenues

For the three months ended March 31, 2024 and 2023, we generated $78,671 and $30,560 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. The increase in revenue for 2024 compared to 2023 was primarily due to the sale of devices to a new overseas customer.

Cost of Revenues and Gross Profit

For the three months ended March 31, 2024 and 2023, cost of revenues was $9,156 and $7,110, respectively, yielding a gross profit of $69,515 and $23,450, respectively, or 88% and 77%, respectively. Such increase in gross margin was due to the change in our sources of revenue. Our revenue for the quarter ended March 31, 2024 was primarily device sales which have a greater gross margin than electrode and cable sales.

Operating Expenses

Total operating expenses for the three months ended March 31, 2024 and 2023 were $1,143,227 and $802,876, respectively. The increase in selling, general and administrative expenses was due primarily to an increase in professional fees of approximately $69,000, an increase in salaries and benefits of approximately $27,000, an increase in travel of approximately $37,000, an increase in consulting of approximately $26,000, an increase in research and development costs of approximately $40,000 and an increase in stock compensation of approximately $161,000. The increase in professional fees is primarily related to costs associated with investor relations. The increase in salaries and benefits is primarily due to the implementation of a company health insurance plan and an increase in staff salaries. The increase in travel is primarily due to costs associated with meetings with our joint venture partners, staff visits to our Houston office and travel related to investor relations. The increase in consulting is primarily due to retaining a new consultant to assist with marketing. The increases in research and development costs are attributable to the development of our Gen-2 and Gen-3 devices. The increase in stock compensation is primarily related to compensating consultants with stock. These amounts were offset by a decrease in insurance of approximately $20,000 resulting from a decrease in premiums.

Other Income (Expense), Net

Other income (expense), net for the three months ended March 31, 2024 and 2023 was $26,772 and $31,012, respectively, consisting of interest and dividend income, gain on the sale of short-term investments offset by interest expense.

Cash Flows

The following table summarizes our consolidated cash flows for the three months ended March 31, 2024 and 2023:

	March 31, 2024			March 31, 2023
Net cash used in operating activities	$	(763,289	)	$	(1,314,649	)
Net cash provided by investing activities	$	729,314		$	1,526,867
Net cash used in financing activities	$	-		$	(200,000	)

Net Cash Used In Operating Activities

Net cash used in operating activities was $763,289 for the three months ended March 31, 2024, as compared to $1,314,649 for the respective period in 2023, primarily due to the net loss of $1,041,157, as well as a combined decrease in accounts payable and accounts payable-related party of approximately $595,585. Offset by increases in stock compensation of approximately $161,349.

Net Cash Provided By Investing Activities

Net cash provided by investing activities during the three months ended March 31, 2024, and 2023 was $729,314 and $1,526,867, respectively, which was due to short-term investment sales of approximately $6.2 million offset by purchases of $5.4 million of short-term investments and the purchase of patents of approximately $19,000. Net cash provided by investing activities as of March 31, 2023 of $1,526,867 was due to the purchase of short term investments.

Net Cash Used In Financing Activities

Net cash used in financing activities during the three months ended March 31, 2024 and 2023 was $0 and $200,000, respectively, which was due to payment of note payable to an officer of the Company in the prior 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 to outsource the manufacture of our products for development, clinical trials and/ or potential commercialization;

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

	●	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 March 31, 2024, the Company had a significant accumulated deficit of $78.1 million. For the three months ended March 31, 2024, the Company had a loss from operations of $1.1 million and negative cash flows from operations of $0.8 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. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period. As of March 31, 2024, the Company had cash and cash equivalents on hand of approximately $546,000 and short-term investments of approximately $1.6 million.

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. These plans require the Company to place reliance on several factors, including favorable market conditions, to access additional capital in the future. These plans were therefore determined not to be sufficient to overcome the presumption of substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. Additionally, management does not believe we have sufficient cash for the next twelve months from the issuance of the financial statements. 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.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Note 3, “Summary of Significant Accounting Policies and New Accounting Standards” of the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the 2023 Form 10-K describe the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements. There have been no material changes to the Company’s critical accounting estimates since the 2023 Form 10-K.

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 7 – 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 $1.235 billion, (ii) we issue more than $1.0 billion of non-convertible debt in any three-year period or (iii) we become a “large accelerated filer,” (as defined in Rule 12b-2 under the 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 10, 2023, the Company received written notice from The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that it was no longer in compliance with the minimum bid price requirement for continued listing on Nasdaq, as the closing bid price for the Company’s common stock was below $1.00 per share as set forth in the Nasdaq listing rules. The Company was afforded 180 calendar days, or until November 6, 2023, to regain compliance with the Nasdaq listing rules. The Company was unable to regain compliance with the bid price requirement by November 6, 2023.

On January 18, 2024, the Nasdaq Hearing Panel granted the Company a temporary exception to regain compliance with the Minimum Bid Price Rule until March 27, 2024.

On March 6, 2024, the Nasdaq Hearing Panel granted the Company a temporary exception to regain compliance with the Minimum Bid Price Rule until April 25, 2024.

On April 23, 2024, the Company received notice from Nasdaq notifying the Company that it has regained compliance with Nasdaq’s minimum bid price requirement under Nasdaq Rule 5550(a)(2).

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 of 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 March 31, 2024, 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 March 31, 2024, 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 over Financial Reporting

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 most recent fiscal quarter 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.

While we attempt to identify, manage and mitigate risks and uncertainties associated with our business to the extent practical under the circumstances, some level of risk and uncertainty will always be present. The risk factors set forth in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 describe some of the risks and uncertainties associated with our business. These risks and uncertainties have the potential to materially affect our results of operations and our financial condition. We do not believe that there have been any material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 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
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)
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.
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.
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.
99.1*		Code of Ethics
99.2*		Audit Committee Charter
99.3*		Compensation Committee Charter
99.4*		Nominating and Corporate Governance Committee Charter
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*	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/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.
****	Previously filed as an exhibit to Form 10-Q as filed with the SEC on August 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 May, 2024.

	NEXALIN TECHNOLOGY, INC.

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

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

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: May 10, 2024	NEXALIN TECHNOLOGY, INC.

	By:	/s/ Mark White
		Mark White
		Chief Executive Officer
		Principal Executive Officer Principal Financial 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 March 31, 2024 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: May 10, 2024	NEXALIN TECHNOLOGY, INC.

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

Cover - shares	3 Months Ended
Cover - shares	Mar. 31, 2024	May 09, 2024
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Mar. 31, 2024
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2024
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

CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Mar. 31, 2024	Dec. 31, 2023
Current Assets:
Cash and cash equivalents	$ 546,255	$ 580,230
Short-term investments	1,597,687	2,368,203
Accounts receivable (Includes related party of $100 and $3,614, respectively)	3,666	9,369
Inventory	153,668	156,420
Prepaid expenses and other current assets	261,977	315,670
Total Current Assets	2,563,253	3,429,892
ROU Asset		496
Intangible assets, net	169,174	105,528
Equity method investment	101,783	96,000
Total Assets	2,834,210	3,631,916
Current Liabilities:
Accounts payable	151,510	159,534
Accrued expenses	355,713	261,284
Lease liability, current portion		4,463
Total Current Liabilities	507,223	425,281
Total Liabilities	507,223	425,281
Stockholders’ Equity:
Common stock, $0.001 par value; 100,000,000 shares authorized; 7,436,562 shares issued and outstanding at March 31, 2024 and December 31, 2023	7,437	7,437
Accumulated other comprehensive income (loss)	(245)	(405)
Additional paid in capital	80,399,001	80,237,652
Accumulated deficit	(78,079,206)	(77,038,049)
Total Stockholders’ Equity	2,326,987	3,206,635
Total Liabilities and Stockholders’ Equity	$ 2,834,210	$ 3,631,916

CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)	Mar. 31, 2024	Dec. 31, 2023
Statement of Financial Position [Abstract]
Accounts receivable, related party	$ 100	$ 3,614
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	7,436,562	7,436,562
Common stock, shares outstanding	7,436,562	7,436,562

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Income Statement [Abstract]
Revenues, net (Includes related party of $300 and $0 for the three months ended March 31, 2024 and March 31, 2023, respectively)	$ 78,671	$ 30,560
Cost of revenues	9,156	7,110
Gross profit	69,515	23,450
Operating expenses:
Professional fees	227,829	158,600
Salaries and benefits	326,417	299,323
Selling, general and administrative	588,981	344,953
Total operating expenses	1,143,227	802,876
Loss from operations	(1,073,712)	(779,426)
Other income (expense), net:
Interest income (expense), net	304	(8,837)
Gain on sale of short-term investments	24,946	38,772
Other income	1,522	1,077
Total other income (expense), net	26,772	31,012
Loss before equity in net earnings of affiliate	(1,046,940)	(748,414)
Equity in net earnings of affiliate	5,783
Net loss	(1,041,157)	(748,414)
Other comprehensive income (loss):
Unrealized gain from short-term investments	160	41,069
Comprehensive loss	$ (1,040,997)	$ (707,345)
Net loss per share attributable to common stockholders - Basic	$ (0.14)	$ (0.10)
Net loss per share attributable to common stockholders - Diluted	$ (0.14)	$ (0.10)
Weighted Average Shares Outstanding - Basic	7,436,562	7,286,562
Weighted Average Shares Outstanding - Diluted	7,436,562	7,286,562

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) (Parenthetical) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Income Statement [Abstract]
Revenue from related parties	$ 300	$ 0

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, 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 gain		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
Beginning balance, value at Dec. 31, 2023	$ 7,437	(405)	80,237,652	(77,038,049)	3,206,635
Beginning balance, shares at Dec. 31, 2023	7,436,562
Other comprehensive gain		160			160
Stock compensation			161,349		161,349
Net loss				(1,041,157)	(1,041,157)
Ending balance, value at Mar. 31, 2024	$ 7,437	$ (245)	$ 80,399,001	$ (78,079,206)	$ 2,326,987
Ending balance, Shares at Mar. 31, 2024	7,436,562

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Cash flows from operating activities:
Net loss	$ (1,041,157)	$ (748,414)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock compensation	161,349
Depreciation		134
Amortization	2,662	660
Non-cash lease expense	496	1,371
Gain on sale of short-term investments	(24,946)	(38,772)
Share of net income from equity method investment	(5,783)
Changes in operating assets and liabilities:
Accounts receivable	100	1,325
Accounts receivable - related party	5,603
Prepaid assets	53,693	30,952
Inventory	2,752	(3,900)
Accounts payable - related party		(250,000)
Accounts payable	(8,024)	(353,609)
Accrued expenses	94,429	57,838
Lease liability	(4,463)	(12,234)
Net cash used in operating activities	(763,289)	(1,314,649)
Cash flows from investing activities:
Sale of short-term investments	6,235,053	11,599,356
Purchase of short-term investments	(5,439,431)	(10,022,293)
Purchase of patents	(47,593)	(50,196)
Purchase of trademarks	(18,715)
Net cash provided by investing activities	729,314	1,526,867
Cash flows from financing activities:
Payments on notes payable - officer		(200,000)
Net cash used in financing activities		(200,000)
Net (decrease) increase in cash and cash equivalents	(33,975)	12,218
Cash and cash equivalents - beginning of period	580,230	162,743
Cash and cash equivalents - end of period	546,255	174,961
Non-cash investing and financing activities:
Unrealized gain on short-term investments	$ 160	$ 41,069

NATURE OF THE ORGANIZATION AND BUSINESS

3 Months Ended

Mar. 31, 2024

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

Continued Nasdaq Listing

On January 18, 2024, the Nasdaq Hearing Panel granted the Company a temporary exception to regain compliance with the Minimum Bid Price Rule until March 27, 2024.

On March 6, 2024, the Nasdaq Hearing Panel granted the Company a temporary exception to regain compliance with the Minimum Bid Price Rule until April 25, 2024.

On April 23, 2024, the Company received notice from Nasdaq notifying the Company that it has regained compliance with Nasdaq’s minimum bid price requirement under Nasdaq Rule 5550(a)(2).

LIQUIDITY AND GOING CONCERN

3 Months Ended

Mar. 31, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

LIQUIDITY AND GOING CONCERN

NOTE 2 — LIQUIDITY AND GOING CONCERN

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS

3 Months Ended

Mar. 31, 2024

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

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 March 31,
	2024		2023
Device sales	$	55,500	$	-
Licensing fee		21,558		23,870
Equipment		1,513		6,400
Other		100		290
Total	$	78,671	$	30,560

Major Geographic Locations

	Three Months Ended March 31,
	2024		2023
U.S. sales	$	23,171	$	30,560
International sales		55,500		-
Total	$	78,671	$	30,560

Contract Modifications

There were no contract modifications during the three months ended March 31, 2024 and 2023. 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

Patents and Trademarks

The following table summarizes the gross carrying amount, amortization and the net carrying value at March 31, 2024 and December 31, 2023.

Schedule of patents
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Value
March 31, 2024
Patents	$	146,563	$	(5,680	)	$	140,883
Trademarks		29,288		(997	)		28,291
Total March 31, 2024	$	175,851	$	(6,677	)	$	169,174
December 31, 2023
Patents	$	98,970	$	(3,751	)	$	95,219
Trademarks		10,573		(264	)		10,309
Total December 31, 2023	$	109,543	$	(4,015	)	$	105,528

Advertising and Marketing Costs

Income Taxes

Fair Value Measurements

●

Fair Value of Financial Instruments

The following table summarizes the amortized cost, unrealized gain (loss) and the fair value at March 31, 2024 and December 31, 2023.


	Amortized Cost		Unrealized Gain (Loss)			Fair Value
March 31, 2024
Short-term investments	$	1,597,932	$	(245	)	$	1,597,687
Total March 31, 2024	$	1,597,932	$	(245	)	$	1,597,687
December 31, 2023
Short-term investments	$	2,368,608	$	(405	)	$	2,368,203
Total December 31, 2023	$	2,368,608	$	(405	)	$	2,368,203

The following table provides the carrying value and fair value of the Company’s financial assets measured at fair value as of March 31, 2024 and December 31, 2023.


	Carrying Value		Level 1		Level 2		Level 3
March 31, 2024
U.S. Treasury Notes	$	1,597,687	$	1,597,687	$	-	$	-
December 31, 2023
U.S. Treasury Notes	$	2,368,203	$	2,368,203	$	-	$	-

Net Loss per Common Share

Schedule of antidilutive shares
	Three Months Ended March 31,
	2024		2023
Warrants		2,662,250		2,662,250
Stock options		2,281,879		-
Total		4,944,129		2,662,250

Stock-Based Compensation

Warrant Accounting

Research and Development

Leases

Equity Method Investments

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

3 Months Ended

Mar. 31, 2024

Payables and Accruals [Abstract]

ACCRUED EXPENSES

NOTE 4 — ACCRUED EXPENSES

Accrued expenses consist of the following amounts:

Schedule of accrued expenses
	March 31, 2024		December 31, 2023
Accrued – other		116,383		21,954
Accrued settlement liabilities		89,330		89,330
Accrued bonuses		150,000		150,000
Total	$	355,713	$	261,284

NON-CONSOLIDATED JOINT VENTURE AND RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2024

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

Leases

STOCKHOLDERS’ EQUITY

3 Months Ended

Mar. 31, 2024

Equity [Abstract]

STOCKHOLDERS’ EQUITY

NOTE 6 — STOCKHOLDERS’ EQUITY

Issuance of Common Stock

The Company did not issue any shares of common stock during the three months ended March 31, 2024 and March 31, 2023.

Options

The following table presents a summary of stock option award activity during the three months ended March 31, 2024:

Schedule of stock option award activity
	Number of options		Weighted Average Exercise Price		Weighted Average Remaining Life In Years
Outstanding December 31, 2023		2,281,879	$	0.89		9.25
Issued
Exercised		-		-		-
Expired or cancelled		-		-		-
Outstanding March 31, 2024		2,281,879	$	0.89		9.25

The following table provides additional information about stock options that are outstanding and exercisable at March 31, 2024:


Exercise Price		Number of Options		Weighted Average Remaining Life in Years		Exercisable Number of Options
$	0.89		2,281,879		9.25		587,248
			2,281,879		9.25		587,248

Schedule of assumptions
	March 31, 2024			December 31, 2023
Volatility		99.0	%		99.0	%
Expected dividends	$	-		$	-
Risk-free interest rate		4.61	%		4.61	%
Expected term (years)		9.25			9.5

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, 2023		2,662,250	$	4.15
Issued		-		-
Exercised		-		-
Expired or cancelled		-		-
Outstanding March 31, 2024		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 March 31, 2024:


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		1.5	$	4.15		2,135,000
$	4.15		347,250		1.5		4.15		347,250
			2,662,250		1.5	$	4.15		2,662,250

COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 7 — COMMITMENTS AND CONTINGENCIES

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

Employment Development Department

Demand Letter from The University of Arizona

CONCENTRATION OF CREDIT RISK

3 Months Ended

Mar. 31, 2024

Risks and Uncertainties [Abstract]

CONCENTRATION OF CREDIT RISK

NOTE 8 — CONCENTRATION OF CREDIT RISK

Revenues

One customer accounted for 71% of revenues for the three months ended March 31, 2024.

Six customers accounted for 94% of revenues for the three months ended March 31, 2023, as set forth below:

Concentration of credit risk
Customer A	25	%
Customer B	17	%
Customer C	16	%
Customer D	14	%
Customer E	12	%
Customer F	10	%

Accounts Receivable

Two customers accounted for 88% of the accounts receivable as of March 31, 2024, as set forth below:

Customer A			54	%
Customer B			34	%

Five customers accounted for 97% of accounts receivable at December 31, 2023.

Customer A – related party	39	%
Customer B	21	%
Customer C	15	%
Customer D	12	%
Customer E	10	%

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

3 Months Ended

Mar. 31, 2024

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

Principles of Consolidation

Principles of 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 March 31,
	2024		2023
Device sales	$	55,500	$	-
Licensing fee		21,558		23,870
Equipment		1,513		6,400
Other		100		290
Total	$	78,671	$	30,560

Major Geographic Locations

	Three Months Ended March 31,
	2024		2023
U.S. sales	$	23,171	$	30,560
International sales		55,500		-
Total	$	78,671	$	30,560

Contract Modifications

There were no contract modifications during the three months ended March 31, 2024 and 2023. 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

Patents and Trademarks

Patents and Trademarks

The following table summarizes the gross carrying amount, amortization and the net carrying value at March 31, 2024 and December 31, 2023.

Schedule of patents
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Value
March 31, 2024
Patents	$	146,563	$	(5,680	)	$	140,883
Trademarks		29,288		(997	)		28,291
Total March 31, 2024	$	175,851	$	(6,677	)	$	169,174
December 31, 2023
Patents	$	98,970	$	(3,751	)	$	95,219
Trademarks		10,573		(264	)		10,309
Total December 31, 2023	$	109,543	$	(4,015	)	$	105,528

Advertising and Marketing Costs

Advertising and Marketing Costs

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 gain (loss) and the fair value at March 31, 2024 and December 31, 2023.


	Amortized Cost		Unrealized Gain (Loss)			Fair Value
March 31, 2024
Short-term investments	$	1,597,932	$	(245	)	$	1,597,687
Total March 31, 2024	$	1,597,932	$	(245	)	$	1,597,687
December 31, 2023
Short-term investments	$	2,368,608	$	(405	)	$	2,368,203
Total December 31, 2023	$	2,368,608	$	(405	)	$	2,368,203

The following table provides the carrying value and fair value of the Company’s financial assets measured at fair value as of March 31, 2024 and December 31, 2023.


	Carrying Value		Level 1		Level 2		Level 3
March 31, 2024
U.S. Treasury Notes	$	1,597,687	$	1,597,687	$	-	$	-
December 31, 2023
U.S. Treasury Notes	$	2,368,203	$	2,368,203	$	-	$	-

Net Loss per Common Share

Net Loss per Common Share

Schedule of antidilutive shares
	Three Months Ended March 31,
	2024		2023
Warrants		2,662,250		2,662,250
Stock options		2,281,879		-
Total		4,944,129		2,662,250

Stock-Based Compensation

Stock-Based Compensation

Warrant Accounting

Warrant Accounting

Research and Development

Research and Development

Leases

Leases

Equity Method Investments

Equity Method Investments

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)

3 Months Ended

Mar. 31, 2024

Accounting Policies [Abstract]

Schedule of disaggregation of revenue

Schedule of disaggregation of revenue
	Three Months Ended March 31,
	2024		2023
Device sales	$	55,500	$	-
Licensing fee		21,558		23,870
Equipment		1,513		6,400
Other		100		290
Total	$	78,671	$	30,560

Major Geographic Locations

	Three Months Ended March 31,
	2024		2023
U.S. sales	$	23,171	$	30,560
International sales		55,500		-
Total	$	78,671	$	30,560

Schedule of patents

Schedule of patents
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Value
March 31, 2024
Patents	$	146,563	$	(5,680	)	$	140,883
Trademarks		29,288		(997	)		28,291
Total March 31, 2024	$	175,851	$	(6,677	)	$	169,174
December 31, 2023
Patents	$	98,970	$	(3,751	)	$	95,219
Trademarks		10,573		(264	)		10,309
Total December 31, 2023	$	109,543	$	(4,015	)	$	105,528

Schedule of unrealized loss on investments


	Amortized Cost		Unrealized Gain (Loss)			Fair Value
March 31, 2024
Short-term investments	$	1,597,932	$	(245	)	$	1,597,687
Total March 31, 2024	$	1,597,932	$	(245	)	$	1,597,687
December 31, 2023
Short-term investments	$	2,368,608	$	(405	)	$	2,368,203
Total December 31, 2023	$	2,368,608	$	(405	)	$	2,368,203

Schedule of fair value, assets measured on recurring basis


	Carrying Value		Level 1		Level 2		Level 3
March 31, 2024
U.S. Treasury Notes	$	1,597,687	$	1,597,687	$	-	$	-
December 31, 2023
U.S. Treasury Notes	$	2,368,203	$	2,368,203	$	-	$	-

Schedule of antidilutive shares

Schedule of antidilutive shares
	Three Months Ended March 31,
	2024		2023
Warrants		2,662,250		2,662,250
Stock options		2,281,879		-
Total		4,944,129		2,662,250

ACCRUED EXPENSES (Tables)

3 Months Ended

Mar. 31, 2024

Payables and Accruals [Abstract]

Schedule of accrued expenses

Schedule of accrued expenses
	March 31, 2024		December 31, 2023
Accrued – other		116,383		21,954
Accrued settlement liabilities		89,330		89,330
Accrued bonuses		150,000		150,000
Total	$	355,713	$	261,284

STOCKHOLDERS’ EQUITY (Tables)

3 Months Ended

Mar. 31, 2024

Equity [Abstract]

Schedule of stock option award activity

Schedule of stock option award activity
	Number of options		Weighted Average Exercise Price		Weighted Average Remaining Life In Years
Outstanding December 31, 2023		2,281,879	$	0.89		9.25
Issued
Exercised		-		-		-
Expired or cancelled		-		-		-
Outstanding March 31, 2024		2,281,879	$	0.89		9.25

Schedule of additional information about stock options


Exercise Price		Number of Options		Weighted Average Remaining Life in Years		Exercisable Number of Options
$	0.89		2,281,879		9.25		587,248
			2,281,879		9.25		587,248

Schedule of assumptions

Schedule of assumptions
	March 31, 2024			December 31, 2023
Volatility		99.0	%		99.0	%
Expected dividends	$	-		$	-
Risk-free interest rate		4.61	%		4.61	%
Expected term (years)		9.25			9.5

Schedule of warrants

Schedule of warrants
	Number of warrants		Weighted Average Exercise Price
Outstanding December 31, 2023		2,662,250	$	4.15
Issued		-		-
Exercised		-		-
Expired or cancelled		-		-
Outstanding March 31, 2024		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		1.5	$	4.15		2,135,000
$	4.15		347,250		1.5		4.15		347,250
			2,662,250		1.5	$	4.15		2,662,250

CONCENTRATION OF CREDIT RISK (Tables)

3 Months Ended

Mar. 31, 2024

Risks and Uncertainties [Abstract]

Concentration of credit risk

Concentration of credit risk
Customer A	25	%
Customer B	17	%
Customer C	16	%
Customer D	14	%
Customer E	12	%
Customer F	10	%

Accounts Receivable

Two customers accounted for 88% of the accounts receivable as of March 31, 2024, as set forth below:

Customer A			54	%
Customer B			34	%

Five customers accounted for 97% of accounts receivable at December 31, 2023.

Customer A – related party	39	%
Customer B	21	%
Customer C	15	%
Customer D	12	%
Customer E	10	%

NATURE OF THE ORGANIZATION AND BUSINESS (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended
	Sep. 20, 2022	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023	Sep. 30, 2023
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
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
Equity method investment income		$ 5,783	$ 0
Equity method investment		101,783		$ 96,000	$ 96,000
Investment					$ 96,000
Wider Come Limited [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Equity method investment		$ 104,000
Wider [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Ownership percentage		52.00%
Nexalin [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Ownership percentage		48.00%
Common Stock [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Shares issued during the period	2,315,000
Warrant [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Shares issued during the period	2,315,000
Warrant [Member] \| Underwriters [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Shares issued during the period	347,250
Proceeds from issuance of warrants	$ 3,473
IPO [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Shares issued during the period	2,315,000

LIQUIDITY AND GOING CONCERN (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accumulated deficit	$ (78,079,206)		$ (77,038,049)
Loss from operation	(1,073,712)	$ (779,426)
Cash flows from operations	(763,289)	$ (1,314,649)
Working capital deficit	$ 2,100,000

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS (Details) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Product Information [Line Items]
Total	$ 78,671	$ 30,560
UNITED STATES
Product Information [Line Items]
Total	23,171	30,560
International Sales [Member]
Product Information [Line Items]
Total	55,500
Device Sales [Member]
Product Information [Line Items]
Total	55,500
Licensing Fee [Member]
Product Information [Line Items]
Total	21,558	23,870
Equipment [Member]
Product Information [Line Items]
Total	1,513	6,400
Other [Member]
Product Information [Line Items]
Total	$ 100	$ 290

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS (Details 1) - USD ($)	Mar. 31, 2024	Dec. 31, 2023
Finite-Lived Intangible Assets [Line Items]
Carrying Amount	$ 175,851	$ 109,543
Accumulated Amortization	(6,677)	(4,015)
Net Carring Value	169,174	105,528
Patents [Member]
Finite-Lived Intangible Assets [Line Items]
Carrying Amount	146,563	98,970
Accumulated Amortization	(5,680)	(3,751)
Net Carring Value	140,883	95,219
Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Carrying Amount	29,288	10,573
Accumulated Amortization	(997)	(264)
Net Carring Value	$ 28,291	$ 10,309

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS (Details 2) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Schedule of Investments [Line Items]
Amortized Cost	$ 1,597,932		$ 2,368,608
Unrealized Gain (Loss)	(245)	$ (405)
Fair Value	1,597,687		2,368,203
Short-Term Investments [Member]
Schedule of Investments [Line Items]
Amortized Cost	1,597,932		2,368,608
Unrealized Gain (Loss)	(245)	$ (405)
Fair Value	$ 1,597,687		$ 2,368,203

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS (Details 3) - USD ($)	Mar. 31, 2024	Dec. 31, 2023
Platform Operator, Crypto Asset [Line Items]
Financial assets	$ 1,597,687	$ 2,368,203
Fair Value, Inputs, Level 1 [Member]
Platform Operator, Crypto Asset [Line Items]
Financial assets	1,597,687	2,368,203
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
	Mar. 31, 2024	Mar. 31, 2023
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	4,944,129	2,662,250
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	2,662,250	2,662,250
Equity Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	2,281,879

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Accounting Policies [Abstract]
Deferred revenue	$ 0		$ 0
Allowance for doubtful accounts	0		$ 0
Wrote down inventory	0	$ 0
Amortization expense	2,662	660
Advertising and marketing expenses	2,304	2,817
Research and development costs	$ 105,668	$ 65,833

ACCRUED EXPENSES (Details) - USD ($)	Mar. 31, 2024	Dec. 31, 2023
Payables and Accruals [Abstract]
Accrued – other	$ 116,383	$ 21,954
Accrued settlement liabilities	89,330	89,330
Accrued bonuses	150,000	150,000
Total	$ 355,713	$ 261,284

NON-CONSOLIDATED JOINT VENTURE AND RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)			3 Months Ended
	Jul. 02, 2023	May 09, 2018	Mar. 31, 2024	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2023	Sep. 30, 2023
Related Party Transaction [Line Items]
Equity method investment			$ 101,783			$ 96,000	$ 96,000
Lease payments				$ 9,500	$ 13,500
2023 Plan [Member]
Related Party Transaction [Line Items]
New service agreement description	In addition to the retention payments, stock awards and nonqualified option grants described above, Messrs. White and Nketiah are receiving cash compensation and each of Messrs. White and Nketiah are eligible for performance-based cash bonuses. The 2023 performance-based milestones regarding Mr. White’s incentive compensation have been met for 2023, and he was awarded a cash bonus of $120,000 and 313,199 nonqualified stock options with a vesting date of July 1, 2024. The 2023 performance-based milestones regarding Mr. Nketiah’s incentive compensation have been met for 2023, and he was awarded a cash bonus of $50,000 and 218,121 nonqualified stock options with a vesting date of July 1, 2024.
Mr. White [Member]
Related Party Transaction [Line Items]
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 1,387,024 shares of the Company’s common stock with an exercise price of $.894 per share subject to certain time and performance- and time-based vesting conditions.
Dr. Owens [Member]
Related Party Transaction [Line Items]
New service agreement description	Under the terms of his service agreement, Dr. Owens is entitled to (i) a sign-on/retention bonus consisting of a grant of nonqualified stock options to purchase 654,362 shares of the Company’s common stock with an exercise price of $.894 per share subject to certain time- and performance-based vesting conditions.
Mr. Nketiah [Member]
Related Party Transaction [Line Items]
New service agreement description	Under the terms of his employment agreement Mr. Nketiah is entitled to nonqualified stock option grants to purchase 100,671 shares of the Company’s common stock with an exercise price of $.894 subject to certain time and performance-based vesting conditions.
Joint Venture [Member]
Related Party Transaction [Line Items]
Equity method investment income from Joint Venture			5,783	0
Wider Come Limited [Member]
Related Party Transaction [Line Items]
Equity method investment			104,000
U.S. Asian Consulting Group, LLC [Member]
Related Party Transaction [Line Items]
Monthly payment		$ 10,000
Consulting expenses			$ 30,000	$ 30,000

STOCKHOLDERS' EQUITY (Details)	3 Months Ended
STOCKHOLDERS' EQUITY (Details)	Mar. 31, 2024 $ / shares shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of Options Exercised
Number of Options Outstanding, Ending Balance	2,281,879
Weighted Average Remaining Life In years	9 years 3 months
Equity Option [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of Options Issued	2,281,879
Weighted Average Exercise Price, Options Issued \| $ / shares	$ 0.89
Weighted Average Remaining Life In years, Issued	9 years 3 months
Number of Options Exercised
Weighted Average Exercise Price, Options Exercised \| $ / shares
Number of Options Expired or cancelled
Weighted Average Exercise Price, Options Expired or cancelled \| $ / shares
Number of Options Outstanding, Ending Balance	2,281,879
Weighted Average Exercise Price, Options outstanding Ending Balance \| $ / shares	$ 0.89
Weighted Average Remaining Life In years	9 years 3 months

STOCKHOLDERS' EQUITY (Details 1)	3 Months Ended
STOCKHOLDERS' EQUITY (Details 1)	Mar. 31, 2024 $ / shares shares
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Outstanding Number of Options	2,281,879
Weighted Average Remaining Life In Years	9 years 3 months
Exercisable Number of Options	587,248
0.89
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price \| $ / shares	$ 0.89
Outstanding Number of Options	2,281,879
Weighted Average Remaining Life In Years	9 years 3 months
Exercisable Number of Options	587,248

STOCKHOLDERS' EQUITY (Details 2)	3 Months Ended
STOCKHOLDERS' EQUITY (Details 2)	Mar. 31, 2024	Mar. 31, 2023
Equity [Abstract]
Volatility	99.00%	99.00%
Expected dividends
Risk-free interest rate	4.61%	4.61%
Expected term (years)	9 years 3 months	9 years 6 months

STOCKHOLDERS' EQUITY (Details 3)	3 Months Ended
STOCKHOLDERS' EQUITY (Details 3)	Mar. 31, 2024 $ / 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 (Details 4) - $ / shares	3 Months Ended
STOCKHOLDERS' EQUITY (Details 4) - $ / shares	Mar. 31, 2024	Dec. 31, 2023	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	1 year 6 months
Weighted Average Exercise Price	$ 4.15
Exercisable Number of Warrants	2,662,250
4.15
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	1 year 6 months
Weighted Average Exercise Price	$ 4.15
Exercisable Number of Warrants	2,135,000
4.15
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	1 year 6 months
Weighted Average Exercise Price	$ 4.15
Exercisable Number of Warrants	347,250

STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($)	3 Months Ended
STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($)	Mar. 31, 2024	Mar. 31, 2023
Equity [Abstract]
Share based compensation	$ 40,060	$ 0

COMMITMENTS AND CONTINGENCIES (Details Narrative)	3 Months Ended
COMMITMENTS AND CONTINGENCIES (Details Narrative)	Mar. 31, 2024
Commitments and Contingencies Disclosure [Abstract]
Accrued expenses description	The Company has accrued $40,000 and $40,000 on the consolidated balance sheets as of March 31, 2024 and December 31, 2023, respectively. The reduction in the amount accrued was recognized as other income on the consolidated statement of operations and comprehensive loss for the year ended December 31, 2023. The Company believes it has adequately accrued for this matter.

CONCENTRATION OF CREDIT RISK (Details) - Customer Concentration Risk [Member]	3 Months Ended		12 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Revenue Benchmark [Member] \| Customer A [Member]
Concentration Risk [Line Items]
Revenue, percentage		25.00%
Revenue Benchmark [Member] \| Customer B [Member]
Concentration Risk [Line Items]
Revenue, percentage		17.00%
Revenue Benchmark [Member] \| Customer C [Member]
Concentration Risk [Line Items]
Revenue, percentage		16.00%
Revenue Benchmark [Member] \| Customer D [Member]
Concentration Risk [Line Items]
Revenue, percentage		14.00%
Revenue Benchmark [Member] \| Customer E [Member]
Concentration Risk [Line Items]
Revenue, percentage		12.00%
Revenue Benchmark [Member] \| Customer F [Member]
Concentration Risk [Line Items]
Revenue, percentage		10.00%
Accounts Receivable [Member] \| Customer A [Member]
Concentration Risk [Line Items]
Revenue, percentage	54.00%		39.00%
Accounts Receivable [Member] \| Customer B [Member]
Concentration Risk [Line Items]
Revenue, percentage	34.00%		21.00%
Accounts Receivable [Member] \| Customer C [Member]
Concentration Risk [Line Items]
Revenue, percentage			15.00%
Accounts Receivable [Member] \| Customer D [Member]
Concentration Risk [Line Items]
Revenue, percentage			12.00%
Accounts Receivable [Member] \| Customer E [Member]
Concentration Risk [Line Items]
Revenue, percentage			10.00%

CONCENTRATION OF CREDIT RISK (Details Narrative) - Customer Concentration Risk [Member]	3 Months Ended		12 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Revenue Benchmark [Member] \| One Customer [Member]
Concentration Risk [Line Items]
Revenue, percentage	71.00%
Revenue Benchmark [Member] \| Six Customers [Member]
Concentration Risk [Line Items]
Revenue, percentage		94.00%
Accounts Receivable [Member] \| Two Customers [Member]
Concentration Risk [Line Items]
Revenue, percentage	88.00%
Accounts Receivable [Member] \| Five Customers [Member]
Concentration Risk [Line Items]
Revenue, percentage			97.00%