What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-10 compared with 2022-11-10 · 647 added, 623 removed, 155 unchanged (89% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

Cash and cash equivalents

Accounts receivable (Includes related party of $ 6,912 and $ - , respectively)

Prepaid expenses

Short-term investments

Accounts receivable

Prepaid expenses and other current assets

Total Current Assets

Equipment, net of accumulated depreciation of $ 30,265

and $ 29,862 , respectively

LIABILITIES AND STOCKHOLDERS’

EQUITY (DEFICIT)

Equipment, net of accumulated depreciation of $ 2,315 and $ 2,181 , respectively

Patent, net of amortization

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current Liabilities:

1 unchanged sentence

Accrued expenses

Lease liability

Loan payable - shareholder

Lease liability, current portion

Loan payable - officer

Deferred revenue

Total Current Liabilities

1 unchanged sentence

Lease liability, net of current portion

PPP Loan payable

Total Liabilities

Commitments and Contingencies

Commitments and Contingencies (Note 8)

Stockholders’ Equity (Deficit):

1 unchanged sentence

100,000,000 shares authorized;

7,279,961 and 4,879,923 shares

issued and outstanding at September 30, 2022 and December 31, 2021, respectively

7,286,562 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Accumulated other comprehensive income

Additional paid in capital

2 unchanged sentences

( 72,389,340 )

Total Stockholders’ Equity

( 1,681,941 )

Total Liabilities and Stockholders’

Equity (Deficit)

The accompanying

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

Total Stockholders’ Equity (Deficit)

Total Liabilities and Stockholders’ Equity (Deficit)

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

TECHNOLOGY, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE GAIN (LOSS)

Three Months Ended

Nine Months Ended

September 30,

Revenues, net (Includes related party of $ 520,000 and $ 26,132 for

the three months ended and $ 1,183,367 and $ 26,132 for the nine months ended respectively)

Cost of revenue

Revenues, net (Includes related party of $ 0 and $ 300,499 for the three months ended March 31, 2023 and March 31, 2022, respectively)

Cost of revenues

Operating expenses

4 unchanged sentences

Loss from operations

( 1,795,449 )

( 1,113,414 )

( 5,441,112 )

Other (income) expense:

Interest expense, net

Forgiveness of PPP Loan

Total other (income) expense

$ ( 135,401 )

$ ( 1,799,708 )

Other income (expense), net:

Interest income (expense), net

Gain on sale of short-term investments

Total other income (expense), net

Other comprehensive income:

Unrealized gain from short-term investments

Comprehensive loss

$ ( 707,345 )

2 unchanged sentences

Weighted Average Shares Outstanding - Basic and Diluted

The accompanying

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

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

TECHNOLOGY, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’ EQUITY (DEFICIT)

Shareholders’

January 1, 2021

$ ( 64,613,520 )

$ ( 1,590,330 )

Stock issued for cash

Stock compensation

Shares issued for conversion of debt

( 1,582,637 )

as of March 31, 2021

( 66,196,157 )

( 1,608,525 )

Stock issued for cash

Stock compensation

Shares issued for conversion of debt

Shares issued for conversion of warrants

( 2,099,731 )

as of June 30, 2021

( 68,295,888 )

( 1,731,219 )

Stock issued for cash

Stock compensation

( 1,799,708 )

as of September 30, 2021

$ ( 70,095,596 )

$ ( 1,968,374 )

Balance at January 1, 2022

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

Accumulated Other Comprehensive Gain

Stockholders’

Balance as January 1, 2022

$ ( 70,691,524 )

2 unchanged sentences

Stock compensation

as of March 31, 2022

( 71,084,773 )

Balance as of March 31, 2022

$ ( 71,084,773 )

Stock compensation

as of June 30, 2022

$ ( 1,972,590 )

Accumulated Other Comprehensive Gain

Stockholders’

Balance as of January 1, 2023

$ ( 72,389,340 )

Stock issued for cash

Stock compensation

Related party foregone interest

Warrants issued for cash

as of September 30, 2022

Other comprehensive gain

Balance as of March 31, 2023

$ ( 73,137,754 )

The accompanying

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

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

TECHNOLOGY, INC.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

3 unchanged sentences

Stock compensation

Amortization of debt discount

Forgiveness of Interest Expense

Forgiveness of PPP loan

Non-cash lease expense

Gain on sale of short-term investments

Changes in operating assets and liabilities:

1 unchanged sentence

Prepaid assets

Accounts payable

Accounts payable - related party

Accounts payable

Accrued expenses

3 unchanged sentences

( 1,314,649 )

Cash flows from investing activities:

Sale of short-term investments

Purchase of short-term investments

( 10,022,293 )

Purchase of patents

Net cash provided by investing activities

Cash flows from financing activities:

Sale of common stock for cash, net of financing fees

Proceeds from exercise of warrants

Proceeds from sale of warrants

Proceeds from PPP loans

Payments on loan payable - shareholder

Net cash provided by financing activities

Net increase in cash and cash equivalents

Payments on notes payable - officer

Net cash provided by (used in) financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents - beginning of period

Cash and cash equivalents - end of period

Supplemental cash flow information:

Cash paid for:

Non-cash investing and financing activities:

Conversion of debt and accrued interest into common stock

Unrealized gain on short-term investments

ROU asset and lease liability recorded

Forgiveness of Interest Expense

Forgiveness of PPP loan

The accompanying

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

NEXALIN TECHNOLOGY, INC.

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

TECHNOLOGY, INC.

AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — NATURE OF THE ORGANIZATION AND BUSINESS

Corporate History

Nexalin Technology, Inc.

TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 — NATURE OF THE ORGANIZATION AND BUSINESS

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 September 6, 2019 (Inception) through the nine months ended September 30, 2022.

On November 22, 2021, NV Nexalin entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Nexalin Technology, Inc., a Delaware corporation (“Nexalin”, or the “Company”).

Pursuant to the Merger Agreement, NV Nexalin merged with and into Nexalin with all shareholders of NV Nexalin receiving one common share of Nexalin in exchange for twenty shares of NV Nexalin held at the time of the Merger Agreement.

NV Nexalin treated the transaction as a corporate reorganization with the historical consolidated financial statements of NV Nexalin becoming the historical consolidated financial statements of Nexalin.

Nexalin had nominal assets and liabilities and did not conduct any operations prior to the reorganization other than its incorporation.

NV Nexalin has retroactively applied the 20-for-1 exchange, effective on November 22, 2021, to share and per share amounts on the unaudited condensed consolidated financial statements for the nine months ended September 30, 2022 and 2021.

NV Nexalin’s authorized shares of common stock was not affected as a result of the Merger.

As a result of the Merger, NV Nexalin was dissolved and Neuro-Health became a subsidiary of Nexalin.

The Company’s principal

offices are located at 1776 Yorktown, Suite 550, Houston, Texas 77056.

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, 2023.

November 22, 2021, NV Nexalin entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Nexalin Technology,

Inc., a Delaware corporation (“Nexalin”, or the “Company”).

Pursuant to the Merger Agreement, NV Nexalin merged

with and into Nexalin with all shareholders of NV Nexalin receiving one common share of Nexalin in exchange for twenty shares of NV Nexalin

held at the time of the Merger Agreement.

NV Nexalin treated the transaction as a corporate reorganization with the historical consolidated

financial statements of NV Nexalin becoming the historical consolidated financial statements of Nexalin.

Nexalin had nominal assets and

liabilities and did not conduct any operations prior to the reorganization other than its incorporation.

NV Nexalin has retroactively

applied the 20-for-1 exchange, effective on November 22, 2021, to share and per share amounts on the unaudited condensed consolidated

financial statements for the three months ended March 31, 2023 and 2022.

NV Nexalin’s authorized shares of common stock were

not affected as a result of the Merger Agreement.

As a result of the Merger Agreement, NV Nexalin was dissolved, and Neuro-Health became

a subsidiary of Nexalin.

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

The initial public offering consisted of 2,315,000 units consisting of 2,315,000 shares of its Common Stock and 2,315,000 accompanying warrants to purchase up to 2,315,000 shares of common stock.

Each share of common stock is being 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 approximately $ 9,607,250 million, before deducting underwriting discounts and offering expenses.

In addition, Nexalin granted the underwriters a 45-day option to purchase up to an additional 347,250 shares of common stock and/or Warrants to purchase up to 347,250 shares of common stock to cover over-allotments at the initial public offering price, less the underwriting discount.

The registration statement on Form S-1 (File No.

333-261989) was filed with the Securities and Exchange Commission (“SEC”), which became effective on September 15, 2022.

A final prospectus relating to the offering was filed with the SEC and is available on the SEC’s website at http://www.sec.gov .

The offering was being made only by means of a prospectus forming part of the effective registration statement.

The shares and warrants began trading on the Nasdaq Capital Market tier of the Nasdaq Stock Market (“Nasdaq”) on September 20, 2022, under the symbols “NXL” and “NXLIW”, respectively.

Business Overview

The Company is a medical device company that designs and develops innovative neurostimulation products to help uniquely and effectively combat the ongoing global mental health epidemic.

The Nexalin Device (the Device) emits a patented, frequency-based waveform that has been proven to be highly effective in stimulating a positive response from the mid-brain structures associated with various mental health disorders.

The Company’s design of an advanced waveform that is safely administered to the human brain is the basis of the Company’s treatment and the evolution of its business strategy.

The Company had previously marketed and licensed a Federal Drug Administration approved 4-milliamp device which is a non-invasive drug-free therapy for the treatment of anxiety and insomnia.

Although the devices are being used in the field and continue to use our single use disposable, we no longer are marketing the 4-milliamp device.

We have designed and developed an advanced device.

The 4-milliamp device and the advanced device may be referred to as the “Nexalin Device” or “Nexalin Therapy” and, collectively, “Nexalin”.

The Company has received approval from the China National Medical Products Administration to market and sell the advanced device in China for the treatment of insomnia and depression.

The Company sells the advanced device in China though an acting distributor.

It is in the Company’s plan to also achieve regulatory approval for the advanced device in other countries including the United States.

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 condensed 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.

COVID-19 Pandemic

In March 2020, the World Health Organization (the “WHO”) characterized the outbreak of the novel strain of coronavirus, specifically identified as COVID-19, as a global pandemic.

This has resulted in governments enacting emergency measures to combat the spread of the virus.

These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to business, resulting in a global economic slowdown.

Equity markets have experienced significant volatility and weakness and the governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions.

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.

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 distributor relationship with Wider Come

Wider Come Limited acts as a distributor for the Company’s devices in China and Asia.

Because of significant

restrictions imposed by the Chinese government during the Covid pandemic, Wider’s ability to market and sell the

Company’s devices has been negatively impacted, resulting in decreased revenue to the Company.

Patients and salespeople

are restricted in their movements resulting in a significant slowdown in the medical and other sectors.

Fortunately, our

Chinese distributor continues our strategy of multiple clinical studies in the major institution in Beijing in an array of

brain related diseases.

Significant efforts and funds expended by our Chinese distributor has led to regulatory approval in

China in both depression and insomnia thus far which has allowed for sales of our devices in China this year.

The extent of

future impact will depend on future developments, including future activities by the Chinese government and other possible

events which are highly uncertain and not in the Company’s control, including new information which may emerge

concerning the spread and severity of COVID-19, or any of its variants, and actions taken to address its impact, among

The repercussions of this health crisis could have a material adverse effect on the Company’s business,

financial condition, liquidity and operating results.

In response to COVID-19, the Company has implemented working practices to address potential impacts to its operations, employees and customers, and will take further measures in the future if and as required.

At present, we do not believe there has been any appreciable impact on the Company specifically associated with COVID-19.

NOTE 2 — GOING CONCERN AND LIQUIDITY

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.

30, 2022, the Company had a significant accumulated deficit of $71.7 71,659,663

For the nine months ended September 30, 2022, the Company had a loss from operations of $1.1 1,113,414

million and negative cash flows from operations of $1.31 1,309,242

At December 31, 2021, the Company had a significant accumulated deficit of approximately $70.7 70,691,524 million and a

working capital deficit of approximately $ 1.6 million.

The Company’s operating activities consume the majority of its cash

The Company will continue to service existing customers in the United States.

During the nine months ended September 30,

2022, the Company sold devices in China to its acting distributor.

The Company expects to continue to incur operating losses as it executes

its development plans through 2023, as well as undertaking other potential strategic and business development initiatives.

the Company has had and expects to have negative cash flows from operations, at least into the near future.

The Company previously funded

these losses primarily through the sale of equity and issuance of convertible notes.

The accompanying unaudited condensed consolidated

financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

At the closing of the Company’s initial public offering on September

20, 2022, the Company sold 2,315,000 Units and 347,250 Warrants at a price of $ 4.15 per Unit and $ 0.01 per Warrant for total gross proceeds

of $ 9,610,723 .

The Company incurred offering costs of $ 1,067,078 , consisting of $ 878,858 of underwriting fees and expenses and $ 188,220

of costs related to the Initial Public Offering.

The Company’s ability to continue as a going concern will be

dependent upon its ability to execute on its business plan, including the ability to generate revenue from the proposed joint venture

and obtain U.S.

approval for the sale of its devices in the United States, or the Company’s ability to raise additional capital.

Although no assurances can be given as to the Company’s ability to deliver on its revenue plans or that unforeseen expenses may

arise, management has evaluated the significance of the conditions as of September 30, 2022 and has concluded that due to the receipt

of the net proceeds from the completion of the Initial Public Offering, the Company has sufficient cash on hand to satisfy its anticipated

cash requirements for the next twelve to fifteen months.

The substantial doubt about the Company’s ability to continue as a going

concern for more than twelve months from the date of these financial statements has been alleviated.

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

Basis of Presentation

The accompanying unaudited condensed consolidated financial information has been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) for interim financial information.

In the opinion of management, such financial information includes all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the Company’s financial position and the operating results and cash flows.

Operating results for the nine months ended September 30, 2022 and 2021 are not necessarily indicative of the results that may be expected for the entire year or for any other subsequent interim period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to the rules of the U.S.

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

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.

this report, the terms “Nexalin,” “our,” “we,” “us,” and the “Company” refer

to Nexalin Technology, Inc.

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 continue providing services to medical professionals to support patients’ use of the Gen-1 devices which were in operation

prior to December 2019, we are not making new sales or new marketing efforts of Gen-1 devices.

We continue to derive revenue

from devices which we sold or leased prior to the FDA’s December 2019 reclassification announcements.

consists of monthly licensing fees and payments for the sale of electrodes.

We have suspended marketing efforts for new sales of

devices related to the Gen-1 device for treatment of anxiety and insomnia in the United States until the Nexalin regulatory team

makes a decision on amending our existing 510(k) application at 4 milliamps.

A new pre-sub document in preparation of a new 510(k)

for our Gen-3 Halo headset at 15 milliamps was filed with the FDA in January of 2023.

Formal comments to our pre-sub document filing

were received in March of 2023.

A formal meeting to address FDA comments is scheduled for May of 2023.

have designed and developed a new advanced wave form 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.

Preliminary data provided by the University of California San Diego supports

the safety of utilizing our 15 milliamp waveform technology, however the determination of safety and efficacy of medical devices in the

United States is subject to clearance by the FDA.

Additionally,

we are currently designing clinical trial strategies for the use of Gen-3 for the treatment of substance use disorders including opiate,

cocaine, and alcohol abuse.

Recently the Gen-2 device was tested in pilot trials in China for the treatment of Alzheimer’s disease,

and dementia.

Continued pilot testing for Alzheimer’s and dementia, cognition and memory, and neurotransmitter changes is planned

in China in 2023.

Growth Company

are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our

Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements

that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required

to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations

regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding

advisory vote on executive compensation and approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1)

of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until

private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class

of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.

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

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.

and Uncertainties

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 consolidated financial statements.

The unaudited condensed consolidated financial statements

do not include any adjustments that might result from the outcome of uncertainties.

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 distributor relationship with Wider Come Limited.

Wider Come Limited acts as a distributor for the

Company’s devices in China and Asia.

Because of significant restrictions imposed by the Chinese government during the COVID-19

pandemic through calendar year 2022 and into 2023, Wider’s ability to market and sell the Company’s devices has been negatively

impacted, resulting in decreased revenue to the Company.

Patients and salespeople have been restricted in their movements resulting in

a significant slowdown in the medical and other sectors.

Significant efforts and funds expended by our Chinese distributor has led to

regulatory approval in China in both depression and insomnia thus far which has allowed for sales of our devices in China in 2022, and

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

2 — LIQUIDITY

accompanying unaudited condensed consolidated financial statements have been prepared on the basis that we will continue as a going concern,

which contemplates realization of assets and the satisfaction of liabilities in the normal course of business.

At March 31, 2023,

we had a significant accumulated deficit of approximately $73.1 73,137,754 million.

For the three months ended March 31, 2023, we had a loss

from operations of approximately $779 779,426 thousand and negative cash flows used in operations of approximately $1.3 1,314,649 million.

a working capital surplus as of March 31, 2023 of approximately $ 4.7 million, our operating activities consume most of our cash

expect to continue to incur operating losses as we execute our development plans, as well as undertaking other potential strategic and

business development initiatives through 2023 and through the twelve months from the date of this report.

In addition, we have had and

expect to have negative cash flows from operations, at least into the near future.

We have previously funded these losses primarily through

the sale of equity and issuance of convertible notes.

The accompanying unaudited consolidated financial statements do not include any

adjustments that might be necessary should we be unable to continue as a going concern.

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 proposed joint venture and obtain U.S.

approval for the sale of our devices in the United States, and, if necessary,

our ability to raise additional capital.

Although no assurances can be given as to our ability to deliver on our revenue plans or that

unforeseen expenses may arise, management has evaluated the significance of the conditions as of March 31, 2023 and has concluded

that due to the receipt of the net proceeds from the completion of the Initial Public Offering, we have sufficient cash and short-term

investments on hand to satisfy its anticipated cash requirements for the next twelve months from the issuance of these financial statements.

3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS

of Presentation

accompanying unaudited condensed consolidated financial information has been prepared in accordance with Generally Accepted Accounting

Principles (“GAAP”) for interim financial information.

In the opinion of management, such financial information includes

all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the Company’s

financial position and the operating results and cash flows.

Operating results for the three months ended March 31, 2023 and 2022

are not necessarily indicative of the results that may be expected for the entire year or for any other subsequent interim period.

information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant

to the rules of the U.S.

Securities and Exchange Commission (the “SEC”).

These unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2021.

Principles of Consolidation

The consolidated financial statements include the accounts of Nexalin and its wholly-owned subsidiary Neuro-Health.

Intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity-based transactions, revenue and expenses and disclosure of contingent liabilities at the date of the financial statements.

The Company bases its estimates and assumptions on historical experience, known or expected trends and various other assumptions that it believes to be reasonable.

As future events and their effects cannot be determined with precision, actual results could differ from these estimates which may cause the Company’s future results to be affected.

The Company recognizes revenue when its performance obligations with its customers have been satisfied.

At contract inception, the Company determines if the contract is within the scope of ASC Topic 606 and then evaluates the contract using the following five steps:

(1) identify the contract with the customer;

These unaudited condensed consolidated financial

statements and related notes should be read in conjunction with the Company’s audited consolidated financial statements for the

year ended December 31, 2022.

of Consolidation

consolidated financial statements include the accounts of Nexalin and its wholly owned subsidiary Neuro-Health.

Intercompany accounts

and transactions have been eliminated in consolidation.

preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the

reported amounts of assets, liabilities, equity-based transactions, revenue and expenses and disclosure of contingent liabilities at

the date of the financial statements.

The Company bases its estimates and assumptions on historical experience, known or expected trends

and various other assumptions that it believes to be reasonable.

As future events and their effects cannot be determined with precision,

actual results could differ from these estimates which may cause the Company’s future results to be affected.

Company recognizes revenue when its performance obligations with its customers have been satisfied.

At contract inception, the Company

determines if the contract is within the scope of ASC Topic 606 and then evaluates the contract using the following five steps:

the contract with the customer;

(2) identify the performance obligations;

(3) determine the transaction price;

(4) allocate the transaction price to the performance obligations;

(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.

only recognizes revenue to the extent that it is probable that a significant revenue reversal will not occur in a future period.

Company has existing licensing and treatment fee agreements with its customers for the use of the Nexalin Device in their practices.

These agreements generally have terms of one year with automatic renewal if certain requirements are met and amounts due per these agreements

are billed monthly.

The Company also sells products related to the provision of services.

The Company sells its Devices in China to its acting distributor and sells products relating to the use of the Devices.

The Company has a Royalty Agreement whereby the manufacturer of the Company’s electrodes will pay a royalty to the Company for a three year period beginning January 1, 2022.

The amount of the Royalty is equal to 20% of the amount that the manufacturer invoices to the acting distributor for the sale of the electrodes.

Revenue Streams

The Company derives revenues from its license agreements by charging a monthly licensing fee for the duration of the agreement.

The Company derives revenues from equipment by selling additional individual electrodes to customers for use with the Nexalin Device.

The Company receives revenue from the sale in China of its Devices to its acting distributor and from the sale of products relating to the use of those Devices.

The Company derives revenue as a royalty fee from the China-based manufacturer for electrodes ordered in connection with the Company’s China sales.

Performance Obligations

Management identified that subsequent licensing revenue has one performance obligation.

That performance obligation is satisfied as long as the licensing contract remains valid and is not terminated.

The licensing revenue is invoiced monthly and is recognized at a point in time in which the invoice is sent to the customer.

Management identified that the Company’s equipment and Device revenue has one performance obligation.

That performance obligation is satisfied when the equipment and Devices are shipped.

The Company recognizes revenue at a point in time in which the electrodes and Devices are shipped to the customer.

The Company 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.

of the Royalty is equal to 20% of the amount that the manufacturer invoices to the acting distributor for the sale of the electrodes.

Company derives revenues from its license agreements by charging a monthly licensing fee for the duration of the agreement.

derives revenues from equipment by selling additional individual electrodes to customers for use with the Nexalin Device.

receives revenue from the sale in China of its Devices to its acting distributor and from the sale of products relating to the use of

those Devices.

The Company derives revenue as a royalty fee from the China-based manufacturer for electrodes ordered in connection with

the Company’s China sales.

identified that subsequent licensing revenue has one performance obligation.

That performance obligation is satisfied as long as the

licensing contract remains valid and is not terminated.

The licensing revenue is invoiced monthly and is recognized at a point in time

in which the invoice is sent to the customer.

identified that the Company’s equipment and Device revenue has one performance obligation.

That performance obligation is satisfied

when the equipment and Devices are shipped.

The Company recognizes revenue at a point in time in which the electrodes and Devices are

shipped to the customer.

The Company does not offer a warranty on the electrodes and Devices.

Management identified that treatment fee revenue has one performance obligation.

The performance obligation is satisfied upon the completion of individual treatments on patients by customers.

Management identified that royalty revenue has one performance obligation.

The performance obligation is satisfied at the time the Electrode manufacturer invoices the acting distributor for the sale to the acting distributor.

Practical Expedients

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

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

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

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

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

Disaggregated Revenues

Major Revenue Streams

Revenue consists of the following by service offering:

of disaggregation of revenue

September 30,

identified that treatment fee revenue has one performance obligation.

The performance obligation is satisfied upon the completion of

individual treatments on patients by customers.

identified that royalty revenue has one performance obligation.

The performance obligation is satisfied at the time the Electrode manufacturer

invoices the acting distributor for the sale to the acting distributor.

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

● Significant

Financing Component — the Company does not adjust the promised amount of consideration for the effects of a significant financing

component since the Company expects, at contract inception, that the period between when the Company transfers a promised goods or services

to the customer and when the customer pays for that service will be one year or less.

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

and Handling Activities — the Company elected to account for shipping and handling activities as a fulfilment cost rather than

as a separate performance obligation.

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

Revenue Streams

consists of the following by service offering:

Schedule of disaggregation of revenue

Three Months Ended

Licensing Fee

Geographic Locations

September 30,

Contract Modifications

There were no contract modifications during the nine months ended September 30, 2022 and 2021.

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.

Three Months Ended

Modifications

were no contract modifications during the three months ended March 31, 2023 and 2022.

Contract modifications are not routine in

the performance of the Company’s contracts.

Company receives payment for equipment and devices in advance of shipping.

The Company recognizes the revenue as being earned upon shipment.

Deferred revenue of $ 0 and $ 130,000 was recognized as of September 30, 2022 and December 31, 2021, respectively.

Schedule of deferred revenue

at January 1, 2022

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase and all treasury obligations 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 major financial institutions.

Accounts Receivable

Accounts receivables are reported at their outstanding unpaid principal balances, net of allowances for doubtful accounts.

The Company periodically assesses its accounts and other receivables for collectability on a specific identification basis.

The Company provides for allowances for doubtful receivables based on management’s estimate of uncollectible amounts considering age, collection history, and any other factors considered appropriate.

No deferred revenue was recognized as of March 31, 2023 and December 31, 2022.

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 major financial institutions.

appropriate classification of marketable securities is determined at the time of purchase and evaluated as of each reporting balance

Investments in marketable debt and equity securities classified as available-for-sale are reported at 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.

Changes in fair value that are considered temporary are reported net of tax in accumulated other comprehensive

Realized gains and losses, amortization of premiums and discounts and interest and dividends earned are included in other income

(expense), net.

For declines in the fair values of equity securities that are considered other-than-temporary, impairment losses are

charged to other income (expense), net.

The Company considers available evidence in evaluating potential impairments of its investments,

including the duration and extent to which fair value is less than cost.

There were no deemed permanent impairments on March 31,

2023 and December 31, 2022, respectively.

receivables are reported at their outstanding unpaid principal balances, net of allowances for doubtful accounts.

The Company periodically

assesses its accounts and other receivables for collectability on a specific identification basis.

The Company provides for allowances

for doubtful receivables based on management’s estimate of uncollectible amounts considering age, collection history, and any other

factors considered appropriate.

Payments are generally due within 30 days of invoice.

The Company writes off accounts receivable against the allowance for doubtful accounts when a balance is determined to be uncollectible.

During the nine months ended September 30, 2022 and 2021, the Company wrote off $ 11,175 and $ - , respectively, in accounts receivable.

During the three months ended September 30, 2022 and 2021, the Company wrote off $ - and $ - , respectively, in accounts receivable.

The Company did no t record an allowance for doubtful accounts on September 30, 2022 and December 31, 2021, respectively.

Inventory consists of finished goods and components stated at the lower of cost or net realizable value with cost determined on a first-in first-out basis.

The Company reviews the composition of inventory at each reporting period in order to identify obsolete, slow-moving, quantities in excess of demand, or otherwise non-saleable items.

The Company did no t record a reserve for obsolete inventory at September 30, 2022 and December 31, 2021.

Equipment are recorded at cost.

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

Expenditures that enhance the useful lives of the assets are capitalized and depreciated.

Maintenance and repairs are charged to expense as incurred.

The Company capitalizes costs attributable to the betterment of property and equipment when such betterment enhances the functionality of the asset or extends the useful life of the asset.

Should an asset be disposed of before the end of its useful life, the cost and accumulated depreciation at that date are removed from the consolidated balance sheets, with the resulting gain or loss, if any, reflected in operations in that period.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount.

If the operation is determined to be unable to recover the carrying amount of its assets, then these assets are written down first, followed by other long-lived assets of the operation to fair value.

Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets.

Advertising and Marketing Costs

The Company expenses advertising and marketing costs as they are incurred.

Advertising and marketing expenses were $ 18,345 and $ 25,470 for the nine months ended September 30, 2022 and 2021, respectively.

Advertising and marketing expenses were $ 12,435 and $ 3,592 for the three months ended September 30, 2022 and 2021, respectively.

All advertising and marketing expenses are recorded in selling, general and administrative expenses on the unaudited condensed consolidated statements of operations.

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.

The Company writes off accounts receivable against

the allowance for doubtful accounts when a balance is determined to be uncollectible.

During the three months ended March 31, 2023

and 2022, the Company did no t write off accounts receivable.

The Company did no t record an allowance for doubtful accounts on March 31,

2023 and December 31, 2022, respectively.

consists of finished goods and components stated at the lower of cost or net realizable value with cost determined on a first-in first-out

The Company reviews the composition of inventory at each reporting period in order to identify obsolete, slow-moving, quantities

in excess of demand, or otherwise non-saleable items.

is recorded at cost.

Depreciation is computed using straight-line method over the estimated useful lives of the related assets, generally

and repairs are charged to expense as incurred.

The Company capitalizes costs attributable to the betterment of property and equipment

when such betterment enhances the functionality of the asset or extends the useful life of the asset.

Should an asset be disposed of

before the end of its useful life, the cost and accumulated depreciation at that date is removed from the consolidated balance sheets,

with the resulting gain or loss, if any, reflected in operations in that period.

are amortized over their useful lives and are reviewed for impairment when warranted by economic conditions.

Amortization expense was

$ 660 and $ 0 for the three months ended March 31, 2023 and 2022, respectively.

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.

The Company routinely evaluates the realizability of deferred tax assets by assessing the likelihood that deferred tax assets will be recovered based on all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, estimates of future taxable income, tax planning strategies and results of operations.

Estimating future taxable income is inherently uncertain and requires judgment.

In projecting future taxable income, historical results are considered along with certain assumptions related to future earnings.

At September 30, 2022 and December 31, 2021, the Company had a full valuation allowance applied against its deferred tax assets

From time to time the Company may recognize an income tax benefit, in its consolidated statements of operations, related to uncertain tax positions taken.

For uncertain tax positions that are “more likely than not” to sustain an income tax audit, the Company may record an allowance against certain deferred tax assets related to these positions.

The Company’s practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the unaudited condensed consolidated statements of operations.

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.

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, 2023 and December 31, 2022, the Company had a full valuation allowance applied

against its net tax assets.

Value Measurements

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).

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.

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.

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.

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, 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.

Net Loss per Common Share

Net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period.

The 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

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.

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.

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

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.

Pricing inputs include significant inputs that are generally less observable from objective

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.

Value of Financial Instruments

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.

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

Schedule of amortized cost, unrealized gains

Amortized Cost

Unrealized Gain

March 31, 2023

Short-term investments

Total March 31, 2022

December 31, 2022

Short-term investments

Total December 31, 2022

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

2023 and December 31, 2022.

Schedule of fair value, assets measured on recurring basis

Carrying Value

March 31, 2023

Treasury Notes

December 31, 2022

Treasury Notes

Loss per Common Share

loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period.

The dilutive effect, if any, of warrants is calculated using the treasury stock method.

All outstanding convertible notes are considered common stock at the beginning of the period or at the time of issuance, if later, pursuant to the if-converted method.

Since the effect of common stock equivalents is anti-dilutive with respect to losses, the warrants and shares issuable upon conversion have been excluded from the Company’s computation of net loss per common share for the three and nine months ended September 30, 2022 and 2021.

These shares were included in the basic and diluted net loss per common share on the unaudited condensed consolidated statements of operations.

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:

These shares were included in the basic and diluted

net loss per common share on the unaudited condensed consolidated statements of operations.

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

Nine Months Ended

September 30,

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 statements of operations.

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.

Three Months Ended

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 statements of operations.

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

Forfeitures are recorded as they are incurred as opposed to being estimated at the time of grant and revised.

Due to the Company’s limited history and lack of public market for its common stock, the Company used the average of historical share prices of similar companies within its industry to calculate volatility for use in the Black-Scholes option pricing model.

Pursuant to ASU 2018-07 Compensation — Stock Compensation (Topic 718):

Improvements to Non-employee Share-Based Payment Accounting, the Company accounts for stock options issued to non-employees for their services in accordance with ASC 718.

The Company uses valuation methods and assumptions to value the stock options that are in line with the process for valuing employee stock options noted above.

Warrant Accounting

The Company does not use derivative instruments

to hedge exposures to cash flow, market, or foreign currency risks.

The Company evaluates all of its financial instruments, including

issued private and public placement stock purchase 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,

to ASU 2018-07 Compensation — Stock Compensation (Topic 718):

Improvements to Non-employee Share-Based Payment Accounting, the

Company accounts for stock options issued to non-employees for their services in accordance with ASC 718.

The Company uses valuation

methods and assumptions to value the stock options that are in line with the process for valuing employee stock options noted above.

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:

2 unchanged sentences

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.

accounted for these warrants in accordance with ASC 815-40.

Accordingly, the Company recognized the warrants as an equity at fair

value and recorded in additional paid-in capital.

The fair value of the warrants was determined using a Black-Scholes option-pricing

methodology (“Black-Scholes model”).

The valuation was primarily based on observable market data while the related

theoretical warrant volatility assumption within the Black-Scholes model represented a Level 3 measurement within the fair value

measurement hierarchy.

Research and Development

All research and development costs are charged to operations as incurred.

For the nine months ended September 30, 2022 and 2021, the Company recorded $ 154,722 and $ 111,440 , respectively, in selling, general and administrative expenses on the unaudited condensed consolidated statements of operations.

For the three months ended September 30, 2022 and 2021, the Company recorded $ 113,617 and $ 33,474 , respectively in selling, general and administrative expenses on the unaudited condensed consolidated statements of operations.

A lease is defined as an agreement that conveys the right to control the use of identified property, plant or equipment (right of use asset or “ROU asset”) for a period of time in exchange for consideration.

The Company accounts for it leases in accordance with ASC 842, Leases, which requires that an ROU asset identified in a lease to be recorded as a noncurrent asset with a related liability.

reporting periods the Public Warrants were outstanding, they were precluded from liability classification, being equity-classified.

and Development

research and development costs are charged to operations as incurred.

For the three months ended March 31, 2023 and 2022, the Company

recorded $ 65,833 and $ 11,565 , respectively, in selling, general and administrative expenses on the unaudited condensed consolidated statements

of operations.

lease is defined as an agreement that conveys the right to control the use of identified property, plant or equipment (right of use asset

or “ROU asset”) for a period of time in exchange for consideration.

The Company accounts for its leases in accordance with

ASC 842, Leases, which requires that an ROU asset identified in a lease to be recorded as a noncurrent asset with a related liability.

The Company does not record ROU assets for those agreements of a twelve-month duration or less.

The Company recognized a ROU asset and corresponding lease liability on its balance sheets related to its office lease agreement.

See Note 10 — Leases for further discussion, including the impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.

ROU assets include any initial direct costs and prepaid lease payments and exclude any lease incentives.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

The lease terms may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option.

Paycheck Protection Program

The Company’s policy is to account for the PPP loan as debt.

The Company continued to record the loan as debt until either (1) the loan was partially or entirely forgiven and the Company had been legally released, at which point the amount forgiven would be recorded as income or (2) the Company paid off the loan.

As of September 30, 2022, the Company’s outstanding PPP loan was forgiven (see Note 7).

Recent Accounting Pronouncements

In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

The Company recognized a ROU asset and

corresponding lease liability on its balance sheets related to its office lease agreement.

See Note 9, Leases, for further discussion,

including the impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.

assets include any initial direct costs and prepaid lease payments and exclude any lease incentives.

Lease expense for minimum lease

payments is recognized on a straight-line basis over the lease term.

The lease terms may include options to extend or terminate the lease

if it is reasonably certain that the Company will exercise that option.

Accounting Pronouncements

In February 2020, the FASB issued ASU 2020-02,

Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting

119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No.

2016-02, Leases (Topic 842), which amends the effective date of the original pronouncement for smaller reporting companies.

ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2022.

The Company believes the adoption will modify the way the Company analyzes financial instruments, but it does not anticipate a material impact on results of operations.

The Company is in the process of determining the effects adoption will have on its unaudited condensed consolidated financial statements.

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

NOTE 4 — INITIAL PUBLIC OFFERING

Pursuant to the Initial Public Offering completed on September 20, 2022, the Company sold 2,315,000 Units and 347,250 of Warrants at a price of $ 4.15 per Unit and $ 0.01 per Warrant for a total of $ 9,610,723 of gross proceeds.

The Company incurred offering costs of $ 1,067,078 , consisting of $ 878,858 of underwriting fees and expenses and $ 188,220 of costs related to the Initial Public Offering.

Each Unit consisted of one share of Common Stock and one Warrant.

Each redeemable Warrant entitles the holder to purchase one share of Common Stock at a price of $4.15 per share, will be exercisable upon issuance and will expire on September 16, 2025

NOTE 5 — ACCRUED EXPENSES

Accrued expenses consist of the following amounts:

2016-02, Leases (Topic 842), which

amends the effective date of the original pronouncement for smaller reporting companies.

ASU 2016-13 and its amendments are in effect

for the Company for interim and annual periods in fiscal years beginning after December 15, 2022.

The adoption on January 1, 2023

modified the way the Company analyzes financial instruments, but it did not have a material impact on our consolidated financial

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

4 — ACCRUED EXPENSES

expenses consist of the following amounts:

Schedule of accrued expenses

September 30,

Accrued interest

1 unchanged sentence

Accrued settlement liabilities

Accrued expenses

Accrued research and development expense

5 — NON-CONSOLIDATED JOINT VENTURE AND RELATED PARTY TRANSACTIONS

Potential Joint Venture

September 21, 2018, the Company entered into the first of a series of agreements providing for the establishment of a joint venture

agreement (the “JV Agreement”) with Wider Come Limited, a China company (“Wider”) for the purpose of marketing,

sale and distribution of the Company’s proprietary devices for the treatment of (i) anxiety, depression and insomnia (“ADI”)

and (ii) Alzheimer’s and dementia (“AD”) in the applicable territories.

Wider has an experienced medical

technology team in China and when formed, the Joint Venture will design and implement a comprehensive business model and distribution

plan for our devices in China, Hong Kong, Macau and Taiwan.

The Joint Venture will be formed following the completion of certain

funding, clinical study, and publication milestones, which Wider has agreed to undertake but not yet completed.

Following its

formation, the Joint Venture will design and implement a comprehensive business model and distribution plan for our devices in

China, Hong Kong, Macau and Taiwan.

The first phase of distribution in China includes implementation of a sales strategy by Wider

for mainland China and other territories serviced by Wider.

originally contemplated, each of the parties to the joint venture would hold a 50 % interest in the equity, profits and losses,

shareholder voting, management control and rights to use production capacity of the facility.

The Company will provide a global

exclusive technology license for ADI treatment to the JV and Wider will contribute funding for the design and execution of

Company approved clinical studies, which we had estimated at the time of our initial public offering would have cost the Company

approximately $ 4,800,000 if the clinical studies had been undertaken by us in the United States.

The Company will also provide

the Joint Venture (the “JV”) with a license for exclusive distribution of its technology for the treatment of ADI

in additional territories.

The JV, if completed, will be controlled by an equally represented Board of Directors in which neither

entity has sole decision-making ability over day-to-day or significant operational decisions.

of September 30, 2022, the joint venture has not been established.

Joint Venture

December 21, 2018, the Company entered into the first of a series of agreements providing for the establishment of a joint venture

(“JV”) agreement (the “JV Agreement”) with Wider Come Limited, a China company (“Wider”) for the

purpose of marketing, sale and distribution of the Company’s proprietary devices for the treatment of (i) anxiety, depression and

insomnia (“ADI”) and (ii) Alzheimer’s and dementia (“AD”) in the applicable territories.

Wider has an experienced

medical technology team in China and when formed, the JV will design and implement a comprehensive business model and distribution plan

for our devices in China, Hong Kong, Macau and Taiwan.

The JV will be formed following the completion of certain funding, clinical study,

and publication milestones, which Wider has agreed to undertake but not yet completed, as well as resolution of potential regulatory

concerns in China.

Following its formation, the JV will design and implement a comprehensive business model and distribution plan for

our devices in China, Hong Kong, Macau and Taiwan.

originally contemplated, each of the parties to the JV would hold a 50 % interest in the equity, profits and losses, shareholder voting,

management control and rights to use production capacity of the facility.

The Company will provide an Asian territory exclusive distribution

license for ADI treatment to the JV and Wider.

As originally contemplated the JV, if completed, will be controlled by an equally represented

Board of Directors in which neither entity has sole decision-making ability over day-to-day or significant operational decisions.

parties may determine to alter the equity interest or board composition of the Joint Venture or other economic terms as they move closer

to its implementation.

As of March 31, 2023, the JV has not been established.

May 22, 2019, the Company entered into a supplementary agreement to the JV Agreement (the “Supplementary Agreement”).

At the time of the May, 2019 Supplementary Agreement, the parties desired to expand the scope of the Joint Venture to include

and address the pain management opportunities for our devices and technology.

Pursuant to the Supplementary Agreement, Wider was

to fund the JV within thirty days of execution of the JV Agreement with $600,000 in cash to be used for clinical trials and other

activities related to pain management utilization of our devices and technology in China.

Within thirty days of the funding, the

Company was to issue 5% of the Company in non-diluted common stock to Wider’s shareholders.

As of the date of this report

the JV has yet to be formally established and therefore the $600,000 has not been funded.

Further, the parties have determined

not to proceed with the pain management scope of the Joint Venture and have decided to terminate the May, 2019 Supplementary Agreement.

At the time of the May 2019 Supplementary Agreement, the parties desired to expand the scope of the JV to include and address the

pain management opportunities for our devices and technology.

Pursuant to the Supplementary Agreement, Wider was to fund the JV within

thirty days of execution of the JV Agreement with $600,000 in cash to be used for clinical trials and other activities related to pain

management utilization of our devices and technology in China.

Within thirty days of the funding, the Company was to issue 5% of the

Company in common stock to Wider’s shareholders.

As of the date of this report the JV has yet to be formally established and therefore

the $600,000 has not been funded.

Further, the parties have determined not to proceed with the pain management scope of the JV and have

decided to terminate the May 2019 Supplementary Agreement.

The parties may elect to proceed with a similar arrangement in the future.

April 6, 2020, the Company entered into a three-year service agreement with Wider, pursuant to which Wider agreed to perform clinical

trials associated with the formation of the JV.

In consideration, the Company and certain designated Wider shareholders entered

into stock issuance agreements for the issuance of 450,000 shares of the Company’s common stock, and simultaneously with

trials associated with the possible formation of the future JV.

In consideration, the Company and certain designated Wider shareholders

entered into stock issuance agreements for the issuance of 450,000 shares of the Company’s common stock, and simultaneously with

the execution of this service agreement, Wider contributed $ 200,000 to the Company.

1 unchanged sentence

Company issued 150,000 shares to affiliates of Wider in satisfaction of the obligation.

The fair value of the 150,000 shares issued

(less the contributed $200,000 in cash) resulted in a charge to stock-based compensation of $ 550,000 and is recorded in selling,

general and administrative expenses on the statement of operations.

The remaining 300,000 shares will be issued in accordance

with the following schedule upon Wider’s successful completion of the following milestones (i) 50% upon successful completion

of the fourth of four clinical trials pursuant to the terms and conditions of the service agreements and (ii) 50% upon all four

trials being submitted for publication in international medical journals satisfactory to the Company.

As of December 31, 2021

and September 30, 2022, these milestones have not been met.

March 2022, we entered into a second supplement to the Joint Venture agreement with Wider, whereby the parties confirmed that

the Joint Venture had not yet been established and is subject to further review and analysis of regulatory issues in China and

the United States, trade and political issues between the two countries and potential changes in the use and market for the Company’s

products and technology.

Pursuant to the second supplement, the parties agreed to use their commercial efforts to complete documentation

by September 30, 2022.

Wider has continued its work with respect to undertaking and establishing clinical trials.

general economic conditions in China and the United States and the continued impact of regulatory issues in China and the United

States and trade and political issues between the two counties, the parties determined to further extend the time frame to complete

establishment of the joint venture to September 30, 2023 and entered into a supplement 3 to the Joint Venture Agreement to memorialize

The fair value of the 150,000 shares issued (less

the contributed $200,000 in cash) resulted in a charge to stock-based compensation of $ 550,000 and was recorded in selling, general and

administrative expenses on the statement of operations.

The remaining 300,000 shares will be issued in accordance with the following

schedule upon Wider’s successful completion of the following milestones (i) 50% upon successful completion of the fourth of four

clinical trials pursuant to the terms and conditions of the Service Agreements and (ii) 50% upon all four trials being submitted for

publication in international medical journals satisfactory to the Company.

As of March 31, 2023, these milestones have not been

In March 2022, we entered into a second supplement

to the JV Agreement with Wider, whereby the parties confirmed that the JV had not yet been established and is subject to further review

and analysis of regulatory issues in China and the United States, trade and political issues between the two countries and potential changes

in the use and market for the Company’s products and technology.

Pursuant to the second supplement, the parties agreed to use their

commercial efforts to complete documentation by September 30, 2022.

Wider has continued its work with respect to undertaking and

establishing clinical trials.

In light of general economic conditions in China and the United States and the continued impact of regulatory

issues in China and the United States and trade and political issues between the two counties, the parties determined to further extend

the time frame to complete establishment of the JV to September 30, 2023 and entered into a supplement 3 to the JV Agreement to memorialize

such extension.

The parties intend to continue to work together to complete the establishment prior to such extended time, however,

the ramifications of continued COVID pandemic, especially in China, and the China government’s regulatory approaches to

the pandemic have adversely affected Wider’s ability to distribute our current products.

As a result, the Joint Venture

may be further delayed or we and Wider may determine to re-structure the business terms (which changes may include timing and

the scope of the intended operations and trial studies) of the proposed joint venture

the nine months ended September 30, 2022 and 2021, the Company recorded $ 1,183,367

in revenue, respectively, from Wider on the unaudited

condensed consolidated statements of operations.

At September 30, 2022 there was $ 6,912

in accounts receivable attributable to Wider.

During the three months ended September 30, 2022 and 2021, the Company recorded $ 520,000

in revenue, respectively, from Wider on the unaudited

condensed consolidated statements of operations.

The parties intend to continue to work together to complete the establishment prior to such extended time, however, the

ramifications of the continued COVID pandemic, especially in China, and the Chinese government’s regulatory approach to the pandemic

have adversely affected Wider’s ability to distribute our current products.

As a result, the JV may be further delayed or we and

Wider may determine to re-structure the business terms (which changes may include timing and the scope of the intended operations and

trial studies) of the proposed JV.

the three months ended March 31, 2023 and 2022, the Company recorded $ 0 and $ 300,499 in revenue, respectively, from Wider on the

unaudited condensed consolidated statements of operations.

Asian Consulting Group, LLC

On May 9, 2018, the Company entered into a five-year consulting agreement with U.S.

May 9, 2018, the Company entered into a five-year consulting agreement with U.S.

Asian Consulting Group, LLC (“U.S.

2 unchanged sentences

Pursuant to the consulting agreement, U.S.

Asian will provide consulting services to the Company with regards to, among other things, corporate development and financing arrangements.

Asian will provide consulting services to the Company with regard to, among other things,

corporate development and financing arrangements.

The Company is to pay U.S.

Asian $ 10,000 per month for services rendered and, on October 24, 2018, the Company issued 249,750 shares of the Company’s common stock to U.S.

The Company recorded consulting expenses related to the consulting agreement of $ 90,000 and $ 90,000 for the nine months ended September 30, 2022 and 2021, respectively, on the Company’s unaudited condensed consolidated statements of operations.

The Company recorded consulting expenses related to the consulting agreement of $ 30,000 and $ 30,000 for the three months ended September 30, 2022 and 2021, respectively.

At September 30, 2022 and December 31, 2021, U.S.

Asian was owed $ 250,000 and $ 399,320 , respectively, for accrued and unpaid services and expenses.

With respect to the amount owed, U.S.

Asian has agreed to defer payment of $250,000 until December 15, 2022.

to the consulting agreement, U.S Asian’s shares in the Company consist of an anti-dilution provision whereas U.S.

Asian’s security holdings, during the term of the consulting agreement, shall remain at 10% of the Company’s

total number of issued and outstanding shares of the Company’s common stock, on a fully diluted basis.

March 2021, the Company entered into an agreement with U.S.

Asian pursuant to which U.S.

Asian waived and relinquished

any rights of protection against dilution afforded to it, provided such dilution results from a transaction that

(i) imputes a pre-money valuation to the Company of not less than $7 million, (ii) raises not less than $7 million,

and (iii) imputes a post-money valuation to the Company of not less than $25 million.

Pursuant to the agreement, upon

closing of the Initial Public Offering, the consulting agreement is extended to May 2031.

In exchange for the waiver and

relinquishment of such rights, the Company issued shares of the Company’s common stock in an amount sufficient for U.S.

Asian (together with its owners) to own an aggregate amount of fifteen (15%) percent of the Company’s issued and

outstanding shares of common stock as of the date of issuance.

On June 22, 2021, the Company issued 304,570

shares of common stock in satisfaction of the waiver (See Note 8).

On November 29, 2021, the Company issued an additional 217,500

shares of common stock, with a fair value of $5.00 per share, in satisfaction of the waiver (see Note 8).

In August 2022

the Company issued an additional 17,699

shares of common stock in full satisfaction of the waiver.

On December 22, 2021, the Company entered into a one-year agreement with Leonard Osser to serve on the Company’s Board of Advisors.

The agreement may be extended for an additional one-year term upon agreement of both parties.

As consideration, the Company will issue $ 80,000 in shares of the Company’s common stock to Mr.

Osser (see Note 8 — Stockholders’ Equity (Deficit) — Shares To Be Issued).

As of September 30, 2022, these shares have yet to be issued.

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

Asian $ 10,000 per month for services rendered and, on October 24,

2018, the Company issued 249,750 shares of the Company’s common stock to U.S.

The Company recorded consulting expenses related

to the consulting agreement of $ 30,000 for each of the three months ended March 31, 2023 and 2022 on the Company’s

unaudited consolidated statements of operations.

At December 31, 2022, U.S.

Asian was owed $ 260,000 for accrued and unpaid services.

A payment of $250,000 was made to U.S.

Asian on March 17, 2023.

December 22, 2021, the Company entered into a one-year agreement with Leonard Osser to serve on the Company’s Board of Advisors.

The agreement may be, but has not yet been, extended for an additional one-year term upon agreement of both parties.

As consideration

Osser was entitled to $ 80,000 in shares of the Company’s common stock which was waived by Mr.

January 11, 2022, the Company entered into an employment agreement with Marilyn Elson to serve as Chief Financial Officer of the

Company for a three-year term with an option for the Company and Ms.

Elson to extend the term for an additional two years.

Loan Payable – Officer

On November 1, 2021, the Company received $ 200,000 from the Company’s Chief Executive Officer.

The loan has a principal of $ 200,000 , an interest rate of 9 %, and a maturity date of the earlier of (i) October 31, 2022 or (ii) the date of the consummation of the initial public offering.

Total interest expense on this note was $ 4,500 and $ 13,500 for the three and nine months ended September 30, 2022.

Total interest expense on this note was $ 0 and $ 0 for the three and nine months ended September 30, 2021.

There was $ 200,000 outstanding at September 30, 2022 and December 31, 2021, respectively.

With respect to the amount owed under this loan, the Company’s Chief Executive Officer has agreed to defer payment until December 15, 2022.

Promissory Notes

On October 19, 2018, the Company issued an on demand promissory note payable with the Company’s Chairman of the Board for $ 10,000 with interest to begin accruing on January 1, 2020 at 5 % per annum.

On September 28, the Company’s Chairman of the Board waived the accrued interest of $ 2,718 which amount is reflected as Additional Paid in Capital.

The note was paid in full as of September 30, 2022.

Total interest expense on this note was $ 369 and $ 1,110 for the nine months ended September 30, 2022 and 2021, respectively.

Total interest expense on this note was $ 119 and $ 370 for the three months ended September 30, 2022 and 2021, respectively.

7 — LOANS PAYABLE

is the spouse of Leonard Osser.

Payable – Officer

November 1, 2021, the Company received $ 200,000

as a loan from the Company’s Chief Executive Officer.

The loan had a principal of $ 200,000 ,

an interest rate of 9 %,

and a maturity date of the earlier of (i) October

31, 2022 or (ii) the date of the consummation of the initial public offering.

The note was amended as of

January 1, 2023 to extend the due date to March 17, 2023 and to provide that interest payable on the maturity date will be

less any interest payments previously made.

Total interest expense on this note was $ 18,000

and $ 4,500 for the three months ended March 31, 2023 and 2022, respectively.

The December 31, 2022 outstanding principal

balance of $ 200,000

was satisfied by a payment on March 17, 2023.

The March 31, 2023 outstanding interest balance of $ 34,500

was satisfied by a payment on April 26, 2023.

principle executive office is located at 1776 Yorktown, Suite 550, Houston, Texas 77056.

Under ASC 842 “ Leases ”, we

have two separate sub-leases (through IIcom Strategic Inc.

controlled and owned by our Chief Executive Officer) totalling approximately

4,000 square feet of office space under operating leases.

Management and supporting staff are hosted at this location.

Our lease payments

for fiscal year 2022 were $54,000.

Our lease costs for each of the three months ended March 31, 2023 and 2022 were $13,500.

The sub-leases are due to expire in 2024.

Pursuant to the sublease, we pay the third-party landlord (not the sub landlord) all direct

and indirect rent costs under the primary lease directly for the leased premises.

No additional payments are made to the Chief Executive

Officer or the entity controlled by him.

6 — LOANS PAYABLE

On October 25, 2018, the Company entered in a promissory note payable with an accredited investor for $ 50,000 due on October 25, 2019.

Pursuant to the note, the maturity date was extended to October 25, 2020 .

The promissory note bears interest at 100 % per annum and the note holder was issued shares of the Company’s common stock in lieu of interest.

On October 7, 2020, the Company entered into a Letter of Agreement Addendum with the note holder, whereas, the Company agreed to make ten monthly principal payments beginning November 1, 2020 with the full principal amount to be paid in full by August 31, 2021.

In addition, if the full principal amount was not paid in full by August 31, 2021 the Company was to and did issue an additional 2,500 shares of common stock to the noteholder.

On November 11, 2021, the Company entered into a Second Letter of Agreement Addendum with the note holder, whereas, the Company agreed to continue making monthly payments beginning on December 1, 2021.

Total interest expense related to this note was $ 15,643 and $ 37,500 for the nine months ended September 30, 2022 and 2021, respectively.

Total interest expense related to this note was $ 4,100 and $ 12,500 for the three months ended September 30, 2022 and 2021, respectively.

During the nine months ended September 30, 2022 and the year ended December 31, 2021, the Company paid $ 27,200 and $ 9,600 , respectively, in cash towards the outstanding principal.

The amount outstanding at December 31, 2021, was $ 27,200 .

On September 28, the note holder waived the accrued interest of $ 165,643 and the note was paid in full as of September 30, 2022.

On February 4, 2021, under the U.S.

Small Business Administration’s Paycheck Protection Program, the Company entered into a second note payable with a financial institution for $ 22,916 at an interest rate of 1 % per annum and a maturity date of February 4, 2026 .

Pursuant to the note, principal and interest payments are deferred for ten months, which, at any time during the ten months the Company may apply for loan forgiveness.

The Company applied for loan forgiveness on a timely basis, and as of September 30, 2022, the total amount of $ 22,916 has been forgiven.

Legacy Ventures International, Inc.

On September 11, 2017, the Company issued a promissory note (the “Promissory Note”) in favor of Legacy Ventures International, Inc.

Ventures International, Inc.

September 11, 2017, the Company issued a promissory note (the “Promissory Note”) in favor of Legacy Ventures International,

(“Legacy”) as part of a commercial transaction with Legacy that was never consummated.

The Promissory Note was issued in the original principal amount of $ 500,000 , with interest at 4 % per annum and a maturity date of December 31, 2017 .

As of September 30, 2022, this promissory note is in default.

The Company recorded $ 15,000 and $ 15,000 of interest expense for the nine months ended September 30, 2022 and 2021, respectively.

The Company recorded $ 5,000 and $ 5,000 of interest expense for the three months ended September 30, 2022 and 2021, respectively.

The amount outstanding at September 30, 2022 and December 31, 2021 was $ 500,000 .

The Promissory Note was issued

in the original principal amount of $ 500,000 , with interest at 4 % per annum and a maturity date of December 31, 2017 .

As of March 31,

2023, this promissory note is in default.

The Company recorded $ 5,000 and $ 5,000 of interest expense for the three months ended March 31,

2023 and 2022, respectively.

The amount outstanding at March 31, 2023 and December 31, 2022 was $ 500,000 .

7 — STOCKHOLDERS’ EQUITY (Deficit)

Issuance of Common Stock

During the three months and nine months ended September 30, 2021, the Company issued an aggregate of 13,550 and 151,426 shares of common stock to various investors for cash proceeds of $ 67,750 and $ 671,407 .

the three months and nine months ended September 30, 2021, the Company issued an aggregate of 81,461

shares of common stock with a fair value

per share to various consultants for services

rendered in lieu of cash for a compensation charge of $ 1,494,803

and $ 4,358,033 .

During the three months and nine months ended September 30, 2021, the company issued an aggregate of 0 and 10,507 shares of common stock to various note holders for the conversion of debt.

During the three months and nine months ended September 30, 2021, the company issued an aggregate of 0 and 8,492 shares of common stock to various investors for the conversion of warrants.

During the three months and nine months ended September 30, 2022, the Company issued 2,315,000 and 2,315,850 shares of common stock to investors for net proceeds of $ 8,540,171 and $ 8,545,171 .

the three months ended September 30, 2022, the Company issued 59,798

shares of common stock for services in lieu of cash of which 24,600

was to outside consultants, 17,699

Asian (a related party) and 17,499

shares to the members of the Board of Directors for their services as Board Members.

The amount expensed during the three

months ended September 30, 2022 in the unaudited condensed consolidated statement of operations was $ 184,291

which included $ 60,000

related to shares not yet issued.

During the nine months ended

September 30, 2022, the Company issued 84,188

shares of common stock for services in lieu of cash of which 48,990

was to outside consultants, 17,699

Asian (a related party) and 17,499

shares to the members of the Board of Directors for their services as Board Members.

The amount expensed during the nine

months ended September 30, 2022 in the unaudited condensed consolidated statement of operations was $ 453,391

which included $ 120,000

related to shares not yet issued.

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

of Common Stock

the three months ended March 31, 2022, the Company issued 850 shares of common stock to an investor for cash proceeds of $ 5,100

with a fair value of $ 6.00 per share.

the three months ended March 31, 2022, the Company issued 24,390 shares of common stock to a consultant for services rendered in

lieu of cash for an aggregate compensation charge of $ 150,000 , of which $ 37,500 was expensed during the three months ended March 31,

2022, in the unaudited condensed consolidated statement of operations.

In addition, $ 60,000 was expensed as stock compensation related

to shares to be issued to advisors.

the three months ended March 31, 2023, the Company issued no shares of common stock.

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

Schedule of warrants

2 unchanged sentences

Outstanding December 31, 2022

Outstanding September 30, 2022

The following table summarizes information about warrants to purchase shares of the Company’s common stock outstanding and exercisable at September 30, 2022:

Expired or cancelled

Outstanding March 31, 2023

following table summarizes information about warrants to purchase shares of the Company’s common stock outstanding and exercisable

at March 31, 2023:

Summary information about warrants to purchase

1 unchanged sentence

Weighted Average

Remaining Life In Years

Remaining Life

Weighted Average

Exercise Price

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 one year from the date of grant.

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.

Shares To Be Issued

During December 2021, the Company entered into one-year agreements with three individuals to serve on the Company’s Board of Advisors.

Each agreement may be extended for an additional one-year term upon agreement of both parties.

As consideration, the Company is to issue an aggregate of $ 240,000 in shares of the Company’s common stock.

During the nine months ended September 30, 2022, an aggregate of $ 180,000 of stock-based compensation was recorded in the unaudited condensed consolidated statement of operations.

As of September 30, 2022, the shares were not issued.

8 — 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.

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:

Nexalin Technology, Inc.

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.

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.

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.

The court has set a jury trial in this matter for April 24, 2023.

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.

The Company believes its potential exposure to be approximately $50,000 and, as such, has accrued this amount on the unaudited consolidated balance sheet at September 30, 2022 and December 31, 2021.

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 EDD has subpoenaed six years’ worth of information from the Company and currently is considering levying a $286,000 tax charge.

Management have petitioned for reassessment and believe the hired workers at issue were indeed actual contractors and not employees.

All our business in California has been closed and moved out of the state.

We have one part time worker residing in California.

the parties are seeking mediation, the court has set a trial in this matter for March 18, 2024.

Management’s intent

is to contest the allegations vigorously and, as of the date of this report, is unable to provide an evaluation of the potential outcome

of the litigation within the probable or remote range or to provide an estimate of the amount of or a range of potential loss that might

be incurred by the Company.

Development Department

Company is currently engaged in settlement discussions with the Employment Development Department (EDD) of the state of California.

matter involves issues related to our previous management’s classification of certain work provided to or on behalf of the Company’s

business as contract labor instead of employee labor.

The total amount involved is approximately $300,000.

Management has petitioned

for reassessment and believes the hired workers at issue were indeed actual contractors and not employees.

We have no business in California

other than one part time and one full time worker residing in California.

An initial hearing before an EDD magistrate was held on April 15,

1 unchanged sentence

We are now in negotiations with the EDD for a final settlement.

The Company believes its potential exposure to be approximately $286,000 and, as such, has accrued this amount on the unaudited condensed consolidated balance sheets at September 30, 2022 and December 31, 2021.

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

On January 1, 2022, the Company exercised its right to lease an additional 400 square feet of office space and an increase of monthly rent of $500.

In accordance with ASC 842 management accounted for this as a separate lease and, as a result, recorded an ROU asset and lease liability of $ 11,359 .

When measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease payments using its estimated incremental borrowing rate at January 1, 2022.

The Company believes

its potential exposure to be approximately $ 300,000 and, as such, has accrued this amount on the consolidated balance sheets as of March 31,

2023 and December 31, 2022 and believes it has adequately accrued for this matter.

Letter from The University of Arizona

December 8, 2022, the Company received a demand letter from the University of Arizona seeking payment of $111,094 purportedly due

on an Investigator Initiated Cooperative Study Agreement, dated as of September 25, 2017 (the “2017 Study”).

believes that the 2017 Study was not completed and no payment was due.

In fact, for a number of months prior to receipt of the demand

letter, the Company had had discussions with the person at the University of Arizona who was to conduct the 2017 Study concerning updating

the 2017 Study and completing an updated study and related work.

After receipt of the demand letter, the Company has had discussions

with the University of Arizona concerning resuming an updated study and receipt of credit for some or all the monies claimed to be due

for the 2017 Study.

Such discussions are ongoing, and no resolution has been reached but the Company hopes to achieve a consensual resolution.

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

lease liabilities.

January 1, 2022, the Company exercised its right to lease an additional 400 square feet of office space and an increase of monthly

rent of $500.

In accordance with ASC 842 management accounted for this as a separate lease and, as a result, recorded an ROU asset and

lease liability of $ 11,359 .

measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease payments using its estimated

incremental borrowing rate at January 1, 2022.

The weighted average incremental borrowing rate applied was 9 %.

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

leases are included in the consolidated balance sheets as follows:

Schedule of Operating leases

7 unchanged sentences

Total lease liabilities

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

Schedule of Lease costs

components of lease costs, which are included in income from operations in our unaudited condensed consolidated statements of operations,

were as follows:

of lease cost

Three Months Ended

September 30,

Nine Months Ended

September 30,

Operating lease costs

Future minimum payments under non-cancellable leases for operating leases for the remaining terms of the leases following the nine months ended September 30, 2022:

Total lease costs

minimum payments under non-cancellable leases for operating leases for the remaining terms of the leases following the three months ended

March 31, 2023:

Future minimum payments under non-cancelable leases for operating leases

Operating Leases

Remainder of 2023

2 unchanged sentences

Present value of net future minimum lease payments

Additional information related to leases is presented as follows:

information related to leases is presented as follows:

Schedule of additional information related to leases

September 30,

Weighted average remaining lease term

1 unchanged sentence

10 — CONCENTRATION OF CREDIT RISK

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

Concentration of credit risk

Three Months Ended

Nine Months Ended

September 30,

Customer A – related party

Accounts Receivable

Two customers accounted for 86 % or accounts receivable at September 30, 2022.

Customer B – related party

Three customers accounted for 67 % of the accounts receivable as of December 31, 2021, as set forth below:

customer, a related party, accounted for 93 % of revenue for the three months ended March 31, 2022.

customers accounted for 91 % of accounts receivable at March 31, 2023, as set forth below:

Three Months Ended

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

11 — SUBSEQUENT EVENTS

evaluated subsequent events and transactions that occurred after the balance sheet date, up to the date that the unaudited financial

statements were issued.

Based upon this review management did not identify any subsequent events that would have required adjustment

or disclosure in the unaudited consolidated condensed financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements