What changed in this filing

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Item 1. Financial Statements

2024-08-08 compared with 2024-05-10 · 405 added, 223 removed, 381 unchanged (62% of the section changed)

20 unchanged sentences

Stockholders’ Equity:

Common stock, $ 0.001 par value;

stock, $ 0.001

shares authorized ;

7,436,562 shares issued and outstanding at March 31, 2024 and December 31, 2023

shares issued and outstanding at June 30, 2024 and 7,436,852 issued and outstanding at December 31, 2023

Accumulated other comprehensive income (loss)

5 unchanged sentences

NEXALIN TECHNOLOGY, INC.

AND SUBSIDIARY CONDENSED

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)

AND SUBSIDIARY

CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)

Three Months Ended

Revenues, net (Includes related party of $ 300 and $ 0 for the three months ended March 31, 2024 and March 31, 2023, respectively)

Six Months Ended

net (Includes related party of $ 0

for the three months ended and $ 0 and $ 10,207 for the six months ended, respectively)

Cost of revenues

12 unchanged sentences

Other comprehensive income (loss):

Unrealized gain from short-term investments

gain (loss) from short-term investments

Comprehensive loss

10 unchanged sentences

Balance as of March 31, 2023

Other comprehensive gain

as of June 30, 2023

Comprehensive

4 unchanged sentences

Balance as of March 31, 2024

Other comprehensive gain

Shares issued

as of June 30, 2024

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

22 unchanged sentences

Net cash used in financing activities

(decrease) increase in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents - beginning of period

11 unchanged sentences

The Company’s principal offices are located at 1776 Yorktown, Suite 550, Houston, Texas 77056.

On September 6, 2019, Neuro-Health International, Inc.

On September 6, 2019, Neuro-Health International,

(“Neuro-Health”), a Nevada corporation, a wholly owned subsidiary of NV Nexalin, was formed.

Neuro-Health had no activity from December 6, 2019 (Inception) through March 31, 2024.

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

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

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

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

NV Nexalin has retroactively applied the 20-for-1 exchange, effective on November 22, 2021, to share and per share amounts.

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

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

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

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

Each share of common stock was sold together with one warrant, each to purchase one share of common stock with an exercise price of $ 4.15 per share at a combined offering price of $4.15, for gross proceeds of $ 9,607,250 , before deducting underwriting discounts and offering expenses.

In addition, the underwriters purchased 347,250 warrants for net proceeds of $ 3,473 .

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

Neuro-Health had no activity

from December 6, 2019 (Inception) through June 30, 2024.

Our shares and warrants began trading on the Nasdaq

Capital Market tier of the Nasdaq Stock Market (“Nasdaq”) on September 16, 2022, under the symbols “NXL”

and “NXLIW”, respectively.

On July 1, 2024, we consummated a follow-on public

offering of an aggregate of 3,000,000 shares of the Common Stock for an offering price of $ 1.75 per share, resulting in aggregate gross

proceeds of approximately $ 5,250,000 .

The Company intends to use the net proceeds of such offering primarily for general corporate purposes,

which may include, but is not limited to, working capital, operating expenses, and capital expenditures.

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

Business Overview

We design and develop innovative neurostimulation products to uniquely and effectively help combat the ongoing global mental health epidemic.

We developed an easy-to-administer medical device — referred to as “Generation 1” or “Gen-1” — that utilizes bioelectronic medical technology to treat anxiety and insomnia, without the need for drugs or psychotherapy.

Our original Gen-1 devices are cranial electrotherapy stimulation (CES) devices that emit waveform at 4 milliamps during treatment and are presently classified by the U.S.

Food and Drug Administration (“FDA”) as a Class II device.

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

While the Gen-1 device had been cleared by the FDA to treat depression, anxiety, and insomnia, three prevalent and serious diseases, because of the FDA’s December 2019 reclassification of CES devices, the Gen-1 device was reclassified as a Class II device for the treatment of anxiety and insomnia.

We are required to file a new application under Section 510(k) of the Federal Food, Drug and Cosmetic Act (“510(k) Application”) to be approved by the FDA for the sales and marketing of our devices for the treatment of anxiety and insomnia.

In the FDA’s December 2019 reclassification ruling, the treatment of depression with our device will require a Class III certification and require a new PMA (premarket approval) application to demonstrate safety and effectiveness.

Nexalin is headquartered, and maintains its base

of management and operations, in Houston, Texas.

We design and develop innovative neurostimulation products to uniquely and effectively

help combat the ongoing global mental health epidemic.

We developed an easy-to-administer medical device — referred to as “Generation

1” or “Gen-1” — that utilizes bioelectronic medical technology to treat anxiety and insomnia and depression, 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 (the “FDA”) as a Class

Medical professionals in the United States have

utilized the Gen-1 device to administer to patients in clinical settings.

While the Gen-1 device had been cleared by the FDA to treat

depression, anxiety, and insomnia, three prevalent and serious diseases, because of the FDA’s December 2019 reclassification of

CES devices, the Gen-1 device was reclassified as a Class II device for the treatment of anxiety and insomnia.

We are required to file

a new application under Section 510(k) of the Federal Food, Drug and Cosmetic Act (“510(k) Application”) to be approved by

the FDA for the sales and marketing of our devices for the treatment of anxiety and insomnia.

In the FDA’s December 2019 reclassification

ruling, the treatment of depression with our device will require a Class III certification and require a new PMA (premarket approval)

and/or a new Denovo application to demonstrate safety and effectiveness.

While we continue providing services to medical

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making new sales or new marketing efforts of Gen-1 devices in the United States.

We continue to derive revenue from devices which we sold or leased

prior to the FDA’s December 2019 reclassification announcements.

This revenue consists of monthly licensing fees and

payments for the sale of electrodes and patient cables.

We have suspended marketing efforts for new sales of devices related to the Gen-1 device for

treatment of anxiety and insomnia in the United States until the Nexalin regulatory team decides on a new 510(k) application at 4

milliamps based on FDA comments expected to be received in 2024.

Our regulatory team continues to inform the FDA of the suspension

of the marketing and sale of the Gen-1 products to new providers.

We are currently analyzing whether to proceed with an amended

application with the FDA for Gen-1 devices for the treatment of insomnia and anxiety.

The waveform that comprises the basis of Gen-2 and new Gen-3 headset devices has been submitted for review by the FDA for safety evaluation and eventual marketing in the United States.

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

We plan to conduct decentralized clinical trials for the Gen-3 device in the U.S.

and we have consulted with the FDA as part of the pre-submission meetings.

We have designed and developed a new advanced waveform technology to be emitted at 15 milliamps through new and improved medical devices referred to as “Generation 2” or “Gen-2” and “Generation 3” or “Gen-3.” Gen-2 is a clinical use device with a modern enclosure to emit the new 15 milliamp advanced waveform.

Gen-3 is a new patient headset that will be prescribed by licensed medical professionals in a virtual clinic setting similar to existing tele-health platforms.

The Nexalin research team believes that the new 15 milliamp Gen-2 and Gen-3 devices can penetrate deeper into the brain and stimulate associated structures of mental illness, which we believe will generate enhanced patient response without any risk or unpleasant side effects.

The Nexalin regulatory team has made a strategic decision to develop strategies for pilot trials and/or pivotal trials in various mental health disease states.

In addition, a new PMA application in the United States is in development for the treatment of depression utilizing both Gen-2 and Gen-3.

The new Gen-3 device is also scheduled for additional pilot trials and/or pivotal trials for anxiety and insomnia in the United States beginning in the late second quarter or early third quarter of 2024.

Preliminary data provided by The University of California, San Diego and recent published data from China supports the safety of utilizing our 15 milliamp waveform technology.

However, the determination of safety and efficacy of medical devices in the United States is subject to clearance by the FDA.

Additionally, we are currently designing clinical trial strategies for the use of Gen-3 for the treatment of substance use disorders including opiate, cocaine, and alcohol abuse.

Recently the Gen-2 device was tested in pilot trials and/or pivotal trials in China for the treatment of Alzheimer’s disease, and dementia.

Continued pilot testing for Alzheimer’s and dementia, cognition and memory, and neurotransmitter changes is planned in China in 2024.

We continue to derive revenue from devices which we

sold or leased prior to the FDA’s December 2019 reclassification announcements.

This revenue consists of monthly

licensing fees and payments for the sale of electrodes and patient cables.

We have suspended marketing efforts for new sales of

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

decides on a new 510(k) application at 4 milliamps based on FDA comments expected to be received in late 2024.

Our regulatory team

continues to inform the FDA of the suspension of the marketing and sale of the Gen-1 products to new providers.

We are currently

analyzing whether to proceed with an amended application with the FDA for Gen-1 devices for the treatment of insomnia and

The waveform that comprises the basis of our “Generation

2” or “Gen-2” and new “Generation 3” or “Gen-3” headset devices is in pre-submission for review

by the FDA for safety evaluation and eventual marketing in the United States.

Determinations of the safety and efficacy of our devices

in the United States are solely within the authority of the FDA.

We plan to conduct decentralized clinical trials for the Gen-3 device

and we continue to consult with the FDA as part of the pre-submission meetings.

If and when we obtain FDA clearance for the

Gen-3 device, we intend to extend the development and commercialization of our devices for sale in the U.S.

and other territories, given

the potential unmet demand for the treatment of mental health conditions with our device.

We have designed and developed a new advanced

waveform technology to be emitted at 15 milliamps through new and improved medical devices referred to as Gen-2 and Gen-3.

clinical use device with a modern enclosure to emit the new 15 milliamp advanced waveform.

Gen-3 is a new patient headset that will be

prescribed by licensed medical professionals in a virtual clinic setting similar to existing tele-health platforms.

The Nexalin research

team believes that the new 15 milliamp Gen-2 and Gen-3 devices can penetrate deeper into the brain and stimulate associated structures

of mental illness, which we believe will generate enhanced patient response without any risk or unpleasant side effects.

The Nexalin regulatory

team has made a strategic decision to develop strategies for pilot trials and/or pivotal trials in various mental health disease states.

In addition, a new PMA application in the United States is in strategic development for the treatment of depression utilizing both Gen-2

We plan to schedule additional pilot trials and/or pivotal trials for the new Gen-3 device for anxiety and insomnia in the

United States and China beginning in the late third quarter or early fourth quarter of 2024.

Preliminary data provided by The University

of California, San Diego and recent published data from Asia supports the safety of utilizing our 15 milliamp waveform technology.

the determination of safety and efficacy of medical devices in the United States is subject to clearance by the FDA.

Currently, the waveform that comprises the basis

of Gen-2 and new Gen-3 headset devices has been tested in research settings to develop safety data that has been submitted for review

by the FDA for safety evaluation and eventual marketing in the United States and around the world.

Determinations of the safety and efficacy

of our devices in the United States are solely within the authority of the FDA.

A new pre-submission document in preparation of

a new 510(k) and/or de novo application for our Gen-3 HALO headset at 15 milliamps was filed with the FDA in January of 2023.

Formal comments

to our pre-submission document filing were received in March of 2023.

A formal meeting to address FDA comments took place on May 9, 2023.

A second FDA pre-submission document was submitted

on February 13, 2024.

FDA comments to this second pre-submission document were received on April 26, 2024.

A formal teleconference was

held with the FDA on April 30, 2024.

The Nexalin regulatory team and the FDA came to a consensus on the Anxiety and Insomnia Clinical

research protocols.

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

The Joint Venture is registered in Hong Kong.

As of the date of this Quarterly Report on Form 10-Q, (i) our operations are carried on outside of China;

and (ii) the Joint Venture does not maintain any variable interest entity structure or operate any data center in China.

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

Under the Joint Venture Agreement, Wider Come

Limited (“Wider”), a related party, is obligated to fund all operations for the initial 12-month period of the Joint Venture,

after which Nexalin and Wider plan to jointly fund the Joint Venture’s operating expenses in accordance with their pro rata ownership.

The Joint Venture conducts research, development and clinical studies of our devices, which supplements similar activities being conducted

by Nexalin in the United States.

The Joint Venture is responsible for funding all clinical trial and development costs incurred in China.

We share associated economic responsibility for these expenses under the terms of the Joint Venture Agreement.

The Joint Venture may provide

the financial resources for, and– together with our clinical studies conducted in the U.S.

- serve as an important regulatory precursor

towards the advancement of our efforts in securing 510(k) and/or Denovo clearance from the FDA for our devices.

As of the date of this Quarterly Report on Form

10-Q, we have no employees or office in China and none of our operations are conducted in China.

The Joint Venture does not maintain any

variable interest entity structure or operate any data center in China.

The Joint Venture is controlled by a Board of

Directors in which Wider is to have sole representation but neither the Company nor Wider has exclusive decision-making ability over

day-to-day or significant operational decisions.

Wider and Nexalin own 52 %

of the Joint Venture, respectively.

In accordance with ASC 323 and ASC 810, the Company recognized $ 5,783

of equity method investment income from the Joint Venture on a one-quarter reporting lag for the three months ended March 31,

2024 and 2023, respectively, on the condensed consolidated statements of operations and comprehensive loss.

The investment in the Joint Venture is accounted for using the equity method of accounting.

As of March 31, 2024 and December 31, 2023 the Company had an Equity Method Investment of $ 101,783 and $ 96,000 , respectively, recorded on the condensed consolidated balance sheets.

The Company invested $ 96,000 in the joint venture in September 2023 and Wider invested $ 104,000 .

In accordance with ASC 323, Investments - Equity Method and Joint Ventures (“ASC 323”), the Company uses the equity method of accounting for its investment in the Joint Venture, an unconsolidated entity over which it does not have a controlling interest.

The equity method of accounting requires the investment to be initially recorded at cost and subsequently adjusted for the Company’s share of equity in the unconsolidated entity’s earnings or losses.

The Company evaluates the carrying amount of this investment in the Joint Venture for impairment in accordance with ASC 323.

If the Company determines that a loss in the value of the investment is other than temporary, the Company writes down the investment to its estimated fair value.

Any such losses are recorded to equity in income of unconsolidated entities in the Company’s condensed consolidated statements of operations and comprehensive loss.

The Company has made an election to classify distributions received from the Joint Venture using the nature of the distribution approach.

Distributions received are classified as cash inflows from operating activities based on the nature of the activities of the unconsolidated entity.

Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.

The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable.

The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

This may make comparison of the Company’s consolidated financial statements with another public company which is neither an emerging growth company, nor an emerging growth company which has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.

Risks and Uncertainties

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

The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of uncertainties.

The current challenging economic climate may lead to adverse changes in cash flows, working capital levels and/or debt balances, which may also have a direct impact on the Company’s operating results and financial position in the future.

The ultimate duration and magnitude of the impact and the efficacy of government interventions on the economy has and may continue to indirectly impact the Company because of its current dependence upon its joint venture relationship with Wider Come Limited.

Wider Come Limited, as part of its obligations under the Joint Venture Agreement, acts as a distributor for the Company’s devices in China and Asia.

Because of significant restrictions imposed by the Chinese government during the COVID-19 pandemic through calendar years 2022 and 2023, and other issues, Wider’s ability to market and sell the Company’s devices has been negatively impacted,

resulting in decreased revenue to the Company.

Patients and salespeople had been restricted in their movements resulting in a significant slowdown in the medical and other sectors.

Significant efforts and funds expended by our Chinese distributor has led to regulatory approval in China in both depression and insomnia thus far which has allowed for sales of our devices in China.

The extent of future impact is dependent on future developments, including future activities by the Chinese government and other possible events which are highly uncertain and not in the Company’s control, including new information which may emerge concerning the spread and severity of COVID-19, or any of its variants, and actions taken to address its impact, among others.

The repercussions of this health crisis could have a material adverse effect on the Company’s business, financial condition, liquidity and operating results.

Directors in which Wider is to have sole representation but neither the Company nor Wider has exclusive decision-making ability over day-to-day

or significant operational decisions.

Wider and Nexalin own 52 % and 48 % of the Joint Venture, respectively.

In accordance with ASC 323

Investments - Equity Method and Joint Ventures (“ASC 323”) and ASC 810 - Consolidations (“ASC 810”), the Company

recognized $ ( 1,291 ) and $ 0 for the three months ended June 30, 2024 and 2023 and $ 4,492 and $ 0 for the six months ended June 30, 2024

and 2023 of equity method investment income from the Joint Venture on a one-quarter reporting lag, on the condensed consolidated statements

of operations and comprehensive loss.

The investment in the Joint Venture is accounted

for using the equity method of accounting.

As of June 30, 2024 and December 31, 2023 the Company had an Equity Method

Investment of $ 100,492 and

respectively, recorded on the condensed consolidated balance sheets.

The Company invested $ 96,000 in

the joint venture in September 2023 which is recorded on the consolidated balance sheet at December 31, 2023 as an Equity

Method Investment.

Wider invested$ 104,000 .

In accordance with ASC 323, the Company uses the equity method of accounting for its

investment in the Joint Venture, an unconsolidated entity over which it does not have a controlling interest.

The equity method of

accounting requires the investment to be initially recorded at cost and subsequently adjusted for the Company’s share of

equity in the unconsolidated entity’s earnings or losses.

The Company evaluates the carrying amount of this investment in the

Joint Venture for impairment in accordance with ASC 323.

If the Company determines that a loss in the value of the investment is

other than temporary, the Company writes down the investment to its estimated fair value.

Any such losses are recorded to equity in

income of unconsolidated entities in the Company’s consolidated statements of operations and comprehensive loss.

has made an election to classify distributions received from the Joint Venture using the nature of the distribution approach.

Distributions received are classified as cash inflows from operating activities based on the nature of the activities of the

unconsolidated entity.

Continued Nasdaq Listing

Our common stock is currently listed on The Nasdaq Stock Market.

In order to maintain that listing, we must satisfy minimum financial and other continued listing requirements and standards, including the Minimum Bid Price Rule (as discussed below) and those regarding director independence and independent committee requirements, minimum stockholders’ equity, and certain corporate governance requirements.

There can be no assurances that we will be able to comply with the applicable listing standards.

Our common stock is currently listed on The Nasdaq

Stock Market.

In order to maintain that listing, we must satisfy minimum financial and other continued listing requirements and standards,

including the Minimum Bid Price Rule and Minimum Stockholder Equity Rule (each as discussed below) and those regarding director independence

and independent committee requirements, minimum stockholders’ equity, and certain corporate governance requirements.

no assurances that we will be able to comply with the applicable listing standards.

We are required to maintain a minimum bid price of $1.00 per share.

2 unchanged sentences

The Company was unable to regain compliance with the bid price requirement by November 6, 2023.

On November 7, 2023, the Company submitted a letter to NASDAQ requesting a second 180-day period in order to regain compliance with NASDAQ Rule 5550(a)(2).

The Company stated in that letter that it believed it will be able to cure the deficiency and increase its stock price to above $1.00 per share pursuant to its plan to do so.

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

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

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

On March 7, 2024, The Company’s

stockholders approved a proposed amendment to Nexalin’s Certificate of Incorporation (the “Amendment”), pursuant

to which Nexalin’s Board of Directors is authorized, in its discretion, to proceed with a reverse stock split.

The exact ratio

of the reverse stock split would be within the 1-for-4 to 1-for-14 range, and, if enacted, will be determined by our Board and

publicly announced by the Company prior to the effective time of the reverse stock split.

The sole purpose for the proposed reverse

stock split was to increase the per share market price of the Company’s Common Stock to meet the Nasdaq Minimum Bid Price Rule

for continued listing on The Nasdaq Capital Market.

The filing of the Amendment and the reverse stock split was only to be

implemented if Nexalin’s Board determined they were necessary to regain and maintain compliance with the Nasdaq Minimum Bid

The Company regained compliance with Nasdaq’s Minimum Bid Price Rule without the necessity of a reverse stock split and the Board

did not exercise the authority given to it to file the proposed Amendment.

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

NOTE 2 — LIQUIDITY AND GOING CONCERN

The Company requested a second 180-day period

in order to regain compliance with Nasdaq Rule 5550(a)(2).

On January 18, 2024, the Nasdaq Hearing Panel granted the Company a temporary

exception to regain compliance with the Minimum Bid Price Rule until March 27, 2024, which date was further extended by the Panel until

April 25, 2024.

On April 23, 2024, the Company received notice

from Nasdaq notifying the Company that it has regained compliance with Nasdaq’s minimum bid price requirement under Nasdaq Rule

Under the Nasdaq listing rules, we are also required

to maintain stockholders’ equity of at least $2,500,000 (the “Minimum Stockholder Equity Rule”).

In our Form 10-Q for

the period ending March 31, 2024, we reported stockholders’ equity of $2,326,987.

On May 16, 2024, we received a letter from the

Listing Qualifications Department of Nasdaq notifying the Company that its stockholders’ equity as reported in such Quarterly Report

did not satisfy the continued listing requirement under Nasdaq Listing Rule 5550(b)(1) for the Nasdaq Capital Market.

Pursuant to the Notice, the Company had 45 calendar

days from the date of the Notice to submit a plan to regain compliance.

On July 1, 2024, the Company submitted a plan to Nasdaq.

in the Company’s submission to Nasdaq, and as set forth in the Current Report on Form

8-K filed by the Company on July 3, 2024 , the Company consummated the public offering of 3 million shares of the Company’s

Common Stock for total aggregate gross proceeds of approximately $ 5,250,000 On July 23, 2024, the Company received written notification

from the Listing Qualifications Department of NASDAQ, confirming that, based on the information contained in the Company’s Form

8-K, filed with the SEC on July 16, 2024, the Company is now in compliance with the Minimum Stockholder Equity Rule.

NOTE 2 — LIQUIDITY

The accompanying unaudited condensed

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

At March 31, 2024, the

At June 30, 2024, the

Company had a significant accumulated deficit of approximately ( 79,363,699 )

$79.4 million.

For the three months ended March 31, 2024, the Company had a loss from operations of approximately ( 1,073,712 )

For the six months ended June 30, 2024, the Company had a loss from operations of approximately ( 2,370,733 )

$2.4 million and negative cash flows from operations of approximately ( 2,009,704 ) $2.0

While the Company had a working capital surplus as of March 31, 2024 of approximately $ 2.1

While the Company had a working capital surplus as of June 30, 2024 of approximately $ 1.0

million, the Company’s operating activities consume most of its cash resources.

The Company expects to continue to incur operating losses as it executes its development plans, as well as undertaking other potential strategic and business development initiatives through 2024 and through the twelve months from the date of this report.

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

The Company previously funded these losses primarily through the sale of equity and issuance of convertible notes.

These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period.

The Company’s ability to continue as a going concern will be dependent upon our ability to execute on our business plan, including the ability to generate revenue from the joint venture and obtain U.S.

The Company expects to continue to incur operating

losses as it executes its development plans, as well as undertaking other potential strategic and business development initiatives through

2024 and through the twelve months from the date of this report.

In addition, the Company has had and expects to have negative cash flows

from operations, at least into the near future.

We previously funded these losses primarily through the sale of equity.

The accompanying

unaudited condensed consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue

as a going concern.

Our ability to continue as a going concern will

be dependent upon our ability to execute on our business plan, including the ability to generate revenue from the joint venture and obtain

approval for the sale of our devices in the United States, and, if necessary, our ability to raise additional capital.

These plans require the Company to place reliance on several factors, including favorable market conditions, to access additional capital in the future.

These plans were therefore determined not to be sufficient to overcome the presumption of substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements are issued.

Additionally, management does not believe we have sufficient cash for the next twelve months from the issuance of the financial statements.

The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

2024, the Company consummated the public offering of an aggregate of 3,000,000 shares of the Company’s common stock resulting in

aggregate gross proceeds of approximately $5.25 million.

The proceeds from the offering increased the Company’s stockholders’

equity by approximately $4.55 million, making the Company's stockholders’ equity approximately $6.9 million as of July 1, 2024.

Although no assurances can be given as to our ability to deliver on our revenue plans or that unforeseen expenses may arise, management

has evaluated the significance of the conditions as of June 30, 2024 and have concluded that we have sufficient cash and short-term investments

in the amount of approximately $5.2 million on hand on August 6, 2024 to satisfy our anticipated cash requirements for the next twelve

months from the issuance of these financial statements.

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

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”).

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

Operating results for the three months ended March 31, 2024 and 2023 are not necessarily indicative of the results that may be expected for any other subsequent interim period.

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

Securities and Exchange Commission (the “SEC”).

These unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2023.

The accompanying unaudited condensed consolidated

financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”).

In the opinion of management, such financial information includes all adjustments (consisting only of normal recurring adjustments) considered

necessary for a fair presentation of the Company’s financial position and the operating results and cash flows.

Operating results

for the six months ended June 30, 2024 and 2023 are not necessarily indicative of the results that may be expected for any other subsequent

interim period.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance

with GAAP have been omitted pursuant to the rules of the 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,

Principles of Consolidation

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Licensing fee

Major Geographic Locations

Six Months Ended

Licensing fee

Geographic Locations

Three Months Ended

International sales

Six Months Ended

International sales

Contract Modifications

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

There were no contract modifications during the

six months ended June 30, 2024 and 2023.

Contract modifications are not routine in the performance of the Company’s contracts.

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The Company recognizes the revenue as being earned upon shipment.

No deferred revenue was recognized as of March 31, 2024 and December 31, 2023.

No deferred revenue was recognized as of June 30, 2024 and December 31, 2023.

Cash and Cash Equivalents

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Short-Term Investments

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

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

Fair value is determined using quoted market prices in active markets for identical assets or liabilities or quoted prices for similar assets or liabilities or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Unrealized holding gains and losses for equity securities are recognized in earnings.

Unrealized holding gains and losses for available for sale debt securities are recognized in other comprehensive income.

Realized gains and losses and interest and dividends earned are included in other income (expense), net.

For individual debt securities classified as available-for-sale securities, the Company determines whether a decline in fair value below the amortized cost basis has resulted from a credit loss or other factors.

If the decline below amortized cost is a result of credit loss or the Company will more likely than not be required to sell the security before recovery of its amortized cost basis, the Company will recognize an impairment relating to the decline through an allowance for credit losses.

There were no deemed permanent impairments at March 31, 2024 and December 31, 2023, respectively.

The appropriate classification of marketable securities

is determined at the time of purchase and evaluated as of each reporting balance sheet date.

Investments in marketable debt and equity

securities classified as available-for-sale are reported at fair value.

Fair value is determined using quoted market prices in active

markets for identical assets or liabilities or quoted prices for similar assets or liabilities or other inputs that are observable or

can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Unrealized holding gains and

losses for equity securities are recognized in earnings.

Unrealized holding gains and losses for available for sale debt securities are

recognized in other comprehensive income.

Realized gains and losses and interest and dividends earned are included in other income (expense),

For individual debt securities classified as available-for-sale securities, the Company determines whether a decline in fair value

below the amortized cost basis has resulted from a credit loss or other factors.

If the decline below amortized cost is a result of credit

loss or the Company will more likely than not be required to sell the security before recovery of its amortized cost basis, the Company

will recognize an impairment relating to the decline through an allowance for credit losses.

There were no deemed permanent impairments

for the three and six months ended June 30, 2024 and 2023 respectively,

Accounts Receivable

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Payments are generally due within 30 days of invoice.

The Company did no t record an allowance for credit loss on March 31, 2024 and December 31, 2023, respectively.

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

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

At March 31, 2024 and 2023, the Company did no t write down inventory.

The Company did no t record an allowance for credit loss on June 30, 2024 and December 31, 2023, respectively.

Inventory consists of finished goods and

components stated at the lower of cost or net realizable value (NRV) with cost determined on a first-in first-out basis.

reviews the composition of inventory at each reporting period in order to identify obsolete quantities in excess of demand, or

otherwise non-saleable items.

At June 30, 2024 and December 31, 2023, the Company did no t

write down inventory.

Patents and Trademarks

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

Amortization expense was $ 2,662 and $ 660 for the three months ended March 31, 2024 and 2023, respectively.

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

Patents and trademarks are amortized over their

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

Amortization expense was $ 6,454 and $ 1,352 for the

six months ended June 30, 2024 and 2023, respectively.

Amortization expense was $ 3,792 and $ 692 for the three months ended June 30, 2024

and 2023, respectively.

The following table summarizes the gross carrying amount, amortization and the net carrying value at June 30, 2024 and December 31, 2023.

Schedule of patents

March 31, 2024

Total March 31, 2024

June 30, 2024

Total June 30, 2024

December 31, 2023

Total December 31, 2023

Advertising and Marketing Costs

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

Advertising and marketing expenses were $ 2,304 and $ 2,817 for the three months ended March 31, 2024 and 2023, respectively.

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

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.

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The Company records valuation allowances against deferred tax assets when it is more likely than not that all or a portion of a deferred tax asset will not be realized.

At March 31, 2024 and December 31, 2023, the Company had a full valuation allowance applied against its net tax assets.

At June 30, 2024 and December 31, 2023, the Company had a full valuation allowance applied against its net tax assets.

Fair Value Measurements

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The carrying amount of the loans payable approximates the estimated fair value for this financial instrument as management believes that such debt and interest payable on the note approximates the Company’s incremental borrowing rate.

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

The following table summarizes the amortized cost, unrealized gain (loss) and the fair value at June 30, 2024 and December 31, 2023.

Schedule of unrealized loss on investments

March 31, 2024

June 30, 2024

Short-term investments

3 unchanged sentences

Total December 31, 2023

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

The following table provides the carrying value and fair value of the Company’s financial assets measured at fair value as of June 30, 2024 and December 31, 2023.

Schedule of fair value, assets measured on recurring basis

March 31, 2024

June 30, 2024

Treasury Notes

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The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).

This fair value measurement framework applies at both initial and subsequent measurement for the three months ended March 31, 2024 and 2023.

This fair value measurement framework applies at both initial and subsequent measurement for the three months ended June 30, 2024 and 2023.

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

2 unchanged sentences

Stock options

Six Months Ended

Stock options

Stock-Based Compensation

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Research and Development

Research and development costs are charged to operations as incurred.

For the three months ended March 31, 2024 and 2023, the Company recorded $ 105,668 and $ 65,833 respectively, in selling, general and administrative expenses on the unaudited condensed consolidated statements of operations and comprehensive loss.

Research and development costs are charged to

operations as incurred.

For the six months ended June 30, 2024 and 2023, the Company recorded $ 275,077 and $ 211,834 respectively, in

selling, general and administrative expenses on the unaudited condensed consolidated statements of operations and comprehensive loss.

For the three months ended June 30, 2024 and 2023, the Company recorded $ 169,409 and $ 146,000 respectively, in selling, general and administrative

expenses on the unaudited condensed consolidated statements of operations and comprehensive loss.

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

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Recent Accounting Pronouncements

In August of 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, requires disclosures about significant segment expenses and additional interim disclosure requirements.

This standard also requires a single reportable segment to provide all disclosures required by ASC 280.

ASU 2023-07 became effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2023.

The adoption of this guidance did not have a material impact on our consolidated financial statements and related disclosures.

In August of 2023, the FASB issued ASU 2023-05, Business Combinations—Joint Venture (“JV”) Formations:

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The Company is evaluating the accounting and disclosure requirements of this update and does not expect them to have a material effect on the consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment

Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

The ASU expands public entities’ segment disclosures

by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included

within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim

disclosures of a reportable segment’s profit or loss and assets.

All disclosure requirements under ASU 2023-07 are also required

for public entities with a single reportable segment.

The ASU is effective on a retrospective basis for fiscal years beginning after December

15, 2024, and interim periods within fiscal years beginning after December 15, 2024.

The Company is currently evaluating the impact of

adopting this ASU on its consolidated financial statements and disclosures.

In December of 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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The Joint Venture is controlled by a Board of Directors in which Wider is to have sole representation but neither the Company nor Wider has exclusive decision-making ability over day-to-day or significant operational decisions.

The Joint Venture is controlled by a Board of

Directors in which Wider is to have sole representation but neither the Company nor Wider has exclusive decision-making ability over

day-to-day or significant operational decisions.

Wider and Nexalin own 52% and 48% of the Joint Venture, respectively.

In accordance with ASC 323 and ASC 810, the Company recognizes the equity method results of the Joint Venture on a one-quarter reporting lag;

the Company recognized $ 5,783 and $ 0 of equity method investment income from the Joint Venture on a one-quarter reporting lag for the three months ended March 31, 2024 and 2023, respectively, on the condensed consolidated statements of operations and comprehensive loss.

In accordance

with ASC 323 Investments - Equity Method and Joint Ventures (“ASC 323”) and ASC 810 - Consolidations (“ASC

810”), the Company recognized $ ( 1,291 ) and $ 0 for the three months ended June 30, 2024 and 2023 and $ 4,492

for the six months ended June 30, 2024 and 2023 of equity method investment income from the Joint Venture on a one-quarter reporting

lag, on the condensed consolidated statements of operations

and comprehensive loss.

During the six months ended June 30, 2024, the Company issued 150,000 shares of common stock to affiliates of Wider in satisfaction of

obligations pursuant to their collaborative agreement.

A charge to research and development was recorded in 2023 at the time the Company

recognized its obligation to issue these shares.

The investment in the Joint Venture is accounted for using the equity method of accounting.

The Company invested $ 96,000 in the joint venture in September 2023 which is recorded on the consolidated balance sheet at December 31, 2023 as an Equity Method Investment.

invested $ 96,000

in the joint venture in September 2023 which is recorded on the consolidated balance sheet at December 31, 2023 as an

Equity Method Investment.

Wider invested $ 104,000 .

The Company evaluates the carrying amount of this investment in the Joint Venture for impairment in accordance with ASC 323.

If the Company determines that a loss in the value of the investment is other than temporary, the Company writes down the investment to its estimated fair value.

Any such losses are recorded to equity in income of unconsolidated entities in the Company’s consolidated statements of income.

The Company has made an election to classify distributions received from the Joint Venture using the nature of the distribution approach.

Distributions received are classified as cash inflows from operating activities based on the nature of the activities of the unconsolidated entity.

In accordance with ASC 323, Investments - Equity Method and Joint Ventures (“ASC 323”), the Company uses the equity

method of accounting for its investment in the Joint Venture, an unconsolidated entity over which it does not have a controlling

The equity method of accounting requires the investment to be initially recorded at cost and subsequently adjusted for the

Company’s share of equity in the unconsolidated entity’s earnings or losses.

The Company evaluates the carrying amount

of this investment in the Joint Venture for impairment in accordance with ASC 323.

If the Company determines that a loss in the

value of the investment is other than temporary, the Company writes down the investment to its estimated fair value.

Any such losses

are recorded to equity in income of unconsolidated entities in the Company’s consolidated statements of income.

has made an election to classify distributions received from the Joint Venture using the nature of the distribution approach.

Distributions received are classified as cash inflows from operating activities based on the nature of the activities of the

unconsolidated entity.

Asian Consulting Group, LLC

6 unchanged sentences

Pursuant to the consulting agreement, U.S.

Asian provides consulting services to the Company with regard to, among other things, corporate development and financing arrangements.

provides consulting services to the Company with regard to, among other things, corporate development and financing arrangements.

The Company pays U.S.

Asian $ 10,000 per month for services rendered pursuant to the consulting agreement.

The Company recorded consulting expenses related to the consulting agreement of $ 30,000 for each of the three months ended March 31, 2024 and 2023 on the Company’s unaudited consolidated statements of operations and comprehensive loss.

On September 22, 2023, Marilyn Elson provided the Company notice that she was stepping down as Chief Financial Officer effective November 1, 2023.

Since such date, Ms.

Elson has continued as Controller for Nexalin Technology.

Elson is the spouse of the other member of U.S.

Asian $ 10,000

per month for services rendered pursuant to the consulting agreement.

The Company recorded consulting expenses related to the

consulting agreement of $ 60,000

for each of the six months ended June 30, 2024 and 2023, respectively, and $ 30,000

for each of the three months ended June 30, 2024 and 2023, respectively, on the Company’s unaudited condensed

consolidated statements of operations and comprehensive loss.

On July 1, 2023, the Company entered into a new employment agreement with Mark White to serve as Chief Executive Officer, a new services agreement with David Owens, M.D.

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Each of the foregoing agreements are governed by three-year terms and provide compensation in the form of performance-and service-based stock option awards based on the closing price of the Company’s publicly traded common stock on the applicable date of grant.

Under the terms of his employment agreement, Mr.

White is entitled to (i) a sign-on/retention bonus consisting of a one-time lump-sum payment of $50,000 and a grant of nonqualified stock options to purchase 1,387,024 shares of the Company’s common stock with an exercise price of $.894 per share subject to certain time and performance- and time-based vesting conditions.

the terms of his employment agreement, Mr.

White is entitled to (i) a sign-on/retention bonus consisting of a one-time lump-sum

payment of $50,000 and a grant of nonqualified stock options to purchase 1,387,024 shares of the Company’s common stock with

an exercise price of $.894 per share subject to certain time and performance- and time-based vesting conditions.

Under the terms of his service agreement, Dr.

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

Under the terms of his employment agreement Mr.

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

the terms of his employment agreement Mr.

Nketiah is entitled to nonqualified stock option grants to purchase 100,671 shares of

the Company’s common stock with an exercise price of $.894 subject to certain time and performance-based vesting conditions.

See Note 9, on July

29, 2024, Michael Nketiah submitted his resignation effective August 16, 2024.

He will continue to serve the Company in his current

capacity until such effective date.

A portion of the nonqualified stock options granted to Messrs.

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ASC 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions, such as the options issued under our 2023 Plan.

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

Under ASC 842 “ Leases ”, we have two separate sub-leases (through IIcom Strategic Inc.

controlled and owned by our Chief Executive Officer) totaling approximately 4,000 square feet of office space under operating leases.

Our principal executive office is located at

1776 Yorktown, Suite 550, Houston, Texas 77056.

Under ASC 842 “ Leases ”, we have two separate sub-leases (through

IIcom Strategic Inc.

controlled and owned by our Chief Executive Officer) totaling approximately 4,000 square feet of office space

under operating leases.

Management and supporting staff are hosted at this location.

Our lease costs for each of the three months ended March 31, 2024 and 2023 were $ 9,500 and $ 13,500 , respectively.

The initial sub-leases expired in January of 2024.

The Company has entered into a new one year sublease for 4,000 square feet of office space under an operating lease.

Pursuant to the sublease, we pay and will pay the third party landlord (not the sub landlord) all direct and indirect rent costs under the primary lease directly for the leased premises.

No additional payments are made to the Chief Executive Officer or the entity controlled by him.

Our lease costs for each of the three months

ended June 30, 2024 and 2023 were $ 13,500

and $ 13,500 .

Our lease costs for each of the six months ended June 30, 2024 and 2023 were $ 27,000 and $ 27,000 .

The initial sub-leases expired in

January of 2024.

The Company has entered into a new one year sublease for 4,000 square feet of office space under an operating

Pursuant to the sublease, the Company pays and will pay the third party landlord (not the sub landlord) all direct and indirect rent

costs under the primary lease directly for the leased premises.

No additional payments are made to the Chief Executive Officer or

the entity controlled by him.

NOTE 6 — STOCKHOLDERS’ EQUITY

Issuance of Common Stock

The Company did not issue any shares of common

stock during the three months ended March 31, 2024 and March 31, 2023.

During the six months ended June 30, 2024, the Company issued 150,000 shares of common stock to affiliates of Wider in satisfaction of

obligations pursuant to their collaborative agreement.

A charge to research and development was recorded in 2023 at the time the Company

recognized its obligation to issue these shares.

During the six months ended June 30, 2023, the

Company issued no shares of common stock.

Nexalin’s 2023 Equity Incentive Plan (the “2023 Plan”) was approved by our stockholders on November 10, 2023.

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In addition to the cash compensation included in their employment contracts, the three executives were granted one-time bonus stock options (that were immediately vested) and performance-based stock options that would be triggered based on certain performance criteria being achieved.

The amount expensed during the three months ended March 31, 2024 and 2023 in the unaudited condensed consolidated statements of operations and comprehensive loss was $ 40,060 and $ 0 respectively.

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

The amount expensed during the three months ended June 30, 2024 and 2023 in the unaudited condensed consolidated statements of operations and comprehensive loss was $ 44,060 and $ 0 respectively.

The amount expensed during the six months ended June 30, 2024 and 2023 in the unaudited condensed consolidated statements

of operations and comprehensive loss was $ 88,120 and $ 0 respectively.

The following table presents a summary of stock

option award activity during the six months ended June 30, 2024:

Schedule of stock option award activity

1 unchanged sentence

Expired or cancelled

Outstanding March 31, 2024

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

Outstanding June 30, 2024

The following table provides additional information about stock options that are outstanding and exercisable at June 30, 2024:

Schedule of additional information about stock options

19 unchanged sentences

Expired or cancelled

Outstanding March 31, 2024

The following table summarizes information about warrants to purchase shares of the Company’s common stock outstanding and exercisable at March 31, 2024:

Outstanding June 30, 2024

The following table summarizes information about warrants to purchase shares of the Company’s common stock outstanding and exercisable at June 30, 2024:

Summary information about warrants to purchase

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On March 12, 2021, the Company filed its answer to the Complaint.

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

Although the parties are seeking mediation, the court has set a trial in this matter for November 18, 2024, with mediation scheduled for October 10, 2024.

Management’s intent is to contest the allegations vigorously and, as of the date of this report, is unable to provide an evaluation of the potential outcome of the litigation within the probable or remote range or to provide an estimate of the amount of or a range of potential loss that might be incurred by the Company.

Employment Development Department

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

This matter involves issues related to our previous management’s classification of certain work provided to or on behalf of the Company’s business as contract labor instead of employee labor.

The Company is currently engaged in settlement

discussions with the Employment Development Department (EDD) of the State of California.

This matter involves issues related to our

previous management’s classification of certain work provided to or on behalf of the Company’s business as contract

labor instead of employee labor.

The total amount involved was approximately $300,000.

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

We have no business in California other than one part time and one full time worker residing in California.

The EDD approved a significant downward adjustment in our outstanding employment tax liability to approximately $40,000 as reflected on its Statement of Account dated November 30, 2023.

Management has petitioned for reassessment

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

We have no business in California other

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

The EDD approved a significant downward adjustment in our

outstanding employment tax liability to approximately $40,000 as reflected on its Statement of Account dated November 30, 2023.

We plan to further negotiate with the EDD and proceed with a settlement offer.

The Company has accrued $40,000 and $40,000 on the consolidated balance sheets as of March 31, 2024 and December 31, 2023, respectively.

The reduction in the amount accrued was recognized as other income on the consolidated statement of operations and comprehensive loss for the year ended December 31, 2023.

The Company believes it has adequately accrued for this matter.

Company has accrued $40,000 and $40,000 on the consolidated balance sheets as of June 30, 2024 and December 31,

2023, respectively.

The reduction in the amount accrued was recognized as other income on the consolidated statement of operations

and comprehensive loss for the year ended December 31, 2023.

The Company believes it has adequately accrued for this

Demand Letter from The University of Arizona

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NOTE 8 — CONCENTRATION OF CREDIT RISK

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

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

Six customers accounted for 90 % of revenues for the three months ended June 30, 2024, as set forth below:

Concentration of credit risk

Two customers accounted for 67 % of revenues for the six months ended

June 30, 2024, as set forth below:

Three customers accounted for 65 % and 54 % of revenues

for the three and six months ended June 30, 2023, respectively as set forth below:

Three Months Ended

Six Months Ended

Customer A - related party

Accounts Receivable

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

Four customers accounted for 84 % of accounts receivable at June 30, 2024, as set forth below:

Customer C - related party

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

Customer A - related party

NOTE 9 — SUBSEQUENT EVENTS

Management evaluated subsequent events and transactions

that occurred after the balance sheet date, up to the date that the unaudited condensed consolidated financial statements were issued.

On July 1, 2024, the Company, consummated a public offering (the “Offering”) of an aggregate of 3,000,000 shares of the Company’s

Class common stock, $ 0.001 par value per share, resulting in aggregate gross proceeds of approximately $ 5,250,000 .

filed a registration statement on Form S-1 (the “Registration Statement”) relating to the Offering (File No.

333-279684) was

initially filed with U.S.

Securities and Exchange Commission (the “SEC”) on May 23, 2024, as amended, and was declared effective

by the SEC on June 27, 2024.

On July 29, 2024, Michael Nketiah submitted

his resignation as Senior Vice President of Quality, Clinical and Regulatory of the Company.

Nketiah’s resignation has

an effective date of August 16, 2024.

He will continue to serve the Company in his current capacity until such effective date.

Management did not identify any additional subsequent

events that would have required adjustment or disclosure in the unaudited condensed consolidated 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