What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-08 compared with 2024-08-08 · 662 added, 568 removed, 218 unchanged (85% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current Assets:

17 unchanged sentences

shares authorized;

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

Accumulated other comprehensive income (loss)

shares issued and outstanding at September 30, 2024 and 7,436,852

shares issued and outstanding at December 31, 2023

Accumulated other comprehensive loss

Additional paid in capital

Accumulated deficit

( 81,811,956 )

( 77,038,049 )

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

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

The accompanying footnotes are an integral part of these unaudited condensed

consolidated financial statements.

NEXALIN TECHNOLOGY, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)

Three Months Ended

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)

September 30,

Nine Months Ended

September 30,

Revenues, net (Includes related party of $ 868 and $ 0 for the three months ended and $ 3,102 and $ 10,207 for the nine months ended, respectively)

Cost of revenues

5 unchanged sentences

Loss from operations

( 2,508,517 )

( 2,415,537 )

( 4,879,250 )

( 4,071,823 )

Other income (expense), net:

3 unchanged sentences

Loss before equity in net earnings of affiliate

( 2,448,416 )

( 2,297,189 )

( 4,778,558 )

( 3,868,040 )

Equity in net earnings of affiliate

( 2,448,257 )

( 2,297,189 )

( 4,773,907 )

( 3,868,040 )

Other comprehensive income (loss):

gain (loss) from short-term investments

Unrealized gain (loss) from short-term investments

Comprehensive loss

$ ( 2,448,582 )

$ ( 2,329,478 )

$ ( 4,773,827 )

$ ( 3,903,553 )

Net loss per share attributable to common stockholders - Basic and Diluted

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.

NEXALIN TECHNOLOGY, INC.

4 unchanged sentences

Balance as January 1, 2023

$ ( 72,389,340 )

Other comprehensive gain

Balance as of March 31, 2023

Other comprehensive gain

as of June 30, 2023

$ ( 73,137,754 )

Other comprehensive loss

Stock compensation

Balance as of June 30, 2023

$ ( 73,960,191 )

Other comprehensive loss

Stock compensation

( 2,297,189 )

Balance as of September 30, 2023

$ ( 76,257,380 )

Comprehensive

1 unchanged sentence

Balance as of January 1, 2024

$ ( 77,038,049 )

Other comprehensive gain

Stock compensation

( 1,041,157 )

Balance as of March 31, 2024

$ ( 78,079,206 )

Other comprehensive gain

Stock compensation

Shares issued

as of June 30, 2024

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

NEXALIN TECHNOLOGY, INC.

( 1,284,493 )

Balance as of June 30, 2024

$ ( 79,363,699 )

Other comprehensive loss

Stock compensation

Shares issued in offering

( 2,448,257 )

Balance as of September 30, 2024

$ ( 81,811,956 )

The accompanying footnotes are an integral part of these unaudited condensed

consolidated financial statements.

TECHNOLOGY, INC.

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

$ ( 4,773,907 )

$ ( 3,868,040 )

Adjustments to reconcile net loss to net cash used in operating activities:

5 unchanged sentences

Accounts receivable

Accounts receivable - related party

Accounts receivable - related

Prepaid assets

4 unchanged sentences

Net cash used in operating activities

( 2,809,914 )

( 2,831,354 )

Cash flows from investing activities:

1 unchanged sentence

Purchase of short-term investments

( 24,399,610 )

( 29,270,926 )

Purchase of patents

Purchase of trademarks

Net cash provided by investing activities

Net cash provided by (used in) investing activities

( 2,205,079 )

Cash flows from financing activities:

Payments on notes payable - officer

Net cash used in financing activities

Net increase in cash and cash equivalents

Issuance of common stock

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents - beginning of period

1 unchanged sentence

Non-cash investing and financing activities:

Unrealized gain on short-term investments

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

NEXALIN TECHNOLOGY, INC.

Unrealized gain (loss) on short-term investments

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,

(“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 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

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

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 September 30, 2024.

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.

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 net proceeds of approximately $ 4,720,000 .

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.

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

to Nexalin Technology, Inc.

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, 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 II device.

Medical professionals in the United States have

1 unchanged sentence

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

professionals to support patients’ use of the Gen-1 devices which were in operation prior to December 2019, we are not

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

We continue to derive revenue from devices which we

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

This revenue consists of monthly

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

We have suspended marketing efforts for new sales of

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

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

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 De Novo application to demonstrate safety and effectiveness.

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

to December 2019, we are not making new sales or new marketing efforts of Gen-1 devices in the United States.

We continue to derive

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

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

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 our “Generation

4 unchanged sentences

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.

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

If and when we obtain FDA clearance for the

11 unchanged sentences

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.

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

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.

United States and China beginning in the 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.

However, 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

8 unchanged sentences

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

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.

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.

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 Nexilin’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.

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 % 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.

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 De Novo clearance from the FDA for our devices.

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

The Joint Venture does not maintain any variable interest entity structure or operate any data center in China.

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

- Consolidations (“ASC 810”), the Company recognized $ 159 and $ 0 for the three months ended September 30, 2024 and 2023

and $ 4,651 and $ 0 for the nine months ended September 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.

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

As of September 30, 2024 and December 31,

2023 the Company had an Equity Method Investment of $ 100,651 and $ 96,000 , respectively, recorded on the condensed consolidated balance

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.

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 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.

On May 10, 2023, the Company received written notice from The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that it was no longer in compliance with the minimum bid price requirement for continued listing on Nasdaq, as the closing bid price for the Company’s common stock was below $1.00 per share as set forth in the Nasdaq listing rules.

The Company was afforded 180 calendar days, or until November 6, 2023, to regain compliance with the Nasdaq listing rules.

The Company 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.

Nasdaq Listing

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.

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

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

On May 10, 2023, the Company received written notice from The Nasdaq

Stock Market LLC (“Nasdaq”) notifying the Company that it was no longer in compliance with the minimum bid price requirement

for continued listing on Nasdaq, as the closing bid price for the Company’s common stock was below $1.00 per share as set forth

in the Nasdaq listing rules.

The Company was afforded 180 calendar days, or until November 6, 2023, to regain compliance with the

Nasdaq listing rules.

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

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

consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which

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

At June 30, 2024, the

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

$79.4 million.

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 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.

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.

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 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

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

Intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

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

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

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

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

At contract inception, the Company determines if the contract is within the scope of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers , and then evaluates the contract using the following five steps:

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.

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).

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.

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.

As described 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.

September 23, 2024, we received a notice from Nasdaq notifying us that we were not in compliance with the Minimum Bid Price Rule.

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we had 180 calendar days, or until March 24, 2025, to regain compliance

with Nasdaq Listing Rule 5450(a)(1).

To regain compliance, the closing bid price of our common stock must be at least $1.00 per

share for a minimum of 10 consecutive business days.

On October 31, 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).

2 — LIQUIDITY

accompanying unaudited condensed consolidated financial statements have been prepared on the basis that the Company will continue as

a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business.

At September 30,

2024, the Company had a significant accumulated deficit of approximately ( 81,811,956 ) $81.8 million.

For the nine months ended September 30,

2024, the Company had a loss from operations of approximately ( 4,879,250 ) $4.9 million and negative cash flows from operations of approximately ( 2,809,914 ) $2.8

While the Company had a working capital surplus as of September 30, 2024 of approximately $ 4.6 million, the Company’s

operating activities consume most of its cash resources.

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 .

These factors, among others, raise substantial

doubt about the ability of the Company to continue as a going concern for a reasonable perio d.

ability to continue as a going concern will be dependent upon our ability to execute on our business plan, including the ability to generate

revenue from the joint venture and obtain U.S.

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

to raise additional capital.

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

expenses may arise, management has evaluated the significance of the conditions as of September 30, 2024 and have concluded that

we will not have sufficient cash and short-term investments to satisfy our anticipated cash requirements for the next twelve months from

the issuance of these financial statements.

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.

3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING STANDARDS

of Presentation

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 nine months ended September 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

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.

of Consolidation

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

accounts and transactions have been eliminated in consolidation.

preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates

and assumptions that affect the reported amounts of assets, liabilities, equity-based transactions, revenue and expenses and disclosure

of contingent liabilities at the date of the consolidated financial statements.

The Company bases its estimates and assumptions on historical

experience, known or expected trends and various other assumptions that it believes to be reasonable.

As future events and their effects

cannot be determined with precision, actual results could differ from these estimates, which may cause the Company’s future results

to be affected.

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

At contract inception, the Company

determines if the contract is within the scope of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts

with Customers , and then evaluates the contract using the following five steps:

(1) identify the contract with the customer;

3 unchanged sentences

and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

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

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

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

The Company 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 our license agreements by charging a monthly licensing fee for the duration of the agreement.

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

We receive revenue from the sale in China of our Devices to our distributor and from the sale of products relating to the use of those Devices.

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 our 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.

revenue from the sale in China of our Devices to our distributor and from the sale of products relating to the use of those Devices.

We derive revenue as a royalty fee from the China-based manufacturer for electrodes ordered in connection with our China sales.

Performance Obligations

Management identified that subsequent licensing revenue has one performance obligation.

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

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

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

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

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

The Company does not offer a warranty on the equipment or Devices.

Management identified that treatment fee revenue has one performance obligation.

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

Management identified that royalty revenue has one performance obligation.

The performance obligation is satisfied at the time the Electrode manufacturer notifies the Company that it has invoiced the distributor for the sale to the distributor.

Practical Expedients

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

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

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

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

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

Disaggregated Revenues

Major Revenue Streams

Revenue consists of the following by service offering:

Disaggregated

Revenue Streams

consists of the following by service offering:

Schedule of disaggregation of revenue

Three Months Ended

September 30,

Licensing fee

Six Months Ended

Nine Months Ended

September 30,

Licensing fee

1 unchanged sentence

Three Months Ended

September 30,

International sales

Six Months Ended

Nine Months Ended

September 30,

International sales

Contract Modifications

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.

Deferred Revenue

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

The Company recognizes the revenue as being earned upon shipment.

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

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

and Cash Equivalents

Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

Cash and cash equivalents held at financial institutions may at times exceed insured amounts.

The Company believes it mitigates such risk by investing in or through, as well as maintaining cash balances with, with major financial institutions.

Short-Term Investments

The appropriate classification of marketable securities

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

Investments in marketable debt and equity

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

Fair value is determined using quoted market prices in active

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

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

Unrealized holding gains and

losses for equity securities are recognized in earnings.

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

recognized in other comprehensive income.

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

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

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

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

The Company provides an allowance for credit loss based on management’s estimate of uncollectible amounts considering age, collection history, and any other factors considered appropriate.

Payments are generally due within 30 days of invoice.

The Company did 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 $ 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

The Company believes it mitigates such

risk by investing in or through, as well as maintaining cash balances with, 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.

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 (loss.) 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 for the three and nine months ended September 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.

and Trademarks

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

expense was $ 10,666 and $ 2,105 for the nine months ended September 30, 2024 and 2023, respectively.

Amortization expense was $ 4,211

and $ 753 for the three months ended September 30, 2024 and 2023, respectively.

following table summarizes the gross carrying amount, amortization and the net carrying value at September 30, 2024 and December 31,

Schedule of patents

June 30, 2024

Total June 30, 2024

December 31, 2023

Gross Carrying

September 30,

Total September 30, 2024

Total December 31, 2023

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.

Company accounts for income taxes pursuant to the asset and liability method which requires the recognition of deferred income tax assets

and liabilities related to the expected future tax consequences arising from temporary differences between the carrying amounts and tax

bases of assets and liabilities based on enacted statutory tax rates applicable to the periods in which the temporary differences are

expected to reverse.

Any effects of changes in income tax rates or laws are included in income tax expense in the period of enactment.

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

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

Fair Value Measurements

As defined in ASC 820, Fair Value Measurements and Disclosures , fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique.

These inputs can be readily observable, market corroborated, or generally unobservable.

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 September 30, 2024 and December 31, 2023, 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.

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.

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, short-term investments, accounts receivable, inventory, prepaids, accounts payable and accrued expenses, and other current liabilities approximate their fair values based on the short-term maturity of these instruments.

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

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

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.

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 gain (loss) and the fair value at September 30, 2024 and December 31,

Schedule of unrealized loss on investments

June 30, 2024

Amortized Cost

Unrealized Gain

September 30, 2024

Short-term investments

Total March 31, 2024

Total September 30, 2024

December 31, 2023

1 unchanged sentence

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 June 30, 2024 and December 31, 2023.

following table provides the carrying value and fair value of the Company’s financial assets measured at fair value as of September 30,

2024 and December 31, 2023.

Schedule of fair value, assets measured on recurring basis

June 30, 2024

Carrying Value

September 30, 2024

Treasury Notes

1 unchanged sentence

Treasury Notes

Net Loss per Common Share

As defined in ASC 820, Fair Value Measurements and Disclosures, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

These inputs can be readily observable, market corroborated, or generally unobservable.

defined in ASC 820, Fair Value Measurements and Disclosures, fair value is the price that would be received to sell an asset or paid

to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

The Company utilizes

market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and

the risks inherent in the inputs to the valuation technique.

These inputs can be readily observable, market corroborated, or generally

unobservable.

ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value.

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:

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 September 30, 2024 and 2023.

Loss per Common Share

following table summarizes the securities that would be excluded from the diluted per share calculation because the effect of including

these potential shares was antidilutive due to the Company’s net loss position even though the exercise price could be less than

the most recent fair value of the common shares:

Schedule of antidilutive shares

Three Months Ended

September 30,

Stock options

Six Months Ended

Nine Months Ended

September 30,

Stock options

Stock-Based Compensation

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

For stock options issued to employees and members of the board of directors for their services, the Company estimates the grant date fair value of each option using the Black-Scholes option pricing model.

The use of the Black-Scholes option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the common stock.

For awards subject to service-based vesting conditions, including those with a graded vesting schedule, the Company recognizes stock-based compensation expense equal to the grant date fair value of stock options on a straight-line basis over the requisite service period, which is generally the vesting term.

Company applies the provisions of ASC 718, Compensation — Stock Compensation (“ASC 718”), which requires the

measurement and recognition of compensation expense for all stock-based awards made to employees, including employee stock options, in

the condensed consolidated statements of operations and comprehensive loss.

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.

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

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

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

Warrant Accounting

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

The Company evaluates all its financial instruments, including issued private and public warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC Topic 480, Distinguishing Liabilities from Equity, and ASC Topic 815-40, Derivatives and Hedging:

Contracts in Entity’s Own Equity (“ASC 815-40”).

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is assessed as part of this evaluation.

During the reporting periods the public warrants were outstanding, they were precluded from liability classification, being equity-classified.

Research and Development

Research and development costs are charged to

operations as incurred.

For the 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.

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

The Company has made an accounting policy election not to recognize right-of-use assets and lease liabilities that arise from short-term leases for any class of underlying asset.

Equity Method Investments

The Company accounts for its investments in common stock or in-substance common stock that give it the ability to exercise significant influence over as an equity method investment in accordance with the guidance in ASC 323, Equity Method and Joint Ventures .

Specifically, the Company initially recognizes its investment in investees as an asset at cost.

Further, the Company subsequently measures its investment by recognizing its share of earnings or losses of the investee on a one-quarter reporting lag.

Recent Accounting Pronouncements

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

Recognition and Initial Measurement.

The guidance requires newly formed JVs to apply a new basis of accounting to all of its contributed net assets, which results in the JV initially measuring its contributed net assets under ASC 805-20, Business Combinations.

The new guidance would be applied prospectively and is effective for all newly formed joint venture entities with a formation date on or after January 1, 2025, with early adoption permitted.

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

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

Reporting (Topic 280):

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

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

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

uses valuation methods and assumptions to value the stock options that are in line with the process for valuing employee stock options

and Development

and development costs are charged to operations as incurred.

For the nine months ended September 30, 2024 and 2023, the Company

recorded $ 453,643 and $ 1,842,341 , respectively, in selling, general and administrative expenses on the unaudited condensed consolidated

statements of operations and comprehensive loss.

For the three months ended September 30, 2024 and 2023, the Company recorded $ 178,565

and $ 1,638,508 , respectively, in selling, general and administrative expenses on the unaudited condensed consolidated statements of operations

and comprehensive loss.

Accounting Pronouncements

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

Recognition and

Initial Measurement.

The guidance requires newly formed JVs to apply a new basis of accounting to all of its contributed net assets,

which results in the JV initially measuring its contributed net assets under ASC 805-20, Business Combinations.

The new guidance would

be applied prospectively and is effective for all newly formed joint venture entities with a formation date on or after January 1,

2025, with early adoption permitted.

The Company is evaluating the accounting and disclosure requirements of this update and does not

expect them to have a material effect on the consolidated financial statements.

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):

Improvements to Income Tax Disclosures, establishes incremental disaggregation of income tax disclosures pertaining to the effective tax rate reconciliation and income taxes paid.

This standard is effective for fiscal years beginning after December 15, 2024, and requires prospective application with the option to apply it retrospectively.

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, 2023, and interim periods within fiscal years beginning after December 15,

The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

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

Improvements to Income Tax Disclosures, establishes incremental

disaggregation of income tax disclosures pertaining to the effective tax rate reconciliation and income taxes paid.

This standard is

effective for fiscal years beginning after December 15, 2024, and requires prospective application with the option to apply it retrospectively.

Early adoption is permitted.

The Company is currently evaluating the potential impact of adopting this standard on our disclosures.

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

NOTE 4 — ACCRUED EXPENSES

Accrued expenses consist of the following amounts:

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 – other

1 unchanged sentence

Accrued bonuses

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

Formalized Joint Venture

The Joint Venture is registered in Hong Kong.

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

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

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

The 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 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.

invested $ 96,000

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

Equity Method Investment.

Wider invested $ 104,000 .

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

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

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.

5 — RELATED PARTY TRANSACTIONS

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.

The consulting agreement was extended for an additional period of eight years upon the closing of our initial public offering.

The agreement

was amended effective as of July 1, 2024 to expand the services.

The two members of U.S.

Asian are shareholders in the Company.

Marilyn Elson is the Company’s Controller.

Pursuant to the consulting agreement, U.S.

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 $ 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.

to serve as Chief Medical Officer and a new employment agreement with Michael Nketiah to serve as Senior Vice President, Quality, Regulatory and Clinical Affairs.

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

Asian are shareholders in the Company including

Marilyn Elson who is Nexalin’s Controller.

to the consulting agreement, U.S.

Asian provides consulting services to the Company with regard to, among other things, corporate development,

financing arrangements and international operations.

The Company was paying U.S.

Asian $ 10,000 per month for services

rendered pursuant to the consulting agreement.

The amended agreement calls for a monthly fee of $ 16,667 , a onetime stock grant and a semi-annual

share award equal to $ 100,000 with the issuance and delivery of shares to take place following the termination of the consulting agreement.

The Company recorded consulting expenses related to the consulting agreement of $ 110,000 and stock compensation expense of $ 146,000 for

the nine months ended September 30, 2024 and $ 90,000 of consulting expenses for the nine months ended September 30, 2023, respectively.

The Company recorded $ 30,000 related to the consulting agreement for each of the three months ended September 30, 2024 and 2023,

respectively, on the Company’s unaudited condensed consolidated statements of operations and comprehensive loss.

Osser was issued 200,000

shares of Company stock as compensation for his services on the Advisory Board.

The Company recorded $ 144,000

of stock compensation expense for the nine months ended September 30, 2024 and September 30, 2023 respectively.

July 1, 2023, the Company entered into a new employment agreement with Mark White to serve as Chief Executive Officer, a new services

agreement with David Owens, M.D.

to serve as Chief Medical Officer and a new employment agreement with Michael Nketiah to serve as Senior

Vice President, Quality, Regulatory and Clinical Affairs.

Each of the foregoing agreements are governed by three-year terms and provide

compensation in the form of performance-and service-based stock option awards based on the closing price of the Company’s publicly

traded common stock on the applicable date of grant.

On July 29, 2024, Michael Nketiah submitted his resignation effective August 16,

September 16, 2024, the Company entered into an agreement with Ms.

Carolyn Shelton to serve as Senior Vice President, Quality, Regulatory

and Clinical Affairs.

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.

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-based vesting conditions.

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.

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.

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

In addition to the retention payments, stock awards and nonqualified option grants described above, Messrs.

White and Nketiah are receiving cash compensation and each of Messrs.

Nketiah was 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 her agreement Ms.

Shelton is entitled to nonqualified stock option grants to purchase 90,620 shares of the

Company’s common stock with an exercise price of $.6621, subject to certain time and performance-based vesting conditions.

Such options were not granted as of September 30, 2024.

addition to the retention payments, stock awards and nonqualified option grants described above, Messrs.

White and Nketiah are receiving

cash compensation and each of Messrs.

White and Nketiah are eligible for performance-based cash bonuses.

The 2023 performance-based milestones regarding Mr.

White’s incentive compensation have been met for 2023, and he was awarded a cash bonus of $120,000 and 313,199 nonqualified stock options with a vesting date of July 1, 2024.

The 2023 performance-based milestones

regarding Mr.

White’s incentive compensation have been met for 2023, and he was awarded a cash bonus of $120,000 and 313,199 nonqualified

stock options with a vesting date of July 1, 2024.

The 2023 performance-based milestones regarding Mr.

Nketiah’s incentive compensation have been met for 2023, and he was awarded a cash bonus of $50,000 and 218,121 nonqualified stock options with a vesting date of July 1, 2024.

The reported amounts are calculated in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 718, “Compensation — Stock Compensation (“ASC 718”).

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

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.

Nketiah’s incentive

compensation have been met for 2023, and he was awarded a cash bonus of $50,000 and 33,557 nonqualified stock options with a vesting

date of July 1, 2024.

reported amounts are calculated in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting

Standard Codification Topic 718, “Compensation — Stock Compensation (“ASC 718”).

ASC 718 focuses primarily on

accounting for transactions in which an entity obtains employee services in share-based payment transactions, such as the options issued

under our 2023 Plan.

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) totalling 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 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

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.

The Plan provides that maximum number of shares of Common Stock available for the grant of awards under the Plan shall be 1,500,000, subject to adjustment for stock dividends, stock splits or similar events.

The 2023 Plan is administered by the Compensation Committee of the Board of Directors, which may in turn delegate administrative authority to one or more of our executive officers.

Under the terms of the 2023 Plan, the Compensation Committee may grant equity awards, including nonqualified stock options and restricted stock to employees, officers, directors, consultants, agents, advisors and independent contractors.

On July 1, 2023, the Company entered into amended employment agreements with the three executives.

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

The amount expensed during the three months ended 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:

Our lease costs

for each of the three months ended September 30, 2024 and 2023 were $ 13,500 and $ 13,500 .

Our lease costs for each of the nine months

ended September 30, 2024 and 2023 were $ 40,500 and $ 40,500 .

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, 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.

6 — STOCKHOLDERS’ EQUITY

of Common Stock

the nine months ended September 30, 2024, the Company issued an aggregate of 5,425,043 shares of its common stock, as follows:

shares of common stock were issued to affiliates of Wider in satisfaction of obligations

pursuant to their collaborative agreement.

A charge to research and development of $750,000

was recorded in 2023 at the time the Company recognized its obligation to issue these shares.

shares of common stock were issued to investors for net proceeds of $ 4,516,184 .

shares of common stock were issued for services in lieu of cash of which 1,232,357 were issued

to outside consultants, 200,000 to a related party, 542,500 to certain employees

of the Company, and 300,186 to current and former members of the Board of Directors for their

services as Board Members.

the nine months ended September 30, 2023, the Company issued 150,000 shares of its common stock to Wider pursuant to their collaborative

agreement resulting in a charge to research and development of $ 750,000 .

2023 Equity Incentive Plan (the “2023 Plan”) was approved by our stockholders on November 10, 2023 and an amendment

thereto, increasing the number of shares reserved for issuance under the 2023 Plan, was approved by our stockholders on August 26,

The 2023 Plan provides that maximum number of shares of Common Stock available for the grant of awards thereunder shall be 6,000,000,

subject to adjustment for stock dividends, stock splits or similar events.

The 2023 Plan is administered by the Board of Directors, which

may in turn delegate administrative authority to one or more of our executive officers.

Under the terms of the 2023 Plan, the Compensation

Committee may grant equity awards, including nonqualified stock options and restricted stock to employees, officers, directors, consultants,

agents, advisors and independent contractors.

July 1, 2023, the Company entered into amended employment agreements with the three executives.

In addition to the cash compensation

included in their employment contracts, the three executives were granted one-time bonus stock options (that were immediately vested)

and performance-based stock options that would be triggered based on certain performance criteria being achieved.

The amount expensed

during the three months ended September 30, 2024 and 2023 in the unaudited condensed consolidated statements of operations and comprehensive

loss was $ 0 and $ 0 respectively.

The amount expensed during the nine months ended September 30, 2024 and 2023 in the unaudited condensed

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

employees and certain members of the Board of Directors were issued options to purchase an aggregate of 581,250 shares of common stock.

The options vested immediately upon grant.

The amount expensed during the three months ended September 30, 2024 and 2023 in the

unaudited condensed consolidated statements of operations and comprehensive loss was $ 434,194 and $ 0 respectively.

The amount expensed

during the nine months ended September 30, 2024 and 2023 in the unaudited condensed consolidated statements of operations

and comprehensive loss was $ 434,194 and $ 0 respectively.

following table presents a summary of stock option award activity during the nine months ended September 30, 2024:

Schedule of stock option award activity

December 31, 2023

Exercise Price

Life In Years

Outstanding December 31, 2023

Expired or cancelled

Outstanding June 30, 2024

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

Outstanding September 30, 2024

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

Schedule of additional information about stock options

2 unchanged sentences

Remaining Life

The fair value of these stock option awards is estimated as of the grant date using a Black-Scholes option pricing model and the following assumptions:

fair value of these stock option awards is estimated as of the grant date using a Black-Scholes option pricing model and the following

A risk-free interest rate based on the U.S.

2 unchanged sentences

and expected volatility based on an evaluation of comparable public companies’ measures of volatility.

The Company does not anticipate declaring dividends on common shares now or in the near future and has therefore assumed no dividend rate.

The following table discloses the assumptions, utilized for stock options as follows:

The Company does not anticipate

declaring dividends on common shares now or in the near future and has therefore assumed no dividend rate.

The following tables disclose

the assumptions, utilized for stock options as follows:

the 581,250 stock options granted during the nine months ended September 30, 2024, we used the following weighted average assumptions

to estimate the fair value of stock options:

Schedule of assumptions

September 30,

Expected dividends

1 unchanged sentence

Expected term (years)

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

the stock options outstanding as of December 31,2023, we used the following weighted average assumptions to estimate the fair value

of stock options:

Expected dividends

Risk-free interest rate

Expected term (years)

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

Schedule of warrants

Weighted Average

Exercise Price

1 unchanged sentence

Expired or cancelled

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:

Outstanding September 30, 2024

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

at September 30, 2024:

Summary information about warrants to purchase

4 unchanged sentences

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.

compensation expense attributed to the issuance of the warrants, if required to be recognized on the nature of the transaction, was recognized

as they vested/earned.

These warrants are exercisable up to three years from the date of grant.

All are currently exercisable.

NOTE 7 — COMMITMENTS AND CONTINGENCIES

There are no material pending legal proceedings in which the Company or any of its subsidiaries is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of its voting securities, or security holder is a party adverse to us or has a material interest adverse to the Company other than the following:

Sarah Veltz v.

7 — COMMITMENTS AND CONTINGENCIES

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.

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 parties are seeking mediation, the court has set a trial in this matter for June 9, 2025, with a mediation date not yet set.

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 was approximately $300,000.

Management has petitioned for reassessment

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

We have no business in California other

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

The EDD approved a significant downward adjustment in our

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

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

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

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

The Company and the University of Arizona agreed on the terms of a settlement for the amounts claimed by the University, whereby the Company paid an aggregate of approximately $69,000 (in three equal monthly payments) in full satisfaction of amounts the University claims it is owed.

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 September 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 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.

The Company and

the University of Arizona agreed on the terms of a settlement for the amounts claimed by the University, whereby the Company paid an

aggregate of approximately $69,000 (in three equal monthly payments) in full satisfaction of amounts the University claims it is owed.

The settlement amount was paid in full as of December 31, 2023.

NOTE 8 — CONCENTRATION OF CREDIT RISK

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

8 — 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:

customers accounted for 75 % of revenues for the three months ended September 30, 2024 and two customers accounted for 59 % of revenues

for the nine months ended September 30, 2024, as set forth below:

Concentration of credit risk

Three Months Ended

Six Months Ended

Customer A - related party

Accounts Receivable

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.

September 30,

Nine Months Ended

September 30,

customers accounted for 70 % and 55 % of revenues for the three and nine months ended September 30, 2023, respectively as set forth

Three Months Ended

September 30,

Nine Months Ended

September 30,

customers accounted for 78 % of accounts receivable at September 30, 2024, as set forth below:

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.

9 — SUBSEQUENT EVENTS

7, 2024, the Company entered into stock option agreements with two employees for services in lieu of cash, and two members of the Board

of Directors for their services as Board Members, granting options to purchase an aggregate of 581,250 shares of the Company’s common

stock at an exercise price of $ .94 per share.

Such stock options were immediately vested.

On November 7, 2024, the Company

entered into a stock option agreement with Michael Nketiah with respect to his July 1, 2023 Employment Agreement.

Nketiah was granted

performance-based stock options to purchase 100,671 shares of common stock at an exercise price of $ .894 per share.

November 7, 2024, the Company entered into a stock option agreement with Carolyn Shelton.

Shelton was granted performance-based

stock options to purchase up to 90,620

shares of common stock at an exercise price of $ .6621

per share that would be triggered based on certain performance criteria being achieved.

Such options vest in three equal

portions over the three year period beginning on the first anniversary of her employment date.

28, 2024, the Board of Directors approved the issuance of an aggregate of 363,635 shares of our restricted common stock for services

in lieu of cash, to outside consultants and to Wider, a related party.

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