Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing in this Quarterly Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report. Actual future results may be materially different from what we expect. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by applicable law.
The management’s discussion and analysis of our financial condition and results of operations are based upon our unaudited financial statements, which have been prepared in accordance with GAAP.
Overview
We design and develop innovative neurostimulation products to uniquely and effectively help combat the ongoing global mental health epidemic. We developed an easy-to-administer medical device — referred to as "Generation 1” or "Gen-1” — that utilizes bioelectronic medical technology to treat anxiety, insomnia and depression without the need for drugs or psychotherapy. Our original Gen-1 devices are cranial electrotherapy stimulation (CES) devices that emit a waveform at 4 milliamps during treatment and are presently classified by the FDA as a Class II device.
Medical professionals in the United States have utilized the Gen-1 device to administer treatment to patients in clinical settings. While the Gen-1 device had been cleared by the FDA to treat depression, anxiety, and insomnia, three prevalent and serious diseases, because of the FDA’s December 2019 reclassification of CES devices, the Gen-1 device was reclassified as a Class II device for the treatment of anxiety and insomnia. We are required to file a new application under Section 510(k) of the Federal Food, Drug and Cosmetic Act ("510(k) Application”) to be approved by the FDA for the sales and marketing of our devices for the treatment of anxiety and insomnia. In the FDA’s December 2019 reclassification ruling, the treatment of depression with our device will require a Class III certification and require a new PMA (premarket approval) and/or a new De Novo 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 announcement. This revenue consists of monthly licensing fees and payments for the sale of electrodes and patient cables. We have paused marketing efforts for new sales of our Gen-1 device for treatment of anxiety and insomnia in the United States. Our regulatory team continues to have discussions with the FDA regarding the suspension of the marketing and sale of the Gen-1 products to new providers.
Beginning in 2019, Nexalin engineers began the
testing and design of a new advanced 15 milliamp waveform that became the basis of our new “Generation 2” or “Gen-2”
and new “Generation 3” or “Gen-3” medical devices. Today the Gen-2 is branded under a new trademark name known
as “SYNC”, the Gen-3 is branded under a new trademark name known as “HALO”. The Gen-2 SYNC and Gen-3 HALO are
in the Q-submission process for review by the FDA. This process allows Nexalin to get clear, specific, written feedback from the FDA on
indications, device classification and clarity on the regulatory pathway and improves the efficiency and predictability of the regulatory
pathway. Determinations of the safety and efficacy of our devices in the United States are solely within the authority of the FDA. We
plan to conduct decentralized clinical trials for the Gen-2 SYNC and Gen-3 HALO devices in the U.S. and we will continue to consult with
the FDA as part of the pre-submission process. If and when we obtain FDA clearance for the Gen-2 SYNC and/or the Gen-3 HALO device, we
will begin the commercialization of our devices for sale in the U.S. and other territories, given the potential unmet demand for the treatment
of mental health conditions.
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Nexalin’s new advanced waveform technology
will be emitted at 15 milliamps through our new and improved medical devices referred to as Gen-2 SYNC and Gen-3 HALO. The new Gen-2 SYNC
is a clinical use device with a modern enclosure to emit the new 15 milliamp advanced waveform. The Gen-3 HALO is a new patient headset
that we intend to be prescribed by licensed medical professionals in a virtual clinic setting similar to existing tele-health platforms.
The Nexalin research team believes that the new 15 milliamp SYNC and HALO devices can penetrate deeper into the brain and stimulate deep
brain structures that contribute to or cause mental illness, which we believe will generate enhanced patient response without any risk
or unpleasant side effects. The Nexalin regulatory team has made a strategic decision to develop strategies for pilot trials and/or pivotal
trials in various mental health disease states. In addition, a new PMA application in the United States will be in development for the
treatment of depression utilizing both Gen-2 SYNC and Gen-3 HALO. We plan to develop a strategic schedule to execute additional pilot
trials and/or pivotal trials for the new Gen-3 HALO device for anxiety and insomnia in the United States, Brazil and China beginning in
the third or fourth quarter of 2025. 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.
Additionally, a new pre-submission document in preparation of a new 510(k) and/or de novo for our Gen-3 Halo headset at 15 milliamps was filed with the FDA in January of 2023. Formal comments to our pre-submission document filing were received in March of 2023. A formal meeting to address FDA comments took place on May 9, 2023. Minutes of the meeting with the FDA were filed with the FDA on May 16, 2023.
A second FDA pre-submission document was submitted on February 13, 2024. FDA comments to this second pre-submission document were received on April 26, 2024. A formal teleconference was held with the FDA on April 30, 2024. The Nexalin regulatory team and the FDA came to a consensus on the Anxiety and Insomnia Clinical research protocols.
In part due to increasing incidence attributed
to the devastating impacts of the COVID-19 pandemic, mental health and cognitive disorders are widespread across the globe and cause substantial
health, social and economic losses, and hardships. Our focus is on the continued development of our innovative bioelectronic medical technologies
and rapid regulatory approval. We intend to help reverse these losses, and hardships of these losses, by safely and effectively treating
various mental health disorders associated with post Covid and long Covid mental disease states.
All our products are non-invasive, safe and undetectable
to the human body and can provide relief to those afflicted with mental health issues without adverse side effects. We have a proprietary
and protected design that stabilizes currents, electromagnetic fields, and various frequencies — referred to collectively as a waveform
- particularly our proprietary, 15 milliamp patented waveform. Additionally, our devices generate a high frequency carrier wave for deeper
penetration into the brain. It is applied to the brain with an array of electrodes on the forehead and behind each ear at the mastoid.
The features of this proprietary waveform and the array of electrodes allow the application of the waveform to the entire brain rather
than a small, targeted area of the brain. To ensure deeper penetration into the brain, our new advanced waveform is undetectable which
allows the increased power from < 4 mAmps to 15 mAmps, more than a 400% increase without incurring any patient discomfort, risk, or
adverse side effects. By increasing the power, our waveform can penetrate deeper into the brain and stimulate deep mid-brain structures
associated with mental illness. Our research and clinical teams believe that a more powerful waveform will create a stronger response
in the brain. A stronger response creates a higher level of efficacy. This entire proprietary technique allows Nexalin to provide a non-invasive
frequency based waveform that provides a comfortable treatment that is undetectable to the patient and is more powerful than other stimulation
devices on the market. Current pilot study protocols and randomized clinical trials have been designed and submitted to the FDA to provide
feedback on final reports and data sets for the purpose of safety and efficacy evaluations in the future. Determinations of the safety
and efficacy of our devices are solely within the authority of the FDA.
Currently, the waveform that comprises the basis of Gen-2 SYNC clinical and HALO headset devices has been tested in research settings to develop safety data that has been submitted for review by the FDA for safety evaluation and eventual marketing in the United States and around the world. Determinations of the safety and efficacy of our devices in the United States are solely within the authority of the FDA.
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Strategic plans are in development to use the data from these clinical trials to support an application for the CE-mark of our SYNC clinical and HALO headset devices in the European Union.
The global rise in mental health and cognitive
disorders is causing widespread suffering and hardship. These conditions have far-reaching consequences for individuals, families, and
communities. Our focus is on the continued development of our innovative bioelectronic medical technologies and regulatory approval. Our
intention is to help reverse these losses, and the hardships of these losses, by safely and effectively treating various mental health
disorders associated with post Covid and long Covid mental disease states.
Beyond the well-known safety, efficacy, and side-effect concerns surrounding conventional mental health treatments such as Electro-Convulsive Therapy (ECT), drugs, and psychotherapy, the stigma associated with mental illness continues to hinder individuals from seeking the help they need. We have received industry reports and feedback that many patients that struggle with mood disorders have the stigma of embarrassment associated with psychiatrists and psychotherapy ( e.g. , counselling with a therapist). Additional stigmas and other issues are associated with the side effects and dependance of medication prescribed by psychiatrists.
To address the embarrassment stigma, we are developing
a new virtual clinic that will allow the physician to diagnose a mental health issue in the privacy of a tele-psychiatry virtual platform.
After diagnosis, the physician can prescribe the Nexalin Gen-3 HALO headset to the patient for treatment. Next, the HALO device will be
shipped to the patient’s home. After the patient receives the device, they will pair the headset device with an app in the patient’s
smart phone. The app will communicate with the Nexalin cloud servers to authorize the device for treatment according to the protocol designed
by the physician. The physician will monitor treatment compliance and other health related issues in a private physician dashboard that
connects through the Nexalin app and cloud servers. We believe that to preserve product safety and integrity for home use, the headset
device will require physician oversight that will include a prescription for use with a monthly authorization provided by the physician
after a monthly virtual visit. All appointments will be in a virtual setting to provide privacy and convenience for the physician and
patient. The Nexalin virtual clinic will be provided in a proprietary virtual platform currently in the design stage.
Our original China Gen-2 15 milliamp device was approved in China by the China National Medical Products Administration (the "NMPA”) for the treatment of insomnia and depression in China. This device and all other clinical devices will include single use electrodes for long term revenue streams. The USA Gen-2 SYNC device bears a fresh and modern appearance that meets the technology standards of the digital tech world of 2025. Early adopters of the Gen-1 device will be able to access additional firmware upgrades which are planned to enhance the previously purchased and leased devices to the new symmetric15-milliamp waveform. Our Gen-2 SYNC device will be equipped with Radio Frequency Identification (RFID) technology that exchanges electrode usage data with a reader in the main device. The purpose of RFID is to track and maintain control of the proprietary single use electrode. Our electrode chip will be programmed to exchange data with the device and allow activation for a single treatment with a new electrode only. This ensures a recurring revenue stream on the device and protects against any generic knockoffs designed to avoid treatment costs. This upgrade in technology also ensures the proprietary nature of the electrodes that support treatment outcomes.
Overall, we believe that our advanced waveform, technological upgrades and the development of a modern headset monitored with our IT management platform will position us with the opportunity to disrupt the traditional mental health treatment model. Our mission is to remove the stigma of expensive psychotherapy or pharmaceuticals with the attendant side effects and dependency issues and replace such stigma with clinically proven and cost-effective technology that is easily accessible in the privacy of the patient’s home and monitored by licensed healthcare providers.
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Recent Developments
Oman
The Sultanate of Oman’s Ministry of Health granted conditional approval for use of our Gen-2 device on June 16, 2022, effective upon the end user of our device opening and operating a mental health care clinic being constructed in Oman. The Company’s first shipment of a device to Oman was made on January 30, 2024 and received in Oman on February 5, 2024 in connection with the opening of the end user’s clinic, rendering the approval effective. Two additional devices were shipped to Oman on February 29, 2024 and were received by the end user on March 6, 2024. Upon receipt of the two additional devices, the end user’s clinic was operational, and the use of the device to treat patients commenced pursuant to the approval.
Brazil
On June 13, 2024, the Company announced that our Gen-2 device had been granted regulatory approval by the Brazilian Health Regulatory Agency, a regulatory body of the Brazilian government responsible for approving new drugs and medical devices.
Results of Operations
Comparison of the three months ended March 31, 2025 and 2024
Our financial results for the three months ended March 31, 2025 and 2024 are summarized as follows:
Three Months Ended
March 31,
2025
2024
Change
Change (1)
$
%
Revenues, net
$
41,015
$
78,671
$
(37,656
)
(48
%)
Cost of revenues
13,558
9,156
4,402
48
%
Gross profit
27,457
69,515
(42,058
)
(61
%)
Operating expenses:
Professional fees
367,816
227,829
139,987
61
%
Salaries and benefits
335,358
326,417
8,941
3
%
Selling, general and administrative
929,220
483,313
445,907
92
%
Research and development
406,288
105,668
300,620
284
%
Total operating expenses
2,038,682
1,143,227
895,455
78
%
Loss from operations
(2,011,225
)
(1,073,712
)
(937,513
)
87
%
Other income, net:
Interest income, net
1,103
304
799
263
%
Gain on sale of short-term investments
20,119
24,946
(4,827
)
(19
%)
Other income
2,714
1,522
1,192
78
%
Total other income, net
23,936
26,772
(2,836
)
(11
%)
Loss before provision for income taxes
$
(1,987,289
)
$
(1,046,940
)
$
(940,349
)
90
%
Provision for income taxes
-
-
-
0
%
Loss before equity in net earnings (loss) of affiliate
(1,987,289
)
(1,046,940
)
(940,349
)
90
%
Equity in net earnings (loss) of affiliate
(1,048
)
5,783
(6,831
)
(118
%)
Net loss
$
(1,988,337
)
$
(1,041,157
)
$
(947,180
)
91
%
Other comprehensive income:
Unrealized gain from short-term investments
830
160
670
419
%
Comprehensive loss
$
(1,987,507
)
$
(1,040,997
)
$
(946,510
)
91
%
(1)
Percentages may not foot due to rounding.
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Revenues
For the three months ended March 31, 2025 and 2024, we generated $41,015 and $78,671 respectively, of revenue. Our revenues is primarily from the sale supplies and from licensing and treatment fee agreements with our customers for which we charge a monthly licensing fee for the duration of the agreement. We also generated revenue from treatment fee agreements by collecting fees based on the number of treatments per month the customer performs. In addition, we derived revenue from equipment by selling electrodes and patient cables to customers for use with our device. For the three months ended March 31, 2024 we also derived revenue from the sale of devices. The decrease in revenue for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was primarily due to the sale of devices to a new overseas customer.
Cost of Revenues and Gross Profit
For the three months ended March 31, 2025 and 2024, cost of revenues was $13,558 and $9,156, respectively, yielding a gross profit of $27,457 and $69,515, respectively, or 67% and 88%, respectively. Such decrease in gross margin was due to the change in our sources of revenue. Our revenue for the quarter ended March 31, 2025 was primarily from the sale of electrodes and patient cables which have a lower gross margin than devices.
Operating Expenses
Total operating expenses for the three months ended March 31, 2025 and 2024 were $2,038,682 and $1,143,227, respectively. The increase in selling, general and administrative expenses was due primarily to an increase in professional fees of approximately $140,000, an increase in consulting of approximately $29,000, an increase in research and development costs of approximately $301,000 and an increase in stock compensation of approximately $475,000. The increase in professional fees is primarily related to costs associated with investor relations. The increase in consulting is primarily due to retaining new consultants to assist with marketing and investor relations. The increases in research and development costs are attributable to the development of our Gen-2 and Gen-3 devices. The increase in stock compensation is primarily related to compensating consultants with stock. These amounts were offset by a decrease in insurance of approximately $16,000 resulting from a decrease in premiums.
Other Income
Other income for the three months ended March 31, 2025 and 2024 was $23,936 and $26,772, respectively, consisting of interest and dividend income and gain on the sale of short-term investments.
Cash Flows
The following table summarizes our consolidated cash flows for the three months ended March 31, 2025 and 2024:
March 31,
2025
March 31,
2024
Net cash used in operating activities
$
(1,426,214
)
$
(763,289
)
Net cash provided by investing activities
$
1,473,758
$
729,314
Net cash provided by (used in) financing activities
$
-
$
-
Net Cash Used In Operating Activities
Net cash used in operating activities was $1,426,214
for the three months ended March 31, 2025, as compared to $763,289 for the respective period in 2024, primarily due to the net loss
of $1,988,337, as well as a combined decreases in prepaid assets and accrued expenses of $231,708 offset by increases in stock compensation
of $475,495 and in accounts payable of $33,469.
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Net Cash Provided By Investing Activities
Net cash provided by investing activities during
the three months ended March 31, 2025 was $1,473,758 which was due to short-term investment sales of $6,496,000 offset by purchases
of $4,998,663 of short-term investments, the purchase of patents of $20,540 and the purchase of trademarks of $3,039. Net cash provided
by investing activities during the three months ended March 31, 2024 was $729,314 and was due to short-term investment sales of $6,235,053
offset by purchases of $5,439,431of short-term investments, the purchase of patents of $47,593 and the purchase of trademarks of $18,715.
Uses and Availability of Additional Funds
Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, manufacturing development costs, legal and other regulatory expenses, and general administrative costs. Although we have produced Gen-2, which is selling in China where it is approved for certain utilizations by medical practitioners, the successful development of our future products is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the clinical development of Gen-3 and obtain regulatory approvals. We are also unable to predict when, if ever, net cash inflows from revenues will enable us to be cash flow positive. This is due to the numerous risks and uncertainties associated with developing products, including, among others, the uncertainty of:
●
successful enrolment in, and completion of clinical trials;
●
performing preclinical studies and clinical trials in compliance with the FDA or any comparable regulatory authority requirements;
●
the ability to outsource the manufacture of our products for development, clinical trials and/ or potential commercialization;
●
obtaining and maintaining patent, trademark and trade secret protection for our products;
●
scaling the commercial sales of products, if and when approved, whether alone or in collaboration with others;
●
acceptance of existing therapies, and future therapies, if and when approved, by healthcare providers, physicians, clinicians, patients and third-party payors;
●
competing effectively with other therapies;
●
obtaining and maintaining healthcare coverage and adequate reimbursement;
●
protecting our rights in our intellectual property portfolio; and
●
maintaining a continued acceptable safety profile of our products following approval.
Liquidity and Capital Resources
As of March 31, 2025, the Company had a significant accumulated deficit of $86.7 million. For the three months ended March 31, 2025, the Company had a loss from operations of $2.0 million and negative cash flows from operations of $1.4 million. The Company’s operating activities consume the majority of its cash resources. The Company will continue to service existing customers in the United States. The Company anticipates that it will continue to incur operating losses as it executes its development plans through 2025, as well as other potential strategic and business development initiatives. In addition, the Company has had and expects to have negative cash flows from operations, at least into the near future. The Company previously funded these losses primarily through the sale of equity. As of March 31, 2025, the Company had cash and cash equivalents on hand of approximately $622,000.
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Our ability to continue as a going concern will
be dependent upon our ability to execute on our business plan, including the ability to obtain U.S. approval for the sale of our devices
in the United States, and, if necessary, our ability to raise additional capital. Management has evaluated the significance of the conditions
as of March 31, 2025 and the impact of the completion of the public offering referred to in Note 10 hereof, and believes that we will
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, although no assurances can be given as to our ability to deliver on our revenue plans or that unforeseen
expenses may arise, or that we will have sufficient liquidity. These plans were therefore determined not to be sufficient to overcome
the presumption of substantial doubt about the Company’s ability to continue as a going concern within one year after the date that
the unaudited condensed consolidated financial statements are issued.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with GAAP and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Note 3, “Summary of Significant Accounting Policies and New Accounting Standards” of the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the 2024 Form 10-K describe the significant accounting policies and methods used in the preparation of the Company’s unaudited condensed consolidated financial statements. There have been no material changes to the Company’s critical accounting estimates since the 2024 Form 10-K.
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 adopted this update and will apply during the formation of future joint ventures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable segment. The ASU is effective on a retrospective basis for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted this update effective December 31, 2024, on a retrospective basis. Refer to Note 9 for the disclosures related to our single operating segment.
In December of 2023, the FASB issued ASU 2023-09 , Income Taxes (Topic 740): Improvements to Income Tax Disclosures, establishes incremental disaggregation of income tax disclosures pertaining to the effective tax rate reconciliation and income taxes paid. This standard is effective for fiscal years beginning after December 15, 2024, and requires prospective application with the option to apply it retrospectively. Early adoption is permitted. The Company is currently evaluating the potential impact of adopting this standard on our disclosures.
In November 2024, the FASB issued ASU 2024-03 , Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses . This ASU requires additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the face of the income statement. The standard is effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the effect of adopting this guidance on its consolidated financial statements.
All other newly issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to the Company.
Contractual Obligations
See Note 7 – Commitments and Contingencies in the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for a summary of our contractual obligations.
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Continued Nasdaq Listing
Our shares of our common stock are listed on the Capital Market tier of the Nasdaq Stock Market, or Nasdaq, under the symbol "NXL.” Nasdaq has rules for continued listing, including, without limitation, minimum market capitalization, minimum stockholders’ equity and other requirements. In order to maintain that listing, we must satisfy minimum financial and other continued listing requirements and standards, including the Minimum Bid Price Rule (as discussed below) and those regarding director independence and independent committee requirements, minimum stockholders’ equity, and certain corporate governance requirements. There can be no assurances that we will be able to comply with the applicable listing standards.
Minimum Bid Price Requirement
We are required to maintain a minimum bid price of $1.00 per share. On May 10, 2023, the Company received written notice from 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 5550(a)(2).
On 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).
Minimum Stockholder Equity Requirement
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. 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.
If the Company’s common stock and warrants are delisted by Nasdaq, it could adversely affect the Company’s ability to attract new investors, decrease the liquidity of the outstanding shares of common stock, reduce the Company’s flexibility to raise additional capital, reduce the price at which the Company’s common stock and warrants trade, and increase the transaction costs inherent in trading such shares and warrants with overall negative effects for the stockholders. In addition, delisting of the Company’s common stock and warrants could deter broker-dealers from making a market in or otherwise seeking or generating interest in the Company’s common stock. Furthermore, the delisting of the Company’s common stock and warrants from The Nasdaq Stock Market could adversely affect the business, financial condition and results of operations of the Company.
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