10-K: Nexalin Faces Going Concern, Nasdaq Delisting Amid Losses

Nexalin Technology, Inc. reported significant operating losses and a going concern warning, alongside Nasdaq minimum bid price non-compliance, despite advancing its neurostimulation product pipeline.

Summary

• Nexalin Technology, Inc. reported a net loss of approximately $8.22 million for the year ended December 31, 2025, an increase from $7.61 million in 2024.
• The company's accumulated deficit reached approximately $92.87 million as of December 31, 2025.
• Revenue increased by 79% to approximately $302,000 in 2025, primarily driven by device sales to international customers and equipment sales, offset by a decrease in licensing fees.
• Operating expenses rose by 9% to approximately $8.63 million in 2025, mainly due to increases in salaries and benefits, professional fees, and selling, general, and administrative costs.
• The company received a deficiency letter from Nasdaq on January 21, 2026, for not meeting the minimum bid price requirement of $1.00 per share, with a compliance period until July 20, 2026.
• Management identified material weaknesses in internal controls over financial reporting, specifically due to insufficient segregation of duties and IT controls.
• The company's independent auditors expressed substantial doubt about its ability to continue as a going concern.
• Nexalin is advancing its Gen-2 SYNC and Gen-3 HALO neurostimulation devices, with the FDA formally accepting a Q-Submission for Gen-2 SYNC for Alzheimers disease and dementia in October 2025.
• Clinical trials for the Gen-3 HALO device for anxiety and insomnia are planned for the U.S., Brazil, and China throughout 2026.
• A wholly foreign-owned enterprise (WOFE) was established in China in January 2026, though it has not yet commenced operations or generated revenue.
• The company continues to derive revenue from legacy Gen-1 device licensing fees and electrode sales, but new U.S. marketing for Gen-1 devices for anxiety and insomnia is paused due to 2019 FDA reclassification.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this filing with low sentiment due to significant and increasing net losses, negative cash flow from operations, a 'going concern' warning from auditors, and the immediate threat of Nasdaq delisting. While product development shows promise, the severe financial and operational challenges overshadow these advancements.

Positives

• Revenue increased by 79% to $301,647 in 2025, primarily from increased international device sales and equipment sales.
• Gross profit increased by 82% to $240,274 in 2025, with a gross profit margin of 80%.
• The FDA formally accepted the Q-Submission for the Gen-2 SYNC system for Alzheimers disease and dementia in October 2025, marking a significant step towards U.S. clinical studies.
• Preliminary data from UCSD and recent published data from Asia support the safety of the 15 milliamp waveform technology used in Gen-2 SYNC and Gen-3 HALO devices.
• The Gen-2 device received regulatory approval in Oman and Brazil in 2024.
• Clinical trials for the Gen-2 device in China during 2023 showed positive results in reducing depressive symptoms in patients with treatment-resistant depression (TRD), with no observed adverse events.
• The company is developing a proprietary virtual clinic platform and a Gen-3 HALO headset for home-based treatment with physician oversight, aiming to address mental health stigma and improve accessibility.
• The company holds 5 U.S. non-provisional utility patents, 2 U.S. design patents, and 14 foreign design patents, with additional pending applications, protecting its neurostimulation technology.

Negatives

• Reported a net loss of approximately $8,222,000 for the year ended December 31, 2025, an 8% increase from $7,607,000 in 2024.
• Accumulated deficit grew to approximately $92,867,000 as of December 31, 2025.
• Negative cash flows from operating activities increased to approximately $4,958,000 in 2025 from $3,944,000 in 2024.
• Independent auditors' report states substantial doubt about the company's ability to continue as a going concern.
• Received a Nasdaq deficiency letter on January 21, 2026, for failing to maintain a minimum bid price of $1.00 per share, risking delisting if compliance is not regained by July 20, 2026.
• Identified material weaknesses in internal controls over financial reporting, including insufficient segregation of duties and IT controls.
• The company has a limited operating history and has had only limited sales of its products and services to date.
• The FDA's December 2019 reclassification of CES devices halted new U.S. sales and marketing of Gen-1 devices for anxiety and insomnia, and requires a full PMA for depression treatment with Gen-2/3 devices.
• The company will require substantial additional funding to continue operations and product development, which may not be available on acceptable terms or at all, leading to potential dilution for existing stockholders.

Risks

• Expect to continue incurring significant expenses and operating losses, and may never achieve or maintain profitability.
• Substantial doubt about the ability to continue as a going concern, highly dependent on executing the business plan and obtaining additional financing.
• Limited operating history and limited sales make it difficult to evaluate business prospects and future performance.
• Need to raise substantial additional capital, which may not be available on acceptable terms or at all, potentially forcing delays or cessation of product development/commercialization.
• Future capital raises through equity offerings will dilute existing stockholders' ownership interests, and debt financing may involve restrictive covenants.
• Dependence on the success of Gen-2 SYNC and Gen-3 HALO devices, which are in clinical development and have not completed advanced clinical trials; failure to obtain regulatory approval or significant delays could prevent profitability.
• Success in preclinical studies or early clinical trials does not ensure similar results in later clinical trials.
• Potential delays or difficulties in enrolling patients in clinical trials could delay or prevent regulatory approvals.
• Reliance on third parties (research institutions, Wider in China) to conduct clinical trials, who may not perform satisfactorily, meet deadlines, or comply with regulations.
• Reliance on collaborations with third parties for quality assurance, manufacturing, and other activities; failure to maintain these relationships could increase costs or prevent finding other collaborators.
• Even if products receive marketing approval, they may fail to achieve market acceptance by healthcare providers, physicians, patients, and third-party payors.
• Coverage and adequate reimbursement may not be available for products from third-party payors, negatively impacting demand or price.
• Competition from other companies with greater financial/human resources, established sales/marketing/distribution capabilities, and more R&D experience.
• Product liability lawsuits could result in substantial liabilities and limit commercialization.
• Future success depends on retaining key executives and attracting/retaining qualified scientific, clinical, commercialization, and sales/marketing personnel; loss of key employees could impede objectives.
• Expected significant growth in employees and operations scope may be difficult to effectively manage.
• Joint Venture in China is subject to regulatory, political, economic, and legal risks, including uncertainties in the PRC legal system and potential difficulties in enforcing contractual/IP rights.
• Changes in U.S. trade policy, including tariffs and restrictions on goods from China, could increase manufacturing costs and disrupt supply chains.
• Potential subjection to PRC laws relating to data security, cybersecurity reviews, and restrictions over foreign investments.
• Inability to obtain or maintain adequate patent protection for technologies and products, or insufficient scope of protection, could allow competitors to commercialize similar products.
• Involvement in expensive and time-consuming lawsuits to protect or enforce intellectual property.
• Third parties may assert intellectual property claims against the company.
• Reliance on trade secrets and unpatented know-how; risk of breach of confidentiality agreements or independent development by competitors.
• Regulatory approval process with the FDA and foreign agencies is expensive, time-consuming, and uncertain.
• Failure to obtain marketing approval in foreign jurisdictions would prevent products from being marketed there.
• Approved products are subject to ongoing review and extensive regulation, including post-marketing studies, surveillance, and compliance with advertising/promotion requirements.
• Business activities may be subject to the U.S. Foreign Corrupt Practices Act (FCPA), anti-bribery laws, export controls, trade sanctions, and import regulations, with potential for fines, criminal sanctions, and prohibitions.
• Potential subjection to healthcare fraud and abuse laws (federal Anti-Kickback Statute, False Claims Act), leading to civil, criminal, and administrative penalties.
• Trading price of common stock has been and is likely to continue to be volatile.
• Non-compliance with Nasdaq minimum bid price requirement could lead to delisting.
• Provisions in corporate charter documents and Delaware law could discourage, delay, or prevent a merger, acquisition, or change in control.
• As an emerging growth company and smaller reporting company, reliance on exemptions from certain disclosure requirements may make common stock less attractive and more volatile.
• Material weaknesses in internal controls over financial reporting could impair ability to produce accurate financial statements on a timely basis.

Future Outlook

Nexalin plans to conduct clinical trials for its Gen-2 SYNC and Gen-3 HALO devices in the U.S., Brazil, and China throughout 2026, aiming for FDA clearance and commercialization for various mental health conditions including anxiety, insomnia, depression, substance use disorder, TBI, PTSD, opioid addiction, alcoholism, chronic pain, Alzheimers disease, and dementia. The company intends to launch a virtual clinic model with a home-based Gen-3 HALO headset, supported by an IT management platform, to disrupt traditional mental health treatment. Strategic plans are also in development to use clinical trial data to support an application for the CE-mark in the European Union. The company expects to continue incurring operating losses and negative cash flows in the near future, relying on additional financing to achieve its business objectives.

Management Comments

• Nexalin research team believes that the new 15 milliamp Gen-2 SYNC and Gen-3 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.
• Nexalin regulatory team is developing strategies for pilot trials and/or pivotal trials for various mental health disease states.
• 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.
• 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 patients home and monitored by licensed healthcare providers.
• Management believes that, based on the market data and current trends, the depression market – like the anxiety and insomnia market – creates enormous potential for our products.
• We believe that this represents a significant market opportunity for our company in Substance Use Disorders (Opioid Addiction) market.
• We believe our products could be leveraged to extend the quality of life for millions of people who are diagnosed with Alzheimers disease.
• Our sales model is to place more than 1,000 Gen-2 and Gen-3 devices on the global stage.
• Management has evaluated the significance of the conditions as of December 31, 2025 and have concluded that we will not have sufficient cash and cash equivalents and short-term investments to satisfy our anticipated cash requirements for the next twelve months from the issuance of these consolidated financial statements.

Industry Context

StockSavvy.ai notes that Nexalin operates in the rapidly evolving neurostimulation and bioelectronic medicine sector, targeting the significant global mental health and cognitive disorder markets. The company's strategy to develop non-invasive, drug-free treatments aligns with a broader industry trend seeking alternatives to traditional pharmaceuticals and psychotherapy, which often carry side effects and stigma. The focus on virtual clinics and home-based care for conditions like anxiety and insomnia positions Nexalin to capitalize on the growing digital health and telehealth trends accelerated by the post-pandemic environment. However, the industry is highly competitive, with established pharmaceutical companies and other neurostimulation firms possessing greater resources and market presence. Nexalin's success hinges on navigating complex regulatory pathways, achieving market acceptance, and securing adequate reimbursement, which are common challenges for innovative medical device companies.

Comparison to Industry Standards

• Nexalin's Gen-1 device was reclassified by the FDA, requiring new 510(k) applications for anxiety/insomnia (Class II) and a full PMA for depression (Class III). This is a significant hurdle compared to devices that maintain their original, less stringent classifications or have already secured broader approvals.
• The company's new 15 milliamp waveform for Gen-2 SYNC and Gen-3 HALO is touted for deeper brain penetration and enhanced patient response without side effects, aiming to differentiate from existing CES devices (like its own Gen-1 at 4 milliamps) and other neurostimulation techniques such as transcranial direct current stimulation (tDCS) and repetitive transcranial magnetic stimulation (rTMS).
• rTMS, a competitor technology, is FDA cleared only for patients who failed anti-depressants, and is noted for side effects, high cost, and moderate efficacy. Nexalin aims to offer a more cost-effective and accessible alternative, particularly with its virtual clinic and home-based HALO headset.
• The global chronic pain treatment market is projected to reach $173 billion by 2033, growing at a CAGR of 7%. Nexalin's patented electrostimulation device for chronic pain, currently in prototype development, would enter a large but competitive market with existing pharmaceutical and device-based solutions.
• The global Alzheimers therapeutics market is projected to reach $13.7 billion by 2030 with a CAGR of 20%. Nexalin's Gen-2 SYNC Q-Submission acceptance for Alzheimers and dementia positions it to potentially address a high-growth, unmet medical need, but it faces competition from numerous companies developing drugs and other therapies for neurodegenerative diseases.

Management Changes

Corporate Governance

Legal Proceedings

• Sarah Veltz v. Nexalin Technology, Inc. et al.: A lawsuit filed on January 20, 2021, alleging unpaid wages, benefits, and sexual harassment. The matter was settled confidentially on May 12, 2025, with a full release provided to the company and its affiliates, and the case has been dismissed.
• Employment Development Department (EDD) of the State of California: Settlement discussions regarding the classification of certain workers as contractors instead of employees. The initial liability of approximately $300,000 was reduced to approximately $30,000 after reassessment and was paid in full prior to December 31, 2025. This matter is fully resolved.

Related Party Transactions

• Joint Venture with Wider Come Limited: Formalized on May 31, 2023, for clinical development, marketing, sale, and distribution of Gen-2 devices in China and other regions. Wider and Nexalin own 52% and 48% respectively. Wider was obligated to fund initial 12 months of operations. The company recognized $(1,048) net loss from the affiliate in 2025 and $4,851 net earnings in 2024. Revenue from the Joint Venture and Wider was $49,671 in 2025 and $4,890 in 2024.
• U.S. Asian Consulting Group, LLC: A consulting agreement entered on May 9, 2018, extended to September 2030, with members Marilyn Elson (former controller) and Leonard Osser (shareholders). The agreement was amended on July 1, 2024, increasing the monthly fee to $16,667, including a one-time stock grant of 100,000 shares, and a semi-annual share award of $100,000 (298,224 shares earned but not issued as of December 31, 2025). Stock compensation related to semi-annual grants was $149,000 in 2025 and $100,000 in 2024. Monthly cash portion compensation was $200,000 in 2025 and $160,000 in 2024.
• Transition and Consulting Agreement with Marilyn Elson: Entered in July 2025, commencing September 30, 2025, upon her voluntary retirement. Consideration included a stock option for 300,000 shares, with a grant date fair value of $335,700, vesting over time.
• Compensation to Leonard Osser: Issued 83,333 shares of common stock in 2025 ($80,000 stock compensation expense) and 200,000 shares in 2024 ($192,000 stock compensation expense) for services on the Strategic Advisory Board.
• Lease with IIcom Strategic Inc.: Sub-lease for principal executive office (4,000 sq ft) through an entity controlled and owned by the Chief Executive Officer, Mark White. The company pays direct and indirect rent costs to the third-party landlord. Lease costs were approximately $80,000 in 2025 and $54,000 in 2024. The sublease expired in February 2026, and the company is currently paying month-to-month.

Stakeholder Impact

• Shareholders: Face significant dilution risk from future equity offerings needed to fund operations. The Nasdaq minimum bid price non-compliance poses a delisting risk, which could severely impact liquidity and the market price of common stock. The 'going concern' warning indicates a high risk of investment loss. Concentration of ownership among executive officers, directors, and principal stockholders (22.14%) may limit influence of new investors.
• Employees: The company's ability to attract and retain qualified personnel is critical for future success, with compensation packages including equity incentives. The identified material weaknesses in internal controls could impact employee morale and operational efficiency.
• Customers (Healthcare Providers/Physicians/Patients): Potential for new, non-invasive, drug-free treatment options for mental health conditions (anxiety, insomnia, depression, Alzheimers, etc.) with the Gen-2 SYNC and Gen-3 HALO devices. The virtual clinic model aims to provide privacy and convenience, potentially increasing access to care. However, market acceptance and insurance reimbursement are crucial for commercial success.
• Suppliers/Manufacturers: The company relies on third-party contractors for manufacturing and quality assurance. Supply chain disruptions, especially related to China, could impact product availability and costs.
• Creditors: The 'going concern' warning and recurring losses indicate increased risk for creditors, potentially affecting the company's ability to secure debt financing on favorable terms.

Next Steps

• Regain compliance with Nasdaq's minimum bid price requirement by July 20, 2026, or secure a second 180-day compliance period.
• Continue discussions with the FDA to develop a strategy and protocol for the Gen-2 SYNC system for Alzheimers disease and dementia.
• Execute additional pilot trials and/or pivotal trials for the Gen-3 HALO device for anxiety and insomnia in the United States, Brazil, and China throughout 2026.
• Develop a strategy for a new PMA application in the United States for the treatment of depression utilizing both Gen-2 SYNC and Gen-3 HALO.
• Complete negotiations for a broader services agreement with Lindus Health Limited for clinical trial support.
• Evaluate potential strategic collaboration with GreenLight Venture LLC.
• Continue developing the proprietary virtual clinic platform and patient app for the Gen-3 HALO headset.
• Conduct a complete reimbursement assessment starting in 2024 to develop a strategy to acquire reimbursement for products.
• Identify and investigate future research and development projects related to advancements in neurostimulation and neuromodulation technology for future patent filings.
• Implement new financial accounting controls and processes, and hire qualified personnel to remediate identified material weaknesses in internal controls over financial reporting.

Key Dates

Recommendation

Nexalin Technology, Inc. faces severe financial distress, evidenced by substantial and increasing net losses, negative cash flow from operations, and an explicit 'going concern' warning from its auditors. The immediate threat of Nasdaq delisting due to minimum bid price non-compliance further exacerbates the risk profile, potentially leading to a significant loss of liquidity and investor confidence. While the company is making progress in product development and regulatory submissions for its next-generation devices, these advancements are overshadowed by the fundamental financial instability and operational control weaknesses. The need for substantial additional capital, likely through dilutive equity offerings, will further pressure the stock price. For a seasoned investor, the cumulative risks far outweigh any speculative upside, making a 'strong sell' recommendation appropriate.

Keywords

Neurostimulation, Mental Health, SEC Filing, 10-K, FDA Approval, Clinical Trials, Nasdaq Delisting, Going Concern, Financial Losses, Intellectual Property, Corporate Governance, Medical Device, Anxiety Treatment, Insomnia Treatment, Depression Treatment, Alzheimers Disease, Dementia, Traumatic Brain Injury, PTSD, China Market, Capital Raise, Internal Controls