10-Q: Nexalin Tech Faces Delisting Amidst Growing Losses

Nexalin Technology, Inc. reported increased operating losses and a going concern warning, alongside receiving a staff delisting determination from Nasdaq, despite advancing its clinical trials and acquiring PONM, Inc.

Summary

• Nexalin Technology, Inc. reported a net loss of $2.24 million for the three months ended June 30, 2026, and $4.34 million for the six months ended June 30, 2026.
• The company received a Staff Delisting Determination from Nasdaq due to not meeting the minimum bid price requirement and also faces substantial doubt about its ability to continue as a going concern.
• Revenue for the three months ended June 30, 2026, was $12,161, a decrease of 83% from the prior year, and $27,111 for the six months ended June 30, 2026, a decrease of 76%.
• Operating expenses increased by 35% for the three months and 18% for the six months, primarily driven by higher research and development costs for clinical trials and increased professional fees.
• The company completed the acquisition of PONM, Inc. for approximately $1.3 million in stock, which is expected to enhance its Nexalin NeuroCare digital health platform.
• Nexalin is actively working to regain compliance with Nasdaq listing requirements, including evaluating a potential 30-to-1 reverse stock split.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as negative due to significant operating losses, a going concern warning, and Nasdaq delisting proceedings, despite progress in clinical trials and a strategic acquisition.

Positives

• Initiated FDA-cleared clinical trial for the Gen-3 HALO device for insomnia treatment.
• Completed the acquisition of PONM, Inc., strengthening the Nexalin NeuroCare digital health platform.
• FDA formally accepted the Q-Submission for the Gen-2 SYNC system targeting Alzheimer's disease and dementia.
• Gross margin improved to 75% for the three months ended June 30, 2026, from 68% in the prior year, due to a favorable revenue mix.

Negatives

• Significant increase in operating expenses, particularly in R&D and professional fees.
• Substantial operating losses continue, with a net loss of $2.24 million for the quarter and $4.34 million for the six months.
• Received a Staff Delisting Determination from Nasdaq, posing a significant risk to continued listing and financing capabilities.
• The company has substantial doubt about its ability to continue as a going concern.
• Revenue decreased significantly, down 83% for the quarter and 76% for the six months, primarily due to lower equipment sales.

Risks

• Potential delisting from the Nasdaq Capital Market, which could severely impact liquidity, market access, and the ability to raise capital.
• Substantial doubt about the company's ability to continue as a going concern due to ongoing operating losses and negative cash flows.
• Failure to realize the anticipated benefits from the PONM, Inc. acquisition if the acquired technology does not perform as expected or if GLV fails to meet its support obligations.
• Dependence on GreenLight Ventures, LLC (GLV) for continued development and support of the acquired technology, with a limited 24-month collaboration term.
• The company has material weaknesses in internal control over financial reporting related to segregation of duties and IT access controls.

Future Outlook

The company expects to continue incurring operating losses and negative cash flows as it advances its clinical development, regulatory, and product development initiatives. Additional capital will be required to fund planned operations and strategic initiatives, with management planning to pursue additional equity financing, expand international revenue, and manage operating expenditures.

Management Comments

• Management believes integrating its technologies strengthens the Companys clinical development programs, regulatory strategy and future commercialization efforts.
• Management believes the acquisition of PONM, Inc. expands the Companys Nexalin NeuroCare digital health platform, which complements its proprietary Deep Intracranial Frequency Stimulation (DIFS) technology and HALO Clarity device platform.
• Management believes the clinical trial for the Gen-3 HALO device represents an important milestone in the continued development of the device and is intended to support future regulatory submissions to the FDA.

Industry Context

StockSavvy.ai notes that the neurostimulation industry is highly competitive and subject to rapid technological change. Nexalin's focus on mental health conditions aligns with a growing market need, but its success is contingent on navigating complex regulatory pathways and achieving market acceptance against established competitors.

Related Party Transactions

• Consulting agreement with U.S. Asian Consulting Group, LLC, whose members include a former controller and a board member.
• Collaboration Agreement with GreenLight Ventures, LLC (GLV), where a board member holds a minority ownership interest in GLV.
• Acquisition of PONM, Inc. from GLV, a related party transaction.

Stakeholder Impact

• Shareholders face potential delisting from Nasdaq, which could negatively impact stock liquidity and value.
• The going concern warning suggests potential financial instability, impacting investor confidence.
• Employees may face uncertainty due to the company's financial situation and potential delisting.
• Suppliers and creditors could be affected by the company's ability to meet its financial obligations.

Next Steps

• Continue advancing clinical development of SYNC and HALO product candidates.
• Pursue FDA marketing authorization and CE marking for the SYNC system.
• Expand the capabilities of the Nexalin NeuroCare platform.
• Protect and enhance the intellectual property portfolio.
• Regain compliance with Nasdaq continued listing requirements.
• Evaluate alternatives to regain compliance, including a potential reverse stock split.

Key Dates

Recommendation

The company is facing significant financial distress, including substantial operating losses, a going concern warning, and a pending Nasdaq delisting. While there are ongoing clinical developments, the immediate risks associated with delisting and continued cash burn outweigh the potential future benefits. Investors should consider selling their holdings due to the high probability of further stock depreciation and the uncertainty of future financing.

Keywords

neurostimulation, medical device, clinical trial, FDA, insomnia, Alzheimer's disease, dementia, digital health platform