8-K: Nexalin Technology Announces Change in Independent Registered Public Accounting Firm

Nexalin Technology, Inc. has replaced Marcum LLP with CBIZ CPAs P.C. as its independent registered public accounting firm, effective April 16, 2025.

Summary

• Nexalin Technology, Inc. (the Company) announced that Marcum LLP resigned as the Company's independent registered public accounting firm on April 16, 2025.
• The Company engaged CBIZ CPAs P.C. as its new independent registered public accounting firm, with the approval of the Audit Committee of the Company's Board of Directors, also on April 16, 2025.
• Marcum's reports on the Company's financial statements for the fiscal years ended December 31, 2024 and December 31, 2023, did not contain an adverse opinion or a disclaimer of opinion, but included an explanatory paragraph regarding substantial doubt about the Company's ability to continue as a going concern.
• There were no disagreements with Marcum on accounting principles, financial statement disclosure, or auditing scope or procedure during the two most recent fiscal years and the subsequent interim period.
• Material weaknesses were identified in internal disclosure controls and procedures related to segregation of duties and IT controls, as disclosed in the Company's Form 10-Ks for the fiscal years ended December 31, 2024 and 2023.
• The Company did not consult with CBIZ CPAs P.C. regarding accounting principles or the type of audit opinion prior to their engagement.

Sentiment

Score: 4

Explanation: The change in auditors, coupled with previously disclosed material weaknesses and a going concern note, raises concerns about the company's financial health and internal controls. This warrants a cautious sentiment.

Positives

• The transition to a new auditor was approved by the Audit Committee of the Board of Directors.
• Marcum agreed with the statements made by the Company regarding their dismissal as the independent registered public accounting firm.

Negatives

• Marcum's audit reports for 2023 and 2024 included an explanatory paragraph about the Company's ability to continue as a going concern.
• Material weaknesses in internal controls were previously disclosed in the company's 10-K filings.

Risks

• The previously identified material weaknesses in internal controls could pose ongoing risks to financial reporting.
• The explanatory paragraph in Marcum's audit reports regarding the Company's ability to continue as a going concern indicates potential financial instability.

Management Comments

• Mark White, Chief Executive Officer, signed the report on behalf of Nexalin Technology, Inc.

Industry Context

Changes in auditors are not uncommon, but the circumstances surrounding the change, such as disagreements or reportable events, can be significant. The acquisition of Marcum's attest business by CBIZ CPAs P.C. may have influenced the change.

Comparison to Industry Standards

• It's common for companies to change auditors periodically, but the presence of material weaknesses and a going concern note is a red flag.
• Companies like Enron and WorldCom had auditor issues before their collapse, so this should be monitored closely.

Stakeholder Impact

• Shareholders may be concerned about the change in auditors and the previously disclosed material weaknesses.
• Creditors may reassess the company's creditworthiness due to the going concern note.

Key Dates

Keywords

auditor, CBIZ CPAs P.C., Marcum LLP, independent registered public accounting firm, internal controls, financial reporting, Nexalin Technology