Nexalin Technology, Inc. (NXL) - 10-K Summary
Business Context and Reporting Period
Company: Nexalin Technology, Inc.
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2025
Business Overview: Nexalin designs and develops non-invasive neurostimulation medical devices to treat mental health conditions (anxiety, insomnia, depression) and cognitive disorders (Alzheimer's, dementia). The company's legacy Gen-1 device is restricted in the U.S. following FDA reclassification, with current revenue derived from servicing existing units and international sales. The company is focused on advancing its Gen-2 SYNC (clinical console) and Gen-3 HALO (patient headset) devices, which utilize a proprietary 15-milliamp waveform.
Key Financial Metrics (Year Ended Dec 31, 2025)
| Metric | 2025 | 2024 |
|---|---|---|
| Net Revenue | $301,647 | $168,721 |
| Gross Profit | $240,274 | $132,128 |
| Gross Margin | 79.7% | 78.3% |
| Net Loss | $(8,222,181) | $(7,607,182) |
| Accumulated Deficit | $(92,867,412) | $(84,645,231) |
| Cash & Cash Equivalents | $654,783 | $574,485 |
| Short-Term Investments | $3,068,429 | $2,905,438 |
| Total Current Assets | $4,299,270 | $3,961,141 |
| Total Current Liabilities | $887,333 | $546,694 |
| Working Capital | $3,411,937 | $3,414,447 |
| Operating Cash Flow | $(4,957,658) | $(3,944,390) |
Material Changes vs. Prior Period
- Revenue Growth: Net revenue increased 79% to $301,647, driven primarily by a $81,000 increase in device sales to international customers and a $47,000 increase in equipment (electrodes/cables) sales. This was partially offset by a $20,000 decrease in licensing fees.
- Expense Increases: Total operating expenses rose 9% to $8.63 million. Key drivers included a $379,000 increase in salaries/benefits (new hires, bonuses) and a $303,000 increase in professional fees (legal, accounting, marketing related to capital raises).
- R&D Efficiency: Research and development expenses decreased 9% to $1.08 million, largely due to the absence of a one-time $400,000 non-cash stock compensation charge recorded in 2024 for the Joint Venture partner.
- Capital Raising: The company utilized its At-The-Market (ATM) offering program, selling 691,407 shares for net proceeds of approximately $524,000 in 2025. Subsequent to year-end, an additional 1.4 million shares were sold for net proceeds of $756,000.
Guidance, Outlook, Risks, and Contingencies
- Going Concern Warning: The independent auditor has issued a "substantial doubt" opinion regarding the company's ability to continue as a going concern. Management acknowledges that current cash and investments are insufficient to fund operations for the next 12 months without additional financing.
- Regulatory Progress:
- Gen-2 SYNC: FDA formally accepted the Q-Submission for Alzheimer's and dementia treatment in October 2025.
- Gen-3 HALO: Pre-submission documents filed for insomnia; clinical trials planned for 2026 in the U.S., Brazil, and China.
- International: Gen-2 device approved in China (NMPA), Brazil, and Oman.
- Nasdaq Compliance Risk: On January 21, 2026, the company received a deficiency letter for failing to maintain the $1.00 minimum bid price. The company has until July 20, 2026, to regain compliance or risk delisting.
- Internal Controls: The company identified material weaknesses in internal controls over financial reporting, specifically regarding segregation of duties and IT access controls.
- Legal Contingencies: A lawsuit regarding unpaid wages and harassment was settled in May 2025. A dispute with the California Employment Development Department regarding worker classification was settled for approximately $30,000.
Investor Verification Checklist
- Cash Runway: Verify the sufficiency of the $3.7 million in liquid assets (cash + short-term investments) against the projected burn rate of ~$5 million annually.
- Financing Plan: Confirm the status of the remaining $2.85 million capacity under the ATM program and any plans for additional equity raises to address the going concern warning.
- Nasdaq Status: Monitor the stock price to ensure it meets the $1.00 minimum bid requirement for 10 consecutive days prior to July 20, 2026, to avoid delisting.
- Regulatory Milestones: Track the timeline for FDA feedback on the Gen-2 SYNC Q-Submission and the initiation of pivotal clinical trials for Gen-3 HALO.
- Revenue Concentration: Note that three customers accounted for 79% of 2025 revenue, with significant exposure to international markets (China sales were $190,301 vs. $111,346 in the U.S.).