Nexalin Technology, Inc.
For the period ended Mar 31, 2026. Filed May 8, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 8, 2026
NXL$1.47+5.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-14.
0001829126-25-009159
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-08.
0001829126-26-004854
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 82 previous paragraphs and 64 current paragraphs.
15 unchanged; 12 reworded; 36 added; 53 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 15 previous and 14 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (36)
Current report
Special Note Regarding Forward-Looking Statements
Current report
References in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “us,” “we,” “our,” and similar terms refer to Nexalin Technology, Inc. and its subsidiaries. This discussion contains forward-looking statements as that term is defined within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. The events described in forward-looking statements contained in this discussion may not occur. Generally, these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions that may be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Our actual results may differ materially from those anticipated in these forward-looking statements. For convenience of presentation some of the numbers have been rounded in the text below.
Current report
Nexalin Technology, Inc. is a medical device company focused on developing innovative neurostimulation products to address the global mental health epidemic. The Company generates limited domestic revenue primarily from legacy Gen-1 device licensing fees and electrode sales, as U.S. marketing of new Gen-1 devices has been paused following the FDA’s December 2019 reclassification of cranial electrotherapy stimulation devices and international sales of our Gen-2 device and supplies. During fiscal year 2025 and the first quarter of 2026, the Company advanced its next-generation product development, with the FDA formally accepting the Company’s Q-Submission for its Gen-2 SYNC system targeting Alzheimer’s disease and dementia, and clinical trials for the Gen-3 HALO device for insomnia in the United States. Management’s priorities include obtaining FDA clearance for its Gen-2 and Gen-3 devices and executing U.S. clinical trials. The Company faces significant challenges, including substantial doubt about its ability to continue as a going concern due to recurring losses and negative cash flows, a requirement to regain compliance with Nasdaq’s minimum bid price requirement, and material weaknesses in internal control over financial reporting related to segregation of duties and IT access controls. The neurostimulation industry remains competitive and subject to rapid technological change, and the Company’s success depends on its ability to obtain regulatory approvals, protect its intellectual property, and achieve market acceptance for its products.
Current report
Recent Developments
Current report
Insomnia FDA Study:
Current report
On April,17, 2026, the Company entered into a Scope of Work (the “SOW”) with Lindus Health Limited (“Lindus Health”), a clinical research organization based in the United Kingdom. The SOW is governed by a Master Services Agreement (“MSA”) previously entered into between the parties and sets forth the terms under which Lindus Health will conduct the Company’s pivotal clinical trial for its HALO Clarity device (the “Pivotal Study”).
Current report
Under the SOW, the Company will pay Lindus Health direct fees in an aggregate amount of approximately $944,820, plus certain pass-through expenses. Payments of direct fees are structured on a milestone basis, and pass-through expenses are invoiced on a monthly basis.
Current report
The term of the SOW continues until completion of all services described therein, unless terminated earlier in accordance with the MSA. The SOW provides that certain changes to the Pivotal Study, such as addition of new clinical sites, increases in enrolled participants, protocol amendments after study start-up, amendments to critical analyses, extension of study duration, and requests for additional platform features or integrations, will require a change order, which may result in adjustments to the scope, budget, or timeline.
Current report
The decrease in revenue for the three months ended March 31, 2026, compared to the same period in 2025, was primarily due to lower equipment sales to an international customer during the current period. We expect device and equipment-related revenue to continue to fluctuate period to period based on customer purchasing patterns, particularly with respect to international customers.
Current report
We expect gross margins to continue to be influenced by the relative proportion of licensing revenue versus device and equipment-related sales in future periods.
Current report
Professional fees increased by approximately $127,000, primarily due to higher marketing and investor relations expenses of approximately $145,000, partially offset by a decrease in accounting and legal fees of approximately $38,000. The remaining increase relates to changes in other immaterial expense categories.
Current report
Salaries and benefits increased by approximately $163,000, primarily attributable to headcount additions in the latter half of 2025, accrued bonuses recognized in the first quarter of 2026, and routine increases in wages, payroll taxes, and employee benefits.
Current report
Selling, general and administrative expenses decreased by approximately $136,000, primarily due to a decrease of approximately $158,000 in stock-based compensation recognized during the three months ended March 31, 2026 compared to the same period in the prior year. Consulting expenses also decreased by approximately $53,000, reflecting reduced international consulting activity. These decreases were partially offset by increases in regulatory and compliance costs of approximately $57,000, related to compliance audits and regulatory consulting, and an increase of approximately $18,000 in travel expenses.
Current report
Research and development expenses decreased by approximately $60,000, primarily due to a reduction of approximately $209,000 in costs associated with the Halo development project, as the units have transitioned from development into production** **for an upcoming clinical trial, as well as a reduction of approximately $24,000 related to the SYNC Desktop project. These decreases were partially offset by an increase of approximately $137,000 in clinical trial expenses and approximately $36,000 in software development costs, including continued development of the app and EDC platform.
Current report
We expect research and development expenses to fluctuate in future periods based on the timing and scope of clinical trials, as well as continued investment in software and platform development.
Current report
Working Capital
Current report
Current assets decreased for the three months ended March 31, primarily due to decreases in short-term investments and cash and cash equivalents resulting from cash used in operating activities, partially offset by proceeds from drawdowns under our at-the-market (“ATM”) program.
Current report
Current liabilities decreased for the three months ended March 31, 2026, primarily due to a decrease in accounts payable resulting from the timing of vendor payments.
Current report
We expect fluctuations in working capital in future periods to be driven by the timing of operating expenditures, vendor payments, and capital raising activities, including potential continued use of the ATM program.
Current report
“At-the-Market” Offering
Current report
On October 15, 2025, we entered into the Second Amendment to the Original Agreement with Maxim, under which we currently have the ability to issue and sell shares of our common stock, from time to time, through Maxim, up to an aggregate offering price of approximately $4,273,000.
Current report
For the three months ended March 31, 2026 we have sold 1,395,300 shares of our common stock under the ATM program for net proceeds of approximately $756,000.
Current report
As of March 31, 2026 we have sold a total of 2,086,707 shares of our common stock under the ATM program for gross proceeds of approximately $1,423,000.
Current report
Net cash provided by financing activities during the three months ended March 31, 2026 and 2025 was approximately $756,000 and $0, respectively, which was due to sales under our ATM program in the three months ended March 31, 2026 period. No such financing occurred during the three months ended March 31, 2025.
Current report
Liquidity
Current report
The Company believes that the acquisition of the licensed technology noted in the recent developments above, together with the related collaboration arrangement, will support its long-term strategic objectives by enhancing its technology platform and enabling potential new product offerings. However, these initiatives may require additional capital resources to fully develop and commercialize, and there can be no assurance that the Company will achieve the anticipated benefits within the expected timeframes.
Current report
Commitments and Contingencies
Current report
As of March 31, 2026, the Company had no material commitments or contingencies. See Note 7 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Current report
We prepare our unaudited condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles, which require our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis.
Current report
Recent Accounting Pronouncements
Current report
Refer to Note 3 to the unaudited condensed consolidated financial statements for a description of recently issued accounting pronouncements. Management does not anticipate a material impact on the Company’s financial position or results of operations from these pronouncements.
Current report
Off-Balance Sheet Arrangements
Current report
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Current report
Minimum Bid Price Requirement
Current report
We are required to maintain a minimum bid price of $1.00 per share. On January 21, 2026, the Company received a deficiency letter (the “Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, based upon the closing bid price of the Company’s common stock, for the last 30 consecutive business days, the Company is not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Requirement”).
Current report
The Notice has no immediate effect on the continued listing status of the Company’s common stock on The Nasdaq Capital Market, and, therefore, the Company’s listing remains fully effective. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company is provided a compliance period of 180 calendar days from the date of the Notice, or until July 20, 2026, to regain compliance with the Minimum Bid Requirement. To regain compliance, the closing bid price of the Company’s common stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days prior to July 20, 2026. If the Company is not in compliance with the Minimum Bid Requirement by July 20, 2026, the Company may be afforded a second 180 calendar day compliance period. To qualify for this additional compliance period, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Minimum Bid Price requirement. The Company continues to evaluate all options to regain compliance with the Minimum Bid Requirement.
Removed paragraphs (53)
Previous report
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.
Previous report
Gen-1:
Previous report
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 U.S. Food and Drug Administration (the “FDA”) as a Class II device for anxiety and insomnia and Class III for depression.
Previous report
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.
Previous report
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 have discussions with the FDA regarding the suspension of the marketing and sale of the Gen-1 products to new providers.
Previous report
Gen-2 SYNC and Gen-3 HALO:
Previous report
Beginning in 2019, Nexalin engineers began the testing and design of a new 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.
Previous report
We plan to conduct 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.
Previous report
All determinations of the safety and efficacy of our devices in the United States are solely within the purview of the FDA.
Previous report
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 emitting the new 15 milliamp advanced waveform. The Gen-3 HALO is a new patient headset that is intended 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 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. The Nexalin regulatory team is developing strategies for pilot trials and/or pivotal trials for various mental health disease states. In addition, a new PMA application in the United States is in strategic development for the treatment of depression utilizing both Gen-2 SYNC and Gen-3 HALO. We plan 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 throughout 2025 and 2026.
Previous report
The University of California, San Diego conducted a clinical study evaluating Nexalin’s Gen-2 SYNC device, which provided positive results in reducing pain in veteran patients with Mild Traumatic Brain Injury (mTBI). 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.
Previous report
Currently, the waveform that comprises the basis of Gen-2 and new Gen-3 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 purview of the FDA.
Previous report
In October 2025, the FDA formally accepted our Q-Submission (“Q-Sub”) related to the Company’s Gen-2 Console (“SYNC”) system for the treatment of Alzheimer’s disease and dementia, with a regulatory meeting scheduled for later this year. This acceptance of the Company’s request for interaction with the FDA with respect to its Gen-2 SYNC system represents a significant step toward Nexalin’s goal of achieving FDA authorization to begin U.S. clinical studies targeting Alzheimer’s and dementia — two of the most urgent unmet needs in healthcare. The Q-Submission process enables structured dialogue with and feedback from the FDA to discuss proposed clinical trial design, study endpoints, and regulatory pathway for evaluating the Gen-2 SYNC system as a potential non-invasive therapy for these debilitating neurodegenerative conditions, as well as for mild to moderate cognitive impairment (MCI) associated with Alzheimer’s disease.
Previous report
A new pre-submission document in preparation of a new 510(k) and/or De Novo application 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.
Previous report
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 26, 2024. The Nexalin regulatory team and the FDA came to a consensus on the Insomnia Clinical research protocols for insomnia assessment scales and timeline end points and patient population size.
Previous report
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 device 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 is solely within the purview of the FDA.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
Significant aspects of our ongoing clinical trials are conducted in Asia with Wider Come Limited (“Wider”). In September of 2021, the China National Medical Products Administration (the “NMPA”), the equivalent of the FDA, approved the Gen-2 device for marketing and sale in China for the treatment of insomnia and depression. These treatment indications and clearances from the NMPA have allowed Wider to market and sell the Gen-2 device in China for the treatment of insomnia and depression.
Previous report
Military & Government
Previous report
In addition to our core business model, we have also formed a Military & Government Advisory Board aimed at fostering and enhancing relationships within and throughout United States federal government and public sector organizations, including the U.S. Department of Defense, U.S. Department of Veterans Affairs, and U.S. Department of Health and Human Services. In conjunction with our ongoing clinical trials, our goals include the broad deployment of our devices within the U.S. military and government agencies.
Previous report
Oman
Previous report
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.
Previous report
Brazil
Previous report
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.
Previous report
The salaries and benefits increase ofapproximately$154,000 was primarily attributable to additional compensation related tothree new employees in 2025 and normal pay, taxes and benefit increases throughout the organization.
Previous report
The selling, general and administrative cost decrease ofapproximately$377,000 wasdue to approximately $450,000 ofdecreased stock-based compensation recognized during this three-month period ended compared to the same period in the prior year. This was offset by increases in consulting expenses by approximately $36,000 during this period for additional international distribution services and other advisory services, approximately $30,000 increased supplies expensed during this current period and a net increase of approximately $7,000 for various other expense categories.
Previous report
The research and development cost increase ofapproximately$48,000 was dueto the increased cost ofapproximately $35,000 on the Halo Development project, $53,000 on general R&D activities, including software and board developments andadditional development expenses of approximately $30,000 related to the App. This was offset byadecreases in Clinical Trials of approximately $50,000 dueto timing of trial expenses and a decrease of approximately $20,000 on our SYNC Desktop project
Previous report
Professional fees increasedby approximately$3,000 which was consistent comparing each period.
Previous report
Comparison of the nine months ended September 30, 2025 and 2024
Previous report
Revenues
Previous report
For the nine months ended September 30, 2025 and 2024, we generated approximately $130,000 and $142,00 respectively, of revenue primarily from the sale of devices and 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 to customers. In addition, we derived revenue from equipment by selling boards, electrodes and patient cables to customers for use with our device. The decrease in revenue for the nine months ended September 2025 compared to 2024 was primarily due to an decrease in Device sales of approximately $56,000 from a large Device sale to Oman during 2024 and a decrease in Licensing fees of approximately $17,000. This was offset by an increase in Equipment sales of approximately $49,000 from a large sale of boards to China during the nine months ended September 30, 2025 and an increase of approximately $12,000 of other revenue from increased shipping charges.
Previous report
For thenine months ended September 30, 2025 and 2024, cost of revenues wasapproximately $40,000 and $30,000, respectively, yielding a gross profit ofapproximately$90,000 and $112,000, respectively, or 68% and 79%, respectively. Such decrease in gross profit was a result of the mix of revenue types during thenine months periods as licensing fees and devices comprised a larger portion of total revenue for the prior period, and drives a higher margin compared to equipment sales.
Previous report
Operating Expenses
Previous report
Total operating expenses for the nine months ended September 30, 2025 and 2024 were approximately$6,067,000 and $4,992,000, respectively, consisting of increases in; salaries and benefits expenses ofapproximately$226,000, selling, general and administrative expenses ofapproximately$364,000, research and development expenses ofapproximately$405,000 and in professional fees expenses ofapproximately$80,000.
Previous report
Thes alaries and benefits cost increases ofapproximately$226,000 wasprimarily attributable to additional compensation related tothree newemployees and normal pay, taxes and benefit increase throughout the organization.
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Reworded paragraphs (12)
Previous wording
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 and our audited 2024 Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or the SEC, on March 14, 2025. 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.
Current wording
You should read the following discussion and analysis of financial condition and operating results together with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Report and our audited 2025 Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or the SEC, on March 25, 2026.
Previous wording
For the three months ended September 30, 2025 and 2024, we generated approximately$18,000 and $36,000 respectively, of revenue primarily 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 to customers. In addition, we derived revenue from equipment by selling boards, electrodes and patient cables to customers for use with our devices. Thedecreasein revenue for the three months ended September 30, 2025 compared to the same period in 2024 was primarilydue toless License fee revenue derived in 2025 compared to 2024, along with decreased Equipment sales in 2025 compared to 2024 due to timing of needs of customers ofelectrodes and other supplies.
Current wording
For the three months ended March 31, 2026 and 2025, we generated approximately $15,000 and $41,000, respectively, primarily derived from licensing and treatment fee agreements with our customers. Under these arrangements, we charge a monthly licensing fee for the duration of the agreement and may also collect fees based on the number of treatments performed each month. In addition, we generate revenue from equipment sales, including boards, electrodes, and patient cables used with our devices, as well as related shipping income.
Previous wording
For the three months ended September 30, 2025 and 2024, cost of revenues wasapproximately$4,000 and $13,000, respectively, yielding a gross profit ofapproximately$14,000 and $23,000, respectively, or 78% and 65%, respectively. Such increasein gross profit was a result of the mix of revenue types during each quarter as licensing fees comprised a larger portion of total revenue for thecurrent period and contributed a higher margin.
Current wording
For the three months ended March 31, 2026 and 2025, cost of revenues was approximately $2,000 and $14,000, respectively, resulting in gross profit of approximately $13,000 and $27,000, respectively, and gross margins of 88% and 66%, respectively. The increase in gross margin was primarily attributable to changes in revenue mix, as licensing fees comprised a larger portion of total revenue in the current period and carry higher margins.
Previous wording
Total operating expenses for the three months ended September 30, 2025 and 2024 were approximately$2,360,000 and $2,532,000, respectively, resulting in a decrease ofapproximately$172,000. The overall decrease was a result of a decrease in selling, general and administrative expenses ofapproximately $377,000 offset by an increase in professional fees ofapproximately$3,000, increase insalaries and benefits ofapproximately$154,000 and an increase in research and development costs ofapproximately$48,000.
Current wording
Total operating expenses for the three months ended March 31, 2026 and 2025 were approximately $2,133,000 and $2,039,000, respectively, an increase of approximately $94,000. The increase was primarily attributable to higher professional fees and increased salaries and benefits, partially offset by decreases in selling, general and administrative expenses and research and development costs.
Previous wording
Other income, net for the three months ended September 30, 2025 and 2024 wasconsistent each period ofapproximately$69,000 and $60,000, respectively, primarily consisting of interest and dividend income and gain on the sale of short-term investments.
Current wording
Other income, net, for the three months ended March 31, 2026 and 2025 was approximately $23,000 and $24,000, respectively, and remained consistent between periods. Other income primarily consists of interest and dividend income, as well as gains on the sale of short-term investments.
Previous wording
The following table summarizes our consolidated cash flows for thenine months ended September 30, 2025 and 2024:
Current wording
The following table summarizes our consolidated cash flows for the three months ended March 31, 2026 and 2025:
Previous wording
Net cash used in operating activities wasapproximately$3,810,000 for thenine months ended September 30, 2025, as compared toapproximately $2,810,000 for the respective period in 2024, an increase of approximately $1,000,000, which was primarily due to an increase in net loss of approximately$1,072,000, or approximately $785,000 adjustedfor non-cash expenses. The remaining change was due to changes in operating assets and liabilities for the respective periods; a decrease in accounts payable of approximately $95,000, a decrease in prepaid expenses and other current assets of approximately $179,000, increase ininventory of approximately $16,000, an increase in lease liability ofapproximately $4,000, aincrease inaccrued expenses of approximately $28,000 andincrease inaccounts receivable of approximately $11,000.
Current wording
Net cash used in operating activities was approximately $1,713,000 for the three months ended March 31, 2026, as compared to approximately $1,426,000 for the respective period in 2025, an increase of approximately $287,000, which was primarily due to an increase in net loss of approximately $109,000, or approximately $262,000 adjusted for non-cash expenses. The remaining change was due to changes in operating assets and liabilities for the respective periods; a decrease in accounts payable of approximately $102,000, an increase in prepaid expenses and other current assets of approximately $90,000, decrease in inventory of approximately $47,000, a decrease in accrued expenses of approximately $5,000 and increase in accounts receivable of approximately $40,000.
Previous wording
Net cash used in investing activities during thenine months ended September 30, 2025, and 2024 wasapproximately$821,000 and $2,205,000, respectively. For the nine months ended September 30, 2025 this wasdue to short-term investment sales of approximately $31,247,000 offset by purchases ofapproximately $32,005,000 of short-term investments and the purchase of patents and trademarks of approximately $63,000. Net cash provided by investing activities during the nine months ended September 30, 2024, ofapproximately$2,205,000 was due to short-term investment sales of approximately $22,349,000 offset by purchases ofapproximately $24,400,000 of short-term investments and the purchase of patents and trademarks of approximately $154,000.
Current wording
Net cash provided by investing activities during the three months ended March 31, 2026 and 2025 was approximately $1,510,000 and $1,474,000, respectively. For the three months ended March 31, 2026 this was due to sales of short-term investments of approximately $5,590,000 offset by purchases of approximately $4,001,000 of short-term investments and the purchase of equipment, patents and trademarks of approximately $79,000. Net cash provided by investing activities during the three months ended March 31, 2025 of approximately $1,474,000 was due to sales of short-term investments of approximately $6,496,000 offset by purchases of approximately $4,999,000 of short-term investments and the purchase of patents and trademarks of approximately $24,000.
Previous wording
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:
Current wording
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 devices, which are selling internationally 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:
Previous wording
As of September 30, 2025, the Company had a significant accumulated deficit ofapproximately $90,491,000. For the nine months ended September 30, 2025, the Company had a loss from operations of approximately $5,846,000 and negative cash flows from operations ofapproximately$3,810,000. The Company’s operating activities consume the majority of its cash resources. The Company will continue to service existing customers in the United States and sell devices and equipment overseas. The Company anticipates that it will continue to incur operating losses as it executes its development plans through 2025 and beyond, 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 September 30, 2025, the Company had cash and cash equivalents on hand of approximately $590,000 and short-term investments ofapproximately $3,763,000. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for at least twelve months after the date of this Report.
Current wording
As of March 31, 2026, the Company had a significant accumulated deficit of approximately $94,964,000. For the three months ended March 31, 2026, the Company had a net loss from operations of approximately $2,120,000 and negative cash flows from operations of approximately $1,713,000. The Company will continue to service existing customers in the United States as well as sell devices and equipment overseas. The Company’s operating activities consume the majority of its cash resources. The Company anticipates that it will continue to incur operating losses as it executes its development plans including clinical trials through 2026 and beyond, as well as other potential strategic and business development initiatives. Management believes that additional capital may be required to fund the Company’s planned clinical and operating activities, including the pivotal insomnia study, beyond its current cash resources. 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 and utilization of our ATM program. As of March 31, 2026, the Company had cash and cash equivalents on hand of approximately $1,208,000 and short-term investments of approximately $1,501,000. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for at least twelve months after the date of this Report.
Previous wording
Our ability to continue as a going concern will be dependent upon our ability to execute on our business plan, including the ability to generate revenue from the joint venture and other overseas ventures and obtain U.S. approval for the sale of our devices in the United States, and, if necessary, our ability to raise additional capital. Although no assurances can be given as to our ability to deliver on our revenue plans or that unforeseen expenses may arise, management has evaluated the significance of the conditions as of September 30, 2025 and have concluded that we will not 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. 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 twelve months after the date that the unaudited condensed consolidated financial statements are issued. The accompanying consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
Current wording
Our ability to continue as a going concern will be dependent upon our ability to execute on our business plan, including the ability to generate revenue from overseas opportunities and obtain U.S. approval for the sale of our devices in the United States, and, if necessary, our ability to raise additional capital. Although no assurances can be given as to our ability to deliver on our revenue plans or that unforeseen expenses may arise, management has evaluated the significance of the conditions as of March 31, 2026 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 unaudited condensed consolidated financial statements. 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 twelve months from the issuance of these unaudited condensed consolidated financial statements. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
Previous wording
The preparation of unaudited condensed consolidated financial statements requires management to make estimates and assumptions that impact amounts reported therein. The unaudited condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, and, as such, include amounts based on informed estimates and judgments of management. We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. There are items within our financial statements that require estimation but are not deemed critical, as defined above.
Current wording
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. There are items within our unaudited condensed consolidated financial statements that require estimation but are not deemed critical, as defined above.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Net Cash Provided by Investing Activities
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Our financial results for thenine months ended September 30, 2025 and 2024 are summarized as follows:
Previous report — wording carried elsewhere
Cost of Revenues and Gross Profit