Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of Nexalin Technology, Inc. and its wholly owned subsidiaries, Neuro-Health International, Inc. (“Neuro-Health”), PONM, Inc. (“PONM”) and Beijing Nexalin Neurotech Co., Ltd (“WOFE”). PONM has been included in the Company’s unaudited condensed consolidated financial statements from the date of its acquisition on May 14, 2026. Neuro-Health and WOFE had no operating activity during the periods presented. All intercompany accounts and transactions have been eliminated in consolidation.

Asset Acquisitions

Asset Acquisitions

The Company accounts for acquisitions that do not meet the definition of a business under Accounting Standards Codification (“ASC”) 805, Business Combinations, as asset acquisitions. The cost of an asset acquisition includes cash paid, the fair value of consideration transferred, and the estimated value of any deferred or other purchase consideration attributable to the acquired assets.

When deferred purchase consideration is payable based on contractual terms and represents additional consideration for the acquired assets, the Company records a corresponding liability. Until such consideration is settled, the liability is remeasured to reflect changes in the estimated amount of consideration expected to be transferred. Corresponding adjustments are recorded as changes to the carrying amount of the related acquired asset and are not recognized in current-period earnings. The acquired asset is amortized over its estimated useful life, with the adjusted carrying amount serving as the basis for future amortization.

Research and Development

Research and Development

Advance payments made to contract research organizations and other clinical trial vendors are capitalized as prepaid assets and recognized as research and development expense as the underlying services are performed. Management periodically evaluates the status of services provided under each contract to determine the appropriate amount of expense to recognize during each reporting period.

Fair Value Measurements

Fair Value Measurements

As defined in ASC 820, Fair Value Measurements and Disclosures, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). In determining fair value, the Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs, and considers assumptions that market participants would use in pricing the asset or liability.

ASC 820 establishes a fair value hierarchy that prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). This hierarchy applies to assets and liabilities measured at fair value on a recurring or nonrecurring basis.

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Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company can access at the measurement date.

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Level 2: Inputs are observable, either directly or indirectly, other than quoted prices included in Level 1. These inputs may include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable market data.

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Level 3: Inputs are unobservable and reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability.

The Company’s financial assets measured at fair value on a recurring basis consist of U.S. Treasury bills and mutual funds. The Company also measures its deferred share liability at fair value on a recurring basis until the underlying shares are issued. U.S. Treasury bills and mutual funds are classified within Level 1 of the fair value hierarchy based on quoted prices in active markets. The deferred share liability is classified within Level 1 of the fair value hierarchy based on the nature of the inputs used in its valuation. The fair value of the deferred share liability is determined using the quoted market price of the Company’s common stock, together with the applicable contractual terms governing the share issuance. There were no transfers between levels of the fair value hierarchy during the six months ended June 30, 2026.

Net Loss per Common Share

Net Loss per Common Share

Basic loss per common share excludes dilution and is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, or otherwise resulted in the issuance of common stock that would share in the earnings of the Company.

Potentially dilutive securities are excluded from the calculation of diluted net loss per share when their effect would be anti-dilutive. Accordingly, basic and diluted loss per share are the same for all periods presented. For all periods presented, certain potentially dilutive securities were excluded from the calculation of diluted loss per share because their effect would have been anti-dilutive.

The following table summarizes the securities that would be excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive due to the Company’s net loss position even though the exercise price could be less than the most recent fair value of the common shares:

Schedule of anti-dilutive shares
	Three and Six Months Ended June 30,
	2026		2025
Warrants		-		2,662,250
Options		4,113,617		3,038,078
Deferred share awards		510,989		201,136
Total		4,624,606		5,901,464

Future Adoption of New Accounting Pronouncement

Future Adoption of New Accounting Pronouncement

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The guidance removes references to software development project stages so that capitalization is based on management authorization, commitment to funding, and probable completion for the intended use. The standard is effective for annual periods beginning after December 15, 2027, including interim periods, with prospective, modified, or retrospective transition methods allowed and early adoption permitted. The Company does not expect the adoption to have a material impact on its unaudited condensed consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires additional disaggregated disclosures of certain income statement expense categories. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the effect of adopting this guidance.

All other newly issued but not yet effective accounting pronouncements are considered either not applicable or immaterial to the Company.