Nexalin Technology, Inc. Commitments Disclosure
NOTE 7 — COMMITMENTS AND CONTINGENCIES
Legal Claims
The Company is not a party to any material pending legal proceedings other than the matters described below.
Sarah Veltz v. Nexalin Technology, Inc. et al.
On January 20, 2021, Plaintiff Sarah Veltz filed a lawsuit in Orange County Superior Court (Case No. 30-2021-01180164-CU-WT-CJC) naming the Company and others as defendants. Plaintiff alleged unpaid wages, including overtime and other benefits, and alleged sexual harassment by the Company’s then Chief Executive Officer. She sought compensatory and punitive damages.
On March 12, 2021, the Company filed its answer to the Complaint. A mediation was held on March 5, 2025, resulting in a Confidential Settlement Agreement executed on May 12, 2025. Pursuant to the settlement, the Company paid a confidential amount to Plaintiff, and Plaintiff provided a full release to the Company, its officers, directors, employees, and affiliates. The settlement also includes a mutual release among all defendants. The case has been dismissed.
Employment Development Department
The Company engaged in settlement discussions with the California Employment Development Department (“EDD”) regarding the classification of certain workers as contractors rather than employees. The total liability initially at issue was approximately $300,000. After petitioning for reassessment, the Company’s liability was reduced to approximately $30,000, which was paid in full prior to December 31, 2025. This matter is now fully resolved.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 25, 2026 | Showing above |
| 2024 | Mar 14, 2025 | |
| 2023 | Mar 27, 2024 | |
| 2022 | Mar 27, 2023 | |
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.