Nexalin Technology, Inc. Revenue Disclosure

Revenue

 

The Company recognizes revenue when its performance obligations with its customers have been satisfied. At contract inception, the Company determines if the contract is within the scope of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, and then evaluates the contract using the following five steps: (1) identify the contract with the customer; (2) identify the performance obligations; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only recognizes revenue to the extent that it is probable that a significant revenue reversal will not occur in a future period.

 

The Company has existing licensing and treatment fee agreements with its customers for the use of the Nexalin Device in their practices. These agreements generally have terms of one year with automatic renewal if certain requirements are met and amounts due per these agreements are billed monthly. The Company also sells products related to the provision of services. The Company sells its Gen-2 devices internationally to its acting distributor and sells products relating to the use of the devices.

 

Revenue Streams

 

The Company derives revenues from our license agreements by charging a monthly licensing fee for the duration of the agreement. The Company derives revenues from equipment by selling additional individual electrodes to customers for use with the Nexalin device. We receive revenue from the sale internationally of our devices to our distributor and from the sale of products relating to the use of those devices.

 

Performance Obligations

 

Management identified that subsequent licensing revenue has one performance obligation. That performance obligation is satisfied if the licensing contract remains valid and is not terminated. The licensing revenue is invoiced monthly and is recognized at a point in time in which the invoice is sent to the customer.

 

Management identified that the Company’s equipment and device revenue has one performance obligation. That performance obligation is satisfied when the equipment and devices are shipped. The Company recognizes revenue at a point in time in which the equipment and devices are shipped to the customer.

 

Management identified that treatment fee revenue has one performance obligation. The performance obligation is satisfied upon the completion of individual treatments on patients by customers.

 

Practical Expedients

 

As part of ASC 606, the Company has adopted several practical expedients including:

 

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Significant Financing Component — The Company evaluates its customer contracts to determine whether they include a significant financing component. In most arrangements, payment terms are intended to provide customers with a short-term mechanism for settling amounts owed and do not provide for a significant financing component.

 

During the year, the Company entered into one limited customer arrangement with extended payment terms that included stated interest. The Company evaluated this arrangement in accordance with ASC 606 and concluded that the financing component was not significant and did not have a material impact on the Company’s consolidated financial statements. Any receivable balances related to these arrangements are included in prepaid expenses and other current assets on the consolidated balance sheets.

 

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Unsatisfied Performance Obligations — for all performance obligations related to contracts with a duration of less than one year, the Company has elected to apply the optional exemption provided in ASC Topic 606 and therefore, is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.

 

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Shipping and Handling Activities — the Company elected to account for shipping and handling activities as a fulfilment cost rather than as a separate performance obligation.

 

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Right to invoice — the Company has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date; the Company may recognize revenue in the amount to which the entity has a right to invoice.

 

Disaggregated Revenues

 

Major Revenue Streams

 

Revenue consists of the following by service offering:

 

Schedule of disaggregation of revenue
		Years Ended December 31,
		2025				2024
Device sales		$	136,000			$	55,500
Licensing fee			49,114				69,501
Equipment			89,042				37,826
Other			27,491				5,894
Total		$	301,647			$	168,721

 

Major Geographic Locations

 

		Years Ended December 31,
		2025				2024
U.S. sales		$	111,346			$	83,473
China sales			190,301				85,248
Total		$	301,647			$	168,721

 

Contract Modifications

 

There were no contract modifications during the years ended December 31, 2025 and 2024. Contract modifications are not routine in the performance of the Company’s contracts.

 

Deferred Revenue

 

The Company may receive payment for equipment and devices in advance of shipping. The Company recognizes the revenue as being earned upon shipment. No deferred revenue was recognized as of December 31, 2025 and December 31, 2024, respectively.