Nexalin Technology (NXL) risk factors, FY2024 10-K

Risks Related to Our Financial Position and Capital Needs

1. 01We have incurred significant losses since our inception. We expect to incur losses over the next several years and may never achieve or maintain profitability
2. 02We have devoted a substantial portion of our financial resources and efforts to research and development, including preclinical studies and clinical trials. We are still in the early stages of development of our products
3. 03We may not be able to continue as a going concern if we do not execute our business plan or obtain additional financing in the future if necessary
4. 04Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability
5. 05We will require additional funding to meet our financial needs and to pursue our business objectives. If we are unable to raise capital when needed, we could be forced to delay, reduce or altogether cease our product development programs or commercialization efforts
6. 06Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or products

Risks Related to the Development of Our Products and Preclinical Program

1. 07If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our products, which would harm our business
2. 08Our products and product candidates may be subject to reclassification by the FDA, and a change in the classification may have an adverse impact on our revenues or our abilities to obtain necessary regulatory approvals
3. 09Success in preclinical studies or clinical trials may not be indicative of results in future clinical trials
4. 10If we experience delays or difficulties in the enrolment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented

Risks Related to Our Dependence on Third Parties

1. 11We rely on third parties to conduct the clinical trials for our products, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials or failing to comply with applicable regulatory requirements
2. 12We rely on a collaboration with a third party for the quality assurance of our products, and we may seek additional collaborations in the future. If those collaborations are not successful, we may not be able to capitalize on the market potential of these products

Risks Related to the Commercialization of Our Products

1. 13Even if any of our products receives marketing approval, it may fail to achieve the degree of market acceptance by healthcare providers, physicians, clinicians, patients, third-party payors and others in the medical community necessary for commercial success
2. 14We may eventually compete for product sales with other companies, many of which will have greater resources or capabilities than we have or may succeed in developing better products or in developing products more quickly than we do, and we may not compete successfully with them
3. 15Coverage and adequate reimbursement may not be available for our current or any future products, which could make it difficult for us to sell profitably, if approved
4. 16Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop

Risks Related to Our Business and Managing Our Growth

1. 17Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel
2. 18We expect to expand our development and regulatory capabilities and potentially implement sales, marketing and distribution capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations
3. 19Significant disruptions of our information technology systems or data security incidents could result in significant financial, legal, regulatory, business and reputational harm to us
4. 20If we engage in future acquisitions or strategic collaborations, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities and subject us to other risks
5. 21We are subject to the risks of conducting business internationally

Risks Related to Doing Business in China

1. 22The medical industry in China is highly regulated and such regulations are subject to change which may affect approval and commercialization of our products
2. 23There may be difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us based on foreign laws
3. 24It may be difficult for overseas regulators to conduct investigations or collect evidence within China
4. 25The PRC’s economic, political and social conditions, as well as governmental policies, could affect the business environment and financial markets in China, and our ability to operate our business, maintain our liquidity and keep our access to capital
5. 26The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have limited precedential value
6. 27In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention
7. 28Uncertainties in the interpretation and enforcement of Chinese laws and regulations could limit the legal protections available to us
8. 29Restrictions on foreign currency may limit our ability to receive and use our revenue effectively
9. 30Fluctuation in exchange rates could have a negative effect on our results of operations and the value of an investment in the Company
10. 31The approval of the CSRC, and other compliance procedures may be required in connection with any offering we may make and, if required, we cannot predict whether we will be able to obtain such approval
11. 32We may be subject to anti-monopoly concerns as a result of our doing business in China
12. 33We may be subject to regulatory and other risks if we were to operate Variable Interest Entities in China
13. 34Changes in U.S. and international trade policies, particularly with respect to China, may adversely impact our business and operating results

Risks Related to Our Intellectual Property

1. 35We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming and unsuccessful
2. 36Our commercial success depends, in part, on our ability to develop, manufacture, market and sell our products and use our proprietary technologies without infringing the intellectual property and other proprietary rights of third parties
3. 37If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed
4. 38We may not be able to protect our intellectual property rights throughout the world

Risks Related to Regulatory Approval of Our Products and Other Legal Compliance Matters

1. 39If we experience delays in obtaining approval or if we fail to obtain approval of our products, the commercial prospects for our products may be harmed and our ability to generate revenues will be impaired
2. 40Failure to obtain marketing approval in foreign jurisdictions would prevent our products from being marketed in these territories. Any approval we are granted for our products in the United States would not assure approval of our products in foreign jurisdictions
3. 41The U.S. FDA, Chinese National Medical Products Administration and other comparable foreign regulatory authorities may not accept data from trials conducted in locations outside of their jurisdiction
4. 42Even if we obtain marketing approvals for our products, the terms of approvals and ongoing regulation of our products may limit how we manufacture and market our products and compliance with such requirements may involve substantial resources, which could materially impair our ability to generate revenue
5. 43Our employees, independent contractors, principal investigators, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements
6. 44Recently enacted and future legislation may increase the difficulty and cost for us and our collaborators to obtain marketing approval of and commercialize our products and affect the prices we may obtain

Risks Related to Ownership of Our Common Stock and Warrants and Our Status as a Public Company

1. 45The trading price of our common stock has been and is likely to be volatile and to fluctuate substantially, which could result in substantial losses for purchasers of our common stock
2. 46If we are not able to comply with the applicable continued listing requirements or standards of The Nasdaq Stock Market, Nasdaq could delist our common stock
3. 47Minimum Bid Price Requirement
4. 48Minimum Stockholder Equity Requirement
5. 49Warrants are speculative in nature
6. 50The warrants may not have any value
7. 51We may redeem unexpired warrants prior to their exercise at a time that is disadvantageous to holders, thereby making such warrants worthless
8. 52Holders of the warrants have no rights as a common stockholder until they acquire our common stock
9. 53If equity research analysts do not publish research or reports, or publish unfavorable research or reports about us, our business or our market, our stock price and trading volume could decline
10. 54We do not intend to pay cash dividends on our common stock in the foreseeable future
11. 55Concentration of ownership of our common stock among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions and matters submitted to stockholders for approval
12. 56Provisions in our corporate charter documents and under Delaware law could make an acquisition of our Company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management
13. 57Our amended and restated certificate of incorporation further provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act and the Exchange Act
14. 58We are an “emerging growth company” and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock and warrants may be less attractive to investors
15. 59We have identified certain material weaknesses in our internal controls, which could impair our ability to produce accurate consolidated financial statements on a timely basis