NXNT 10-Q
Nexscient, Inc. (NXNT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
For the Transition Period from to .
Commission File Number
(Exact name of registrant as specified in its charter) |
7372 |
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(Primary Standard Industrial Classification Code Number) |
| (State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification Number) |
(Address of principal executive offices, including zip code)
(
(Registrant’s telephone number, including area code)
Not applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Title of each class |
| Trading Symbol |
| Name of exchange on which registered |
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| OTCQB |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☐ | Smaller reporting company | ||
Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 14, 2026, there were
TABLE OF CONTENTS
| 2 |
| Table of Contents |
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
NEXSCIENT, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
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| June 30, |
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| December 31, |
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| 2026 |
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| 2025 |
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ASSETS |
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Current assets: |
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Cash |
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Accounts receivable, net |
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Due from related party |
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Prepaid expenses |
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Other current assets |
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Total current assets |
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Due from related party, net of current portion |
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Right of use assets |
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Property and equipment, net |
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Other non-current assets |
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Software |
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Intangible assets, net |
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Goodwill |
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Total assets |
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LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
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Current liabilities: |
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Accounts payable |
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Accrued liabilities |
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Deferred wages payable |
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Accrued interest payable - short term |
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Convertible debentures - short term |
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Loans payable, current portion |
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Right of use liability, current portion |
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Total current liabilities |
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Accrued interest payable |
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Convertible debentures |
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Loans payable, net of current portion |
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Right of use liability |
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Retirement benefit obligation |
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Deferred tax liability |
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Total liabilities |
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Commitments and contingencies (Note 13) |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Accumulated deficit |
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Total stockholders’ equity (deficit) |
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Total liabilities and stockholders’ equity (deficit) |
| $ |
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| $ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
| Table of Contents |
NEXSCIENT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
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| Three Months Ended |
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| Six Months Ended |
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| June 30, |
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| June 30, |
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| 2026 |
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| 2025 |
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Net revenues |
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Cost of revenue |
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Gross profit |
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Operating expenses: |
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General and administrative |
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Research and development |
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Impairment of software |
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Total operating expenses |
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Loss from operations |
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Other income (expense): |
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Other income |
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Interest expense, convertible debt |
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Interest expense, loans payable |
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Foreign exchange gain (loss) |
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Interest expense, officer loan |
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Total other income (expense), net |
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Provision for income taxes |
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Net Loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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Other comprehensive loss: |
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Foreign currency translation adjustment |
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Comprehensive loss |
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| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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Weighted average common shares outstanding - basic and diluted |
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Net loss per common share - basic and diluted |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
| Table of Contents |
NEXSCIENT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(Unaudited)
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| Accumulated |
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| Total |
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| Additional |
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| Other |
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| Preferred Stock |
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| Common Stock |
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| Paid-in |
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| Accumulated |
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| Comprehensive |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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| Income |
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Balance at December 31, 2024 |
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| - |
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| $ |
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| $ |
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| $ |
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| $ |
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Shares issued for services |
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Shares issued for software |
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Shares issued with debt |
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Net loss |
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Balance at March 31, 2025 |
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Shares issued for services |
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Net loss |
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Balance at June 30, 2025 |
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| $ |
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| $ |
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Balance at December 31, 2025 |
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| - |
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| $ |
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| $ |
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| $ |
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| $ |
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Shares issued for cash - private placement |
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Net loss |
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Balance, March 31, 2026 |
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Shares issued for cash - private placement |
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Shares issued - acquisition |
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Shares issued for services |
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Shares issued - settlement of accrued wages |
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Currency translation adjustment |
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Net loss |
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Balance, June 30, 2026 |
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| $ |
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| $ |
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| $ | ( | ) |
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| $ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
| Table of Contents |
NEXSCIENT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
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| Six Months Ended |
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| June 30, |
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| 2026 |
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Cash flows from operating activities: |
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Net loss |
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| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Shares issued for services, expensed portion |
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Broker fee shares issued as acquisition transaction costs |
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Amortization of prepaid stock-based compensation |
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Amortization of debt discount |
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Amortization of intangibles |
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Depreciation |
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Impairment of software |
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Amortization of right of use asset |
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Deferred tax benefit |
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Changes in operating assets and liabilities (net of amounts acquired): |
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Accounts receivable |
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Due from related parties |
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Prepaid expenses and other current assets |
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Accounts payable |
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Accrued liabilities |
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Deferred wages payable |
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Accrued interest payable |
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Lease liabilities |
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Retirement benefit obligation |
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Net cash used in operating activities |
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Cash flows from investing activities: |
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Cash paid for acquisition, net of cash acquired |
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Purchase of property and equipment |
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Purchase of software |
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Net cash used in investing activities |
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Cash flows from financing activities: |
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Proceeds from shares issued for cash |
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Proceeds from loans payable |
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Repayments of loans payable |
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Proceeds from convertible debentures |
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Net cash provided by financing activities |
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Effect of exchange rate changes on cash |
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Net change in cash |
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Cash at beginning of period |
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Cash at end of period |
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Supplemental disclosure of non-cash investing and financing activities: |
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Shares issued for acquisition (including broker shares) |
| $ |
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| $ |
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Seller convertible note issued for acquisition |
| $ |
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| $ |
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Shares issued for settlement of accrued wages |
| $ |
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| $ |
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Shares issued for prepaid services |
| $ |
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| $ |
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Shares issued for software with debt |
| $ |
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| $ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
| Table of Contents |
NEXSCIENT, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 1 — ORGANIZATION AND DESCRIPTION OF BUSINESS
Nexscient, Inc. (“Nexscient” or the “Company”) was incorporated in the State of Delaware on March 14, 2023. The Company is an emerging-growth company that’s building a global collaborative network of AI-enabled Intelligent Enterprise Solutions and technologies through internal development, synergistic acquisitions, and capital investments in companies involved in machine learning and artificial intelligence technologies. As part of its growth strategy, the Company also seeks to acquire and integrate synergistic AI and machine learning companies and technologies into our collaborative network, further expanding its service offerings while enhancing shareholder value. The Company’s headquarters are in Los Angeles, California.
On April 1, 2026, the Company acquired all of the issued and outstanding equity interests of Crestview BPO Pte. Ltd., a Singapore company subsequently renamed TaskAlpha Pte. Ltd. (“TaskAlpha”), which owns 100% of Flipside Digital Content Company, Inc. (“Flipside AI”), a corporation organized under the laws of the Republic of the Philippines.
Flipside AI is engaged in the business of providing data curation, annotation, and validation services for artificial intelligence (“AI”) systems, including 2D and 3D annotation, LiDAR and sensor fusion annotation, video and temporal annotation, Vision-Language-Action (“VLA”) captioning and reasoning, and data collection. Flipside’s customers consist principally of AI companies operating in the autonomous driving, robotics, and geospatial sectors. Flipside AI is incorporated and domiciled in the Republic of the Philippines and is registered with the Philippine Economic Zone Authority. Following the acquisition, the consolidated operations of the Company consist principally of the operations of Flipside AI; prior to the acquisition the Company had no revenue-generating operations.
Change in fiscal year
On June 25, 2026 the board of directors approved a change in the Company’s fiscal year end from June 30 to December 31, which was reported on a Current Report on Form 8-K under Item 5.03. In accordance with Rule 13a-10 under the Securities Exchange Act of 1934, the Company will file a transition report on Form 10-KT covering the six-month transition period from July 1, 2025 to December 31, 2025.
The comparative balance sheet as of December 31, 2025 presented herein is unaudited, is derived from the books and records for that transition period, and will be superseded by the audited balance sheet included in the transition report. The most recent audited annual financial statements of the Company are those for the fiscal year ended June 30, 2025. The statements of operations, stockholders’ equity (deficit) and cash flows for the three and six months ended June 30, 2025 are unaudited and have been recast from the Company’s former June 30 fiscal basis to a calendar-quarter basis to conform to the current presentation.
Because Flipside AI was acquired on April 1, 2026, the comparative periods contain no results of the acquired business and the periods presented are therefore not comparable.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and interim financial information
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. They do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair statement of the results for the interim periods have been included. Results for interim periods are not necessarily indicative of results for a full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2025. As described in Note 1, the Company changed its fiscal year end to December 31 and the transition report on Form 10-KT for the six-month period ended December 31, 2025 has not yet been filed.
Principles of consolidation
The condensed consolidated financial statements include the accounts of Nexscient and its wholly owned subsidiaries, TaskAlpha and Flipside AI, from April 1, 2026, the date control was obtained. All intercompany accounts and transactions have been eliminated in consolidation.
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Foreign currency translation
The functional currency of Flipside AI is the Philippine peso and the functional currency of TaskAlpha is the U.S. dollar. Assets and liabilities of the Philippine subsidiary are translated into U.S. dollars at period-end exchange rates and revenues and expenses at average rates for the period. Translation adjustments are reported in accumulated other comprehensive loss.
Use of estimates
The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts. Significant estimates include the fair values assigned to assets acquired and liabilities assumed in the Flipside AI acquisition, the imputed discount on the seller convertible note, the allowance for credit losses, the retirement benefit obligation, incremental borrowing rates used for leases, and the valuation of share-based payments. Actual results could differ from those estimates.
Business combinations
The Company accounts for business combinations under ASC 805, Business Combinations, using the acquisition method. The consideration transferred is measured at fair value at the acquisition date and allocated to the identifiable assets acquired and liabilities assumed based on their estimated fair values, with any excess recorded as goodwill. Acquisition-related transaction costs are expensed as incurred. Amounts recorded are provisional and may be adjusted during the measurement period, which does not exceed one year from the acquisition date.
Goodwill
Goodwill represents the excess of consideration transferred over the fair value of net identifiable assets acquired. Goodwill is not amortized. The Company has determined it operates as a single reporting unit and tests goodwill for impairment annually as of December 31, and more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company may first perform a qualitative assessment and, if necessary, a quantitative comparison of the reporting unit’s fair value to its carrying amount.
Intangible assets
Acquired intangible assets with finite lives are recorded at fair value at the acquisition date and amortized on a straight-line basis over their estimated useful lives of five to seven years. The Company has no indefinite-lived intangible assets other than goodwill.
Impairment of long-lived assets
Long-lived assets, including property and equipment, right-of-use assets and finite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability is assessed by comparing the carrying amount to the undiscounted future cash flows expected to result from the use and eventual disposition of the asset group. If the carrying amount is not recoverable, an impairment loss is recognized for the amount by which the carrying amount exceeds fair value. During the three months ended June 30, 2026 the Company recognized an impairment charge of $135,000, writing off in full the carrying amount of software purchased in a prior year. Following the acquisition of Flipside AI the Company is no longer pursuing commercialization of the software, and no future cash flows are expected from its use or disposition. The charge is presented as a separate line within operating expenses. No impairment of goodwill or of other long-lived assets was recorded in any period presented.
Cash
Cash consists of demand deposits held with financial institutions in the United States, Singapore and the Philippines. The Company had no cash equivalents at June 30, 2026 or December 31, 2025. Balances held at these institutions may exceed applicable deposit insurance limits.
Accounts receivable and allowance for credit losses
Accounts receivable are recorded at invoiced amounts, net of an allowance for credit losses, and do not bear interest. The Company’s trade receivables are short-term in nature and are evaluated as a single portfolio segment and class of financing receivable. The Company measures expected credit losses over the contractual life of the receivables under ASC 326, Financial Instruments—Credit Losses, using an approach that considers historical loss experience, the aging of balances, customer-specific circumstances and reasonable and supportable forecasts of economic conditions. Receivables are considered past due when payment is not received by the contractual due date. Balances are written off when the Company determines that collection is no longer probable and all practical collection efforts have been exhausted, and recoveries of amounts previously written off are recognized in the period received.
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Property and equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed on a straight-line basis over estimated useful lives ranging from
Leases
The Company determines whether an arrangement is a lease at inception under ASC 842. Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term, discounted using the incremental borrowing rate when the rate implicit in the lease is not readily determinable. Lease expense for operating leases is recognized on a straight-line basis over the lease term.
Revenue recognition
The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. Revenue is recognized when control of the promised services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The Company applies the five-step model: identification of the contract, identification of the performance obligations, determination of the transaction price, allocation of the transaction price to the performance obligations, and recognition of revenue as the performance obligations are satisfied.
Substantially all revenue is generated by Flipside AI from data engineering and content services. Services are provided under arrangements that represent a single performance obligation satisfied over time as the services are rendered, and revenue is recognized as the work is performed. Payment terms are generally 30 to 60 days from invoice and contracts do not contain significant financing components, variable consideration or rights of return.
Revenue of $
Concentrations of credit risk and major customers
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. For the three months ended June 30, 2026, four customers each accounted for
Retirement benefits
The Company maintains an unfunded non-contributory defined benefit retirement plan covering substantially all of its regular employees, in accordance with the provisions of Republic Act No. 7641 of the Philippines. The Company accounts for the plan in accordance with ASC Topic 715, Compensation – Retirement Benefits. The year-over-year change in the obligation, reflecting changes in compensation, service, and the Company's attrition experience, is recognized as retirement expense in the period in which it occurs.
Income taxes
The Company accounts for income taxes under ASC 740. For interim periods, income tax expense is determined under ASC 740-270 by applying an estimated annual effective tax rate to year-to-date pre-tax results, adjusted for discrete items. The consolidated provision reflects income taxes of the Philippine subsidiary, net of the deferred tax benefit arising on amortization of acquired intangible assets. A valuation allowance is recorded against deferred tax assets when it is more likely than not that they will not be realized. Flipside AI is registered with the Philippine Economic Zone Authority, and its income tax position reflects the incentives available under that registration.
Fair value of financial instruments
The carrying amounts of cash, accounts receivable, accounts payable and accrued liabilities approximate fair value because of the short-term nature of these instruments. The Company’s borrowings are carried at amortized cost; the seller convertible note was initially recorded at fair value determined using an imputed interest rate.
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The Advance Payable Note received in the acquisition was recorded at fair value at the acquisition date in accordance with ASC 805 and is subsequently measured at amortized cost. The Company has not elected the fair value option under ASC 825-10-25 and does not remeasure the note to fair value at subsequent reporting dates. Because the discount recognized on acquisition principally reflects expected credit losses rather than the time value of money, it is not accreted to the principal amount. Interest income is recognized only if and when cash is received in excess of the carrying amount of the installment settled. See Note 10.
Convertible debt
The Company accounts for convertible debt instruments in accordance with ASC 470-20. Conversion features that are not required to be bifurcated as derivatives are not separately accounted for, and no beneficial conversion feature is recognized.
Stock-based compensation
Share-based payments to employees, directors and non-employees are measured at the grant-date fair value of the award and recognized as expense over the requisite service period. Shares issued for services are measured at the fair value of the equity instruments issued.
Net loss per share
Basic net loss per share is computed by dividing net loss by the weighted average number of shares outstanding during the period. Diluted net loss per share is the same as basic for all periods presented because the effect of potentially dilutive securities, including shares issuable on conversion of the convertible debentures and the seller convertible note and unvested performance stock units, would be antidilutive. The maximum number of shares issuable on conversion of the Company’s convertible debt at June 30, 2026 was
Segments
The Company operates as a single operating segment and a single reportable segment. Segment and entity-wide information is presented in Note 14.
Recently issued accounting pronouncements
The Company adopted ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. Adoption affected disclosure only and had no effect on financial position or results of operations. ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, is effective for the Company’s annual period ending December 31, 2026 and is expected to affect disclosure only. Management has evaluated other recently issued accounting pronouncements and does not believe that any will have a material effect on the condensed consolidated financial statements upon adoption.
NOTE 3 — GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
The Company has incurred losses since inception and had an accumulated deficit of $(
Management’s plans include applying cash generated by the operations of Flipside AI to the servicing and repayment of these obligations, pursuing the renewal or refinancing of the subsidiary’s borrowings as they mature, and raising additional capital through the sale of equity securities or the issuance of convertible debt. The Company has historically funded its operations through private placements of common stock and the issuance of convertible debentures.
After considering these plans, management concluded that substantial doubt about the Company’s ability to continue as a going concern has not been alleviated. The accompanying financial statements have been prepared on the going concern basis and do not include any adjustments to the carrying amounts or classification of assets and liabilities that might result from the outcome of this uncertainty.
NOTE 4 — BUSINESS COMBINATION
On April 1, 2026, the Company completed the acquisition of
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The consideration transferred consisted of the following:
Cash |
| $ |
| |
Seller convertible note, at present value |
|
|
| |
Common stock |
|
|
| |
Total consideration transferred |
| $ |
|
The cash consideration was paid on April 1, 2026, of which $
The Company issued an aggregate
Shares issued in the acquisition were measured at $
The following table summarizes the provisional fair values of the assets acquired and liabilities assumed at the acquisition date:
|
| Amount |
| |
Identifiable assets acquired: |
|
|
| |
Cash |
| $ |
| |
Accounts receivable, net |
|
|
| |
Due from related parties |
|
|
| |
Prepaid expenses and other current assets |
|
|
| |
Property and equipment, net |
|
|
| |
Right of use asset |
|
|
| |
Other non-current assets |
|
|
| |
Identifiable intangible assets |
|
|
| |
Total identifiable assets acquired |
|
|
| |
|
|
|
|
|
Liabilities assumed: |
|
|
|
|
Accounts payable and accrued expenses |
|
| ( | ) |
Loans payable |
|
| ( | ) |
Right of use liability |
|
| ( | ) |
Retirement benefit obligation |
|
| ( | ) |
Deferred tax liability on intangibles (25%) |
|
| ( | ) |
Total liabilities assumed |
|
| ( | ) |
|
|
|
|
|
Net identifiable assets acquired |
|
|
| |
Goodwill |
|
|
| |
Total consideration transferred |
| $ |
| |
The allocation is provisional pending completion of the Company’s valuation procedures and may be revised during the measurement period, which ends April 1, 2027. Goodwill represents the excess of consideration transferred over the net identifiable assets acquired and is attributable principally to the assembled workforce and expected synergies. Goodwill is not expected to be deductible for income tax purposes.
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Supplemental pro forma information
The following unaudited pro forma information presents the combined results as though the acquisition had occurred on January 1, 2025:
|
| Six Months Ended |
| |||||
|
| June 30, |
| |||||
|
| 2026 |
|
| 2025 |
| ||
Revenues as reported |
| $ |
|
| $ |
| ||
Flipside AI pre-acquisition revenue |
|
|
|
|
|
| ||
Pro forma revenues |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Net loss as reported |
|
| ( | ) |
|
| ( | ) |
Flipside AI pre-acquisition net income |
|
|
|
|
| ( | ) | |
Amortization of acquired intangible assets |
|
| ( | ) |
|
| ( | ) |
Accretion of seller note discount |
|
| ( | ) |
|
| ( | ) |
Pro forma net loss |
| $ | ( | ) |
| $ | ( | ) |
The pro forma amounts are presented for informational purposes only and do not purport to represent the results that would have been achieved had the acquisition occurred on the date indicated, nor are they indicative of future results. Pre-acquisition amounts for Flipside AI are derived from the subsidiary’s statutory records and do not reflect the U.S. GAAP conversion adjustments applied to post-acquisition periods.
NOTE 5 — GOODWILL AND INTANGIBLE ASSETS
Goodwill
Goodwill was $
Because goodwill was first recognized on April 1, 2026, no annual impairment test has been performed to date. The Company did not identify events or changes in circumstances during the quarter that would indicate the carrying amount of goodwill may not be recoverable.
Intangible assets
|
| Gross |
|
| Accumulated amortization |
|
| Net |
|
| Useful life | ||||
Customer relationships |
|
|
|
|
| ( | ) |
|
|
|
| ||||
Trade name |
|
|
|
|
| ( | ) |
|
|
|
| ||||
Non-compete agreement |
|
|
|
|
| ( | ) |
|
|
|
| ||||
Total |
|
|
|
|
| ( | ) |
|
|
|
|
| |||
Amortization expense was $
Twelve months ending June 30, |
|
|
|
|
2027 |
| $ |
| |
2028 |
|
|
| |
2029 |
|
|
| |
2030 |
|
|
| |
2031 |
|
|
| |
Thereafter |
|
|
| |
| Total |
| $ |
|
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NOTE 6 — PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at June 30, 2026:
|
| June 30, |
|
| December 31, |
| ||
|
| 2026 |
|
| 2025 |
| ||
Leasehold and improvement |
| $ |
|
| $ |
| ||
Furniture and fixtures |
|
|
|
|
|
| ||
Office equipment |
|
|
|
|
|
| ||
Transportation equipment |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Less: Accumulated depreciation |
|
| ( | ) |
|
|
| |
Property and equipment, net |
| $ |
|
| $ |
| ||
Depreciation expense was $
NOTE 7 — LEASES
Flipside AI leases office space and parking facilities in the Philippines under operating lease arrangements. Right-of-use assets and lease liabilities were recognized on acquisition at the present value of the remaining lease payments.
The Company leases office space under operating lease arrangements with remaining terms of approximately one to three years. The Company does not have any finance leases. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate to determine the present value of lease payments.
Operating lease cost is recognized on a straight-line basis over the lease term. The Company has elected the practical expedient not to separate lease and non-lease components for all classes of underlying assets, and not to recognize ROU assets and lease liabilities for short-term leases (term of twelve months or less).
The following table summarizes the supplemental balance sheet information related to leases as of June 30, 2026 and December 31, 2025:
|
| June 30, |
|
| December 31, |
| ||
|
| 2026 |
|
| 2025 |
| ||
Assets |
|
|
|
|
|
| ||
Operating lease right-of-use assets |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Current: Operating lease liabilities |
| $ |
|
| $ |
| ||
Non-current: Operating lease liabilities |
|
|
|
|
|
| ||
Total operating lease liabilities |
| $ |
|
| $ |
| ||
The components of lease cost recognized in the statements of operations for the six months ended June 30, 2026 and 2025 were as follows:
|
| Six Months Ended |
| |||||
|
| June 30, |
| |||||
|
| 2026 |
|
| 2025 |
| ||
Operating lease cost |
| $ |
|
| $ |
| ||
Total lease cost |
| $ |
|
| $ |
| ||
Other information related to leases as of and for the six months ended June 30, 2026 and 2025 was as follows:
|
| Six Months Ended |
| |||||
|
| June 30, |
| |||||
Cash paid for amounts included in the measurement of lease liabilities: |
| 2026 |
|
| 2025 |
| ||
Operating cash flows from operating leases |
| $ |
|
| $ |
| ||
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The weighted-average remaining lease term was
The following table summarizes the maturity of undiscounted cash flows for operating lease liabilities as of June 30, 2026:
|
| Operating |
| |
Year ending December 31, |
| Leases |
| |
2026 |
| $ |
| |
2027 |
|
|
| |
2028 |
|
|
| |
Total lease payments |
|
|
| |
Less: Imputed interest |
|
| ( | ) |
Total lease obligations |
|
|
| |
Less current lease obligations |
|
|
| |
Long-term lease obligations |
| $ |
| |
NOTE 8 — DEBT
Debt consisted of the following at June 30, 2026:
|
| Current |
|
| Non-current |
|
| Total |
| |||
Convertible debentures: |
|
|
|
|
|
|
|
|
| |||
Private placement debentures |
| $ |
|
| $ |
|
| $ |
| |||
Seller convertible note |
|
|
|
|
|
|
|
|
| |||
Loans payable - Flipside AI |
|
|
|
|
|
|
|
|
| |||
Loan payable - Arcadia Data Pte. Ltd. |
|
|
|
|
|
|
|
|
| |||
Total |
| $ |
|
| $ |
|
| $ |
| |||
Convertible debentures
The Company’s convertible debt comprises the 9% private placement debentures and the seller convertible note issued in the acquisition. The combined carrying value was $
9% private placement debentures
On July 1, 2024, the Board authorized a private placement of unsecured 9% convertible debentures with 24-month maturities in an aggregate principal amount of up to $
Seller convertible note
In connection with the acquisition the Company issued a $
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Loans payable — Flipside AI
Flipside AI has borrowings from Philippine financial institutions and a shareholder totaling $
Loan payable — Arcadia
On April 6, 2026, Arcadia advanced $
Future principal maturities
Future principal payments on debt outstanding at June 30, 2026 are as follows:
Year ending December 31, |
| Amount |
| |
2026 (remaining six months) |
| $ |
| |
2027 |
|
| |
|
2028 |
|
|
| |
2029 |
|
|
| |
Total |
| $ |
| |
Total principal payments of $
NOTE 9 — ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accrued liabilities of the Philippine subsidiary consisted of the following at June 30, 2026:
|
| June 30, |
|
| December 31, |
| ||
|
| 2026 |
|
| 2025 |
| ||
|
|
|
|
|
|
| ||
Trade payable |
| $ |
|
| $ |
| ||
Accrued expenses |
|
|
|
|
|
| ||
Accrued interest expense |
|
|
|
|
|
| ||
Tax and government agency payable |
|
|
|
|
|
| ||
Commission payable |
|
|
|
|
|
| ||
Accounts payable and accrued expenses |
| $ |
|
| $ |
| ||
The table above comprises the obligations of the Company, TaskAlpha and Flipside AI, including the commission accrual described in Note 10. The total of $
NOTE 10 — RELATED PARTY TRANSACTIONS
In connection with the acquisition, Anthony De Luna, the founder and Chief Executive Officer of Flipside AI and, effective April 1, 2026, the Company’s Chief Technology Officer and a member of its board of directors, delivered an Advance Payable Note in favor of the Company in the principal amount of $
The
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The acquisition-date fair value was determined by weighting two settlement outcomes. Under cash settlement the installments were discounted at a market rate for an unsecured personal obligation. Under share settlement the amount recoverable is limited to the value of the escrowed shares, valued by reference to the share price and the contractual floor. A 20% probability was assigned to cash settlement, supported by an assessment of the obligor’s identifiable resources over the term of the note, and 80% to settlement in shares.
Arcadia was the selling shareholder in the acquisition, holds the seller convertible note described in Note 8, is
Anthony De Luna is the founder and Chief Executive Officer of Flipside AI and, effective April 1, 2026, a director and the Chief Technology Officer of the Company. Under his employment agreement he receives an annual base salary of $
Deferred wages payable of $
Interest expense on related party balances was $
Flipside AI has borrowings from individuals and related parties, including certain of the shareholders who sold the business to the Company. These borrowings are described in Note 8.
NOTE 11 — STOCKHOLDERS’ EQUITY
The Company is authorized to issue
Shares issued during the six months ended June 30, 2026 were as follows:
Shares issued other than for cash were valued at $
At June 30, 2026,
NOTE 12 — EMPLOYEE BENEFITS
Flipside AI maintains an unfunded, non-contributory defined benefit retirement plan covering substantially all of its employees, as required by Republic Act No. 7641 of the Philippines. Benefits are based on years of credited service and final salary, and the obligation is measured using the projected unit credit method. No plan assets are held. The obligation assumed on April 1, 2026 was $
NOTE 13 — COMMITMENTS AND CONTINGENCIES
See Note 7 for leases.
From time to time the Company may become subject to legal proceedings and claims arising in the ordinary course of business. Management is not currently aware of any matters that would have a material adverse effect on the consolidated financial position or results of operations.
Under his employment agreement, the Chief Technology Officer is entitled to severance equal to base salary for the month of termination plus six months, together with a prorated portion of incentive compensation, upon termination without cause, for good reason, or on death or disability.
NOTE 14 — SEGMENT AND ENTITY-WIDE INFORMATION
The Company operates as a single operating segment and a single reportable segment. The Company’s chief operating decision maker (the “CODM”) is the Chief Executive Officer. The CODM uses consolidated net loss to evaluate performance and to decide how to allocate the Company’s operating and capital resources, including in budgeting and in monitoring results against prior periods. The measure of segment assets reported to the CODM is total consolidated assets, which were $
The significant segment expenses regularly provided to the CODM and included in the measure of segment profit or loss are cost of revenue, general and administrative expenses and research and development expenses. Other segment items consist of the $
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2026 |
|
| 2025 |
|
| 2026 |
|
| 2025 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Cost of revenue |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
General and administrative |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Research and development |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Other segment items |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Segment net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Revenue is derived from a single line of business, the provision of outsourced digital content production and related creative services under master services agreements with customers. All revenue is recognized over time as the services are performed.
Revenues are attributed to the country in which the customer is located. For both the three and six months ended June 30, 2026, revenues were $
Long-lived assets, which comprise property and equipment and right of use assets and exclude goodwill and intangible assets, were located in the Philippines in the amount of $
Four customers each accounted for
NOTE 15 — SUBSEQUENT EVENTS
The $
In July 2026, Crestview BPO Pte. Ltd. was renamed TaskAlpha Pte. Ltd. and, by directors’ resolutions dated July 15, 2026, its registered primary business activity was changed to software and application development with a secondary activity of other holding companies.
On July 1, 2026, the Company entered into director agreements with three non-employee directors and granted each of them
Management has evaluated subsequent events through the date these financial statements were issued and determined that no other events require adjustment to or disclosure in the condensed consolidated financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read together with the unaudited condensed consolidated financial statements and related notes included in this report. This discussion contains forward-looking statements that involve risks and uncertainties, and actual results could differ materially.
Overview
Nexscient, Inc. is a Delaware corporation. On April 1, 2026 we acquired TaskAlpha Pte. Ltd. and its wholly owned Philippine subsidiary Flipside AI, a data engineering business. Following the acquisition our consolidated results consist principally of the operations of Flipside AI, which are included from April 1, 2026. Prior to the acquisition we had no revenue-generating operations. We also changed our fiscal year end from June 30 to December 31, and will file a transition report on Form 10-KT for the six months ended December 31, 2025.
Results of operations — three months ended June 30, 2026 compared with 2025
Revenues. Revenues were $1,110,112 for the three months ended June 30, 2026 compared with $nil in the prior-year period, reflecting the consolidation of Flipside AI from April 1, 2026. Revenue was concentrated among four customers that each accounted for more than 10% of the total. Two customer relationships drove the majority of activity in the quarter: a new customer added in the second quarter and substantial growth in an existing account.
Cost of revenue and gross profit. Cost of revenue was $672,899, producing gross profit of $437,213, a gross margin of approximately 39%. Cost of revenue consists principally of direct labor, consultancy fees and facility costs of the Philippine operations.
Operating expenses. Total operating expenses were $817,287 compared with $98,902 in the prior-year period. The increase reflects the consolidation of Flipside AI administrative costs, the $81,500 broker fee expensed as an acquisition transaction cost, and $8,714 of amortization of acquired intangible assets. Operating expenses for the quarter include an impairment charge of $135,000 in respect of software that the Company is no longer pursuing commercialization of following the acquisition.
Other expense. Total other expense, net was $52,561 compared with $8,564, reflecting interest on the convertible debentures, interest on the borrowings of the Philippine subsidiary and the Arcadia loan, and accretion of the discount on the seller convertible note.
Net loss. Net loss was $430,456 compared with $107,466 in the prior-year period.
Results of operations — six months ended June 30, 2026 compared with 2025
Revenues were $1,110,112 compared with $nil, reflecting one quarter of consolidated Flipside AI operations. Total operating expenses were $932,756 compared with $206,996, and net loss was $557,687 compared with $242,317. On a pro forma basis as though the acquisition had occurred on January 1, 2025, revenues would have been $1,795,498 for the six months ended June 30, 2026 and $1,160,617 for the comparable prior-year period. Operating expenses for the quarter include an impairment charge of $135,000 in respect of software that the Company is no longer pursuing commercialization of following the acquisition.
Liquidity and capital resources
At June 30, 2026 we had cash of $489,216 and a working capital deficit of $484,674. During the six months ended June 30, 2026, operating activities used $197,322 of cash, investing activities used $614,216 of cash, consisting of $574,854 paid for the acquisition net of cash acquired and $39,362 of purchases of property and equipment, and financing activities provided $1,274,272 of cash, consisting of $1,200,000 of proceeds from private placements of common stock and $74,272 of net proceeds from subsidiary borrowings.
Our Philippine subsidiary carries short-term borrowings that mature within twelve months, and the $200,000 Arcadia loan matured shortly after the balance sheet date. Our ability to fund operations depends on cash generated by Flipside AI, refinancing or extension of these borrowings, and access to additional capital. These matters are discussed in Note 3 to the condensed consolidated financial statements.
Critical accounting estimates
Our critical accounting estimates include the provisional fair values assigned to the assets acquired and liabilities assumed in the Flipside AI acquisition, including the fair value of the Advance Payable Note, which depends on the probability assigned to settlement in cash rather than in shares; the imputed discount on the seller convertible note; the allowance for credit losses; and the retirement benefit obligation. See Note 2.
Emerging growth company status
We are an emerging growth company as defined in the JOBS Act and have elected to take advantage of certain reduced disclosure requirements available to emerging growth companies.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company we are not required to provide the information required by this Item. Our principal market risk exposure is foreign currency risk arising from the operations of our Philippine subsidiary, whose functional currency is the Philippine peso, and from receivables denominated in U.S. dollars, euros and pounds sterling.
Item 4. Controls and Procedures
Disclosure controls and procedures
Under the supervision of and with the participation of management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2026. Based on that evaluation, and in light of the material weaknesses described below, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of June 30, 2026.
Management’s report on internal control over financial reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Management assessed the effectiveness of internal control over financial reporting as of June 30, 2026 and concluded that it was not effective. Material weaknesses relate to the absence of a formal policies and procedures manual that governs reporting and oversight functions. Our size prevents us from being able to employ sufficient resources to a properly functioning reporting system, which also results in segregation of duties deficiencies.
This report does not include an attestation report of our registered public accounting firm on internal control over financial reporting, as we are not required to include one.
Changes in internal control over financial reporting
On April 1, 2026 we acquired TaskAlpha and its subsidiary Flipside AI. In connection with the acquisition we began consolidating the acquired operations, extended our financial close and reporting process to entities in Singapore and the Philippines, and implemented procedures to convert the Philippine subsidiary’s statutory financial information to U.S. GAAP and to translate it into U.S. dollars. These changes materially affected our internal control over financial reporting during the three months ended June 30, 2026. Management is integrating the acquired business into our internal control over financial reporting and expects to complete that integration within the period permitted by SEC guidance, which does not extend beyond one year from the acquisition date. Other than the changes resulting from the acquisition described above, there were no changes in our internal control over financial reporting during the three months ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
We are not currently a party to any material legal proceedings.
Item 1A. Risk Factors
As a smaller reporting company we are not required to provide the information required by this Item. Investors should consider the risks arising from the integration of the acquired Flipside AI business, our dependence on a small number of customers, exposure to Philippine country and currency risk, the short-term maturity profile of our subsidiary’s borrowings, and the substantial doubt about our ability to continue as a going concern described in Note 3.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended June 30, 2026 the Company issued shares of common stock in private placements and in connection with the acquisition, for services, and in settlement of accrued wages, as described in Notes 4 and 11. All such issuances were made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and Regulation S promulgated thereunder.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibit Number |
| Description |
| Certification of Principal Executive Officer pursuant to Rule 13a-14(a) | |
| Certification of Principal Financial Officer pursuant to Rule 13a-14(a) | |
| ||
| ||
101.INS |
| Inline XBRL Instance Document the instance document does not appear in Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document |
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
NEXSCIENT, INC. | |||
| Date: August 14, 2026 | By: | /s/ Fred E. Tannous | |
|
| Fred E. Tannous | |
President and Chief Executive Officer | |||
(Principal Executive Officer) | |||
Date: August 14, 2026 | By: | /s/ Eric Sherb | |
|
| Eric Sherb |
|
|
| Chief Financial Officer |
|
|
| (Principal Financial and Accounting Officer) |
|
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