NEUROONE MEDICAL TECHNOLOGIES Corp

Previous wording

In November 2019, our Evo cortical electrode technology received 510(k) clearance from the FDA for recording, monitoring, and stimulating brain tissue for up to 30 days, and in October 2022, we received FDA clearance for our Evo sEEG electrode technology for temporary (less than 30 days) use with recording, monitoring, and stimulation equipment for the recording, monitoring, and stimulation of electrical signals at the subsurface level of the brain.

Current wording

NeuroOne has received 510(k) clearance for three of its devices from the FDA, including: (i) our Evo cortical electrode technology for recording, monitoring, and stimulating brain tissue for up to 30 days, (ii) our Evo sEEG electrode technology for temporary (less than 30 days) use with recording, monitoring, and stimulation equipment for the recording, monitoring, and stimulation of electrical signals at the subsurface level of the brain, and (iii) our OneRF ablation system for creation of radiofrequency lesions in nervous tissue for functional neurosurgical procedures. Our other products are still under development.

Previous wording

We commenced commercial sales of cEEG strip/grid and electrode cable assembly products beginning in the first quarter of fiscal year 2021. We sold, on a limited application basis for design verification, sEEG depth electrode products for non-human use beginning in late fiscal year 2021, and we commenced commercial sales of our sEEG depth electrode products in late calendar 2022.

Current wording

We commenced commercial sales of cEEG strip/grid and electrode cable assembly products beginning in the first quarter of fiscal year 2021. We sold, on a limited application basis for design verification, sEEG depth electrode products for non-human use beginning in late fiscal year 2021, and we commenced commercial sales of our sEEG depth electrode products in late calendar 2022. We initiated a limited commercial launch of our OneRF ablation system in March 2024.

Previous wording

We have incurred losses since inception. As of December 31, 2023, we had an accumulated deficit of $66.0 million, primarily as a result of expenses incurred in connection with our research and development, selling, general and administrative expenses associated with our operations and interest expense, fair value adjustments and loss on extinguishments related to our debt, offset in part by collaborations and product revenues.

Current wording

We have incurred losses since inception. As of March 31, 2024, we had an accumulated deficit of $68.9 million, primarily as a result of expenses incurred in connection with our research and development, selling, general and administrative expenses associated with our operations and interest expense, fair value adjustments and loss on extinguishments related to our debt, offset in part by collaborations and product revenues.

Previous wording

In November 2019, we received FDA 510(k) clearance for our cortical strip electrode for temporary (less than 30 days) recording, monitoring, and stimulation on the surface of the brain. In October 2022, we received FDA 510(k) clearance for our Evo sEEG electrode technology for temporary (less than 30 days) use with recording, monitoring, and stimulation equipment for the recording, monitoring, and stimulation of electrical signals at the subsurface level of the brain.

Current wording

In November 2019, we received FDA 510(k) clearance for our cortical electrode for temporary (less than 30 days) recording, monitoring, and stimulation on the surface of the brain. In October 2022, we received FDA 510(k) clearance for our Evo sEEG electrode technology for temporary (less than 30 days) use with recording, monitoring, and stimulation equipment for the recording, monitoring, and stimulation of electrical signals at the subsurface level of the brain. In December 2023, we received FDA 510(k) clearance for our OneRF ablation system for creation of radiofrequency lesions in nervous tissue for functional neurosurgical procedure.

Previous wording

Product gross profit (loss) represents our product revenue less our cost of product revenue. Our cost of product revenue consists of the manufacturing and materials costs incurred by our third-party contract manufacturer in connection with our Strip/Grid Products, sEEG Products and outside supplier materials costs of producing the Electrode Cable Assembly Products. In addition, cost of product revenue includes royalty fees incurred in connection with our license agreements.

Current wording

Product gross profit represents our product revenue less our cost of product revenue. Our cost of product revenue consists of the manufacturing and materials costs incurred by our third-party contract manufacturer in connection with our Strip/Grid Products, sEEG Products and outside supplier materials costs of producing the Electrode Cable Assembly Products. In addition, cost of product revenue includes royalty fees incurred in connection with our license agreements.

Previous wording

On July 20, 2020, we entered into an exclusive development and distribution agreement (the “Zimmer Development Agreement”) with Zimmer, pursuant to which we granted Zimmer exclusive global rights to distribute the Strip/Grid Products and electrode cable assembly products (the “Electrode Cable Assembly Products”). Additionally, we granted Zimmer the exclusive right and license to distribute certain sEEG Products developed by the Company . The parties agreed to collaborate with respect to development activities under the Zimmer Development Agreement through a joint development committee composed of an equal number of representatives of Zimmer and the Company.

Current wording

On July 20, 2020, we entered into an exclusive development and distribution agreement (the “Zimmer Development Agreement”) with Zimmer, pursuant to which we granted Zimmer exclusive global rights to distribute the Strip/Grid Products and Electrode Cable Assembly Products. Additionally, we granted Zimmer the exclusive right and license to distribute certain sEEG Products developed by the Company. The OneRF ablation system is not covered by the Zimmer Development Agreement. The parties agreed to collaborate with respect to development activities under the Zimmer Development Agreement through a joint development committee composed of an equal number of representatives of Zimmer and the Company.

Previous wording

In October 2022, we received 510(k) clearance from the FDA for our Evo sEEG electrode technology for temporary (less than 30 days) use with recording, monitoring, and stimulation equipment for the recording, monitoring, and stimulation of electrical signals at the subsurface level of the brain. Accordingly, we recognized revenue in the amount of $1.5 million during the three months ended December 31, 2022 related to the completion of the sEEG exclusivity maintenance milestone. There was no collaboration revenue during the three months ended December 31, 2023.

Current wording

In October 2022, we received 510(k) clearance from the FDA for our Evo sEEG electrode technology for temporary (less than 30 days) use with recording, monitoring, and stimulation equipment for the recording, monitoring, and stimulation of electrical signals at the subsurface level of the brain. Accordingly, we recognized revenue in the amount of $1.5 million during the six months ended March 31, 2023 related to the completion of the sEEG exclusivity maintenance milestone. There was no collaboration revenue during the six months ended March 31, 2024.

Previous wording

Other income, net primarily consists of interest income related to our cash, cash equivalents, investment income or loss from short-term investments and other income or expense outside of normal operating activity relating to legal settlements, sales of non-commercial supplies and other items as applicable.

Current wording

Other income (expense), net primarily consists of interest income related to our cash, cash equivalents, investment income or loss from short-term investments and other income or expense outside of normal operating activity relating to legal settlements, sales of non-commercial supplies and other items as applicable.

Previous wording

Product revenue was approximately $1.0 million and $0.1 million during the three months ended December 31, 2023 and 2022, respectively. Product gross profit (loss) was approximately $0.3 million with a gross margin of 27.2% during the three months ended December 31, 2023 as compared to a gross loss of $(12,000) during the three months ended December 31, 2022. The product revenue consists of the sale of our strip/grid, depth electrode and electrode cable assembly products. Cost of product revenue consisted of the manufacturing and materials costs incurred by our third-party contract manufacturer in connection with our strip/grid and depth electrode products, and outside supplier materials costs in connection with the electrode cable assembly products. In addition, cost of product revenue included royalty fees incurred of approximately $38,000 in connection with our license agreements during each of the three months ended December 31, 2023 and 2022, respectively.

Current wording

Product revenue and product gross profit was $1.4 million and $0.4 million, respectively, during the three months ended March 31, 2024. Product revenue and product gross profit was $0.5 million and $32,000, respectively, during the three months ended March 31, 2023. The product revenue consists of the sale of our strip/grid, sEEG and electrode cable assembly products. Cost of product revenue consisted of the manufacturing and materials costs incurred by our third-party contract manufacturer in connection with our strip/grid and sEEG products, and outside supplier materials costs in connection with the electrode cable assembly products. In addition, cost of product revenue included royalty fees incurred of approximately $42,000 and $38,000 in connection with our license agreements during the three months ended March 31, 2024 and 2023, respectively.

Previous wording

Research and development expenses were $1.5 million for the three months ended December 31, 2023, compared to $1.6 million during for the three months ended December 31, 2022. The $0.1 million decrease period over period was attributed largely to the timing of development of activities, which primarily included salary-related expenses and costs related to consulting services, materials and supplies associated with the development of depth electrode products and to a lesser extent strip/grid products, offset in part by an increase in quality control activities. Research and development expenses included stock-based compensation of $65,000 and $45,000 during the three months ended December 31, 2023 and 2022, respectively.

Current wording

Research and development expenses were $1.3 million for the three months ended March 31, 2024, compared to $1.7 million during for the three months ended March 31, 2023. The $0.4 million decrease in the current period over the prior year period was attributed largely to the timing and overall lower OneRF Product development activities in the current quarter when compared to the comparable prior year quarter. Research and development expenses primarily included salary-related expenses and costs related to consulting services, materials and supplies associated with the development of sEEG Products and to a much lesser extent Strip/Grid Products. Research and development expenses included $76,000 and $38,000 of stock-based compensation during the three months ended March 31, 2024 and 2023, respectively.

Previous wording

Other income during the three months ended December 31, 2022 consisted of interest income in the amount of $52,000 attributed to our cash, cash equivalents and short term investments.

Current wording

Other income during the three months ended March 31, 2024 and 2023 related to interest income on our cash, cash equivalents and short-term investments in the amount of $31,000 and $67,000, respectively.

Previous wording

Collaborations revenue was $1.5 million for the three months ended December 31, 2022. Revenue during the period was derived from the Zimmer Development Agreement and Zimmer Amendment and represented the portion of the milestone earned uponthe completion of the sEEG maintenance fee obligation. No collaborations revenue was derived from the Zimmer Development Agreement and Zimmer Amendment during the three months ended in the current quarter.* *

Current wording

Collaborations revenue was zero and $1.5 million for the six months ended March 31, 2024 and 2023, respectively. Revenue was derived from the Zimmer Development Agreement and represented the portion of the upfront initial development fee payment eligible for revenue recognition during such period. The amount of revenue recognized in the current six months related to the completion of the sEEG maintenance fee obligation as a result of securing FDA approval. For the comparable prior year period, the upfront fee was based on development completed in connection with depth electrode products, and to a lesser extent, the strip/grid products.

Previous wording

Other income during the three months ended December 31, 2023 consisted of interest income in the amount of $46,000 attributed to our cash and cash equivalents.

Current wording

Other income, net during the six months ended March 31, 2024 consisted of $77,000 related to interest income attributed to our cash and cash equivalents.

Previous wording

As of December 31, 2023, our principal source of liquidity consisted of cash and cash equivalents in the aggregate of approximately $2.7 million. While we began to generate revenue in fiscal year 2021 from commercial sales and through milestone and other payments under our collaboration with Zimmer, we expect to continue to incur significant expenses and increasing operating and net losses for the foreseeable future until and unless we generate an adequate level of revenue from commercial sales to cover expenses. Our most significant cash requirements relate to the funding of our ongoing product development and commercialization operations and our royalty obligations under our intellectual property licenses with the Wisconsin Alumni Research Foundation (“WARF”) and the Mayo Foundation for Medical Education and Research (“Mayo”). Our additional material cash needs include commitments under operating leases and other administrative services. See “Funding Requirements” below for more information. We anticipate that our expenses will increase substantially as we develop and commercialize our electrode technology and pursue pre-clinical and clinical trials, seek regulatory approvals, manufacture products, establish our own sales, marketing and distribution infrastructure to commercialize our ablation electrode technology, hire additional staff, add operational, financial and management systems and continue to operate as a public company.

Current wording

As of March 31, 2024, our principal source of liquidity consisted of cash and cash equivalents in the aggregate of approximately $2.4 million. While we began to generate revenue in fiscal year 2021 from commercial sales and through milestone and other payments under our collaboration with Zimmer, we expect to continue to incur significant expenses and increasing operating and net losses for the foreseeable future until and unless we generate an adequate level of revenue from commercial sales to cover expenses. Our most significant cash requirements relate to the funding of our ongoing product development and commercialization operations and our royalty obligations under our intellectual property licenses with the Wisconsin Alumni Research Foundation (“WARF”) and the Mayo Foundation for Medical Education and Research (“Mayo”). Our additional material cash needs include commitments under operating leases and other administrative services. See “Funding Requirements” below for more information. We anticipate that our expenses will increase substantially as we develop and commercialize our electrode technology and pursue pre-clinical and clinical trials, seek regulatory approvals, manufacture products, establish our own sales, marketing and distribution infrastructure to commercialize our ablation electrode technology, hire additional staff, add operational, financial and management systems and continue to operate as a public company.

Previous wording

Through December 31, 2023, we have issued 2,307,920 shares of common stock under the ATM for gross proceeds in the amount of $3.8 million. We incurred issuance costs in connection with the ATM in the amount of $0.3 million through December 31, 2023. During January 2024, we issued an additional 1,080,314 shares of common stock for net proceeds in the amount of $1.5 million in connection with the Sales Agreement.

Current wording

Through March 31, 2024, we have issued 3,769,273 shares of common stock under the ATM for gross proceeds in the amount of $5.9 million. We incurred issuance costs in connection with the ATM in the amount of $0.4 million through March 31, 2024. Between April 1 and May 10, 2024, we issued an additional 1,093,135 shares of common stock for net proceeds in the amount of $1.3 million in connection with the Sales Agreement.

Previous wording

At December 31, 2023, we had cash and cash equivalents in the aggregate of approximately $2.7 million. Management has noted the existence of substantial doubt about our ability to continue as a going concern. Additionally, our independent registered public accounting firm included an explanatory paragraph in the report on our financial statements as of and for the years ended September 30, 2023 and 2022, respectively, noting the existence of substantial doubt about our ability to continue as a going concern. Our existing cash and cash equivalents may not be sufficient to fund our operating expenses through at least twelve months from the date of this filing. To continue to fund operations, we will need to secure additional funding through public or private equity or debt financings, through collaborations or partnerships with other companies or other sources. We may not be able to raise additional capital on terms acceptable to us, or at all. Any failure to raise capital when needed could compromise our ability to execute on our business plan. If we are unable to raise additional funds, or if our anticipated operating results are not achieved, we believe planned expenditures may need to be reduced in order to extend the time period that existing resources can fund our operations. If we are unable to obtain the necessary capital, it may have a material adverse effect on our operations and the development of our technology, or we may have to cease operations altogether.

Current wording

At March 31, 2024, we had cash and cash equivalents in the aggregate of approximately $2.4 million. Management has noted the existence of substantial doubt about our ability to continue as a going concern. Additionally, our independent registered public accounting firm included an explanatory paragraph in the report on our financial statements as of and for the years ended September 30, 2023 and 2022, respectively, noting the existence of substantial doubt about our ability to continue as a going concern. Our existing cash and cash equivalents may not be sufficient to fund our operating expenses through at least twelve months from the date of this filing. To continue to fund operations, we will need to secure additional funding through public or private equity or debt financings, through collaborations or partnerships with other companies or other sources. We may not be able to raise additional capital on terms acceptable to us, or at all. Any failure to raise capital when needed could compromise our ability to execute on our business plan. If we are unable to raise additional funds, or if our anticipated operating results are not achieved, we believe planned expenditures may need to be reduced in order to extend the time period that existing resources can fund our operations. If we are unable to obtain the necessary capital, it may have a material adverse effect on our operations and the development of our technology, or we may have to cease operations altogether.

Previous wording

Net cash used in operating activities was $3.8 million for the three months ended December 31, 2023, which consisted of a net loss of $3.3 million partially offset by non-cash stock-based compensation, depreciation, amortization related to intangible assets and non-cash lease expense, totaling approximately $0.4 million in the aggregate. The net change in our net operating assets and liabilities associated with fluctuations in our operating activities resulted in a net cash use of $0.9 million. The net cash use stemming from the change in operating assets and liabilities was primarily attributable to an increase in accounts receivable connection with the Zimmer Development Agreement and to a decrease in accrued expenses, offset in part by decreases in prepaid expenses and inventory on hand attributed to the timing of payments and purchases.

Current wording

Net cash used in operating activities was $6.0 million for the six months ended March 31, 2024, which consisted of a net loss of $6.2 million partially offset principally by non-cash stock-based compensation, depreciation, amortization related to intangible assets, operating lease expense, totaling approximately $0.8 million in the aggregate. The net change in our net operating assets and liabilities associated with fluctuations in our operating activities resulted in a cash use of approximately $0.6 million. The net cash use stemming from the change in operating assets and liabilities was primarily attributable to both an increase in our accounts receivable and prepaid expense as well as attributed to a net decrease in our accrued expenses and other liabilities. Partially offsetting the net cash used for the period was the reduction in inventory purchases and increase in our account payable attributed to the timing of payments.

Previous wording

Net cash used in operating activities was $3.5 million for the three months ended December 31, 2022, which consisted of a net loss of $1.7 million partially offset by non-cash stock-based compensation, depreciation, amortization related to intangible assets, short-term investment discount and premium amortization, and non-cash lease expense, totaling approximately $0.3 million in the aggregate. The net change in our net operating assets and liabilities associated with fluctuations in our operating activities resulted in a net cash use of $2.1 million. The net cash use stemming from the change in operating assets and liabilities was primarily attributable to a decrease in deferred revenue in connection with the completion of the remaining milestone performance obligation under the Zimmer Development Agreement and Zimmer Amendment, and to a lesser extent, due to an increase in inventory purchases and accounts receivable and a net decrease in the aggregate of account payable, accrued expenses, prepaid expense attributed to the timing of payments.

Current wording

Net cash used in operating activities was $7.0 million for the six months ended March 31, 2023, which consisted of a net loss of $5.3 million partially offset principally by non-cash stock-based compensation, depreciation, amortization related to intangible assets and to our short-term investments, operating lease expense, totaling approximately $0.6 million in the aggregate. The net change in our net operating assets and liabilities associated with fluctuations in our operating activities resulted in a cash use of approximately $2.4 million. The net cash use stemming from the change in operating assets and liabilities was primarily attributable to a decrease in deferred revenue in connection with the completion of the remaining milestone performance obligation under the Zimmer Development Agreement, and to a lesser extent, to an increase in inventory purchases, accounts receivable and prepaids, coupled with a decrease in the aggregate of account payable and accrued expenses, attributed to the timing of payments.

Previous wording

Net cash used by investing activities for the three month ended December 31, 2023 was $37,000 and consisted of outlays for purchases of property and equipment.

Current wording

Net cash used in investing activities was $ 68,000 for the six months ended March 31, 2024 and consisted of outlays for purchases of property and equipment.

Previous wording

Net cash provided by investing activities for the three month ended December 31, 2022 was $15,000 and consisted of maturities of short-term investments in the amount of $1.5 million, offset by purchases of short term investments, consisting of treasury and corporate notes, and by outlays for purchases of property and equipment.

Current wording

Net cash provided by investing activities was $1.8 million for the six months ended March 31, 2023 and consisted of maturities of short-term investments in the amount of $3.5 million, offset by purchases of short term investment of $1.5 million, consisting of treasury and corporate notes. The balance of activity during the period consisted of outlays for purchases of property and equipment in the amount $0.2 million.

Previous wording

Net cash provided by financing activities was $1.2 million for the three months ended December 31, 2023, which consisted of net proceeds in connection with the ATM, offset in a small part by common stock repurchases for the payment of withholding taxes.

Current wording

Net cash provided by financing activities was $3.2 million for the six months ended March 31, 2024, which consisted of net proceeds from the ATM of $3.2 million, offset partially by repurchases of common stock for the payment of employee taxes in the amount of $25,000.