What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-02-14 compared with 2021-08-13 · 542 added, 552 removed, 14 unchanged (99% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

following discussion of our financial condition and results of operations should be read in conjunction with the financial statements

and notes included in Part I “Financial Information”, Item I “Financial Statements” of this Quarterly Report

on Form 10-Q (the “Report”) and the audited financial statements and related footnotes included in our Annual Report on Form

10-K for the year ended September 30, 2020.

Forward-Looking

statements contained in this Report are not statements of historical fact and are forward-looking statements within the meaning of Section

27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange

Forward-looking statements give current expectations or forecasts of future events or our future financial or operating

We may, in some cases, use words such as “anticipate,” “believe,” “could,” “estimate,”

“expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,”

“should,” “will,” “would” or the negative of those terms, and similar expressions that convey uncertainty

of future events or outcomes to identify these forward-looking statements.

forward-looking statements reflect our management’s beliefs and views with respect to future events, are based on estimates and

assumptions as of the date of this Report and are subject to risks and uncertainties, many of which are beyond our control, that could

cause our actual results to differ materially from those in these forward-looking statements.

We discuss many of these risks in greater

detail under Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2020 and our

Quarterly Report on Form 10-Q for the quarter ended December 31, 2020, and subsequent reports filed with or furnished to the Securities

and Exchange Commission (the “SEC”).

Moreover, we operate in a very competitive and rapidly changing environment.

emerge from time to time.

It is not possible for our management to predict all risks, nor can we assess the impact of all factors on

our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained

in any forward-looking statements we may make.

Given these uncertainties, you should not place undue reliance on these forward-looking

forward-looking statement made by us in this Report speaks only as of the date hereof or as of the date specified herein.

no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise,

except as may be required by applicable laws or regulations.

date, our primary activities have been limited to, and our limited resources have been dedicated to, performing business and financial

planning, raising capital, recruiting personnel, negotiating with business partners and the licensors of our intellectual property and

conducting research and development activities.

Our Evo cortical technology (“cEEG”) has received 510(k) clearance from the

FDA for recording, monitoring, and stimulating brain tissue for up to 30 days for which we have begun to generate revenue beginning in

the first quarter of fiscal 2021 from the sale of products based on our Evo cortical technology.

Our other products are still under development.

have incurred losses since inception.

As of June 30, 2021, we had an accumulated deficit of $38.2 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

We expect to continue to incur significant expenses and increasing operating and net losses for the foreseeable future until

and unless we generate a higher level of revenue from commercial sales.

main source of cash to date, outside of collaborations and product revenues, has been proceeds from the issuances of notes, common stock,

warrants and unsecured loans.

See “—Liquidity and Capital Resources—Historical Capital Resources” below.

June 30, 2021, we had $9.0 million in cash deposits.

Our existing cash and cash equivalents is not sufficient to fund our operating expenses

through at least twelve months from the date of this filing.

We will need to obtain substantial additional funding in connection with

our continuing operations through public or private equity or debt financings or other sources such as additional product revenue and

milestone payments from our current collaboration with Zimmer.

However, we may be unable to raise additional funds when needed on favorable

terms or at all.

Our failure to raise such capital as and when needed would have a negative impact on our financial condition and our

ability to develop and commercialize our cortical strip, grid electrode and depth electrode technology and future products and our ability

to pursue our business strategy.

See “—Liquidity and Capital Resources—Funding Requirements and Outlook” below.

of Independent Registered Public Accounting Firm for Fiscal 2021

June 18, 2021, the Audit Committee (the “Audit Committee”) of the Board of the Company (i) engaged Baker Tilly US, LLP (“Baker

Tilly”) to serve as the Company’s independent registered public accounting firm for the Company’s fiscal year ending

September 30, 2021, and (ii) determined to dismiss BDO USA, LLP (“BDO”), the Company’s independent registered

public accounting firm for the year ending September 30, 2020 and the quarters ending December 31, 2020 and March 31, 2021.

Medical Technologies Corporation

Shelf Registration

June 4, 2021, NeuroOne filed a Form S-3 shelf registration statement under the Securities Act, which was declared effective by the SEC

on June 14, 2021 (the “2021 Shelf”) under which the Company may offer and sell, from time to time in its sole discretion,

securities having an aggregate offering price of up to $150 million.

Capital Market

Company’s common stock commenced trading on The Nasdaq Capital Market on May 26, 2021 under the ticker symbol “NMTC.”

Previously, the Company’s common stock was traded on the OTC Markets quotation system on the OTCQB.

after the close of business on March 31, 2021, the Company completed a 1-for-3 reverse stock split of its common stock.

All share and

per share amounts in this Quarterly Report have been reflected on a post-split basis.

Private Placement

January 12, 2021, we entered into a Common Stock and Warrant Purchase Agreement (the “2021 Purchase Agreement”) with certain

accredited investors (the “Purchasers”), pursuant to which the Company, in a private placement (the “2021 Private Placement”),

agreed to issue and sell an aggregate of 4,166,682 shares (the “Shares”) of the common stock of the Company, and warrants

to purchase an aggregate of 4,166,682 shares of common stock (the “2021 Warrants”) at an aggregate purchase price of $3.00

per share of common stock and corresponding warrant, resulting in total gross proceeds of $12.5 million before deducting placement agent

fees and offering expenses.

The 2021 Warrants have an initial exercise price of $5.25 per share.

See “— Liquidity and Capital

Resources — Historical Capital Resources ” section below for additional information with regard to the 2021 Private

March 11, 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic.

As a result of the COVID-19 pandemic,

the Company has experienced, and will likely continue to experience, delays and disruptions in our pre-clinical and clinical trials,

as well as interruptions in our manufacturing, supply chain, and research and development operations.

The global outbreak of COVID-19

continues to rapidly evolve.

In April 2020, given the impact of COVID-19 on the Company, the Company applied for and received loan funding

of $83,333 under the Paycheck Protection Program, which was forgiven by the U.S.

Small Busing Administration on June 9, 2021.

extent to which the COVID-19 pandemic may impact our business and pre-clinical and clinical trials will depend on future developments,

which are highly uncertain and cannot be predicted with confidence, such as the effect of the pandemic on our suppliers and distributors

and the global supply chain, the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social

distancing in the U.S.

and other countries, business closures or business disruptions and the effectiveness of actions taken in the U.S.

and other countries to contain and treat the disease.

The COVID-19 pandemic may also impact our business as a result of employee illness,

school closures, and other community response measures.

COVID-19 pandemic may also impact our ability to secure additional financing.

Although the Company cannot estimate the length or gravity

of the impact of the COVID-19 outbreak at this time, if the pandemic continues, it may have a material adverse effect on the Company’s

results of future operations, financial position, and liquidity in for the remainder of fiscal year 2021 and beyond.

product revenue during the three and nine months ended June 30, 2021 was derived from the sale of strip/grid and electrode cable assembly

products based on Evo cortical technology.

For the foreseeable future, we anticipate that we will generate additional revenue from the

sale of products based on Evo cortical technology.

have received FDA 510(k) clearance for our cortical strip electrode, but we do not expect to generate any revenue from the sale of our

other products until we develop and obtain all required regulatory approvals or clearances for and commercialize depth electrode technology.

If we fail to complete the development of the depth electrode technology, or any other product candidate we may pursue in the future,

in a timely manner, or fail to obtain regulatory approval, we may never be able to generate revenue from product sales sufficient to

sustain operations.

Medical Technologies Corporation

gross 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 and outside supplier

materials costs in connection with the Electrode Cable Assembly Products.

In addition, cost of product revenue includes royalty fees

incurred in connection with our license agreements.

Collaborations

revenue was derived from the upfront initial exclusivity fee payment under the Zimmer Development Agreement.

We anticipate that we may

earn additional revenues stemming from additional milestone and royalty payments from Zimmer, however, the hitting of milestones or level

of sales required to earn royalty payments is uncertain.

General and Administrative

general and administrative expenses consist primarily of personnel-related costs including stock-based compensation for personnel in

functions not directly associated with research and development activities.

Other significant costs include legal fees relating to corporate

matters, intellectual property costs, professional fees for consultants assisting with regulatory, clinical, product development, financial

matters, and beginning in the first quarter of fiscal year 2021, sales and marketing in connection with the commercial sale of cEEG strip/grid

and electrode cable assembly products.

We anticipate that our general and administrative expenses will significantly increase in the

future to support our continued research and development activities, further commercialization of our cortical strip technology, potential

commercialization of our grid electrode and depth electrode technology, if approved, and the increased costs of operating as a public

These increases will include increased costs related to the hiring of additional personnel and fees for legal and professional

services, as well as other public-company related costs.

and Development

and development expenses consist of expenses incurred in performing research and development activities in developing our cortical strip,

grid electrode and depth electrode technology.

Research and development expenses include compensation and benefits for research and development

employees including stock-based compensation, overhead expenses, cost of laboratory supplies, clinical trial and related clinical manufacturing

expenses, costs related to regulatory operations, fees paid to consultants and other outside expenses.

Research and development costs

are expensed as incurred and costs incurred by third parties are expensed as the contracted work is performed.

Lastly, de minimis income

from the sale of prototype products and related materials are offset against research and development expenses.

expect our research and development expenses to significantly increase over the next several years as we develop our cortical strip,

grid electrode and depth electrode technology and conduct preclinical testing and clinical trials and will depend on the duration, costs

and timing to complete our preclinical programs and clinical trials.

expense primarily consists of interest costs related to our 2019 Paulson Notes and 2020 Paulson Notes.

valuation change of instruments measured at fair value

net valuation change of instruments measured at fair value include the change in fair value of the 2019 Paulson Notes and 2020 Paulson

on notes extinguishment

on note extinguishment includes the loss associated with debt instrument modifications and conversions accounted for as debt extinguishments.

of proceeds outside of normal operating activity relating to legal settlements and to the forgiveness of the paycheck protection program

Medical Technologies Corporation

of Operations

of the Three Months Ended June 30, 2021 and 2020

following table sets forth the results of operations for the three-months ended June 30, 2021 and 2020, respectively.

three months ended

of product revenue

Collaborations

general and administrative

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

The following discussion of our financial

condition and results of operations should be read in conjunction with the financial statements and notes included in Part I “Financial

Information”, Item I “Financial Statements” of this Quarterly Report on Form 10-Q (the “Report”) and the

audited financial statements and related footnotes included in our Annual Report on Form 10-K for the year ended September 30, 2021.

Forward-Looking Statements

This Report contains forward-looking statements

that involve substantial risks and uncertainties.

In some cases, you can identify forward-looking statements by the words “may,”

“might,” “will,” “could,” “would,” “should,” “expect,” “intend,”

“plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,”

“project,” “potential,” “target,” “seek,” “contemplate,” “continue”

and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the

These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of

activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.

Although we believe that we have a reasonable basis for each forward-looking statement contained in this Report, we caution you that

these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which

we cannot be certain.

Forward-looking statements include statements about:

the timing of and our ability

to obtain and maintain regulatory clearance of our cortical strip, grid and depth electrode technology;

even if our cortical strip,

grid electrode and depth electrode technology is approved for commercial sale, our ability to successfully commercialize our technology

in the United States;

our ability to achieve

or sustain profitability;

our ability to raise additional

capital and to fund our operations;

the availability of additional

capital on acceptable terms or at all as or when needed;

the clinical utility of

our cortical strip, grid and depth electrode including technology under development;

our ability to develop

additional applications of our cortical strip, grid and depth electrode technology with the benefits we hope to offer as compared

to existing technology, or at all;

the results of our development

and distribution relationship with Zimmer, Inc.

the performance, productivity,

reliability and regulatory compliance of our third party manufacturers of our cortical strip, grid electrode and depth electrode

our ability to develop

future generations of our cortical strip, grid and depth electrode technology;

our future development

the impact of the COVID-19

pandemic and resulting macroeconomic conditions, including supply chain disruptions, labor shortages and inflationary pressures,

on our business;

our ability to obtain reimbursement

coverage for our cortical strip, grid and depth electrode technology;

our expectations about

the willingness of healthcare providers to recommend our cortical strip, grid and depth electrode technology to people with epilepsy,

Parkinson’s disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other related neurological

our future commercialization,

marketing and manufacturing capabilities and strategy;

our ability to comply with

applicable regulatory requirements;

our ability to maintain

our intellectual property position;

the outcome of legal proceedings

with PMT Corporation (“PMT”);

our expectations regarding

international opportunities for commercializing our cortical strip, grid and depth electrode technology under including technology

under development;

our estimates regarding

the size of, and future growth in, the market for our technology, including technology under development;

our estimates regarding

our future expenses and needs for additional financing.

Forward-looking statements are based on management’s

current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and management’s

beliefs and assumptions are not guarantees of future performance or development and involve known and unknown risks, uncertainties and

other factors that are in some cases beyond our control.

You should refer to the “Risk Factors” section of our Annual Report

on Form 10-K for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied

by our forward-looking statements.

As a result of these factors, we cannot assure you that the forward-looking statements in this Report

will prove to be accurate.

Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material.

light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation

or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all.

These forward-looking statements speak only as

of the date of this Report.

Except as required by law, we assume no obligation to update or revise these forward-looking statements for

any reason, even if new information becomes available in the future.

You should, however, review the factors and risks and other information

we describe in the reports we will file from time to time with the Securities and Exchange Commission (the “SEC”) after the

date of this Report.

We are a medical technology

company focused on the development and commercialization of thin film electrode technology for cEEG and sEEG recording, spinal cord stimulation,

brain stimulation and ablation solutions for patients suffering from epilepsy, Parkinson’s disease, dystonia, essential tremors,

chronic pain due to failed back surgeries and other related neurological disorders.

Additionally, we are investigating the potential

applications of our technology associated with artificial intelligence

We are developing our

cortical, sheet and depth electrode technology to provide solutions for diagnosis through cEEG recording and sEEG recording and treatment

through brain stimulation and ablation, all in one product.

A cEEG is a continuous recording of the electrical activity of the brain

that identifies the location of irregular brain activity, which information is required for proper treatment.

cEEG recording involves

an invasive surgical procedure, referred to as a craniotomy.

sEEG involves a less invasive procedure whereby doctors place electrodes

in targeted brain areas by drilling small holes through the skull.

Both methods of seizure diagnosis are used to identify areas of the

brain where epileptic seizures originate in order to precisely locate the seizure source for therapeutic treatment if possible.

Deep brain stimulation,

or DBS, therapies involve activating or inhibiting the brain with electricity that can be given directly by electrodes on the surface

or implanted deeper in the brain via depth electrodes.

Introduced in 1987, this procedure involves implanting a power source referred

to as a neurostimulator, which sends electrical impulses through implanted depth electrodes, to specific targets in the brain for the

treatment of disorders such as Parkinson’s disease, essential tremors, dystonia, and chronic pain.

The effects of DBS as a potential

treatment for Alzheimer’s is also being evaluated by researchers.

Unlike ablative technologies, the effects of DBS are reversible.

RF ablation is a procedure

that uses radiofrequency under the electrode contacts which is directed to the site of the brain tissue that is targeted for removal.

The process involves delivering energy to the contacts, thereby heating them and destroying the brain tissue.

The ablation does not remove

Rather, it is left in place and typically scar tissue forms in the place where the ablation occurs.

This procedure is also

known as brain lesioning as it causes irreversible lesions.

We received 510(k)

FDA clearance for our Evo cortical technology in November 2019, and in September 2021 we received FDA clearance to market our Evo

sEEG electrode technology for temporary (less than 24 hours) use with recording, monitoring, and stimulation equipment for the

recording, monitoring, and stimulation of electrical signals at the subsurface level of the brain.

Our submission to the FDA seeking

510(k) for use of our Evo sEEG electrode technology for up to 30 days was made in November 2021 and is pending.

responses on February 9, 2022 to questions from the FDA regarding our submission and the FDA acknowledged receipt of our response on

February 10, 2022.

The Company commenced commercial sales of cEEG strip/grid and electrode cable assembly products beginning in the

first quarter of fiscal year 2021.

The Company sold, on a limited application basis for design verification, sEEG depth electrode

products for non-human use in late fiscal year 2021 and the first quarter of fiscal year 2022.

Our other products are still under

Prior to FDA approval

or clearance of certain of our products, our primary activities were limited to, and our limited resources were dedicated to, performing

business and financial planning, raising capital, recruiting personnel, negotiating with business partners and the licensors of our intellectual

property and conducting research and development activities.

We have incurred losses

since inception.

As of December 31, 2021, we had an accumulated deficit of $43.6 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.

Prior to FDA approval

of certain of our products, our main source of cash was proceeds from the issuances of notes, common stock, warrants and unsecured loans.

See “—Liquidity and Capital Resources—Capital Resources” below.

While we have begun to generate revenue

from the sale of products based on our cEEG and sEEG technology and through milestone payments from our current 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 a higher level of revenue from commercial sales, and we will need to obtain substantial additional funding in connection

with our continuing operations through public or private equity or debt financings, through collaborations or partnerships with other

companies or other sources.

We may be unable to

raise additional funds when needed on favorable terms or at all.

Our failure to raise such capital as and when needed would have a negative

impact on our financial condition and our ability to develop and commercialize our cortical strip, grid electrode and depth electrode

technology and future products and our ability to pursue our business strategy.

See “—Liquidity and Capital Resources—Liquidity

Outlook” below

Recent Developments and Upcoming Milestones

Corporate Updates

In November 2021, we

submitted a clearance request to the FDA for less than 30-day use of our Evo® sEEG Electrode, which has already been 510(k) cleared

for temporary (less than 24 hours) use, and our request is pending.

We expect to be commercial ready pending that approval.

Product shipment

following FDA clearance of our SEEG product family may also qualify the Company for an additional milestone payment from our distribution

partner Zimmer Biomet, who has placed initial stocking orders.

We completed feasibility

bench top testing with a new design of our diagnostic and ablation depth electrode in the first calendar quarter of 2021, and signed

a contract with RBC Medical Innovations to develop and manufacture hardware (a radio frequency generator) for the system in the third

calendar quarter of 2021.

We are targeting the third calendar quarter of 2022 for completion of a prototype of hardware and the submission

of an application for FDA clearance in early calendar 2023.

We also completed an animal feasibility study at Emory University in September

2021 and additional animal studies are planned.

Subsequent to the end of the fiscal quarter, we also announced that we have surpassed

five years of accelerated aging testing for our recording electrodes.

On March 11, 2020, the World Health Organization

declared the outbreak of COVID-19 as a global pandemic.

COVID-19 and its variants continue to impact the United States and the world.

As a result of the COVID-19 pandemic, the Company has experienced delays and disruptions in our pre-clinical and clinical trials, as

well as interruptions in our manufacturing, supply chain, and research and development operations.

● development of our technology has been and may continue to

be delayed in fiscal year 2021 and continuing into fiscal 2022 due to interruptions in global manufacturing and shipping as a result

of the COVID-19 pandemic and macroeconomic conditions, including as one of our key manufacturing partners and one of the Company’s

suppliers had staffing issues leading to delays in the Company’s development builds and delays in shipping product;

● the Company’s own staff has been impacted by infections

and mandatory quarantines;

● the Company is currently experiencing and may continue to

experience product shortages of its primary component, polyimide film, due to supply chain shortages attributed to COVID related issues;

● the Company is experiencing and may continue to experience

delays in timelines for product availability and delivery from vendors, including related to staffing shortages, both generally and due

to employee illness, and due to increases in demand from other larger or more longstanding customers of our suppliers placing large orders

due to concerns with supply chain disruption and the impact of COVID-19.

The Company’s plans for further testing

or clinical trials and costs to obtain components may be further impacted by the continuing effects of COVID-19, supply chain challenges

and inflationary pressures.

The global outbreak of COVID-19 continues to

rapidly evolve as new variants emerge.

The extent to which the COVID-19 pandemic may impact our business and pre-clinical and clinical

trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the effect of

the pandemic on our suppliers and distributors and the global supply chain, the impact of inflation, the ultimate geographic spread of

the disease and its variants, the duration of the outbreak, travel restrictions and social distancing in the U.S.

and other countries,

business closures or business disruptions and the effectiveness of actions taken in the U.S.

and other countries to contain and treat

The COVID-19 pandemic may also impact our ability

to secure additional financing.

Although the Company cannot estimate the length or gravity of the impact of the COVID-19 outbreak at

this time, if the pandemic continues, it may have a material adverse effect on the Company’s results of future operations, financial

position, and liquidity in fiscal year 2022 and beyond.

Financial Overview

Product Revenue

Our product revenue was derived from the sale

of strip/grid, depth electrode and electrode cable assembly products based on Evo cortical and sEEG technology.

For the foreseeable future,

we anticipate that we will generate additional revenue from the sale of products based on Evo cortical and sEEG technology.

We have received FDA 510(k) clearance for our

cortical strip electrode, but we do not expect to generate any significant revenue from the sale of our other products until we develop

and obtain all required regulatory approvals or clearances for and commercialize depth electrode technology for human use.

to complete the development of the depth electrode technology, or any other product candidate we may pursue in the future, in a timely

manner, or fail to obtain regulatory approval, we may never be able to generate revenue from product sales sufficient to sustain operations.

Product Gross Profit (Loss)

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 and depth electrode products and outside supplier materials costs

in connection with the electrode cable assembly products.

In addition, cost of product revenue includes royalty fees incurred in connection

with our license agreements.

Collaborations Revenue

Collaborations revenue was derived from the upfront

initial exclusivity fee payment under the Zimmer Development Agreement.

We anticipate that we may earn additional revenues stemming from

additional milestone and royalty payments from Zimmer, however, the achievement and timing of future milestones or level of sales required

to earn royalty payments from Zimmer is uncertain.

For a discussion of milestones and royalty payments under the Zimmer Development Agreement,

see “—Liquidity and Capital Resources—Liquidity Outlook” below and see “Note 7 — Zimmer Development

Agreement” included in our condensed financial statements included in “Part 1, Item 1 – Financial Statements”

in this Report.

Selling, General and Administrative

Selling, general and administrative expenses

consist primarily of personnel-related costs including stock-based compensation for personnel in functions not directly associated with

research and development activities.

Other significant costs include legal fees relating to corporate matters, intellectual property

costs, professional fees for consultants assisting with financial and administrative matters, and sales and marketing in connection with

the commercial sale of cEEG strip/grid, sEEG depth electrode and electrode cable assembly products.

We anticipate that our selling, general

and administrative expenses will significantly increase in the future to support our continued research and development activities, further

commercialization of our cortical strip technology, potential further commercialization of our grid electrode and depth electrode technology,

if approved, and the increased costs of operating as a public company.

These increases will include increased costs related to the hiring

of additional personnel and fees for legal and professional services, as well as other public-company related costs.

Research and Development

Research and development expenses consist of

expenses incurred in performing research and development activities in developing our cortical strip, grid electrode and depth electrode

Research and development expenses include compensation and benefits for research and development employees including stock-based

compensation, overhead expenses, cost of laboratory supplies, clinical trial and related clinical manufacturing expenses, costs related

to regulatory operations, fees paid to consultants and other outside expenses.

Research and development costs are expensed as incurred

and costs incurred by third parties are expensed as the contracted work is performed.

Lastly, de minimis income from the sale of prototype

products and related materials are offset against research and development expenses.

We expect our research and development expenses

to significantly increase over the next several years as we develop our cortical strip, grid electrode and depth electrode technology

and conduct preclinical testing and clinical trials and will depend on the duration, costs and timing to complete our preclinical programs

and clinical trials.

Interest Expense

Interest expense consists of interest costs related

to our convertible notes issued in 2019 (the “2019 Paulson Notes”) outstanding during the first quarter of fiscal year 2021.

Net valuation change of instruments measured

at fair value

The net valuation change of instruments measured

at fair value include the change in fair value of the 2019 Paulson Notes outstanding during the first quarter of fiscal year 2021.

Other income primarily consists of interest income

related to our cash deposits and proceeds outside of normal operating activity relating to legal settlements.

Results of Operations

Comparison of the Three Months Ended December 31, 2021 and 2020

The following table sets forth the results of

operations for the three-months ended December 31, 2021 and 2020, respectively.

the three months ended

Product revenue

Cost of product revenue

Product gross profit (loss)

Collaborations revenue

Operating expenses:

Selling, general

and administrative

and development

operating expenses

from operations

Net valuation

change of instruments measured at fair value

on note extinguishment

before income taxes

Loss from operations

Interest expense

Net valuation change

of instruments measured at fair value

Loss before income

for income taxes

1 unchanged sentence

$ (1,959,480 )

Revenue and Product Gross Loss

revenue and product gross loss was $40,000 and $(62,000), respectively, during the three months ended June 30, 2021.

The product revenue

during the second quarter related to the sale of our Strip/Grid Products 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

Products and outside supplier materials costs in connection with the Electrode Cable Assembly Products.

In addition, cost of product

revenue included royalty fees incurred in connection with our license agreements of approximately $26,000.

There was no product revenue

or product gross loss recognized during the comparable prior year period.

Collaborations

revenue was $17,000 for the three months ended June 30, 2021.

Revenue during the period was derived from the Zimmer Development Agreement

and represented the portion of the upfront initial development fee payment eligible for revenue recognition during the third quarter

of fiscal year 2021.

The amount of revenue recognized related to the upfront fee was based on development completed in connection with

SEEG Products, and to a lesser extent, the Strip/Grid Products.

There was no collaborations revenue recognized during the comparable

prior year period.

general and administrative expenses

general and administrative expenses were $2.1 million for the three months ended June 30, 2021, compared to $1.1 million for the three

months ended June 30, 2020.

The $1.0 million increase was primarily due to an increase in sales and marketing expenses of $0.2 million,

stock-based compensation of $0.5 million, payroll related costs of $0.2 million and public company related costs of $0.1 million in the

current quarter when compared to the prior year period.

Medical Technologies Corporation

and development expenses

and development expenses were $0.9 million for the three months ended June 30, 2021, compared to $0.4 million during for the three months

ended June 30, 2020.

The $0.5 million increase period over period was attributed to supporting development activities, which primarily

included salary-related expenses and costs related to consulting services, materials and supplies associated with the development of

SEEG Products and to a lesser extent Strip/Grid Products.

expense for the three months ended June 30, 2020 was attributed to non-cash interest expense in connection with our 2020 Paulson Notes

and a nominal amount related to the 2019 Paulson Notes, both of which are described further below, and was comprised of issuance costs

of $1.0 million and day-one interest at issuance of $3.8 million representing the amount by which fair value exceeded the 2020 Paulson

Note proceeds.

Interest on principal in connection with the 2019 Paulson Notes and 2020 Paulson Notes is included in the net valuation

change of instruments measured at fair value line item.

During the three months ended June 30, 2021, no interest expense was incurred

as there was no debt outstanding.

valuation change of instruments measured at fair value:

net valuation change of instruments measured at fair value for the 2019 Paulson Notes for the three months ended June 30, 2021 and 2020

was none and a benefit of $1.3 million, respectively.

The change was due to accrued interest on the 2019 Paulson Notes and due to fluctuations

in our common stock fair value and the number of potential shares of common stock issuable upon conversion of the 2019 Paulson Notes

while outstanding.

on note extinguishment

loss on note extinguishment for the three months ended June 30, 2020 was $2.0 million.

The 2019 Paulson notes were amended on April 24,

2020 to add a 40% discount to the optional conversion feature and to extend the maturity date by six months.

The April 2020 amendment

was accounted for as a note extinguishment given the significant modification made to the optional conversion feature.

There were no

note extinguishments during the three months ended June 30, 2021.

income during the three months ended June 30, 2021 consisted of the forgiveness of the paycheck protection program loan in the amount

Product Revenue and Product Gross Profit (Loss)

Product revenue was $34,000 and $71,000 during

the three months ended December 31, 2021 and 2020, respectively.

Product gross profit (loss) was $(13,000) and $(38,000) during the three

months ended December 31, 2021 and 2020, respectively.

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 $26,000 and $52,000

in connection with our license agreements during the three months ended December 31, 2021 and 2020, respectively.

Collaborations Revenue

Collaborations revenue was $6,000 and $22,000

for the three months ended December 31, 2021 and 2020, respectively.

Revenue during each period 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 related to the upfront fee was based on development completed in connection with depth electrode products,

and to a lesser extent, the strip/grid products.

Selling, general and administrative expenses

were $1.7 million for the three months ended December 31, 2021, compared to $1.2 million for the three months ended December 31, 2020.

The $0.5 million increase was primarily due to an increase in legal costs of $0.3 million, sales and marketing of $0.1 million and operating

costs of $0.1 million on a net basis.

Research and development expenses

Research and development expenses were $1.1 million

for the three months ended December 31, 2021, compared to $0.9 million during for the three months ended December 31, 2020.

million increase period over period was attributed to supporting development 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.

Interest expense

Interest expense for the three months ended December

31, 2020 was $3,000 and consisted of issuance costs in connection with our 2019 Paulson Notes.

The 2019 Paulson Notes were not

outstanding and there was no interest expense during the three month period ended December 31, 2021.

Net valuation change of instruments measured

at fair value:

The net valuation change of instruments measured

at fair value for the 2019 Paulson Notes for the three months ended December 31, 2020 was a benefit of $2,000.

The change was due to

accrued interest on the 2019 Paulson Notes and due to fluctuations in our common stock fair value and the number of potential shares

of common stock issuable upon conversion of the 2019 Paulson Notes while outstanding.

There was no net valuation change of instruments

measured at fair value during the three month period ended December 31, 2021 as the 2019 Paulson Notes were not outstanding.

Other income during the three month period ended

December 31, 2021 consisted of $2,000 related primarily to interest income attributed to our cash deposits.

Other income during the three

months ended December 31, 2020 consisted primarily of proceeds received in connection with the PMT Corporation litigation in the amount

of $0.2 million.

We did not have other income during the comparable prior year period.

Medical Technologies Corporation

of the Nine Months Ended June 30, 2021 and 2020

following table sets forth the results of operations for the nine months ended June 30, 2021 and 2020, respectively.

nine months ended

product revenue

Collaborations

general and administrative

and development

operating expenses

Net valuation

change of instruments measured at fair value

note extinguishment

for income taxes

Revenue and Product Gross Loss

revenue and product gross loss was $0.1 million and $(0.2) million during the nine months ended June 30, 2021, respectively.

revenue consisted of Strip/Grid Products and Electrode Cable Assembly Products sales.

Cost of product revenue consisted of the manufacturing

and materials costs incurred by our third-party contract manufacturer in connection with our Strip/Grid Products and outside supplier

materials costs in connection with the Electrode Cable Assembly Products.

In addition, cost of product revenue included royalty fees

incurred, including the royalty fees to WARF and Mayo of $0.1 million in connection with our license agreements.

There was no product

revenue or product gross loss recognized during the comparable prior year period.

Collaborations

revenue was $60,000 for the nine months ended June 30, 2021.

Revenue during the period was derived from the Zimmer Development Agreement

and represented the portion of the upfront initial development fee payment eligible for revenue recognition during the nine months ended

June 30, 2021.

The amount of revenue recognized related to the upfront fee was based on development completed in connection with SEEG

products, and to a lesser extent, the Strip/Grid Products.

There was no collaborations revenue recognized during the comparable prior

general and administrative expenses

general and administrative expenses were $4.6 million for the nine months ended June 30, 2021, compared to $3.5 million for the nine

months ended June 30, 2020.

The $1.1 million increase was primarily due to an increase in sales and marketing expenses of $0.7 million,

payroll related costs of $0.2 million, public company and governance costs of $0.4 million and other operating expenses and fees of $0.1

million, offset in part by a decrease in stock-based compensation of $0.1 million and legal costs of $0.2 million.

and development expenses

and development expenses were $2.9 million for the nine months ended June 30, 2021, compared to $1.3 million during for the nine months

ended June 30, 2020.

The $1.6 million increase period over period was attributed to supporting development activities, which primarily

included salary-related expenses and costs related to consulting services, materials and supplies associated with the development of

SEEG Products and to a lesser extent Strip/Grid Products.

Medical Technologies Corporation

expense for the nine months ended June 30, 2021 was $3,000 and consisted of issuance costs in connection with our 2019 Paulson Notes

described further below.

expense during the nine months ended June 30, 2020 was primarily attributed to non-cash interest expense in connection with our 2019

Paulson Notes and 2020 Paulson Notes.

Interest expense attributed to the 2019 Paulson Notes and 2020 Paulson Notes was comprised of issuance

costs of $1.8 million and day-one interest at issuance of $5.6 million representing the amount by which fair value exceeded note proceeds.

Interest on principal in connection with the 2019 Paulson Notes and 2020 Paulson Notes is included in the net valuation change of

instruments measured at fair value line item.

valuation change of instruments measured at fair value:

net valuation change of instruments measured at fair value for the 2019 Paulson Notes for the nine months ended June 30, 2021 and 2020

was a benefit of $2,000 and $1.2 million, respectively.

The change was due to accrued interest on the 2019 Paulson Notes and due to fluctuations

in our common stock fair value and the number of potential shares of common stock issuable upon conversion of the 2019 Paulson Notes

while outstanding.

on note extinguishment

loss on note extinguishment for the nine months ended June 30, 2020 was $2.0 million.

The 2019 Paulson notes were amended on April 24,

2020 (the “April 2020 Amendment”) to add a 40% discount to the optional conversion feature and to extend the maturity date

by six months.

The April 2020 Amendment was accounted for as a note extinguishment given the significant modification made to the optional

conversion feature.

There were no note extinguishments during the nine months ended June 30, 2021.

income during the nine months ended June 30, 2021 consisted principally of proceeds received in connection with the PMT Corporation litigation

in the amount of $0.2 million and the forgiveness of the paycheck protection program loan in the amount of $0.1 million.

We did not have

other income during the comparable prior year period.

and Capital Resources

Capital Resources

of June 30, 2021, our principal source of liquidity consisted of cash deposits of $9.0 million.

We have just begun to generate revenue

from commercial sales during the first quarter of fiscal year 2021, and we anticipate that we will continue to incur losses for the foreseeable

future until and unless we generate an adequate level of revenue from commercial sales to cover expenses.

Liquidity and Capital Resources

As of December 31, 2021, our principal source

of liquidity consisted of cash deposits of $16.2 million.

While we began to generate revenue in fiscal year 2021 from commercial sales

and through milestone 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.

anticipate that our expenses will increase substantially as we develop and commercialize our cortical strip, grid electrode and depth

electrode technology and pursue pre-clinical and clinical trials, seek regulatory approvals, contract to manufacture any products, establish

our own sales, marketing and distribution infrastructure to commercialize our cortical strip, grid electrode and depth electrode technology

under development, if approved, hire additional staff, add operational, financial and management systems and continue to operate as a

public company.

source of cash, outside of collaboration and product revenues, to date has been proceeds from the issuances of notes with warrants, common

stock with and without warrants and unsecured loans, the terms of which are further described below.

What changed 10-Q

Item 2. Management’s Discussion and Analysis