What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-14 compared with 2023-05-12 · 160 added, 149 removed, 446 unchanged (41% of the section changed)

62 unchanged sentences

company focused on the development and commercialization of thin film electrode technology for continuous electroencephalogram (“cEEG”)

and stereoelectrocencephalography (sEEG), 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

Additionally, we are investigating the potential applications of our technology associated with artificial intelligence.

and stereoelectrocencephalography (“sEEG”), spinal cord stimulation, brain stimulation, drug delivery 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.

We are also developing the capability to use our sEEG electrode technology to deliver drugs

or gene therapy while being able to record brain activity before, during, and after delivery.

Additionally, we are investigating the potential

applications of our technology associated with artificial intelligence.

In November 2019, our Evo cortical technology

5 unchanged sentences

Innovations to develop hardware for the system in the third calendar quarter of 2021.

We are targeting early in the second calendar quarter

of 2023 for design verification of such hardware.

We completed design verification of such hardware

early in the second calendar quarter of 2023.

We also completed an animal feasibility study at Emory University in September 2021.

We plan to complete additional animal studies early in the second quarter of calendar 2023 and submit an application for FDA 510(k) clearance

in the second calendar quarter of 2023.

completed additional animal studies early in the second quarter of calendar 2023 and submitted an application for FDA 510(k) clearance

in June 2023.

Our other products are still under development.

NeuroOne Medical Technologies

We commenced commercial

4 unchanged sentences

Our other products are still under development.

NeuroOne Medical Technologies

We have incurred losses since inception.

As of March 31, 2023, we had

As of June 30, 2023, we had

an accumulated deficit of $59.6 million, primarily as a result of expenses incurred in connection with our research and development, selling,

22 unchanged sentences

of the Evo® sEEG electrode product line in the United States with exclusive distribution partner Zimmer Biomet.

We fulfilled five

shipments of sEEG product to Zimmer Biomet in preparation for launch, and completed initial training or the sEEG product line to Zimmer

Biomet sales personnel.

We have fulfilled

eight shipments of sEEG product to Zimmer Biomet in preparation for launch and completed initial training on the sEEG product line to

Zimmer Biomet sales personnel.

The first clinical case using the Evo® sEEG

8 unchanged sentences

protocols for the final OneRF Ablation System.

We intend to submit a 510(k) application to the FDA for OneRF ablation system in the second

calendar quarter of 2023.

NeuroOne Medical Technologies

We submitted a 510(k) application to the FDA for the OneRF ablation system in June 2023.

Spinal Cord Stimulation Program

5 unchanged sentences

a needle) delivery system for paddle leads is also under development and has been successfully bench-tested.

NeuroOne Medical Technologies

Global Economic Conditions

43 unchanged sentences

committee composed of an equal number of representatives of Zimmer and the Company.

NeuroOne Medical Technologies

Under the terms of the Zimmer Development Agreement,

4 unchanged sentences

with respect to the manufacturing and supply of the Products.

NeuroOne Medical Technologies

Except as otherwise provided in the Zimmer Development

29 unchanged sentences

the effective date of the Amendment until the end of the Zimmer Term.

All payments attributed to the Initial Exclusivity Fee, the sEEG

exclusivity maintenance fee and sEEG design milestone payment are non-refundable.

All payments attributed to the Initial Exclusivity Fee, the sEEG exclusivity

maintenance fee and sEEG design milestone payment are non-refundable.

The Zimmer Development Agreement and Amendment

15 unchanged sentences

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

During the six months ended March 31, 2022, we recognized revenue in the amount of $6,000 related to sEEG Product development.

NeuroOne Medical Technologies

revenue in the amount of $1.5 million during the nine months ended June 30, 2023 related to the completion of the sEEG exclusivity maintenance

During the nine months ended June 30, 2022, we recognized revenue in the amount of $6,000 related to sEEG Product development.

The achievement of the level of sales required

5 unchanged sentences

Financial Statements” in this Report.

NeuroOne Medical Technologies

Selling, General and Administrative

7 unchanged sentences

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

commercialization of our cortical strip technology, our grid electrode technology, and our depth electrode technology, 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.

commercialization of our cortical strip and grid technology, and our depth electrode technology, 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 technology.

incurred in performing research and development activities in developing our cortical strip and grid electrode and depth electrode technology.

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

6 unchanged sentences

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

to significantly increase over the next several years as we develop our cortical strip and 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.

Other (Expense) Income, net

Other (expense) 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.

NeuroOne Medical Technologies

Other Income, net

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.

Results of Operations

Comparison of the Three Months Ended March

Comparison of the Three Months Ended June 30,

2023 and 2022

The following table sets forth the results of

operations for the three months ended March 31, 2023 and 2022, respectively.

operations for the three months ended June 30, 2023 and 2022, respectively.

Three Months Ended

7 unchanged sentences

Loss from operations

Other (expense) income, net

Other income, net

Loss before income taxes

2 unchanged sentences

$ (2,759,727 )

NeuroOne Medical Technologies

Product Revenue and Product Gross Profit (Loss)

Product revenue and product gross profit was $0.6

and $32,000, respectively, during the three months ended March 31, 2023.

Product revenue and product gross loss was $37,000 and $(36,000),

respectively, during the three months ended March 31, 2022.

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 $38,000 and $39,000 in connection

with our license agreements during the three months ended March 31, 2023 and 2022, respectively.

million and $0.2 million, respectively, during the three months ended June 30, 2023.

Product revenue and product gross loss was $32,000

and $(6,000), respectively, during the three months ended June 30, 2022.

The increase in gross profit during the current three month period

was largely due to the higher sales volume that exceeded fixed royalty period costs.

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 $43,000

and $38,000 in connection with our license agreements during the three months ended June 30, 2023 and 2022, respectively.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were

$1.8 million during each of the three months ended March 31, 2023 and 2022.

The negligible expense increase in the current three months

was attributed to higher administrative payroll and professional service costs of approximately $0.1 million, offset by lower sales and

marketing expenses of $0.1 million.

$1.9 million and $1.5 million during the three months ended June 30, 2023 and 2022, respectively.

The $0.3 million expense increase in

the current three months was attributed to higher administrative payroll costs of approximately $0.1 million and professional services

costs of $0.2 million.

Research and Development Expenses

Research and development expenses were $1.9 million

for the three months ended March 31, 2023, compared to $1.2 million during for the three months ended March 31, 2022.

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 much lesser extent

Strip/Grid Products.

Other (Expense) Income, net

Other income during the three months ended March

31, 2023 and 2022 related to interest income on our cash, cash equivalents and short-term investments in the amount of $67,000 and $2,000,

respectively.

Other expense during the three months ended March 31, 2023 was attributed to an exploit loss of $94,000.

Other expense during

the three months ended March 31, 2022 was nil.

NeuroOne Medical Technologies

Comparison of the Six Months Ended March

for the three months ended June 30, 2023, compared to $1.2 million during for the three months ended June 30, 2022.

The $0.7 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 much lesser extent Strip/Grid

Other Income, net

Other income during the three months ended June

30, 2023 and 2022 related to interest income on our cash and cash equivalents in the amount of $41,000 and $2,000, respectively.

Comparison of the Nine Months Ended June

30, 2023 and 2022

The following table sets forth the results of

operations for the six months ended March 31, 2023 and 2022, respectively.

Six Months Ended

operations for the nine months ended June 30, 2023 and 2022, respectively.

Nine Months Ended

Product revenue

12 unchanged sentences

$ (8,625,269 )

NeuroOne Medical Technologies

Product Revenue and Product Gross Profit (Loss)

Product revenue and product gross profit was $1.2

and $19,000 during the six months ended March 31, 2023, respectively.

Product revenue and product gross loss was $70,000 and $(49,000)

during the six months ended March 31, 2022, respectively.

Product revenue consisted of Strip/Grid Products, sEEG 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, 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 $76,000 and

$64,000 in connection with our license agreements during the six months ended March 31, 2023 and 2022, respectively.

million and $0.3 million during the nine months ended June 30, 2023, respectively.

Product revenue and product gross loss was $102,000

and $(56,000) during the nine months ended June 30, 2022, respectively.

The increase in gross profit during the current period was largely

due to the higher sales volume that exceeded fixed royalty period costs.

Product revenue consisted of Strip/Grid Products, sEEG 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, 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 $119,000

and $103,000 in connection with our license agreements during the nine months ended June 30, 2023 and 2022, respectively.

Collaborations Revenue

Collaborations revenue was $1.5 million and $6,000

for the six months ended March 31, 2023 and 2022, respectively.

for the nine months ended June 30, 2023 and 2022, 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.

of revenue recognized in the current six months related to the completion of the sEEG maintenance fee obligation as a result of securing

of revenue recognized in the current nine months related to the completion of the sEEG maintenance fee obligation as a result of securing

FDA approval.

3 unchanged sentences

Selling, general and administrative expenses were

$3.5 million for the six months ended March 31, 2023, compared to $3.6 million for the six months ended March 31, 2022.

$5.3 million for the nine months ended June 30, 2023, compared to $5.1 million for the nine months ended June 30, 2022.

The $0.3 million

decrease was primarily due to lower professional fees of $0.2 million, offset partially by higher administrative payroll costs of $0.1

million on a net basis.

NeuroOne Medical Technologies

increase was primarily due to higher administrative payroll costs of $0.2 million and stock-based compensation of $0.1million.

Research and Development Expenses

Research and development expenses were $5.2 million

for the six months ended March 31, 2023, compared to $2.3 million for the six months ended March 31, 2022.

for the nine months ended June 30, 2023, compared to $3.5 million for the nine months ended June 30, 2022.

The $1.7 million increase period

2 unchanged sentences

Other Income, net

Other income, net during the six months ended

March 31, 2023 consisted of $119,000 related primarily to interest income attributed to our cash, cash equivalents and short-term investments,

partially offset by an exploit loss of $94,000.

Other income, net during the six months ended

March 31, 2022 consisted of $4,000 related primarily to interest income attributed to our cash deposits.

Other income, net during the nine months ended

June 30, 2023 of $66,000 consisted of $160,000 related primarily to interest income attributed to our cash, cash equivalents and short-term

investments, while outstanding, which was partially offset by an exploit loss of $94,000.

Other income during the nine months ended June

30, 2022 consisted of $5,000 related primarily to interest income attributed to our cash deposits.

NeuroOne Medical Technologies

Liquidity and Capital Resources

As of March 31, 2023, our principal source of

liquidity consisted of cash, cash equivalents and short-term investments in the aggregate of approximately $4.6 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

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 cortical strip, grid electrode and depth 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.

As of June 30, 2023, our principal source of liquidity

consisted of cash and cash equivalents in the aggregate of approximately $3.1 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 cortical strip,

grid electrode and depth 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.

Capital Resources

1 unchanged sentence

investments to date have been limited to collaboration and product revenues, along with proceeds from the issuances of notes with warrants,

common stock with and without warrants and unsecured loans, with the terms of our most recent financings described below.

common stock with and without warrants and unsecured loans, with the terms of our most recent financings, as of the third fiscal quarter

of 2023, described below.

At-The-Market Offering

On December 21, 2022, we entered into a Capital

on Demand TM Sales Agreement with JonesTrading Institutional Services LLC (“JonesTrading”) to create an at-the-market

offering program (“ATM”) under which we may offer and sell shares having an aggregate offering price of up to $14.5 million.

on Demand TM Sales Agreement (“Sales Agreement”) with JonesTrading Institutional Services LLC (“JonesTrading”)

to create an at-the-market offering program (“ATM”) under which we may offer and sell shares having an aggregate offering

price of up to $14.5 million.

JonesTrading is entitled to a commission at a fixed commission rate equal to up to 3% of the gross proceeds.

Through May 8, 2023, we have

issued 1,156,384 shares of common stock under the ATM for gross proceeds in the amount of $2.1 million.

We incurred issuances costs in

connection with the ATM in the amount of $0.2 million through May 8, 2023.

NeuroOne Medical Technologies

Through June 30, 2023, we have issued 1,439,677 shares of common stock under the ATM for gross proceeds in the amount of $2.6 million.

We incurred issuance costs in connection with the ATM in the amount of $0.2 million through June 30, 2023.

On July 24, 2023, we decreased

the amount of common stock that can be sold pursuant to the Sales Agreement, such that we are offering up to an aggregate of $2.6 million

of our common stock for sale under the Sales Agreement, including the shares of common stock previously sold.

October 2021 Underwritten Public Offering

17 unchanged sentences

estimate such costs.

NeuroOne Medical Technologies

On January 22, 2020,

35 unchanged sentences

have a material adverse effect on our business and operating results.

NeuroOne Medical Technologies

At March 31, 2023, we had cash, cash equivalents

and short-term investments in the aggregate of approximately $4.6 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, 2022 and 2021, respectively, noting the existence

of substantial doubt about our ability to continue as a going concern.

Our existing cash, cash equivalents and short-term investments

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.

At June 30, 2023, we had cash and cash equivalents

in the aggregate of approximately $3.1 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, 2022 and 2021, respectively, noting the existence of substantial

doubt about our ability to continue as a going concern.

Our existing cash, cash equivalents and short-term investments 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.

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.

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.

The development and commercialization of our cortical

strip, grid electrode and depth electrode technology is subject to numerous uncertainties, and we could use our cash, cash equivalent

and short-term investment resources sooner than we expect.

Additionally, the process of developing medical devices is costly, and the

timing of progress in pre-clinical tests and clinical trials is uncertain.

Our ability to successfully transition to profitability will

be dependent upon achieving further regulatory approvals and achieving a level of product sales adequate to support our cost structure.

We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.

strip, grid electrode and depth electrode technology is subject to numerous uncertainties, and we could use our cash and cash equivalent

resources sooner than we expect.

Additionally, the process of developing medical devices is costly, and the timing of progress in pre-clinical

tests and clinical trials is uncertain.

Our ability to successfully transition to profitability will be dependent upon achieving further

regulatory approvals and achieving a level of product sales adequate to support our cost structure.

We cannot assure you that we will

ever be profitable or generate positive cash flow from operating activities.

NeuroOne Medical Technologies

The following is a summary of cash flows for each

of the periods set forth below.

Six Months Ended

Nine Months Ended

Net cash used in operating activities

7 unchanged sentences

Net cash used in operating activities was $10.0

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

million for the nine months ended June 30, 2023, which consisted of a net loss of $8.7 million partially offset principally by non-cash

stock-based compensation, depreciation, amortization related to intangible assets, operating lease expense, totaling approximately $1.0

4 unchanged sentences

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.

NeuroOne Medical Technologies

under the Zimmer Development Agreement, and to a lesser extent, to an increase in inventory purchases, coupled with a decrease in the

aggregate of account payable and accrued expenses, attributed to the timing of payments.

Partially offsetting the net cash operating use

during the period was a decrease in our accounts receivable and prepaids in the aggregate of $0.1 million resulting from timing of payments

and fluctuations in our operations.

Net cash used in operating activities was $8.5

million for the six months ended March 31, 2022, which consisted of a net loss of $5.9 million partially offset principally by non-cash

million for the nine months ended June 30, 2022, which consisted of a net loss of $8.6 million partially offset principally by non-cash

stock-based compensation, depreciation, amortization related to intangible assets, operating lease expense, totaling approximately $0.9

3 unchanged sentences

The change in operating assets and liabilities was primarily attributable to a net

decrease in accrued expenses and to an increase in inventory and prepaid expenses attributed to both the timing of payments and the timing

of product sales.

decrease in accounts payable and accrued expenses and to an increase in inventory and prepaid expenses attributed to both the timing of

payments and the timing of product sales.

Net cash provided by (used in) investing activities

4 unchanged sentences

of property and equipment in the amount $0.3 million.

Net cash used in investing activities during the

six months ended March 31, 2022 consisted of outlays for purchases of equipment.

Net cash used in investing activities was

$0.2 million during the nine months ended June 30, 2022 and consisted of outlays for purchases of property and equipment.

Net cash provided by financing activities

Net cash provided by financing activities was

$0.6 million for the six months ended March 31, 2023, which consisted of net proceeds from the ATM of $0.7 million, offset partially by

$2.2 million for the nine months ended June 30, 2023, which consisted of net proceeds from the ATM of $2.3 million, offset partially by

repurchases of common stock for the payment of employee taxes in the amount of $0.1 million.

Net cash provided by financing activities was

$12.0 million for the six months ended March 31, 2022, which consisted of net proceeds from the October 2021 Underwritten Public Offering.

$12.0 million for the nine months ended June 30, 2022, which consisted of net proceeds from the October 2021 Underwritten Public Offering.

NeuroOne Medical Technologies

Critical Accounting Estimates

21 unchanged sentences

and sales returns.

NeuroOne Medical Technologies

Stock-Based Compensation

18 unchanged sentences

in this Report for a discussion of recently issued accounting pronouncements.

NeuroOne Medical Technologies

Quantitative and Qualitative Disclosures About Market Risk

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis