NEUROONE MEDICAL TECHNOLOGIES Corp 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended December 31, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number : 001-40439 NeuroOne Medical Technologies Corporation (Exact name of Registrant as specified in its charter) Delaware 27-0863354 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification Number) 7599 Anagram Drive Eden Prairie , MN 55344 (Address of Principal Executive Offices) (Zip Code) Registrant’s Telephone Number, Including Area Code: 952 - 426-1383 Not Applicable (Former name, former address and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered Common stock, $0.001 par value NMTC The Nasdaq Stock Market LLC Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act: Large accelerated filer ☐ Non-accelerated filer ☒ Accelerated filer ☐ Smaller reporting company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ The number of outstanding shares of the registrant’s common stock as of February 10, 2025 was 30,862,542 . NEUROONE MEDICAL TECHNOLOGIES CORPORATION FORM 10-Q INDEX Page PART I – FINANCIAL INFORMATION 1 Item 1. Financial Statements 1 Condensed Balance Sheets as of December 31, 2024 (unaudited) and September 30, 2024 1 Condensed Statements of Operations for the three months ended December 31, 2024 and 2023 (unaudited) 2 Condensed Statements of Changes in Stockholders’ Equity for the three months ended December 31, 2024 and 2023 (unaudited) 3 Condensed Statements of Cash Flows for the three months ended December 31, 2024 and 2023 (unaudited) 4 Notes to Condensed Financial Statements (unaudited) 5 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20 Item 3. Quantitative and Qualitative Disclosures About Market Risk 32 Item 4. Controls and Procedures 32 PART II – OTHER INFORMATION 33 Item 1. Legal Proceedings 33 Item 1A. Risk Factors 33 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 33 Item 3. Defaults Upon Senior Securities 33 Item 4. Mine Safety Disclosures 33 Item 5. Other Information 34 Item 6. Exhibits 34 SIGNATURES 35 i PART I – FINANCIAL INFORMATION Item 1. Financial Statements NeuroOne Medical Technologies Corporation Condensed Balance Sheets As of December 31, September 30, 2024 2024 (Unaudited) Assets Current assets: Cash and cash equivalents $ 1,134,350 $ 1,460,042 Accounts receivable 2,368,913 176,636 Inventory 1,930,861 2,635,153 Deferred offering costs 82,962 142,633 Prepaid expenses 194,699 216,461 Total current assets 5,711,785 4,630,925 Intangible assets, net 61,683 67,262 Right-of-use asset 339,271 254,910 Property and equipment, net 381,711 416,843 Total assets $ 6,494,450 $ 5,369,940 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 744,525 $ 1,029,206 Accrued expenses and other liabilities 826,386 1,184,014 Total current liabilities 1,570,911 2,213,220 Warrant liability 1,750,870 2,140,315 Operating lease liability, long term 237,377 194,392 Total liabilities 3,559,158 4,547,927 Commitments and contingencies (Note 4) Stockholders’ equity: Preferred stock, $ 0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding. — — Common stock, $ 0.001 par value; 100,000,000 shares authorized; 30,841,830 and 30,816,499 shares issued and outstanding as of December 31, 2024 and September 30, 2024, respectively. 30,841 30,816 Additional paid–in capital 76,123,542 75,795,610 Accumulated deficit ( 73,219,091 ) ( 75,004,413 ) Total stockholders’ equity 2,935,292 822,013 Total liabilities and stockholders’ equity $ 6,494,450 $ 5,369,940 See accompanying notes to condensed financial statements 1 NeuroOne Medical Technologies Corporation Condensed Statements of Operations (unaudited) For the three months ended December 31, 2024 2023 Product revenue $ 3,274,167 $ 977,649 Cost of product revenue 1,347,278 711,335 Product gross profit 1,926,889 266,314 License revenue 3,000,000 — Operating expenses: Selling, general and administrative 2,043,454 2,173,472 Research and development 1,172,228 1,483,317 Total operating expenses 3,215,682 3,656,789 Income (loss) from operations 1,711,207 ( 3,390,475 ) Fair value change in warrant liability 389,445 — Financing cost ( 324,738 ) — Other income 9,408 45,575 Income (loss) before income taxes 1,785,322 ( 3,344,900 ) Provision for income taxes — — Net income (loss) $ 1,785,322 $ ( 3,344,900 ) Net income (loss) per share: Basic $ 0.06 $ ( 0.14 ) Diluted $ 0.06 $ ( 0.14 ) Number of shares used in per share calculations: Basic 30,837,524 23,995,610 Diluted 30,880,415 23,995,610 See accompanying notes to condensed financial statements 2 NeuroOne Medical Technologies Corporation Condensed Statements of Changes in Stockholders’ Equity (unaudited) Common Stock Additional Paid–In Accumulated Total Stockholders’ Shares Amount Capital Deficit Equity Balance at September 30, 2023 23,928,945 $ 23,929 $ 68,911,778 $ ( 62,686,303 ) $ 6,249,404 Issuance of common stock attributed to equity financings 868,243 868 1,255,403 — 1,256,271 Issuance costs related to equity financings — — ( 37,698 ) — ( 37,698 ) Stock-based compensation — — 308,638 — 308,638 Issuance of common stock upon vesting of restricted stock units 45,078 45 ( 45 ) — — Share repurchases for the payment of employee taxes ( 11,176 ) ( 11 ) ( 13,548 ) — ( 13,559 ) Net loss — — — ( 3,344,900 ) ( 3,344,900 ) Balance at December 31, 2023 24,831,090 $ 24,831 $ 70,424,528 $ ( 66,031,203 ) $ 4,418,156 Common Stock Additional Paid–In Accumulated Total Stockholders’ Shares Amount Capital Deficit Equity Balance at September 30, 2024 30,816,499 $ 30,816 $ 75,795,610 $ ( 75,004,413 ) $ 822,013 Stock-based compensation — — 339,224 — 339,224 Issuance of common stock upon vesting of restricted stock units 37,798 37 ( 37 ) — — Share repurchases for the payment of employee taxes ( 12,467 ) ( 12 ) ( 11,255 ) ( 11,267 ) Net income — — — 1,785,322 1,785,322 Balance at December 31, 2024 30,841,830 $ 30,841 $ 76,123,542 $ ( 73,219,091 ) $ 2,935,292 See accompanying notes to condensed financial statements 3 NeuroOne Medical Technologies Corporation Condensed Statements of Cash Flows (unaudited) For the three months ended December 31, 2024 2023 Operating activities Net income (loss) $ 1,785,322 $ ( 3,344,900 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Amortization and depreciation 65,127 58,657 Amortization of deferred offering costs 192,647 — Debt termination costs reclassed to financing activities 132,091 — Stock-based compensation 339,224 308,638 Fair value change in warrant liability ( 389,445 ) — Non-cash lease expense 27,537 28,861 Change in assets and liabilities: Accounts receivable ( 2,192,277 ) ( 543,399 ) Inventory 704,292 118,029 Prepaid expenses and other assets 21,762 3,780 Accounts payable ( 14,939 ) 79,527 Accrued expenses, operating leases and other liabilities ( 463,292 ) ( 518,584 ) Net cash provided by (used in) operating activities 208,049 ( 3,809,391 ) Investing activities Purchase of property and equipment ( 24,416 ) ( 37,131 ) Net cash used in investing activities ( 24,416 ) ( 37,131 ) Financing activities Proceeds from issuance of common stock attributed to equity financings — 1,256,271 Issuance costs attributed to common stock and warrants issued in private placements ( 185,902 ) ( 37,698 ) Financing costs in connection with debt facility ( 290,851 ) — Deferred issuance costs in connection with at-the-market offering program ( 21,305 ) — Share repurchases for the payment of employee taxes ( 11,267 ) ( 13,559 ) Net cash (used in) provided by financing activities ( 509,325 ) 1,205,014 Net decrease in cash ( 325,692 ) ( 2,641,508 ) Cash at beginning of period 1,460,042 5,322,493 Cash at end of period $ 1,134,350 $ 2,680,985 Supplemental non-cash financing and investing transactions: Unpaid deferred offering costs attributed to the at-the-market offering program $ 41,657 $ — Unpaid debt issuance costs $ 7,091 $ — Modification of right-of-use asset and associated lease liability $ 111,898 $ — See accompanying notes to condensed financial statements 4 NeuroOne Medical Technologies Corporation Notes to Condensed Financial Statements (unaudited) NOTE 1 – Description of Business and Basis of Presentation NeuroOne Medical Technologies Corporation (the “Company” or “NeuroOne”), a Delaware corporation, is a medical technology company focused on the development and commercialization of thin film electrode for continuous electroencephalogram (“cEEG”) and stereoelectrocencephalography (“sEEG”) recording, monitoring, ablation, drug delivery and brain stimulation solutions to diagnose and treat patients with epilepsy, Parkinson’s disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other related neurological disorders. The Company received 510(k) clearance for three of its devices from the U.S. Food and Drug Administration (“FDA”), including: (i) its Evo cortical electrode technology for recording, monitoring, and stimulating brain tissue for up to 30 days, (ii) its 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) its OneRF ablation system for creation of radiofrequency lesions in nervous tissue for functional neurosurgical procedures. The Company has a distribution agreement with Zimmer, Inc. (“Zimmer”) providing Zimmer with a license to commercialize and distribute these three products in the brain. The Company’s other products and indications are still under development. The Company is based in Eden Prairie, Minnesota. Global Economic Conditions Generally, worldwide economic conditions remain uncertain, particularly due to the conflicts between Russia and Ukraine and in the Middle East, disruptions in the banking system and financial markets, and increased inflation. The general economic and capital market conditions both in the U.S. and worldwide, have been volatile in the past and at times have adversely affected the Company’s access to capital and increased the cost of capital. The capital and credit markets may not be available to support future capital raising activity on favorable terms or at all. If economic conditions continue to decline, the Company’s future cost of equity or debt capital and access to the capital markets could be adversely affected. The Company’s operating results could be materially impacted by changes in the overall macroeconomic environment and other economic factors. Changes in economic conditions, supply chain constraints, logistics challenges, labor shortages, the conflicts in Ukraine and the Middle East, disruptions in the banking system and financial markets, and steps taken by governments and central banks, have led to higher inflation, which has led to an increase in costs and has caused changes in fiscal and monetary policy, including increased interest rates. Basis of presentation The accompanying unaudited condensed financial statements have been prepared by the Company, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations. The condensed financial statements may not include all disclosures required by U.S. GAAP; however, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended September 30, 2024 included in the Company’s Annual Report on Form 10-K. The condensed balance sheet at September 30, 2024 was derived from the audited financial statements of the Company. In the opinion of management, all adjustments, consisting of only normal recurring adjustments that are necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, have been made. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future periods. 5 NeuroOne Medical Technologies Corporation Notes to Condensed Financial Statements (unaudited) NOTE 2 - Going Concern The accompanying condensed financial statements have been prepared on the basis that the Company will continue as a going concern. The Company has incurred losses since inception, negative cash flows from operations since inception, and an accumulated deficit of $ 73.2 million as of December 31, 2024. To date, the Company’s revenues have not been sufficient to cover its full operating costs, and as such, it has been dependent on funding operations through the issuance of debt and sale of equity securities. The Company has adequate liquidity to fund its operations through April 2025. The raising of additional funds is not solely within the control of the Company. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this condition. If the Company is unable to raise additional funds, or the Company’s anticipated operating results are not achieved, management believes planned expenditures may need to be reduced to extend the time period that existing resources can fund the Company’s operations. The Company intends to fund ongoing activities by utilizing its current cash and cash equivalents on hand, from product and license revenue and by raising additional capital through equity or debt financings. If management is unable to obtain the necessary capital, it may have a material adverse effect on the operations of the Company and the development of its technology, or the Company may have to cease operations altogether. NOTE 3 – Summary of Significant Accounting Policies Management’s Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Segment Information Operating segments are components of an enterprise for which separate financial information is available and are evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer. The Company’s Chief Executive Officer views the Company’s operations and manages its business in one operating segment, which is the business of development and commercialization of products related to comprehensive neuromodulation cEEG and sEEG recording, monitoring, ablation, and brain stimulation solutions. Accordingly, the Company has a single reporting segment. Cash and Cash Equivalents The Company considers all highly liquid investments with an original contractual maturity on date of purchase of less than or equal to three months to be classified and presented as cash equivalents on the balance sheets. Cash equivalents are stated at cost, which approximates fair value. The Company’s cash and cash equivalents may include demand deposit accounts with large financial institutions, institutional money market funds, U.S. Treasury securities, and corporate notes and bonds. The Company monitors the creditworthiness of the financial institutions, institutional money market funds, and corporations in which the Company invests its surplus funds. The Company has experienced no credit losses from its cash and cash equivalent investments. Revenue Recognition The Company entered into a development and distribution agreement which has current and future revenue recognition implications. See “Note 7 – Zimmer Distribution Agreement and Other Product Revenue. In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. 6 NeuroOne Medical Technologies Corporation Notes to Condensed Financial Statements (unaudited) A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”). Performance obligations may include license rights, development services, and services associated with regulatory submission and approval processes. Significant management judgment is required to determine the level of effort required under an arrangement and the period over which the Company expects to complete its performance obligations under the arrangement. If the Company cannot reasonably estimate when its performance obligations are either completed or become inconsequential, then revenue recognition is deferred until the Company can reasonably make such estimates. Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up method. Product Revenue Revenues from product sales are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. When the Company has consigned inventory at a customer, revenue is recognized at the point in time when the customer issues a purchase order to the Company and when control of the promised goods or services is transferred to the Company’s customers. At the inception of each customer contract, performance obligations are identified, and the total transaction price is allocated to the performance obligations. Cost of Product Revenue Cost of product revenue consists of the manufacturing and materials costs incurred by the Company’s third-party contract manufacturers in connection with the Company’s strip and grid cortical electrodes (the “Strip/Grid Products”), depth electrodes (“sEEG Products), OneRF product offerings (“OneRF Products”) and outside supplier materials costs in connection with the electrode cable assembly products (“Electrode Cable Assembly Products”). In addition, cost of product revenue includes royalty fees incurred in connection with the Company’s license agreements. License Revenue As part of the accounting for collaboration arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price of each performance obligation identified in the contract. The Company uses key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. The Company allocates the total transaction price to each performance obligation based on the estimated relative standalone selling prices of the promised goods or service underlying each performance obligation. Licenses of intellectual property and distribution rights: If the license to the Company’s intellectual property or distribution rights to an underlying product is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, up-front fees allocated to the license or distribution rights when the license or distribution right is transferred to the customer, and the customer can use and benefit from the license or distribution right. For licenses or distribution rights that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Milestone payments: At the inception of each arrangement that includes milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal will not occur, the value of the associated milestone (such as a regulatory submission) is included in the transaction price. Milestone payments that are not within the control of the Company, such as approvals from regulators, are not considered probable of being achieved until those approvals are received. When the Company’s assessment of probability of achievement changes and variable consideration becomes probable, any additional estimated consideration is allocated to each performance obligation based on the estimated relative standalone selling prices of the promised goods or service underlying each performance obligation and recorded in license revenues based upon when the customer obtains control of each element. Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (a) when the related sales occur, or (b) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). 7 NeuroOne Medical Technologies Corporation Notes to Condensed Financial Statements (unaudited) Warrant Liability The Company issued warrants in connection with its 2024 Private Placement (See Note 9– Stockholders’ Equity). The Company accounts for these warrants as a liability at fair value when warrant pricing protection provisions are not available to other common stockholders. Additionally, issuance costs associated with the warrant liability are expensed as incurred and reflected as a financing cost in the accompanying condensed statements of operations. The Company adjusts the liability for changes in fair value until the earlier of the exercise or expiration of the warrants for any period when pricing protections remain in place. Any future change in the fair value of the warrant liability is recognized in the condensed statements of operations under the fair value change in the warrant liability line item. Fair Value of Financial Instruments The Company’s accounting for fair value measurements of assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring or nonrecurring basis adheres to the Financial Accounting Standards Board (“FASB”) fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: ● Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the Company at the measurement date. ● Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. ● Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. As of December 31, 2024 and September 30, 2024, the fair values of cash, cash equivalents, accounts receivable, inventory, prepaids and deferred offering costs, accounts payable and accrued expenses and other liabilities approximated their carrying values because of the short-term nature of these assets or liabilities. The fair value of the warrant liability was based on Level 3 inputs as well as the Company’s underlying stock price and associated volatility, expected term of the warrants and market interest rates. There were no transfers between fair value hierarchy levels during the three months ended December 31, 2024 and 2023. The fair value of financial instruments measured on a recurring basis is as follows: As of December 31, 2024 Description Total Level 1 Level 2 Level 3 Liabilities: Warrant liability $ 1,750,870 $ — $ — $ 1,750,870 Total liabilities at fair value $ 1,750,870 $ — $ — $ 1,750,870 As of September 30, 2024 Description Total Level 1 Level 2 Level 3 Liabilities: Warrant liability $ 2,140,315 $ — $ — $ 2,140,315 Total liabilities at fair value $ 2,140,315 $ — $ — $ 2,140,315 The following table provides a roll-forward of the warrant liability measured at fair value on a recurring basis using unobservable level 3 inputs for the three months ended December 31, 2024. 2024 Warrant liability Balance as of beginning of period $ 2,140,315 Change in fair value of warrant liability ( 389,445 ) Balance as of end of period $ 1,750,870 8 NeuroOne Medical Technologies Corporation Notes to Condensed Financial Statements (unaudited) Intellectual Property The Company has entered into two licensing agreements with major research institutions, which allow for access to certain patented technology and know-how. Payments under those agreements are capitalized and amortized to selling, general and administrative expense over the expected useful life of the acquired technology. Property and Equipment Property and equipment is recorded at cost and reduced by accumulated depreciation. Depreciation expense is recognized over the estimated useful lives of the assets using the straight-line method. The estimated useful life for equipment and furniture ranges from three to seven years. Tangible assets acquired for research and development activities and that have alternative use are capitalized over the useful life of the acquired asset. Estimated useful lives are periodically reviewed, and, when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts. Maintenance and repairs are charged directly to expense as incurred. Impairment of Long-Lived Assets The Company evaluates its long-lived assets, which consist of licensed intellectual property, property and equipment and right-of-use assets for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. The Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the asset is considered to be impaired, the amount of impairment is measured as the difference between the carrying value and the fair value of the impaired asset. Accounts Receivable and Allowances for Credit Losses The Company records a provision for credit losses, when appropriate, based on historical experience, current conditions and reasonable supportable forecasts. In estimating the allowance for credit losses, the Company considers, among other factors, the estimate of credit losses over the remaining expected life of the asset, primarily using historical experience and current economic conditions that could affect the collectability of the balances in the future. Account balances are charged off against the allowance when the Company believes that it is probable that the receivable will not be recovered. Actual write-offs may be in excess of the Company’s estimated allowance. The Company has not incurred any bad debt expense to date and no allowance for credit losses has been recorded during the periods presented. Inventory Inventory is stated at the lower of cost (using the first-in, first-out “FIFO” method) or net realizable value. The Company calculates inventory valuation adjustments for excess and obsolete inventory, when appropriate, based on current inventory levels, movement, expected useful lives, and estimated future demand of the products and spare parts. The Company’s inventory is currently comprised of Strip/Grid Products, sEEG Products, OneRF Products and Electrode Cable Assembly Products component, work-in-process and finished good product. The Strip/Grid Products, sEEG Products and OneRF Products are produced by a third-party contract manufacturer and the Electrode Cable Assembly Products are obtained from outside suppliers. No inventory valuation allowance was required during the periods presented. Research and Development Costs Research and development costs are charged to expense as incurred. Research and development expenses comprise of costs incurred in performing research and development activities, including 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. Non-refundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity is performed or when the goods have been received, rather than when payment is made, in accordance with ASC 730, Research and Development . Advertising Expense Advertising expense is charged to selling, general and administrative expenses during the period that it is incurred. Total advertising expense amounted to $ 38,543 and $ 49,272 for the three months ended December 31, 2024 and 2023, respectively. 9 NeuroOne Medical Technologies Corporation Notes to Condensed Financial Statements (unaudited) 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 and litigation costs 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 sales of the Company’s products. Stock-Based Compensation The Company accounts for stock-based compensation in accordance with the provisions of ASC 718, Compensation — Stock Compensation (“ASC 718”). Accordingly, compensation costs related to equity instruments granted are recognized at the grant-date fair value over the requisite service period. The Company records forfeitures when they occur. Stock-based compensation arrangements to non-employees are accounted for in accordance with the applicable provisions of ASC 718. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax base and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. Net income (loss) per share Basic net income (loss) per share of common stock is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income or loss per share of common stock is computed similarly to basic net income or loss per share except the weighted average shares outstanding are increased to include additional shares from the assumed exercise of any common stock equivalents, if dilutive. The Company’s warrants, stock options and restricted stock units, while outstanding, are considered common stock equivalents for this purpose. Diluted net income or loss per share is computed utilizing the treasury method for the warrants, stock options and restricted stock units. Incremental common stock equivalents that were antidilutive were excluded in calculating diluted net income or loss per share. For the three months ended December 31, 2023, no common stock equivalents were included in the diluted net loss per share because such inclusion would be anti-dilutive given the net loss reported for the prior year period. The following table presents the computation of weighted average common shares considered in the computation of diluted net income (loss) per share during the three months ended December 31, 2024 2023 Denominator (weighted average shares) Basic common shares outstanding 30,837,524 23,995,610 Dilutive stock options 22,320 — Dilutive warrants 20,571 — Diluted common shares outstanding 30,880,415 23,995,610 10 NeuroOne Medical Technologies Corporation Notes to Condensed Financial Statements (unaudited) The following potential common shares were not considered in the computation of diluted net income (loss) per share as their effect would have been anti-dilutive for the three months ended December 31: 2024 2023 Warrants 7,025,304 5,143,293 Stock options 2,791,776 2,814,096 Restricted stock units 1,091,953 355,691 Recent Accounting Pronouncements In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07 - Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which enhances reportable segment disclosure requirements, primarily through disclosures of significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The guidance must be applied retrospectively to all prior periods presented. The Company adopted this guidance on October 1, 2024. The adoption of this ASU did not have a material impact on the Company’s financial statements. In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which enhances income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This guidance also includes certain other amendments to improve the effectiveness of income tax disclosures. This ASU is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years and should be applied on a prospective basis, with retrospective application permitted. The Company is currently evaluating the impact of the adoption of this guidance on its financial statements. NOTE 4 – Commitments and Contingencies WARF License Agreement The Company has entered into an exclusive start-up company license agreement with the Wisconsin Alumni Research Foundation (“WARF”) for WARF’s neural probe array and thin film micro electrode technology. The Company entered into an Amended and Restated Exclusive Start-up Company License Agreement (the “WARF License”) with WARF on January 21, 2020, which amended and restated in full the prior license agreement between WARF and NeuroOne, LLC, a predecessor of the Company, dated October 1, 2014, as amended on February 22, 2017, March 30, 2019 and September 18, 2019. The WARF License grants to the Company an exclusive license to make, use and sell, in the United States only, products that employ certain licensed patents for a neural probe array or thin-film micro electrode array and method. The Company agreed to pay WARF a royalty equal to a single-digit percentage of our product sales pursuant to the WARF License, with a minimum annual royalty payment of $ 50,000 for 2020, $ 100,000 for 2021 and $ 150,000 for 2022 and each calendar year thereafter that the WARF License is in effect. If the Company or any of its sublicensees contest the validity of any licensed patent, the royalty rate will be doubled during the pendency of such contest and, if the contested patent is found to be valid and would be infringed by the Company if not for the WARF License, the royalty rate will be tripled for the remaining term of the WARF License. WARF may terminate the WARF License on 30 days’ written notice if we default on the payments of amounts due to WARF or fail to timely submit development reports, actively pursue our development plan or breach any other covenant in the WARF License and fail to remedy such default in 90 days or in the event of certain bankruptcy events involving us. WARF may also terminate the WARF License (i) on 90 days’ notice if we had failed to have commercial sales of one or more FDA-approved products under the WARF License by June 30, 2021 or (ii) if, after royalties earned on sales begin to be paid, such earned royalties cease for more than four calendar quarters. The first commercial sale occurred on December 7, 2020, prior to the June 30, 2021 deadline. The WARF License otherwise expires by its terms on the date that no valid claims on the patents licensed thereunder remain. The Company expects the latest expiration of a licensed patent to occur in 2030. During the three months ended December 31, 2024 and 2023, $ 37,500 in royalty fees were incurred related to the WARF License during each of these periods and were reflected as a component of cost of product revenue. 11 NeuroOne Medical Technologies Corporation Notes to Condensed Financial Statements (unaudited) Mayo Agreement The Company has an exclusive license and development agreement with the Mayo Foundation for Medical Education and Research (“Mayo”) related to certain intellectual property and development services for thin film micro electrode technology (“Mayo Agreement”). If the Company is successful in obtaining regulatory approval, the Company is to pay royalties to Mayo based on a percentage of net sales of products of the licensed technology through the term of the Mayo Agreement, set to expire May 25, 2037. During the three months ended December 31, 2024 and 2023, zero and $ 269 in royalty fees were incurred related to the Mayo Agreement, respectively, and were reflected as a component of cost of product revenue. Facility Leases Headquarters Lease On May 20, 2024, the Company amended its non-cancellable headquarters lease (the “Lease”) with certain landlords (together, the “Landlord”) pursuant to which the Company leases office space located at 7599 Anagram Drive, Eden Prairie, Minnesota (the “Premises”). The Company took possession of the Premises on November 1, 2019, with the term of the Lease ending June 30, 2028, as amended, unless terminated earlier (the “Lease Term”). The base rent for the Premises ranges from $ 6,410 per month to $ 7,107 per month by the end of the Lease Term as amended. In addition, as long as the Company is not in default under the Lease, the Company will be entitled to an abatement of its base rent for the first two months of the amended Lease Term beginning in April 2025 and for the last month of the amended Lease Term (June 2028). In addition, the Company pays its pro rata share of the Landlord’s annual operating expenses associated with the Premises. Los Gatos Lease On July 1, 2021, the Company entered into a non-cancellable facility lease (the “Los Gatos Lease”), pursuant to which the Company agreed to rent office space for its research and development operations located at 718 University Avenue, Suite #111, Los Gatos, California. The facility space under the Los Gatos Lease is approximately 1,162 square feet. The Company took possession of the office space on July 2, 2021. The initial monthly rent under the Los Gatos Lease was $ 4,241 . On November 4, 2022, the Los Gatos Lease was extended for an additional two years to December 31, 2024. The rent under the extended Los Gatos Lease ranged from $ 4,453 to $ 4,632 per month beginning on January 1, 2023. On December 17, 2024, the Los Gatos Lease was extended again for an additional two years to December 31, 2026. The rent under the newly extended Los Gatos Lease ranges from $ 4,939 to $ 5,087 per month beginning on January 1, 2025. During the three months ended December 31, 2024 and 2023, rent expense associated with the facility leases, including cancellable arrangements, amounted to $ 69,178 and $ 43,053 , respectively. Supplemental cash flow information related to the operating leases was as follows: For the three months ended December 31, 2024 2023 Cash paid for amounts included in the measurement of lease liability: Operating cash flows from operating leases $ 35,122 $ 34,070 Right-of -use assets obtained in exchange for lease obligations: Modification of right-of-use asset and associated lease liability $ 111,898 $ — 12 NeuroOne Medical Technologies Corporation Notes to Condensed Financial Statements (unaudited) Supplemental balance sheet information related to the operating leases was as follows: As of December 31, 2024 As of September 30, 2024 Right-of-use assets $ 339,271 $ 254,910 Lease liabilities $ 341,514 $ 260,160 Weighted average remaining lease term (years) 3.0 3.6 Weighted average discount rate 7.2 % 7.4 % Maturity of the lease liabilities was as follows: Calendar Year As of December 31, 2024 2025 $ 125,359 2026 139,985 2027 81,708 2028 34,815 Total lease payments 381,867 . Less imputed interest ( 40,353 ) Total 341,514 Short-term portion (included in other liabilities) ( 104,137 ) Long-term portion $ 237,377 Other Contingencies In the ordinary course of business, from time to time, the Company may be subject to a broad range of claims and legal proceedings that relate to contractual allegations, patent infringement and other claims. The Company establishes accruals when applicable for matters and commitments which it believes losses are probable and can be reasonably estimated. To date, no loss contingency for such matters and potential commitments have been recorded. Although it is not possible to predict with certainty the outcome of these matters or potential commitments, the Company is of the opinion that the ultimate resolution of these matters and potential commitments will not have a material adverse effect on its results of operations or financial position. NOTE 5 – Supplemental Balance Sheet Information Inventory Inventory consisted of the following: As of December 31, 2024 As of September 30, 2024 Component inventory $ 915,641 $ 877,065 Work-in-process 135,254 192,360 Finished goods 879,966 1,565,728 Total $ 1,930,861 $ 2,635,153 Intangibles Intangible assets rollforward is as follows: Useful Life Net Intangibles, September 30, 2024 12 - 13 years $ 67,262 Less: amortization ( 5,579 ) Net Intangibles, December 31, 2024 $ 61,683 Amortization expense was $ 5,579 for each of the three months ended December 31, 2024 and 2023. 13 NeuroOne Medical Technologies Corporation Notes to Condensed Financial Statements (unaudited) Property and Equipment Property and equipment held for use by category are presented in the following table: As of December 31, 2024 As of September 30, 2024 Equipment and furniture $ 1,000,719 $ 976,303 Total property and equipment 1,000,719 976,303 Less accumulated depreciation ( 619,008 ) ( 559,460 ) Property and equipment, net $ 381,711 $ 416,843 Depreciation expense was $ 59,548 and $ 53,078 for the three months ended December 31, 2024 and 2023, respectively. NOTE 6 - Accrued Expenses and Other Liabilities Accrued expenses and other liabilities consisted of the following : As of December 31, 2024 As of September 30, 2024 Accrued payroll $ 322,546 $ 950,260 Operating lease liability, short term 104,137 65,768 Royalty payments 141,459 108,036 Other 258,244 59,950 Total $ 826,386 $ 1,184,014 NOTE 7 – Zimmer Distribution Agreement and Other Product Revenue On October 25, 2024, the Company entered into the Zimmer Amended and Restated Distribution Agreement (the “Amendment”) with Zimmer pursuant to which the Company granted Zimmer the exclusive right and license to distribute its OneRF Ablation System for an upfront payment of $ 3.0 million, with eligibility for an additional $ 1.0 million payment from Zimmer upon achievement of certain specified net sales milestones. The Company and Zimmer previously entered into an Exclusive Development and Distribution Agreement dated July 20, 2020, related to the SEEG and Strip/Grid Product Systems, which was subsequently amended pursuant to the terms and conditions of a letter agreement dated January 6, 2021, a Second Amendment to Exclusive Development and Distribution Agreement dated June 28, 2022, and a Third Amendment to Exclusive Development and Distribution Agreement dated August 2, 2022 (collectively, the “EDDA”).The EDDAs executed prior to the Amendment granted Zimmer exclusive global rights to distribute the Strip/Grid Products and the Electrode Cable Assembly Products. Additionally, the Company granted Zimmer the exclusive right and license to distribute certain sEEG Products developed by the Company and together with the Strip/Grid Products and Electrode Cable Assembly Products, the “Products”. In addition, under the prior EDDAs, the Company and Zimmer agreed to collaborate with respect to development activities through a joint development committee composed of an equal number of representatives of Zimmer and the Company. Under the Amendment, Zimmer paid the Company $ 3.0 million for an exclusive RF Distribution License (the “RF Distribution License” and “License”) for commercialization of its OneRF™ product. In addition, the Company is eligible to receive a future milestone payment of $ 1.0 million upon reaching a one-time sales volume threshold. The revised term under the Amendment (the “Term”) began on the effective date of the Amendment and will remain in effect until October 31, 2034. Upon the expiration of the Term, it may be renewed upon the mutual written of the parties. The Amended and Restated Exclusive Development and Distribution Agreement may be terminated before the expiration of the Term in accordance with certain terms under the Amendment. In addition, the license rights granted to Zimmer under this Amendment shall be exclusive (i) until September 30, 2032 for the SEEG Products and Strip/Grid Products; and (ii) until October 31, 2034 for the OneRF™ Product System. 14 NeuroOne Medical Technologies Corporation Notes to Condensed Financial Statements (unaudited) License Revenue The Amendment was accounted for under the provisions of ASC 606 as a separate contract from the prior EDDAs. In accordance with the provisions under ASC 606, the Company identified the transfer of the RF Distribution License as the sole performance obligation of the RF Distribution License. The distribution rights granted to Zimmer, inclusive of the access to the underlying intellectual property for future production of the OneRF Product if required, was found to have significant standalone functionality as no additional substantive input was required by the Company on a go forward basis. Lastly, ancillary support related to the Amendment was concluded to be a perfunctory obligation and de minimis in terms of required resources. The transaction price associated with the Amendment was $ 3.0 million, which was comprised solely of the One RF Exclusivity Fee and was allocated totally to RF Distribution License performance obligation. Sales Volume Milestone and Payment The sales volume milestone associated with the Amendment was determined by sales or usage-based thresholds. The sales volume milestone was accounted for under the sales milestone recognition constraint and will be accounted for as constrained variable consideration. The Company has applied the sales volume constraint to the milestone payment and will not recognize revenue until the sales volume threshold occurs. Recognition of License Revenue The Company determined that the RF Distribution License represented functional intellectual property given Zimmer’s access to the underlying intellectual property associated with the OneRF Product. As such, the revenue related to the licenses was recognized at the point in time in which the license/know-how was delivered to Zimmer which occurred in October 2024. Revenue recognized under the Amendment during the three months ended December 31, 2024 was $ 3.0 million. Product Revenue Product revenue related to the Company’s Strip/Grid Products, sEEG Products, OneRF Products and Electrode Cable Assembly Products. Product revenue recognized during the three months ended December 31, 2024 and 2023 was $ 3,274,167 and $ 977,649 , respectively. All product revenue was comprised of OneRF Product revenue during the three months ended December 31, 2024. There was no OneRF Product revenue recognized during the prior year period presented. OneRF Products were subject to the Amendment upon its execution in October 2024. NOTE 8 – Stock-Based Compensation During the three months ended December 31, 2024 and 2023, stock-based compensation expense was included in selling, general and administrative and research and development costs as follows in the accompanying condensed statements of operations. 2024 2023 Selling, general and administrative $ 269,629 $ 243,198 Research and development 69,595 65,440 Total stock-based compensation expense $ 339,224 $ 308,638 The Company’s 2017 Equity Incentive Plan (“2017 Plan”) provides for the issuance of restricted shares and stock options to employees, directors, and consultants of the Company. 15 NeuroOne Medical Technologies Corporation Notes to Condensed Financial Statements (unaudited) Inducement Plan In addition to the Company’s 2017 Plan, the Company adopted the NeuroOne Medical Technologies Corporation 2021 Inducement Plan (the “Inducement Plan”) on October 4, 2021, pursuant to which the Company reserved 420,350 shares of its common stock to be used exclusively for grants of awards to individuals who were not previously employees or directors of the Company, as an inducement material to the individual’s entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. The Inducement Plan was approved by the Company’s Board of Directors without stockholder approval in accordance with such a rule. On November 9, 2023, the Company’s Board of Directors adopted the First Amendment to the Company’s Inducement Plan, increasing the aggregate number of shares of common stock that may be issued pursuant to equity incentive awards under the Inducement Plan by 150,000 shares for a total of 570,350 shares of common stock that may be issued pursuant to equity incentive awards under the Inducement Plan. Evergreen Provision Under the 2017 Plan, the shares reserved automatically increase on January 1st of each year, for a period of not more than ten years from the date the 2017 Plan is approved by the stockholders of the Company, commencing on January 1, 2019 and ending on (and including) January 1, 2027, to an amount equal to 13 % of the fully-diluted shares outstanding as of December 31st of the preceding calendar year. Notwithstanding the foregoing, the Company’s Board of Directors may act prior to January 1st of a given year to ensure that there will be no January 1st increase in the share reserve for such year or that the increase in the share reserve for such year will be a lesser number of shares of common stock than would otherwise occur pursuant to the preceding sentence. “Fully Diluted Shares” as of a date means an amount equal to the number of shares of common stock (i) outstanding and (ii) issuable upon exercise, conversion or settlement of outstanding awards under the 2017 Plan and any other outstanding options, warrants or other securities of the Company that are (directly or indirectly) convertible or exchangeable into or exercisable for shares of common stock, in each case as of the close of business of the Company on December 31 of the preceding calendar year. On January 1, 2024, 1,051,556 shares were added to the 2017 Plan as a result of the evergreen provision. See Note 13 – Subsequent Events related to additional shares added to the 2017 Plan effective January 1, 2025. Stock Options During the three months ended December 31, 2024 and 2023, under the 2017 Plan and the Inducement Plan, the Company granted zero and 1,160,669 stock options, respectively, to its employees and consultants. Vesting generally occurs over a 48 -month period based on a time-of-service condition. The weighted-average grant date fair value of the grants issued during the three months ended December 31, 2023 was $ 1.08 per share. The total expense for the three months ended December 31, 2024 and 2023 related to stock options was $ 202,954 and $ 187,431 , respectively. The total number of stock options outstanding as of December 31, 2024 and September 30, 2024 was 2,814,096 . The weighted-average assumptions used in the Black-Scholes option-pricing model are as follows for the stock options granted during the three months ended December 31, 2023: 2023 Expected stock price volatility 112.0 % Expected life of options (years) 6.1 Expected dividend yield 0 % Risk free interest rate 4.7 % During the three months ended December 31, 2024 and 2023, 394,450 and 56,616 stock options vested, and zero and 55,000 stock options were forfeited during these periods, respectively. 16 NeuroOne Medical Technologies Corporation Notes to Condensed Financial Statements (unaudited) Restricted Stock Units There were no restricted stock units (“RSUs”) granted during the three months ended December 31, 2024 and 2023. 37,809 and 37,679 previously granted RSUs vested during these periods, respectively. The total expense for the three months ended December 31, 2024 and 2023 related to these RSUs was $ 136,270 and $ 121,207 , respectively. No RSUs were forfeited during the three months ended December 31, 2024 and 2023. General As of December 31, 2024, 297,461 shares were available in the aggregate for future issuance under the 2017 Equity Incentive Plan and Inducement Plan. Unrecognized stock-based compensation was $ 2,034,404 as of December 31, 2024. The unrecognized share-based expense is expected to be recognized over a weighted average period of 2.6 years. NOTE 9 – Stockholders’ Equity August 2024 Private Placement On August 1, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors (the “Purchasers”), pursuant to which the Company, in a private placement (the “2024 Private Placement”), agreed to issue and sell an aggregate of (i) 2,944,446 shares of the Company’s common stock and (ii) warrants to purchase an aggregate of 2,208,333 shares of common stock (the “PIPE Warrants”) at a purchase price of $ 0.90 per unit, consisting of one share and a PIPE Warrant to purchase 0.75 shares of common stock, resulting in total gross proceeds of approximately $ 2.65 million before deducting expenses. Issuance costs attributed to 2024 Private Placement amounted to approximately $ 0.2 million. The 2024 Private Placement closed on August 2, 2024. The PIPE Warrants are exercisable beginning on the date of issuance, have an exercise price of $ 1.19 per share, subject to adjustment, and will expire on the third anniversary of the date of issuance. One of the Purchasers in the 2024 Private Placement included Paul Buckman, a director on the Company’s Board of Directors. The PIPE Warrants were accounted for and classified as liabilities on the accompanying condensed balance sheets given certain price reset provisions not used for a fair valuation under a fixed for fixed settlement scenario as required for equity balance sheet classification. A Monte Carlo simulation model was used to estimate the aggregate fair value of the PIPE Warrants. Input assumptions used were as follows on December 31, 2024 and September 30, 2024: risk-free interest rate 4.17 % and 3.53 %, respectively; expected volatility of 110.20 % and 115.7 %; respectively; expected life of 2.59 years and 2.84 years, respectively; and expected dividend yield zero percent for both dates. The underlying stock price used was the market price as quoted on Nasdaq as of December 31, 2024 and September 30, 2024. The Company recorded the fair value change of the PIPE Warrants in the amount of $ 389,445 the fair value change in warrant liability line item on the accompanying condensed statements of operations for the three months ended December 31, 2024. At-The-Market Offering On December 21, 2022, the Company entered into a Capital on Demand TM Sales Agreement (the “Sales Agreement”) with JonesTrading Institutional Services LLC (“JonesTrading”) that created an at-the-market offering program (“ATM”) under which the Company may offer and sell common stock having an aggregate offering price of up to $ 14.5 million. JonesTrading is entitled to a commission at a fixed commission rate of up to 3 % of the gross proceeds. On July 24, 2023, the Company decreased the amount of common stock that can be sold pursuant to the Sales Agreement, such that the Company was offering up to an aggregate of $ 2.6 million of its common stock for sale under the Sales Agreement, including the shares of common stock previously sold. Subsequently on December 1, 2023, however, the Company increased the amount of common stock that can be sold pursuant to the Sales Agreement, such that the Company was offering up to an aggregate of $ 4.8 million of its common stock for sale under the Sales Agreement, including the shares of common stock previously sold. On January 5, 2024, the Company further increased the amount of common stock that can be sold pursuant to the Sales Agreement, such that the Company was offering up to an aggregate of $ 9.3 million of its common stock for sale under the Sales Agreement, including the shares of common stock previously sold. On August 16, 2024, the Company increased the amount of common stock that can be sold pursuant to the Sales Agreement by $ 3.0 million. 17 NeuroOne Medical Technologies Corporation Notes to Condensed Financial Statements (unaudited) During the three months ended December 31, 2023, 868,243 shares of common stock were issued under the ATM for an aggregate offering price of $ 1,256,271 . There were no shares issued out of the ATM during the three months ending December 31, 2024. Lastly, the Company incurred deferred offering costs related to the ATM during the three months ended December 31, 2024 of $ 41,657 . The total aggregate offering price and common stock issued since the inception of the ATM though December 31, 2024 was $ 7,586,562 and 5,188,590 shares, respectively. Cumulative issuance costs incurred under the ATM through December 31, 2024 was $ 554,285 of which $ 82,962 was included as a deferred cost on the condensed balance sheets as of December 31, 2024. Warrant Activity and Summary Warrants Exercise Price Per Warrant Weighted Average Exercise Price Weighted Average Term (Years) Outstanding and exercisable at September 30, 2024 7,045,875 $ 0.66 - 5.61 $ 3.81 1.98 Issued — $ — $ — — Exercised — $ — $ — — Expired — $ — $ — — Outstanding and exercisable at December 31, 2024 7,045,875 $ 0.66 - 5.61 $ 3.81 1.73 The following table summarizes information about warrants outstanding at December 31, 2024: Exercise Price Number Outstanding Weighted Average Remaining Contractual life (Years) Number Exercisable at December 31, 2024 $ 0.66 100,000 4.59 100,000 $ 1.19 2,208,338 2.59 2,208,338 $ 3.00 350,000 2.58 350,000 $ 5.25 4,166,682 1.04 4,166,682 $ 5.61 220,855 3.50 220,855 Total 7,045,875 7,045,875 NOTE 10 - Debt Financing Debt Facility Financing On August 2, 2024, the Company entered into a loan and security agreement (the “Debt Facility Agreement”) with Growth Opportunity Funding, LLC, as the lender (the “Lender”), which provided for a delayed draw term loan facility in an aggregate principal amount not to exceed $ 3.0 million (the “Debt Facility”). The Company was permitted to borrow loans under the Debt Facility from time to time (collectively, the “Loans”), for general corporate purposes and subject to certain specified conditions, until the earliest of: (i) November 30, 2024, (ii) the occurrence of any Monetization Event (as defined in the Debt Facility Agreement) or Change of Control (as defined in the Debt Facility Agreement), or (iii) at the Lender’s option, upon the occurrence and during the continuance of an event of default under the Debt Facility Agreement. On November 7, 2024, the Company terminated the Debt Facility Agreement, and no amounts were drawn under the Debt Facility Agreement. The Company paid a termination fee of $ 125,000 to the Lender and incurred additional legal fees of $ 7,091 related to the termination. The Company also incurred non-termination Debt Facility costs of $ 192,647 during the three-months ended December 31, 2024. 18 NeuroOne Medical Technologies Corporation Notes to Condensed Financial Statements (unaudited) At closing of the Debt Facility, the Company issued to the Lender a warrant exercisable for five years for 100,000 shares of common stock at an exercise price of $ 0.66 per share, subject to adjustment (the “Closing Date Debt Facility Warrant”). The Closing Date Debt Facility Warrant was accounted for and classified as equity on the accompanying condensed balance sheets. NOTE 11 – Concentrations Revenue For the three months ended December 31, 2024, one customer accounted for 91 % of the Company’s product revenue and three customers accounted for the remaining 9 % of product revenue. For the three months ended December 31, 2023, one customer accounted for all of the Company’s product and license revenue. Supplier concentration One contract manufacturer produces all of the Company’s Strip/Grid Products and sEEG Products and another supplier was responsible for the development of the Company’s OneRF Ablation system. NOTE 12 – Income Taxes The effective tax rate for the three months ended December 31, 2024 and 2023 was zero percent. As a result of the analysis of all available evidence as of December 31, 2024 and September 30, 2024, the Company recorded a full valuation allowance on its net deferred tax assets. Consequently, the Company reported no income tax benefit during the three months ended December 31, 2024 and 2023. If the Company’s assumptions change and the Company believes that it will be able to realize these deferred tax assets, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets will be recognized as a reduction of future income tax expense. If the assumptions do not change, each period the Company could record an additional valuation allowance on any increases in the deferred tax assets. NOTE 13 – Subsequent Events 2017 Plan Evergreen Provision Effective January 1, 2025, 1,124,446 shares were added to the 2017 Plan as a result of the evergreen provision. See Note 8 – Stock-Based Compensation. 19 NeuroOne Medical Technologies Corporation Form 10-Q Item 2. 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, 2024. 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 future. 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: ● our ability to maintain regulatory clearance of our cortical strip and grid electrode technology, and our OneRF ablation system; ● 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, RF ablation system, and 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. (“Zimmer”); ● we have been the victim of a cyber-related crime, and our controls may not be successful in avoiding future cyber-related crimes; ● the performance, productivity, reliability and regulatory compliance of our third-party manufacturers of our cortical strip, grid electrode and depth electrode and RF ablation technology; ● our ability to develop future generations of our cortical strip, grid and depth electrode technology; ● our future development priorities; ● 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 and RF ablation technology to people with epilepsy, Parkinson’s disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other related neurological disorders; 20 NeuroOne Medical Technologies Corporation Form 10-Q ● 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; ● 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; and ● 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. In 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. Overview We are a medical technology company focused on the development and commercialization of thin film electrode technology for continuous electroencephalogram (“cEEG”) 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. We have 510(k) clearance for three of our 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. We distribute our cEEG strip/grid electrodes, cable assembly products and our OneRF Ablation System with Zimmer Biomet. We have incurred mostly losses since inception. As of December 31, 2024, we had an accumulated deficit of $73.2 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 license and product revenues. 21 NeuroOne Medical Technologies Corporation Form 10-Q Prior to FDA clearance of certain of our products, our main sources of cash, cash equivalents and short-term investments were 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 OneRF System, and through milestone and other payments from our current collaboration and distribution arrangement 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 Corporate Updates Zimmer Amended and Restated Distribution Agreement On October 25, 2024, we entered into the Zimmer Amended and Restated Distribution Agreement (the “Amendment”) with Zimmer, Inc. (“Zimmer”) pursuant to which we granted Zimmer the exclusive right and license to distribute our OneRF Ablation System for an upfront payment of $3.0 million, with eligibility for an additional $1.0 million payment from Zimmer upon achievement of certain specified net sales milestones. We previously entered into an Exclusive Development and Distribution Agreement dated July 20, 2020 with Zimmer, related to the SEEG and Strip/Grid Product Systems, which was subsequently amended pursuant to the terms and conditions of a letter agreement dated January 6, 2021, a Second Amendment to Exclusive Development and Distribution Agreement dated June 28, 2022, and a Third Amendment to Exclusive Development and Distribution Agreement dated August 2, 2022 (collectively, the “EDDA”).The EDDAs executed prior to the Amendment granted Zimmer exclusive global rights to distribute the Strip/Grid Products and the Electrode Cable Assembly Products. Additionally, we granted Zimmer the exclusive right and license to distribute certain sEEG Products developed by the Company and together with the Strip/Grid Products and Electrode Cable Assembly Products, the “Products”. In addition, under the prior EDDAs, we agreed to collaborate with respect to development activities through a joint development committee composed of an equal number of representatives of Zimmer and the Company. Under the Amendment, Zimmer paid us $3.0 million for an exclusive RF Distribution License (the “RF Distribution License” and “License”) for commercialization of its OneRF™ product. In addition, we are eligible to receive a future milestone payment of $1.0 million upon reaching a one-time sales volume threshold. 22 NeuroOne Medical Technologies Corporation Form 10-Q The revised term under the Amendment (the “Term”) began on the Effective Date and will remain in effect until October 31, 2034. Upon the expiration of the Term, it may be renewed upon the mutual written of the Parties. The Amended and Restated Exclusive Development and Distribution Agreement may be terminated before the expiration of the Term only by the Parties in accordance with certain terms under the Amendment. In addition, the license rights granted to Zimmer under this Amendment shall be exclusive (i) from the Original Effective Date until September 30, 2032 for the SEEG Products and Strip/Grid Products (the “SEEG and Strip/Grid Product Term”); and (ii) from the Effective Date until October 31, 2034 for the OneRF™ Product System (the “RF Term”). Nasdaq Notice As previously reported, on July 11, 2024, we received a letter (the “Bid Price Deficiency Notice”) from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying the Company that, because the closing bid price for its common stock had been below $1.00 per share for 30 consecutive trading days, it was not compliant with Nasdaq Marketplace Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). In accordance with Nasdaq Marketplace Rule 5810(c)(3)(A), we had a period of 180 calendar days from July 11, 2024, or until January 7, 2025, to regain compliance with the Minimum Bid Price Requirement. On January 8, 2025, we received a letter from the Staff indicating the Company’s continued non-compliance with the Minimum Bid Price Requirement. The letter further informed us that our common stock would be delisted from the Nasdaq Capital Market unless the Company appeals the Staff’s delisting determination by requesting a hearing before the Nasdaq Hearings Panel (the “Panel”). On January 15, 2025, the Company requested a hearing before the Panel to appeal the determination by the Staff, and to present its plan to regain and sustain compliance with the Minimum Bid Price Requirement. The request was granted and a hearing was scheduled for February 20, 2025. O n February 3, 2025, the Company received a letter from the Staff of Nasdaq that the Company’s bid price deficiency had been cured and that the Company was in compliance with all applicable listing standards. Based on the foregoing, the previously scheduled Nasdaq hearing has been cancelled and the matter is now closed. Financing Debt Facility Agreement In August 2024, we entered into a loan and security agreement (the “Debt Facility Agreement”) with Growth Opportunity Funding, LLC, as the Lender, which provided for a delayed draw term loan facility in an aggregate principal amount not to exceed $3.0 million. On November 7, 2024, we mutually agreed with the Lender to terminate the loan facility under which no amounts were drawn under the facility. Global Economic Conditions Generally, worldwide economic conditions remain uncertain, particularly due to the conflicts between Russia and Ukraine and in the Middle East, disruptions in the banking system and financial markets, and increased inflation. The general economic and capital market conditions both in the U.S. and worldwide, have been volatile in the past and at times have adversely affected our access to capital and increased the cost of capital. The capital and credit markets may not be available to support future capital raising activity on favorable terms or at all. If economic conditions continue to decline, our future cost of equity or debt capital and access to the capital markets could be adversely affected. 23 NeuroOne Medical Technologies Corporation Form 10-Q Our operating results could be materially impacted by changes in the overall macroeconomic environment and other economic factors. Changes in economic conditions, supply chain constraints, logistics challenges, labor shortages, increased inflation, the conflicts in Ukraine and the Middle East, disruptions in the banking system and financial markets, and steps taken by governments and central banks, have led to higher inflation, which has led to an increase in costs and has caused changes in fiscal and monetary policy, including increased interest rates. Financial Overview Product Revenue Our product revenue was derived from the sale of our Strip/Grid Products, the sEEG Products and the Electrode Cable Assembly Products based on Evo cortical electrode technology and the OneRF Products, which are products based on our OneRF Ablation System. We anticipate that we will generate additional revenue from the sale of products based on Evo cortical electrode technology and our OneRF Ablation System. 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. Product Gross Profit 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 manufacturers in connection with our Strip/Grid Products, sEEG Products, OneRF Products and outside supplier materials costs of producing the Electrode Cable Assembly Products. In addition, the cost of product revenue includes royalty fees incurred in connection with our license agreements. License Revenue The Company determined that the RF Distribution License granted under the Zimmer Amended and Restated Distribution Agreement represented functional intellectual property given Zimmer’s access to the underlying intellectual property associated with the OneRF Product. As such, the revenue related to the license was recognized at the point in time in which the license/know-how was delivered to Zimmer which occurred in October 2024. Revenue recognized under the Amendment during the three months ending December 31, 2024 was $3.0 million. For further discussion about the determination of license revenue, product revenue and cost of product revenue, and for a discussion of milestones and royalty payments under the Amended and Restated Zimmer Distribution Agreement, see “—Liquidity and Capital Resources—Liquidity Outlook” below and see “Note 7 — Zimmer Distribution Agreement and Other Product Revenue” 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 and litigation costs 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, OneRF ablation system and electrode cable assembly products. We anticipate that our selling, general and administrative expenses will increase in the future to support our continued research and development activities, further commercialization of our cortical strip and grid technology, ablation system 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. 24 NeuroOne Medical Technologies Corporation Form 10-Q Research and Development Research and development expenses consist of expenses incurred in performing research and development activities in developing our 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. Fair Value Change in Warrant Liability The net change in the fair value line item is attributed to the warrant liability while outstanding. Financing Costs Financing costs consists of the amortization of the deferred issuance costs and other lending costs in connection with the debt facility (as described further below). Other Income Other income primarily consists of interest income related to our cash and cash equivalents, Results of Operations Comparison of the Three Months Ended December 31, 2024 and 2023 The following table sets forth the results of operations for the three months ended December 31, 2024 and 2023, respectively. For the three months ended December 31, (unaudited) 2024 2023 Period to Period Change Product revenue $ 3,274,167 $ 977,649 $ 2,296,518 Cost of product revenue 1,347,278 711,335 635,943 Product gross profit 1,926,889 266,314 1,660,575 License revenue 3,000,000 — 3,000,000 Operating expenses: Selling, general and administrative 2,043,454 2,173,472 (130,018 ) Research and development 1,172,228 1,483,317 (311,089 ) Total operating expenses 3,215,682 3,656,789 (441,107 ) Income (loss) from operations 1,711,207 (3,390,475 ) 5,101,682 Fair value change in warrant liability 389,445 — 389,445 Financing cost (324,738 ) — (324,738 ) Other income 9,408 45,575 (36,167 ) Income (loss) before income taxes 1,785,322 (3,344,900 ) 5,130,222 Provision for income taxes — — — Net income (loss) $ 1,785,322 $ (3,344,900 ) $ 5,130,222 25 NeuroOne Medical Technologies Corporation Form 10-Q Product Revenue and Product Gross Profit Product revenue was $3.3 million during the three months ended December 31, 2024 with a gross profit and gross profit percentage of $1.9 million and 58.9%, respectively. Product revenue was $1.0 million during the three months ended December 31, 2023 with a gross profit and gross profit percentage of $0.3 million and 27.2%, respectively. The increase in gross profit percentage during the current period was largely due to the higher sales volume that exceeded fixed royalty and overhead period costs and due to lower overall material supply costs in the current period. Product revenue consisted of Strip/Grid Products, sEEG Products, OneRF Products and Electrode Cable Assembly Products sales. The cost of product revenue consisted of the manufacturing and materials costs incurred by our third-party contract manufacturers in connection with our Strip/Grid Products, sEEG Products and OneRF 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, 2024 and 2023, respectively. License Revenue License revenue was $3.0 million for the three months ended December 31, 2024. License revenue during the current period related to the distribution license granted to Zimmer for the OneRF Product in October 2024. No license revenue was generated from the Amended and Restated Zimmer Development Agreement during the three months ended December 31, 2023. Selling, General and Administrative Expenses Selling, general and administrative expenses were $2.0 million for the three months ended December 31, 2024, compared to $2.2 million for the three months ended December 31, 2023. The $130,000 decrease was primarily due to an overall decrease in legal, investor relations, and other professional service fees. Selling, general and administrative expenses included stock-based compensation of $270,000 and $243,000 during the three months ended December 31, 2024 and 2023, respectively. Research and Development Expenses Research and development expenses were $1.2 million for the three months ended December 31, 2024, compared to $1.5 million during the three months ended December 31, 2023. The $0.3 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 OneRF Products, depth electrode products and to a lesser extent strip/grid products. Research and development expenses included stock-based compensation of $70,000 and $65,000 during the three months ended December 31, 2024 and 2023, respectively. Fair Value Change in Warrant Liability The net change in fair value of the warrant liability during the three months ended December 31, 2024 was $0.4 million benefit. The change was due primarily to fluctuations in our common stock fair value. There were no warrants outstanding during the three months ended December 31, 2023 that were measured on a fair value basis. Financing Costs Financing costs during the three months ended December 31, 2024 consisted of the amortization of the deferred issuance costs associated with the debt facility (described further below) in the amount of $0.2 million and additional legal and loan facility termination costs of $0.1 million upon the termination of the Debt Facility in November 2024. We did not incur any financing costs during the three months ended December 31, 2023. Other Income Other income during the three months ended December 31, 2024 consisted of interest income in the amount of $9,000 attributed to our cash and cash equivalents. 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. 26 NeuroOne Medical Technologies Corporation Form 10-Q Liquidity and Capital Resources Overview As of December 31, 2024, our principal source of liquidity consisted of cash and cash equivalents in the aggregate of approximately $1.1 million. While we began to generate revenue in fiscal year 2021 from commercial sales and through milestone and other payments under our agreement 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. Our additional material cash needs include commitments under operating leases, royalty obligations under our intellectual property licenses with the Wisconsin Alumni Research Foundation and the Mayo Foundation for Medical Education and Research as well as other administrative services. See “Funding Requirements” below for more information. We anticipate that our expenses will increase substantially as we continue to develop and commercialize our electrode technology and pursue pre-clinical and clinical trials, seek regulatory approvals, manufacture products, market and distribute our OneRF Products, hire additional staff, add operational, financial and management systems and continue to operate as a public company. On August 2, 2024, we closed the 2024 Private Placement, a private placement of shares of common stock and warrants for total gross proceeds of approximately $2.65 million, and entered into the Debt Facility, a delayed draw term debt facility in an aggregate principal amount not to exceed $3.0 million which was ultimately not used. Capital Resources Our sources of cash and cash equivalents to date have been limited to license, 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 more recent financings described below. August 2024 Private Placement On August 1, 2024, we entered into a Securities Purchase Agreement with certain Purchasers, pursuant to which we, in a private placement, agreed to issue and sell an aggregate of (i) 2,944,446 shares of our Company’s common stock (the “Shares”), par value $0.001 per share and (ii) warrants to purchase an aggregate of 2,208,333 shares of common stock (the “PIPE Warrants”) at a purchase price of $0.90 per unit, consisting of one share and a PIPE Warrant to purchase 0.75 shares of common stock, resulting in total gross proceeds of approximately $2.65 million before deducting estimated expenses. The 2024 Private Placement closed on August 2, 2024. Issuance costs attributed to the 2024 Private Placement amounted to $0.2 million. The PIPE Warrants are exercisable beginning on the date of issuance, have an exercise price of $1.19 per share, subject to adjustment, and will expire on the third anniversary of the date of issuance . In connection with the 2024 Private Placement, we agreed to file a registration statement with the SEC covering the resale of the Shares and the shares of common stock issuable upon exercise of the PIPE Warrants which became effective on September 13, 2024. At-The-Market Offering On December 21, 2022, we entered into a Capital 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 of up to 3% of the gross proceeds. On July 24, 2023, we decreased the amount of common stock that can be sold pursuant to the Sales Agreement, such that we were offering up to an aggregate of $2.6 million of our common stock for sale under the Sales Agreement, including the shares of our common stock previously sold. Subsequently, on December 1, 2023, however, we increased the amount of common stock that can be sold pursuant to the Sales Agreement, such that we were offering up to an aggregate of $4.8 million of our common stock for sale under the Sales Agreement, including the shares of our common stock previously sold. On January 5, 2024, we further increased the amount of common stock that can be sold pursuant to the Sales Agreement, such that we are offering up to an aggregate of $9.3 million of our common stock for sale under the Sales Agreement, including the shares of common stock previously sold. Through December 31, 2024, we have issued 5,188,590 shares of common stock under the ATM for gross proceeds in the amount of $7.6 million. We incurred issuance costs in connection with the ATM in the amount of $0.6 million through December 31, 2024, of which $83,000 was reflected as a deferred cost on our balance sheet. On August 16, 2024, we increased the amount of common stock that can be sold pursuant to the Sales Agreement by $3.0 million. 27 NeuroOne Medical Technologies Corporation Form 10-Q Debt Facility Financing On August 2, 2024, we entered into the Debt Facility Agreement with Growth Opportunity Funding, LLC, as the Lender, which provided for a delayed draw term loan facility in an aggregate principal amount not to exceed $3.0 million. We were permitted to borrow loans under the Debt Facility Agreement from time to time, for general corporate purposes and subject to certain specified conditions, until the earliest of: (i) November 30, 2024, (ii) the occurrence of any Monetization Event as defined in the Debt Facility Agreement or a change of control, or (iii) at the Lender’s option, upon the occurrence and during the continuance of an event of default under the Debt Facility Agreement. On November 7, 2024, the Company terminated the Debt Facility Agreement, and no amounts were drawn under the Debt Facility Agreement. Total costs incurred under the debt facility financing was $0.4 million. July 2023 Public Offering On July 24, 2023, we entered into an underwriting agreement with The Benchmark Company, LLC, as underwriter (“Benchmark”), relating to the issuance and sale of 5,250,000 shares of our common stock, par value $0.001 per share, at a price to the public of $1.00 per share (the “July 2023 Public Offering”). In addition, under the terms of the July 2023 Public Offering, we granted Benchmark an option, exercisable for 30 days, to purchase up to an additional 787,500 shares of common stock on the same terms (“the Overallotment Option”). The July 2023 Public Offering closed on July 27, 2023, and we completed the sale and issuance of an aggregate of 6,037,500 shares of our common stock, including the exercise in full of the Overallotment Option. The net proceeds to us from the July 2023 Public Offering were approximately $5.2 million after deducting underwriting discounts and other offering expenses payable by the Company. Funding Requirements As noted above, certain of our cash requirements relate to the funding of our ongoing product development and commercialization operations and our milestone and royalty obligations under our intellectual property licenses with WARF and Mayo. See “Item 1—Business—Clinical Development and Regulatory Pathway—Clinical Experience, Future Development and Clinical Trial Plans” in our Annual Report on Form 10-K for the year ended September 30, 2024 for a discussion of design, development, pre-clinical and clinical activities that we may conduct in the future, including expected cash expenditures required for some of those activities, to the extent we are able to estimate such costs. On January 21, 2020, we entered into an Amended and Restated License Agreement (the “WARF License”) with WARF, which amended and restated in full our prior license agreement with WARF, dated October 1, 2014. Under the WARF License, we have agreed to pay WARF a royalty equal to a single-digit percentage of our product sales pursuant to the WARF License, with a minimum annual royalty payment of $50,000 for 2020, $100,000 for 2021 and $150,000 for 2022 and each calendar year thereafter that the WARF License is in effect. If we or any of our sublicensees contest the validity of any licensed patent, the royalty rate will be doubled during the pendency of such contest and, if the contested patent is found to be valid and would be infringed by us if not for the WARF License, the royalty rate will be tripled for the remaining term of the WARF License. 28 NeuroOne Medical Technologies Corporation Form 10-Q Under the Amended and Restated License and Development Agreement with Mayo (the “Mayo Development Agreement”), we have agreed to pay Mayo a royalty equal to a single-digit percentage of our product sales pursuant to the Mayo Development Agreement. See “Note 4 – Commitments and Contingencies” included in our condensed financial statements included in “Part 1, Item 1 – Financial Statements” in this Report for more information about the WARF License and the Mayo Development Agreement. Our other cash requirements within the next twelve months include accounts payable, accrued expenses, purchase commitments and other current liabilities. Our other cash requirements greater than twelve months from various contractual obligations and commitments include operating leases and contracted services. Refer to “Note 4 – Commitments and Contingencies” included in our condensed financial statements included in “Part 1, Item 1 – Financial Statements” in this Report for further detail of our lease obligations and the timing of expected future payments. Contracted services include agreements with third-party service providers for clinical research, product development, manufacturing, supplies, payroll services, equipment maintenance services, and audits for periods up to fiscal year 2027. We expect to satisfy our short-term and long-term obligations through cash on hand and, until we generate an adequate level of revenue from commercial sales to cover expenses, if ever, from future equity and debt financings. Liquidity Outlook For a discussion of potential fee payments under the Amended and Restated Zimmer Development Agreement, see “Note 7 — Zimmer Distribution Agreement and Other Product Revenue” included in our condensed financial statements included in “Part 1, Item 1 – Financial Statements” in this Report. Even though we have received regulatory clearance to expand the use of our Evo sEEG electrode technology for up to 30 days, commercial sales of the sEEG electrodes and OneRF Products are expected to take some time to be a significant source of liquidity. Zimmer has exclusive global rights to distribute our strip and grid cortical electrodes, depth electrodes and electrode cable assembly products. Zimmer’s failure to timely develop or commercialize these products would have a material adverse effect on our business and operating results. On October 2024, we entered into an Amended and Restated Distribution Agreement with Zimmer to provide Zimmer with the exclusive right and license to distribute also our OneRF Ablation System for an upfront payment of $3.0 million, with eligibility for an additional $1.0 million payment from Zimmer upon achievement of certain specified net sales milestones. At December 31, 2024, we had cash and cash equivalents in the aggregate of approximately $1.1 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, 2024 and 2023, 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. The development and commercialization of our cortical strip, grid electrode, depth electrode, ablation system technology and future products and 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. 29 NeuroOne Medical Technologies Corporation Form 10-Q Cash Flows The following is a summary of cash flows for each of the periods set forth below. For the Three Months Ended December 31, 2024 2023 Net cash provided by (used in) operating activities $ 208,049 $ (3,809,391 ) Net cash used in investing activities (24,416 ) (37,131 ) Net cash (used in) provided by financing activities (509,325 ) 1,205,014 Net decrease in cash $ (325,692 ) $ (2,641,508 ) Net cash provided by (used in) operating activities Net cash provided by operating activities was $0.2 million for the three months ended December 31, 2024, which consisted of net income of $1.8 million inclusive of non-cash stock-based compensation, depreciation, amortization related to intangible assets and deferred costs, non-cash lease expense, fair value change in warrant liability and reclass of debt facility termination costs 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 approximately $2.0 million. The net cash use stemming from the change in operating assets and liabilities was primarily attributable to an increase in accounts receivable in connection with the Zimmer Distribution Agreement and to a decrease in accrued expenses and accounts payable, offset in part by decreases in prepaid expenses and inventory on hand attributed to the timing of payments and purchases. 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 in connection with the Zimmer Distribution 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. Net cash used in investing activities Net cash used in investing activities for the three months ended December 31, 2024 was $24,000 and consisted of outlays for purchases of property and equipment. Net cash used in investing activities for the three months ended December 31, 2023 was $37,000 and consisted of outlays for purchases of property and equipment. Net cash (used in) provided by financing activities Net cash used in financing activities was $0.5 million for the three months ended December 31, 2024, which consisted of the payment of issuance costs related to the August 2024 Private Placement that were unpaid as of September 30, 2024, debt facility costs, and deferred issuance costs in connection with ATM. In addition, there were common stock repurchases for the payment of withholding taxes. 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. 30 NeuroOne Medical Technologies Corporation Form 10-Q Critical Accounting Estimates Our financial statements are prepared in accordance with U.S. generally accepted accounting principles. These accounting principles require us to make estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expense during the periods presented. We believe that the estimates and judgments upon which we rely are reasonably based upon information available to us at the time that we make these estimates and judgments. To the extent that there are material differences between these estimates and actual results, our financial results will be affected. The accounting policies that reflect our more significant estimates and judgments and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described in Note 3 — “Summary of Significant Accounting Policies” to our condensed financial statements included in “Part 1, Item 1 – Financial Statements” in this Report. Of these policies, the following are considered critical to an understanding of our condensed financial statements included in “Part 1, Item 1 – Financial Statements” in this Report as they require the application of the most subjective and the most complex judgments: Revenues: For discussion about the determination of license revenue and product revenue, see “Note 7 — Zimmer Distribution Agreement and Other Product Revenue” included in our condensed financial statements included in “Part 1, Item 1 – Financial Statements” in this Report. To date, we have not had, nor expect to have in the future, significant variable consideration adjustments related to product revenue, such as chargebacks, sales allowances and sales returns. Stock-based Compensation For discussions about the application of grant date fair value associated with our stock-based compensation, see “Note 8 — Stock-Based Compensation” included in our condensed financial statements included in “Part 1, Item 1 – Financial Statements” in this Report. Fair Value of Warrant liability We issued warrants in connection with our August 2024 Private Placement. The warrants were classified as a liability on our balance sheet and were recorded at fair value as certain provisions precluded equity accounting treatment for these instruments. We will continue to adjust the liabilities for changes in fair value until the earlier of the exercise, expiration, or until such time that cash settlement or indexation provisions are no longer in effect for the warrants. For discussions about the application of fair value associated with the warrants, see “Note 9 – Stockholders’ Equity” included in “Part 1, Item 1 – Financial Statements” in this Report. 31 NeuroOne Medical Technologies Corporation Form 10-Q Income Tax Assets and Liabilities Income tax assets and liabilities include income tax valuation allowances. For additional information, see “Note 12 — Income Taxes” included in our condensed financial statements included in “Part 1, Item 1 – Financial Statements” in this Report and “Note 12 – Income Taxes” in Part II, Item 8 “Financial Statements” of our Annual Report on Form 10-K for the year ended September 30, 2024. Contingencies We are subject to numerous contingencies arising in the ordinary course of business, including legal contingencies. For additional information, see “Note 4 — Commitments and Contingencies” included in our condensed financial statements included in “Part 1, Item 1 – Financial Statements” in this Report. Recent Accounting Pronouncements Refer to “Note 3— Summary of Significant Accounting Policies” to our condensed financial statements included in “Part 1, Item 1 – Financial Statements” in this Report for a discussion of recently issued accounting pronouncements. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not applicable for smaller reporting companies. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, under the direction of the Chief Executive Officer and the Chief Financial Officer, we have evaluated our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report. Our management has concluded that the financial statements included elsewhere in this Quarterly Report present fairly, in all material respects, our financial position, results of operations and cash flows in conformity with generally accepted accounting principles. Changes in Internal Control over Financial Reporting There has not been any change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting. 32 NeuroOne Medical Technologies Corporation Form 10-Q PART II – OTHER INFORMATION Item 1. Legal Proceedings From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. Item 1A. Risk Factors In addition to the other information set forth elsewhere in this Report, you should carefully consider the factors discussed in Part I, Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended September 30, 2024. Such factors, if they were to occur, could cause our actual results to differ materially from those expressed in our forward-looking statements in this Report, and materially adversely affect our financial condition or future results. Although we are not aware of any other factors that we currently anticipate will cause our forward-looking statements to differ materially from our future actual results, or materially affect the Company’s financial condition or future results, additional risks and uncertainties not currently known to us or that we currently deem to be immaterial might materially adversely affect our actual business, financial condition and/or operating results. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosures Not applicable to our Company. 33 NeuroOne Medical Technologies Corporation Form 10-Q Item 5. Other Information Rule 10b5-1 Trading Plans – Directors and Section 16 Officers During the three months ended December 31, 2024, none of the Company’s directors or Section 16 officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any “non-Rule 10b5-1 trading arrangement”. Item 6. Exhibits Exhibit No. Document 3.1 Certificate of Incorporation of NeuroOne Medical Technologies Corporation (incorporated by reference to Exhibit 3.4 on the Registrant’s Current Report on Form 8-K filed on June 29, 2017) . 3.2 Certificate of Amendment to Amended and Restated Certificate of Incorporation of NeuroOne Medical Technologies Corporation (incorporated by reference to Exhibit 3.1 on the Registrant’s Current Report on Form 8-K filed on March 31, 2021) . 3.3 Amended and Restated Bylaws of NeuroOne Medical Technologies Corporation (incorporated by reference to Exhibit 3.1 on the Registrant’s Current Report on Form 8-K filed on June 21, 2024 . 10.1 Amended and Restated Exclusive Development and Distribution Agreement, dated October 25, 2024, by and between NeuroOne and Zimmer (incorporated by reference to Exhibit 10.1 on the Registrant's Current Report on Form 8-K filed on October 31, 2024). 31.1* Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1** Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2** Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS Inline XBRL Instance Document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Filed herewith. ** Documents are furnished and not filed. 34 NeuroOne Medical Technologies Corporation Form 10-Q SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: February 12, 2025 NeuroOne Medical Technologies Corporation By: /s/ David Rosa David Rosa Chief Executive Officer (Principal Executive Officer) By: /s/ Ronald McClurg Ronald McClurg Chief Financial Officer (Principal Financial Officer) 35