NEUROONE MEDICAL TECHNOLOGIES Corp 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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; ● 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; 22 NeuroOne Medical Technologies Corporation Form 10-Q ● 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 received 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 each of these three devices with Zimmer Biomet. We have incurred mostly losses since inception. As of March 31, 2025, we had an accumulated deficit of $75.5 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. 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 may incur increasing operating and net losses for the foreseeable future until we generate a higher level of revenue from commercial sales. 23 NeuroOne Medical Technologies Corporation Form 10-Q Recent Developments Corporate Updates 510(k) Submission for Trigeminal Facial Pain On April 22, 2025, we filed a 510(k) submission to the FDA for our OneRF® Trigeminal Nerve Ablation System to treat facial pain. April 2025 Financing On April 4, 2025, we entered into an Underwriting Agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co. Inc. as underwriter (the “Underwriter”), relating to the issuance and sale of 16,000,000 shares of the Company’s common stock, at a price to the public of $0.50 per share (the “April 2025 Financing”). In addition, under the terms of the Underwriting Agreement, we granted the Underwriter an option, exercisable for 45 days, to purchase up to an additional 2,400,000 shares of common stock on the same terms as the offering, which was exercised in full. Net proceeds to the Company were approximately $8.2 million. 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. 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”). 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. We do not currently anticipate any meaningful impact from current or proposed tariffs on imported goods. 24 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. We have 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, 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 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 six months ending March 31, 2025 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. 25 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, 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 March 31, 2025 and 2024 The following table sets forth the results of operations for the three months ended March 31, 2025 and 2024, respectively. For the Three Months Ended March 31, (unaudited) 2025 2024 Period to Period Change Product revenue $ 1,386,550 $ 1,377,294 $ 9,256 Cost of product revenue 615,489 986,875 (371,386 ) Product gross profit 771,061 390,419 380,642 Operating expenses: Selling, general and administrative 1,940,414 2,002,949 (62,535 ) Research and development 1,510,663 1,273,568 237,095 Total operating expenses 3,451,077 3,276,517 174,560 Loss from operations (2,680,016 ) (2,886,098 ) 206,082 Fair value change in warrant liability 390,351 — 390,351 Other income 19,058 31,008 (11,950 ) Loss before income taxes (2,270,607 ) (2,855,090 ) 584,483 Provision for income taxes — — — Net loss $ (2,270,607 ) $ (2,855,090 ) $ 584,483 26 NeuroOne Medical Technologies Corporation Form 10-Q Product Revenue and Product Gross Profit Product revenue was $1.4 million during the three months ended March 31, 2025 with a gross profit and gross profit percentage of $0.8 million and 55.6%, respectively. Product revenue was $1.4 million during the three months ended March 31, 2024 with a gross profit and gross profit percentage of $0.4 million and 28.3%, respectively. The increase in gross profit percentage during the current period was largely due to the higher margin OneRF Products being sold in the current period under the Amendment with Zimmer. Product revenue consisted of Strip/Grid Products, sEEG Products, Electrode Cable Assembly Products, and for the current three-month period, OneRF Product 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. In addition, cost of product revenue included royalty fees incurred of approximately $38,000 and $42,000 in connection with our license agreements during the three months ended March 31, 2025 and 2024, respectively. Selling, General and Administrative Expenses Selling, general and administrative expenses were $1.9 million and $2.0 million during the three months ended March 31, 2025 and 2024, respectively. The $0.1 million expense decrease in the current quarter over the comparable prior year quarter was largely attributed to lower administrative payroll and stock-based compensation of $0.1 million, lower legal costs of $0.1 million and lower public company costs of $0.1 million, partially offset by higher professional services and marketing expenses of $0.2 million. Selling, general and administrative expenses included $0.2 million and $0.3 million of stock-based compensation during the three months ended March 31, 2025 and 2024, respectively. Research and Development Expenses Research and development expenses were $1.5 million for the three months ended March 31, 2025, compared to $1.3 million for the three months ended March 31, 2024. The $0.2 million increase in the current period over the prior year period was attributed largely to the timing of product development activities in the current quarter when compared to the comparable prior year quarter. Research and development expenses primarily included salary-related expenses and costs related to consulting services, materials and supplies associated with the development of sEEG Products and to a much lesser extent Strip/Grid Products. Research and development expenses included $55,000 and $76,000 of stock-based compensation during the three months ended March 31, 2025 and 2024, respectively. Fair Value Change in Warrant Liability The net change in fair value of the warrant liability during the three months ended March 31, 2025 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 March 31, 2024 that were measured on a fair value basis. Other Income Other income during the three months ended March 31, 2025 and 2024 related to interest income on our cash, cash equivalents and short-term investments in the amount of $19,000 and $31,000, respectively. 27 NeuroOne Medical Technologies Corporation Form 10-Q Comparison of the Six Months Ended March 31, 2025 and 2024 The following table sets forth the results of operations for the six months ended March 31, 2025 and 2024, respectively. For the Six Months Ended March 31, (unaudited) 2025 2024 Period to Period Change Product revenue $ 4,660,717 $ 2,354,943 $ 2,305,774 Cost of product revenue 1,962,767 1,698,210 264,557 Product gross profit 2,697,950 656,733 2,041,217 License revenue 3,000,000 — 3,000,000 Operating expenses: Selling, general and administrative 3,983,868 4,176,421 (192,553 ) Research and development 2,682,891 2,756,885 (73,994 ) Total operating expenses 6,666,759 6,933,306 (266,547 ) Loss from operations (968,809 ) (6,276,573 ) 5,307,764 Fair value change in warrant liability 779,796 — 779,796 Financing costs (324,738 ) — (324,738 ) Other income 28,466 76,583 (48,117 ) Loss before income taxes (485,285 ) (6,199,990 ) 5,714,705 Provision for income taxes — — — Net loss $ (485,285 ) $ (6,199,990 ) $ 5,714,705 Product Revenue and Product Gross Profit Product revenue was $4.7 million during the six months ended March 31, 2025 with a gross profit and gross profit percentage of $2.7 million and 57.9%, respectively. Product revenue was $2.4 million during the six months ended March 31, 2024 with a gross profit and gross profit percentage of $0.7 million and 27.9%, respectively. The increase in gross profit percentage during the current period was largely due to higher margin OneRF Products being sold in the current period under the Amendment with Zimmer. Product revenue consisted of Strip/Grid Products, sEEG Products, Electrode Cable Assembly Products, and for the current six-month period, OneRF Product 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 $75,000 and $79,000 in connection with our license agreements during the six months ended March 31, 2025 and 2024, respectively. License Revenue License revenue was $3.0 million for the six months ended March 31, 2025. 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 six months ended March 31, 2024. 28 NeuroOne Medical Technologies Corporation Form 10-Q Selling, General and Administrative Expenses Selling, general and administrative expenses were $4.0 million for the six months ended March 31, 2025, compared to $4.2 million for the six months ended March 31, 2024. The $0.2 million decrease in the current six-month period compared to the comparable prior year period was primarily due to lower administrative payroll of $0.1 million, lower legal costs of $0.2 million, lower public company costs of $0.3 million, offset by higher professional fees of $0.3 million and facility costs and other general operating expenses of $0.1 million on a net basis. Selling, general and administrative expenses included $0.5 million of stock-based compensation during each of the six months ended March 31, 2025 and 2024. Research and Development Expenses Research and development expenses were $2.7 million for the six months ended March 31, 2025, compared to $2.8 million for the six months ended March 31, 2024. The $0.1 million decrease period over period was attributed to the timing and an overall reduction in OneRF Product development activities during the current six-month period when compared to the comparable prior year period. Research and development primarily included salary-related expenses and costs related to consulting services, materials and supplies associated with the development of sEEG Products and to a much lesser extent Strip/Grid Products. Research and development expenses included $0.1 million of stock-based compensation during each of the six months ended March 31, 2025 and 2024. Fair Value Change in Warrant Liability The net change in fair value of the warrant liability during the six months ended March 31, 2025 was $0.8 million. The change was due primarily to fluctuations in our common stock fair value. There were no warrants outstanding during the six months ended March 31, 2024 that were measured on a fair value basis. Financing Costs Financing costs during the six months ended March 31, 2025 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 six months ended March 31, 2024. Other Income Other income during the six months ended March 31, 2025 and 2024 consisted of $28,000 and $77,000 related to interest income attributed to our cash and cash equivalents, respectively. Liquidity and Capital Resources Overview As of March 31, 2025, our principal source of liquidity consisted of cash and cash equivalents in the aggregate of approximately $1.3 million. Subsequently, on April 7, 2025, we received net proceeds of approximately $8.2 million from the April 2025 Financing. 29 NeuroOne Medical Technologies Corporation Form 10-Q 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. April 2025 Financing On April 4, 2025, we entered into an Underwriting Agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co. Inc. as underwriter (the “Underwriter”), relating to the issuance and sale of 16,000,000 shares of our common stock, at a price to the public of $0.50 (the “April 2025 Financing”). In addition, under the terms of the Underwriting Agreement, we granted the Underwriter an option, exercisable for 45 days, to purchase up to an additional 2,400,000 shares of common stock on the same terms as the offering, which was exercised in full. Issuance costs in connection with the April 2025 Financing amounted to approximately $1.0 million which included a 7.0% commission to the Underwriter and legal and other expenses in the amount of $0.3 million. The Company received approximately $8.2 million in net proceeds. 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 March 31, 2025, we have issued 5,544,489 shares of common stock under the ATM for gross proceeds in the amount of $8.0 million. We incurred issuance costs in connection with the ATM in the amount of $0.6 million through March 31, 2025. On August 16, 2024, we increased the amount of common stock that can be sold pursuant to the Sales Agreement by $3.0 million. On April 3, 2025, we decreased the amount of common stock that can be sold pursuant to the Sales Agreement to zero. 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. 30 NeuroOne Medical Technologies Corporation Form 10-Q Funding Requirements 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 “Part 1, 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. 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 revenue from commercial sales to cover expenses. 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 March 31, 2025, we had cash and cash equivalents in the aggregate of approximately $1.3 million. Subsequently, on April 7, 2025, we received net proceeds of approximately $8.2 million from the April 2025 Financing. 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. We believe our current available cash and cash equivalents inclusive of the April 2025 Financing, coupled with the anticipated increase in product revenues from minimum purchases and improved gross margins under the Zimmer Amendment and forecasted operating expense reductions, will be sufficient to fund our planned expenditures and meet our obligations for at least twelve months from the date of issuance of these financial statements. 31 NeuroOne Medical Technologies Corporation Form 10-Q In the future, however, in the absence of an adequate level of commercial sales to cover expenses, we may 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 in the future from operating results or future financing, 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. Cash Flows The following is a summary of cash flows for each of the periods set forth below. For the Six Months Ended March 31, 2025 2024 Net cash provided by (used in) operating activities $ 151,905 $ (5,984,554 ) Net cash used in investing activities (27,587 ) (68,491 ) Net cash (used in) provided by financing activities (264,109 ) 3,165,207 Net decrease in cash and cash equivalents $ (139,791 ) $ (2,887,838 ) Net cash provided by (used in) operating activities Net cash provided by operating activities was $152,000 for the six months ended March 31, 2025, which consisted of a net loss of $0.5 million partially offset by non-cash stock-based compensation, depreciation, amortization related to intangible assets, a fair value change in warrant liability and operating lease expense, totaling approximately $0.2 million in the aggregate. Our net loss was further adjusted to account for the reclassification of debt termination costs to financing activities in the amount of $0.1 million. The net change in our net operating assets and liabilities associated with fluctuations in our operating activities resulted in a cash source of approximately $0.3 million. The net cash source stemming from the change in operating assets and liabilities was primarily attributable to both a decrease in inventory and prepaid expenses, partially offset by a net decrease in our aggregate accrued expenses, other liabilities and accounts payable as well as by an increase in our accounts receivable attributed to the timing of payments. Net cash used in operating activities was $6.0 million for the six months ended March 31, 2024, which consisted of a net loss of $6.2 million partially offset principally by non-cash stock-based compensation, depreciation, amortization related to intangible assets, operating lease expense, totaling approximately $0.8 million in the aggregate. The net change in our net operating assets and liabilities associated with fluctuations in our operating activities resulted in a cash use of approximately $0.6 million. The net cash use stemming from the change in operating assets and liabilities was primarily attributable to both an increase in our accounts receivable and prepaid expense as well as attributed to a net decrease in our accrued expenses and other liabilities. Partially offsetting the net cash used for the period was the reduction in inventory purchases and increase in our account payable attributed to the timing of payments. 32 NeuroOne Medical Technologies Corporation Form 10-Q Net used in investing activities Net cash used in investing activities was $28,000 for the six months ended March 31, 2025 and consisted of outlays for purchases of property and equipment. Net cash used in investing activities was $68,000 for the six months ended March 31, 2024 and consisted of outlays for purchases of property and equipment. Net cash (used in) provided by financing activities Net cash used in financing activities was $0.3 million for the six months ended March 31, 2025, which consisted of issuance costs and repurchases of common stock for the payment of employee taxes in the amount of $0.7 million in the aggregate, offset partially by proceeds from the ATM of $0.4 million. Net cash provided by financing activities was $3.2 million for the six months ended March 31, 2024, which consisted of net proceeds from the ATM of $3.2 million, offset partially by repurchases of common stock for the payment of employee taxes in the amount of $25,000. 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. 33 NeuroOne Medical Technologies Corporation Form 10-Q 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 12 – Stockholders’ Equity” included in “Part 1, Item 1 – Financial Statements” in this Report. Income Tax Assets and Liabilities Income tax assets and liabilities include income tax valuation allowances. For additional information, see “Note 10 — 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.