NMTC US Equity☆

ITEM 1A. RISK FACTORS 28

ITEM 1B. UNRESOLVED STAFF COMMENTS 68

ITEM 2. PROPERTIES 68

ITEM 3. LEGAL PROCEEDINGS 68

ITEM 4. MINE SAFETY DISCLOSURES 69

PART II

ITEM 6. SELECTED FINANCIAL DATA 71

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 85

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA F-1

ITEM 9A. CONTROLS AND PROCEDURES 86

ITEM 9B. OTHER INFORMATION 86

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 87

ITEM 11. EXECUTIVE COMPENSATION 87

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 87

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 88

i

SPECIAL

NOTE REGARDING FORWARD-LOOKING STATEMENTS

Unless

the context requires otherwise, references in this Annual Report on Form 10-K (this “Annual Report” or “Report”)

to “we,” “us,” “the Company” and “our” refer to NeuroOne Medical Technologies

Corporation (the “Company”).

This

Annual Report contains forward-looking statements that involve substantial risks and uncertainties. The forward-looking statements

are contained principally in the sections entitled “Risk Factors,” “Management’s Discussion and Analysis

of Financial Condition and Results of Operations” and “Business,” but are also contained elsewhere in this Annual

Report. 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 Annual 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 future development priorities;

● the COVID-19 pandemic;

ii

● our ability to comply with applicable regulatory requirements;

● our ability to maintain our intellectual property position;

● The outcome of legal proceedings with PMT;

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 this Annual Report 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 Annual 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 Annual 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 Annual Report.

iii

PART

I

ITEM

1. BUSINESS

Overview

Corporate

Overview of NeuroOne Medical Technologies Corporation

We

were originally incorporated as Original Source Entertainment, Inc. under the laws of the State of Nevada on August 20, 2009.

Prior to the closing of the Acquisition, as defined below, we completed a series of steps contemplated by a Plan of Conversion

pursuant to which we, among other things, changed our name to NeuroOne Medical Technologies Corporation, increased our authorized

number of shares of Common Stock from 45,000,000 to 100,000,000, increased our authorized number of shares of preferred stock

from 5,000,000 to 10,000,000 and reincorporated in Delaware. On July 20, 2017, we acquired NeuroOne, Inc. (the “Acquisition”).

Immediately following the closing of the Acquisition, the business of NeuroOne, Inc. became our sole focus.

Corporate

Overview and History of NeuroOne, Inc.

NeuroOne,

Inc. was incorporated under the laws of the State of Delaware on October 7, 2016. Its predecessor entity, NeuroOne LLC (the “LLC”),

was formed on December 13, 2013 and operated as a limited liability company until it was merged with and into NeuroOne, Inc. on

October 27, 2016 with NeuroOne, Inc. as the surviving entity (the “Merger”). As a result of the Merger, all of the

properties, rights, privileges and powers of the LLC vested in NeuroOne, Inc., and all debts, liabilities and duties of the LLC

became the debts, liabilities and duties of NeuroOne, Inc., except for the license agreement (the “WARF License”)

with the WARF which was not legally transferred until May 2017. The purposes of the Merger were to: change the jurisdiction of

incorporation from Minnesota to Delaware; change the ownership of the LLC’s underlying assets; and convert from a limited

liability company to a corporation. In December 2019, NeuroOne, Inc. was merged with and into the Company, with the Company remaining

as the surviving entity.

We

are a medical technology company focused on the development and commercialization of thin film electrode technology for continuous

electroencephalogram (cEEG) and stereoelectrocencephalography (sEEG) recording, spinal cord stimulation, brain stimulation and

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

brain related disorders. Additionally, we are investigating the potential applications of our technology associated with artificial

intelligence. Members of our management team have held senior leadership positions at a number of medical technology and biopharmaceutical

companies, including Boston Scientific, St. Jude Medical, Stryker Instruments, C.R. Bard, A-Med Systems, Sunshine Heart, Empi,

Don-Joy and PMT Corporation (“PMT”).

1

We

are developing our cortical, sheet and depth electrode technology to provide solutions for diagnosis through cEEG recording and

sEEG recording and treatment through brain stimulation and ablation, all in one product. A cEEG is a continuous recording of the

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

treatment. cEEG recording involves an invasive surgical procedure, referred to as a craniotomy. sEEG involves a less invasive

procedure whereby doctors place electrodes in targeted brain areas by drilling small holes through the skull. Both methods of

seizure diagnosis are used to identify areas of the brain where epileptic seizures originate in order to precisely locate the

seizure source for therapeutic treatment if possible.

Deep

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

electrodes on the surface or implanted deeper in the brain via depth electrodes. Introduced in 1987, this procedure involves implanting

a power source referred to as a neurostimulator, which sends electrical impulses through implanted depth electrodes, to specific

targets in the brain for the treatment of disorders such as Parkinson’s disease, essential tremor, dystonia, and chronic

pain. Alzheimer’s is another indication evaluating the effects of DBS. Unlike ablative technologies, the effects of DBS

are reversible.

RF

ablation is a procedure that uses radiofrequency under the electrode contacts that is directed to the site of the brain tissue

that is targeted for removal. The process involves delivering energy to the contacts, thereby heating them and destroying the

brain tissue. The ablation does not remove the tissue. Rather, it is left in place and typically scar tissue forms in the place

where the ablation occurs. This procedure is also known as brain lesioning as it causes irreversible lesions.

Failed

back surgery syndrome (“FBSS”) is a condition that produces chronic lower back/leg pain due to one or more failed

back surgeries. Typically, it is related to patients that suffer with pain after surgery of the lumbar spine for degenerative

disc disease. Re-operations are usually not recommended for these patients due to low success rates. These patients experience

greater levels of pain, a lower quality of life, varying levels of disability and higher rate of unemployment. Spinal cord stimulation

works by placing an electrodes(s) in a targeted area of the spine and then connected to an implantable pulse generator that sends

electrical stimulation to the electrode to block the pain signals from reaching the brain.

Our

cortical sheet electrode and depth electrode technology has been tested over the years by both WARF, the owners of our licensed

patents, and Mayo Clinic located in Rochester, Minnesota, in both pre-clinical models as well as through an IRB approval at Mayo

Clinic for clinical research. Regarding our ablation electrode, the Cleveland Clinic has performed testing in bench top models

and pre-clinical (or animal testing) modes. These pre-clinical tests have demonstrated that the technology is capable of recording,

ablation and acute stimulation, although our technology remains in product development (meaning that additional trials will be

needed prior to it being approved for sale by the U.S. Food and Drug Administration (the “FDA”)) for all of the recording

(or diagnostic) and therapeutic modalities.

Prior

to commercialization of our technology, we will have to obtain regulatory approval as discussed in “—Clinical Development

and Regulatory Pathway” and “—Government Regulation” below.

2

Our

Market Opportunity

Epilepsy

Market

We

expect to initially target the diagnosis and treatment of epilepsy. Epilepsy can be caused by a variety of conditions that

affect a person’s brain, some of which are: stroke, brain tumor, traumatic brain injury and central nervous system

infections. According to the Centers for Disease Control and Prevention (the “CDC”) and Citizens United for

Research in Epilepsy (“CURE”), there are approximately 3,000,000 patients annually suffering with epilepsy in the

United States, with an additional 200,000 diagnosed every year. They also estimate that epilepsy costs the United States

$15.5 billion per year. We believe the European market is similar. Approximately 720,000 of these patients are not receptive

to pharmaceutical treatment and therefore are appropriate for surgical treatment of this disorder. In addition to poor

quality of life, epilepsy also is associated with fairly high mortality rates, especially in children. CURE reported that

Sudden Unexpected Death in Epilepsy accounts for 34% of all deaths in children. Such deaths have increased by close to 100%

from 2005 to 2015 according to the CDC. Despite the large market opportunity, it is estimated that there are only 16,000

craniotomies performed for epilepsy cases each year in the United States with 18,000 performed in Europe.1 These

numbers represent an underpenetrated market due to the invasiveness of a full craniotomy required just to perform the

diagnostic procedure. After the diagnostic procedure, a second therapeutic procedure is required and at times even a third

surgery if the seizures persist. We believe patients are unwilling to proceed due to the long diagnostic times (one-four

weeks in the hospital with a craniotomy), infection rates and 50% rate of success in the diagnosis and treatment of the

disorder. As detailed above, after the diagnosis is completed, if successful, the patient must undergo an additional

procedure to have the affected area of brain tissue removed. The average cost for the diagnostic technology per procedure is

$10,000, with ablation devices costing $15,000 and brain stimulation devices costing $25,000 to $30,000. We believe our

technology, once developed, will offer an all in one solution with diagnostic and therapeutic capabilities.

We

believe that many leading neurologists believe that the limits of today’s current technologies are the reason the exact

affected area of the brain causing epileptic seizures is not well-determined. We expect our technology, which has been developed

to date by physicians at WARF and Mayo Clinic, will provide a number of advantages over the current commercially available technologies,

including the following:

We

expect our technology can ablate through the electrodes as well as perform brain stimulation, allowing for diagnosis and treatment

through the same product and in the same procedure.

Parkinson’s

Disease

The

Parkinson’s Disease Foundation estimates that as many as 1,000,000 patients in the United States live with Parkinson’s

disease with an additional 60,000 patients diagnosed per year. Over 10,000,000 patients worldwide are living with Parkinson’s

disease. There have not been any drugs introduced that have been effective at treating Parkinson’s disease. The average

onset is over 60 years old but some people have been diagnosed as young as 40 years old. Parkinson’s is a disorder of the

central nervous system caused by loss of brain cells throughout various regions of the brain. It is attributed to the loss of

dopamine production in the brain, a messenger in the brain that allows for movement and coordination. There are no objective tests

to diagnose Parkinson’s disease, and misdiagnosis rates are still very high. Doctors look to find two or more signs to make

a diagnosis, including balance problems, rigidity and tremors that occur during rest. In 2011, the FDA approved the first imaging

device called a DaTscan that can capture images of the dopamine system in the brain. By itself, these scans cannot diagnose Parkinson’s

but can help confirm a doctor’s diagnosis. Parkinson’s disease is typically not fatal; however, complications caused

by the symptoms of Parkinson’s, such as difficulty swallowing causing food to travel to the lungs resulting in pulmonary

issues or falls related to loss of balance, can be fatal.

3

Today’s

primary treatment for Parkinson’s disease involves medications that have not proven to resolve symptoms but rather ease

symptoms. Years ago, surgical procedures such as thalamotomy and pallidotomy targeted certain parts of the brain and involved

destroying the tissue. More recently, these procedures have been replaced with DBS. A doctor evaluates the patient by reviewing

the patient’s symptoms and medications taken and administering detailed memory, thinking and imaging tests to determine

if they are appropriate for DBS. According to the Michael J. Fox Parkinson’s Disease Research Foundation website, patients

that seem to do best with DBS are those that have had the disease for at least four years and have benefited from taking medications

prescribed to control the disease. In addition, DBS seems to help with reducing the issues with motor functions such as tremors,

stiffness and slowness but not for balance issues. Doctors are evaluating treatment to other parts of the brain in an effort to

address more symptoms to treat walking or balance issues. In addition, research is being conducted to provide stimulation when

the symptoms return as opposed to all of the time.

Essential

Tremors

Essential

tremors are thought to be due to electrical irregularities in the brain that send abnormal signals to the muscles. It is a progressive

condition that worsens over time and is linked to genetic disorders that typically appear in people who are over 40. Essential

tremors usually occur alone and without any other neurological symptoms or signs. The tremors usually occur when the hands are

raised and primarily affect the hands. Muscles in the trunk, face and neck may also experience symptoms. Sometimes misdiagnosed

as Parkinson’s disease, essential tremors are an involuntary rhythmic shaking of the hands that is not present at rest.

It is apparent during activities such as drinking, writing and eating. Symptoms can worsen due to stress, anxiety, smoking, caffeine,

fatigue, etc. Genetics Home Reference estimates that as many as 10,000,000 people in the United States are affected by the disease.

Treatments for the disease include medical therapy, weighting the limbs and DBS. Patients need to eliminate any medications they

are taking that cause tremors as this can exacerbate the symptoms. For some patients, using wrist weights may ease symptoms allowing

the patient to function. Other patients may also use relaxation techniques as stress can increase symptoms. Medical therapy is

also used to treat patients’ symptoms. Primidone is typically the first drug prescribed as it has had success in some situations

for epilepsy. Botox is also used at times to control head tremors. When these fail, surgery is the next alternative. A surgical

procedure used years ago created lesions in the ventral intermediate thalamus and was highly successful with treating essential

tremors but is no longer commonly used due to increased risk of developing speech problems. The latest therapy is DBS, which,

unlike other therapies, is reversible and programmable, helping to adjust the settings to maximize patient benefit. Similar to

Parkinson’s disease, the ability to detect this irregular brain activity before it causes a tremor is highly desirable.

Dystonia

Dystonia

is a neurological condition recognized as a motion disorder that involves over activity of a variety of different muscles simultaneously

that work against each other. It presents itself in a variety of symptoms but typically involves repetitive, patterned and often

twisting involuntary muscle contractions resembling tremors. According to the Dystonia Medical Research Foundation, over 300,000

people are affected in the United States and Canada alone. Dystonia is the third most common problem seen in movement disorder

clinics. Because it has many different manifestations, it is often misdiagnosed. In addition, similar to Parkinson’s disease,

there are no specific tests that can positively diagnose dystonia. A doctor typically will evaluate patient and family history,

potentially do genetic testing, EEG testing, blood and urine tests. There are also many treatment options for patients but depend

on the type of dystonia. Botox and certain medications may be helpful or DBS may be used.

Spinal

Cord Stimulation

The

market for spinal cord stimulation was reported to be $1.97 billion in the United States in 2017 as reported by Infinium Research

in their Spinal Cord Stimulation Market Research report. The market includes the following indications: Failed Back Surgery Syndrome,

Ischemic Limb Pain, and Complex Regional Pain Syndrome. Over half of this market is comprised of patients with FBSS. Certain studies

have indicated a benefit for these patients suffering from chronic back and lower limb pain when they have been treated with electrical

stimulation. Prior to the patient receiving an implant, they undergo a trial period that allows them to determine if they are

receiving relief from the therapy while preventing a surgery to implant the pulse generator that provides the stimulation. If

the trial period is successful, then the device is implanted in a follow-up procedure.

4

Artificial

Intelligence

The

brain consists of approximately 100 billion nerve cells, which are small wires that pass electrical signals to control all of

its functions. There have been a number of successful clinical trials in which small metal wires, known as electrodes, are implanted

in the brain to correct nerve damage using wireless communication between implanted wires to simulate functional nerve cells.

In addition to correcting damaged nerve cells, certain scientists have theorized that if millions of wires could be implanted

in the brain, these electrodes could present an opportunity to use artificial intelligence to create infrared sight, increase

hearing or perfect memory recall. However, there currently is no commercially available manufacturing platform capable of making

thousands of wires that can be placed within or on the brain and work reliably for the lifetime of a subject, and are soft enough

to match the tissue of the brain, that avoid damage to the brain.

Limitations

of Currently Available Therapies

There

are a limited number of currently available products for diagnosis and treatment for people with neurological disorders such as

epilepsy. Although the currently available systems provide diagnosis and treatment for patients, they have certain inherent limitations

and shortcomings that we believe limit their use and validate the need for improved technology in the market. These limitations

include:

Our

Solution

As

a result of the inherent limitations and inconvenience of existing systems, we believe that there is a significant unmet need

among people with neurological disorders for cortical strip, grid and depth electrodes that provide diagnostic capabilities through

cEEG and sEEG recording in addition to therapeutic modalities, such as brain stimulation and ablation, offered as an all in one

product. In comparison to currently available technologies, we are currently developing our strip, grid and depth electrodes with

the goal of providing the following expected advantages:

5

Our

Strategy

Our

goal is to be the global leader in cEEG and sEEG recording, deep brain stimulation and ablation, owning the procedure from diagnosis

through treatment. The key elements of our strategy include:

6

7

Our

Technology

Epilepsy

Mapping and Monitoring

Epileptic

seizures occur when the neurons in the brain miscommunicate. This miscommunication typically results in involuntary muscle seizure

activities and/or periods of perceptual disconnect where the individual appears frozen. Modern medical science has advanced the

treatment of epileptic seizures by mapping the electrical communication activity of neurons and understanding their special orientation

in the brain. This mapping is accomplished by access to the cranium (through a craniotomy) and placing conductive contacts on

the brain directly. The craniotomy procedure is very invasive, traumatic to the surrounding tissue, results in high patient down

time, and increases the risk of infection.

Our

Technology

We

seek to leverage scale-able technology and produce ultra-thin, or paper-thin electrodes that allow for high-resolution and high-definition

recordings, which would improve mapping resolution and signal acquisition. If the Company is able to leverage scale-able technology,

it would mean that our technology would be able to incorporate smaller electrodes and thereby increase the number of electrodes

on a given surface area. We expect that this would increase the imaging resolution so that brain activity is displayed in greater

definition. We also believe that the electrodes’ unique thinness and flexibility will provide a less invasive approach to

electrode placement. The electrodes would be able to be placed through a small quarter size hole instead of by an invasive full

craniotomy procedure.

8

The

images under “Cortical Electrode,” from bottom to top, are images of our cortical electrode strip, our grid electrode,

and the placement of the grid electrode on the brain, respectively. The images under “High Density Interconnect” are

both images of our product that connects our electrodes to the head box, which is a piece of hardware that connects to electrodes

to acquire, amplify, display, store and archive electrophysiological signals, and is integrated as part of our manufactured electrode

product. The images under “Head Box” and “Signal Monitoring and Mapping” are images of the device which

processes information received through the high density interconnect, and a sample output of data acquisition, respectively, neither

of which is one of a Company product.

Our

technology consists of three primary types of cortical electrodes: grid electrodes, strip electrodes and dual-sided electrodes.

These electrodes have a patented design that utilizes proprietary processing and materials technology, which we believe will allow

the electrodes to have improved features over the current industry standard recording electrodes.

What

sets our technology apart from others is the integration of state of the art design leveraging the latest in flexible printed

circuit technology. We believe our patented designs will provide the surgeon a higher tactile perspective on electrode placement

allowing for ultra-precise neuron recording. We expect the benefits of our electrode designs to include the ability to detect

better defined margins between healthy tissue and resect-able tissue, less immune-response from the brain and surrounding tissue,

better signal acquisition due to superior conformability of the electrode over the brain, improved flexibility that physicians

have requested, which we expect will enable a minimally invasive approach and the electrodes unique thinness that is unmatched

by current products being used.

The

Future of Neurology Mapping with NeuroOne

We

seek to develop superior “scale-able” technology for future product system iterations in higher density contact placement.

This will open the doors to other brain related disease recording procedures by providing hi-fidelity, more accurate diagnostic

capabilities and also the ability to provide an all in one therapy capable of diagnosis, ablation and/or stimulation. Beyond the

brain, we believe our technology under development has applications in other neurological signal recording disease states related

to voluntary or involuntary motor neuron abnormalities, understanding sensory neuro behavior (pain), limb prosthetics and degenerative

muscle disease.

9

Clinical

Development and Regulatory Pathway

Clinical

Experience, Future Development and Clinical Trial Plans

Our

Evo cortical electrode technology has received 510(k) clearance from the FDA for recording, monitoring, and stimulating brain

tissue for up to 30 days. Our other products have not received any clearance for commercialization by any U.S. or foreign regulatory

body. To date, the Company has performed a number of bench top (which includes feasibility testing) and pre-clinical tests (which

include animal testing of device placement, ergonomics, performance, ease of use, and other tests required by FDA regulations).

As described in “—Government Regulation” below, the Company will be required to perform additional testing of

its technology in connection with obtaining regulatory approvals.

In

parallel with the development and testing needed to launch our cortical strip and grid electrodes and sEEG electrodes in development,

we intend to expand our product offerings to include less invasive means and all in one solutions, thus providing both patients

and physicians better options to treat epilepsy and other brain related disorders. While we expect to make modifications to this

initial system, we believe that most of our future product development initiatives will involve unique and transformational next

generation technology that should drive further appeal of our products with both physicians and patients.

We

are utilizing a number of resources to develop these technologies. We license three critical patents from WARF that are the foundation

of the technology and we are developing and intend to commercialize and benefit from the thin film technology know-how of Mayo

Clinic doctors through our license and development agreement. WARF, Mayo Clinic and Cleveland Clinic have been responsible for

all pre-clinical studies of our technology under development to date. See “—WARF License” and “—Mayo

Foundation for Medical Education and Research License and Development Agreement” below.

Below

we have summarized, for each component of our technology under development, the current stage of development, the pre-clinical

testing done to date by WARF, The Cleveland Clinic or Mayo Clinic on such component, if any, our plans for further testing or

clinical trials and our expectations regarding the requirements for regulatory approval and timing of regulatory submissions.

The development of our technology was

delayed in fiscal year 2020 due to interruption in global manufacturing and shipping as a result of the COVID-19 pandemic. For

example, one of our key manufacturing partners and one of our key suppliers have each had staffing issues due to COVID-19, leading

to delays in our development build times and delays in shipping our product. Additionally, our own staff has been impacted by

infections and mandatory quarantines. Our plans for further testing or clinical trials may be further impacted by the continuing

effects of COVID-19. See “Risk Factors – The COVID-19 pandemic could has adversely impacted, and may continue to

impact, our business, including pre-clinical and clinical trials and regulatory approvals.”

10

11

12

Mayo

Clinic Studies

Our

cortical technology for the diagnosis of epilepsy has been tested by doctors at Mayo Clinic in multiple pre-clinical tests conducted

from 2012 to 2017. In pre-clinical models, doctors examined the biological impact on mammalian brains. Polyimide substrate electrodes

(NeuroOne technology) were implanted on the pig’s brain for one week alongside standard competitive electrodes. The tissue

underneath the two types of electrodes was removed, fixed, stained, and examined for immunological responses. The results of a

histological (evaluation of brain tissue under a microscope) analysis showed reduced immunological reaction to prolonged polyimide

substrate implants (NeuroOne technology) compared to standard silicone substrate clinical electrodes. Electrophysiological recordings

showed data obtained from polyimide electrodes which showed the feasibility of high fidelity multi-scale electrophysiology while

also displaying easier deployment of polyimide electrodes (NeuroOne technology) through minimally invasive burr holes.

Additionally,

doctors implanted our polyimide thin film electrodes on five human patients who were undergoing surgery to remove brain tissue

for drug resistant epilepsy. Electrophysiological recordings from the polyimide thin film technology displayed in each of these

patients demonstrated micro-seizure activity due to the high fidelity multi-scale electrophysiology.

Conclusions

reached by the physicians at Mayo Clinic were that thin, flexible polyimide electrodes (NeuroOne technology) provided recordings

similar to standard clinical electrodes with reduced immunological response. In addition, the flexibility of polyimide electrodes

may reduce pain and swelling associated with implantation of the device, and the single wire exiting the skull may reduce infection

risk. The ability to record micro-seizure and single neuron brain activity may also provide additional useful clinical data. Combined,

these properties suggest that the replacement of our current competitive silicone electrodes with polyimide substrate electrodes

(NeuroOne technology) for recording brain activity for epilepsy could provide enhanced clinical value with reduced cost, reduced

infection risk, and improved patient comfort.

In

addition, our thin film cortical implant technology has been tested by researchers at the University of Wisconsin-Madison in multiple

pre-clinical animal studies conducted from 2006 to 2016, which included mice, rats and primates. In these studies, our technology

was able to record brain activity from different areas of the brain, was implanted in a minimally invasive fashion, electrically

provided brain stimulation and tissue ablation, and had increased flexibility compared to existing commercially available technology,

which allowed the grids to conform more easily to the brain surface (and may have reduced pain and swelling, compared to less

flexible devices).

Sales

and Marketing

Based on the size and maturity of the U.S.

market, our initial commercial focus, on July 20, 2020, we entered into an exclusive development and distribution agreement (the

“Development Agreement”) with Zimmer, Inc. (“Zimmer”), pursuant to which we granted Zimmer exclusive global

rights to distribute NeuroOne’s strip and grid cortical electrodes (the “Strip/Grid Products”) and electrode

cable assembly products (the “Electrode Cable Assembly Products”), including to approximately 188 Level 4 epilepsy

centers.. Additionally, we granted Zimmer the exclusive right and license to distribute certain depth electrodes developed by the

Company (“SEEG Products”, and together with the Strip/Grid Products and Electrode Cable Assembly Products, the “Products”).

The parties have agreed to collaborate with respect to development activities under the Development Agreement through a joint development

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

Under the terms of the Development Agreement,

we will be responsible for all costs and expenses related to developing the Products, and Zimmer will be responsible for all costs

and expenses related to the commercialization of the Products. In addition to the Development Agreement, Zimmer and the Company

have entered into a Manufacturing and Supply Agreement (the “MS Agreement”) and a supplier quality agreement (the “Quality

Agreement”) with respect to the manufacturing and supply of the Products.

Except as otherwise provided in the Development

Agreement, we will be responsible for performing all development activities, including non-clinical and clinical studies directed

at obtaining regulatory approval of each Product. Zimmer has agreed to use commercially reasonable efforts to promote, market and

sell each Product following the “Product Availability Date” (as defined in the Development Agreement) for such Product.

Pursuant to the Development Agreement, Zimmer

made an upfront payment of $2.0 million to the Company, the announcement of which triggered the automatic conversion of the Company’s

2020 Notes pursuant to their terms. Additionally, in order to maintain the exclusivity of its distribution license for the SEEG

Products, Zimmer must pay an additional fee to the Company within 60 days following the Product Availability Date for the SEEG

Products.

The Development Agreement will expire on the

tenth anniversary of the date of the first commercial sale of the last of the Products to achieve a first commercial sale, unless

terminated earlier pursuant to its terms. Either party may terminate the Development Agreement (x) with written notice for the

other party’s material breach following a cure period or (y) if the other party becomes subject to certain insolvency proceedings.

In addition, Zimmer may terminate the Development Agreement for any reason with 90 days’ written notice, and we may terminate

the Development Agreement if Zimmer acquires or directly or indirectly owns a controlling interest in certain competitors of the

Company.

We

will investigate markets outside of the U.S. with the assistance of Zimmer Biomet and formulate a plan to enter those markets

with the support of Zimmer. See “—Recent Developments – Zimmer Development Agreement.”

13

Reimbursement

Coverage

in the United States

Reimbursement

from private third-party healthcare payors and, to a lesser extent, Medicare will be an important element of our success. Although

the Centers for Medicare and Medicaid Services (“CMS”) and third-party payors have adopted coverage policies for our

targeted indications, there is no guarantee this will continue at the same levels or at all in the future. Current Procedural

Terminology, or CPT, is a medical code set that is used to report medical, surgical and diagnostic procedures and services to

entities such as physicians, health insurance companies and accreditation organizations.

Applicable

diagnostic CPT codes for mapping (diagnosing) the brain for diagnostic procedures are as follows:

Regarding

ICD-10 codes, the International Classification of Diseases, Tenth Edition (ICD-10) is a clinical cataloging system that went into

effect for the U.S. healthcare industry on October 1, 2015, after a series of lengthy delays. Accounting for modern advances in

clinical treatment and medical devices, ICD-10 codes offer many more classification options compared to those found in its predecessor,

ICD-9. Within the healthcare industry, providers, coders, IT professionals, insurance carriers, government agencies and others

use ICD codes to properly note diseases on health records, to track epidemiological trends and to assist in medical reimbursement

decisions.

ICD-10

codes for epilepsy are as follows:

● G40.3 Generalized idiopathic epilepsy and epileptic syndromes;

● G40.A Absence epileptic syndrome;

14

● G40.4 Other generalized epilepsy and epileptic syndromes;

● G40.50 Epileptic seizures related to external causes, not intractable;

● G40.80 Other epilepsy; and

● G40.82 Epileptic spasms.

We

believe that many of the indications we are pursuing with our technologies are currently reimbursed on a widespread basis by Medicare,

Medicaid and private insurance companies.

Medicare,

Medicaid, health maintenance organizations and other third-party payors are increasingly attempting to contain healthcare costs

by limiting both coverage and the level of reimbursement of new medical devices, and, as a result, their coverage policies may

be restrictive, or they may not cover or provide adequate payment for our products. In order to obtain reimbursement arrangements,

we may have to agree to a net sales price lower than the net sales price we might charge in other sales channels. Our revenue

may be limited by the continuing efforts of government and third-party payors to contain or reduce the costs of healthcare through

various increasingly sophisticated means, such as requiring prospective reimbursement and second opinions, purchasing in groups,

or redesigning benefits. Our future dependence on the commercial success of our technologies makes us particularly susceptible

to any cost containment or reduction efforts. Accordingly, unless government and other third-party payors provide adequate coverage

and reimbursement for our products and the related insertion and removal procedures, our financial performance may be limited.

Coverage

Outside the United States

If

we seek to commercialize in countries outside the United States, coverage for epilepsy surgical procedures are available from

certain governmental authorities, private health insurance plans, and labor unions. Coverage systems in international markets

vary significantly by country and, within some countries, by region. If we seek to commercialize our technology, if approved,

outside the United States, coverage approvals must be obtained on a country-by-country, region-by-region or, in some instances,

a case-by case basis. Based on our ongoing evaluation, certain countries reimburse more highly than others.

We

evaluated international opportunities to market our technology under development. While we believe there is a market for our technology

in Europe and other foreign jurisdictions, we have determined not to seek to commercialize in any foreign jurisdictions due to

time intensive approval processes, the lack of certainty regarding approval, significant cost and the stringency of the regulatory

approval process in Europe in particular, among other factors.

Manufacturing,

Supply and Quality Assurance

We

currently outsource the supply and manufacture of all components of our prototypes of our technology under development. We plan

to continue with an outsourced manufacturing arrangement for the foreseeable future. Our third-party manufacturers are recognized

in their field for their competency to manufacture the respective portions of our system and have quality systems established

that meet FDA requirements. We believe the manufacturers we currently utilize have sufficient capacity to meet our launch requirements

if our technology under development is approved in the future and are able to scale up their capacity relatively quickly with

minimal capital investment. We believe that, as we increase our demand in the future, our per-unit costs will decrease materially.

We have also identified capable second source manufacturers and suppliers in the event of disruption from any of our primary vendors.

Our

suppliers meet the latest ISO 13485 certification, which includes design control requirements. As a medical device developer,

the facilities of our sterilization and other critical suppliers are subject to periodic inspection by the FDA and corresponding

state and foreign agencies. We believe that our quality systems and those of our suppliers are robust and achieve high product

quality. We plan to audit our suppliers periodically to ensure conformity with the specifications, policies and procedures for

our devices.

15

Research

and Development

Our

research and development team, which includes our Chief Technology Officer and two third party consultants who perform research

and development activities for us, is focused on the development of thin film cortical grid and strip electrodes and depth electrodes

for recording, ablation and chronic stimulation for brain related disorders as well as stimulation for spinal cord stimulation

for back related pain.

Our

research and development expenses were $2.1 million and $1.5 million for the years ended September 30, 2020 and 2019, respectively.

Competition

In

the market for Epilepsy diagnosis, our cortical strip, sheet and depth electrode technology will likely compete with Integra Life

Science’s Integra Epilepsy Strip, Grid and depth electrodes, which provide a similar function to our diagnostic technologies

under development. These products are well established in the marketplace and Integra has greater resources than us, which could

allow them to innovate faster. Ad-Tech Medical Instrument Corporation’s Epilepsy/LTM (subdural grid, strip and depth) electrodes,

which have become the market leaders for diagnostic mapping in epilepsy, and PMT’s Cortac Strips and grid electrodes and

Depthalon depth electrodes are used for recording brain activity similar to other competitive technologies. In addition, Dixie

Medical has launched a product line of depth electrodes and CorTec has launched a cortical electrode product line called AirRay.

Today’s success rates for seizure free post-operative conditions remain at 50%, which has limited patients’ willingness

to undergo the currently highly invasive surgical procedure. We will also compete against other companies in early stages of development

of thin film technologies.

In

the neuro-ablation market, we expect to compete with Medtronic’s Visualase guided-laser ablation technology and Monteris

Medical’s NeuroBlate technology, which use MRI guided laser surgical ablation for use to ablate, necrotize or coagulate

soft tissue through interstitial irradiation or thermal therapy in medicine and surgery in the discipline of neurosurgery with

1064 nm lasers. Their website claims it is used for ablation in the brain for soft tissue and tumors. We believe there are other

laser-based systems in development that will compete with these technologies.

In

the neurostimulation market, we expect to compete with NeuroPace’s RNS system approved for epilepsy, Medtronic’s Activa

system approved for Parkinson’s disease, Boston Scientific Vercise (indicated for Parkinson’s, dystonia and essential

tremors), Abbott/St. Jude Medical’s Infinity DBS system (approved for Parkinson’s disease and essential tremors),

Liva Nova/Cyberonic’s VNS therapy intended for patients suffering with epilepsy. We believe there are additional companies

pursuing thin film electrode technology for use in the brain although none are expected to be commercially available in 2020.

Although we will face potential competition from many different sources, we believe that our technology, knowledge, experience

and scientific resources will provide us with competitive advantages. We expect the key competitive factors affecting the success

of our cortical strip and sheet electrodes under development, if successfully developed and approved, are likely to be: hi-fidelity

recording that allows for detection of pre-seizure activity, ability to place the devices minimally invasively, deliverability

of cortical grid, strip and depth electrode technology, ability to offer grid, strip and depth electrodes in various electrode

shapes and sizes, potential reduction in infections and ability to record brain activity both on the surface using cortical grid

and strip technology and deeper into the brain using depth electrodes concurrently.

Many

of the companies against which we may compete in the future have significantly greater financial resources and expertise in research

and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing

approved products than we do. Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result

in even more resources being concentrated among a smaller number of our competitors. Smaller or early stage companies may also

prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These

competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical

trial sites and subject registration for clinical trials, as well as in acquiring technologies complementary to, or necessary

for, our development.

16

WARF

License

We have an Exclusive Start-Up Company License

Agreement with WARF, pursuant to which WARF has granted us the WARF 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. 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 sublicenses 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.

We have agreed to diligently develop,

manufacture, market and sell products under the WARF License in the United States during the term of the agreement and, specifically,

that we would submit a business plan to WARF by February 1, 2018, which we submitted on January 18, 2018, and would file an application

for 510(k) marketing clearance with the FDA by February 1, 2019, which we submitted on January 28, 2019. WARF may terminate this

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 fail 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 WARF

License otherwise expires by its terms on the date that no valid claims on the patents licensed thereunder remain. We expect the

latest expiration of a licensed patent to occur in 2030. The first commercial sale occurred on December 7, 2020, prior to the

June 30, 2021 deadline.

In

addition, WARF reserves the right to grant non-profit research institutions and government agencies non-exclusive licenses to

practice and use the inventions of the licensed patents for non-commercial research purposes, and we grant WARF a non-exclusive,

sub licensable, royalty-free right and license for non-commercial research purposes to use improvements to the licensed patents.

In the event that we discontinue use or commercialization of the licensed patents or improvements thereon, we must grant WARF

an option to obtain a non-exclusive, sub-licensable royalty-bearing license to use the improvements for commercial purposes.

See

“Risk Factors”— We depend on intellectual property licensed from WARF for our technology under development,

and the termination of this license would harm our business” for additional information regarding the WARF License.

Mayo

Foundation for Medical Education and Research License and Development Agreement

We

have entered into the Amended and Restated License and Development Agreement (the “Mayo Development Agreement”) with

Mayo Foundation for Medical Education and Research (“Mayo”) to license worldwide (i) certain know how for the development

and commercialization of products, methods and processes related to flexible circuit thin film technology for the recording of

tissue and (ii) the products developed therefrom, and to partner with Mayo to assist the Company in the investigation, research

application, development and improvement of such technology. Mayo has agreed to assist us by providing access to certain individuals

at Mayo, or the Mayo Principal Investigators, in developing our cortical thin film flexible circuit technology, including prototype

development, animal testing, protocol development for human and animal use, abstract development and presentation and access to

and license of any intellectual property that the Mayo Principal Investigators develop relating to the procedure.

We

have agreed to pay Mayo a royalty equal to a single-digit percentage of our product sales pursuant to the Mayo Development Agreement.

Mayo may purchase any developed products licensed under the Mayo Development Agreement at the best price offered by us to the

end user in the prior year. The Mayo Development Agreement generally will expire in October 2034, unless the Mayo know-how and

improvements under the Mayo Development Agreement remain in use, and the Mayo Development Agreement may be terminated by Mayo

for cause or under certain circumstances.

For

additional information regarding the Mayo Development Agreement, see “Risk Factors—We depend on our partnership with

Mayo to license certain know how for the development and commercialization of our technology. Termination of this partnership

would harm our business, and even if this partnership continues, it may not be successful.”

17

Intellectual

Property

Protection

of our intellectual property is a strategic priority for our business. We rely on a combination of patents, trademarks, copyrights,

and trade secrets as well as nondisclosure and assignment of invention agreements, material transfer agreements, confidentiality