ITEM 7. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and
analysis of financial condition and results of operations of NeuroOne together with our financial statements and the related notes included
elsewhere in this Report.
Overview
We are a medical technology company focused on
(i) diagnostic, ablation and deep brain stimulation technology for brain related conditions such as epilepsy and Parkinson’s disease;
(ii) ablation and stimulation for pain management throughout the body; and (iii) drug delivery including diagnostic and stimulation capabilities.
We are developing and commercializing 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, trigeminal neuralgia,
Parkinson’s disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other pain-related neurological
disorders. The Company is also developing the capability to use its sEEG electrode technology to deliver drugs or gene therapy while being
able to record activity before, during, and after delivery.
We have received 510(k) clearance for four of
our devices from the Food and Drug Administration (“FDA”), including: (i) our Evo cortical electrode technology for recording,
monitoring, and stimulating brain tissue for up to 30 days (“Evo Cortical”), (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 (“Evo sEEG”), (iii) our OneRF ablation system for creation of radiofrequency
lesions in nervous tissue for functional neurosurgical procedures (“OneRF Ablation System”), (iv) our OneRF TN ablation system
for use in procedures to create radiofrequency (RF) lesions for the treatment of pain, or for lesioning nerve tissue for functional neurosurgical
procedures (“OneRF TN Ablation System”). We have a distribution agreement with Zimmer, Inc. (“Zimmer”) providing
Zimmer with a license to commercialize and distribute the Evo Cortical, Evo sEEG, and OneRF Ablation System in the brain. We initiated
a limited market release of the OneRF TN Ablation System in December 2025. The Company’s other products and indications are still
under development.
We have largely incurred losses since inception.
As of September 30, 2025, we had an accumulated deficit of $78.6 million, primarily as a result of expenses incurred in connection with
our research and development, selling, general and administrative expenses associated with our operations and interest expense, fair value
adjustments and loss on extinguishments related to our debt, offset in part by 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 our Evo Cortical, Evo sEEG, OneRF Ablation System, and OneRF TN Ablation 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.
54
NeuroOne Medical Technologies Corporation
FORM 10-K
Recent Developments
Corporate Updates
510(k) Clearance for Trigeminal Facial Pain
On August 15, 2025 we received FDA 510(k) clearance
to market its OneRF® Trigeminal Nerve Ablation System for use in procedures to create radiofrequency lesions for the treatment of
pain, or for lesioning nerve tissue for functional neurosurgical procedures.
April
2025 Financing
On April
4, 2025, we entered into an underwriting agreement with Ladenburg Thalmann & Co. Inc. as underwriter ( “Ladenburg”), 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 Ladenburg 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 Evo Cortical and Evo sEEG products, 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 Evo Cortical and Evo sEEG 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
the OneRF Ablation System in the brain. In addition, we are eligible to receive a future milestone payment of $1.0 million upon reaching
a one-time sales volume threshold. We do not anticipate receiving this milestone payment.
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 Zimmer 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 Evo Cortical and
Evo sEEG products; and (ii) from the effective date until October 31, 2034 for the OneRF Ablation System.
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 have experienced
minor price increases from our suppliers related to tariffs on imported goods, and may experience additional price increases.
55
NeuroOne Medical Technologies Corporation
FORM 10-K
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 Evo Cortical, Evo sEEG, and OneRF Ablation System, which have each received FDA 510(k) clearance.
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 Evo Cortical, Evo sEEG, and OneRF Ablation Systems, and outside supplier costs of producing
our electrode cable assembly products. In addition, the cost of product revenue includes royalty fees incurred in connection with our
license agreements as well as valuation adjustments for excess or obsolete inventory.
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 Ablation System. 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 year ended September 30, 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 Zimmer Amended
and Restated Distribution Agreement, see “—Liquidity and Capital Resources—Liquidity Outlook” below and see “Note
7 — Zimmer Distribution Agreement and Other Product Revenue” included in our financial statements included in Item 8
— Financial Statements and Supplementary Data” 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 our Evo Cortical, Evo sEEG, and OneRF Ablation Systems. 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 technology,
and the increased costs of operating as a public company.
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.
56
NeuroOne Medical Technologies Corporation
FORM 10-K
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 and issuance costs in connection with the debt facility and at-the market offering facility
(both described below).
Other Income
Other income primarily consists of interest income
related to our cash and cash equivalents,
Results of Operations
Comparison of the Fiscal Years Ended September
30, 2025 and 2024
The following table sets forth our results of
operations for the fiscal years ended September 30, 2025 and 2024.
For the years ended September 30,
Operating expenses:
Provision for income taxes — — —
Product Revenue and Product Gross Profit
Product revenue was $9.1 million during the year
ended September 30, 2025 with a gross profit and gross profit percentage of $5.1 million and 56.5%, respectively. Product revenue was
$3.5 million during the year ended September 30, 2024 with a gross profit and gross profit percentage of $1.1 million and 31.3%, respectively.
The increase in gross profit percentage during the current period was largely due to the higher margin OneRF Ablation System being sold
in the current period under the Amendment with Zimmer. Product revenue consisted primarily of sales of the OneRF Ablation System to Zimmer
during the year ended September 30, 2025 while revenue consisted of Evo Cortical, Evo sEEG, and OneRF Ablation System sales during the
prior year period. The cost of product revenue consisted of the manufacturing and materials costs incurred by our third-party contract
manufacturers in connection with our Evo Cortical, Evo sEEG, and OneRF Ablation System. In addition, cost of product revenue included
royalty fees incurred of approximately $150,000 and $157,000 in connection with our license agreements during the years ended September
30, 2025 and 2024, respectively.
57
NeuroOne Medical Technologies Corporation
FORM 10-K
Collaborations Revenue
License revenue was $3.0 million for the year ended September 30, 2025
which related to the distribution license granted to Zimmer for the OneRF Ablation System in October 2024. No license revenue was generated
from the Zimmer Amended and Restated Development Agreement during the year ended September 30, 2024.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were
$7.4 million and $7.9 million for the years ended September 30, 2025 and 2024, respectively. The $0.5 million decrease period over period
was primarily due to a decrease in both legal fees in the amount of $0.4 million and investor relations related expense of $0.6 million,
offset in part by increases in payroll related costs of approximately $0.1 million, non-legal professional fees of $0.2 million, marketing
and sales costs of $0.1 million and other operating cost increases of $0.1 million on a net basis.
Research and Development Expenses
Research and development expenses were approximately
$5.0 million for the year ended September 30, 2025, compared to $5.1 million for the year ended September 30, 2024. The $0.1 million decrease
period over period was attributed to the net reduction in development activities associated with our Evo Cortical, Evo sEEG, and OneRF
Ablation System, given the commercialization of these products. Activity associated with new technology development largely offset the
overall net decrease in research and development costs during the current period. Development activities primarily included salary-related
expenses and costs related to consulting services, testing, materials and supplies.
Fair Value Change in Warrant Liability
The net change in fair value of the warrant liability
during the year ended September 30, 2025 resulted in a $0.8 million benefit compared to an expense of $0.3 million during the year ended
September 30, 2024. The change was due primarily to fluctuations in our common stock fair value.
Financing Costs
Financing costs during the year ended September
30, 2025 of $0.3 million 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. In addition, $9,000 in legal fees were incurred in connection with the at-the market offering program
(described further below).
Financing costs during the year ended September
30, 2024 of $0.2 million consisted of the amortization of the deferred issuance costs associated with the debt facility (described further
below) in the amount of $0.1 million and issuance costs attributed to the warrants issued in connection with the 2024 Private Placement
(described further below) in the amount of $0.1 million.
Other Income, net
Other income, net during the year ended September
30, 2025 and 2024 consisted principally of interest income attributed to our cash and cash equivalents.
Liquidity and Capital Resources
Overview
As of September 30, 2025, our principal source
of liquidity consisted of cash and cash equivalents in the aggregate of approximately $6.6 million.
58
NeuroOne Medical Technologies Corporation
FORM 10-K
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 with Ladenburg, relating to the issuance and sale of 16,000,000 shares of our common
stock, at a price to the public of $0.50. In addition, under the terms of the underwriting agreement, we granted Ladenburg 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 2,208,338 shares of common stock (the “PIPE Warrants”) at a purchase price of $0.90 per unit, consisting of
one share and a PIPE Warrant to purchase 0.75 shares of common stock, resulting in total gross proceeds of approximately $2.65 million
before deducting expenses. 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 and had an initial exercise price of $1.19 per share, subject to adjustment. In April 2025, the exercise price was
reset to $0.465 upon the close of the April 2025 Financing for all of the PIPE Warrants, except for the PIPE Warrants to purchase 20,834
shares of common stock issued to a director on our Board of Directors for which the exercise price was reset to $0.876 per share. The
PIPE Warrants 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 DemandTM Sales Agreement (“Sales Agreement”) with JonesTrading Institutional Services LLC (“JonesTrading”)
to create an at-the-market offering program (“ATM Program”) 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. 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. On August 15, 2025, we increased the amount of common stock that can be sold pursuant to the Sales Agreement to $6,750,000.
Through September 30, 2025, we have issued 5,544,489 shares of common stock under the ATM Program for gross proceeds in the amount of
$8.0 million. We incurred issuance costs in connection with the ATM Program in the amount of $0.6 million through September 30, 2025.
59
NeuroOne Medical Technologies Corporation
FORM 10-K
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.
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 “Item 1—Business—Clinical Development
and Regulatory Pathway—Clinical Experience, Future Development and Clinical Trial Plans” of this Report 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 certain
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 certain of our product sales pursuant to the Mayo Development Agreement. See
“Note 4 – Commitments and Contingencies” included in our financial statements included in “Item 8 —
Financial Statements and Supplementary Data” 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 financial
statements included in “Item 8 — Financial Statements and Supplementary Data” 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 2028.
We expect to satisfy our short-term and long-term
obligations through cash on hand and revenue from commercial sales to cover expenses.
60
NeuroOne Medical Technologies Corporation
FORM 10-K
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 financial statements included in “Item 8 — Financial Statements and Supplementary Data” 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 Ablation System 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. In October 2024, we entered into an Amended and Restated Distribution Agreement with Zimmer to provide Zimmer with the
exclusive right and license to distribute our OneRF Ablation System in the brain 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 September 30, 2025, we had cash and cash equivalents
in the aggregate of approximately $6.6 million. Management has noted the existence of substantial doubt about our ability to continue
as a going concern. Additionally, our independent registered public accounting firm included an explanatory paragraph in the report on
our financial statements as of and for the years ended September 30, 2025 and 2024, respectively, noting the existence of substantial
doubt about our ability to continue as a going concern. Our existing cash and cash equivalents may not be sufficient to fund our operating
expenses through at least twelve months from the date of this filing. To continue to fund operations, we will need to secure additional
funding through public or private equity or debt financing, 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.
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.
We expect to satisfy
our short term and long term obligations through cash on hand and, until we generate an adequate level of revenue from commercial sales
to cover expenses, if ever, from future equity and debt financings.
Cash Flows
The following is a summary of cash flows for each
of the periods set forth below.
For the Years Ended
September 30,
Net cash used in investing activities (81,742 ) (120,197 )
Net increase (decrease) in cash and cash equivalents $ 5,110,340 $ (3,862,451 )
61
NeuroOne Medical Technologies Corporation
FORM 10-K
Net cash used in operating activities
Net cash used in operating activities was $2.8
million for the year ended September 30, 2025, which consisted of a net loss of $3.6 million partially offset principally by non-cash
stock-based compensation, depreciation, amortization related to intangible assets and deferred issuance costs, operating lease expense,
fair value change in warrant liability totaling approximately $1.1 million in the aggregate. Our net loss was further adjusted to account
for the reclassification of debt and equity facility 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 use
of approximately $0.4 million. The net cash use stemming from the change in operating assets and liabilities was primarily attributable
to an increase in our accounts receivable attributed largely to the timing of customer payments. Partially offsetting the net cash operating
use during the period was a decrease in our inventory and prepaid expenses as well as a net increase in our accounts payable and accrued
expenses resulting from timing of payments and fluctuations in our operations.
Net cash used in operating activities was $11.0
million for the year ended September 30, 2024, which consisted of a net loss of $12.3 million partially offset principally by non-cash
stock-based compensation, depreciation, amortization related to intangible assets and deferred issuance costs, operating lease expense,
fair value change in warrant liability and the proceeds from the issuance of warrants in connection with the 2024 Private Placement totaling
approximately $2.2 million in the aggregate. Our net loss was further adjusted to account for the reclassification of debt and equity
facility 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 use
of approximately $1.0 million. The net cash use stemming from the change in operating assets and liabilities was primarily attributable
to an increase in inventory purchases and to an increases in our accounts receivable attributed largely to the timing of customer payments.
Partially offsetting the net cash operating use during the period was an increase in our accounts payable and accrued expenses coupled
with a decrease in prepaid expenses resulting from timing of payments and fluctuations in our operations.
Net cash used in investing activities
Net cash used in investing activities was $0.1
million for each of the years ended September 30, 2025 and 2024 consisting of outlays for purchases of property and equipment.
Net cash provided by financing activities
Net cash provided by financing activities was
$8.0 million for the year ended September 30, 2025, which consisted of net proceeds from the April 2025 Financing of approximately $8.2
million and from the ATM Program in the amount of approximately $0.3 million as well as from the exercise of warrants in the amount of
$0.1 million. Offsetting the net proceeds were debt facility issuance costs of $0.3 million, issuance costs paid in connection with a
prior year private placement of approximately $0.2 million and as a result of the repurchases of common stock for the payment of employee
taxes in the amount of $0.1 million.
Net cash provided by financing activities
was $7.3 million for the year ended September 30, 2024, which consisted of net proceeds from the ATM Program of $4.8 million and net proceeds
from the 2024 Private Placement of $2.6 million, offset partially by repurchases of common stock for the payment of employee taxes in
the amount of $81,000 and debt facility issuance costs of approximately $75,000.
62
NeuroOne Medical Technologies Corporation
FORM 10-K
Critical Accounting Policies and Significant
Judgments and 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 financial statements included in “Item
8 — Financial Statements and Supplementary Data” in this Report.
Of these policies, the
following are considered critical to an understanding of our financial statements included in “Item 8 — Financial Statements
and Supplementary Data” in this Report that require the application of the most subjective and the most complex judgments:
Revenues:
For discussion about the determination of collaborations
revenue, product revenue and cost of product revenue, see “Note 7 — Zimmer Amended and Restated Distribution Agreement and
Other Product Revenue” included in “Item 8 — Financial Statements and Supplementary Data” 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.
Fair Value of Warrant
liability
We issued warrants in connection with our August
2024 Private Placement. The warrants were classified as a liability on our balance sheet and were recorded at fair value as certain provisions
precluded equity accounting treatment for these instruments. We will continue to adjust the liabilities for changes in fair value until
the earlier of the exercise, expiration, or until such time that cash settlement or indexation provisions are no longer in effect for
the warrants. For discussions about the application of fair value associated with the warrants, see “Note 9 – Stockholders’
Equity” included in “Item 8 — Financial Statements and Supplementary Data” in this Report.
Recent Accounting Pronouncements
See “Note 3 — Summary of Significant
Accounting Policies” included in “Item 8 — Financial Statements and Supplementary Data” in this Report regarding
the impact of certain recent accounting pronouncements on our financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Not applicable.
63
NeuroOne Medical Technologies Corporation
FORM 10-K
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID 23) F-2
Balance Sheets F-4
Statements of Operations F-5
Statements of Changes in Stockholders’ Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-8
F-1
NeuroOne Medical Technologies Corporation
FORM 10-K
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the stockholders and the board of directors
of NeuroOne Medical Technologies Corporation:
Opinion on the Financial Statements
We have audited the accompanying balance sheets
of NeuroOne Medical Technologies Corporation (the “Company”) as of September 30, 2025 and 2024, the related statements of
operations, changes in stockholders’ equity, and cash flows, for each of the two years in the period ended September 30, 2025, and
the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the Company as of September 30, 2025 and 2024, and the results of the Company’s
operations and cash flows for each of the two years in the period ended September 30, 2025, in conformity with accounting principles generally
accepted in the United States of America.
Going Concern
The accompanying financial statements have been
prepared assuming the Company will continue as a going concern. As discussed in Note 2 of the financial statements, the Company had recurring
losses from operations and an accumulated deficit, expects to incur losses for the foreseeable future and requires additional working
capital. These are the reasons that raise substantial doubt about the Company’s ability to continue as a going concern. Management’s
plans in regard to these matters are also described in Note 2. The financial statements do not contain any adjustments that might result
from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
F-2
NeuroOne Medical Technologies Corporation
FORM 10-K
Critical Audit Matter
The critical audit matter
communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to
be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements
and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of warrants
Critical Audit Matter Description
As described in Note 9 to the financial
statements, the Company completed a private placement offering during the year which included the issuance of warrants. Management determined
the proper classification of the warrants by reviewing the terms and conditions of the issued warrants and applying the applicable accounting
guidance, including Accounting Standards Codification (ASC) 480, Distinguishing Liabilities from Equity and ASC 815, Derivatives and Hedging.
Management concluded the warrants met the criteria for the classification as a liability. The Company determined the fair value of warrants
at the date of issuance and year-end using a Monte Carlo simulation model.
We identified the assessment of the
measurement of fair value of the common stock warrants as a critical audit matter. Specifically, there was a high degree of subjective
auditor judgment, including the involvement of professionals with specialized skills and knowledge, due to the complex valuation methodology
that incorporates several assumptions.
How We Addressed the Matter in
Our Audit
The primary procedures we performed
to address this critical audit matter included:
/s/ Baker Tilly US, LLP
We have served as the Company’s auditor
since 2021.
Minneapolis, Minnesota
December 17, 2025
F-3
NeuroOne Medical Technologies Corporation
Balance Sheets
As of September 30,
Assets
Current assets:
Liabilities and Stockholders’ Equity
Current liabilities:
Commitments and contingencies (Note 4)
Stockholders’ equity:
See accompanying notes to financial statements
F-4
NeuroOne Medical Technologies Corporation
Statements of Operations
Years ended September 30,
Operating expenses:
Provision for income taxes — —
Net loss per share:
Basic and diluted $ (0.09 ) $ (0.46 )
Number of shares used in per share calculations:
See accompanying notes to financial statements
F-5
NeuroOne Medical Technologies Corporation
Statements of Changes in Stockholders’
Equity
Common Stock Additional Paid–In Accumulated Total Stockholders’
Shares Amount Capital Deficit Equity
Issuance of warrants in connection with debt facility — — 53,124 — 53,124
Issuance costs related to equity offerings — — (1,056,646 ) — (1,056,646 )
See accompanying notes to financial statements
F-6
NeuroOne Medical Technologies Corporation
Statements of Cash Flows
Years ended September 30,
Operating activities
Adjustments to reconcile net loss to net cash used in operating activities:
Valuation adjustments for excess or obsolete inventory 10,000 —
Change in assets and liabilities:
Accrued expenses, operating lease and other liabilities (54,442 ) 16,214
Investing activities
Purchases of property and equipment (81,742 ) (120,197 )
Net cash used in investing activities (81,742 ) (120,197 )
Financing activities
Deferred issuance costs in connection with debt facility (297,942 ) (75,000 )
Exercise of warrants 69,750 —
Share repurchases for the payment of employee taxes (124,617 ) (81,403 )
Net increase (decrease) in cash and cash equivalents 5,110,340 (3,862,451 )
Supplemental non-cash financing and investing transactions:
Non-cash warrants issued in connection with debt facility $ — $ 53,124
Unpaid issuance costs in connection with private placement $ — $ 185,903
See accompanying notes to financial statements
F-7
NeuroOne Medical Technologies Corporation
Notes
to Financial Statements
NOTE 1 - Organization and Nature of Operations
NeuroOne Medical Technologies Corporation (the
“Company” or “NeuroOne”), a Delaware corporation, is a medical technology company focused on the development and
commercialization of thin film electrode for continuous electroencephalogram (“cEEG”) and stereoelectrocencephalography (“sEEG”)
recording, monitoring, ablation and brain stimulation solutions to diagnose and treat patients with epilepsy, trigeminal neuralgia, Parkinson’s
disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other pain-related neurological disorders. The Company
is also developing the capability to use its sEEG electrode technology to deliver drugs or gene therapy while being able to record activity
before, during, and after delivery.
The Company has received 510(k) clearance from the United States (“U.S.”)
Food and Drug Administration (“FDA”) for four of its devices: (i) its Evo cortical electrode technology for recording, monitoring,
and stimulating brain tissue for up to 30 days (“Evo Cortical”), (ii) its Evo® sEEG electrode technology for temporary
(less than 30 days) use with recording, monitoring, and stimulation equipment for the recording, monitoring, and stimulation of electrical
signals at the subsurface level of the brain (“Evo sEEG”); (iii) its OneRF ablation system for creation of radiofrequency
lesions in nervous tissue for functional neurosurgical procedures (the “OneRF Ablation System”) and (iv) our OneRF TN ablation
system for use in procedures to create radiofrequency (RF) lesions for the treatment of pain, or for lesioning nerve tissue for functional
neurosurgical procedures (“OneRF TN Ablation System”, together with the Evo Cortical, Evo sEEG, and OneRF Ablation System,
the “Commercialized Products”). The Company has a distribution agreement with Zimmer, Inc. (“Zimmer”) providing
Zimmer with a license to commercialize and distribute the Evo Cortical, Evo sEEG, and OneRF Ablation System in the brain. The Company
initiated a limited market release of its OneRF TN Ablation System in December 2025. The Company’s other products and indications
are still under development.
The Company is based in Eden Prairie, Minnesota.
Global Economic Conditions
Generally, worldwide economic conditions remain
uncertain, particularly due to the conflicts between Russia and Ukraine and in the Middle East, disruptions in the banking system and
financial markets, and increased inflation. The general economic and capital market conditions both in the U.S. and worldwide, have been
volatile in the past and at times have adversely affected the Company’s access to capital and increased the cost of capital. The
capital and credit markets may not be available to support future capital raising activity on favorable terms or at all. If economic conditions
continue to decline, the Company’s future cost of equity or debt capital and access to the capital markets could be adversely affected.
The Company has experienced minor price increases from our suppliers related to tariffs on imported goods, and may experience additional
price increases.
The Company’s operating results could be
materially impacted by changes in the overall macroeconomic environment and other economic factors. Changes in economic conditions, supply
chain constraints, logistics challenges, labor shortages, the conflicts in Ukraine and the Middle East, disruptions in the banking system
and financial markets, and steps taken by governments and central banks, have led to higher inflation, which has led to an increase in
costs and has caused changes in fiscal and monetary policy, including increased interest rates.
Basis of Presentation
The accompanying financial statements have been
prepared in accordance with accounting standards generally accepted in the United States of America (“U.S. GAAP”).
F-8
NeuroOne Medical Technologies Corporation
Notes
to Financial Statements
NOTE 2 – Going Concern
The accompanying financial statements have been
prepared on the basis that the Company will continue as a going concern. The Company has incurred losses since inception, negative cash
flows from operations since inception, and an accumulated deficit of $78.6 million as of September 30, 2025. To date, the Company’s
revenues have not been sufficient to cover its full operating costs, and as such, it has been dependent on funding operations through
the issuance of debt and sale of equity securities which previously resulted in substantial doubt regarding the Company’s ability to continue
as a going concern. As of September 30, 2025, the Company had $6.6 million in cash and cash equivalents. The Company believes its current