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What changed in NEUROONE MEDICAL TECHNOLOGIES Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of NEUROONE MEDICAL TECHNOLOGIES Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+331 added−300 removedSource: 10-K (2023-12-15) vs 10-K (2022-12-22)

Top changes in NEUROONE MEDICAL TECHNOLOGIES Corp's 2023 10-K

331 paragraphs added · 300 removed · 239 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

84 edited+19 added−15 removed222 unchanged
Biggest changePatents As of September 30, 2022, our patent estate consists of three issued United States patents licensed from WARF covering a neural probe array and thin-film micro electrode array and method, a pending U.S. patent application filed by us and published in 2018 covering our applications and additional devices used during the diagnostic and therapeutic ablation and stimulation procedures, a U.S. patent issued in October 2022 and pending European patent application filed by us and published in 2020 relating to improved neural depth electrodes, a pending U.S. patent application filed by us and published in 2020 relating to agent-delivering neural electrodes, pending U.S. and European patent applications published in 2020 relating to minimally invasive electrodes, pending U.S. and European patent applications published in 2021 relating to spinal cord stimulation systems and devices, a pending U.S. patent application (and corresponding PCT application) published in 2022 relating to methods of making electrode probes, a pending U.S. patent application (and corresponding PCT application) filed in 2021 relating to devices having temperature sensors, a pending U.S. patent application filed in 2022 relating to deformable spinal cord stimulation devices, a pending U.S. patent application filed in 2022 relating to spinal cord stimulation device implantation methods, and a pending U.S. patent application filed in 2022 relating to ablation probe and temperature sensing device systems.
Biggest changePatents As of September 30, 2023, our patent estate consists of three issued United States patents licensed from WARF covering a neural probe array and thin-film micro electrode array and method, a U.S. patent issued in October 2022 and a pending European patent application filed by us and published in 2020 relating to improved neural depth electrodes, a pending U.S. patent application filed by us and published in 2020 relating to agent-delivering neural electrodes in which a Notice of Allowance was issued in August 2023 (along with a second pending U.S. patent application filed in 2023 relating to the same technology), pending U.S. and European patent applications published in 2020 relating to minimally invasive electrodes (with a Notice of Allowance issued in September 2023 in the U.S. application), pending U.S. and European patent applications published in 2021 relating to spinal cord stimulation systems and devices (with a Notice of Allowance issued in October 2023 in the U.S. application), pending U.S. and European patent applications published in 2022 relating to methods of making electrode probes, a pending U.S. patent application (and corresponding PCT application) published in 2023 relating to devices having temperature sensors, a pending U.S. patent application (and corresponding PCT application) filed in 2023 relating to deformable spinal cord stimulation devices, a pending U.S. patent application (and corresponding PCT application) filed in 2023 relating to spinal cord stimulation device implantation methods, and a pending U.S. patent application (and corresponding PCT application) filed in 2023 relating to ablation probe and temperature sensing device systems.
The technology has demonstrated these functions in acute and short term animal models; however, additional development is required to offer a device that has long term therapeutic application. These therapeutic technologies are expected to require more robust regulatory approvals for the United States, ranging from a 510(k) to potential for pre-market approvals (“PMAs”) with human clinical data.
The technology has demonstrated these functions in acute and short term animal models; however, additional development is required to offer a device that has long term therapeutic application. These long term therapeutic technologies are expected to require more robust regulatory approvals for the United States, ranging from a 510(k) to potential for pre-market approvals (“PMAs”) with human clinical data.
On October 20, 2022, the Company received an FDA clearance to market 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.
On October 20, 2022, the Company received an FDA clearance to market 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.
Any adverse determination in litigations, post grant trial proceedings, at the Patent Office relating to intellectual property to which we are or may become a party could subject us to significant liabilities to third parties or require us to seek licenses from third parties, and result in the cancellation and/or invalidation of our intellectual property.
Any adverse determination in litigations or post grant trial proceedings at the Patent Office relating to intellectual property to which we are or may become a party could subject us to significant liabilities to third parties or require us to seek licenses from third parties, and could result in the cancellation and/or invalidation of our intellectual property.
The commencement or completion of any clinical trial may be delayed or halted, or be inadequate to support approval of a PMA application, for numerous reasons, including, but not limited to, the following: ● the FDA or other regulatory authorities do not approve a clinical trial protocol or a clinical trial, or place a clinical trial on hold; 21 NeuroOne Medical Technologies Corporation FORM 10-K ● patients do not enroll in clinical trials at the rate expected; ● patients, sponsor (NeuroOne) or study sites do not comply with trial protocols; ● patient follow-up is not at the rate expected; ● patients experience unanticipated adverse event; ● the data safety monitoring board determines the study should be placed on hold: ● patients die during a clinical trial, even though their death may not be related to the products that are part of our trial; ● institutional review boards and third-party clinical investigators may delay or reject the trial protocol; ● third-party clinical investigators decline to participate in a trial or do not perform a trial on the anticipated schedule or consistent with the clinical trial protocol, good clinical practices or other FDA requirements; ● the sponsor (NeuroOne) or third-party organizations do not perform data collection, monitoring and analysis in a timely or accurate manner or consistent with the clinical trial protocol or investigational or statistical plans; ● third-party clinical investigators have significant financial interests related to the sponsor (NeuroOne) or the study that the FDA deems to make the study results unreliable, or the company or investigators fail to disclose such interests; ● regulatory inspections of our clinical trials or manufacturing facilities, which may, among other things, require us to undertake corrective action or suspend or terminate our clinical trials; ● changes in governmental regulations or administrative actions; ● the interim or final results of the clinical trial are inconclusive or unfavorable as to safety or efficacy; and ● the FDA concludes that our trial design is inadequate to demonstrate safety and efficacy.
The commencement or completion of any clinical trial may be delayed or halted, or be inadequate to support approval of a PMA application, for numerous reasons, including, but not limited to, the following: ● the FDA or other regulatory authorities do not approve a clinical trial protocol or a clinical trial, or place a clinical trial on hold; ● patients do not enroll in clinical trials at the rate expected; ● patients, sponsor (NeuroOne) or study sites do not comply with trial protocols; ● patient follow-up is not at the rate expected; ● patients experience unanticipated adverse event; ● the data safety monitoring board determines the study should be placed on hold; ● patients die during a clinical trial, even though their death may not be related to the products that are part of our trial; ● institutional review boards and third-party clinical investigators may delay or reject the trial protocol; 21 NeuroOne Medical Technologies Corporation FORM 10-K ● third-party clinical investigators decline to participate in a trial or do not perform a trial on the anticipated schedule or consistent with the clinical trial protocol, good clinical practices or other FDA requirements; ● the sponsor (NeuroOne) or third-party organizations do not perform data collection, monitoring and analysis in a timely or accurate manner or consistent with the clinical trial protocol or investigational or statistical plans; ● third-party clinical investigators have significant financial interests related to the sponsor (NeuroOne) or the study that the FDA deems to make the study results unreliable, or the company or investigators fail to disclose such interests; ● regulatory inspections of our clinical trials or manufacturing facilities, which may, among other things, require us to undertake corrective action or suspend or terminate our clinical trials; ● changes in governmental regulations or administrative actions; ● the interim or final results of the clinical trial are inconclusive or unfavorable as to safety or efficacy; and ● the FDA concludes that our trial design is inadequate to demonstrate safety and efficacy.
Mayo Foundation for Medical Education and Research License and Development Agreement In May 2017, we entered into the Amended and Restated License and Development Agreement, dated as of May 25, 2017 (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 Foundation for Medical Education and Research License and Development Agreement In May 2017, we entered into an Amended and Restated License and Development Agreement, dated as of May 25, 2017 (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.
A variety of complications can occur when a full craniotomy is performed, including but not limited to: stroke, bleeding, infection, seizures, swelling of the brain (which may require a second craniotomy), nerve damage, which may cause muscle paralysis or weakness, cerebrospinal fluid (CSF) leak, which may require repair, loss of mental functions and permanent brain damage with associated disabilities.
A variety of complications can occur when a full craniotomy is performed, including but not limited to: stroke, bleeding, infection, seizures, swelling of the brain (which may require a second craniotomy), nerve damage, which may cause muscle paralysis or weakness, cerebrospinal fluid leak, which may require repair, loss of mental functions and permanent brain damage with associated disabilities.
We announced in December 2020, Mayo Clinic doctors used our technology in the first human commercial application of our Evo cortical electrode technology to perform recording, functional mapping and stimulation of the brain on a human patient. And more recently, in July 2022, we announced the first clinical case using the Evo sEEG electrode was performed by Dr.
We announced in December 2020 that Mayo Clinic doctors used our technology in the first human commercial application of our Evo cortical electrode technology to perform recording, functional mapping and stimulation of the brain on a human patient. And more recently, in July 2022, we announced the first clinical case using the Evo sEEG electrode was performed by Dr.
NeuroOne’s platform thin film technology has the capability to increase the number of contacts in a similar footprint that has fewer contacts. ● Gain clearance for other brain or motor related disorders such as Parkinson’s with the therapeutic technologies developed for epilepsy: While we are developing our technology for the diagnosis and treatment of epilepsy, we believe that our technology has strong application and utilization for other brain or motor related disorders such as Parkinson’s disease, dystonia, essential tremors and facial pain as these diseases are currently treated with DBS if medications are not effective.
NeuroOne’s platform thin film technology has the capability to increase the number of contacts in a similar footprint that has fewer contacts. ● Gain approval for other brain or motor related disorders such as Parkinson’s with the therapeutic technologies developed for epilepsy: While we are developing our technology for the diagnosis and treatment of epilepsy, we believe that our technology has strong application and utilization for other brain or motor related disorders such as Parkinson’s disease, dystonia, essential tremors and facial pain as these diseases are currently treated with DBS if medications are not effective.
WARF License In January 2020, we entered into the Amended and Restated Exclusive Start-Up Company License Agreement, dated as of January 21, 2020, as amended on June 15, 2020 (the “WARF License”) with WARF, which amended and restated in full the Original WARF License.
WARF License In January 2020, we entered into an Amended and Restated Exclusive Start-Up Company License Agreement, dated as of January 21, 2020, as amended on June 15, 2020 (the “WARF License”) with WARF, which amended and restated in full the Original WARF License.
Currently, we are developing a combination recording, stimulation and RF ablation technology that will perform both diagnostic and therapeutic functions. ● Percutaneous placement of spinal cord stimulation paddle electrodes with scalability options: Due to the thin film nature of our electrode technology, we believe that it may allow for percutaneous placement of “paddle” (flat) shaped electrodes, thereby preventing the need to use more invasive surgical approaches to place the electrodes.
Currently, we are preparing a combination recording, stimulation and RF ablation technology that will perform both diagnostic and therapeutic functions for commercialization. ● Percutaneous placement of spinal cord stimulation paddle electrodes with scalability options: Due to the thin film nature of our electrode technology, we believe that it may allow for percutaneous placement of “paddle” (flat) shaped electrodes, thereby preventing the need to use more invasive surgical approaches to place the electrodes.
A manufacturer can submit a Pre-submission (Q-Sub) for De Novo review if the manufacturer is unable to identify an appropriate predicate device and the new device or new use of the device presents a moderate or low risk.
A manufacturer can submit a Pre-submission for De Novo review if the manufacturer is unable to identify an appropriate predicate device and the new device or new use of the device presents a moderate or low risk.
Pre-clinical testing and clinical testing on the final design has been conducted by Mayo Clinic and WARF (as described in “Mayo Clinic Studies” below). The product is in commercial production. The Company received FDA 510(k) clearance in the fourth calendar quarter of 2019. Commercial launch commenced utilizing Zimmer, our distribution partner.
Pre-clinical testing and clinical testing on the final design has been conducted by Mayo Clinic and WARF (as described in “Mayo Clinic and University of Wisconsin-Madison Studies” below). The product is in commercial production. The Company received FDA 510(k) clearance in the fourth calendar quarter of 2019. Commercial launch commenced utilizing Zimmer, our distribution partner.
Failed back surgery syndrome (“FBSS”) is one of leading causes for 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.
FBSS is one of leading causes for 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 include: ● establishment registration and device listing; ● QSR, which requires manufacturers, including third party manufacturers, to follow stringent design, testing, risk management, production control, supplier/contractor selection, complaint handling, documentation and other quality assurance procedures during all aspects of the manufacturing process; ● labeling regulations that prohibit the promotion of products for uncleared, unapproved or “off-label” uses, and impose other restrictions on labeling, advertising and promotion; 22 NeuroOne Medical Technologies Corporation FORM 10-K ● MDR regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur; ● voluntary and mandatory device recalls to address problems when a device is mislabeled or does not meet specifications and could be a risk to health; and ● corrections and removals reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health.
These include: ● establishment registration and device listing; ● QSR, which requires manufacturers, including third party manufacturers, to follow stringent design, testing, risk management, production control, supplier/contractor selection, complaint handling, documentation and other quality assurance procedures during all aspects of the manufacturing process; ● labeling regulations that prohibit the promotion of products for uncleared, unapproved or “off-label” uses, and impose other restrictions on labeling, advertising and promotion; ● MDR regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur; ● voluntary and mandatory device recalls to address problems when a device is mislabeled or does not meet specifications and could be a risk to health; and ● corrections and removals reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health.
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.
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, electroencephalogram (“EEG”) testing, blood and urine tests.
One of the potential treatments for Parkinson’s patients is Deep Brain Stimulation (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.
One of the potential treatments for Parkinson’s patients is 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.
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, chronic pain due to failed back surgeries and other related neurological disorders.
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, chronic pain due to failed back surgeries and other related neurological disorders.
Our research and development expenses were $4.9 million and $3.9 million for the years ended September 30, 2022 and 2021, respectively. Competition In the market for Epilepsy diagnosis, our cortical strip, grid 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.
Our research and development expenses were $6.9 million and $4.9 million for the years ended September 30, 2023 and 2022, respectively. Competition In the market for Epilepsy diagnosis, our cortical strip, grid 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.
As previously mentioned, we are actively evaluating the potential to offer electrodes that can be implanted for long term stimulation applications, but such use will require that we pursue additional approvals from the FDA and any international regulatory bodies where we seek to commercialize our technology. ● Explore partnerships with other companies that leverage our core technology: Given that our technology enables, complements and/or competes with a number of companies that are in the market or attempting to enter the market with diagnostic or therapeutic technologies to treat brain related disorders, we believe there may be opportunities to establish mutually beneficial relationships.
As previously mentioned, we are actively evaluating the potential to offer electrodes that can be implanted for long term stimulation applications, but such use will require that we pursue additional approvals from the FDA and any international regulatory bodies where we seek to commercialize our technology. 7 NeuroOne Medical Technologies Corporation FORM 10-K ● Explore partnerships with other companies that leverage our core technology: Given that our technology enables, complements and/or competes with a number of companies that are in the market or attempting to enter the market with diagnostic or therapeutic technologies to treat brain related disorders, we believe there may be opportunities to establish mutually beneficial relationships.
As discussed under “Our Strategy” below, our technology has been and will be implanted via a full craniotomy until such time, if ever, as we are able to develop our minimally invasive procedure. 5 NeuroOne Medical Technologies Corporation FORM 10-K ● All-in-one diagnostic and therapeutic technology solution: Due to the expected recording and treatment capabilities of some of our technology under development, we have received feedback from physicians that they will attempt to perform the diagnosis and treatment in a single procedure, thereby potentially eliminating the need for a second surgical procedure, reducing the likelihood of patient infection, risks associated with surgical procedures and minimizing the diagnostic, procedural and hospital costs.
As discussed under “Our Strategy” below, our technology has been and will be implanted via a full craniotomy until such time, if ever, as we are able to develop our minimally invasive procedure. ● All-in-one diagnostic and therapeutic technology solution: Due to the expected recording and treatment capabilities of some of our technology under development, we have received feedback from physicians that they will attempt to perform the diagnosis and treatment in a single procedure, thereby potentially eliminating the need for a second surgical procedure, reducing the likelihood of patient infection, risks associated with surgical procedures and minimizing the diagnostic, procedural and hospital costs.
Based on FDA classifications, we believe our diagnostic cortical strip, grid and depth electrode and RF ablation technology will be categorized by the FDA as Class II devices that do not require clinical testing and can be filed as a 510(k), similar to existing competitive technology.
Based on FDA classifications, our diagnostic cortical strip, grid and depth electrode and RF ablation technology are categorized by the FDA as Class II devices that do not require clinical testing and can be filed as a 510(k), similar to existing competitive technology.
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.
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, Nuwellis, Inc., formerly known as Sunshine Heart, Empi, Don-Joy and PMT.
The process involves delivering energy to the contacts, thereby heating them and creating a lesion in the brain tissue. The ablation does not remove the tissue. Rather, it is left in place and typically scar tissue (lesion) forms in the place where the ablation occurs. This procedure is also known as brain lesioning as it causes irreversible lesions.
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.
Unlike ablative technologies, the effects of DBS are reversible. 1 NeuroOne Medical Technologies Corporation FORM 10-K Radio frequency (RF) ablation is a procedure that uses radiofrequency under the electrode contacts which is directed to the site of the brain tissue that is targeted for ablation.
Unlike ablative technologies, the effects of DBS are reversible. 1 NeuroOne Medical Technologies Corporation FORM 10-K Radio frequency (“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.
As we continue to develop our technology, we plan to release further information about the expected advantages of our technology over currently available therapies. 6 NeuroOne Medical Technologies Corporation FORM 10-K ● Utilize these core technologies to develop all-in-one diagnostic and therapeutic solutions with the initial focus on a combination diagnostic and ablation electrode: For many patients who currently undergo one surgical procedure for diagnosis, a second and different procedure or surgery is then required to treat the patient.
As we continue to develop our technology, we plan to release further information about the expected advantages of our technology over currently available therapies. ● Utilize these core technologies to develop all-in-one diagnostic and therapeutic solutions with the initial focus on a combination diagnostic and ablation electrode: For many patients who currently undergo one surgical procedure for diagnosis, a second and different procedure or surgery is then required to treat the patient.
Our cortical strip, grid 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 institutional review board (“IRB”) approval at Mayo Clinic for clinical research.
Our cortical sheet electrode and depth electrode technology have 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 institutional review board (“IRB”) approval at Mayo Clinic for clinical research.
To date, several institutions around the country have successfully tried and adopted our cortical electrode technology for diagnostic procedures. ● Launch depth electrodes for sEEG recording: In September 2021, we announced that we received FDA 510(k) clearance to market our Evo sEEG electrode technology for temporary (less than 24 hours) use with recording, monitoring, and stimulation equipment for recording, monitoring, and stimulation of electrical signals at the subsurface level of the brain.
To date, several institutions around the country have successfully tried and adopted our cortical electrode technology for diagnostic procedures. 6 NeuroOne Medical Technologies Corporation FORM 10-K ● Launch depth electrodes for sEEG recording: In September 2021, we announced that we received FDA 510(k) clearance to market our Evo sEEG electrode technology for temporary (less than 24 hours) use with recording, monitoring, and stimulation equipment for recording, monitoring, and stimulation of electrical signals at the subsurface level of the brain.
These may include any of the following sanctions or consequences: ● warning letters or untitled letters that require corrective action; ● fines and civil penalties; ● unanticipated expenditures; ● delays in approving or refusal to approve future products; ● FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries; ● suspension or withdrawal of FDA clearance or approval; ● product recall or seizure; interruption of production; ● operating restrictions; ● injunctions; and ● criminal prosecution.
These may include any of the following sanctions or consequences: ● warning letters or untitled letters that require corrective action; ● fines and civil penalties; 22 NeuroOne Medical Technologies Corporation FORM 10-K ● unanticipated expenditures; ● delays in approving or refusal to approve future products; ● FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries; ● suspension or withdrawal of FDA clearance or approval; ● product recall or seizure; interruption of production; ● operating restrictions; ● injunctions; and ● criminal prosecution.
This may provide the potential for meaningful cost savings for hospitals and patients and improved quality of life for patients. ● Improved accuracy of diagnostic technologies: Because we believe our thin film technology is capable of recording at higher fidelity than current technologies used in EEG recording, we believe our technology may be able to more precisely determine the brain tissue causing seizures.
This may provide the potential for meaningful cost savings for hospitals and patients and improved quality of life for patients. 5 NeuroOne Medical Technologies Corporation FORM 10-K ● Improved accuracy of diagnostic technologies: Because we believe our thin film technology is capable of recording at higher fidelity than current technologies used in EEG recording, we believe our technology may be able to more precisely determine the brain tissue causing seizures.
Our business is subject to federal, state, local and harmonized standards, such as ISO 13485, ISO 14971, and FDA’s Quality System Regulation (“QSR”) contained in 21 CFR Part 820. Regulatory Framework in the United States Device classification The FDA characterizes medical devices into one of three classes, Class I, II, and III.
Our business is subject to federal, state, local and harmonized standards, such as ISO 13485, ISO 14971, and FDA’s Quality System Regulation (“QSR”) contained in 21 CFR Part 820. 18 NeuroOne Medical Technologies Corporation FORM 10-K Regulatory Framework in the United States Device classification The FDA characterizes medical devices into one of three classes, Class I, II, and III.
Existing, higher spatial scales increase the potential for missing data that may be critical in the removal of brain tissue causing the irregular activity. 4 NeuroOne Medical Technologies Corporation FORM 10-K ● Need to perform a full craniotomy (invasiveness): Currently available cortical electrode technology is typically placed after a craniotomy, which may require removing the top part of the cranium and is a very painful and invasive procedure.
Existing, higher spatial scales increase the potential for missing data that may be critical in the removal of brain tissue causing the irregular activity. ● Need to perform a full craniotomy (invasiveness): Currently available cortical electrode technology is typically placed after a craniotomy, which may require removing the top part of the cranium and is a very painful and invasive procedure.
In August 2021, the Company announced a strategic partnership with RBC Medical Innovations to develop a RF ablation generator. The following month, our RF ablation technology was tested by representatives from Emory University in Atlanta Georgia in an animal study. The product remains in development.
In August 2021, the Company announced a strategic partnership with RBC Medical Innovations to develop a RF ablation generator. The following month, our OneRF ablation system was tested by representatives from Emory University in Atlanta Georgia in an animal study.
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 the Company’s products. Our technology consists of three primary types of cortical electrodes: grid electrodes, strip electrodes and dual-sided electrodes.
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 the Company’s products. 8 NeuroOne Medical Technologies Corporation FORM 10-K Our technology consists of three primary types of cortical electrodes: grid electrodes, strip electrodes and dual-sided electrodes.
We are developing our cortical, strip, grid 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.
We are developing our cortical sheet and depth electrode technology to provide solutions for diagnosis through cEEG recording and sEEG recording and treatment through spinal cord stimulation, brain stimulation and ablation, all in one product.
There are several treatment options (including medication and Botox) for patients depending on the type of dystonia. DBS may be also an alternative for certain patient sub-types. 3 NeuroOne Medical Technologies Corporation FORM 10-K Spinal Cord Stimulation Chronic back pain is one of the most prevalent chronic conditions in the world.
There are several treatment options (including medication and Botox) for patients depending on the type of dystonia. DBS may be also an alternative for certain patient sub-types. Spinal Cord Stimulation Chronic back pain is one of the most prevalent chronic conditions in the world.
The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. 20 NeuroOne Medical Technologies Corporation FORM 10-K Prior to approval of a PMA, the FDA may conduct inspections of the clinical trial data and clinical trial sites, as well as inspections of the manufacturing facility and processes.
The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. Prior to approval of a PMA, the FDA may conduct inspections of the clinical trial data and clinical trial sites, as well as inspections of the manufacturing facility and processes.
Human Capital As of September 30, 2022, we had 15 employees, all of whom are full-time, seven of whom are engaged in research and development activities, and all of whom are located in the United States. As of September 30, 2022, we also retained the services of approximately seven regular consultants.
Human Capital As of September 30, 2023, we had 16 employees, all of whom are full-time, eight of whom are engaged in research and development activities, and all of whom are located in the United States. As of September 30, 2023, we also retained the services of approximately 9 regular consultants.
The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. A violation of this statute is a felony and may result in fines or imprisonment.
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 tremors, dystonia, and chronic pain. The effects of DBS as a potential treatment for Alzheimer’s is also being evaluated by researchers.
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.
We believe that we are in conformance to such laws. Nevertheless, a determination of liability under such laws could result in fines and penalties and restrictions on our ability to operate in these jurisdictions. Physician Payment Sunshine Act Transparency laws regarding payments or other items of value provided to healthcare providers and teaching hospitals may also impact our business practices.
Nevertheless, a determination of liability under such laws could result in fines and penalties and restrictions on our ability to operate in these jurisdictions. 25 NeuroOne Medical Technologies Corporation FORM 10-K Physician Payment Sunshine Act Transparency laws regarding payments or other items of value provided to healthcare providers and teaching hospitals may also impact our business practices.
Outside educators are reimbursed for their services at fair market value. Noncompliance with the Anti-Kickback Statute could result in our exclusion from Medicare, Medicaid or other governmental programs, restrictions on our ability to operate in certain jurisdictions, and civil and criminal penalties.
Noncompliance with the Anti-Kickback Statute could result in our exclusion from Medicare, Medicaid or other governmental programs, restrictions on our ability to operate in certain jurisdictions, and civil and criminal penalties.
Adverse determinations in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us from manufacturing and selling our products, which could have a significant adverse impact on our business. Trademarks We have registered U.S. trademarks for the trademarks “NEUROONE” and “EVO.” The document(s) updating the owner’s name were filed with the U.S.
Adverse determinations in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us from manufacturing and selling our products, which could have a significant adverse impact on our business. Trademarks We have registered U.S. trademarks for the trademarks “NEUROONE” and “EVO”. We have a pending U.S. trademark application for the trademark OneRF.
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.
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.
Although many 510(k) premarket notifications are cleared without clinical data, the FDA may require further information, including clinical data, to make a determination regarding substantial equivalence, which may significantly prolong the review process. If the FDA agrees that the device is substantially equivalent, it will grant clearance to commercially market the device.
Although many 510(k) premarket notifications are cleared without clinical data, the FDA may require further information, including clinical data, to make a determination regarding substantial equivalence, which may significantly prolong the review process.
Very early testing at the Cleveland Clinic was completed in the second calendar quarter of 2020. Pre-clinical (animal) feasibility testing was conducted in September 2021 with representatives from Emory University in Atlanta Georgia. We plan to do further pre-clinical animal testing of our near-final and final designs in the coming months.
Pre-clinical testing, including benchtop and animal testing, has been conducted on final designs. Very early testing at the Cleveland Clinic was completed in the second calendar quarter of 2020. Pre-clinical (animal) feasibility testing was conducted in September 2021 with representatives from Emory University in Atlanta, Georgia.
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.
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.
A violation of this statute is a felony and may result in fines or imprisonment. 25 NeuroOne Medical Technologies Corporation FORM 10-K Civil Monetary Penalties Law In addition to the Anti-Kickback Statute and the False Claims Act, the federal government has the authority to seek civil monetary penalties, or CMPs, assessments, and exclusion against an individual or entity based on a wide variety of prohibited conduct.
Civil Monetary Penalties Law In addition to the Anti-Kickback Statute and the False Claims Act, the federal government has the authority to seek civil monetary penalties, or CMPs, assessments, and exclusion against an individual or entity based on a wide variety of prohibited conduct.
Mayo has agreed to assist us by providing access to certain individuals at Mayo (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.
Mayo has agreed to assist us by providing access to certain individuals at Mayo (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. 16 NeuroOne Medical Technologies Corporation FORM 10-K We have agreed to pay Mayo a royalty equal to a single-digit percentage of our product sales pursuant to the Mayo Development Agreement.
Federal Anti-Kickback and Self-Referral Laws The federal Anti-Kickback Statute (the “Anti-Kickback Statute”) prohibits persons from knowingly and willfully soliciting, receiving, offering or providing remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, to induce either the referral of an individual, or the furnishing, recommending, or arranging of a good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid or other federal healthcare programs.
Violations of these laws are punishable by criminal and civil sanctions, including, in some instances, imprisonment and exclusion from participation in federal and state healthcare programs, including the Medicare, Medicaid and Veterans Administration health programs. 23 NeuroOne Medical Technologies Corporation FORM 10-K Federal Anti-Kickback and Self-Referral Laws The federal Anti-Kickback Statute (the “Anti-Kickback Statute”) prohibits persons from knowingly and willfully soliciting, receiving, offering or providing remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, to induce either the referral of an individual, or the furnishing, recommending, or arranging of a good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid or other federal healthcare programs.
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. 8 NeuroOne Medical Technologies Corporation FORM 10-K 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.
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.
In addition, our technology may have application in cardiovascular, orthopedic and pain related indications that could benefit from a high fidelity thin film electrode product that can provide stimulation and/or ablation therapies. 7 NeuroOne Medical Technologies Corporation FORM 10-K ● Investigate the potential applications associated with Artificial Intelligence: We have been informed by some of our corporate advisors that the ability to offer scale-able electrode technology that can provide thousands of electrodes in the brain may be helpful in treating medical conditions that may benefit from using artificial intelligence.
In addition, our technology may have application in cardiovascular, orthopedic and pain related indications that could benefit from a high fidelity thin film electrode product that can provide stimulation and/or ablation therapies. ● Partner with biotech, pharmaceutical or biopharma companies to provide a drug delivery sEEG electrode capable of delivering the therapy and recording before, during and after the therapy is delivered for up to 30 days. ● Investigate the potential applications associated with Artificial Intelligence: We have been informed by some of our corporate advisors that the ability to offer scale-able electrode technology that can provide thousands of electrodes in the brain may be helpful in treating medical conditions that may benefit from using artificial intelligence.
If the FDA determines that the device is not “substantially equivalent” to a predicate device, or if the device is automatically classified into Class III, the device sponsor must then fulfill the more rigorous premarketing requirements of the PMA approval process, or seek reclassification of the device through the De Novo process.
If the FDA agrees that the device is substantially equivalent, it will grant clearance to commercially market the device. 19 NeuroOne Medical Technologies Corporation FORM 10-K If the FDA determines that the device is not “substantially equivalent” to a predicate device, or if the device is automatically classified into Class III, the device sponsor must then fulfill the more rigorous premarketing requirements of the PMA approval process, or seek reclassification of the device through the De Novo process.
The licensed issued patents expire between 2025 and 2030, subject to any patent extensions that may be available for such patents. The issued patent owned by NeuroOne expires in 2041.
The licensed issued patents expire between 2025 and 2030, subject to any patent extensions that may be available for such patents. The issued patent owned by NeuroOne expires in 2041. If a patent or patents are issued on our additional pending patent applications, the resulting patents are projected to expire between 2038 and 2043.
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.
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.
Applicable diagnostic CPT codes for mapping (diagnosing) the brain for diagnostic procedures are as follows: ● 61531 Subdural implantation of strip electrodes through one or more burr or trephine (saw) hole(s) for long-term seizure monitoring; ● 61533 Craniotomy with elevation of bone flap: for subdural implantation of an electrode array, for long term seizure monitoring; ● 61535 Craniotomy with elevation of bone flap; for removal of epidural or subdural electrode array, without excision of cerebral tissue (separate procedure); and ● 61760 Stereotactic implantation of depth electrodes into the cerebrum for long term seizure monitoring.
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. 13 NeuroOne Medical Technologies Corporation FORM 10-K Applicable diagnostic CPT codes for mapping (diagnosing) the brain for diagnostic procedures are as follows: ● 61531 Subdural implantation of strip electrodes through one or more burr or trephine (saw) hole(s) for long-term seizure monitoring; ● 61533 Craniotomy with elevation of bone flap: for subdural implantation of an electrode array, for long term seizure monitoring; ● 61535 Craniotomy with elevation of bone flap; for removal of epidural or subdural electrode array, without excision of cerebral tissue (separate procedure); and ● 61760 Stereotactic implantation of depth electrodes into the cerebrum for long term seizure monitoring.
False Claims Act The False Claims Act provides, in part, that the federal government may bring a lawsuit against any person whom it believes has knowingly presented, or caused to be presented, a false or fraudulent request for payment from the federal government, or who has made a false statement or used a false record to get a claim approved.
As a result, our provider and training arrangements may ultimately be found to be not in compliance with applicable federal law. 24 NeuroOne Medical Technologies Corporation FORM 10-K False Claims Act The False Claims Act provides, in part, that the federal government may bring a lawsuit against any person whom it believes has knowingly presented, or caused to be presented, a false or fraudulent request for payment from the federal government, or who has made a false statement or used a false record to get a claim approved.
Notwithstanding the foregoing, there can be no assurance that our employees and third parties that have access to our confidential proprietary information will abide by the terms of their agreements.
Notwithstanding the foregoing, there can be no assurance that our employees and third parties that have access to our confidential proprietary information will abide by the terms of their agreements. Despite the measures that we take to protect our intellectual property and confidential information, unauthorized third parties may copy aspects of our products or obtain and use our proprietary information.
This will open the doors to other brain related disease recording procedures by providing high fidelity, more accurate diagnostic capabilities and also the ability to provide an all-in-one therapy capable of diagnosis, ablation and/or stimulation.
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 high fidelity, more accurate diagnostic capabilities and also the ability to provide an all-in-one therapy capable of diagnosis, ablation and/or stimulation.
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.
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. 4 NeuroOne Medical Technologies Corporation FORM 10-K 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.
The FDA can delay, limit or deny approval of a PMA application for many reasons, including: ● the device may not be safe, effective, reliable or accurate to the FDA’s satisfaction; ● the data from pre-clinical studies and clinical trials may be insufficient to support approval; ● the manufacturing process or facilities may not meet applicable requirements; and ● changes in FDA approval policies or adoption of new regulations may require additional data.
The FDA can delay, limit or deny approval of a PMA application for many reasons, including: ● the device may not be safe, effective, reliable or accurate to the FDA’s satisfaction; ● the data from pre-clinical studies and clinical trials may be insufficient to support approval; ● the manufacturing process or facilities may not meet applicable requirements; and ● changes in FDA approval policies or adoption of new regulations may require additional data. 20 NeuroOne Medical Technologies Corporation FORM 10-K If an FDA evaluation of a PMA application is favorable, the FDA will either issue an approval letter, or approvable letter, which usually contains a number of conditions that must be met in order to secure final approval of the PMA.
ICD-10 codes for epilepsy are as follows: ● G40.0 Localization-related (focal) (partial) idiopathic epilepsy and epileptic syndromes with seizures of localized onset; ● G40.1 Localization-related (focal) (partial) symptomatic epilepsy and epileptic syndromes with simple partial seizures; ● G40.2 Localization-related (focal) (partial) symptomatic epilepsy and epileptic syndromes with complex partial seizures; ● G40.3 Generalized idiopathic epilepsy and epileptic syndromes; ● G40.A Absence epileptic syndrome; ● 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. 14 NeuroOne Medical Technologies Corporation FORM 10-K 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.
ICD-10 codes for epilepsy are as follows: ● G40.0 Localization-related (focal) (partial) idiopathic epilepsy and epileptic syndromes with seizures of localized onset; ● G40.1 Localization-related (focal) (partial) symptomatic epilepsy and epileptic syndromes with simple partial seizures; ● G40.2 Localization-related (focal) (partial) symptomatic epilepsy and epileptic syndromes with complex partial seizures; ● G40.3 Generalized idiopathic epilepsy and epileptic syndromes; ● G40.A Absence epileptic syndrome; ● 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.
In addition, DBS seems to help with reducing the issues with motor functions such as tremors, stiffness and slowness but not for balance issues. Essential Tremors Essential tremors are thought to be due to electrical irregularities in the brain that send abnormal signals to the muscles.
In addition, DBS seems to help with reducing the issues with motor functions such as tremors, stiffness and slowness but not for balance issues. 1 Epilepsy surgery in the United States: Analysis of data from the National Association of Epilepsy Centers 2015 Epilepsy Research. 3 NeuroOne Medical Technologies Corporation FORM 10-K Essential Tremors Essential tremors are thought to be due to electrical irregularities in the brain that send abnormal signals to the muscles.
CMS. Regulations cover virtually every critical aspect of a medical device company’s business operations, including research activities, product development, quality, manufacturing, supplier management and risk management, contracting, reimbursement, medical communications, and sales and marketing.
Government Regulation Our cortical strip, grid and depth electrodes are medical devices subject to extensive and ongoing regulation by the FDA and the U.S. CMS. Regulations cover virtually every critical aspect of a medical device company’s business operations, including research activities, product development, quality, manufacturing, supplier management and risk management, contracting, reimbursement, medical communications, and sales and marketing.
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.
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.
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 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 at this time the manufacturers we currently utilize have sufficient capacity to meet our requirements.
Trade Secrets We also rely on trade secrets, technical know-how and continuing innovation to develop and maintain our competitive position.
We also have registered trademarks in the United Kingdom and the European Union for the trademark OneRF. Trade Secrets We also rely on trade secrets, technical know-how and continuing innovation to develop and maintain our competitive position.
If the FDA believes that any of our contract manufacturers or regulated suppliers are not in compliance with these requirements, it can shut down such manufacturing operations, require a recall of our products, refuse to approve new marketing applications, institute legal proceedings to detain or seize products, enjoin future violations or assess civil and criminal penalties against us or our officers or other employees. 23 NeuroOne Medical Technologies Corporation FORM 10-K The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and Similar Foreign and State Laws and Regulations Affecting the Transmission, Security and Privacy of Health Information We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business.
If the FDA believes that any of our contract manufacturers or regulated suppliers are not in compliance with these requirements, it can shut down such manufacturing operations, require a recall of our products, refuse to approve new marketing applications, institute legal proceedings to detain or seize products, enjoin future violations or assess civil and criminal penalties against us or our officers or other employees.
The Company expects that indications for treating epilepsy, Parkinson’s and other patients suffering from motor related neurological deficiencies via a permanent implant for chronic treatment will require a PMA process to commercially distribute in the United States. 19 NeuroOne Medical Technologies Corporation FORM 10-K The 510(k) clearance process Under the 510(k) clearance process, the manufacturer must submit to the FDA a premarket notification, demonstrating that the device is “substantially equivalent” to a legally marketed predicate device.
The Company expects that indications for treating epilepsy, Parkinson’s and other patients suffering from motor related neurological deficiencies via a permanent implant for chronic treatment will require a PMA process to commercially distribute in the United States.
We believe our technology, once developed, will offer an all-in-one solution with diagnostic and therapeutic capabilities. 1 Epilepsy surgery in the United States: Analysis of data from the National Association of Epilepsy Centers 2015 Epilepsy Research 2 NeuroOne Medical Technologies Corporation FORM 10-K 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.
The average cost for the diagnostic technology per procedure could be >$10,000, with ablation devices costing >$15,000. We believe our technology, once developed, will offer an all-in-one solution with diagnostic and therapeutic capabilities. 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.
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. 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.
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.
If a patent or patents are issued on our additional pending patent applications, the resulting patents are projected to expire between 2038 and 2043. 17 NeuroOne Medical Technologies Corporation FORM 10-K Our patent applications may not result in issued patents, and any patents that have been issued or may be issued in the future may not protect the commercially important aspects of our technology.
Our patent applications may not result in issued patents, and any patents that have been issued or may be issued in the future may not protect the commercially important aspects of our technology.
For more information regarding the Development Agreement, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Financial Overview-Collaborations Revenue” and “Note 7 - Zimmer Development Agreement” included in “Item 8 - Financial Statements and Supplementary Data” in this Report. 13 NeuroOne Medical Technologies Corporation FORM 10-K 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.
For more information regarding the Development Agreement, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Financial Overview-Collaborations Revenue” and “Note 7—Zimmer Development Agreement” included in “Item 8—Financial Statements and Supplementary Data” in this Report.
Future testing requirements for regulatory clearance will continue to be evaluated as we develop the design and regulatory strategy for this product. Spinal cord stim electrodes No design freeze. We performed pre-clinical in-house bench top testing in August 2020. In 2021/early 2022, we performed bench top testing of prototypes to demonstrate chronic performance and longevity.
The Company received 510(k) clearance from the FDA for creation of radiofrequency lesions in nervous tissue for functional neurosurgical procedures on December 6, 2023. Spinal cord stim electrodes No design freeze. We performed pre-clinical in-house bench top testing in August 2020. In 2021/early 2022, we performed bench top testing of prototypes to demonstrate chronic performance and longevity.
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.
For a discussion of the key competitive factors that we believe will impact the success of our cortical strip, grid electrodes under development, if successfully developed and approved, see “—Our Solution” above. 15 NeuroOne Medical Technologies Corporation FORM 10-K 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.
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. 16 NeuroOne Medical Technologies Corporation FORM 10-K See “Risk Factors- Risks Related to Our Business-We depend on intellectual property licensed from WARF for our technology, including our technology under development, and the termination of this license would harm our business” for additional information regarding the WARF License.
See “Risk Factors—Risks Related to Our Business-We depend on intellectual property licensed from WARF for our technology, including our technology under development, and the termination of this license would harm our business” for additional information regarding the WARF License.
Their website claims it is used for ablation in the brain for soft tissue and tumors.
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 addition, our intellectual property may be infringed or misappropriated by third parties, particularly in foreign countries where the laws and governmental authorities may not protect our proprietary rights as effectively as those in the United States.
In addition, our intellectual property may be infringed or misappropriated by third parties, particularly in foreign countries where the laws and governmental authorities may not protect our proprietary rights as effectively as those in the United States. 17 NeuroOne Medical Technologies Corporation FORM 10-K The medical device industry in general, and the recording, ablation and neurostimulation sector of this industry in particular, are characterized by the existence of a large number of patents and frequent litigation based on assertions of patent infringement.
In addition, the ACA codified case law that a claim including items or services resulting from a violation of the Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act (the “False Claims Act”). 24 NeuroOne Medical Technologies Corporation FORM 10-K We plan to provide the initial training to providers and patients necessary for appropriate use of our technology either through our own educators or by contracting with outside educators that have completed an appropriate training course.
In addition, the ACA codified case law that a claim including items or services resulting from a violation of the Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act (the “False Claims Act”).
The Company announced a partnership with RBC Medical Systems in August 2021 to develop an RF generator that will be used with the Company’s diagnostic and ablation electrode. No animal or human clinical testing is anticipated for FDA submission since 510K predicate devices did not perform such clinical testing.
Additional pre-clinical animal testing of our final design was conducted at Emory University in April 2023 and invivo testing of our final design was conducted in May 2023. The Company announced a partnership with RBC Medical Systems in August 2021 to develop an RF generator that will be used with the Company’s diagnostic and ablation electrode.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe may face challenges convincing physicians, many of whom have extensive experience with competitors’ products and established relationships with other companies, to appreciate the benefits of our cortical strip, grid electrode and depth electrode technology and, in particular, our ability to successfully diagnose and treat epilepsy, Parkinson’s disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other related neurological disorders in a way that is superior to and differentiated from currently available technology, and adopt it for treatment of their patients. 36 NeuroOne Medical Technologies Corporation FORM 10-K Achieving and maintaining market acceptance of cortical strip, grid electrode and depth electrode technology could be negatively impacted by many factors, including: ● the failure of our cortical strip, grid electrode and depth electrode technology to achieve wide acceptance among people with epilepsy, Parkinson’s disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other related neurological disorders, their caregivers, healthcare providers, third-party payors and key opinion leaders in the community; ● lack of evidence supporting the performance criteria or other perceived benefits of our cortical strip, grid electrode and depth electrode technology over competitive products or other currently available technology; ● perceived risks associated with the use of our cortical strip, grid electrode and depth electrode technology or similar products or technologies generally; ● the introduction of competitive products and the rate of acceptance of those products as compared to our cortical strip, grid electrode and depth electrode technology; ● adverse results of clinical trials relating to our cortical strip, grid electrode and depth electrode technology or similar competitive products; and ● loss of regulatory clearance or approval for our cortical strip, grid electrode and depth electrode technology, adverse publicity or other adverse events including any product liability lawsuits.
Biggest changeAchieving and maintaining market acceptance of cortical strip, grid electrode and depth electrode technology could be negatively impacted by many factors, including: ● the failure of our cortical strip, grid electrode and depth electrode technology to achieve wide acceptance among people with epilepsy, Parkinson’s disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other related neurological disorders, their caregivers, healthcare providers, third-party payors and key opinion leaders in the community; ● lack of evidence supporting the performance criteria or other perceived benefits of our cortical strip, grid electrode and depth electrode technology over competitive products or other currently available technology; ● perceived risks associated with the use of our cortical strip, grid electrode and depth electrode technology or similar products or technologies generally; ● the introduction of competitive products and the rate of acceptance of those products as compared to our cortical strip, grid electrode and depth electrode technology; 34 NeuroOne Medical Technologies Corporation FORM 10-K ● adverse results of clinical trials relating to our cortical strip, grid electrode and depth electrode technology or similar competitive products; and ● loss of regulatory clearance or approval for our cortical strip, grid electrode and depth electrode technology, adverse publicity or other adverse events including any product liability lawsuits.
The Medicare program is administered by the Centers for Medicare and Medicaid Services, or CMS, which imposes extensive and detailed requirements on medical services providers, including, but not limited to, rules that govern how we structure our relationships with physicians, and how and where we provide our solutions.
Medicare program is administered by the Centers for Medicare and Medicaid Services, or CMS, which imposes extensive and detailed requirements on medical services providers, including, but not limited to, rules that govern how we structure our relationships with physicians, and how and where we provide our solutions.
We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of any product; ● changes in the configuration of our cortical strip, grid electrode and depth electrode technology under development may result in additional costs or delay; ● if we are unable to successfully develop, receive regulatory clearance/approval for and commercialize our technology and other products under development, or if we experience significant delays in doing so, our business will be harmed; ● failure to secure or retain coverage or adequate reimbursement for our cortical strip, grid electrode and depth electrode technology or future versions thereof, including the implantation procedures, by third-party payors could adversely affect our business, financial condition and operating results; ● if our competitors are better able to develop and market products for the diagnosis and treatment of epilepsy, Parkinson’s disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other related neurological disorders that are safer, more effective, less costly, easier to use or otherwise more attractive than our cortical strip, grid electrode and depth electrode technology, our business will be adversely impacted; ● the size and future growth in the market for our cortical strip, grid electrode and depth electrode technology under development has not been established with precision and may be smaller than we estimate, possibly materially; 27 NeuroOne Medical Technologies Corporation FORM 10-K ● we depend on intellectual property licensed from WARF for our technology under development, and the termination of this license would harm our business; ● we depend on our partnership with Mayo to license certain know how for the development and commercialization of our technology.
We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of any product; ● changes in the configuration of our cortical strip, grid electrode and depth electrode technology under development may result in additional costs or delay; ● if we are unable to successfully develop, receive regulatory clearance/approval for and commercialize our technology and other products under development, or if we experience significant delays in doing so, our business will be harmed; ● failure to secure or retain coverage or adequate reimbursement for our cortical strip, grid electrode and depth electrode technology or future versions thereof, including the implantation procedures, by third-party payors could adversely affect our business, financial condition and operating results; 26 NeuroOne Medical Technologies Corporation FORM 10-K ● if our competitors are better able to develop and market products for the diagnosis and treatment of epilepsy, Parkinson’s disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other related neurological disorders that are safer, more effective, less costly, easier to use or otherwise more attractive than our cortical strip, grid electrode and depth electrode technology, our business will be adversely impacted; ● the size and future growth in the market for our cortical strip, grid electrode and depth electrode technology under development has not been established with precision and may be smaller than we estimate, possibly materially; ● we depend on intellectual property licensed from WARF for our technology under development, and the termination of this license would harm our business; ● we depend on our partnership with Mayo to license certain know how for the development and commercialization of our technology.
We identified material weaknesses in our internal control over financial reporting in 2018, and we cannot assure you that material weaknesses or significant deficiencies will not occur in the future and that we will be able to remediate such weaknesses or deficiencies in a timely manner, which could impair our ability to accurately and timely report our financial position, results of operations or cash flows.
However, we identified material weaknesses in our internal control over financial reporting in 2018, and we cannot assure you that material weaknesses or significant deficiencies will not occur in the future and that we will be able to remediate such weaknesses or deficiencies in a timely manner, which could impair our ability to accurately and timely report our financial position, results of operations or cash flows.
Even if we are successful in receiving patent protection for certain products and processes, our competitors may be able to design around our patents or develop products that provide outcomes which are comparable to ours without infringing on our intellectual property rights.
Even if we are successful in receiving patent protection for certain products and processes, our competitors may be able to design around our patents or develop products that provide outcomes which are comparable to ours without infringing our intellectual property rights.
In addition, if we raise additional funds through collaborations, licensing, joint ventures, strategic alliances, partnership arrangements or other similar arrangements, it may be necessary to relinquish valuable rights to our potential future products or proprietary technologies or grant licenses on terms that are not favorable to us. 32 NeuroOne Medical Technologies Corporation FORM 10-K Changes in the configuration of our cortical strip, grid electrode and depth electrode technology under development may result in additional costs or delay.
In addition, if we raise additional funds through collaborations, licensing, joint ventures, strategic alliances, partnership arrangements or other similar arrangements, it may be necessary to relinquish valuable rights to our potential future products or proprietary technologies or grant licenses on terms that are not favorable to us. 30 NeuroOne Medical Technologies Corporation FORM 10-K Changes in the configuration of our cortical strip, grid electrode and depth electrode technology under development may result in additional costs or delay.
Our estimates of the size and future growth in the market for our cortical strip, grid electrode and depth electrode technology under development, including the number of people with epilepsy, Parkinson’s disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other related neurological disorders who may benefit from and be amenable to using cortical strip, grid electrode and depth electrode technology for diagnosis and treatment, is based on a number of internal and third-party studies, reports and estimates.
Our estimates of the size and future growth in the market for our cortical strip, grid electrode and depth electrode technology, including the number of people with epilepsy, Parkinson’s disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other related neurological disorders who may benefit from and be amenable to using cortical strip, grid electrode and depth electrode technology for diagnosis and treatment, is based on a number of internal and third-party studies, reports and estimates.
Our future capital requirements will depend on many factors, including: ● the cost of further developing our cortical strip, grid electrode and depth electrode technology; ● obtaining and maintaining regulatory clearance or approval for our cortical strip, grid electrode and depth electrode technology; ● the costs associated with commercializing our cortical strip, grid electrode and depth electrode technology; ● any change in our development priorities; ● the revenue generated by sales of our cortical strip, grid electrode and depth electrode technology; ● the costs associated with expanding our sales and marketing infrastructure for commercialization of our cortical strip grid electrode and depth electrode technology; ● any change in our plans regarding the manner in which we choose to commercialize any approved product in the United States; ● the cost of ongoing compliance with regulatory requirements; ● expenses we incur in connection with potential litigation or governmental investigations; ● expenses and costs we incur in connection with changes in the economy and regulatory process in connection with the COVID-19 pandemic; ● the costs to develop additional intellectual property; ● anticipated or unanticipated capital expenditures; and ● unanticipated general and administrative expenses.
Our future capital requirements will depend on many factors, including: ● the cost of further developing our cortical strip, grid electrode and depth electrode technology; ● obtaining and maintaining regulatory clearance or approval for our cortical strip, grid electrode and depth electrode technology; ● the costs associated with commercializing our cortical strip, grid electrode and depth electrode technology; ● any change in our development priorities; ● the revenue generated by sales of our cortical strip, grid electrode and depth electrode technology; ● the costs associated with expanding our sales and marketing infrastructure for commercialization of our cortical strip grid electrode and depth electrode technology; ● any change in our plans regarding the manner in which we choose to commercialize any approved product in the United States; ● the cost of ongoing compliance with regulatory requirements; ● expenses we incur in connection with potential litigation or governmental investigations; ● expenses and costs we incur in connection with changes in the economy and regulatory process; ● the costs to develop additional intellectual property; ● anticipated or unanticipated capital expenditures; and ● unanticipated general and administrative expenses.
Further, we cannot assure you that competitors will not infringe upon our trademarks, or that we will have adequate resources to enforce our trademarks. 47 NeuroOne Medical Technologies Corporation FORM 10-K We also rely on trade secrets, know-how and technology, which are not protectable by patents, to maintain our competitive position.
Further, we cannot assure you that competitors will not infringe upon our trademarks, or that we will have adequate resources to enforce our trademarks. 45 NeuroOne Medical Technologies Corporation FORM 10-K We also rely on trade secrets, know-how and technology, which are not protectable by patents, to maintain our competitive position.
Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. 29 NeuroOne Medical Technologies Corporation FORM 10-K Our Company has limited experience in medical device development and may not be able to successfully develop any device or therapy.
Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. 28 NeuroOne Medical Technologies Corporation FORM 10-K Our Company has limited experience in medical device development and may not be able to successfully develop any device or therapy.
We may experience numerous unforeseen events during or as a result of clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our products, including: ● regulators may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; ● the failure to successfully complete pre-clinical testing requirements required by the FDA; ● we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts with third parties or clinical trial protocols with prospective trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different trial sites; 33 NeuroOne Medical Technologies Corporation FORM 10-K ● clinical trials of our cortical strip, grid electrode and depth electrode technology may produce negative or inconclusive results, including failure to demonstrate statistical significance, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon our development programs; ● the number of people with brain related disorders required for clinical trials may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or people may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate; ● our products may have unanticipated adverse events, undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or institutional review boards to suspend or terminate the trials; ● our third-party contractors conducting the clinical trials may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; ● regulators may require that we or our investigators suspend or terminate clinical development for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; ● the cost of clinical trials of our products may be greater than we anticipate; ● the supply or quality of our products or other materials necessary to conduct clinical trials of our products may be insufficient or inadequate; ● the COVID-19 pandemic may cause delays and disruptions in the supply chain, clinical trials, clinical development, and regulatory approval process; and ● delays from our suppliers and manufacturers could impact clinical trial completion and impact revenue.
We may experience numerous unforeseen events during or as a result of clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our products, including: ● regulators may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; ● the failure to successfully complete pre-clinical testing requirements required by the FDA; ● we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts with third parties or clinical trial protocols with prospective trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different trial sites; ● clinical trials of our cortical strip, grid electrode and depth electrode technology may produce negative or inconclusive results, including failure to demonstrate statistical significance, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon our development programs; ● the number of people with brain related disorders required for clinical trials may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or people may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate; 31 NeuroOne Medical Technologies Corporation FORM 10-K ● our products may have unanticipated adverse events, undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or institutional review boards to suspend or terminate the trials; ● our third-party contractors conducting the clinical trials may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; ● regulators may require that we or our investigators suspend or terminate clinical development for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; ● the cost of clinical trials of our products may be greater than we anticipate; ● the supply or quality of our products or other materials necessary to conduct clinical trials of our products may be insufficient or inadequate; and ● delays from our suppliers and manufacturers could impact clinical trial completion and impact revenue.
From our inception through September 30, 2022, we have generated limited revenue from the commercial sales of our products. Because we have generated very limited revenues from commercialization, our operations to date have been principally financed through public and private offerings of our Common Stock and convertible debt and exercises of options and warrants.
From our inception through September 30, 2023, we have generated limited revenue from the commercial sales of our products. Because we have generated very limited revenues from commercialization, our operations to date have been principally financed through public and private offerings of our Common Stock and convertible debt and exercises of options and warrants.
Our independent registered public accounting firm included an explanatory paragraph in the report on our financial statements as of and for the years ended September 30, 2022 and 2021, respectively, noting the existence of substantial doubt about our ability to continue as a going concern.
Our 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, 2023 and 2022, respectively, noting the existence of substantial doubt about our ability to continue as a going concern.
If we are unable to successfully develop, and receive regulatory clearance/approval for our other products under development, or if we experience significant delays in doing so, our business will be harmed. Two of our products have received 510(k) clearance from the FDA.
If we are unable to successfully develop, and receive regulatory clearance/approval for our other products under development, or if we experience significant delays in doing so, our business will be harmed. Three of our products have received 510(k) clearance from the FDA.
Risks associated with the manufacturing of our products could reduce our gross margins and negatively affect our operating results; ● if we or our third-party suppliers or manufacturers fail to comply with the FDA’s good manufacturing practice regulations, this could impair our ability to market our products in a cost-effective and timely manner; ● potential complications from our cortical strip, grid electrode and depth electrode technology that are currently unknown may come to light; ● if there are significant disruptions in our information technology systems, our business, financial condition and operating results could be adversely affected; ● we have entered into, and may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships with third-parties that may not result in the development of commercially viable products or the generation of significant future revenues; ● our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel; ● our ability to protect our intellectual property and proprietary technology is uncertain; ● we may be subject to damages resulting from claims that we, or our employees, have wrongfully used or disclosed alleged trade secrets of our competitors or are in breach of non-competition or non-solicitation agreements with our competitors; ● our products and operations are subject to extensive governmental regulation, and failure to comply with applicable requirements could cause our business to suffer; ● the price of our Common Stock might fluctuate significantly, and you could lose all or part of your investment; and ● we intend to issue more shares to raise capital, which will result in substantial dilution. 28 NeuroOne Medical Technologies Corporation FORM 10-K Risks Related to Our Business We have incurred significant operating losses since inception and cannot assure you that we will ever achieve or sustain profitability.
Risks associated with the manufacturing of our products could reduce our gross margins and negatively affect our operating results; ● if we or our third-party suppliers or manufacturers fail to comply with the FDA’s good manufacturing practice regulations, this could impair our ability to market our products in a cost-effective and timely manner; ● potential complications from our cortical strip, grid electrode and depth electrode technology that are currently unknown may come to light; ● if there are significant disruptions in our information technology systems, our business, financial condition and operating results could be adversely affected; ● we have entered into, and may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships with third-parties that may not result in the development of commercially viable products or the generation of significant future revenues; ● our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel; ● we have been the victim of a cyber-related crime and our controls may not be successful in avoiding further cyber-related crimes in the future; ● our ability to protect our intellectual property and proprietary technology is uncertain; ● we may be subject to damages resulting from claims that we, or our employees, have wrongfully used or disclosed alleged trade secrets of our competitors or are in breach of non-competition or non-solicitation agreements with our competitors; ● our products and operations are subject to extensive governmental regulation, and failure to comply with applicable requirements could cause our business to suffer; ● the price of our Common Stock might fluctuate significantly, and you could lose all or part of your investment; and ● we intend to issue more shares to raise capital, which will result in substantial dilution. 27 NeuroOne Medical Technologies Corporation FORM 10-K Risks Related to Our Business We have incurred significant operating losses since inception and cannot assure you that we will ever achieve or sustain profitability.
We are subject to numerous risks relating to the manufacturing capabilities of our third-party manufacturers, including: ● quality or reliability defects; ● inability to secure product components in a timely manner, in sufficient quantities or on commercially reasonable terms; ● failure to increase production to meet demand; ● inability to modify production lines to enable us to efficiently produce future products or implement changes in current products in response to regulatory requirements; 43 NeuroOne Medical Technologies Corporation FORM 10-K ● difficulty identifying and qualifying alternative manufacturers in a timely manner; ● inability to manufacture product components cost-effectively; ● inability to establish agreements with future third-party manufacturers or to do so on acceptable terms; ● potential damage to or destruction of our manufacturers’ equipment or facilities; ● failure to complete sterilization on time or in compliance with the required regulatory standards; ● transportation and import and export risk; ● delays in analytical results or failure of analytical techniques that we will depend on for quality control and release of products; ● natural disasters, labor disputes, financial distress, raw material availability, issues with facilities and equipment or other forms of disruption to business operations affecting our manufacturers or suppliers; or ● latent defects that may become apparent after products have been released and that may result in a recall of such products.
We are subject to numerous risks relating to the manufacturing capabilities of our third-party manufacturers, including: ● quality or reliability defects; ● inability to secure product components in a timely manner, in sufficient quantities or on commercially reasonable terms; ● failure to increase production to meet demand; ● inability to modify production lines to enable us to efficiently produce future products or implement changes in current products in response to regulatory requirements; ● difficulty identifying and qualifying alternative manufacturers in a timely manner; ● inability to manufacture product components cost-effectively; ● inability to establish agreements with future third-party manufacturers or to do so on acceptable terms; ● potential damage to or destruction of our manufacturers’ equipment or facilities; ● failure to complete sterilization on time or in compliance with the required regulatory standards; ● transportation and import and export risk; ● delays in analytical results or failure of analytical techniques that we will depend on for quality control and release of products; ● natural disasters, labor disputes, financial distress, raw material availability, issues with facilities and equipment or other forms of disruption to business operations affecting our manufacturers or suppliers; or ● latent defects that may become apparent after products have been released and that may result in a recall of such products.
Many of the companies developing or marketing competing products enjoy several advantages over us, including: ● more experienced sales forces; ● greater name recognition; ● more established sales and marketing programs and distribution networks; 39 NeuroOne Medical Technologies Corporation FORM 10-K ● earlier regulatory clearance or approval in the United States or foreign jurisdictions; ● long established relationships with physicians and hospitals; ● significant patent portfolios, including issued U.S. and foreign patents and pending patent applications, as well as the resources to enforce patents against us or any of our third-party suppliers and distributors; ● the ability to acquire and integrate our competitors and/or their technology; ● demonstrated ability to develop product enhancements and new product offerings; ● established history of product reliability, safety and durability; ● the ability to offer rebates or bundle multiple product offerings to offer greater discounts or incentives; ● greater financial and human resources for product development, sales, and marketing; and ● greater experience in and resources for conducting research and development, clinical studies, manufacturing, preparing regulatory submissions, obtaining regulatory clearance or approval for products and marketing approved products.
Many of the companies developing or marketing competing products enjoy several advantages over us, including: ● more experienced sales forces; ● greater name recognition; ● more established sales and marketing programs and distribution networks; ● earlier regulatory clearance or approval in the United States or foreign jurisdictions; ● long established relationships with physicians and hospitals; ● significant patent portfolios, including issued U.S. and foreign patents and pending patent applications, as well as the resources to enforce patents against us or any of our third-party suppliers and distributors; ● the ability to acquire and integrate our competitors and/or their technology; ● demonstrated ability to develop product enhancements and new product offerings; ● established history of product reliability, safety and durability; ● the ability to offer rebates or bundle multiple product offerings to offer greater discounts or incentives; ● greater financial and human resources for product development, sales, and marketing; and ● greater experience in and resources for conducting research and development, clinical studies, manufacturing, preparing regulatory submissions, obtaining regulatory clearance or approval for products and marketing approved products.
The success of our strategy relating to future acquisitions, investments or alliances will depend on a number of factors, including our ability to: ● identify suitable opportunities for acquisition, investment or alliance, if at all; ● manage acquisition, investment or alliance opportunities within our capital capacity and prioritize those investments to execute on our strategy; ● manage our due diligence process to uncover potential issues and liabilities with targets; ● finance any future acquisition, investment or alliance on terms acceptable to us, if at all; ● complete acquisitions, investments or alliances in a timely manner on terms that are satisfactory to us, if at all; ● successfully integrate and operate acquired businesses; ● successfully identify and retain key target employees; ● comply with applicable laws and regulations; ● protect intellectual property and to prevail in litigation related to newly acquired technologies; ● assimilate the acquired products or technologies; ● maintain uniform standards, procedures, controls and policies; ● anticipate costs associated with acquisitions; ● avoid the diversion of management’s attention from our existing business; ● manage risks associated with entering new markets in which we have limited or no experience; and ● manage legal and accounting costs relating to the acquisitions or compliance with regulatory matters.
The success of our strategy relating to future acquisitions, investments or alliances will depend on a number of factors, including our ability to: ● identify suitable opportunities for acquisition, investment or alliance, if at all; ● manage acquisition, investment or alliance opportunities within our capital capacity and prioritize those investments to execute on our strategy; ● manage our due diligence process to uncover potential issues and liabilities with targets; ● finance any future acquisition, investment or alliance on terms acceptable to us, if at all; ● complete acquisitions, investments or alliances in a timely manner on terms that are satisfactory to us, if at all; ● successfully integrate and operate acquired businesses; ● successfully identify and retain key target employees; ● comply with applicable laws and regulations; ● protect intellectual property and to prevail in litigation related to newly acquired technologies; ● assimilate the acquired products or technologies; ● maintain uniform standards, procedures, controls and policies; ● anticipate costs associated with acquisitions; ● avoid the diversion of management’s attention from our existing business; ● manage risks associated with entering new markets in which we have limited or no experience; and ● manage legal and accounting costs relating to the acquisitions or compliance with regulatory matters. 56 NeuroOne Medical Technologies Corporation FORM 10-K We have no current commitments with respect to any acquisition.
Any potential intellectual property litigation could force us to do one or more of the following: ● stop selling our products or using technology that contains the allegedly infringing intellectual property; ● incur significant legal expenses; ● pay substantial damages to the party whose intellectual property rights we are allegedly infringing; ● redesign those products that contain the allegedly infringing intellectual property; or ● attempt to obtain a license to the relevant intellectual property from third-parties, which may not be available on reasonable terms or at all, and if available, may be non-exclusive, thereby giving our competitors access to the same technology.
Any potential intellectual property litigation could force us to do one or more of the following: ● stop selling our products or using technology that contains the allegedly infringing intellectual property; ● incur significant legal expenses; 46 NeuroOne Medical Technologies Corporation FORM 10-K ● pay substantial damages to the party whose intellectual property rights we are allegedly infringing; ● redesign those products that contain the allegedly infringing intellectual property; or ● attempt to obtain a license to the relevant intellectual property from third-parties, which may not be available on reasonable terms or at all, and if available, may be non-exclusive, thereby giving our competitors access to the same technology.
A person or entity does not need to have actual knowledge of this statute or specific intent to violate it to have committed a violation; 51 NeuroOne Medical Technologies Corporation FORM 10-K ● federal civil and criminal false claims laws and civil monetary penalty laws, including civil whistleblower or qui tam actions that prohibit, among other things, knowingly presenting, or causing to be presented, claims for payment or approval to the federal government that are false or fraudulent, knowingly making a false statement material to an obligation to pay or transmit money or property to the federal government or knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay or transmit money or property to the federal government.
A person or entity does not need to have actual knowledge of this statute or specific intent to violate it to have committed a violation; ● federal civil and criminal false claims laws and civil monetary penalty laws, including civil whistleblower or qui tam actions that prohibit, among other things, knowingly presenting, or causing to be presented, claims for payment or approval to the federal government that are false or fraudulent, knowingly making a false statement material to an obligation to pay or transmit money or property to the federal government or knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay or transmit money or property to the federal government.
A person or entity does not need to have actual knowledge of these statutes or specific intent to violate them; ● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and their implementing regulations, also imposes certain regulatory and contractual requirements regarding the privacy, security and transmission of individually identifiable health information; ● federal “sunshine” requirements imposed by the ACA on device manufacturers regarding any “transfer of value” made or distributed to physicians and teaching hospitals.
A person or entity does not need to have actual knowledge of these statutes or specific intent to violate them; ● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and their implementing regulations, also imposes certain regulatory and contractual requirements regarding the privacy, security and transmission of individually identifiable health information; 49 NeuroOne Medical Technologies Corporation FORM 10-K ● federal “sunshine” requirements imposed by the ACA on device manufacturers regarding any “transfer of value” made or distributed to physicians and teaching hospitals.
These governmental authorities enforce laws and regulations that are meant to assure product safety and effectiveness, including the regulation of, among other things: ● product design and development; ● pre-clinical studies and clinical trials; ● product safety; ● establishment registration and product listing; ● labeling, content and language of instructions for use and storage; ● marketing, manufacturing, sales and distribution; ● pre-market clearance or approval; ● servicing and post-market surveillance; ● record-keeping procedures; ● product import and export; 50 NeuroOne Medical Technologies Corporation FORM 10-K ● advertising and promotion; and ● recalls and field safety corrective actions.
These governmental authorities enforce laws and regulations that are meant to assure product safety and effectiveness, including the regulation of, among other things: ● product design and development; ● pre-clinical studies and clinical trials; ● product safety; ● establishment registration and product listing; ● labeling, content and language of instructions for use and storage; ● marketing, manufacturing, sales and distribution; ● pre-market clearance or approval; ● servicing and post-market surveillance; ● record-keeping procedures; ● product import and export; ● advertising and promotion; and ● recalls and field safety corrective actions.
In addition, regardless of merit or eventual outcome, product liability claims may result in: ● litigation; ● distraction of management’s attention from our primary business; ● the inability to commercialize our cortical strip, grid electrode and depth electrode technology; ● decreased demand; ● damage to our business reputation; ● product recalls or withdrawals from the market; ● withdrawal of clinical trial participants; ● substantial monetary awards or settlements to patients or other claimants; or ● loss of revenue.
In addition, regardless of merit or eventual outcome, product liability claims may result in: ● litigation; ● distraction of management’s attention from our primary business; ● the inability to commercialize our cortical strip, grid electrode and depth electrode technology; 42 NeuroOne Medical Technologies Corporation FORM 10-K ● decreased demand; ● damage to our business reputation; ● product recalls or withdrawals from the market; ● withdrawal of clinical trial participants; ● substantial monetary awards or settlements to patients or other claimants; or ● loss of revenue.
The following examples are illustrative: ● others may be able to make devices that are the same as or similar to our cortical strip, grid electrode and depth electrode technology but that are not covered by the claims of the patents that we own; 49 NeuroOne Medical Technologies Corporation FORM 10-K ● we or any collaborators might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own; ● we might not have been the first to file patent applications covering certain of our inventions; ● others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; ● it is possible that our pending patent applications will not lead to issued patents; ● issued patents that we own may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges; ● we might enforce our patent rights or defend a challenge to our issued patents or pending application, putting the patents and patent applications at risk of being invalidated or interpreted narrowly; ● our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; and ● we may not develop additional proprietary technologies that are patentable.
The following examples are illustrative: ● others may be able to make devices that are the same as or similar to our cortical strip, grid electrode and depth electrode technology but that are not covered by the claims of the patents that we own; ● we or any collaborators might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own; ● we might not have been the first to file patent applications covering certain of our inventions; ● others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; ● it is possible that our pending patent applications will not lead to issued patents; ● issued patents that we own may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges; ● we might enforce our patent rights or defend a challenge to our issued patents or pending application, putting the patents and patent applications at risk of being invalidated or interpreted narrowly; ● our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; and ● we may not develop additional proprietary technologies that are patentable. 47 NeuroOne Medical Technologies Corporation FORM 10-K Risks Related to our Legal and Regulatory Environment Our products and operations are subject to extensive governmental regulation, and any adverse regulatory action may materially adversely affect our financial condition and business operations.
The trading price of our Common Stock may be volatile and subject to wide price fluctuations in response to various factors, including: ● actual or anticipated fluctuations in our quarterly financial and operating results; ● our progress toward developing our cortical strip and sheet electrode technology; ● the commencement, enrollment and results of our future clinical trials; ● adverse results from, delays in or termination of our clinical trials; ● adverse regulatory decisions, including failure to receive regulatory approval; ● publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts, if any; ● perceptions about the market acceptance of our products and the recognition of our brand; ● adverse publicity about our products or industry in general; ● overall performance of the equity markets; ● introduction of products, or announcements of significant contracts, licenses or acquisitions, by us or our competitors; ● legislative, political or regulatory developments; ● additions or departures of key personnel; ● threatened or actual litigation and government investigations; ● third-party promotional activities, which are subject to ongoing regulatory obligations; ● sale of shares of our Common Stock by us or members of our management; and ● general economic conditions. 54 NeuroOne Medical Technologies Corporation FORM 10-K These and other factors might cause the market price of our Common Stock to fluctuate substantially, which may negatively affect the liquidity of our Common Stock.
The trading price of our Common Stock may be volatile and subject to wide price fluctuations in response to various factors, including: ● actual or anticipated fluctuations in our quarterly financial and operating results; ● our progress toward developing our cortical strip and sheet electrode technology; ● the commencement, enrollment and results of our future clinical trials; ● adverse results from, delays in or termination of our clinical trials; ● adverse regulatory decisions, including failure to receive regulatory approval; ● publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts, if any; ● perceptions about the market acceptance of our products and the recognition of our brand; ● adverse publicity about our products or industry in general; ● overall performance of the equity markets; ● introduction of products, or announcements of significant contracts, licenses or acquisitions, by us or our competitors; ● legislative, political or regulatory developments; ● additions or departures of key personnel; ● threatened or actual litigation and government investigations; ● third-party promotional activities, which are subject to ongoing regulatory obligations; ● sale of shares of our Common Stock by us or members of our management; and ● general economic conditions.
If passed, this legislation would lead to increased coverage levels and utilization of services; however, at this point, the impact of any such changes is unclear because specific changes have not been enacted or implemented. 53 NeuroOne Medical Technologies Corporation FORM 10-K We cannot predict whether any additional healthcare reform proposals will be adopted or how such proposals may impact our business and operations.
If passed, this legislation would lead to increased coverage levels and utilization of services; however, at this point, the impact of any such changes is unclear because specific changes have not been enacted or implemented. We cannot predict whether any additional healthcare reform proposals will be adopted or how such proposals may impact our business and operations.
There can be no assurance that this type of litigation will not occur, and any future litigation or the threat thereof may adversely affect our ability to hire additional employees.
Litigation may be necessary to defend against these claims. There can be no assurance that this type of litigation will not occur, and any future litigation or the threat thereof may adversely affect our ability to hire additional employees.
See “Business-Mayo Foundation for Medical Education and Research License and Development Agreement” for additional information regarding our agreement with Mayo. 41 NeuroOne Medical Technologies Corporation FORM 10-K 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.
See “Business-Mayo Foundation for Medical Education and Research License and Development Agreement” for additional information regarding our agreement with Mayo. 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.
At September 30, 2022, we had cash, cash equivalents and short-term investments in the aggregate of approximately $11.1 million. Our existing cash, cash equivalents and short-term investments will not be sufficient to fund our operating expenses. To continue to fund operations, we will need to secure additional funding.
At September 30, 2023, we had cash and cash equivalents in the aggregate of approximately $5.3 million. Our existing cash, cash equivalents and short-term investments will not be sufficient to fund our operating expenses. To continue to fund operations, we will need to secure additional funding.
If we fail to maintain effective internal controls and procedures for financial reporting, it could result in material misstatements in the annual or interim financial statements that would not be prevented or detected in a timely manner.
If we fail to maintain effective internal controls and procedures for financial reporting, it could result in material misstatements in the annual or interim financial statements that would not be prevented or detected in a timely manner. In that case, we could become subject to regulatory sanction or investigation.
It may not be possible for us to manufacture these products at a cost or in quantities sufficient to make any future versions of our cortical strip, grid electrode and depth electrode technology commercially viable. Potential complications from our cortical strip, grid electrode and depth electrode technology that are currently unknown may come to light.
It may not be possible for us to manufacture these products at a cost or in quantities sufficient to make any future versions of our cortical strip, grid electrode and depth electrode technology commercially viable. 41 NeuroOne Medical Technologies Corporation FORM 10-K Potential complications from our cortical strip, grid electrode and depth electrode technology that are currently unknown may come to light.
Any of these results could negatively affect our business, financial condition and operating results. Zimmer has exclusive global rights to distribute our strip and grid cortical 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.
Any of these results could negatively affect our business, financial condition and operating results. 43 NeuroOne Medical Technologies Corporation FORM 10-K Zimmer has exclusive global rights to distribute our strip and grid cortical 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.
Our development costs will also increase if we experience delays in testing or marketing approvals, including, but not limited to, the COVID-19 pandemic. We do not know whether any of our clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all.
Our development costs will also increase if we experience delays in testing or marketing approvals. We do not know whether any of our clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all.
Significant clinical trial delays also could allow our competitors to bring innovative products to market before we do and impair our ability to successfully commercialize our products. 34 NeuroOne Medical Technologies Corporation FORM 10-K Even if we obtain regulatory clearance and/or approval for all of our products, we will remain subject to extensive regulatory scrutiny and compliance obligations.
Significant clinical trial delays also could allow our competitors to bring innovative products to market before we do and impair our ability to successfully commercialize our products. Even if we obtain regulatory clearance and/or approval for all of our products, we will remain subject to extensive regulatory scrutiny and compliance obligations.
We have incurred losses since inception, and as of September 30, 2022, we had an accumulated deficit of $ 50.8 million primarily as a result of expenses incurred in connection with our operations and from our research and development programs.
We have incurred losses since inception, and as of September 30, 2023, we had an accumulated deficit of $62.7 million primarily as a result of expenses incurred in connection with our operations and from our research and development programs.
Our potential inability to integrate any acquired products or technologies effectively may adversely affect our business, operating results and financial condition. 58 NeuroOne Medical Technologies Corporation FORM 10-K Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
Our potential inability to integrate any acquired products or technologies effectively may adversely affect our business, operating results and financial condition. Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
These provisions could limit the price that investors might be willing to pay in the future for shares of the Common Stock. We are a smaller reporting company, and the reduced reporting requirements applicable to smaller reporting companies may make our Common Stock less attractive to investors.
These provisions could limit the price that investors might be willing to pay in the future for shares of the Common Stock. 53 NeuroOne Medical Technologies Corporation FORM 10-K We are a smaller reporting company, and the reduced reporting requirements applicable to smaller reporting companies may make our Common Stock less attractive to investors.
Prolonged negative economic conditions could adversely affect us, our customers and third-party partners, manufactures or suppliers, if any, which could harm our financial condition. We are subject to the risks arising from adverse changes in general economic and market conditions, including, but not limited to, changes related to the COVID-19 pandemic.
Prolonged negative economic conditions could adversely affect us, our customers and third-party partners, manufactures or suppliers, if any, which could harm our financial condition. We are subject to the risks arising from adverse changes in general economic and market conditions.
The success of any products that we develop will depend on several factors, including: ● receipt of timely commercialization approvals from applicable regulatory authorities; ● our ability to procure and maintain suppliers and manufacturers of the components of our current cortical strip, grid electrode and depth electrode technology and future versions; 35 NeuroOne Medical Technologies Corporation FORM 10-K ● launching commercial sales of our cortical strip, grid electrode and depth electrode technology, if approved for marketing; ● market acceptance of our cortical strip, grid electrode and depth electrode technology, if approved, by people with epilepsy, Parkinson’s disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other related neurological disorders, the medical community and third-party payors; ● our success in educating healthcare providers and people with epilepsy, Parkinson’s disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other related neurological disorders about the benefits, administration and use of our cortical strip, grid electrode and depth electrode technology and future versions; ● the prevalence and severity of adverse events, including, but not limited to, events related to the COVID-19 pandemic; ● the perceived advantages, cost, safety, convenience and accuracy of alternative therapies; ● obtaining and maintaining patent, trademark and trade secret protection and regulatory exclusivity for our cortical strip, grid electrode and depth electrode technology and otherwise protecting our rights in our intellectual property portfolio; ● maintaining compliance with regulatory requirements, including current good manufacturing practices; and ● obtaining and maintaining a continued acceptable performance and safety profile of our cortical strip, grid electrode and depth electrode technology following approval.
The success of any products that we develop will depend on several factors, including: ● receipt of timely commercialization approvals from applicable regulatory authorities; ● our ability to procure and maintain suppliers and manufacturers of the components of our current cortical strip, grid electrode and depth electrode technology and future versions; ● market acceptance of our cortical strip, grid electrode and depth electrode technology by people with epilepsy, Parkinson’s disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other related neurological disorders, the medical community and third-party payors; ● our success in educating healthcare providers and people with epilepsy, Parkinson’s disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other related neurological disorders about the benefits, administration and use of our cortical strip, grid electrode and depth electrode technology and future versions; ● the prevalence and severity of adverse events and public health emergencies such as the COVID-19 pandemic; ● the perceived advantages, cost, safety, convenience and accuracy of alternative therapies; ● obtaining and maintaining patent, trademark and trade secret protection and regulatory exclusivity for our cortical strip, grid electrode and depth electrode technology and otherwise protecting our rights in our intellectual property portfolio; ● maintaining compliance with regulatory requirements, including current good manufacturing practices; and ● obtaining and maintaining a continued acceptable performance and safety profile of our cortical strip, grid electrode and depth electrode technology. 33 NeuroOne Medical Technologies Corporation FORM 10-K The continuing development and commercialization of our products depends upon us maintaining strong relationships with academic and healthcare institutions and professionals.
The large number of patents, the rapid rate of new patent issuances, and the complexities of the technology involved increase the risk of patent litigation. 48 NeuroOne Medical Technologies Corporation FORM 10-K In the future, we could receive communications from various industry participants alleging our infringement of their intellectual property rights.
The large number of patents, the rapid rate of new patent issuances, and the complexities of the technology involved increase the risk of patent litigation. In the future, we could receive communications from various industry participants alleging our infringement of their intellectual property rights.
Any of the foregoing could adversely impact the likelihood and timing of any payments we are eligible to receive under the Zimmer Development Agreement. FDA clearance is one condition of the Product Availability Date. The Company is reliant on Zimmer to drive the commercialization and sales of our products.
Any of the foregoing could adversely impact the likelihood and timing of any payments we are eligible to receive under the Zimmer Development Agreement. The Company is reliant on Zimmer to drive the commercialization and sales of our products.
If sufficient coverage and reimbursement is not available for our any product we develop, in the United States, the demand for our products and our revenues will be adversely affected. 38 NeuroOne Medical Technologies Corporation FORM 10-K Reimbursement by Medicare is highly regulated and subject to change.
If sufficient coverage and reimbursement is not available for our any product we develop, in the United States, the demand for our products and our revenues will be adversely affected. Reimbursement by Medicare is highly regulated and subject to change.
We have no current commitments with respect to any acquisition. We do not know if we will be able to identify acquisitions we deem suitable, whether we will be able to successfully complete any such acquisitions on favorable terms or at all, or whether we will be able to successfully integrate any acquired products or technologies.
We do not know if we will be able to identify acquisitions we deem suitable, whether we will be able to successfully complete any such acquisitions on favorable terms or at all, or whether we will be able to successfully integrate any acquired products or technologies.
If our competitors are more successful than us in these matters, our business may be harmed. The size and future growth in the market for our cortical strip, grid electrode and depth electrode technology under development has not been established with precision and may be smaller than we estimate, possibly materially.
If our competitors are more successful than us in these matters, our business may be harmed. 37 NeuroOne Medical Technologies Corporation FORM 10-K The size and future growth in the market for our cortical strip, grid electrode and depth electrode technology has not been established with precision and may be smaller than we estimate, possibly materially.
Any federal, state or foreign regulatory review to which we may become subject, regardless of the outcome, would be costly and time-consuming. 52 NeuroOne Medical Technologies Corporation FORM 10-K For example, to enforce compliance with the federal laws, the U.S.
Any federal, state or foreign regulatory review to which we may become subject, regardless of the outcome, would be costly and time-consuming. For example, to enforce compliance with the federal laws, the U.S.
We may obtain additional financing in the future through the issuance of our Common Stock, through other equity or debt financings or through collaborations or partnerships with other companies. We may not be able to raise additional capital on terms acceptable to us, or at all. The COVID-19 pandemic has adversely impacted, and may continue to impact, our business.
We may obtain additional financing in the future through the issuance of our Common Stock, through other equity or debt financings or through collaborations or partnerships with other companies. We may not be able to raise additional capital on terms acceptable to us, or at all.
Manufacturers must submit reports by the 90th day of each subsequent calendar year; ● federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; ● state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state laws governing the privacy and security of certain health information, many of which differ from each other in significant ways and often are not preempted by HIPAA; and The risk of our being found in violation of these laws and regulations is increased by the fact that the scope and enforcement of these laws is uncertain, many of them have not been fully interpreted by the regulatory authorities or the courts, their provisions are open to a variety of interpretations, or they vary country by country.
Manufacturers must submit reports by the 90th day of each subsequent calendar year; ● federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; and ● state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state laws governing the privacy and security of certain health information, many of which differ from each other in significant ways and often are not preempted by HIPAA.
Additionally, our suppliers may encounter problems that limit their ability to supply components or manufacture products for us, including financial difficulties, damage to their manufacturing equipment or facilities, product discontinuations, or complications arising in connection with the COVID-19 pandemic. As a result, there is a risk that certain components could be discontinued and no longer available to us.
Additionally, our suppliers may encounter problems that limit their ability to supply components or manufacture products for us, including financial difficulties, damage to their manufacturing equipment or facilities, product discontinuations, or complications due to worldwide economic and social instability. As a result, there is a risk that certain components could be discontinued and no longer available to us.
In addition, in recent years, the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies across many industries. The changes frequently appear to occur without regard to the operating performance of the affected companies.
This volatility has had a significant impact on the market price of securities issued by many companies across many industries. The changes frequently appear to occur without regard to the operating performance of the affected companies.
We expect to continue to incur significant expenses and increasing operating costs resulting in net losses for the foreseeable future, and management has raised substantial doubt about our ability to continue as a going concern.
We expect to continue to incur significant expenses and increasing operating costs resulting in net losses for the foreseeable future, and management has raised substantial doubt about our ability to continue as a going concern. There was also substantial doubt about the Company’s ability to continue as a going concern as of and for the year ended September 30, 2022.
Within and outside the United States, reimbursement is obtained from a variety of sources, including government-sponsored and private health insurance plans. These third-party payors determine whether to provide coverage and reimbursement for specific products and procedures.
Healthcare providers may choose not to order a product unless third-party payors pay a substantial portion of the product. Within and outside the United States, reimbursement is obtained from a variety of sources, including government-sponsored and private health insurance plans. These third-party payors determine whether to provide coverage and reimbursement for specific products and procedures.
We are required to comply with the internal control evaluation and certification requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”) and management is required to report annually on our internal control over financial reporting.
We are required to comply with the internal control evaluation and certification requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”) and management is required to report annually on our internal control over financial reporting. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
Additionally, if we settle an investigation with law enforcement or other regulatory agencies, we may be forced to agree to additional onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business.
Additionally, if we settle an investigation with law enforcement or other regulatory agencies, we may be forced to agree to additional onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement.
The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy.
Recruiting and retaining qualified scientific and clinical personnel will also be critical to our success. The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy.
In addition, even though we have obtained FDA clearance to market two of our products, and even if we obtain the proper regulatory approval or clearance to market any additional products under development, the FDA has the power to require us to conduct post-market surveillance studies, which are designed to identify adverse events, device malfunctions or complaints from patients implanted with the device during a specified period after the commencement of commercial use in the U.S.
In addition, negative publicity and product liability claims resulting from any adverse regulatory action could have a material adverse effect on our business, financial condition, and operating results. 32 NeuroOne Medical Technologies Corporation FORM 10-K In addition, even though we have obtained FDA clearance to market two of our products, and even if we obtain the proper regulatory approval or clearance to market any additional products under development, the FDA has the power to require us to conduct post-market surveillance studies, which are designed to identify adverse events, device malfunctions or complaints from patients implanted with the device during a specified period after the commencement of commercial use in the U.S.
If the actual number of people with brain related disorders who would benefit from cortical strip, grid electrode and depth electrode technology and the size and future growth in the market for cortical strip, grid electrode and depth electrode technology is smaller than we have estimated, it may impair our projected sales growth and have an adverse impact on our business. 40 NeuroOne Medical Technologies Corporation FORM 10-K We depend on intellectual property licensed from WARF for our technology, including our technology under development, and the termination of this license would harm our business.
If the actual number of people with brain related disorders who would benefit from cortical strip, grid electrode and depth electrode technology and the size and future growth in the market for cortical strip, grid electrode and depth electrode technology is smaller than we have estimated, it may impair our projected sales growth and have an adverse impact on our business.
Risks Related to our Common Stock The price of our Common Stock might fluctuate significantly, and you could lose all or part of your investment. Volatility in the market price of our Common Stock may prevent you from being able to sell your shares of our Common Stock at or above the price you paid for your shares.
Volatility in the market price of our Common Stock may prevent you from being able to sell your shares of our Common Stock at or above the price you paid for your shares.
There was also substantial doubt about the Company’s ability to continue as a going concern as of and for the year ended September 30, 2021 To date, we have financed our operations primarily through debt and equity financings, and our primary activities have been limited to, and our limited resources have been dedicated to, performing business and financial planning, raising capital, recruiting personnel, negotiating with business partners and the licensors of our intellectual property and conducting development activities.
To date, we have financed our operations primarily through debt and equity financings, and our primary activities have been limited to, and our limited resources have been dedicated to, performing business and financial planning, raising capital, recruiting personnel, negotiating with business partners and the licensors of our intellectual property and conducting development activities.
The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our Board, on committees of our Board or as members of senior management.
The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our Board, on committees of our Board or as members of senior management. 57 NeuroOne Medical Technologies Corporation FORM 10-K ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable.
Because of this past breach, WARF may be less likely to waive future defaults or breaches or further amend the WARF License in the future, to the extent we request any waiver or amendment. See “Note 4-Commitments and Contingencies” included in “Item 8 - Financial Statements and Supplementary Data” in this Report.
Because of this past breach, WARF may be less likely to waive future defaults or breaches or further amend the WARF License in the future, to the extent we request any waiver or amendment.
Until we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings, or other capital sources.
Our certificate of incorporation authorizes the issuance of a maximum of 100,000,000 shares of Common Stock and 10,000,000 shares of preferred stock. Until we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings, or other capital sources.
Material risks that may affect our business, operating results and financial condition include, but are not necessarily limited to, those relating to: ● we have incurred significant operating losses since inception and cannot assure you that we will ever achieve or sustain profitability; ● our ability to continue our operations requires that we raise additional capital and our operations could be curtailed if we are unable to obtain the additional funding as or when needed; ● the COVID-19 pandemic has adversely impacted and will likely continue to adversely impact our business, including through component shortages, including of our primary component, polyimide film, due to supply chain shortages attributed to COVID related issues, supply chain disruptions, including related to staffing availability, and delays in product availability and delivery, impacts on pre-clinical and clinical trials and regulatory clearances/approvals; ● we will need to raise substantial additional funds in the future, and these funds may not be available on acceptable terms or at all.
Material risks that may affect our business, operating results and financial condition include, but are not necessarily limited to, those relating to: ● we have incurred significant operating losses since inception and cannot assure you that we will ever achieve or sustain profitability; ● our ability to continue our operations requires that we raise additional capital and our operations could be curtailed if we are unable to obtain the additional funding as or when needed; ● we will need to raise substantial additional funds in the future, and these funds may not be available on acceptable terms or at all.
We depend on a limited number of third-party suppliers for the components of our cortical strip, grid electrode and depth electrode technology, and the loss of any of these suppliers, or their inability to provide us with an adequate supply of materials, could harm our business.
Termination of the Mayo Development Agreement could result in the loss of significant rights and would harm our ability to further develop our technology. 39 NeuroOne Medical Technologies Corporation FORM 10-K We depend on a limited number of third-party suppliers for the components of our cortical strip, grid electrode and depth electrode technology, and the loss of any of these suppliers, or their inability to provide us with an adequate supply of materials, could harm our business.
In particular, these collaborations may not result in the development of products that achieve commercial success or result in significant revenues and could be terminated prior to developing any products. 46 NeuroOne Medical Technologies Corporation FORM 10-K Additionally, we may not be in a position to exercise sole decision making authority regarding the transaction or arrangement, which could create the potential risk of creating impasses on decisions, and our future collaborators may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals.
Additionally, we may not be in a position to exercise sole decision making authority regarding the transaction or arrangement, which could create the potential risk of creating impasses on decisions, and our future collaborators may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals.
However, any changes that lower reimbursements for either our products or procedures using our products, reduce medical procedure volumes, increase cost containment pressures on us or others in the healthcare sector, or impose additional or heightened regulatory requirements could adversely affect our business and results of operations.
However, any changes that lower reimbursements for either our products or procedures using our products, reduce medical procedure volumes, increase cost containment pressures on us or others in the healthcare sector, or impose additional or heightened regulatory requirements could adversely affect our business and results of operations. 51 NeuroOne Medical Technologies Corporation FORM 10-K Risks Related to our Common Stock The price of our Common Stock might fluctuate significantly, and you could lose all or part of your investment.
For example, in August 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted into law. The IRA includes a 15% corporate alternative minimum tax and a 1% excise tax on share repurchases. We urge investors to consult with their legal and tax advisers regarding the implications of potential changes in tax laws on an investment in our common stock.
The IRA includes a 15% corporate alternative minimum tax and a 1% excise tax on share repurchases. 55 NeuroOne Medical Technologies Corporation FORM 10-K We urge investors to consult with their legal and tax advisers regarding the implications of potential changes in tax laws on an investment in our common stock.
None of our other products have received clearance or approval for commercial sale. Our ability to generate revenue from our developed products, if any, will depend heavily on their successful development and regulatory approval.
Our OneRF ablation system has received 510(k) clearance from the FDA for creation of radiofrequency lesions in nervous tissue for functional neurosurgical procedures. None of our other products have received clearance or approval for commercial sale. Our ability to generate revenue from our developed products, if any, will depend heavily on their successful development and regulatory approval.
Healthcare providers may use our products, if approved, off-label, as the FDA does not restrict or regulate a physician’s choice of treatment within the practice of medicine.
Our promotional materials and training methods must comply with FDA and other applicable laws and regulations, including the prohibition of the promotion of the off-label use of our products. Healthcare providers may use our products, if approved, off-label, as the FDA does not restrict or regulate a physician’s choice of treatment within the practice of medicine.
Access to adequate coverage and reimbursement for our cortical strip, grid electrode and depth electrode technology by third-party payors is essential to the acceptance of our products by people with epilepsy, Parkinson’s disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other related neurological disorders. 37 NeuroOne Medical Technologies Corporation FORM 10-K In the United States, a third-party payor’s decision to provide coverage for our products does not imply that an adequate reimbursement rate will be obtained.
Access to adequate coverage and reimbursement for our cortical strip, grid electrode and depth electrode technology by third-party payors is essential to the acceptance of our products by people with epilepsy, Parkinson’s disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other related neurological disorders.
Further, one third-party payor’s decision to cover our products does not assure that other payors will also provide coverage for the products or will provide coverage at an adequate reimbursement rate. Healthcare providers may choose not to order a product unless third-party payors pay a substantial portion of the product.
In the United States, a third-party payor’s decision to provide coverage for our products does not imply that an adequate reimbursement rate will be obtained. Further, one third-party payor’s decision to cover our products does not assure that other payors will also provide coverage for the products or will provide coverage at an adequate reimbursement rate.
It could also require us to cease using the components, seek alternative components or technologies and modify our products to incorporate alternative components or technologies, which could result in a requirement to seek additional regulatory approvals. Any disruption of this nature or increased expenses could harm our development, approval or commercialization efforts and adversely affect our operating results.
It could also require us to cease using the components, seek alternative components or technologies and modify our products to incorporate alternative components or technologies, which could result in a requirement to seek additional regulatory approvals.
We have limited institutional knowledge and experience with respect to these business development activities, and we may also not realize the anticipated benefits of any such transaction or arrangement.
We have limited institutional knowledge and experience with respect to these business development activities, and we may also not realize the anticipated benefits of any such transaction or arrangement. In particular, these collaborations may not result in the development of products that achieve commercial success or result in significant revenues and could be terminated prior to developing any products.
Further, these transactions and arrangements will be contractual in nature and will generally be terminable under the terms of the applicable agreements and, in such event, we may not continue to have rights to the products relating to such transaction or arrangement or may need to purchase such rights at a premium.
Further, these transactions and arrangements will be contractual in nature and will generally be terminable under the terms of the applicable agreements and, in such event, we may not continue to have rights to the products relating to such transaction or arrangement or may need to purchase such rights at a premium. 44 NeuroOne Medical Technologies Corporation FORM 10-K If we enter into in-bound intellectual property license agreements, we may not be able to fully protect the licensed intellectual property rights or maintain those licenses.
If our, or our third-party service provider’s, security systems are breached or fail, unauthorized persons may be able to obtain access to sensitive data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability.
To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability.
As of September 30, 2022, we had outstanding warrants to purchase an aggregate of 7,103,344 shares of Common Stock at a weighted average exercise price of $5.98 per share, and options to purchase an aggregate of 1,239,915 shares of Common Stock at a weighted average exercise price of $5.40 per share.
As of September 30, 2023, we had outstanding warrants to purchase an aggregate of 6,202,426 shares of Common Stock at a weighted average exercise price of $5.92 per share, and options to purchase an aggregate of 1,708,427 shares of Common Stock at a weighted average exercise price of $4.34 per share.
If, notwithstanding our efforts to comply with new laws, regulations and standards, we fail to comply, regulatory authorities may initiate legal proceedings against us and our business may be harmed. 59 NeuroOne Medical Technologies Corporation FORM 10-K Failure to comply with these rules might also make it more difficult for us to obtain some types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.
Failure to comply with these rules might also make it more difficult for us to obtain some types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.
The medical device industry has historically been subject to extensive litigation over product liability claims, and we cannot offer any assurance that we will not face product liability lawsuits. 44 NeuroOne Medical Technologies Corporation FORM 10-K The sale and use of our cortical strip, grid electrode and depth electrode technology or future versions thereof could lead to the filing of product liability claims if someone were to allege that our cortical strip, grid electrode and depth electrode technology or one of our products contained a design or manufacturing defect.
The sale and use of our cortical strip, grid electrode and depth electrode technology or future versions thereof could lead to the filing of product liability claims if someone were to allege that our cortical strip, grid electrode and depth electrode technology or one of our products contained a design or manufacturing defect.
Any failure to maintain an effective system of internal controls could result in material misstatements of our financial statements or cause us to fail to meet our reporting obligations or fail to prevent fraud in which case, our stockholders could lose confidence in our financial reporting, which would harm our business and could negatively impact the price of our stock.
This litigation, if instituted against us, could result in substantial costs, divert our management’s attention and resources, and harm our business, operating results and financial condition. 52 NeuroOne Medical Technologies Corporation FORM 10-K Any failure to maintain an effective system of internal controls over our financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could result in material misstatements of our financial statements or cause us to fail to meet our reporting obligations or fail to prevent fraud in which case, our stockholders could lose confidence in our financial reporting, which would harm our business and could negatively impact the price of our stock.
Further, under the FDA’s medical device reporting regulations, we are required to report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury.
Recalls of any of our products would divert managerial and financial resources and have an adverse effect on our reputation, financial condition and operating results, which could impair our ability to produce our products in a cost-effective and timely manner. 48 NeuroOne Medical Technologies Corporation FORM 10-K Further, under the FDA’s medical device reporting regulations, we are required to report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury.
Coverage determinations and reimbursement levels of both our products and the healthcare provider’s performance of the insertion and removal procedures are critical to the commercial success of our product, and if we are not able to secure positive coverage determinations and reimbursement levels for our products or the insertion and removal procedures, our business would be materially adversely affected.
Coverage determinations and reimbursement levels of both our products and the healthcare provider’s performance of the insertion and removal procedures are critical to the commercial success of our product, and if we are not able to secure positive coverage determinations and reimbursement levels for our products or the insertion and removal procedures, our business would be materially adversely affected. 35 NeuroOne Medical Technologies Corporation FORM 10-K In addition, there may be significant delays in obtaining reimbursement, and coverage may be more limited than the purposes for which the product is cleared by the FDA or other foreign regulatory authorities.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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ITEM 3. LEGAL PROCEEDINGS From time to time, the Company is subject to litigation and claims arising in the ordinary course of business. PMT Litigation On March 29, 2018, the Company was served with a complaint filed by PMT Corporation (“PMT”), the former employer of Mark Christianson, a current Company employee, and Wade Fredrickson, a now former Company employee.
Added
ITEM 3. LEGAL PROCEEDINGS From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business.
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The complaint added the Company, NeuroOne, Inc. and Mr. Christianson to its existing lawsuit against Mr. Fredrickson in the Fourth Judicial District Court of the State of Minnesota. In the lawsuit, PMT claimed that Mr. Fredrickson and Mr.
Added
Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Removed
Christianson, by virtue of their work for the Company and their prior work during employment with PMT, breached their non-competition, non-solicitation and non-disclosure obligations, breached their fiduciary duty obligations, were unjustly enriched, engaged in unfair competition, engaged in a civil conspiracy, tortiously interfered with PMT’s contracts and prospective economic advantage, and breached a covenant of good faith and fair dealing.
Removed
The litigation was settled on September 29, 2022.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePrior to December 19, 2017, our Common Stock had been quoted on the OTC Pink Sheets under the symbol “OSOK” from November 2012 to August 4, 2017 and under the symbol “NMTC” from August 4, 2017 to December 19, 2017. Stockholders On December 20, 2022, there were 99 record holders of our Common Stock.
Biggest changePrior to December 19, 2017, our Common Stock had been quoted on the OTC Pink Sheets under the symbol “OSOK” from November 2012 to August 4, 2017 and under the symbol “NMTC” from August 4, 2017 to December 19, 2017. Stockholders On December 13, 2023, there were 103 record holders of our Common Stock.
Removed
The transfer agent and registrar for our Common Stock is Action Stock Transfer Corporation. Recent Sales of Unregistered Equity Securities All sales of unregistered equity securities have previously been disclosed in our Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.
Added
The transfer agent and registrar for our Common Stock is Equiniti Trust Company. Share Repurchases During the three months ended September 30, 2023, we repurchased 8,382 common shares surrendered by employees to satisfy income tax withholding obligations of employees in connection with the administration of employee share-based compensation plans.
Added
The following table summarizes the share repurchase activity: Total number of Maximum number shares purchased of shares that may as part of publicly yet be purchased Total number of Average price announced plans under the plans Purchase period shares purchased paid per share or programs or programs July 1 – July 31, 2023 2,794 $ 1.20 - - August 1 – August 31, 2023 2,794 $ 1.02 - - September 1 – September 30, 2023 2,794 $ 0.85 - - ITEM 6. [RESERVED]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

57 edited+30 added−24 removed43 unchanged
Biggest changeNet cash used in operating activities was $8.6 million for the year ended September 30, 2021, which consisted of a net loss of $9.9 million partially offset primarily by stock-based compensation, depreciation, amortization related to intangible assets, revaluation of convertible notes, non-cash lease expense and Paycheck Protection Program loan forgiveness, totaling approximately $1.9 million in the aggregate.
Biggest changeFor the Years Ended September 30, 2023 2022 Net cash used in operating activities $ (12,886,874 ) $ (7,519,534 ) Net cash provided by (used in) investing activities 2,649,964 (3,244,765 ) Net cash provided by financing activities 7,399,074 12,023,282 Net (decrease) increase in cash $ (2,837,836 ) $ 1,258,983 Net cash used in operating activities Net cash used in operating activities was $12.9 million for the year ended September 30, 2023, which consisted of a net loss of $11.9 million partially offset by non-cash stock-based compensation, depreciation, amortization related to intangible assets and short term investment premiums and discounts, operating lease expense and loss on disposal of fixed assets, totaling approximately $1.4 million in the aggregate.
In accordance with the provisions under ASC 606, we identified five performance obligations under the Zimmer Development Agreement and Amendment: (1) our obligation to grant Zimmer access to our intellectual property; (2) completion SEEG Product development; (3) completion of Strip/Grid Product development; (4) the provision of sEEG exclusivity maintenance; and (5) sEEG design modifications as requested by Zimmer.
In accordance with the provisions under ASC 606, we identified five performance obligations under the Zimmer Development Agreement and Amendment: (1) our obligation to grant Zimmer access to our intellectual property; (2) completion of sEEG Product development; (3) completion of Strip/Grid Product development; (4) the provision of sEEG exclusivity maintenance; and (5) sEEG design modifications as requested by Zimmer.
These increases will include increased costs related to the hiring of additional personnel and fees for legal and professional services, as well as other public company related costs. Research and Development Research and development expenses consist of expenses incurred in performing research and development activities in developing our cortical strip, grid electrode and depth electrode technology.
These increases will include increased costs related to the hiring of additional personnel and fees for legal and professional services, as well as other public company related costs. Research and Development Research and development expenses consist of expenses incurred in performing research and development activities in developing our cortical strip and grid electrode and depth electrode technology.
We expect our research and development expenses to significantly increase over the next several years as we develop our cortical strip, grid electrode and depth electrode technology and conduct preclinical testing and clinical trials and will depend on the duration, costs and timing to complete our preclinical programs and clinical trials.
We expect our research and development expenses to significantly increase over the next several years as we develop our cortical strip and grid electrode and depth electrode technology and conduct preclinical testing and clinical trials and will depend on the duration, costs and timing to complete our preclinical programs and clinical trials.
In consideration of the mutual covenants and agreements contained in the Development Agreement, certain fee and milestone payment provisions in the Development Agreement were replaced with the following below: ● $1.5 million for the sEEG exclusivity maintenance fee; and ● $2.0 million for satisfaction of each of the milestone events related to the design of SEEG Products set forth in the Development Agreement, even though the satisfaction was after the deadlines originally identified.
In consideration of the mutual covenants and agreements contained in the Zimmer Development Agreement, certain fee and milestone payment provisions in the Zimmer Development Agreement were replaced with the following below: ● $1.5 million for the sEEG exclusivity maintenance fee; and ● $2.0 million for satisfaction of each of the milestone events related to the design of sEEG Products set forth in the Zimmer Development Agreement, even though the satisfaction was after the deadlines originally identified.
In November 2019, our Evo cortical technology (“cEEG”) received 510(k) clearance from the FDA for recording, monitoring, and stimulating brain tissue for up to 30 days, and in October 2022, we received FDA clearance for our Evo sEEG electrode technology for temporary (less than 30 days) use with recording, monitoring, and stimulation equipment for the recording, monitoring, and stimulation of electrical signals at the subsurface level of the brain.
In November 2019, our Evo cortical electrode technology received 510(k) clearance from the FDA for recording, monitoring, and stimulating brain tissue for up to 30 days, and in October 2022, we received FDA clearance for our Evo sEEG electrode technology for temporary (less than 30 days) use with recording, monitoring, and stimulation equipment for the recording, monitoring, and stimulation of electrical signals at the subsurface level of the brain.
See “Item 1—Business—Clinical Development and Regulatory Pathway—Clinical Experience, Future Development and Clinical Trial Plans” in the 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.
See “Item 1—Business—Clinical Development and Regulatory Pathway—Clinical Experience, Future Development and Clinical Trial Plans” in 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.
We anticipate that our selling, general and administrative expenses will significantly increase in the future to support our continued research and development activities, further commercialization of our cortical strip technology, our grid electrode technology, and our depth electrode technology, and the increased costs of operating as a public company.
We anticipate that our selling, general and administrative expenses will increase in the future to support our continued research and development activities, further commercialization of our cortical strip and grid technology, and our depth electrode technology, and the increased costs of operating as a public company.
The Development Agreement will expire on the tenth anniversary of the date of the first commercial sale of the last Products to achieve a first commercial sale (the “Zimmer Term”), unless terminated earlier pursuant to its terms.
The Zimmer Development Agreement will expire on the tenth anniversary of the date of the first commercial sale of the last Products to achieve a first commercial sale (the “Zimmer Term”), unless terminated earlier pursuant to its terms.
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.
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.
Additionally, our independent registered public accounting firm included an explanatory paragraph in the report on our financial statements as of and for the years ended September 30, 2022 and 2021, respectively, noting the existence of substantial doubt about our ability to continue as a going concern.
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, 2023 and 2022, respectively, noting the existence of substantial doubt about our ability to continue as a going concern.
Our existing cash, cash equivalents and short-term investments may not be sufficient to fund our operating expenses through at least twelve months from the date of this filing. To continue to fund operations, we will need to secure additional funding through public or private equity or debt financings, through collaborations or partnerships with other companies or other sources.
Our existing cash and cash equivalents may not be sufficient to fund our operating expenses through at least twelve months from the date of this filing. To continue to fund operations, we will need to secure additional funding through public or private equity or debt financings, through collaborations or partnerships with other companies or other sources.
The product revenue consisted of the sale of Strip/Grid Products and Electrode Cable Assembly Products. Cost of product revenue consisted of the manufacturing and materials costs incurred by our third-party contract manufacturer in connection with our Strip/Grid Products and outside supplier materials costs in connection with the Electrode Cable Assembly Products.
Cost of product revenue consisted of the manufacturing and materials costs incurred by our third-party contract manufacturer in connection with our Strip/Grid Products, sEEG Products and outside supplier materials costs in connection with the Electrode Cable Assembly Products.
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.
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 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.
On January 22, 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 (the “Original WARF License”).
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 (the “Original WARF License”).
The development and commercialization of our cortical strip, grid electrode and depth electrode technology is subject to numerous uncertainties, and we could use our cash, cash equivalent and short-term investment resources sooner than we expect. Additionally, the process of developing medical devices is costly, and the timing of progress in pre-clinical tests and clinical trials is uncertain.
The development and commercialization of our cortical strip, grid electrode and depth electrode technology is subject to numerous uncertainties, and we could use our cash 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.
Financial Overview Product Revenue Our product revenue was derived from the sale of our strip and grid cortical electrodes (“Strip/Grid Products”) and electrode cable assembly products (“Electrode Cable Assembly Products”) based on Evo cortical technology. We anticipate that we will generate additional revenue from the sale of products based on Evo cortical technology.
Financial Overview Product Revenue Our product revenue was derived from the sale of our Strip/Grid Products, depth electrodes (“sEEG Products”) and electrode cable assembly products (“Electrode Cable Assembly Products”) based on Evo cortical electrode technology. We anticipate that we will generate additional revenue from the sale of products based on Evo cortical electrode technology.
Overview We are a medical technology company focused on the development and commercialization of thin film electrode technology for continuous electroencephalogram (cEEG) and stereoelectrocencephalography (sEEG), spinal cord stimulation, brain stimulation and ablation solutions for patients suffering from epilepsy, Parkinson’s disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other related neurological disorders.
Overview We are a medical technology company focused on the development and commercialization of thin film electrode technology for continuous electroencephalogram (“cEEG”) and stereoelectrocencephalography (“sEEG”), spinal cord stimulation, brain stimulation, drug delivery and ablation solutions for patients suffering from epilepsy, Parkinson’s disease, dystonia, essential tremors, chronic pain due to failed back surgeries and other related neurological disorders.
As of September 30, 2022, we had an accumulated deficit of $50.8 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 collaborations and product revenues.
As of September 30, 2023, we had an accumulated deficit of $62.7 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 collaborations and product revenues.
We commenced commercial sales of cEEG strip/grid and electrode cable assembly products beginning in the first quarter of fiscal year 2021. We sold, on a limited application basis for design verification, sEEG depth electrode products for non-human use beginning in late fiscal year 2021, and plan to commence commercial sales of our sEEG depth electrode products in early calendar 2023.
We commenced commercial sales of cEEG strip/grid and electrode cable assembly products beginning in the first quarter of fiscal year 2021. We sold, on a limited application basis for design verification, sEEG depth electrode products for non-human use beginning in late fiscal year 2021, and we commenced commercial sales of our sEEG depth electrode products in late calendar 2022.
Changes in economic conditions, supply chain constraints, logistics challenges, labor shortages, the conflict in Ukraine, and steps taken by governments and central banks, particularly in response to the COVID-19 pandemic as well as other stimulus and spending programs, 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.
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, particularly in response to the COVID-19 pandemic as well as other stimulus and spending programs, 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.
Our failure to raise such capital as and when needed would have a negative impact on our financial condition and our ability to develop and commercialize our cortical strip, grid electrode and depth electrode technology and future products and our ability to pursue our business strategy.
Our failure to raise such capital as and when needed would have a negative impact on our financial condition and our ability to develop and commercialize our cortical strip, grid electrode and depth electrode technology and future products and our ability to pursue our business strategy. See “Liquidity and Capital Resources—Liquidity Outlook” below.
The net change in our net operating assets and liabilities associated with fluctuations in our operating activities resulted in a cash use of approximately $0.5 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 $2.4 million.
Our cost of product revenue consists of the manufacturing and materials costs incurred by our third-party contract manufacturer in connection with our Strip/Grid Products and outside supplier materials costs of producing the Electrode Cable Assembly Products.
Product Gross Profit (Loss) Product gross profit (loss) 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 manufacturer in connection with our Strip/Grid Products, sEEG Products and outside supplier materials costs of producing the Electrode Cable Assembly Products.
Research and development expenses Research and development expenses were $4.9 million for the year ended September 30, 2022, compared to $3.9 million for the year ended September 30, 2021.
Research and development expenses Research and development expenses were $6.9 million for the year ended September 30, 2023, compared to $4.9 million for the year ended September 30, 2022.
Stock-based Compensation For discussions about the application of grant date fair value associated with our stock-based compensation, see “Note 9 — Stock-Based Compensation” included in “Item 8 — Financial Statements and Supplementary Data” in this Report. 71 NeuroOne Medical Technologies Corporation FORM 10-K Income Tax Assets and Liabilities Income tax assets and liabilities include income tax valuation allowances.
Stock-based Compensation For discussions about the application of grant date fair value associated with our stock-based compensation, see “Note 8 — Stock-Based Compensation” included in “Item 8 — Financial Statements and Supplementary Data” in this Report. Income Tax Assets and Liabilities Income tax assets and liabilities include income tax valuation allowances.
Contracted services include agreements with third-party service providers for clinica l research, product development, manufacturing, supplies, payroll services, equipment maintenance services, and audits for periods up to fiscal 2024.
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 2025.
We completed feasibility bench top testing with a new design of our diagnostic and ablation depth electrode in the first calendar quarter of 2021, and signed a contract with RBC Medical Innovations to develop hardware for the system in the third calendar quarter of 2021. We are targeting the fourth calendar quarter of 2022 for completion of such hardware.
We completed feasibility bench top testing with a new design of our diagnostic and ablation depth electrode in the first calendar quarter of 2021 and signed a contract with RBC Medical Innovations to develop hardware for the system in the third calendar quarter of 2021. We completed design verification of such hardware early in the second calendar quarter of 2023.
Zimmer’s failure to timely develop or commercialize these products would have a material adverse effect on our business and operating results. 69 NeuroOne Medical Technologies Corporation FORM 10-K At September 30, 2022, we had cash, cash equivalents and short-term investments in the aggregate of approximately $11.1 million.
Zimmer’s failure to timely develop or commercialize these products would have a material adverse effect on our business and operating results. 66 NeuroOne Medical Technologies Corporation FORM 10-K At September 30, 2023, we had cash and cash equivalents in the aggregate of approximately $5.3 million.
While we have begun to generate revenue from the sale of products based on our cEEG and sEEG technology and through milestone and other payments from our current collaboration with Zimmer, we expect to continue to incur significant expenses and increasing operating and net losses for the foreseeable future until and unless we generate a higher level of revenue from commercial sales, and we will need to obtain substantial additional funding in connection with our continuing operations through public or private equity or debt financings, through collaborations or partnerships with other companies or other sources. 62 NeuroOne Medical Technologies Corporation FORM 10-K We may be unable to raise additional funds when needed on favorable terms or at all.
While we have begun to generate revenue from the sale of products based on our cEEG and sEEG technology and through milestone and other payments from our current collaboration with Zimmer, we expect to continue to incur significant expenses and increasing operating and net losses for the foreseeable future until and unless we generate a higher level of revenue from commercial sales, and we will need to obtain substantial additional funding in connection with our continuing operations through public or private equity or debt financings, through collaborations or partnerships with other companies or other sources.
In addition, cost of product revenue included royalty fees incurred, including the royalty fees to WARF and Mayo of $0.1 million in connection with our license agreements during each of the years ended September 31, 2022 and 2021. Collaborations Revenue Collaborations revenue was $1.9 million and $0.1 million during the years ended September 30, 2022 and 2021, respectively.
In addition, cost of product revenue included royalty fees incurred of approximately $0.2 million and $0.1 million in connection with our license agreements during the years ended September 30, 2023 and 2022, respectively. Collaborations Revenue Collaborations revenue was $1.5 million and $1.9 million during the years ended September 30, 2023 and 2022, respectively.
Funding Requirements As noted above, certain of our cash requirements relate to the funding of our ongoing product development and commercialization operations and our milestone and royalty obligations under our intellectual property licenses with the Wisconsin Alumni Research Foundation (“WARF”) and the Mayo Foundation for Medical Education and Research (“Mayo”).
Funding Requirements As noted above, certain of our cash requirements relate to the funding of our ongoing product development and commercialization operations and our milestone and royalty obligations under our intellectual property licenses with WARF and Mayo.
The year on year change in operating assets and liabilities was primarily attributable to a net decrease in accounts payable and accrued expenses, and by an increases in inventory purchases, accounts receivable and prepaid expenses. 70 NeuroOne Medical Technologies Corporation FORM 10-K Net cash used in investing activities Net cash used by investing activities for the year ended September 30, 2022 was $3.2 million and consisted of purchases of short-term investments consisting of treasury and corporate notes of approximately $3.5 million and outlays for purchases of property and equipment of $0.3 million which were partially offset by maturities of short-term investments in the amount of $0.5 million.
The year on year change in operating assets and liabilities was primarily attributable to a net increase in accounts payable, accrued expenses and deferred revenue, offset partially by increases in inventory purchases and prepaid expenses. 67 NeuroOne Medical Technologies Corporation FORM 10-K Net cash provided by (used in) investing activities Net cash provided by investing activities was $2.6 million for the year ended September 30, 2023 and consisted of maturities of short-term investments in the amount of $4.5 million, offset by purchases of short term investments of $1.5 million, consisting of treasury and corporate notes.
For the Years Ended September 30, 2022 2021 Net cash used in operating activities $ (7,519,534 ) $ (8,602,826 ) Net cash used in investing activities (3,244,765 ) (67,079 ) Net cash provided by financing activities 12,023,282 11,534,854 Net increase in cash $ 1,258,983 $ 2,864,949 Net cash used in operating activities Net cash used in operating activities was $7.5 million for the year ended September 30, 2022, which consisted of a net loss of $10.0 million partially offset primarily by stock-based compensation, depreciation, amortization related to intangible assets and to short-term investment discounts and premiums, non-cash lease expense and non-cash consideration associated with the Zimmer Development Agreement, totaling approximately $1.3 million in the aggregate.
Net cash used in operating activities was $7.5 million for the year ended September 30, 2022, which consisted of a net loss of $10.0 million partially offset primarily by stock-based compensation, depreciation, amortization related to intangible assets and to short-term investment discounts and premiums, non-cash lease expense and non-cash consideration associated with the Zimmer Development Agreement, totaling approximately $1.3 million in the aggregate.
For further discussion about the determination of collaborations revenue, product revenue and cost of product revenue, see “Note 7 — Zimmer Development Agreement” included in “Item 8 — Financial Statements and Supplementary Data” in this Report.
For further discussion about the determination of collaborations revenue, product revenue and cost of product revenue, and for a discussion of milestones and royalty payments under the Zimmer Development Agreement, see “—Liquidity and Capital Resources—Liquidity Outlook” below and see “Note 7 — Zimmer Development Agreement” included in 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 Development Agreement” included in “Item 8 — Financial Statements and Supplementary Data” in this Report.
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. 68 NeuroOne Medical Technologies Corporation FORM 10-K 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 Development Agreement” included in “Item 8 — Financial Statements and Supplementary Data” in this Report.
Selling, general and administrative expenses Selling, general and administrative expenses were $7.0 million for the year ended September 30, 2022, compared to $6.3 million for the year ended September 30, 2021.
Selling, general and administrative expenses Selling, general and administrative expenses were $6.9 million and $7.0 million for the years ended September 30, 2023 and 2022, respectively.
We recognized revenue in the amount of $1,948,872 and $64,812 during the years ended September 30, 2022 and 2021, respectively, in connection with the Zimmer Development Agreement and Amendment. 64 NeuroOne Medical Technologies Corporation FORM 10-K The achievement of the level of sales required to earn royalty payments from Zimmer is uncertain.
During the year ended September 30, 2022, we recognized revenue in the amount of $1.9 million related to sEEG Product development. 62 NeuroOne Medical Technologies Corporation FORM 10-K The achievement of the level of sales required to earn royalty payments from Zimmer is uncertain.
Pursuant to the terms and conditions of the Amendment, Zimmer made a $3.5 million payment to us in August 2022.
In addition, on August 2, 2022, we entered into a Third Amendment to the Zimmer Development Agreement (the “Amendment”) with Zimmer. Pursuant to the terms and conditions of the Amendment, Zimmer made a $3.5 million payment to us in August 2022.
In addition, cost of product revenue includes royalty fees incurred in connection with our license agreements. 63 NeuroOne Medical Technologies Corporation FORM 10-K Collaborations Revenue On July 20, 2020, we entered into an exclusive development and distribution agreement (the “Zimmer Development Agreement”) with Zimmer, pursuant to which we granted Zimmer exclusive global rights to distribute the Strip/Grid Products and electrode cable assembly products (the “Electrode Cable Assembly Products”).
Collaborations Revenue On July 20, 2020, we entered into an exclusive development and distribution agreement (the “Zimmer Development Agreement”) with Zimmer, pursuant to which we granted Zimmer exclusive global rights to distribute the Strip/Grid Products and electrode cable assembly products (the “Electrode Cable Assembly Products”).
All performance obligations under the Zimmer Development Agreement and Amendment, outside of the sEEG exclusivity maintenance obligation, were met as of September 30, 2022.
All performance obligations under the Zimmer Development Agreement and Amendment were met as of December 31, 2022.
We also completed an animal feasibility study at Emory University in September 2021. Next, we plan to complete additional animal studies through the first quarter of calendar 2023, and submit an application for FDA 510(k) clearance in the second calendar quarter of 2023. Our other products are still under development.
We also completed an animal feasibility study at Emory University in September 2021. We completed additional animal studies early in the second quarter of calendar 2023 and received 510(k) clearance in December 2023 for creation of radiofrequency lesions in nervous tissue for functional neurosurgical procedures. Our other products are still under development.
Our other products are still under development. We have incurred losses since inception.
Our other products are still under development. 59 NeuroOne Medical Technologies Corporation FORM 10-K We have incurred losses since inception.
The base offering closed on October 15, 2021, and the sale of 422,057 shares of common stock subject to the underwriter’s overallotment option closed on November 15, 2021.
The base offering closed on October 15, 2021, and the sale of 422,057 shares of common stock subject to the underwriter’s overallotment option closed on November 15, 2021. The gross proceeds from this offering were approximately $13.4 million prior to deducting underwriting discounts and other offering expenses payable by us.
October 2021 Underwritten Public Offering On October 13, 2021, we entered into an underwriting agreement relating to the issuance and sale of 3,750,000 shares of our common stock at a price to the public of $3.20 per share (the “October 2021 Underwritten Public Offering”).
On December 1, 2023, we 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 $4.8 million of our common stock for sale under the Sales Agreement, including the shares of common stock previously sold. 65 NeuroOne Medical Technologies Corporation FORM 10-K October 2021 Underwritten Public Offering On October 13, 2021, we entered into an underwriting agreement relating to the issuance and sale of 3,750,000 shares of our common stock at a price to the public of $3.20 per share (the “October 2021 Underwritten Public Offering”).
Net cash used by investing activities for the year ended September 30, 2021 was $0.1 million and consisted of outlays for research and development equipment. Net cash provided by financing activities Net cash provided by financing activities was $12.0 million for the year ended September 30, 2022, which consisted of net proceeds from the October 2021 Underwritten Public Offering.
Net cash provided by financing activities was $12.0 million for the year ended September 30, 2022, which consisted of net proceeds from the October 2021 Underwritten Public Offering. Critical Accounting Policies and Significant Judgments and Estimates Our financial statements are prepared in accordance with U.S. generally accepted accounting principles.
Liquidity and Capital Resources Overview As of September 30, 2022, our principal source of liquidity consisted of cash, cash equivalents and short-term investments in the aggregate of approximately $11.1 million.
Other income, net during the year ended September 30, 2022 consisted principally of interest income attributed to our cash, cash equivalents and short-term investments, while outstanding. 64 NeuroOne Medical Technologies Corporation FORM 10-K Liquidity and Capital Resources Overview As of September 30, 2023, our principal source of liquidity consisted of cash and cash equivalents in the aggregate of approximately $5.3 million.
Except as otherwise provided in the Zimmer Development Agreement, we are 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 Zimmer Development Agreement) for such Product.
In addition to the Zimmer Development Agreement, Zimmer and the Company have entered into an MS Agreement and a Quality Agreement with respect to the manufacturing and supply of the Products. 61 NeuroOne Medical Technologies Corporation FORM 10-K Except as otherwise provided in the Zimmer Development Agreement, we are responsible for performing all development activities, including non-clinical and clinical studies directed at obtaining regulatory approval of each Product.
The $1.0 million increase during fiscal 2022 over the comparable prior year period was due to an increase in supporting development activities largely attributed to our Evo sEEG electrode technology, which primarily included salary-related expenses and other costs of consulting services, materials and supplies. 66 NeuroOne Medical Technologies Corporation FORM 10-K Interest expense Interest expense for the year ended September 30, 2021 was $3,000 and consisted of issuance costs in connection with our 2019 Paulson Notes described further below.
The $2.0 million increase during fiscal 2023 over the comparable prior year period was attributed to supporting development activities, which primarily included salary-related expenses and costs related to consulting services, materials and supplies associated with the development of future sEEG product applications and other products utilizing new technologies.
Other Income Other income primarily consists of interest income related to our cash, cash equivalents and short-term investments and to proceeds outside of normal operating activity relating to legal settlements and sales of non-commercial supplies. 65 NeuroOne Medical Technologies Corporation FORM 10-K Results of Operations Comparison of the Fiscal Years Ended September 30, 2022 and 2021 The following table sets forth our results of operations for the fiscal years ended September 30, 2022 and 2021.
Other Income, net Other income, net primarily consists of interest income related to our cash, cash equivalents, investment income or loss from short-term investments and other income or expense outside of normal operating activity relating to legal settlements, sales of non-commercial supplies and other items as applicable.
Net cash provided by financing activities was $11.5 million for the year ended September 30, 2021, which consisted primarily of net proceeds received upon the issuance of the 2021 Private Placement in the amount of $11.3 million in the aggregate.
Net cash provided by financing activities Net cash provided by financing activities was $7.4 million for the year ended September 30, 2023, which consisted of net proceeds from the July 2023 Public Offering of $5.2 million and from the ATM of $2.3 million, offset partially by repurchases of common stock for the payment of employee taxes in the amount of $0.1 million.
Pursuant to the Zimmer Development Agreement, Zimmer made an upfront initial exclusivity fee payment of $2.0 million (the “Initial Exclusivity Fee”) to the Company in fiscal year 2020. In addition, on August 2, 2022, we entered into a Third Amendment to the Zimmer Development Agreement (the “Amendment”) with Zimmer.
Zimmer has agreed to use commercially reasonable efforts to promote, market and sell each Product following the “Product Availability Date” (as defined in the Zimmer Development Agreement) for such Product. Pursuant to the Zimmer Development Agreement, Zimmer made an upfront initial exclusivity fee payment of $2.0 million (the “Initial Exclusivity Fee”) to the Company in fiscal year 2020.
Even though we have received regulatory clearance to expand the use of our Evo sEEG Electrode technology for up to 30 days, we don’t anticipate that commercial sales of the sEEG Electrode will begin until early 2023. Zimmer has exclusive global rights to distribute our strip and grid cortical electrodes, depth electrodes and electrode cable assembly products.
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 are expected to take some time to be a significant source of liquidity.
We did not have any instruments measured at fair value during fiscal year 2022. Other Income Other income during the year ended September 30, 2022 related to interest income on our cash, cash equivalents and short-term investments in the amount of $31,000.
Other Income, net Other income, net during the year ended September 30, 2023 related to interest income attributed to our cash, cash equivalents and short-term investments in the amount of $0.2 million, while outstanding, which was partially offset by an exploit loss of $94,000 and a loss on disposal of equipment in the amount of $32,000.
For the years ended September 30, 2022 2021 Period to Period Change Product revenue $ 171,169 $ 178,146 $ (6,977 ) Cost of product revenue 241,963 275,895 (33,932 ) Product gross loss (70,794 ) (97,749 ) 26,955 Collaborations revenue 1,948,872 64,812 1,884,060 Operating expenses: Selling, general and administrative 6,979,416 6,260,266 719,150 Research and development 4,929,427 3,925,008 1,004,419 Total operating expenses 11,908,843 10,185,274 1,723,569 Loss from operations (10,030,765 ) (10,218,211 ) 187,446 Interest expense — (3,053 ) 3,053 Net valuation change of instruments measured at fair value — 1,974 (1,974 ) Other income 31,152 271,122 (239,970 ) Net loss $ (9,999,613 ) $ (9,948,168 ) $ (51,445 ) Product Revenue and Product Gross Loss Product revenue and product gross loss were $0.2 million and $(0.1) million, respectively, during each of the years ended September 30, 2022 and 2021.
For the years ended September 30, 2023 2022 Period to Period Change Product revenue $ 1,952,441 $ 171,169 $ 1,781.272 Cost of product revenue 1,495,924 241,963 1,253,961 Product gross profit (loss) 456,517 (70,794 ) 527,311 Collaborations revenue 1,455,188 1,948,872 (493,684 ) Operating expenses: Selling, general and administrative 6.926,269 6,979,416 (53,147 ) Research and development 6,940,686 4,929,427 2,011,259 Total operating expenses 13,866,955 11,908,843 1,958,112 Loss from operations (11,955,250 ) (10,030,765 ) (1,924,485 ) Other income, net 95,759 31,152 64,607 Loss before income taxes (11,859,491 ) (9,999,613 ) (1,859,878 ) Provision for income taxes — — — Net loss $ (11,859,491 ) $ (9,999,613 ) $ (1,859,878 ) 63 NeuroOne Medical Technologies Corporation FORM 10-K Product Revenue and Product Gross Profit (Loss) Product revenue and product gross profit were $2.0 million and $0.5 million, respectively, during the year ended September 30, 2023.
Additionally, we are investigating the potential applications of our technology associated with artificial intelligence.
We are also developing the capability to use our sEEG electrode technology to deliver drugs or gene therapy while being able to record brain activity before, during, and after delivery. Additionally, we are investigating the potential applications of our technology associated with artificial intelligence.
The year on year change in operating assets and liabilities was primarily attributable to a net increase in accounts payable, accrued expenses and deferred revenue, offset partially by increases in inventory purchases and prepaid expenses.
The net cash use stemming from the change in operating assets and liabilities was primarily attributable to both a decrease in deferred revenue in connection with the completion of the remaining milestone performance obligation under the Zimmer Development Agreement and to an increase in inventory purchases, attributed to the timing of payments.
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References in this discussion to “series” or “notes” refer to all of our outstanding notes as of the relevant date of the item being discussed. References in this discussion to “convertible promissory notes” refer to all of our outstanding convertible promissory notes as of the relevant date of the item being discussed.
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We may be unable to raise additional funds when needed on favorable terms or at all.
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See “Liquidity and Capital Resources—Liquidity Outlook” below Recent Developments and Upcoming Milestones Corporate Updates Accelerated Zimmer Milestone Payment In August 2022, we entered into an amendment to the Exclusive Development and Distribution Agreement with Zimmer that provided us with a $3.5 million accelerated payment relating to certain milestone events.
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Recent Developments and Upcoming Milestones Corporate Updates Appointment of COO On November 14, 2023, we announced the appointment of Christopher R.
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As part of the consideration, Zimmer received a Warrant to purchase 350,000 shares of our Common Stock, with an exercise price of $3.00 per share. Global Economic Conditions Generally, worldwide economic conditions remain uncertain, particularly due to the effects of the COVID-19 pandemic and increased inflation.
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Volker as the Chief Operating Officer of the Company, effective on November 10, 2023. sEEG Commercial Launch In May 2023, we announced the commercial launch of the Evo® sEEG electrode product line in the United States with exclusive distribution partner Zimmer Biomet.
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We expect to begin generating revenue from our depth electrode technology in the first quarter of fiscal 2023. Product Gross Loss Product gross loss represents our product revenue less our cost of product revenue.
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We have fulfilled eight shipments of sEEG product to Zimmer Biomet in preparation for launch and completed initial training on the sEEG product line to Zimmer Biomet sales personnel. The first clinical case using the Evo® sEEG electrode in robotic neurosurgery was performed by Dr. William Bingaman at the Cleveland Clinic.
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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.
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The procedure was the first to utilize NeuroOne’s Evo sEEG electrode with Zimmer Biomet’s ROSA One® Brain, a robotic platform that assists surgeons in planning and performing complex yet minimally invasive neurosurgical procedures.
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Interest Expense Interest expense consists of interest costs related to our convertible notes issued in 2019 (the “2019 Paulson Notes”) outstanding during the first quarter of fiscal year 2021.
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OneRF Ablation During the second fiscal quarter of 2023, we successfully completed summative usability testing for OneRF with 15 neurosurgeons, and completed execution of internal device verification/validation protocols for the final OneRF ablation system.
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Net valuation change of instruments measured at fair value The net valuation change of instruments measured at fair value included the change in fair value of the 2019 Paulson Notes while they were outstanding.
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We submitted a 510(k) application to the FDA for the OneRF ablation system in June 2023, submitted responses to FDA comments on November 6, 2023 and received 510(k) clearance on December 6, 2023.
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The increase of $0.7 million was primarily due to an increase in legal and litigation settlement costs of $0.8 million, public company costs largely in connection with the Nasdaq up-listing of $0.6 million and other operating costs on a net basis of $0.1 million, offset partially by a reduction in stock-based compensation of $0.8 million.
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Spinal Cord Stimulation Program During the second fiscal quarter of 2023, we completed an initial animal implant of novel thin film paddle leads for spinal cord stimulation (SCS). The devices are intended for the treatment of patients with chronic back pain due to multiple failed back surgery syndrome, intractable low back, and leg pain.
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We did not incur any interest expense in fiscal year 2022. Net valuation change of instruments measured at fair value The net valuation change of instruments measured at fair value for the year 2021 was a benefit of $(2,000) attributed to the fair value change of Paulson Notes while they were outstanding.
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A percutaneous (through a needle) delivery system for paddle leads is also under development and has been successfully bench-tested. 60 NeuroOne Medical Technologies Corporation FORM 10-K Global Economic Conditions Generally, worldwide economic conditions remain uncertain, particularly due to the conflicts between Russia and Ukraine and the Middle East, disruptions in the banking system and financial markets, lingering effects of the COVID-19 pandemic and increased inflation.
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Other income during the year ended September 30, 2021 consisted principally of proceeds received in connection with the PMT Corporation litigation in the amount of $0.2 million and from the forgiveness of the paycheck protection program loan in the amount of $0.1 million.
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In addition, cost of product revenue includes royalty fees incurred in connection with our license agreements.
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The gross proceeds from this offering were approximately $13.4 million prior to deducting underwriting discounts and other offering expenses payable by us. 67 NeuroOne Medical Technologies Corporation FORM 10-K 2021 Private Placement On January 12, 2021, we entered into a purchase agreement with certain accredited investors, pursuant to which the Company, in a private placement (the “2021 Private Placement”), agreed to issue and sell an aggregate of 4,166,682 shares of the common stock of the Company, and warrants to purchase an aggregate of 4,166,682 shares of common stock (the “2021 Warrants”) at an aggregate purchase price of $3.00 per share of common stock and corresponding warrant, resulting in total gross proceeds of $12.5 million before deducting placement agent fees and estimated offering expenses.
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In October 2022, we received 510(k) clearance from the FDA for our Evo sEEG electrode technology for temporary (less than 30 days) use with recording, monitoring, and stimulation equipment for the recording, monitoring, and stimulation of electrical signals at the subsurface level of the brain.
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The 2021 Warrants have an initial exercise price of $5.25 per share. The 2021 Warrants became immediately exercisable beginning on the date of issuance and will expire on the fifth anniversary of such date.

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