Notes
to Condensed Financial Statements
(unaudited)
NOTE
1 – Description of Business and Basis of Presentation
NeuroOne
Medical Technologies Corporation (the “Company” or “NeuroOne”), a Delaware Corporation, is an early-stage medical
technology company developing comprehensive neuromodulation cEEG and sEEG monitoring, ablation, and brain stimulation solutions to diagnose
and treat patients with epilepsy, Parkinson’s disease, essential tremors, and other brain related disorders.
To
date, the Company has had limited commercial sales. The Company is currently raising capital to fund the development of its proprietary
technology. The Company received 510(k) clearance from the FDA to market the initial cEEG product and submitted an application for 510(k)
clearance for a second product in May 2021.
The
Company’s common stock commenced trading on The Nasdaq Capital Market on May 26, 2021 under the ticker symbol “NMTC.”
Previously, the Company’s common stock was traded on the OTC Markets quotation system on the OTCQB.
The
Company is based in Eden Prairie, Minnesota.
COVID-19
On
March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a global pandemic.
As a result of the COVID-19 pandemic, the Company has experienced, and will likely continue to experience, delays and disruptions in
its pre-clinical and clinical trials, as well as interruptions in its manufacturing, supply chain, shipping, and research and development
operations. For example, one of our key manufacturing partners and one of the Company’s suppliers have had staffing issues due
to COVID-19, leading to delays in the Company’s development builds and delays in shipping product. Additionally, the Company’s
own staff has been impacted by infections and mandatory quarantines. The Company’s plans for further testing or clinical trials
may be further impacted by the continuing effects of COVID-19. The global outbreak of COVID-19 continues to rapidly evolve. In April
2020, given the impact of COVID-19 on the Company and in connection with the enactment of the CARES Act, the Company applied for and
received loan funding of $83,333 under the Paycheck Protection Program (“PPP”), which was forgiven by the U.S. Small Business
Administration in June 2021.
The
extent to which the COVID-19 pandemic may impact the Company’s business and pre-clinical and clinical trials will depend on future
developments, which are highly uncertain and cannot be predicted with confidence, such as the effect of the pandemic on its suppliers
and distributors and the global supply chain, the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions
and social distancing in the U.S. and other countries, business closures or business disruptions and the effectiveness of actions taken
in the U.S. and other countries to contain and treat the disease. The COVID-19 pandemic may also impact the Company’s business
because of employee illness, school closures, and other community response measures.
Although
the Company cannot estimate the length or gravity of the impact of the COVID-19 outbreak at this time, if the pandemic continues, it
may have a material adverse effect on the Company’s results of future operations, financial position, and liquidity for the remainder
of fiscal year 2021 and beyond.
Basis
of presentation
The
accompanying unaudited condensed financial statements have been prepared by the Company, pursuant to the rules and regulations of the
Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial
statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to
such rules and regulations. The condensed financial statements may not include all disclosures required by U.S. GAAP; however, the Company
believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed financial statements
should be read in conjunction with the audited financial statements and the notes thereto for the year ended September 30, 2020 included
in the Annual Report on Form 10-K. The condensed balance sheet at September 30, 2020 was derived from the audited financial statements
of the Company.
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
In
December 2019, the Company merged its wholly owned subsidiary, NeuroOne Inc., into NeuroOne Medical Technologies Corporation. The merger
of the Company’s wholly owned subsidiary did not have a financial impact to the periods presented. Upon close of the merger, the
Company did not have any remaining entities that required consolidation for financial statement reporting purposes.
In
the opinion of management, all adjustments, consisting of only normal recurring adjustments that are necessary to present fairly the
financial position, results of operations, and cash flows for the interim periods, have been made. The results of operations for the
interim periods are not necessarily indicative of the operating results for the full fiscal year or any future periods.
Reclassifications
Certain
amounts presented in the prior year period have been reclassified to conform to current period financial statement presentation. The
change in accounts payable and accrued expenses reported in the statements of cash flows during the comparable prior year period was
reclassified into two separate line item categories and the non-cash portion of the lease liability line item was reclassified to the
change in accrued expenses, deferred revenue, operating lease and other liabilities line item.
Reverse
Stock Split
On
March 11, 2021, the Company’s Board of Directors (the “Board”) approved a one-for-three reverse stock split of the
Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”).
All
issued and outstanding common stock and per share amounts contained in the financial statements have been retroactively adjusted to reflect
this Reverse Stock Split for all periods presented. In addition, a proportionate adjustment was made to the per share exercise price
and the number of shares issuable upon the exercise of all outstanding stock options, restricted stock units and warrants to purchase
shares of common stock. A proportionate adjustment was also made to the number of shares reserved for issuance pursuant to the Company’s
equity incentive compensation plans to reflect the Reverse Stock Split. Any fraction of a share of common stock that was created as a
result of the Reverse Stock Split was rounded up to the next whole share. The authorized shares and par value of the common stock and
preferred stock were not adjusted as a result of the Reverse Stock Split.
NOTE
2 – Going Concern
The
accompanying condensed financial statements have been prepared on the basis that the Company will continue as a going concern. The Company
has incurred losses since inception, negative cash flows from operations, and an accumulated deficit of $38.2 million as of June 30,
2021. The Company has not established a source of revenues to cover its full operating costs, and as such, has been dependent on funding
operations through the issuance of debt and sale of equity securities. The Company does not have adequate liquidity to fund its operations
without raising additional funds. These factors raise substantial doubt about its ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of this condition. While the Company’s future operating
activities under the distribution and development agreement with Zimmer, Inc. coupled with its plans to raise capital or issue debt financing
may provide additional liquidity in the future, these actions are not solely within the control of the Company. If the Company is unable
to raise additional funds, or the Company’s anticipated operating results are not achieved, management believes planned expenditures
may need to be reduced in order to extend the time period that existing resources can fund the Company’s operations. If management
is unable to obtain the necessary capital, it may have a material adverse effect on the operations of the Company and the development
of its technology, or the Company may have to cease operations altogether.
NOTE
3 – Summary of Significant Accounting Policies
Management’s
Use of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, primarily in connection with
the convertible promissory notes while outstanding, and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
Revenue
Recognition
The
Company entered into a development and distribution agreement which has current and future revenue recognition implications. See Note
7 – Zimmer Development Agreement.
Product
Revenue
Revenues
from product sales are recognized when control of the promised goods or services is transferred to the Company’s customers, in
an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. At the inception
of each contract, performance obligations are identified and the total transaction price is allocated to the performance obligations.
The Company commenced commercial sales of cEEG strip/grid and electrode cable assembly products in the first quarter of fiscal year 2021.
Cost
of Product Revenue
Cost
of product revenue consists of the manufacturing and materials costs incurred by the Company’s third-party contract manufacturer
in connection with NeuroOne’s strip and grid cortical electrodes (the “Strip/Grid Products”) and outside supplier materials
costs in connection with the Electrode Cable Assembly Products. In addition, cost of product revenue includes royalty fees incurred in
connection with the Company’s license agreements.
Collaborations
Revenue
In
determining the appropriate amount of revenue to be recognized as it fulfills its obligations under its agreements, the Company performs
the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised
goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of
the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance
obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
A
performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in
Account Standards Codification (“ASC”) Topic 606. Performance obligations may include license rights, development services,
and services associated with regulatory submission and approval processes. Significant management judgment is required to determine the
level of effort required under an arrangement and the period over which the Company expects to complete its performance obligations under
the arrangement. If the Company cannot reasonably estimate when its performance obligations are either completed or become inconsequential,
then revenue recognition is deferred until the Company can reasonably make such estimates. Revenue is then recognized over the remaining
estimated period of performance using the cumulative catch-up method.
As
part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone
selling price of each performance obligation identified in the contract. The Company uses key assumptions to determine the stand-alone
selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates
and probabilities of technical and regulatory success. The Company allocates the total transaction price to each performance obligation
based on the estimated relative standalone selling prices of the promised goods or service underlying each performance obligation.
Licenses
of intellectual property: If the license to the Company’s intellectual property is determined to be distinct from the other
performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, up-front fees allocated to
the license when the license is transferred to the customer, and the customer can use and benefit from the license. For licenses that
are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine
whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of
measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress
each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
Milestone
payments: At the inception of each arrangement that includes milestone payments, the Company evaluates whether the milestones are
considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method.
If it is probable that a significant revenue reversal would not occur, the value of the associated milestone (such as a regulatory submission)
is included in the transaction price. Milestone payments that are not within the control of the Company, such as approvals from regulators,
are not considered probable of being achieved until those approvals are received. When the Company’s assessment of probability
of achievement changes and variable consideration becomes probable, any additional estimated consideration is allocated to each performance
obligation based on the estimated relative standalone selling prices of the promised goods or service underlying each performance obligation
and recorded in license, collaboration, and other revenues based upon when the customer obtains control of each element.
Royalties:
For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed
to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (a) when the related sales occur,
or (b) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
Fair
Value of Financial Instruments
The
Company’s accounting for fair value measurements of assets and liabilities that are recognized or disclosed at fair value in the
financial statements on a recurring or nonrecurring basis adheres to the Financial Accounting Standards Board (“FASB”) fair
value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements
involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
|
●
|
Level
1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities
accessible to the Company at the measurement date.
|
|
●
|
Level
2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the
asset or liability, either directly or indirectly, for substantially the full term of the
asset or liability.
|
|
●
|
Level
3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the
extent that observable inputs are not available, thereby allowing for situations in which
there is little, if any, market activity for the asset or liability at the measurement date.
|
As
of June 30, 2021 and September 30, 2020, the fair values of cash, prepaid expenses, other assets, accounts payable and accrued expenses
approximated their carrying values because of the short-term nature of these assets or liabilities. The fair value of the convertible
notes while outstanding were based on both the fair value of our common stock, discount associated with the embedded redemption features,
and cash flow models discounted at current implied market rates evidenced in recent arms-length transactions representing expected returns
by market participants for similar instruments and are based on Level 3 inputs.
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
There
were no transfers between fair value hierarchy levels during the three and nine months ended June 30, 2021 and 2020.
The
fair value of financial instruments measured on a recurring basis is as follows:
|
|
As
of June 30, 2021
|
|
Description
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
notes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total
liabilities at fair value
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
As
of September 30, 2020
|
|
Description
|
|
Total
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
notes
|
|
$
|
1,007,206
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,007,206
|
|
Total
liabilities at fair value
|
|
$
|
1,007,206
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,007,206
|
|
The
following table provides a roll-forward of the convertible notes at fair value on a recurring basis using unobservable level 3 inputs
for the nine months ended June 30 as follows:
|
|
2021
|
|
Convertible notes
|
|
|
|
Balance as
of beginning of period – September 30, 2020
|
|
$
|
1,007,206
|
|
Change
in fair value including accrued interest
|
|
|
(1,974
|
)
|
Conversion
of convertible promissory notes to common stock
|
|
|
(1,005,232
|
)
|
Balance
as of end of period – June 30, 2021
|
|
$
|
—
|
|
|
|
2020
|
|
Convertible notes
|
|
|
|
Balance as of beginning
of period – September 30, 2019
|
|
$
|
—
|
|
Fair
value attributed to convertible promissory notes upon issuance
|
|
|
13,974,358
|
|
Fair
value attributed to note extinguishment
|
|
|
2,017,847
|
|
Conversion
of convertible promissory notes to common stock
|
|
|
(8,088,951
|
)
|
Change
in fair value including accrued interest
|
|
|
(1,175,685
|
)
|
Balance
as of end of period –June 30, 2020
|
|
$
|
6,727,569
|
|
Intellectual
Property
The
Company has entered into two licensing agreements with major research institutions, which allow for access to certain patented technology
and know-how. Payments under those agreements are capitalized and amortized to general and administrative expense over the expected useful
life of the acquired technology.
Property
and Equipment
Property
and equipment is recorded at cost and reduced by accumulated depreciation. Depreciation expense is recognized over the estimated useful
lives of the assets using the straight-line method. The estimated useful life for equipment and furniture ranges from three to seven
years and three years for software. Tangible assets acquired for research and development activities and that have alternative use are
capitalized over the useful life of the acquired asset. Estimated useful lives are periodically reviewed, and, when appropriate, changes
are made prospectively. Software purchased for internal use consists primarily of amounts paid for perpetual licenses to third-party
software providers and installation costs. When certain events or changes in operating conditions occur, asset lives may be adjusted
and an impairment assessment may be performed on the recoverability of the carrying amounts. Maintenance and repairs are charged directly
to expense as incurred.
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
Allowances
for Doubtful Accounts
The
Company records a provision for doubtful accounts, when appropriate, based on historical experience and a detailed assessment of the
collectability of its accounts receivable. In estimating the allowance for doubtful accounts, the Company considers, among other factors,
the aging of the accounts receivable, its historical write-offs, the credit worthiness of each customer, and general economic conditions.
Account balances are charged off against the allowance when the Company believes that it is probable that the receivable will not be
recovered. Actual write-offs may be in excess of the Company’s estimated allowance.
Inventories
Inventories
are stated at the lower of cost (using the first-in, first-out “FIFO” method) or net realizable value. The Company calculates
inventory valuation adjustments for excess and obsolete inventory, when appropriate, based on current inventory levels, movement, expected
useful lives, and estimated future demand of the products and spare parts. The Company’s inventory is currently comprised of cEEG
strip/grid and electrode cable assembly finished good product. The Strip/Grid Products are produced by a third-party contract manufacturer
and the Electrode Cable Assembly Products are obtained from outside suppliers.
Impairment
of Long-Lived Assets
The
Company evaluates its long-lived assets, which consist of licensed intellectual property and property and equipment for impairment whenever
events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. The Company assesses the
recoverability of long-lived assets by determining whether or not the carrying value of such assets will be recovered through undiscounted
expected future cash flows. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between
the carrying value and the fair value of the impaired asset.
Research
and Development Costs
Research
and development costs are charged to expense as incurred. Research and development expenses may include costs incurred in performing
research and development activities, including clinical trial costs, manufacturing costs for both clinical and pre-clinical materials
as well as other contracted services, license fees, and other external costs. Non-refundable advance payments for goods and services
that will be used in future research and development activities are expensed when the activity is performed or when the goods have been
received, rather than when payment is made, in accordance with ASC 730, Research and Development.
Selling,
General and Administrative
Selling,
general and administrative expenses consist primarily of personnel-related costs including stock-based compensation for personnel in
functions not directly associated with research and development activities. Other significant costs include legal fees relating to corporate
matters, intellectual property costs, professional fees for consultants assisting with regulatory, clinical, product development, financial
matters, and beginning in the first quarter of fiscal year 2021, sales and marketing in connection with the commercial sale of cEEG strip/grid
and electrode cable assembly products.
Income
Taxes
For
the Company, income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax base and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered
or settled. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred
tax asset will not be realized.
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
Net
Loss Per Share
For
the Company, basic loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common
stock outstanding during the period.
Diluted
earnings or loss per share of common stock is computed similarly to basic earnings or loss per share except the weighted average shares
outstanding are increased to include additional shares from the assumed exercise of any common stock equivalents, if dilutive. The Company’s
convertible promissory notes, warrants, stock options and restricted stock units while outstanding are considered common stock equivalents
for this purpose. Diluted earnings is computed utilizing the treasury method for the warrants, stock options and restricted stock units.
Diluted earnings with respect to the convertible promissory notes utilize the if-converted method. No incremental common stock equivalents
were included in calculating diluted loss per share because such inclusion would be anti-dilutive given the net loss reported for the
three and nine months ended June 30, 2021 and 2020.
The
following potential common shares were not considered in the computation of diluted net loss per share as their effect would have been
anti-dilutive for the three and nine months ended June 30, 2021 and 2020:
|
|
2021
|
|
|
2020
|
|
Warrants
|
|
|
7,503,808
|
|
|
|
3,390,220
|
|
Stock
options
|
|
|
1,162,838
|
|
|
|
479,509
|
|
Restricted
stock units
|
|
|
18,176
|
|
|
|
36,948
|
|
Convertible
notes
|
|
|
—
|
|
|
|
1,465,249
|
|
Recent
Accounting Pronouncements
In
June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses”.
The ASU sets forth a “current expected credit loss” (“CECL”) model which requires the Company to measure all
expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable
supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial
assets measured at amortized cost and applies to some off-balance sheet credit exposures. This ASU is effective for fiscal years beginning
after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. Recently, the FASB issued
the final ASU to delay adoption for smaller reporting companies to calendar year 2023. The Company is currently assessing the impact
of the adoption of this ASU on its financial statements.
In
August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements
for Fair Value Measurement (ASU 2018-13). The new guidance modifies the disclosure requirements in Topic 820 as follows:
|
●
|
Removals:
the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy;
the policy for timing of transfers between levels; and the valuation processes for Level
3 fair value measurements.
|
|
●
|
Modifications:
for investments in certain entities that calculate net asset value, an entity is required
to disclose the timing of liquidation of an investee’s assets and the date when restrictions
from redemption might lapse only if the investee has communicated the timing to the entity
or announced the timing publicly; and the amendments clarify that the measurement uncertainty
disclosure is to communicate information about the uncertainty in measurement as of the reporting
date.
|
|
●
|
Additions:
the changes in unrealized gains and losses for the period included in other comprehensive
income for recurring Level 3 fair value measurements held at the end of the reporting period;
and the range and weighted average of significant unobservable inputs used to develop Level
3 fair value measurements.
|
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
This
guidance is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used
to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should all be applied prospectively
for only the most recent interim or annual period presented in the initial year of adoption. All other amendments should be applied retrospectively
to all periods presented upon their effective date. Early adoption is permitted. An entity is permitted to early adopt any removed or
modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date. The Company
adopted the new guidance on October 1, 2020 and it did not have a material impact on its financial statements.
In
December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) which amends the existing guidance relating to the accounting
for income taxes. This ASU is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles
of accounting for income taxes and to improve the consistent application of GAAP for other areas of accounting for income taxes by clarifying
and amending existing guidance. The ASU is effective for fiscal years beginning after December 15, 2020. The Company does not expect
that the adoption of this new guidance will have a material impact on the Company’s financial statements and plans to adopt this
guidance on a prospective basis for the provisions applicable to the Company.
In
August 2020, FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts
in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,
which, among other things, provides guidance on how to account for contracts on an entity’s own equity. This ASU eliminates the
beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts
in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition,
this ASU modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted
earnings per share computation. The amendments in this ASU are effective for smaller reporting companies as defined by the SEC for fiscal
years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier
than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on its financial statements.
NOTE
4 – Commitments and Contingencies
WARF
License Agreement
The
Company has entered into an exclusive start-up company license agreement with the Wisconsin Alumni Research Foundation (“WARF”)
for WARF’s neural probe array and thin film micro electrode technology (the “WARF Agreement”). The Company entered
into an Amended and Restated Exclusive Start-up Company License Agreement (the “WARF License”) with WARF on January 21, 2020,
which amended and restated in full the prior license agreement between WARF and NeuroOne, LLC, a predecessor of the Company, dated October
1, 2014, as amended on February 22, 2017, March 30, 2019 and September 18, 2019.
The
WARF License grants to the Company an exclusive license to make, use and sell, in the United States only, products that employ certain
licensed patents for a neural probe array or thin-film micro electrode array and method. The Company has agreed to pay WARF a royalty
equal to a single-digit percentage of its product sales pursuant to the WARF License, with a minimum annual royalty payment of $50,000
for 2020, $100,000 for 2021 and $150,000 for 2022 and each calendar year thereafter that the WARF License is in effect. The minimum annual
royalty payment for calendar year 2020 in the amount of $50,000 was paid by the Company as of June 30, 2021 and was reflected as a component
of cost of product revenue for the nine month period ended June 30, 2021. In addition, $50,000 of the minimum annual royalty payment
for calendar year 2021 was accrued for as of June 30, 2021 and was reflected as a component of cost of product revenue. The cost of product
revenue attributed to the WARF License amounted to $25,000 and $100,000 for the three and nine month periods ended June 30, 2021, respectively.
If the Company or any of its sublicensees contest the validity of any licensed patent, the royalty rate will be doubled during the pendency
of such contest and, if the contested patent is found to be valid and would be infringed by the Company if not for the WARF License,
the royalty rate will be tripled for the remaining term of the WARF License.
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
WARF
may terminate the WARF License if the Company defaults on the payments of amounts due to WARF or fails to timely submit development reports,
or breaches any other covenant in the WARF License and fails to remedy such default in ninety (90) days or in the event of certain bankruptcy
events involving the Company. WARF may also terminate the WARF License on ninety (90) days’ notice if the Company fails to have
commercial sales of one or more FDA-approved products under the WARF License by June 30, 2021. The WARF License otherwise expires by
its terms (i) on the date that no valid claims on the patents licensed thereunder remain or (ii) upon the cessation for more than four
(4) calendar quarters of the payment, once begun, of earned royalties under certain sections of the WARF License. The Company expects
the latest expiration of a licensed patent to occur in 2030. The first commercial sale occurred in December 2020, prior to the June 30,
2021 deadline.
Mayo
Agreement
The
Company has an exclusive license and development agreement with the Mayo Foundation for Medical Education and Research (“Mayo”)
related to certain intellectual property and development services for thin film micro electrode technology (“Mayo Agreement”).
If the Company is successful in obtaining regulatory approval, the Company is to pay royalties to Mayo based on a percentage of net sales
of products of the licensed technology through the term of the Mayo Agreement, set to expire May 25, 2037. As of June 30, 2021, $3,894
in royalty fees were incurred given the commencement of commercial sales and were reflected as a component of cost of product revenue
in the amount of $1,203 and $3,894 during the three and nine month periods ended June 30, 2021, respectively.
Legal
PMT
Litigation
From
time to time, the Company is subject to litigation and claims arising in the ordinary course of business. In May 2017, NeuroOne received
a letter from PMT Corporation (“PMT”), the former employer of Mark Christianson and Wade Fredrickson. PMT claimed that these
officers had breached their restrictive covenant obligations with PMT by virtue of their work for NeuroOne and such officer’s prior
work during employment with the prior employer, that these officers had breached their confidentiality and non-disclosure obligations
to PMT and federal and state law by misappropriating confidential and trade secret information, and that the Company is responsible for
tortious interference with contracts. The letter, which purported to attach a noncompete agreement signed by Mr. Fredrickson, demanded
that Mr. Fredrickson (who resigned from the Company in June 2017), Mr. Christianson and NeuroOne cease and desist all competitive activities,
that Mr. Fredrickson step down from his position and that Mr. Christianson and NeuroOne provide the former employer access to NeuroOne’s
systems to demonstrate that it is not using trade secrets or proprietary information nor competing with the former employer.
On
March 29, 2018, the Company was served with a complaint filed by PMT adding the Company, NeuroOne and Mr. Christianson to its existing
lawsuit against Mr. Fredrickson in the Fourth Judicial District Court of the State of Minnesota. The complaint purported to attach Mr.
Fredrickson’s noncompete agreement as Exhibit A. In the lawsuit, PMT claims that Mr. Fredrickson and Mr. Christianson 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. Against Mr. Fredrickson, PMT also alleges that he intentionally or
negligently spoliated evidence, made negligent or fraudulent misrepresentations, misappropriated trade secrets in violation of Minnesota
law, and committed the tort of conversion and statutory civil theft. Against the Company and NeuroOne, PMT alleges that the Company and
NeuroOne were unjustly enriched and engaged in unfair competition. PMT asked the Court to impose a constructive trust over the shares
held by Mr. Fredrickson and Mr. Christianson and to award compensatory damages, equitable relief, punitive damages, attorneys’
fees, costs and interest.
On
April 18, 2018, Mr. Christianson, the Company and NeuroOne, Inc. filed a motion for dismissal, which was heard by the Court on October
11, 2018. The motion for dismissal stated that: the contract claims against Mr. Christianson fail because his agreement was not supported
by consideration; the Minnesota Uniform Trade Secrets Act preempts plaintiff’s claims for unfair competition, civil conspiracy
and unjust enrichment; plaintiff fails to state a claim regarding alleged breach of the duties of loyalty and good faith/fair dealing;
plaintiff cannot legally obtain a constructive trust; plaintiff has insufficiently pled its tortious interference claims; and Plaintiff
has not stated a claim for unfair competition. On January 7, 2019, the judge granted the motion for dismissal with respect to PMT’s
claim for breach of the duty of good faith and fair dealing, and denied the motion for dismissal with respect to the other claims presented.
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
In
April 2019, PMT served the Company, NeuroOne, Inc and Christianson with a proposed Second Amended Complaint, which included new claims
against the Company and NeuroOne, Inc for tortious interference with contract and tortious interference with prospective business advantage
and punitive damages against the Company, NeuroOne Inc. and Christianson. On June 28, 2019, the Company presented evidence indicating
that PMT had participated in a fraud on the Court and sought an Order that PMT had waived the attorney client privilege.
On
July 16, 2019, the defendants served PMT with a joint notice of motion for sanctions seeking a variety of sanctions for litigation misconduct
including, but not limited to, dismissal of the case and an award of attorneys’ fees. The Company, NeuroOne Inc and Mr. Christianson
further intend to move for summary judgment on all remaining claims asserted against them as well as for leave to assert counterclaims
against PMT for abuse of process.
On
August 30, 2019, the Hennepin County District Court heard dispositive motions in this case. The district court judge indicated some claims
would likely be tried to a jury and encouraged the parties to settle.
On
September 12, 2019, the district court heard NeuroOne’s motion for sanctions against PMT. The district court held the sanctions
hearing on December 17, 2019 and December 18, 2019 and indicated that a ruling would be made in approximately 90 days.
On
April 29, 2020, the district court granted the Company’s motion for sanctions. Additionally, the district court granted the Company’s
motion for summary judgment in part with respect to the counts for Christianson’s breach of non-confidentiality agreement, and
denied the Company’s motion for summary judgment on all other counts.
On
August 24, 2020, defendants moved the Court to amend their counterclaims for abuse of process against PMT to add a claim for punitive
damages with respect to its conduct pertaining to the Fredrickson noncompete. On October 12, 2020 the Court awarded NeuroOne $185,000
in Rule 11 sanctions and Fredrickson $145,000 in Rule 11 sanctions with respect to PMT’s misconduct relating to the Fredrickson
noncompete. PMT and its former litigation counsel, Barnes &Thornburg, were jointly and severally liable for these awards, which were
paid on December 11, 2020 and have been recognized in other income in the condensed statement of operations. The Court granted NeuroOne’s
motion to amend to permit its assertion of the right to assert a punitive damages claim against PMT associated with fighting the allegations
relating to the Fredrickson noncompete.
On
May 27, 2021 PMT moved for summary judgment on defendants’ claims for abuse of process and punitive damages, and on August 5, 2021,
the district court granted PMT’s motion to dismiss the abuse of process and punitive damage claims asserted by the defendants.
Trial
has been set for December 2021, but this may be delayed or impacted by the COVID-19 pandemic. The Company intends to continue to defend
itself vigorously and to continue to aggressively prosecute its affirmative counterclaim against PMT. The outcome of any claim against
the Company by PMT was not estimable as of the issuance of these financial statements.
Facility
Leases
Headquarters
Lease
On
October 7, 2019, the Company entered into a non-cancellable lease agreement (the “Lease”) with Biynah Cleveland, LLC, BIP
Cleveland, LLC, and Edenvale Investors (together, the “Landlord”) pursuant to which the Company has agreed to lease office
space located at 7599 Anagram Drive, Eden Prairie, Minnesota (the “Premises”). The Company took possession of the Premises
on November 1, 2019, with the term of the Lease ending 65 months after such date, unless terminated earlier (the “Term”).
The initial base rent for the Premises is $6,410 per month for the first 17 months, increasing to $7,076 per month by the end of the
Term. In addition, as long as the Company is not in default under the Lease, the Company shall be entitled to an abatement of its base
rent for the first 5 months. In addition, the Company will pay its pro rata share of the Landlord’s annual operating expenses associated
with the premises, calculated as set forth in the Lease of which the Company is entitled to an abatement of these operating expense for
the first 3 months.
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
During
the three and nine months ended June 30, 2021, rent expense associated with the facility leases amounted to $31,485 and $92,746, respectively.
During the three and nine months ended June 30, 2020, rent expense associated with the facility leases amounted to $25,861 and $73,727,
respectively.
Supplemental
cash flow information related to the operating lease was as follows:
|
|
For
the nine months ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
Cash paid for amounts included in the measurement of lease liability:
|
|
|
|
|
|
|
Operating
cash flows from operating leases
|
|
$
|
58,173
|
|
|
$
|
19,231
|
|
Right-of-use
assets obtained in exchange for lease obligations:
|
|
|
|
|
|
|
|
|
Operating
leases
|
|
$
|
—
|
|
|
$
|
335,119
|
|
Supplemental
balance sheet information related to the operating lease was as follows:
|
|
As
of
June 30,
2021
|
|
|
As
of
September 30,
2020
|
|
Right-of-use
assets
|
|
$
|
241,156
|
|
|
$
|
282,211
|
|
Lease
liability
|
|
$
|
269,412
|
|
|
$
|
312,176
|
|
Weighted
average remaining lease term (years)
|
|
|
3.75
|
|
|
|
4.5
|
|
Weighted
average discount rate
|
|
|
7.0
|
%
|
|
|
7.0
|
%
|
Maturity
of the lease liability was as follows:
|
|
As
of
June 30,
2021
|
|
2021 (period
from July 1, 2021 to September 30, 2021)
|
|
$
|
19,712
|
|
2022
|
|
|
79,832
|
|
2023
|
|
|
81,827
|
|
2024
|
|
|
83,873
|
|
2025
|
|
|
42,454
|
|
Total
lease payments
|
|
|
307,698
|
|
Less
imputed interest
|
|
|
(38,286
|
)
|
Total
|
|
|
269,412
|
|
Short-term
portion
|
|
|
(62,446
|
)
|
Long-term
portion
|
|
$
|
206,966
|
|
San
Jose Lease:
On
December 30, 2020, the Company entered into a non-cancellable lease agreement for short term office space in San Jose, California (the
“San Jose Lease”) for a three month initial term. After March 31, 2021, the San Jose Lease is cancellable upon a 30-day notice
to the landlord. The Company took possession of the office space on January 1, 2021. The base rent under the San Jose Lease is $504 per
month.
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
NOTE
5 – Prepaid and Other Assets, Intangibles and Property and Equipment
Prepaid
and Other Assets
Prepaid
and other assets consisted of the following at June 30, 2021 and September 30, 2020:
|
|
As
of
June 30,
2021
|
|
|
As
of
September 30,
2020
|
|
Prepaid
expenses
|
|
$
|
135,947
|
|
|
$
|
118,010
|
|
Deferred
offering costs
|
|
|
24,179
|
|
|
|
—
|
|
Other
|
|
|
28,283
|
|
|
|
601
|
|
Total
|
|
$
|
188,409
|
|
|
$
|
118,611
|
|
Intangibles
Intangible
assets rollforward is as follows:
|
|
Useful
Life
|
|
|
|
Net Intangibles,
September 30, 2020
|
|
12-13 years
|
|
$
|
156,523
|
|
Less:
amortization
|
|
|
|
|
(16,737
|
)
|
Net
Intangibles, June 30, 2021
|
|
|
|
$
|
139,786
|
|
Amortization
expense was $5,579 and $16,737 for the three and nine months ended June 30, 2021 and 2020, respectively.
Property
and Equipment
Property
and equipment held for use by category are presented in the following table:
|
|
As
of
June 30,
2021
|
|
|
As
of
September 30,
2020
|
|
Equipment
and furniture
|
|
$
|
227,726
|
|
|
$
|
195,756
|
|
Software
|
|
|
1,895
|
|
|
|
1,895
|
|
Total
property and equipment
|
|
|
229,621
|
|
|
|
197,651
|
|
Less accumulated
depreciation
|
|
|
(73,268
|
)
|
|
|
(31,620
|
)
|
Property
and equipment, net
|
|
$
|
156,353
|
|
|
$
|
166,031
|
|
Depreciation
expense was $14,776 and $41,648 for the three months and nine months ended June 30, 2021, respectively, $7,298 and $17,105 during the
three and nine months ended June 30, 2020, respectively.
NOTE
6 – Accrued Expenses and Other Liabilities
Accrued
expenses consisted of the following at June 30, 2021 and September 30, 2020:
|
|
As
of
June 30,
2021
|
|
|
As
of
September 30,
2020
|
|
Accrued
payroll
|
|
$
|
218,249
|
|
|
$
|
238,212
|
|
Operating
lease liability, short term
|
|
|
62,446
|
|
|
|
57,848
|
|
Royalty
payments
|
|
|
50,838
|
|
|
|
—
|
|
Accrued
issuance costs
|
|
|
—
|
|
|
|
50,400
|
|
Other
|
|
|
105,313
|
|
|
|
166,302
|
|
Total
|
|
$
|
436,846
|
|
|
$
|
512,762
|
|
The
“other” category is primarily comprised of board fees.
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
Paycheck
Protection Program
The
CARES Act, signed into law in March 2020, established the Paycheck Protection Program (“PPP”). The PPP authorizes over $600
billion in forgivable loans to small businesses. Loan amounts may be forgiven to the extent proceeds are used to cover documented payroll,
mortgage interest, rent, and utility costs over a 24-week measurement period following loan funding. Loans have a maturity of 2 years
and an interest rate of 1%. Prepayments may be made without penalty. In April 2020, the Company received loan funding of $83,333 under
the PPP and was recorded as a long-term liability. The PPP loan was forgiven on June 9, 2021 by the U.S. Small Business Administration
and was reflected as other income in the accompanying condensed statements of operations. Interest was nominal during the three and nine
months ended June 30, 2021.
NOTE
7 – Zimmer Development Agreement
On
July 20, 2020, the Company entered into an exclusive development and distribution agreement (the “Development Agreement”)
with Zimmer, Inc. (“Zimmer”), pursuant to which the Company granted Zimmer exclusive global rights to distribute the Strip/Grid
Products and electrode cable assembly products (the “Electrode Cable Assembly Products”). Additionally, the Company granted
Zimmer the exclusive right and license to distribute certain depth electrodes developed by the Company (“SEEG Products”,
and together with the Strip/Grid Products and Electrode Cable Assembly Products, the “Products”). The parties have agreed
to collaborate with respect to development activities under the Development Agreement through a joint development committee composed
of an equal number of representatives of Zimmer and the Company.
Under
the terms of the Development Agreement, the Company will be responsible for all costs and expenses related to developing the Products,
and Zimmer will be responsible for all costs and expenses related to the commercialization of the Products. In addition to the Development
Agreement, Zimmer and the Company have entered into a Manufacturing and Supply Agreement (the “MS Agreement”) and a supplier
quality agreement (the “Quality Agreement”) with respect to the manufacturing and supply of the Products.
Except
as otherwise provided in the Development Agreement, the Company will be responsible for performing all development activities, including
non-clinical and clinical studies directed at obtaining regulatory approval of each Product. Zimmer has agreed to use commercially reasonable
efforts to promote, market and sell each Product following the “Product Availability Date” (as defined in the Development
Agreement) for such Product.
Pursuant
to the Development Agreement, Zimmer made an upfront initial exclusivity fee payment of $2.0 million (the “Initial Exclusivity
Fee”) to the Company. In addition, the Company is to receive the following fee payments (the “Interim Fee Bonus”) upon
reaching certain milestones:
Scenario
1: Except where Zimmer timely delivers a Design Modification Notice pursuant to Section 1.2, if one or more of the events set forth
below occurs on or before the deadline indicated for such event and the Product Availability Date (as defined in the Development Agreement)
for the SEEG Products occurs on or before June 30, 2021, then the Company shall receive the additional amount indicated for such event
as part of the SEEG Exclusivity Maintenance Fee:
|
●
|
Design freeze for the SEEG Products by November 30, 2020 - $500,000
|
|
●
|
Acceptance of all Deliverables for SEEG Products under the Development Plan (as defined in the Development Agreement) by April 30, 2021 - $500,000
|
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
Scenario
2: Notwithstanding Scenario 1 above, if Zimmer timely delivers a Design Modification Notice to the Company pursuant to Section 1.2,
and one or more of the events set forth below occurs on or before the deadline indicated for such event and the Product Availability
Date for the SEEG Products occurs on or before June 30, 2021 as determined by Zimmer, then the Company shall receive the additional amount
indicated for such event as part of the SEEG Exclusivity Maintenance Fee:
|
●
|
Acceptance of all Deliverables for SEEG Products under the Development Plan other than the Modified Connector by April 30, 2021 - $500,000
|
|
●
|
Acceptance of all Deliverables for SEEG Products under the Development Plan, including the Modified Connector by September 30, 2021 - $500,000
|
For
purposes of the Development Agreement, each of the foregoing events shall have occurred only if the Company has demonstrated the achievement
of the event to Zimmer’s reasonable satisfaction. Notwithstanding the foregoing, the events in Sections 6.1(c)(ii), (iii) and (iv)
of the Development Agreement shall not be deemed to be met if FDA Approval for the SEEG Products is not received prior to the applicable
deadline.
In
addition to the Initial Exclusivity Fee and Interim Fee Bonus, in order to maintain the exclusivity of the SEEG Distribution License,
Zimmer must pay the SEEG Exclusivity Maintenance Fee to the Company, on or prior to the SEEG Exclusivity Confirmation Date, in immediately
available funds as follows:
|
●
|
if the Product Availability Date for the SEEG Products occurs on or before June 30, 2021, then $3,000,000, plus the amount of any Interim Fee Bonuses earned pursuant to Section 6.1(c), including any such Interim Fee Bonus earned after June 30, 2021 pursuant to Section 6.1(c)(iv) following the delivery of a Design Modification Notice;
|
|
●
|
if the Product Availability Date for the SEEG Products occurs after June 30, 2021, but on or before September 30, 2021, then $3,000,000, plus if Zimmer timely issues a Design A-9 Modification Notice, any Interim Fee Bonus earned pursuant to Section 6.1(c)(iv);
|
|
●
|
if the Product Availability Date for the SEEG Products occurs after September 30, 2021, but on or before December 31, 2021, then $2,500,000; and
|
|
●
|
if the Product Availability Date for the SEEG Products occurs after December 31, 2021, then $1,500,000.
|
Notwithstanding
any other provision of the Development Agreement, if the Product Availability Date for the SEEG Products has not occurred on or before
June 30, 2022, Zimmer shall have the right to terminate the SEEG Distribution License by delivering written notice to the Company to
that effect and, upon delivery of such notice, Zimmer shall be relieved of all of its obligations hereunder with respect to SEEG Products,
including any obligation to pay the SEEG Exclusivity Maintenance Fee or to purchase, market, distribute or sell any SEEG Products. The
Initial Exclusivity Fee and the SEEG Exclusivity Maintenance Fee (including any Interim Fee Bonus(es)), once paid, are non-refundable.
The
Development Agreement will expire on the tenth anniversary of the date of the first commercial sale of the last of the Products to achieve
a first commercial sale, unless terminated earlier pursuant to its terms. Either party may terminate the Development Agreement (x) with
written notice for the other party’s material breach following a cure period or (y) if the other party becomes subject to certain
insolvency proceedings. In addition, Zimmer may terminate the Development Agreement for any reason with 90 days’ written notice,
and the Company may terminate the Development Agreement if Zimmer acquires or directly or indirectly owns a controlling interest in certain
competitors of the Company.
At
inception of the Zimmer Development Agreement through June 30, 2021, the Company had identified three performance obligations under the
Zimmer Development Agreement and consisted of the following: (1) the Company obligation to grant Zimmer access to its intellectual property;
(2) complete SEEG Product development; and (3) complete Strip/Grid Product development. Accordingly, the Company recognized revenue in
the amount of $17,451 and $59,838 for the three month and nine month periods ended June 30, 2021 related to the development of the Products
completed during the period in connection with the Initial Exclusivity Fee payment. The Zimmer Development Agreement was accounted for
under the provisions of ASC 606, Revenue from Contracts with Customers.
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
A
reconciliation of the closing balance of deferred revenue related to the Zimmer Development Agreement is as follows as of June 30, 2021:
|
|
|
|
Deferred Revenue
|
|
|
|
Balance as
of beginning of period – September 30, 2020
|
|
$
|
73,434
|
|
Revenue
recognized
|
|
|
(59,838
|
)
|
Balance
as of end of period – June 30, 2021
|
|
$
|
13,596
|
|
The
remaining performance obligations reflected in deferred revenue as of June 30, 2021 are expected to be completed in the fourth quarter
of fiscal year 2021.
Product
Revenue
In
December 2020, the Company commenced commercial sales of its Strip/Grid Products and Electrode Cable Assembly Products in connection
with the Development Agreement. Product revenue recognized during the three and nine month periods ended June 30, 2021 was $40,096 and
$129,810, respectively.
Advertising
Expense
Advertising
expense is charged to selling, general and administrative expenses during the period that it is incurred. Total advertising expense amounted
to $79,261 and $221,408 for the three and nine month periods ended June 30, 2021, respectively. Advertising expense during the prior
year period was negligible.
NOTE
8 – Convertible Promissory Notes and Warrant Agreements
|
|
As
of
June 30,
2021
|
|
|
As
of
September 30,
2020
|
|
Paulson
convertible notes, principal
|
|
$
|
—
|
|
|
$
|
546,000
|
|
Accrued
interest
|
|
|
—
|
|
|
|
63,458
|
|
Fair
value adjustments
|
|
|
—
|
|
|
|
397,748
|
|
|
|
$
|
—
|
|
|
$
|
1,007,206
|
|
2019
Paulson Convertible Note Offering
On
November 1, 2019, the Company entered into a subscription agreement with certain accredited investors, pursuant to which the Company,
in a private placement (the “2019 Paulson Private Placement”), agreed to issue and sell to the investors 13% convertible
promissory notes (each, a “2019 Paulson Note” and collectively, the “2019 Paulson Notes”) and warrants (each,
a “2019 Paulson Warrant” and collectively, the “2019 Paulson Warrants”) to purchase shares of the Company’s
common stock.
The
initial closing of the 2019 Paulson Private Placement was consummated on November 1, 2019, and, on that date and through December 3,
2019, the Company issued the 2019 Paulson Notes in an aggregate principal amount of $3,234,800 to the subscribers for gross proceeds
equaling the principal amount. The 2019 Paulson Private Placement terminated on December 3, 2019.
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
The
2019 Paulson Notes had a fixed interest rate of 13% per annum and required the Company to repay the principal and accrued and unpaid
interest thereon on November 1, 2020 (the “Maturity Date”). Interest on principal amounted to $5,701 during the nine month
period ended June 30, 2021, and $41,494 and $195,638 during the three and nine month periods ended June 30, 2020, respectively, and was
recorded under the net valuation change of instruments measured at fair value in the condensed statements of operations. The subscriber,
prior to the Second 2019 Paulson Notes Amendment, had the option to convert the outstanding principal and accrued and unpaid interest
of such subscriber’s 2019 Paulson Note (the “Outstanding Balance”) into common stock in an amount equal to the Outstanding
Balance divided by the ten day volume weighted average closing price of the common stock prior to conversion. In addition, both before
and after the Second 2019 Paulson Note Amendment, if the Company raised more than $3,000,000 in an equity financing (the “Qualified
Financing”) before the Maturity Date, each subscriber had the option to convert the Outstanding Balance into the securities issued
by the Company in such Qualified Financing in an amount equal to (i) the Outstanding Balance divided by (ii) the lower of 0.6 multiplied
by (A) the actual per share price of securities issued by the Company in the Qualified Financing or (B) the ten day volume weighted average
closing price of the common stock prior to the first closing of a Qualified Financing. If a change of control transaction had occurred
prior to a Qualified Financing or the Maturity Date, the 2019 Paulson Notes would have become payable on demand as of the closing date
of such transaction. Change of control meant a merger or consolidation with another entity in which the Company’s stockholders
did not own more than 50% of the outstanding voting power of the surviving entity or the disposition of all or substantially all of the
Company’s assets.
The
Company elected to account for the 2019 Paulson Notes on a fair value basis under ASC 825 to comprehensively value and streamline the
accounting for the embedded conversion options. The fair value of the 2019 Paulson Notes was significantly higher than the proceeds received
as of each of the respective issuance dates given the significant redemption discount associated with the Qualified Financing provision.
The excess of fair value over proceeds at issuance amounted to $1,831,940 and was recorded to interest expense in the condensed statements
of operations during the nine months ended June 30, 2020. Subsequent to issuance, the fair value change of the Paulson Notes amounted
to a benefit of $(1,974) during the nine months ended June 30, 2021, and amounted to a benefit of $(1,344,852) and $(1,250,994) during
the three and nine month periods ended June 30, 2020, respectively, and was recorded under the net valuation change of instruments measured
at fair value in the condensed statements of operations.
Each
2019 Paulson Warrant granted the holder the option to purchase the number of shares of common stock equal to (i) 0.5 multiplied by (ii)
the principal amount of such subscriber’s 2019 Paulson Notes divided by 5.61, with an exercise price per share equal to $5.61.
As of the final closing on December 3, 2019, the Company issued 2019 Paulson Warrants exercisable for 288,305 shares of common stock
in connection with all closings of the 2019 Paulson Private Placement. The 2019 Paulson Warrants are immediately exercisable and expire
on November 1, 2022. The exercise price is subject to adjustment in the event of any stock dividends or splits, reverse stock split,
recapitalization, reorganization or similar transaction, as described therein. The 2019 Paulson warrants were deemed to be a free-standing
instrument and were accounted for as equity. Given that the fair value of the 2019 Paulson Notes exceeded the proceeds received at issuance,
there was no value attributed to the 2019 Paulson Warrants in the condensed financial statements.
Issuance
costs during the nine month period ended June 30, 2021 in connection with the 2019 Paulson Private Placement were $3,053 and related
to legal costs. Issuance costs incurred during the nine months ended June 30, 2020 were $865,567. During the first quarter of 2020, Paulson Investment
Company (“Paulson”) received a cash commission equal to 12% of the gross proceeds from the sale of the 2019 Paulson Notes
which amounted to $388,176, and 10-year warrants to purchase an amount of common stock equal to 86,498 shares of common stock at an exercise
price equal to $5.61 per share (the “Broker Warrants”) at a fair value $419,635. Lastly, issuance costs included legal and
third party fees in the amount of $57,756. The issuance costs were recorded as a component of interest in the accompanying statements
of operations.
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
On
April 24, 2020, the Company and holders of a majority in aggregate principal amount of the 2019 Paulson Notes entered into an amendment
to the 2019 Paulson Notes (the “Second 2019 Paulson Notes Amendment”) to, among other things:
|
i.
|
Extended the Maturity Date – The Second 2019 Paulson Notes Amendment extended the maturity date of the 2019 Paulson Notes from May 1, 2020 to November 1, 2020 (in either case, unless a change of control transaction happens prior to such date);
|
|
ii.
|
Revised Optional Conversion Terms – The Second 2019 Paulson Notes Amendment provided that the amount of shares to be received upon the subscriber’s optional conversion of the 2019 Paulson Notes prior to a 2019 Qualified Financing (as defined in the 2019 Paulson Notes) would have equaled: (1) the Outstanding Balance as defined below of such subscriber’s 2019 Paulson Note elected by the subscriber to be converted divided by (2) an amount equal to 0.6 multiplied by the volume weighted average price of the common stock for the ten (10) trading days immediately preceding the date of conversion; and
|
|
iii.
|
Revise the Registration Date – The Second 2019 Paulson Notes Amendment provided that promptly following the earlier of (1) May 1, 2020, if the applicable subscriber converted all or a majority of the Outstanding Balance of such subscriber’s 2019 Paulson Note prior to such date; (2) the final closing of a 2019 Qualified Financing; and (3) the maturity date, the Company will enter into a registration rights agreement with the applicable subscriber containing customary and usual terms pursuant to which the Company shall agree to prepare and file with the SEC a registration statement on or prior to the 90th calendar day following the registration date, covering the resale of any common stock received on conversion of such 2019 Paulson Notes, and shares of common stock underlying the Warrants.
|
The
Second 2019 Paulson Notes Amendment was accounted for as a note extinguishment for accounting purposes given the substantive change in
the optional redemption feature’s conversion formula. The fair value change in the 2019 Paulson Notes associated with the extinguishment
was recorded as a loss on notes extinguishment in the accompanying condensed statements of operations in the amount of $2,017,847 during
the three and nine month periods ended June 30, 2020. Lastly, in connection with the Second 2019 Paulson Notes Amendment, legal costs
in the amount of $1,943 were incurred and recorded as a component of interest in the accompanying condensed statements of operations.
During
the first quarter of fiscal year 2021, the remaining holders of the 2019 Paulson Notes elected to convert the remaining outstanding principal
and accrued and unpaid interest in the amount of $615,159 into 292,754 shares of common stock.
Paulson
2020 Convertible Note Financing
On
April 30, 2020, the Company entered into a subscription agreement with certain accredited investors, pursuant to which the Company, in
a private placement (the “2020 Paulson Private Placement”), agreed to issue and sell to the investors 13% convertible promissory
notes (each, a “2020 Paulson Note” and collectively, the “2020 Paulson Notes”) and warrants (each, a “2020
Paulson Warrant” and collectively, the “2020 Paulson Warrants”) to purchase shares of the Company’s common stock.
Between
May 1, 2020 and June 30, 2020, the Company issued 2020 Paulson Notes in an aggregate principal amount of $5,122,700 to the Subscribers.
The 2020 Paulson Private Placement was terminated on June 30, 2020.
The
2020 Paulson Notes bear interest at a fixed rate of 13% per annum and require the Company to repay the principal and accrued and unpaid
interest thereon on the earlier of December 31, 2020 or a change of control transaction. Interest on principal amounted to $60,050 during
the three and nine month periods ended June 30, 2020 and was recorded under the net valuation change of instruments measured at fair
value in the condensed statements of operations.
If
the Company had raised more than $5,000,000 in an equity financing before the maturity date (the “2020 Qualified Financing”),
without any action on the part of the Subscribers, all of the outstanding principal and accrued and unpaid interest of the Notes (the
“Outstanding Balance”) would have been converted into that number of shares of the securities issued by the Company in the
closing on the date a 2020 Qualified Financing occurred equal to: (i) the Outstanding Balance divided by (ii) the lower of 0.6 multiplied
by (A) the actual per share price of the securities issued by the Company in the closing on the date a 2020 Qualified Financing occurred
and (B) the volume weighted average price of the common stock for ten (10) trading days immediately preceding the 2020 Qualified Financing.
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
If
the Company had announced a transaction between the Company and any other company (or an affiliate of any such company) that was included
in the S&P 500 Health Care Index as published from time to time by S&P Dow Jones Indices LLC that included an investment or upfront
payments resulting in gross proceeds to the Company of at least $2,000,000 upon the execution of such transaction or definitive agreement,
and provides for terms of collaboration, manufacturing, distribution, licensing or supply of the Company’s products (a “Strategic
Transaction”) before the maturity date, without any action on the part of the subscribers, the Outstanding Balance would be converted
into that number of shares of common stock equal to: (i) the Outstanding Balance divided by (ii) the lower of 0.6 multiplied by (A) the
VWAP of the common stock for the ten (10) trading days immediately preceding the first announcement of the Strategic Transaction or (B)
closing price of the common stock on the day preceding the first announcement by the Company of a Strategic Transaction.
At
any time, at the sole election of the holder of such 2020 Paulson Note, all or a portion of the Outstanding Balance could have been converted
into that number of shares of common stock equal to: (i) the Outstanding Balance elected by the holder to be converted divided by (ii)
an amount equal to 0.6 multiplied by the volume weighted average price of the common stock for the ten (10) trading days immediately
preceding the date of conversion.
If
a change of control transaction had occurred prior to the conversion of the 2020 Paulson Notes or the maturity date, the 2020 Paulson
Notes would have become payable on demand as of the closing date of such transaction. Change of control meant a merger or consolidation
with another entity in which the Company’s stockholders did not own more than 50% of the outstanding voting power of the surviving
entity or the disposition of all or substantially all of the Company’s assets.
The
Company elected to account for the 2020 Paulson Notes on a fair value basis under ASC 825 to
comprehensively value and streamline the accounting for the embedded conversion options. The fair value of the 2020 Paulson Notes
was significantly higher than the proceeds received as of each of the respective issuance dates given the significant redemption discount
associated with the redemption provisions. The excess of fair value over proceeds at issuance amounted to $3,784,918 and was recorded
to interest expense in the condensed statements of operations during the three and nine month periods ended June 30, 2020. Subsequent
to issuance, the fair value change of the 2020 Paulson Notes amounted to an increase of $75,309 during the three and nine month periods
ended June 30, 2020 and was recorded under the net valuation change of instruments measured at fair value in the condensed statements
of operations.
Each
2020 Paulson Warrant grants the holder the option to purchase the number of shares of common stock equal to (i) 0.5 multiplied by (ii)
the principal amount of such subscriber’s 2020 Paulson Notes divided by 5.61, with an exercise price per share equal to $5.61.
The 2020 Paulson Warrants are immediately exercisable and expire on April 30, 2023. The exercise price is subject to adjustment in the
event of any stock dividends or splits, reverse stock split, recapitalization, reorganization or similar transaction. The Company issued
2020 Paulson Warrants exercisable for 456,564 shares of common stock in connection with all closings of the 2020 Paulson Private Placement
through June 30, 2020. The 2020 Paulson warrants were deemed to be a free-standing instrument and were accounted for as equity. Given
that the fair value of the 2020 Paulson Notes exceeded the proceeds received at issuance, there was no value attributed to the 2020 Paulson
Warrants in the condensed financial statements.
In
connection with the 2020 Paulson Private Placement, Paulson received a cash commission equal to 12% of the gross proceeds from
the sale of the 2020 Paulson Notes and received 7-year warrants to purchase an amount of common stock equal to 136,971 (“Broker
Warrants”). The Broker Warrants have an exercise price equal to $5.61 per share. The issuance costs incurred during the three and
nine months ended June 30, 2020 in connection with the 2020 Paulson Private Placement were $962,402. Issuance costs included cash commissions
equal to $633,725 and legal and third party fees in the amount of $51,640. In addition, issuance costs included the value of the Broker
Warrants in the amount of $277,037. The issuance costs were recorded as a component of interest in the accompanying condensed statements
of operations.
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
Between
May 4, 2020 and June 30, 2020, certain Subscribers elected to convert $1,870,352 of the outstanding principal and interest of such Subscribers’
2020 Paulson Notes into 678,122 shares of common stock (41,305 shares of common stock were not formally issued until July 2020). In July
2020, the balance of the 2020 Paulson Notes were converted into common stock upon the announcement of the Zimmer Development Agreement
that qualified as a Strategic Transaction.
NOTE
9 – Stock-Based Compensation
During
the three and nine month periods ended June 30, 2021 and 2020, stock-based expense related to stock-based awards was included in general
and administrative and research and development costs as follows in the accompanying condensed statements of operations.
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
General
and administrative
|
|
$
|
816,033
|
|
|
$
|
291,545
|
|
|
$
|
1,251,412
|
|
|
$
|
1,351,003
|
|
Research
and development
|
|
|
62,819
|
|
|
|
92,138
|
|
|
|
199,628
|
|
|
|
152,138
|
|
Total
stock-based compensation
|
|
$
|
878,852
|
|
|
$
|
383,683
|
|
|
$
|
1,451,040
|
|
|
$
|
1,503,141
|
|
Stock
Options
During
the three month periods ended June 30, 2021 and 2020, under the 2017 Equity Incentive Plan (the “2017 Plan”), the Company
granted 81,446 and 48,061 stock options, respectively, to its employees, consultants and scientific advisory board members. During the
nine month periods ended June 30, 2021 and 2020, the Company granted 703,117 and 321,397, respectively, to its employees, consultants
and scientific advisory board members. Vesting generally occurs over an immediate to 48 month period based on a time of service condition
although vesting acceleration is provided under one grant in the event that certain milestones are met. The grant date fair value of
the grants issued during the three month periods ended June 30, 2021 and 2020 was $3.65 and $2.19 per share, respectively. The grant
date fair value of the grants issued during the nine month periods ended June 30, 2021 and 2020 was $3.01 and $3.03 per share, respectively.
The
total expense for the three months ended June 30, 2021 and 2020 related to stock options was $500,149 and $103,998, respectively. The
total expense for the nine months ended June 30, 2021 and 2020 related to stock options was $817,761 and $630,887, respectively. The
total number of stock options outstanding as of June 30, 2021 and September 30, 2020 was 1,162,838 and 479,509, respectively.
The
weighted-average assumptions used in the Black-Scholes option-pricing model are as follows for the stock options granted during the three
and nine month periods ended June 30, 2021 and 2020:
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Expected
stock price volatility
|
|
|
56.0
|
%
|
|
|
54.3
|
%
|
|
|
55.9
|
%
|
|
|
53.0
|
%
|
Expected
life of options (years)
|
|
|
5.9
|
|
|
|
5.3
|
|
|
|
6.0
|
|
|
|
5.6
|
|
Expected
dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Risk
free interest rate
|
|
|
1.0
|
%
|
|
|
0.4
|
%
|
|
|
0.6
|
%
|
|
|
1.5
|
%
|
During
the three month periods ended June 30, 2021 and 2020, 162,266 and 17,501 stock options vested, respectively and 21,437 and 9,061 stock
options were forfeited during these periods, respectively. During the nine month periods ended June 30, 2021 and 2020, 268,793 and 158,399
stock options vested, respectively and 31,583 and 98,331 stock options were forfeited during these periods, respectively. During the
three and nine month periods ended June 30, 2021, 780 and 1,538 stock options were exercised, respectively, and the intrinsic value of
options exercised during these periods was $1,693 and $2,648, respectively. During the three and nine month periods ended June 30, 2020,
11,340 and 25,515 stock options were exercised, respectively, and the intrinsic value of options exercised during these periods was $46,437
and $149,135, respectively.
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
Restricted
Stock Units
During
the three and nine month periods ended June 30, 2021, 13,776 restricted stock units (“RSUs”) were granted During the three
and nine months ended June 30, 2020, 22,371 and 78,323 RSUs were granted. During the three months ended June 30, 2021 and 2020, 7,077
and 6,990 RSUs vested, respectively, and no RSUs were forfeited during these periods. During the nine months ended June 30, 2021 and
2020, 23,453 and 51,417 RSUs vested, respectively, and zero and 2,335 RSUs were forfeited during these periods. The total expense for
the three months ended June 30, 2021 and 2020 related to these RSUs was $39,702 and $38,535, respectively. The total expense for the
nine months ended June 30, 2021 and 2020 related to these RSUs was $123,278 and $352,929, respectively.
Other
Stock-Based Awards
In
April 2021, two consulting agreements were executed whereby a total of 62,659 shares of common stock were subject to issuance of which
51,330 shares of common stock were issued as of June 30, 2021. Compensation expense related to the stock awards granted under these consulting
agreements amounted to $339,001 for the three and nine months ended June 30, 2021 and were included in the total stock-based compensation
expense.
In
August 2020, an additional consulting agreement was executed whereby 40,000 shares of common stock were issued, subject to Company repurchase.
The stock award under the agreement vests over a six-month period. As of June 30, 2021, 40,000 shares were vested under this agreement
of which 33,334 shares vested during the nine months ended June 30, 2021. Compensation expense related to the stock award granted under
this consulting agreement amounted to $171,000 for the nine months ended June 30, 2021 and was included in the total stock-based compensation
expense.
In
October 2019, two consulting agreements were executed whereby up to 38,334 shares of common stock were issued as of June 30, 2020 of
which 34,167 shares of common stock were vested as of June 30, 2020 under these agreements. On April 22, 2020, the Company entered into
an amendment (the “Amendment”) to one of the consulting agreements. Pursuant to the Amendment, the Company issued an additional
11,667 shares in exchange for consulting services of which 4,667 shares of common stock were vested as of June 30, 2020 under the Amendment.
Vesting was based on a time-based vesting condition ranging over a three to nine month period commencing upon the execution of the consulting
agreements.
In
February 2020, an additional consulting agreement was executed whereby up to 30,000 shares of common stock were issuable of which 25,500
shares of common stock were issued and vested as of June 30, 2020 under this agreement. On May 21, 2020, 22,195 shares of common stock
were issued as compensation to a former 2019 Paulson Note holder related to a prior 2019 Paulson Note conversion and release of liability.
Compensation
expense related to the stock awards granted under the consulting agreements and to the former 2019 Paulson Note holder referenced above
amounted to $241,150 and $519,325 for the three and nine month periods ended June 30, 2020, respectively, and was included in the total
stock-based expense. The expense was based on the fair value of the underlying common stock at the point of vesting which ranged from
$4.53 to $7.95 per share.
General
2017
Plan Evergreen Provision
Under
the 2017 Plan, the shares reserved automatically increase on January 1st of each year, for a period of not more than ten years from the
date the 2017 Plan is approved by the stockholders of the Company, commencing on January 1, 2019 and ending on (and including) January
1, 2027, to an amount equal to 13% of the fully-diluted shares outstanding as of December 31st of the preceding calendar year. Notwithstanding
the foregoing, the Board may act prior to January 1st of a given year to provide that there will be no January 1st increase in the share
reserve for such year or that the increase in the share reserve for such year will be a lesser number of shares of common stock than
would otherwise occur pursuant to the preceding sentence. “Fully Diluted Shares” as of a date means an amount equal to the
number of shares of common stock (i) outstanding and (ii) issuable upon exercise, conversion or settlement of outstanding awards under
the 2017 Plan and any other outstanding options, warrants or other securities of the Company that are (directly or indirectly) convertible
or exchangeable into or exercisable for shares of common stock, in each case as of the close of business of the Company on December 31
of the preceding calendar year. On January 1, 2021, 484,623 shares were added to the 2017 Plan as a result of the evergreen provision.
As
of June 30, 2021, 361,099 shares were available for future issuance on a combined basis under the 2016 Equity Incentive Plan and 2017
Plan. Unrecognized stock-based compensation was $1,953,964 as of June 30, 2021. The unrecognized share-based expense is expected to be
recognized over a weighted average period of 3.0 years.
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
NOTE
10 – Concentrations
Credit
Risk
Financial
instruments that potentially subject the Company to a concentration of credit risk consist of cash. The Company’s cash is held
by one financial institution in the United States. Amounts on deposit may at times exceed federally insured limits. The Company has not
experienced any losses on its deposits since inception, and management believes that minimal credit risk exists with respect to these
financial institutions. As of June 30, 2021, the Company had $8.5 million of deposits in excess of federally insured amounts.
Revenue
One
customer accounts for all of the Company’s product and collaborations revenue.
Supplier
concentration
One
contract manufacturer produces all of the Company’s Strip/Grid Products.
NOTE
11 – Income Taxes
The
effective tax rate for the three and nine months ended June 30, 2021 and 2020 was zero percent. As a result of the analysis of all available
evidence as of June 30, 2021 and September 30, 2020, the Company recorded a full valuation allowance on its net deferred
tax assets. Consequently, the Company reported no income tax benefit during the three and nine months ended June
30, 2021 and 2020. If the Company’s assumptions change and the Company believes that it will be able to realize these deferred
tax assets, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets will be recognized as a reduction
of future income tax expense. If the assumptions do not change, each period the Company could record an additional valuation allowance
on any increases in the deferred tax assets.
NOTE
12 – Stockholders’ Equity
2021
Shelf Registration
On
June 4, 2021, NeuroOne filed a Form S-3 shelf registration statement under the Securities Act, which was declared effective by the SEC
on June 14, 2021 (the “2021 Shelf”) under which the Company may offer and sell, from time to time in its sole discretion,
securities having an aggregate offering price of up to $150 million. Deferred offering costs in connection with the 2021 Shelf amounted
to $24,179 and are reflected in the prepaid and other assets line item in the accompanying condensed balance sheets.
NeuroOne
Medical Technologies Corporation
Notes
to Condensed Financial Statements
(unaudited)
2021
Private Placement
On
January 12, 2021, the Company entered into a Common Stock and Warrant Purchase Agreement with certain accredited investors, pursuant
to which the Company, in 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. The 2021 Warrants have an initial exercise price of $5.25 per share.
The 2021 Warrants are immediately exercisable and will expire on the fifth anniversary of issuance. Prior to expiration, subject to the
terms and conditions set forth in the 2021 Warrants, the holders of such 2021 Warrants may exercise the 2021 Warrants for shares of common
stock by providing notice to the Company and paying the exercise price per share for each share so exercised or by utilizing the “cashless
exercise” feature contained in each 2021 Warrant. The fair value of the 2021 Warrants was $7.3 million and was based on the Black-Scholes
pricing model. Input assumptions used were as follows: a risk-free interest rate of 0.5%; expected volatility of 56.0%; expected life
of 5 years; expected dividend yield of 0%; and the underlying traded stock price. $3.7 million of the total proceeds was allocated
to the 2021 Warrants based on the relative fair value allocation method, which has been reflected in stockholders’ equity. The
2021 Warrants were classified in stockholders’ equity as the number of shares were fixed and determinable, and no other provisions
precluded equity treatment. The private placement closed on January 14, 2021.
2019
Common Stock Offering
On
October 23, 2019, the Company entered into Securities Purchase Agreements with certain accredited investors, pursuant to which the Company,
in a private placement, has issued and sold 47,223 shares of the Company’s common stock to the accredited investors at a price
of $5.40 per share, for gross proceeds amounting to $255,000. The Company filed a registration statement with the SEC covering the resale
of the shares of common stock sold in the private placement on August 11, 2020.
Warrant
Activity and Summary
The
following table summarizes warrant activity during the nine month period ended June 30, 2021:
|
|
Warrants
|
|
|
Exercise
Price
Per
Warrant
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Term
(years)
|
|
Outstanding
and exercisable at September 30, 2020
|
|
|
3,390,320
|
|
|
$
|
5.40 - 9.00
|
|
|
$
|
7.05
|
|
|
|
2.89
|
|
Issued
|
|
|
4,166,682
|
|
|
$
|
5.25
|
|
|
$
|
5.25
|
|
|
|
—
|
|
Exercised
|
|
|
(53,194
|
)
|
|
$
|
5.61-8.25
|
|
|
$
|
5.69
|
|
|
|
—
|
|
Forfeited
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
Outstanding
and exercisable at June 30, 2021
|
|
|
7,503,808
|
|
|
|
$ 5.25-9.00
|
|
|
$
|
6.06
|
|
|
|
3.48
|
|
NOTE 13
– Subsequent Events
Facility
Lease
On
July 1, 2021, the Company entered into a non-cancellable facility lease (the “New Lease”), pursuant to which the Company
agreed to rent office space for its research and development operations located at 718 University Avenue, Suite #111, Los Gatos, California.
The term of the New Lease is eighteen months. The facility space under the New Lease is approximately 1,162 square feet. The Company
took possession of the office space on July 2, 2021. The initial monthly rent under the New Lease is approximately $4,241.
NeuroOne
Medical Technologies Corporation
Form
10-Q