NEUROONE MEDICAL TECHNOLOGIES CORP MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

You should read the following discussion and analysis of financial condition and
results of operations of NeuroOne together with our financial statements and the
related notes included elsewhere in this Report. 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.



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. Additionally, we are investigating the potential applications of our
technology associated with artificial intelligence.



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.



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 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 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.
Our other products are still under development.



We have incurred losses since inception. 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.



Prior to FDA clearance of certain of our products, our main sources of cash,
cash equivalents and short-term investments were proceeds from the issuances of
notes, common stock, warrants and unsecured loans. See "Liquidity and Capital
Resources-Capital Resources" below. While we have begun to generate revenue from
the sale of products based on our cEEG and sEEG technology and 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. 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

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. 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. 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. If
economic conditions decline, our future cost of equity or debt capital and
access to the capital markets could be adversely affected.



The COVID-19 pandemic that began in late 2019 introduced significant volatility
to the global economy, disrupted supply chains and had a widespread adverse
effect on the financial markets. Additionally, our operating results could be
materially impacted by changes in the overall macroeconomic environment and
other economic factors. Changes in economic conditions, supply chain
constraints, logistics challenges, labor shortages, 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.



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.



In November 2019, we received FDA 510(k) clearance for our cortical strip
electrode for temporary (less than 30 days) recording, monitoring, and
stimulation on the surface of the brain. In October 2022, we received FDA 510(k)
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. 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. 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. 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").
Additionally, we granted Zimmer the exclusive right and license to distribute
certain depth electrodes developed by the Company ("SEEG Products", and together
with the Strip/Grid Products and Electrode Cable Assembly Products, the
"Products"). The parties have agreed to collaborate with respect to development
activities under the Zimmer Development Agreement through a joint development
committee composed of an equal number of representatives of Zimmer and the
Company.



Under the terms of the Zimmer Development Agreement, we are responsible for all
costs and expenses related to developing the Products, and Zimmer is 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 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.



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. Pursuant to the terms and conditions of the Amendment, Zimmer made a
$3.5 million payment to us in August 2022. 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 addition, in connection with the Amendment, we issued to Zimmer a warrant to
purchase common stock (the "2022 Zimmer Warrant"). The 2022 Zimmer Warrant is
exercisable for up to an aggregate of 350,000 shares of our Common Stock. The
2022 Zimmer Warrant has an exercise price of $3.00 per share, will be
exercisable commencing six months from the issuance date, and will expire on
August 2, 2027.

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.
Either party may terminate the Zimmer 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 Zimmer Development Agreement for any reason with 90
days' written notice, and the Company may terminate the Zimmer Development
Agreement if Zimmer acquires or directly or indirectly owns a controlling
interest in certain competitors of the Company. The license rights granted to
Zimmer under the Zimmer Development Agreement shall be exclusive from the
effective date of the Amendment until the end of the Zimmer Term.

All payments attributed to the Initial Exclusivity Fee, the sEEG exclusivity
maintenance fee and sEEG design milestone payment are non-refundable.

The Zimmer Development Agreement and Amendment were accounted for under the
provisions of Accounting Standards Codification ("ASC") 606, Revenue from
Contracts with Customers ("ASC 606"). 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. All
performance obligations under the Zimmer Development Agreement and Amendment,
outside of the sEEG exclusivity maintenance obligation, were met as of September
30, 2022. 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.

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.

Selling, General and Administrative

Selling, general and administrative expenses consist primarily of
personnel-related costs including stock-based compensation for personnel in
functions not directly associated with research and development activities.
Other significant costs include legal and litigation costs relating to corporate
matters, intellectual property costs, professional fees for consultants
assisting with financial and administrative matters, and sales and marketing in
connection with the commercial sale of cEEG strip/grid, sEEG depth electrode and
electrode cable assembly products. 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.
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. Research and development expenses
include compensation and benefits for research and development employees
including stock-based compensation, overhead expenses, cost of laboratory
supplies, clinical trial and related clinical manufacturing expenses, costs
related to regulatory operations, fees paid to consultants and other outside
expenses. Research and development costs are expensed as incurred and costs
incurred by third parties are expensed as the contracted work is performed.
Lastly, de minimis income from the sale of prototype products and related
materials are offset against research and development expenses.



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.



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.

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.

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.

                                                                   For the years ended
                                                                      September 30,
                                                                                          Period to
                                                                                           Period
                                                         2022              2021            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. 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. 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. Revenue during the periods presented
were derived from the Zimmer Development Agreement and Amendment and represented
the portion of our performance obligations that were met in connection with the
upfront initial development fee and payments associated with the Amendment.

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. 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.

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. 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. 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. 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 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.

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. While we began to generate revenue in fiscal year 2021 from
commercial sales and through milestone and other payments under our
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 an adequate level of revenue from commercial sales to cover
expenses. Our most significant cash requirements relate to the funding of our
ongoing product development and commercialization operations and our royalty
obligations under our intellectual property licenses with the Wisconsin Alumni
Research Foundation ("WARF") and the Mayo Foundation for Medical Education and
Research ("Mayo").  Our additional material cash needs include commitments under
operating leases and other administrative services. See "Funding Requirements"
below for more information. We anticipate that our expenses will increase
substantially as we develop and commercialize our cortical strip, grid electrode
and depth electrode technology and pursue pre-clinical and clinical trials, seek
regulatory approvals, manufacture products, establish our own sales, marketing
and distribution infrastructure to commercialize our ablation electrode
technology, hire additional staff, add operational, financial and management
systems and continue to operate as a public company.



Capital Resources



Our sources of cash, cash equivalents and short-term investments to date have
been limited to collaboration and product revenues, along with proceeds from the
issuances of notes with warrants, common stock with and without warrants and
unsecured loans with the terms of our financings described below.

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"). In
addition, under the terms of the underwriting agreement, we granted the
underwriter an option, exercisable for 30 days, to purchase up to an additional
562,500 shares of common stock on the same terms. 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.



                                       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. 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. 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
2021 Private Placement closed on January 14, 2021.



Common Stock Offerings



On July 24, 2020, we entered into a securities purchase agreement ("2020
Purchase Agreement") with an accredited investor pursuant to which we, in a
private placement, issued and sold 25,000 shares of the Company's common stock
for gross proceeds in the amount of $135,000. Under the 2020 Purchase Agreement,
we agreed to use the net proceeds from the private placement for funding
operations or working capital and general corporate purposes. We granted the
investor indemnification rights with respect to representations, warranties and
agreements under the 2020 Purchase Agreement.



On October 23, 2019, the Company entered into securities purchase agreements
with certain accredited investors, pursuant to which the Company, in a private
placement, 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 $0.3 million before deducting offering expenses.

2020 Paulson Convertible Notes

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 April 30, 2020 and June 30, 2020, the Company issued 2020 Paulson Notes
in an aggregate principal amount of $5.1 million to the Subscribers. The final
closing under the 2020 Paulson Private Placement occurred on June 30, 2020. In
July 2020, all remaining 2020 Paulson Notes outstanding were automatically
converted into common stock following the announcement of a Strategic
Transaction (as defined in the 2020 Paulson Notes) with Zimmer, Inc. Refer to
"Liquidity and Capital Resources-Historical Capital Resources" in our Annual
Report on Form 10-K for the year ended September 30, 2021 for additional
information related to the 2020 Paulson Convertible Notes.

2019 Paulson Convertible Notes

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.



                                       68





                   NeuroOne Medical Technologies Corporation
                                   FORM 10-K

The initial closing of the private placement was consummated on November 1,
2019, and, on that date and through December 3, 2019, the Company issued 2019
Paulson Notes in an aggregate principal amount of $3,234,800 to the Subscribers
for gross proceeds equaling the principal amount. The private placement
terminated on December 3, 2019. Between April 24, 2020 and December 15, 2020,
all of the holders elected to convert outstanding principal and accrued and
unpaid interest of 2019 Paulson Notes in the amount of $3,453,883 into shares of
common stock. Refer to "-Liquidity and Capital Resources-Historical Capital
Resources" in our Annual Report on Form 10-K for the year ended September 30,
2021 for additional information related to the 2019 Paulson Convertible Notes.

Paycheck Protection Program Loan

In connection with the CARES Act, the Company received loan funding of
approximately $83,000 under the Paycheck Protection Program (“PPP”), which was
forgiven by the U.S. Small Business Administration on June 9, 2021.

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").  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.



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"). Under the WARF License, we have agreed to pay WARF a royalty equal to
a single-digit percentage of our product sales pursuant to the WARF License,
with a minimum annual royalty payment of $50,000 for 2020, $100,000 for 2021 and
$150,000 for 2022 and each calendar year thereafter that the WARF License is in
effect. If we or any of our sublicensees contest the validity of any licensed
patent, the royalty rate will be doubled during the pendency of such contest
and, if the contested patent is found to be valid and would be infringed by us
if not for the WARF License, the royalty rate will be tripled for the remaining
term of the WARF License.

Under the Amended and Restated License and Development Agreement with Mayo (the
"Mayo Development Agreement"), we have agreed to pay Mayo a royalty equal to a
single-digit percentage of our product sales pursuant to the Mayo Development
Agreement. See "Note 4 - Commitments and Contingencies" included in our
financial statements included in "Item 8 - Financial Statements and
Supplementary Data" in this Report for more information about the WARF License
and the Mayo Development Agreement.



Our other cash requirements within the next twelve months include accounts
payable, accrued expenses, purchase commitments and other current liabilities.
Our other cash requirements greater than twelve months from various contractual
obligations and commitments include operating leases and contracted services.
Refer to "Note 4 - Commitments and Contingencies" included in our financial
statements included in "Item 8 - Financial Statements and Supplementary Data" in
this Report for further detail of our lease obligations and the timing of
expected future payments. Contracted services include agreements with
third-party service providers for clinical research, product development,
manufacturing, supplies, payroll services, equipment maintenance services, and
audits for periods up to fiscal 2024.



We expect to satisfy our short-term and long-term obligations through cash on
hand and, until we generate an adequate level of revenue from commercial sales
to cover expenses, if ever, from future equity and debt financings.



Liquidity Outlook



For a discussion of potential fee payments under the Zimmer Development
Agreement, see "Note 7 - Zimmer Development Agreement" included in our financial
statements included in "Item 8 - Financial Statements and Supplementary Data" in
this Report. Even though we have received regulatory clearance to expand the use
of our Evo sEEG Electrode technology for up to 30 days, 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. 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. Management has noted the
existence of substantial doubt about our ability to continue as a going concern.
Additionally, our independent registered public accounting firm included an
explanatory paragraph in the report on our financial statements as of and for
the years ended September 30, 2022 and 2021, 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. We may not
be able to raise additional capital on terms acceptable to us, or at all. Any
failure to raise capital when needed could compromise our ability to execute on
our business plan. If we are unable to raise additional funds, or if our
anticipated operating results are not achieved, we believe planned expenditures
may need to be reduced in order to extend the time period that existing
resources can fund our operations. If we are unable to obtain the necessary
capital, it may have a material adverse effect on our operations and the
development of our technology, or we may have to cease operations altogether.



The development and commercialization of our cortical strip, grid electrode 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.
Our ability to successfully transition to profitability will be dependent upon
achieving further regulatory approvals and achieving a level of product sales
adequate to support our cost structure. We cannot assure you that we will ever
be profitable or generate positive cash flow from operating activities.



Cash Flows



The following is a summary of cash flows for each of the periods set forth
below.



                                                 For the 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. The
net change in our net operating assets and liabilities associated with
fluctuations in our operating activities resulted in a cash source of
approximately $1.2 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.



Net 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. 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 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.

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 $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. There were also exercises of stock options and warrants during the
year ended September 30, 2021 resulting in additional cash proceeds of $0.3
million, offset in part by deferred offering costs of $49,000.

Critical Accounting Policies and Significant Judgments and Estimates

Our financial statements are prepared in accordance with U.S. generally accepted
accounting principles. These accounting principles require us to make estimates
and judgments that can affect the reported amounts of assets and liabilities as
of the date of the financial statements as well as the reported amounts of
revenue and expense during the periods presented. We believe that the estimates
and judgments upon which we rely are reasonably based upon information available
to us at the time that we make these estimates and judgments. To the extent that
there are material differences between these estimates and actual results, our
financial results will be affected. The accounting policies that reflect our
more significant estimates and judgments and which we believe are the most
critical to aid in fully understanding and evaluating our reported financial
results are described in "Note 3 - Summary of Significant Accounting Policies"
to our financial statements included in "Item 8 - Financial Statements and
Supplementary Data" in this Report.

Of these policies, the following are considered critical to an understanding of
our financial statements included in “Item 8 – Financial Statements and
Supplementary Data” in this Report that require the application of the most
subjective and the most complex judgments:

Revenues:



For discussion about the determination of collaborations revenue, product
revenue and cost of product revenue, see "Note 7 - Zimmer Development Agreement"
included in "Item 8 - Financial Statements and Supplementary Data" in this
Report. To date, we have not had, nor expect to have in the future, significant
variable consideration adjustments related to product revenue, such as
chargebacks, sales allowances and sales returns.



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. For
additional information, see “Note 11 – Income Taxes” included in “Item 8 –
Financial Statements and Supplementary Data” in this Report.

Contingencies

We are subject to numerous contingencies arising in the ordinary course of
business, including legal contingencies. For additional information, see "Note 4
- Commitments and Contingencies" included in "Item 8 - Financial Statements and
Supplementary Data" in this Report.

Recent Accounting Pronouncements

See "Note 3 - Summary of Significant Accounting Policies" included in "Item 8 -
Financial Statements and Supplementary Data" in this Report regarding the impact
of certain recent accounting pronouncements on our financial statements.

© Edgar Online, source Glimpses