NeuroOne Medical Technologies Corporation — FY2023 Form 10-K
Reporting period: Fiscal year ended September 30, 2023. This is an annual report; it does not provide standalone fourth-quarter results. NeuroOne is an early-stage medical technology company developing thin-film electrode products for brain recording and stimulation, ablation, drug delivery, and spinal cord stimulation.
Financial results and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Product revenue | $1.95 million | $0.17 million |
| Collaboration revenue | $1.46 million | $1.95 million |
| Total revenue | $3.41 million | $2.12 million |
| Product gross profit (loss) | $0.46 million; 23.4% product gross margin | ($0.07 million) |
| Operating expenses | $13.87 million | $11.91 million |
| Operating loss | ($11.96 million) | ($10.03 million) |
| Net loss | ($11.86 million); ($0.65) per share | ($10.00 million); ($0.63) per share |
| Cash used in operating activities | $12.89 million | $7.52 million |
| Cash and cash equivalents at year-end | $5.32 million | $8.16 million |
| Total assets / liabilities | $8.10 million / $1.85 million | $12.82 million / $3.22 million |
Product revenue rose mainly after FDA clearance of the sEEG electrode; product sales exceeded product costs for the first time. Collaboration revenue declined as Zimmer-related performance obligations were completed. Research and development expense increased $2.01 million to $6.94 million; selling, general and administrative expense was nearly unchanged at $6.93 million. No income tax provision was recorded. The balance sheet reports no borrowings; liabilities include accounts payable, accrued expenses, deferred revenue and operating leases.
FY2023 investing activities provided $2.65 million, primarily from maturities of short-term investments; financing activities provided $7.40 million, principally from equity offerings. The July 2023 public offering generated approximately $5.2 million net, and the ATM generated approximately $2.3 million net. Year-end working capital was approximately $5.52 million.
Material changes and business developments
- FDA-cleared Evo sEEG electrodes for use of less than 30 days in October 2022; commercial launch with exclusive distributor Zimmer Biomet was announced in May 2023.
- OneRF ablation system received FDA 510(k) clearance on December 6, 2023, after the fiscal year-end, for creating radiofrequency lesions in nervous tissue for functional neurosurgical procedures.
- The company completed an initial animal implant of thin-film spinal cord stimulation paddle leads and bench-tested a percutaneous delivery system. These products remain in development.
- At September 30, 2023, inventory was $1.73 million, up from $0.70 million, while cash and cash equivalents declined by $2.84 million year over year.
Outlook, risks and unusual items
Management expects continued significant expenses and losses and does not provide numerical revenue or earnings guidance. It expects further development, regulatory and commercialization spending. The filing states that year-end liquidity was expected to fund operations through March 31, 2024, but also says existing resources may not fund operations for at least 12 months from the filing date. Management and the auditor identify substantial doubt about the company’s ability to continue as a going concern; additional financing is needed, may not be available on acceptable terms, and could substantially dilute shareholders. The financial statements contain no adjustments for the going-concern uncertainty.
- Commercialization depends substantially on Zimmer, which has exclusive global distribution rights for specified products; one customer accounted for all product and collaboration revenue.
- A single contract manufacturer produces all Strip/Grid and sEEG products. Supplier disruption, product quality, regulatory compliance and scaling production are material risks.
- Products are early in commercialization; market adoption, reimbursement, future regulatory pathways and clinical requirements for chronic stimulation and other therapies remain uncertain.
- In January 2023, a business-email-compromise fraud caused an approximately $0.1 million loss; the company did not expect recovery. FY2023 other income included a $94,000 exploit loss and a $32,000 loss on equipment disposal.
- The company reported no material legal proceedings. Management concluded disclosure controls and internal control over financial reporting were effective as of September 30, 2023; the auditor did not attest to internal-control effectiveness.
Important facts for investors to verify
- Current cash runway, subsequent financing, and whether operations can be funded beyond the stated March 31, 2024 estimate.
- Zimmer’s actual sales, shipments, commercialization progress and any further milestone or royalty revenue.
- Whether product revenue growth can produce positive overall gross profit and eventually cover the company’s operating costs.
- Post-year-end OneRF commercialization progress and the regulatory, clinical and funding requirements for spinal cord stimulation, chronic stimulation and drug-delivery products.
- Potential dilution from future equity issuance, the ATM program and outstanding options and warrants; the filing reports 6.20 million warrants and 1.71 million options outstanding at year-end.
- Customer and manufacturing concentration, inventory utilization and any effects of the disclosed fraud loss or other control risks.