NeuroOne Medical Technologies Corporation — FY2022 Form 10-K
Reporting period: Fiscal year ended September 30, 2022; comparisons are with the year ended September 30, 2021. The filing is an annual report, not a stand-alone fourth-quarter report.
Business context
NeuroOne is an early-stage medical-device company developing thin-film electrodes for brain-signal recording and monitoring, stimulation, and ablation. Its cleared products include Evo cortical electrodes and sEEG depth electrodes. Zimmer holds exclusive global distribution rights for specified products. Most therapeutic products and other applications remain in development.
Financial performance and position
| Metric | FY2022 | FY2021 |
|---|---|---|
| Product revenue | $171,169 | $178,146 |
| Cost of product revenue | $241,963 | $275,895 |
| Product gross loss | $(70,794) | $(97,749) |
| Zimmer collaboration revenue | $1,948,872 | $64,812 |
| Operating expenses | $11,908,843 | $10,185,274 |
| Loss from operations | $(10,030,765) | $(10,218,211) |
| Net loss | $(9,999,613) | $(9,948,168) |
| Net loss per share, basic and diluted | $(0.63) | $(0.93) |
| Cash used in operating activities | $(7,519,534) | $(8,602,826) |
At September 30, 2022, cash and cash equivalents were $8.16 million and short-term investments were $2.98 million, for combined liquidity of approximately $11.1 million. Current assets were $12.18 million and current liabilities $3.10 million. Total liabilities were $3.22 million, including operating lease liabilities; the filing reports no outstanding convertible notes at year-end. Stockholders’ equity was $9.60 million and accumulated deficit was $50.83 million.
Changes versus the prior year
- Collaboration revenue rose to $1.95 million, largely reflecting Zimmer agreement payments, including a $3.5 million payment in August 2022. Most related performance obligations had been fulfilled by year-end; $1.46 million remained deferred for sEEG exclusivity maintenance and was recognized in the first quarter of FY2023.
- Product revenue edged down about 4%; product gross loss narrowed by about $27,000 but remained negative.
- Operating expenses increased $1.72 million: R&D rose $1.00 million, primarily for sEEG development, and SG&A increased $0.72 million, including higher legal and public-company costs, partly offset by lower stock compensation.
- Operating cash use decreased by approximately $1.08 million. Investing cash use increased to $3.24 million, mainly from purchases of short-term investments and equipment.
- The October 2021 public offering generated approximately $12.0 million in net financing cash proceeds; common shares outstanding increased to 16.22 million from 12.01 million.
Outlook, risks, and unusual items
- Going concern: Management and the auditor stated that substantial doubt exists about the Company’s ability to continue as a going concern. The auditor’s opinion was otherwise unqualified. Management said available liquidity might not fund operations for at least 12 months from the filing date and that additional capital is needed; spending reductions or cessation of operations could follow if funding is unavailable.
- Product and regulatory outlook: The sEEG electrode received FDA clearance for use up to 30 days on October 20, 2022, after fiscal year-end. The Company anticipated commercial sEEG sales in early 2023. It planned additional preclinical work on its diagnostic/ablation depth electrode and anticipated a 510(k) submission in the second calendar quarter of 2023; timing and approval are uncertain. Chronic stimulation and spinal-cord-stimulation products remain earlier-stage projects.
- Funding: On December 21, 2022, the Company established an at-the-market program allowing sales of up to $9.0 million of common stock, with commissions of up to 3%. Issuance would dilute existing shareholders.
- Key risks: Continuing losses and financing dependence; commercialization and Zimmer execution; regulatory, development, and clinical uncertainty; supply-chain constraints, including polyimide film; reliance on third-party manufacturers and licensed intellectual property; reimbursement and adoption risks; competition; and potential dilution.
- Contingencies and unusual items: PMT litigation was settled on September 29, 2022. Litigation-related legal costs were $663,629 in FY2022, versus $80,356 in FY2021. The Company granted Zimmer a warrant for 350,000 shares at $3.00 per share as part of the August 2022 amendment. The auditor identified Zimmer milestone-payment revenue recognition as a critical audit matter.
Most important facts for investors to verify
- Cash runway, cash burn, and financing raised or shares issued under the $9.0 million ATM program.
- Actual timing and commercial uptake of sEEG sales, and revenue and gross margin from product sales rather than collaboration payments.
- Zimmer’s commercialization progress, future milestones, and any royalty-generating sales.
- Progress and costs for the planned ablation-device submission and other clinical, regulatory, and development programs.
- Whether supply constraints, reimbursement, or other risks affect product availability and adoption.