NEUROONE MEDICAL TECHNOLOGIES Corp 10-Q for FY2020 Q2

NEUROONE MEDICAL TECHNOLOGIES Corp (NMTC)

10-Q 2020-05-14 For: 2020-03-31

Added on April 05, 2026

About this 10-Q

NEUROONE MEDICAL TECHNOLOGIES Corp filed this 10-Q on May 14, 2020, covering the quarter ended March 31, 2020 (FY2020 Q2).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Net loss: $1.35M; compared with a net loss of $2.21M a year earlier

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Delaware		27-0863354
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

7599 Anagram Drive Eden Prairie, MN		55344
(Address of Principal Executive Offices)		(Zip Code)

Title of Each Class		Trading Symbol(s)		Name of Each Exchange on Which Registered
N/A		N/A		N/A

Large accelerated filer	☐	Non-accelerated filer	☒
Accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

		Page
	PART 1 – FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Balance Sheets as of March 31, 2020 (unaudited) and September 30, 2019	1
	Condensed Statements of Operations for the three and six months ended March 31, 2020 and 2019 (unaudited)	2
	Condensed Statements of Changes in Stockholders’ Deficit for the three and six months ended March 31, 2020 and 2019 (unaudited)	3
	Condensed Statements of Cash Flows for the six months ended March 31, 2020 and 2019 (unaudited)	4
	Notes to Condensed Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	37

SIGNATURES		38

	As of
	March 31, 2020			September 30, 2019
	(unaudited)
Assets
Current assets:
Cash	$	747,244		$	260,749
Prepaid and other assets		81,305			41,002
Total current assets		828,549			301,751
Right-of-use asset		308,055			—
Intangible assets, net		167,680			178,838
Property and equipment, net		84,943			52,026
Total assets	$	1,389,227		$	532,615

Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	1,077,225		$	1,152,472
Accrued expenses		291,874			617,721
Convertible promissory notes (Note 7)		4,921,076			—
Total current liabilities		6,290,175			1,770,193
Lease liability		284,235			—
Total liabilities		6,574,410			1,770,193

Commitments and contingencies (Note 4)

Stockholders’ deficit:
Preferred stock, $0.001 par value; 10,000,000 shares authorized as of March 31, 2020 and September 30, 2019; no shares issued or outstanding as of March 31, 2020 and September 30, 2019.		—			—
Common stock, $0.001 par value; 100,000,000 shares authorized as of March 31, 2020 and September 30, 2019; 14,022,423 and 13,493,705 shares issued and outstanding as of March 31, 2020 and September 30, 2019, respectively.		14,023			13,494
Additional paid–in capital		18,022,373			15,987,799
Accumulated deficit		(23,221,579	)		(17,238,871	)
Total stockholders’ deficit		(5,185,183	)		(1,237,578	)
Total liabilities and stockholders’ deficit	$	1,389,227		$	532,615

	For the Three Months Ended						For the Six Months Ended
	March 31,						March 31,
	2020			2019			2020			2019
Operating expenses:
General and administrative	$	1,035,256		$	1,084,789		$	2,347,422		$	1,951,468
Research and development		342,102			436,311			843,921			645,479
Total operating expenses		1,377,358			1,521,100			3,191,343			2,596,947
Loss from operations		(1,377,358	)		(1,521,100	)		(3,191,343	)		(2,596,947	)
Interest expense		—			(20,534	)		(2,697,507	)		(284,557	)
Net valuation change of instruments measured at fair value		31,716			(116,809	)		(93,858	)		(129,763	)
Loss on notes extinguishment		—			(553,447	)		—			(553,447	)
Loss before income taxes		(1,345,642	)		(2,211,890	)		(5,982,708	)		(3,564,714	)
Provision for income taxes		—			—			—			—
Net loss	$	(1,345,642	)	$	(2,211,890	)	$	(5,982,708	)	$	(3,564,714	)

Net loss per share:
Basic and diluted	$	(0.10	)	$	(0.20	)	$	(0.43	)	$	(0.34	)
Number of shares used in per share calculations:
Basic and diluted		13,904,429			10,971,425			13,780,509			10,360,696

					Additional						Total
	Common Stock				Paid–In			Accumulated			Stockholders’
	Shares		Amount		Capital			Deficit			Equity (Deficit)
Balance at September 30, 2018		9,656,505	$	9,657	$	6,052,161		$	(10,457,710	)	$	(4,395,892	)
Issuance of common stock under 2018 and 2019 private placements		330,000		330		601,319			—			601,649
Issuance of warrants under 2018 and 2019 private placements		—		—		223,351			—			223,351
Issuance costs related to 2018 and 2019 private placements		—		—		(149,316	)		—			(149,316	)
Issuance of common stock for consulting services		50,000		50		114,950			—			115,000
Net loss		—		—		—			(1,352,824	)		(1,352,824	)
Balance at December 31, 2018		10,036,505		10,037		6,842,465			(11,810,534	)		(4,958,032	)
Issuance of common stock under 2019 private placement		1,743,979		1,744		3,164,640			—			3,166,384
Issuance of warrants under 2019 private placements		—		—		1,193,564			—			1,193,564
Issuance costs related to 2019 and 2018 private placements		—		—		(698,777	)		—			(698,777	)
Issuance of common stock upon conversion of convertible promissory notes		839,179		839		1,920,881			—			1,921,720
Issuance of warrants and reclassification of warrant liability upon conversion of convertible promissory notes		—		—		1,565,402			—			1,565,402
Share–based compensation — employee		—		—		30,085			—			30,085
Share–based compensation — non–employee		—		—		16,569			—			16,569
Exercise of stock options		93,555		94		3,179			—			3,273
Exercise of warrants		231,296		231		416,102			—			416,333
Net loss		—		—		—			(2,211,890	)		(2,211,890	)
Balance at March 31, 2019		12,944,514	$	12,945	$	14,454,110		$	(14,022,424	)	$	444,631

Balance at September 30, 2019		13,493,705	$	13,494	$	15,987,799		$	(17,238,871	)	$	(1,237,578	)
Issuance of common stock under securities purchase agreement		141,666		142		254,858			—			255,000
Issuance of warrants in connection with convertible notes offering		—		—		419,635			—			419,635
Stock-based compensation		—		—		463,084			—			463,084
Issuance of common stock for consulting services		90,000		90		124,503			—			124,593
Issuance of common stock upon vesting of restricted stock units		10,503		11		(11	)		—			—
Net loss		—		—		—			(4,637,066	)		(4,637,066	)
Balance at December 31, 2019		13,735,874		13,737		17,249,868			(21,875,937	)		(4,612,332	)

Conversion of convertible notes into common stock		60,847		61		239,461			—			239,522
Exercise of stock options		42,525		42		1,446			—			1,488
Stock-based compensation		—		—		88,806			—			88,806
Issuance of common stock for consulting services		61,000		61		153,520			—			153,581
Issuance of common stock upon vesting of restricted stock units		122,177		122		289,272			—			289,394
Net loss		—		—		—			(1,345,642	)		(1,345,642	)
Balance at March 31, 2020		14,022,423	$	14,023	$	18,022,373		$	(23,221,579	)	$	(5,185,183	)

	For the six months ended March 31,
	2020			2019
Operating activities
Net loss	$	(5,982,708	)	$	(3,564,714	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization and depreciation		20,965			10,622
Stock-based compensation		1,119,458			189,197
Non-cash interest on convertible notes		1,831,940			51,333
Non-cash discount amortization on convertible notes		—			233,224
Revaluation of convertible notes		93,858			—
Revaluation of premium conversion derivatives and warrant liability		—			129,763
Issuance costs attributed to financing activities		865,567			—
Loss on notes extinguishment		—			553,447
Lease liability principal payment deferral		4,038
Right-of-use asset depreciation adjustment		(4,038	)
Change in assets and liabilities:
Prepaid and other assets		(40,303	)		(74,574	)
Accounts payable and other accrued liabilities		(383,855	)		(104,578	)
Net cash used in operating activities		(2,475,078	)		(2,576,280	)
Investing activities
Purchase of fixed assets and intangible assets		(40,224	)		(65,000	)
Net cash used in investing activities		(40,224	)		(65,000	)
Financing activities
Proceeds from issuance of convertible promissory notes		3,234,800			—
Issuance costs related to convertible notes		(417,176	)		—
Proceeds from unsecured loans		—			245,000
Proceeds from issuance of common stock in connection with private placements		255,000			3,768,032
Proceeds from issuance of warrants in connection with private placements		—			1,416,915
Exercise of warrants		—			416,333
Exercise of stock options		1,488			3,273
Repayment of unsecured loans		—			(299,000	)
Issuance costs related to private placements		(72,315	)		(617,134	)
Net cash provided by financing activities		3,001,797			4,933,419
Net increase in cash		486,495			2,292,139
Cash at beginning of period		260,749			13,260
Cash at end of period	$	747,244		$	2,305,399
Supplemental non-cash financing and investing transactions:
Conversion of convertible promissory notes to equity	$	—		$	1,678,361
Exercise of premium conversion derivative liability	$	—		$	419,590
Reclassification of warrant liability to equity	$	—		$	835,723
Unpaid issuance costs attributed to convertible notes and private placement	$	28,756		$	230,959
Broker warrants issued in connection with convertible notes	$	419,635		$	—
Purchased fixed assets in accounts payable and accrued expenses	$	2,500		$	—
Operating lease right of use asset obtained in exchange for operating lease	$	335,119		$	—

	As of March 31, 2020
Description	Total		Level 1		Level 2		Level 3
Liabilities:
Convertible Notes	$	4,921,076		—		—	$	4,921,076
Total liabilities at fair value	$	4,921,076		—		—	$	4,921,076

	2020
Convertible notes
Balance as of beginning of period – September 30, 2019	$	—
Fair value attributed to convertible promissory notes upon issuance		5,066,740
Conversion of convertible promissory notes to common stock		(239,522	)
Change in fair value including accrued interest		93,858
Balance as of end of period – March 31, 2020	$	4,921,076

	2019
Warrant liability
Balance as of beginning of period – September 30, 2018	$	817,155
Change in fair value of warrant liability		18,568
Reclassification to equity upon conversion of convertible promissory notes		(835,723	)
Balance as of end of period – March 31, 2019	$	—

	2019
Premium debt conversion derivatives
Balance as of beginning of period – September 30, 2018	$	308,395
Change in fair value of premium debt conversion derivatives		111,195
Reclassification to equity upon conversion of convertible promissory notes		(419,590	)
Balance as of end of period – March 31, 2019	$	—

	2020		2019
Warrants		8,389,987		6,448,613
Stock options		1,355,512		600,209
Restricted stock units		59,090		—
Convertible notes		1,648,287		—

	●	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.

	Six months ended
	March 31, 2020

Cash paid for amounts included in the measurement of lease liability:
Operating cash flows from operating leases	$	—

Right-of -use assets obtained in exchange for lease obligations:
Operating leases	$	335,119

	As of
	March 31, 2020
Right-of-use assets	$	308,055

Lease liability	$	339,157

Weighted average remaining lease term (years)		5.0
Weighted average discount rate		7.0	%

	As of
	March 31, 2020
2020 (period from April 1, 2020 to September 30, 2020)	$	38,462
2021		77,884
2022		79,832
2023		81,827
2024		83,873
2025		42,454
Total lease payments		404,332
Less imputed interest		(65,175	)
Total		339,157
Short-term portion		(54,922	)
Long-term portion	$	284,235

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2020			2019			2020			2019

Expected stock price volatility		54.3	%		50.7	%		52.8	%		50.2	%
Expected life of options (years)		5.4			6.0			5.7			5.9
Expected dividend yield		0	%		0	%		0	%		0	%
Risk free interest rate		1.4	%		2.6	%		1.7	%		2.7	%

			Exercise Price		Weighted Average		Weighted Average
	Warrants		Per Warrant		Exercise Price		Term (years)
Outstanding and exercisable at September 30, 2019		7,265,598	$	1.80 - 3.00	$	2.55		3.60
Issued		1,124,389	$	1.87	$	1.87		4.26
Exercised		—	$	—	$	—		—
Forfeited		—	$	—	$	—		—
Outstanding and exercisable at March 31, 2020		8,389,987	$	1.80 - 3.00	$	2.45		3.26

	Useful Life
Net Intangibles, September 30, 2019	12-13 years	$	178,838
Less: amortization			(11,158	)
Net Intangibles, March 31, 2020		$	167,680

	As of March 31, 2020		As of September 30, 2019
Paulson convertible notes, principal	$	3,085,200	$	—
Accrued interest		152,036		—
Fair value adjustments		1,683,840		—
	$	4,921,076	$	—

	For the three months ended March 31, (unaudited)
	2020			2019			Period to Period Change
Operating expenses:
General and administrative	$	1,035,256		$	1,084,789		$	(49,533	)
Research and development		342,102			436,311			(94,209	)
Total operating expenses		1,377,358			1,521,100			(143,742	)
Loss from operations		(1,377,358	)		(1,521,100	)		143,742
Interest expense		—			(20,534	)		20,534
Net valuation change of instruments measured at fair value		31,716			(116,809	)		148,525
Loss on note extinguishment		—			(553,447	)		553,447
Loss before income taxes		(1,345,642	)		(2,211,890	)		866,248
Provision for income taxes		—			—			—
Net loss	$	(1,345,642	)	$	(2,211,890	)	$	866,248

	For the six months ended March 31, (unaudited)
	2020			2019			Period to Period Change
Operating expenses:
General and administrative	$	2,347,422		$	1,951,468		$	395,954
Research and development		843,921			645,479			198,442
Total operating expenses		3,191,343			2,596,947			594,396
Loss from operations		(3,191,343	)		(2,596,947	)		(594,396	)
Interest expense		(2,697,507	)		(284,557	)		(2,412,950	)
Net valuation change of instruments measured at fair value		(93,858	)		(129,763	)		35,905
Loss on note extinguishment		—			(553,447	)		553,447
Loss before income taxes		(5,982,708	)		(3,564,714	)		(2,417,994	)
Provision for income taxes		—			—			—
Net loss	$	(5,982,718	)	$	(3,564,714	)	$	(2,417,994	)

	For the Six Months Ended
	March 31,
	2020			2019
Net cash used in operating activities	$	(2,475,078	)	$	(2,576,280	)
Net cash used by investing activities		(40,224	)		(65,000	)
Net cash provided by financing activities		3,001,797			4,933,419
Net increase in cash	$	486,495		$	2,292,139

Exhibit 3.1		Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.4 on the Registrant’s Current Report on Form 8-K filed on June 29, 2017)
Exhibit 3.2		Bylaws of the Company (incorporated by reference to Exhibit 3.5 on the Registrant’s Current Report on Form 8-K filed on June 29, 2017)
Exhibit 10.1+		Amended and Restated Exclusive Start-up Company License Agreement effective January 21, 2020 by and between NeuroOne Medical Technologies Corporation and Wisconsin Alumni Research Foundation (incorporated by reference to Exhibit 10.1 on the Registrant’s Current Report on Form 8-K filed on January 24, 2020)
Exhibit 10.2		Form of Broker Warrant (incorporated by reference to Exhibit 4.1 on the Registrant’s Current Report on Form 8-K filed on January 24, 2020)
Exhibit 31		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101.INS		XBRL Instance Document.
Exhibit 101.SCH		XBRL Taxonomy Extension Schema Document.
Exhibit 101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
Exhibit 101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
Exhibit 101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
Exhibit 101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.
Exhibit 104		XBRL Cover Page

By:	/s/ Dave Rosa
	Dave Rosa
	Chief Executive Officer
	(Principal Executive Officer)
	(Principal Financial Officer)

Date: May 14, 2020	/s/ David Rosa
	Name:	David Rosa
	Title:	Chief Executive Officer
		(Principal Executive Officer and Principal Financial Officer)