Full Press Release Details
| Report of Independent Registered Public Accounting Firm | 3 |
| Financial Statements | |
| Balance Sheets | 4 |
| Statements of Operations | 5 |
| Statements of Changes in Stockholders'/Member Deficit | 6 |
| Statements of Cash Flows | 7 |
| Notes to Financial Statements | 8 - 20 |
To the Board of Directors and Stockholders of
We have audited the accompanying balance sheets of NeuroOne, Inc.
(the "Company") as of December 31, 2016 and NeuroOne LLC as of December 31, 2015 and the related statements of operations,
stockholders' deficit and cash flows for NeuroOne, Inc. for the period from October 7, 2016 (inception) to December 31, 2016
and statements of operations, member deficit and cash flows for NeuroOne LLC for the period from January 1, 2016 to October 26,
2016 and for the year ended December 31, 2015. These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public
Company Accounting Oversight Board (United States of America) and in accordance with auditing standards generally accepted in the
United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial
reporting as a basis of designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such
opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of NeuroOne, Inc. as of December 31, 2016 and NeuroOne LLC as of December
31, 2015 and the related statements of operations, stockholders' deficit and cash flows for NeuroOne, Inc. for the period
from October 7, 2016 (inception) to December 31, 2016 and statements of operations, member deficit and cash flows for NeuroOne
LLC for the period from January 1, 2016 to October 26, 2016 and for the year ended December 31, 2015 in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has recurring
losses and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are described in Note 2 to the financial statements. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
As discussed in Note 1 to the financial statements, the Company
merged with NeuroOne LLC on October 27, 2016. Our opinion is not modified with respect to this matter.
| NeuroOne LLC | ||||||||
| December 31, | December 31, | |||||||
| 2016 | 2015 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 522,217 | $ | - | ||||
| Prepaid expenses | 53,823 | - | ||||||
| Total current assets | 576,040 | - | ||||||
| Intangible assets, net | 180,890 | 100,293 | ||||||
| Total assets | $ | 756,930 | $ | 100,293 | ||||
| Liabilities and Stockholders'/Member Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | - | $ | 247 | ||||
| Accrued expenses | 264,343 | 114,187 | ||||||
| Short-term unsecured loan | 50,000 | - | ||||||
| Convertible promissory notes | 225,197 | - | ||||||
| Premium conversion derivative | 137,650 | - | ||||||
| Total current liabilities | 677,190 | 114,434 | ||||||
| Warrant liability | 345,960 | - | ||||||
| Total liabilities | 1,023,150 | 114,434 | ||||||
| Commitments and contingencies (Note 4) | ||||||||
| Member deficit | (14,141 | ) | ||||||
| Stockholders' deficit: | ||||||||
| Preferred stock, $0.0001 par value; 100,000 shares authorized as of December 31, 2016, no shares issued or outstanding as of December 31, 2016. | - | |||||||
| Common stock, $0.0001 par value; 1,200,000 shares authorized and 306,670 shares issued and outstanding as of December 31, 2016. | 31 | |||||||
| Additional paid-in capital | 119 | |||||||
| Accumulated deficit | (266,370 | ) | ||||||
| Total stockholders'/member deficit | (266,220 | ) | (14,141 | ) | ||||
| Total liabilities and stockholders'/member deficit | $ | 756,930 | $ | 100,293 |
See accompanying notes to financial statements
Statements of Operations
| NeuroOne LLC | ||||||||||||
| For the period October 7, 2016 to December 31, 2016 | For the period January 1, 2016 to October 26, 2016 | For the year ended December 31, 2015 | ||||||||||
| Operating expenses: | ||||||||||||
| General and administrative | $ | 182,667 | $ | 6,657 | $ | 7,936 | ||||||
| Research and development | - | - | 2,400 | |||||||||
| Total operating expenses | 182,667 | 6,657 | 10,336 | |||||||||
| Loss from operations | (182,667 | ) | (6,657 | ) | (10,336 | ) | ||||||
| Interest expense | (83,703 | ) | (11,947 | ) | (4,187 | ) | ||||||
| Net loss | $ | (266,370 | ) | $ | (18,604 | ) | $ | (14,523 | ) | |||
| Net loss per share: | ||||||||||||
| Basic and diluted | $ | (1.02 | ) | |||||||||
| Number of shares used in per share calculations: | ||||||||||||
| Basic and diluted | 259,906 |
See accompanying notes to financial statements
Statements of Changes in Stockholders'/Member
| NeuroOne LLC | NeuroOne, Inc. | ||||||||||||||||||||||||
| Member | Additional | Total | |||||||||||||||||||||||
| Deficit | Common Stock | Paid-In | Accumulated | Stockholders' | |||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | |||||||||||||||||||||
| Balance at December 31, 2014 | $ | (2,018 | ) | ||||||||||||||||||||||
| Contributions | 2,400 | ||||||||||||||||||||||||
| Net loss | (14,523 | ) | |||||||||||||||||||||||
| Balance at December 31, 2015 | (14,141 | ) | |||||||||||||||||||||||
| Net loss from January 1, 2016 through October 26, 2016 | (18,604 | ) | |||||||||||||||||||||||
| Balance at October 26, 2016 | $ | (32,745 | ) | ||||||||||||||||||||||
| Balance at October 7, 2016 | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
| Issuance of common shares in connection with the merger with NeuroOne LLC | 5,000 | 1 | 149 | - | 150 | ||||||||||||||||||||
| Issuance of common shares to subscription holders | 301,670 | 30 | 9,020 | - | 9,050 | ||||||||||||||||||||
| Subscription receivable | - | - | (9,050 | ) | - | (9,050 | ) | ||||||||||||||||||
| Net loss from October 7, 2016 through December 31, 2016 | - | - | - | (266,370 | ) | (266,370 | ) | ||||||||||||||||||
| Balance at December 31, 2016 | 306,670 | $ | 31 | $ | 119 | $ | (266,370 | ) | $ | (266,220 | ) |
See accompanying notes to financial statements
Statements of Cash Flows
| NeuroOne LLC | ||||||||||||
| For the period October 7, 2016 to December 31, 2016 | For the period January 1, 2016 to October 26, 2016 | For the year ended December 31, 2015 | ||||||||||
| Operating activities | ||||||||||||
| Net loss | $ | (266,370 | ) | $ | (18,604 | ) | $ | (14,523 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Amortization | 1,269 | 6,471 | 7,765 | |||||||||
| Non-cash interest on convertible promissory notes | 4,356 | - | - | |||||||||
| Non-cash discount amortization on convertible promissory notes | 41,514 | - | - | |||||||||
| Non-cash note issuance costs attributed to warrant liability | 36,546 | - | - | |||||||||
| Revaluation of premium conversion derivative | 86 | - | - | |||||||||
| Revaluation of warrant liability | 320 | - | - | |||||||||
| Change in assets and liabilities: | ||||||||||||
| Prepaid expenses | (53,823 | ) | - | - | ||||||||
| Accounts payable | - | 186 | 171 | |||||||||
| Accrued expenses | 60,319 | 11,947 | 4,187 | |||||||||
| Net cash used in operating activities | (175,783 | ) | - | (2,400 | ) | |||||||
| Financing activities | ||||||||||||
| Proceeds from issuance of convertible promissory notes | 354,360 | - | - | |||||||||
| Proceeds from issuance of warrants | 345,640 | - | - | |||||||||
| Proceeds from short term unsecured loan | 50,000 | - | - | |||||||||
| Issuance costs related to convertible promissory notes | (26,306 | ) | - | - | ||||||||
| Issuance costs related to warrants | (25,694 | ) | - | - | ||||||||
| Member contributions | - | - | 2,400 | |||||||||
| Net cash provided by financing activities | 698,000 | - | 2,400 | |||||||||
| Net increase in cash | 522,217 | - | - | |||||||||
| Cash at beginning of period | - | - | - | |||||||||
| Cash at end of period | $ | 522,217 | $ | - | $ | - | ||||||
| Supplemental non-cash financing transactions: | ||||||||||||
| Bifurcation of premium conversion derivative related to convertible promissory notes | $ | 137,564 | $ | - | $ | - | ||||||
| Issuance of common stock for intangible assets | $ | 150 | $ | - | $ | - | ||||||
| Purchased intangible assets in accrued liabilities | $ | 182,009 | $ | - | $ | - | ||||||
| Accrued issuance costs attributed to convertible promissory notes | $ | 11,163 | $ | - | $ | - | ||||||
| Accrued issuance costs attributed to warrant liability | $ | 10,852 | $ | - | $ | - |
See accompanying notes to financial statements
1 - Organization and Nature of Operations
NeuroOne, Inc. (NeuroOne or the Company) 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
To date, the Company has recorded no product
sales and has a limited expense history. NeuroOne is currently raising capital to fund the development of its proprietary technology
and seek regulatory clearances required to initiate commercial activities.
The Company is based in Eden Prairie, Minnesota.
NeuroOne LLC (the "LLC") was formed
on December 12, 2013 and operated as a limited liability company until it was merged with and into NeuroOne, Inc. on October 27,
2016 with NeuroOne, Inc. as the surviving entity of the "Merger" (see Note 9 - Stockholders'/Member Deficit).
NeuroOne, Inc. was formed on October 7, 2016 under different ownership than the LLC. As a result of the Merger, all of the properties,
rights, privileges, powers and franchises of the LLC vested in NeuroOne, Inc., and all debts, liabilities and duties of the LLC
became the debts, liabilities and duties of NeuroOne, Inc., with the exception of the Company's license agreement with Wisconsin
Alumni Research Foundation ("WARF") which required WARF's approval for transfer (See Note 4 - Commitments
and Contingencies). The purpose of the Merger was to change the jurisdiction of the Company's incorporation from Minnesota
to Delaware, change the ownership of the LLC's underlying assets, and to convert from a limited liability company to a corporation.
NeuroOne, Inc. and the LLC were not entities
under common control. As the LLC did not have an integrated set of activities that contained the required complement of inputs,
processes and outputs to be considered a business, the Merger was accounted for as an asset acquisition as prescribed under Accounting
Standards Codification (ASC) 805 - Business Combinations.
The holders of shares of common stock of NeuroOne,
Inc. exchanged, upon the effectiveness of the Merger, three (3) shares of common stock of NeuroOne, Inc. that they subscribed to
and held pre-Merger for one (1) share of common stock in the surviving entity. All issued and outstanding common stock and per
share amounts contained in the financial statements have been retroactively adjusted to reflect this stock combination completed
in connection with the Merger for the period presented.
The accompanying financial statements have
been prepared on the basis that the Company will continue as a going concern. The Company has incurred losses since inception and
had an accumulated deficit of $266,370 as December 31, 2016. Prior to the Merger, the LLC also incurred losses since its inception
and had cumulative losses of $49,930 as of the date of the Merger. The Company does not have adequate liquidity to fund its operations
throughout fiscal 2017 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.
Management intends to seek additional financing to fund operations. If the Company is not able to raise additional working capital,
it will have a material adverse effect on the operations of the Company and the development of its technology.
The Company completed $700,000 of a planned
$1.5 million convertible promissory note financing (subsequently amended to $2.5 million authorized in June 2017) in the fourth
quarter of 2016, with another $925,120 raised as of July 13, 2017. The Company does not have adequate liquidity to fund its operations
throughout fiscal 2017 without raising additional funds. Management believes that the currently available resources from the convertible
promissory note financing combined with funds expected to be raised in fiscal 2017 will be sufficient to enable the Company to
meet its operating plan through at least December 31, 2017. However, 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 to cease operations.
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 and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could
differ from those estimates.
Concentration of 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. Management believes that the financial institution
is financially sound, and accordingly, minimal credit risk exists with respect to the financial institution. As of December 31,
2016, the Company had deposits in excess of federally insured amounts of $272,906.
Prior to October 27, 2016, the Company did
not maintain a bank account. Any expenses incurred while the Company was organized as an LLC were paid by the sole member of the