Full Press Release Details
FINANCIAL STATEMENTS
| Condensed Financial Statements (unaudited) | |
| Condensed Balance Sheets (unaudited) | 3 |
| Condensed Statements of Operations (unaudited) | 4 |
| Condensed Statements of Cash Flows (unaudited) | 5 |
| Notes to Condensed Financial Statements (unaudited) | 6 - 18 |
Condensed Balance Sheets
| June 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 421,562 | $ | 522,217 | ||||
| Prepaid expenses and other assets | 7,146 | 53,823 | ||||||
| Total current assets | 428,708 | 576,040 | ||||||
| Intangible assets, net | 194,901 | 180,890 | ||||||
| Total assets | $ | 623,609 | $ | 756,930 | ||||
| Liabilities and Stockholders' Deficit | ||||||||
| Current liabilities: | ||||||||
| Accrued expenses | $ | 693,653 | $ | 264,343 | ||||
| Short-term unsecured loan | - | 50,000 | ||||||
| Convertible promissory notes, net and accrued interest | 982,017 | 225,197 | ||||||
| Premium debt conversion derivative | 426,417 | 137,650 | ||||||
| Total current liabilities | 2,102,087 | 677,190 | ||||||
| Warrant liability | 767,626 | 345,960 | ||||||
| Total liabilities | 2,869,713 | 1,023,150 | ||||||
| Commitments and contingencies (Note 4) | ||||||||
| Stockholders' deficit: | ||||||||
| Preferred stock, $0.0001 par value; 100,000 shares authorized; no shares issued or outstanding as of June 30, 2017 and December 31, 2016. | - | - | ||||||
| Common stock, $0.0001 par value; 1,200,000 shares authorized and 369,892 and 306,670 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively. | 37 | 31 | ||||||
| Additional paid-in capital | 44,128 | 119 | ||||||
| Accumulated deficit | (2,290,269 | ) | (266,370 | ) | ||||
| Total stockholders' deficit | (2,246,104 | ) | (266,220 | ) | ||||
| Total liabilities and stockholders' deficit | $ | 623,609 | $ | 756,930 |
See accompanying notes to condensed financial
Condensed Statements of Operations
| NeuroOne, Inc. | NeuroOne LLC | NeuroOne, Inc. | NeuroOne LLC | |||||||||||||
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | $ | 731,973 | $ | 2,067 | $ | 1,175,990 | $ | 4,068 | ||||||||
| Research and development | 156,716 | - | 228,757 | - | ||||||||||||
| Total operating expenses | 888,689 | 2,067 | 1,404,747 | 4,068 | ||||||||||||
| Loss from operations | (888,689 | ) | (2,067 | ) | (1,404,747 | ) | (4,068 | ) | ||||||||
| Interest expense | (405,634 | ) | (3,565 | ) | (619,152 | ) | (7,063 | ) | ||||||||
| Net loss and comprehensive loss | $ | (1,294,323 | ) | $ | (5,632 | ) | $ | (2,023,899 | ) | $ | (11,131 | ) | ||||
| Net loss per share: | ||||||||||||||||
| Basic and diluted | $ | (3.75 | ) | $ | (6.21 | ) | ||||||||||
| Number of shares used in per share calculations: | ||||||||||||||||
| Basic and diluted | 345,025 | 325,953 |
See accompanying notes to condensed financial
Condensed Statements of Cash Flows
| NeuroOne LLC | NeuroOne LLC | |||||||
| Six months ended June 30, 2017 | Six months ended June 30, 2016 | |||||||
| Operating activities | ||||||||
| Net loss | $ | (2,023,899 | ) | $ | (11,131 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization | 9,104 | 3,882 | ||||||
| Stock-based compensation | 11,849 | |||||||
| Foregiveness of share subscription agreement for founders' shares | 9,051 | |||||||
| Non-cash interest on convertible promissory notes | 43,856 | - | ||||||
| Non-cash discount amortization on convertible promissory notes | 482,505 | - | ||||||
| Non-cash note issuance costs attributed to warrant liability | 38,119 | - | ||||||
| Revaluation of premium debt conversion derivative | 74,806 | - | ||||||
| Revaluation of warrant liability | (19,253 | ) | - | |||||
| Change in assets and liabilities: | ||||||||
| Prepaid expenses and other assets | 46,677 | - | ||||||
| Accrued expenses | 414,019 | 7,249 | ||||||
| Net cash used in operating activities | (913,166 | ) | - | |||||
| Financing activities | ||||||||
| Proceeds from issuance of convertible promissory notes | 484,201 | - | ||||||
| Proceeds from issuance of warrants | 440,919 | - | ||||||
| Repayment of short term unsecured loan | (50,000 | ) | - | |||||
| Issuance costs related to convertible promissory notes | (33,039 | ) | - | |||||
| Issuance costs related to warrants | (29,570 | ) | - | |||||
| Net cash provided by financing activities | 812,511 | - | ||||||
| Net decrease in cash | (100,655 | ) | - | |||||
| Cash at beginning of period | 522,217 | - | ||||||
| Cash at end of period | $ | 421,562 | $ | - | ||||
| Supplemental non-cash financing transactions: | ||||||||
| Bifurcation of premium conversion derivative related to convertible promissory notes | $ | 213,961 | $ | - | ||||
| Accrued issuance costs attributed to convertible promissory notes | $ | 39,781 | $ | - | ||||
| Accrued issuance costs attributed to warrant liability | $ | 38,119 | $ | - | ||||
| Common stock issued in connection with purchase of intangible assets | $ | 23,115 | $ | - |
See accompanying notes to condensed
financial statements
TO CONDENSED FINANCIAL STATEMENTS
1 - Organization and Basis of Presentation
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
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". 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.
Basis of presentation
The accompanying unaudited condensed financial
statements have been prepared by the Company, in accordance with U.S. generally accepted accounting principles (U.S. GAAP). Certain
information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been
condensed or omitted. In the opinion of management, the accompanying unaudited condensed financial statements of the Company contain
all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position as of June
30, 2017 and the results of operations and cash flows for the three and six month periods ended June 30, 2017 and 2016. The operating
results for the periods presented are not necessarily indicative of the results that may be expected for the full fiscal year.
These unaudited condensed financial statements should be read in conjunction with the audited financial statements and the notes
thereto for the fiscal period ended December 31, 2016. The condensed balance sheet at December 31, 2016 was derived from the audited
financial statements.
The accompanying condensed 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 $2,290,269 as of June 30, 2017. 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.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Through June 30, 2017, the Company has
completed $1,625,120 ($550,000 during the quarter ended June 30, 2017) of a planned $1.5 million convertible promissory note financing
(subsequently amended to $2.5 million authorized in June 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 June 30, 2018. 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 condensed 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 June 30, 2017,
the Company had deposits in excess of federally insured amounts of $171,562.
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
Fair Value of Financial Instruments
The Company's accounting
for fair value measurements of assets and liabilities that are recognized or disclosed at fair value in the condensed financial
statements on a recurring or nonrecurring basis adheres to the Financial Accounting Standards Board (FASB) fair value hierarchy
that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements
involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
NOTES TO CONDENSED FINANCIAL STATEMENTS
As of June 30, 2017 and December
31, 2016, the fair values of cash, other assets, accrued expenses and the unsecured loan approximated their carrying values because
of the short-term nature of these assets or liabilities. The estimated fair value of the convertible promissory notes of the Company
was based on amortized cost which was deemed to approximate fair value. The fair value of the warrant liability and the premium
conversion derivative associated with the convertible promissory notes of the Company were based on cash flow models discounted
at current implied market rates evidenced in recent arms-length transactions representing expected returns by market participants
for similar instruments which were based on Level 3 inputs. There were no transfers between fair value hierarchy levels during
the three and six month periods ended June 30, 2017.
The fair value of financial instruments measured on
a recurring basis is as follows:
| As of June 30, 2017 | ||||||||||||||||
| Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant liability | $ | 767,626 | $ | - | $ | - | $ | 767,626 | ||||||||
| Premium conversion derivative | 426,417 | - | - | 426,417 | ||||||||||||
| Total liabilities at fair value | $ | 1,194,043 | $ | - | $ | - | $ | 1,194,043 |
| As of December 31, 2016 | ||||||||||||||||
| Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant liability | $ | 345,960 | $ | - | $ | - | $ | 345,960 | ||||||||
| Premium conversion derivative | 137,650 | - | - | 137,650 | ||||||||||||
| Total liabilities at fair value | $ | 483,610 | $ | - | $ | - | $ | 483,610 |
NOTES TO CONDENSED FINANCIAL STATEMENTS
The following table provides a roll-forward of the warrant
liability and premium conversion derivative measured at fair value on a recurring basis using unobservable level 3 inputs
for the six months ended June 30, 2017:
| Warrant liability | Six months ended June 30, 2017 | |||
| Balance as of beginning of period | $ | 345,960 | ||
| Issuance of warrants in connection with convertible promissory notes | 440,919 | |||
| Change in fair value of warrant liability | (19,253 | ) | ||
| Balance as of end of period | $ | 767,626 |