UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20212022
OR 
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____  
Commission File Number 001-33351
_________________________________________________ 
 NEUROMETRIX, INC.
(Exact name of registrant as specified in its charter)
Delaware04-3308180
(State or other jurisdiction of(I.R.S. Employer Identification No.)
incorporation or organization) 
  
4B Gill Street Woburn, Massachusetts01801
(Address of principal executive offices)(Zip Code)
(781) 890-9989
(Registrant’s telephone number, including area code) 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, $0.0001 par value per shareNUROThe Nasdaq Stock Market LLC
Preferred Stock Purchase Rights
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x     No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x     No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting companyEmerging growth company
☐☐☐x☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐     No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 5,628,9077,130,487 shares of common stock, par value $0.0001 per share, were outstanding as of July 22, 2021.20, 2022.





NeuroMetrix, Inc.
Form 10-Q
Quarterly Period Ended June 30, 20212022
 
TABLE OF CONTENTS
 
 
   
Item 1. 
   
 Balance Sheets as of June 30, 20212022 (unaudited) and December 31, 20202021
1
   
 Statements of Operations (unaudited) for the Quarters and Six Months Ended June 30, 20212022 and 20202021
2
   
Statements of Changes in Stockholders' Equity (unaudited) for the Quarters and Six Months Ended June 30, 20212022 and 20202021
3
 Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 20212022 and 202020214
   
 
5
   
Item 2.10
   
Item 3.1615
   
Item 4.1615
   
 
   
Item 1.1716
   
Item 1A.1716
   
Item 2.1716
   
Item 3.1716
   
Item 4.1716
   
Item 5.1716
   
Item 6.1816
   
1917

3



PART I – FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
NeuroMetrix, Inc.
Balance Sheets
 
June 30, 2021December 31, 2020 June 30, 2022December 31, 2021
(Unaudited)(Unaudited)
AssetsAssets  Assets  
Current assets:Current assets:  Current assets:  
Cash and cash equivalentsCash and cash equivalents$8,364,197 $5,226,213 Cash and cash equivalents$6,002,329 $22,572,104 
Held-to-maturity securitiesHeld-to-maturity securities16,965,817 — 
Accounts receivable, netAccounts receivable, net457,033 334,297 Accounts receivable, net547,775 310,818 
InventoriesInventories1,029,154 1,051,282 Inventories869,378 706,553 
Prepaid expenses and other current assetsPrepaid expenses and other current assets180,838 478,074 Prepaid expenses and other current assets241,651 598,384 
Total current assetsTotal current assets10,031,222 7,089,866 Total current assets24,626,950 24,187,859 
Fixed assets, netFixed assets, net187,256 183,494 Fixed assets, net178,983 198,703 
Right to use asset522,131 692,692 
Right of use assetRight of use asset424,720 475,230 
Other long-term assetsOther long-term assets28,284 28,523 Other long-term assets26,400 26,400 
Total assetsTotal assets$10,768,893 $7,994,575 Total assets$25,257,053 $24,888,192 
Liabilities and Stockholders’ EquityLiabilities and Stockholders’ Equity  Liabilities and Stockholders’ Equity  
Current liabilities:Current liabilities:  Current liabilities:  
Accounts payableAccounts payable$289,760 $142,316 Accounts payable$400,572 $284,036 
Accrued expenses and compensationAccrued expenses and compensation790,427 998,442 Accrued expenses and compensation1,030,607 814,155 
Accrued product returnsAccrued product returns45,000 545,000 Accrued product returns8,000 39,000 
Lease obligation, currentLease obligation, current457,682 599,632 Lease obligation, current148,391 228,506 
Total current liabilitiesTotal current liabilities1,582,869 2,285,390 Total current liabilities1,587,570 1,365,697 
Lease obligation, net of current portionLease obligation, net of current portion350,895 461,410 Lease obligation, net of current portion258,912 306,709 
Total liabilitiesTotal liabilities1,933,764 2,746,800 Total liabilities1,846,482 1,672,406 
Commitments and contingenciesCommitments and contingencies00Commitments and contingencies00
Stockholders’ equity:Stockholders’ equity:  Stockholders’ equity:  
Preferred stockPreferred stock0 0 Preferred stock— — 
Convertible preferred stockConvertible preferred stock1 1 Convertible preferred stock1 1 
Common stock, $0.0001 par value; 25,000,000 shares authorized at June 30, 2021 and December 31, 2020; 5,046,198 and 3,793,739 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively505 379 
Common stock, $0.0001 par value; 25,000,000 shares authorized at June 30, 2022 and December 31, 2021; 7,133,724 and 6,694,296 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectivelyCommon stock, $0.0001 par value; 25,000,000 shares authorized at June 30, 2022 and December 31, 2021; 7,133,724 and 6,694,296 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively713 669 
Additional paid-in capitalAdditional paid-in capital206,307,790 202,129,195 Additional paid-in capital224,691,599 222,378,373 
Accumulated deficitAccumulated deficit(197,473,167)(196,881,800)Accumulated deficit(201,281,742)(199,163,257)
Total stockholders’ equityTotal stockholders’ equity8,835,129 5,247,775 Total stockholders’ equity23,410,571 23,215,786 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$10,768,893 $7,994,575 Total liabilities and stockholders’ equity$25,257,053 $24,888,192 

The accompanying notes are an integral part of these interim financial statements.
1



NeuroMetrix, Inc.
Statements of Operations
(Unaudited)
 
Quarters Ended June 30,Six Months Ended June 30, Quarters Ended June 30,Six Months Ended June 30,
2021202020212020 2022202120222021
RevenuesRevenues$2,213,499 $1,359,979 $4,368,971 $3,532,015 Revenues$2,138,301 $2,213,499 $4,440,692 $4,368,971 
Cost of revenuesCost of revenues558,221 495,086 1,134,510 1,115,276 Cost of revenues686,121 558,221 1,194,995 1,134,510 
Gross profitGross profit1,655,278 864,893 3,234,461 2,416,739 Gross profit1,452,180 1,655,278 3,245,697 3,234,461 
Operating expenses:Operating expenses:    Operating expenses:    
Research and developmentResearch and development641,525 660,278 874,802 1,193,898 Research and development915,799 641,525 1,626,376 874,802 
Sales and marketingSales and marketing269,493 379,113 663,318 803,462 Sales and marketing566,598 269,493 1,425,437 663,318 
General and administrativeGeneral and administrative1,276,223 678,497 2,288,499 1,930,243 General and administrative1,180,101 1,276,223 2,366,192 2,288,499 
Total operating expensesTotal operating expenses2,187,241 1,717,888 3,826,619 3,927,603 Total operating expenses2,662,498 2,187,241 5,418,005 3,826,619 
Loss from operationsLoss from operations(531,963)(852,995)(592,158)(1,510,864)Loss from operations(1,210,318)(531,963)(2,172,308)(592,158)
Other incomeOther income379 1,051 791 1,549 Other income50,395 379 53,823 791 
Net lossNet loss$(531,584)$(851,944)$(591,367)$(1,509,315)Net loss$(1,159,923)$(531,584)$(2,118,485)$(591,367)
Net loss per common share applicable to common stockholders, basic and dilutedNet loss per common share applicable to common stockholders, basic and diluted$(0.13)$(0.28)$(0.15)$(0.68)Net loss per common share applicable to common stockholders, basic and diluted$(0.17)$(0.13)$(0.30)$(0.15)
 
The accompanying notes are an integral part of these interim financial statements.
 
2



NeuroMetrix, Inc.
Statements of Changes in Stockholders' Equity
(Unaudited)

Series B Convertible Preferred StockCommon
Stock		Additional
Paid-In
Capital		Accumulated
Deficit		Total
Number of
Shares		AmountNumber of
Shares		Amount
Balance at December 31, 2019200 $1 1,400,674 $140 $197,319,698 $(194,789,605)$2,530,234 
Stock-based compensation expense— — — — 144,047 — 144,047 
Issuance of common stock under at the market offering— — 256,078 25 453,432 — 453,457 
Issuance of common stock to settle compensation obligations— — 31,000 3 43,748 — 43,751 
Net loss— (657,371)(657,371)
Balance at March 31, 2020200 1 1,687,752 168 197,960,925 (195,446,976)2,514,118 
Stock-based compensation expense— — — — 128,862 — 128,862 
Issuance of common stock under at the market offering— — 2,092,541 209 3,689,765 — 3,689,974 
Issuance of common stock under employee stock purchase plan— — 4,364 1 7,605 — 7,606 
Net loss— — — — — (851,944)(851,944)
Balance at June 30, 2020200 $1 3,784,657 $378 $201,787,157 $(196,298,920)$5,488,616 
Series B Convertible Preferred StockCommon
Stock		Additional
Paid-In
Capital		Accumulated
Deficit		TotalSeries B Convertible Preferred StockCommon
Stock		Additional
Paid-In
Capital		Accumulated
Deficit		Total
Number of
Shares		AmountNumber of
Shares		AmountNumber of
Shares		AmountNumber of
Shares		Amount
Balance at December 31, 2020Balance at December 31, 2020200 $1 3,793,739 $379 $202,129,195 $(196,881,800)$5,247,775 Balance at December 31, 2020200 $1 3,807,555 $380 $202,129,194 $(196,881,800)$5,247,775 
Stock-based compensation expenseStock-based compensation expense— — — — 68,863 — 68,863 Stock-based compensation expense— — — — 68,863 — 68,863 
Issuance of common stock under employee stock purchase plan— — 2,408 1 4,196 — 4,197 
Issuance of common stock under at the market offeringIssuance of common stock under at the market offering— — 2,408 1 4,196 — 4,197 
Net lossNet loss— — — — — (59,783)(59,783)Net loss— — — — — (59,783)(59,783)
Balance at March 31, 2021Balance at March 31, 2021200 1 3,796,147 380 202,202,254 (196,941,583)5,261,052 Balance at March 31, 2021200 1 3,809,963 381 202,202,253 (196,941,583)5,261,052 
Stock-based compensation expenseStock-based compensation expense— — — — 319,863 — 319,863 Stock-based compensation expense— — — — 319,863 — 319,863 
Issuance of common stock under at the market offeringIssuance of common stock under at the market offering— — 1,207,681 121 3,766,727 — 3,766,848 Issuance of common stock under at the market offering— — 1,207,681 121 3,766,727 — 3,766,848 
Issuance of common stock under employee stock purchase planIssuance of common stock under employee stock purchase plan— — 7,055 1 18,949 — 18,950 Issuance of common stock under employee stock purchase plan— — 7,055 1 18,949 — 18,950 
Vesting of restricted stock under option plan— — 13,911 3 (3)— 0 
Vesting of restricted stock under equity planVesting of restricted stock under equity plan— — 13,911 3 (3)— — 
Net lossNet loss— — — — — (531,584)(531,584)Net loss— — — — — (531,584)(531,584)
Balance at June 30, 2021Balance at June 30, 2021200 $1 5,024,794 $505 $206,307,790 $(197,473,167)$8,835,129 Balance at June 30, 2021200 $1 5,038,610 $506 $206,307,789 $(197,473,167)$8,835,129 
Series B Convertible Preferred StockCommon
Stock		Additional
Paid-In
Capital		Accumulated
Deficit		Total
Number of
Shares		AmountNumber of
Shares		Amount
Balance at December 31, 2021Balance at December 31, 2021200 $1 6,664,296 $669 $222,378,373 $(199,163,257)$23,215,786 
Stock-based compensation expenseStock-based compensation expense— — — — 37,632 — 37,632 
Issuance of common stock under at the market offeringIssuance of common stock under at the market offering— — 292,500 29 1,943,023 — 1,943,052 
Vesting of restricted stock under equity planVesting of restricted stock under equity plan— — 1,759 3 (3)— — 
Net lossNet loss— — — — — (958,562)(958,562)
Balance at March 31, 2022Balance at March 31, 2022200 1 6,958,555 701 224,359,025 (200,121,819)24,237,908 
Stock-based compensation expenseStock-based compensation expense— — — — 109,340 — 109,340 
Issuance of common stock under employee stock purchase planIssuance of common stock under employee stock purchase plan— — 2,503 — 7,829 — 7,829 
Issuance of common stock to settle compensation obligationIssuance of common stock to settle compensation obligation— — 50,213 5 215,412 — 215,417 
Vesting of restricted stock under equity planVesting of restricted stock under equity plan— — 3,120 7 (7)— — 
Net lossNet loss— — — — — (1,159,923)(1,159,923)
Balance at June 30, 2022Balance at June 30, 2022200 $1 7,014,391 $713 $224,691,599 $(201,281,742)$23,410,571 

The accompanying notes are an integral part of these interim financial statements.




3









NeuroMetrix, Inc.
Statements of Cash Flows
(Unaudited)
Six Months Ended June 30, Six Months Ended June 30,
20212020 20222021
Cash flows from operating activities:Cash flows from operating activities:  Cash flows from operating activities:  
Net lossNet loss$(591,367)$(1,509,315)Net loss$(2,118,485)$(591,367)
Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to reconcile net loss to net cash used in operating activities:  Adjustments to reconcile net loss to net cash used in operating activities:  
DepreciationDepreciation79,511 45,589 Depreciation26,277 79,511 
Stock-based compensationStock-based compensation388,726 272,909 Stock-based compensation146,972 388,726 
Settlement of compensation obligation0 43,751 
Issuance of common stock to settle compensation obligationsIssuance of common stock to settle compensation obligations26,019 — 
Impairment charge against right of use assetImpairment charge against right of use asset126,748 204,000 Impairment charge against right of use asset— 126,748 
Loss on disposal of fixed assetsLoss on disposal of fixed assets6,875 — 
Accretion of interest income on held-to-maturity securitiesAccretion of interest income on held-to-maturity securities(37,275)— 
Changes in operating assets and liabilities:Changes in operating assets and liabilities:  Changes in operating assets and liabilities:  
Accounts receivableAccounts receivable(122,736)(108,694)Accounts receivable(236,957)(122,736)
InventoriesInventories22,128 (28,284)Inventories(162,825)22,128 
Collaboration receivable0 7,678 
Prepaid expenses and other current and long-term assetsPrepaid expenses and other current and long-term assets28,823 465,630 Prepaid expenses and other current and long-term assets219,331 28,823 
Accounts payableAccounts payable147,444 (534,823)Accounts payable116,536 147,444 
Accrued expenses and compensationAccrued expenses and compensation(148,015)(599,201)Accrued expenses and compensation465,850 (148,015)
Accrued product returnsAccrued product returns(500,000)(91,000)Accrued product returns(31,000)(500,000)
Net cash used in operating activitiesNet cash used in operating activities(568,738)(1,831,760)Net cash used in operating activities(1,578,682)(568,738)
Cash flows from investing activities:Cash flows from investing activities:  Cash flows from investing activities:  
Purchases of held-to-maturity securitiesPurchases of held-to-maturity securities(16,928,542)— 
Purchases of fixed assetsPurchases of fixed assets(83,273)(10,500)Purchases of fixed assets(13,432)(83,273)
Net cash used in investing activitiesNet cash used in investing activities(83,273)(10,500)Net cash used in investing activities(16,941,974)(83,273)
Cash flows from financing activities:Cash flows from financing activities:  Cash flows from financing activities:  
Net proceeds from issuance of stockNet proceeds from issuance of stock3,789,995 4,151,037 Net proceeds from issuance of stock1,950,881 3,789,995 
Proceeds from debt issuance0 773,200 
Repayment of debt0 (773,200)
Net cash provided by financing activitiesNet cash provided by financing activities3,789,995 4,151,037 Net cash provided by financing activities1,950,881 3,789,995 
Net increase in cash and cash equivalents3,137,984 2,308,777 
Net (decrease) increase in cash and cash equivalentsNet (decrease) increase in cash and cash equivalents(16,569,775)3,137,984 
Cash and cash equivalents, beginning of periodCash and cash equivalents, beginning of period5,226,213 3,126,206 Cash and cash equivalents, beginning of period22,572,104 5,226,213 
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$8,364,197 $5,434,983 Cash and cash equivalents, end of period$6,002,329 $8,364,197 
Supplemental disclosure of cash flow information:Supplemental disclosure of cash flow information:  Supplemental disclosure of cash flow information:  
Common stock issued to settle employee compensation$0 $43,751 
Issuance of common stock to settle compensation obligationIssuance of common stock to settle compensation obligation$189,398 $— 
 
The accompanying notes are an integral part of these interim financial statements.
 
4

NeuroMetrix, Inc.
Notes to Unaudited Financial Statements
June 30, 20212022



1.Business and Basis of Presentation

Our Business-An Overview
 
NeuroMetrix, Inc. (the Company) is an innovation-driven company focused on the development"Company" or "NeuroMetrix") develops and global commercialization ofcommercializes health care products that utilize non-invasive medical devices for the diagnosis and treatment of pain and neurological disorders.neurostimulation. Revenues are derived from the sale of medical devices and after-market consumable products and accessories. The Company’s products are sold in the United States and select overseas markets. They are cleared by the U.S. Food and Drug Administration (FDA)("FDA") and regulators in foreign jurisdictions where appropriate. The Company has three commercialtwo primary products. DPNCheck®DPNCheck® is a diagnostic device that provides rapid, point-of-care detection of peripheral neuropathies. ADVANCE® is a diagnostic device that provides automated, in-office nerve conduction studies for the evaluation of focal neuropathies. Quell® is a wearable neurostimulation deviceneuromodulation technology indicated for symptomatic relieftreatment of fibromyalgia symptoms and chronic lower extremity chronic painpain.

The Company held cash, cash equivalents and held-to-maturity securities totaling $23.0 million as of June 30, 2022. The Company has a history of operating losses and has financed its operations primarily from sales of equity, sales of its products and third party development collaboration payments. The Company believes that is available over-the-counter.its present balance of cash and securities resources coupled with cash inflows from product sales will enable the Company to fund its operations for at least the next twelve months from the date of issuance of the financial statements. Actual cash requirements could differ from management's projections for many reasons. These include the effects of the Covid-19 pandemic on sales, procurement of production materials, and maintenance of critical staffing. They could also include changes the Company may make to its business strategy that affect operating expenses, regulatory developments, changes to research and development spending plans; and other items affecting the Company's projected uses of cash.

Unaudited Interim Financial Statements
 
The accompanying unaudited balance sheet as of June 30, 2021,2022, unaudited statements of operations, changes in stockholders' equity for the quarters and six months ended June 30, 20212022 and 20202021 and cash flows for the six months ended June 30, 20212022 and 20202021 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. The accompanying balance sheet as of December 31, 2020 has been derived from audited financial statements prepared at that date but2021 does not include all disclosures required by accounting principles generally accepted in the United States of America. In the opinion of management, the financial statements include all normal and recurring adjustments considered necessary for a fair presentation of the Company’s financial position and operating results. Operating results for the six months ended June 30, 20212022 are not necessarily indicative of the results that may be expected for the year ending December 31, 20212022 or any other period. These financial statements and notes should be read in conjunction with the financial statements for the year ended December 31, 20202021 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, or the SEC, on January 29, 202128, 2022 (File No. 001-33351).
 
Revenues

Revenues include product sales, net of estimated returns. Revenue is measured as the amount of consideration the Company expects to receive in exchange for product transferred. Revenue is recognized when contractual performance obligations have been satisfied and control of the product has been transferred to the customer. In most cases, the Company has a single product delivery performance obligation. Accrued product returns are estimated based on historical data and evaluation of current information.

Accounts receivable are recorded at the amount the Company expects to collect, net of the allowance for doubtful accounts receivable. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses based on customer past payment history, product usage activity, and recent communications with the customer. Individual customer balances which are over 90 days past due are reviewed individually for collectability and written-off when recovery is not probable. Allowance for doubtful accounts was $25,000 as of June 30, 20212022 and December 31, 2020.2021.
 
One customer accounted for 34% and 39% of total revenues in the quarter and six months ended June 30, 2022, respectively. One customer accounted for 26% and 31% of total revenues in the quarter and six months ended June 30, 2021, respectively. Three customers accounted for 42% and one customer accounted for 20% of total revenues in the quarter and six months ended June 30, 2020, respectively. Two customers accounted for 25% and two customers accounted for 50% of accounts receivable as of June 30, 2021 and December 31, 2020, respectively.

Stock-based Compensation
Total compensation cost related to non-vested awards not yet recognized at June 30, 2021 was $302,249. The total compensation costs are expected to be recognized over a weighted-average period of 1.1 years.

5




Liquidityrespectively. One customer accounted for 40% and two customers accounted for 35% of accounts receivable as of June 30, 2022 and December 31, 2021, respectively.

Our principal sourceHeld-To-Maturity Securities

The Company's investments in held-to-maturity securities consist of liquidityinvestment grade U.S. Treasury obligations, commercial paper and corporate bonds with maturity dates of less than 365 days. The Company has the ability and intention to hold these securities until maturity. Accordingly, these securities are recorded in the Company's balance sheet at amortized cost and interest is cash and cash equivalentsrecorded within other income on the Company's statement of $8.4 millionoperations. The market value of the held-to-maturity securities at June 30, 2021. In addition to our cash resources, funding for our operations largely depends on revenues from the sale of our commercial products. A low level of market interest in our products, a decline in our consumables sales, unanticipated increases in our operating costs, and the effects of the COVID-19 pandemic could have an adverse effect on our liquidity and cash.2022 was $16,796,840.

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 significant 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 revenue and expenses during reporting periods. Actual results could differ from those estimates.


2.     Comprehensive Loss
 
For the quarters and six months ended June 30, 20212022 and 2020,2021, the Company had 0no components of other comprehensive loss other than net loss itself.
 

3.     Net Loss Per Common Share
 
Basic and dilutive net loss per common share were as follows:
Quarters Ended June 30,Six Months Ended June 30,Quarters Ended June 30,Six Months Ended June 30,
20212020202120202022202120222021
Net loss applicable to common stockholdersNet loss applicable to common stockholders$(531,584)$(851,944)$(591,367)$(1,509,315)Net loss applicable to common stockholders$(1,159,923)$(531,584)$(2,118,485)$(591,367)
Weighted average number of common shares outstanding, basic and dilutiveWeighted average number of common shares outstanding, basic and dilutive4,155,948 3,014,523 3,977,028 2,235,874 Weighted average number of common shares outstanding, basic and dilutive7,009,775 4,169,764 6,951,792 3,990,844 
Net loss per common share applicable to common stockholders, basic and dilutedNet loss per common share applicable to common stockholders, basic and diluted$(0.13)$(0.28)$(0.15)$(0.68)Net loss per common share applicable to common stockholders, basic and diluted$(0.17)$(0.13)$(0.30)$(0.15)

Shares underlying the following potentially dilutive weighted average number of common stock equivalents were excluded from the calculation of diluted net loss per common share because their effect was anti-dilutive for each of the periods presented: 
Quarters Ended June 30,Six Months Ended June 30,June 30,
2021202020212020 20222021
OptionsOptions439,410 163,481 404,156 163,774 Options523,505 554,045 
Warrants0 27,287 0 34,686 
Unvested restricted stock awardsUnvested restricted stock awards119,333 21,404 
Unvested restricted stock unitsUnvested restricted stock units161,764 — 
Convertible preferred stockConvertible preferred stock62 62 62 62 Convertible preferred stock62 62 
TotalTotal439,472 190,830 404,218 198,522 Total804,664 575,511 


6








4.     Inventories
 
Inventories consist of the following: 

June 30, 2021December 31, 2020 June 30, 2022December 31, 2021
Purchased componentsPurchased components$755,578 $716,848 Purchased components$453,610 $422,093 
Finished goodsFinished goods273,576 334,434 Finished goods415,768 284,460 
$1,029,154 $1,051,282  $869,378 $706,553 



5.     Accrued Expenses and Compensation
  
Accrued expenses and compensation consist of the following:
June 30, 2021December 31, 2020 June 30, 2022December 31, 2021
Professional servicesProfessional services$173,000 $343,000 Professional services$224,000 $109,000 
CompensationCompensation354,422 49,837 Compensation543,075 440,474 
Advertising and promotion1,000 31,000 
WarrantyWarranty37,600 49,600 Warranty21,700 28,400 
Technology fees0 450,000 
LeaseholdLeasehold60,000 0 Leasehold— 60,000 
Sales taxSales tax127,775 24,493 Sales tax127,828 108,788 
OtherOther36,630 50,512 Other114,004 67,493 
$790,427 $998,442  $1,030,607 $814,155 


7




6.     Operating Leases
 
The Company's lease on its Woburn, Massachusetts corporate office and manufacturing facilities (the “Woburn Lease”)facility extends through September 2025 with a monthly base rent of $13,846 and a 5-year extension option.

Future minimum lease payments under this non-cancellable operating lease as of June 30, 2022 are as follows:
2022$82,892 
2023165,785 
2024165,785 
2025117,431 
Total minimum lease payments$531,893 
Discount rate, 15%$124,590 
Lease obligation, current portion148,391 
Lease obligation, net of current portion258,912 
$531,893 

The Company's lease on its former corporate office in Waltham, Massachusetts (the "Waltham Lease") extends throughexpired in February 2022. During the first quarter of 2021, the Company recorded an impairment charge of $126,748 on that idle facility which was being offered for sublet. In the first quarter of 2022, with an average monthly basea $60,000 reduction in rent expense was recorded upon return of $41,074 and a 5-year extension option. Athe facility to the lessor. The letter of credit in the amount of $226,731, secured by the Company's cash balances, was issued by a bank in favor onof the Waltham Lease landlord. While the Company continues to actively seek a sublet for the Waltham Lease under difficult market conditions, the Company has written off the value of its right-to-use asset in the Waltham facility. The impairment charges recorded within the Company's Statement of Operations for the quarters ended June 30, 2021 and 2020 were 0 and $117,000, respectively and $126,748 and $204,000 forfacility was released. For the six months ended June 30, 2021 and 2020, respectively.

Future minimum lease payments under non-cancellable2022, the Company recorded sublet income totaling $22,795 within operating leases asexpenses on the Company's statement of June 30, 2021 are as follows:
2021$327,580 
2022247,347 
2023165,785 
2024165,785 
2025117,431 
Total minimum lease payments$1,023,928 
Weighted-average discount rate, 14.7%$215,351 
Lease obligation, current portion457,682 
Lease obligation, net of current portion350,895 
$1,023,928 
operations.

Total recorded rent expense was $57,453$46,102 and $166,905,$57,453, for the quarters ended June 30, 20212022 and 2020,2021, respectively. Total recorded rent expense was $224,357$70,856 and $333,809,$224,357 for the six months ended June 30.30, 2022 and 2021, and 2020, respectively. The Company records rent expense on its facility leaseslease on a straight-line basis over the lease term. Weighted averageThe remaining operating lease term was 2.93.2 years as of June 30, 2021.2022.


7.     Fair Value Measurements
 
The following tables present information about the Company’s assetsAssets and liabilities that are measured at fair value on a recurring basis for the periodsare presented and indicates the fair value hierarchy of the valuation techniques it utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates, and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.below. All Company assets and liabilities measured at fair value utilize Level 1 inputs.inputs (i.e. quoted prices (unadjusted) in active markets for identical assets or liabilities).
 
 Fair Value Measurements at June 30, 2021 Using  Fair Value Measurements at June 30, 2022 Using
June 30, 2021Quoted Prices in
Active Markets
for Identical
Assets (Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		 June 30, 2022Quoted Prices in
Active Markets
for Identical
Assets (Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Assets:Assets:    Assets:    
Cash equivalentsCash equivalents$5,463,532 $5,463,532 $0 $0 Cash equivalents$5,030,666 $5,030,666 $— $— 
TotalTotal$5,463,532 $5,463,532 $0 $0 Total$5,030,666 $5,030,666 $— $— 
 
  
8




 Fair Value Measurements at December 31, 2020 Using  Fair Value Measurements at December 31, 2021 Using
December 31, 2020Quoted Prices in
Active Markets
for Identical
Assets (Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)		 December 31, 2021Quoted Prices in
Active Markets
for Identical
Assets (Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Assets:Assets:    Assets:    
Cash equivalentsCash equivalents$2,374,216 $2,374,216 $0 $0 Cash equivalents$20,317,736 $20,317,736 $— $— 
TotalTotal$2,374,216 $2,374,216 $0 $0 Total$20,317,736 $20,317,736 $— $— 

As of June 30, 2021, theThe Company's cash equivalents consistedconsist of money market accounts.  

8.     Stockholders’ Equity
 
Preferred stock and convertible preferred stock consist of the following: 
 June 30, 2021December 31, 2020
Preferred stock, $0.001 par value; 5,000,000 shares authorized at June 30, 2021 and December 31, 2020; 0 shares issued and outstanding at June 30, 2021 and December 31, 2020$0 $0 
Series B convertible preferred stock, $0.001 par value; 147,000 shares designated at June 30, 2021 and December 31, 2020; 200 shares issued and outstanding at June 30, 2021 and December 31, 2020$1 $1 
 June 30, 2022December 31, 2021
Preferred stock, $0.001 par value; 5,000,000 shares authorized at June 30, 2022 and December 31, 2021; no shares issued and outstanding at June 30, 2022 and December 31, 2021$— $— 
Series B convertible preferred stock, $0.001 par value; 147,000 shares designated at June 30, 2022 and December 31, 2021; 200 shares issued and outstanding at June 30, 2022 and December 31, 2021$1 $1 

2022 equity activity

In January 2022, the Company issued 292,500 shares of common stock under an at-the-market (ATM) equity offering program with net proceeds of $1,943,052 and issued 20,000 restricted stock awards under its 2004 Stock Option Plan with a value of $104,200. In April 2022, the Company issued 76,000 shares of restricted common stock under its 2022 Equity Incentive Plan with a value of $326,000 to employees as long term incentives (LTI) and issued 50,213 shares of fully vested common stock with a value of $215,417 in settlement of management incentive compensation. In May 2022, the Company issued 161,764 restricted stock units with a value of $550,000 as LTI to its management and directors under its 2022 Equity Incentive Plan. In June 2022, the Company issued 2,503 shares of fully vested common stock with a value of $7,829 pursuant to the Company's Employee Stock Purchase Plan. As of June 30, 2022, the Company had issued 119,333 shares of restricted common stock and 161,764 restricted stock units that remain unvested. At December 31, 2021 the Company had issued 30,000 shares of restricted common stock that were unvested. Total compensation cost related to non-vested awards not yet recognized at June 30, 2022 was $1,183,449. These unrecognized costs are expected to be recognized over a weighted-average period of 2.5 years.

2021 equity activity

In January 2021, the Company issued 2,408 shares of fully vested common stock par value $0.0001 per share ("common stock"), with a value of $4,197 pursuant to the Company's 2010 Employee Stock Purchase Plan.

In May 2021, the Company issued 42,808 shares of restricted common stock with a value of $125,000 under its 2004 Stock Option Plan. As of June 30, 2021, 13,911 of these shares were vested, 7,493 shares were forfeited in lieu of payingto settle withholding taxes on the vesting of the restricted stock and 21,404 remain restricted.

In June 2021, the Company issued 7,055 shares of fully vested common stock with a value of $18,950 pursuant to the Company's 2010 Employee Stock Purchase Plan.

During the six months ended June 30, 2021, the Company issued 1,207,681 shares of its common stock, under an at-the-market offering program ("the ATM Agreement") for net proceeds of $3,766,848. The ATM Agreement was entered into in 2020 and permits the sale and issuance of the Company's common stock subject to regulatory limitations imposed by the Securities and Exchange Commission and pursuant to a "shelf" registration statement on Form S-3.

2020 equity activity

In March 2020, the Company issued 31,000 shares of fully vested common stock with a value of $43,751 pursuant to a Separation Agreement between the Company and an employee. The shares issued reflected the $1.41 closing price of the Company's common stock as reported on the Nasdaq Capital Market on March 11, 2020.

In June 2020, the Company issued 4,364 shares of fully vested common stock with a value of $7,606 pursuant to the Company's 2010 Employee Stock Purchase Plan.

During the six months ended June 30, 2020, 2,348,619 shares of common stock were issued pursuant to the ATM Agreement for net proceeds of $4,143,431.

9




9.     Termination Agreement

On June 30, 2021, the Company entered into a Termination Agreement with GSK Consumer Healthcare S.A. ("GSK") pursuant to which the parties terminated the 2018 Development and Services Agreement which provided GSK with license and intellectual property rights for the commercialization of the Quell technology for markets outside the United States. Under terms of the Termination Agreement, GSK transferred back to NeuroMetrix all of GSK's rights in the Quell technology related to markets outside the United States, including technology improvements and intellectual property. NeuroMetrix agreed to make royalty payments to GSK ranging between 5% and 8% for a ten-year period based on net sales of Quell devices that are available to consumers for purchase without a prescription from a licensed medical professional outside the United States.

10.     Subsequent Event

From July 1, 2021 to July 20, 2021, the Company issued 582,709 shares of common stock under its ATM program. Net proceeds from this activity was $2,239,607.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
You should read the following discussion of our financial condition and results of operations in conjunction with our financial statements and the accompanying notes to those financial statements included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. For a description of factors that may cause our actual results to differ materially from those anticipated in these forward-looking statements, please refer to the below section of this Quarterly Report on Form 10-Q titled “Cautionary Note Regarding Forward-Looking Statements.” Unless the context otherwise requires, all references to “we”, “us”, the “Company”, or “NeuroMetrix” in this Quarterly Report on Form 10-Q refer to NeuroMetrix, Inc.


OverviewOur Business

NeuroMetrix developsOur mission is to reduce the impact of neurological disorders and commercializespain syndromes on individuals and on population health care products that utilizethrough innovative non-invasive neurostimulation. Our core expertise in biomedical engineering has been refined over two decades of designing, building and marketing medical devices that stimulate nerves and analyze nerve response for diagnostic and therapeutic purposes. We created the market for point-of-care nerve testing and were first to market with sophisticated wearable technology for symptomatic relief of chronic pain. devices.

Our business is fully integrated with in-house capabilities spanning research and development, manufacturing, regulatory affairs and compliance, sales and marketing, product fulfillment and customer support. We derive revenues from the sale of medical devices and after-market consumable products and accessories. Our products are soldproprietary and encompass point-of-care neuropathy diagnostic tests and wearable neurotherapeutic devices.

DPNCheck is our testing technology for peripheral neuropathies. It is designed to address unmet physician needs in the United Statesassessment of peripheral neuropathy risk, particularly in value-based care models such as Medicare Advantage. The technology is well-suited to this task given its ease of use, rapid testing, quantitative results, and select overseas markets. Theyoverall high sensitivity and specificity. DPNCheck has been evaluated in numerous clinical studies. It contributes attractive gross margins and has posted average revenue growth exceeding 20% over the past five years through December 31, 2021. We believe there is significant, accessible opportunity to expand DPNCheck usage. Towards that goal, we are clearedinvesting in commercial resources and in the technology itself. Our next generation DPNCheck technology, targeted for commercial launch in late 2022, will further enhance the user experience and improve our manufacturing efficiency.

Quell is our wearable neuromodulation technology for chronic pain and associated syndromes. Patients control and personalize the technology via a mobile phone app and their utilization and certain clinical metrics may be tracked in the Quell Health Cloud. Quell is currently sold over-the-counter (OTC) for the management of lower extremity chronic pain. Its technological sophistication, combined with our extensive consumer experience and the compelling results of recent clinical studies provide the opportunity to leverage the technology platform into a portfolio of Quell-based prescription (Rx) wearable neurotherapeutics. The first product in that portfolio will be a Quell fibromyalgia indication which was recently approved for marketing by the U.S. FoodFDA under a De Novo regulatory filing.

ADVANCE is our legacy neurodiagnostic technology primarily used for the diagnosis and Drug Administration (FDA)screening of Carpal Tunnel Syndrome (CTS). The technology has been marketed since 2008. While we no longer market ADVANCE devices, we continue to provide disposable electrodes to a loyal base of hand surgeons and regulators in foreign jurisdictions where appropriate. We have two principal product categories:manufacturers for industrial health use.

Recent Developments

•Breakthrough Device Designation for Quell fibromyalgia indication - Point-of-careIn 2021, Quell received Breakthrough Device Designation (BDD) from the FDA for a fibromyalgia indication. A pivotal clinical study of Quell for fibromyalgia was completed, and the indication was authorized for marketing by the FDA under a De Novo regulatory filing. We are planning a limited commercial launch in late 2022 to guide our marketing approach. We plan a similar approach with other disease indications involving chronic pain and associated syndromes. These include chemotherapy induced peripheral neuropathy diagnostic tests
•(CIPN) and, potentially, chronic overlapping pain conditions (COPC) and restless leg syndrome (RLS).Wearable neurostimulation devicesWe intend to end sales of the current OTC version of Quell in advance of the launch of the Quell fibromyalgia indication. Our focus would then be on the development of a Quell prescription portfolio for disease-specific indications where we would have unique product offerings without direct, non-pharmaceutical competition.

Peripheral neuropathies, also called polyneuropathies, are diseasesBreakthrough Device Designation for Chronic Chemotherapy CIPN indication - In January 2022, Quell received BDD from the FDA for reducing moderate to severe symptoms of the peripheral nerves. They affect about 10% of adults in the United States, with the prevalence rising to 25-50% among individuals 65 years and older. Peripheral neuropathies are associated with loss of sensation, pain, increased risk of falling, weakness, and other complications. People with peripheral neuropathies generally have a diminished quality of life, poor overall health and higher mortality. The most common specific cause of peripheral neuropathies, accounting for about one-third of cases, is diabetes. Diabetes is a worldwide epidemic with an estimated affected population of over 400 million people. Within the United States there are over 30 million people with diabetes and another 80 million people with pre-diabetes. The annual direct cost of treating diabetes in the United States exceeds $100 billion. Although there are dangerous acute manifestations of diabetes, the primary burden of the disease is in its long-term complications, which include cardiovascular disease, nerve disease and resulting conditions such as foot ulcers which may require amputation, eye disease leading to blindness, and kidney failure. The most common long-term complication of diabetes, affecting over 50% of the diabetic population, is peripheral neuropathy. Diabeticchemotherapy induced peripheral neuropathy (DPN) isthat have persisted for at least six months following the primary trigger for diabetic foot ulcers, which may progress to the pointend of requiring amputation. People with diabetes have a 15-25% lifetime risk of foot ulcers and approximately 15% of foot ulcers lead to amputation. Foot ulcers are the most expensive complication of diabetes with a typical cost of $5,000 to $50,000 per episode. In addition, between 16% and 26% of people with diabetes suffer from chronic pain in the feet and lower legs.
chemotherapy.
A National Cancer Institute (NCI) funded, multi-center, double
10




Early detectionblind, randomized, sham-controlled trial of peripheral neuropathies, such as DPN,Quell in CIPN is important because there are no treatment options oncecurrently ongoing. The study is expected to complete by the nerves have degenerated. Today’s diagnostic methodsend of 2022. Depending on the outcome of the trial, we hope to be positioned for peripheral neuropathies range from a simple monofilament test for lack of sensory perceptionan FDA filing in the feet to a nerve conduction study performed by a specialist. Our DPNCheck nerve conduction technology provides a rapid, low cost, quantitative test for peripheral neuropathies, including DPN. It addresses an important medical need and is particularly effective in screening large populations. DPNCheck has been validated in numerous clinical studies.2023.

Chronic pain isEquity sales – We secured $1.95 million in net proceeds from equity sales in the first half of 2022. We maintain a significant public health problem. It is defined by the National Institutes of Health (NIH) as pain lasting more than 12 weeks. This contrasts with acute pain which is a normal bodily responsedebt-free, primarily common stock equity capital structure, and adequate funding resources to injury or trauma. Chronic pain conditions include low back pain, arthritis, fibromyalgia, neuropathic pain, cancer painsupport operations and many others. Chronic pain may be triggered by an injury or there may be an ongoing cause such as disease or illness. There may also be no clear cause. Chronic pain can also lead to other health problems. These can include fatigue, sleep disturbance and mood changes which cause difficulty in carrying out important activities and may contribute to disability and despair. In general, chronic pain cannot be cured. Treatment of chronic pain is focused on reducing pain and improving function. The goal is effective pain management.our growth initiatives.

Chronic pain affects nearly 100 million adultsCOVID-19 - The ongoing COVID-19 pandemic continues to adversely affect our business. It is difficult to quantify the disruption to our markets and customers; however, we believe the effects have been more pronounced in the United Statesdiagnostic testing markets for DPNCheck and more than 1.5 billion people worldwide. The estimated incremental impact of chronic pain on health care costsADVANCE, and less pronounced in the United States is over $250 billion per year and lost productivity is estimated to exceed $300 billion per year. The most common approach to chronic pain management is pain medication. This includes over-the-counter (OTC) internal and external analgesics as well as prescription pain medications, both non-opioid and opioids. The approach to treatment is individualized, drug combinations may be employed, and the results are often inadequate. Side effects, including the potentialconsumer retail markets for addiction are substantial. Increasingly, restrictions are being imposed on access to prescription opioids. Reflecting the complexityQuell. Generally, we see continued purchases of chronic pain and the difficulty in treating it, we believe that inadequate relief leads 25% to 50% of pain sufferers to seek alternatives to prescription pain medications. These alternatives include nutraceuticals, acupuncture, chiropractic care, non-prescription analgesics, electrical stimulators, braces, sleeves, pads and other items. In total these pain relief products and services account for approximately $20 billion in annual out-of-pocket spendingtesting consumables by existing customers but with less predictability than in the United States.past. Also, our growth via new customer acquisition has been lower due to the marketing challenges resulting from COVID-19 restrictions.

Nerve stimulation isWe have been able to maintain our business operations during the past two years while prioritizing employee safety. On-premises staffing in production and fulfillment has successfully met our business requirements. Other functional areas including R&D, sales and marketing, and administration have been a long-established categoryblend of treatment for chronic pain. This treatment approach ison-premises and remote work. These functional areas have been disadvantaged to a degree by the pandemic.

We plan to continue with our present blend of staff activity until we have greater clarity on the opportunities and risks of a more personally interactive business model. The extent to which COVID-19 affects future operations will depend on new developments which are uncertain and cannot be predicted with confidence, including the pandemic duration, severity, vaccination effectiveness, and treatments available through implantable devices which have both surgical and ongoing risks, such as migrationto those with severe COVID-19 symptoms. Also uncertain are the potential effects on our business of the implanted nerve stimulation leads. Non-invasive approaches involving transcutaneous electrical nerve stimulation (TENS) have achieved limited efficacy in practice due to power limitations, ineffective dosingeconomic impacts from the pandemic including inflation, electronic parts and low patient adherence. We believe that our Quell wearable technology for chronic pain is designed to address many of the limitations of traditional TENS.components availability, labor availability and costs, and other issues.





 
Results of Operations
 
Comparison of Quarters Ended June 30, 20212022 and 20202021
Quarter ended June 30,Increase (Decrease)
20222021AmountPercent
Revenues$2,138,301 $2,213,499 $(75,198)(3.4)%
Gross profit$1,452,180 $1,655,278 $(203,098)(12.3)%
–% of revenues
67.9 %74.8 %(6.9)%
Operating expenses$2,662,498 $2,187,241 $475,257 21.7 %
Other income, net$50,395 $379 $50,016 13,196.8 %
Net loss$(1,159,923)$(531,584)$628,339 118.2 %
Net loss per common share$(0.17)$(0.13)$0.04 30.8 %

Revenues

 Quarters Ended June 30, 
 20212020Change% Change
 (in thousands) 
Revenues$2,213.5 $1,360.0 $853.5 62.8 %
Revenues include sales of our wearable technologies for chronic pain and our nerve conduction technologies to physician offices, clinics, hospitals, other healthcare providers and insurers, as well as domestic and international distributors. Revenues comprise sales of medical devices as well as aftermarket electrodes and other supplies. Revenues were approximately $2.2 million during the second quarter of 2021 compared with $1.4 million during2022 decreased by $75 thousand or 3.4% from the second quarter of 2020 which was adversely affected by2021. DPNCheck contributed the economic effectsmajority of revenues in both quarters. It posted revenue growth of 13.6% in the second quarter of 2022, attributable to increased device placements both domestic and international, as well as increased biosensor shipments. Quell revenue declined in the second quarter of 2022 with lower advertising spending and an emphasis on product line profitability. Our legacy ADVANCE revenues also declined due to continuing erosion of the COVID-19 pandemic.customer base.

Gross Profit

11




Cost of Revenues and Gross Profit
 Quarters Ended June 30, 
 20212020Change% Change
 (in thousands) 
Cost of revenues$558.2 $495.1 $63.1 12.7 %
Gross profit$1,655.3 $864.9 $790.4 91.4 %
Gross margin was 74.8% inprofit for the second quarter of 2021 versus 63.6%2022 decreased by $203 thousand or 12.3% from the second quarter of 2021. The decrease reflected the decline in revenues exacerbated by increases in cost of goods sold to secure essential electronic components for the same period in the prior year. The margin improvement in 2021 was due to increased weightingmanufacture of our nerve conduction testing technologies within total revenue.devices.

Operating Expenses

 Quarters Ended June 30, 
 20212020Change% Change
 (in thousands) 
Operating expenses:    
Research and development$641.5 $660.3 $(18.8)(2.8)%
Sales and marketing269.5 379.1 (109.6)(28.9)%
General and administrative1,276.2 678.5 597.7 88.1 %
Total operating expenses$2,187.2 $1,717.9 $469.3 27.3 %
Research and Development
Research and development expenseOperating expenses increased in the second quarter of 2021 decreased2022 by 2.8%$475 thousand or 21.7% from the same periodsecond quarter of 2021. The increase reflects investment in our DPNCheck initiatives to drive future growth, including the prior year dueexpansion of our commercial capabilities and bringing to a decrease of $35,000 in personnel costs and a decrease of $64,000 in consulting and professional services offset by anmarket our next generation testing technology. The increase of $86,000 in clinicalalso includes regulatory and development costs.costs related to the Quell disease-specific indications portfolio.

SalesResearch and Marketing
Sales and marketing expensedevelopment spending in the second quarter of 2022 of $916 thousand was $274 thousand higher than the second quarter of 2021 decreasedattributable to expanded outside engineering services. Sales and marketing spending of $567 thousand increased by 28.9% from$297 thousand over the same period insecond quarter of 2021. The increase was attributable to personnel costs of $259 thousand greater than the prior year due to a reductionquarter reflecting costs of $61,000 in advertising spending and $40,000 in consulting costs.
the new commercial team supporting DPNCheck.
General and Administrative
General and administrative expensecosts of $1.2 million in the second quarter of 2021 increased2022 decreased by 88.1% from the same period in the prior year$96 thousand primarily due to an increase of $56,000 in consulting costs, an increase of $105,000 in outside professional service costs, $110,000 in sales tax and fee related costs and a $335,000 increase in non-cashlower personnel costs relating to executive officers who took significant compensation reductions in the prior year.costs.

Other income
 Quarters Ended June 30, 
 20212020Change% Change
 (in thousands) 
    
Other income$0.4 $1.1 $(0.7)(63.6)%


Other income




Net loss

The net loss in the second quarter of 2022 increased by $628 thousand from the second quarter of 2021. Similarly, net loss per common share increased to ($0.17) per common share in the second quarter of 2022 from ($0.13) per common share in the second quarter of 2021. The increase in the number of our common shares outstanding in the second quarter of 2022 partially offset the per share effect of a greater net loss in that period.

Comparison of Six Months Ended June 30, 2022 and 2021
Six months ended June 30,Increase (Decrease)
20222021AmountPercent
Revenues$4,440,692 $4,368,971 $71,721 1.6 %
Gross profit$3,245,697 $3,234,461 $11,236 0.3 %
–% of revenues
73.1 %74.0 %(0.9)%
Operating expenses$5,418,005 $3,826,619 $1,591,386 41.6 %
Other income, net$53,823 $791 $53,032 6,704.4 %
Net loss$(2,118,485)$(591,367)$1,527,118 258.2 %
Net loss per common share$(0.30)$(0.15)$0.15 100.0 %

Revenues

Revenues for the first half of 2022 increased by $72 thousand or 1.6% from the first half of 2021. DPNCheck contributed the majority of revenues in both quarters. It posted revenue growth of 14.6% in the first half of 2022, primarily includes interest income.attributable to increased biosensor shipments both domestic and international. Quell revenue declined in the first half of 2022 with lower advertising spending and an emphasis on product line profitability. Our legacy ADVANCE revenues also declined with the continuing erosion of the customer base.

12




Comparison of Six Months Ended June 30, 2021 and 2020
Revenues
 Six Months Ended June 30, 
 20212020Change% Change
 (in thousands) 
Revenues$4,369.0 $3,532.0 $837.0 23.7 %
Revenues include sales of our wearable technologies for chronic pain and our nerve conduction technologies to physician offices, clinics, hospitals, other healthcare providers and insurers, as well as domestic and international distributors. Revenues comprise sales of medical devices as well as aftermarket electrodes and other supplies. Revenues in the six months ended June 30, 2021 were approximately $837,000 higher than the six months ended June 30, 2020, which was adversely affected by the economic effects of the COVID-19 pandemic.Gross Profit

CostGross profit for the first half of Revenues and2022 increased slightly by $11 thousand or 0.3% from the first half of 2021. Gross Profit
 Six Months Ended June 30, 
 20212020Change% Change
 (in thousands) 
Cost of revenues$1,134.5 $1,115.3 $19.2 1.7 %
Gross profit$3,234.5 $2,416.7 $817.7 33.8 %
Gross marginprofit as a percent of revenue was 74.0% inapproximately flat between the six months ended June 30, 2021 versus 68.4% in the same period in the prior year. The margin improvement in 2021 was due to increased weighting of our nerve conduction testing technologies within total revenue.comparable periods.

Operating Expenses

 Six Months Ended June 30, 
 20212020Change% Change
 (in thousands) 
Operating expenses:    
Research and development$874.8 $1,193.9 $(319.1)(26.7)%
Sales and marketing663.3 803.5 (140.2)(17.4)%
General and administrative2,288.5 1,930.2 358.3 18.6 %
Total operating expenses$3,826.6 $3,927.6 $(101.0)(2.6)%
Research and Development
Research and development expense in the six months ended June 30, 2021 decreased by 26.7% from the same period in the prior year due to the reversal of a $450,000 technology fee accrualOperating expenses increased in the first quarterhalf of 2021 offset2022 by an$1.6 million or 41.6% from the first half of 2021. The increase of $50,000 in consulting and professional costs and $84,000 in clinicalincludes a research and development costs.
Salesbenefit in 2021 of $450 thousand from reversal of previously accrued technology fees upon the expiry of the relevant statute of limitations. Excluding the one-time research and Marketing
Sales and marketing expensedevelopment benefit in the six months ended June 30, 2021, decreased by 17.4% from the same period in the prior year due to a $236,000 reduction in personnel spending offset by an increase in advertisingoperating expenses between the periods was $1.1 million or 27%. The increase in spending reflects investment in DPNCheck initiatives to drive future growth, including the expansion of $116,000.DPNCheck commercial capabilities and product initiatives for the Medicare Advantage market. The increase also reflects regulatory and product development investments related to the emerging Quell portfolio for disease-specific indications.

13Research and development spending in the first half of 2022 of $1.6 million was $752 thousand higher than the first half of 2021. Adjusting for the one-time technology credit in 2021, the research and development spending increase of $301 thousand or 23% encompasses product development efforts for both DPNCheck and Quell. Sales and marketing spending of $1.4 million increased by $762 thousand due to the addition of a new commercial team for DPNCheck. General and administrative costs of $2.4 million increased by $78 thousand or 3.4% primarily due to inflation





General and Administrative
General and administrative expense in the six months ended June 30, 2021 increased by 18.6% from the same period in the prior year due to a reduction of $62,000 in consulting costs and a reduction of $50,000 in outside professional service costs. This was offset by a $372,000 increase in non-cash personnel costs relating to executive officers who took significant compensation reductions in the prior year and by $95,000 in sales tax and fee related costs.Net loss

Other income
 Six Months Ended June 30, 
 20212020Change% Change
 (in thousands) 
    
Other income$0.8 $1.5 $(0.8)(51.6)%

The net loss for the first half of
Other income primarily includes interest income.2022 increased by $1.5 million from 2021. Similarly, net loss per common share increased to ($0.30) per common share in the first half of 2022 from ($0.15) per common share in the first half of 2021. The increase in the number of common shares outstanding in the first half of 2022 partially offset the effect of a greater net loss in that period.






Liquidity and Capital Resources
 
The following table contains certain key performance indicators we believe depict our liquidity and cash flow position:
 June 30,December 31,
202220212021
 
Cash, cash equivalents and securities$22,968,146 $8,364,197 $22,572,104 
Working capital$23,039,380 $8,448,353 $22,822,162 
Current ratio15.5 6.3 17.7 
Days sales outstanding25.9 19.0 14.1 
Inventory turnover3.5 2.2 2.2 

Our principal sourceprimary sources of liquidity isare cash, and cash equivalents, of $8.4 million at June 30, 2021. In addition to our cash resources, funding for our operations largely depends onheld-to-maturity securities, revenues from the salesales of our commercial products. A low levelproducts, and net proceeds from equity sales. Our expected cash outlays relate to funding operations. We believe that our resources are sufficient to fund our cash requirements over at least the next twelve months from the date of market interest in our products, a decline in our consumables sales, unanticipated increases in our operating costs, and the effectsissuance of the COVID-19 pandemic could have an adverse effect on our liquidity and cash.financial statements.
 June 30, 2021December 31, 2020Change% Change
 (in thousands) 
Cash and cash equivalents$8,364.2 $5,226.2 $3,138.0 60.0 %

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During the six months ended June 30, 2021, our cash and cash equivalents increased by $3,138.0 thousand reflecting $568.7 thousand in cash used in operating activities and $83.3 thousand in cash used in investing activities, offset by $3,785.0 thousand in cash provided by financing activities.



In managing working
As of June 30, 2022, we held $23.0 million in cash, cash equivalents, and held-to-maturity securities. Working capital we focus on two important financial measurements:
 Quarters Ended June 30,Year Ended
December 31,
 202120202020
Days sales outstanding (days)192615
Inventory turnover rate (times per year)2.21.71.9
was $23.0 million, and the current ratio was 15.5. The Company had no term debt or borrowings.

Days sales outstanding (DSO) reflect our customer payment terms which vary from payment on order to 60 days from invoiceshipment date. The increase in DSO decreased to 19 days during the quarter endedat June 30, 2022 in comparison with December 31, 2021 compared to 26 days in the prior year period. This was primarily attributable toreflects the timing of sales withinshipments during the respective quarters.

first half of 2022. The inventory turnover rate increasedreflects reduced stocking levels relative to 2.2 turns in the second quarter of 2021 compared to 1.7 turns in the prior year period. The increase was due to higher sales in the second quarter of 2021 on approximately constant inventory levels.and prior year end.
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Cash Flows
Six months ended June 30,
 20222021Change
 
Net cash provided by (used in):
Operating activities$(1,578,682)$(568,738)$(1,009,944)
Investing activities(16,941,974)(83,273)(16,858,701)
Financing activities1,950,881 3,789,995 (1,839,114)
Net change in cash and cash equivalents$(16,569,775)$3,137,984 


Operating activities

Operations cash usage in the first half of 2022 increased by $1.0 million from the comparable period in 2021. This reflects the increased net loss and non-cash adjustments in the components of working capital.

Investing activities

Investing activities in the first half of 2022 primarily reflect the deployment of cash to purchase investment grade, held-to-maturity securities in the amount of $16.9 million. The following sets forth information relatingcash deployed is invested short term, and while it is not forecasted to our sources and usesbe essential to the Company’s near-term operations requirements, provides a cushion if necessary.

Financing activities

Equity sales in the first half of our cash:2022 contributed $1.95 million. Common shares were sold to investors utilizing the Company's at-the-market (ATM) facility.
 Six Months Ended June 30,
 20212020
 (in thousands)
Net cash used in operating activities$(568.7)$(1,831.8)
Net cash used in investing activities(83.3)(10.5)
Net cash provided by financing activities3,790.0 4,151.0 
Net cash provided$3,138.0 $2,308.7 

We have an effectivemaintain a shelf registration statement on Form S-3 on file with the SEC covering the sales of shares of our common stock and other securities. This shelf registration statement givessecurities, and giving us the opportunity to raise funding when needed or otherwise considered appropriate at prices and on terms to be determined at the time of any such offerings. Pursuant to the instructions to Form S-3, we have the ability to sell shares under the shelf registration statement, during any 12-month period, in an amount less than or equal to one-third of the aggregate market value of our common stock held by non-affiliates. If we raise additional funds by issuing equity or debt securities, either through the sale of securities pursuant to a registration statement or by other means, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. If we raise additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to our potential products or proprietary technologies, or grant licenses on terms that are not favorable to us.



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Cautionary Note Regarding Forward-Looking Statements
 
The statements contained in this Quarterly Report on Form 10-Q, including under the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other sections of this Quarterly Report, include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, including, without limitation, statements regarding our or our management’s expectations, hopes, beliefs, intentions or strategies regarding the future, such as our estimates regarding anticipated operating losses, future revenues and projected expenses, the effect of the COVID-19 pandemic on our operating capabilities, our future liquidity and our expectations regarding our needs for and ability to raise additional capital; our ability to manage our expenses effectively and raise the funds needed to continue our business; our belief that there are unmet needs for the management of chronic pain and in the diagnosis and treatment of diabetic neuropathy; our expectations surrounding our commercialized neurostimulation and neuropathy diagnostic products; our expected timing and our plans to develop and commercialize our products; our ability to meet our proposed timelines for the commercial availability of our products; our ability to obtain and maintain regulatory approval of our existing products and any future products we may develop; regulatory and legislative developments in the United States and foreign countries; the performance of our third-party manufacturers; our ability to obtain and maintain intellectual property protection for our products; the successful development of our sales and marketing capabilities; the size and growth of the potential markets for our products and our ability to serve those markets; our estimate of our customer returns of our products; the rate and degree of market acceptance of any future products; our reliance on key scientific management or personnel; the payment and reimbursement methods used by private or government third party payers; and other factors discussed elsewhere in this Quarterly Report on Form 10-Q. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “plan” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. The forward-looking statements contained in this quarterly report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described in the section titled “Risk Factors” in our Annual Report on Form 10-K. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
We do not use derivative financial instruments in our investment portfolio and have no foreign exchange contracts. Our financial instruments consist of cash and cash equivalents. We consider investments that, when purchased, have a remaining maturity of 90 days or less to be cash equivalents. The primary objectives of our investment strategy are to preserve principal, maintain proper liquidity to meet operating needs, and maximize yields. To minimize our exposure to an adverse shift in interest rates, we invest mainly in cash equivalents and short-term investments with a maturity of twelve months or less and maintain an average maturity of twelve months or less. We do not believe that a notional or hypothetical 10% change in interest rate percentages would have a material impact on the fair value of our investment portfolio or our interest income.
 
Item 4. Controls and Procedures
 
(a) Evaluation of Disclosure Controls and Procedures. Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2021,2022, have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
 
(b) Changes in Internal Controls. There were no changes in our internal control over financial reporting, identified in connection with the evaluation of such internal control that occurred during the quarter ended June 30, 20212022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION
 
Item 1. Legal Proceedings
 
While we are not currently a party to any material legal proceedings, we could become subject to legal proceedings in the ordinary course of business. We do not expect any such potential items to have a significant impact on our financial position.
 
Item 1A. Risk Factors
 
There have been no material changes in the risk factors described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 20202021.


Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds
None.

Item 3.    Defaults Upon Senior Securities
 
None. 

Item 4.    Mine Safety Disclosures
 
Not applicable. 

Item 5.    Other Information
 
Amendment to the Shareholders Rights Agreement

On July 20, 2021, NeuroMetrix, Inc. entered into Amendment No. 14 (“Amendment No. 14”) to the Shareholder Rights Agreement with American Stock Transfer & Trust Company, LLC dated as of March 7, 2007, as amended (the “Rights Plan”), to amend certain of the provisions of the Rights Plan. Any capitalized term used herein that is not defined shall have the meaning ascribed to it in Amendment No. 14 or the Rights Plan, as the case may be.

As in past years, the primary purpose of Amendment No. 14 is to extend the term of the Rights Plan by an incremental one-year period, i.e., from an expiry of March 7, 2022 to March 7, 2023. In addition, Amendment No. 14 also makes certain amendments to update provisions of the Rights Plan that have been unchanged since their original adoption, including: (1) expanding the definition of “Beneficial Ownership” to account for current types of derivative contracts and synthetic equity, and (2) including a trust feature in Section 24 of the Rights Plan.

The foregoing description of Amendment No. 14 is subject to, and is qualified in its entirety by reference to, and the fully text of Amendment No. 14, a copy of which is set forth as Exhibit 4.1 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.

None. 
 
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Item 6.    Exhibits

Exhibit No. Description
4.1
Amendment No. 14 to Shareholder Rights Agreement by and between NeuroMetrix, Inc. and American Stock Transfer & Trust Company, as Rights Agent, dated July 20, 2021. Filed herewith.
10.1
Termination Agreement by and between NeuroMetrix, Inc. and GSK Consumer Healthcare S.A. dated June 30, 2021. Filed herewith.
31.1
 Certification of Principal Executive Officer Under Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, and pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002. Filed herewith.
   
31.2
 Certification of Principal Financial Officer Required Under Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
   
32
 Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350. Furnished herewith.
101101.INSThe following materials fromInline XBRL Instance Document (the instance document does not appear in the Company’s Quarterly Report on Form 10-Q forInteractive Data File because its XBRL tags are embedded within the quarter ended June 30, 2021, formatted inInline XBRL (eXtensible Business Reporting Language): (i) Balance Sheets at June 30, 2021 and December 31, 2020, (ii) Statements of Operations for the quarters ended June 30, 2021 and 2020, (iii) Statements of Changes in Stockholders' Equity for the quarters ended June 30, 2021 and 2020, (iv) Statements of Cash Flows for the quarters ended June 30, 2021 and 2020, and (v) Notes to Financial Statements.document). Filed herewith.
101.SCHInline XBRL Taxonomy Extension Schema Document. Filed herewith.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document. Filed herewith.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith.
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). Filed herewith.
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  NEUROMETRIX, INC.
  
July 22, 202121, 2022/s/SHAI N. GOZANI, M.D., PH. D.
  Shai N. Gozani, M.D., Ph. D.
  Chairman, President and Chief Executive Officer
  
July 22, 202121, 2022/s/THOMAS T. HIGGINS
  Thomas T. Higgins
  Senior Vice President, Chief Financial Officer and Treasurer
 
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