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 March 31, ~~2022~~2023


☐			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)


Delaware			04-3308180
(State or other jurisdiction of			(I.R.S. Employer Identification No.)
incorporation or organization)

4B Gill Street Woburn, Massachusetts			01801
(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 class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, $0.0001 par value per share	NURO	The 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 company

Emerging growth company

☐

☐☒

☒

☐

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: ~~7,130,091~~7,839,549 shares of common stock, par value $0.0001 per share, were outstanding as of ~~April 25, 2022.~~May 2, 2023

NeuroMetrix, Inc.

Form 10-Q

Quarterly Period Ended March 31, ~~2022~~2023

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements:

	Balance Sheets as of March 31, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022	1

	Statements of Operations (unaudited) for the Quarters Ended March 31, ~~2022~~2023 and ~~2021~~2022	2

	Statements of Comprehensive Loss (unaudited) for the Quarters Ended March 31, 2023 and 2022	2

	Statements of Changes in Stockholders' Equity (unaudited) for the Quarters Ended March 31, ~~2022~~2023 and ~~2021~~2022	3

	Statements of Cash Flows (unaudited) for the Quarters Ended March 31, ~~2022~~2023 and ~~2021~~2022	4

	Notes to Unaudited Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	912

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	1417

Item 4.	Controls and Procedures	1418

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	1519

Item 1A.	Risk Factors	1519

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	1519

Item 3.	Defaults Upon Senior Securities	1519

Item 4.	Mine Safety Disclosures	1519

Item 5.	Other Information	1519

Item 6.	Exhibits	1520

Signatures		1621

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

NeuroMetrix, Inc.

Balance Sheets


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(Unaudited)					(Unaudited)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	23,769,380	$	22,572,104	Cash and cash equivalents	$	2,376,619	$	4,335,020
Held-to-maturity securities						Held-to-maturity securities	8,473,905		16,864,707
Available-for-sale securities						Available-for-sale securities	9,402,858		—
Accounts receivable, net	Accounts receivable, net	683,319		310,818		Accounts receivable, net	576,281		646,771
Inventories	Inventories	711,936		706,553		Inventories	1,748,115		1,614,987

Prepaid expenses and other current assets	Prepaid expenses and other current assets	422,616		598,384		Prepaid expenses and other current assets	508,391		645,502
Total current assets	Total current assets	25,587,251		24,187,859		Total current assets	23,086,169		24,106,987

Fixed assets, net	Fixed assets, net	184,346		198,703		Fixed assets, net	155,397		165,619
Right of use asset	Right of use asset	450,374		475,230		Right of use asset	342,082		370,609
Other long-term assets	Other long-term assets	26,400		26,400		Other long-term assets	26,400		26,400
Total assets	Total assets	$	26,248,371	$	24,888,192	Total assets	$	23,610,048	$	24,669,615

Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:

Accounts payable	Accounts payable	$	360,855	$	284,036	Accounts payable	$	400,299	$	368,082

Accrued expenses and compensation	Accrued expenses and compensation	1,207,008		814,155		Accrued expenses and compensation	868,265		589,939
Accrued product returns		11,000		39,000

Lease obligation, current	Lease obligation, current	148,391		228,506		Lease obligation, current	148,391		148,391
Total current liabilities	Total current liabilities	1,727,254		1,365,697		Total current liabilities	1,416,955		1,106,412

Lease obligation, net of current portion	Lease obligation, net of current portion	283,209		306,709		Lease obligation, net of current portion	180,345		207,516
Total liabilities	Total liabilities	2,010,463		1,672,406		Total liabilities	1,597,300		1,313,928

Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies

Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock	Preferred stock	—		—		Preferred stock	—		—
Convertible preferred stock	Convertible preferred stock	1		1		Convertible preferred stock	1		1
Common stock, $0.0001 par value; 25,000,000 shares authorized at March 31, 2022 and December 31, 2021; 7,006,055 and 6,694,296 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		701		669
Common stock, $0.0001 par value; 25,000,000 shares authorized at March 31, 2023 and December 31, 2022; 7,781,156 and 7,771,938 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively						Common stock, $0.0001 par value; 25,000,000 shares authorized at March 31, 2023 and December 31, 2022; 7,781,156 and 7,771,938 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	778		777
Additional paid-in capital	Additional paid-in capital	224,359,025		222,378,373		Additional paid-in capital	227,100,135		226,934,775
Accumulated other comprehensive income						Accumulated other comprehensive income	65,874		—
Accumulated deficit	Accumulated deficit	(200,121,819)		(199,163,257)		Accumulated deficit	(205,154,040)		(203,579,866)
Total stockholders’ equity	Total stockholders’ equity	24,237,908		23,215,786		Total stockholders’ equity	22,012,748		23,355,687
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	26,248,371	$	24,888,192	Total liabilities and stockholders’ equity	$	23,610,048	$	24,669,615

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

NeuroMetrix, Inc.

Statements of Operations

(Unaudited)


		Quarters Ended March 31,				Quarters Ended March 31,
		2022		2021				2023		2022

Revenues	Revenues	$	2,302,391	$	2,155,472		Revenues	$	1,724,771	$	2,302,391

Cost of revenues	Cost of revenues	508,874		576,289			Cost of revenues	526,372		508,874

Gross profit	Gross profit	1,793,517		1,579,183			Gross profit	1,198,399		1,793,517

Operating expenses:	Operating expenses:						Operating expenses:
Research and development	Research and development	710,577		233,277			Research and development	699,425		710,577
Sales and marketing	Sales and marketing	858,839		393,825			Sales and marketing	815,872		858,839
General and administrative	General and administrative	1,186,091		1,012,276			General and administrative	1,393,171		1,186,091

Total operating expenses	Total operating expenses	2,755,507		1,639,378			Total operating expenses	2,908,468		2,755,507

Loss from operations	Loss from operations	(961,990)		(60,195)			Loss from operations	(1,710,069)		(961,990)

Other income		3,428		412
Other income, net							Other income, net	135,895		3,428

Net loss	Net loss	$	(958,562)	$	(59,783)		Net loss	$	(1,574,174)	$	(958,562)

Net loss per common share applicable to common stockholders, basic and diluted		$	(0.14)	$	(0.02)
Net loss per common share, basic and diluted							Net loss per common share, basic and diluted	$	(0.20)	$	(0.14)

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

Statements of Comprehensive Loss

(Unaudited)


	Quarters Ended March 31,
	2023		2022

Net loss	$	(1,574,174)	$	(958,562)

Other comprehensive income:

Unrealized gain on available-for-sale securities	65,874		—

Comprehensive loss	(1,508,300)		(958,562)

NeuroMetrix, Inc.

Statements of Changes in Stockholders' Equity

(Unaudited)


		Series B Convertible Preferred Stock			Common Stock			Additional Paid-In Capital				Accumulated Deficit					Total			Series B Convertible Preferred Stock							Common Stock						Additional Paid-In Capital				Accumulated Other Comprehensive Income					Accumulated Deficit					Total
		Number of Shares	Amount		Number of Shares	Amount										Number of Shares					Amount				Number of Shares			Amount
Balance at December 31, 2020		200	$	1	3,807,555	$	380			$	202,129,194			$	(196,881,800)					$	5,247,775
Balance at December 31, 2022																			Balance at December 31, 2022	200				1			7,675,682			$	777				$	226,934,775				$	—				$	(203,579,866)				$	23,355,687
Stock-based compensation expense	Stock-based compensation expense	—	—		—	—		68,863				—					68,863		Stock-based compensation expense	—				—			—			—			165,361				—					—					165,361
Issuance of common stock under employee stock purchase plan		—	—		2,408	1		4,196				$	—				$	4,197

Vesting of restricted stock under option plan																			Vesting of restricted stock under option plan	—				—			19,512			1			(1)				—					—					—
Unrealized gain on available-for-sale securities																			Unrealized gain on available-for-sale securities	—				—			—			—			—				65,874										65,874
Net loss	Net loss	—	—		—	—		—				(59,783)					(59,783)		Net loss	—				—			—			—			—				—					(1,574,174)					(1,574,174)
Balance at March 31, 2021		200	$	1	3,809,963	$	381	$	202,202,253			$	(196,941,583)				$	5,261,052
Balance at March 31, 2023																			Balance at March 31, 2023	200				$	1		7,695,194			$	778		$	227,100,135			$	65,874				$	(205,154,040)				$	22,012,748

		Series B Convertible Preferred Stock			Common Stock			Additional Paid-In Capital				Accumulated Deficit					Total			Series B Convertible Preferred Stock							Common Stock						Additional Paid-In Capital				Accumulated Other Comprehensive Income					Accumulated Deficit					Total
		Number of Shares	Amount		Number of Shares	Amount										Number of Shares					Amount				Number of Shares			Amount
Balance at December 31, 2021	Balance at December 31, 2021	200	$	1	6,664,296	$	669			$	222,378,373			$	(199,163,257)					$	23,215,786	Balance at December 31, 2021	200			$	1		6,650,480			$			668				$	222,378,374				$	—				$	(199,163,257)		$	23,215,786
Stock-based compensation expense	Stock-based compensation expense	—	—		—	—		37,632				—					37,632		Stock-based compensation expense	—				—			—			—			37,632				—					—					37,632
Issuance of common stock under at the market offering	Issuance of common stock under at the market offering	—	—		292,500	29		1,943,023				$	—				$	1,943,052	Issuance of common stock under at the market offering	—				—			292,500			29			1,943,023				—					—					1,943,052

Vesting of restricted stock under option plan	Vesting of restricted stock under option plan	—	—		1,759	3		(3)				—					—		Vesting of restricted stock under option plan	—				—			1,759			3			(3)				—					—					—
Net loss	Net loss	—	—		—	—		—				(958,562)					(958,562)		Net loss	—				—			—			—			—				—					(958,562)					(958,562)
Balance at March 31, 2022	Balance at March 31, 2022	200	$	1	6,958,555	$	701	$	224,359,025			$	(200,121,819)				$	24,237,908	Balance at March 31, 2022	200				$	1		6,944,739			$	700		$	224,359,026			$	—				$	(200,121,819)				$	24,237,908

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

NeuroMetrix, Inc.

Statements of Cash Flows

(Unaudited)


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(958,562)	$	(59,783)	Net loss	$	(1,574,174)	$	(958,562)
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:
Depreciation	Depreciation	12,877		22,182		Depreciation	10,222		12,877
Stock-based compensation	Stock-based compensation	37,632		68,863		Stock-based compensation	165,361		37,632

Impairment charge against right of use asset		—		126,748
Inventory reserve charged to cost of revenue						Inventory reserve charged to cost of revenue	63,420		—
Amortization of premiums and discounts on held-to-maturity securities						Amortization of premiums and discounts on held-to-maturity securities	(109,198)		—
Loss on disposal of fixed assets	Loss on disposal of fixed assets	6,875		—		Loss on disposal of fixed assets	—		6,875
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(372,501)		(143,392)		Accounts receivable	70,490		(372,501)
Inventories	Inventories	(5,383)		71,656		Inventories	(196,548)		(5,383)

Prepaid expenses and other current and long-term assets	Prepaid expenses and other current and long-term assets	37,009		(16,043)		Prepaid expenses and other current and long-term assets	78,467		37,009
Accounts payable	Accounts payable	76,819		238,932		Accounts payable	32,217		76,819
Accrued expenses and compensation	Accrued expenses and compensation	452,853		(332,953)		Accrued expenses and compensation	338,326		424,853
Accrued product returns		(28,000)		(10,000)

Net cash used in operating activities	Net cash used in operating activities	(740,381)		(33,790)		Net cash used in operating activities	(1,121,417)		(740,381)

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of available-for-sale securities						Purchases of available-for-sale securities	(9,336,984)		—
Proceeds from maturities of held-to-maturity securities						Proceeds from maturities of held-to-maturity securities	8,500,000		—
Purchases of fixed assets	Purchases of fixed assets	(5,395)		(21,453)		Purchases of fixed assets	—		(5,395)
Net cash used in investing activities	Net cash used in investing activities	(5,395)		(21,453)		Net cash used in investing activities	(836,984)		(5,395)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net proceeds from issuance of stock	Net proceeds from issuance of stock	1,943,052		4,197		Net proceeds from issuance of stock	—		1,943,052
Deferred stock issuance costs paid		—		$	(30,000)

Net cash provided (used in) by financing activities		1,943,052		(25,803)

Net cash provided by financing activities						Net cash provided by financing activities	—		1,943,052

Net increase (decrease) in cash and cash equivalents	Net increase (decrease) in cash and cash equivalents	1,197,276		(81,046)		Net increase (decrease) in cash and cash equivalents	(1,958,401)		1,197,276
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	22,572,104		5,226,213		Cash and cash equivalents, beginning of period	4,335,020		22,572,104
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	23,769,380	$	5,145,167	Cash and cash equivalents, end of period	$	2,376,619	$	23,769,380

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

NeuroMetrix, Inc.

Notes to Unaudited Financial Statements

For the Three Months Ended March 31, ~~2022~~2023

1.Business and Basis of Presentation

~~Our Business-An Overview~~

NeuroMetrix, Inc. (the "Company" or "NeuroMetrix") develops and commercializes health care products that utilize non-invasive 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") and regulators in foreign jurisdictions where appropriate. The Company has two primary products. DPNCheck® is a point-of-care test for diabetic peripheral neuropathy, which is the most common long-term complication of Type 2 diabetes. Quell is an app-enabled, ~~over-the-counter~~ wearable device for lower extremity chronic ~~pain.~~pain and for the symptoms of fibromyalgia.

The Company held cash, ~~and~~ cash equivalents ~~of $23.8~~and investment grade securities totaling $20.3 million ~~as of~~on March 31, ~~2022. The Company has a history of operating losses and has financed its operations primarily from sales of equity, from collaboration milestone payments, and from sales of its products.~~2023. The Company believes that its present balance of cash resources and securities 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~~reasons, including changes the Company may make to its business strategy, ~~that affect operating expenses,~~commercial challenges, regulatory developments, changes to research and development ~~spending plans;~~programs, supply chain issues, staffing challenges and other items affecting the Company's projected uses of cash.

Unaudited Interim Financial Statements

The accompanying unaudited balance sheet as of March 31, ~~2022,~~2023, unaudited statements of operations, statements of comprehensive loss, changes in stockholders' equity ~~for the quarters ended March 31, 2022 and 2021~~ and cash flows for the quarters ended March 31, ~~2022~~2023 and ~~2021~~2022 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, ~~2021~~2022 has been derived from the audited balance sheet as of December 31, 2022 included in the Company's Form 10-K referenced below and 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 three months ended March 31, ~~2022~~2023 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022~~2023 or any other period. These financial statements and notes should be read in conjunction with the financial statements for the year ended December 31, ~~2021~~2022 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, or the SEC, on ~~January 28, 2022~~March 22, 2023 (File No. 001-33351).

Prior period reclassifications

We have reclassified certain amounts in prior periods to conform with current presentation. During the current period we have reported money market funds within cash and cash equivalents. Money market funds in the amount of $81,751 which were reported within held-to-maturity securities at December 31, 2022 have been reclassified into cash and cash equivalents.

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 at the point in time when contractual performance obligations have been satisfied and control of the product has been transferred to the customer. ~~In most cases, the~~The Company typically has a single product delivery performance obligation. Accrued product returns using the most likely amount method are estimated based on historical data and evaluation of current ~~information.~~information and variable consideration is not constrained.

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, recent customer communications and, ~~recent communications~~if appropriate, assessment of the future credit losses for receivables with ~~the customer.~~similar characteristics. Individual customer balances which are over 9060 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 March 31, 2022 and December 31, 2021.~~

~~One customer~~due are reviewed individually for collectability. The Company does not have any off-balance sheet credit exposure related to its customers. Allowance for doubtful accounts was $25,000 as of March 31, 2023 and December 31, 2022.

Two customers accounted for ~~43%~~39% and ~~36%~~43% of total revenues in the quarters ended March 31, 2023 and 2022, ~~and 2021,~~ respectively. ~~Three~~Two customers accounted for ~~55%~~60% and ~~two~~three customers accounted for ~~35%~~55% of accounts receivable as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

~~Stock-based Compensation~~Cash and Cash Equivalents

~~Total compensation cost related to non-vested awards not yet recognized~~Cash and cash equivalents include bank demand deposits and money market funds that invest primarily in U.S. government securities.

Securities

The Company invests in highly liquid, marketable debt securities with high credit ratings and typically with maturities of two years or less. Individual securities are designated by the Company as either “held-to-maturity" (HTM) or “available-for-sale” (AFS) at the point of investment. Securities classified as short-term have maturities of less than one year. As of March 31, ~~2022~~2023, all marketable securities held by the Company had remaining contractual maturities of one year or less.

HTM securities are valued on an amortized cost basis and reviewed to determine if an allowance for credit losses should be recorded in the statements of operations. AFS securities are valued at fair value. Unrealized gains and losses on AFS securities are included as a component of accumulated other comprehensive income in the balance sheets and statements of stockholders’ equity and a component of total comprehensive loss in the statements of comprehensive income loss. An AFS security is impaired if its fair value is less than amortized cost. Unrealized losses are evaluated to determine if the impairment is credit-related or non credit-related. Credit-related impairment is recognized as an allowance on the balance sheet with a corresponding adjustment to earnings, and a non credit-related impairment is recognized in other comprehensive income (loss).For certain types of securities, such as U.S. Treasuries, the Company generally expects zero credit losses. No allowance for credit losses was ~~$93,991.~~ recorded on its securities portfolio as of March 31, 2023

Fair Value

The ~~total compensation costs~~Company follows the provisions of Financial Accounting Standards Board (the "FASB") Accounting Standards Codification ("ASC") Topic 820-10, Fair Value Measurements and Disclosures ("ASC 820-10"), which defines fair value, establishes a framework for measuring fair value in GAAP and requires certain disclosures about fair value measurements. Fair Value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

As a basis for considering such assumptions, ASC 820-10 established a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows: Level 1 observable inputs such as quoted prices in active markets; Level 2 inputs, other than quoted prices in active markets, that are ~~expected~~observable either directly or indirectly; and Level 3 unobservable inputs for which there are little or no market data, which require the Company to ~~be recognized over a weighted-average period~~develop its own assumptions. The hierarchy requires the Company to use observable market data, when available, and to minimize the use of ~~3.4 years.~~unobservable inputs when determining fair value (See Note 5).

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.

Recent Accounting Pronouncements

Accounting Standards Updates (ASUs) issued by the FASB are evaluated for their applicability. ASUs not included in the disclosures in this report were assessed and determined to be either not applicable or not expected to have a material impact on our financial statements.

Recently adopted accounting pronouncement

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments. The guidance in Accounting Standards Update (“ASU”) 2016-13 replaces the incurred loss impairment methodology under current GAAP. The new impairment requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other instruments. It applies to all entities. For trade receivables, loans and held-to-maturity (HTM) debt securities, entities are required to estimate lifetime expected credit losses. Trading and available-for-sale (AFS) debt securities are required to be recorded at fair value. SEC small reporting companies were required to adopt this new guidance in fiscal years beginning on or after December 15, 2022. The Company adopted this guidance on a prospective basis as of January 1, 2023.

2. Comprehensive ~~Loss~~Income (Loss)

For the ~~quarters~~quarter ended March 31, ~~2022 and 2021,~~2023, the Company had comprehensive income of $65,874 for unrealized gains on available-for-sale marketable securities, in addition to net loss of $1,574,174 in the statement of operations. There were no components of ~~other~~ comprehensive ~~loss~~income (loss) in the quarter ended March 31, 2022 other than net loss itself.

3. Net Loss Per Common Share

Basic and dilutive net loss per common share were as follows:


		Quarters Ended March 31,				Quarters Ended March 31,
		2022		2021				2023		2022
Net loss applicable to common stockholders	Net loss applicable to common stockholders	$	(958,562)	$	(59,783)		Net loss applicable to common stockholders	$	(1,574,174)	$	(958,562)

Weighted average number of common shares outstanding, basic	Weighted average number of common shares outstanding, basic	6,893,164		3,796,120			Weighted average number of common shares outstanding, basic	7,689,226		6,879,348

Weighted average number of common shares outstanding, dilutive	Weighted average number of common shares outstanding, dilutive	6,893,164		3,796,120			Weighted average number of common shares outstanding, dilutive	7,689,226		6,879,348

Net loss per common share applicable to common stockholders, basic and diluted	Net loss per common share applicable to common stockholders, basic and diluted	$	(0.14)	$	(0.02)		Net loss per common share applicable to common stockholders, basic and diluted	$	(0.20)	$	(0.14)

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 March 31,		Quarters Ended March 31,
		2022	2021			2023	2022
Options	Options	510,256	368,510		Options	525,462	510,256

Unvested restricted stock awards					Unvested restricted stock awards	85,962	47,500
Unvested restricted stock units					Unvested restricted stock units	179,812	—
Convertible preferred stock	Convertible preferred stock	62	62		Convertible preferred stock	62	62
Total	Total	510,318	368,572		Total	791,298	557,818

4. Securities

The Company's marketable debt securities are classified as either held-to-maturity (HTM) or available-for-sale (AFS) pursuant to ASC 320 - Investments - Debt Securities. HTM securities are valued at amortized cost. The following tables summarize the valuations of HTM securities as of March 31, 2023 and December 31, 2022.


	March 31, 2023
Held-to-maturity securities	Amortized Cost		Credit Losses		Estimated Fair Value
U.S. government bonds	$	1,484,977	$	—	$	1,484,625
Corporate bonds	4,026,570		—		3,894,100
Commercial paper	2,962,358		—		2,958,894
Total	$	8,473,905	$	—	$	8,337,619


	December 31, 2022
Held-to-maturity securities	Amortized Cost		Credit Losses		Estimated Fair Value
U.S. government bonds	$	3,457,651	$	—	$	3,456,580
Corporate bonds	4,011,569		—		3,950,380
Commercial paper	9,395,487		—		9,387,914
Total	$	16,864,707	$	—	$	16,794,874

The following table summarizes the valuations and unrealized gains and losses of AFS securities which are recorded at estimated fair value as of March 31, 2023. The Company held no AFS securities as of December 31, 2022.


	March 31, 2023
			Gross Unrealized
Available-for-sale securities	Amortized Cost		Gains		Losses		Credit Losses		Estimated Fair Value
U.S. government bonds	$	5,953,685	$	36,576	$	—	$	—	$	5,990,260
Corporate bonds	—		—		—		—		—
Commercial paper	3,383,300		29,298		—		—		3,412,598
Total	$	9,336,985	$	65,874	$	—	$	—	$	9,402,858

The Company evaluates all HTM and AFS securities for impairment at each reporting period. It determined that changes in the fair value of its securities at March 31, 2023 resulted primarily from interest rate fluctuations subsequent to the purchase date of the securities. There was no deterioration in the credit worthiness of the issuers and no credit losses were recorded as of March 31, 2023.

5. Fair Value Measurements

The following tables set forth the Company’s financial instruments that were measured at fair value:


	March 31, 2023
	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	1,667,697	$	1,667,697	$	—	$	—
U.S. government bonds	5,990,260		5,990,260		—		—
Commercial paper	3,412,598		—		3,412,598		—
Total	$	11,070,555	$	7,657,957	$	3,412,598	$	—


	December 31, 2022
	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	1,551,027	$	1,551,027	$	—	$	—


Total	$	1,551,027	$	1,551,027	$	—	$	—

The Company's accounts receivable, accounts payable, and accrued expenses are valued at cost which approximates fair value.

4.6. Inventories

Inventories consist of the following:


	March 31, 2023		December 31, 2022
Purchased components	$	1,119,662	$	982,129

Finished goods	628,453		632,858
	$	1,748,115	$	1,614,987

March 31, 2022 December 31, 2021
Purchased components $ 413,653 $ 422,093
Finished goods 298,283 284,460
$ 711,936 $ 706,553

The Company recorded a charge of $63,420 in the first quarter of 2023 to reduce the carrying value of inventory to net realizable value.

5.7. Accrued Expenses and Compensation

Accrued expenses and compensation consist of the following:


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Professional services	Professional services	$	156,000	$	109,000	Professional services	$	212,000	$	155,000
Compensation	Compensation	825,698		440,474		Compensation	361,115		249,224

Clinical						Clinical	40,000		—
Warranty	Warranty	24,800		28,400		Warranty	15,100		16,700

Leasehold		$	—	$	60,000

Sales Tax	Sales Tax	$	139,507	$	108,788	Sales Tax	$	132,045	$	131,621
Other	Other	61,003		67,493		Other	108,005		37,394

		$	1,207,008	$	814,155		$	868,265	$	589,939

8. Operating Leases

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

~~Future minimum lease payments under non-cancellable operating leases as of March 31, 2022 are as follows:~~
2022 124,339
2023 165,785
2024 165,785
2025 117,431
Total minimum lease payments $ 573,340
Discount rate, 15% $ 141,740
Lease obligation, current portion 148,391
Lease obligation, net of current portion 283,209
$ 573,340

The Company's lease on its former corporate office in Waltham, Massachusetts (the "Waltham Lease") expired 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, a $60,000 reduction in rent expense was recorded upon return of the facility to the lessor. The letter of credit issued by a bank in favor of the Waltham facility was released. For the quarter ended March 31, 2022, the Company recorded sublet income on the Waltham Lease totaling $22,795 within operating expenses on the Company's Statement of Operations.

The following is a maturity analysis of the annual cash flows of the operating lease liabilities as of March 31, 2023:






2023	124,339
2024	165,785
2025	117,431
Total minimum lease payments	$	407,555

Discount rate, 15%	$	78,819
Lease obligation, current portion	148,391
Lease obligation, net of current portion	180,345
	$	407,555

Total recorded rent expense was ~~$24,754~~$49,232 and ~~$166,904,~~$24,754, for the quarters ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. The Company records rent expense on its facility leases on a straight-line basis over the lease term. The remaining operating lease term was ~~3.7~~2.5 years as of March 31, ~~2022.~~

~~7. Fair Value Measurements~~

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis for the periods 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. All Company assets and liabilities measured at fair value utilize Level 1 inputs.

Fair Value Measurements at March 31, 2022 Using
March 31, 2022 Quoted Prices in
Active Markets
for Identical
Assets (Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Assets:
Cash equivalents $ 20,821,291 $ 20,821,291 $ — $ —
Total $ 20,821,291 $ 20,821,291 $ — $ —

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

2023.

8.9. Stockholders’ Equity

Preferred stock and convertible preferred stock consist of the following:

March 31, 2022 December 31, 2021
Preferred stock, $0.001 par value; 5,000,000 shares authorized at March 31, 2022 and December 31, 2021; no shares issued and outstanding at March 31, 2022 and December 31, 2021 $ — $ —
Series B convertible preferred stock, $0.001 par value; 147,000 shares designated at March 31, 2022 and December 31, 2021; 200 shares issued and outstanding at March 31, 2022 and December 31, 2021 $ 1 $ 1


	March 31, 2023		December 31, 2022
Preferred stock, $0.001 par value; 5,000,000 shares authorized at March 31, 2023 and December 31, 2022; no shares issued and outstanding at March 31, 2023 and December 31, 2022	$	—	$	—
Series B convertible preferred stock, $0.001 par value; 147,000 shares designated at March 31, 2023 and December 31, 2022; 200 shares issued and outstanding at March 31, 2023 and December 31, 2022	$	1	$	1

2023 equity activity

As of March 31, 2023, the Company has 85,962 restricted stock awards and 179,812 restricted stock units that remain unvested. At December 31, 2022 the Company had 96,250 restricted stock awards and 194,731 restricted stock units that were unvested.

2022 equity activity

In January 2022, the Company issued 292,500 shares of common stock under its ATM 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.

As of March 31, 2022, the Company has issued 47,500 restricted stock awards that remain unvested. At December 31, 2021 the Company had 30,000 restricted stock awards that were unvested.

Subsequent to March 31, 2022, under its 2004 Stock Option Plan, the Company issued 76,000 restricted stock awards with a value of $326,040 to employees as long term incentives (LTI) and 49,084 shares of fully vested common stock with a value of $210,567 in settlement of management incentive compensation.

~~2021 equity activity~~

~~In January 2021, the Company issued 2,408 shares of fully vested common stock with a value of $4,197 pursuant to the Company's 2010 Employee Stock Purchase Plan.~~

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.

~~Our~~ Business Overview

~~Our~~NeuroMetrix is a commercial stage neurotechnology company based in Woburn, Massachusetts. The Company’s mission is to ~~reduce the impact of~~improve individual and population health through innovative medical devices and technology solutions for neurological disorders and pain ~~syndromes on individuals~~syndromes. Our core expertise in biomedical engineering has been refined over two decades of designing, building and ~~on population health through innovative non-invasive~~marketing medical ~~devices.~~

~~Our business is~~devices that stimulate nerves and analyze nerve response for diagnostic and therapeutic purposes. We are fully integrated with in-house capabilities spanning research and development, ~~manufacturing,~~ regulatory affairs and compliance, sales and marketing, customer support, manufacturing, and product ~~fulfillment~~fulfillment. We hold extensive, proprietary intellectual property.

NeuroMetrix created the market for point-of-care nerve testing and ~~customer support. We derive revenues~~introduced sophisticated wearable technology for chronic pain syndromes. Nearly five million patients have been served with our products. Revenue is derived from the sale of medical devices and after-market consumable products and ~~accessories. Our products~~accessories in the United States and select overseas markets. Products are ~~proprietary~~authorized by the U.S. Food and ~~encompass point-of-care neuropathy diagnostic tests~~Drug Administration (FDA) and ~~wearable neurotherapeutic devices.~~regulators in foreign jurisdictions where appropriate. We have two principal product categories:

–Diagnostic technology - point-of-care peripheral neuropathy assessment

–Therapeutic technology – wearable neuromodulation for chronic pain syndromes

Peripheral neuropathies are diseases of the peripheral nerves. They affect about 10% of adults in the United States, with the prevalence rising to over 30% 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 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. The most common long-term complication of diabetes, affecting over 50% of the diabetic population, is diabetic peripheral neuropathy (DPN). Early detection of peripheral neuropathies, such as DPN, is important because there are no treatment options once the nerves have degenerated. Today’s diagnostic methods for peripheral neuropathies range from a simple monofilament test for lack of sensory perception 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 multiple clinical studies.

Chronic pain is 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 response to injury or trauma. Chronic pain conditions include low back pain, arthritis, fibromyalgia, neuropathic pain, cancer pain 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 contributing 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.

Chronic pain affects nearly 100 million adults in the United States. 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 opioid. The approach to treatment is individualized, drug combinations may be employed, and the results are often inadequate. Side effects, including the potential for addiction, are substantial. Nerve stimulation is a long-established category of treatment for chronic pain. This treatment approach is available through implantable devices which have both surgical and ongoing risks. Non-invasive approaches involving transcutaneous electrical nerve stimulation (TENS) have achieved limited efficacy in practice due to power limitations, inadequate dosing and low

patient adherence. We believe that our ~~testing~~Quell wearable technology for ~~peripheral neuropathies. It~~chronic pain is designed to address ~~unmet physician needs in the assessment~~many of these limitations.

Business Strategy

Our DPNCheck diagnostic technology for 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 overall high sensitivity and specificity. DPNCheckneuropathies has been ~~evaluated~~validated in ~~numerous~~multiple clinical studies. It contributes attractive gross margins and has posted an average ~~revenue~~annual growth ~~exceeding 20%~~rate of 16.5% over the past five ~~years through December 31, 2021. We believe there is significant, accessible opportunity to expand~~years. During 2022 we expanded our commercial team for the domestic Medicare Advantage (MA) and launched our next-generation DPNCheck ~~usage. Towards that goal, we are investing in commercial resources and in the technology itself. Our next generation DPNCheck technology, targeted for commercial launch in 2022, will further enhance~~device which enhances the user experience, improves testing efficiency and ~~improve~~continues to deliver quantitative results with high sensitivity and specificity. Our 2023 efforts will focus on expanding our ~~manufacturing efficiency.~~MA pipeline, encouraging transition to the new device, and on software development both to connect user testing at the clinic level to the overall business enterprise via a DPNCheck data cloud and to facilitating linkages between clinic testing and patient electronic medical records (EMR). The software projects are complex and costly; however, we see them as essential to expanding usage of DPNCheck, particularly in large organizations.

The MA market has grown rapidly and is expected to soon exceed traditional Medicare fee-for-service in terms of population enrollment. The Centers for Medicare and Medicaid Services (CMS) announced policy changes in Q1 2023 regarding their approach to compliance audits of MA health plans and also regarding coding of patient risk adjustment factors. CMS announced that the audit changes would be immediate and enforced retroactively, and that risk factor coding would be phased-in over three years. The changes to risk factor coding would significantly reduce CMS payments for population screening, including neuropathy. CMS policy changes have created significant uncertainty in the MA market and are likely to be challenged. The ultimate outcome cannot be determined at this time. At present, the Company is working to adapt its commercial strategy to the evolving landscape.

Quell, is our wearable neuromodulation technology for chronic pain has been refined over the past seven years with over 200,000 chronic pain patients and ~~associated syndromes.~~is protected by over 20 U.S. utility patents. 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~~The degree of ~~lower extremity chronic pain. Its~~ technological sophistication, combined with our extensive consumer experience and the compelling results of ~~recent~~ clinical studies ~~provide~~has given us the opportunity to ~~leverage~~redirect this technology away from the ~~technology platform~~commodity-oriented OTC market and into aan emerging portfolio of ~~Quell-based~~specialized, disease indicated, prescription (Rx) wearable neurotherapeutics. ~~The first product in that portfolio will be~~

In 2021 Quell received FDA Breakthrough Device Designation for a fibromyalgia indication. A pivotal double-blind, randomized, sham-controlled clinical study of Quell - fibromyalgia ~~indication which is currently under~~was completed. In 2022 an FDA ~~regulatory review as a~~ De Novo ~~request.~~marketing authorization was received with an indication for use as an aid for reducing the symptoms of fibromyalgia in adults with high pain sensitivity. A limited strategic launch of Quell – fibromyalgia was initiated in late 2022 to confirm the commercial proposition, better understand market dynamics, and refine the fulfillment process prior to full launch in H2 2023.

Quell also received FDA Breakthrough Device Designation in early 2022 for the treatment of chronic Chemotherapy Induced Peripheral Neuropathy (CIPN). A CIPN double-blind, randomized, sham-controlled clinical study employing Quell and funded by the National Cancer Institute (NCI) and the National Institute of Health (NIH) recently completed enrollment. Study results are expected in Q2 2023. A positive outcome would support an FDA DeNovo filing similar to Quell – fibromyalgia and potentially an early 2024 launch of our second Quell Rx portfolio product. We see opportunities with other specific disease indications involving chronic pain, including Chronic Low Back Pain, Post-Acute Sequelae of COVID 19, Chronic Overlapping Pain Conditions (COPC), and Restless Leg Syndrome (RLS).

ADVANCE is our legacy, point-of-care neurodiagnostic technology used primarily ~~used~~ for the diagnosis and screening ~~of Carpal Tunnel Syndrome~~for carpal tunnel syndrome (CTS). ~~The technology has been marketed since 2008.~~ While weADVANCE devices are no longer ~~market ADVANCE devices,~~sold, we continue to provide ~~disposable electrodes~~consumables and repair services to ~~a loyal~~our customer base of hand surgeons and manufacturers for use in industrial ~~health use.~~health.

~~Recent Developments~~

~~Breakthrough Device Designation for Quell fibromyalgia indication -~~ In 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 is currently the subject of an FDA De Novo request, the outcome of which is expected during the second half of 2022. A positive FDA decision could lead to commercial launch in late 2022 or early 2023. We plan a similar

913

approach with other disease indications involving chronic pain and associated syndromes. These include chemotherapy induced peripheral neuropathy (CIPN) and, potentially, chronic overlapping pain conditions (COPC) and restless leg syndrome (RLS). We 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.

~~Breakthrough Device Designation for Chronic Chemotherapy CIPN indication -~~ In January 2022, Quell received BDD from the FDA for reducing moderate to severe symptoms of chemotherapy induced peripheral neuropathy that have persisted for at least six months following the end of chemotherapy. A ~~National Cancer Institute~~ (NCI) funded, multi-center, double blind, randomized, sham-controlled trial of Quell in CIPN is currently ongoing. The study is expected to complete by the end of 2022. Depending on the outcome of the trial, we hope to be positioned for an FDA filing in 2023.

~~Equity sales~~ – We secured $1.94 million in net proceeds from equity sales in the first quarter of 2022. We maintain a debt-free, common stock only equity capital structure, and adequate cash resources to support operations and our growth initiatives.

~~COVID-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 diagnostic testing markets for DPNCheck and ADVANCE, and less pronounced in the consumer retail markets for Quell. Generally, we see continued purchases of testing consumables by existing customers but with less predictability than in the past. Also, our growth via new customer acquisition has been lower due to the marketing challenges resulting from COVID-19 restrictions.

We 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 blend of on-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 to those with severe COVID-19 symptoms. Also uncertain are the potential effects on our business of the eventual economic recovery from the pandemic including inflation, electronic parts and components availability, labor availability and costs, and other issues.

Results of Operations

Comparison of Quarters Ended March 31, ~~2022~~2023 and March 31, ~~2021~~2022


		Three months ended March 31,						Increase (Decrease)					Three months ended March 31,						Increase (Decrease)
		2022			2021			Amount		Percent			2023			2022			Amount		Percent

Revenues	Revenues	$	2,302,391		$	2,155,472		$	146,919	6.8	%	Revenues	$	1,724,771		$	2,302,391		$	(577,620)	(25.1)	%
Gross profit	Gross profit	1,793,517			1,579,183			$	214,334	13.6	%	Gross profit	1,198,399			1,793,517			$	(595,118)	(33.2)	%
–% of revenues	–% of revenues	77.9		%	73.3		%			4.6	%	–% of revenues	69.5		%	77.9		%			(8.4)	%
Operating expenses	Operating expenses	2,755,507			1,639,378			$	1,116,129	68.1	%	Operating expenses	2,908,468			2,755,507			$	152,961	5.6	%
Other income, net	Other income, net	3,428			412			$	3,016	732.0	%	Other income, net	135,895			3,428			$	132,467	3,864.3	%
Net loss	Net loss	$	(958,562)		$	(59,783)		$	898,779	1,503.4	%	Net loss	$	(1,574,174)		$	(958,562)		$	615,612	64.2	%
Net loss per common share	Net loss per common share	$	(0.14)		$	(0.02)		$	0.12	600.0	%	Net loss per common share	$	(0.20)		$	(0.14)		$	0.06	42.9	%

Revenues

Revenues for the first quarter of ~~2022 increased~~2023 decreased by ~~$147~~$578 thousand or ~~6.8%~~25.1% from the first quarter of ~~2021.~~2022. DPNCheck ~~contributed~~sales, primarily focused on Medicare Advantage, accounted for the majority of revenues in both ~~quarters. It posted~~quarters and were the primary contributor to the revenue ~~growth of 15.6%~~decline in the first quarter of ~~2022, attributable~~2023. DPNCheck® sales declined due to ~~new~~a suspension of patient screening programs, including DPNCheck, by the Company's largest Medicare Advantage ~~customers~~customer. This drop was partially offset by increased sales to other Medicare Advantage accounts and ~~to sales price increases. Quell revenue declined in~~ the ~~first quarter~~acquisition 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.~~

new customers.

The Medicare Advantage market is experiencing substantial uncertainty following policy changes recently announced by the Centers for Medicare and Medicaid (CMS) concerning its audit practices and its revisions to patient risk adjustment coding. These changes are extensive and resulted in downward pressure on DPNCheck revenues, although it is too early to determine the duration and magnitude of the impact. Sales of Quell® over the counter and ADVANCE® consumables also decreased as these product lines are being phased out.

Gross Profit

Gross profit for the first quarter of ~~2022 increased~~2023 decreased by ~~$214~~$595 thousand or ~~13.6%~~33.2% from the first quarter of ~~2021. The increase~~2022. Gross profit reflected ~~growth~~a 69.5% gross margin rate in ~~revenues plus increased weighting of our higher margin DPNCheck business within total revenues, which expanded by 460 basis points to~~comparison with 77.9% in ~~comparison with~~the prior year quarter. The decline in revenue, particularly DPNCheck revenue, was the largest contributor to the reduction in gross profit. Gross profit in the first quarter of ~~2021.~~2023 was also adversely impacted by charges to adjust inventory to net realizable value and cost increases for electronic components.

Operating Expenses

Operating expenses increased in the first quarter of ~~2022~~2023 by ~~$1,116~~$153 thousand or ~~68.1%~~5.6% from the first quarter of ~~2021.~~2022. The ~~increase reflects investment~~primary contributor across all operating expense categories was increased personnel costs reflecting increased headcount and compensation rates. Promotional spending was reduced in our DPNCheck initiatives to drive future growth, including the restructuring and expansion of our commercial capabilities and bringing to market our next generation testing technology. The increase also includes early regulatory costs and a market analysis related to potential Quell disease-specific indications.

Research and development spending in the first quarter of 2022 of $711 thousand was $477 thousand higher than the first quarter of 2021 which benefited from a $450 thousand reversal of previously accrued technology costs upon the expiry of the relevant statute of limitations. Salessales and marketing ~~spending~~with the discontinuation of ~~$859 thousand~~Quell OTC sales. Non-cash equity compensation and professional service fees were the major contributors to increased by $465 thousand over the first quarter of 2021. The increase was attributable to personnel costs of $393 thousand greater than the prior year quarter reflecting new employee hires, employee severance costsgeneral and an increase in advertising and consulting costs of $61 thousand. General and administrative costs of $1,186 thousand included an increase of $147 thousand in personnel costs related to employee severance costs and the restoration of previously reduced executive compensation. Professional costs in the first quarter of 2022 were greater than the first quarter of 2021 by $58 thousand offset by a savings of $60 thousand upon vacating a previously leased facility.administration costs.

Net loss

The net loss in ~~2022~~2023 increased by ~~$899~~$616 thousand from ~~2021.~~2022. Similarly, net loss per common share increased to ($0.20) per common share in the first quarter of 2023 from ($0.14) per common share in the first quarter of ~~2022 from ($0.02) per common share in the first quarter of 2021. Increased common shares outstanding in the first quarter of 2022 partially offset the effect of a greater net loss in that period.~~2022.

Liquidity and Capital Resources

The following table contains certain key performance ~~indicators we believe depict our liquidity and cash flow position:~~indicators:


		Three months ended March 31,				December 31,			March 31,				December 31,
		2022		2021		2021			2023		2022		2022

Cash and cash equivalents	Cash and cash equivalents	$	23,769,380	$	5,145,167	$	22,572,104	Cash and cash equivalents	$	2,376,619	$	23,769,380	$	4,335,020
Securities								Securities	$	17,876,763	$	—	$	16,864,707
Working capital	Working capital	$	23,859,997	$	4,877,410	$	22,822,162	Working capital	$	21,669,214	$	23,859,997	$	23,000,575
Current ratio	Current ratio	14.8		3.3		17.7		Current ratio	16.3		14.8		21.8
Net debt position	Net debt position	$	(21,758,917)	$	(2,685,347)	$	(20,899,698)	Net debt position	$	(18,656,082)	$	(21,758,917)	$	(19,885,799)
Days sales outstanding	Days sales outstanding	19.4		17.0		14.1		Days sales outstanding	31.9		19.4		20.9
Inventory turnover	Inventory turnover	2.9		2.3		2.2		Inventory turnover	1.3		2.9		1.8

Our primary sources of liquidity are cash and cash equivalents, securities, revenues from the sales of our products, 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 issuance of the financial statements.

As of March 31, ~~2022,~~2023, we had ~~$23.8~~$20.3 million in cash and cash equivalents and securities, working capital of ~~$23.9~~$21.7 million, and a current ratio of ~~14.8.~~16.3. We had no term debt or ~~borrowings which contributes~~borrowings. Net debt, defined as short and long-term debts, less cash, cash equivalents and securities, continues to ~~negative net debt positions at the end of the quarter.~~be negative.

Days sales outstanding (DSO) reflect our customer payment terms which vary from payment on order to 60 days from shipment date. ~~The increase in~~ DSO of 31.9 at March 31, 2023 versus 19.4 at March 31, 2022 primarily reflects a deterioration of the accounts receivable aging and the modest effect of a shift in ~~comparison~~the Company’s product line composition of revenue to DPNCheck sales with ~~December 31, 2021 reflects the timing of shipments during the first quarter of 2022.~~30-60 day credit terms and away from Quell OTC sales with immediate credit card payment. Inventory turnover rate ~~has improved slightly~~declined during the quarter ended March 31, ~~2022, reflecting~~2023 due to the ~~timing~~combined effects onof inventory ~~receipts rather than a change~~growth and the drop in ~~inventory management.~~

sales.

Cash Flows


		Three months ended March 31,							Three months ended March 31,
		2022		2021		Change			2023		2022		Change

Net cash provided by (used in):	Net cash provided by (used in):							Net cash provided by (used in):
–Operating activities	–Operating activities	$	(740,381)	$	(33,790)	$	(706,591)	–Operating activities	$	(1,121,417)	$	(740,381)	$	(381,036)
–Investing activities	–Investing activities	(5,395)		(21,453)		16,058		–Investing activities	(836,984)		(5,395)		(831,589)
–Financing activities	–Financing activities	1,943,052		(25,803)		1,968,855		–Financing activities	—		1,943,052		(1,943,052)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	$	1,197,276	$	(81,046)			Net change in cash and cash equivalents	$	(1,958,401)	$	1,197,276

Operating activities

Operations cash usage in the first quarter of ~~2022~~2023 increased by ~~$707~~$381 thousand from the prior year quarter reflecting ~~the increased~~an increase in net loss ~~and non-cash adjustments~~of $616 thousand offset by the net change in the components of working ~~capital.~~capital which included an increase in inventory $191 thousand and a reduction of accounts receivable $443 thousand.

Investing activities

Investing activities ~~reflect our purchases of fixed assets for use in production and in research and development. There were $5 thousand of capitalized costs~~ in the first quarter of ~~2022.~~2023 reflect $9.3 million in purchases of available-for-sale (AFS) securities and $8.5 million in maturities of held-to-maturity (HTM) securities.

Financing activities

~~Equity sales in~~There were no financing activities for the first quarter of 2023. During the first quarter of 2022, ~~contributed $1.94 million. Common shares were sold to investors utilizing~~$1.9 million was raised through the ~~Company's at-the-market (ATM)~~ATM facility.

We continue to maintain an effective shelf registration statement covering the sales of shares of our common stock and other securities, 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.

1316

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,~~��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 March 31, ~~2022,~~2023, 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~~In connection with our evaluation of the Company’s internal ~~control~~controls over financial reporting during 2022, we identified a control deficiency in ~~connection with~~inventory accounting which represented a material weakness in our controls over financial reporting as of December 31, 2022. Specifically, our controls were not designed or implemented to ensure the ~~evaluation~~proper review and determination of ~~such~~inventory costing, and the valuation of inventory net realizable value. The Company has taken steps to remediate the material weakness in inventory accounting controls by expanding its period-end closing process to require that the Corporate Controller perform and document a review of inventory costing and also prepare an analysis of inventory net realizable value, which analysis is required to be reviewed and approved by the Chief Financial Officer. This change in internal ~~control that occurred~~controls was implemented during the closing process for the first quarter ~~ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.~~of 2023.

1418

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 are not aware of and do not expect any such potential ~~items~~issues. However, should they occur, we do not expect them 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 F ~~orm~~Form 10-K for the year ended December 31, 202 12.

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

None.

Item 6. Exhibits


Exhibit No.						Description

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.

101.INS						Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). Filed herewith.

101.SCH						Inline XBRL Taxonomy Extension Schema Document. Filed herewith.

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith.

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith.

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document. Filed herewith.

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith.

104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). Filed herewith.

1520

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.

~~April 26, 2022~~May 3, 2023	/s/	SHAI N. GOZANI, M.D., PH. D.
		Shai N. Gozani, M.D., Ph. D.
		Chairman, President and Chief Executive Officer

~~April 26, 2022~~May 3, 2023	/s/	THOMAS T. HIGGINS
		Thomas T. Higgins
		Senior Vice President, Chief Financial Officer and Treasurer


			Fair Value Measurements at March 31, 2022 Using
	March 31, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	20,821,291	$	20,821,291	$	—	$	—
Total	$	20,821,291	$	20,821,291	$	—	$	—