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, ~~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

☐

☐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: ~~7,130,487~~8,579,517 shares of common stock, par value $0.0001 per share, were outstanding as of July ~~20, 2022.~~26, 2023.

NeuroMetrix, Inc.

Form 10-Q

Quarterly Period Ended June 30, ~~2022~~2023

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements:

	Balance Sheets as of June 30, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022	1

	Statements of Operations (unaudited) for the Quarters and Six Months Ended June 30, ~~2022~~2023 and ~~2021~~2022	2

	Statements of Comprehensive Loss (unaudited) for the Quarters Ended June 30, 2023 and 2022	2

	Statements of Changes in Stockholders' Equity (unaudited) for the Quarters and Six Months Ended June 30, ~~2022~~2023 and ~~2021~~2022	3

	Statements of Cash Flows (unaudited) for the Six Months Ended June 30, ~~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	1011

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	1517

Item 4.	Controls and Procedures	1518

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	1619

Item 1A.	Risk Factors	1619

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	1619

Item 3.	Defaults Upon Senior Securities	1619

Item 4.	Mine Safety Disclosures	1619

Item 5.	Other Information	1619

Item 6.	Exhibits	1620

Signatures		1721

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

NeuroMetrix, Inc.

Balance Sheets


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(Unaudited)					(Unaudited)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	6,002,329	$	22,572,104	Cash and cash equivalents	$	1,862,949	$	4,335,020
Held-to-maturity securities	Held-to-maturity securities	16,965,817		—		Held-to-maturity securities	995,834		16,864,707
Available-for-sale securities						Available-for-sale securities	16,768,426		—
Accounts receivable, net	Accounts receivable, net	547,775		310,818		Accounts receivable, net	746,725		646,771
Inventories	Inventories	869,378		706,553		Inventories	1,583,985		1,614,987

Prepaid expenses and other current assets	Prepaid expenses and other current assets	241,651		598,384		Prepaid expenses and other current assets	331,487		645,502
Total current assets	Total current assets	24,626,950		24,187,859		Total current assets	22,289,406		24,106,987

Fixed assets, net	Fixed assets, net	178,983		198,703		Fixed assets, net	145,175		165,619
Right of use asset	Right of use asset	424,720		475,230		Right of use asset	312,522		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	$	25,257,053	$	24,888,192	Total assets	$	22,773,503	$	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	$	400,572	$	284,036	Accounts payable	$	181,462	$	368,082

Accrued expenses and compensation	Accrued expenses and compensation	1,030,607		814,155		Accrued expenses and compensation	880,076		589,939
Accrued product returns		8,000		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	1,587,570		1,365,697		Total current liabilities	1,209,929		1,106,412

Lease obligation, net of current portion	Lease obligation, net of current portion	258,912		306,709		Lease obligation, net of current portion	152,143		207,516
Total liabilities	Total liabilities	1,846,482		1,672,406		Total liabilities	1,362,072		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 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, respectively		713		669
Common stock, $0.0001 par value; 25,000,000 shares authorized at June 30, 2023 and December 31, 2022; 8,578,800 and 7,771,938 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively						Common stock, $0.0001 par value; 25,000,000 shares authorized at June 30, 2023 and December 31, 2022; 8,578,800 and 7,771,938 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	858		777
Additional paid-in capital	Additional paid-in capital	224,691,599		222,378,373		Additional paid-in capital	227,932,920		226,934,775
Accumulated other comprehensive income						Accumulated other comprehensive income	168,721		—
Accumulated deficit	Accumulated deficit	(201,281,742)		(199,163,257)		Accumulated deficit	(206,691,069)		(203,579,866)
Total stockholders’ equity	Total stockholders’ equity	23,410,571		23,215,786		Total stockholders’ equity	21,411,431		23,355,687
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	25,257,053	$	24,888,192	Total liabilities and stockholders’ equity	$	22,773,503	$	24,669,615

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

NeuroMetrix, Inc.

Statements of Operations

(Unaudited)


		Quarters Ended June 30,				Six Months Ended June 30,					Quarters Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022

Revenues	Revenues	$	2,138,301	$	2,213,499	$	4,440,692	$	4,368,971	Revenues	$	1,655,744	$	2,138,301	$	3,380,515	$	4,440,692

Cost of revenues	Cost of revenues	686,121		558,221		1,194,995		1,134,510		Cost of revenues	536,486		686,121		1,062,858		1,194,995

Gross profit	Gross profit	1,452,180		1,655,278		3,245,697		3,234,461		Gross profit	1,119,258		1,452,180		2,317,657		3,245,697

Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	915,799		641,525		1,626,376		874,802		Research and development	753,509		915,799		1,452,934		1,626,376
Sales and marketing	Sales and marketing	566,598		269,493		1,425,437		663,318		Sales and marketing	744,963		566,598		1,560,835		1,425,437
General and administrative	General and administrative	1,180,101		1,276,223		2,366,192		2,288,499		General and administrative	1,244,241		1,180,101		2,637,412		2,366,192

Total operating expenses	Total operating expenses	2,662,498		2,187,241		5,418,005		3,826,619		Total operating expenses	2,742,713		2,662,498		5,651,181		5,418,005

Loss from operations	Loss from operations	(1,210,318)		(531,963)		(2,172,308)		(592,158)		Loss from operations	(1,623,455)		(1,210,318)		(3,333,524)		(2,172,308)

Other income	Other income	50,395		379		53,823		791		Other income	86,426		50,395		222,321		53,823

Net loss	Net loss	$	(1,159,923)	$	(531,584)	$	(2,118,485)	$	(591,367)	Net loss	$	(1,537,029)	$	(1,159,923)	$	(3,111,203)	$	(2,118,485)

Net loss per common share applicable to common stockholders, basic and diluted	Net loss per common share applicable to common stockholders, basic and diluted	$	(0.17)	$	(0.13)	$	(0.30)	$	(0.15)	Net loss per common share applicable to common stockholders, basic and diluted	$	(0.19)	$	(0.17)	$	(0.40)	$	(0.30)

Statements of Comprehensive Loss

(Unaudited)


	Quarters Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Net loss	$	(1,537,029)	$	(1,159,923)	$	(3,111,203)	$	(2,118,485)

Other comprehensive income:

Unrealized gain on available-for-sale securities, net	102,847		—		168,721		—

Comprehensive loss	$	(1,434,182)	$	(1,159,923)	$	(2,942,482)	$	(2,118,485)

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

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 at the market offering		—	—		2,408	1		4,196				—					4,197
Vesting of restricted stock under equity plan																			Vesting of restricted stock under equity 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
Stock-based compensation expense	Stock-based compensation expense	—	—		—	—		319,863				—					319,863		Stock-based compensation expense	—				—			—			—			132,745				—					—					132,745
Issuance of common stock under at the market offering	Issuance 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	—				—			725,291			73			691,332				—					—					691,405
Issuance of common stock under employee stock purchase plan	Issuance of common stock under employee stock purchase plan	—	—		7,055	1		18,949				—					18,950		Issuance of common stock under employee stock purchase plan	—				—			10,526			1			8,714				—					—					8,715
Vesting of restricted stock under equity plan	Vesting of restricted stock under equity plan	—	—		13,911	3		(3)				—					—		Vesting of restricted stock under equity plan	—				—			72,121			6			(6)				—					—					—
Unrealized gain on available-for-sale securities																			Unrealized gain on available-for-sale securities	—				—			—			—			—				102,847					—					102,847
Net loss	Net loss	—	—		—	—		—				(531,584)					(531,584)		Net loss	—				—			—			—			—				—					(1,537,029)					(1,537,029)
Balance at June 30, 2021		200	$	1	5,038,610	$	506	$	206,307,789			$	(197,473,167)				$	8,835,129
Balance at June 30, 2023																			Balance at June 30, 2023	200				1			8,503,132			$	858		$	227,932,920			$	168,721				$	(206,691,069)				$	21,411,431

		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 equity plan	Vesting of restricted stock under equity plan	—	—		1,759	3		(3)				—					—		Vesting of restricted stock under equity 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
Stock-based compensation expense	Stock-based compensation expense	—	—		—	—		109,340				—					109,340		Stock-based compensation expense	—				—			—			—			109,340				—					—					109,340

Issuance of common stock under employee stock purchase plan		—	—		2,503	—		7,829				—					7,829
Issuance common stock under employee stock purchase plan																			Issuance common stock under employee stock purchase plan	—				—			2,503			—			7,829				—					—					7,829
Issuance of common stock to settle compensation obligation	Issuance of common stock to settle compensation obligation	—	—		50,213	5		215,412				—					215,417		Issuance of common stock to settle compensation obligation	—				—			50,213			5			215,412				—					—					215,417
Vesting of restricted stock under equity plan	Vesting of restricted stock under equity plan	—	—		3,120	7		(7)				—					—		Vesting of restricted stock under equity plan	—				—			3,120			7			(7)				—					—					—
Net loss	Net loss	—	—		—	—		—				(1,159,923)					(1,159,923)		Net loss	—				—			—			—			—				—					(1,159,923)					(1,159,923)

Balance at June 30, 2022	Balance at June 30, 2022	200	$	1	7,014,391	$	713	$	224,691,599			$	(201,281,742)				$	23,410,571	Balance at June 30, 2022	200				1			7,000,575			712			224,691,600				—					(201,281,742)					23,410,571

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

NeuroMetrix, Inc.

Statements of Cash Flows

(Unaudited)


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(2,118,485)	$	(591,367)	Net loss	$	(3,111,203)	$	(2,118,485)
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	26,277		79,511		Depreciation	20,444		26,277
Stock-based compensation	Stock-based compensation	146,972		388,726		Stock-based compensation	298,106		146,972
Issuance of common stock to settle compensation obligations	Issuance of common stock to settle compensation obligations	26,019		—		Issuance of common stock to settle compensation obligations	—		26,019
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		—
Loss on disposal of fixed assets	Loss on disposal of fixed assets	6,875		—		Loss on disposal of fixed assets	—		6,875
Accretion of interest income on held-to-maturity securities		(37,275)		—
Amortization of premiums and discounts on held-to-maturity securities						Amortization of premiums and discounts on held-to-maturity securities	(131,127)		(37,275)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(236,957)		(122,736)		Accounts receivable	(99,954)		(236,957)
Inventories	Inventories	(162,825)		22,128		Inventories	(32,418)		(162,825)

Prepaid expenses and other current and long-term assets	Prepaid expenses and other current and long-term assets	219,331		28,823		Prepaid expenses and other current and long-term assets	256,729		219,331
Accounts payable	Accounts payable	116,536		147,444		Accounts payable	(186,620)		116,536
Accrued expenses and compensation	Accrued expenses and compensation	465,850		(148,015)		Accrued expenses and compensation	350,137		465,850
Accrued product returns	Accrued product returns	(31,000)		(500,000)		Accrued product returns	—		(31,000)
Net cash used in operating activities	Net cash used in operating activities	(1,578,682)		(568,738)		Net cash used in operating activities	(2,572,486)		(1,578,682)

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of held-to-maturity securities	Purchases of held-to-maturity securities	(16,928,542)		—		Purchases of held-to-maturity securities	—		(16,928,542)
Purchases of available-for-sale securities						Purchases of available-for-sale securities	(16,599,705)		—
Proceeds from maturities of held-to-maturity securities						Proceeds from maturities of held-to-maturity securities	16,000,000		—
Purchases of fixed assets	Purchases of fixed assets	(13,432)		(83,273)		Purchases of fixed assets	—		(13,432)
Net cash used in investing activities	Net cash used in investing activities	(16,941,974)		(83,273)		Net cash used in investing activities	(599,705)		(16,941,974)

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	1,950,881		3,789,995		Net proceeds from issuance of stock	700,120		1,950,881

Net cash provided by financing activities	Net cash provided by financing activities	1,950,881		3,789,995		Net cash provided by financing activities	700,120		1,950,881

Net (decrease) increase in cash and cash equivalents		(16,569,775)		3,137,984
Net decrease in cash and cash equivalents						Net decrease in cash and cash equivalents	(2,472,071)		(16,569,775)
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	$	6,002,329	$	8,364,197	Cash and cash equivalents, end of period	$	1,862,949	$	6,002,329

Supplemental disclosure of cash flow information:
Issuance of common stock to settle compensation obligation		$	189,398	$	—

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

NeuroMetrix, Inc.

Notes to Unaudited Financial Statements

June 30, ~~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 ~~diagnostic~~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, wearable device ~~that provides rapid, point-of-care detection of peripheral neuropathies. Quell~~® ~~is a wearable neuromodulation technology indicated~~ for ~~treatment of fibromyalgia symptoms and chronic~~ lower extremity ~~pain.~~chronic pain and for the symptoms of fibromyalgia.

The Company held cash, cash equivalents and ~~held-to-maturity~~ securities totaling ~~$23.0~~$19.6 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.~~2023. The Company believes that its present balance of cash resources 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~~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~~financial statements as of June 30, ~~2022, unaudited statements of operations, changes in stockholders' equity for the quarters and six months ended June 30, 2022 and 2021 and cash flows for the six months ended June 30, 2022 and 2021~~2023, 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 six months ended June 30, ~~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 classify 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 to conform with the current presentation.

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~~collectability. The Company does not ~~probable.~~have any off-balance sheet credit exposure related to its customers. Allowance for doubtful accounts was $25,000 as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

Two customers accounted for 34% and one customer accounted for 26% of total revenues in the quarter and six months ended June 30, 2023, respectively. One customer accounted for 34% and 39% of total revenues in the quarter and six months ended June 30, 2022, respectively. ~~One customer~~Three customers accounted for ~~26% and 31% of total revenues in the quarter and six months ended June 30, 2021,~~

~~respectively. One customer accounted for 40%~~57% and two customers accounted for ~~35%~~31% of accounts receivable as of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

~~Held-To-Maturity~~ Cash and Cash Equivalents

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 June 30, 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 recorded on its securities portfolio as of June 30, 2023.

Fair Value

The ~~Company's investments~~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 ~~held-to-maturity securities consist~~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 observable either directly or indirectly; and Level 3 unobservable inputs for which there are little or no market data, which require the Company to develop its own assumptions. The hierarchy requires the Company to use observable market data, when available, and to minimize the use of investment 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 recorded within other income on the Company's statement of operations. The marketunobservable inputs when determining fair value ~~of the held-to-maturity securities at June 30, 2022 was $16,796,840.~~(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 Accounting Standards Update ("ASU") 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments. The guidance in 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 and had no material impact on the financial statements.

2. Comprehensive Loss

For the ~~quarters~~quarter and six months ended June 30, ~~2022 and 2021,~~2023, the Company had comprehensive income of $102,847 and $168,721, respectively, for net unrealized gains on available-for-sale marketable securities, in addition to net loss in the statement of operations. There were no components of ~~other~~ comprehensive ~~loss~~income (loss) for the quarter and six months ended June 30, 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 June 30,				Six Months Ended June 30,				Quarters Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021				2023		2022		2023		2022
Net loss applicable to common stockholders	Net loss applicable to common stockholders	$	(1,159,923)	$	(531,584)	$	(2,118,485)	$	(591,367)		Net loss applicable to common stockholders	$	(1,537,029)	$	(1,159,923)	$	(3,111,203)	$	(2,118,485)

Weighted average number of common shares outstanding, basic and dilutive	Weighted average number of common shares outstanding, basic and dilutive	7,009,775		4,169,764		6,951,792		3,990,844			Weighted average number of common shares outstanding, basic and dilutive	7,885,752		6,995,959		7,788,032		6,937,976

Net loss per common share applicable to common stockholders, basic and diluted	Net loss per common share applicable to common stockholders, basic and diluted	$	(0.17)	$	(0.13)	$	(0.30)	$	(0.15)		Net loss per common share applicable to common stockholders, basic and diluted	$	(0.19)	$	(0.17)	$	(0.40)	$	(0.30)

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:


		June 30,				Quarters Ended June 30,
			2022	2021			2023	2022
Options	Options		523,505	554,045	Options		525,462	523,505
Unvested restricted stock awards	Unvested restricted stock awards		119,333	21,404	Unvested restricted stock awards		75,668	119,333
Unvested restricted stock units	Unvested restricted stock units		161,764	—	Unvested restricted stock units		120,157	161,764
Convertible preferred stock	Convertible preferred stock		62	62	Convertible preferred stock		62	62
Total	Total		804,664	575,511	Total		721,349	804,664

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 June 30, 2023 and December 31, 2022.


	June 30, 2023
Held-to-maturity securities	Amortized Cost		Credit Losses		Estimated Fair Value


Commercial paper	995,834		—		995,608
Total	$	995,834	$	—	$	995,608


	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 June 30, 2023. The Company held no AFS securities as of December 31, 2022.


	June 30, 2023
			Gross Unrealized
Available-for-sale securities	Amortized Cost		Gains		Losses		Credit Losses		Estimated Fair Value
U.S. government bonds	$	9,853,238	$	106,765	$	—	$	—	$	9,960,003

Commercial paper	6,746,467		71,476		(9,520)		—		6,808,423
Total	$	16,599,705	$	178,241	$	(9,520)	$	—	$	16,768,426

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 June 30, 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 June 30, 2023.

5. Fair Value Measurements

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


	June 30, 2023
	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	1,105,076	$	1,105,076	$	—	$	—
U.S. government bonds	9,960,003		9,960,003		—		—
Commercial paper	6,808,423		—		6,808,423		—
Total	$	17,873,502	$	11,065,079	$	6,808,423	$	—


	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.

6. Inventories

Inventories consist of the following:


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Purchased components	Purchased components	$	453,610	$	422,093	Purchased components	$	1,075,707	$	982,129

Finished goods	Finished goods	415,768		284,460		Finished goods	508,278		632,858
		$	869,378	$	706,553		$	1,583,985	$	1,614,987

The company recorded a charge of $63,420 in the six months ended June 30, 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:


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Professional services	Professional services	$	224,000	$	109,000	Professional services	$	238,000	$	155,000
Compensation	Compensation	543,075		440,474		Compensation	456,555		249,224

Warranty	Warranty	21,700		28,400		Warranty	13,000		16,700
Leasehold		—		60,000

Sales tax	Sales tax	127,828		108,788		Sales tax	128,353		131,621
Other	Other	114,004		67,493		Other	44,168		37,394

		$	1,030,607	$	814,155		$	880,076	$	589,939

6.8. Operating Leases

The Company's lease on its Woburn, Massachusetts corporate office and manufacturing facility (the "Woburn Lease") 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
2023 165,785
2024 165,785
2025 117,431
Total minimum lease payments $ 531,893
Discount rate, 15% $ 124,590
Lease obligation, current portion 148,391
Lease obligation, net of current portion 258,912
$ 531,893

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 six months ended June 30, 2022, the Company recorded sublet income on the Waltham Lease totaling $22,795 within operating expenses on the Company's ~~statement~~Statement of ~~operations.~~Operations.

Future minimum lease payments under this non-cancellable operating lease as of June 30, 2023 are as follows:






2023	82,892
2024	165,785
2025	117,431
Total minimum lease payments	$	366,108

Interest, based on a 15%, discount rate	$	65,574
Lease obligation, current portion	148,391
Lease obligation, net of current portion	152,143
	$	366,108

Total recorded rent expense was ~~$46,102~~$49,232 and ~~$57,453,~~$46,102, for the quarters ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Total recorded rent expense was ~~$70,856~~$98,464 and ~~$224,357~~$70,856 for the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The Company records rent expense on its facility lease on a straight-line basis over the lease term. The remaining operating lease term was ~~3.2~~2.2 years as of June 30, ~~2022.~~2023.

~~7. Fair Value Measurements~~

Assets and liabilities that are measured at fair value are presented below. All Company assets and liabilities measured at fair value utilize Level 1 inputs (i.e. quoted prices (unadjusted) in active markets for identical assets or liabilities).

Fair Value Measurements at June 30, 2022 Using
June 30, 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 $ 5,030,666 $ 5,030,666 $ — $ —
Total $ 5,030,666 $ 5,030,666 $ — $ —

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 $ — $ —

~~The Company's cash equivalents consist of money market accounts.~~

8.9. Stockholders’ Equity

Preferred stock and convertible preferred stock consist of the following:

June 30, 2022 December 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


	June 30, 2023		December 31, 2022
Preferred stock, $0.001 par value; 5,000,000 shares authorized at June 30, 2023 and December 31, 2022; no shares issued and outstanding at June 30, 2023 and December 31, 2022	$	—	$	—
Series B convertible preferred stock, $0.001 par value; 147,000 shares designated at June 30, 2023 and December 31, 2022; 200 shares issued and outstanding at June 30, 2023 and December 31, 2022	$	1	$	1

2023 equity activity

In May 2023, the Company issued 12,500 restricted stock units under its 2022 Equity Incentive Plan with a value of $12,625.

In June 2023, the Company issued 725,291 shares of its common stock, under an at-the-market ("ATM") program for net proceeds of $691,405 and issued 10,526 shares of fully vested common stock with a value of $8,715 pursuant to the Company's Employee Stock Purchase Plan.

As of June 30, 2023, the Company has 75,668 restricted stock awards and 120,157 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 an ~~at-the-market (ATM) equity offering~~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.

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)~~("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 with a value of $4,197 pursuant to the Company's 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 to settle withholding taxes on the vesting 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 Employee Stock Purchase Plan. During the six months ended June 30, 2021, the Company issued 1,207,681 shares of its common stock, under the ATM for net proceeds of $3,766,848.

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~~improve individual and population health through the ~~impact~~development of 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 that 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 often experience 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 many cases, 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 is estimated to affect 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~~many of these limitations.

Business Strategy

Our DPNCheck diagnostic technology for peripheral neuropathies has been validated in multiple clinical studies During 2022 we expanded our commercial team for the ~~assessment of peripheral neuropathy risk, particularly in value-based care models such as~~domestic Medicare ~~Advantage. The technology is well-suited~~Advantage ("MA") and launched our next-generation DPNCheck device which enhances the user experience, improves testing efficiency and continues to ~~this task given its ease of use, rapid testing,~~deliver quantitative results ~~and overall~~with high sensitivity and specificity. Our 2023 commercial efforts focus on expanding our 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.

The MA market has ~~been evaluated~~grown rapidly and is expected to soon exceed traditional Medicare fee-for-service in ~~numerous clinical studies. It contributes attractive gross margins~~terms of population enrollment. In the first quarter of 2023, The Centers for Medicare and ~~has posted average revenue growth exceeding 20%~~Medicaid Services ("CMS") announced policy changes regarding their approach to compliance audits of MA health plans and also regarding coding of patient risk adjustment factors. CMS confirmed that the audit changes would be immediate and enforced retroactively, and that risk factor coding would be phased-in over ~~the past five years through December 31, 2021. We believe there is~~three years. The changes to risk factor coding will significantly reduce CMS payments for population screening, including neuropathy. CMS policy changes have created significant ~~accessible opportunity to expand DPNCheck usage. Towards that goal, we are investing in commercial resources and~~uncertainty in the ~~technology itself. Our next generation~~MA market among participating healthcare insurers and providers. The Company believes that the long-term opportunity in MA remains attractive for DPNCheck ~~technology, targeted for~~and is best addressed with a commercial ~~launch in late 2022, will further enhance the user experience~~approach involving patience, flexibility and ~~improve our manufacturing efficiency.~~careful resource deployment.

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 covered 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 a Quell fibromyalgia indication which was recently approved for marketing by the FDA under a De Novo regulatory filing.~~

ADVANCE is our legacy neurodiagnostic technology primarily used for the diagnosis and 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 manufacturers for industrial health use.

~~Recent Developments~~

~~Breakthrough Device Designation for Quell fibromyalgia indication -~~ In 2021 Quell received FDA Breakthrough Device Designation ~~(BDD) from the FDA~~ for a fibromyalgia indication. A pivotal double-blind, randomized, sham-controlled clinical study of Quell ~~for fibromyalgia~~Fibromyalgia was ~~completed, and the indication was authorized for marketing by the~~completed. In 2022 an FDA ~~under a~~ De Novo ~~regulatory filing.~~marketing authorization was received with an indication for use as an aid for reducing the symptoms of fibromyalgia in adults with high pain sensitivity. The Company ~~We are planning~~initiated a limited ~~commercial~~strategic launch of Quell Fibromyalgia in ~~late~~December 2022 to ~~guide our marketing approach. We plan a similar approach~~better understand market dynamics and to refine the fulfillment process. The Company recently announced the next step in commercial release with ~~other disease indications involving chronic pain~~the deployment of direct sales resources in the large markets of Florida, Texas and ~~associated syndromes. These include chemotherapy induced peripheral neuropathy (CIPN) and, potentially, chronic overlapping pain conditions (COPC) and restless leg syndrome (RLS).~~California. 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.

Quell received FDA Breakthrough Device Designation in early 2022 for ~~Chronic~~the treatment of chronic Chemotherapy ~~CIPN indication -~~ ~~In January 2022,~~Induced Peripheral Neuropathy ("CIPN"). The University of Rochester School of Medicine and Dentistry recently reported results of an NIH-funded multi-center randomized sham-controlled trial of Quell ~~received BDD from the FDA~~ for ~~reducing~~CIPN. The results indicated a statistically meaningful reduction in moderate to severe CIPN symptoms of ~~chemotherapy induced peripheral neuropathy that have persisted~~pain and muscular cramping in patients using the Quell device. We intend to use this data as the basis for ~~at least six months following the end of chemotherapy.~~ A ~~National Cancer Institute~~ ~~(NCI) funded, multi-center, double~~making an FDA regulatory submission to market Quell with a CIPN indication. We currently

1012

~~blind, randomized, sham-controlled trial~~expect that the regulatory filing would occur in late 2023/early 2024 with the potential for market launch in late 2024. We see opportunities with other specific disease indications involving chronic pain, including Chronic Low Back Pain, Post-Acute Sequelae 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.~~COVID 19 (Long COVID), Chronic Overlapping Pain Conditions, and Restless Leg Syndrome.

~~Equity sales~~ ~~– We secured $1.95 million in net proceeds from equity sales in~~ADVANCE is our legacy, point-of-care neurodiagnostic technology used primarily for the ~~first half of 2022. We maintain a debt-free, primarily common stock equity capital structure,~~diagnosis and ~~adequate funding resources~~screening for carpal tunnel syndrome. While ADVANCE devices are no longer sold, we continue to ~~support operations~~provide consumables and ~~our growth initiatives.~~

~~COVID-19 -~~ ~~The ongoing COVID-19 pandemic continues to adversely affect our business. It is difficult to quantify the disruption~~repair services to our ~~markets~~customer base of hand surgeons and ~~customers; however, we believe the effects have been more pronounced~~manufacturers for use 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 economic impacts from the pandemic including inflation, electronic parts and components availability, labor availability and costs, and other issues.industrial health.

Results of Operations

Comparison of Quarters Ended June 30, ~~2022~~2023 and ~~2021~~2022


		Quarter ended June 30,						Increase (Decrease)					Quarter ended June 30,						Increase (Decrease)
		2022			2021			Amount		Percent			2023			2022			Amount		Percent

Revenues	Revenues	$	2,138,301		$	2,213,499		$	(75,198)	(3.4)	%	Revenues	$	1,655,744		$	2,138,301		$	(482,557)	(22.6)	%
Gross profit	Gross profit	$	1,452,180		$	1,655,278		$	(203,098)	(12.3)	%	Gross profit	1,119,258			1,452,180			$	(332,922)	(22.9)	%
–% of revenues	–% of revenues	67.9		%	74.8		%			(6.9)	%	–% of revenues	67.6		%	67.9		%			(0.3)	%
Operating expenses	Operating expenses	$	2,662,498		$	2,187,241		$	475,257	21.7	%	Operating expenses	2,742,713			2,662,498			$	80,215	3.0	%
Other income, net	Other income, net	$	50,395		$	379		$	50,016	13,196.8	%	Other income, net	86,426			50,395			$	36,031	71.5	%
Net loss	Net loss	$	(1,159,923)		$	(531,584)		$	628,339	118.2	%	Net loss	$	(1,537,029)		$	(1,159,923)		$	377,106	32.5	%
Net loss per common share	Net loss per common share	$	(0.17)		$	(0.13)		$	0.04	30.8	%	Net loss per common share	$	(0.19)		$	(0.17)		$	0.02	11.8	%

Revenues

Revenues for the second quarter of ~~2022~~2023 decreased by ~~$75~~$483 thousand or ~~3.4% from~~22.6% compared to the second quarter of ~~2021.~~2022. DPNCheck ~~contributed~~sales, primarily focused on MA, accounted for the majority of revenues in both ~~quarters. It posted~~quarters and a decline in such sales were the primary contributor to the revenue ~~growth of 13.6%~~decline in the second quarter of ~~2022, attributable~~2023.

The MA market is experiencing substantial uncertainty following recent policy changes by the CMS concerning its audit practices and its patient risk adjustment coding. These changes are extensive and we believe have resulted in downward pressure on DPNCheck revenues. While it is difficult to ~~increased device placements both domestic~~predict the ultimate reactions by MA healthcare insurers and ~~international, as well as increased biosensor shipments.~~providers to these changes, and the effects on their patient screening with DPNCheck, it does appear likely that DPNCheck revenues will be depressed during the remainder of 2023 and potentially thereafter. Sales of Quell ~~revenue~~® declined in comparison with 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~~reflecting growth in sales of the ~~customer base.~~recently launched Quell Fibromyalgia, offset by declines in sales of Quell OTC which is no longer offered to new accounts. Sales of legacy ADVANCE® consumables continue to decline as this product is no longer promoted and is managed for cash flow purposes.

Gross Profit

Gross profit for the second quarter of 2023 decreased by $333 thousand or 22.9% compared to the second quarter of 2022. The gross profit rate as a percentage of revenue was approximately flat between the comparable periods. The decline in revenue, particularly DPNCheck revenue, was the largest contributor to the reduction in gross profit.

Operating Expenses

Operating expenses increased in the second quarter of 2023 by $80 thousand or 3% compared to from the second quarter of 2022. Personnel costs increased due to a modest gain in headcount and compensation. This was offset by costs of consulting services, particularly in research and development, which declined due to completion of product engineering projects, and by reduced promotional spending with the discontinuation of Quell OTC sales to new accounts.

Gross profit for the second quarter of 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 manufacture of our devices.

~~Operating Expenses~~

Operating expenses increased in the second quarter of 2022 by $475 thousand or 21.7% from the second quarter of 2021. The increase reflects investment in our DPNCheck initiatives to drive future growth, including the expansion of our commercial capabilities and bringing to market our next generation testing technology. The increase also includes regulatory and development costs related to the Quell disease-specific indications portfolio.

~~Research and development spending in the second quarter of 2022 of $916 thousand was $274 thousand higher than the second quarter of 2021 attributable to expanded outside engineering services.~~ Sales and marketing spending of $567 thousand increased by $297 thousand over the second quarter of 2021. The increase was attributable to personnel costs of $259 thousand greater than the prior year quarter reflecting costs of the new commercial team supporting DPNCheck. ~~General and administrative costs of $1.2 million in the second quarter of 2022 decreased by $96 thousand primarily due to lower personnel costs.~~

Net loss

The net loss in the second quarter of ~~2022~~2023 increased by ~~$628~~$377 thousand ~~from~~compared to the second quarter of ~~2021.~~2022. Similarly, net loss per common share increased to ($0.19) per common share in the second quarter of 2023 from ($0.17) per common share in the second quarter of ~~2022 from ($0.13) per common share in the second quarter of 2021.~~2022. The increase in ~~the number of our~~ common shares outstanding in the second quarter of ~~2022~~2023 partially offset the per share effect of a greater net loss in that period.

Comparison of Six Months Ended June 30, ~~2022~~2023 and ~~2021~~2022


		Six months ended June 30,						Increase (Decrease)					Six months ended June 30,						Increase (Decrease)
		2022			2021			Amount		Percent			2023			2022			Amount		Percent

Revenues	Revenues	$	4,440,692		$	4,368,971		$	71,721	1.6	%	Revenues	$	3,380,515		$	4,440,692		$	(1,060,177)	(23.9)	%
Gross profit	Gross profit	$	3,245,697		$	3,234,461		$	11,236	0.3	%	Gross profit	$	2,317,657		$	3,245,697		$	(928,040)	(28.6)	%
–% of revenues	–% of revenues	73.1		%	74.0		%			(0.9)	%	–% of revenues	68.6		%	73.1		%			(4.5)	%
Operating expenses	Operating expenses	$	5,418,005		$	3,826,619		$	1,591,386	41.6	%	Operating expenses	$	5,651,181		$	5,418,005		$	233,176	4.3	%
Other income, net	Other income, net	$	53,823		$	791		$	53,032	6,704.4	%	Other income, net	$	222,321		$	53,823		$	168,498	313.1	%
Net loss	Net loss	$	(2,118,485)		$	(591,367)		$	1,527,118	258.2	%	Net loss	$	(3,111,203)		$	(2,118,485)		$	992,718	46.9	%
Net loss per common share	Net loss per common share	$	(0.30)		$	(0.15)		$	0.15	100.0	%	Net loss per common share	$	(0.40)		$	(0.30)		$	0.10	33.3	%

Revenues

Revenues for the first half of ~~2022 increased~~2023 decreased by ~~$72 thousand~~$1.1 million or ~~1.6% from~~23.9% compared to the first half of ~~2021.~~2022. DPNCheck ~~contributed~~sales, primarily focused on MA, accounted for the majority of revenues in both ~~quarters. It posted~~quarters and a decline in such sales was the primary contributor to the revenue ~~growth of 14.6%~~decline in the first half of ~~2022, primarily 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.2023.

Gross Profit

Gross profit for the first half of ~~2022 increased slightly~~2023 decreased by ~~$11~~$928 thousand or ~~0.3% from~~28.6% compared to the first half of ~~2021. Gross profit as a percent of~~2022. The decline in revenue, particularly DPNCheck revenue, was ~~approximately flat between~~ the ~~comparable periods.~~largest contributor to the reduction in gross profit. The gross profit rate in the first half of 2023 contracted from the prior year period due to lower weighting of aftermarket DPNCheck sales and supply chain costs for electronic components including net realizable value inventory charges related to Quell components.

Operating Expenses

Operating expenses increased in the first half of ~~2022~~2023 by ~~$1.6 million~~$233 thousand or ~~41.6% from~~4.3% compared to the first half of 2021. The increase includes a research and development benefit 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 development benefit in 2021, the increase in operating 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 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.~~

Research 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 million2022. Personnel costs increased ~~by $762 thousand~~ due to ~~the addition of~~ a ~~new commercial team for DPNCheck. General~~modest gain in headcount and ~~administrative~~compensation. This was offset by costs of ~~$2.4 million increased by $78 thousand or 3.4% primarily~~consulting services, particularly in R&D, which declined due to ~~inflation~~

completion of product engineering projects, and by reduced promotional spending with the discontinuation of Quell OTC sales to new accounts.

Net loss

The net loss for the first half of ~~2022~~2023 increased by ~~$1.5 million from 2021.~~$993 thousand compared to 2022. Similarly, net loss per common share increased to ($0.40) per common share in the first half of 2023 from ($0.30) per common share in the first half of ~~2022 from ($0.15) per common share in the first half of 2021.~~2022. The increase in the number of common shares outstanding in the first half of ~~2022~~2023 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,			June 30,				December 31,
		2022		2021		2021			2023		2022		2022

Cash, cash equivalents and securities		$	22,968,146	$	8,364,197	$	22,572,104
Cash and cash equivalents								Cash and cash equivalents	$	1,862,949	$	6,002,329	$	4,335,020
Securities								Securities	$	17,764,260	$	16,965,817	$	16,864,707
Working capital	Working capital	$	23,039,380	$	8,448,353	$	22,822,162	Working capital	$	21,079,477	$	23,039,380	$	23,000,575
Current ratio	Current ratio	15.5		6.3		17.7		Current ratio	18.4		15.5		21.8

Net debt position								Net debt position	$	(18,265,137)	$	(21,121,664)	$	(19,885,799)
Days sales outstanding	Days sales outstanding	25.9		19.0		14.1		Days sales outstanding	36.0		25.9		32.9
Inventory turnover	Inventory turnover	3.5		2.2		2.2		Inventory turnover	1.3		3.5		1.8

Our primary sources of liquidity are cash and cash equivalents, ~~held-to-maturity~~ 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 June 30, ~~2022,~~2023, we held ~~$23.0~~$19.6 million in cash and cash equivalents, and ~~held-to-maturity~~ securities. Working capital was ~~$23.0~~$21.1 million, and the current ratio of working capital was ~~15.5.~~18.4. The Company had no term debt or borrowings. Net debt, defined as short and long-term debts (liabilities), less cash, cash equivalents and securities, continues to be negative.

Days sales outstanding ~~(DSO)~~("DSO") reflect our customer payment terms which vary from payment on order to 60 days from shipment date. ~~The increase in~~ DSO atof 36.0 on June 30, ~~2022~~2023 in comparison with ~~December 31, 2021~~25.9 on June 30, 2022 reflects the timing of ~~shipments~~sales within the quarter plus an increase in sales to international distributors with 60 day credit terms. Overall, the receivable aging viewed from a 0-60 days perspective improved from the prior year. Inventory turnover rate declined during the ~~first half of 2022. The inventory turnover rate reflects reduced stocking levels relative~~quarter ended June 30, 2023 due to the ~~prior year quarter and prior year end.~~drop in sales.

Cash Flows

Six months ended June 30,
2022 2021 Change

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 activities 1,950,881 3,789,995 (1,839,114)
Net change in cash and cash equivalents $ (16,569,775) $ 3,137,984


	Six months ended June 30,
	2023		2022		Change

Net cash provided by (used in):
Operating activities	$	(2,572,486)	$	(1,578,682)	$	(993,804)
Investing activities	(599,705)		(16,941,974)		16,342,269
Financing activities	700,120		1,950,881		(1,250,761)
Net change in cash and cash equivalents	$	(2,472,071)	$	(16,569,775)

Operating activities

~~Operations cash usage~~Cash used in operating activities in the first half of ~~2022~~2023 increased by $1.0 million from the comparable period in ~~2021.~~2022. This primarily reflects the increased net loss ~~and non-cash adjustments~~ in the ~~components of working capital.~~period.

Investing activities

Investing activities in the first half of 2023 and 2022 primarily reflect the deployment of cash to purchase investment grade ~~held-to-maturity~~ securities in the amount of $600 thousand, net and $16.9 ~~million.~~million, respectively. The cash deployed is invested for the short term, and while it is not forecasted to be essential to the Company’s near-term operations requirements, provides a cushion if necessary.

Financing activities

Equity sales in the first half of 2023 and 2022 contributed ~~$1.95 million. Common shares~~$700 thousand and $1.9 million, respectively. Shares of our common stock were sold to investors ~~utilizing~~pursuant to the Company's at-the-market ~~(ATM)~~("ATM") facility.

On October 22, 2021, we entered into an At Market Issuance Sales Agreement (the “ATM Sales Agreement”) with Ladenburg Thalmann & Co. Inc. (the “Sales Agent”), pursuant to which we can offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $25 million through the sales agent in an “at the market offering.” The Sales Agent will receive a commission of 3.0% of the gross proceeds of any common stock sold under the ATM Sales Agreement. On August 31, 2022, Amendment 1 was filed which limited the amount of common stock we may offer and sell up to $7.6 million due to SEC limitations. During the three months ended June 30, 2023, we sold 725,291 shares of our common stock, net of banker, audit and legal fees, for proceeds of $691,405 pursuant to the ATM Sales Agreement.

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

1416

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,~~(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 we 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, ~~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 ~~quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.~~closing process for the first half of 2023.

1518

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~~Form~~orm 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.

1620

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 ~~21, 2022~~27, 2023	/s/	SHAI N. GOZANI, M.D., PH. D.
		Shai N. Gozani, M.D., Ph. D.
		Chairman, President and Chief Executive Officer

July ~~21, 2022~~27, 2023	/s/	THOMAS T. HIGGINS
		Thomas T. Higgins
		Senior Vice President, Chief Financial Officer and Treasurer

1721


			Fair Value Measurements at June 30, 2022 Using
	June 30, 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	$	5,030,666	$	5,030,666	$	—	$	—
Total	$	5,030,666	$	5,030,666	$	—	$	—