UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|
| | | | |
x☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20202021
OR
|
| | | | |
¨☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____ to ____
Commission File Number 001-33351
_________________________________________________
NEUROMETRIX, INC.
(Exact name of registrant as specified in its charter)
|
| | | | |
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 companyx |
| | | 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: 3,784,6576,645,397 shares of common stock, par value $0.0001 per share, were outstanding as of October 21, 2020.20, 2021.
NeuroMetrix, Inc.
Form 10-Q
Quarterly Period Ended September 30, 20202021
TABLE OF CONTENTS
|
| | | | | | | |
| |
|
| | |
|
Item 1. | | |
|
| | |
|
| Balance Sheets as of September 30, 20202021 (unaudited) and December 31, 20192020 | |
|
| | |
|
| Statements of Operations (unaudited) for the Quarters and Nine Months Ended September 30, 20202021 and 20192020 | |
|
| | |
|
| StatementStatements of Changes in Stockholders' Equity (unaudited) for the Quarters and Nine Months Ended September 30, 20202021 and 20192020 | |
|
| | |
| Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 20202021 and 20192020 | | 4 |
| | |
|
| | |
|
| | |
|
Item 2. | | 13 | 10 |
| | |
|
Item 3. | | 21 | 16 |
| | |
|
Item 4. | | 21 | 16 |
| | |
|
| |
|
| | |
|
Item 1. | | 22 | 17 |
| | |
|
Item 1A. | | 22 | 17 |
| | |
|
Item 2. | | 22 | 17 |
| | |
|
Item 3. | | 22 | 17 |
| | |
|
Item 4. | | 22 | 17 |
| | |
|
Item 5. | | 22 | 17 |
| | |
|
Item 6. | | 22 | 17 |
| | |
|
| 23 | 18 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
NeuroMetrix, Inc.
Balance Sheets
| | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
| (Unaudited) | | |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 23,213,537 | | | $ | 5,226,213 | |
Accounts receivable, net | 639,766 | | | 334,297 | |
Inventories | 996,951 | | | 1,051,282 | |
| | | |
Prepaid expenses and other current assets | 710,136 | | | 478,074 | |
Total current assets | 25,560,390 | | | 7,089,866 | |
| | | |
Fixed assets, net | 204,939 | | | 183,494 | |
Right to use asset | 499,047 | | | 692,692 | |
Other long-term assets | 29,293 | | | 28,523 | |
Total assets | $ | 26,293,669 | | | $ | 7,994,575 | |
| | | |
Liabilities and Stockholders’ Equity | | | |
Current liabilities: | | | |
| | | |
Accounts payable | $ | 316,969 | | | $ | 142,316 | |
| | | |
Accrued expenses and compensation | 1,028,373 | | | 998,442 | |
Accrued product returns | 46,000 | | | 545,000 | |
Lease obligation, current | 345,147 | | | 599,632 | |
Total current liabilities | 1,736,489 | | | 2,285,390 | |
| | | |
Lease obligation, net of current portion | 329,169 | | | 461,410 | |
Total liabilities | 2,065,658 | | | 2,746,800 | |
| | | |
Commitments and contingencies | 0 | | 0 |
| | | |
Stockholders’ equity: | | | |
Preferred stock | — | | | — | |
Convertible preferred stock | 1 | | | 1 | |
Common stock, $0.0001 par value; 25,000,000 shares authorized at September 30, 2021 and December 31, 2020; 6,645,397 and 3,793,739 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively | 665 | | | 379 | |
Additional paid-in capital | 222,387,601 | | | 202,129,195 | |
Accumulated deficit | (198,160,256) | | | (196,881,800) | |
Total stockholders’ equity | 24,228,011 | | | 5,247,775 | |
Total liabilities and stockholders’ equity | $ | 26,293,669 | | | $ | 7,994,575 | |
|
| | | | | | | |
| September 30, 2020 | | December 31, 2019 |
| (Unaudited) | | |
Assets | |
| | |
|
Current assets: | |
| | |
|
Cash and cash equivalents | $ | 4,929,175 |
| | $ | 3,126,206 |
|
Accounts receivable, net | 633,146 |
| | 298,967 |
|
Inventories | 1,050,293 |
| | 1,163,714 |
|
Collaboration receivable | — |
| | 189,008 |
|
Prepaid expenses and other current assets | 677,526 |
| | 652,919 |
|
Total current assets | 7,290,140 |
| | 5,430,814 |
|
| | | |
Fixed assets, net | 205,676 |
| | 273,448 |
|
Right to use asset | 815,558 |
| | 1,159,774 |
|
Other long-term assets | 28,664 |
| | 29,650 |
|
Total assets | $ | 8,340,038 |
| | $ | 6,893,686 |
|
| | | |
Liabilities and Stockholders’ Equity | |
| | |
|
Current liabilities: | |
| | |
|
| | | |
Accounts payable | $ | 192,356 |
| | $ | 725,658 |
|
Accrued expenses and compensation | 1,011,228 |
| | 1,443,574 |
|
Accrued product returns | 586,000 |
| | 689,000 |
|
Lease obligation, current | 596,779 |
| | 588,546 |
|
Total current liabilities | 2,386,363 |
| | 3,446,778 |
|
| | | |
Lease obligation, net of current portion | 581,903 |
| | 916,674 |
|
Total liabilities | 2,968,266 |
| | 4,363,452 |
|
| | | |
Commitments and contingencies |
|
| |
|
|
| | | |
Stockholders’ equity: | |
| | |
|
Preferred stock | — |
| | — |
|
Convertible preferred stock | 1 |
| | 1 |
|
Common stock, $0.0001 par value; 25,000,000 shares authorized at September 30, 2020 and December 31, 2019; 3,784,657 and 1,400,674 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively | 378 |
| | 140 |
|
Additional paid-in capital | 201,927,426 |
| | 197,319,698 |
|
Accumulated deficit | (196,556,033 | ) | | (194,789,605 | ) |
Total stockholders’ equity | 5,371,772 |
| | 2,530,234 |
|
Total liabilities and stockholders’ equity | $ | 8,340,038 |
| | $ | 6,893,686 |
|
The accompanying notes are an integral part of these interim financial statements.
NeuroMetrix, Inc.
Statements of Operations
(Unaudited)
| | | Quarters Ended September 30, | | Nine Months Ended September 30, | | Quarters Ended September 30, | | Nine Months Ended September 30, |
| 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
| | | | | | | | | | | | | | | |
Revenues | $ | 2,036,228 |
| | $ | 2,088,001 |
| | $ | 5,568,243 |
| | $ | 7,565,619 |
| Revenues | $ | 2,064,359 | | | $ | 2,036,228 | | | $ | 6,433,330 | | | $ | 5,568,243 | |
| | | | | | | | |
Cost of revenues | 537,614 |
| | 914,322 |
| | 1,652,890 |
| | 6,382,340 |
| Cost of revenues | 619,833 | | | 537,614 | | | 1,754,343 | | | 1,652,890 | |
| | | | | | | | | | | | | | | |
Gross profit | 1,498,614 |
| | 1,173,679 |
| | 3,915,353 |
| | 1,183,279 |
| Gross profit | 1,444,526 | | | 1,498,614 | | | 4,678,987 | | | 3,915,353 | |
| | | | | | | | |
Operating expenses: | |
| | |
| | |
| | |
| Operating expenses: | | | | | | | |
Research and development | 652,671 |
| | 475,137 |
| | 1,846,569 |
| | 2,365,139 |
| Research and development | 724,556 | | | 652,671 | | | 1,599,358 | | | 1,846,569 | |
Sales and marketing | 340,927 |
| | 647,719 |
| | 1,144,389 |
| | 4,046,956 |
| Sales and marketing | 442,230 | | | 340,927 | | | 1,105,548 | | | 1,144,389 | |
General and administrative | 762,903 |
| | 1,462,887 |
| | 2,693,146 |
| | 4,646,932 |
| General and administrative | 965,711 | | | 762,903 | | | 3,254,210 | | | 2,693,146 | |
| | | | | | | | | | | | | | | |
Total operating expenses | 1,756,501 |
| | 2,585,743 |
| | 5,684,104 |
| | 11,059,027 |
| Total operating expenses | 2,132,497 | | | 1,756,501 | | | 5,959,116 | | | 5,684,104 | |
| | | | | | | | | | | | | | | |
Loss from operations | (257,887 | ) | | (1,412,064 | ) | | (1,768,751 | ) | | (9,875,748 | ) | Loss from operations | (687,971) | | | (257,887) | | | (1,280,129) | | | (1,768,751) | |
| | | | | | | | |
Other income: | | | | | | | | |
Collaboration income | — |
| | — |
| | — |
| | 7,116,667 |
| |
| Other income | 774 |
| | 7,464 |
| | 2,323 |
| | 42,797 |
| Other income | 882 | | | 774 | | | 1,673 | | | 2,323 | |
| | | | | | | | | | | | | | | |
Total other income | 774 |
| | 7,464 |
| | 2,323 |
| | 7,159,464 |
| |
| | | | | | | | | |
Net loss | $ | (257,113 | ) | | $ | (1,404,600 | ) | | $ | (1,766,428 | ) | | $ | (2,716,284 | ) | Net loss | $ | (687,089) | | | $ | (257,113) | | | $ | (1,278,456) | | | $ | (1,766,428) | |
| | | | | | | | |
| | | | Net loss per common share applicable to common stockholders, basic and diluted | $ | (0.07 | ) | | $ | (1.44 | ) | | $ | (0.64 | ) | | $ | (3.06 | ) | Net loss per common share applicable to common stockholders, basic and diluted | $ | (0.12) | | | $ | (0.07) | | | $ | (0.28) | | | $ | (0.64) | |
|
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 Deficit | | Total |
| Number of Shares | | Amount | | Number of Shares | | Amount | | | Number of Shares | | Amount | | Number of Shares | | Amount | |
Balance at December 31, 2019 | 200.00 |
| | $ | 1 |
| | 1,400,674 |
| | $ | 140 |
| | $ | 197,319,698 |
| | $ | (194,789,605 | ) | | $ | 2,530,234 |
| Balance at December 31, 2019 | 200 | | | $ | 1 | | | 1,400,674 | | | $ | 140 | | | $ | 197,319,698 | | | $ | (194,789,605) | | | $ | 2,530,234 | |
Stock-based compensation expense | — |
| | — |
| | — |
| | — |
| | 144,047 |
| | — |
| | 144,047 |
| Stock-based compensation expense | — | | | — | | | — | | | — | | | 144,047 | | | — | | | 144,047 | |
Issuance of common stock under at the market offering | — |
| | — |
| | 256,078 |
| | 25 |
| | 453,432 |
| | — |
| | 453,457 |
| Issuance of common stock under at the market offering | — | | | — | | | 256,078 | | | 25 | | | 453,432 | | | — | | | 453,457 | |
Issuance of common stock to settle compensation obligations | — |
| | — |
| | 31,000 |
| | 3 |
| | 43,748 |
| | — |
| | 43,751 |
| Issuance of common stock to settle compensation obligations | — | | | — | | | 31,000 | | | 3 | | | 43,748 | | | — | | | 43,751 | |
Net loss | | | — |
| | | | | | | | (657,371 | ) | | (657,371 | ) | Net loss | | — | | | (657,371) | | | (657,371) | |
Balance at March 31, 2020 | 200.00 |
| | $ | 1 |
| | 1,687,752 |
| | $ | 168 |
| | $ | 197,960,925 |
| | $ | (195,446,976 | ) | | $ | 2,514,118 |
| Balance at March 31, 2020 | 200 | | | 1 | | | 1,687,752 | | | 168 | | | 197,960,925 | | | (195,446,976) | | | 2,514,118 | |
Stock-based compensation expense | — |
| | — |
| | — |
| | — |
| | 128,862 |
| | — |
| | 128,862 |
| Stock-based compensation expense | — | | | — | | | — | | | — | | | 128,862 | | | — | | | 128,862 | |
Issuance of common stock under at the market offering | — |
| | — |
| | 2,092,541 |
| | 209 |
| | 3,689,765 |
| | — |
| | 3,689,974 |
| Issuance of common stock under at the market offering | — | | | — | | | 2,092,541 | | | 209 | | | 3,689,765 | | | — | | | 3,689,974 | |
Issuance of common stock under employee stock purchase plan | — |
| | — |
| | 4,364 |
| | 1 |
| | 7,605 |
| | — |
| | 7,606 |
| Issuance of common stock under employee stock purchase plan | — | | | — | | | 4,364 | | | 1 | | | 7,605 | | | — | | | 7,606 | |
Net loss | — |
| | — |
| | — |
| | — |
| | — |
| | (851,944 | ) | | (851,944 | ) | Net loss | — | | | — | | | — | | | — | | | — | | | (851,944) | | | (851,944) | |
Balance at June 30, 2020 | 200.00 |
| | $ | 1 |
| | 3,784,657 |
| | $ | 378 |
| | $ | 201,787,157 |
| | $ | (196,298,920 | ) | | $ | 5,488,616 |
| Balance at June 30, 2020 | 200 | | | 1 | | | 3,784,657 | | | 378 | | | 201,787,157 | | | (196,298,920) | | | 5,488,616 | |
Stock-based compensation expense | — |
| | — |
| | — |
| | — |
| | 140,269 |
| | — |
| | 140,269 |
| Stock-based compensation expense | — | | | — | | | — | | | — | | | 140,269 | | | — | | | 140,269 | |
Net loss | — |
| | — |
| | — |
| | — |
| | — |
| | (257,113 | ) | | (257,113 | ) | Net loss | — | | | — | | | — | | | — | | | — | | | (257,113) | | | (257,113) | |
Balance at September 30, 2020 | 200.00 |
| | $ | 1 |
| | 3,784,657 |
| | $ | 378 |
| | $ | 201,927,426 |
| | $ | (196,556,033 | ) | | $ | 5,371,772 |
| Balance at September 30, 2020 | 200 | | | $ | 1 | | | 3,784,657 | | | $ | 378 | | | $ | 201,927,426 | | | $ | (196,556,033) | | | $ | 5,371,772 | |
| | | | Series B Convertible Preferred Stock | | Common Stock | | Additional Paid-In Capital | | Accumulated Deficit | | Total |
| | | Number of Shares | | Amount | | Number of Shares | | Amount | |
Balance at December 31, 2020 | | Balance at December 31, 2020 | 200 | | | $ | 1 | | | 3,793,739 | | | $ | 379 | | | $ | 202,129,195 | | | $ | (196,881,800) | | | $ | 5,247,775 | |
Stock-based compensation expense | | Stock-based compensation expense | — | | | — | | | — | | | — | | | 68,863 | | | — | | | 68,863 | |
| Issuance of common stock under employee stock purchase plan | | Issuance of common stock under employee stock purchase plan | — | | | — | | | 2,408 | | | 1 | | | 4,196 | | | — | | | 4,197 | |
Net loss | | Net loss | — | | | — | | | — | | | — | | | — | | | (59,783) | | | (59,783) | |
Balance at March 31, 2021 | | Balance at March 31, 2021 | 200 | | | 1 | | | 3,796,147 | | | 380 | | | 202,202,254 | | | (196,941,583) | | | 5,261,052 | |
Stock-based compensation expense | | Stock-based compensation expense | — | | | — | | | — | | | — | | | 319,863 | | | — | | | 319,863 | |
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 employee stock purchase plan | | Issuance of common stock under employee stock purchase plan | — | | | — | | | 7,055 | | | 1 | | | 18,949 | | | — | | | 18,950 | |
Vesting of restricted stock under option plan | | Vesting of restricted stock under option plan | — | | | — | | | 13,911 | | | 3 | | | (3) | | | — | | | — | |
Net loss | | Net loss | — | | | — | | | — | | | — | | | — | | | (531,584) | | | (531,584) | |
Balance at June 30, 2021 | | Balance at June 30, 2021 | 200 | | | 1 | | | 5,024,794 | | | 505 | | | 206,307,790 | | | (197,473,167) | | | 8,835,129 | |
Stock-based compensation expense | | Stock-based compensation expense | — | | | — | | | — | | | — | | | 196,361 | | | — | | | 196,361 | |
Issuance of common stock under at the market offering | | Issuance of common stock under at the market offering | — | | | — | | | 1,549,024 | | | 154 | | | 15,804,956 | | | — | | | 15,805,110 | |
Issuance of common stock upon exercise of stock options | | Issuance of common stock upon exercise of stock options | — | | | — | | | 50,000 | | | 5 | | | 78,495 | | | — | | | 78,500 | |
Vesting of restricted stock under option plan | | Vesting of restricted stock under option plan | — | | | — | | | 10,877 | | | 1 | | | (1) | | | — | | | — | |
Net loss | | Net loss | — | | | — | | | — | | | — | | | — | | | (687,089) | | | (687,089) | |
Balance at September 30, 2021 | | Balance at September 30, 2021 | 200 | | | $ | 1 | | | 6,634,695 | | | $ | 665 | | | $ | 222,387,601 | | | $ | (198,160,256) | | | $ | 24,228,011 | |
The accompanying notes are an integral part of these interim financial statements.
NeuroMetrix, Inc.
Statements of Changes in Stockholders' Equity
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Series B – F Convertible Preferred Stock | | Common Stock | | Additional Paid-In Capital | | Accumulated Deficit | | Total |
| Number of Shares | | Amount | | Number of Shares | | Amount | | | |
Balance at December 31, 2018 | 17,513.63 |
| | $ | 18 |
| | 738,029 |
| | $ | 74 |
| | $ | 197,114,310 |
| | $ | (191,016,591 | ) | | $ | 6,097,811 |
|
Stock-based compensation expense | — |
| | — |
| | — |
| | — |
| | 44,093 |
| | — |
| | 44,093 |
|
Issuance of common stock upon conversion of preferred stock | (2,445.90 | ) | | (3 | ) | | 93,000 |
| | 9 |
| | (6 | ) | | — |
| | — |
|
Net income | — |
| | — |
| | — |
| | — |
| | — |
| | 2,050,507 |
| | 2,050,507 |
|
Balance at March 31, 2019 | 15,067.73 |
| | $ | 15 |
| | 831,029 |
| | $ | 83 |
| | $ | 197,158,397 |
| | $ | (188,966,084 | ) | | $ | 8,192,411 |
|
Stock-based compensation expense | — |
| | — |
| | — |
| | — |
| | 19,933 |
| | — |
| | 19,933 |
|
Issuance of common stock upon conversion of preferred stock | (3,813.00 | ) | | (4 | ) | | 144,981 |
| | 15 |
| | (11 | ) | | — |
| | — |
|
Issuance of common stock under employee stock purchase plan | — |
| | — |
| | 2,148 |
| | 1 |
| | 7,496 |
| | — |
| | 7,497 |
|
Net loss | — |
| | — |
| | — |
| | — |
| | — |
| | (3,362,191 | ) | | (3,362,191 | ) |
Balance at June 30, 2019 | 11,254.73 |
| | $ | 11 |
| | 978,158 |
| | $ | 99 |
| | $ | 197,185,815 |
| | $ | (192,328,275 | ) | | $ | 4,857,650 |
|
Stock-based compensation expense | — |
| | — |
| | — |
| | — |
| | 120,460 |
| | — |
| | 120,460 |
|
Net loss | — |
| | — |
| | — |
| | — |
| | — |
| | (1,404,600 | ) | | (1,404,600 | ) |
Balance at September 30, 2019 | 11,254.73 |
| | $ | 11 |
| | 978,158 |
| | $ | 99 |
| | $ | 197,306,275 |
| | $ | (193,732,875 | ) | | $ | 3,573,510 |
|
| | | | | | | | | | | | | |
The accompanying notes are an integral part of these interim financial statements.
NeuroMetrix, Inc.
Statements of Cash Flows
(Unaudited)
|
| | | | | | | |
| Nine Months Ended September 30, |
| 2020 | | 2019 |
Cash flows from operating activities: | |
| | |
|
Net loss | $ | (1,766,428 | ) | | $ | (2,716,284 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | |
|
Depreciation | 67,772 |
| | 98,166 |
|
Stock-based compensation | 413,178 |
| | 184,486 |
|
Settlement of compensation obligation | 43,751 |
| | — |
|
Impairment charge against right of use asset | 280,000 |
| | — |
|
Inventory provision | — |
| | 2,595,884 |
|
Changes in operating assets and liabilities: | |
| | |
|
Accounts receivable | (334,179 | ) | | 558,968 |
|
Inventories | 113,421 |
| | (357,673 | ) |
Collaboration receivable | 189,008 |
| | (1,174,092 | ) |
Prepaid expenses and other current and long-term assets | (23,621 | ) | | 189,092 |
|
Accounts payable | (533,302 | ) | | (659,538 | ) |
Accrued expenses and compensation | (694,668 | ) | | 115,752 |
|
Accrued product returns | (103,000 | ) | | (438,352 | ) |
Deferred collaboration income | — |
| | (1,956,522 | ) |
Net cash used in operating activities | (2,348,068 | ) | | (3,560,113 | ) |
| | | |
Cash flows from investing activities: | |
| | |
|
Purchases of fixed assets | — |
| | (41,177 | ) |
Net cash used in investing activities | — |
| | (41,177 | ) |
| | | |
Cash flows from financing activities: | |
| | |
|
Net proceeds from issuance of stock | 4,151,037 |
| | 7,497 |
|
Proceeds from debt issuance | 773,200 |
| | — |
|
Repayment of debt | (773,200 | ) | | — |
|
Net cash provided by financing activities | 4,151,037 |
| | 7,497 |
|
| | | |
Net increase (decrease) in cash and cash equivalents | 1,802,969 |
| | (3,593,793 | ) |
Cash and cash equivalents, beginning of period | 3,126,206 |
| | 6,780,429 |
|
Cash and cash equivalents, end of period | $ | 4,929,175 |
| | $ | 3,186,636 |
|
Supplemental disclosure of cash flow information: | |
| | |
|
Common stock issued to settle employee compensation | $ | 43,751 |
| | $ | — |
|
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2021 | | 2020 |
Cash flows from operating activities: | | | |
Net loss | $ | (1,278,456) | | | $ | (1,766,428) | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | |
Depreciation | 103,594 | | | 67,772 | |
Stock-based compensation | 585,087 | | | 413,178 | |
Settlement of compensation obligation | — | | | 43,751 | |
Impairment charge against right of use asset | 126,748 | | | 280,000 | |
| | | |
Changes in operating assets and liabilities: | | | |
Accounts receivable | (305,469) | | | (334,179) | |
Inventories | 54,331 | | | 113,421 | |
Collaboration receivable | — | | | 189,008 | |
Prepaid expenses, other current and long-term assets and lease obligation | (612,661) | | | (23,621) | |
Accounts payable | 174,653 | | | (533,302) | |
Accrued expenses and compensation | 89,931 | | | (694,668) | |
Accrued product returns | (499,000) | | | (103,000) | |
| | | |
Net cash used in operating activities | (1,561,242) | | | (2,348,068) | |
| | | |
Cash flows from investing activities: | | | |
Purchases of fixed assets | (125,039) | | | — | |
Net cash used in investing activities | (125,039) | | | — | |
| | | |
Cash flows from financing activities: | | | |
Net proceeds from issuance of stock | 19,673,605 | | | 4,151,037 | |
Proceeds from debt issuance | — | | | 773,200 | |
Repayment of debt | — | | | (773,200) | |
Net cash provided by financing activities | 19,673,605 | | | 4,151,037 | |
| | | |
Net increase in cash and cash equivalents | 17,987,324 | | | 1,802,969 | |
Cash and cash equivalents, beginning of period | 5,226,213 | | | 3,126,206 | |
Cash and cash equivalents, end of period | $ | 23,213,537 | | | $ | 4,929,175 | |
Supplemental disclosure of cash flow information: | | | |
| | | |
| | | |
Common stock issued to settle employee compensation | $ | — | | | $ | 43,751 | |
The accompanying notes are an integral part of these interim financial statements.
NeuroMetrix, Inc.
Notes to Unaudited Financial Statements
September 30, 20202021
| |
1. | Business and Basis of Presentation |
1.Business and Basis of Presentation
Our Business-An Overview
NeuroMetrix, Inc., or (the Company) is an innovation-driven company focused on the Company, is a leading developerdevelopment and manufacturerglobal commercialization of diagnostic and therapeutic neurostimulation basednon-invasive medical devices thatfor the diagnosis and treatment of pain and neurological disorders. Revenues are used throughoutderived from the world.sale of medical devices and after-market consumable products and accessories. The Company’s products are cleared by the U.S. Food and Drug Administration (FDA) and regulators in foreign jurisdictions where appropriate. The Company has three FDA cleared commercial products. DPNCheck®DPNCheck® is a point-of-care test that is used to evaluate peripheral neuropathies. ADVANCE™ is a point-of-carediagnostic device that provides rapid, point-of-care detection of peripheral neuropathies. ADVANCE® is a diagnostic device that provides automated, in-office nerve conduction studies as an aid in diagnosing and evaluating patients suspectedfor the evaluation of having focal or systemic neuropathies. Quell® 2.0 is a wearable mobile app enabled, neurostimulation device indicated for symptomatic relief and management of lower extremity chronic pain andthat is available OTC. The Company maintains an active, industry-leading R&D program.over-the-counter.
The accompanying financial statements have been prepared on a basis which assumes that the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company has reported recurring losses from operations and negative cash flows from operating activities. At September 30, 2020, the Company had an accumulated deficit of $196.6 million. These factors raise substantial doubt about the Company’s ability to continue as a going concern for the one-year period from the date of issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company held cash and cash equivalents of $4.9 million as of September 30, 2020. The Company believes that these resources and the cash to be generated from future product sales will be sufficient to meet its projected operating requirements into the fourth quarter of 2021. Accordingly, the Company may need to raise additional funds to support its operating and capital needs in the fourth quarter of 2021 and beyond.
The Company continues to face challenges and uncertainties. Among these uncertainties is the future effect on the Company's business of the COVID-19 pandemic which has depressed sales of the Company's products. As a result, the Company’s available capital resources may be consumed more rapidly than currently expected due to (a) decreases in sales of the Company’s products, including decreases in customer orders related to the COVID-19 pandemic, and the uncertainty of future revenues from new products; (b) the effect of the COVID-19 pandemic on the Company's ability to obtain parts and materials from the Company's suppliers while continuing to staff critical production and fulfillment functions; (c) changes the Company may make to the business that affect ongoing operating expenses; (d) changes the Company may make in its business strategy; (e) regulatory developments affecting the Company’s existing products; (f) changes the Company may make in its research and development spending plans; and (g) other items affecting the Company’s forecasted level of expenditures and use of cash resources.
The Company may attempt to obtain additional funding through public or private financing, collaborative arrangements with strategic partners, or through additional credit lines or other debt financing sources to increase the funds available to fund operations. However, the Company may not be able to secure such funding in a timely manner or on favorable terms, if at all. Furthermore, if the Company issues equity or debt securities to raise additional funds, its existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of the Company’s existing stockholders. If the Company raises additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to its potential products or proprietary technologies, or grant licenses on terms that are not favorable to the Company. Without additional funds, the Company may be forced to delay, scale back or eliminate some of its sales and marketing efforts, research and development activities, or other operations and potentially delay product development in an effort to provide sufficient funds to continue its operations. If any of these events occurs, the Company’s ability to achieve its development and commercialization goals would be adversely affected.
Unaudited Interim Financial Statements
The accompanying unaudited balance sheet as of September 30, 2020,2021, unaudited statements of operations, changes in stockholders' equity for the quarters and nine months ended September 30, 20202021 and 20192020 and cash flows for the nine months ended September 30, 20202021 and 20192020 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, 20192020 has been derived from audited financial statements prepared at that date but 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 nine months ended September 30, 20202021 are not necessarily indicative of the results that may be expected for the year ending December 31, 20202021 or any other period. These financial statements and notes should be read in conjunction with the financial statements for the year ended December 31, 20192020 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, 202029, 2021 (File No. 001-33351), or the Company’s 2019 Form 10-K..
Revenues
Revenues include product sales, net of estimated returns. Revenue is measured as the amount of consideration the Company expects to receive in exchange for product transferred. Revenue is recognized when contractual performance obligations have been satisfied and control of the product has been transferred to the customer. In most cases, the Company has a single product delivery performance obligation. Accrued product returns are estimated based on historical data and evaluation of current information.
Accounts receivable are recorded at the amount the Company expects to collect, net of the allowance for doubtful accounts which representsreceivable. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses.losses based on customer past payment history, product usage activity, and recent communications with the customer. Individual customer balances which are over 90 days past due are reviewed individually for collectability and written-off when recovery is not probable. Allowance for doubtful accounts was $70,000$25,000 as of September 30, 20202021 and December 31, 2019.2020.
ForOne customer accounted for 25% and 29% of total revenues in the quartersquarter and nine months ended September 30, 2020 and 2019, three2021, respectively. Three customers accounted for 47% and two customers accounted for 34% of total revenues in the quarter and one customer accounted for 19% of total revenues, respectively. For the nine months ended September 30, 2020, and 2019, tworespectively. Two customers accounted for 34% and one customer accounted for 20% of total revenues, respectively. Three customers accounted for 54% and two customers accounted for 42%50% of accounts receivable as of September 30, 20202021 and December 31, 2019, respectively.2020.
Collaboration Income
Collaboration Income is recognized within Other Income when contractual performance obligations, outside the ordinary activities of the Company, have been satisfied and control has been transferred to a collaboration partner. Collaboration Income for each performance obligation is based on the fair value of such performance obligation relative to the total fair value of all performance obligations multiplied by the overall transaction price. A deferred collaboration income liability is recorded when payments are received prior to satisfaction of performance obligations. A collaboration receivable is recorded when amounts are owed to the Company under the collaboration agreements and related support services. The Company recognized Collaboration income net of costs, within Other income in the Statement of Operations of zero and $7,116,667, for the nine months ended September 30, 2020 and 2019, respectively.
Stock-based Compensation
Total compensation cost related to non-vested awards not yet recognized at September 30, 20202021 was $136,569.$170,151. The total compensation costs are expected to be recognized over a weighted-average period of 0.31.3 years.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during reporting periods. Actual results could differ from those estimates.
2. Comprehensive Loss
| |
2. | Comprehensive Income (Loss) |
For the quarters and nine months ended September 30, 20202021 and 2019,2020, the Company had no components of other comprehensive income (loss)loss other than net income (loss)loss itself.
| |
3. | Net Loss Per Common Share |
3. Net Loss Per Common Share
Basic and dilutive net income (loss)loss per common share were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarters Ended September 30, | | Nine Months Ended September 30, | | |
| 2021 | | 2020 | | 2021 | | 2020 | | | | |
Net loss applicable to common stockholders | $ | (687,089) | | | $ | (257,113) | | | $ | (1,278,456) | | | $ | (1,766,428) | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Weighted average number of common shares outstanding, basic and dilutive | 5,818,449 | | | 3,784,657 | | | 4,597,580 | | | 2,755,903 | | | | | |
| | | | | | | | | | | |
Net loss per common share applicable to common stockholders, basic and diluted | $ | (0.12) | | | $ | (0.07) | | | $ | (0.28) | | | $ | (0.64) | | | | | |
| | | | | | | | | | | |
|
| | | | | | | | | | | | | | | |
| Quarters Ended September 30, | | Nine Months Ended September 30, |
| 2020 | | 2019 | | 2020 | | 2019 |
Net loss applicable to common stockholders | $ | (257,113 | ) | | $ | (1,404,600 | ) | | $ | (1,766,428 | ) | | $ | (2,716,284 | ) |
| | | | | | | |
Weighted average number of common shares outstanding, basic | 3,784,657 |
| | 978,175 |
| | 2,755,903 |
| | 886,609 |
|
Dilutive convertible preferred stock | — |
| | — |
| | — |
| | — |
|
Weighted average number of common shares outstanding, dilutive | 3,784,657 |
| | 978,175 |
| | 2,755,903 |
| | 886,609 |
|
| | | | | | | |
Net loss per common share applicable to common stockholders, basic and diluted | $ | (0.07 | ) | | $ | (1.44 | ) | | $ | (0.64 | ) | | $ | (3.06 | ) |
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 September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
Options | 533,393 | | | 162,373 | | | 447,708 | | | 163,303 | |
Warrants | — | | | — | | | — | | | 23,040 | |
Convertible preferred stock | 62 | | | 62 | | | 62 | | | 62 | |
Total | 533,455 | | | 162,435 | | | 447,770 | | | 186,405 | |
|
| | | | | | | | | | | |
| Quarters Ended September 30, | | Nine Months Ended September 30, |
| 2020 | | 2019 | | 2020 | | 2019 |
Options | 162,373 |
| | 40,396 |
| | 163,303 |
| | 45,777 |
|
Warrants | — |
| | 44,221 |
| | 23,040 |
| | 45,359 |
|
Convertible preferred stock | 62 |
| | 420,395 |
| | 62 |
| | 510,830 |
|
Total | 162,435 |
| | 505,012 |
| | 186,405 |
| | 601,966 |
|
4. Inventories
Inventories consist of the following:
|
| | | | | | | |
| September 30, 2020 | | December 31, 2019 |
Purchased components | $ | 690,643 |
| | $ | 720,209 |
|
Finished goods | 359,650 |
| | 443,505 |
|
| $ | 1,050,293 |
| | $ | 1,163,714 |
|
| | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
Purchased components | $ | 728,225 | | | $ | 716,848 | |
| | | |
Finished goods | 268,726 | | | 334,434 | |
| $ | 996,951 | | | $ | 1,051,282 | |
| |
5. | Accrued Expenses and Compensation |
5. Accrued Expenses and Compensation
Accrued expenses and compensation consist of the following:
| | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
Professional services | $ | 209,000 | | | $ | 343,000 | |
Compensation | 494,361 | | | 49,837 | |
Advertising and promotion | 11,000 | | | 31,000 | |
Warranty | 33,100 | | | 49,600 | |
Technology fees | — | | | 450,000 | |
Leasehold | 60,000 | | | — | |
Sales tax | 111,984 | | | 24,493 | |
Other | 108,928 | | | 50,512 | |
| | | |
| $ | 1,028,373 | | | $ | 998,442 | |
|
| | | | | | | |
| September 30, 2020 | | December 31, 2019 |
Technology fees | $ | 450,000 |
| | $ | 450,000 |
|
Professional services | 291,000 |
| | 454,000 |
|
Compensation | 109,896 |
| | 62,322 |
|
Advertising and promotion | 6,000 |
| | 68,000 |
|
Warranty | 62,200 |
| | 75,300 |
|
Other | 92,132 |
| | 333,952 |
|
| $ | 1,011,228 |
| | $ | 1,443,574 |
|
6. Operating Leases
The Company's lease on its Woburn, Massachusetts corporate office and manufacturing facilities (the “Woburn Lease”) extends through September 2025 with a monthly base rent of $13,846 and a 5-year extension option. The Company's lease on its former corporate office in Waltham, Massachusetts facilities, now inactive and offered for sublet,(the "Waltham Lease") extends through February 2022 with an average monthly base rent of $41,074 and a 5-year extension option. At September 30, 2020, an impairment reserveA letter of $400,000 reducedcredit in the rightamount of use asset$226,731, secured by the Company's cash balances, was issued by a bank in favor of the Waltham Lease landlord. On August 15, 2021 the Company sublet the Waltham facility to a third party for Waltham idle facility costs. The impairment reserve was increased duringa monthly base rent of $20,929 for the remaining lease term. For the quarter and nine months ended September 30, 2020 by a charge2021 the company recorded sublet income totaling $34,560 within operating expenses on the Company's Statement of $280,000Operations. The Company had previously written off the value of its right-to-use asset in the Waltham facility. The impairment charges recorded within the Company's Statement of Operations as follows: $98,000 within researchfor the quarters ended September 30, 2021 and development, $56,000 within sales2020 were 0 and marketing,$76,000, respectively, and $126,000 within general$126,748 and administrative.$280,000 for the nine months ended September 30, 2021 and 2020, respectively.
Future minimum lease payments under non-cancellable operating leases as of September 30, 20202021 are as follows: | | | | | | | | |
| | |
| | |
2021 | | $ | 163,790 | |
2022 | | 247,347 | |
2023 | | 165,785 | |
2024 | | 165,785 | |
2025 | | 117,431 | |
Total minimum lease payments | | $ | 860,138 | |
| | |
Weighted-average discount rate, 14.7% | | $ | 185,822 | |
Lease obligation, current portion | | 345,147 | |
Lease obligation, net of current portion | | 329,169 | |
| | $ | 860,138 | |
|
| | | | |
2020 | | 160,797 |
|
2021 | | 653,164 |
|
2022 | | 247,347 |
|
2023 | | 165,785 |
|
2024 | | 165,785 |
|
2025 | | 117,431 |
|
Total minimum lease payments | | $ | 1,510,309 |
|
| | |
Weighted-average discount rate, 14.7% | | $ | 331,627 |
|
Lease obligation, current portion | | 596,779 |
|
Lease obligation, net of current portion | | 581,903 |
|
| | $ | 1,510,309 |
|
Total recorded rent expense was $166,905$18,932 and $166,025,$166,905, for the quarters ended September 30, 20202021 and 2019,2020, respectively. Total recorded rent expense was $500,713$243,289 and $498,073,$500,713, for the nine months ended September 30, 20202021 and 2019,2020, respectively. The Company records rent expense on its facility leases on a straight-line basis over the lease term. Weighted average remaining operating lease term was 3.12.9 years as of September 30, 2020.2021.
In the second quarter of 2019, the Company was restructured to reduce operating costs and improve efficiency. Operations were consolidated in a single location, headcount was reduced, and excess inventory was written down to net realizable value. Total 2019 restructuring charges were $2.5 million. During 2020 revised estimates of idle facility costs at the Company's Waltham location resulted in impairment charges in the quarter and nine months ended September 30, 2020 of $76,000 and $280,000, respectively. The impairment reserve against the right to use asset was $400,000 at September 30, 2020.
7. Fair Value Measurements
The obligations relating to the business restructuring outstanding as of September 30, 2020 are presented below. |
| | | | |
| | September 30, 2020 |
Severance obligations: | | |
Provision | | $ | 224,773 |
|
Amounts paid out | | (224,773 | ) |
Total | | — |
|
Relocation costs: | | |
Provision | | 100,000 |
|
Amounts paid out | | (100,000 | ) |
Total | | — |
|
Impairment charge for idle facility | | 680,000 |
|
Amounts paid out | | (280,000 | ) |
Total | | 400,000 |
|
| | |
Balance - September 30, 2020 | | $ | 400,000 |
|
| |
8. | 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 September 30, 2020 Using | | | | Fair Value Measurements at September 30, 2021 Using |
| September 30, 2020 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | September 30, 2021 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets: | |
| | |
| | |
| | |
| Assets: | | | | | | | |
Cash equivalents | $ | 2,159,475 |
| | $ | 2,159,475 |
| | $ | — |
| | $ | — |
| Cash equivalents | $ | 20,453,185 | | | $ | 20,453,185 | | | $ | — | | | $ | — | |
Total | $ | 2,159,475 |
| | $ | 2,159,475 |
| | $ | — |
| | $ | — |
| Total | $ | 20,453,185 | | | $ | 20,453,185 | | | $ | — | | | $ | — | |
|
| | | | | | | | | | | | | | | |
| | | Fair Value Measurements at December 31, 2019 Using |
| December 31, 2019 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets: | |
| | |
| | |
| | |
|
Cash equivalents | $ | 698,807 |
| | $ | 698,807 |
| | $ | — |
| | $ | — |
|
Total | $ | 698,807 |
| | $ | 698,807 |
| | $ | — |
| | $ | — |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Fair Value Measurements at December 31, 2020 Using |
| December 31, 2020 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Assets: | | | | | | | |
Cash equivalents | $ | 2,374,216 | | | $ | 2,374,216 | | | $ | — | | | $ | — | |
Total | $ | 2,374,216 | | | $ | 2,374,216 | | | $ | — | | | $ | — | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| |
9. | Credit Facility and Debt |
The Company's Loan and Security Agreement (the “Credit Facility”) with a bank expired AprilAs of September 30, 2020 and was not renewed. The Credit Facility had previously supported letters of credit in the amount of $226,731 issued in favor of the Company's landlords. These letters of credit remain outstanding and are secured by2021, the Company's cash balances.equivalents consisted of money market accounts.
In April 2020 the Company received a loan of $773,200 under the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act and fully repaid the loan in May 2020.
8. Stockholders’ Equity
Preferred stock and convertible preferred stock consist of the following:
|
| | | | | | | |
| September 30, 2020 | | December 31, 2019 |
Preferred stock, $0.001 par value; 5,000,000 shares authorized at September 30, 2020 and December 31, 2019; no shares issued and outstanding at September 30, 2020 and December 31, 2019 | $ | — |
| | $ | — |
|
Series B convertible preferred stock, $0.001 par value; 147,000 shares designated at September 30, 2020 and December 31, 2019; 200 shares issued and outstanding at September 30, 2020 and December 31, 2019 | $ | 1 |
| | $ | 1 |
|
Series D convertible preferred stock, $0.001 par value; 21,300 shares designated at September 30, 2020 and December 31, 2019; no shares issued and outstanding at September 30, 2020 and December 31, 2019 | $ | — |
| | $ | — |
|
Series E convertible preferred stock, $0.001 par value; 7,000 shares designated at September 30, 2020 and December 31, 2019; no shares issued and outstanding at September 30, 2020 and December 31, 2019 | $ | — |
| | $ | — |
|
Series F convertible preferred stock, $0.001 par value; 10,621 shares designated at September 30, 2020 and December 31, 2019; no shares issued and outstanding at September 30, 2020 and December 31, 2019 | $ | — |
| | $ | — |
|
| | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
Preferred stock, $0.001 par value; 5,000,000 shares authorized at September 30, 2021 and December 31, 2020; no shares issued and outstanding at September 30, 2021 and December 31, 2020 | $ | — | | | $ | — | |
Series B convertible preferred stock, $0.001 par value; 147,000 shares designated at September 30, 2021 and December 31, 2020; 200 shares issued and outstanding at September 30, 2021 and December 31, 2020 | $ | 1 | | | $ | 1 | |
| | | |
| | | |
| | | |
20202021 equity activity
In February 2020,January 2021, the Company entered into an At Market Issuance Sales Agreement (the "Agreement") with respect to an at-the-market offering program ("ATM program"), under which the Company may offer and sell, from time to time at its sole discretion,issued 2,408 shares of itsfully vested common stock, par value $0.0001 per share (the "Common Stock"("common stock"), having an aggregate offering pricewith a value of up to $4,482,000 (the "Placement Shares"). The issuance and sale of the Placement Shares by the Company under the Agreement will be made$4,197 pursuant to the Company's effective "shelf" registration statement2010 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 September 30, 2021, 24,788 shares were vested, 7,318 shares were forfeited in lieu of paying withholding taxes on Form S-3. the vesting of the restricted stock and 10,702 shares remain restricted.
In June 2021, the Company issued 7,055 shares of fully vested common stock with a value of $18,950 pursuant to the Company's 2010 Employee Stock Purchase Plan.
In August 2021, the Company issued 50,000 shares of fully vested common stock with a value of $78,500 upon the exercise of stock options pursuant to the Company's 2004 Stock Option Plan.
During the nine months ended September 30, 2020, 2,348,6192021, the Company issued 2,756,705 shares of its common stock, were issued pursuant to the Agreementunder an at-the-market offering program ("ATM Agreement") for net proceeds of $4,143,431.$19,571,958. The ATM Agreement was entered into in 2020 and permits the sale and issuance of the Company's common stock subject to regulatory limitations imposed by the Securities and Exchange Commission and pursuant to a "shelf" registration statement on Form S-3.
2020 equity activity
In March 2020, the Company issued 31,000 shares of fully vested common stock with a value of $43,751 pursuant to a Separation Agreement between the Company and an employee. The shares issued reflected the $1.41 closing price of the Company's common stock as reported on the Nasdaq Capital Market on March 11, 2020.
In June 2020, the Company issued 4,364 shares of fully vested common stock with a value of $7,606 pursuant to the Company's 2010 Employee Stock Purchase Plan.
2019 equity activity
During the nine months ended September 30, 2019, 2,998.22020, 2,348,619 shares of the Company's Series D Preferred Stock were converted into a total of 114,000 shares of Common Stock and 3,260.70 shares of the Company's Series E Preferred Stock were converted into a total of 123,981 shares of Common Stock.
On November 18, 2019, the Company effected a 1-for-10 reverse stock split of its Common Stock, or the Reverse Stock Split. The par value and other terms of the common stock were not affected byissued pursuant to the Reverse Stock Split. Share, per share, and stock option amountsATM Agreement for all periods presented within the financial statements contained in the Quarterly Report on Form 10-Q, including the December 31, 2019 Balance Sheet amounts for Common Stock and additional paid-in capital, have been retroactively adjusted to reflect the Reverse Stock Split.
net proceeds of $4,143,431.
12. Commitments and Contingencies
The previously reported investigation by the Federal Trade Commission (the “Commission”) regarding Quell® advertising was settled in March 2020. The Company did not admit to any of the Commission's allegations, agreed to certain modifications of Quell advertising claims, and pledged to pay to the Commission future commercial milestone payments, if and when received, pursuant to a collaboration agreement with a third party.
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.
Overview
NeuroMetrix develops and commercializes health care products that utilize non-invasive neurostimulation and digital medicine.neurostimulation. Our core expertise in biomedical engineering has been refined over two decades of designing, building and marketing medical devices that stimulate nerves and analyze nerve response for diagnostic and therapeutic purposes. We created the market for point-of-care nerve testing and were first to market with sophisticated wearable technology for symptomatic relief of chronic pain. Our business is fully integrated with in-house capabilities spanning research and development, manufacturing, regulatory affairs and compliance, sales and marketing, product fulfillment and customer support. We derive revenues from the sale of medical devices and after-market consumable products and accessories. Our products are 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. We have two principal product lines:categories:
•Point-of-care neuropathy diagnostic tests
•Wearable neurostimulation devices
Peripheral neuropathies, also called polyneuropathies, are diseases of the peripheral nerves. They affect about 10% of adults in the United States, with the prevalence rising to 25-50% among individuals 65 years and older. Peripheral neuropathies are associated with loss of sensation, pain, increased risk of falling, weakness, and other complications. People with peripheral neuropathies generally have a diminished quality of life, poor overall health and higher mortality. The most common specific cause of peripheral neuropathies, accounting for about one-third of cases, is diabetes. Diabetes is a worldwide epidemic with an estimated affected population of over 400 million people. Within the United States there are over 30 million people with diabetes and another 80 million people with pre-diabetes. The annual direct cost of treating diabetes in the United States exceeds $100 billion. Although there are dangerous acute manifestations of diabetes, the primary burden of the disease is in its long-term complications, which include cardiovascular disease, nerve disease and resulting conditions such as foot ulcers which may require amputation, eye disease leading to blindness, and kidney failure. The most common long-term complication of diabetes, affecting over 50% of the diabetic population, is nerve disease orperipheral neuropathy. Diabetic peripheral neuropathy (DPN) is the primary trigger for diabetic foot ulcers, which may progress to the point of requiring amputation. People with diabetes have a 15-25% lifetime risk of foot ulcers and approximately 15% of foot ulcers lead to amputation. Foot ulcers are the most expensive complication of diabetes with a typical cost of $5,000 to $50,000 per episode. In addition, between 16% and 26% of people with diabetes suffer from chronic pain in the feet and lower legs.
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 DPNperipheral 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 nerve disease,neuropathies, including DPN. It addresses an important medical need and is particularly effective in screening large populations. DPNCheck has been validated in numerous clinical studies. We are investing R&D resources in the next generation technology to enhance the user experience, improve manufacturing, and restrict the potential use of non-compliant biosensors. Release of the new DPNCheck, forecast for the second half of 2021, may also provide the opportunity for customer upgrades and expansion of product margins.
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. Pain signals continue to be transmitted in the nervous system over extended periods of time often leadingChronic pain can also lead to other health problems.
These can include fatigue, sleep disturbance decreased appetite, and mood changes which cause difficulty in carrying out important activities and canmay contribute to disability and despair. In general, chronic pain cannot be cured. Treatment of chronic pain is focused on reducing pain and improving function. The goal is effective pain management.
Chronic pain affects overnearly 100 million adults in the United States and more than 1.5 billion people worldwide. The estimated incremental impact of chronic pain on health care costs in the United States is over $250 billion per year and lost productivity is estimated to exceed $300 billion per year. The most common approach to chronic pain management is pain medication. This includes over-the-counter (OTC) internal and external analgesics as well as prescription pain medications, both non-opioid and opioid.opioids. 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. Increasingly, restrictions are being imposed on access to prescription opioids. Reflecting the complexity of chronic pain and the difficulty in treating it, we believe that inadequate relief leads 25% to 50% of pain sufferers to seek alternatives to prescription pain medications. These alternatives include nutraceuticals, acupuncture, chiropractic care, non-prescription analgesics, electrical stimulators, braces, sleeves, pads and other items. In total these pain relief products and services account for approximately $20 billion in annual out-of-pocket spending in the United States.
Nerve stimulation is a long-established category of treatment for chronic pain. This treatment approach is available through implantable spinal corddevices which have both surgical and ongoing risks, such as migration of the implanted nerve stimulation requiring surgery with its attendant risks.leads. Non-invasive approaches involving transcutaneous electrical nerve stimulation (TENS) have achieved limited efficacy in practice due to devicepower limitations, ineffective dosing and low patient adherence. We believe that our Quell wearable technology for chronic pain is designed to address many of the limitations of traditional TENS.
Quell is our wearable TENS device for knee, foot and leg pain that is available over-the-counter and is sold primarily via our e-commerce platform, www.QuellRelief.com. It can be used during the day while active and at night while sleeping. Users can personalize and manage therapy discreetly via the mobile app for iPhone and Android smartphones. Quell is also a pain management solution with pain, activity, and gait tracking. It is covered by 15 U.S. patents and is currently employed in two clinical studies funded by the National Institutes of Health (NIH) addressing fibromyalgia and chemotherapy induced peripheral neuropathy (CIPN). Over the past year we restructured the Quell commercial model to achieve a positive net operating contribution after direct costs. As we gain confidence with our core commercial model and demonstrate our capability to promote Quell in a cost-efficient manner, our focus will shift to expanding the Quell user group. This may involve disease-specific application of this technology in areas related to our current clinical study program.
Both DPNCheck and Quell are sophisticated neurotechnology products that are unique in their markets. Our goal for both products is the same: to optimize market positioning and financial performance for the benefit of our shareholders. We also continue to supply consumables for ADVANCE, our legacy nerve conduction testing system.
Results of Operations
Comparison of Quarters Ended September 30, 20202021 and 20192020
Revenues
|
| | | | | | | | | | | | | | |
| Quarters Ended September 30, | | |
| 2020 | | 2019 | | Change | | % Change |
| (in thousands) | | |
Revenues | $ | 2,036.2 |
| | $ | 2,088.0 |
| | $ | (51.8 | ) | | (2.5 | )% |
| | | | | | | | | | | | | | | | | | | | | | | |
| Quarters Ended September 30, | | |
| 2021 | | 2020 | | Change | | % Change |
| (in thousands) | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Revenues | $ | 2,064.4 | | | $ | 2,036.2 | | | $ | 28.2 | | | 1.4 | % |
Revenues include sales of Quell, DPNCheckour wearable technologies for chronic pain and ADVANCEour nerve conduction technologies to physician offices, clinics, hospitals, other healthcare providers and insurers, as well as domestic and international distributors. Revenues comprise sales of medical devices as well as aftermarket electrodes and other supplies. Revenues were approximately $2.0 million during the third quarters of 2020 and 2019. Revenues during the quarter ending September 30, 2020 were adversely affected by the economic effects of the COVID-19 pandemic. A recovery trend in customer orders and shipment volume was observed beginning late in the second quarter which continued during the third quarter of 2021 and 2020. This trend particularly benefited DPNCheck sales into U.S. Medicare Advantage accounts.
Cost of Revenues and Gross Profit
| | | Quarters Ended September 30, | | | | Quarters Ended September 30, | | |
| 2020 | | 2019 | | Change | | % Change | | 2021 | | 2020 | | Change | | % Change |
| (in thousands) | | | | (in thousands) | | |
Cost of revenues | $ | 537.6 |
| | $ | 914.3 |
| | $ | (376.7 | ) | | (41.2 | )% | Cost of revenues | $ | 619.8 | | | $ | 537.6 | | | $ | 82.2 | | | 15.3 | % |
| | | | | | | | | | | | | | |
Gross profit | $ | 1,498.6 |
| | $ | 1,173.7 |
| | $ | 324.9 |
| | 27.7 | % | Gross profit | $ | 1,444.6 | | | $ | 1,498.6 | | | $ | (54.0) | | | (3.6) | % |
Gross margin was 73.6%70.0% in the third quarter of 20202021 versus 56.2%73.6% in the same period in the prior year. The margin improvementdecline in 20202021 was due to improved profitability of Quell sales and increased weighting of DPNCheck within total revenue.inventory charges related to sourcing components parts for our wearable neurostimulation device.
Operating Expenses
| | | Quarters Ended September 30 | | | | Quarters Ended September 30, | | |
| 2020 | | 2019 | | Change | | % Change | | 2021 | | 2020 | | Change | | % Change |
| (in thousands) | | | | (in thousands) | | |
Operating expenses: | |
| | |
| | |
| | |
| Operating expenses: | | | | | | | |
Research and development | $ | 652.7 |
| | $ | 475.1 |
| | $ | 177.6 |
| | 37.4 | % | Research and development | $ | 724.6 | | | $ | 652.7 | | | $ | 71.9 | | | 11.0 | % |
Sales and marketing | 340.9 |
| | 647.7 |
| | (306.8 | ) | | (47.4 | )% | Sales and marketing | 442.2 | | | 340.9 | | | 101.3 | | | 29.7 | % |
General and administrative | 762.9 |
| | 1,462.9 |
| | (700.0 | ) | | (47.9 | )% | General and administrative | 965.7 | | | 762.9 | | | 202.8 | | | 26.6 | % |
Total operating expenses | $ | 1,756.5 |
| | $ | 2,585.7 |
| | $ | (829.2 | ) | | (32.1 | )% | Total operating expenses | $ | 2,132.5 | | | $ | 1,756.5 | | | $ | 376.0 | | | 21.4 | % |
Research and Development
Research and development expense in the third quarter of 20202021 increased by 37.4%11.0% from the same period in the prior year due to increased spendingincreases of $144,000 on$117,000 in clinical and development costs and $29,000 in personnel related costs offset by a decrease of $33,000 in consulting costs and $74,000 on clinical costs and fees. Personnel related costs decreased by $28,000 and$49,000 in facility and supply costs decreased by $10,000.depreciation costs.
Sales and Marketing
Sales and marketing expense in the third quarter of 2020 decreased2021 increased by 47.4%29.7% from the same period in the prior year due to a $141,000 reductionan increase of $165,000 in personnel related costs offset by decreases of $27,000 in facility and depreciation costs, $32,000 in advertising spending and a $26,000 reduction$5,000 in consulting spending. In addition, personnel related costs decreased by $130,000 and facility and supply costs decreased by $10,000.costs.
General and Administrative
General and administrative expense in the third quarter of 2020 decreased2021 increased by 47.9%26.6% from the same period in the prior year due to a reductionincreases of $85,000$29,000 in personnel relatedconsulting costs, a reduction of $393,000$38,000 in outside professional service costs, primarily legal, a decrease of $165,000$41,000 in consulting spendingsales tax, insurance and aother related costs and $142,000 in personnel costs. A reduction ofin facility and supply costs of $57,000.$55,000 offset the increases.
Other income
| | | | | | | | | | | | | | | | | | | | | | | |
| Quarters Ended September 30, | | |
| 2021 | | 2020 | | Change | | % Change |
| (in thousands) | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Other income | $ | 0.9 | | | $ | 0.8 | | | $ | 0.1 | | | 12.5 | % |
|
| | | | | | | | | | | | | | |
| Quarters Ended September 30, | | |
| 2020 | | 2019 | | Change | | % Change |
| (in thousands) | | |
| |
| | |
| | |
| | |
|
Other income | $ | 0.8 |
| | $ | 7.5 |
| | $ | (6.7 | ) | | (89.3 | )% |
Other income primarily includes interest income.
Comparison of Nine Months Ended September 30, 20202021 and 20192020
Revenues
|
| | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | |
| 2020 | | 2019 | | Change | | % Change |
| (in thousands) | | |
Revenues | $ | 5,568.2 |
| | $ | 7,565.6 |
| | $ | (1,997.4 | ) | | (26.4 | )% |
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | |
| 2021 | | 2020 | | Change | | % Change |
| (in thousands) | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Revenues | $ | 6,433.3 | | | $ | 5,568.2 | | | $ | 865.1 | | | 15.5 | % |
Revenues include sales of Quell, DPNCheckour wearable technologies for chronic pain and ADVANCEour nerve conduction technologies to physician offices, clinics, hospitals, other healthcare providers and insurers, as well as domestic and international distributors. Revenues comprise sales of medical devices as well as aftermarket electrodes and other supplies. Revenues in the nine months ended September 30, 2021 were $5.6 million and $7.6 million duringapproximately $865,000 higher than the nine months ended September 30, 2020, and 2019, respectively. Revenues during the nine month period ended September 30, 2020 werewhich was adversely affected by the economic effects of the COVID-19 pandemic. A recovery trend in customer orders and shipment volume was observed beginning late in the second quarter which continued during the third quarter of 2020. This trend particularly benefited DPNCheck sales in U.S. Medicare Advantage accounts.
Cost of Revenues and Gross Profit
| | | Nine Months Ended September 30, | | | | Nine Months Ended September 30, | | |
| 2020 | | 2019 | | Change | | % Change | | 2021 | | 2020 | | Change | | % Change |
| (in thousands) | | | | (in thousands) | | |
Cost of revenues | $ | 1,652.9 |
| | $ | 6,382.3 |
| | $ | (4,729.4 | ) | | (74.1 | )% | Cost of revenues | $ | 1,754.3 | | | $ | 1,652.9 | | | $ | 101.5 | | | 6.1 | % |
| | | | | | | | | | | | | | |
Gross profit | $ | 3,915.4 |
| | $ | 1,183.3 |
| | $ | 2,732.1 |
| | 230.9 | % | Gross profit | $ | 4,679.0 | | | $ | 3,915.4 | | | $ | 763.6 | | | 19.5 | % |
Our gross profitGross margin was 70.3%72.7% in the nine months ended September 30, 20202021 versus 15.6%70.3% in the same period in the prior year. The unusually low gross margin in 2019 reflected an inventory charge of $2.6 million as part of restructuring the Quell business. Excluding this charge, the gross margin rate in 2019 was 50.0%. The margin improvement in 20202021 was due to improved profitability of Quell sales and higherincreased weighting of DPNCheck businessour nerve conduction testing technologies within total revenue.
Operating Expenses
| | | Nine Months Ended September 30, | | | | Nine Months Ended September 30, | | |
| 2020 | | 2019 | | Change | | % Change | | 2021 | | 2020 | | Change | | % Change |
| (in thousands) | | | | (in thousands) | | |
Operating expenses: | |
| | |
| | |
| | |
| Operating expenses: | | | | | | | |
Research and development | $ | 1,846.6 |
| | $ | 2,365.1 |
| | (518.5 | ) | | (21.9 | )% | Research and development | $ | 1,599.4 | | | $ | 1,846.6 | | | $ | (247.2) | | | (13.4) | % |
Sales and marketing | 1,144.4 |
| | 4,047.0 |
| | (2,902.6 | ) | | (71.7 | )% | Sales and marketing | 1,105.5 | | | 1,144.4 | | | (38.9) | | | (3.4) | % |
General and administrative | 2,693.1 |
| | 4,646.9 |
| | (1,953.8 | ) | | (42.0 | )% | General and administrative | 3,254.2 | | | 2,693.1 | | | 561.1 | | | 20.8 | % |
Total operating expenses | $ | 5,684.1 |
| | $ | 11,059.0 |
| | $ | (5,374.9 | ) | | (48.6 | )% | Total operating expenses | $ | 5,959.1 | | | $ | 5,684.1 | | | $ | 275.0 | | | 4.8 | % |
Research and Development
Research and development expense in the nine months ended September 30, 20202021 decreased by 21.9%13.4% from the same period in the prior year due to reduced personnel related coststhe reversal of $676,000, a reduction$450,000 technology fee accrual in professional feesthe first quarter of $105,0002021 and a decrease ofin facility and supply costs of $105,000. The reductions were$48,000 offset with increasedby increases of $200,000 in clinical and development costs, $38,000 in consulting costs and clinical spending of $378,000.$16,000 in personnel related costs.
Sales and Marketing
Sales and marketing expense in the nine months ended September 30, 20202021 decreased by 71.7%3.4% from the same period in the prior year reflectingdue to a $76,000 reduction in advertisingpersonnel spending and promotiona $39,000 reduction in facility and depreciation costs offset by an increase in advertising spending of $1.4 million. In addition, consulting costs decreased by $751,000, personnel related costs decreased by $621,000 and facility and supply costs decreased by $130,000.$83,000.
General and Administrative
General and administrative expense in the nine months ended September 30, 2020 decreased2021 increased by 42.0%20.8% from the same period in the prior year due to increases of $512,000 in non-cash personnel costs and $108,000 in sales tax and fee related costs. This was offset by a reduction of $156,000 in personnel related costs, a reduction of $1.5 million in professional service costs, primarily legal, and a decrease$55,000 in facility and supply costs of $462,000. The reductions were partially offset with increased insurance costs of $238,000.depreciation costs.
Collaboration income
|
| | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | |
| 2020 | | 2019 | | Change | | % Change |
| (in thousands) | | |
| | | | | | | |
Collaboration income | $ | — |
| | $ | 7,116.7 |
| | $ | (7,116.7 | ) | | (100.0 | )% |
Collaboration income in 2019 included development milestones funded by GlaxoSmithKline (GSK) under a Quell collaboration agreement. Total development milestones received under the GSK collaboration since initiation in early 2018 were approximately $20.5 million.
Other income
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | |
| 2021 | | 2020 | | Change | | % Change |
| (in thousands) | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Other income | $ | 1.7 | | | $ | 2.3 | | | $ | (0.6) | | | (26.1) | % |
|
| | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | |
| 2020 | | 2019 | | Change | | % Change |
| (in thousands) | | |
| |
| | |
| | |
| | |
|
Other income | $ | 2.3 |
| | $ | 42.8 |
| | $ | (40.5 | ) | | (94.6 | )% |
Other income primarily includes interest income.
Liquidity and Capital Resources
Our principal source of liquidity is cash and cash equivalents of $4.9$23.2 million at September 30, 2020. Funding2021. In addition to our cash resources, funding for our operations largely depends on revenues from the sale of our commercial products. A low level of market interest in our products, a decline in our consumables sales, unanticipated increases in our operating costs, and the adverse effects of the COVID-19 pandemic could have an adverse effect on our liquidity and cash.
|
| | | | | | | | | | | | | | |
| September 30, 2020 | | December 31, 2019 | | Change | | % Change |
| (in thousands) | | |
| | | | | | | |
Cash and cash equivalents | $ | 4,929.2 |
| | $ | 3,126.2 |
| | $ | 1,803 |
| | 57.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 | | Change | | % Change |
| (in thousands) | | |
| | | | | | | |
Cash and cash equivalents | $ | 23,213.5 | | | $ | 5,226.2 | | | $ | 17,987.3 | | | 344.2 | % |
During the nine months ended September 30, 2020,2021, our cash and cash equivalents increased by $1.8$18.0 million reflecting net proceeds of $4.1 million from common stock sales under our ATM program partially offset by $2.3$1.6 million in cash used in operating activities and $125.0 thousand in cash used in investing activities, offset by $19.7 million in cash provided by financing activities.
In managing working capital, we focus on two important financial measurements:
| | | | | | | | | | | | | | | | | |
| Quarters Ended September 30, | | Year Ended December 31, |
| 2021 | | 2020 | | 2020 |
| | | | | |
Days sales outstanding (days) | 24 | | 23 | | 15 |
Inventory turnover rate (times per year) | 2.4 | | 1.9 | | 1.9 |
|
| | | | | |
| Quarters Ended September 30, | | Year Ended December 31, |
| 2020 | | 2019 | | 2019 |
| | | | | |
Days sales outstanding (days) | 23 | | 27 | | 27 |
Inventory turnover rate (times per year) | 1.9 | | 2.3 | | 3.5 |
Days sales outstanding (DSO) reflect customer payment terms which vary from payment on order to 60 days from invoice date. DSO improved to 23of 24 days during the quarter ended September 30, 2020 versus 272021 is consistent when compared to 23 days in the prior year period. This was attributable to improved collection rates on receivables with payment terms.
The inventory turnover rate deceleratedincreased to 1.92.4 turns in the third quarter of 2020 versus 2.32021 compared to 1.9 turns in the prior year period. This reflected lowerThe increase was due to higher sales in the third quarter of 2021 on approximately constant inventory levels in the comparable periods.levels.
The following sets forth information relating to our sources and uses of our cash:
| | | | | | | | Nine Months Ended September 30, |
| Nine Months Ended September 30, | | 2021 | | 2020 |
| 2020 | | 2019 | | (in thousands) |
| (in thousands) | |
Net cash used in operating activities (excluding collaboration income) | $ | (2,348.1 | ) | | $ | (6,582.4 | ) | |
Net cash provided by collaboration income | — |
| | 4,760.1 |
| |
| Net cash used in operating activities | (2,348.1 | ) | | (3,560.1 | ) | Net cash used in operating activities | $ | (1,561.2) | | | $ | (2,348.1) | |
Net cash used in investing activities | — |
| | (41.2 | ) | Net cash used in investing activities | (125.0) | | | — | |
Net cash provided by financing activities | 4,151.0 |
| | 7.5 |
| Net cash provided by financing activities | 19,673.6 | | | 4,151.0 | |
Net cash (used) provided | $ | 1,802.9 |
| | $ | (3,593.8 | ) | |
Net cash provided | | Net cash provided | $ | 17,987.4 | | | $ | 1,802.9 | |
|
During the nine months ended September 30, 2020, our operating activities consumed $2.3 million of cash offset by $4.1 million in net proceeds from sales of common stock.
We have reported recurring losses from operations and negative cash flows from operating activities. These factors raise substantial doubt about our ability to continue as a going concern for the one-year period from the date of issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. We held cash and cash equivalents of $4.9 million as of September 30, 2020. We believe that these resources and the cash to be generated from future product sales will be sufficient to meet our projected operating requirements into the fourth quarter of 2021. Accordingly, we may need to raise additional funds to support our operating and capital needs in the fourth quarter of 2021 and beyond.
We continue to face challenges and uncertainties. Among these uncertainties is the future effect on the Company's business of the COVID-19 pandemic which, from late in the first quarter of 2020 through the third quarter of 2020, depressed sales of the Company's products. As a result, our available capital resources may be consumed more rapidly than currently expected due to (a) decreases in sales of our products, including decreases in customer orders related to the COVID-19 pandemic, and the uncertainty of future revenues from new products; (b) the effect of the COVID-19 pandemic on our ability to obtain parts and materials from our suppliers while continuing to staff critical production and fulfillment functions, (c) changes we may make to the business that affect ongoing operating expenses; (d) changes we may make in our business strategy; (e) regulatory developments affecting our existing products; (f) changes we may make in our research and development spending plans; and (g) other items affecting our forecasted level of expenditures and use of cash resources. We may attempt to obtain additional funding through public or private financing, collaborative arrangements with strategic partners, or through additional credit lines or other debt financing sources. However, we may not be able to secure such funding in a timely manner or on favorable terms, if at all.
We maintain a shelf registration statement on Form S-3 with the SEC covering shares of our common stock and other securities for sale, giving us the opportunity to raise funding when needed or otherwise considered appropriate at prices and on terms to be determined at the time of any such offerings. Pursuant to the instructions to Form S-3, we have the ability to sell shares under the shelf registration statement, during any 12-month period, in an amount less than or equal to one-third of the aggregate market value of our common stock held by non-affiliates. If we raise additional funds by issuing equity or debt securities, either through the sale of securities pursuant to a registration statement or by other means, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. If we raise additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to our potential products or proprietary technologies, or grant licenses on terms that are not favorable to us. Without additional funds, we may be forced to delay, scale back or eliminate some of our sales and marketing efforts, research and development activities, or other operations and potentially delay product development in an effort to provide sufficient funds to continue our operations. If any of these events occurs, our ability to achieve our development and commercialization goals would be adversely affected.
Off-Balance Sheet Arrangements, Contractual Obligation and Contingent Liabilities and Commitments
As of September 30, 2020, we did not have any off-balance sheet financing arrangements.
Recent Accounting Pronouncements
In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 required that lessees recognize virtually all of their leases on the balance sheet, by recording a right-of-use asset and lease liability. We adopted ASU 2016-02, using the modified retrospective method, upon its effective date of January 1, 2019. The impact of adoption was an increase to long-term assets and total liabilities of approximately $1.9 million as of January 1, 2019.
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 Quellour commercialized neurostimulation and DPNCheck;neuropathy diagnostic products; our expected timing and our plans to develop and commercialize our products; our ability to meet our proposed timelines for the commercial availability of our products; our ability to obtain and maintain regulatory approval of our existing products and any future products we may develop; regulatory and legislative developments in the United States and foreign countries; the performance of our third-party manufacturers; our ability to obtain and maintain intellectual property protection for our products; the successful development of our sales and marketing capabilities; the size and growth of the potential markets for our products and our ability to serve those markets; our estimate of our customer returns of our products; the rate and degree of market acceptance of any future products; our reliance on key scientific management or personnel; the payment and reimbursement methods used by private or government third party payers; and other factors discussed elsewhere in this Quarterly Report on Form 10-Q. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “plan” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. The forward-looking statements contained in this quarterly report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described in the section titled “Risk Factors” in our Annual Report on Form 10-K. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We do not use derivative financial instruments in our investment portfolio and have no foreign exchange contracts. Our financial instruments consist of cash and cash equivalents. We consider investments that, when purchased, have a remaining maturity of 90 days or less to be cash equivalents. The primary objectives of our investment strategy are to preserve principal, maintain proper liquidity to meet operating needs, and maximize yields. To minimize our exposure to an adverse shift in interest rates, we invest mainly in cash equivalents and short-term investments with a maturity of twelve months or less and maintain an average maturity of twelve months or less. We do not believe that a notional or hypothetical 10% change in interest rate percentages would have a material impact on the fair value of our investment portfolio or our interest income.
Item 4. Controls and Procedures
(a)Evaluation of Disclosure Controls and Procedures. Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2020,2021, have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
(b)Changes in Internal Controls. There were no changes in our internal control over financial reporting, identified in connection with the evaluation of such internal control that occurred during the quarter ended September 30, 20202021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
While we are not currently a party to any material legal proceedings, we could become subject to legal proceedings in the ordinary course of business. We do not expect any such potential items to have a significant impact on our financial position.
Item 1A. Risk Factors
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.Not applicable.
Item 6. Exhibits
See the Exhibit Index on the page immediately preceding the exhibits for a list of exhibits filed as part of this quarterly report, which Exhibit Index is incorporated herein by this reference.
| | | | | | | | |
Exhibit No. | | Description |
| | |
| | Amendment No. 14 to Shareholder Rights Agreement by and between NeuroMetrix, Inc. and American Stock Transfer & Trust Company, as Rights Agent, dated July 20, 2021 (filed as Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q filed on July 22, 2021 and incorporated in this document by reference). |
| | |
| | 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. |
| | |
| | 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. |
| | |
| | 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 | | The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in XBRL (eXtensible Business Reporting Language): (i) Balance Sheets at September 30, 2021 and December 31, 2020, (ii) Statements of Operations for the quarters ended September 30, 2021 and 2020, (iii) Statements of Changes in Stockholders' Equity for the quarters ended September 30, 2021 and 2020, (iv) Statements of Cash Flows for the quarters ended September 30, 2021 and 2020, and (v) Notes to Financial Statements. |
| |
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. |
| |
October 22, 202021, 2021 | /s/ | SHAI N. GOZANI, M.D., PH. D. |
| | Shai N. Gozani, M.D., Ph. D. |
| | Chairman, President and Chief Executive Officer |
| |
October 22, 202021, 2021 | /s/ | THOMAS T. HIGGINS |
| | Thomas T. Higgins |
| | Senior Vice President, Chief Financial Officer and Treasurer |
EXHIBIT INDEX
|
| | |
Exhibit No. | | Description |
| | |
| | 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. |
| | |
| | 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. |
| | |
| | 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 | | The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, formatted in XBRL (eXtensible Business Reporting Language): (i) Balance Sheets at September 30, 2020 and December 31, 2019, (ii) Statements of Operations for the quarter and nine months ended September 30, 2020 and 2019, (iii) Statements of Changes in Stockholders' Equity for the nine months ended September 30, 2020 and 2019, (iv) Statements of Cash Flows for the nine months ended September 30, 2020 and 2019, and (v) Notes to Financial Statements.
|
| |