nuro-20210930

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 September 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File Number 001-33351

_________________________________________________

NEUROMETRIX, INC.

(Exact name of registrant as specified in its charter)


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

4B Gill Street Woburn, Massachusetts			01801
(Address of principal executive offices)			(Zip Code)

(781) 890-9989

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, $0.0001 par value per share	NURO	The Nasdaq Stock Market LLC
Preferred Stock Purchase Rights

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 6,645,397 shares of common stock, par value $0.0001 per share, were outstanding as of October 20, 2021.

NeuroMetrix, Inc.

Form 10-Q

Quarterly Period Ended September 30, 2021

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements:

	Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020	1

	Statements of Operations (unaudited) for the Quarters and Nine Months Ended September 30, 2021 and 2020	2

	Statements of Changes in Stockholders' Equity (unaudited) for the Quarters and Nine Months Ended September 30, 2021 and 2020	3

	Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2021 and 2020	4

	Notes to Unaudited Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16

Item 4.	Controls and Procedures	16

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	17

Item 1A.	Risk Factors	17

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17

Item 3.	Defaults Upon Senior Securities	17

Item 4.	Mine Safety Disclosures	17

Item 5.	Other Information	17

Item 6.	Exhibits	17

Signatures		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

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

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,
	2021		2020		2021		2020

Revenues	$	2,064,359	$	2,036,228	$	6,433,330	$	5,568,243

Cost of revenues	619,833		537,614		1,754,343		1,652,890

Gross profit	1,444,526		1,498,614		4,678,987		3,915,353

Operating expenses:
Research and development	724,556		652,671		1,599,358		1,846,569
Sales and marketing	442,230		340,927		1,105,548		1,144,389
General and administrative	965,711		762,903		3,254,210		2,693,146

Total operating expenses	2,132,497		1,756,501		5,959,116		5,684,104

Loss from operations	(687,971)		(257,887)		(1,280,129)		(1,768,751)



Other income	882		774		1,673		2,323



Net loss	$	(687,089)	$	(257,113)	$	(1,278,456)	$	(1,766,428)








Net loss per common share applicable to common stockholders, basic and diluted	$	(0.12)	$	(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
	Number of Shares	Amount		Number of Shares	Amount
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
Issuance of common stock under at the market offering	—	—		256,078	25		453,432		—		453,457
Issuance of common stock to settle compensation obligations	—	—		31,000	3		43,748		—		43,751
Net loss		—							(657,371)		(657,371)
Balance at March 31, 2020	200	1		1,687,752	168		197,960,925		(195,446,976)		2,514,118
Stock-based compensation expense	—	—		—	—		128,862		—		128,862
Issuance of common stock under at the market offering	—	—		2,092,541	209		3,689,765		—		3,689,974
Issuance of common stock under employee stock purchase plan	—	—		4,364	1		7,605		—		7,606
Net loss	—	—		—	—		—		(851,944)		(851,944)
Balance at June 30, 2020	200	1		3,784,657	378		201,787,157		(196,298,920)		5,488,616
Stock-based compensation expense	—	—		—	—		140,269		—		140,269
Net loss	—	—		—	—		—		(257,113)		(257,113)
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	200	$	1	3,793,739	$	379	$	202,129,195	$	(196,881,800)	$	5,247,775
Stock-based compensation expense	—	—		—	—		68,863		—		68,863

Issuance of common stock under employee stock purchase plan	—	—		2,408	1		4,196		—		4,197
Net loss	—	—		—	—		—		(59,783)		(59,783)
Balance at March 31, 2021	200	1		3,796,147	380		202,202,254		(196,941,583)		5,261,052
Stock-based compensation expense	—	—		—	—		319,863		—		319,863
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	—	—		7,055	1		18,949		—		18,950
Vesting of restricted stock under option plan	—	—		13,911	3		(3)		—		—
Net loss	—	—		—	—		—		(531,584)		(531,584)
Balance at June 30, 2021	200	1		5,024,794	505		206,307,790		(197,473,167)		8,835,129
Stock-based compensation expense	—	—		—	—		196,361		—		196,361
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	—	—		50,000	5		78,495		—		78,500
Vesting of restricted stock under option plan	—	—		10,877	1		(1)		—		—
Net loss	—	—		—	—		—		(687,089)		(687,089)
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 Cash Flows

(Unaudited)


	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, 2021

1.Business and Basis of Presentation

Our Business-An Overview

NeuroMetrix, Inc. (the Company) is an innovation-driven company focused on the development and global commercialization of non-invasive medical devices for the diagnosis and treatment of pain and neurological disorders. Revenues are derived from the 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 commercial products. DPNCheck® is a diagnostic device that provides rapid, point-of-care detection of peripheral neuropathies. ADVANCE® is a diagnostic device that provides automated, in-office nerve conduction studies for the evaluation of focal neuropathies. Quell® is a wearable neurostimulation device indicated for symptomatic relief of lower extremity chronic pain that is available over-the-counter.

Unaudited Interim Financial Statements

The accompanying unaudited balance sheet as of September 30, 2021, unaudited statements of operations, changes in stockholders' equity for the quarters and nine months ended September 30, 2021 and 2020 and cash flows for the nine months ended September 30, 2021 and 2020 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. The accompanying balance sheet as of December 31, 2020 has been derived from audited financial statements prepared at that date 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, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any other period. These financial statements and notes should be read in conjunction with the financial statements for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, or the SEC, on January 29, 2021 (File No. 001-33351).

Revenues

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

Accounts receivable are recorded at the amount the Company expects to collect, net of the allowance for doubtful accounts receivable. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses based on customer past payment history, product usage activity, and recent communications with the customer. Individual customer balances which are over 90 days past due are reviewed individually for collectability and written-off when recovery is not probable. Allowance for doubtful accounts was $25,000 as of September 30, 2021 and December 31, 2020.

One customer accounted for 25% and 29% of total revenues in the quarter and nine months ended September 30, 2021, respectively. Three customers accounted for 47% and two customers accounted for 34% of total revenues in the quarter and nine months ended September 30, 2020, respectively. Two customers accounted for 50% of accounts receivable as of September 30, 2021 and December 31, 2020.

Stock-based Compensation

Total compensation cost related to non-vested awards not yet recognized at September 30, 2021 was $170,151. The total compensation costs are expected to be recognized over a weighted-average period of 1.3 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

For the quarters and nine months ended September 30, 2021 and 2020, the Company had no components of other comprehensive loss other than net loss itself.

3. Net Loss Per Common Share

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


	Quarters Ended 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)

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

4. Inventories

Inventories consist of the following:


	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

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

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 (the "Waltham Lease") extends through February 2022 with an average monthly base rent of $41,074 and a 5-year extension option. A letter of credit in the amount of $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 a monthly base rent of $20,929 for the remaining lease term. For the quarter and nine months ended September 30, 2021 the company recorded sublet income totaling $34,560 within operating expenses on the Company's Statement of Operations. 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 for the quarters ended September 30, 2021 and 2020 were zero and $76,000, respectively, and $126,748 and $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, 2021 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

Total recorded rent expense was $18,932 and $166,905, for the quarters ended September 30, 2021 and 2020, respectively. Total recorded rent expense was $243,289 and $500,713, for the nine months ended September 30, 2021 and 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 2.9 years as of September 30, 2021.

7. Fair Value Measurements

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis for the periods presented and indicates the fair value hierarchy of the valuation techniques it utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates, and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. All Company assets and liabilities measured at fair value utilize Level 1 inputs.


			Fair Value Measurements at September 30, 2021 Using
	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:
Cash equivalents	$	20,453,185	$	20,453,185	$	—	$	—
Total	$	20,453,185	$	20,453,185	$	—	$	—


			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	$	—	$	—

As of September 30, 2021, the Company's cash equivalents consisted of money market accounts.

8. Stockholders’ Equity

Preferred stock and convertible preferred stock consist of the following:


	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

2021 equity activity

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

In May 2021, the Company issued 42,808 shares of restricted common stock with a value of $125,000 under its 2004 Stock Option Plan. As of September 30, 2021, 24,788 shares were vested, 7,318 shares were forfeited in lieu of paying withholding taxes on 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, 2021, the Company issued 2,756,705 shares of its common stock, under an at-the-market offering program ("ATM Agreement") for net proceeds of $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.

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

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. 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 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 peripheral 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 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 numerous 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 may contribute to disability and despair. In general, chronic pain cannot be cured. Treatment of chronic pain is focused on reducing pain and improving function. The goal is effective pain management.

Chronic pain affects nearly 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 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 devices which have both surgical and ongoing risks, such as migration of the implanted nerve stimulation leads. Non-invasive approaches involving transcutaneous electrical nerve stimulation (TENS) have achieved limited efficacy in practice due to power limitations, ineffective 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.

Results of Operations

Comparison of Quarters Ended September 30, 2021 and 2020

Revenues


	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 our wearable technologies for chronic pain and our nerve conduction technologies to physician offices, clinics, hospitals, other healthcare providers and insurers, as well as domestic and international distributors. Revenues comprise sales of medical devices as well as aftermarket electrodes and other supplies. Revenues were approximately $2.0 million during the third quarter of 2021 and 2020.

Cost of Revenues and Gross Profit

SEC Form 10-Q filed by NeuroMetrix, Inc.