NeuroMetrix(NURO) - 2019 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section provides unaudited interim financial information, including statements and management's discussion and analysis Item 1. Financial Statements Presents unaudited interim financial statements, including balance sheets, operations, equity, and cash flows, detailing significant losses and negative cash flow Balance Sheets Summarizes the company's financial position, highlighting changes in assets, liabilities, and equity between reporting periods Balance Sheet Highlights (June 30, 2019 vs. December 31, 2018) | Metric | June 30, 2019 | December 31, 2018 | Change (%) | | :-------------------------- | :-------------- | :---------------- | :--------- | | Cash and cash equivalents | $4,958,058 | $6,780,429 | -26.9% | | Total assets | $10,814,277 | $13,991,880 | -22.7% | | Total liabilities | $5,956,627 | $7,894,069 | -24.5% | | Total stockholders' equity | $4,857,650 | $6,097,811 | -20.3% | | Accumulated deficit | $(192,328,275) | $(191,016,591) | +0.7% | Statements of Operations Details the company's revenues, expenses, and net income or loss over specific periods, reflecting operational performance Statements of Operations Summary (Quarter Ended June 30) | Metric | 2019 | 2018 | Change (%) | | :-------------------------- | :----------- | :----------- | :--------- | | Revenues | $2,354,683 | $3,751,568 | -37.2% | | Gross profit (loss) | $(789,104) | $1,801,264 | -143.8% | | Net income (loss) | $(3,362,191) | $573,928 | -686.0% | | Basic EPS | $(0.37) | $0.08 | -562.5% | Statements of Operations Summary (Six Months Ended June 30) | Metric | 2019 | 2018 | Change (%) | | :-------------------------- | :----------- | :----------- | :--------- | | Revenues | $5,477,618 | $8,694,558 | -37.0% | | Gross profit (loss) | $9,600 | $3,788,994 | -99.7% | | Net income (loss) | $(1,311,684) | $1,740,180 | -175.4% | | Basic EPS | $(0.16) | $0.25 | -164.0% | Statement of Changes in Stockholders' Equity Outlines changes in equity components, including net income/loss, stock-based compensation, and preferred stock conversions - Total stockholders' equity decreased by $1,240,161 from December 31, 2018, to June 30, 2019, primarily due to a net loss of $1,311,684[17] - During the six months ended June 30, 2019, 2,998.20 shares of Series D Preferred Stock and 3,260.70 shares of Series E Preferred Stock were converted into a total of 2,379,810 shares of Common Stock[49] - Stock-based compensation expense for the six months ended June 30, 2019, was $64,026[17] Statements of Cash Flows Reports cash inflows and outflows from operating, investing, and financing activities, showing liquidity changes Cash Flow Summary (Six Months Ended June 30) | Activity | 2019 | 2018 | | :------------------------------------------------ | :----------- | :----------- | | Net cash (used in) provided by operating activities | $(1,822,281) | $3,196,050 | | Net cash used in investing activities | $(7,587) | $(130,816) | | Net cash provided by financing activities | $7,497 | — | | Net (decrease) increase in cash and cash equivalents | $(1,822,371) | $3,065,234 | | Cash and cash equivalents, end of period | $4,958,058 | $7,108,915 | Notes to Unaudited Financial Statements Provides detailed explanations and additional information supporting the unaudited interim financial statements 1. Business and Basis of Presentation Describes the company's business, products, and the basis for preparing the financial statements, including going concern risks - NeuroMetrix, Inc. is a commercial stage healthcare company focused on chronic pain (Quell) and diabetic neuropathy (DPNCheck®)[21] - In June 2019, the company announced a business restructuring, including a reduction in force, operational consolidation, and a $2.3 million charge for Quell inventory write-down[22] - The company has suffered recurring losses and negative cash flows, raising substantial doubt about its ability to continue as a going concern beyond 2019, necessitating additional funding[23] 2. Comprehensive Income (Loss) Reports comprehensive income or loss, which includes net income and other comprehensive income items - The company had no components of other comprehensive income (loss) other than net income (loss) for the quarters and six months ended June 30, 2019 and 2018[34] 3. Net Income (Loss) Per Common Share Presents basic and diluted earnings per common share, reflecting profitability on a per-share basis Net Income (Loss) Per Common Share | Period | Basic EPS | Diluted EPS | | :-------------------------- | :-------- | :---------- | | Quarter Ended June 30, 2019 | $(0.37) | $(0.37) | | Quarter Ended June 30, 2018 | $0.08 | $0.04 | | Six Months Ended June 30, 2019 | $(0.16) | $(0.16) | | Six Months Ended June 30, 2018 | $0.25 | $0.13 | - Potentially dilutive common stock equivalents (options, warrants, convertible preferred stock) were excluded from diluted EPS calculation for the periods presented because their effect was anti-dilutive[35] 4. Inventories Details inventory composition and valuation, including write-downs and reserves for excess stock Inventories (June 30, 2019 vs. December 31, 2018) | Category | June 30, 2019 | December 31, 2018 | | :------------------ | :-------------- | :---------------- | | Purchased components | $1,226,434 | $1,767,674 | | Finished goods | $836,997 | $1,094,190 | | Total | $2,063,431 | $2,861,864 | Inventory Reserves (June 30, 2019) | Category | Amount | | :------------------ | :----------- | | Excess stock | $2,181,819 | | - Purchased components | $2,030,000 | | - Finished goods | $151,819 | 5. Accrued Expenses Lists various accrued liabilities, such as lease obligations, supplier commitments, and professional service fees Accrued Expenses (June 30, 2019 vs. December 31, 2018) | Category | June 30, 2019 | December 31, 2018 | | :-------------------------- | :-------------- | :---------------- | | Lease obligation, current | $582,940 | $577,460 | | Supplier excess commitments | $590,000 | $160,000 | | Professional services | $566,000 | $391,000 | | Technology fees | $450,000 | $450,000 | | Advertising and promotion | $380,000 | $171,000 | | Compensation expense | $162,990 | $223,756 | | Warranty reserve | $103,000 | $129,837 | | Relocation costs | $100,000 | — | | Other | $146,262 | $133,580 | | Total | $3,081,192 | **$2,