x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 04-3308180 |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) |
incorporation or organization) | |
1000 Winter Street, Waltham, Massachusetts | 02451 |
(Address of principal executive offices) | (Zip Code) |
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 | NUROW | |
Warrants to Purchase Common Stock |
Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company x |
Emerging growth company ¨ |
Item 1. | ||
Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018 | ||
Statements of Operations (unaudited) for the Quarters and Six Months Ended June 30, 2019 and 2018 | ||
Statement of Changes in Stockholders' Equity (unaudited) for the Six Months Ended June 30, 2019 and 2018 | ||
Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2019 and 2018 | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
June 30, 2019 | December 31, 2018 | ||||||
(Unaudited) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 4,958,058 | $ | 6,780,429 | |||
Accounts receivable, net | 726,670 | 1,082,957 | |||||
Inventories | 2,063,431 | 2,861,864 | |||||
Prepaid expenses and other current assets | 1,101,154 | 860,915 | |||||
Total current assets | 8,849,313 | 11,586,165 | |||||
Fixed assets, net | 289,472 | 407,339 | |||||
Right to use asset | 1,645,668 | 1,968,062 | |||||
Other long-term assets | 29,824 | 30,314 | |||||
Total assets | $ | 10,814,277 | $ | 13,991,880 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 1,017,094 | $ | 1,298,084 | |||
Accrued expenses | 3,081,192 | 2,236,633 | |||||
Accrued product returns | 741,607 | 1,101,658 | |||||
Deferred collaboration income | — | 1,956,522 | |||||
Total current liabilities | 4,839,893 | 6,592,897 | |||||
Lease obligation, net of current portion | 1,116,734 | 1,301,172 | |||||
Total liabilities | 5,956,627 | 7,894,069 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Preferred stock | — | — | |||||
Convertible preferred stock | 11 | 18 | |||||
Common stock, $0.0001 par value; 100,000,000 shares authorized at June 30, 2019 and December 31, 2018; 9,781,755 and 7,380,463 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively | 978 | 738 | |||||
Additional paid-in capital | 197,184,936 | 197,113,646 | |||||
Accumulated deficit | (192,328,275 | ) | (191,016,591 | ) | |||
Total stockholders’ equity | 4,857,650 | 6,097,811 | |||||
Total liabilities and stockholders’ equity | $ | 10,814,277 | $ | 13,991,880 |
Quarters Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues | $ | 2,354,683 | $ | 3,751,568 | $ | 5,477,618 | $ | 8,694,558 | |||||||
Cost of revenues | 3,143,787 | 1,950,304 | 5,468,018 | 4,905,564 | |||||||||||
Gross profit (loss) | (789,104 | ) | 1,801,264 | 9,600 | 3,788,994 | ||||||||||
Operating expenses: | |||||||||||||||
Research and development | 1,034,921 | 1,616,863 | 1,890,002 | 2,896,427 | |||||||||||
Sales and marketing | 1,373,949 | 2,200,852 | 3,399,237 | 4,705,593 | |||||||||||
General and administrative | 1,564,555 | 1,170,634 | 3,184,045 | 2,974,777 | |||||||||||
Total operating expenses | 3,973,425 | 4,988,349 | 8,473,284 | 10,576,797 | |||||||||||
Loss from operations | (4,762,529 | ) | (3,187,085 | ) | (8,463,684 | ) | (6,787,803 | ) | |||||||
Other income: | |||||||||||||||
Collaboration income | 1,381,818 | 3,749,999 | 7,116,667 | 8,505,704 | |||||||||||
Other income | 18,520 | 11,014 | 35,333 | 22,279 | |||||||||||
Total other income | 1,400,338 | 3,761,013 | 7,152,000 | 8,527,983 | |||||||||||
Net income (loss) | $ | (3,362,191 | ) | $ | 573,928 | $ | (1,311,684 | ) | $ | 1,740,180 | |||||
Net income (loss) per common share applicable to common stockholders, | |||||||||||||||
Basic | $ | (0.37 | ) | $ | 0.08 | $ | (0.16 | ) | $ | 0.25 | |||||
Diluted | $ | (0.37 | ) | $ | 0.04 | $ | (0.16 | ) | $ | 0.13 |
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, 2017 | 29,479.98 | $ | 30 | 2,706,066 | $ | 271 | $ | 196,355,142 | $ | (191,338,054 | ) | $ | 5,017,389 | ||||||||||||
Stock-based compensation expense | — | — | — | — | 371,917 | — | 371,917 | ||||||||||||||||||
Common stock issued to settle employee incentive compensation obligations | — | — | 214,791 | 21 | 294,243 | — | 294,264 | ||||||||||||||||||
Issuance of common stock upon conversion of preferred stock | (11,666.35 | ) | (12 | ) | 4,435,874 | 444 | (432 | ) | — | — | |||||||||||||||
Effect of adoption of ASC 606 | — | — | — | — | — | 297,858 | 297,858 | ||||||||||||||||||
Net income | — | — | — | — | — | 1,740,180 | 1,740,180 | ||||||||||||||||||
Balance at June 30, 2018 | 17,813.63 | $ | 18 | 7,356,731 | $ | 736 | $ | 197,020,870 | $ | (189,300,016 | ) | $ | 7,721,608 | ||||||||||||
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 | 7,380,463 | $ | 738 | $ | 197,113,646 | $ | (191,016,591 | ) | $ | 6,097,811 | ||||||||||||
Stock-based compensation expense | — | — | — | — | 64,026 | — | 64,026 | ||||||||||||||||||
Issuance of common stock upon conversion of preferred stock | (6,258.90 | ) | (7 | ) | 2,379,810 | 238 | (231 | ) | — | — | |||||||||||||||
Issuance of common stock under employee stock purchase plan | — | — | 21,482 | 2 | 7,495 | — | 7,497 | ||||||||||||||||||
Net loss | — | — | — | — | — | (1,311,684 | ) | (1,311,684 | ) | ||||||||||||||||
Balance at June 30, 2019 | 11,254.73 | $ | 11 | 9,781,755 | $ | 978 | $ | 197,184,936 | $ | (192,328,275 | ) | $ | 4,857,650 |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | (1,311,684 | ) | $ | 1,740,180 | ||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | |||||||
Depreciation | 107,494 | 140,989 | |||||
Stock-based compensation | 64,026 | 371,917 | |||||
Inventory provision | 2,595,884 | — | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 356,287 | 1,288,332 | |||||
Inventories | (1,207,451 | ) | (281,617 | ) | |||
Prepaid expenses and other current and long-term assets | (239,749 | ) | 609,358 | ||||
Accounts payable | (287,260 | ) | 66,480 | ||||
Accrued expenses | 416,745 | (93,651 | ) | ||||
Accrued product returns | (360,051 | ) | (645,938 | ) | |||
Deferred collaboration income | (1,956,522 | ) | — | ||||
Net cash (used in) provided by operating activities | (1,822,281 | ) | 3,196,050 | ||||
Cash flows from investing activities: | |||||||
Purchases of fixed assets | (7,587 | ) | (130,816 | ) | |||
Net cash used in investing activities | (7,587 | ) | (130,816 | ) | |||
Cash flows from financing activities: | |||||||
Net proceeds from issuance of stock and warrants | 7,497 | — | |||||
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, beginning of period | 6,780,429 | 4,043,681 | |||||
Cash and cash equivalents, end of period | $ | 4,958,058 | $ | 7,108,915 | |||
Supplemental disclosure of cash flow information: | |||||||
Common stock issued to settle employee incentive compensation obligation | $ | — | $ | 294,264 |
1. | Business and Basis of Presentation |
As reported | Adjustments | Amounts under prior GAAP | |||||||||
Assets | |||||||||||
Prepaid expenses and other current assets | $ | 1,101,154 | $ | 26,895 | $ | 1,128,049 | |||||
Total current assets | $ | 8,849,313 | $ | 26,895 | $ | 8,876,208 | |||||
Right of use asset | $ | 1,645,668 | $ | (1,645,668 | ) | $ | — | ||||
Other long-term assets | $ | 29,824 | $ | 44,100 | $ | 73,924 | |||||
Total assets | $ | 10,814,277 | $ | (1,574,673 | ) | $ | 9,239,604 | ||||
Liabilities | |||||||||||
Accrued expenses | $ | 3,081,192 | $ | (457,939 | ) | $ | 2,623,253 | ||||
Total current liabilities | $ | 4,839,893 | $ | (457,939 | ) | $ | 4,381,954 | ||||
Lease obligation - net of current portion | $ | 1,116,734 | $ | (1,116,734 | ) | $ | — | ||||
Total liabilities | $ | 5,956,627 | $ | (1,574,673 | ) | $ | 4,381,954 |
As reported | Adjustments | Amounts under prior GAAP | |||||||||
Assets | |||||||||||
Prepaid expenses and other current assets | $ | 860,915 | $ | 44,852 | $ | 905,767 | |||||
Total current assets | $ | 11,586,165 | $ | 44,852 | $ | 11,631,017 | |||||
Right of use asset | $ | 1,968,062 | $ | (1,968,062 | ) | $ | — | ||||
Other long-term assets | $ | 30,314 | $ | 44,578 | $ | 74,892 | |||||
Total assets | $ | 13,991,880 | $ | (1,878,632 | ) | $ | 12,113,248 | ||||
Liabilities | |||||||||||
Accrued expenses | $ | 2,236,633 | $ | (577,460 | ) | $ | 1,659,173 | ||||
Total current liabilities | $ | 6,592,897 | $ | (577,460 | ) | $ | 6,015,437 | ||||
Lease obligation - net of current portion | $ | 1,301,172 | $ | (1,301,172 | ) | $ | — | ||||
Total liabilities | $ | 7,894,069 | $ | (1,878,632 | ) | $ | 6,015,437 |
2. | Comprehensive Income (Loss) |
3. | Net Income (Loss) Per Common Share |
Quarters Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income (loss) applicable to common stockholders | $ | (3,362,191 | ) | $ | 573,928 | $ | (1,311,684 | ) | $ | 1,740,180 | |||||
Weighted average number of common shares outstanding, basic | 9,048,235 | 7,330,479 | 8,396,249 | 6,839,778 | |||||||||||
Dilutive convertible preferred stock | — | 6,584,674 | — | 6,980,585 | |||||||||||
Weighted average number of common shares outstanding, dilutive | 9,048,235 | 13,915,153 | 8,396,249 | 13,820,363 | |||||||||||
Net income (loss) per common share applicable to common stockholders, basic | $ | (0.37 | ) | $ | 0.08 | $ | (0.16 | ) | $ | 0.25 | |||||
Net income (loss) per common share applicable to common stockholders, diluted | $ | (0.37 | ) | $ | 0.04 | $ | (0.16 | ) | $ | 0.13 |
Quarters Ended June 30, | Six Months Ended June 30, | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
Options | 482,656 | 466,025 | 485,559 | 401,778 | |||||||
Warrants | 459,375 | 459,375 | 459,375 | 459,375 | |||||||
Convertible preferred stock | 4,915,974 | — | 5,567,960 | — | |||||||
Total | 5,858,005 | 925,400 | 6,512,894 | 861,153 |
4. | Inventories |
June 30, 2019 | December 31, 2018 | ||||||
Purchased components | $ | 1,226,434 | $ | 1,767,674 | |||
Finished goods | 836,997 | 1,094,190 | |||||
$ | 2,063,431 | $ | 2,861,864 |
5. | Accrued Expenses |
June 30, 2019 | December 31, 2018 | ||||||
Lease obligation, current portion | $ | 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 | |||||
$ | 3,081,192 | $ | 2,236,633 |
6. | Leases |
2019 | $ | 315,609 | ||
2020 | 641,193 | |||
2021 | 653,164 | |||
2022 | 247,347 | |||
2023 | 165,785 | |||
2024 | 165,785 | |||
2025 | 117,431 | |||
Total minimum lease payments | $ | 2,306,314 | ||
Weighted-average discount rate, 14.6% | $ | 606,640 | ||
Lease obligation, current portion | 582,940 | |||
Lease obligation, net of current portion | 1,116,734 | |||
$ | 2,306,314 |
7. | Business Restructuring |
June 30, 2019 | ||||
Severance obligations: | ||||
Provision | $ | 224,773 | ||
Amounts paid out | (192,515 | ) | ||
Total | 32,258 | |||
Relocation costs: | ||||
Provision | 225,000 | |||
Total | 225,000 | |||
Balance - June 30, 2019 | $ | 257,258 |
9. | Fair Value Measurements |
Fair Value Measurements at June 30, 2019 Using | |||||||||||||||
June 30, 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 | $ | 3,004,775 | $ | 3,004,775 | $ | — | $ | — | |||||||
Total | $ | 3,004,775 | $ | 3,004,775 | $ | — | $ | — |
Fair Value Measurements at December 31, 2018 Using | |||||||||||||||
December 31, 2018 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Assets: | |||||||||||||||
Cash equivalents | $ | 4,284,928 | $ | 4,284,928 | $ | — | $ | — | |||||||
Total | $ | 4,284,928 | $ | 4,284,928 | $ | — | $ | — | |||||||
10. | Credit Facility |
11. | Stockholders’ Equity |
6/30/2019 | 12/31/2018 | ||||||
Preferred stock, $0.001 par value; 5,000,000 shares authorized at June 30, 2019 and December 31, 2018; no shares issued and outstanding at June 30, 2019 and December 31, 2018 | $ | — | $ | — | |||
Series B convertible preferred stock, $0.001 par value; 147,000 shares designated at June 30, 2019 and December 31, 2018; 200 shares issued and outstanding at June 30, 2019 and December 31, 2018 | $ | 1 | $ | 1 | |||
Series D convertible preferred stock, $0.001 par value; 21,300 shares designated at June 30, 2019 and December 31, 2018; 11,054.73 and 14,052.93 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively | $ | 10 | $ | 14 | |||
Series E convertible preferred stock, $0.001 par value; 7,000 shares designated at June 30, 2019 and December 31, 2018; zero and 3,260.70 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively | $ | — | $ | 3 |
Quarters Ended June 30, | ||||||||||||||
2019 | 2018 | Change | % Change | |||||||||||
(in thousands) | ||||||||||||||
Revenues | $ | 2,354.7 | $ | 3,751.6 | $ | (1,396.9 | ) | (37.2 | )% |
Quarters Ended June 30, | ||||||||||||||
2019 | 2018 | Change | % Change | |||||||||||
(in thousands) | ||||||||||||||
Cost of revenues | $ | 3,143.8 | $ | 1,950.3 | $ | 1,193.5 | 61.2 | % | ||||||
Gross profit (loss) | $ | (789.1 | ) | $ | 1,801.3 | $ | (2,590.4 | ) | (143.8 | )% |
Quarters Ended June 30, | ||||||||||||||
2019 | 2018 | Change | % Change | |||||||||||
(in thousands) | ||||||||||||||
Operating expenses: | ||||||||||||||
Research and development | $ | 1,034.9 | $ | 1,616.9 | $ | (582.0 | ) | (36.0 | )% | |||||
Sales and marketing | 1,373.9 | 2,200.9 | (827.0 | ) | (37.6 | )% | ||||||||
General and administrative | 1,564.6 | 1,170.6 | 394.0 | 33.7 | % | |||||||||
Total operating expenses | $ | 3,973.4 | $ | 4,988.4 | $ | (1,015.0 | ) | (20.3 | )% |
Quarters Ended June 30, | ||||||||||||||
2019 | 2018 | Change | % Change | |||||||||||
(in thousands) | ||||||||||||||
Collaboration income | $ | 1,381.8 | $ | 3,750.0 | $ | (2,368.2 | ) | (63.2 | )% |
Quarters Ended June 30, | ||||||||||||||
2019 | 2018 | Change | % Change | |||||||||||
(in thousands) | ||||||||||||||
Other income | $ | 18.5 | $ | 11.0 | $ | 7.5 | 68.2 | % |
Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | Change | % Change | |||||||||||
(in thousands) | ||||||||||||||
Revenues | $ | 5,477.6 | $ | 8,694.6 | $ | (3,217.0 | ) | (37.0 | )% |
Six Months Ended June 30, | |||||||||||
2019 | 2018 | Change | % Change | ||||||||
(in thousands) | |||||||||||
Cost of revenues | 5,468.0 | 4,905.6 | 562.4 | 11.5 | % | ||||||
Gross profit (loss) | 9.6 | 3,789.0 | (3,779.4 | ) | (99.7 | )% |
Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | Change | % Change | |||||||||||
(in thousands) | ||||||||||||||
Operating expenses: | ||||||||||||||
Research and development | $ | 1,890.0 | $ | 2,896.4 | $ | (1,006.4 | ) | (34.7 | )% | |||||
Sales and marketing | 3,399.2 | 4,705.6 | (1,306.4 | ) | (27.8 | )% | ||||||||
General and administrative | 3,184.0 | 2,974.8 | 209.2 | 7.0 | % | |||||||||
Total operating expenses | $ | 8,473.2 | $ | 10,576.8 | $ | (2,103.6 | ) | (19.9 | )% |
Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | Change | % Change | |||||||||||
(in thousands) | ||||||||||||||
Collaboration income | $ | 7,116.7 | $ | 8,505.7 | $ | (1,389.0 | ) | (16.3 | )% |
Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | Change | % Change | |||||||||||
(in thousands) | ||||||||||||||
Other income | $ | 35.3 | $ | 22.3 | $ | 13.0 | 58.6 | % |
June 30, 2019 | December 31, 2018 | Change | % Change | |||||||||||
($ in thousands) | ||||||||||||||
Cash and cash equivalents | $ | 4,958.1 | $ | 6,780.4 | $ | (1,822.3 | ) | (26.9 | )% |
Quarters Ended June 30, | Year Ended December 31, | ||||
2019 | 2018 | 2018 | |||
Days sales outstanding (days) | 33 | 32 | 39 | ||
Inventory turnover rate (times per year) | 5.5 | 3.6 | 3.5 |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
(in thousands) | |||||||
Net cash used in operating activities (excluding collaboration income) | $ | (6,582.4 | ) | $ | (5,309.6 | ) | |
Net cash provided by collaboration income | 4,760.1 | 8,505.7 | |||||
Net cash (used in) provided by operating activities | $ | (1,822.3 | ) | $ | 3,196.1 |
• | inability to efficiently create market demand for Quell at profitable pricing levels through our TV and digital marketing efforts, or any other marketing efforts we may adopt; |
• | changes we may make to our pricing and marketing strategy with respect to Quell or our other products; |
• | manufacturing issues with Quell or our other products; |
• | inability to increase adoption of DPNCheck within the Medicare Advantage market and Outside the United States (OUS) markets; |
• | regulatory inquiries or issues affecting our products; |
• | unfavorable changes to current Medicare, Medicare Advantage and commercial payer payment policies; |
• | changes to payor policies under the Patient Protection and Affordable Care Act; |
• | the outcome of the ongoing FTC investigation regarding Quell; |
• | unfavorable experiences by patients and physicians using Quell and our other products; and, |
• | physicians’ or patients' reluctance to alter their existing practices and adopt the use of our devices. |
NEUROMETRIX, INC. | ||
July 18, 2019 | /s/ | SHAI N. GOZANI, M.D., PH. D. |
Shai N. Gozani, M.D., Ph. D. | ||
Chairman, President and Chief Executive Officer | ||
July 18, 2019 | /s/ | THOMAS T. HIGGINS |
Thomas T. Higgins | ||
Senior Vice President, Chief Financial Officer and Treasurer |
Exhibit No. | Description | |
Twelfth Modification to Loan and Security Agreement with Comerica Bank, dated June 21, 2019. Filed herewith. | ||
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(a) or Rule 15d-14(a) 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 June 30, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Balance Sheets at June 30, 2019 and December 31, 2018, (ii) Statements of Operations for the quarter and six months ended June 30, 2019 and 2018, (iii) Statements of Changes in Stockholders' Equity for the six months ended June 30, 2019 and 2018, (iv) Statements of Cash Flows for the six months ended June 30, 2019 and 2018, and (v) Notes to Financial Statements. | |
2. | Modification to the Agreement. Subject to the satisfaction of the conditions precedent as set forth in Section 3 hereof, the Agreement is hereby modified as set forth below. |
3. | Legal Effect. |
7. | Counterparts. This Modification may be executed in one or more counterparts, each of which shall be deemed an original but all of which taken together shall constitute one and the same Agreement, and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other party. |
1. | I have reviewed this Quarterly Report on Form 10-Q of NeuroMetrix, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and | |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): | |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | July 18, 2019 | /s/ SHAI N. GOZANI, M.D., PH.D. |
Shai N. Gozani, M.D., Ph.D. | ||
Chairman, President and Chief Executive Officer |
I, Thomas T. Higgins, certify that: | ||
1. | I have reviewed this Quarterly Report on Form 10-Q of NeuroMetrix, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and | |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): | |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | July 18, 2019 | /s/ THOMAS T. HIGGINS |
Thomas T. Higgins | ||
Senior Vice President, Chief Financial Officer and Treasurer |
/s/ SHAI N. GOZANI, M.D., PH.D. | |
Shai N. Gozani, M.D., Ph.D. | |
Chairman, President and Chief Executive Officer | |
/s/ THOMAS T. HIGGINS | |
Thomas T. Higgins | |
Senior Vice President, Chief Financial Officer and Treasurer |
Document And Entity Information - shares |
6 Months Ended | |
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Jun. 30, 2019 |
Jul. 12, 2019 |
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Document And Entity Information [Abstract] | ||
Entity Registrant Name | NeuroMetrix, Inc. | |
Entity Central Index Key | 0001289850 | |
Trading Symbol | NURO | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 9,781,755 | |
Class of Warrant or Right, Outstanding | 454,781 |
Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Common Stock, Shares, Outstanding | 9,781,755 | 7,380,463 |
Common Stock, Shares, Issued | 9,781,755 | 7,380,463 |
Common Stock, Shares Authorized | 100,000,000 | 100,000,000 |
Common Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
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Revenue from Contract with Customer, Including Assessed Tax | $ 2,354,683 | $ 3,751,568 | ||
Other Income | 18,520 | 11,014 | $ 35,333 | $ 22,279 |
Other Operating Income | 1,400,338 | 3,761,013 | 7,152,000 | 8,527,983 |
Net income (loss) | (3,362,191) | 573,928 | (1,311,684) | 1,740,180 |
Loss from operations | (4,762,529) | (3,187,085) | (8,463,684) | (6,787,803) |
Collaboration Income | 1,381,818 | 3,749,999 | 7,116,667 | 8,505,704 |
Net income (loss) applicable to common stockholders: | ||||
Net income (loss) applicable to common stockholders | $ (3,362,191) | $ 573,928 | $ (1,311,684) | $ 1,740,180 |
Earnings Per Share, Basic | $ (0.37) | $ 0.08 | $ (0.16) | $ 0.25 |
Earnings Per Share, Diluted | $ (0.37) | $ 0.04 | $ (0.16) | $ 0.13 |
Weighted Average Number of Shares Outstanding, Basic | 9,048,235 | 7,330,479 | 8,396,249 | 6,839,778 |
Operating expenses: | ||||
Research and development | $ 1,034,921 | $ 1,616,863 | $ 1,890,002 | $ 2,896,427 |
Sales and marketing | 1,373,949 | 2,200,852 | 3,399,237 | 4,705,593 |
General and administrative | 1,564,555 | 1,170,634 | 3,184,045 | 2,974,777 |
Total operating expenses | 3,973,425 | 4,988,349 | 8,473,284 | 10,576,797 |
Revenues | 5,477,618 | 8,694,558 | ||
Gross profit | (789,104) | 1,801,264 | 9,600 | 3,788,994 |
Cost of revenues | $ 3,143,787 | $ 1,950,304 | $ 5,468,018 | $ 4,905,564 |
Business and Basis of Presentation |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business and Basis of Presentation | Business and Basis of Presentation Our Business-An Overview NeuroMetrix, Inc., or the Company, is a commercial stage, innovation driven healthcare company combining neurostimulation and digital medicine to address chronic health conditions including chronic pain, sleep disorders, and diabetes. The Company has two primary products. Quell is an over-the-counter wearable therapeutic device for chronic pain. DPNCheck® is a rapid point-of-care test for diabetic neuropathy which is the most common long-term complication of Type 2 diabetes. In June 2019 the Company announced a business restructuring aimed at operating costs and cash preservation while continuing to focus on supporting its DPNCheck® product line, managing its existing Quell® business while evaluating alternative therapeutic applications for the core technology, maintaining its strategic collaboration with GlaxoSmithKline, and attempting to negotiate a settlement of the previously disclosed and ongoing Federal Trade Commission (FTC) investigation which is centered on Quell advertising. The restructuring involved a reduction in force, a planned consolidation of all operations in a single location, and the write-down of excess Quell inventory. In connection with the restructuring, the Company recorded in the second quarter of 2019 a restructuring charge of $2.3 million (See Note 7.). It is likely that the Company will incur future charges associated with settlement of the FTC matter; however, the amount of such charges cannot be reasonably estimated at this time (See Note 8.). In June 2019, the Company also announced that it had retained an investment bank to explore strategic alternatives to enhance shareholder value, including the potential sale or merger of the Company. 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 suffered recurring losses from operations and negative cash flows from operating activities. At June 30, 2019, the Company had an accumulated deficit of $192.3 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 $5.0 million as of June 30, 2019. The Company believes that these resources, future GSK collaboration milestone payments, and the cash to be generated from future product sales will be sufficient to meet its projected operating requirements through 2019. Accordingly, the Company will need to raise additional funds to support its operating and capital needs in 2020. The Company continues to face significant challenges and uncertainties and, 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 and the uncertainty of future revenues from new products; (b) changes the Company may make to the business that affect ongoing operating expenses; (c) changes the Company may make in its business strategy; (d) regulatory developments affecting the Company’s existing products; (e) changes the Company may make in its research and development spending plans; (f) delays in the anticipated timing of achievement of GSK milestones; (g) the final outcome of the FTC civil investigative demand enforcement action involving Quell; and (h) other items affecting the Company’s forecasted level of expenditures and use of cash resources. The Company may attempt to obtain additional funding through achievement of milestones under the GSK collaboration, 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 June 30, 2019, unaudited statements of operations for the quarters and six months ended June 30, 2019 and 2018, unaudited statements of changes in stockholders' equity for the six months ended June 30, 2019 and 2018 and the unaudited statements of cash flows for the six months ended June 30, 2019 and 2018 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, 2018 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 six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 or any other period. These financial statements and notes should be read in conjunction with the financial statements for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, or the SEC, on January 24, 2019 (File No. 001-33351), or the Company’s 2018 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 net of the allowance for doubtful accounts which represents the Company’s best estimate of credit losses. Allowance for doubtful accounts was $25,000 as of June 30, 2019 and December 31, 2018. Two customers accounted for 31% and one customer accounted for 20% of total revenues in the quarters and six months ended June 30, 2019, respectively. Two customers accounted for 24% and 29% of total revenues in the quarters and six months ended June 30, 2018, respectively. Three customers accounted for 62% and two customers accounted for 45% of accounts receivable as of June 30, 2019 and December 31, 2018, respectively. 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. The Company recognized Collaboration income net of costs, within Other income in the Statement of Operations of $7,116,667 and $8,505,704, for the six months ended June 30, 2019 and 2018, respectively. Stock-based Compensation Total compensation cost related to non-vested awards not yet recognized at June 30, 2019 was $139,588. 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. Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. 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. The Company 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. The following table summarizes the effects of adopting ASU 2016-02 on the Company's balance sheet as of June 30, 2019:
The following table summarizes the effects of adopting ASU 2016-02 on the Company's balance sheet as of December 31, 2018:
Adoption of ASU 2016-02 had no impact on the Company's statements of operations, statements of changes in stockholders' equity and statements of cash flows. |
Comprehensive Loss |
6 Months Ended |
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Jun. 30, 2019 | |
Equity [Abstract] | |
Comprehensive Loss | Comprehensive Income (Loss) For the quarters and six months ended June 30, 2019 and 2018, the Company had no components of other comprehensive income (loss) other than net income (loss) itself. |
Net Loss Per Common Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Loss Per Common Share |
Basic and dilutive net income (loss) per common share were as follows:
Shares underlying the following potentially dilutive weighted average number of common stock equivalents were excluded from the calculation of diluted net (loss) income per common share because their effect was anti-dilutive for each of the periods presented:
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Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
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Inventories | Inventories Inventories consist of the following:
As of June 30, 2019 inventory reserves for excess stock totaled $2,181,819 with $2,030,000 allocated to purchased components and $151,819 allocated to finished goods. |
Accrued Expenses |
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Accrued Expenses | Accrued Expenses Accrued expenses consist of the following:
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | 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.
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Credit Facility |
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Debt Disclosure [Abstract] | |
Credit Facility | Credit Facility The Company is party to a Loan and Security Agreement, as amended (the “Credit Facility”), with a bank. As of June 30, 2019, the Credit Facility permitted the Company to borrow up to $2.5 million on a revolving basis. The Credit Facility was amended most recently in June 2019 and expires in September 2019. Amounts borrowed under the Credit Facility will bear interest equal to the prime rate plus 0.5%. Any borrowings under the Credit Facility will be collateralized by the Company’s cash, accounts receivable, inventory, and equipment. The Credit Facility includes traditional lending and reporting covenants. These include certain financial covenants applicable to liquidity that are to be maintained by the Company. As of June 30, 2019, the Company was in compliance with these covenants and had not borrowed any funds under the Credit Facility. However, $226,731 of the amount under the Credit Facility is restricted to support letters of credit issued in favor of the Company's landlords. Consequently, the amount available for borrowing under the Credit Facility as of June 30, 2019 was approximately $2.3 million. |
Stockholders' Equity |
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Stockholders' Equity | Stockholders’ Equity Preferred stock and convertible preferred stock consist of the following:
2019 equity activity During the six months ended June 30, 2019, 2,998.20 shares of the Series D Preferred Stock were converted into a total of 1,140,000 shares of Common Stock and 3,260.70 shares of the Series E Preferred Stock were converted into a total of 1,239,810 shares of Common Stock. 2018 equity activity During the six months ended June 30, 2018, the Company issued shares of fully vested common stock in partial settlement of outstanding management incentive compensation. The issuance involved 214,791 shares with an aggregate value of $294,264, reflecting the $1.37 closing price of the Company’s common stock as reported on the Nasdaq Capital Market on April 12, 2018. During the six months ended June 30, 2018, 3,739.3 shares of the Series E Preferred Stock were converted into a total of 1,421,787 shares of Common Stock and 7,927.05 shares of the Series F Preferred Stock were converted into a total of 3,014,087 shares of Common Stock. |
Reverse Stock Split |
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Reverse Stock Split | Stockholders’ Equity Preferred stock and convertible preferred stock consist of the following:
2019 equity activity During the six months ended June 30, 2019, 2,998.20 shares of the Series D Preferred Stock were converted into a total of 1,140,000 shares of Common Stock and 3,260.70 shares of the Series E Preferred Stock were converted into a total of 1,239,810 shares of Common Stock. 2018 equity activity During the six months ended June 30, 2018, the Company issued shares of fully vested common stock in partial settlement of outstanding management incentive compensation. The issuance involved 214,791 shares with an aggregate value of $294,264, reflecting the $1.37 closing price of the Company’s common stock as reported on the Nasdaq Capital Market on April 12, 2018. During the six months ended June 30, 2018, 3,739.3 shares of the Series E Preferred Stock were converted into a total of 1,421,787 shares of Common Stock and 7,927.05 shares of the Series F Preferred Stock were converted into a total of 3,014,087 shares of Common Stock. |
Restructuring And Related Activities (Notes) |
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Restructuring and Related Activities Disclosure [Text Block] | Business Restructuring In June 2019 the Company reported a business restructuring incorporating several different elements and involving a charge against operations of approximately $2.3 million. This restructuring included a reduction in force affecting eleven employees and severance costs of $224,773. It also includes a planned consolidation of the Company's corporate office and engineering labs into its Woburn manufacturing facility resulting in estimated relocation and idle asset costs of approximately $225,000. In addition, the Company incurred a Quell inventory-related costs totaling $1,895,884 in order to cover the write down of excess parts to their net realizable value of $1,485,884 and accrued costs related to parts purchase commitments of $410,000. The severance and relocation obligations relating to the business restructuring outstanding as of June 30, 2019 are presented below.
Within the Company's Statements of Operations for the quarter and six months ended June 30, 2019, Quell inventory-related costs of $1,895,884 were recorded within costs of revenues, $201,514 of severance and relocation costs were recorded within research and development, $129,812 of severance and relocation costs were recorded within sales and marketing, and $118,447 of severance and relocation costs were recorded within general and administrative. |
Commitments And Contingencies Commitments And Contingencies (Notes) |
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Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies Disclosure [Text Block] | Contingencies As previously disclosed, in 2017, the Company received a Civil Investigative Demand (“CID”) from the Federal Trade Commission (the “FTC”). The CID requested information in connection with an FTC review for compliance of the Company’s advertising about its product Quell with Sections 5 and 12 of the Federal Trade Commission Act (the “FTC Act”). During 2017 and 2018, the Company provided responses to those requests. The Company met with the staff of the FTC (the “Staff”) on three occasions between March and July 2019 to discuss the Company’s responses to FTC inquiries, and the Company has provided additional information in response to further requests from the FTC. As part of those discussions, the parties are engaged in a dialogue regarding the possible structuring of a settlement of this matter, which is likely to include a monetary judgment that would be payable to the FTC. The Company and the FTC will also be negotiating the scope and terms of a proposed consent order (the “Order”), which is expected to prohibit the Company from making certain claims in the Company’s advertising about Quell, as will likely be defined by the Order. The Company is currently awaiting feedback from the Staff on the latest discussions and responses to Staff inquiries, and intends to continue the dialogue with the Staff regarding a resolution of this matter. The ultimate outcome cannot be reasonably estimated at this time; however, the Company believes that a material financial loss is probable. |
Leases Leases (Notes) |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lessee, Operating Leases [Text Block] | Operating Leases In June 2018, the Company extended the lease on its Woburn, Massachusetts manufacturing facilities (the “Woburn Lease”) through September 2025. The Woburn Lease has a monthly base rent of $13,918 and a 5-year extension option. In September 2014, the Company entered into a 7-year operating lease agreement with one 5-year extension option for its corporate office and product development activities in Waltham, Massachusetts (the “Waltham Lease”). The term of the Waltham Lease commenced on February 20, 2015 and includes fixed payment obligations that escalate over the initial lease term. Average monthly base rent under the Waltham lease is $41,074. Future minimum lease payments under non-cancellable operating leases as of June 30, 2019 are as follows:
Total recorded rent expense was $332,049 and $307,420, for the six months ended June 30, 2019 and 2018, respectively. The Company records rent expense on its facility leases on a straight-line basis over the lease term. |
Business and Basis of Presentation (Policies) |
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Share-based Payment Arrangement [Policy Text Block] | Stock-based Compensation Total compensation cost related to non-vested awards not yet recognized at June 30, 2019 was $139,588. The total compensation costs are expected to be recognized over a weighted-average period of 1.3 years. |
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Our Business-An Overview | Our Business-An Overview NeuroMetrix, Inc., or the Company, is a commercial stage, innovation driven healthcare company combining neurostimulation and digital medicine to address chronic health conditions including chronic pain, sleep disorders, and diabetes. The Company has two primary products. Quell is an over-the-counter wearable therapeutic device for chronic pain. DPNCheck® is a rapid point-of-care test for diabetic neuropathy which is the most common long-term complication of Type 2 diabetes. In June 2019 the Company announced a business restructuring aimed at operating costs and cash preservation while continuing to focus on supporting its DPNCheck® product line, managing its existing Quell® business while evaluating alternative therapeutic applications for the core technology, maintaining its strategic collaboration with GlaxoSmithKline, and attempting to negotiate a settlement of the previously disclosed and ongoing Federal Trade Commission (FTC) investigation which is centered on Quell advertising. The restructuring involved a reduction in force, a planned consolidation of all operations in a single location, and the write-down of excess Quell inventory. In connection with the restructuring, the Company recorded in the second quarter of 2019 a restructuring charge of $2.3 million (See Note 7.). It is likely that the Company will incur future charges associated with settlement of the FTC matter; however, the amount of such charges cannot be reasonably estimated at this time (See Note 8.). In June 2019, the Company also announced that it had retained an investment bank to explore strategic alternatives to enhance shareholder value, including the potential sale or merger of the Company. 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 suffered recurring losses from operations and negative cash flows from operating activities. At June 30, 2019, the Company had an accumulated deficit of $192.3 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 $5.0 million as of June 30, 2019. The Company believes that these resources, future GSK collaboration milestone payments, and the cash to be generated from future product sales will be sufficient to meet its projected operating requirements through 2019. Accordingly, the Company will need to raise additional funds to support its operating and capital needs in 2020. The Company continues to face significant challenges and uncertainties and, 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 and the uncertainty of future revenues from new products; (b) changes the Company may make to the business that affect ongoing operating expenses; (c) changes the Company may make in its business strategy; (d) regulatory developments affecting the Company’s existing products; (e) changes the Company may make in its research and development spending plans; (f) delays in the anticipated timing of achievement of GSK milestones; (g) the final outcome of the FTC civil investigative demand enforcement action involving Quell; and (h) other items affecting the Company’s forecasted level of expenditures and use of cash resources. The Company may attempt to obtain additional funding through achievement of milestones under the GSK collaboration, 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. |
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Unaudited Interim Financial Statements | Unaudited Interim Financial Statements The accompanying unaudited balance sheet as of June 30, 2019, unaudited statements of operations for the quarters and six months ended June 30, 2019 and 2018, unaudited statements of changes in stockholders' equity for the six months ended June 30, 2019 and 2018 and the unaudited statements of cash flows for the six months ended June 30, 2019 and 2018 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, 2018 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 six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 or any other period. These financial statements and notes should be read in conjunction with the financial statements for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, or the SEC, on January 24, 2019 (File No. 001-33351), or the Company’s 2018 Form 10-K. |
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Revenues | 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 net of the allowance for doubtful accounts which represents the Company’s best estimate of credit losses. Allowance for doubtful accounts was $25,000 as of June 30, 2019 and December 31, 2018. Two customers accounted for 31% and one customer accounted for 20% of total revenues in the quarters and six months ended June 30, 2019, respectively. Two customers accounted for 24% and 29% of total revenues in the quarters and six months ended June 30, 2018, respectively. Three customers accounted for 62% and two customers accounted for 45% of accounts receivable as of June 30, 2019 and December 31, 2018, respectively. 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. The Company recognized Collaboration income net of costs, within Other income in the Statement of Operations of $7,116,667 and $8,505,704, for the six months ended June 30, 2019 and 2018, respectively. |
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Use of Estimates | 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. |
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Reclassification, Policy [Policy Text Block] | Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. |
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Recent Accounting Pronouncements | 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. The Company 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. The following table summarizes the effects of adopting ASU 2016-02 on the Company's balance sheet as of June 30, 2019:
The following table summarizes the effects of adopting ASU 2016-02 on the Company's balance sheet as of December 31, 2018:
Adoption of ASU 2016-02 had no impact on the Company's statements of operations, statements of changes in stockholders' equity and statements of cash flows. |
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ASU 2016-02 Impact [Table Text Block] [Table Text Block] | The following table summarizes the effects of adopting ASU 2016-02 on the Company's balance sheet as of June 30, 2019:
The following table summarizes the effects of adopting ASU 2016-02 on the Company's balance sheet as of December 31, 2018:
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Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
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Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share |
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Schedule of Inventory | Inventories consist of the following:
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accrued Expenses | Accrued expenses consist of the following:
|
Fair Value Measurements (Tables) |
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets and Liabilities Measured at Fair Value on Recurring Basis |
|
Stockholders' Equity (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock and convertible preferred stock | Preferred stock and convertible preferred stock consist of the following:
|
Restructuring And Related Activities Restructuring And Related Activities |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Cost and Reserve [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Costs [Table Text Block] | The severance and relocation obligations relating to the business restructuring outstanding as of June 30, 2019 are presented below.
|
Leases Leases (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lessee, Operating Lease, Liability, Maturity [Table Text Block] |
|
Business and Basis of Presentation (Detail) - USD ($) |
1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Organization And Basis Of Presentation [Line Items] | |||||||
Restructuring Charges | $ 2,300,000 | $ 2,300,000 | |||||
Revenues | $ 5,477,618 | $ 8,694,558 | |||||
Accounts receivable, net | 726,670 | 726,670 | 726,670 | $ 1,082,957 | |||
Net proceeds from issuance of stock and warrants | 7,497 | 0 | |||||
Accumulated deficit | 192,328,275 | 192,328,275 | 192,328,275 | 191,016,591 | |||
Cash and cash equivalents | 4,958,058 | 4,958,058 | 4,958,058 | 6,780,429 | |||
Allowance for doubtful accounts | 25,000 | 25,000 | 25,000 | 25,000 | |||
Prepaid expenses and other current assets | (1,101,154) | (1,101,154) | (1,101,154) | (860,915) | |||
Assets, Current | (8,849,313) | (8,849,313) | (8,849,313) | (11,586,165) | |||
Accrued Sales Return provisions | 741,607 | 741,607 | 741,607 | 1,101,658 | |||
Liabilities, Current | (4,839,893) | (4,839,893) | (4,839,893) | (6,592,897) | |||
Operating Lease, Liability, Noncurrent | (1,116,734) | (1,116,734) | $ (1,116,734) | (1,116,734) | (1,116,734) | (1,301,172) | |
Stockholders' Equity Attributable to Parent | 4,857,650 | 4,857,650 | 7,721,608 | 4,857,650 | 7,721,608 | 6,097,811 | $ 5,017,389 |
Cost of revenues | 3,143,787 | 1,950,304 | 5,468,018 | 4,905,564 | |||
Gross Profit | (789,104) | 1,801,264 | 9,600 | 3,788,994 | |||
Net Income (Loss) Available to Common Stockholders, Diluted | (3,362,191) | $ 573,928 | (1,311,684) | $ 1,740,180 | |||
Compensation cost not yet recognized | 139,588 | $ 139,588 | $ 139,588 | ||||
Compensation cost not yet recognized, period for recognition | 1 year 3 months 23 days | ||||||
Earnings Per Share, Basic | $ (0.37) | $ 0.08 | $ (0.16) | $ 0.25 | |||
Earnings Per Share, Diluted | $ (0.37) | $ 0.04 | $ (0.16) | $ 0.13 | |||
Operating Lease, Right-of-Use Asset | (1,645,668) | $ (1,645,668) | $ (1,645,668) | (1,968,062) | |||
Other long-term assets | (29,824) | (29,824) | (29,824) | (30,314) | |||
Assets | (10,814,277) | (10,814,277) | (10,814,277) | (13,991,880) | |||
Accrued Liabilities, Current | (3,081,192) | (3,081,192) | (3,081,192) | (2,236,633) | |||
Liabilities | (5,956,627) | (5,956,627) | (5,956,627) | $ (7,894,069) | |||
Collaboration Income | $ 1,381,818 | $ 3,749,999 | $ 7,116,667 | $ 8,505,704 | |||
One Customer [Member] | Revenue | Customer Concentration Risk | |||||||
Organization And Basis Of Presentation [Line Items] | |||||||
Concentration risk, percentage | 20.00% | ||||||
Two Customers | Revenue | Customer Concentration Risk | |||||||
Organization And Basis Of Presentation [Line Items] | |||||||
Concentration risk, percentage | 31.00% | 24.00% | 29.00% | ||||
Two Customers | Accounts Receivable | Customer Concentration Risk | |||||||
Organization And Basis Of Presentation [Line Items] | |||||||
Concentration risk, percentage | 45.00% | ||||||
Three Customers [Member] | Accounts Receivable | Customer Concentration Risk | |||||||
Organization And Basis Of Presentation [Line Items] | |||||||
Concentration risk, percentage | 62.00% | ||||||
CalculatedUnderRevenueGuidanceInEffectBeforeTopic842 [Member] | |||||||
Organization And Basis Of Presentation [Line Items] | |||||||
Prepaid expenses and other current assets | (1,128,049) | $ (1,128,049) | $ (1,128,049) | $ (905,767) | |||
Assets, Current | (8,876,208) | (8,876,208) | (8,876,208) | (11,631,017) | |||
Liabilities, Current | (4,381,954) | (4,381,954) | (4,381,954) | (6,015,437) | |||
Operating Lease, Liability, Noncurrent | 0 | 0 | 0 | 0 | |||
Operating Lease, Right-of-Use Asset | 0 | 0 | 0 | 0 | |||
Other long-term assets | (73,924) | (73,924) | (73,924) | (74,892) | |||
Assets | (9,239,604) | (9,239,604) | (9,239,604) | (12,113,248) | |||
Accrued Liabilities, Current | (2,623,253) | (2,623,253) | (2,623,253) | (1,659,173) | |||
Liabilities | (4,381,954) | (4,381,954) | (4,381,954) | (6,015,437) | |||
DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic842 [Member] | |||||||
Organization And Basis Of Presentation [Line Items] | |||||||
Prepaid expenses and other current assets | 26,895 | 26,895 | 26,895 | 44,852 | |||
Assets, Current | 26,895 | 26,895 | 26,895 | 44,852 | |||
Liabilities, Current | (457,939) | (457,939) | (457,939) | (577,460) | |||
Operating Lease, Liability, Noncurrent | (1,116,734) | (1,116,734) | (1,116,734) | (1,301,172) | |||
Operating Lease, Right-of-Use Asset | (1,645,668) | (1,645,668) | (1,645,668) | (1,968,062) | |||
Other long-term assets | 44,100 | 44,100 | 44,100 | 44,578 | |||
Assets | (1,574,673) | (1,574,673) | (1,574,673) | (1,878,632) | |||
Accrued Liabilities, Current | (457,939) | (457,939) | (457,939) | (577,460) | |||
Liabilities | $ (1,574,673) | $ (1,574,673) | $ (1,574,673) | $ (1,878,632) |
Comprehensive Loss (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Equity [Abstract] | ||||
Other comprehensive income (loss), net of tax | $ 0 | $ 0 | $ 0 | $ 0 |
Net Loss Per Common Share Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Earnings Per Share [Abstract] | ||||
Net Income (Loss) Available to Common Stockholders, Diluted | $ (3,362,191) | $ 573,928 | $ (1,311,684) | $ 1,740,180 |
Weighted Average Number of Shares Outstanding, Basic | 9,048,235 | 7,330,479 | 8,396,249 | 6,839,778 |
Incremental Common Shares Attributable to Dilutive Effect of Conversion of Preferred Stock | 0 | 6,584,674 | 0 | 6,980,585 |
Weighted Average Number of Shares Outstanding, Diluted | 9,048,235 | 13,915,153 | 8,396,249 | 13,820,363 |
Earnings Per Share, Basic | $ (0.37) | $ 0.08 | $ (0.16) | $ 0.25 |
Earnings Per Share, Diluted | $ (0.37) | $ 0.04 | $ (0.16) | $ 0.13 |
Inventories (Detail) - USD ($) |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
Inventory [Line Items] | |||
Inventory Valuation Reserves | $ 2,181,819 | ||
Purchased components | 1,226,434 | $ 1,767,674 | |
Inventory Write-down | (2,595,884) | $ 0 | |
Finished goods | 836,997 | 1,094,190 | |
Inventories | 2,063,431 | $ 2,861,864 | |
PurchasedComponents [Member] | |||
Inventory [Line Items] | |||
Inventory Valuation Reserves | (2,030,000) | ||
FinishedGoods [Member] | |||
Inventory [Line Items] | |||
Inventory Valuation Reserves | $ (151,819) |
Accrued Expenses - Schedule of Accrued Expenses (Detail) - USD ($) |
Jun. 30, 2019 |
Dec. 31, 2018 |
Jun. 30, 2018 |
---|---|---|---|
Payables and Accruals [Abstract] | |||
Sales return allowance | $ 741,607 | $ 1,101,658 | |
Technology fees | 450,000 | 450,000 | |
ContractManufacturer | 590,000 | 160,000 | |
Professional services | 566,000 | 391,000 | |
Operating Lease, Liability, Current | 582,940 | 577,460 | $ 582,940 |
Warranty reserve | 103,000 | 129,837 | |
Accrued Relocation Costs | 100,000 | 0 | |
Accrued Advertising | 380,000 | 171,000 | |
Accrued Salaries | 162,990 | 223,756 | |
Other | 146,262 | 133,580 | |
Accrued expenses | $ 3,081,192 | $ 2,236,633 |
Fair Value Measurements - Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - Fair Value, Measurements, Recurring - USD ($) |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Assets | ||
Cash equivalents | $ 3,004,775 | $ 4,284,928 |
Assets, Fair Value Disclosure | 3,004,775 | 4,284,928 |
Level 1 | ||
Assets | ||
Cash equivalents | 3,004,775 | 4,284,928 |
Assets, Fair Value Disclosure | 3,004,775 | 4,284,928 |
Level 2 | ||
Assets | ||
Cash equivalents | 0 | 0 |
Assets, Fair Value Disclosure | 0 | 0 |
Level 3 | ||
Assets | ||
Cash equivalents | 0 | 0 |
Assets, Fair Value Disclosure | $ 0 | $ 0 |
Credit Facility (Detail) |
6 Months Ended |
---|---|
Jun. 30, 2019
USD ($)
| |
Line of Credit Facility [Line Items] | |
Revolving credit facility, maximum borrowing capacity | $ 2,500,000 |
Credit facility expiration date | Sep. 30, 2019 |
Credit facility limit restricted to support letter of credit | $ 226,731 |
Line of credit facility, remaining borrowing capacity | $ 2,300,000 |
Prime Rate | |
Line of Credit Facility [Line Items] | |
Interest rate over prime rate | 0.50% |
Reverse Stock Split (Details) - shares |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Class of Stock [Line Items] | ||
Shares outstanding (in shares) | 9,781,755 | 7,380,463 |
Label | Element | Value |
---|---|---|
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents | us-gaap_CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents | $ 4,043,681 |
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents | us-gaap_CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents | $ 6,780,429 |
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