On this call, the company may make statements which are not historical facts and are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature that depend upon or refer to future events or conditions that include words such as believe, may, will, estimate, continue, anticipate, intend, expect, plan or other similar expressions are forward-looking statements.

Any forward-looking statements reflect current views of NeuroMetrix about future results of operations and other forward-looking information. You should not rely on forward-looking statements because actual results may differ materially as a result of a number of important factors, including those set forth in the earnings release issued earlier today.

Please refer to the risks and uncertainties, including the factors described under the heading Risk Factors in the company's periodic filings with the SEC available on the company's Investor Relations website at www.neurometrix.com and on the SEC's website at www.sec.gov. NeuroMetrix does not intend to and undertakes no duty to update the information disclosed on this conference call.

I'd now like to hand -- like to introduce the NeuroMetrix President and CEO, Dr. Shai Gozani.

Thank you, and good morning. I'm joined on the call today by Tom Higgins, our Chief Financial Officer.

We appreciate this opportunity to review our fourth quarter and 2015 business highlights and our plans for 2016. Following our prepared remarks, we will be pleased to take your questions.

My notes will be focused on Quell, which we see as our primary growth driver. We believe that Quell is well positioned to address unmet needs in the $20 billion global market for devices and drugs that treat chronic pain.

In the U.S. alone, there are over 100 million adults with chronic pain, over half of them report inadequate pain control.

Quell is an FDA-cleared over-the-counter wearable device that utilizes our proprietary noninvasive neuro-stimulation technology to provide relief from chronic pain. The device is designed for people with various types of pain, including nerve pain, arthritic pain, low back pain and leg and foot pain.

Quell is lightweight and can be worn during the day while active and at night while sleeping.

Importantly, Quell is a connected device. It is enhanced by a smartphone app that controls and customizes the device and objectively tracks therapy and sleep.

Quell is -- the Quell data is synchronized to the Quell Health Cloud, which provides benefits to the user and gives us a large database of de-identified data to evaluate and optimize device performance.

We launched Quell in late second quarter of 2015 with a goal for the year of demonstrating initial significant product adoptions, strong user satisfaction and reliable product performance. From the launch in the second quarter through the end of the fourth quarter, we averaged 61% sequential growth in device shipments, achieving a total of 13,796 devices shipped.

We averaged 63% sequential quarter growth in electrode reorders, for the total of 14,906 electrode packages reordered. We averaged 57% sequential quarter growth in invoice value of cost shipments with a total invoice value of $3.06 million.

These results were achieved through online channels, primarily including our website QuellRelief.com and Amazon, QVC, physician dispensing and several other smaller channel. This initial approach was effective.

However, to support our growth plan, we need to move beyond our current distribution into mass merchandisers, chain drug stores and shopping clubs. This is our primary initiative and focus for 2016.

As a status update, negotiations have been underway for sometime, and we believe these discussions could lead to retail shipments as early as the second quarter of this year. We would then expect shipments to expand over the course of the year.

Now to be clear, there are challenges to be overcome still. However, we believe we are well positioned to successfully expand into retail this year.

In parallel with retail distribution, we must expand product awareness and brand identities so that customers are informed when Quell is available in their local retail locations. We have an expanded media campaign planned in 2016, including television promotion that will launch in earnest in the second quarter.

This promotional campaign will support our retail partners and also drive online sales.

2016 is an important and exciting year for Quell in our metrics. We look forward to keeping you informed as we proceed.

I'll now turn it over to Tom for discussion of the overall financial results.

Thanks, Shai. We had a strong ending to a successful year.

In Q4, we reported revenue of $2.7 million, that was up nearly 2x Q4 of the prior year. Full year revenue was $7.3 million versus $5.5 million in 2014, an increase of 32%.

Quell was the largest contributor to revenue growth in the quarter and in the full year. The invoice value of Quell shipments in Q4 was $1.5 million.

Against that, we recorded Q4 Quell revenue of $1.3 million. This reflects sales into distribution channels where we have sufficient experience to estimate product return rates under our 60-day right of return policy.

Other sales are not recorded in revenue until we satisfy the GAAP criteria for estimating product returns. At year-end, there was about $0.5 million in Quell sales that had not yet been recorded in revenue.

Full year 2015 Quell revenue was $2.1 million. Q4 DPNCheck revenue was $753,000, that was up 36% from the fourth quarter of last year.

Biosensor shipments reached an all-time high of 54,300 tests, and the comparable number was 31,375 tests in fourth quarter of 2014.

International sales were responsible for this increase. In the fourth quarter, we made a large initial shipment to our local distributor in Mexico, and we shipped incremental volumes to Japan in support of a local pricing initiative designed to improve sales.

That initiative is getting fully underway in the first quarter of 2016.

Shortly after the end of the year, we were notified that DPNCheck had received regulatory approval in China, and will be working with Omron Healthcare on the remaining registration items and developing the market plan for our entry into that local market.

DPNCheck sales for full year 2015 were $2,293,000, an increase of 27% over $1,800,000 in 2014. Q4 SENSUS revenue totaled $143,000 with the shipment of 812 devices and 4,600 electrodes.

This was a decline from revenue of $262,000 in Q4 of 2014.

For the full year, SENSUS revenue was $565,000, down from $877,000 in 2014. SENSUS is our prescription wearable technology for chronic pain, it was the precursor to Quell, and these sales reductions reflect both the presence of Quell in the market as well as the challenging environment for DME suppliers who deal with a high-cost structure and the anticipated effects of Medicare competitive bidding.

Q4 ADVANCE revenue was $541,000 versus $592,000 in the fourth quarter last year. For the full year, ADVANCE revenue was $2,352,000 versus $2.8 million in 2014.

This is a legacy product line, it is in decline and we do not actively promote it, rather we manage it for cash flow, shipping electrodes against reorders. It generated about $270,000 in cash in Q4 and about $1.2 million cash for the full year of 2015.

Our gross profit for the fourth quarter was $1,138,000 representing a margin rate of 41.6%, that's in comparison with the 53% rate in Q4 of last year. Full year margin was about 46% versus about 53% in the prior year.

The lower margin reflects 2 factors. First, an increase in proportion of Quell device sales in our product mix as we build our installed base of Quell users.

And secondly, a relatively low utilization of our Woburn manufacturing facility, which we opened about a year ago. Over time, a shifting balance to our higher-margin Quell electrodes and higher plant utilization should have a positive effect on the margin.

Q4 operating expenses were $4.5 million, a spending increase of 40% over $3.2 million during the fourth quarter in 2014. Full year OpEx spending of $16.6 million was up by $4.9 million from the prior year.

Within OpEx, R&D and G&A spending did not change significantly between the comparative quarters and years. Staffing levels and activity levels were similar year-to-year.

The majority of this increase was in sales and marketing.

Q4 sales and marketing spending of $2,049,000 increased from $1,234,000 in the prior fourth quarter, and full year 2015 spending of $7.2 million was up from $2.9 million in 2014.

The quarter and annual comparison reflects similar factors. Commercialization activity for Quell began in the second half of 2014 leading to product launch in June of 2015.

We developed a new consumer marketing organization beginning in August 2014. And in the early part of 2015, we fielded a small sales force for healthcare professional market.

Total Quell sales in marketing headcount is now 14 persons. Personnel costs related to Quell, including travel and other expenses, comprised about 40% of the increase both on the quarter and on the year.

Media advertising also accounted for over 40% of the increase with the balance consisting of promotional materials, marketing research and public relations. We expect that Quell promotional spending will increase as we move into retail distribution.

The income statement for the comparative quarters and the years reflect noncash credits or charges for revaluing our outstanding common stock warrants at fair value at the end of each period. These amounts are based on a Black Scholes Model and change based on stock prices.

This charge or credit does not reflect the underlying business operations in the periods.

Our net loss for Q4 was $2.7 million and our weighted average shares outstanding totaled 3.5 million. For the full year, our net loss was $9.2 million and our weighted average shares for 2015 were 2.7 million.

Our cash usage during the fourth quarter was $3.5 million. For the full year, it was $13.5 million.

On the last day of 2015, we closed an equity offering at the market price of $2.30 per common share. The offering consisted of preferred stock and warrants.

Gross proceeds were $13.8 million with $6.3 million of that number used to redeem at cost preferred shares held by the investor. Net proceeds for the company were $7.5 million before fees and expenses.

Following this transaction, we ended the year with $12.4 million in cash.

The accounting for equity offerings is complex, applying a GAAP valuation method to our offering yields a factor called a deemed dividend or beneficial conversion factor that is used in calculating reported earnings per share.

Consequently, our EPS for Q4, which would have been a negative $0.78 based on our operating results and without the affect of the equity offering, will be reported in our 10-K as a loss of $3.19. And full year 2015 EPS, which would have been a negative $3.38 without the offering, will be reported as a negative $7.75 with the offering effects.

This reporting requirement has no effect on the income statement or balance sheet, it is EPS reporting alone.

So those, Shai, are the highlights. And now back to you.

Thank you, Tom. Those conclude our prepared remarks, and we'd be happy to take questions at this point..

Talked about your openings to potential strategic investors on the last call. Could you comment on that current status and whether you have had discussions, whether this could be a source of potential future non-dilutive financing?

Thank you for the question. We are actively having discussions with a variety of different potential partners at a strategic level.

There's a great deal of interest both in wearable technology as well as chronic pain, and we have the unique solution that merges to those 2 areas. So there's nothing eminent, Bret, but we continue to have those discussions and looking for opportunities to accelerate our efforts in the marketplace as well as to pay in less dilutive financing or to, again, to support our efforts in the marketplace, but there is nothing right around the corner.

Question, what is the fully diluted share count right now?

Let's see, I can get that. The share count for the quarter -- I knew for the end of the year.

Share count for the quarter -- for the fully diluted -- the fully diluted share count is about 25 million all in.

Okay. And can you give me what percentage of that is warrants?

Sure. If you go through the -- from the top, there's about 4 million common shares that are outstanding in the market.

If you include the conversion of preferred stock into common, that takes that number from 4 million up to 10 million. And then finally, the balance of about 15 million due to combination of primarily warrants, but also some options.

Okay. And I was reading through the preferred announcement that you guys had a couple of weeks ago.

It says the initial conversion price is $2.55 per share, all right, on that, on the preferred. Is there -- is that subject to any resets?

No, no. The -- and the conversion price, when -- no, there's no subject to any resets.

Okay, okay. All right.

So that -- and so it's straight preferred that's convertible $2.55 per share.

Yes. It's a plain vanilla per preferred.

So on -- just on notice, the holder of the preferred stock can convert that to common, subject to certain limitations on percentage ownership in the company.

Okay, okay. So could you just explain that a little bit further if you could?

Yes. So the investor and we prefer that the percentage ownership in the outstanding common stock of the company and the voting interest of the company not exceed 10% of our outstanding common shares.

And so the word stock instrument contains a blocking mechanism that precludes that investor from converting. If the act is converting, it would result in exceeding that number.

Thank you. Well, Tom, can you read those.

Sure.

Since they were not addressed, please.

So one is -- one question is, what is your level of confidence that you'll be able to secure distribution deals allowing the company to get into retail distribution in the second quarter?

Thank you. So -- again, thank you for that email question.

We have a high degree of confidence that we will be in retail distribution this year. It is a multistep process that began in 2015.

There is -- obviously, the process involves convincing the various retailers of the value proposition to the consumer of the product and then going through the many steps towards agreements. So at this point, we're well into that process and we have a high degree of confidence with potential retail distribution to occur as soon as the second quarter of this year.

Thanks. Shai, another question had to do with our cash position and how far the cash horizon of the company exist now that, that financing has completed.

If you don't mind, I could...

Yes, please.

I could take that. So the -- we ended the quarter with -- and ended the year with $12.4 million in cash, and we felt that, that was an effective time to do the financing and particularly with the benefit of hindsight and seeing the volatility that's in the market today.

So we had an opportunity at the end of the year to do a deal at market, which was priced at $2.30 and that was effective for us. Now with regard to our cash horizon, it's a little bit difficult to assess considering the retail initiative, which has not yet started, and the TV promotional support to that retail initiative, which will be required.

But as we sit here today, our cash horizon certainly extends beyond the second quarter, and we see it extending beyond the third quarter also. But again, the [indiscernible] of -- the unknown here really is the retail initiative and the results.

Thank you, Tom. I think that probably concludes our e-mail questions.

Yes, absolutely.

Sorry. Just another follow-up, which is a follow-up question to what I was asking before.

What percentage of ownership is the -- does the preferred shareholder have right now in the company besides the preferred?

Slightly under 10%.

All right. So at this point, they couldn't convert if they wanted to.

Let me qualify that. At the time we do the transaction, which was the end of the year, we communicated with the investor who confirmed to us that his percentage shareholding was slightly below 10%, and we're not aware of whatever activities might have occurred in his trading since then.

Okay, yes. Got you.

So if he had sold all his stock, okay, would the amount that he could convert be based upon the fully diluted share count or on the 4 million shares that are out there right now? So like at this point, if he had 0 shares, would he be able to convert 400,000 or 2.5 million based on the fully diluted number?

No, it's based on the outstanding common share. So it'd be based on that approximately 4 million share number.

Okay. So this is a real long-term believer in your company?

We think so, yes. We're very pleased with this investor.

Well, thank you very much for joining us on this conference call. We are encouraged by the strong early response to Quell, and we look forward to updating you during the course of the year as we continue to progress.

Thank you.