Echo Lake Capital Issues Top Ten List of Reasons Why Shai Gozani, CEO of Neurometrix Inc., Should Be Fired

  • NURO stock price has declined 99% since its IPO
  • Gozani has received compensation of over $10 million since the IPO
  • Gozani was charged by the FTC for various wrongdoings at NURO
  • Gozani apparently personally paid the FTC $4 million as part of a settlement
  • Gozani barely owns any NURO shares
  • NURO continues to sell stock significantly below its net cash value

NEW YORK, NY / ACCESSWIRE / March 12, 2024 / Earlier today Echo Lake Capital sent a letter to the Board of Directors of Neurometrix, Inc. (NASDAQ:NURO). The letter listed the top ten reasons why the Board should immediately fire Shai Gozani, the company's longstanding Chairman and CEO. The reasons include (i) NURO's stock price has declined 99% since the IPO, (ii) while shareholders have suffered massive losses, Gozani has received over $10 million of compensation, (iii) Gozani was charged by the Federal Trade Commission for various wrongdoings at NURO, (iv) Gozani apparently personally paid $4 million to the FTC as part of a settlement, and (v) Gozani's decision to dilute shareholders by having NURO issue shares at prices significantly below net cash.

The letter also questions why the Board (whose members include a stand up comedian, a practicing doctor, and a board director of two other public companies (Performant Financial Corp. and American Oncology Network Inc.)), continue to support Gozani considering his performance over the past twenty years.

A full copy of the letter can be found below:

Ephraim Fields


Shai Gozani - Chairman and CEO

Bradley Fluegel - Board Director at Performant Financial Corp. and American Oncology Network Inc.

David E. Goodman - Practicing Doctor in Novato, CA

Nancy E. Katz - "Consultant"

David Van Avermaete - Stand Up Comedian

Shai Gozani is the worst Chairman/CEO we have ever seen…and we've a lot of them.

You collectively are among the worst Board of Directors we have ever seen. Even though NURO's long-suffering shareholders continue to lose money, you continue to enrich yourselves at shareholders' expense while also inexcusably continuing to support Mr. Gozani (despite his well-established track record of destroying shareholder value). We are deeply concerned about your repeated failures to act in shareholders' best interests. Furthermore, having closely analyzed your backgrounds and professional experiences we question why any public company would select you to serve as a board member....but these topics can be addressed in subsequent letters.

Since you apparently believe Mr. Gozani has been doing a good job, we've prepared a list of the TOP 10 reasons why we believe he should be fired immediately:

1) Stock price declined 99% since IPO in 2004.
Gozani has been NURO's Chairman and CEO since its IPO and since that time NURO's stock price has declined 99% (adjusted for reverse stock splits). We don't know many CEOs who have kept their jobs after destroying so much shareholder value.
2) Received over $10 mm of compensation since IPO.
Since the IPO Gozani has received (aka the Board has given him) compensation exceeding $10 million. We're not sure what he has done to deserve so much compensation and can only wonder how much you would have paid him had NURO's stock price only declined 50% instead of 99%.
3) Personally charged by the Federal Trade Commission for actions at NURO.
In 2020 the FTC claimed Gozani (among other things) engaged in "unlawful acts and practices repeatedly over a period of more than four years, continued their unlawful acts or practices despite knowledge of complaints that advertising claims for Quell were not substantiated and went beyond claims the FDA allowed for similar devices, and continued such deceptive advertising unabated until FTC staff notified them it would recommend law enforcement action." We encourage you to read the entire FTC complaint which includes additional damaging allegations.
4) Apparently personally paid the FTC $4 million as part of a settlement.
We can only imagine the level of incriminating evidence the FTC had against Gozani that motivated him to apparently personally pay the FTC $4 million to settle this matter. More importantly, we strongly believe that Gozani's actions in this matter caused severe financial, operational and reputational damage to NURO and its shareholders.
5) Approves of NURO issuing stock at massive discount to net cash.
We find it inexcusable that NURO has been selling stock at prices dramatically below its net cash per share. We see no justification for these equity issuances especially since NURO already has a significant amount of net cash. Year to date Nuro has sold over 460,000 shares at an average price of $3.40, even though the company had $11.80 of net cash per share as of December 31, 2023. How on earth can you or Gozani justify this? We have NEVER seen a company sell stock at such a large discount to its net cash. Furthermore, considering how much shareholder value Gozani has destroyed, we wonder why you expect that he will do a good job allocating the additional capital NURO is raising.
6) Barely owns any NURO shares.
Despite being NURO's founder, Gozani owns only approximately 10,000 NURO shares. These shares have a market value of only $40,000 and represent 0.5% of the company's shares outstanding. Gozani's lack of personal investment in NURO shares may explain why he endorses such value destroying initiatives such as selling stock significantly below net cash. We think it reflects very poorly on a CEO when he owns so little stock in his own company.
7) Refuses to speak with a large NURO shareholder.
We are NURO's 2nd largest shareholder (and own multiples more stock than does the entire Board combined). We have been trying to speak to Gozani since late February (before we filed our Schedule 13D) but he has not responded to us. We believe part of a CEO's job is to engage with shareholders, not avoid them.
8) Has taken compensation worth almost 2x NURO's equity market cap.
The $10 million of compensation Gozani has taken from NURO (and its shareholders) is almost 2x greater than NURO's equity market cap (as of December 31, 2023). If you didn't think paying Gozani $10 million was excessive considering his absolute performance, what do you think of his compensation on a relative basis?
9) Believes a $5.5 million market cap company should remain public.
At the end of 2023, NURO had an equity market of only $5.5 million, making it one of the smallest publicly traded companies in the United States. Most sophisticated board members and investors we know believe that companies this small should not remain public (for many reasons including the relatively high costs of remaining public). On the other hand, Gozani apparently believes that NURO should remain public…since he is paid by NURO but owns very few shares in the company, we understand why he may be financially motivated to have NURO remain public, regardless of what happens to its stock price.
10) Ask some former NURO shareholders.
We believe that almost every institutional investor that NURO has had over the past 20 years has lost confidence in Gozani. If the nine reasons we listed above haven't convinced you to fire Gozani, we suggest you speak with some of NURO's former investors to learn why they dumped their shares and what they think of Gozani.

None of what we have written in this letter should be new to you, nor should the public criticism you've received from the company's largest shareholder, RS Fund LP. We think it is shameful that the company's two largest shareholders have to publicly write to you in order to protect the value of their investment. If you really want anyone to believe you are fulfilling your fiduciary responsibilities and acting in the best interests of shareholders, we believe you should immediately (i) fire Gozani, (ii) cancel the ATM offering and (iii) liquidate the company.


Ephraim Fields
Echo Lake Capital

SOURCE: Echo Lake Capital

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