NeuroMetrix, Inc. Reports Total Revenues of $14.0 Million for the Second Quarter of 2006, 73% Growth over Second Quarter of 2005; GAAP Net Income of $1.5 million, Non-GAAP Adjusted Net Income of $2.2 million WALTHAM, Mas

Reports Total Revenues of $14.0 Million for the Second Quarter of 2006, 73%

Growth over Second Quarter of 2005; GAAP Net Income of $1.5 million, Non-GAAP

Adjusted Net Income of $2.2 million

Mass. (BUSINESS WIRE) July 27, 2006 NeuroMetrix, Inc. (Nasdaq: NURO), a medical

device company focused on the design, development and sale of proprietary

products used to diagnose neuropathies, or diseases of the nerves, announced

today the financial results for the three and six month periods ended June 30,

revenues for the three months ended June 30, 2006, the Company s second

quarter, were $14.0 million, compared with $8.1 million for the second quarter

of 2005, representing an increase of 73%.

During the three month periods ended June 30, 2006 and June 30, 2005,

86% and 88% of revenues, respectively, were derived from biosensor sales and

14% and 12% of revenues, respectively, were derived from diagnostic device

revenues for the six months ended June 30, 2006, were $25.8 million, compared

with $14.9 million for the six months ended June 30, 2005, representing an

increase of 74%. During the six month

periods ended June 30, 2006 and June 30, 2005, 87% and 88% of revenues,

respectively, were derived from biosensor sales and 13% and 12% of revenues,

respectively, were derived from diagnostic device sales.

margin percentage for the second quarter of 2006 was 75.8% of revenues compared

with 74.1% of revenues for the second quarter of 2005. In the second quarter of 2006, the gross

margin percentage for biosensors was 74.9% of revenues compared with 74.2% of

revenues in the second quarter of 2005.

The gross margin percentage for diagnostic devices was 81.4% of revenues

for the second quarter of 2006, compared with 73.0% of revenues for the second

margin percentage for the six months ended June 30, 2006 was 75.7% of revenues

compared with 73.7% of revenues for the six months ended June 30, 2005. The gross margin percentage for biosensors

was 74.9% for the six months ended June 30, 2006 compared with 73.8% for the

same period in 2005. The gross margin

percentage for diagnostic devices was 81.0% for the six months ended June 30,

2006, compared with 73.0% for the same period in 2005.

income calculated in accordance with U.S. generally accepted accounting

principles ( GAAP ) for the second quarter of 2006 was $1,530,700, compared

with a net loss of $(40,100) for the second quarter of 2005, including

stock-based compensation expense of $626,800 and $71,900 for the second quarter

of 2006 and 2005, respectively. The

large increase in stock-based compensation expense was due to the adoption of

Statement of Financial Accounting Standards No. 123R ( SFAS 123R ) in

2006. Excluding stock-based compensation

expense, non-GAAP adjusted net income for the second quarter of 2006 was

$2,157,500, compared with a non-GAAP adjusted net income of $31,800 for the

second quarter of 2005.

income calculated in accordance with GAAP for the six months ended June 30,

2006 was $1,678,000, compared with a net loss of $(636,500) for the same period

in 2005, including stock-based compensation expense of $1,364,000 and $147,900

for the six months ended June 30, 2006 and 2005, respectively. Excluding stock-based compensation expense,

non-GAAP adjusted net income for the six months ended June 30, 2006 was

$3,042,000, compared with a non-GAAP adjusted net loss of $(488,600) for the

same period in 2005.

diluted net income per share was $0.12 for the three months ended June 30,

2006, compared with basic and diluted net loss per share of $0.00 for the three

months ended June 30, 2005. The basic

and diluted net income (loss) per share for the three months ended June 30,

2006 and June 30, 2005 included stock-based compensation expense of $626,800

and $71,900, respectively. Excluding

stock-based compensation expense, non-GAAP adjusted diluted net income per

share was $0.16 for the three months ended June 30, 2006, compared with

non-GAAP adjusted diluted net income per share of $0.00 for the same period in

diluted net income per share was $0.13 for the six months ended June 30, 2006,

compared with basic and diluted net loss per share of $(0.05) for the six

months ended June 30, 2005. The basic

and diluted net income (loss) per share for the six months ended June 30, 2006

and June 30, 2005 included stock-based compensation expense of $1,364,000 and

$147,900, respectively. Excluding

stock-based compensation expense, non-GAAP adjusted diluted net income per

share was $0.23 for the six months ended June 30, 2006, compared with non-GAAP

adjusted diluted net loss per share of $(0.04) for the same period in 2005.

contains a reconciliation of non-GAAP net income (loss), adjusted to exclude

stock-based compensation expense, to GAAP net income (loss) and non-GAAP

diluted net income (loss) per share, adjusted to exclude stock-based

compensation expense, to GAAP diluted net income (loss) per share, during the

three and six month periods ended June 30, 2006 and 2005.

cash equivalents and short-term investments totaled $34.7 million as of June

30, 2006, compared with $32.3 million as of December 31, 2005.

Gozani, M.D., Ph.D., NeuroMetrix s President & CEO commented, During the

second quarter of 2006, we posted top line growth of 73% on a year over year

basis due to continuing strong demand from our existing customers and due to

expansion of our customer base using our NC-stat neuropathy diagnostic

solution. We continued to see strong

penetration into the primary care physician market, which now represents 72% of

total biosensor usage. We experienced an

increase of 102% in biosensor usage on a year-over-year basis by primary care

physicians in the second quarter of 2006.

We expanded our overall active customer count to a total of 4,068

physician practices and clinics, as of the end of the second quarter of 2006,

compared with 2,696 at the end of the second quarter of 2005. A total of 287,200 biosensors were used by

our customers during the second quarter of 2006, an increase of 66% over the

173,100 biosensors used by our customers in the second quarter of 2005.

Gozani further commented: We recently

completed the expansion of our sales force to a total of 46 regional sales

managers and added Physician Sales & Services with their 700 sales reps as

a national partner to generate qualified sales leads for our direct sales

force. We believe that the strengthening

of our sales and marketing capabilities will further advance our goal of

creating a new standard of care throughout the marketplace.

continued: We were also able to

leverage our investments in sales and marketing and all other areas of the

company in the second quarter of 2006 to expand our operating margins and