NeuroMetrix, Inc. Reports Total Revenues of $14.2 Million for the Fourth Quarter of 2006, Representing 37% Growth over the Fourth Quarter of 2005; GAAP Net Income of $1.2 Million, Non-GAAP Adjusted Net Income of $1.9 Mil

Reports Total Revenues of $14.2 Million for the Fourth Quarter of 2006,

Representing 37% Growth over the Fourth Quarter of 2005; GAAP Net Income of

$1.2 Million, Non-GAAP Adjusted Net Income of $1.9 Million

Mass. (BUSINESS WIRE) February 1, 2007 NeuroMetrix, Inc. (Nasdaq: NURO), a

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

proprietary products used to help physicians diagnose neuropathies, or diseases

of the nerves, and neurovascular diseases, announced today the financial

results for the three and twelve month periods ended December 31, 2006.

revenues for the three months ended December 31, 2006, the Company s fourth

quarter, were $14.2 million, compared with $10.3 million for the fourth quarter

of 2005, representing an increase of 37%.

During the three month periods ended December 31, 2006 and 2005, 87% of

revenues were derived from biosensor sales and 13% of revenues were derived

from diagnostic device sales.

revenues for the twelve months ended December 31, 2006, were $55.2 million,

compared with $34.3 million for the twelve months ended December 31, 2005,

representing an increase of 61%. During

the twelve month periods ended December 31, 2006 and 2005, 86% and 88% of

revenues, respectively, were derived from biosensor sales and 14% and 12% of

revenues, respectively, were derived from diagnostic device sales.

margin percentage for the fourth quarter of 2006 was 74.9% of revenues,

compared with 74.5% of revenues for the fourth quarter of 2005. In the fourth quarter of 2006, the gross

margin percentage for biosensors was 73.7% of revenues, compared with 74.1% of

revenues in the fourth quarter of 2005.

The gross margin percentage for diagnostic devices was 82.9% of revenues

for the fourth quarter of 2006, compared with 77.2% of revenues for the fourth

margin percentage for the twelve months ended December 31, 2006 was 75.5% of

revenues, compared with 74.2% of revenues for the twelve months ended December

31, 2005. The gross margin percentage

for biosensors was 74.4% for the twelve months ended December 31, 2006,

compared with 74.1% for the same period in 2005. The gross margin percentage for diagnostic

devices was 82.5% for the twelve months ended December 31, 2006, compared with

74.9% for the same period in 2005.

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

principles ( GAAP ) for the fourth quarter of 2006 was $1,208,100, compared

with $805,500 for the fourth quarter of 2005, including stock-based

compensation expense of $653,400 and $146,800 for the fourth 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 fourth quarter of 2006 was

$1,861,500, compared with $952,300 for the fourth quarter of 2005.

income calculated in accordance with GAAP for the twelve months ended December

31, 2006 was $5,299,800, compared with $938,300 for the same period in 2005,

including stock-based compensation expense of $2,652,600 and $406,300 for the

twelve months ended December 30, 2006 and 2005, respectively. Excluding stock-based compensation expense,

non-GAAP adjusted net income for the twelve months ended December 31, 2006 was

$7,952,400, compared with $1,344,600 for the same period in 2005.

diluted net income per share was $0.10 and $0.09, respectively, for the three

months ended December 31, 2006, compared with $0.07 and $0.06, respectively,

for the three months ended December 31, 2005.

The basic and diluted net income per share for the three months ended

December 31, 2006 and 2005 included stock-based compensation expense of

$653,400 and $146,800, respectively.

Excluding stock-based compensation expense, non-GAAP adjusted diluted

net income per share was $0.14 for the three months ended December 31, 2006,

compared with $0.07 for the same period in 2005.

diluted net income per share was $0.42 and $0.40, respectively, for the twelve

months ended December 31, 2006, compared with $0.08 and $0.07, respectively,

for the twelve months ended December 31, 2005.

The basic and diluted net income per share for the twelve months ended

December 31, 2006 and 2005 included stock-based compensation expense of

$2,652,600 and $406,300, respectively.

Excluding stock-based compensation expense, non-GAAP adjusted diluted

net income per share was $0.61 for the twelve months ended December 31, 2006,

compared with $0.10 for the same period in 2005.

The following table contains a reconciliation of

non-GAAP net income, adjusted to exclude stock-based compensation expense, to

GAAP net income and non-GAAP diluted net income per share, adjusted to exclude

stock-based compensation expense, to GAAP diluted net income per share, during

the three and twelve month periods ended December 31, 2006 and 2005.

cash equivalents and short-term investments totaled $40.3 million as of

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

Gozani, M.D., Ph.D., NeuroMetrix s President & CEO commented, Our revenues

in the fourth quarter grew 37% over the same period in 2005. However, we did experience a decline in

revenues from the third quarter of 2006.

During the fourth quarter of 2006, several Medicare carriers issued

policies requiring customers using the NC-stat System to submit for

reimbursement under a miscellaneous code (95999) rather than the codes used for

traditional nerve conduction testing. We

believe that our revenues in the fourth quarter were impacted by customers

uncertainty around the level of reimbursement under this miscellaneous code and

the reimbursement environment in general.

We are exploring a number of strategies with regard to these

reimbursement challenges and have assembled a team of resources internally and

externally with expertise in healthcare reimbursement to assist us in this

market position and progression is supported by (a) the FDA 510(k) clearance of

the NC-stat System as comparable to conventional nerve conduction equipment,

(b) over forty peer-reviewed publications, abstracts and posters supporting the

accuracy and clinical utility of the NC-stat System and (c) over 4,900

physician offices and approximately 15,000 physicians using the product in

their clinical practices.

revenue growth of 37% on a year over year basis in the fourth quarter due to

growth in our customer base using the NC-stat neuropathy diagnostic solution,

especially in the primary care and internal medicine market. We expanded our overall active customer count

to a total of over 4,900 physician practices and clinics as of the end of the

fourth quarter of 2006, compared with approximately 3,300 at the end of the