UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

Current Report Pursuant

to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) December 26, 2007

NEUROMETRIX, INC.

(Exact Name of Registrant as Specified in Its Charter)

DELAWARE

(State or Other Jurisdiction of Incorporation)

(781) 890-9989

(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

EXPLANATORY NOTE: On December 28, 2007, NeuroMetrix, Inc. (the “Company”) filed a Current Report on Form 8-K with the Securities and Exchange Commission announcing the completion of its acquisition of substantially all of the assets of EyeTel Imaging, Inc., a Delaware corporation (“EyeTel”) and EyeTel Reading Center, LLC, a Maryland limited liability company and wholly-owned subsidiary of EyeTel (the “Subsidiary”) on December 26, 2007. This Current Report on Form 8-K/A (this “Amendment”) is filed as an Amendment to the Current Report on Form 8-K filed by the Company under Items 1.02, 2.01, 3.02 and 9.01 on December 28, 2007 to include the financial information required under parts (a) and (b) of Item 9.01.

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Item 9.01     Financial Statements And Exhibits.

(a)          Financial Statements of Business Acquired are Filed with this Amendment as Exhibit 99.1

·                  unaudited financial statements of EyeTel Imaging, Inc. as of September 30, 2007 and for the nine month periods ended September 30, 2007 and 2006

·                  audited financial statements of EyeTel Imaging, Inc. as of and for the years ended December 31, 2006 and 2005, and the related report of PricewaterhouseCoopers LLP, an independent registered public accounting firm.

(b)         Pro Forma Financial Information

The unaudited pro forma financial information included with this Amendment has been prepared to illustrate the pro forma effects of the acquisition of EyeTel Imaging, Inc.  The unaudited pro forma combined statements of operations for the nine months ended September 30, 2007 and the twelve months ended December 31, 2006 as well as the unaudited pro forma combined balance sheet as of September 30, 2007 are filed with this Amendment as Exhibit 99.2.  The unaudited pro forma combined statements of operations for the nine months ended September 30, 2007 and the twelve months ended December 31, 2006 give effect to the acquisition of EyeTel Imaging, Inc. as if it had occurred on January 1, 2006.  The unaudited pro forma combined balance sheet as of September 30, 2007 gives effect to the acquisition of EyeTel Imaging, Inc. as if it had occurred on September 30, 2007.  All pro forma information in this Amendment has been prepared for informational purposes only and does not purport to be indicative of what would have resulted had the acquisition actually occurred on the dates indicated or what may result in the future.

(d)   Exhibits

* Previously filed.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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EXHIBIT INDEX

* Previously filed.

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-118059 and 333-135242) of NeuroMetrix, Inc. of our report dated May 4, 2007, except for Note 3 as to which the date is October 9, 2007, Note 20 as to which the dates are September 21, 2007 and October 25, 2007 and Note 21 as to which the date is October 31, 2007 relating to the financial statements of EyeTel Imaging, Inc. which appears in the Current Report on Form 8-K/A of NeuroMetrix, Inc. dated March 7, 2008.

/s/  PricewaterhouseCoopers LLP

McLean, Virginia

March 7, 2008

Exhibit 99.1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
EyeTel Imaging, Inc.

                In our opinion, the accompanying balance sheets and the related statements of operations, of redeemable convertible preferred stock and stockholders’ deficit and of cash flows present fairly, in all material respects, the financial position of EyeTel Imaging, Inc. at December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

                The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management’s plan in regard to these matters is also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

                As discussed in Note 4 to the financial statements the Company adopted FASB Staff Position No. 150-5 (“FSP 150-5”), Issuer’s Accounting under FASB Statement No. 150 for Freestanding Warrants and Other Instruments on Shares that are Redeemable, during the year ended December 31, 2005.

McLean, Virginia
May 4, 2007, except for Note 3 as to which the date is October 9, 2007, Note 20 as to which the dates are September 21, 2007 and October 25, 2007 and Note 21 as to which the date is October 31, 2007

EYETEL IMAGING, INC.

BALANCE SHEETS

The accompanying notes are an integral part of these financial statements.

EYETEL IMAGING, INC.

STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these financial statements.

EYETEL IMAGING, INC.

STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS’ DEFICIT

The accompanying notes are an integral part of these financial statements.

EYETEL IMAGING, INC.
  
STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these financial statements.

EYETEL IMAGING, INC.
  
NOTES TO FINANCIAL STATEMENTS

1. Going Concern

These financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assume that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations.

At December 31, 2006 there was substantial doubt that the Company would be able to continue as a going concern. The Company’s ability to continue as a going concern is primarily dependent upon its ability to obtain additional financing, reduce expenses or enter into corporate collaborations.

The Company incurred a significant net loss of $7,397,866 and used cash in its operations of $6,629,647 during the year ended December 31, 2006 and a net loss of $7,619,866 (unaudited) and used cash in its operations of $4,487,161 (unaudited) during the nine months ended September 30, 2007.  The Company had cash and cash equivalents of $2,425,447 at December 31, 2006. The current financial condition, among other factors, indicates that there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability of assets that might be necessary should the Company be unable to continue as a going concern.

The Company’s continuation as a going concern is dependent upon its ability to obtain additional cash to allow for the satisfaction of its obligations on a timely basis. The Company is actively exploring various financing alternatives including equity financing transactions and corporate collaborations. Equity financings could include, but are not limited to, the infusion of cash from its current investors either as additional equity or as a bridge loan which might roll into a subsequent equity round, and the raising of cash from a combination of current and new investors. Corporate collaborations could include partnerships with larger, more financially sound entities for the distribution of the Company’s product and services to a wider market than it can currently reach by itself or the sale of an interest in its business to such a partner. While the Company is exploring all opportunities to improve its financial condition over the next several months, there is no assurance that these efforts will be successful. If they are not successful, the Company will be forced to reduce significantly the scope of its operations, thereby raising further doubt about its ability to continue to do business.

2. Description of Business

EyeTel Imaging, Inc. (“EyeTel” or the “Company”), a Delaware corporation, was incorporated in January 1996 as EyeTel Corporation and assumed its current name in March 2002. EyeTel is a medical diagnostic company dedicated to improving the standard of healthcare for people with various vision threatening conditions. The Company designs, develops and commercializes proprietary technology and services that help physicians to diagnose three leading causes of preventable blindness: age-related macular degeneration (“AMD”), glaucoma and diabetic retinopathy, the primary cause of blindness among working age adults. The EyeTel Retinal Imaging System (the “EyeTel System”) is an imaging and diagnostic system that helps physicians diagnose these diseases at early stages when various treatment options for preserving vision are available. The EyeTel System is based on patented technology developed at the Wilmer Eye Institute at The Johns Hopkins University and commercialized by the Company under an exclusive licensing agreement. It is comprised of the DigiScope®, a medical device which takes high resolution retinal images, and a telemedicine image analysis service provided by the EyeTel Reading Center to identify pathology indicative of eye disease in order to assist physicians in making diagnoses.

3. Reverse Split of Common Stock

In June 2007, the Company’s board of directors approved a 1-for-3.6 reverse stock split of the Company’s common stock.  The reverse stock split took place on October 9, 2007 when the Company filed its amended and restated certificate of incorporation with the Delaware Secretary

3. Reverse Split of Common Stock (continued)

of State (the “Reverse Split”). The Reverse Split resulted in an adjustment to the conversion price applicable to the Series B (See Note 12, Series B redeemable convertible preferred stock).

All references to share and per share data in these financial statements and accompanying notes have been adjusted retroactively to reflect the Reverse Split.

4. Summary of Significant Accounting Policies

The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the Company’s financial position as of September 30, 2007 and results of operations and cash flows for the nine months ended September 30, 2007 and 2006.  The financial data and other information disclosed in these notes to the financial statements related to the nine months periods are unaudited.  The results of the nine months ended September 30, 2007 are not necessarily indicative of the results to be expected for the year ending December 31, 2007 or for any other period or for any other future year.

Use of Estimates

The preparation of these financial statements requires that the Company make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to doubtful accounts, useful lives of property and equipment, income taxes, the valuation of equity instruments and contingencies, among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ significantly from the estimates made by management with respect to these and other items.

Cash, Cash Equivalents and Short-term Investments

The Company considers all highly liquid instruments purchased with a maturity of three months or less at the date of purchase to be cash equivalents. The majority of the Company’s cash equivalents comprise money market securities.

Investments with original maturities of three to twelve months are considered current assets. A majority of the Company’s short-term investments comprise certificates-of-deposit. The Company’s policy is to protect the value of its investment portfolio and minimize principal risk by earning revenue returns based on current interest rates. The Company’s entire investment portfolio is classified as available-for-sale since these investments may be sold any time to meet the liquidity needs of the Company. Accordingly, they are recorded at fair market value, with unrealized gains and losses, net of taxes, reported as a separate component of stockholders’ deficit. There were no unrealized gains or losses associated with short-term investments as of December 31, 2005. The Company did not hold any short-term investments as of December 31, 2006.

Substantially all of the Company’s cash and cash equivalents, and short-term investments are held in custody by major financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. However, these deposits may be redeemed generally upon demand and therefore bear minimal risk.

Restricted Cash

At December 31, 2006, the Company had short-term certificates-of-deposit of $65,000 used as collateral in connection with the use of certain cash management services provided by one of the Company’s banks. The Company did not have restricted cash as of December 31, 2005.

Concentration of Credit Risk

Financial instruments that potentially expose the Company to credit risk include accounts receivable. At December 31, 2006 and 2005 and for the years ended December 31, 2006 and 2005 no single customer or third-party payer accounted for more than 10% of accounts receivable or

4. Summary of Significant Accounting Policies (continued)

revenue. One customer, NeuroMetrix, Inc. (“NeuroMetrix”), accounted for 86% (unaudited) of accounts receivable at September 30, 2007 and 75% (unaudited) of revenue for the nine months ended September 30, 2007.

Fair Value of Financial Instruments

The Company believes that the carrying amount of its financial instruments, which include cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued expenses, the Convertible Bridge Loan, the 2007 Bridge loan and long-term debt, approximate their fair value at December 31, 2006 and 2005.

Revenue Recognition

The Company’s DigiScope® device is integrated with software that is essential to its functionality. Further, the Company provides unspecified software upgrades and enhancements related to the device through contractual agreements. Accordingly, the Company accounts for revenue in accordance with the American Institute of Certified Public Accountants Statement of Position (“SOP”) No. 97-2, Software Revenue Recognition, and all related amendments and interpretations.

The Company’s revenue is derived primarily from three sources: (i) imaging and reading services, (ii) rental fees, including hardware, software and technical support and (iii) installation fees.

Imaging and reading services revenues consist of the fees charged to third-party payers for interpretation of digital retinal images produced by the DigiScope® at the healthcare professionals’ sites and transmitted over the internet to the EyeTel Reading Center. Revenue is recognized upon completion of such services.

Effective January 1, 2007, the Company no longer has a direct relationship with the third-party payer. Instead, the healthcare professional manages the third-party payer directly and the Company receives a predetermined fee from the healthcare professional based on usage of the DigiScope®.  Prior to January 1, 2007, the Company retained the full amount of the third-party payer reimbursement and paid physician customers a fixed fee for each image set taken, whether or not it was reimbursed for the service by the third-party payer.  Beginning on January 1, 2007, however, the Company’s primary diabetes care physician customers became responsible for billing the third-party payer directly and the physician customer now pays the Company a fixed fee for each image set taken.  In addition, beginning January 1, 2007, the Company commenced an exclusive distribution relationship with NeuroMetrix in the primary diabetes care market.  Under this arrangement, the Company shares with NeuroMetrix the imaging and reading  services revenue and installation fees generated by primary diabetes care customers signed by NeuroMetrix as well as imaging and reading services revenue from customers who historically have been serviced by the Company but who are now serviced by NeuroMetrix.  NeuroMetrix now has the direct relationship with these customers and is solely responsible for growing this customer base.

DigiScope® rental fees revenues consist of fixed monthly lease rentals to the Company’s healthcare professionals for the ongoing use of the DigiScope®. Revenue is recognized monthly as billed.

Installation fees revenues consist of a one-time fee the Company charges the healthcare professional for the initial installation of the DigiScope® and initial training for its use. The fee is payable primarily upon signing of the contract and revenue is recognized ratably over the term of the agreement, generally twelve months. The unrecognized balance of the installation fee is reported as deferred revenue.

Typically, the Company’s sales involved multiple elements, such as installation and rentals that include support. When a sale involves multiple elements, the Company allocates the entire fee from the arrangement to each respective element based on its Vendor Specific Objective

4. Summary of Significant Accounting Policies (continued)

Evidence (“VSOE”) of fair value and recognizes revenue when each element’s revenue recognition criteria are met. VSOE of fair value for each element is established based on the price charged when the same element is sold separately. If VSOE of fair value cannot be established for the undelivered element of an agreement and the undelivered element is support, the entire amount of the revenue from the arrangement is deferred and recognized ratably over the period that the support is delivered. The Company has not established VSOE of fair value in accordance with SOP 97-2 at the outset of its arrangements. Accordingly, the Company recognizes installation revenue ratably over the lease period.

The Company recognizes revenue only when persuasive evidence of an arrangement exists, the service has been provided, the fee is fixed or determinable and collectibility is probable. The Company evaluates each of these criteria as follows:

Evidence of an arrangement:   Contracts are used to determine the existence of an arrangement.

Provision of services:   Provision of services is contractual and is based on the completion of specified services for installation fee revenues and the passage of time for rental fee revenues. For image and reading service revenues, provision of services is based on the provision of the report to the healthcare professional.

Fixed or determinable:   The Company assesses whether fees are fixed or determinable at the time of the sale. The Company only considers the fee to be fixed or determinable if the fee is not subject to refund or adjustment. If the arrangement fee is not fixed or determinable, revenue is recognized as amounts become due and payable.

Collection is deemed probable:   Collection is deemed probable if the Company expects that the customer will be able to pay amounts under the arrangement as payments become due. If the Company determines that collection is not probable, revenue is recognized upon cash collection.

Cost of Revenues

Cost of revenues consists of costs directly related to the generation of revenue. Imaging and reading services costs include fees paid to the Company’s healthcare professionals for each set of retinal images read, the costs of the Company’s reading centers and royalty payments. DigiScope® rental fees costs include depreciation, royalty payments and repairs and maintenance of the DigiScopes® on lease to customers, a portion of which is allocated to installation fees costs, which also include outbound shipping costs.

Research and Development Costs

Research and development costs consist of expenses incurred by the Company in the continuing research and development of its DigiScope® and the embedded proprietary software. Such costs primarily include salaries, benefits and other related expenses for personnel performing research and development activities, contractual payments to The Johns Hopkins University for research and development and facilities costs.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable consists of amounts due from third-party payers, primarily managed care companies, commercial insurance companies, physician practices, private-pay patients and, effective January 1, 2007, from NeuroMetrix. Estimated provisions for doubtful accounts are recorded to the extent that it is probable that a portion or all of a particular account receivable will not be collected. The Company estimates the provision for doubtful accounts based on various factors including payer type, historical collection patterns, and the age of the receivable. Changes in estimates for particular accounts receivable are recorded in the period in which the change occurs. Account balances are written off against the allowances when management believes it is probable the receivable will not be recovered.

4. Summary of Significant Accounting Policies (continued)

Property and Equipment

Property and equipment are stated at historical cost. DigiScope® equipment is leased to healthcare professionals and depreciation commences upon completion of an activated DigiScope® at the healthcare professionals’ sites. DigiScope® sub-assemblies, which are component parts of the DigiScope® equipment, are not depreciated until they become part of the activated DigiScope®.

Depreciation is computed on a straight-line basis over the estimated useful life of the assets as follows:

Upon disposal, the cost of the asset and the related accumulated depreciation are removed from the books and any resulting gain or loss is reflected in the statements of operations. Repairs and maintenance are expensed as incurred and were $45,113 and $29,401 for the years ended December 31, 2006 and 2005, respectively.

Impairment of Long Lived Assets

The Company, in accordance with provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment and Disposal of Long-Lived Assets (“SFAS 144”), periodically evaluates the recoverability of its property and equipment held for use, when circumstances indicate that an event of impairment may have occurred and the carrying value of assets may not be recoverable. The recoverability of the assets is determined by comparing the carrying value of the assets to the future undiscounted cash flows expected to result from use of these assets. If the assets are considered to be impaired, then impairment is recorded as the difference between the book value and the fair value of the underlying asset. The Company did not recognize any impairment charges in the in any of the periods presented.

Accounting for Stock-Based Compensation

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“ SFAS”) No. 123(R), “Share Based Payment” (“SFAS 123R”), which requires companies to recognize expense associated with share-based compensation arrangements, including employee stock options, using a fair-value method. SFAS 123R eliminates the alternative to use the intrinsic value method of accounting for share-based payments under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”). SFAS 123R is effective for the Company’s fiscal year beginning January 1, 2006.

The Company adopted SFAS 123R using the prospective transition method. Under this method only new awards or awards modified, repurchased or cancelled on or after January 1, 2006 are accounted for under the provisions of SFAS 123R. Awards which were granted prior to January 1, 2006 and which continue to vest after January 1, 2006 are continued to be accounted using the intrinsic value method under APB 25.

The Company uses the Black-Scholes option pricing model for determining the fair value of its stock options and recognizes the compensation expense using the straight-line attribution method. Prior to the adoption of SFAS 123R, the Company accounted for stock options granted to employees in accordance with APB 25 and provided the disclosures required under SFAS 148, Accounting for Stock-Based Compensation — Transition and Disclosure, only in the notes to its financial statements. Accordingly, compensation expense was recorded for options issued to employees to the extent that the fair market value of the Company’s common stock exceeded the exercise price of the option at the date granted and all other criteria for fixed accounting were met.

4. Summary of Significant Accounting Policies (continued)

The following table illustrates the effect on net loss, if the Company had applied the fair value recognition provisions to share-based employee compensation as of December 31:

Income Taxes

The Company accounts for income taxes under an asset and liability approach. Under this approach, deferred tax assets and liabilities are recognized based upon temporary differences between the financial statement and tax basis of assets and liabilities, as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred tax expense or benefit is the result of changes between deferred tax assets and liabilities. A valuation allowance is established when, based on an evaluation of objective verifiable evidence, there is a likelihood that some portion or all of the deferred tax assets will not be realized.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of other comprehensive income (loss) and net loss. Other comprehensive income (loss) consists of gains and losses that are not recorded in the statements of operations, but are instead recorded directly to stockholders’ deficit. To date, there have been no differences between net loss and comprehensive loss.

Segment Reporting

The Company operates in one industry segment. All of the Company’s efforts are devoted to the design, development and lease of a proprietary retinal-imaging device and reading of retinal images produced by the product that are managed and reported in one segment.

SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer. The Company’s Chief Executive Officer reviews financial information presented for purposes of allocating resources and evaluating financial performance. The Company has one business activity and there are no segment managers who are held accountable for operations, operating results and plans for products or components below this level. Accordingly, the Company reports as a single operating segment. The Company derives all of its revenues from activities within the United States of America.

Reclassification

Certain amounts for the year ended December 31, 2005 have been reclassified to conform to the current year.

Recent Accounting Standards

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value in generally accepted accounting principles (“GAAP”) and expands disclosures related to the use of fair value measures in financial statements. SFAS 157 does not expand the use of fair value measures in financial statements, but standardizes its definition and guidance in GAAP. The standard emphasizes that fair value is a market-based measurement and not an entity-specific measurement based on an exchange transaction in which the entity sells an asset or transfers a liability (exit price). SFAS 157 establishes a fair value hierarchy from observable market data as the highest level to fair value based on an entity’s own fair value assumptions as the lowest level. SFAS 157 is effective for financial statements issued for fiscal

4. Summary of Significant Accounting Policies (continued)

years beginning after November 15, 2007, and interim periods within those fiscal years. The provisions of SFAS 157 are generally required to be applied on a prospective basis. The Company will adopt SFAS 157 in the first quarter of 2008. The Company does not believe adoption of this standard will have a material effect on its financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115 “ (“SFAS 159”).  SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company does not believe adoption of SFAS 159 will have a material impact on its financial position, results of operations or cash flows.

5. Change in Accounting Principle

On June 29, 2005, the FASB issued Staff Position 150-5, Issuer’s Accounting under FASB Statement No. 150, for Freestanding Warrants and Other Similar Instruments on Shares That Are Redeemable (“FSP 150-5”). FSP 150-5 requires the Company to classify its outstanding preferred stock warrants as liabilities on its balance sheet and record adjustments to the value of its preferred stock warrants in its statements of operations to reflect their fair value at each reporting period. The Company previously accounted for such warrants as additional paid-in capital.

The Company adopted FSP 150-5 as of July 1, 2005. This adoption resulted in no effect to the Company’s financial position, cash flow or results of operation other than the reclassification of the preferred stock warrants from additional paid-in-capital to a liability.

6. Property and Equipment, Net

Property and equipment, net consist of the following:

At December 31, 2006 and 2005, accumulated depreciation includes $395,013 and $323,949, respectively, for assets on lease to customers.

Depreciation expense was $406,496 and $255,072 for the years ended December 31, 2006 and 2005, respectively and $342,363 (unaudited) and $294,547 (unaudited) for the nine months ended September 30, 2007 and 2006, respectively.

7. Accrued Liabilities

Accrued liabilities consist of the following:

8. Convertible Bridge Loans

Convertible Bridge Loan

On December 28, 2006, the Company obtained a convertible bridge loan in the amount of $2,500,000 from two of its major Series B convertible preferred stock (“Series B”) investors (“Convertible Bridge Loan”). The loan bears interest at 10% per annum and is payable upon the earlier of conversion of the convertible loan or at its maturity date. Unless earlier converted into equity securities, the convertible loan is due and payable on December 27, 2007. This loan is subordinate to the current outstanding debt of the Company. Interest expense on the Convertible Bridge Loan for the year ended December 31, 2006 and the nine months ended September 30, 2007 was $2,055 and $186,986 (unaudited), respectively.

The Convertible Bridge Loan together with accrued interest is convertible into the Company’s Series B, (i) automatically, upon the closing of the Company’s next round of preferred stock financing with cash proceeds of at least $5 million, or (ii) at the option of the loan-holders at (a) maturity, if not converted earlier, or (b) at the time of sale of the Company, at a conversion price of $5.02 per share. The Convertible Bridge Loan together with accrued interest is convertible into the Company’s common stock automatically upon the closing of an initial public offering at a conversion price of $5.02 per share.

In connection with the Convertible Bridge Loan, the Company issued warrants to the loan-holders, which were valued at $636,305 using the Black-Scholes Model (See Note 11, Preferred stock warrants) at December 31, 2006. This amount is being accreted as additional debt discount over the twelve-month period of the loan.

2007 Bridge Loan

In January 2007, the Company offered all other Series B investors who were accredited investors the opportunity to participate in the bridge loan financing on the same terms as those granted the two Major Investors.  In a series of closings between April 6, 2007 and May 2, 2007 the Company obtained additional bridge loans in the amount of $3,807,684 from both new and existing lenders, including the Major Investors, and $119,292 from certain Series B stockholders (the “2007 Bridge Loan”).  Interest expense on the 2007 Bridge Loan for the nine months ended September 30, 2007 was $163,190 (unaudited).

In connection with the 2007 Bridge Loan, the Company issued warrants to the lenders, which were valued at $998,439 using the Black-Scholes Model (See Note 11, Preferred Stock Warrants) at September 30, 2007 (unaudited).  This amount is being accredited as additional debt discount over the eight-month period of the loan.

9.  Long-Term Debt

Long-term debt consists of the following: