The field of neurostimulation—a form of therapy in which a low-voltage electrical current is used to treat medical conditions affecting different parts of the central nervous system—has grown dramatically in recent years. According to industry sources, the worldwide market for neurostimulation devices grew from approximately $500 million in 2001 to approximately $1.2 billion in 2005, representing a compound annual growth rate in excess of 20%.

Stroke is a medical condition involving the death of brain cells caused by blood clot or rupture of blood vessels leading to or within the brain. There are two types of stroke: ischemic, caused by a blood clot within an artery; and hemorrhagic, caused by the sudden rupture or bursting of such an artery. According to the American Stroke Association, or ASA, ischemic strokes account for approximately 88% of all strokes in the U.S.

Stroke is the leading cause of serious, long-term disability in the U.S. and, according to the ASA, the annual healthcare burden of stroke-related care in the U.S. alone is expected to exceed $57.9 billion in 2006. The ASA estimates that in the U.S. there currently are more than 5.5 million stroke survivors, and each year approximately 540,000 additional people in the U.S. survive a stroke. Many of these stroke survivors are left significantly and permanently disabled. Worldwide, approximately 15 million people suffer a stroke each year.

The Company’s implantable pulse generator, or IPG, is a small, battery-powered electrical stimulator that is surgically implanted in the upper chest area of a patient. The IPG delivers electricity to the lead. The proprietary software contained in the Company’s IPG is customized for each specific application. When configured for the stroke motor recovery and aphasia applications, the IPG only provides electrical stimulation during the rehabilitative therapy sessions. For other clinical applications, the IPG will likely be required to provide sustained stimulation.

The cortical stimulation lead is powered by the IPG and delivers electrical stimulation to the cortex via the lead’s electrode grid, the dimensions of which are approximately one inch by one inch. The electrode grid is sutured to the dura, and the lead wire is tunneled under the skin and connected to the IPG. The electrode grid used in the Company’s pivotal trial utilizes two parallel rows of three electrodes each. The Company has developed other electrode grid configurations specific to various clinical applications. The components and materials of the cortical stimulation lead are similar to other standard leads currently in commercial distribution

The Company’s programming system is operated with a commercially available handheld computer with the Company’s proprietary, internally-developed software, connected to the proprietary communications device that the Company refers to as a wand. The wand allows wireless communication between the handheld computer and the implanted IPG. The programmer and wand allow the clinician to turn the IPG on and off, and to set and modify electrical stimulation parameters, such as amplitude, frequency, pulse width, polarity and duration of stimulation.

Selling, general and administrative expenses were $3.3 million for the year ended December 31, 2005, compared to $3.1 million for the year ended December 31, 2004.

Loss on sublease was $794,000 for the year ended December 31, 2005, compared to no sublease loss for the year ended December 31, 2004.