The first quarter 2009 gross profit improvement represented an increase of 67% over the comparable period in 2008 and was due primarily to medical device sales. Operating expenses increased to $2.1 million for the first quarter of 2009 from $1.4 million for the first quarter of 2008.

Brent Larson, Neoprobe’s Vice President, Finance and CFO, said, “Our first quarter 2009 revenue increased $942,000 or 53% from last year’s first quarter revenue. The increase was primarily attributable to sales of our gamma devices which increased by $915,000 or 53% for the first quarter of 2009 compared to the first quarter of 2008. The improved gamma device sales were due in large part to our primary marketing partner restocking its inventory, as well as changes in the terms of our primary distribution agreement that took effect at the beginning of the year. The first quarter of 2009 represents the third highest quarterly revenue in Company history, our second highest quarterly revenue since we began distributing our gamma detection devices solely on a wholesale versus retail basis, and the highest first quarter of sales in Company history. The medical device gross margin increased for the first quarter to 69% of net revenue, compared to 63% of net revenue for the same period in the prior year. The increase in gross margin was expected due to the improved product distribution terms; however, the comparative increase would have been four percentage points greater if the positive adjustment to our warranty reserve estimates made in the first quarter of 2008 following the initial year of repair experience after the launch of our wireless probes were excluded. We are tremendously pleased with the first quarter results for our gamma device business; however, we believe revenues for the remainder of the year could soften somewhat compared to prior year levels as the global economic downturn impacts the medical device market.”

During the first quarter of 2009, the Company was required to adopt certain authoritative guidance related to the accounting for derivative liabilities. The Company’s derivative liabilities stem primarily from warrants the Company issued related to and conversion features associated with, various financing agreements the Company entered into in 2007 and 2008. The adoption resulted in the inclusion of $13 million in derivative liabilities and a non-cash adjustment of $4 million recorded to our accumulated deficit on the Company’s balance sheet as of January 1, 2009. We recorded $1.5 million in non-cash income for the first quarter of 2009 related to marking such derivative liabilities to market as required by the new guidance. Excluding the $1.5 million mark-to-market adjustment, the Company would have generated a net loss for the first quarter of 2009 of $711,000.