According to the World Health Organization, or WHO, an estimated 7.6 million people died of cancer in 2005, accounting for 13% of all deaths worldwide. The WHO estimates that there are 24.6 million people living with cancer worldwide, with approximately 10.9 million new cases being diagnosed every year.

Cancer is the second leading cause of death in the United States, after heart disease. The American Cancer Society, or ACS, estimates that approximately 564,000 Americans will die as a result of cancer in 2006. The ACS also estimates that approximately 1.4 million new cases of cancer will be diagnosed in the United States in 2006, with continued increases in the prevalence of cancer forecasted as the U.S. population ages. The National Institutes of Health estimates that the treatment of cancer accounted for more than $74.0 billion in direct medical costs in 2005.

Cancers can be divided broadly into two groups: solid tumor cancers, which are characterized by the growth of malignant tumors within the body in areas such as the brain, lung, liver, breast or prostate, and hematological, or blood-borne, cancers, such as leukemia. The ACS estimates that solid tumor cancers will account for approximately 1.3 million, or approximately 92%, of new cancer cases diagnosed and will account for approximately 500,000 cancer-related deaths in the United States in 2006.

In addition, cancers that initially appear in one region of the body as a primary tumor, such as in the breast or prostate, even when diagnosed and treated, can lead to the development of tumors in other locations of the body, or secondary tumors. This is referred to as metastatic disease.

As of September 30, 2006, the Company had 83 units installed at customer sites: 52 in the United States, 10 of which are pursuant to its shared ownership programs, 24 in Asia and 7 in Europe. In addition as of September 30, 2006, the Company had 78 CyberKnife systems pending installation, 12 of which will be placed pursuant to its shared ownership programs.

The CyberKnife system combines continuous image-guidance technology with a compact linear accelerator mounted on a computer-controlled manipulator arm to precisely deliver high doses of radiation to the tumor from numerous directions during treatment. The Company’s patented image-guidance technology correlates low dose, real-time treatment X-rays with previously taken CT images of the tumor and surrounding tissue to precisely direct each beam of radiation. This enables delivery of a highly conformal, non-isocentric dose of radiation to the tumor, with minimal radiation delivered to surrounding healthy tissue.

Key components and technologies of the CyberKnife system include:

- Compact X-band linear accelerator - This compact linac generates the radiation that destroys the tumor;

- Robotic manipulator - The manipulator arm, with six-degrees-of-freedom range of movement, is designed to move and direct the linac with an extremely high level of precision and repeatability;

- Real-time image-guidance system with continuous target tracking and feedback;

- X-ray sources - The low-energy X-ray sources generate orthogonal X-ray images to determine the location of bony landmarks or implanted fiducials throughout the entire treatment;

- Image detectors - The image detectors capture high-resolution anatomical images throughout the treatment.

Total cost of revenue increased from $8.5 million for the year ended June 30, 2004 to $11.1 million for the year ended June 30, 2005.

Selling and marketing expenses increased from $10.6 million for the year ended June 30, 2004 to $16.4 million for the year ended June 30, 2005.

Research and development expenses increased from $7.3 million for the year ended June 30, 2004 to $11.7 million for the year ended June 30, 2005.

Interest and other income increased from $13,000 for the year ended June 30, 2004 to $156,000 for the year ended June 30, 2005.