It is estimated that there are approximately seven million women in the United States that suffer from excessive menstrual bleeding who are older than 35, an age generally considered beyond typical childbearing age.

Excessive menstrual bleeding can have a significant impact on a woman’s quality of life, by disrupting family, social, personal and professional activities. Treatments include drug therapy, traditional surgical procedures and new endometrial ablation procedures. Often treatment begins with drug therapy, which preserves a woman’s ability to bear children but may have significant side effects. Drug therapy has been reported to be effective in reducing menstrual bleeding to a normal level in up to 50% of cases. Women who do not desire to have children may pursue alternative solutions including traditional surgeries, such as hysterectomy, dilation and curettage or rollerball ablation, or newer minimally invasive endometrial ablation procedures.

Traditional surgeries have a number of drawbacks including higher cost and complication rates, and serious side effects. The use of new endometrial ablation procedures has grown because they are less invasive, present lower risk and are less expensive than hysterectomies, and because they are typically easier to perform than rollerball ablation. However, some of these new endometrial ablation procedures have a number of less desirable characteristics, such as the common use of separate pre-treatments and long procedure times.

New endometrial ablation treatments have been developed to provide permanent relief from excessive menstrual bleeding while avoiding many of the shortcomings, complications and costs of traditional drug and surgical therapies. These new procedures reduce costs, risks and recovery time when compared with hysterectomy and are generally easier for physicians to perform than rollerball ablation. In general, these treatments use a surgical device that is inserted through the cervix into the uterus to deliver energy and ablate the endometrium.

The Company’s NovaSure System provides physicians and patients with a fast, simple, safe and effective treatment for excessive menstrual bleeding that addresses many of the shortcomings of alternative treatments.

The system is comprised of two primary components: a disposable device and an RF controller. The NovaSure disposable device is a slender, hand-held, single-use device that incorporates a flexible metallized-mesh electrode used to deliver radiofrequency energy during the procedure. The NovaSure controller generates an amount of radiofrequency energy individually determined for each patient. The Company’s system is designed to safely ablate the lining of the uterus, or the endometrium, which is responsible for the occurrence of excessive menstrual bleeding. The controller also monitors several critical treatment and safety parameters.

Cost of revenue increased from $5.9 million in the nine months ended September 30, 2002 to $11.0 million in the nine months ended September 30, 2003.

General and administrative expenses increased from $1.9 million in the nine months ended September 30, 2002 to $5.2 million in the nine months ended September 30, 2003.