One in eight women in the United States will develop breast cancer during her lifetime, a risk that was one in fourteen in 1960. It is estimated that in the United States, approximately 213,000 new cases of breast cancer will be diagnosed in 2006. Breast cancer is the second-leading cause of cancer-related death in U.S. women overall, and the leading cause of cancer-related death for women of ages 20 to 59.

Over 70% of breast cancers occur in women who have no identifiable risk factor other than age. The older a woman is, the greater her chance of getting breast cancer. One of the major challenges in the treatment of breast cancer is that, while the disease typically does not show symptoms in early stages, survival is dramatically impacted by the stage at which the disease is diagnosed and treated. If breast cancer is detected at an early “localized” stage and treated, the 5-year survival rate is 98%. If the cancer has spread to nearby lymph nodes, the 5-year survival rate decreases to 81%. If the cancer has spread, or metastasized, to organs such as the lungs, bone marrow, liver or brain, the 5-year survival rate falls to 26%. These statistics underscore the need for early diagnosis and treatment of breast cancer. Currently, 62% of breast cancers are discovered at an early, localized stage.

The Company’s breast biopsy systems primarily consist of three components—a modular console, reusable handpieces and disposable probes.

The SenoRx Breast Biopsy Console is compatible with both the Company’s EnCor and SenoCor reusable handpieces and disposable probes. This modular console is a portable hardware system which may be conveniently transported to various areas of the healthcare facility.

Handpieces are instruments which facilitate placement or insertion of the biopsy probe. The handpieces primarily consist of motors, circuitry, sensors and proprietary software incorporated into a housing.

The Company’s probes are sterile, single-use, vacuum-assisted disposables, which are used with its EnCor and SenoCor handpieces. They consist of a sharp stainless steel or RF insertion tip, a tissue cutter and, with EnCor, a tissue sample collection chamber. The probe accessories also include additional tubing and a vacuum canister.

The Company offers probes in a variety of sizes, ranging from 7-gauge to 10-gauge, depending on user preference. The probe cutters and tips incorporate one or more of the Company’s proprietary mechanical or RF tissue cutting technologies.

The Company’s flagship diagnostic product, the EnCor system, is a vacuum-assisted breast biopsy system that facilitates adoption of minimally-invasive biopsy procedures over open surgical biopsy.

The Company’s SenoCor 360 system utilizes a vacuum to provide the physician with a contiguous 360° breast biopsy sample. The SenoCor 360 system incorporates either the Company’s mechanical Tri-Concave Tip or its RF Tip to penetrate virtually any lesion, regardless of size, location or density.

Cost of goods sold increased $1.0 million, or 46.5%, to $3.1 million in the three months ended March 31, 2006 from $2.1 million in the three months ended March 31, 2005.

Research and development expenses decreased by $0.1 million, or 8.3%, to $1.1 million in the three months ended March 31, 2006 from $1.2 million in the three months ended March 31, 2005.

Selling and marketing expenses increased by $0.9 million, or 40.4%, to $3.2 million in the three months ended March 31, 2006 from $2.2 million in the three months ended March 31, 2005.