Cardiovascular disease is the leading cause of death in the United States. It encompasses a wide range of conditions and pathologies including aneurysms, heart failure, hypertension, strokes and heart attacks. Recent advances in drug and device technologies have significantly reduced mortality rates from cardiovascular diseases, and, therefore, cardiovascular patients are now living longer. As a result, there is a significant unmet need for ongoing patient management of chronic cardiovascular disease.

An aortic aneurysm is the weakening and enlargement of the aortic wall, which if left untreated can lead to rupture and death. There are two types of aortic aneurysms: thoracic and abdominal. Aortic aneurysms affect approximately 2.7 million Americans and are the 13th leading cause of death in the United States. Early diagnosis and preventive repair are vital since only one out of two patients with an AAA rupture will survive.

Heart failure is the progressive weakening of the heart muscle that can occur from a variety of causes, particularly heart attacks and hypertension. Heart failure is characterized by high mortality, frequent hospitalizations and poor quality of life. The estimated direct and indirect cost of heart failure in the United States for 2006 was approximately $30 billion. In Europe, heart failure afflicts more than 14 million people with over 3.6 million hospitalizations per year. By 2020, the number of people with heart failure in Europe is projected to increase to 30 million with nine million deaths attributed to the disease.

Hypertension is a disease characterized by a chronic increase in blood pressure and is a major cause of heart failure, stroke and kidney failure. Hypertension is one of the most common diseases in the world and affects 65 million people in the United States alone. The estimated direct and indirect cost of hypertension in the United States for 2006 was approximately $64 billion. The World Health Organization reports that hypertension is the underlying cause of 62% of strokes and 49% of heart attacks. Hypertension is the number one attributable risk for death throughout the world.

The EndoSure system includes two components, a wireless sensor and an external electronics module. The sensor comes pre-loaded in a one-piece 14 French delivery system that enables the physician to insert the EndoSure sensor during the same procedure as the stent graft. Radiopaque markers assist the physician in delivery of the EndoSure sensor by clearly defining the sensor location within the aneurysm sac between the stent graft and aortic wall. The EndoSure sensor is intended to be a permanent implant in the aneurysm sac.

The Company expects to introduce its next generation EndoSure system in 2007. The next generation EndoSure sensor is smaller, approximately 18 millimeters versus 30 millimeters, and, is therefore, easier to deliver. The next generation external electronics module has also been reduced in size and has an improved graphic user interface. The next generation external electronics module also includes a flat antenna that is thinner and more flexible and can be placed on the back of a chair or bed located in the hospital or the patient’s home.

The Company’s wireless heart failure sensors have been designed for three applications: heart failure, cardiac surgery and pulmonary hypertension. The core technology of the Company’s heart failure sensors is identical to its EndoSure sensor and can be percutaneously implanted in a patient’s pulmonary artery for heart failure and pulmonary hypertension patients or surgically placed just outside the pulmonary artery during cardiac surgery procedures.

The Company’s heart failure sensor includes nitinol wires, similar to those used in the EndoSure sensor, designed for permanent placement inside the pulmonary artery. The Company’s cardiac surgery sensor does not have nitinol wires and has holes that allow surgeons to attach the sensor to the outside of the pulmonary artery with sutures. The Company’s heart failure systems have been designed to monitor patients both in the hospital as well as at the patient’s home using next generation external electronics module.

Cost of revenue was $1.2 million for the nine months ended September 30, 2006 compared to no cost of revenue for the nine months ended September 30, 2005.

Research and development expenses were $5.6 million for the nine months ended September 30, 2006 compared to $3.4 million for the nine months ended September 30, 2005, an increase of $2.1 million, or 62.5%.

Interest income, net was $214,000 for the nine months ended September 30, 2006 compared to $37,000 for the nine months ended September 30, 2005, an increase of $177,000 or 478.4%.