According to the American Heart Association, or AHA, over 70 million people in the United States have cardiovascular disease. Cardiovascular disease is the leading cause of death for both men and women in the United States and results in over $400 billion in direct and indirect costs. CAD affects approximately 13 million people in the United States with approximately 3 million of those cases requiring interventional diagnosis or treatment each year. Interventional procedures are done percutaneously, or through a minimally invasive incision in the skin in order to gain access to parts of the anatomy through an artery. AHA estimates that PAD affects more than 8 million people in the United States with approximately 2 million of those cases requiring intervention each year. Structural heart disease affects approximately 5 million people in the United States, with approximately 1 million of those cases requiring surgical intervention each year.

The AHA estimates that 700,000 new and 500,000 recurrent heart attacks occur in the United States each year and the prevalence of people who have survived a heart attack is 7.2 million. Similarly, as the progression of CAD leads to heart attacks, PAD can also lead to blockage of blood flow to or in the brain thereby leading to a stroke. According to the AHA, 88% of all strokes result from a blockage of blood flow to, or in the brain. The AHA estimates that 500,000 new and 200,000 recurrent strokes occur in the United States each year and the prevalence of people who have survived a stroke is 5.5 million.

In order to diagnose and treat vascular disease, the medical community over the last several years has made a significant shift towards the use of minimally invasive procedures. Based on industry estimates, it is believed that physicians currently perform over 4 million diagnostic angiographies and approximately 2 million percutaneous coronary interventions, or PCIs, worldwide each year and approximately 3 million percutaneous interventional peripheral artery procedures and approximately 1 million structural heart procedures in the United States each year.

The Company’s IVUS products are comprised of consoles, catheters and advanced functionality options. The Company designs, manufactures and commercializes consoles that are proprietary, high-speed computer systems that process the signals received from its IVUS catheters. These consoles generate high-resolution images which can be displayed on a monitor and can be permanently stored on the system or another medium. The Company has a family of consoles including its IVUS In-Vision Gold, or IVG, and the new PC-based s5. The new s5 family of consoles, which will be the Company’s primary console following its full commercial launch, is substantiality smaller, lighter and less expensive to manufacture, and has enhanced functionality.

The Company’s single-procedure disposable catheters only operate and interface with its family of IVUS consoles. Each phased array IVUS catheter contains a cylindrical transducer array with 64 elements capable of separately sending and receiving signals. Revolution rotational catheter will be the highest frequency catheter on the market. The Revolution develops images by rotating a single transducer element inside the tip of the catheter using a flexible torque cable. The Company’s Eagle Eye Gold, Visions PV .018, Visions PV 8.2 and Revolution catheters vary in their principal use, frequencies, shaft sizes, shaft lengths, guidewire compatibility and distal tip lengths.

The Company’s IVUS products now incorporate VH which contains in vivo color-coded identification of plaque composition and automatic drawing of lumen and plaque borders. Furthermore, IVUS and angiographic image co-registration functionality is being developed for inclusion in the Company’s IVUS products.

The Company’s FM products consist of pressure and flow consoles and single-procedure disposable pressure and flow guidewires. The Company’s consoles are mobile, proprietary and high speed electronic systems with different functionalities and sizes designed and manufactured to process the signals received from only its guidewires. ComboMap, the Company’s mobile PC based high-end full-functionality console introduced in 2005, is the first and only product that can measure pressure and flow. The SmartMap is the Company’s compact limited functionality pressure product that is designed to be integrated into a cath lab. The Company offers a family of guidewires including Smartwire II/Brightwire II and WaveWire, each of which measures pressure, ComboWire, which measures pressure and flow, and FloWire, which measures flow.

Cost of revenues increased $18.0 million, or 60.2%, to $47.8 million, or 52.1% of revenues in the year ended December 31, 2005, from $29.9 million, or 48.9% of revenues in the year ended December 31, 2004.

Research and development expenses increased $5.3 million, or 54.3%, to $15.1 million, or 16.4% of revenues in the year ended December 31, 2005, as compared to $9.8 million, or 16.0% of revenues in the year ended December 31, 2004.

Interest expense increased $527,000, or 11.0%, to $5.3 million, or 5.8% of revenues in the year ended December 31, 2005, as compared to $4.8 million, or 7.8% of revenues in the year ended December 31, 2004.

Interest and other income (expense), net was an expense of $401,000 in the year ended December 31, 2005, as compared to income of $495,000 in the year ended December 31, 2004.