UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                  FORM 10-QSB/A
                                (Amendment No. 1)


  [X]     Quarterly Report pursuant to Section 13 or 15(d) of the Securities
          Exchange Act of 1934 For the quarterly period ended March 31, 2005

  [ ]     Transition Report pursuant to 13 or 15(d) of the Securities Exchange
          Act of 1934 For the transition period              to
                                               --------------   --------------

                        Commission File Number  000-49735



                           INTRAOP MEDICAL CORPORATION

        (Exact name of small business issuer as specified in its charter)


             Nevada                                      87-0642947
  (State or other jurisdiction of           (I.R.S. Employer Identification No.)
   incorporation or organization)



        3170 De La Cruz Boulevard
               Suite 108
        Santa Clara, California                             95054
(Address of principal executive offices)                  (Zip Code)

          Issuer's telephone number, including area code: 408-986-6020


              (Former name, former address and former fiscal year,
                          if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days [X] Yes [ ] No

State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:16,527,028 shares of $0.001 par value
Common Stock outstanding as of the date of this filing.


                                       1


<PAGE>


                           INTRAOP MEDICAL CORPORATION

                                  FORM 10-QSB/A

                                TABLE OF CONTENTS



PART I. FINANCIAL INFORMATION


                                                                           Page

Purpose of this Amendment..................................................    3
Item 1. Financial Statements (Unaudited)................................... 4-28
Item 2  Management's Discussion and Analysis or Plan of Operations.........29-35
Item 3  Controls and Procedures............................................   43


PART II OTHER INFORMATION

Item 1  Legal Proceedings..................................................   43
Item 2  Unregistered Sales of Equity Securities and Use of Proceeds........   44
Item 3  Defaults Upon Senior Securities....................................   44
Item 4  Submission of Matters to a Vote of Securities Holders..............   44
Item 5  Other Information..................................................   44
Item 6  Exhibits...........................................................   44


                                       2


<PAGE>


                            PURPOSE OF THIS AMENDMENT


The purpose of this 10-QSB/A is to restate the financial statements of the of
Intraop Medical Corporation. for the three and six months ended March 31, 2005.
In summary, in mid-July 2005, and in consultation with our independent
registered public accounting firm, Stonefield Josephson, Inc., we determined
that certain restatements to these financials statements were needed to
correctly account for i) certain liabilities related to product financing,
including interest thereon, previously reported only as commitments and
contingencies in the footnotes to these financial statements, ii) the value of
certain options and warrants granted during those periods, and iii) the accrual
of certain liabilities for the redemption of common stock as the result of the
completion of our Merger. These financial statements have been prepared in
accordance with those restatements and as if such restatements were in effect
from the inception of the restated transactions. Also, contemporaneous with the
filing of this report, the Company filed Form 8-K/A in which it similarly
restated the financial statements of its merger partner, Intraop Medical, Inc.,
for the three months ended December 31, 2004, to the extent that the
restatements discussed herein affected that period. A full discussion of those
restatements can be found in that filing.


                                       3


<PAGE>


PART 1 - FINANCIAL INFORMATION

Item 1.  Financial Statements

     The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB/A and, therefore, do not include
all information and footnotes necessary for a complete presentation of financial
position, results of operations, cash flows, and stockholders' deficit in
conformity with generally accepted accounting principles. In the opinion of
management, all adjustments considered necessary for a fair presentation of the
results of operations and financial position have been included and all such
adjustments are of a normal recurring nature. Operating results for the six
months ended March 31, 2005 are not necessarily indicative of the results that
can be expected for the year ending September 30, 2005.


                                       4


<PAGE>


                           INTRAOP MEDICAL CORPORATION
                   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                              AS OF MARCH 31, 2005
             AND THREE AND SIX MONTHS ENDED MARCH 31, 2005 AND 2004


                                TABLE OF CONTENTS


                                                                           Pages
                                                                           -----
Condensed Consolidated Financial Statements:
  Condensed Consolidated Balance Sheet (Unaudited)                         6 - 7
  Condensed Consolidated Statements of Operations (Unaudited)                  8
  Condensed Consolidated Statements of Cash Flows (Unaudited)             9 - 10
  Notes to Condensed Consolidated Financial Statements (Unaudited)       11 - 23


                                       5


<PAGE>


Intraop Medical Corporation
Condensed Consolidated Balance Sheet (Unaudited)
--------------------------------------------------------------------------------

                                                                March 31,
                                                                   2005
                                                             Restated, Note 10
                                                             -----------------
Assets

Current assets:
  Cash and cash equivalents                                  $       198,498
  Accounts receivable                                                110,011
  Inventory, net                                                     675,481
  Prepaid expenses                                                   101,818
  Deposits                                                         1,483,475
  Other current assets                                               210,000
                                                             -----------------

         Total current assets                                      2,779,283

Property and equipment,
  net of accumulated depreciation                                     64,382

Leased Equipment
  net of accumulated depreciation                                    736,148

Other assets:
  Intangible assets,
     net of accumulated amortization                                 145,241
                                                             -----------------

                                                             $      3,725,054
                                                             =================



Liabilities and Stockholders' Deficit

Current liabilities:
  Accounts payable and accrued expenses                      $        931,596
  Notes payable, related parties                                      907,425
  Notes payable, other, net debt discounts due
   to warrants                                                      6,046,721
  Liability related to product financing, net
   discounts due to warrants                                        1,056,408
  Obligation for leased equipment                                   1,110,267
  Interest payable                                                    211,161
  Royalty payable to related party                                    150,000
  Advances, including $438,000 from shareholders                      598,000
  Manditorily redeemable common stock, 97,000 shares                  121,250
  Sales tax payable                                                    59,040
  Estimated liability under warranties                                 96,781
  Other current liabilities                                            60,170
                                                             -----------------

         Total liabilities, all current                      $     11,348,819
                                                             -----------------

The accompanying notes form an integral part of the condensed consolidated
financial statements.


                                       6


<PAGE>


Intraop Medical Corporation
Condensed Consolidated Balance Sheet (Unaudited) (Continued)
--------------------------------------------------------------------------------


                                                                   March 31,
                                                                     2005
                                                               Restated, Note 10
                                                               -----------------

Commitments and contingencies                                  $               -

Stockholders' deficit:
 Common stock, $0.001 par value:
   Authorized shares - 100,000,000, issued and outstanding
     common shares - 16,429,028 (excluding manditory
     redemptions, 97,000 shares)                                          16,429
 Additional paid-in capital                                           10,842,301
 Treasury stock, at cost, 600,000 shares at $.25 per share             (150,000)
 Accumulated deficit                                                (18,332,495)
                                                               -----------------

     Total stockholders' deficit                                     (7,623,765)
                                                               -----------------

                                                               $       3,725,054
                                                               =================


The accompanying notes form an integral part of the condensed consolidated
financial statements.


                                       7


<PAGE>


<TABLE>
<CAPTION>
Intraop Medical Corporation
Condensed Consolidated Statements of Operations (Unaudited)
--------------------------------------------------------------------------------------------------


                                      Three Months Ended March 31,    Six Months Ended March 31,
                                        2005                            2005
                                   Restated, Note 10     2004      Restated, Note 10     2004
                                   --------------- --------------- --------------- ---------------

<S>                                <C>             <C>             <C>             <C>
Revenue                            $       196,431 $       134,450 $     2,557,395 $       275,422

Cost of revenue                            217,506         223,615       2,085,291         390,477
                                   --------------- --------------- --------------- ---------------

Gross profit                              (21,075)        (89,165)        472,104        (115,055)
                                   --------------- --------------- --------------- ---------------

Operating expenses:
  Research and development                132,500         117,317         236,148         239,442
  General and administrative            1,989,163         584,348       2,302,057         895,734
  Sales and marketing                     179,457         102,313         295,045         205,432
                                   --------------- --------------- --------------- ---------------

      Total operating expenses          2,301,120         803,978       2,833,250       1,340,608
                                   --------------- --------------- --------------- ---------------

Loss from operations                   (2,322,195)       (893,143)     (2,361,146)     (1,455,663)
                                   --------------- --------------- --------------- ---------------

Other income (expense):
  Interest expense                       (458,013)        (61,137)       (837,334)       (181,954)
                                   --------------- --------------- --------------- ---------------

      Total other expense                (458,013)        (61,137)       (837,334)       (181,954)
                                   --------------- --------------- --------------- ---------------

Loss before income taxes               (2,780,208)       (954,280)     (3,198,480)     (1,637,617)

Provision for income taxes                      -               -               -               -
                                   --------------- --------------- --------------- ---------------

Net loss                           $   (2,780,208) $     (954,280) $   (3,198,480) $   (1,637,617)
                                   =============== =============== =============== ===============

Net loss per share available to
  common shareholders              $        (0.17) $        (0.07) $        (0.19) $        (0.12)
                                   =============== =============== =============== ===============

Weighted average number of shares
  outstanding (basic and diluted)       16,527,028      14,344,610      16,527,028      14,181,482
                                   =============== =============== =============== ===============
</TABLE>


The accompanying notes form an integral part of the condensed consolidated
financial statements.


                                       8


<PAGE>


<TABLE>
<CAPTION>
Intraop Medical Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
--------------------------------------------------------------------------------

                                                  Six Months Ended March 31,
                                                        2005
                                               Restated, Note
                                                     10                    2004
                                                ---------------  -----------------
<S>                                                <C>                <C>

Cash flows provided by (used for) operating
 activities:
Net loss                                        $   (3,198,480)  $     (1,637,617)
                                                ---------------  -----------------

Adjustments to reconcile net loss to net cash
  provided by (used for) operating activities:
 Depreciation                                           115,331            150,122
 Amortization of intangible assets                      107,952             70,605
 Non-cash compensation  for options issued               20,649              1,489
 Debt discount due to warrants                           13,747              1,393
 Amortization of note discount                            5,155              1,409
 Amortization of debt issuance costs                    312,500             15,675
 Non-cash compensation  for warrants issued              16,154            162,953
 Non-cash compensation for common stock issued        1,216,350                  -
 Non-cash expense related to issuance
  of anti-dilutive shares of common stock               375,420                  -
 Non-cash revenue received on leased equipment         (124,335)           (82,890)
 Non-cash interest expense for obligation for
  leased
   equipment                                             82,290             43,639

Changes in assets and liabilities:
 (Increase) decrease in assets:
  Accounts receivable                                 1,024,285            149,821
  Inventory                                           1,290,787         (1,022,739)
  Prepaid expenses and other current assets             (19,414)          (429,772)
  Debt issuance costs                                  (210,000)          (625,000)
   Deposits                                            (292,061)          (101,703)
Increase (decrease) in liabilities:
  Accounts payable and accrued expenses               (131,159)        (1,205,719)
  Interest payable                                      34,894             53,290
  Royalty payable                                       25,000                  -
  Advances, including advances from shareholders             -            175,917
  Estimated liabilities under warranties               (21,204)            67,662
  Other current liabilities                                841            (22,751)
                                                ---------------  -----------------

  Total adjustments                                  3,843,182         (2,596,599)
                                                ---------------  -----------------

  Net cash provided by (used for) operating
   activities                                   $      644,702   $     (4,234,216)
                                                ---------------  -----------------
</TABLE>


The accompanying notes form an integral part of the condensed consolidated
financial statements.

                                       9


<PAGE>


<TABLE>
<CAPTION>
Intraop Medical Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)
-----------------------------------------------------------------------------------------

                                                             Six Months Ended March 31,
                                                            2005
                                                      Restated, Note 10          2004
                                                      -----------------   ------------------
<S>                                                   <C>                 <C>
Cash flows used for investing activities:
  Acquisition of fixed assets                         $          1,268    $         (13,270)
                                                      -----------------   ------------------

     Net cash provided by (used for) investing
      activities                                                 1,268              (13,270)
                                                      -----------------   ------------------

Cash flows provided by (used for) financing
 activities:
  Proceeds from note payable - other                         2,520,000            3,941,250
  Payments on note payable - related party                    (125,000)                   -
  Payments on note payable - other, net discounts           (3,036,947)            (826,734)
  Proceeds from obligation for leased equipment                      -            1,230,685
  Proceeds from note payable - related party                    75,000               50,000
  Proceeds from issuance of common stock                            -                11,250
                                                      -----------------   ------------------

     Net cash provided by (used for) financing
      activities                                              (566,947)           4,406,451
                                                      -----------------   ------------------

Net increase (decrease) in cash                                 79,023              158,965

Cash, beginning of period                                      119,475               31,012
                                                      -----------------   ------------------

Cash, end of period                                   $        198,498    $         189,977
                                                      =================   ==================

Supplemental disclosure of cash flow information:

  Interest paid                                       $        484,785    $         469,586
                                                      =================   ==================

  Income taxes paid                                   $              -    $               -
                                                      =================   ==================

Supplemental disclosure of non-cash investing
  and financing activities:

  Inventory converted to leased equipment             $          1,137    $       1,009,192
                                                      =================   ==================

  Property and equipment, at book value, converted
   to inventory                                       $          6,620    $               -
                                                      =================   ==================

  Proceeds of product financing directly remitted
   to vendor                                          $      1,065,000    $               -
                                                      =================   ==================

  Accounts payable converted to notes payable         $        233,023    $               -
                                                      =================   ==================

  Conversion of promissory notes to
   commitments to issue common stock                  $        395,000    $               -
                                                      =================   ==================

  Adjustment to common stock and additional paid in
  capital
  due to issuance of 300,336 shares of common stock
  per
  antidilution provisions                             $        375,420    $               -
                                                      =================   ==================
</TABLE>


The accompanying notes form an integral part of the condensed consolidated
financial statements.

                                       10


<PAGE>


Intraop Medical Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)

(1)      Business and Summary of Significant Accounting Policies:

         Basis of Presentation:

                  The accompanying unaudited condensed consolidated financial
                  statements have been prepared in accordance with the
                  instructions under Regulations SB and do not include all of
                  the information and footnotes required by accounting
                  principles generally accepted in the United States of America
                  for complete consolidated financial statements. These
                  condensed consolidated financial statements and related notes
                  should be read in conjunction with the Company's audited
                  consolidated annual financial statements filed on or about the
                  date of this filing on Form 8K/A in which we disclosed the
                  restated financial results Intraop Medical, Inc., our recent
                  merger partner, for the three months ended December 31, 2004
                  and 2003 and the years ended September 30, 2004 and 2003. In
                  the opinion of management, these unaudited condensed
                  consolidated financial statements reflect all adjustments
                  which are of a normal recurring nature and which are necessary
                  to present fairly the consolidated financial position of the
                  Company as of March 31, 2005, and the results of operations
                  for the three and six months ended March 31, 2005 and 2004 and
                  cash flows for the six-months ended March 31, 2005 and 2004.
                  The results of operations for the three and six months ended
                  March 31, 2005 are not necessarily indicative of the results,
                  which may be expected for the entire fiscal year.

         Restatements:

                  In mid-July 2005, and in consultation with our independent
                  registered public accounting firm, Stonefield Josephson, Inc.,
                  we determined that certain restatements to these financials
                  statements were needed to correctly account for i) certain
                  liabilities related to product financing, including interest
                  thereon, previously reported only as commitments and
                  contingencies in the footnotes to these financial statements,
                  ii) the value of certain options and warrants granted during
                  those periods, and iii) the accrual of certain liabilities for
                  the redemption of common stock as the result of the completion
                  of our Merger. See Note 10 for a full discussion of these
                  restatements. These financial statements have been prepared in
                  accordance with those restatements and as if such restatements
                  were in effect from the inception of the restated
                  transactions. Also, contemporaneous with the filing of this
                  report, the Company filed Form 8-K/A in which it similarly
                  restated the financial statements of its merger partner,
                  Intraop Medical, Inc., for the three months ended December 31,
                  2004, to the extent that the restatements discussed herein
                  affected that period. A full discussion of those restatements
                  can be found in that filing.


                                       11


<PAGE>


(1)      Business and Summary of Significant Accounting Policies (Continued):

         Formation and Business of the Company:

                  Intraop Medical Corporation (the "Company") was organized
                  under the laws of the State of Nevada on November 5, 1999
                  under the name DigitalPreviews.com. On January 21, 2004, the
                  Company filed a Certificate of Amendment with the Secretary of
                  State of Nevada to change the name of the Company from
                  DigitalPreviews.com, Inc. to Intraop Medical Corporation. The
                  Company had been seeking viable business opportunities but had
                  not commenced operations. The Company had not yet generated
                  any revenues from its planned principal operations and was
                  considered a development stage company as defined in Statement
                  of Financial Accounting Standards No. 7. The Company has, at
                  the present time, not paid any dividends and any dividends
                  that may be paid in the future will depend upon the financial
                  requirements of the Company and other relevant factors.

                  On February 24, 2004, the Company signed a definitive
                  agreement and plan of reorganization (the "Merger Agreement")
                  with Intraop Medical, Inc., a privately-held Delaware
                  corporation (the "Target") under which the Target will be
                  merged with and into the Company in a tax-free exchange of
                  stock. Under the Merger Agreement, the Company will issue one
                  share of its common stock in exchange for each share of the
                  Target outstanding shares of common and preferred stock on the
                  closing date of the proposed merger. All of the Target's
                  obligations under its outstanding options, warrants, and
                  convertible securities will be assumed by the Company.

                  The Board of Director's of the Company approved the merger on
                  February 24, 2004, the Target's Board of Directors approved
                  the merger on February 12, 2004. In addition, the merger was
                  approved by the Company's majority stockholder on September 3,
                  2004, and by the Target's stockholders on July 13, 2004. The
                  merger was consummated on March 9, 2005 as considerations for
                  the merger were exchanged.

                  The Target is deemed to be the purchaser and surviving company
                  for accounting purposes. Accordingly, due to the Merger, its
                  net assets are included in the balance sheet at their
                  historical book values and the results of operations of the
                  Target will be presented for the comparative prior periods.
                  Weighted average shares and loss per share have been
                  retroactively restated to reflect the effect of the Merger.

                  Control of the net assets and operations of Company was
                  acquired effective March 9, 2005. The Company will account for
                  this transaction as a purchase of the assets and liabilities
                  of Intraop Medical Corporation. The historical cost of the net
                  assets assumed was $0.

                  Pursuant to the Merger, all of the Target's 4,678,767
                  preferred Series 1, Series 2, Series 3, and Series 4 shares
                  were exchanged for common stock of the Company. Additionally,
                  due to certain antidilutive provisions related to the
                  preferred shares of the Target, the Company issued an
                  additional 300,336 shares of common stock to these
                  shareholders based on certain cumulative antidilutive events
                  occurring prior to the merger. The shares were valued at the
                  $1.25 per share, the fair market value of the shares at the
                  time of the events triggering the antidilutive provisions.


                                       12


<PAGE>


(1)      Business and Summary of Significant Accounting Policies (Continued):

         Formation and Business of the Company (Continued):

                  Further pursuant to the Merger, certain holders of convertible
                  notes representing $295,000 of principal and $100,000 of
                  principal due related parties under the Company's Promissory
                  Note program had previously agreed to convert their notes to
                  common stock upon completion of the Merger at a price of $1.25
                  per share as per their original promissory note agreements. As
                  the shares have not been issued as of March 31, 2005, the
                  Company recorded these amounts as a reduction to notes payable
                  and notes payable related parties and an increase in
                  additional paid in capital.


                  Further pursuant to the Merger, the Company had agreed upon
                  the close of the Merger to issue 795,000 of common stock to
                  certain service providers in exchange for services related to
                  the Merger. These shares were valued at $1.53 per share, the
                  price of the Company's common stock on March 9, 2005, the date
                  of the close of the merger and were recorded as expense on the
                  Company's books and a corresponding increase in additional
                  paid in capital as the shares were not issued as of March 31,
                  2005.


                  Further pursuant to the Merger, the Company cancelled
                  19,932,265 shares of outstanding common stock ($0.001 par
                  value) of Mr. David Shamy.


                  The Target was incorporated in Delaware in March 1993 to
                  develop, manufacture, market, and service mobile electron beam
                  treatment systems designed for intraoperative radiotherapy
                  (IORT). IORT is the application of radiation directly to a
                  cancerous tumor and/or tumor bed during surgery. In July 1998,
                  the Company obtained FDA 510k clearance on its initial
                  product, the "Mobetron". This business of the Target is now
                  the sole business of the Company.


         Basis of Consolidation:

                  The unaudited condensed consolidated financial statements
                  include the accounts of Intraop Medical Corporation and its
                  wholly owned subsidiaries Intraop Medical Services, Inc. and
                  Intraop Medical Services Louisville, LLC. All significant
                  intercompany balances and transactions have been eliminated in
                  preparation of the unaudited condensed consolidated financial
                  statements.

         Revenue Recognition:

                  Revenue is recognized when earned in accordance with
                  applicable accounting standards, including Staff Accounting
                  Bulletins 104, "Revenue Recognition in Financial Statements"
                  ("SAB 104"), and the interpretive guidance issued by the
                  Securities and Exchange commission and EITF issue number
                  00-21, "Accounting for Revenue Arrangements with Multiple
                  Elements", of the FASB's Emerging Task Force. Revenue is
                  generated from machine sales, leasing of machines,
                  installations, and maintenance.


                                       13


<PAGE>


(1)      Business and Summary of Significant Accounting Policies (Continued):


         Revenue Recognition (Continued):


                  Machine sales and installation revenue are recognized upon
                  shipment, installation, or final customer acceptance,
                  depending on specific contract terms, provided any remaining
                  obligations are inconsequential or perfunctory and collection
                  of resulting receivable is deemed probable. Revenue from
                  maintenance is recognized as services are completed or over
                  the term of the maintenance agreements. Revenue from the
                  leasing of machines is recognized over the term of the lease
                  agreements.

                  During the three and six months ended March 31, 2005 and 2004,
                  the Company recognized revenue on service contracts to two
                  institutions for the service of Mobetrons at the customer
                  site. The customer paid for a one-year service contract for
                  which they receive warranty-level labor and a credit for a
                  certain contracted dollar amount of service-related parts. On
                  each contract, the Company recorded a liability for parts
                  equal to the amount of the parts credit contracted for by the
                  customer with the remainder of the contract price recorded as
                  labor-related service contract liability. The labor-related
                  portion, which has been approximately equal to the Company's
                  standard warranty estimate for new machines, has been adequate
                  to meet service contract expenses.


         Basic and Diluted Loss Per Share:

                  In accordance with SFAS No. 128, "Earnings Per Share," the
                  basic loss per share is computed by dividing the loss
                  attributable to common stockholders by the weighted average
                  number of common shares outstanding during the period. Diluted
                  loss per share reflects the amount that would have resulted if
                  certain dilutive potential common stock had been issued.
                  Because the Company has experienced losses from inception, the
                  convertible notes payable described in Note 4 are
                  anti-dilutive. Therefore, such notes do not impact the
                  weighted average number of common shares outstanding reported
                  in the accompanying statement of operations. For the three and
                  six months ended March 31, 2005 and 2004, potential equivalent
                  shares excluded from the calculation of diluted earnings per
                  share, as their effect is not dilutive, include stock options,
                  warrants, and convertible notes of 3,673,919 and for the three
                  months and six months ended March 31, 2005 and 3,075,091 for
                  the three months and six months ended March 31, 2004.

         Stock-Based Compensation:


                  The Company accounts for stock-based compensation in
                  accordance with Accounting Principles Board ("APB") Opinion
                  No. 25, "Accounting for Stock Issued to Employees", and
                  complies with the disclosure provisions of SFAS No. 123,
                  "Accounting for Stock-Based Compensation". Under APB No. 25
                  compensation cost is recognized on the excess, if any, on the
                  date of grant of the fair value of the Company's shares over
                  the employee's exercise price. The Company has, since
                  inception, granted options at the fair value of the stock and
                  therefore has had no compensation expense to record.


                                       14


<PAGE>



(1)      Business and Summary of Significant Accounting Policies (Continued):

         Stock-Based Compensation (Continued):

                  When the exercise price of the option is less than the fair
                  value price of the underlying shares on the grant date,
                  deferred stock compensation is recognized and amortized to
                  expense in accordance with Financial Accounting Standards
                  Board ("FASB") Interpretation No. 44 over the vesting period
                  of the individual options.

                  Accordingly, if the exercise price of the Company's employee
                  options equals or exceeds the market price of the underlying
                  shares on the date of grant, no compensation expense is
                  recognized. Options or shares awards issued to non-employees
                  are valued using the Black-Scholes pricing model and expensed
                  over the period services are provided.

                  In December 2002, the FASB issued SFAS No. 148, "Accounting
                  for Stock-Based Compensation - Transition and Disclosure",
                  which amends SFAS No. 123, "Accounting for Stock-Based
                  Compensation", to provide alternative methods of transition
                  for a voluntary change to the fair value-based method of
                  accounting for stock-based employee compensation. In addition,
                  SFAS No. 148 expands the disclosure requirements of SFAS No.
                  123 to require more prominent disclosures in both annual and
                  interim financial statements about the method of accounting
                  for stock-based employee compensation and the effect of the
                  method used on reported results. The transition provisions of
                  SFAS No. 148 are effective for fiscal years ended after
                  December 15, 2002. The transition provisions do not currently
                  have an impact on the Company's consolidated financial
                  position and results of operations as the Company has not
                  elected to adopt the fair value-based method of accounting for
                  stock-based employee compensation under SFAS NO. 123. The
                  disclosure provisions of SFAS No. 148 are effective for
                  financial statements for interim periods beginning after
                  December 15, 2002. The Company adopted the disclosure
                  requirements in the first quarter of fiscal year 2003.

                  The Company accounts for its stock option plans under the
                  recognition and measurement principles of APB Opinion No. 25,
                  Accounting for Stock Issued to Employees, and related
                  Interpretations. No stock-based employee compensation cost is
                  reflected in net loss, except when options granted under those
                  plans had an exercise price less than the market value of the
                  underlying common stock on the date of grant.


                                       15


<PAGE>


(1)      Business and Summary of Significant Accounting Policies (Continued):


         Stock-Based Compensation (Continued):


                  The following table illustrates the effect on net loss and
                  loss per share if the Company had applied the fair value
                  recognition provisions of FASB Statement No. 123, Accounting
                  for Stock-Based Compensation, to Stock-Based Employee
                  Compensation.


<TABLE>
<CAPTION>
                                                                    Three months ended March 31,
                                                                       2005
                                                                     Restated,
                                                                      Note 10                 2004
                                                              -----------------------------------------

<S>                                                             <C>                     <C>
                  Net loss as reported                          $   (2,780,208)         $     (954,280)

                  Compensation  recognized under APB 25                       -                      -

                  Compensation  recognized under SFAS 123              -                      -
                                                              -----------------------------------------

                  Pro-forma net loss                            $   (2,780,208)         $     (954,280)
                                                              =========================================

                  Net loss per share:
                  Basic and diluted -- as reported              $        (0.17)         $        (0.07)
                                                              =========================================
                  Basic and diluted -- pro-forma                $        (0.17)         $        (0.07)
                                                              =========================================


                                                                       Six months ended March 31,
                                                              -----------------------------------------
                                                                       2005
                                                                     Restated,
                                                                      Note 10                 2004
                                                              -----------------------------------------

                  Net loss as reported                          $   (3,198,480)         $   (1,637,617)

                  Compensation  recognized under APB 25                       -                      -
                  Compensation  recognized under SFAS 123              (47,637)                (16,319)
                                                              -----------------------------------------

                  Pro-forma net loss                            $   (3,246,117)         $   (1,653,936)
                                                              =========================================

                  Net loss per share:
                  Basic and diluted -- as reported              $        (0.19)         $        (0.12)
                                                              =========================================
                  Basic and diluted -- pro-forma                $        (0.20)         $        (0.12)
                                                              =========================================
</TABLE>


                                       16


<PAGE>



(1)      Business and Summary of Significant Accounting Policies (Continued):


         Stock-Based Compensation (Continued):


                  No grants were made during the three months ended March 31,
                  2005 and 2004. For grants in the six months ended March 31,
                  2005 and 2004, the following assumptions were used: (i) no
                  expected dividends, (ii) a risk-free interest rate ranging
                  from 3.11% to 4.10%, between 2.61% to 4.16% during the six
                  months ended March 31, 2005 and 2004 respectively, (iii)
                  expected volatility 42.68% and 0.01% during the six months
                  ended March 31, 2005 and 2004 respectively, and (iv) an
                  expected life of 4 to 10 years or the stated life of the
                  option. The fair value was determined using the Black-Scholes
                  option-pricing model.

                  The estimated fair value of grants of stock options and
                  warrants to non-employees of the Company is charged to expense
                  in the condensed consolidated financial statements. These
                  options vest in the same manner as the employee options
                  granted under each of the option plans as described above.

(2)      Going Concern:

         The accompanying unaudited condensed consolidated financial statements
         have been prepared on a going-concern basis in accordance with
         accounting principles generally accepted in the United States of
         America. As shown in the unaudited condensed consolidated financial
         statements, the Company has incurred substantial losses of $2,780,208
         and $954,280 during the three months ended March 31, 2005 and 2004,
         respectively, and $3,198,480 and $1,637,617 during the six months ended
         March 31, 2005 and 2004, respectively. The Company has working capital
         deficit of $8,569,536 as of March 31, 2005, and significant borrowings
         from notes payable and other amounts due and/or past due and an
         accumulated deficit of $18,332,495 as of March 31, 2005. The Company
         must raise additional working capital in order to continue as a going
         concern. There can be no assurance that the Company will be able to
         obtain financing at all, or if obtained, on terms favorable to the
         Company or its stockholders. This , in turn, raises substantial doubt
         about the Company's ability to continue as a going concern. The
         unaudited condensed consolidated financial statements do not include
         any adjustments that might result from the outcome of this uncertainty.


(3)      Recent Accounting Pronouncements:


         In March 2004, the Financial Accounting Standards Board (FASB) approved
         the consensus reached on the Emerging Issues Task Force (EITF) Issue
         No. 03-1, "The Meaning of Other-Than-Temporary Impairment and Its
         Application to Certain Investments." The objective of this Issue is to
         provide guidance for identifying impaired investments. EITF 03-1 also
         provides new disclosure requirements for investments that are deemed to
         be temporarily impaired. The accounting provisions of EITF 03-1 are
         effective for all reporting periods beginning after June 15, 2004,
         while the disclosure requirements for certain investments are effective
         for annual periods ending after December 15, 2003, and for other
         investments such disclosure requirements are effective for annual
         periods ending after June 15, 2004. The Company has evaluated the
         impact of the adoption of EITF 03-1 and does not believe the impact
         will be significant to the Company's overall results of operations or
         financial position.


                                       17

<PAGE>


(3)      Recent Accounting Pronouncements (Continued):


         In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an
         amendment of ARB No. 43, Chapter 4". The amendments made by Statement
         151 clarify that abnormal amounts of idle facility expense, freight,
         handling costs, and wasted materials (spoilage) should be recognized as
         current period charges and require the allocation of fixed production
         overheads to inventory based on the normal capacity of the production
         facilities. The guidance is effective for inventory costs incurred
         during fiscal years beginning after June 15, 2005. Earlier application
         is permitted for inventory costs incurred during fiscal years beginning
         after November 23, 2004. The Company has evaluated the impact of the
         adoption of SFAS 151, and does not believe the impact will be
         significant to the Company's overall results of operations or financial
         position.


         In December 2004, the FASB issued SFAS No.152, "Accounting for Real
         Estate Time-Sharing Transactions, an amendment of FASB Statements No.
         66 and 67 (SFAS 152)". The amendments made by Statement 152 amend FASB
         Statement No. 66, Accounting for Sales of Real Estate, to reference the
         financial accounting and reporting guidance for real estate
         time-sharing transactions that is provided in AICPA Statement of
         Position (SOP) 04-2, Accounting for Real Estate Time-Sharing
         Transactions. This Statement also amends FASB Statement No. 67,
         Accounting for Costs and Initial Rental Operations of Real Estate
         Projects, to state that the guidance for (a) incidental operations and
         (b) costs incurred to sell real estate projects does not apply to real
         estate time-sharing transactions. The accounting for those operations
         and costs is subject to the guidance in SOP 04-2. This Statement is
         effective for financial statements for fiscal years beginning after
         June 15, 2005, with earlier application encouraged. The Company has
         evaluated the impact of the adoption of SFAS 152, and does not believe
         the impact will be significant to the Company's overall results of
         operations or financial position.


         In December 2004, the FASB issued SFAS No.153, "Exchanges of
         Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for
         Nonmonetary Transactions." The amendments made by Statement 153 are
         based on the principle that exchanges of nonmonetary assets should be
         measured based on the fair value of the assets exchanged. Further, the
         amendments eliminate the narrow exception for nonmonetary exchanges of
         similar productive assets and replace it with a broader exception for
         exchanges of nonmonetary assets that do not have commercial substance.
         Previously, Opinion 29 required that the accounting for an exchange of
         a productive asset for a similar productive asset or an equivalent
         interest in the same or similar productive asset should be based on the
         recorded amount of the asset relinquished. Opinion 29 provided an
         exception to its basic measurement principle (fair value) for exchanges
         of similar productive assets. The Board believes that exception
         required that some nonmonetary exchanges, although commercially
         substantive, be recorded on a carryover basis. By focusing the
         exception on exchanges that lack commercial substance, the Board
         believes this Statement produces financial reporting that more
         faithfully represents the economics of the transactions. The Statement
         is effective for nonmonetary asset exchanges


                                       18


<PAGE>


(3)      Recent Accounting Pronouncements (Continued):


         occurring in fiscal periods beginning after June 15, 2005. Earlier
         application is permitted for nonmonetary asset exchanges occurring in
         fiscal periods beginning after the date of issuance. The provisions of
         this Statement shall be applied prospectively. The Company has
         evaluated the impact of the adoption of SFAS 153, and does not believe
         the impact will be significant to the Company's overall results of
         operations or financial position.


         In December 2004, the FASB issued SFAS No.123 (revised 2004),
         "Share-Based Payment". Statement 123(R) will provide investors and
         other users of financial statements with more complete and neutral
         financial information by requiring that the compensation cost relating
         to share-based payment transactions be recognized in financial
         statements. That cost will be measured based on the fair value of the
         equity or liability instruments issued. Statement 123(R) covers a wide
         range of share-based compensation arrangements including share options,
         restricted share plans, performance-based awards, share appreciation
         rights, and employee share purchase plans. Statement 123(R) replaces
         FASB Statement No. 123, Accounting for Stock-Based Compensation, and
         supersedes APB Opinion No. 25, Accounting for Stock Issued to
         Employees. Statement 123, as originally issued in 1995, established as
         preferable a fair-value-based method of accounting for share-based
         payment transactions with employees. However, that Statement permitted
         entities the option of continuing to apply the guidance in Opinion 25,
         as long as the footnotes to financial statements disclosed what net
         income would have been had the preferable fair-value-based method been
         used. Public entities (other than those filing as small business
         issuers) will be required to apply Statement 123(R) as of the first
         interim or annual reporting period that begins after June 15, 2005. The
         Company has evaluated the impact of the adoption of SFAS 123(R), and
         does not believe the impact will be significant to the Company's
         overall results of operations or financial position.


         In December 2004 the Financial Accounting Standards Board issued two
         FASB Staff Positions--FSP FAS 109-1, Application of SFAS Statement 109
         "Accounting for Income Taxes" to the Tax Deduction on Qualified
         Production Activities Provided by the American Jobs Creation Act of
         2004, and FSP FAS 109-2 Accounting and Disclosure Guidance for the
         Foreign Earnings Repatriation Provision within the American Jobs
         Creation Act of 2004. Neither of these affected the Company as it does
         not participate in the related activities.

         In March 2005, the FASB issued Staff Accounting Bulletin No. 107 ("SAB
         107") which provides additional guidance to the new stock option
         expensing provisions under SFAS 123(R). SAB 107 acknowledges that fair
         value estimates cannot predict actual future events and as long as the
         estimates are made in good faith, they will not be subsequently
         questioned no matter what the actual outcome. Historical volatility
         should be measured on an unweighted basis over a period equal to or
         longer than the expected option term or contractual term, depending on
         the option-pricing model that is used. Implied volatility is based on
         the market prices of a company's traded options or other financial
         instruments with option-like features, and is derived by entering the
         market price of the traded option into a closed-form model and solving
         for the volatility input. SAB 107 provides additional guidance for
         companies when estimating an option's expected term. In general,
         companies are not allowed to consider additional term reduction and the
         option

                                       19


<PAGE>


(3)      Recent Accounting Pronouncements (Continued):

         term cannot be shorter than the vesting period. Companies are permitted
         to use historical stock option exercise experience to estimate expected
         term if it represents the best estimate for future exercise patterns.
         SAB 107 provides that companies should enhance MD&A disclosures related
         to equity compensation subsequent to adoption of Statement 123(R). SAB
         107 provided that companies should provide all disclosures required by
         Statement 123 (R) in the first 10-Q filed after adoption of the new
         rules.


(4)      Notes Payable:

         A summary is as follows as of March 31, 2005:



                 Notes payable, related parties                $    907,425
                                                        ====================

                 Convertible notes                                  480,000

                 Other convertible notes                          1,280,194
                 Other notes                                      4,286,527
                                                        --------------------

                                                               $  6,046,721
                                                        ====================


         Notes Payable, Related Parties:

                  Notes payable to related parties of $907,425 (including
                  $100,000 of notes under the Company's Convertible Note
                  Program) at March 31, 2005, include notes issued to various
                  officers, directors, and stockholders of the Company. The
                  notes are due on demand and bear interest at 9% per annum,
                  payable quarterly unless otherwise specified by each holder.
                  During the six months ended March 31, 2005 and pursuant to the
                  Company's Merger and per the prior agreement of the related
                  party note holders, $100,000 of notes under the Company's
                  Promissory Note Program were converted to commitments to issue
                  80,000 shares of common stock at $1.25 per share. Additionally
                  for the six months ended March 31, 2005, the Company repaid
                  $125,000 of Promissory Notes to a related party, and that same
                  related party also purchased $75,000 of notes under the
                  Company's Convertible Note Program.


                                       20


<PAGE>


(4)      Notes Payable (Continued):

         Convertible Notes:

                  In January 2001, the Financial Accounting Standards Board
                  Emerging Issues Task Force issued EITF 00-27, "Application of
                  Issue No. 98-5 to Certain Convertible Instruments". This
                  pronouncement requires the use of the intrinsic value method
                  for recognition of the detachable and imbedded equity features
                  included with indebtedness, and requires amortization of the
                  amount associated with the convertibility feature over the
                  life of the debt instrument rather than the period for which
                  the instrument first becomes convertible.

                  Convertible notes relate to notes issued under the Company's
                  Promissory Note Program. The notes are convertible to Company
                  common stock at $1.25 per share at the option of the note
                  holders and bear interest at 9% per annum payable quarterly.
                  During the six months ended March 31, 2005 and pursuant to the
                  Company's Merger and per the prior agreement of the note
                  holders, $295,000 of notes under the Company's Promissory Note
                  Program were converted to commitments to issue shares of
                  common stock at $1.25 per share, while $250,000 of notes were
                  repaid. The notes are were due at various dates between June
                  1, 2004 and September 1, 2004. Although the notes were not
                  repaid when due, the Company paid interest on the notes when
                  due. The Company has contacted the note holders and is working
                  towards resolution of this event; however, no assurance can be
                  given that the note holders will continue to grant
                  forbearance. The principal balance outstanding under the notes
                  is $480,000 at March 31, 2005.

         Other Convertible Notes:

                  Other Convertible notes relate to notes issued under the
                  Company's Convertible Note Program, which the Company began in
                  October 2003 in anticipation of its planned Merger . Other
                  Convertible notes are convertible to Company common stock at
                  $1.50 per share at the option of the note holders; however,
                  such notes, including any accrued interest, will automatically
                  convert to Company common stock at between $1.00 and $1.50 per
                  share based on the terms and attainment of its next round of
                  equity financing. The notes are current and bear interest at
                  8% per annum and were due in full including all accrued
                  interest on March 31, 2005 but were note repaid when due. Note
                  holders purchased $532,500 of Notes under the Company's
                  Convertible Note Program during the six months ended March 31,
                  2005. Additionally, during the six months ended March 31,
                  2005, creditors of the Company agreed to convert $136,838 of
                  Company accounts payable and royalties payable (see Note 6) to
                  notes under the program. As of March 31, 2005, the principal
                  balance outstanding under the notes is $1,280,194 (excluding
                  $100,000 owed to related parties).


                                       21


<PAGE>


(4)  Notes Payable (Continued):

         Other Notes:

                  The Company converted an outstanding accounts payable balance
                  into unsecured notes payable during fiscal year 2003. These
                  unsecured notes payable accrue interest at rates between 5%
                  and 6%. As of March 31, 2005, the principal balance
                  outstanding under this note is $5,343.

                  The Company has a note payable to a former director in the
                  amount of $50,000. This note is due on demand and bears
                  interest at 9% per annum, payable quarterly unless otherwise
                  specified by the holder.

                  In March 2004, the Company borrowed $3,000,000 from a
                  financial institution. The note bears interest at 21% per
                  annum. Interest is due monthly while principal was originally
                  due in full at the maturity of the note in March 2005, however
                  the maturity date of the note has been extended until March
                  2006. The loan is secured by a lien on all of the assets of
                  the Company. In addition, the Company issued 2,400,000 shares
                  of its common stock to the lender as security for the note
                  "Collateral Shares", which the company estimated had a fair
                  market value of $1.25 per share. So long as an event of
                  default under the agreement has not occurred, the Company
                  retains voting rights over the Collateral Shares and the
                  lender is not permitted to sell the Collateral Shares. The
                  note may be prepaid in full at any time without penalty.

                  At inception, certain non-refundable loan fees, including
                  amounts paid to an intermediary, were also paid in relation to
                  this note in the amount of $625,000, which were capitalized on
                  the books of the Company and will be amortized into interest
                  expense ratably over the initial, one year term of the note.
                  Additionally, at inception, the Company prepaid seven months
                  of interest in the amount of $367,500. In March 2005, the
                  Company elected to extend the note for one year by paying a
                  fee of $210,000 to the lender which was capitalized on the
                  books of the Company and will be amortized into interest
                  expense ratably over the remaining term of the note.


                  Prior to October 1, 2004, the Company entered into a factoring
                  agreement under which it borrowed $900,000 from a financial
                  institution. The agreement was secured by a pledge of the
                  Company's equipment and sales contract related to the
                  Company's sale of a Mobetron system to a foreign customer. The
                  factoring agreement plus interest of $600 per day on the
                  factored amount was repaid in November 2004.


                  Prior to October 1, 2004, the Company entered into a factoring
                  agreement under which it borrowed $945,700 from a financial
                  institution. The agreement was secured by a pledge of the
                  Company's equipment and sales contract related to the
                  Company's sale of a Mobetron system to a domestic customer.
                  The factoring agreement plus interest of $630 per day on the
                  factored amount was repaid in November 2004.


                                       22


<PAGE>


(4) Notes Payable (Continued):

    Other Notes (Continued):

                  In November 2004, the Company entered into a factoring
                  agreement under which it borrowed $875,000 from a financial
                  institution. The agreement was secured by a pledge

                  of the Company's equipment and sales contract related to the
                  Company's sale of a Mobetron system to a foreign customer. The
                  factoring agreement plus interest of $600 per day on the
                  factored amount was repaid in January 2005.


                  In February 2005, the Company entered into a factoring
                  agreement under which it borrowed $1,060,000 from a financial
                  institution. The agreement was secured by a pledge of the
                  Company's equipment and sales contract related to the
                  Company's sale of a Mobetron system to a foreign customer. The
                  factoring agreement bears interest of $707 per day on the
                  factored amount. As of March 31, 2005, the principal balance
                  outstanding under this note is $1,060,000.


                  In February 2005, the Company borrowed on an unsecured basis
                  and subsequently repaid $52,500 from a financial institution
                  (the "February Unsecured Note"). The interest rate on the note
                  was 12% per annum and as a further inducement to issue the
                  note, the Company granted the lender warrants for 20,000
                  shares of the Company's common stock at $1.25 per share. The
                  fair value attributable to the warrant of $16,155 was recorded
                  as a note discount and was accreted to interest over the life
                  of the borrowing. The discount has been fully amortized as of
                  March 31, 2005.


                  In December 2004, the Company executed a non-interest bearing
                  promissory note for a principal amount of $171,184 in full
                  settlement of all amounts outstanding under a Manufacturing
                  and Distribution Agreement with Siemens Medical Systems, Inc.
                  ("Siemens") originally entered into on October 7, 1997. The
                  note was due on December 31, 2004, but was not repaid. As a
                  result of the non-payment the Company incurred a fee in the
                  amount of two percent of the outstanding principal balance and
                  the note began accruing interest at 9% per annum. The Company
                  has contacted the Siemens and is working towards resolution of
                  this event; however, no assurance can be given that Siemens
                  will continue to grant forbearance.


(5) Product Finance Transactions:


                  In October 2004, the Company entered into an inventory
                  repurchase agreement with a financial institution (the
                  "Inventory Repurchase Agreement"). Under the terms of the
                  agreement, the financial institution placed an order for a
                  Mobetron (the "Financed Mobetron") with CDS Engineering LLC
                  ("CDS") and gave a deposit to CDS of $525,000 towards the
                  purchase of that Mobetron. Per agreement between the Company
                  and CDS, the deposit was used to start the manufacture of the
                  Company's next three Mobetron systems. Under the terms of the
                  agreement between the Company and the financial institution
                  the Company is obligated to repurchase the Financed Mobetron
                  from the financial institution prior to taking delivery of any
                  other Mobetron systems from CDS. The Company recorded the
                  transaction as a liability related to product financing and a
                  corresponding deposit with CDS. In addition, the Company
                  agreed to pay interest on the deposited amount at a rate of
                  $144 per day until the Company repurchases the unit from the
                  financial institution.


                                       23


<PAGE>


                  As a further inducement, the Company further agreed to
                  certain piggyback registration rights for 100,000 shares of
                  the Company's common stock owned by the financial
                  institution. At March 31, 2005, outstanding principal
                  balance under the note is $525,000.

                  In January 2005, the Company entered into an inventory
                  repurchase agreement with a financial institution (the "Second
                  Inventory Repurchase Agreement"). Under the terms of the
                  agreement, the financial institution placed an order for a
                  Mobetron (the "Second Financed Mobetron") with CDS and gave a
                  deposit to CDS of $540,000 towards the purchase of that
                  Mobetron. Per agreement between the Company and CDS, the
                  deposit was used to start the manufacture of an additional
                  three Mobetron systems. Under the terms of the agreement
                  between the Company and the financial institution, the Company
                  is obligated to repurchase the Second Financed Mobetron from
                  the financial institution prior to taking delivery of any
                  other Mobetron systems from CDS except the Financed Mobetron.
                  The Company recorded the transaction as a liability related to
                  product financing and a corresponding deposit with CDS. In
                  addition, the Company agreed to pay interest on the financed
                  deposited amount at a rate of $148 per day until the Company
                  repurchases the unit from the financial institution. As a
                  further inducement, the Company also agreed to grant the
                  financial institution a warrant for 43,200 shares of its
                  common stock at an exercise price of $1.25 per share. The
                  relative fair value attributable to the warrant of $13,747 was
                  recorded as a note discount and will be accreted to interest
                  over the estimated life of the borrowing. As of the March 31,
                  2005 the outstanding principal balance under this note
                  approximated $540,000 and the unamortized note discount was
                  $8,592.


(6) Related Party Transaction:

         Schonberg Radiation Corporation
         -------------------------------

         One of the Company's stockholders is a former director, officer, and
         stockholder of Schonberg Radiation Corporation (SRC). SRC granted the
         Company an exclusive license to certain technology related to medical
         applications of the linear accelerator used in the Company's products.
         The license agreement provides for a payment of $25,000 upon delivery
         of each of the first 20 accelerators. After the payments have been
         made, there are no additional license payments under this agreement,
         and the Company has the right to obtain proprietary information for the
         manufacture of these accelerators.

         Prior to receiving regulatory approval to market its Mobetron product,
         the Company expensed $25,000 of license payments. After receiving
         regulatory approval, the Company has capitalized these payments as they
         are made and amortized the related asset over a seven-year estimated
         useful life from the date of regulatory approval. At March 31, 2005,
         $300,000 has been capitalized with accumulated amortization of $236,399
         and is included in intangible assets.

         In February 2005, SRC agreed to sell and transfer to the Company all
         right, title and interest to the linear accelerator technology
         previously licensed to the Company. In exchange for these rights, the
         Company agreed to convert outstanding accounts payables balances of
         $40,000 and $50,000 of royalty payable due SRC to note under its
         Convertible Note Program (see Note 4) and further agreed to repay the
         remaining $150,000 of royalty payable accrued as of March 31, 2005 to
         SRC at certain dates in the future.


                                       24


<PAGE>


(7)      Commitments and Contingencies:


         During the three months ended March 31, 2005, the Company's customer in
         Netherlands notified the Company that the customer will exercise its
         option to terminate its lease for the Company's equipment and, as per
         prior agreement, require the Company to reimburse the customer for the
         prepayment amount that the customer is required to make to the leasing
         company.. The hospital will continue to lease the equipment through
         September 1, 2005 and a new prepayment amount has been agreed to. The
         Company estimates that the amount of the refund, due on September 1,
         2005, will be approximately $1,035,000 based on the prepayment price
         quoted by the lessor and contingent on the euro to dollar exchange rate
         at that time.


(8) Segment Information:


         Net revenues by geographic area are presented based upon the country of
         destination. No other foreign country represented 10% or more of net
         revenues for the six-month periods presented. Net revenues by
         geographic area were as follows:


<TABLE>
<CAPTION>
                                            Three Months Ended                 Six Months Ended
                                               March 31,                           March 31,
                                             2005              2004               2005             2004
                                    -----------------------------------    --------------------------------
 <S>                                     <C>               <C>              <C>                <C>
            Spain                       $       -         $       -        $    41,310        $       -
            Poland                          1,255               745              2,155            7,455
            Netherlands                    62,167            62,166            124,335           82,890
            Italy                          92,500                 -          1,037,955                -
            United States                  40,509            71,539          1,351,640          185,077
                                    -----------------------------------    --------------------------------
            Total Revenue               $ 196,431         $ 134,450        $ 2,557,395        $ 275,422
                                    ===================================    ================================
</TABLE>


         Long lived assets includes property and equipment, intangible assets,
         and leased equipment each net of applicable depreciation or
         amortization resides in the following countries March 31, 2005.


           Netherlands                      $        736,148
           United States                             209,623
                                            ----------------
           Total                            $        945,771
                                            ================




(9) Subsequent Events:

          In April 2005 the Company borrowed and repaid $73,000 from an officer
         and director of the Company. The loan was unsecured and bore interest
         at 9% per annum.

         In April 2005, the Company entered into an inventory repurchase
         agreement with a financial institution. Under the terms of the
         agreement, the financial institution placed an order for a Mobetron
         (the "Third Financed Mobetron") with the Company and gave a deposit to
         the Company of $562,000 towards the purchase of that Mobetron. Under
         the terms of the agreement between the Company and the financial
         institution the Company is obligated to repurchase the Third Financed
         Mobetron from the financial institution prior to taking delivery of any
         other Mobetron


                                       25


<PAGE>


(9) Subsequent Events (Continued):

         systems from CDS except the Financed Mobetron or the Second Financed
         Mobetron. In addition, the Company agreed to pay interest on the
         financed amount at a rate of $154 per day until the Company repurchases
         the unit from the financial institution. As a further inducement, the
         Company also agreed to grant the financial institution a warrant for
         44,960 shares of its common stock at an exercise price of $1.25 per
         share.

         In May 2005, the Company repaid $21,185 of its note due Siemens and all
         accrued interest to April 30, 2005 (see Note 4).


(10)     Restatements:

                  In mid-July 2005, and in consultation with our independent
         registered public accounting firm, Stonefield Josephson, Inc., we
         determined that certain restatements to these financials statements
         were needed to correctly account for i) certain liabilities related to
         product finance, including interest thereon, previously reported only
         as commitments and contingencies in the footnotes to these financial
         statements, ii) the value of certain options and warrants granted
         during those periods, and iii) the accrual of certain liabilities for
         the redemption of common stock as the result of the completion of our
         Merger. These financial statements have been prepared in accordance
         with those restatements and as if such restatements were in effect from
         the inception of the restated transactions. Also, contemporaneous with
         the filing of this report, the Company filed Form 8-K/A in which it
         similarly restated the financial statements of its merger partner,
         Intraop Medical, Inc., for the three months ended December 31, 2004, to
         the extent that the restatements discussed herein affected that period.
         A full discussion of those restatements can be found in that filing.


         The results of these restatements, as more fully described below are:


                                     Three Months Ended March 31, 2005
                              Previously
                               Reported     Adjustments  Notes    Restated
                               -------------------------------------------
Statements of Operations:
  General and
   administrative              $ 1,996,580  $   (7,417)  (a)(b) $  1,989,163
  Total operating expenses       2,308,537      (7,417)  (a)(b)    2,301,120
   Loss from operations         (2,329,612)      7,417   (a)(b)   (2,322,195)
   Interest expense               (410,884)    (47,129)  (a)(b)     (458,013)
   Net loss                    $(2,740,496) $  (39,712)  (a)(b) $ (2,780,208)


                                 Six Months Ended March 31, 2005
                             Previously
                               Reported     Adjustments  Notes    Restated
                               -------------------------------------------
Statements of Operations:
  General and
   administrative              $ 2,300,423  $    1,634   (a)(b) $  2,302,057
  Total operating expenses       2,831,616       1,634   (a)(b)    2,833,250
   Loss from operations         (2,359,512)     (1,634)  (a)(b)   (2,361,146)
   Interest expense               (777,690)    (59,644)  (a)(b)     (837,334)
   Net loss                    $(3,137,202) $  (61,278)  (a)(b) $ (3,198,480)


                                       26


<PAGE>


(10)     Restatements (Continued):


<TABLE>
<CAPTION>
                                                                As of March 31, 2005
                                                    Previously
Balance Sheet:                                       Reported    Adjustments      Notes      Restated
                                               --------------------------------------------------------
<S>                                            <C>              <C>                     <C>
 Deposits                                      $      418,475   $  1,065,000        (a) $   1,483,475
 Total current assets                               1,714,283      1,065,000        (a)     2,779,283
 Liability related to product financing,
   net discounts due to warrants                           -       1,056,408        (a)     1,056,408
  Interest payable                                    172,827         38,334        (a)       211,161
  Commitments to redeem common stock                       -         121,250        (c)       121,250
  Total liabilities, all current                   10,132,827      1,215,992     (a)(c)    11,348,819
  Common Stock                                         16,526            (97)       (c)        16,429
  Additional paid-in capital                       10,931,915        (89,614) (a)(b)(c)    10,842,301
  Accumulated deficit                             (18,271,217)       (61,278)    (a)(b)   (18,332,495)
  Total stockholders' deficit                  $   (7,472,776)  $   (150,989) (a)(b)(c) $  (7,623,765)
</TABLE>






         (a) Product Finance Transactions:

                  The Inventory Repurchase Agreement and the Second Inventory
         Repurchase Agreement discussed in Note 4, Other Notes to these
         financial statements was previously reported, except for the warrant
         associated with the Second Inventory Repurchase Agreement which had
         previously been expense, only in footnotes to the financial statements
         and was not on the books of Company, nor did the Company recognize
         interest expense related to this Agreement. These restated financial
         statements now include the Inventory Repurchase Agreement and the
         Second Inventory Repurchase Agreement as a liability related to product
         financing. Interest expense, including the amortization of certain
         discounts due to the issuance of warrants, related to these
         transactions has been accrued as more fully described in Note 5 above.
         At March 31, 2005 this restatement resulted in i) an increase in
         deposits of $1,065,000, ii) an increase in liability related to product
         financing net of discounts due to warrants of $1,056,408, iii) an
         increase in interest payable of $38,334 and iv) an increase in
         additional paid in capital of $10,510. For the three months ended March
         31, 2005, the restatement of these transactions resulted in i) a
         decrease in general and administrative expense of $3,236 from the
         reversal of the warrant expense previously recognized on the warrant
         associated with the Second Inventory Purchase Agreement, and ii) an
         increase in interest expense of $30,974. For the six months ended March
         31, 2005, the restatement of these transactions resulted in i) a
         decrease in general and administrative expense of $3,236, and ii) an
         increase in interest expense of $43,489.



         (b) Restatement of the value of options and warrants granted:

                  During the three months ended December 31, 2004, the company
         granted options to purchase the Company's common stock to certain
         affiliates of the Company for services rendered. The Company previously
         recorded an option expense of $11,599 based on the fair value of those
         options determined using the Black-Scholes option-pricing model and
         assuming (i) no expected dividends; (ii) a risk-free interest rate of
         between 4.10% to 4.16%; (iii) expected volatility of 0.01%, and (iv) an
         expected life equal to the stated life of the option.


                                       27


<PAGE>


(10)      Restatements (Continued):


         (b) Restatement of the value of options and warrants granted
             (Continued):

         Subsequently, the Company determined that an estimated volatility of
         42.68% should have been used, and the Company re-computed a restated
         value for the options of $20,650. This change in the value of the
         options resulted, at March 31, 2005 and for the three and six months
         ended March 31, 2005, in an increase in general and administrative
         expense and a corresponding increase in additional paid in capital of
         $9,051.


         The Company also previously used a volatility of 0.01% in the
         calculation of the warrants associated with the February Unsecured Note
         as further described in Note 4, Other Notes above. The Company has
         restated the value of this warrant based on the revised volatility of
         42.68%, and reclassified the expense associated with this warrant from
         general and administrative expense to interest expense. The effect of
         this restatement at March 31, 2005, is an increase in additional paid
         in capital of $11,973, while for the three and six months ended March
         31, 2005, the effect of the restatement is i) a decrease in general and
         administrative expense of $4,181 and an increase in interest expense of
         $16,155.


         (c) Accrual of liability for redemption of common stock:


         Prior to the Company's Merger, shareholders representing 97,000 shares
         of common stock had previously voted against the Merger. Their "no"
         vote reserved for them certain dissenters rights which allowed them,
         upon completion of the Merger and subject to their giving proper notice
         to the Company and certain other conditions, to redeem their shares at
         a redemption value of $121,250. As these holders had not given such
         notice until April 2005, the Company had previously reported these
         dissenter's rights only in the subsequent events footnote to these
         financials. However, the Company has concluded that the actual giving
         of notice by these shareholder's was likely upon completion of the
         Merger on March 9, 2005 and has therefore accrued a liability in the
         amount of the redemption value. The effect of this restatement at March
         31, 2005 is an increase in commitments to redeem common stock of
         $121,250 and a reduction in common stock and additional paid in capital
         of $97 and $121,153 respectively.


                                       28


<PAGE>


Item 2.  Management's Discussion and Analysis or Plan of Operation

         This Discussion and Analysis should be read in conjunction with: a) the
Company's audited financial statements and accompanying footnotes included Form
8K/A filed on or about the date of this filing in which we disclosed the
restated financial results Intraop Medical, Inc., our recent merger partner, for
the three months ended December 31, 2004 and 2003 and the years ended September
30, 2004 and 2003, and c) such other reports as we file from time to time with
the SEC.



         This section contains forward-looking statements. These forward-looking
statements involve a number of risks and uncertainties, including those
identified in the section of this Information Statement entitled "Summary - Risk
Factors" that may cause actual results to differ materially from those discussed
in, or implied by, such forward-looking statements. Forward-looking statements
within this Form 10-QSB are identified by words such as "believes,"
"anticipates," "expects," "intends," "may," and other similar expressions.
However, these words are not the only means of identifying such statements. In
addition, any statements that refer to expectations, projections or other
characterizations of future events or circumstances are forward-looking
statements. We are not obligated and expressly disclaim any obligation to
publicly release any update to any forward-looking statement. Actual results
could differ materially from those anticipated in, or implied by,
forward-looking statements as a result of various factors, including the risks
outlined elsewhere in this report.

         Intraop Medical Corporation, formerly "Digitalpreviews.com, Inc." (the
"Company") was organized under the laws of the State of Nevada on November 5,
1999. The initial purpose of the Company was to engage in a consulting and
seminar business. The Company has not generated any revenues from its consulting
and seminar business. In September 2003, the Company, in anticipation of
negotiating a potential merger with Intraop Medical, Inc., a privately-held
Delaware corporation, formally abandoned its consulting and seminar business
operations. On March 9, 2005, the Company completed the merger with Intraop
Medical, Inc. pursuant to the terms of that certain Agreement and Plan of
Reorganization dated February 24, 2004, or the Merger Agreement, by and between
the Company and Intraop Medical, Inc. pursuant to which Intraop Medical, Inc.
was merged with and into the Company, and the Company remained as the surviving
corporation. As result of the merger, the Company acquired all of the assets and
assumed all of the obligations of Intraop Medical, Inc. Such assets consist,
without limitation, of all of Intraop Medical, Inc.'s cash and cash equivalents,
accounts receivables, inventory, prepaid expenses, property and equipment,
leased equipment, intangible assets (including patents, certain installment
payments for license rights to acquire certain technology, amounts paid to third
parties for manufacturing and design rights as well as design rights and
manufacturing/ design instructions in connection with the Mobetron, Intraop
Medical Inc.'s product, and a certain medical device approval license).

         In connection with the consummation of the merger and pursuant to the
Merger Agreement, each of the issued and outstanding shares of Intraop Medical,
Inc.'s preferred stock and common stock were cancelled and extinguished and
automatically converted into the right to receive one (1) corresponding share of
the Company's common stock. As a result of the merger, 14,175,028 shares of the
Company's common stock were issued to Intraop Medical's stockholders in exchange
for their shares of preferred stock and common stock. Additionally, as of March
9, 2005 the Company assumed (i) 1,023,611 options reserved under Intraop
Medical's stock option plan which are exercisable within 60 days of the closing
date for the merger; (ii) warrants exercisable for 926,291 shares of the
Company's common stock and (iii) convertible promissory notes convertible into
1,540,795 shares of the Company's common stock. Additionally, the Company sold
795,000 shares of its common stock to certain consultants in consideration for
services provided in connection with the consummation of the Merger. All of
these securities were issued in reliance upon the exemption from securities
registration afforded by the provisions of Regulation D, as promulgated by the
Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as
amended (the "Securities Act").


                                       29


<PAGE>


         As a result of the merger with Intraop Medical, Inc., the Company now
manufactures, markets and distributes the Mobetron, a proprietary mobile
electron beam cancer treatment system designed for use in IORT. The IORT
procedure involves the direct application of radiation to a tumor and/or tumor
bed while a patient is undergoing surgery for cancer. The Mobetron is designed
to be used without requiring additional shielding in the operating room, unlike
conventional equipment adapted for the IORT procedure. The Mobetron system can
be moved from operating room to operating room, thereby increasing its
utilization and cost effectiveness. In addition to IORT, the Mobetron system
also can be used as a conventional radiotherapy electron beam accelerator.

         The Company's strategy is to expand its customer base both in the
United States and internationally through direct and distributor sales channels
and joint ventures with health care providers. The Company also intends to
continue its research and development efforts for additional Mobetron
applications.

         The Company derives revenues from Mobetron product and accessory sales,
service and support, and leases. Product sales revenue is recognized upon
installation provided that any remaining obligations are inconsequential or
perfunctory and collection of the receivable is deemed probable. Revenues from
accessory sales are recognized upon shipment. Revenue from lease activities is
recognized as income over the lease term as it becomes receivable according to
the provisions of the lease. Revenue from maintenance is recognized as services
are completed or over the term of the service agreements as more fully disclosed
in the financial statements of the Company.

         Cost of revenues consists primarily of amounts paid to contact
manufacturers and, salary and benefit costs for employees performing customer
support and installation, lease related interest expense and depreciation
related to leased assets. General and administrative expenses include the
salaries and benefits of executive and administrative personnel, communications,
facilities, insurance, professional services and other administrative expenses.
Sales and marketing costs include salaries, benefits and the related expenses of
the sales staff including travel expenses, promotion materials, conferences and
seminars. Research and development expenses consist primarily of compensation
and related direct costs for employees and an allocation of research and
development-related overhead expenses. Since inception, the Company has invested
approximately $6.3 million in research and development. These amounts have been
primarily invested in development of the Mobetron product and have been expensed
as they have been incurred.

Critical Accounting Policies

         This discussion and analysis of financial condition and results of
operation is based on the Company's financial statements which were prepared in
conformity with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires the Company's
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses. These estimates and assumptions are
based on historical experience and on various other factors that they believe
are reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. These estimates and assumptions also
require the application of certain accounting policies, many of which require
estimates and assumptions about future events and their effect on amounts
reported in the financial statements and related notes. The Company periodically
reviews its accounting policies and estimates and makes adjustments when facts
and circumstances dictate. Actual results may differ from these estimates under
different assumptions or conditions. Any differences may have a material impact
on the Company's financial condition and results of operations.

         We believe that the following accounting policies fit the definition of
critical accounting policies. The Company uses the specific identification
method to set reserves for both doubtful accounts receivable and the valuation
of its inventory. Further, in assessing the fair value of option and warrant
grants made to service providers, the Company has valued these instruments based
on the Black-Scholes model and based on the market price of our shares, or in
the absence of a market for shares, based on estimates of fair value made by our
Board of Directors.


                                       30

<PAGE>


Overview

         The Company is an early-stage start-up that is completing the research
and development phase and moving into sales and production, and therefore, the
Company's historical results of operations vary significantly from year to year
and quarter to quarter. For example, sale of only one Mobetron in any given
quarter may substantially alter the sales and cost numbers for that quarter, and
the timing of such a sale often cannot be predicted with any accuracy. While the
Company expects that its financial results may ultimately become more
predictable as sales increase and costs stabilize, its financial results for the
foreseeable future are likely to continue to vary widely from period to period.

Results of Operations for the three months ended March 31, 2005 compared to the
three months ended March 31, 2004.

Revenues.

<TABLE>
<CAPTION>
                                       Three Months Ended March 31,
                                               2005              2004        Change            %
----------------------------------------------------------------------------------------------------
<S>                                          <C>               <C>           <C>          <C>
 Mobetron and Accessory Sales                106,916             3,034       103,882      3,423.93%
 Service Revenue                              27,347            15,250        12,097         79.32%
 Lease Revenue                                62,168           116,166       (53,998)       -46.48%
----------------------------------------------------------------------------------------------------
 Total Revenue                               196,431           134,450        61,981         46.10%
====================================================================================================
</TABLE>


Revenue was modest in both periods as no Mobetron system sales were recorded
during these periods. The increase in accessories revenue of $103,822 in the
three months ended March 31, 2005 over the same period in 2004 is primarily
attributable the sale of a spare parts kit to a Mobetron distributor.

Service revenue for the three months ended March 31, 2005 and 2004 came
primarily from two service contracts with U.S. hospitals, with the balance from
as-requested service calls and parts sales to customers. As-requested service
and parts account for the difference in service revenue during the two periods.
We expect service revenue to grow in relative proportion to U.S. based sales.
Overseas distributors are generally responsible for servicing their own
customers with parts supplied by us.

Leasing revenue in the three months ended March 31, 2005 and 2004 is partly
comprised of revenue recognized on a Mobetron system delivered to our customer
in Eindhoven, Holland in November 2003. At inception, as an equipment supplier,
we received proceeds in the amount of $1,230,685 as sale price of the equipment
from a third party leasing company, who in turn leased the equipment to the
hospital pursuant to a seventy month lease. The Company has no material
obligations under the lease and the lease remains an unconditional obligation of
the hospital as the lessee to make payments to the leasing company as lessor for
the leasing company's own account.

However, as an inducement to the hospital to enter into the lease, the Company
agreed in a contract with the hospital that, should the hospital decide, upon
sixty days prior notice to the Company, that at end of month eighteen of its
lease on May 31, 2005 that the hospital wishes to prepay the lease with the
leasing company (a one-time option), that the Company would reimburse the
hospital for the cost of the hospital's exercise of the prepayment option to the
leasing company. Following the reimbursement by the Company to the hospital for
the prepayment amount, title to the equipment would revert to the Company.

Because of the potential reimbursement to the hospital at the end of month
eighteen of the lease, the Company retains substantial risk of ownership in the
leased property, and the transaction has therefore been accounted for in
accordance with SFAS 13, "Accounting for Leases", specifically paragraphs 19,
21, and 22.


                                       31

<PAGE>


Accordingly, the Company recorded the entire $1,230,685 of proceeds received
from the leasing company as obligation for leased equipment, a liability on its
balance sheet and accounted for the item as borrowing. In accordance with APB
Opinion 21, "Interest on Receivables and Payables" paragraphs 13 and 14, the
Company determined an interest rate for the obligation of 14.5% based on other
debt arrangements entered into by the Company at dates closest to the inception
of the obligation for leased equipment. Further, although the Company is not
entitled to the cash rental payments, the Company recognized rents totaling
$62,168 revenue during both three month periods ended March 31, 2005 and 2004. A
portion of each month's rental revenue is recorded as interest and included in
cost of revenue with the remainder recorded as a reduction in obligation for
leased equipment.

Correspondingly, at inception, the Company also recorded $1,015,101, the amount
that the Company would otherwise have been the Company's cost of revenue for the
transaction, as leased equipment, an asset on its balance sheet. The asset will
be depreciated on a straight line over the 18 month period of the Company's
obligation to the hospital down to a residual value of $700,000, the estimated
residual value of the equipment. The depreciation expense is included in cost of
revenue.

During the quarter ended March 31, 2005, the hospital notified the Company that
it intends to exercise its prepayment option, however the Company has agreed to
allow the hospital to continue to lease the equipment through September 1, 2005
and a new prepayment amount has been agreed to. Although satisfied with the
performance of the Mobetron, the customer completed the build out of certain
shielded facilities and found the Mobetron surplus to its use. The Company
estimates that the amount of the refund will be approximately $1,035,000 based
on the prepayment price quoted by the lessor and contingent on the euro to
dollar exchange rate at that time. In addition to the lease revenue from its
customer in Eindhoven, Holland, the Company also recognized $54,000 of lease
revenue from the rental of one of its systems to the University of Louisville
Hospital in the three months ended March 31, 2004. The hospital subsequently
exercised its option to purchase the system in September 2004.

Cost of Revenue

Cost of revenue for the three months ended March 31, 2005 was basically flat
when compared to the same period in 2004 because among other factors, although
costs of sold inventory were higher during the three months ended March 31,
2005, the Company no longer bore the depreciation and interest expenses related
to the Mobetron system it had on lease to the University of Louisville during
the same three months of 2004.

<TABLE>
<CAPTION>
                          Three Months Ended March 31,
                                   2005                  2004          Change          %
--------------------------------------------------------------------------------------------
<S>                            <C>                   <C>              <C>            <C>
Cost of Revenues                217,506               223,615         (6,109)        -2.73%
Gross Margin                   (21,075)              (89,165)          68,090        76.36%
Gross Margin                    -10.73%               -66.32%
============================================================================================
</TABLE>



Additionally, in both the three months ended March 31, 2005 and March 31, 2004
the depreciation recognized on the Company's Mobetron in Eindhoven, Holland
$92,283 and $96,156 respectively, exceeded the revenue recognized for that
transaction during those periods (see Revenue above). This drag on gross margin
will likely continue through September 2005 when the unit will be repurchased at
which point the effect of the transaction on the Company's earnings (loss) will
depend on our ability to profitably remarket the unit.


                                       32


<PAGE>


Operating Expenses

A comparison of the Company's operating expenses for the three months ended
March 31, 2005 and 2004 are as follows:

<TABLE>
<CAPTION>
                                    Three Months Ended March 31,
                                                2005
                                            Restated               2004          Change         % Age
------------------------------------------------------------------------------------------------------

<S>                                        <C>                  <C>           <C>             <C>
Research and Development                     132,500            117,317          15,183        12.94%
General & Administrative                   1,989,163            584,348       1,404,815       240.41%
Sales and Marketing                          179,457            102,313          77,144        75.40%
------------------------------------------------------------------------------------------------------
Total Operating Expenses                   2,301,120            803,978       1,497,142       186.22%
======================================================================================================
</TABLE>


         Research and Development expenses increased by $15,183 in the three
months ended March 31, 2005 in comparison to the same period in the prior fiscal
year, mainly due increases in salaries and benefits in this area. Expenses in
this area have otherwise remained fairly stable as much of the documentation and
design work on the Mobetron has become relatively routine following the
transition in our fiscal year ended September 2003 to our new contract
manufacturer CDS Engineering LLC. The Company expects however, that research and
development expenses will increase over the coming months as the Company works
on various cost reduction and enhancement projects for the Mobetron and engages
in additional sponsorship of clinical research.

         General and Administrative expenses increased by $1,404,815 in the
three months ended March 31, 2005 in comparison to the same period in the prior
fiscal year. The largest component of this change were costs related to the
Company's Merger. Merger related costs for the three months ended March 31, 2005
were $1,646,410 of which $1,591,470 were non-cash charges for stock issued to
service providers and preferred shareholders under anti-dilutive agreements upon
their conversion to common stock. In the three months ended March 31, 2004,
merger related charges were $253,160 and were primarily related to legal
services. Further, as a public company, the amounts paid for legal and
accounting services and insurance are expected to rise, although the Company
cannot yet estimate the full amount of these expenses.

         Sales and Marketing expenses rose by $77,144 for the three months ended
March 31, 2005 in comparison to the same period in the prior fiscal year
primarily due to a variety of factors including increased expenditures for
marketing and promotion, and travel. We expect expenses in this area to continue
to rise as we further our sales efforts.

         Interest Expense increased by $396,876 in the three months ended March
31, 2005 in comparison to the same period in the prior fiscal year. The addition
of $3,000,000 of secured debt in late March 2004 resulted in $313,750 of
interest expense to this lender in the three months ended March 31, 2005 versus
$13,125 in the same period in the prior year. Of the $313,750 incurred during
the three months ended March 31, 2005, $156,250 represented the amortization of
$625,000 of fees associated with this loan and recognized as interest and which
were fully amortized as of March 31, 2005. In March 2005, the company renewed
this loan for another year by paying an extension fee of $210,000, which will be
amortized into interest beginning April 1, 2005. As a result of the reduction of
the amount of fees being amortized, the company expects that interest expense
from this loan will be reduced accordingly over twelve months ending March 31,
2006 versus the same twelve months ended March 31, 2005.


                                       33


<PAGE>



Results of Operations for the six months ended March 31, 2005 compared to the
six months ended March 31, 2004.

Revenues.

<TABLE>
<CAPTION>
                                      Six Months Ended March 31,
                                              2005             2004        Change          %
-------------------------------------------------------------------------------------------------
<S>                                      <C>                <C>         <C>            <C>
Mobetron and Accessory Sales             2,384,623           42,747     2,341,876      5478.46%
Service Revenue                             48,437           41,785         6,652        15.92%
Lease Revenue                              124,335          190,890      (66,555)       -34.87%
-------------------------------------------------------------------------------------------------
Total Revenue                            2,557,395          275,422     2,281,973       828.54%
=================================================================================================
</TABLE>


An increase in revenue of $2,281,973 from the six months ended March 31, 2005 in
comparison to the same period in the prior fiscal year is primarily attributable
to the sale of two Mobetron systems in the 2005 period. The Company sold its
eleventh and twelfth systems to The Ohio State University Medical Center and
Azienda Ospedelariera "Maggiore della Carrita" in Novara, Italy, our first sale
in Italy.

The majority of service revenue for the six months ended March 31, 2005 and 2004
came from two service contracts with U.S. hospitals, with the balance from
as-requested service calls and parts sales to customers. As-requested service
and parts account for the difference in service revenue during the two periods.
We expect service revenue to grow in relative proportion to U.S. based sales.
Overseas distributors are generally responsible for servicing their own
customers with parts supplied by us.

Leasing revenue in the six months ended March 31, 2005 and 2004 is partly
comprised of revenue recognized on a Mobetron system delivered to our customer
in Eindhoven, Holland in November 2003 as described above. The Company
recognized rents totaling $124,335 and $82,890 as revenue during the six months
ended March 31, 2005 and 2004 respectively.

In addition to the lease revenue from its customer in Eindhoven, Holland, the
Company also recognized $108,000 of lease revenue from the rental of one of its
systems to the University of Louisville Hospital in the six months ended March
31, 2004. The hospital subsequently exercised its option to purchase the system
in September 2004.

Cost of Revenue

Cost of revenue for the six months ended March 31, 2005 increased by $1,694,814
over the same period in 2004 primarily due to the sale of two Mobetron systems
in the six months ended March 31, 2005 versus no system sales in the same period
in 2004.

<TABLE>
<CAPTION>
                            Six Months Ended March 31,
                                     2005             2004         Change           %
-----------------------------------------------------------------------------------------
<S>                             <C>              <C>            <C>             <C>
Cost of Revenues                2,085,291          390,477      1,694,814        434.04%
Gross Margin                      472,104        (115,055)        587,159       -510.33%
Gross Margin                       18.46%          -41.77%
=========================================================================================
</TABLE>


Additionally, in both the six months ended March 31, 2005 and March 31, 2004 the
depreciation recognized on the Company's Mobetron in Eindhoven, Holland $187,324
and $113,661 respectively, exceeded the revenue recognized for that transaction
during those periods (see Revenue above). This drag on gross margin will likely
continue through the September 2005 when the unit is subject to repurchase at
which point the effect of the transaction on the Company's earnings will depend
on our ability to profitably remarket the unit.


                                       34


<PAGE>


Operating Expenses

A comparison of the Company's operating expenses for the six months ended March
31, 2005 and 2004 are as follows:

<TABLE>
<CAPTION>
                                       Six Months Ended March 31,
                                               2005
                                           Restated               2004          Change         % Age
------------------------------------------------------------------------------------------------------
<S>                                       <C>                <C>             <C>             <C>
Research and Development                    236,148            239,442         (3,294)        -1.38%
General & Administrative                  2,302,057            895,734       1,406,323       157.00%
Sales and Marketing                         295,045            205,432          89,613        43.62%
------------------------------------------------------------------------------------------------------
Total Operating Expenses                  2,833,250          1,340,608       1,492,642       111.34%
======================================================================================================
</TABLE>


         Research and Development expenses were little changed in the six months
ended March 31, 2005 in comparison to the same period in the prior fiscal year,
as much of the documentation and design work on the Mobetron has become
relatively routine following the transition in our fiscal year ended September
2003 to our new contract manufacturer CDS Engineering LLC. The Company expects
however, that research and development expenses will increase over the coming
months as the Company works on various cost reduction and enhancement projects
for the Mobetron and engages in additional sponsorship of clinical research.

         General and Administrative expenses increased by $1,406,323 in the six
months ended March 31, 2005 in comparison to the same period in the prior fiscal
year. The largest component of this change were costs related to the Company's
Merger. Merger related costs for the six months ended March 31, 2005 were
$1,671,899 of which $1,591,470 were non-cash charges for stock issued to service
providers and preferred shareholders under anti-dilutive agreements upon their
conversion to common stock. In the six months ended March 31, 2004, merger
related charges were $270,292 and were primarily related to legal services.
Further, as a public Company, the amounts paid for accounting services and
insurance are expected to rise, although the Company cannot yet estimate the
full amount of these expenses.

         Sales and Marketing expenses rose by $89,613 for the six months ended
March 31, 2005 in comparison to the same period in the prior fiscal year
primarily due to a variety of factors including increased expenditures for
marketing and promotion, travel (especially abroad), and increased use of
consultants to further our efforts in Europe and Asia. We expect expenses in
this area to continue to rise as we further our sales efforts.

         Interest Expense increased by $655,380 in the six months ended March
31, 2005 in comparison to the same period in the prior fiscal year.. The
addition of $3,000,000 of secured debt in late March 2004 resulted in $627,500
of interest expense to this lender in the six months ended March 31, 2005 versus
$13,125 in the same period in the prior year. Of the $627,500 incurred during
the six months ended March 31, 2005, $312,500 represented the amortization of
$625,000 of fees associated with this loan and recognized as interest and which
were fully amortized as of March 31, 2005. In March 2005, the company renewed
this loan for another year by paying an extension fee of $210,000, which will be
amortized into interest beginning April 1, 2005. As a result of the reduction of
the amount of fees being amortized, the company expects that interest expense
from this loan will be reduced accordingly over twelve months ending March 31,
2006 versus the same twelve months ended March 31, 2005.

Liquidity and Capital Resources

         The Company has incurred significant operating losses since inception
and expects such losses to continue as it furthers its product development
programs. From inception to March 31, 2005, the Company incurred cumulative net
losses of $18,332,495. As of March 31, 2005 the Company had cash and cash
equivalents and other current assets of $2,779,283 which was not sufficient to
pay existing liabilities and commitments and fund its obligations in the near
term. These factors raise substantial doubt about the Company's ability to
continue as a


                                       35


<PAGE>



going concern. Since inception, the Company has financed its operations
primarily through a combination of indebtedness, capital leases, private equity
financings, government grants and revenues.

<TABLE>
<CAPTION>
                                     Six Months Ended March 31,
                                               2005
Cash Flows                                 Restated              2004          Change
----------------------------------------------------------------------------------------
<S>                                        <C>             <C>              <C>
Provided by (Used in):
  Operating Activities                      644,702        (4,234,216)       4,878,918
  Investing Activities                        1,268           (13,270)          14,538
  Financing Activities                    (566,947)         4,406,451       (4,973,398)
----------------------------------------------------------------------------------------
Net Increase/(Decrease)                      79,023           158,965          (79,942)
========================================================================================
</TABLE>


The Company's primary cash inflows and outflows for the six months ended March
31, 2005 and 2004 are as follows:

Operating Activities

         Net cash used for operating activities improved in the six months ended
March 31, 2005 compared to the same period in the prior fiscal year. Offsetting
the Company's net loss for the six months ended March 31, 2005 were non-cash
charges of $1,591,470 for common stock issued to service providers related to
the merger and certain anti-dilutive share issuances. Additionally, the Company
collected $1,024,285 of accounts receivable in the six months ended March 31,
2005 versus $149,821 for the six months ended March 31, 2004. The Company
expects short term fluctuations in accounts receivable to continue to be
volatile based on the low volume of machine sales and the large per sale
receivable of its Mobetron systems. Also, in contrast to the six months ended
March 31, 2004 in which the Company's the net change in accounts payable to CDS
Engineering LLC ("CDS"), its primary contract manufacturer, was a reduction of
$1,049,814, during in the six months ended March 31, 2005, total payables to CDS
grew by $19,650 to $23,186.

Investing Activities

         Although the Company had a low level of investing activity in the six
months ended March 31, 2005 and March 31, 2004, we expect activity here to grow
as we expand facilities and staff to meet future sales growth.

Financing Activities

         During the six months ended March 31, 2005, the Company received cash
loan proceeds of $2,520,000, the majority, $1,935,000 were proceeds to factor
customer receivables due upon the installation or acceptance of Mobetron
systems. During that same period, the Company repaid $2,720,000 of similar loans
entered into during or prior to the six months ended March 31, 2005. These
comprised the majority of loan repayments during the period.

         In contrast, during the six months ended March 31, 2004, the Company's
primary debt sources was a $3,000,000 loan from a financial institution used for
general corporate purposes. This loan was renewed for another year during the
six months ended March 31, 2005. Also during the six months ended March 31,
2004, the Company borrowed and repaid a $400,000 note which was made in
anticipation of the larger $3,000,000 funding above.

         Additionally, the Company increased its borrowings under its two
convertible notes programs by $566,250 (including borrowings from related
parties) during the six months ended March 31, 2004 while repaying $300,000 of
such debt during those same six months. Comparatively, during the six months
ended March 31, 2005, under the same two convertible notes programs, the Company
borrowed $744,348 (including notes from related parties and conversions of
accounts payable and royalty payable), converted $395,000 to common stock, and
repaid $325,000 of notes.


                                       36


<PAGE>


Debt and Lease Obligations

         At April 30, 2005, the Company had $8,619,466 in notes payable and
obligations for leased equipment from various sources. Interest rates on such
debt range from 5% to 21%. At April 30, 2005, the Company had no capital lease
obligations. The Company leases space at its principal executive and corporate
headquarters on a month-to-month basis, leases its test facility under a lease
expiring July 15, 2005.

         Future minimum payments under all debt and lease obligations at April
30, 2005 are as follows:




Notes payable - related parties                                $      907,425
Notes payable - other, net discounts                                6,046,721
Liability related to product financing                              1,609,137
Obligation for leased equipment                                     1,103,320
--------------------------------------------------------------------------------
Notes payable - total                                          $    9,666,603
Less current portion of debt and lease obligations                  9,666,603
--------------------------------------------------------------------------------
Long-term portion of debt and lease obligations                $        --.--
================================================================================


         At April 30, 2005, future minimum lease payments that come due in the
current and following fiscal years ending September 30 are:

                     2005                        5,028
                    ------------------------------------
                     Total                      $5,028
                    ====================================


Deferred Revenue Items

         The Company has no deferred revenue items to report for the six months
ended March 31, 2005 or March 31, 2004.



Off-Balance Sheet Arrangements

         The Company had no off-balance sheet transactions to report for the
three or six months ended March 31, 2005 or 2004..


                                       37


<PAGE>



                                  RISK FACTORS

         Stockholders should carefully consider the following risk factors,
together with the other information included and incorporated by reference in
this Form 10-QSB.

The Company been in operation for over 10 years and has never been profitable.

         The Company is a medical device company that has experienced
significant operating losses in each year since incorporation on March 9, 1993,
primarily due to the cost of substantial research and development of its sole
product, the Mobetron. The Company has generated about $11.4 million in
operating revenues through March 31, 2005, and it expects to incur additional
operating losses as well as negative cash flows from operations in future
periods. The Company's ability to achieve profitability will depend upon its
successful commercial marketing of the Mobetron and its effectively making the
transition to a manufacturing and marketing company. It is possible that the
Mobetron and any other products of the Company will never gain full commercial
acceptance, and as a result the Company may never generate significant revenues
or achieve or maintain profitability.

The Company has significant debt obligations that are due or will become due in
the near future.

         In addition, the Company has significant obligations due or becoming
due in the near future. At March 31, 2005, the Company owed Siemens Medical
Solutions, Oncology Care Systems Division, a division of Siemens Medical
Solutions USA, Inc. (collectively "Siemens") $178,566 (after including interest)
due to the termination of the Company's Manufacturing and Distribution agreement
with Siemens which was terminated in October 2002. In December 2004, the Company
and Siemens reached a settlement agreement whereby the Company signed an
unsecured note in the amount of $171,185 in full satisfaction of all outstanding
amounts due Siemens. The note was due in full on December 31, 2004. The note is
non-interest bearing unless the Company fails to repay the note when due after
which the note accrues interest from the due date until repaid at 9% per annum.
Pursuant to the terms of the settlement agreement and mutual release, the
Company executed a stipulation for entry of judgment in Siemen's favor, which
entitles Siemens to immediately enforce a judgment against the Company in the
amount of any payment due under the settlement agreement and mutual release
which is not paid in accordance with such settlement agreement. The Company did
not make the payment due on December 31, 2004, but did however pay all accrued
interest plus principal in the amount of $21,185 in May 2005, and therefore,
Siemens is entitled to enforce a judgment against the Company in the amount of
$150,000 plus any other amounts due under the settlement agreement and mutual
release. The Company and Siemens are currently in discussions regarding the
non-payment, and Siemens has not yet indicated to the Company whether it will
enforce the judgment or what other actions, if any, it may take with respect to
the missed payment. No assurance can be given that resolution favorable to the
Company will be reached or that Siemens will continue to grant forbearance.
Actions by Siemens could have a material adverse effect on the business of the
Company.

         The Company has certain past due promissory notes under its Promissory
Note Program with an aggregate outstanding principal balance of $480,000 (see
Note 4 to Company's Consolidated Financial Statements for March 31, 2005). The
notes, which matured at various dates between June 1, 2004 and September 1,
2004, were not paid when due. The Company has been in contact with the
noteholders and is working to find a solution to the non-payment of the notes.
No assurance can be given that these noteholders will continue to grant
forbearance to the Company. Additionally, as of March 31, 2005, the Company has
issued $1,280,194 (excluding $100,000 owed to related parties) of notes under
the Company's Convertible Note Program (see Note 4 to Company's Consolidated
Financial Statements for March 31, 2005). These notes were due in full on March
31, 2005, but have were not repaid when due.

         If any of the obligations are not timely repaid, actions by the
noteholders could have a material adverse effect on the business of the Company.


                                       38


<PAGE>


The Company has pledged all of its assets and issued a significant amount of its
capital stock as security for a loan.

         In March 2004, the Company borrowed $3,000,000 from a financial
institution which is more fully described in Note 4 to the Company's March 31,
2005 financial statements and due at maturity in March 2006. Among other terms,
the loan is secured by a lien on all of the assets of the Company. In addition,
the Company issued 2,400,000 shares of its common stock to the lender as
security for the note ("Collateral Shares"). So long as an event of default
under the agreement has not occurred, the Company retains voting rights over the
Collateral Shares and the lender is not permitted to sell the Collateral Shares.
Should a default occur under this loan, the lender under this agreement would be
entitled to exercise its rights as a secured creditor under the Uniform
Commercial Code, including the right to take possession of all of the Company's
assets and to sell those assets at a public or private sale following five
business days' prior written notice to the Company and, pursuant to the
agreement, also to sell the Collateral Shares. In the event the lender exercises
those rights, the Company would have a very short period of time in which to
obtain adequate capital to satisfy the amount of the obligations to the lender
in order to prevent the sale of its assets. For the Company to obtain such
capital in such a short period would result in very significant dilution to the
stockholders and if the Company is unable to obtain those funds, the Company
could be unable thereafter to operate, possibly resulting in a total loss of the
investment made by its stockholders.

The Company has significant additional capital needs.

         The Company has expended, and will continue to expend, substantial
funds on development, marketing, research, and commercialization related to the
Mobetron. At present, the Company receives liquidity from proceeds from the sale
of securities, funding from strategic partners, and payments by distributors and
customers.

         However, the Company currently lacks the working capital to continue in
business for more than about three months and has obligations described above
that it may not be able to meet. Any additional secured debt financing would
require the consent of its senior lender. Equity or debt financing may not be
available on terms favorable to the Company or at all, in which case the Company
may be unable to meet its expenses.

The Company's single product is subject to uncertain market acceptance.

         Through March 31, 2005, the Company has delivered twelve Mobetron units
to: the University of California-San Francisco, University Hospitals of
Cleveland, University of Louisville Hospital, University of Tokyo, University of
North Carolina, Methodist Hospital of Indianapolis, Mayo Clinic of Arizona,
Jagiellonian University Hospital in Krakow, Poland, Catharina Ziekenhuis in
Eindhoven, the Netherlands, Hospital San Jaime in Alicante, Spain, The Ohio
State University Medical Center, and Azienda Ospedelariera "Maggiore della
Carrita" in Novara, Italy. The Company has not yet manufactured, marketed, or
sold the Mobetron in full commercial quantities. There can be no assurances that
the Mobetron will gain broad commercial acceptance or that commercial viability
will be achieved; that future research and development related to the Mobetron
system will be successful or produce commercially salable products; that other
products under development by the Company will be completed or commercially
viable; or that hospitals or other potential customers will be willing to make
the investment necessary to purchase the Mobetron or other products under
development by the Company, or be willing to comply with applicable government
regulations regarding their use.

The Company is dependent on key suppliers and has limited manufacturing
experience.

         The Company has entered into an exclusive agreement with CDS
Engineering LLC for the manufacture of the Mobetron System, while the
accelerator component of the Mobetron is manufactured Accuray Incorporated of
Sunnyvale, California.

         Though members of management have extensive experience in
manufacturing, to date the Company has not itself manufactured the Mobetron
system. The Company does not have experience manufacturing its products in the
volumes that will be necessary for the Company to achieve significant commercial
sales. Any significant interruption in the Company's relationship Accuray, CDS
Engineering LLC, or any other key suppliers, including subcontractors, would
have a material adverse effect on the Company's ability to manufacture the
Mobetron and, therefore, on its business, financial condition, and results of
operation.

                                       39

<PAGE>


         The Company expects to retain the rights to manufacture certain
Mobetron accessories, options, and disposable medical devices. The Company may
encounter difficulties in scaling up the production of the Mobetron or in hiring
and training additional personnel to manufacture the Mobetron in commercial
quantities.

         The Company intends to continue to do its own final testing of the
Mobetron. This testing requires a specialized test facility. The Company
currently has access to test facilities which it believes to be adequate for
testing the Mobetrons through July 15, 2005. The Company is working on obtaining
additional test facilities. The inability of the Company to locate additional
test facilities would likely have a material adverse effect on the Company's
ability to manufacture the Mobetron and, therefore, on its business, financial
condition, and results of operation.

The Company is subject to intense competition.

         Conventional medical linear accelerator manufacturers have more
substantial histories, backgrounds, experience, and records of successful
operations; possess greater financial, technical, marketing, and other
resources; and have more employees and more extensive facilities than the
Company now has, or will have in the foreseeable future. These companies have
sold one or two modified conventional accelerators and could continue to offer
essentially the same type of conventional unshielded system. Additionally, two
other manufacturers, Hytesis and Liac, are known to the Company to have
developed systems that are light enough for operating room use.

         The possibility of significant competition from other companies with
substantial resources also exists. The cancer treatment market is subject to
intense research and development efforts all over the world, and the Company can
face competition from competing technologies that treat cancer in a different
manner. It is also likely that other competitors will emerge in the markets that
the Company intends to commercialize. There can be no assurances that the
Company's competitors will not develop technologies or obtain regulatory
approval for products that may be more effective than the Company's products,
and that Company's technologies and products would not be rendered less
competitive or obsolete by such developments.

The Company's industry is subject to rapid, unpredictable, and significant
technological change.

         The medical device industry is subject to rapid, unpredictable, and
significant technological change. The Company's business is subject to
competition in the U.S. and abroad from a variety of sources, including
universities, research institutions, and medical device and other companies.
Many of these potential competitors have substantially greater technical,
financial, and regulatory resources than the Company does and are accordingly
better equipped to develop, manufacture, and market their products. If these
companies develop and introduce products and processes competitive with or
superior to the Company's products, the Company may not be able to compete
successfully against them.

The Company may be unable to protect its patents and proprietary technology.

         The Company's ability to compete effectively in the marketplace will
depend, in part, on its ability to protect its intellectual property rights. The
Company relies on patents, trade secrets, and know-how to establish and maintain
a competitive position in the marketplace. The enforceability of medical device
or other patents, however, can be uncertain. Any limitation or reduction in its
rights to obtain or enforce its patents could have a material adverse effect on
its ability to maintain or protect its intellectual property rights.

The Company may unknowingly infringe the intellectual property rights of third
parties and thereby expose it to lawsuit(s).

         The Company attempts to avoid infringing known proprietary rights of
third parties in its product development efforts. However, the Company has not
conducted and does not conduct comprehensive patent searches to determine
whether the technology used in its products infringes patents held by third
parties.


                                       40

<PAGE>


In addition, it is difficult to proceed with certainty in a rapidly
evolving technological environment in which there may be numerous patent
applications pending, many of which are confidential when filed, with regard to
similar technologies.

         If the Company were to discover that its products violate third-party
proprietary rights, there can be no assurance that it would be able to obtain
licenses to continue offering such products without substantial reengineering or
that any effort to undertake such reengineering would be successful, that any
such licenses would be available on commercially reasonable terms, if at all, or
that litigation regarding alleged infringement could be avoided or settled
without substantial expense and damage awards. Any claims against the Company
relating to the infringement of third-party proprietary rights, even if not
meritorious, could result in the expenditure of significant financial and
managerial resources and in injunctions preventing the Company from distributing
certain products. Such claims could materially adversely affect the Company's
business, financial condition, and results of operations.

The Company is subject to extensive government regulation.

         The development, testing, manufacturing, and marketing of the Company's
Mobetron are regulated by the United States Food and Drug Administration
("FDA"), which requires government clearance of such products before they are
marketed. The Company filed and received 510(k) pre-market notification
clearance from the FDA in July 1998. The Company received clearance for sales in
Japan ("JIS") in May 2000, and received European EC Certificate approval ("CE
Mark") on October 12, 2001. However, the Company may need to obtain additional
approvals from the FDA or other governmental authorities if they decide to
change or modify the Mobetron. In that case, the FDA or other authorities may
not grant any new approvals. In addition, if they fail to comply with FDA or
other regulatory standards, they could be forced to withdraw their products from
the market or be sanctioned or fined.

         The Company is also subject to federal, state, and local regulations
governing the use, generation, manufacture, and testing of radiation equipment,
including periodic FDA inspections of manufacturing facilities to determine
compliance with FDA regulations. In addition, the Company must comply with
federal, state, and local regulations regarding the manufacture of healthcare
products and radiotherapy accelerators, including Good Manufacturing Practice
("GMP") regulations, Suggested State Regulations for the Control of Radiation
("SSRCR"), and International Electrotechnical Committee ("IEC") requirements,
and similar foreign regulations and state and local health, safety, and
environmental regulations. In addition, they may not be able to identify and
retain manufacturers on commercially acceptable terms, if at all, and any
manufacturers they do retain might not be able to meet all relevant regulatory
requirements. Although the Company believes that it has complied in all material
respects with applicable laws and regulations, there can be no assurances that
the Company will not be required to incur significant costs in the future in
complying with manufacturing and environmental regulations. Any problems with
their ability to meet regulatory standards could prevent the Company from
marketing the Mobetron or other products.

The Company expects to be highly dependent on overseas sales.

         The Company believes that the majority of its sales over at least the
next two years will be made to overseas customers. The Company's business,
financial condition, and results of operations could be materially adversely
affected by changes in the political or economic climates, laws, regulations,
tariffs, duties, import quotas, or other trade policies in the United States or
foreign countries.

         Additionally, the Company has limited experience in many of the foreign
markets in which it plans to sell its goods and services. To succeed, the
Company will need to expand its presence overseas by hiring addition staff and
opening overseas offices to meet its sales, manufacturing, and customer support
goals. No assurance can be given that the Company can meet these goals. An
inability to expand its overseas presence could have a material adverse affect
on the Company's business, financial condition, and results of operations.


                                       41

<PAGE>


If the Company's revenue stream were to become more dependent upon third party
payors such as insurance companies, their revenues could decrease and their
business could suffer.

         The system of health care reimbursement in the United States is being
intensively studied at the federal and state level. There is a significant
probability that federal and state legislation will be enacted that may have a
material impact on the present health care reimbursement system. If, because of
a change in the law or other unanticipated factors, certain third party payors
(primarily insurance companies) were to become a more substantial source of
payment for the Company's products in the future, the Company's revenues may be
adversely affected. This is because such providers commonly negotiate or
legislate cost structures below the prevailing market rate and typically
negotiate payment arrangements which are less advantageous than those available
from private payors. Payment by third party payors could also be subject to
substantial delays and other problems related to receipt of payment. The health
care industry, and particularly the operation of reimbursement procedures, has
been characterized by a great deal of uncertainty, and accordingly no assurance
can be given that third party payors will not become a significant source of
payment for the Company's products, or that such a change in payment policies
will not occur. Any of these factors could have a material adverse effect on the
Company's business and financial condition and affect the Company's ability to
make interest and principal payments under the Company's notes. There can be no
assurances that such legislation will not restrict hospitals' ability to
purchase equipment such as the Mobetron or that such legislation will not have a
material adverse effect on the Company's ability to sell the Mobetron and the
Company's business prospects and financial condition.

The Company could be subject to product liability claims for which it has no
insurance coverage.

         The manufacture and sale of the Company's products entails the risk of
product liability claims. Although the Company has obtained product liability
insurance prior to commercially marketing its products, product liability
insurance is expensive and may not be available to the Company in the future on
acceptable terms or at all. To date, the Company has not experienced any product
liability claims. A successful product liability claim against the Company in
excess of its insurance coverage could have a material adverse effect on the
Company's business, financial condition, and results of operations.

The Company is substantially dependent on certain key employees.

         The Company believes that its success will depend to a significant
extent upon the efforts and abilities of a relatively small group of management
personnel, particularly Donald Goer, PhD, Chief Executive Officer of the
Company. The loss of the services of one or more of these key people could have
a material adverse effect on the Company. The Company has employment agreements
with Mr. Goer and one other employee and has purchased "key person" life
insurance in the amount of $5,000,000, of which $3,000,000 has been pledged to
one of its lender's as security for their loan.

         The Company's future success will also depend upon its ability to
continue to attract and retain qualified personnel to design, test, market, and
service its products and manage its business. There is significant competition
for these technical and management employees. There can be no assurance that the
Company will be successful in attracting and retaining such personnel.

The Company's limited resources may prevent it from developing additional
products or services.

         The Company has limited financial, management, research, and
development resources. Plans by the Company to develop additional products and
services may require additional management or capital which may not be available
at the appropriate time or at a reasonable cost. In addition, these products and
services may divert management and research and development resources from the
development and marketing of the Mobetron system which would adversely impact
the revenue and potential earnings of the Company.


                                       42

<PAGE>



The conversion or exercise of currently outstanding convertible securities and
warrants would result in significant dilution to holders of the Company's common
stock.

         As a result of various transactions previously entered by the Company,
as of March 31, 2005, there were outstanding convertible securities, warrants
and options for the conversion and purchase of up to approximately 3,673,919
shares of common stock at March 31, 2005. This represents significant additional
potential dilution for the Company's existing stockholders. The shares of common
stock issuable upon conversion of convertible securities or exercise of warrants
or options are not included in currently outstanding shares.



Item 3.  Controls And Procedures.

         In mid-July 2005, and in consultation with our independent registered
public accounting firm, Stonefield Josephson, Inc., we determined that certain
restatements to our prior financials statements were needed to correctly account
for i) certain items of indebtedness, including interest thereon, previously
reported only as commitments and contingencies in the footnotes to our financial
statements, ii) the value of warrants and options granted during those periods,
and iii) the accrual of certain liabilities for the redemption of common stock
as the result of the completion of our Merger. As such, contemporaneous with the
filing of this report, the Company filed Form 8-K/A in which it restated the
financial statements of its merger partner, Intraop Medical, Inc., for the three
months ended December 31, 2004. A full discussion of those restatements can be
found in that filings.

In connection with the restatements mentioned above, as of the end of the period
covered by the Quarterly Report on Form 10-QSB, we re-evaluated, under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, the effectiveness of our
disclosure controls and procedures, as such term is defined under Rules
13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934,
as amended. Based upon that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective to insure that information we are required to disclose in reports that
we file or submit under the Securities Exchange Act of 1934 is properly
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.

         There has been no change in our internal control over financial
reporting during the quarter ended March 31, 2005 that has materially affected,
or is reasonably likely to materially affect, our internal control over
financial reporting.


                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

         At March 31, 2005, the Company owed Siemens Medical Solutions, Oncology
Care Systems Division, a division of Siemens Medical Solutions USA, Inc.
(collectively "Siemens") $178,566 (after including interest) due to the
termination of the Company's Manufacturing and Distribution agreement with
Siemens which was terminated in October 2002. In December 2004, the Company and
Siemens reached a settlement agreement whereby the Company signed an unsecured
note in the amount of $171,185 in full satisfaction of all outstanding amounts
due Siemens. The note was due in full on December 31, 2004. The note is
non-interest bearing unless the Company fails to repay the note when due after
which the note accrues interest from the due date until repaid at 9% per annum.
Pursuant to the terms of the settlement agreement and mutual release, the
Company executed a stipulation for entry of judgment in Siemen's favor, which
entitles Siemens to immediately enforce a judgment against the Company in the
amount of any payment due under the settlement agreement and mutual release
which is not paid in accordance with such settlement agreement. The Company did
not make the payment due on December 31, 2004, but did however pay all accrued
interest plus principal in the amount of $21,185 in May 2005, and therefore,

                                       43

<PAGE>



Siemens is entitled to enforce a judgment against the Company in the amount of
$150,000 plus any other amounts due under the settlement agreement and mutual
release. The Company and Siemens are currently in discussions regarding the
non-payment, and Siemens has not yet indicated to the Company whether it will
enforce the judgment or what other actions, if any, it may take with respect to
the missed payment. No assurance can be given that resolution favorable to the
Company will be reached or that Siemens will continue to grant forbearance.
Actions by Siemens could have a material adverse effect on the business of the
Company and cause the Company to terminate the Merger Agreement.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended March 31, 2005, the Company issued convertible
promissory notes under the Company's Convertible Note Program (see Note 4 to the
Company's financial statements) in the aggregate principal amount of $396,838 to
nine private investors, one of whom was a related party . The notes bear
interest of 8% per annum payable upon maturity of the notes and are due and
payable March 31, 2005. The notes automatically convert into common stock upon
the Company closing an equity financing prior to the maturity date of the notes
in an amount of not less than $1,000,000. The notes were issued in reliance upon
the exemption from securities registration afforded by the provisions of
Regulation D, as promulgated by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.


Item 3.  Defaults upon Senior Securities

The Company is in default on payment of notes under its Promissory Notes Program
(see Note 4 to the Company's financial statements). The notes are were due at
various dates between June 1, 2004 and September 1, 2004. Although the notes
were not repaid when due, the Company paid interest on the notes when due. The
Company has contacted the note holders and is working towards resolution of this
event; however, no assurance can be given that the note holders will continue to
grant forbearance. The principal balance outstanding under the notes is $480,000
at March 31, 2005.

In December 2004, the Company executed a non-interest bearing promissory note
for a principal amount of $171,184 in full settlement of all amounts outstanding
under a Manufacturing and Distribution Agreement with Siemens Medical Systems,
Inc. ("Siemens") originally entered into on October 7, 1997. The note was due on
December 31, 2004, but was not repaid. As a result of the non-payment the
Company incurred a fee in the amount of two percent of the outstanding principal
balance and the note began accruing interest at 9% per annum. The Company has
contacted the Siemens and is working towards resolution of this event; however,
no assurance can be given that Siemens will continue to grant forbearance.

Item 4.  Submission of Matters to a Vote of Security Holders

None.

Item 5.  Other Information

None.

Item 6.  Exhibits

Exhibit
Number                                Description
-------   ----------------------------------------------------------------------
31.1      Certification of Chief Executive Officer pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002.
31.2      Certification of Chief Financial Officer pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002.
32.1      Certification of Chief Executive Officer pursuant to Section 906 of
          the Sarbanes-Oxley Act of 2002.
32.2      Certification of Chief Financial Officer pursuant to Section 906 of
          the Sarbanes-Oxley Act of 2002.
-------   ----------------------------------------------------------------------

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<PAGE>



                                   SIGNATURES

In accordance with the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                             INTRAOP MEDICAL CORPORATION


Date: August 12, 2005        By:  /s/ Donald A. Goer
                                ------------------------------------------------
                                     Donald A. Goer, Chief Executive Officer and
                                     President
                                     (Principal Executive Officer)


                             By:  /s/ Howard Solovei
                                ------------------------------------------------
                                     Howard Solovei, Chief Financial Officer
                                     (Principal Financial Officer and Principal
                                     Accounting Officer)


                                       45