NOTE 2 - SHARE BASED PAYMENT

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

NOTE 2 — SHARE BASED PAYMENT

NOTE 2 — SHARE BASED PAYMENT

On August 29, 2008, the Company issued options to certain employees and Board members to purchase membership units in the Company. The options give the grantees the right to purchase up to 2,398,400 shares of the Company's common stock at an exercise price of $0.23 per share. The options vest 20% each year over a five-year period and expire after ten years. The weighted average grant date fair value of options granted was $0.13 per option. Stock option compensation recognized for the three months ended March 31, 2012 and 2011 in the accompanying condensed consolidated statements of operations amounted to $2,000 and $11,000, respectively.

The fair value of each option award was estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. Because the Black-Scholes option valuation model incorporates ranges of assumptions for inputs, those ranges are disclosed. To estimate volatility of the options over their expected terms, the Company measured the historical volatility of the components of the small cap sector of the Dow Jones medical equipment index for a period equal to the expected life of the Company's options. It also measured the volatility of other public companies with similar size and industry characteristics to the Company for the same period. These measurements were averaged and the result was used as expected volatility. As there was no history of option lives at the Company, the expected term of options granted was the midpoint between the vesting periods and the contractual life of the options. The risk-free rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of grant. The forfeiture rate was based on an analysis of the nature of the recipients' jobs and relationships to the Company. As a result of the sale of substantially all of the Company's assets in the second quarter of 2011, other than the CEO, the Company no longer has any employees. As a result, the only options expected to vest are those held by the Company's Board of Directors and CEO. As a result, the estimated forfeiture rate has been adjusted to 75.6%.

A summary of stock option activity as of March 31, 2012, and changes during the period then ended is presented below.

				Weighted-
			Weighted-	Average
			Average	Remaining		Aggregate
			Exercise	Contractual		Intrinsic
	Options		Price	Life (Years)		Value
Outstanding at December 31, 2011	385,000	$	0.23	6.67	$	-
Granted	-		-	-		-
Exercised	-		-	-		-
Forfeited	-		-	-		-
Outstanding at March 31, 2012 (unaudited)	385,000	$	0.23	6.42	$	-
Vested and expected to vest
at March 31, 2012 (unaudited)	385,000	$	0.23	6.42	$	-
Exercisable at March 31, 2012 (unaudited)	231,000	$	0.23	6.42	$	-

The Company had 575,613 warrants outstanding as of March 31, 2012 which entitle the holders to immediately purchase one share of the Company's common stock at an exercise price of $0.44 per share. The warrants expire on November 13, 2014.