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Unassociated Document

Filed Pursuant to Rule 424(b)(3)

File Number 333-155299

Prospectus Supplement No. 8

(To prospectus dated May 7, 2010)

BioDrain Medical, Inc.

13,030,747 Shares of Common Stock

$0.01 par value

This Prospectus Supplement No. 8 supplements and amends the prospectus dated May 7, 2010, as amended and supplemented by Prospectus Supplement No. 7 dated August 22, 2011 (the “Final Prospectus”). This Prospectus Supplement No. 8 should be read in conjunction with the Final Prospectus and may not be delivered or utilized without the Final Prospectus.

On November 15, 2011, BioDrain Medical, Inc. filed with the Securities and Exchange Commission its quarterly report for the quarter ended September 30, 2011.

The date of this Prospectus Supplement No. 8 is September 30, 2011.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________________ to

Commission File Number: 000-54361

BioDrain Medical, Inc.

(Exact name of registrant as specified in its charter)

Minnesota		33-1007393
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

2060 Centre Pointe Blvd., Suite 7,		Mendota Heights, MN 55120
(Address of principal executive offices)		(Zip Code)

651-389-4800

(Registrant’s telephone number, including area code)


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

Indicate by check mark whether the registrant (1) has 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨

Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨ Yes x No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of November 1, 2011, the registrant had 30,427,328 shares of common stock, par value $.01 per share, outstanding.

BIODRAIN MEDICAL, INC.

TABLE OF CONTENTS

	Page No.
PART I. FINANCIAL INFORMATION

Item 1. Condensed Financial Statements	3

Condensed Balance Sheets September 30, 2011 and December 31, 2010	3

Condensed Statements of Operations for the three-month and nine-month periods ended September 30, 2011 and September 30, 2010	4

Statement of Stockholders’ Deficit from Inception to September 30, 2011	5

Condensed Statements of Cash Flows for the nine-month periods ended September 30, 2011 and September 30, 2010	6

Notes to Condensed Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3. Quantitative and Qualitative Disclosures About Market Risk	24

Item 4. Controls and Procedures	24

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	24

Item 1A. Risk Factors	24

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 3. Defaults Upon Senior Securities	25

Item 4. [Removed and Reserved]	25

Item 5. Other Information	25

Item 6. Exhibits	25

Signatures	26

Exhibit Index	27

PART 1. FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

BIODRAIN MEDICAL, INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED BALANCE SHEETS

(Unaudited)

	September 30,			December 31,
	2011			2010
ASSETS
Current Assets:
Cash	$	77,728		$	9,383
Accounts receivable		19,277			-
Prepaid expense and other assets		30,649			8,126
Total Current Assets		127,654			17,509

Fixed assets, net		5,009			6,831
Intangibles, net		141,532			141,532

Total Assets	$	274,195		$	165,872

LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Current portion of long term debt (See Note 7)	$	-		$	10,267
Current portion of convertible debt, net of discounts of $32,513 and $0		683,987			56,000
Accounts payable		719,969			768,720
Accrued expenses		551,896			498,707
Total Current Liabilites		1,955,852			1,333,694

Long term debt and convertible debt, net of discounts of $39,807 and $109,310 (See Notes 6 and 7)		705,593			1,006,789

Liability for equity-linked financial instruments (See Note 9)		87,533			14,946

Stockholders Deficit:
Common stock, $.01 par value, 200,000,000 authorized, 29,139,828 and 14,002,290 outstanding		291,398			140,023
Additional paid-in capital		6,134,829			5,052,497
Deficit accumulated during development stage		(8,901,010	)		(7,382,077	)
Total Shareholder' Deficit		(2,474,783	)		(2,189,557	)

Total Liabilities and Shareholders' Deficit	$	274,195		$	165,872

See Notes to Condensed Financial Statements

BIODRAIN MEDICAL, INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

													Period From
													April 23, 2002
													(Inception)
	Three Months Ended September 30,						Nine Months Ended September 30,						To September 30,
	2011			2010			2011			2010			2011
Revenue	$	20,264		$	-		$	22,638		$	288		$	38,663

Cost of goods sold		11,161			-			12,981			140			20,121

Gross margin		9,103			-			9,657			148			18,542

General and administrative expense		428,843			381,053			1,014,667			1,531,669			6,917,559

Operations expense		135,358			55,649			402,479			165,308			1,580,351

Sales and marketing expense		60,989			36,415			149,247			177,065			805,016

Interest expense		61,033			33,873			176,118			107,580			612,851

Loss (gain) on valuation of equity-linked financial instruments		(23,006	)		(348,880	)		(213,921	)		(1,025,294	)		(996,225	)

Total expense		663,217			158,110			1,528,590			956,328			8,919,552

Net income (loss) available to common shareholders	$	(654,114	)	$	(158,110	)	$	(1,518,933	)	$	(956,180	)	$	(8,901,010	)

Loss per common share basic and diluted	$	(0.02	)	$	(0.01	)	$	(0.07	)	$	(0.08	)	$	(1.73	)

Weighted average shares used in computation, basic and diluted		27,236,303			13,159,639			22,193,681			12,428,401			5,136,012

See Notes to Condensed Financial Statements

BIODRAIN MEDICAL, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF STOCKHOLDERS' DEFICIT

PERIOD FROM APRIL 23, 2002 (INCEPTION)

TO SEPTEMBER 30, 2011

	Shares		Amount		Paid in Capital			Deficit			Total
Issuance of common stock 9/1/02, $.0167 (1)		598,549	$	5,985	$	4,015		$	-		$	10,000
												-
Issuance of common 10/23/02, $1.67/share		2,993		30		4,970						5,000
Net loss									(51,057	)		(51,057	)
Balance 12/31/02		601,542	$	6,015	$	8,985		$	(51,057	)	$	(36,057	)

Issuance of common 2/12/03, $.0167 (2)		23,942		239		161						400
Issuance of common 6/11&12,$1.67 (3)		21,548		216		34,784						35,000
Net Loss									(90,461	)		(90,461	)
Balance 12/31/03		647,032	$	6,470	$	43,930		$	(141,518	)	$	(91,118	)

Issuance of common 5/25/04, $.0167 (4)		6,567		66		44						110
Net Loss									(90,353	)		(90,353	)
Balance 12/31/04		653,599	$	6,536	$	43,974		$	(231,871	)	$	(181,361	)

Issuance of common 12/14/05, $.0167 (5)		14,964		150		100						250
Vested stock options and warrants						2,793						2,793
Net Loss									(123,852	)		(123,852	)
Balance 12/31/05		668,563	$	6,686	$	46,867		$	(355,723	)	$	(302,170	)

Issuance of common 5/16 & 8/8, $.0167 (6)		86,869		869		582						1,451
Issuance of common 10/19 & 23, $.0167 (7)		38,906		389		261						650
Issuance of common 12/01, $1.67 (8)		28,739		287		44,523						44,810
Vested stock options and warrants						13,644						13,644
Net Loss									(273,026	)		(273,026	)
Balance 12/31/06		823,077	$	8,231	$	105,877		$	(628,749	)	$	(514,641	)

Issuance of common 1/30/07 @ 1.67 (9)		599		6		994						1,000
Value of equity instruments issued with debt						132,938						132,938
Capital contributions resulting from waivers of debt						346,714						346,714
Vested stock options and warrants						73,907						73,907
Net loss									(752,415	)		(752,415	)
Balance 12/31/07		823,676	$	8,237	$	660,430		$	(1,381,164	)	$	(712,497	)

Issuance of common 6/11 to 9/30, $.35 (10)		4,552,862		45,528		1,547,974						1,593,502
Shares issued to finders, agents		2,012,690		20,127		(20,127	)					-
Shares issued to pay direct legal fees		285,714		2,857		(2,857	)
Issuance of common due to antidilution provisions		205,899		2,059		(2,059	)					-
Shares issued to pay investor relations services 6/23/08, $.35		250,000		2,500		85,000						87,500
Vested stock options and warrants						354,994						354,994
Capital contributions resulting from waivers of debt						129,684						129,684
Net loss									(1,762,628	)		(1,762,628	)
Balance 12/31/08		8,130,841	$	81,308	$	2,753,039		$	(3,143,792	)	$	(309,445	)

Cumulative effect of adoption of EITF 07-5						(486,564	)		6,654			(479,910	)
Vested stock options and warrants						111,835						111,835
Shares issued 3/20/09 to pay for fund raising		125,000		1,250		(1,250	)					-
Shares issued under PMM in April 2009, $.50		700,000		7,000		343,000						350,000
Shares issued under PPM in May 2009, $.50		220,000		2,200		107,800						110,000
Shares issued under PPM in June 2009, $.50		50,000		500		24,500						25,000
Shares issued under PPM in August 2009, $.50		80,000		800		39,200						40,000
Shares issued under PPM in September 2009, $.50		150,000		1,500		73,500						75,000
Shares issued to directors, management and consultant in August 2009, $.50		797,810		7,978		390,927						398,905
Shares issued to finder in September 2009, $.50		100,000		1,000		49,000						50,000
Capital contributions resulting from waivers of debt						84,600						84,600
Value of equity-linked financial instruments issued in connection with PPMs						(222,296	)					(222,296	)
Value of equity instruments issued with debt						30,150						30,150
Shares issued to consultant for fund raising		30,000		300		(300	)					-
Shares issued under PPM in November 2009, $.50		50,000		500		24,500						25,000
Shares issued upon conversion of debt and interest, $.27		935,446		9,354		247,100						256,454
Shares issued upon conversion of shareholder note, $.35		14,024		140		4,766						4,906
Net Loss									(2,892,230	)		(2,892,230	)
Balance 12/31/09		11,383,121		113,830		3,573,507			(6,029,368	)		(2,342,030	)

Shares issued in March 2010 under PPM, $.50		174,550		1,746		85,529						87,275
Shares issed to consultants for IR and consulting, $.50		374,090		3,741		183,304						187,045
Vested stock options and warrants						11,382						11,382
Value of equity instruments issued for consulting services						354,602						354,602
Value of equity-linked financial instruments issued in connection with PPM in first quarter						(25,553	)					(25,553	)
Shares issued in April 2010 under PPM, $.50		180,000		1,800		88,200						90,000
Shares issed in May 2010 to consultant, $.50		12,850		129		6,296						6,425
Shares issued in May 2010 to 2008 investors as a penalty for late registration of 4,552,862 shares, $.50		710,248		7,102		348,022						355,124
Value of equity instruments issued with debt in second quarter						96,613						96,613
Value of equity-linked financial instruments issued in connection with PPM in second quarter						(31,332	)					(31,332	)
Value of equity-linked financial instruments issued in connection with PPM in third quarter						(31,506	)					(31,506	)
Value of equity instruments issued with debt in third quarter						15,553						15,553
Shares issued in September 2010 under PPM, $.10		250,000		2,500		22,500						25,000
Shares issued to consultants in third quarter at $.22 per share		488,860		4,889		102,660						107,549
Shares issued, November 2010, upon exercise of warrants at $.135 per share		128,571		1,286		16,071						17,357
Shares issued to directors as compensation at $.15 per share		300,000		3,000		42,000						45,000
Value of equity instruments issued with debt in fourth quarter						7,308						7,308
Vested stock options in fourth quarter						161,107						161,107
Equity instruments issued to consultants in fourth quarter						26,234						26,234
Net Loss									(1,352,709	)		(1,352,709	)
Balance 12/31/2010		14,002,290	$	140,023	$	5,052,497		$	(7,382,077	)	$	(2,189,557	)

Value of equity instruments issued with debt in first quarter						47,908						47,908
Value of equity-linked financial instruments issued in connection with stock in first quarter						(265,815	)					(265,815	)
Shares issued in first quarter at $.075 per share under PPM		5,333,334		53,334		346,666						400,000
Shares issued in first quarter at $.085 per share under PPM		1,294,117		12,941		97,059						110,000
Shares issued in first quarter at $.09 per share under PPM		200,000		2,000		16,000						18,000
Shares issued in first quarter at $.10 per share under PPM		150,000		1,500		13,500						15,000
Equity instruments issued to consultants in first quarter						85,916						85,916
Stock issued upon conversion of debt in first quarter		416,010		4,160		15,840						20,000
Stock issued to pay interest on debt in second quarter		158,333		1,583		20,917						22,500
Shares issued in second quarter at $.085 per share under PPM		588,236		5,882		44,118						50,000
Shares issued in second quarter at $.07 per share under PPM		500,000		5,000		30,000						35,000
Stock issued upon conversion of debt and interest		940,737		9,407		22,593						32,000
Value of equity-linked financial instruments issued in connection with stock in second quarter						(20,695	)					(20,695	)
Stock options issued to management in second quarter						65,204						65,204
Stock options issued to management in third quarter						200,189						200,189
Stock issued to consultants in third quarter		822,842		8,228		46,772						55,000
Shares issued in third quarter at $.06 per share under PPM		2,916,666		29,167		145,833						175,000
Shares issued in third quarter at $.07 per share under PPM		571,429		5,715		34,285						40,000
Shares issued in third quarter at $.075 per share under PPM		583,334		5,833		29,167						35,000
Shares issued in third quarter at $.20 per share under PPM		562,500		5,625		106,875						112,500
Shares issued upon exercise of a management stock option		100,000		1,000		-						1,000
Net Loss									(1,518,933	)		(1,518,933	)
Balance 9/30/2011		29,139,828	$	291,398	$	6,134,829		$	(8,901,010	)	$	(2,474,783	)

(1) Founders shares, 1,000,000 pre-split

(2) 23,492 (40,000 pre-split) shares valued at $.0167 per share as compensation for loan guarantees by management

(3) Investment including 670 shares issued as a 10% finders fee

(4) For payment of patent legal fees

(5) Compensation for loan guarantees by management

(6) For vendor contractual consideration

(7) Employment agreements

(8) Investment

(9) Conversion of convertible notes by management

(10) Investment, "October 2008 financing".

See Notes to Condensed Financial Statements

BIODRAIN MEDICAL, INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

							April 23,
							2002
	Nine Months						(Inception)
	Ended September 30,						To September 30,
	2011			2010			2011

Cash flow from operating activities:
Net loss	$	(1,518,933	)	$	(956,180	)	$	(8,901,010	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		1,822			1,822			8,212
Vested stock options and warrants		265,393			11,382			995,035
Equity instruments issued for management and consulting		142,813			655,621			1,406,072
Stock based registration payments		-			-			355,124
Conversion of accrued liabilites to capital		-			-			560,998
Amortization of debt discount		84,999			33,411			258,252
(Gain)Loss on valuation of equity-linked instruments		(213,921	)		(1,025,294	)		(996,225	)
Changes in assets and liabilities:
Accounts receivable		(19,277	)		15,737			(19,277	)
Prepaid expense and other		(22,523	)		(6,692	)		(30,649	)
Notes payable to shareholders		-			-			(14,957	)
Accounts payable		40,550			314,229			1,266,571
Accrued expenses		53,189			182,835			551,896
Net cash used in operating activities		(1,185,888	)		(773,129	)		(4,559,958	)

Cash flow from investing activities:
Purchase of fixed assets		-			-			(12,258	)
Purchase of intangibles		-			-			(142,495	)
Net cash used in investing activities		-			-			(154,753	)

Cash flow from financing activities:
Proceeds from long term and convertible debt		250,500			582,000			1,376,805
Repayment of convertible debt		-			(100,000	)		(100,000	)
Principal payments on long term debt		(10,267	)		(10,677	)		(296,531	)
Restricted cash in escrow		-			103,333			-
Debt converted to common stock		-			-			174,000
Accrued interest converted to stock		22,500			-			109,860
Issuance of common stock		991,500			202,275			3,528,305
Net cash provided by financing activities		1,254,233			776,931			4,792,439

Net increase in cash		68,345			3,802			77,728
Cash at beginning of period		9,383			16,632			-
Cash at end of period	$	77,728		$	20,434		$	77,728

Non cash transactions:
Conversion of debt into common stock	$	52,000		$	-		$	52,000
Conversion of accounts payable to convertible debt		89,300			-			546,599
Total non cash transactions	$	141,300		$	-		$	598,599

See Notes to Condensed Financial Statements

BIODRAIN MEDICAL, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Amounts presented at and for the three months and nine months ended September 30, 2011 and September 30, 2010 are unaudited)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Continuance of Operations

BioDrain Medical, Inc. (the "Company") was incorporated under the laws of the State of Minnesota in 2002. The Company is developing an environmentally safe system for the collection and disposal of infectious fluids that result from surgical procedures and post-operative care.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has suffered recurring losses from operations and has a shareholders’ deficit. These factors raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Management hired an investment banker in 2010 to raise an additional $3-$5 million in new equity. The banker was unable to raise the expected $500,000 by September 30, 2010 and the balance within 3 months, but the Company raised approximately $229,000 in equity and $605,000 in convertible debt in 2010 and $992,000 in equity and $251,000 in convertible debt in 2011 through alternative means. Although the Company's ability to raise all of this new capital is in substantial doubt it did receive approximately $2,075,000 through private placements of equity and convertible debt in 2010 and 2011, and the Company's April 1, 2009 510(k) clearance from the FDA to authorize the Company to market and sell its FMS products is being received very positively. The Company engaged a new investment banker in May 2011 to raise approximately $2 million and if the Company is successful in raising at least $2 million in new equity it will have sufficient capital to operate its business and execute its business plan for at least the next 12 months. The Company currently has a commitment for $1 million in convertible debt from an institutional investor that is contingent upon raising an equal amount of equity prior to closing. The Company is continuing its efforts to raise at least $1 million in equity so that it can take advantage of the $1 million commitment from the institutional investor. If the Company raises the additional capital by issuing additional equity securities, its existing shareholders will likely experience substantial dilution.

Recent Accounting Developments

In the first quarter 2011 we adopted new guidance on separating consideration in multiple-deliverable arrangements. The guidance addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting and how the consideration should be allocated among the separate units of accounting. The adoption of this guidance did not have a material impact on our financial statements.

We reviewed all other significant newly issued accounting pronouncements and determined they are either not applicable to our business or that no material effect is expected on our financial position and results of our operations.

Valuation of Intangible Assets

We review identifiable intangible assets for impairment in accordance with ASC 360-Property Plant and Equipment ("ASC 360"), whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Our intangible assets are currently solely the costs of obtaining trademarks and patents. Events or changes in circumstances that indicate the carrying amount may not be recoverable include, but are not limited to, a significant change in the medical device marketplace and a significant adverse change in the business climate in which we operate. If such events or changes in circumstances are present, the undiscounted cash flows method is used to determine whether the intangible asset is impaired. Cash flows would include the estimated terminal value of the asset and exclude any interest charges. If the carrying value of the asset exceeds the undiscounted cash flows over the estimated remaining life of the asset, the asset is considered impaired, and the impairment is measured by reducing the carrying value of the asset to its fair value using the discounted cash flows method. The discount rate utilized is based on management's best estimate of the related risks and return at the time the impairment assessment is made.

Our accounting estimates and assumptions bear various risks of change, including the length of the current recession facing the United States, the expansion of the slowdown in consumer spending in the U.S. medical markets despite the early expressed opinions of financial experts that the medical market would not be as affected as other markets and failure to gain acceptance in the medical market.

Accounting Policies and Estimates

The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Presentation of Taxes Collected from Customers

Sales taxes are imposed on the Company’s sales to nonexempt customers. The Company collects the taxes from customers and remits the entire amounts to the governmental authorities. The Company’s accounting policy is to exclude the taxes collected and remitted from revenues and expenses.

Shipping and Handling

Shipping and handling charges billed to customers are recorded as revenue. Shipping and handling costs are recorded within cost of goods sold on the statement of operations.

Advertising

Advertising costs are expensed as incurred. There were no advertising expenses in the three months and nine months ended September 30, 2011 and September 30, 2010.

Research and Development

Research and development costs are charged to operations as incurred. There were no research and development expenses in the three months and nine months ended September 30, 2011 and September 30, 2010.

Revenue Recognition

The Company recognizes revenue in accordance with the SEC’s Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, as amended by Staff Accounting Bulletin No. 104 (together, SAB 101), and ASC 605-Revenue Recognition.

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable and collectability is probable. Delivery is considered to have occurred upon either shipment of the product or arrival at its destination based on the shipping terms of the transaction. The Company standard terms specify that shipment is FOB BioDrain and the Company will, therefore recognize revenue upon shipment in most cases. This revenue recognition policy applies to shipments of the FMS units as well as shipments of cleaning solution kits. When these conditions are satisfied, the Company recognizes gross product revenue, which is the price it charges generally to its customers for a particular product. Under the Company’s standard terms and conditions there is no provision for installation or acceptance of the product to take place prior to the obligation of the customer. The customer’s right of return is limited only to the Company’s standard warranty whereby the Company replaces or repairs, at its option, and it would be very rare that the unit or significant quantities of cleaning solution kits may be returned. Additionally, since the Company buys both the FMS units and cleaning solution kits from “turnkey” suppliers the Company would have the right to replacements from the suppliers if this situation should occur.

Receivables

Receivables are reported at the amount the Company expects to collect on balances outstanding. The Company has determined there will be no losses on balances outstanding at September 30, 2011.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets. Estimated useful asset life by classification is as follows:

		Years
Computers and office equipment		3
Furniture and fixtures		5

Upon retirement or sale, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repairs are charged to operations as incurred.

Intangible Assets

Intangible assets consist of patent costs. These assets are not subject to amortization until the property patented is in production. The assets are reviewed for impairment annually, and impairment losses, if any, are charged to operations when identified. No impairment losses have been identified by management.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740- Income Taxes(“ASC 740”). Under ASC 740, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carry forwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

The Company reviews income tax positions expected to be taken in income tax returns to determine if there are any income tax uncertainties. The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax positions will be sustained on examination by taxing authorities, based on technical merits of the positions. The Company has identified no income tax uncertainties.

Tax years subsequent to 2006 remain open to examination by federal and state tax authorities.

Patents and Intellectual Property

The Company, in June 2008, completed and executed an agreement to secure exclusive ownership of the patent from an inventor, Marshall Ryan. Mr. Ryan received a combination of cash and warrants, and he will receive a 4% royalty on FMS (the Product) sales for the life of the patent. At the signing of the agreement, Mr. Ryan received $75,000 in exchange for the exclusive assignment of the patent. In addition, on June 30, 2009, Mr. Ryan, through his Mid-State Stainless, Inc. entity, was entitled to receive $100,000 as payment (currently recorded as an account payable with the Company) for past research and development activities. Should Mr. Ryan be utilized in the future for additional product development activities, he will be compensated at a rate of ninety five dollars ($95.00) per hour.

Mr. Ryan also received a warrant, with immediate vesting, to purchase 150,000 shares of the Company's common stock at a price of $.35 per share. The warrant has a term of five years, ending on June 30, 2013 and is assigned a value of $28,060 using a Black-Scholes formula and this amount was expensed as consulting expense in 2008 using a 5-year expected life, a 3.73% risk free interest rate, an expected 59% volatility and a zero dividend rate. Should there be a change in control of the Company (defined as greater than 50% of the Company’s outstanding stock or substantially all of its assets being transferred to one independent person or entity), Mr. Ryan will be owed a total of $2 million to be paid out over the life of the patent if the change in control occurs within 12 months of the first sale of the product; or $1 million to be paid out over the life of the patent if the change in control occurs between 12 and 24 months of the first sale of the product; or $500,000 to be paid out over the life of the patent if the change in control occurs between 24 and 36 months of the first sale of the product. There will be no additional payment if a change in control occurs more than 36 months after the first sale of the product.

Subsequent Events

The Company has evaluated subsequent events through the date of this filing. The Company does not believe there are subsequent events that require disclosure.

Interim Financial Statements

The Company has prepared the unaudited interim financial statements and related unaudited financial information in the footnotes in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. These interim financial statements reflect all adjustments consisting of normal recurring accruals, which, in the opinion of management, are necessary to present fairly the Company’s financial position, the results of its operations and its cash flows for the interim periods. These interim financial statements should be read in conjunction with the annual financial statements and the notes thereto contained in the Form 10-K filed with the SEC on March 31, 2011. The nature of the Company’s business is such that the results of any interim period may not be indicative of the results to be expected for the entire year.

NOTE 2 – DEVELOPMENT STAGE OPERATIONS

The Company was formed April 23, 2002. Since inception through November 1, 2011, 30,427,328 shares of common stock have been issued between par value and $1.67. Operations since incorporation have primarily been devoted to raising capital, obtaining financing, development of the Company’s product, and administrative services.

NOTE 3 – STOCKHOLDERS’ DEFICIT, STOCK OPTIONS AND WARRANTS

In connection with the financing completed in October 2008, the Company has effected two reverse stock splits, one on June 6, 2008 and another on October 20, 2008. In accordance with SAB Topic 4C, all stock options and warrants and their related exercise prices are stated at their post-reverse stock split values.

The Company has an equity incentive plan, which allows issuance of incentive and non-qualified stock options to employees, directors and consultants of the Company, where permitted under the plan. The exercise price for each stock option is determined by the board of directors. Vesting requirements are determined by the board of directors when granted and currently range from immediate to three years. Options under this plan have terms ranging from three to ten years.

Accounting for share-based payment

The Company has adopted ASC 718- Compensation-Stock Compensation ("ASC 718"). Under ASC 718 stock-based employee compensation cost is recognized using the fair value based method for all new awards granted after January 1, 2006 and unvested awards outstanding at January 1, 2006. Compensation costs for unvested stock options and non-vested awards that were outstanding at January 1, 2006, are being recognized over the requisite service period based on the grant-date fair value of those options and awards as previously calculated under SFAS 123 for pro forma disclosures, using a straight-line method. We elected the modified-prospective method under which prior periods are not retroactively restated.

ASC 718 requires companies to estimate the fair value of stock-based payment awards on the date of grant using an option-pricing model or other acceptable means. The Company uses the Black-Scholes option valuation model which requires the input of significant assumptions including an estimate of the average period of time employees will retain vested stock options before exercising them, the estimated volatility of the Company's common stock price over the expected term, the number of options that will ultimately be forfeited before completing vesting requirements, the expected dividend rate and the risk-free interest rate. Changes in the assumptions can materially affect the estimate of fair value of stock-based compensation and, consequently, the related expense recognized. The assumptions the Company uses in calculating the fair value of stock-based payment awards represent the Company's best estimates, which involve inherent uncertainties and the application of management's judgment. As a result, if factors change and the Company uses different assumptions, the Company's equity-based compensation expense could be materially different in the future.

Since the Company's common stock has no significant public trading history, and the Company has experienced no significant option exercises in its history, the Company is required to take an alternative approach to estimating future volatility and estimated life and the future results could vary significantly from the Company's estimates. The Company compiled historical volatilities over a period of 2-7 years of 15 small-cap medical companies traded on major exchanges and 10 mid-range medical companies on the OTC Bulletin Board and combined the results using a weighted average approach. In the case of ordinary options to employees the Company determined the expected life to be the midpoint between the vesting term and the legal term. In the case of options or warrants granted to non-employees the Company estimated the life to be the legal term unless there was a compelling reason to make it shorter.

When an option or warrant is granted in place of cash compensation for services the Company deems the value of the service rendered to be the value of the option or warrant. In most cases, however, an option or warrant is granted in addition to other forms of compensation and its separate value is difficult to determine without utilizing an option pricing model. For that reason the Company also uses the Black-Scholes-Merton option-pricing model to value options and warrants granted to non-employees, which requires the input of significant assumptions including an estimate of the average period the investors or consultants will retain vested stock options and warrants before exercising them, the estimated volatility of the Company's common stock price over the expected term, the number of options and warrants that will ultimately be forfeited before completing vesting requirements, the expected dividend rate and the risk-free interest rate. Changes in the assumptions can materially affect the estimate of fair value of stock-based consulting and/or compensation and, consequently, the related expense recognized.

Since the Company has limited trading history in its stock and no first-hand experience with how its investors and consultants have acted in similar circumstances, the assumptions the Company uses in calculating the fair value of stock-based payment awards represent its best estimates, which involve inherent uncertainties and the application of management's judgment. As a result, if factors change and the Company uses different assumptions, the Company's equity-based consulting and interest expense could be materially different in the future.

Valuation and accounting for options and warrants

The Company determines the grant date fair value of options and warrants using a Black-Scholes-Merton option valuation model based upon assumptions regarding risk-free interest rate, expected dividend rate, volatility and estimated term. For grants during 2008, the Company used a 2.0 to 4.5% risk-free interest rate, 0% dividend rate, 53-66% volatility and estimated term of 2.5 to 7.5 years. Values computed using these assumptions ranged from $.102 per share to $.336 per share. Warrants or options awarded for services rendered are expensed over the period of service (normally the vesting period) as compensation expense for employees or an appropriate consulting expense category for awards to consultants and directors. Warrants granted in connection with a common equity financing are included in shareholders’ equity, provided that there is no re-pricing provision that requires they be treated as a liability (See Note 10) and warrants granted in connection with a debt financing are treated as a debt discount and amortized using the interest method as interest expense over the term of the debt. Warrants issued in connection with the $100,000 convertible debt that closed March 1, 2007 created a debt discount of $40,242 that is being amortized as additional interest over its 5-year term.

Warrants issued in connection with the $170,000 in convertible “bridge” debt that closed in July 2007 created a calculated debt discount of $92,700 that was fully expensed over its loan term that matured April 30, 2008. The Company issued $100,000 in convertible debt in October 2009 and issued a warrant, in connection with the debt, for 200,000 shares of common stock at $.65 per share. The Company determined that the warrant had an initial value of $30,150 that was treated as a debt discount and is being amortized as additional interest expense over the 24-month term of the note. The Company also issued $200,000 in convertible debt in June 2010 and issued a warrant, in connection with the debt, to purchase 1,111,112 shares at $.46 per share.

The Company determined that the value of the June 2010 warrant is $96,613.This value is treated as a debt discount and amortized as additional interest expense over the 22-month term of the note. The Company also issued $32,000 in convertible debt in September, 2010 and issued a warrant to purchase 320,000 shares at $.46 per share. The Company determined that this warrant has a value of $15,553 that was treated as a debt discount and amortized as additional interest expense over the 18 month term of the note. In January, 2011 the Company issued three convertible notes of $50,000 each and also issued warrants to purchase 1,595,239 common shares at $.20 per share. The value of the warrants was determined to be $47,908 and this amount is being treated as a debt discount and amortized as additional interest expense over the 24 month term of the notes.

The following summarizes transactions for stock options and warrants for the periods indicated:

	Stock Options (1)					Warrants (1)
	Number of Shares			Average Exercise Price		Number of Shares			Average Exercise Price
Outstanding at December 31, 2005		17,956		$	1.67		20,950		$	2.62

Issued		23,942			1.67		71,826			0.85

Outstanding at December 31, 2006		41,898			1.67		92,776			1.25

Issued		5,984			1.67		28,502			0.35

Outstanding at December 31, 2007		47,882			1.67		121,278			1.04

Issued		1,243,292			0.20		5,075,204			0.45
Expired							(11,971	)		3.76

Outstanding at December 31, 2008		1,291,174			0.26		5,184,511			0.45

Issued		205,000			0.37		2,188,302			0.65

Outstanding at December 31, 2009		1,496,174			0.27		7,372,813			0.49

Issued		2,210,000			0.17		3,435,662			0.34
Expired		(207,956	)		0.43		(8,979	)		1.67
Exercised							(128,571	)		0.46

Outstanding at December 31, 2010		3,498,218			0.19		10,670,925			0.44

Issued		2,483,334			0.01		16,821,508			0.13
Expired		(65,985	)		0.47		(2,009,560	)		0.46
Exercised		(100,000	)		0.01
Outstanding at September 30, 2011		5,815,567		$	0.11		25,482,873		$	0.23

(1)

Adjusted for the reverse stock splits in total at June 6, 2008 and October 20, 2008.

At September 30, 2011, 4,818,657 stock options are fully vested and currently exercisable with a weighted average exercise price of $0.14 and a weighted average remaining term of 8.02 years. There are 25,482,873 warrants that are fully vested and exercisable. Stock based compensation recognized in the nine months ended September 30, 2011 was $265,393 and was $667,000 in the nine months ended September 30, 2010.

The following summarizes the status of options and warrants outstanding at September 30, 2011:

Range of Exercise Prices		Shares		Weighted Average Remaining Life
Options:
$	0.01		2,926,626		9.22
$	0.15		2,060,000		8.85
$	0.35		775,000		1.80
$	0.50		30,000		1.12
$	1.67		23,941		0.37
Total			5,815,567

Warrants:
$	0.01		200,000		4.19
$	0.02		71,826		2.70
$	0.075		4,657,745		2.77
$	0.10		2,328,572		2.18
$	0.12		500,000		2.59
$	0.13		631,429		2.03
$	0.15		5,333,334		2.41
$	0.16		500,000		2.52
$	0.17		1,294,118		2.51
$	0.18		200,000		2.36
$	0.20		2,445,239		2.30
$	0.25		562,500		2.95
$	0.35		998,597		0.74
$	0.46		4,000,035		1.18
$	0.65		1,729,550		0.91
$	1.67		29,928		0.24
Total			25,482,873

Stock options and warrants expire on various dates from October 2011 to July 2021.

Under the terms of the Company's agreement with investors in the October 2008 financing, 1,920,000 shares of common stock were the maximum number of shares allocated to the Company's existing shareholders at the time of the offering (also referred to as the original shareholders or the "Founders"). Since the total of the Company's fully-diluted shares of common stock was greater than 1,920,000 shares, in order for the Company to proceed with the offering, the board of directors approved a reverse stock split of 1-for-1.2545. After this split was approved, additional options and warrants were identified, requiring a second reverse stock split in order to reach the 1,920,000 shares. The second reverse stock split on the reduced 1-for-1.2545 balance was determined to be 1-for 1.33176963. Taken together, if only one reverse stock were performed, the number would have been a reverse stock split of 1-for 1.670705.

On June 6, 2008, the board of directors approved the first reverse stock split. The authorized number of common stock of 20,000,000 shares was proportionately divided by 1.2545 to 15,942,607.

On October 20, 2008, the board of directors (i) approved the second reverse stock split pursuant to which the authorized number of shares of common stock of 15,942,607 was proportionately divided by 1.33177 to 11,970,994 shares and (ii) approved a resolution to increase the number of authorized shares of the Company's common stock from 11,970,994 to 40,000,000, which was approved by the Company’s shareholders holding a majority of the shares entitled to vote thereon at a special meeting of shareholders held on December 3, 2008.

The shareholders approved an increase in authorized shares to 80 million shares in an annual shareholder meeting on June 22, 2010 and approved an increase in authorized shares to 200 million shares in a special shareholder meeting on September 7, 2011.

Stock, Stock Options and Warrants Granted by the Company

The following table is the listing of stock options and warrants as of September 30, 2011 by year of grant:

Stock Options:
Year	Shares		Price
2006		17,956	$	1.67
2007		5,985		1.67
2008		1,243,292		.01-.35
2009		105,000		.35
2010		2,060,000		.15
2011		2,383,334		.01
		5,815,567	$	.01-1.67
Warrants:
Year	Shares		Price
2006		65,841	$	.02-1.67
2007		28,502		.35
2008		2,943,058		.02-.46
2009		2,188,302		.13-.65
2010		3,435,662		.01-.65
2011		16,821,508		.075-.25
Total		25,482,873	$	.01-1.67

NOTE 4 - LOSS PER SHARE

The following table presents the shares used in the basic and diluted loss per common share computations:

													From
	Three Months Ended						Nine Months Ended						April 23, 2002
	September 30,						September 30,						(Inception) To
	2011			2010			2011			2010			September 30, 2011
Numerator
Net Loss available in basic and diluted calculation	$	(654,114	)	$	(158,110	)	$	(1,518,933	)	$	(956,180	)	$	(8,901,010	)

Denominator
Weighted average common shares oustanding-basic		27,236,303			13,159,639			22,193,681			12,428,401			5,136,012

Effect of dilutive stock options and warrants (1)		-			-			-			-			-

Weighted average common shares outstanding-diluted		27,236,303			13,159,639			22,193,681			12,428,401			5,136,012

Loss per common share-basic and diluted	$	(0.02	)	$	(0.01	)	$	(0.07	)	$	(0.08	)	$	(1.73	)

(1) The number of shares underlying options and warrants outstanding as of September 30, 2011 and September 30, 2010 are 31,298,440 and 12,027,714, respectively. The effect of the shares that would be issued upon exercise of such options and warrants has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.

NOTE 5 – INCOME TAXES

The provision for income taxes consists of an amount for taxes currently payable and a provision for tax consequences deferred to future periods. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

There is no income tax provision in the accompanying statement of operations due to the cumulative operating losses that indicate a 100% valuation allowance for the deferred tax assets and state income taxes is appropriate.

Federal and state income tax return operating loss carryovers, as of September 30, 2011, were approximately $8,300,000 and will begin to expire in 2017.

The valuation allowance has been recorded due to the uncertainty of realization of the benefits associated with the net operating losses. Future events and changes in circumstances could cause this valuation allowance to change.

The components of deferred income taxes at September 30, 2011 and December 31, 2010 are as follows:

	September 30, 2011		December 31, 2010
	(Unaudited)
Deferred Tax Asset:
Net Operating Loss	$	1,933,000	$	1,579,000
Other		48,000		56,000
Total Deferred Tax Asset		1,981,000		1,635,000
Less Valuation Allowance		1,981,000		1,635,000
Net Deferred Income Taxes	$	—	$	—

NOTE 6 - CONVERTIBLE DEBENTURE

The Company issued a convertible debenture to Andcor Companies, Inc. (“Andcor”) with principal of $10,000 and interest at 10.25% that originally matured in 2007. The debenture is convertible into shares of the Company’s common stock at the lower of $0.90 per share or the price per share at which the next equity financing agreement is completed, and is now re-set to $.35 per share. The convertible debenture has not yet been paid, but the maturity of the note was extended, in May 2010, to March 31, 2012.

NOTE 7 – LONG-TERM DEBT

Long-term debt is as follows:

	September 30, 2011		December 31, 2010
Note payable to bank in monthly installments of $1,275/including variable interest at 2% above the prevailing prime rate (3.25% at December 31, 2010). The final payment under the note was made in September 2011. The note was personally guaranteed by former executives of the Company.	$	—	$	10,267
Notes payable to two individuals, net of discounts of $3,353 and $9,390 with interest only payments at 12% to March 2012 when the remaining balance is payable. The notes are convertible into 285,715 shares of common stock in the Company at $.35 per share.		96,647		90,610
Note payable issued on October 26, 2009 to the parents of one the Company's officers, net of a discount of $1,054 and $12,360 discount, with interest at 8% to March 31, 2012 and convertible into shares of common stock at $.35 per share.		98,946		87,640
Notes payable issued to two individuals in January 2010. The notes bear interest at 8%, mature March 31, 2012 and are convertible into shares of common stock, at 50% of the weighted average closing bid price over any 10 consecutive days of trading.		100,000		100,000
Note payable issued on June 12, 2010 to the parents of one of the Company's officers, net of a discount of $28,106 and $67,629. The note bears interest at 12% to March 31, 2012, and is convertible into common stock at $.18 per share.		171,894		132,371
Note payable issued on August 2, 2010 to an institutional investor. The note bears interest at 8%, matured May 4, 2011 and was convertible into common stock at 50% of the average of the three lowest closing prices in any 10 day trading period. $20,000 was converted in the three months ended March 31, 2011 and $30,000, plus accrued interest, was converted in the three months ended June 30, 2011.		—		50,000
Note payable issued on June 14, 2011 to an institutional investor. The note bears interest at 8%, matures June 14, 2012 and is convertible into common stock at 55% of the average of the five lowest closing prices in any 10 day trading period.		63,000		—
Note payable issued on July 12, 2011 to an institutional investor. The note bears interest at 8%, matures April 16, 2012 and is convertible into common stock at 60% of the average of the five lowest closing prices in any 10 day trading period.		37,500		—
Note payable issued on September 16, 2010 to an institutional investor. The note bears interest at 10%, matures March 15, 2012 and is convertible into common stock at $.18 per share.		100,000		100,000
Note payable issued on December 23, 2010 to the parents of one of our officers, net of a discount of $4,489 and $7,229. The note bears interest at 12%, matures December 23, 2012 and is convertible into common stock at $.084 per share.		12,311		9,571
Note payable issued December 31, 2010 to a law firm that accepted this note in full payment of their past due legal fees. The Note bears interest at 6%, matures December 31, 2014 and is convertible into common stock at $.15 per share.		457,300		457,300
Note payable issued on December 23, 2010 to a private investor. The Note matured April 30, 2011, is due on demand, and bears interest at 10%.		6,000		6,000
Note payable issued on September 21, 2010 to the parents of one of our officers, net of a discount of $4,925 and $12,702. The note bears interest at 12%, matures December 23, 2012 and is convertible into common stock at $.18 per share.		27,075		19,298
Notes payable issued in January 2011 to three individuals, net of a debt discount of $30,393. The notes bear interest at 10%, have a 24 month term and are convertible into common stock at $0.084 to $0.10 per share.		119,607		—
Note payable issued January 1, 2011 to a law firm that accepted this note in full payment of their past due legal fees. The Note bears interest at 6%, matures December 31, 2014 and is convertible into common stock at $.15 per share.		89,300		—
Total	$	1,379,580	$	1,063,056
Less amount due within one year		673,987		66,267
Long-Term Debt	$	705,593	$	$ 996,789

Cash payments for interest were $208 for the nine months ended September 30, 2011 and $799 for the nine months ended September 30, 2010.

Principal payments required during the 12 month periods ended September 30:

2012	$	716,500
2013	$	48,800
2014	$	150,000
2015	$	546,600

NOTE 8 – RENT OBLIGATION

The Company leases its principal office under a non-cancelable lease that extends five years. In addition to rent, the Company pays real estate taxes and repairs and maintenance on the leased property. Rent expense was $24,293 in the nine months ended September 30, 2011 and $24,187 in the nine months ended September 30, 2010.

The Company’s rent obligation for the years 2011 to 2015 is as follows:

2011	$	30,000
2012	$	31,000
2013	$	26,000
2014	$	0
2015	$	0

NOTE 9 – LIABILITY FOR EQUITY-LINKED FINANCIAL INSTRUMENTS

The Company adopted ASC 815- Derivatives and Hedging (“ASC 815”) on January 1, 2009. ASC 815 mandates a two-step process for evaluating whether an equity-linked financial instrument or embedded feature is indexed to the entity's own stock. It is effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, which was the Company's first quarter of 2009. Many of the warrants issued by the Company contain a strike price adjustment feature, which upon adoption of ASC 815, changed the classification (from equity to liability) and the related accounting for warrants with a $479,910 estimated fair value of as of January 1, 2009. An adjustment was made to remove $486,564 from paid-in capital (the cumulative values of the warrants on their grant dates), a positive adjustment of $6,654 was made to accumulated deficit, representing the gain on valuation from the grant date to January 1, 2009, and booked $479,910 as a liability. The warrants issued in 2011 do not contain a strike price adjustment feature and, therefore, are not treated as a liability.

The January 1, 2009 valuation was computed using the Black-Scholes valuation model based upon a 2.5-year expected term, an expected volatility of 63%, an exercise price of $.46 per share, a stock price of $.35, a zero dividend rate and a 1.37% risk free interest rate. Subsequent to January 1, 2009 these warrants were revalued at the end of each quarter and a gain or loss was recorded based upon their increase or decrease in value during the quarter. Likewise, new warrants that were issued during 2009 and 2010 were valued, using the Black-Scholes valuation model on their date of grant and an entry was made to reduce paid-in capital and increase the liability for equity-linked financial instruments. These warrants were also re-valued at the end of each quarter based upon their expected life, the stock price, the exercise price, assumed dividend rate, expected volatility and risk free interest rate. A significant reduction in the liability was realized in 2010 primarily due to a reduction from $.50 to $.22 per share in the underlying share price. The Company realized a slight increase in the liability for existing warrants during the first quarter of 2011 primarily due to a reduction in the spread between the exercise price and the market price of the underlying shares, but this was more than offset by a decrease in the liability for new warrants that were issued during the quarter as a result of a reduction in the underlying market price of the stock.

The inputs to the Black-Scholes model during 2011 and 2010 were as follows:

Stock price	$	.08 to $.50
Exercise price	$	.01 to $.65
Expected life	2.00 to 6.5		years
Expected volatility	54% to 68		%
Assumed dividend rate		-	%
Risk free interest rate	.13% to 2.97		%

The original valuations, annual gain/(loss) and end of year valuations are shown below:

	Initial Value		2009 Gain (Loss)			2010 Gain(Loss)		YTD 2011 Gain(Loss)		Value at 9/30/2011
January 1, 2009 Adoption	$	479,910	$	(390,368	)	$	868,772		1,506	$	0
Warrants issued in quarter ended 6/30/2009		169,854		20,847			149,007		(10,498)		12,101
Warrants issued in quarter ended 9/30/2009		39,743		(738	)		40,419		(2,902)		2,964
Warrants issued in quarter ended 12/31/2009		12,698		617			12.053		(1,068)		1,095
Subtotal	$	702,205
Warrants issued in quarter ended 3/31/2010		25,553					25,014		(7,115)		7,654