Summary of Significant Accounting Policies and Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company's management evaluates its estimates, including those related to collectibility of customer accounts, whether the cost of inventories can be recovered, the value assigned to and estimated useful life of intangible assets, the realization of tax assets and estimates of tax liabilities, contingent liabilities, and the potential outcome of litigation. Such estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Nonetheless, actual results may differ from these estimates.

The following critical accounting policies and estimates were used in the preparation of the accompanying Consolidated Financial Statements:

(a) Cash and Cash Equivalents

Cash and cash equivalents includes cash on hand, amounts held as bank deposits, and balances held in money market funds.

(b) Accounts Receivables

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in existing accounts receivable. Account balances are charged off against the allowance after appropriate collection efforts are exhausted.

The Company values inventory at the lower of the actual cost to purchase or manufacture the inventory, or the market value for such inventory. Cost is determined on the first-in, first-out method (FIFO). The Company regularly reviews inventory quantities in process and on hand and records a provision for obsolete inventory. The provision is based on actual loss experience and a forecast of product demand compared to its remaining shelf life.

(d) Property and Equipment

Property and equipment are stated at cost and depreciated on a straight-line basis over the following estimated useful lives:



	Useful Life
Office furniture, computer hardware, software, and production equipment	Three to seven years
Leasehold improvements	Shorter of useful life or remaining term of lease, with expected extensions

Maintenance and repairs are expensed as incurred, while leasehold improvements are capitalized and amortized over the shorter of their estimated useful lives or the remaining lease term (including expected extensions). Upon sale or disposition of property and equipment, any gain or loss is included in the statement of operations.

(e) Goodwill and Intangible Assets

Goodwill and other intangible assets with indefinite lives are not subject to amortization, but are tested for impairment

annually as of June 30, or whenever events or changes in circumstances indicate that the asset might be impaired.



	Useful Life
Goodwill	Indefinite lived
In-process research and development	Indefinite lived until commercial launch of underlying technology, then amortized over its then remaining useful life on a straight-line basis
Developed technology	Ten years, amortized on a straight-line basis
Patent	Five years, amortized on a straight-line basis

(f) Long-Lived Asset Impairment

The Company evaluates the possible impairment of long-lived assets, including indefinite lived intangible assets, if/when events or changes in circumstances occur that indicate that the carrying value of such assets may not be recoverable. Recoverability of assets to be held and used is measured by the comparison of the carrying value of such assets to the Company's pretax cash flows (undiscounted and without interest charges) expected to be generated from their use in the Company's operations. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds fair value. Assets held for sale are reported at the lower of the carrying amount, or fair value less costs to sell.

The asset group, for purposes of impairment testing, is comprised of the Company's entire aortic disorder device business, representing the lowest level of separately identifiable cash flows. The impairment evaluation utilizes the Company's ten-year operating and cash flow projections in determining the undiscounted cash flows expected to be generated by the asset group through continuing operations. Such undiscounted cash flows are next compared to the carrying amount of the asset group to determine if an impairment of the asset group is indicated.

The undiscounted net cash flows expected to be generated by the Company's asset group exceeded its carrying amount as of December 31, 2011 and June 30, 2011 (the annual impairment assessment date), therefore, the asset group is not considered to be impaired. Such conclusion is based upon management's significant judgments and estimates inherent in the Company's ten-year operating and cash flow projections, including assumptions pertaining to revenue growth, expense trends, and working capital management. Accordingly, changes in business circumstances could adversely impact the results of the Company's long-lived asset impairment test.

(g) Fair Value Measurements

The Company applies relevant GAAP in measuring the fair value of its Contingent Payment (see Note 10). Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (ii) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g. interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

(h) Contingent Consideration for Business Acquisition

The Company determined the fair value of contingently issuable common stock on the Nellix (see Note 10) acquisition date using a probability-based income approach using an appropriate discount rate (determined using both Level 1 and Level 3 inputs). Changes in the fair value of the contingently issuable common stock are determined each period end (determined using both Level 1 and Level 3 inputs) and recorded in the other income/(expense) section of the consolidated statements of operations and the non-current liabilities section of the consolidated balance sheet.

(i) Fair Value of Financial Instruments

The carrying amount of all financial instruments (i.e. money market funds) approximates fair value (utilizing Level 1 inputs), because of their ability to immediately convert to cash with minimal change in value.

(j) Revenue Recognition

The Company recognizes revenue when all of the following criteria are met:

• Appropriate evidence of a binding arrangement exists with the Company's customer;


•	The sales price for the Company's ELG System (including extensions and accessories) are established with the customer;


•	The Company's ELG System have been used in an EVAR procedure, or shipped to a distributor, as applicable; and

• Collection of the relevant receivable is reasonably assured at the time of sale.

For sales made to a direct customer (i.e. hospitals), the Company recognizes revenue upon completion of a EVAR procedure, when the ELG Device is implanted in a patient. For sales made to distributors, the Company recognizes revenue at the time of shipment of the ELG System, as this represents the period that the customer has taken custody of the ELG System, without right of return, and assumed risk of loss.

The Company does not offer rights of return or price protection, and has no post delivery obligations, other than its

specified warranty.

(k) Shipping Costs

Shipping costs billed to customers are reported within revenue, with the related costs reported within costs of goods sold.

(l) Foreign Currency

The assets and liabilities of the Company's foreign subsidiaries are translated at the rates of exchange at the balance sheet date. The income and expense items of these subsidiaries are translated at average monthly rates of exchange. Gains and losses resulting from foreign currency transactions, which are denominated in a currency other than the respective entity’s functional currency are included in the Consolidated Statement of Operations. Foreign currency translation adjustments are recorded to stockholders' equity within the Consolidated Balance Sheets.

(m) Income Taxes

The Company records the estimated future tax effects of temporary differences between the tax basis of assets and

liabilities and amounts reported in the financial statements, as well as operating losses and tax credit carry forwards. The Company has recorded a full valuation allowance to reduce its deferred tax assets to zero, because the Company believes that, based upon a number of factors, it is more likely than not that the deferred tax assets will not be realized. If the Company were to determine that it would be able to realize their deferred tax assets in the future, an adjustment to the valuation allowance on its deferred tax assets would increase net income in the period such determination was made.

(n) Net Earnings (Loss) Per Share

Net earnings (loss) per common share is computed using the weighted average number of common shares outstanding

during the periods presented. Because of the net losses during the years ended December 31, 2011 and 2009, options to purchase the common stock of the Company were excluded from the computation of net loss per share for these years because the effect would have been antidilutive.

(o) Research and Development Costs

Research and development costs are expensed as incurred.

(p) Product Warranty

Within six months of shipment, certain customers may request replacement of products they receive that do not meet product specifications. No other warranties are offered and the Company contractually disclaims responsibility for any consequential or incidental damages associated with the use of its ELG System. Historically, the Company has not experienced a significant amount of costs associated with its warranty policy.