Note 1. Significant Accounting Policies

3 Months Ended

Dec. 31, 2011

Note 1. Significant Accounting Policies Disclosure

Note 1. Significant Accounting Policies

1.  SIGNIFICANT ACCOUNTING POLICIES

We have prepared the accompanying unaudited financial statements in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  In our opinion, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included.  Operating results for the three-month period ended December 31, 2011 are not necessarily indicative of the results that may be expected for the year ending September 29, 2012.  For further information, refer to our Annual Report on Form 10-K for the year ended October 1, 2011.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and Span Medical Products Canada Inc. ("Span-Canada"), its wholly-owned subsidiary.  Significant intercompany accounts and transactions have been eliminated.

FOREIGN CURRENCY TRANSLATION

The assets and liabilities of Span-Canada, operating under the name "M.C. Healthcare Products," which uses the Canadian dollar as its functional currency, are translated into U.S. dollars at the quarter-end exchange rate.  Revenues and expenses are translated at weighted average exchange rates.  The resulting translation adjustments are recorded as a separate component of shareholders' equity.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Accounting standards that have been issued or proposed by the Financial Accounting Standards Board (FASB) or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption.

STOCK-BASED COMPENSATION

We measure and recognize compensation expense for all stock-based payments at fair value.  Stock-based payments include stock option grants.  We have granted options to purchase common stock to some of our employees under various plans at prices equal to the market value of the stock on the dates the options were granted.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for grants made on November 9, 2010 during fiscal year 2011: risk-free interest rate of 2.54%; dividend yield of 2.5%; volatility factor of the expected market price of our common stock of 43.02%; and a weighted average expected life of the option of 9.0 years.  No options were granted during the quarter ended December 31, 2011.