On February 25, 2011, the Company announced that as a result of the Company's strategic planning process and the current regulatory and commercial capital equipment environment, the Company has determined to explore strategic alternatives for its LipoSonix business including, but not limited to, the sale of the stand-alone business. The Company has engaged an investment banking firm to assist the Company in its exploration of strategic alternatives for LipoSonix. The Company expects the disposal of the LipoSonix business to take place by February 2012 or before. As a result of this decision, the Company now classifies the LipoSonix business as a discontinued operation for financial statement reporting purposes, including comparable period results.

Intangible assets and property and equipment related to LipoSonix were determined to be impaired as of December 31, 2010, based on the Company's analysis of the long-lived assets' carrying value and projected future cash flows. As a result of the impairment analysis, the Company recorded a write-down of approximately $7.7 million related to LipoSonix intangible assets and $2.1 million related to LipoSonix property and equipment during the three months ended December 31, 2010. The write-down of intangible assets and property and equipment related to LipoSonix represented the full carrying value of the respective assets as of December 31, 2010. Therefore, no depreciation or amortization expense was recognized during the six months ended June 30, 2011 related to the discontinued operations, as the long-lived assets of the discontinued operations were written down to $0 as of December 31, 2010.

The following is a summary of loss from discontinued operations, net of income tax benefit, for the three and six months ended June 30, 2011 and 2010 (in thousands):

	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2011		2010		2011		2010

Net revenues	$	200	$	448	$	356	$	1,397
Cost of revenues		82		196		2,456		846

Gross profit		118		252		(2,100)		551

Operating expenses:
Selling, general and administrative		5,731		3,782		11,594		7,542
Research and development		3,302		3,091		6,648		6,601
Depreciation and amortization		-		323		-		643

Loss from discontinued operations
before income tax benefit		(8,915)		(6,944)		(20,342)		(14,235)

Income tax benefit		(3,186)		(2,516)		(7,288)		(5,157)

Loss from discontinued operations,
net of income tax benefit	$	(5,729)	$	(4,428)	$	(13,054)	$	(9,078)

The Company includes only revenues and costs directly attributable to the discontinued operations, and not those attributable to the ongoing entity. Accordingly, no interest expense or general corporate overhead costs have been allocated to the LipoSonix discontinued operations. Included in cost of revenues for the six months ended June 30, 2011 was a $1.9 million charge related to an increase in the valuation reserve for LipoSonix inventory that is not expected to be sold.

The following is a summary of assets and liabilities held for sale associated with the LipoSonix discontinued operations as of June 30, 2011 and December 31, 2010 (in thousands):

	June 30, 2011		December 31, 2010

Cash and cash equivalents	$	878	$	629
Accounts receivable, net		83		129
Inventories, net		3,815		4,495
Deferred tax assets, net		5,191		7,328
Other assets		281		546
Assets held for sale from discontinued operations	$	10,248	$	13,127

Accounts payable	$	2,228	$	1,802
Other liabilities		4,944		5,474
Liabilities held for sale from discontinued operations	$	7,172	$	7,276

The following is a summary of net cash used in operating activities from discontinued operations for the six months ended June 30, 2011 and 2010 (in thousands):

	Six Months Ended
	June 30,		June 30,
	2011		2010

Loss from discontinued operations, net of income tax benefit	$	(13,054)	$	(9,078)
Depreciation and amortization		-		643
Share-based compensation expense		1,795		327
Decrease in assets held for sale from discontinued operations		2,879		3,563
Decrease in liabilities held for sale from discontinued operations		(1,598)		(729)
Net cash used in operating activities from
discontinued operations	$	(9,978)	$	(5,274)

Net cash used in investing activities from discontinued operations of $0.6 million for the six months ended June 30, 2010 represents purchases of property and equipment.