MedPro Safety Products 10-K 2011 FY Annual report

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2011

Commission File Number 000-49768

MEDPRO SAFETY PRODUCTS, INC.

(Exact name of registrant as specified in its charter)

Nevada	91-2015980
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

145 Rose Street, Lexington, KY	40507
(Address of Principal Executive Offices)	(Zip Code)

(859) 225-5375

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None.

Securities registered pursuant to section 12(g) of the Act:

Common Stock, par value $0.001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes  ¨     No  ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes  ¨     No  ý

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.                    Yes  ý     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).         Yes  ý    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

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Large accelerated filer Â	Accelerated filer Â	Non-accelerated filer Â	Smaller reporting company  x
	(Do not check if a smaller reporting company.)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).        Yes  ¨    No  ý

As of June 30, 2011, the aggregate market value of the registrant’s outstanding common stock held by non-affiliates of the registrant was approximately $32,372,973.

As of March 23, 2012, 12,980,563 shares of the registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

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INDEX

		Page
PART I –		X
ITEM 1.	BUSINESS	X
ITEM 1 A.	RISK FACTORS	X
ITEM 1B.	UNRESOLVED STAFF COMMENTS	X
ITEM 2.	PROPERTIES	X
ITEM 3.	LEGAL PROCEEDINGS	X
ITEM 4.	MINE SAFETY DISCLOSURES	X
PART II –		X
ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	X
ITEM 6.	SELECTED FINANCIAL DATA	X
ITEM 7.	MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	X
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	X
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	X
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	X
ITEM 9A.	CONTROLS AND PROCEDURES	X
ITEM 9B.	OTHER INFORMATION	X

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PART III -		X
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	X
ITEM 11.	EXECUTIVE COMPENSATION	X
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	X
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	X
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	X
PART IV -		X
ITEM 15.	INDEX TO EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	X
	SIGNATURES	X
	INDEX TO FINANCIAL STATEMENTS	X
	REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	X
	FINANCIAL STATEMENTS	X
	NOTES TO FINANCIAL STATEMENTS	X
	INDEX TO EXHIBITS FILED HEREWITH	X

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PART I

Preliminary Note Regarding Forward-Looking Statements

This report contains statements about future expectations, activities and events that constitute forward-looking statements. Forward-looking statements are based on our beliefs, assumptions and expectations of our future financial and operating performance and growth plans, taking into account the information currently available to us. Any statements that are not statements of historical fact are forward-looking statements.  Words such as “believe,” “may,” “should,” “anticipate,” “estimate,” “expect,”, “intend,” , “likely,” “objective,” “seek,” “plan,” “strive” or similar words, or the negatives of these words, identify forward-looking statements.

Forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the expectations of future results we express or imply in any forward-looking statements. In addition to the other factors discussed in the “Risk Factors” section of this report, factors that could contribute to those differences include, but are not limited to:

¤ Our ability to fund development of our products and operations from third party financing and cash flow from operations.

¤ A highly competitive environment. New product introductions by our current or future competitors could adversely affect our ability to compete in the global market.

¤ The ability of our competitors with greater financial resources to develop and introduce products and services that enables them to compete more successfully than us.

¤ The continued service of key management personnel.

¤ Our ability to attract, motivate and retain qualified employees.

¤ Changes in government laws and regulations affecting the medical device industry, sales practices, price controls, licensing and regulatory approval of new products, or changes in enforcement practices with respect to any such laws and regulations.

¤ Difficulties inherent in product development, including the potential inability to successfully continue technological innovation, complete clinical trials, obtain regulatory approvals in the United States and abroad, or gain and maintain market approval of products, as well as the possibility of encountering infringement claims by competitors with respect to patent or other intellectual property rights, all of which can preclude or delay commercialization of a product.

¤ Potential litigation or other proceedings, including product liability and patent infringement claims adverse to us.

¤ The effects, if any, of adverse media exposure or other publicity regarding our business, products or operations.

¤ Product efficacy or safety concerns resulting in product recalls, regulatory action on the part of the FDA (or foreign counterparts) or declining sales.

¤ Our ability to maintain favorable supplier arrangements and relationships with manufacturers and distributors of our products.

Forward-looking statements are not guarantees of performance or results. A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe we have chosen these assumptions or bases in good faith and that they are reasonable. We caution you, however, that assumptions or bases almost always vary from actual results, and the differences between assumptions or bases and actual results can be material. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this report. These statements speak only as of the date of this report (or an earlier date to the extent applicable). We do not intend to update these statements unless applicable laws require us to do so.

References in this Report to “us,” “we,” “our,” and similar terms refers to MedPro Safety Products, Inc.

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Item 1.    Business.

Overview

MedPro Safety Products, Inc. has developed and acquired a portfolio of medical device safety products incorporating proprietary needlestick prevention technologies that deploy with minimal or no user activation. In addition to needlestick prevention, the technologies acquired and developed internally create a safer environment for drug delivery that is time saving and reduces the chance of a medication error in administration to the patient. Our objective for each of our products is to enter into a strategic agreement with one or more major pharmaceutical companies or medical product distributor, manufacturer, or supplier. We plan to continue to outsource the production of many of our products to established medical safety device manufacturers while we pursue a strategy of either developing or acquiring our own manufacturing capabilities.

Our offices are located at 145 Rose Street, Lexington, KY 40507 and our telephone number is (859)225-5375. Our website is http://www.medprosafety.com.

History

Our company was originally incorporated in Kentucky in 1995 and changed its domicile to Delaware in 1999. On December 28, 2007, as a condition to a financing in which we sold securities to institutional investors for $13 million, we became a public reporting company through a reverse merger with a public shell company incorporated in Nevada. The combined company, a Nevada corporation, changed its name to "MedPro Safety Products, Inc." The combined company continues our historical business, which is developing and marketing medical safety devices incorporating proprietary needlestick prevention technology and more efficient drug delivery, as described in this section.

In the December 28, 2007 financing, Vision Opportunity Master Fund, Ltd. (“VOMF”), a Cayman Island investment fund, and three other accredited investors purchased $13 million of newly issued shares of Series A Convertible Preferred Stock (“Series A Stock”) and warrants to purchase our common stock. We received approximately $11.6 million in net offering proceeds from the sale of these securities.

In 2008, we received $13,025,000 in cash for our issuance of 1,493,779 shares of newly designated Series B Convertible Preferred Stock ("Series B Stock") when VOMF and its affiliate Vision Capital Advantage Fund, LP ("VCAF", to whom VOMF transferred a portion of its holdings) exercised warrants. In 2009, VOMF and VCAF exercised warrants for $3,000,000 in cash and exchanged all of their remaining warrants for 1,571,523 shares of newly designated Series C Convertible Preferred Stock ("Series C Stock").

In July 2010, we entered into a new distribution agreement for three blood collection products. The agreement provides that we will receive quarterly royalties, with minimum quarterly royalty payments due based on minimum volume production levels over the six-year term of the agreement. The automated assembly line has been assembled, validated and has produced product for shipment to customers. We have received quarterly royalty payments beginning with the fourth quarter of 2010.

On September 1 and October 1, 2010, we issued Senior Secured 14% Notes due 2016 (the “Notes”) in the aggregate principal amount of $30 million in private placements to institutional investors. In connection with the Note issuance, we transferred the rights to receive all royalties under our distribution agreement to a new wholly owned subsidiary that is the issuer of the Notes. All of the royalties payable under our distribution agreement have been committed to pay the principal and interest due on the Notes. We received approximately $23,294,000 in net proceeds after establishing a $4,500,000 interest reserve and paying offering expenses. We used the net proceeds from the sale of the Notes to pay off all of our debt owed to banks and to VOMF on bridge loans, all of which together totaled $4,360,000. Since September 2010, we have been using the remaining net proceeds principally to finance the development of other safety products in our portfolio.

Needlestick Safety and Prevention

One of the most potentially deadly risks to health care workers is the transfer of blood-borne pathogens such as hepatitis and human immunodeficiency virus (HIV) because of accidental needlesticks. A needlestick injury occurs when a sharp that has been in contact with a patient's bodily fluid subsequently is introduced into a healthcare worker's blood or mucous system. The transfer of bloodborne pathogens through a needlestick injury is potentially one of the most deadly risks to healthcare workers. Common pathogens contracted include hepatitis B, hepatitis C, and HIV. In a 2008 study by the American Nurses Association (ANA), 47% of the 706 nurses surveyed reported being accidentally injured by a contaminated needle.

The majority of needlestick injuries have occurred during routine activities that are performed in the healthcare

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industry. These injuries occur while administering injections, drawing blood, needle disposal, and handling trash and dirty linens. Anyone who comes in contact with a non-sterile, unprotected needle can suffer a needlestick injury. In fact, disposable syringes cause more needlestick injuries than any other type of device.

Although nurses sustain the highest rate of needlestick injuries, all healthcare workers-from physicians to cleaning staff as well as other individuals-are at risk for harm. Consequently, fear of contracting a bloodborne disease from a needlestick injury is one of the greatest workplace concerns for healthcare employees. Other concerns include potential anxiety about disease exposure, the social stigma associated with contracting an infectious pathogen, lost work productivity, and litigation expenses. In addition to the risks faced by healthcare workers, a needlestick injury can also be a costly event for the organizations and businesses that employ healthcare workers. According to the U.S. Centers for Disease Control and Prevention (CDC), direct costs for initial testing and follow-up treatment of a needlestick injury, even if an infection does not occur, can range from $500 to $3,000 or more per injury.

There are 385,000 needlestick injuries per year among U.S. hospitals (Source: CDC, 2004; Panlilio A, et al. “Estimate of the annual number of percutaneous injuries among hospital-based healthcare workers in the United Sattes, 1997-1998.” Inject Control Hosp Epidemiol, 2004, 25(7), pp 556-562). Worldwide, roughly one million needlestick injuries occur annually, according to the European Agency of Occupational Safety and Health (Source: The Royal College of Nursing's Needlestick Injuries: The Point of Prevention, January 2009). Notably, according to the ANA, roughly half of all sharps injuries go unreported by employees.

To help protect healthcare workers from needlestick injuries, many healthcare markets worldwide are transitioning to the mandatory use of safety syringes. In 2000, with the passage of the Federal Needlestick Safety and Prevention Act, the U.S. became the first country to adopt and actively enforce legislation requiring healthcare facilities to use safety syringes. In the European Union, a directive has been adopted that requires all members to take specific preventative measures by May 11th, 2013 that are necessary to protect healthcare workers from injuries caused by needlesticks. Likewise, Canadian and Australian healthcare markets are also working toward the mandatory protection of healthcare workers from needlestick injuries. In countries such as the U.S., where the use of safety syringes is mandated, healthcare facilities are required to conduct annual evaluations of new sharps safety products to assess which devices provide the safest working environment.

Safer Injection Practices

The most common method of drug delivery is through oral administration of a medicine, followed by injection of a drug into the patient. MedPro's drug delivery technology focuses on the injectable market segment. The most common form of container used to hold the injectable is a drug vial, and a hypodermic syringe is used to draw up the medicine from the vial and inject into the patient.

This method of drug delivery poses risks to the patient receiving the medication. The required number of steps of drawing the medicine up into a needle and delivering the medicine increases the risk of contamination that could cause additional harm to the patient. Likewise, this method does not insure that each patient would receive a new, sterile needle, as the same hypodermic could be used for multiple patients. When multi-dose vials are used, if not properly cleaned, cross-contamination between the patient population could also occur.

In response to this, the healthcare industry has seen a large effort to put more injectable products in a prefilled drug container that would be used for a single patient. The Centers for Disease Control created a “One and Only Campaign” (www.oneandonlycampaign.org) to better educate the healthcare workforce on the dangers of multi-use devices. The CDC has stated:

“Whenever possible, use of single-dose vials is preferred over multiple-dose vials, especially when medications will be administered to multiple patients. Outbreaks related to unsafe injection practices indicate that some healthcare personnel are unaware of, do not understand, or do not adhere to basic principles of infection control and aseptic technique. A survey of U.S. healthcare workers who provide medication through injection found that 1% to 3% reused the same needle and/or syringe on multiple patients. Among the deficiencies identified in recent outbreaks were a lack of oversight of personnel and failure to follow up on reported breaches in infection control practices in ambulatory settings.”

The prefilled syringe offers benefits over a standard vial by eliminating the risks stated above. Prefilled syringes are filled with the injectable medicine by the pharmaceutical company and delivered to the point of use. When the patient needs to receive the medication, the nurse can deliver the medicine directly to the patient without having to draw up medicine from a vial with a standard hypodermic. By using the primary container (prefilled syringe) as part of the delivery system, the risks to the patient for contamination or being stuck with a used needle drastically decrease.

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Besides the benefits of contamination reduction and single needle use, prefilled syringes for fixed dose administration also eliminate the opportunity for a healthcare worker to draw up the incorrect amount of medicine, a common medication error. A fixed dose, delivered in a prefilled syringe, can be delivered to the patient without relying on additional process steps to deliver the correct amount of medicine.

Market for Needlestick Prevention and Safer Injection Practices

According to Greystone Associates ('Pre-filled Syringes February 2008'), there were a total of 19.3 billion injections worldwide in 2006. Of these 27% were from safety syringes, 56% from the traditional syringe, 14% are from pen injectors (the predominant insulin delivery system in most of the world), and 3% from other devices. The injectable drug market represents an increasingly significant percentage of the pharmaceutical market, valued in excess of $100 billion annually. It is one of the fastest-growing sectors of the market, which pharmaceutical companies expect to generate an increasingly larger percentage of revenues over the coming decade. Traditionally, injectable drugs are supplied in vials that are administered via an IV or a standard syringe and hypodermic needle. There has been a strong trend over the past two decades towards the use of pre-filled syringes as a drug delivery device for therapeutic drugs and vaccines.

The US market for needle-based medical devices has been undergoing a widespread transition to safety syringes over the past two decades. Currently 87% of the acute care market for hypodermic syringes, 92% of specimen collection sets, and 94% of IV catheters include a safety feature. In the alternate care market, safety syringes account for two-thirds of the syringe market with even higher penetration rates among the other devices.

Several factors have driven increased usage of safety syringes in the U.S. The transmission of blood-borne diseases such as HIV-AIDS and Hepatitis C to healthcare workers precipitated federal regulation that spurred the development of more effective needlestick prevention technology. Center for Disease Control (“CDC”) guidelines led to Occupational Safety and Health Administration (“OSHA”) regulations during the 1990's. The Federal Needlestick Safety and Prevention Act (of 2001) further modified the OSHA blood-borne pathogen (“BBP”) standards. The BBP standard required that occupational exposure control plans identify, evaluate and make use of needle devices with built-in safety features and/or needleless systems for withdrawing body fluids, accessing a vein or artery and administering medications. Prior needle-based devices at the time often included no safety feature or required active safety activation by the healthcare worker. Together with the American Nursing Association (ANA) and other organizations, MedPro lobbied for the introduction of the legislation which also required healthcare providers to engage front line healthcare workers in the device evaluation process in order to better protect nurses from harm. OSHA is now enforcing these standards with random inspections and the threat of fines for non-compliance.

Although there has been widespread adoption of safety products, the technologies utilized have not significantly eliminated sharp object injuries to healthcare workers. The International Healthcare Worker Safety Center at the University of Virginia has collected data on occupational exposures to blood borne pathogens from a cumulative total of 84 hospitals in the U.S. since September 1992. Exposure data from these healthcare facilities was collected on an annual basis, merged into an aggregate database, and analyzed using Exposure Prevention Information Network (“EPINet™”) reporting software. Although participating hospitals vary in size, geographic location, and teaching status, the exposure patterns are similar, suggesting a high degree of standardization among medical devices and procedures. The number of injuries attributable to a specific type of device and the aggregate census of the reporting facilities is published annually. The 2007 EPINet data shows 289 needlestick injuries from disposable syringes in survey hospitals totaling a census of 3,400 (30+% of the incidents). Grossing up the reported incident rates for the national census of about 700,000 (a 60-80% occupancy rate on 1MM licensed beds) equates to 51,000 to 68,000 injuries from syringe use in hospitals. At an average cost of $3,000, that equates to $153 to $204 million of post-exposure testing and treatment expense, not to mention the personal and emotional ramifications. Markets and Markets, Global Injectable Drug Delivery Market (2010-2015) estimates there are between 600,000 and 1,000,000 needlestick injuries reported in the U.S. every year.

For drug delivery and blood collection, the needlestick injury can occur at various points during the procedure. A 2006 study from EPINET data categorized the point of use from reported sharps injuries as follows:

Point of Use	Percentage
During use of item	43	%
Between steps of a multi-step procedure	15	%
After use, before disposal	11	%
While putting into the disposal container	5	%
Other	26	%

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Safer injection practices are largely driven by the drug delivery device that is being used to deliver the injectable medicine to the patient. When these devices contain innovative safety solutions for needlestick protection, they decrease the risk of a contaminated needlestick for the healthcare worker. Likewise, innovative prefilled drug containers can also increase the level of safety for the patient receiving the injection. The growing use of prefilled syringes is largely due to the increase in safety benefits it brings to the patient, along with the time savings component for the healthcare worker.

Due to the benefits of the prefilled syringe for the patient, the prefilled syringe global market is expected to reach $4.8 billion by 2015 (Source: Markets and Markets, Global Injectable Drug Delivery 2010). The U.S. Market will be the fastest growing segment, expected to reach $2.2 billion by 2015, at a Combined Annual Growth Rate of 18.3%. The European market for prefilled syringes is more matured as compared to the US market and was worth $1 billion in 2009. This market is expected to reach $1.7 billion in 2015 at a compound annual growth rate of 9.2%. Of the 250 drugs currently under development by pharmaceutical companies, 70% are expected be injectable, making them prospects for a pre-filled delivery device. In addition, development of vaccines, which are well suited for pre-filled delivery, is forecast to grow over the next decade.

Demand for needlestick protection and prefilled drug delivery are expected to show rapid growth over the next decade, with continued emphasis on both healthcare worker and patient safety requirements. MedPro is positioning its product portfolio to take advantage of these market trends.

Targeted Markets

MedPro has assembled a broad portfolio of medical safety devices based on its passive safety technology. Our plan over the next two to three years is to commercialize our drug delivery platform and continue to support our blood collection safety products that are licensed to a multi-national manufacturer and distributor of medical devices. We estimate the targeted market for our products to have annual revenue potential of $15.8 billion by 2015.

Global Injectable Drug Delivery Devices Market, By Products, 2008 - 2015 ($Million)
Product	2008	2009	2010	2015	CAGR% (2010-2015)
Conventional Injection Devices	6,197	6,631	7,101	9,757	6.6
Prefilled syringes	2,028	2,270	2,550	4,806	13.5
Self-injection devices	501	570	648	1,276	14.5
Others	22	24	25	36	7.6
Total	8,748	9,495	10,324	15,875	9.0

Source: Markets and Markets Global Injectable Drug Delivery Market (2010-2015)

MedPro's drug delivery platform focuses on the two major types of devices in the injectable market - conventional injection and prefilled syringe.

MedPro Products

We have one product that is commercially available and several products under development for the blood collection, conventional injection and prefilled syringe categories. We anticipate launching the development products during the next 24 months.

Blood Collection Safety Needle

Our Vacuette® Premium Safety Needle System is a blood collection device that is formatted in two separate models: tube-activated and skin-activated. The distinction relates to the method in which the safety system, a sleeve that covers the needle after the completion of blood collection, is engaged. The operator cannot draw blood without having engaged the safety system. The tube-activated model has received FDA clearance to market (510K) and CE Marking for EU sales. The skin-activated product is being developed with our licensed partner.

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The safety system on the “tube-activated” model will engage when the first blood collection tube is fully inserted into the device and blood collection activity initiates. The “skin activated” system will engage as soon as the needle is inserted into the patient and the sleeve has interacted with the patient. Our skin-activated model is considered “fully passive,” and we are not aware of any other comparable fully passive blood collection device on the market. We have granted worldwide exclusive rights to both models of the product under our agreement with a multi-national manufacturer and distributor of medical devices.

Winged Safety Blood Collection Set

Our Vacuette® Premium Winged Safety Blood Collection Set is used for blood collection in the healthcare setting where patient comfort and ease of venous access are paramount. It is a single use, sterile device designed with a fully passive safety system that engages upon completion of access when the user grips the wings and pushes them up. When the wings close to approximately 20 degrees, the safety guard automatically releases over the needle. The user then removes the device from the patient's skin with the needle fully covered by the guard. The guard secures itself over the needle into a fully extended and locked position covering the needle, preventing the wings from reopening, and preventing any exposure of the contaminated sharp to the user. The user then discards the device without ever having actively deployed the guard or touched the needle. We received FDA 510(k) clearance for the winged blood collection set during the fourth quarter of 2010. Like our blood collection safety needle technology, this product has been licensed to the same multi-national manufacturer and distributor of medical devices.

Hypodermic Safety Syringe

The safety syringe product is designed to offer the highest level of safety in the conventional injectable marketplace. The patented technology is similar to other MedPro technology by having an inner safety shield that deploys automatically during the injection of medicine. This allows the user to be protected without having to activate any additional safety features. The product line also includes anti-blunting technology that could be used by the medical device industry to protect the injection needle from damage upon insertion into a vial. The syringe can be offered with multiple needle gauges and lengths for different types of injections, sub-cutaneous or intramuscular.

Prefilled Safety Syringe

Our line of safety syringes includes a model that can accept prefilled cartridges commonly used today as a primary container of injectable medicine. The system is designed to utilize the standard cartridge as the activation mechanism of the safety feature, whereas a safety shield deploys automatically to cover the needle during the injection of the medicine. The primary container, in this case a standard cartridge, is a major risk factor for pharmaceutical companies. Today, many prefilled syringes with needlestick protection features introduce new risks for the pharmaceutical company by incorporating the primary drug container with the safety needle. These risks include tungsten interaction of the drug with staked needle syringes, possible capital expenditure and additional cost of secondary packaging, and the requirement of the user to use a certain needle gauge and length with a certain type of medicine.

The MedPro Prefilled Safety syringe separates the primary container, the standard cartridge, from the safety system. This allows a pharmaceutical company to focus its efforts on value added work (injectable medicine and primary container stability) that can then be combined with an innovative safety solution. Inserting the cartridge into the syringe component activates the safety mechanism before completion of the injection, which renders the product safe. We are not aware of any product on the market today in the prefilled drug injection space that offers the same level of protection for the healthcare worker from a needlestick. The current market offering has safety features that activate at the completion of the injection, and often times it requires additional force by the operator to accomplish the act of safety activation.

IV Shuttle Device2010 2015

During 2011, the Company developed an IV drug delivery device which operates using a luer lock access to an IV system. The IV Shuttle device was designed to work with the same standard cartridge that pairs with the prefilled safety syringe. This allows the pharmaceutical company to increase the number of drugs that would be available for the platform, by offering IV access to compliment the safety skin injection. Being a non-sharp device for IV Delivery, the IV Shuttle uses an internal cannula to penetrate the cartridge and deliver the medicine to the patient. The system is designed to allow the pharmaceutical company to use a glass cartridge, the most widely accepted container choice for decades, while also offering the healthcare worker a luer tip made of plastic. Today there are issues with glass luer syringes that the IV Shuttle device eliminates by offering the luer in plastic. These issues include glass tolerancing that is higher and does not allow for a reliable fit at all times to the IV connection, as well as the risk of breakage of the IV connection within the IV line.

Ready To Fill Cartridge

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To address the needs of certain pharmaceutical customers, MedPro has designed a ready to fill cartridge to work with the drug delivery platform. Cartridges today are commonly filled with standard cartridge filling equipment. With the growing use of prefilled syringes, many pharmaceutical companies have purchased prefilled syringe lines that allow them to place the injectable product in the prefilled syringe line in an automated system. To meet the needs of those systems, MedPro has designed a ready-to-fill cartridge that will work with prefilled syringe lines being used today. This would give the pharmaceutical company multiple filling options for the primary container. The ready-to-fill cartridge and standardized cartridge will work with the drug delivery platform for skin injection and IV shuttle delivery systems.

Insulin Guard

In 2011 a patent was issued for the Insulin Guard. The product consists of a detachable safety needle that is made to work with autoinjectors. Typically, a non safety needle is used with a pen system that is self-administered, which creates a hazard after use for the patient, family members around the device, and downstream waste management activities. By using a safety needle on the injector, it virtually eliminates that someone could come into contact with the needle after it has been used.

The MedPro Insulin Guard is fully passive. Once the cap is removed, the user can see the needle for injection. During the act of injection, upon contact with the skin, the safety guard deploys and covers the needle upon removal from the skin. It is then locked in place and needle contact is eliminated.

Contracts

In July 2010 we entered into a new agreement for the manufacture and distribution of our three blood collection products. Our customer is Greiner Bio-One, an international manufacturer and distributor of medical products with locations in Austria, Germany, Hungary, United States and Brazil and a worldwide distribution network. The July 2010 agreement provides for per unit royalty payments for a designated minimum number of units each quarter commencing October 1, 2010, totaling 350 million units during the six-year term of the agreement. The agreement contemplates that the production and sale of our three blood collection products, and therefore the amount of revenue we receive, will increase over the next several fiscal quarters. The total value of royalty payments based on minimum production volumes over the six-year term of the July 2010 agreement totals $43.75 million. We also agreed to make a marketing contribution totaling approximately $6.65 million over the six-year term of the agreement. The July 2010 agreement was described in the Company's Form 8-K filed July 22, 2010.

Our customer has completed the automation lines for two of three of our products at one of its manufacturing plant in Austria. As the owner of the intellectual property underlying the technology, we retain responsibility for certain ongoing product design and enhancements to be performed at our expense. We are in the process of transferring responsibility for future FDA and MDD compliance and continuous product enhancement and improvement to our customer.

We have established a semi-automated assembly line at a contract manufacturer's location in Pennsylvania for the Wing blood collection set. We have manufactured a sufficient number of evaluation samples for human use to get final consumer feedback on the product. We are now working with our customer to finalize the design for high volume manufacturing and commercialization.

Product Development

Since the passage of the 2001 Needlestick Safety and Prevention Act, we have focused on developing safety solutions employing inherent passive safety needles or needleless replacements that require minimal or no user activation of the safety mechanism. Our approach to research and development has been to identify and acquire leading edge technology with a view to developing medical device safety products with significant commercial potential. Prior to 2011 we had obtained all of our proprietary intellectual property, research and development through either acquisitions or technology agreements with third party inventors.

In 2011, we designed, developed and manufactured a new IV Shuttle device that will utilize a lure lock connector to couple with an IV access line. The IV Shuttle will utilize the same cartridges that we are developing for our prefilled safety syringe. The Shuttle device has no exposed sharp or cannula and no moving parts. We engaged a consulting engineering firm to assist with the project. Through the end of 2011, we had incurred research, development and related costs of approximately $488,500 in connection with the Shuttle device.

We have engaged a US firm to create small cavitational molds for the prefilled safety syringe and our newly developed IV Shuttle device. We will continue to solicit participation in the development and distribution of the prefilled syringe device and the related fillable safety syringes within our drug delivery platform. We have had discussions with several manufacturers, suppliers and distributors about partnering with MedPro on the development and high volume manufacturing of these devices.

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We have ordered initial design and sourcing of molds and equipment for a semi-automated assembly and high volume assembly to make both the prefilled safety syringe and our newly developed IV Shuttle device.

We may also engage directly in research and product development activities in the future. Our winged intravenous valve is based on an internally developed design. We have no present plans to build an internal research and development function, and our future in-house capabilities will likely depend upon opportunities to add product development personnel through acquisitions or otherwise.

Intellectual Property and Licenses

We own or hold rights to acquire intellectual property, including patents, patent applications, technology, trade secrets, know-how, copyrights and trademarks in the United States and other countries. MedPro's patent portfolio includes six issued U.S. patents directed to the three products subject to its agreement with a multi-national manufacturer and distributor of medical devices. These products are also subject to two issued European patents, which have been validated in Germany, France, and Great Britain, issued patents in Canada, Japan and Korea, and pending applications in Europe, Brazil and Hong Kong. With respect to products currently under development, MedPro's patent portfolio also includes two issued U.S. patents, 18 pending U.S. non-provisional patent applications, an issued patent in Canada and pending applications in China, Canada, Japan, Europe, and Hong Kong.

In the aggregate, our intellectual property assets are of material importance to our business. However, we believe that no single patent, technology, trademark, or intellectual property asset is material in relation to our business as a whole.

The following narrative describes each family of patents or rights to acquire patents we currently hold, as well as those products for which we have filed a non-provisional patent application.

Safety System for a Blood Collection Device:

MedPro's patent portfolio includes two issued U.S. patent directed to a safety system for a blood collection device. The safety system for a blood collection device family also includes an issued European patent, which has been validated in Austria, Germany, France, Great Britain, and a European divisional application. The family also includes issued patents in Japan and China.

Winged Safety Needle System:

MedPro's patent portfolio includes two issued U.S. patents directed to a butterfly system having a passive guard. The family also includes issued patents in Canada, Japan, and Korea, and pending applications in Europe, Brazil, and Hong Kong.

Protective Device for Injection Needle:

MedPro's patent portfolio includes one issued U.S. patent directed to a protective device for an injection needle. The family also includes an issued European patent that has been validated in France, Germany, and Great Britain, and issued patents in Canada and Japan.

Automatic Non-Reusable Needle Guard:

MedPro's patent portfolio includes one issued U.S. patent directed to an automatic non-reusable needle guard.

Pre-Filled Safety System:

MedPro's patent portfolio includes eight pending U.S. non-provisional patent applications directed to the pre-filled safety system, where one of the pending patent applications has recently received a notice of allowance. The pre-filled safety system family also includes an issued patent in Canada and pending applications in Europe and Japan.

Automatic Needle Guard for an Insulation Pen:

MedPro's patent portfolio includes one issued U.S. patent and one U.S. pending non-provisional patent application directed to an automatic needle guard for an insulation pen.

Fillable Injection Syringe:

MedPro's patent portfolio includes two issued U.S patents and one pending U.S. non-provisional patent application directed to a fillable injection syringe. The fillable injection syringe family also includes pending applications in China,

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Canada, Japan, Europe, and Hong Kong.

IV Shuttle and Delivery System:

MedPro has six provisional patent applications directed to an IV shuttle and delivery system.

Filling Systems and Methods:

MedPro's patent portfolio includes two U.S. provisional applications directed to pre-filled cartridge filling systems and methods.

Competition

We operate in the increasingly complex and challenging medical device marketplace. Technological advances, federal regulations in the United States and some foreign markets, and scientific discoveries have accelerated the pace of change in medical technology, and the regulation of increasingly more sophisticated and complex medical products is increasing. Companies of varying sizes compete in the global medical technology field. Some are more specialized than us with respect to particular markets, and some have greater financial resources than us. New companies have entered the field; particularly in the areas of safety-engineered devices and in life sciences, and established companies have diversified their business activities into the medical technology area. Other firms engaged in the distribution of medical technology products have become manufacturers of medical devices and instruments as well. Acquisitions and collaborations by and among other companies seeking a competitive advantage also affect the competitive environment.

Becton Dickinson and Covidien are the leaders the hypodermic safety syringe market, collectively representing approximately 80% of sales. In the pre-filled syringe market, Becton Dickinson is the market leader with an estimated $500 million in sales worldwide and 1 billion in units in 2004. With pharmaceutical companies now seeking to specialize in the commercialization of drugs, it is expected that contract manufacturers will be increasingly engaged to develop and fill these pre-filled syringes. Currently, major pharmaceutical companies such as Sanofi-Aventis operate their own filling lines. Small to medium sized pharmaceutical companies typically enter into contracts with contract pharmaceutical fillers such as Baxter Healthcare or Hospira that have extensive contract manufacturing facilities across the U.S. and Europe. The trend toward combining functionality and packaging in drug delivery systems will continue as new therapeutic substances are introduced at an increasingly rapid rate.

A company's ability to compete in the medical device market depends on many factors, including price, quality, innovation, service, reputation, distribution, and promotion. To increase revenue growth by focusing on products that deliver greater benefits to patients and medical professionals, and to maintain an advantage in the competitive environment in which we operate, we must continue to invest in research and development, quality management, quality improvement, product innovation and productivity improvement. We will compete against companies with substantially more financial resources to invest for these purposes.

Suppliers

MedPro has received a Certificate of Registration from BSI Management Systems to ISO 13485:2003. The scope of the certificate is the design and manufacture of single use, sterilized and non-sterile blood collection and fluid delivery devices, accessories, and fluid channeling devices. This is an expansion from our prior certification, which was limited to to blood collection devices.

We have also obtained CE Marking certification under the European Medical Device Directive 93/42/EEC, which is required to distribute products in Europe.

Our production strategy is to outsource the manufacturing of all our products to reputable medical device manufacturers with well-established reputations in the industry. We require that each of our current and prospective suppliers comply with Good Manufacturing Practice (“GMP”) requirements under the U.S. Food, Drug and Cosmetic Act and be ISO certified or meet equivalent applicable standards. We believe that if the manufacturers with whom we currently contract were no longer able to produce our products for any reason, there are sufficient other manufacturers to allow use to make alternative production arrangements.

We utilize various biomedical contractors to assist us with product development. We have engaged GW Plastics, Inc. to mold various components for our wing device and Precision Medical Products, Inc. to assemble this device. We have also employed Gilero Biomedical to build small cavitational molds to manufacture limited quantities of our prefilled syringe for testing and marketing purposes. We have received delivery of the first production from these new molds and have working

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prototypes of this device. We expect to engage Gilero to do the same for our hypodermic safety syringe.

Government Regulation

FDA and Other Regulators

Medical devices are subject to regulation by the FDA, state agencies and, in varying degrees, by agencies that perform similar regulatory oversight functions in other countries. These regulations, as well as various federal and state laws, govern the manufacturing, labeling, record keeping, clinical testing and marketing of these products. The majority of our medical device product candidates must undergo rigorous testing and an extensive government regulatory approval process prior to sale in the United States and other countries. The lengthy process of seeking required approvals and the continuing need for compliance with applicable laws and regulations require the expenditure of financial resources. Regulatory approval, when and if obtained, may be limited in scope, which may significantly limit the indicated uses for which a product may be marketed. Approved products and their manufacturers are subject to ongoing review, and discovery of previously unknown problems with products may result in restriction on their manufacture, sale or use, or their withdrawal from the market.

Regulation of Medical Devices

All of our current products are medical devices intended for human use and are subject to FDA regulation. Unless an exemption applies, each medical device we market in the United States must have a 510(k) clearance or a Pre -Market Approval (“PMA”) in accordance with the Federal Food, Drug, and Cosmetic Act. The FDA regulations generally:

set standards for medical devices;

require proof of safety and effectiveness prior to marketing;

require safety data and clinical protocol approval prior to evaluation in humans;

establish FDA-mandated current good manufacturing practices, or GMPs; and

permit detailed inspection of manufacturing facilities.

These regulations also require reporting of product defects to the FDA and prohibit export of devices that do not comply with FDA regulations, unless the devices comply with established foreign regulations and the FDA and the health agency of the importing country determine export is not contrary to public health. FDA regulation divides medical devices into three classes. Class I devices are subject to general controls to preclude mislabeling or adulteration and require compliance with labeling and other general requirements. Class II devices are subject to special controls and must also comply with general controls. Class III devices are subject to the most extensive regulation and in most cases require submission to the FDA of a PMA application that includes information on the safety and effectiveness of the device.

Products marketed in the European Community must comply with the requirements of the European Medical Device Directive (“MDD”) and be CE-marked. The CE Mark is the European equivalent of FDA approval to market. Medical device laws and regulations similar to those described above are also in effect in some of the other countries to which we intend to export our products. These range from comprehensive device approval requirements for some or all of our medical device products to requests for product data or certifications. Failure to comply with these domestic and international regulatory standards and requirements could affect our ability to market and sell our products in these markets.

Other Regulations

We are subject to various federal and state laws pertaining to health care fraud and abuse, including anti-kickback laws and false claims laws. Anti-kickback laws make it illegal to solicit, offer, receive or pay any remuneration in exchange for, or to induce, the referral of business, including the purchase or prescription of a particular product. The United States has published regulations that identify “safe harbors” or exemptions for certain payment arrangements that do not violate the anti-kickback statutes. We seek to comply with the safe harbors where possible. Due to the breadth of the statutory provisions and the absence of guidance in the form of regulations or court decisions addressing some of our practices, it is possible that our practices might be challenged under anti-kickback or similar laws. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented for payment to third party payers (including Medicare and Medicaid) claims for reimbursed products or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. Our activities relating to the sale and marketing of our products may be subject to scrutiny under these laws. Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including fines and civil monetary penalties, as well as the possibility of exclusion from federal health care programs (including Medicare and

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Medicaid).

Our business has been and will continue to be subject to various other laws and regulations.

Dependence on One or a Few Major Customers

We currently do not depend on any individual source of raw materials or suppliers.

The royalties we receive under our agreement with Greiner Bio-One currently are our principal source of revenue.

Employees

As of February 28, 2011, we had fifteen full time employees. None of our employees are subject to a collective bargaining agreement.

Reports to Security Holders

We file reports with the Securities and Exchange Commission, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current event reports on Form 8-K and proxy statements, as well as any amendments to those reports. Our reports are available on the SEC's internet site at http://www.sec.gov, which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The public also may read and copy any materials the Registrant files with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. Investors also may access our periodic reports and ownership reports of our directors and executive officers on our website www.medprosafety.com. Shareholders may also request a copy of our SEC reports at no cost by telephoning us at (859) 225-5375 or by writing us at the following address: MedPro Safety Products, Inc., 145 Rose Street, Lexington, KY 40507, Attention: Corporate Secretary.

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Item 1A.                 Risk Factors.

An investment in our common stock involves a number of risks. You should carefully read and consider the following risks as well as the other information contained in this report, including the financial statements and the notes to those financial statements, before making an investment decision. The realization of any of the risks described below could have a material adverse affect on our business, financial condition, results of operations, cash flows and/or future prospects. The trading price of our common stock could decline due to any of these risks, and you could lose part or all of your investment. The order of these risk factors does not reflect their relative importance or likelihood of occurrence.

Risks Relating to Our Business

MedPro has incurred substantial losses since inception.  We may incur net losses in the foreseeable future and may never become profitable.

Since MedPro’s inception in 1995, we have incurred significant losses and negative cash flows from operations. We incurred net losses from operations of $(7,222,221) in 2011 and $(12,894,817) in 2010 .  In 2011 we had a net loss of $(12,032,604). In 2010 we had a net loss of $(15,514,214).  As of December 31, 2011, we had an accumulated deficit of $(84,498,684), which was $(12,032,604) larger than at the end of 2010.  This change reflects the net loss for 2011.

We anticipate incurring additional losses for at least several more fiscal quarters through approximately the last quarter of 2013. We expect to spend significant resources over the next few years to fund the continued development of our pipeline of potential products.  Before 2010 we had derived only limited revenue from the sale of two products, both of which have been discontinued.  In 2010, we began to realize royalty revenue from the first of three blood collection devices being manufactured and distributed by a customer under a six-year agreement.  These revenues are pledged to debt service on our Senior debt through 2016. Our ability to generate revenues and become profitable will depend on our ability to timely, efficiently and successfully develop and commercialize more products. We may not ever become profitable. If we sustain losses over an extended period of time, we may be unable to continue our business.

We will need substantial additional funding to develop our products and for our future operations. If we cannot obtain the funds necessary to do so, we may be required to delay, scale back or eliminate our product development or may be unable to continue our business.

The development of our products will require substantial funds to obtain regulatory approvals and bring our products to market. Net cash used in operations was $10,611,334 in 2011.  Our cash has declined by $2,142,017 during 2011 to $6,173,627 from $8,315,644 at December 31, 2010, despite receiving an additional $7,870,000 that was released from an escrow account in January 2011, after we received FDA clearance on our Wing device. We will need additional cash in periods after 2011.

In the future, we will need financing in addition to our current cash on hand to maintain our present operations. Our future capital requirements will depend on many factors, including:

• the progress and costs of our research and development programs, including our ability to develop our current portfolio of medical safety products, or to identify, acquire and develop new ones;

• the time and cost involved in obtaining regulatory approvals;

• the cost of manufacturing our products;

• competing technological and market developments;

• our ability to establish and maintain arrangements with third parties to assist in bringing our products to market and the cost of such arrangements;

• costs associated with the integration of any new operation, including costs relating to future mergers and acquisitions with companies that have complementary capabilities;

• expenses related to the establishment of sales and marketing capabilities;

• the level of our sales and marketing expenses; and

• our ability to introduce and sell new products.

We anticipate we will need to raise additional funds to support our current operations and future expansion and growth plans, and we may need additional capital sooner than currently anticipated. Our funding requirements may change as a result of many factors, including underestimates of budget items, unanticipated cash requirements, delays in bringing our products to market, future product and service opportunities, and future business combinations.

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We cannot be certain that additional financing will be available on acceptable terms, or at all. To the extent we raise additional capital through the sale of equity securities; the ownership position of our existing stockholders could be substantially diluted. If additional funds are raised through the issuance of preferred stock or debt securities, these securities are likely to have rights, preferences and privileges senior to our common stock. Fluctuating interest rates could also increase the costs of any debt financing we may obtain. To the extent we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our products, or grant licenses on unfavorable terms.

Failure to successfully address liquidity requirements will have a material adverse effect on our business. If we are unable to obtain additional capital on acceptable terms when needed, we may be required to take actions that harm our business and our ability to achieve cash flow in the future, including possibly the surrender of our rights to some technologies or product opportunities, delaying our clinical trials or curtailing or ceasing operations.

The indenture governing our Notes issued in September and October of 2010 restricts the amount of additional debt we can incur during the term of the Notes to $7,500,000 of senior debt and $15,000,000 of unsecured debt.  This may limit our ability to fund capital equipment and development costs without issuing additional equity securities.  Issuing equity securities may not be feasible or accepted by the investing public.

Our future growth depends upon our ability to develop new products.

A significant element of our strategy is to increase revenue by focusing on products that deliver greater benefits to patients, healthcare workers and researchers. The development of these products requires significant research and development, significant financial resources, clinical trials and regulatory approvals. The results of our product development efforts may be affected by a number of factors, including our ability to innovate, develop, acquire and manufacture new products, complete clinical trials, obtain regulatory approvals and reimbursement in the United States and abroad, or gain and maintain market approval of our products. In addition, patents obtained by others could preclude or delay our commercialization of a product. None of our products now in development or that we may seek to develop in the future may achieve technological feasibility, obtain regulatory approval, or gain market acceptance.

Even if we receive regulatory approval for our products, those products may never be commercially successful.

Even if we develop medical safety products that obtain the necessary regulatory approval, and we have access to the necessary manufacturing, sales, marketing and distribution capabilities that we need, our success depends to a significant degree upon the commercial success of those products. If our products fail to achieve or subsequently maintain market acceptance or commercial viability, our business would be significantly harmed because our future royalty revenue or other revenue would depend upon sales of these products. Many factors may affect the market acceptance and commercial success of our products, including:

• the timing of market entry as compared to competitive products;

• the rate of adoption of new medical safety products by hospital, clinics and medical practitioners;

• convenience and ease of administration;

• pricing;

• marketing;

• availability of alternative products; and

• activities by our competitors.

We will rely on third parties to manufacture our medical safety products.

Our business strategy relies on third parties to manufacture and produce our medical safety devices in accordance with good manufacturing practices established by the FDA, or similar regulations in other countries. Our products may compete with other products or companies for access to these facilities and may be subject to delays in manufacture if third parties give other products greater priority than our products. These third parties may not deliver sufficient quantities of our products, manufacture our products in accordance with specifications, or comply with applicable government regulations. In addition, if the manufactured products fail to perform as specified, our business and reputation could be significantly harmed.

The manufacturers on whom we will depend may not be able to successfully produce our products on acceptable terms, or on a timely or cost-effective basis. They may not be able to manufacture our products in accordance with our product specifications or will meet FDA or other requirements. We must have sufficient and acceptable quantities of our products to conduct our clinical trials and to market, if and when the products have been approved by the FDA for marketing.  If we are unable to obtain sufficient and acceptable quantities of our products, we may be required to delay the marketing and

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distribution of our products, which would further delay our receipt of revenue.  If our contract manufacturers are not satisfying our needs, it could be difficult and very expensive to change suppliers or to establish our own manufacturing capabilities. Any change in the location of manufacturing would require FDA inspection and approval, which could interrupt the supply of products and may be time-consuming and expensive to obtain. If we are unable to identify alternative contract manufacturers that are qualified to produce our products, we may have to temporarily suspend the production of products, and would be unable to generate revenue from the sale of products.

If we do not comply with applicable regulatory requirements in the manufacture and distribution of our products, we may incur penalties that may inhibit our ability to commercialize our products and adversely affect our revenue.

Our failure or the failure of our potential third party manufacturers to comply with applicable FDA or other regulatory requirements including manufacturing, quality control, labeling, safety surveillance, promoting and reporting may result in criminal prosecution, civil penalties, recall or seizure of our products, total or partial suspension of production or an injunction, as well as other regulatory action against us.  Discovery of previously unknown problems with a product, supplier, manufacturer or facility may result in restrictions on the sale of our products, including a withdrawal of such products from the market. The occurrence of any of these events would negatively impact our business, results of operations and financial condition.

Product defects could adversely affect the results of our operations.

The design, manufacture and marketing of medical devices involve certain inherent risks.  Manufacturing or design defects, unanticipated use of our products, or inadequate disclosure of risks relating to the use of the product can lead to injury or other adverse events. These events could lead to recalls or safety alerts relating to our products (either voluntary or required by the FDA or similar governmental authorities in other countries), and could result, in certain cases, in the removal of a product from the market. Any recall could result in significant costs, as well as negative publicity that could reduce demand for our products. Personal injuries relating to the use of our products can also result in product liability claims being brought against us. In some circumstances, such adverse events could also cause delays in new product approvals. Any of the foregoing circumstances could have a material adverse effect on our, financial condition or cash flows.

The medical device industry is very competitive.

The medical device industry is subject to rapid technological changes, and we face significant competition across our product lines and in each market in which our products are sold. We face this competition from a wide range of companies. These include large medical device companies, which have greater financial and marketing resources than MedPro. We also face competition from firms that are more specialized than we are with respect to particular markets. Non-medical device companies, including pharmaceutical companies, also offer alternative therapies for disease states that may be delivered without a medical device. In addition, some competitors have established manufacturing sites or have contracted with suppliers located in China and other low-cost manufacturing locations as a means to lower their costs. New entrants may also appear, particularly in these low-cost countries.

The development of new or improved products, processes or technologies by other companies may make our products or proposed products obsolete or less competitive and may materially adversely affect our earnings, financial condition or cash flows.

Many potential competitors, including those who have greater resources and experience than we do, may develop products or technologies that make ours obsolete or noncompetitive.

Many companies are engaged in developing medical safety devices. Our future success will depend on our ability to maintain a competitive position with respect to technological advances. Technological developments by others may result in our products and technologies becoming obsolete.  Significant competitors include Baxter International and Becton Dickinson. Most of our current and potential competitors have substantially greater research and development capabilities and financial, regulatory, manufacturing, marketing, sales, human resources, and experience than we do. Many of our competitors have several products that have already been developed, approved and successfully commercialized, or are in the process of obtaining regulatory approval for their products in the United States and internationally. Many of these companies have substantially greater capital resources, research and development resources and experience, manufacturing capabilities, regulatory expertise, sales and marketing resources, and production facilities. Our competitors may succeed in developing technologies or products that are more effective, safer, more affordable or more easily commercialized than ours, and our competitors may obtain intellectual property protection or commercialize products sooner than we do. Developments by others may render our product candidates or our technologies obsolete. Our failure to compete effectively would have a significant

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adverse effect on our business, financial condition and results of operations.

Our operations are subject to governmental regulation associated with the medical safety device industry, the operation and enforcement of which may restrict our ability to carry on our business.

The development, manufacture, and marketing of products sold by us will be subject to extensive regulation by various government agencies, including the U.S. Food and Drug Administration and the U.S. Federal Trade Commission, as well as various state and local agencies. These agencies regulate production processes, product attributes, packaging, labeling, advertising, storage, and distribution. These agencies establish and enforce standards for safety, purity, and labeling. In addition, other governmental agencies (including the U.S. Occupational Safety and Health Administration), establish and enforce health and safety standards and regulations in the workplace. We will seek to comply at all times with all such laws and regulations. We will also seek to obtain and maintain all permits and licenses relating to our operations that are necessary so that our facilities and practices comply with applicable governmental laws and regulations. Nevertheless, there is no guarantee that we will be able to comply with any future laws and regulations. Our failure to comply with applicable laws and regulations could subject us to civil remedies including fines, injunctions, recalls or seizures as well as potential criminal sanctions. As a result of such regulations, we may encounter a variety of difficulties or extensive costs, which could delay or preclude us from marketing our products or continuing or expanding our operations. We cannot predict if all necessary approvals will be granted or that if granted, any approval will be received on a timely basis. If we do not obtain required approvals, or if those approvals are delayed, it may also preclude us from marketing our products, or continuing or expanding our operations.

We cannot guarantee that any of our strategic acquisitions, investments or alliances will be successful.

While our strategy to increase revenue growth is driven primarily by development of products based on technology we own or control, we will seek to supplement our growth through strategic acquisitions, investments and alliances. Such transactions are inherently risky. Any number of factors may affect the success of any acquisition, investment or alliance including our ability to properly assess and value the potential business opportunity or to successfully integrate it into our existing business. There can be no assurance that any past or future transaction will be successful or that the transaction will not materially adversely affect our earnings, financial condition or cash flows.

Our operations depend in part on patents and other intellectual property rights.

Our business relies on patent, trademark and other intellectual property rights. While we do not believe that the loss of any one patent or other intellectual property asset would materially affect our operations, these intellectual property assets, in the aggregate, are of material importance to our business. We can lose the protection afforded by these intellectual property assets through patent expirations, legal challenges or governmental action. Patents attained by competitors, particularly as patents on our products expire, may also adversely affect our competitive position. The loss of a significant portion of our portfolio of intellectual property assets may have a material adverse effect on our earnings, financial condition, or cash flows.

Our ability to compete in the medical device market may decline if we do not adequately protect our proprietary technologies.

Our success depends in part on our ability to obtain and maintain intellectual property that protects our technologies and our products, including rights we have licensed. Patent positions may be highly uncertain and may involve complex legal and factual questions, and we cannot predict the extent to which we may enforce these claims against our competitors. It may be necessary or useful for us to participate in opposition proceedings to determine the validity of our competitors’ patents or to defend the validity of any of our or our licensor’s future patents, which could result in substantial costs and would divert our efforts and attention from other aspects of our business. In addition, patent law outside the United States is uncertain and in many countries intellectual property laws are undergoing review and revision. The laws of some countries do not protect intellectual property rights to the same extent as domestic laws. Therefore, the degree of future protection for our proprietary rights is not certain, which could have a significant adverse effect on our business, financial condition and results of operations.

Technologies we license from others, or in-licensed technologies, are important to our business. The scope of our rights under our licenses may be subject to dispute by our licensors or third parties. Our rights to use these technologies and to practice the inventions claimed in the licensed patents are subject to our licensors abiding by the terms of those licenses and not terminating them. In particular, we have agreed to use commercially reasonable efforts to develop and commercialize some of our significant licensed technology. If we fail to comply with those obligations, we may lose some of the rights that enable us to utilize this technology, and our ability to develop products could be seriously hampered.

In addition, we may in the future acquire rights to additional technologies by licensing rights from existing licensors or

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from third parties. Such in-licenses may be costly. Also, we generally do not control the patent prosecution, maintenance or enforcement of in-licensed technologies. Accordingly, we may not be able to exercise the same degree of control over this intellectual property as we could over internally developed technologies.

Disputes concerning the infringement or misappropriation of our proprietary rights or the proprietary rights of others could be time consuming and extremely costly and could delay our research and development efforts.

Our commercial success, if any, will be significantly harmed if we infringe the patent rights of third parties or if we breach any license or other agreements that we have entered into with regard to our technology or business.  We are not currently a party to any litigation or any potentially adverse proceeding with regard to our patent or trademark positions.

If we become involved in litigation, interference proceedings, oppositions, reexamination, protest or other potentially adverse intellectual property proceedings as a result of alleged infringement by us of the rights of others or as a result of priority of invention disputes with third parties, we might have to spend significant amounts of money, time and effort defending our position and we may not be successful. In addition, any claims relating to the infringement of third-party proprietary rights or proprietary determinations, even if not meritorious, could result in costly litigation, lengthy governmental proceedings, divert management’s attention and resources, or require us to enter into royalty or license agreements that are not advantageous to us. If we do not have the financial resources to support such litigation or appeals, we may forfeit or lose certain commercial rights. Even if we have the financial resources to continue such litigation or appeals, we may lose. If we lose, we may be forced to pay very substantial damages; we may have to obtain costly license rights, which may not be available to us on acceptable terms, if at all; or we may be prohibited from selling products that are found to infringe the patent rights of others.

Uncertainties resulting from initiation and continuation of any patent proceeding or related litigation could harm our ability to compete and could have a significant adverse effect on our business, financial condition and results of operations. An adverse ruling arising out of any intellectual property dispute could undercut or invalidate our intellectual property position. An adverse ruling could also subject us to significant liability for damages, including possible treble damages, prevent us from using technologies or developing products, or require us to negotiate licenses to disputed rights from third parties. Although patent and intellectual property disputes in the technology area are often settled through licensing or similar arrangements, costs associated with these arrangements may be substantial and could include license fees and ongoing royalties. Furthermore, necessary licenses may not be available to us on satisfactory terms, if at all. Failure to obtain a license in such a case could have a significant adverse effect on our business, financial condition and results of operations.

If we acquire products, technologies or other businesses, we will incur a variety of costs, may have

integration difficulties and may experience numerous other risks that could adversely affect our

business.

To remain competitive, we may decide to acquire additional businesses, products and technologies. We have limited experience in identifying acquisition targets, successfully acquiring them and integrating them into our current infrastructure. We may not be able to successfully integrate any businesses, products, technologies or personnel that we might acquire in the future without a significant expenditure of operating, financial and management resources, if at all. In addition, future acquisitions could require significant capital infusions and could involve many risks, including, but not limited to:

• we may have to issue convertible debt or equity securities to complete an acquisition, which would dilute our stockholders and could adversely affect the market price of our common stock;

• an acquisition may adversely affect our results of operations because it may require us to incur large one-time charges to earnings, amortize or write down amounts related to goodwill and other intangible assets, or incur or assume substantial debt or liabilities, or it may cause adverse tax consequences, substantial depreciation or deferred compensation charges;

• we may encounter difficulties in assimilating and integrating the business, technologies, products, personnel or operations of companies that we acquire;

• certain acquisitions may disrupt our relationship with existing customers, distributors or suppliers who compete with the acquired business;

• acquisitions may require significant capital infusions and the acquired businesses, products or technologies may not generate sufficient revenue to offset acquisition costs;

• an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management;

• acquisitions may involve the entry into a geographic or business market in which we have little or no prior experience; and

• key personnel of an acquired company may decide not to work for us.

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Any of the foregoing risks could have a significant adverse effect on our business, financial condition and

results of operations.

To the extent we enter markets outside of the United States; our business will be subject to political,

economic, legal and social risks in those markets, which could adversely affect our business.

There are significant regulatory and legal barriers in markets outside the United States that we must overcome to the extent we enter or attempt to enter markets in countries other than the United States. We will be subject to the burden of complying with a wide variety of national and local laws, including multiple and possibly overlapping and conflicting laws. We also may experience difficulties adapting to new cultures, business customs and legal systems. Any sales and operations outside the United States would be subject to political, economic and social uncertainties including, among others:

• changes and limits in import and export controls;

• increases in custom duties and tariffs;

• changes in currency exchange rates;

• economic and political instability;

• changes in government regulations and laws;

• absence in some jurisdictions of effective laws to protect our intellectual property rights; and

• currency transfer and other restrictions and regulations that may limit our ability to sell certain products or repatriate profits to the United States.

Any changes related to these and other factors could adversely affect our business to the extent we enter

markets outside the United States.

We may encounter difficulties managing our growth, which could adversely affect our business.

Our success will depend on the ability of our officers and key employees to continue to improve our operational capabilities and our management information and financial control systems, and to expand, train and manage our work force.  We have conducted an assessment of internal control over financial reporting  as of December 31, 2011 as required by Section 404(a) of the Sarbanes-Oxley Act and have included management’s assessment report in this Form 10-K.   Although we have engaged a third party to assist us with design, implementation and testing of our compliance system, if we are unable to successfully implement improvements to our management information and financial control systems in an efficient and timely manner, or if we encounter deficiencies in existing systems and controls, our management may not have adequate information to manage our day-to-day operations and our inability to manage our growth effectively could increase our losses.  Future compliance with the Sarbanes-Oxley Act and auditing of our system of compliance may not be possible without the addition of accounting and compliance personnel.

We depend on our key personnel, and the loss of their services may adversely affect our business.

We are highly dependent upon the efforts of our senior management team. The death or departure of any of our key personnel could have a material adverse effect on our business. In particular, the loss of W. Craig Turner, our Chairman and Chief Executive Officer, could significantly impact our ability to operate and grow the business and could cause performance to differ materially from projected results.

We could face labor shortages which could slow our growth.

Our success depends in part upon our ability to attract, motivate and retain a sufficient number of qualified employees necessary to keep pace with our expansion plans. Qualified individuals of the requisite caliber needed to fill these positions are in short supply in some areas. Any material increases in employee turnover rates could have a material adverse effect on our business, financial condition, operating results or cash flows. Additionally, competition for qualified employees could require us to pay higher wages to attract sufficient employees, which could result in higher labor costs.

We may be sued for product liability, which could adversely affect our business.

Because our business strategy involves the development of commercial products and sale of those products by us or our distribution partners, we may be sued for product liability. We may be held liable if any product we develop and commercialize causes injury or is found otherwise unsuitable during product testing, manufacturing, marketing, sale or consumer use. In addition, the safety studies we must perform and the regulatory approvals required to commercialize our

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medical safety products, will not protect us from any such liability.  We carry product liability insurance. Currently, our coverage limits are $2 million per event, and $2 million annual aggregate coverage for products liability.  We also intend to seek product liability insurance for any approved products that we may develop or acquire.  However, if there are product liability claims against us, our insurance may be insufficient to cover the expense of defending against such claims, or may be insufficient to pay or settle such claims. Furthermore, we may be unable to obtain adequate product liability insurance coverage for commercial sales of any of our approved products. If our insurance coverage is insufficient to protect us, our results of operations will suffer.  If any product liability claim is made against us, our reputation and future sales will be damaged, even if we have adequate insurance coverage.

Risks Relating to Ownership of Our Common Stock

Our future operating results may fluctuate and cause the price of our common stock to decline.

Our sales and operating results could fluctuate significantly from quarter to quarter due to various factors, many of which are beyond our control. The factors that could cause our operating results to fluctuate include, but are not limited to:

• Our ability to identify and acquire medical safety device safety technologies with commercialization potential;

• Our ability to successfully develop and bring products to market, including our success in obtaining regulatory approvals, outsourcing production to reputable and capable manufacturers, and entering into profitable distribution arrangements;

• Our ability to generate and successfully increase sales of our products and expand into new markets;

• Marketplace acceptance of our products and the impact of competition;

• Our ability to obtain additional financing on satisfactory terms;

• Our ability to attract and retain qualified employees;

• Changes in the costs we pay; and

• Governmental regulation associated with the medical safety products industry.

If our sales or operating results fall below the expectations of investors or securities analysts, the price of our common stock could significantly decline.

The price of our common stock is expected to be volatile and an investment in our common stock could

decline in value.

We expect the market price of our common stock to be highly volatile. The following factors, in addition to other risk factors described in this report, and the potentially low volume of trades in our common stock, may have a significant impact on the market price of our common stock, some of which are beyond our control:

• the announcement of new products or services by us or our competitors;

• quarterly variations in our and our competitors’ results of operations;

• changes in earnings estimates or recommendations by securities analysts;

• developments in our industry;

• general market conditions; and

• other factors, including factors unrelated to our own operating performance or the condition or prospects of our industry.

Further, the stock market in general, and securities of small-cap companies in particular, can experience extreme price and volume fluctuations. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in the value of our common stock. You should also be aware that price volatility might be worse if the trading volume of our common stock is low.

We cannot assure you that an active trading market for our common stock will develop.

Since our common stock is eligible for trading on the OTC Bulletin Board, our shareholders may find it difficult to obtain accurate quotations of our common stock and may experience a lack of buyers to purchase such stock or a lack of market makers to support the stock price. We cannot assure you that an active trading market for our common stock will develop.  Accordingly, trades may occur very infrequently, and holders of our common stock must assume they may have to bear the economic risk of an investment in our common stock for an indefinite period of time.

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Our common stock may be considered a “penny stock” and may be difficult to sell.

The SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market or exercise price of less than $5.00 per share, subject to specific exemptions.  Our common stock has been trading at a market price below $5.00 per share and therefore may be designated as a “penny stock” according to SEC rules. This designation requires any broker or dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our common stock and may affect the ability of our stockholders to sell their shares.

A significant number of the shares of our common stock have become eligible for sale since January 4, 2009, and the sale of those shares could depress the market price of our common stock.

The sale of a significant number of shares of our common stock in the public market could harm the market price of our common stock. On December 28, 2007, we issued 11,878,685 shares of common stock in connection with our reverse merger.  On that date we also completed a private placement to accredited investors in which we issued convertible preferred stock and common stock purchase warrants.  In 2008 and 2009, we issued convertible preferred stock upon the exercise of, and in exchange for, outstanding warrants, which could result in the issuance of additional shares of common stock in the future.   We also issued warrants in 2010 to obtain interim financing that was repaid in September 2010.  As of February 28, 2011, our outstanding preferred stock was convertible into 28,358,575 shares of common stock, and our outstanding stock purchase warrants could be exercised for up to an additional 1,734,340 shares of common stock.

Some or all of the shares of common stock issued in connection with the merger or that may be issued (in certain circumstances) upon the conversion of the preferred stock or the exercise of the warrants may be offered from time to time in the open market pursuant to Rule  144 under the Securities Act of 1933.  As additional shares of our common stock become available for resale in the public market pursuant to Rule  144, the supply of our common stock will increase, which could decrease its market price.  In addition, the holders of our preferred stock and stock purchase warrants may offer the shares of common stock issuable upon the conversion of the preferred stock or the exercise of the warrants.  We also completed a registration of 2,402,029 of our shares for resale by our preferred stockholders on August 12, 2009.  Sales by either of these means may have a depressive effect on the market for the shares of common stock.

In general, a person who has held shares of restricted common stock for a period of six months and is not an affiliate of the issuer of those securities, may sell those shares into the market.  An initial twelve month holding period applied to shareholders who received their shares in our merger.  An affiliate who has held restricted shares for the applicable holding period, upon filing of a notification on Form 144 with the SEC, may sell shares of restricted common stock into the market in an amount up to the greater of 1% of the outstanding shares of common stock or the average weekly number of shares sold in the last four weeks before such sale.  An affiliate may sell this number of shares once each three months.

Sales of a substantial number of these shares of our common stock, or the perception that holders of a large number of shares intend to sell their shares, could depress the market price of our common stock. In addition, the registration rights of the holders of our preferred stock and stock purchase warrants could make it more difficult for us to raise funds through future offerings of our equity securities.

Our stockholders may experience additional dilution upon the exercise of warrants.

As of February 29, 2012, warrants to purchase up to 1,734,340 shares of our common stock were issued and outstanding.  The exercise of the warrants could decrease the net tangible book value of our common stock.

Our stockholders may experience future dilution.

Our articles of incorporation permit our board of directors, without shareholder approval, to authorize shares of preferred stock, which may also be issued by the board of directors without shareholder approval. The board of directors may classify or reclassify any preferred stock to set the preferences, rights and other terms of the classified or reclassified shares, including the issuance of shares of preferred stock that have preference rights over the common stock with respect to dividends, liquidation, voting and other matters or shares of common stock having special voting rights. The issuance of additional shares of our capital stock could be substantially dilutive to your shares and may negatively affect the market price of our common stock.

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We do not intend to pay dividends in the foreseeable future.

For the foreseeable future, we intend to retain any earnings to finance the development of our business, and we do not anticipate paying any cash dividends on our common stock. Any future determination to pay dividends will be at the discretion of our board of directors and will depend upon then-existing conditions, including our financial condition and results of operations, capital requirements, contractual restrictions, business prospects and other factors that our board of directors considers relevant. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize their investment.

As a public company, we will be subject to extensive corporate governance and disclosure regulations that will result in additional operating expenses.

We have incurred and expect to continue to incur significant ongoing legal, accounting and other expenses as a result of becoming a public company in December 2007. Corporate governance requirements, requirements under the Sarbanes-Oxley Act of 2002, as well as new rules implemented by the SEC have significantly increased our legal and financial compliance costs and make some administrative functions more time-consuming and costly. Like many smaller public companies, compliance with Section 404 of the Sarbanes-Oxley Act of  2002 has had a significant impact on our operating costs. Section 404 requires the management of public companies to evaluate the effectiveness of internal control over financial reporting. As a smaller reporting company, we currently are exempt from compliance with Section 404(b) , which requires that a company’s independent auditors also attest to assessment conducted by its management.  However, should we become an accelerated filer due to the growth in our market capitalization, we may not be able to effectively meet all of the requirements of Section 404 as currently known to us in the then mandated timeframe.  Any failure to implement effectively new or improved internal controls, or to resolve difficulties encountered in their implementation, could harm our operating results, cause it to fail to meet reporting obligations or result in management being required to give a qualified assessment of our internal controls over financial reporting or our independent auditors providing an adverse opinion regarding our internal controls over financial reporting. Any such result could cause investors to lose confidence in our reported financial information, which could have a material adverse effect on its stock price.

We also expect these new rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance.  We may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.  As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers.  We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

Item lB.                  Unresolved Staff Comments.

Not applicable.

Item 2.   Properties.

We lease our current office from Oakleaf Real Estate, LLC, an unrelated third party. Our lease for this space, which we began occupying on or about the last week of March 2011 provides for lease payments of $8,000 per month.  If we give timely notice of our intent to vacate the premises after three years, we can pay one year’s rent to avoid the rent for year five of the initial five year term.  The lease has three extensions of three years each.  This space should be adequate to accommodate approximately 25 employees.  This will provide the capacity to increase our existing staff by two-thirds.

We leased our former office and storage facility, in Lexington, Kentucky, under an operating lease from a firm in which our Chairman and CEO is a partner. The lease runs through August 2012, with an option for two five-year extension options.  Monthly lease payments are $6,975 though the end of the lease term. We will not renew this lease in 2012.   

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Item 3 Legal Proceedings

On November 1, 2011, Visual Connections, Inc. filed suit against MedPro in Kentucky federal district court alleging breach of contract, unjust enrichment/constructive trust, and interest. The case was subsequently transferred to Delaware federal district court. Visual Connections claims that under the terms of the agreements pursuant to which MedPro acquired the intellectual property underlying three medical devices from Visual Connections, Visual Connections is entitled to receive royalty payments on the principal amount of the 14% Senior Notes due 2016 that a wholly owned subsidiary of MedPro issued to institutional investors in September and October 2010. Visual Connections, Inc. v. MedPro Safety Products, Inc., Case No. 1:11-1307-GMS (D.C. Del.). MedPro believes the claim that it owes royalty payments on the proceeds of long-term debt is without merit, and intends to contest the matter vigorously.

Item 4.   Mine Safety Disclosures.

Not Applicable.

PART II

Item 5.   Market for Registrant’s Common Equity and Related Stockholder Matters.

Market Information

Since December 31, 2007, our common stock has traded on the OTC Bulletin Board under the symbol “MPSP.BB”.  There is no established trading market for our convertible preferred stock.

The following table sets forth, for the periods indicated, the reported high and low closing bid quotations for our common stock as reported on the OTC Bulletin Board. The bid prices reflect inter-dealer quotations, do not include retail markups, markdowns or commissions and do not necessarily reflect actual transactions.

Period		Bid Price
Year	Quarter	High	Low
2011
	Fourth	$2.75	$1.50
	Third	$3.00	$2.00
	Second	$3.00	$1.55
	First	$3.00	$1.60
2010
	Fourth	$3.00	$1.55
	Third	$3.10	$2.70
	Second	$3.10	$2.75
	First	$3.70	$3.01
2009
	Fourth	$4.44	$3.00
	Third	$4.50	$3.50
	Second	$5.75	$3.50
	First	$10.00	$3.90

Holders

As of December 31, 2011, we had approximately 325 holders of our common stock.

Dividends

We do not anticipate declaring or paying any dividends in the foreseeable future. We anticipate that for the foreseeable future we will follow a policy of retaining earnings, if any, in order to finance the expansion and development of our business.

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Payment of dividends is within the discretion of MedPro’s board of directors and will depend upon earnings, capital requirements, and operating and financial condition, among other factors.

Item 6.       Selected Financial Data.

Not Applicable.

Item 7.       Management’s Discussion and Analysis of Financial Condition and Results of Operation.

The following discussion and analysis of the results of operations and financial condition of MedPro Safety Products, Inc. for the fiscal years ended December 31, 2011 and 2010 should be read in conjunction with our audited financial statements and the notes to those financial statements that are included elsewhere in this report.

Overview

MedPro Safety Products, Inc. has acquired and developed a portfolio of medical device safety products incorporating proprietary needlestick prevention technologies that deploy with minimal or no user activation. Our present strategy focuses on developing and commercializing multiple products in four related product segments: clinical, phlebotomy, pharmaceutical, and intravenous.

In July 2010, we entered into a new contract with our distribution partner that grants exclusive rights to manufacture, market and distribute three MedPro blood collection products over a six-year term (the “GBO agreement”). The GBO agreement provides that beginning with the fourth quarter of 2010, we will receive quarterly royalty payments totaling not less than $43,750,000 over the six-year term, and during the same period we will make quarterly financial contributions totaling approximately $6,650,000 to cover the anticipated expenses of marketing the products.

On September 1 and October 1, 2010, we issued Senior Secured 14% Notes due 2016 (the “Notes”) in the aggregate principal amount of $30 million in private placements to institutional investors. In connection with the Note issuance, we transferred the rights to receive all royalties under the GBO agreement to a new wholly owned subsidiary that is the issuer of the Notes. All of the royalties payable under the GBO agreement are committed to pay the principal and interest due on the notes. We received approximately $23,294,000 in net proceeds after establishing a $4,500,000 interest reserve and paying offering expenses.

We used the net proceeds from the sale of the Notes to pay off all of our bank debt and all principal and accrued interest on bridge loans made by a principal shareholder, which together totaled $4,360,000.   We expect to use the remaining net proceeds to pay royalties on our blood collection technology, our marketing contributions, and to finance the development of other safety products in our portfolio.

Our strategy for the next 18 to 24 months focuses on completing the steps necessary to attain pre-market product development milestones for our prefilled syringe.  Our objective is to enter into strategic partnership agreements with major medical products distribution partners that, whenever possible, would provide for fixed minimum volume contracts, as does the GBO agreement.

Our operations are currently funded principally from the net proceeds of our sale of the Notes.  Our financial results and operations in future periods will depend upon our ability to enter into sales and distribution agreements for our products currently under development so we can generate sustained revenues from our portfolio of products and technologies. Current cash should allow us to operate through June or July 2012. We have secured a letter of commitment for bridge funding from our principal investor and we are working on our capital and operational requirements through 2014 with investment advisors in connection with a potential capital raise in early 2012.

Critical Accounting Estimates and Judgments

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other

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sources. Actual results may differ from these estimates. The significant accounting policies that are believed to be the most critical to fully understanding and evaluating the reported financial results include revenue recognition, recoverability of intangible assets and the recovery of deferred income tax assets.

We recognize sales and associated cost of sales when delivery has occurred and collectability is probable. We began recognizing revenue under the GBO agreement for the fourth quarter of 2010.  Historically, we have had minimal returns for credit, so no reserve for product returns has been established. At this point we have not manufactured products for sale. Our customer has manufacturing responsibility and would be responsible for returns of product. We provide for probable uncollected amounts through a charge to earnings and a credit to the allowance for doubtful accounts based on our assessment of the current status of individual accounts.

Our intangible assets consist principally of intellectual properties such as regulatory product approvals and patents. We currently are amortizing certain of our intangible assets using the straight line method based on an estimated economic life, after the products are introduced into the market.  We began amortization of the Vacumate patents in December 2009 since products were first introduced for human use in December.  Our Winged Safety Blood Collection Set was tested in 2011 and is expected to be introduced into the market for human use in 2012.  Our Key-Lok proprietary technology and our Syringe Guard family of products are currently not in production for distribution.  We expect to use the straight line method to amortize these intellectual properties over their estimated period of benefit, ranging from one to ten years, when our products are placed in full production and we can better evaluate market demand for our technology.

We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or indicate that impairment exists. Once our intellectual property has been placed into productive service and after an impairment determination, we utilize a net present value of future cash flows analysis to calculate carrying value.  Our forecasted revenue on our current portfolio of intellectual property over the next five years, discounted to the balance sheet date based on a 7.5% discount factor, is in excess of our cost of our patents and expected development costs ($67.8 million) by approximately 215%.

We wrote down our Key-Lok technology to fifty percent of its original cost in the fourth quarter of 2010.  Key-Lok may require substantial modification before it can be commercially produced.  Our carrying value of this technology is now $244,561, down from $489,122 in 2009.   

As part of the process of preparing our financial statements, we must estimate our actual current tax liabilities together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the balance sheet. We must assess the likelihood that the deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, a valuation allowance must be established. To the extent we establish a valuation allowance or increase or decrease this allowance in a period, the impact will be included in the tax provision in the statement of operations.

Results of Operations for the Years Ended December 31, 2011 and 2010

A summary of operating results for 2011 and 2010 is reflected in the following table:

	2011			2010			Change
Revenue	$	2,313,125		$	150,000		$	2,163,125
Cost of Sales	(628,579		)	(832,235		)	203,656
Gross Profit (Loss)	$	1,684,546		$	(682,235	)	$	2,366,781
Operating Expenses	$	8,906,767		$	12,212,582		$	(3,305,815	)
Loss from Operations	$	(7,222,221	)	$	(12,894,817	)	$	5,672,596
Other Income/(Expense)	$	(4,810,383	)	$	(2,619,397	)	$	(2,190,986	)
Net (Loss)	$	(12,032,604	)	$	(15,514,214	)	$	3,481,610

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MedPro recorded a net loss of $(12,032,604) for the year ended December 31, 2011, as compared to $(15,514,214) for year ended December 31, 2010.  Losses from operations were $(7,222,221) for 2011 and $(12,894,817) for 2010.

In 2011, the Company recorded net other expenses of $(4,810,383) compared to net other expense of $(2,619,397) in 2010.  Other expenses in 2011 included $(4,692,406) of interest expense, which includes $492,406 of amortization of Senior Note issuance expense. In addition, the Company recorded a $135,931 loss from the adjustment to the derivative liability associated with the issuance of warrants. In 2010, a $(313,335) loss associated with the change in valuation of derivative liabilities was recorded.  The 2010 interest expense was $2,325,972. Interest income of $17,954 and $19,910 was reported in 2011 and 2010, respectively.  

Sales for 2011 were $2,313,125 compared to $150,000 for 2010.  In July 2010, we entered into the GBO agreement that provides for total minimum royalty of not less than $43,750,000 payable to us, and our obligation to make quarterly marketing contributions totaling approximately $6,650,000 over a six-year term. We began recognizing revenue under the GBO agreement for the fourth quarter of 2010.  We also returned $350,000 of the automation advance received in 2008, and received title to packaging equipment originally purchased with funds provided by GBO totaling $452,855.  We recorded the equipment at $275,000, or approximately the average of two appraisals, and expensed the remaining $75,000 in 2010.

A table of comparison of 2011 and 2010 compensation and related expenses follows:

	2011		2010		Change
Salaries	$	2,840,472	$	1,790,201	$	1,050,271
Share-Based Compensation	427,771		4,824,854		(4,397,083		)
Payroll Taxes	134,316		93,613		40,704
Total Compensation Related	$	3,402,560	$	6,708,668	$	(3,306,108	)

The most substantial decline in individual operating expense categories from 2010 to 2011 was the $(3,306,108) decrease in compensation expense.  The charge for stock option expense went from $4,824,854 in 2010 to $427,771 in 2011, a decrease of $4,397,083.  The balance of the change in compensation represents changes in employee compensation from year to year. The change includes contractual severance pay of $236,813 accrued at year end and $98,577 of non-recurring payments to our former President upon his resignation. Bonuses paid in 2011 were $275,578 higher than 2010. Base pay went up approximately $300,000 from 2010 to 2011. We hired a new COO in April of 2011. We ended the 2010 year with fourteen employees. We ended 2011 with fifteen full time employees.

Costs associated with our qualified defined contribution plan are reflected in the following table:

	2011		2010		Change
Company 401(k) Match	$	65,733	$	71,075	$	(5,342	)
Profit Sharing Contribution	141,930		150,000		(8,070		)
Total Qualified Plan Expenses	$	207,663	$	221,075	$	(13,412	)

Costs associated with our profit sharing plan in 2011 and 2010 were $207,663 and $221,075, respectively.  The plan was amended on July 1, 2010 to provide for a 1 for 1 match up to 4% deferral.  The plan previously provided for a 1 for 1 match on the first 3% deferral and 1 for 2 match on the next 2% of employee salary deferral.  The Company decreased its discretionary contribution from $150,000 in 2010 to $141,930 in 2011. The remaining $5,342 decline was due to the change in matching contribution percentages and employee participation.

On August 18, 2008, we adopted our stock incentive compensation plan and granted options to purchase 3,000,000 shares of common stock to seven employees and two directors.  The options may be exercised only during a thirty-day period beginning on January 1, 2013.  If before that date either the recipient terminates service with us or a change of control occurs, then the recipient must exercise the options 30 days after the event.  Because the exercise price was less than market price of our common stock on the date of grant, we set a date certain for the exercise of the options in order to qualify for exemption from excise taxes under IRS deferred compensation rules.

Total share-based compensation for the August 2008 grants was calculated at $14,580,000, $4.86 per share underlying

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the options.  The Black-Scholes model was used to value the options.  The valuation methodology and underlying assumptions are described in Note 11 of the notes to the financial statements.  The share-based compensation expense has been charged to earnings over 24 months, which period coincides with the term of a non-competition covenant included in the option agreement. The Company recorded $4,596,750 of share-based compensation expense in 2010.  There was no remaining balance of unearned compensation at December 31, 2010 on this option.

In 2009, we granted incentive stock options for 185,715 shares in May and for 47,256 shares in October.  The May options were valued at $355,106 and the October options were valued at $91,944 utilizing the Black-Scholes valuation methodology.  Total share-based compensation expense on these awards was $84,103 in 2011 and $85,154 in 2010.  The remaining unearned compensation on the 2009 options as of December 31, 2011 was $232,762.

In 2009, the Company also granted 50,000 options to each of two directors on the same terms and conditions as the options granted to the initial directors in August 2008.  They are each exercisable for one share of common stock at $1.81 per share and they may only be exercised from January 1, 2013 to January 31, 2013.  The total expense associated with these options was $224,373.  During 2011 the Company recorded share-based compensation expense of $72,767 in connection with these options. In 2010, $112,186 of expense was recorded.  As of December 31, 2011 the entire balance had been expensed.

On September 29, 2010 the Company awarded employee options to acquire 575,500 shares of common at $2.70 per share. Unearned compensation of $422,824 was recorded at the issue date. The Company recorded $30,764 of compensation expense in 2010 and $120,742 in 2011. Unearned compensation related to these options was $271,318 as of December 31, 2011.

On February 2, 2011 the Company granted three options to the CEO for 100,000 common shares each based on remaining with the Company through December 31, 2011 through 2013. The Company recorded $444,675 of unearned compensation relating to these options. The Company has recorded expense of $94,655 in 2011. These options vest after the CEO stays through each December 31 of 2011 through 2013. Unearned compensation to be recorded in future periods was $350,020 at December 31, 2011.

On August 15, 2011 the Company granted an option to acquire 50,000 shares of common stock to our new COO exercisable on the one year anniversary date of the grant. The option was recorded as unearned compensation of $74,794. Share-based compensation expense of $9,383 was recorded in 2011, leaving $65,411 of unearned expense at year end.

Non-employee director options for 125,000 shares (5 at 25,000 shares each) pursuant to a newly adopted Non-Employee Director Stock Option Plan and a 50,000 share option for Carl Kleidman, a director, with the same terms as the August 18, 2008 options were issued on August 23, 2011. Unearned compensation expense of $263,079 was recorded. Share-based compensation expense of $40,994 has been recorded in 2011 and $222,085 of unearned compensation is still remaining at year end.

Finally, on December 9, 2011 the Company awarded 575,000 options to officers (other than the CEO) and employees. Unearned compensation expense of $1,075,987 was recorded. Through year end the Company expensed $5,127 leaving $1,070,860 of unearned share-based compensation.

The following table reflects the comparison of 2011 and 2010 professional fees:

	2011		2010		Change
Patent - Legal	$	710,522	$	212,712	$	497,810
General - Legal	235,652		587,392		(351,740		)
Accounting and Auditing	132,582		168,850		(36,268		)
Regulatory Audits	13,450		4,950		8,500
Consulting Fees	678,285		597,424		80,861
Recruiting	53,299		22,500		30,799
Quality Testing and Other	17,046		1,832		15,214
Total Professional Fees	$	1,840,836	$	1,595,660	$	245,176

Professional fees increased by $245,176 in 2011 over 2010.  Consulting, accounting and other related fees and expenses increased by $99,105 during 2011.  Legal fees increased $146,070 in 2011, due to our increased patent activity of

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$497,810 offset by a reduction of $351,740 in general corporate legal expenses associated with the Senior Notes in 2010 and reduced assistance with other matters.  Consulting fees increased by $80,861 as a result of the Company's use of a contract regulatory director and the employment of several other specialists which were utilized in our product evaluation activity in 2011. Consulting costs in our wholly owned LLC were down $37,858 in 2011.

Comparative travel and entertainment expenses between 2011 and 2010 as reflected in the table that follows:

	2011		2010		Change
Airfare, cars, ground, parking, mileage and travel insurance	$	351,816	$	297,145	$	54,671
Hotels, conference rooms, entertainment, meals and gratuities	193,244		132,310		60,934
Total Travel and Entertainment	$	545,060	$	429,455	$	115,605

Travel and entertainment expense increased by $115,605 in 2011 to $545,060 from $429,455 in 2010. Airfare, cars, ground transportation, parking, mileage and travel insurance increased by $54,671. Hotels, conference rooms, entertainment, meals and miscellaneous expenses were up $60,934. Most of the increased costs were associated with increase customer visits and several trade shows. We had three employees performing ISO 13485 supplier audits in Europe for two weeks in late November and early December.

The following table reflects the comparison of various insurance expense items for 2011 and 2010:

	2011		2010		Change
Health Insurance	$	204,894	$	151,025	$	53,869
Product Liability Coverage	21,483		8,852		12,631
Property and Casualty Coverage	14,110		9,427		4,683
Disability Insurance	4,242		—		4,242
D&O and Other	77,507		74,527		2,980
Total Insurance Expense	$	322,236	$	243,831	$	78,405

Insurance expense was up $78,405 in 2011 over 2010. Health insurance and Health Savings Account contributions were up $53,869 in 2011. Product and general liability insurance costs associated with increased production were up $12,631 in 2011. Property and casualty insurance is up $4,683 with the addition of the new office location. Disability costs were up $4,242 in 2011. All other insurance costs were up a net of $2,980.

Royalties expenses were as follows for 2011 and 2010:

	2011		2010		Change
Royalties in Cost of Sales	$	117,183	$	7,632	$	109,551
Royalty Settlement	—		600,000		(600,000		)
Total Royalty Expense / Settlements	$	117,183	$	607,632	$	(490,449	)

We paid $607,632 in royalties in 2010.  We agreed to pay $600,000 to resolve a potential issue regarding the inception of royalty payments under the terms of a technology transfer agreement for one of our blood collection devices.  The balance represented the royalty payable upon the commencement of revenue under the GBO agreement. Royalty expenses in 2011 were $117,183, down $490,449 from 2010.

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Details of the advertising and promotion expenses in 2011 and 2010 are as follows:

	2011		2010		Change
Investor Relation Expenses	$	60,569	$	225,024	$	(164,455	)
Marketing Assistance Payment	350,075		22,800		327,275
Promotional Expenses	55,010		8,170		46,840
Other	21,627		4,671		16,956
Total Advertising and Promotion	$	487,281	$	260,665	$	226,616

Advertising and promotion costs increased by $226,616 over 2010. Total 2011 expenses were $487,281. Our expenses for investor relation services decreased in 2011 by $164,455. This change consisted of lower monthly retainer costs. In addition, we expensed $167,600 of share-based compensation in connection with a research report in 2010 which did not recur in 2011. Marketing assistance payment expense was $350,075 in 2011 versus $22,800 in 2010. An increase of $327,275. We spent $55,010 in 2011 versus $8,170 in 2010 (increase of $46,840) in promotional expenses and trade show registrations. All other costs increased by $16,956.

Product development costs for 2011 and 2010 reflected the following detail:

	2011		2010		Change
Completed Parts	$	66,175	$	229,144	$	(162,969	)
Engineering	728,049		342,887		385,162
Materials and Components	143,684		136,542		7,142
Simulated Use	17,056		3,173		13,883
Sterilization	5,360		19,476		(14,116		)
Testing	36,745		111,715		(74,970		)
Automation	—		14,850		(14,850		)
Clean Room	—		7,000		(7,000		)
Total Product Development Costs	$	997,069	$	864,787	$	132,282

Product development costs increased by $132,282 from 2010 levels to $997,069.  We spent approximately $480,700 of the total development costs incurred in 2011 for the development of a new IV Shuttle device we are planning to market as a companion to our prefilled syringe device. We continue to work on our blood collection devices and our prefilled syringe product.

In 2010, we wrote down inventory by $247,981.  This represented the remaining carrying value of our Needlyzer product and a few items that were related to raw materials for the blood collection device that have been scrapped. We had no inventory at year end for 2011 or 2010.

We recorded a $696,331 charge in 2010 to write off equipment a partial write down of our Key-Lok intellectual property and a few miscellaneous assets. In 2011, we charged off abandoned leasehold improvements and miscellaneous retired fixed assets totaling $150,342.   

Amortization expense associated with intellectual property was $505,085 in 2011 and was reflected in cost of operations. This is down by $104,629 reflecting suspension of amortization on the Key-Lok product. Depreciation expense of $265,648 was $40,122 higher than the $225,526 of depreciation in 2010. Amortization of finance costs in 2010 was $213,008 and $492,390 in 2011.  Fixed asset additions were $880,964 (net) in 2011.  They consisted primarily of leasehold improvements in our new office space, manufacturing molds, jigs and fixtures.  

The following table compares general and administrative expenses between 2011 and 2010:

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	2011		2010		Change
Office and Warehouse Lease	$	147,733	$	83,700	$	64,033
Director Fees	62,500		—		62,500
Network Support	72,805		39,956		32,849
Software and Website Development	52,360		5,623		46,737
Contributions	16,950		15		16,935
Moving Expense Reimbursement	29,828		—		29,828
Office Expense	30,527		18,598		11,929
Parking	14,940		—		14,940
Other General and Administration Expense	260,429		218,692		41,737
Total G&A	$	688,072	$	366,584	$	321,488

General and administrative expenses were up $321,488 in 2011 over 2010. Office rent is up $64,033 due to our new office and continued rent on our former location. Director fees of $62,500 were paid in 2011 for the first time. Network support and maintenance costs were up $32,849 in 2011. Most of the increase relates to our move to our new office and set up and moving costs for the network and workstations. Software purchases and website development costs totaled $52,360 in 2011 versus $5,623 in 2010, an increase of $46,737. We have upgraded many machines to current platforms and standardized versions of application software. Charitable contributions were up $16,935 in 2011. We incurred $29,828 of moving cost in 2011 over 2010. Office expenses were up $11,929 in 2011. Some of this increase relates to our new location and reprinting cards and stationary. Paid parking is necessary at our new location and totaled $14,940 in 2011. All other changes were less than $10,000 each and combined were a net increase of $41,737.

Other income included interest income from temporary cash investments of $17,954 in 2011 versus $19,910 in 2010.  In 2011, we recognized a loss on the write up of derivative liabilities based on the fair value of the derivative warrants issued in connection with debt during the first three quarters of 2010.  The net expense for the change in valuation of the derivative warrants was $135,931 in 2011 versus $313,335 of expense in 2010. Interest expense on our Notes, including $492,406 of debt issuance cost amortization was $4,692,406 in 2011. Interest expense in 2010 was $2,325,681. The increase of $2,523,725 is due to having the $30,000,000 of Notes outstanding all year in 2011 as compared to approximately four months in 2010.

Liquidity and Capital Resources

Total assets were $19,399,630 as of December 31, 2011 and $31,608,933 as of December 31, 2010. The $12,209,303 decrease in total assets reflects the net impact of the operating loss of $12,032,604.  The Company spent $638,043 to repurchase 259,355 of its own common shares in 2011.

During 2011, our unrestricted cash decreased by $2,142,017 to $6,173,628.  Restricted cash held in a reserve account for future interest payable on our Notes was $1,206,371 at the end of 2011 versus $3,864,411 at December 31, 2010, a decrease of $2,658,040.  Accounts receivable, accrued interest and prepaid assets were up $745,019 in 2011.  Most of this change related to increased product royalties accrued at December 31, 2011. The reserve for FDA clearance on our winged blood collection set was collected in 2011 thereby eliminating the $7,870,000 other current assets from 2010. Altogether, current assets declined by $11,925,038.

Fixed assets increased $880,964 due to additions in excess of deletions in 2011. Accumulated depreciation increased by $167,755.  Net intangible assets and recoupable royalties declined by $997,475.  All of this change related to amortization in 2011 of $505,085 on intellectual property and $492,391 of amortization of debt issuance costs.

Under the terms of the GBO agreement, we granted exclusive rights to manufacture, market and distribute three blood collection products over a six-year term.  Beginning with the fourth quarter of 2010, we began receiving quarterly royalty payments, which will total not less than $43,750,000 over the six-year term. During the same period we will make quarterly financial contributions totaling approximately $6,650,000 to cover the anticipated expenses of marketing the products. Royalty income in 2011 increased to $2,303,125 versus $150,000 in 2010.

In connection with the issuance of our Notes in September and October 2010, we transferred the rights to receive all

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royalties under the GBO agreement to a new wholly owned subsidiary. All of the royalties payable under the GBO agreement are committed to pay the principal and interest due on the Notes. We received approximately $23,294,000 in net proceeds from the sale of our Notes after establishing a $4,500,000 interest reserve and paying offering expenses.

We used the net proceeds from the sale of the Notes to pay off all of our bank debt and all principal and accrued interest on bridge loans made by a principal shareholder, which together totaled $4,360,000.   

Our primary cash requirements are: (a) funding continuing development of our safety syringe products and other medical device safety products based on the technology for which we hold rights, (b) utilizing our internal personnel and third party contractors as needed to support our day-to-day operations required to develop and commercialize these products; and (c) paying royalties and marketing contributions on our blood collection productions being distributed under the GBO agreement.

Our operations are currently funded principally from the net proceeds of our sale of the Notes. Current cash should allow us to operate through June 2012. We have secured a letter of commitment for bridge funding from our principal investor, and we are working with financial advisors to plan a capital raise in early 2012 to fund our capital and operational requirements through 2014. The indenture for our Notes limits our future borrowing to an additional $7,500,000 of new senior debt and $15,000,000 of unsecured debt while the Notes are outstanding.

Our long-term financial results and operations in future periods will depend upon our ability to enter into sales and distribution agreements for our products currently under development so we can generate sustained revenues from our portfolio of products and technologies. We anticipate that funding our continued development and launches of our planned products, meeting current capital support requirements, and pursuing such other opportunities as our board of directors may authorize will continue to require a substantial amount of cash. Whether we commit resources to optional projects will depend upon our cash position from time to time.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk.

We are not party to any forwards and futures, options, swaps, or other instruments that would expose us to market risk associated with activities in derivative financial instruments, other financial instruments, and derivative commodity instruments.  Our bank indebtedness was historically priced at interest rates geared to the lender’s prime rate.  Therefore, our interest expense may increase or decrease due to changes in the interest rate environment should we elect to incur future bank debt.  Our Senior Notes were priced at 14%, at issue, based on the minimum cash flow under our distribution agreements for our blood collection devices.  If we exceed the minimum volumes under the contract, the yield to the investors will increase based on additional interest being paid on the notes through October 2016. To date the revenue has not exceeded minimum volumes pursuant to our contract.

Item 8.       Financial Statements and Supplementary Data.

The following financial statements of the company are included at the end of this report:

• Report of Independent Registered Public Accounting Firm

• Balance Sheets as of December 31, 2011 and 2010

• Statements of Operations for the Years Ended December 31, 2011 and 2010

• Statements of Shareholders' Equity/(Deficiency) for the Years Ended December 31, 2011 and 2010

• Statements of Cash Flows for the Years Ended December 31, 2011 and 2010

• Notes to Financial Statements

Item 9.       Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A.    Controls and Procedures.

MedPro’s management, under the supervision and with the participation of the Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), evaluated the effectiveness of the design and operation of our disclosure controls and

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procedures as of December 31, 2011.  Based on that evaluation, the CEO and CFO concluded that MedPro’s disclosure controls and procedures are effective in timely making known to them material information required to be disclosed in the reports filed or submitted under the Securities Exchange Act.  There were no changes in MedPro’s internal control over financial reporting during the fourth quarter of 2011 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Management conducted an evaluation of the effectiveness of the internal controls over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011.  Based on management’s assessment and those criteria, management believes that the internal control over financial reporting as of December 31, 2011 was effective.

Management’s internal control report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report.

Item 9B.    Other Information.

Not applicable.

PART III

Item 10.     Directors, Executive Officers and Corporate Governance.

Directors and Executive Officers

The following table shows information regarding our current directors and executive officers. The directors are elected by the stockholders. The executive officers serve at the pleasure of the Board of Directors.

Name	Age	Title
W. Craig Turner	58	Chief Executive Officer and Chairman of the Board of Directors
Marc T. Ray	58	Vice President Finance, Chief Financial Officer
Gregory C. Schupp	56	Chief Operating Officer
C. Garyen Denning	31	Executive Vice President
Gary A. Peterson	60	Director
Warren Rustand	68	Director
Ernest L. Fletcher	59	Director
W. Leo Kiely III	64	Director
Carl Kleidman	53	Director

W. Craig Turner is the founder of MedPro and has been Chairman of the board of directors of our predecessor since its inception. He was appointed Chairman of our Board of Directors when our merger took effect in December 2007. Mr. Turner is also the President and Chairman of the Board of Directors of CRM Companies, Inc., a real estate development

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company specializing in the development of commercial and industrial properties with more than 450 employees. At CRM Properties, Mr. Turner has been responsible for the development of over $250 million in commercial and industrial properties. Previously, Mr. Turner served as Director of Industrial Development for the Commonwealth of Kentucky under then Governors John Y. Brown and Martha Layne Collins. Mr. Turner is the father-in-law of C. Garyen Denning.

Marc T. Ray was appointed Vice President Finance and Chief Financial Officer of our predecessor in October 2007 and continued in the same capacity when our merger took effect in December 2007. Mr. Ray served as the Treasurer and as a member of the Board of Directors of MedPro from July 1994 to August 2007. Mr. Ray is a Certified Public Accountant with 35 years of experience in public accounting and industry. From November 2004 to October 2007 Mr. Ray served as the managing member of Ray, Foley, Hensley & Company, PLLC, a public accounting firm that he founded in Lexington, Kentucky. From February 1994 to October 2004, Mr. Ray was President of the Lexington, Kentucky based public accounting firm Ray, Hager & Henderson, PSC. From 1976 through 1978 and 1982 through January 1994, Mr. Ray was employed or was a partner with Coopers & Lybrand, a predecessor of PriceWaterhouseCoopers.  In the intervening years Mr. Ray was employed as a financial analyst with a fortune 500 company and was a partner in a local accounting firm.

Gregory C. Schupphas agreed to join MedPro as Chief Operating Officer effective April 23, 2011. Since 2009, Mr. Schupp had served as Director of Operations, G.M. of United States manufacturing for the Sorin Group, a global medical device manufacturer and distributor based in Milan, Italy.  From 2005 through 2008, he served as Vice President Operations of the New Jersey facilities of Maquet, Inc., a global medical equipment company headquartered in Rastatt, Germany.  Mr. Schupp has served in strategic and operational positions for medical and telecommunications manufacturers for over twenty years.

C. Garyen Denning was appointed Executive Vice President in March 2011, having previously served as Director, Program Management since joining MedPro in February 2006. He previously served as a sales manager for Union Beverage, a wine distributor in Chicago, Illinois.  Mr. Denning received his undergraduate degree in economics from Wake Forest University and a master’s degree from the Warrington College of Business Administration at the University of Florida.  Mr. Denning is the son-in-law of W. Craig Turner.

Gary A. Petersonwas appointed as a Director when our merger took effect in December 2007. He also served as a director of our predecessor since 1998 and as its President and Chief Executive Officer from 1998 to 2003.  Mr. Peterson is President and Chief Executive Officer of BATON Development Inc., a virtual incubator for new medical products and has been the Managing Member of BATON Ventures LLC and PSF Health Care LLC, and a Venture Partner in Affinity Ventures II LLC, all venture capital funds.  Mr. Peterson has spent over 35 years in the medical device and health services business and has served as a director of numerous public and private companies.  He was co-founder and Chief Operating Officer and Executive Vice President of Angiomedics Incorporated, which was acquired by Pfizer, Inc. in 1986 and renamed Schneider USA. Schneider then sold to Boston Scientific for over $2 billion. Before starting Angiomedics, Mr. Peterson was responsible for product management and long term planning for Cardiac Pacemakers, Inc. (which became Guidant and was subsequently acquired by Boston Scientific) and held various sales and marketing management positions with Renal Systems, Inc. (now Minntech).

Warren Rustand was appointed as a Director when our merger took effect in December 2007. Mr. Rustand is currently managing partner for SC Capital Partners LLC. He has served as a member of the Board of Directors for over 50 public, private, and not-for-profit organizations, including as Chairman of more than half of those organizations. In the medical field, Mr. Rustand has served as Chairman of Tucson Medical Center, Chairman of Health Partners of Arizona, Chairman of TLC Vision, Chairman of Medical Body Sculpting, and Chairman of Health Equity, Incorporated. Mr. Rustand also served as Appointment Secretary and Cabinet Secretary to former US President Gerald Ford.

Dr. Ernest L. Fletcher, who served as Governor of the Commonwealth of Kentucky from 2003 to 2007, was appointed a director in October 2008.  Governor Fletcher was elected to the United States House of Representatives in 1998 from Kentucky’s 6th Congressional District. In Congress, he served as a member of the House Committees on Energy and Commerce and was selected to chair the Policy Subcommittee on Health.  His legislative career began in 1995 as a State Representative for Kentucky’s 78th District.  He has also been an Air Force fighter pilot, engineer, family doctor, lay minister, state legislator, and United States Congressman.  Governor Fletcher was a family practice physician in Lexington for twelve years, including two years as CEO of the Saint Joseph Medical Foundation.  He is currently a business development and healthcare consultant.

W. Leo Kiely III was appointed a director in October 2008.  He is the retired in July 2011 as Chief Executive Officer of MillerCoors, a joint venture combining the U.S. and Puerto Rico operations of SABMiller plc and Molson Coors Brewing Company.  Mr. Kiely formerly served as President and Chief Executive Officer of Molson Coors Brewing Company.  He

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served as President and Chief Operating Officer of Coors Brewing Company from March 1993 to May 2000. Before joining Coors Brewing Company, he held executive positions with Frito-Lay, Inc., a subsidiary of PepsiCo and Ventura Coastal Corporation, a division of Seven Up Inc. Mr. Kiely began serving on the Board of Directors of Altria Group, Inc. in October of 2011. He serves on the Boards of the Denver Center for the Performing Arts and the Bonfils Foundation in Denver, Colorado.

Carl Kleidman was elected as a director in August 2010.  He is the Managing Director of Investments of Vision Capital Advisors LLC ("Vision"), a New York based hedge fund manager. Before joining Vision in November 2007, Mr. Kleidman served as a Managing Director at Centrecourt Asset Management from January to November 2007, and at ComVest Investment Partners from 2002 through 2005. He has also served as Head of Investment Banking at Commonwealth Associates and Barington Capital Group, and was a partner at the law firm of Shea and Gould. Mr. Kleidman is a director of Novaray Medical, Inc., a medical imaging company.

Committees of the Board of Directors

The standing committees of MedPro's board of directors are its audit committee, executive compensation committee and nominating committee.  These standing committees were established in 2008.  The board of directors appoints the members of each committee for a term beginning after the first regular meeting of the board following the annual shareholders meeting and until their respective successors are elected and qualified.  The charters of each of the standing committees of our board of directors are available on our corporate website at http://www.medprosafetyproducts.com.

Audit Committee

The audit committee selects the auditing firm to be retained each year as independent auditors of MedPro's financial statements and to perform services related to the audit. It pre-approves any audit and non-audit services to be performed by the independent auditors. It reviews the scope and results of the audit with the independent auditors. It also reviews MedPro's financial statements and results of operations, internal accounting and control procedures, financial reporting policies and practices, internal audit reports, and makes reports and recommendations to the board as it deems appropriate. The audit committee reviews and approves related party transactions and other transactions as required by applicable rules and regulations.

The current members of the audit committee are Messrs. Peterson,  Fletcher and Kiely, which Mr. Peterson chairs.  As described under “Item 13. Certain Relationships and Related Transactions, and Director Independence” below, each of its members is an independent director.  Mr. Kiely qualifies as an audit committee financial expert.

Executive Compensation Committee

The executive compensation committee determines the cash and other incentive compensation, if any, to be paid to MedPro's Chief Executive Officer, evaluates the performance of the Chief Executive Officer, and administers MedPro's 2008 Stock and Incentive Compensation Plan.  The Chief Executive Officer determines the compensation of the other executives and employees under guidelines for incentive compensation approved by the executive compensation committee.  The current members of the executive compensation committee are Messrs.  Rustand, Fletcher and Kiely, which Mr. Kiely chairs.

Nominating and Governance Committee

The nominating and governance committee exercises general oversight with respect to the governance of the board of directors. It reviews and recommends candidates for director, evaluates and recommends governance practices, leads the board performance review, makes recommendations concerning the size and composition of the board, reviews and recommends policies applicable to directors, including compensation and retirement, assesses the independence of directors, recommends membership of board committees, reviews shareholder proposals and makes recommendations of changes to MedPro's articles of incorporation and bylaws.  The current members of the nominating and governance committee are Messrs. Peterson, Rustand, and Kleidman which Mr. Kleidman chairs.

Nomination Policy

In evaluating candidates for director, the corporate governance and nominating committee considers experience, mix of skills and other qualities desired to achieve appropriate board composition, taking into account the experience, skills and qualities of current board members and needs of the board and MedPro as identified by the committee from time to time. The committee has not established specific minimum criteria or qualifications because from time to time the needs of the board and

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Company may change. However, the committee will generally look for people who have demonstrated high ethical standards, integrity and sound business judgment.

Consideration of new board nominee candidates typically involves a series of internal discussions, review of information concerning candidates and interviews with selected candidates. In general, candidates for nomination to the board are suggested by board members or by officers of MedPro.  MedPro did not employ a search firm or pay fees to other third parties in connection with seeking or evaluating board nominee candidates. The committee will consider candidate proposals by shareholders that comply with the requirements of MedPro's bylaws and will evaluate candidates proposed by shareholders using the same criteria as for other candidates. A shareholder seeking to recommend a prospective nominee for the committee's consideration should submit the candidate's name and qualifications to the Company's Secretary by fax to (859) 225-5347 or by mail to Bethany Denning, Corporate Secretary, MedPro Safety Products, Inc., 145 Rose Street, Lexington, Kentucky 40507.

Communications with the Board of Directors

Shareholders and other parties interested in communicating directly with the board of directors or individual directors may do so by writing in care of MedPro's Corporate Secretary, Bethany Denning, 145 Rose Street, Lexington, Kentucky 40507, or by fax to (859) 225-5347. The nominating committee is considering procedures for handling correspondence received by MedPro and addressed to the board of directors, or an individual director. The Corporate Secretary reviews any correspondence received in this manner to filter advertisements, solicitations, spam and other such items.

Code of Ethics

We have adopted a code of ethics applicable to directors, officers and employees, which is included with our Code of Conduct and is posted on our website at http://www.medprosafetyproducts.com. If we amend or waive any of the provisions of the Code of Conduct applicable to our directors, executive officers or senior financial officers, we intend to disclose the amendment or waiver on our website. We will provide to any person without charge, upon request, a copy of the Code of Conduct. You can request a copy by contacting MedPro's Corporate Secretary, Bethany Denning, 145 Rose Street, Lexington, Kentucky 40507, or by fax to (859) 225-5347.

Conflicts of Interest

Certain conflicts of interest may exist from time to time between MedPro and certain officers and directors due to the fact that some of them may have other business interests to which they devote their attention. Some of our officers and directors may continue to do so notwithstanding the fact that management time should be devoted to our business. MedPro has not established policies or procedures for the resolution of current or potential conflicts of interest between us, our officers and directors or affiliated entities. There can be no assurance that our management will resolve all conflicts of interest in favor of us, and conflicts of interest may arise that can be resolved only through the exercise by management of their best judgment as may be consistent with their fiduciary duties.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers and people who own more than 10 percent of our common shares to file initial stock ownership reports and reports of changes in ownership with the Securities and Exchange Commission. Based on a review of these reports, the following filings were filed late during 2011:

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Late Filings with the SEC
Officer / Director	Filed by The Company	Form	Event	Earliest Reporting Date	Date Report Filed
Marc T. Ray	yes	4	Options Grant	9/29/2010	7/1/2011
Greg C. Schupp	yes	4	Options Grant	8/15/2011	9/26/2011
Warren S. Rustand	yes	4	Options Grant	8/23/2011	9/26/2011
Ernie L. Fletcher	yes	4	Options Grant	8/23/2011	9/26/2011
Gary A. Peterson	yes	4	Options Grant	8/23/2011	9/28/2011
Vision Capital Advantage Fund - on behalf of Carl Kleidman	no	4	Options Grant	8/23/2011	9/28/2011
W. Leo Kiely III	yes	4	Options Grant	8/23/2011	9/29/2011
Gary A. Peterson	yes	4	Gifts/Sale	10/12/2011	11/23/2011

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Item 11.     Executive Compensation.

The Summary Compensation Table below shows the compensation earned by our executive officers for the last three fiscal years.

Summary Compensation Table

Name and principal Position	Year	Salary ($)		Bonus ($)		Stock Awards ($)(2)		Non-Equity Incentive Plan Compensation ($)(1)		All Other Compensation  ($) (3)		Total  ($)
W. Craig
Turner,	2011	$	396,494	$	—	$	444,675	$	200,000	$	34,600	$	1,075,769
Chairman and	2010	$	354,489	$	253,000	$	—	$	—	$	32,290	$	639,779
Chief Executive	2009	$	296,160	$	75,000	$	31,507	$	—	$	41,590	$	444,257
Officer
Gregory C.
Schupp,	2011	$	173,636	$	30,000	$	245,954	$	—	$	86,161	$	535,751
Chief Operating
Officer
Marc T. Ray,
Chief Financial	2011	$	234,462	$	35,000	$	171,160	$	—	$	34,600	$	475,222
Officer and	2010	$	229,633	$	43,050	$	90,442	$	—	$	40,224	$	403,349
Vice President of	2009	$	216,715	$	42,000	$	49,407	$	—	$	38,339	$	346,461
Finance
C. Garyen
Denning,	2011	$	186,194	$	35,000	$	171,160	$	—	$	30,202	$	422,556
Executive Vice
President
Walter W.
Weller, III (3)	2011	$	309,523	$	—	$	—	$	—	$	131,032	$	440,555
Former President	2010	$	311,143	$	63,550	$	90,442	$	—	$	33,553	$	498,688
and Chief	2009	$	264,408	$	62,000	$	49,407	$	—	$	41,160	$	416,975
Operating Officer

(1) The Executive Compensation Committee awarded Mr. Turner $200,000 on February 8, 2012, based on 2011 performance.  The amount of the Non Equity Award was not determinable at year end, and the Company did not accrue and charge these expenses until 2012 when all events to determine the amount of the award had occurred.

(2) Represents the aggregate grant date fair value recorded under ASC 718 with respect to stock options awarded to the named executive.  The terms of these awards are described under “Stock Option Awards,” below.

(3) Mr. Weller resigned from all his positions with MedPro in September 2011.

(4) The following table shows the various components of All Other Compensation paid in 2011.

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Name	Profit Sharing Amount		401(k)  Match		Group Term  Life		Accrued Vacation and Other Termination		Moving Expenses		Health Savings Account Contribution		Totals
Mr. Turner
2011	$	19,857	$	9,800	$	943					$	4,000	$	34,600
2010	$	17,200	$	9,800	$	1,290					$	4,000	$	32,290
2009	$	22,700	$	13,600	$	1,290					$	4,000	$	41,590
Mr. Weller
2011	$	19,857	$	9,800	$	798	$	98,577			$	2,000	$	131,032
2010	$	20,463	$	9,800	$	1,290					$	2,000	$	33,553
2009	$	22,700	$	15,170	$	1,290					$	2,000	$	41,160
Mr. Schupp
2011 (1)	$	18,547	$	7,068	$	268			$	57,945	$	2,333	$	86,161
Mr. Ray
2011	$	19,857	$	9,800	$	942					$	4,000	$	34,599
2010	$	25,134	$	9,800	$	1,290					$	4,000	$	40,224
2009	$	22,700	$	10,349	$	1,290					$	4,000	$	38,339
Mr. Denning
2011	$	17,823	$	8,203	$	176					$	4,000	$	30,202
													—

(1) - Moving expenses included $7,945 of taxable temporary living expenses, $29,828 of non taxable moving expenses and $20,172 of additional taxable moving allowance.

Stock Option Awards

On August 18, 2008, our board of directors adopted the MedPro Safety Products, Inc. 2008 Stock and Incentive Compensation Plan (the “2008 Plan”) and awarded options to purchase a total of 3,000,000 shares to directors, officers and employees at an exercise price of $1.81 per share.  The exercise price is equal to the per share valuation of our common stock agreed upon with the holders of our Series A Stock in connection with those holders’ purchase of  preferred stock and warrants to purchase common stock for $13 million on December 28, 2007.  The options may be exercised only during the 30-day period ending on January 31, 2013.  If before that date, the recipient terminates service with us or a change of control of our company (as defined in the 2008 Plan) occurs, then the recipient must exercise the options 30 days after the event.

On February 2, 2011, the Executive Compensation Committee approved awards of service-based and performance-based options to our CEO, Mr. Turner.  On that date, he was granted options to purchase 300,000 options at an exercise price of $2.62 per share, the average of the bid and ask price on the date of grant. Fully vested options for 100,000 shares will vest on each of December 31, 2011, 2012 and 2013 if Mr. Turner continues to serve as CEO on each date.  The Committee also approved a second award of options to purchase 300,000 shares upon the achievement of performance goals.  Options for up to 100,000 shares will be granted annually if and to the extent that the Company achieves predetermined goals for financial results, business and product development, capital market milestones, and organizational initiatives in each of 2011, 2012, and 2013.  The committee also determined that Mr. Turner was entitled to 100,000 options at $2.725 as a performance based award for 2011. The award was not granted until March 5, 2012 and was not recorded in the 2011 financial statements.

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During 2011, the Company the following options to acquire common stock to various officers as part of compensation to Executive Officers:

2011 Options Awarded to Executive Officers
Officer Name and Grant Date	Options Granted	Date Exercisable	Option Exercise Price		Option Expiration Date
W. Craig Turner
2/2/2011	100,000	1/1/2012	$	2.62	2/2/2021
2/2/2011	100,000	1/1/2013	$	2.62	2/2/2021
2/2/2011	100,000	1/1/2014	$	2.62	2/2/2021
Gregory C. Schupp
8/15/2011	50,000	8/15/2012	$	2.96	8/15/2021
12/9/2011	100,000	12/9/2011	$	2.25	12/9/2021
Marc T. Ray
12/9/2011	100,000	12/9/2011	$	2.25	12/9/2021
C. Garyen Denning
12/9/2011	100,000	12/9/2011	$	2.25	12/9/2021

Employment Agreements

MedPro has entered into employment agreements with its each of its executive officers. Each employment agreement extends for an initial three-year term, subject to automatic one-year extensions thereafter, unless we or the executive provide prior written notice of intent not to renew.  The initial terms of the employment agreements expire on the following dates:

W. Craig Turner	June 30, 2012
Gregory C. Schupp	April 24, 2014
Marc T. Ray	December 31, 2011
C. Garyen Denning	December 31, 2013

Each of the employment agreements provides that the named executive officer will be paid a base salary and is eligible for a bonus of up to a specific percentage of base salary.  The annual base salaries and maximum bonus percentages for 2011 are currently as follows:

Name	Annual Salary		Maximum Bonus (% of annual salary)
W. Craig Turner	$	395,000	100	%
Gregory Schupp	252,000		70	%
Marc T. Ray	245,000		70	%
C. Garyen Denning	238,800		70	%

The board of directors has sole discretion to increase the base salary and determine the amount of and criteria for any bonus for Mr. Turner.  Either the board of directors or the CEO can increase the base salary and determine the amount of and criteria for any bonus for the other executive officers, subject to applicable corporate governance requirements of any securities exchange on which our common stock may be listed.

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On February 2, 2011, the Executive Compensation Committee increased Mr. Turner’s base compensation to $395,000 per year as of January 1, 2011.  The Committee also determined that beginning in 2011, Mr. Turner’s cash incentive compensation will be based on achievement of specific, measurable annual performance goals as established by the independent members of the Board of Directors at the beginning of each fiscal year.  The goals will include four categories: (1) financial results; (2) business/product development milestones; (3) Capital market milestones; and (4) organizational/talent initiatives.  The payout as a percentage of base compensation will be 50% for achieving a threshold level, 100% for achieving a targeted level, and 150% for achieving a maximum level.

Each of the executives is entitled to participate in our stock option and incentive compensation arrangements for management and in our employee benefit plans, policies and practices on the same terms and conditions as other employees, including vacation and holiday time.  Mr. Schupp’s contract provides for a grant of options to purchase 50,000 shares at market value on the date his employment commences.  These options will vest one year after the date of grant.

Each agreement contains confidentiality, non-solicitation and non-competition covenants.  The executive agrees not to encourage employees to leave the Company, encourage customers to terminate their relationships with the Company, and compete with the Company during his employment and during a restricted period.  For Mr. Turner, the restricted period extends for six months after terminating employment.  For the other executives, the restricted period ends on the later of (i) the expiration of the term of his employment agreement or (ii) two years after terminating employment.  Each executive also agrees to maintain the confidentiality of the Company’s information during and after employment with the Company.

The employment agreements provide that if the executive voluntarily terminates his employment, or if we terminate the executive for cause (as defined in the employment agreement), then we have no further obligations to the executive after the date of termination.  Should we terminate the executive other than for cause, we must continue to pay the executive’s monthly base salary (but no other amounts related to any employee benefit plans and no further accrual of vacation, sick or holiday time) until the end of the term of the agreement, subject to and in exchange for any written releases we deem appropriate.

Our agreement with Mr. Turner provides that upon termination of employment following a “change of control,” the executive will receive a single sum payment in an amount equal to his monthly base salary for 36 months (less any applicable social security, federal, state or local tax withholdings), based on the monthly base salary in the month in which such termination occurs.

The employment agreements for Mr. Turner defines a "change of control" as the occurrence of one of the following events:

• any person or group acquires ownership of our stock that, together with stock held by that person or group, constitutes more than 50% of the total fair market value or total voting power of our stock.

• any person group acquires, during a 12-month period ending on the date of the most recent acquisition by that person or group, ownership of stock possessing 30% or more of the total voting power of the stock of our Company,

• a majority of the members of our board of directors are replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of our board of directors before the date of the appointment or election.

• any person or group, during a 12-month period ending on the date of the most recent acquisition by that person or group, acquires assets from our Company or a parent entity that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of our assets immediately before the acquisition or acquisitions.

There is no change of control in the event of a transfer to an entity that is controlled by the shareholders of our company immediately after the transfer.  In addition, the transfer of our assets to one of the following recipients will not constitute a "change of control":

• a shareholder of our company (immediately before the asset transfer) in exchange for or with respect to its stock;

• an entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by us;

• a person or group that owns, directly or indirectly, 50% or more of the total value or voting power of all of our outstanding stock; or

• a person, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a person described in the preceding subparagraph.

We have agreed to pay Mr. Turner the amount of any state, local or federal tax incurred as a result of payments made to either of them that would not have been imposed but for the occurrence of a change of control.

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Mr. Ray’s employment agreement provides that upon a change of control any amounts he would be due in connection with any unexpired term may be accelerated, without discount, at his discretion.  His employment agreement defines a “change of control” as (1) a change in ownership of 50% or more within a 12 month period as a result of a single transaction or a series of transactions with one or more related buyers or a consortium of buyers, or (2) any sale, merger, consolidation or leveraged buyout resulting in our company no longer being public as a standalone company.  We have agreed to indemnify Mr. Ray against any excise tax (in connection with parachute payments) or additional taxes, other than ordinary income taxes, due to the acceleration of payments as a result of a change of control.

Mr. Schupp’s contract, as amended, also provides for aggregate moving expenses, relocation costs, transportation costs and temporary living expenses of $52,000 (originally $42,000). His based pay was reduced by $10,000 to compensate for the increase in moving expense allowance. His base pay was reinstated to $240,000 after the $10,000 reallocation to moving expenses was recovered by the Company.

Outstanding Equity Awards at Fiscal Year-End

The following table shows the stock options currently held by the named executives. We have not awarded restricted stock to our executive.

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Option Awards
(a)	(b)	(c)	(d)	(e)				(f)
Name and Grant Date	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Equity  Incentive Plan  Awards:  Number of Shares, Underlying Unexercised Unearned Options(#)	Option  Exercise Price  ($)				Option  Expiration Date
W. Craig Turner
8/18/2008	—	1,050,000	n/a	$	1.81	(1)		1/31/2013	(2)
5/27/2009	25,974	—	n/a	$	4.24			5/27/2014
2/2/2011	—	300,000	n/a	$	2.62			2/2/2021
Gregory C. Schupp
8/15/2011	—	50,000	n/a	$	2.96			8/15/2021
12/9/2011	—	100,000	n/a	$	2.25			12/9/2021
Marc T. Ray
8/18/2008	—	350,000	n/a	$	1.81	(1)		1/31/2013	(2	)
5/27/2009	25,974	—	n/a					5/27/2019
9/29/2010	—	150,000	n/a					9/29/2020
12/9/2011	—	100,000	n/a					12/9/2021
C. Garyen Denning
8/18/2008	—	250,000	n/a	$	1.81	(1	)	1/31/2013	(2	)
5/27/2009	19,481	—	n/a	$	3.85			5/27/2019
10/6/2009	6,849	—	n/a	$	3.65			10/6/2019
9/29/2010	—	52,500	n/a	$	2.70			9/29/2020
12/9/2011	—	100,000	n/a	$	2.25			12/9/2021
Walter W. Weller	n/a	n/a	n/a	n/a				n/a

(1) The exercise price is equal to the per share valuation of our common stock agreed upon with the holders of our Series A Stock in connection with those holders’ purchase of  preferred stock and warrants for $13 million on December 28, 2007.

(2) The options may only be exercised during a 30-day period ending on January 31, 2013.  If before that date either the recipient terminates service with us or a change of control of our company occurs, then the recipient must exercise the options within 30 days after the event.

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Options Exercised and Stock Vested

The following table shows options exercised by the named executive officers during 2011.

Options Exercised and Stock Vested

	Options Exercised
Name	Number of Shares Acquired on Exercise (#)(1)	Value Realized on Exercise ($)
W. Craig Turner	—	—
Marc T. Ray	—	—
Gregory C. Schupp	—	—
C. Garyen Denning	—	—
Walter W. Weller	1,050,000	$840,000

(1) Mr. Weller received a total of 210,161 shares of common stock net of shares withheld to pay the option exercise price and tax withholding.

Mr. Weller elected to exercise his 1,050,000 options granted in 2008 within that 30 day period following his resignation in September 2011. In connection with the exercise, Mr. Weller authorized the withholding of 728,161 shares at $2.61 per share to pay the $1,900,500 exercise price and 111,678 shares at $2.61 per share to pay withholding taxes.

Director Compensation

None of MedPro's non-employee directors received cash compensation for service as a director through the second quarter of 2011.  

The Company has made a one-time grant of stock options to each of its non-employee directors for their service through the second quarter of 2011. Messrs. Peterson and Rustand, who have served as directors since December 27, 2007, were each awarded options to purchase 100,000 shares on August 18, 2008, at an exercise price of $1.81 per share.  The options may be exercised only during the 30-day period ending on January 31, 2013.  If before that date, the recipient terminates service with us or a change of control of our company (as defined in the 2008 Plan) occurs, then the recipient must exercise the options 30 days after the event.   Messrs. Fletcher, Kiely and Kleidman, the three non-employee directors who subsequently joined the board, have each been awarded 50,000 share options at the same exercise price and on the same terms as the options awarded to Messrs. Peterson and Rustand on August 18, 2008.

Beginning with the third quarter of 2011, MedPro pays each of its non-employee directors an annual retainer of $25,000, payable in quarterly installments. In addition, on August 23, 2011, the

board of directors adopted the 2011 Non-Employee Director Stock Option Program and reserved 500,000 of the shares authorized for issuance under the 2008 Plan for the stock options to be awarded under the Program.

The Program provides that each non-employee director automatically receives an award of options to purchase 25,000 shares each year upon election at each annual meeting. The options have a ten-year term and become exercisable on the first anniversary of the award date. The exercise price is trading price at close of trading on the award date, which was $2.96 for initial grant of options on August 23, 2011. Vested options may be exercised for one year following termination of service due to death or disability. Unvested options will become fully exercisable upon a change of control, as defined by the 2008 Plan.

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The following table shows the compensation paid to our non-employee directors in 2011. Compensation paid to Messrs. Turner and Weller, the two executive officers who served as directors during 2011, is included in the Summary Compensation Table. 

Director Compensation

Name	Fees earned or paid in cash ($)		Option Awards ($)		Total ($)
Ernest Fletcher	$	12,500	$	37,200	$	49,700
Leo Kiely	12,500		37,200		49,700
Carl Kleidman (1)	12,500		114,278		126,778
Gary Peterson	12,500		37,200		49,700
Warren Rustand (2)	12,500		37,200		49,700

(1) In addition to options for 25,000 shares granter under the Non-Employee Director Stock Option Program, Mr. Kleidman also received a grant of options for 50,000 shares on August 23, 2011 on the same terms of options previously granted to each of MedPro's other non-employee directors in prior years.

(2) Does not included compensation for financial advisory fees paid to Mr. Rustand's firm. See “Item 13 -- Certain Relationships and Related Transactions, and Director Independence.”

2008 Stock and Incentive Compensation Plan

The 2008 Plan authorizes the issuance of a maximum of 7,500,000 common shares for awards to employees and directors, subject to adjustment as described below.  If an award granted under the 2008 Plan expires or terminates without exercise, the shares no longer subject to that award will again become available for issuance under the Plan.  A maximum of 1,500,000 common shares subject to stock-based awards or $1,000,000 for cash-based awards may be granted during any one fiscal year to any one individual.  A maximum of 300,000 shares may be issued upon the exercise of incentive stock options. A maximum number of 50,000 shares may be issued without consideration as restricted stock awards, restricted stock units or other “full-value awards.” The 2008 Plan permits grants of stock options (including incentive stock options and nonqualified stock options), stock appreciation rights (“SARs”), restricted stock awards, restricted stock units, and cash performance awards.

The 2008 Plan became effective upon adoption by the board of directors.  The 2008 Plan was subsequently approved by shareholders as required by the Internal Revenue Code in order to award incentive stock options.

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Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth information known to us regarding beneficial ownership of our common stock as of February 28, 2011, by:

• each person known by us to be the beneficial owner of more than 5% of either class of our common stock;

• each of our executive officers and directors; and

• our executive officers and directors as a group.

The table does not show the full potential effect of the conversion of Series A Stock, Series B Stock or Series C Stock into our common stock or the exercise of warrants to purchase our common stock. Neither the Series A Stock, the Series B Stock nor the Series C Stock may be converted, nor may the related warrants be exercised, to the extent that such a conversion or exercise would cause the holder to beneficially own more than 9.9% of the outstanding common stock.  The holder may terminate the restriction 60 days after giving written notice to MedPro.

	Shares Beneficially Owned (1)
Name	Number  of Shares	Percentage of class (2)
W. Craig Turner (3)	4,592,789	35.24	%
Vision Opportunity Master Fund, Ltd. ("VOMF") (4)	1,653,679	12.71	%
Vision Capital Advantage Fund LLC ("VCAF") (5)	1,398,090	9.90	%
Gary A. Peterson (6)	795,583	6.12	%
Baton Development (6)	673,722	5.18	%
C. Garyen Denning (8)	498,420	3.75	%
Marc T. Ray (9)	322,724	2.43	%
Warren Rustand (7)	243,658	1.85	%
Ernest L. Fletcher	14,000	*
W. Leo Kiely III	—	—	%
Carl Kleidman	—	—	%
Gregory C. Schupp	—	—	%
Executive officers and directors as a group (7 persons)	6,467,174	43.49	%

*           Indicates less than 1%

(1)           Unless otherwise indicated, each of the listed shareholders has sole voting and investment power with respect to the shares. Under SEC rules, each a person or group is considered to be the beneficial owner of securities that the person may acquire within 60 days through the exercise or conversion of convertible securities, options, warrants and rights, if any. Those securities are included in the total number of outstanding shares when computing the percentage beneficially owned by the person or group. The securities are not included in the total number of outstanding shares when computing the percentage of shares beneficially owned by any other person or group.

(2)           Percentages are based upon 13,007,963 outstanding shares.  Shares underlying currently exercisable warrants and convertible preferred shares are deemed outstanding for determining the ownership percentage solely of the holder.

(3)           Business address is 145 Rose Street, Lexington, Kentucky 40507.

(4)           The number of shares shown in the table is the number of outstanding common shares VOMF owns.  VOMF’s business address is 20 West 55th Street, New York, New York 10019.  Adam Benowitz, Managing Member of Vision Capital

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Advisors LLC, has voting and investment power with respect to the securities owned by VOMF.

(5)           The number of shares shown in the table is the number of outstanding common shares VCAF owns plus the number of shares issuable upon conversion of preferred stock or exercise of warrants that would increase VCAF’s beneficial ownership to 9.9%.  VCAF’s business address is 615 South DuPont Highway, Dover, Delaware 19901.  Adam Benowitz, Managing Member of Vision Capital Advisors LLC, has voting and investment power with respect to the securities owned by VCAF.

(6)           Mr. Peterson is the CEO of Baton Development. Business address is 10040 East Happy Valley Road # 37, Scottsdale, Arizona 85255.

(7)           Includes currently exercisable warrants for 131,023 shares.

(8)    Includes 143,907 shares held by Mr. Denning's wife and minor children and 52,500 options exercisable by his wife who is also an employee.

(9)    Includes 275,974 options currently exercisable and 100 shares beneficially owned as a trustee.

The following table shows as of February 28, 2012, the ownership of our common stock by our directors and officers as a group, our preferred shareholders, and our non-affiliate shareholders as of February 28, 2012 and assuming the conversion of all of the preferred stock and the exercise of all warrants and options for cash.

Shareholder	Common Shares	Price Per Share (1)		Aggregate Exercise Price		Percentage of Common Stock
As of February28, 2012
Directors and executive officers of MedPro	5,749,690					44.20	%
Other non-affiliate shareholders	5,318,504					40.90	%
VOMF	1,653,679					12.70	%
VCAF	286,090					2.20	%
TOTAL	13,007,963					100.00	%
Assuming conversion of all preferred stock and exercise of all warrants and stock options for cash
Directors and executive officers of MedPro
Common stock	5,749,690					11.95	%
Other warrants	131,023	$	1.81	$	237,152	0.27	%
Options (2)	3,161,461	$	2.13	6,748,085		6.57	%
SGPF earn-out shares (3)	690,608					14.30	%
						20.22	%
Non-affiliate shareholders
Common stock	5,318,504					11.05	%
Other warrants	402,435	$	1.81	728,407		0.83	%
Employee options (2)	609,348	$	2.54	1,552,003		1.27	%
						13.15	%
Preferred shareholders
Common stock	1,939,769					4.03	%
Series A Stock (4)	6,668,229					13.86	%
Series B Stock (4) (5)	5,975,116					12.41	%
Series C Stock (4) (6)	15,715,230					32.65	%
A Warrants	512,941	$	1.81	928,423		1.07	%
B Warrants	512,941	$	1.99	1,020,753		1.07	%
Warrants issued with debt (7)	741,672	$	3.44	2,550,016		1.54	%
						66.63	%
TOTALS	48,128,967			$	13,764,839	100.00	%

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(1) Represents either the conversion price of the preferred stock, or the exercise price of the warrants or options, as applicable on an average basis.

(2) Average exercise price of options awarded since 2008.  See Item 11 Executive Compensation – Stock Option Awards and Note 11 of Notes to Financial Statements.

(3) Issuable if revenue received on products based on acquired technology exceeds $5,000,000.

(4) VOMF and VCAF together own 6,155,288 of the outstanding Series A Stock and all of the Series B Stock and Series C Stock.

(5) Represents the common shares issuable upon the conversion of the 1,493,779 shares of Series B Stock

(6) Represents the common shares issuable upon the conversion of the 1,571,523 Series C Stock.

(7) The Company issued warrants with interim financing provided in 2010 by VOMF.  The debt was repaid in September 2010.

Equity Compensation Plan Information

The following table provides information with respect to our equity compensation plans as of December 31, 2011:

Plan category	Number of shares to be issued upon the  exercise of outstanding options, warrants and rights	Weighted-average exercise price of  outstanding options, warrants and rights		Number of securities remaining available for future issuance  under equity  compensation plans (excluding securities reflected in column  (a))
Equity compensation plans approved by security holders	3,770,809	$	2.20	1,816,529
Shares reserved for future incentive options for CEO	300,000	—		—
Shares reserved for future board of director options	375,000	—		—
Equity compensation plans not approved by security holders	—	—		—
Subtotal	4,445,809			1,816,529
Shares exercised in 2011	1,050,000	—		—
Shares expired/forfeited	187,662	—		—
Total	5,683,471	$	2.06	1,816,529
Total shares approved by security holders				7,500,000

Item 13.     Certain Relationships and Related Transactions, and Director Independence.

Director Independence

Our Board of Directors is currently composed of six members. Two of our directors, Mr. Kiely and Dr. Fletcher, are independent under the definition of the NASDAQ Stock Exchange. Mr. Turner is an officer and employee. SC Capital, for which Mr. Rustand is a Managing Director, received cash and equity compensation for financial services provided in connection with the merger, the private placement and the Senior Notes issued in 2010.  It also receives a fee under an advisory services agreement described above.  Mr. Peterson has provided consulting services to us, and Baton Development, an entity controlled by Mr. Peterson, has been a party to transactions with our predecessor described above.  Mr. Turner currently serves

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as Chairman of the Board of Directors.  Mr. Carl Kleidman, a new Director elected in August 2010, is the Managing Director of Investments of Vision Capital Advisors, LLC, the adviser to VOMF and VCAF.

Certain Relationships and Related Transactions

The following section describes transactions between MedPro and its directors, executive officers and their affiliates since January 1, 2009.

Technology Development and Option Agreement

On August 24, 2007, we entered into a Technology Development and Option Agreement (the “Technology Agreement”) with SGPF, LLC.  W. Craig Turner, our Chairman and CEO, owns 100% of the equity units of SGPF.  SGPF was established to acquire technology underlying a family of prefilled safety syringe products (the “Blunt Technology”) that we believed had potential for successful commercialization, at a time when MedPro did not have the financial resources to acquire the technology and risked losing the opportunity to other interested parties.

SGPF acquired the Blunt Technology from Visual Connections and its founder in 2007.  SGPF paid an initial transfer payment of $250,000 and agreed to pay Visual Connections transfer payments totaling $2,750,000 in installments over three years beginning in 2007.  SGPF also agreed to pay a royalty of 5% of on the first $250,000 of adjusted gross sales of products using the Blunt Technology in any calendar year, and 4% of the adjusted gross sales of such products for the remainder of the year.

The Technology Agreement requires SGPF to acquire the Blunt Technology.  MedPro agreed to direct the development of the Blunt Technology with the objective of fully commercializing it as quickly as possible, and to pay up to $375,000 towards the cost of development.  MedPro also acquired the option to purchase the Blunt Technology from SGPF.  The Technology Agreement originally provided that MedPro would pay the following amounts upon exercise of the option:

• $2,500,000 payable in cash to SGPF;

• assumption of the $2,750,000 in patent transfer payments payable to Visual Connections, including reimbursement of any installments previously paid by SGPF; and

• $2,500,000 payable in common stock to SGPF, based on a value of $1.81 per common share, which was the value agreed upon in our agreement with the Series A Stockholders.

MedPro also agreed to assume the obligation to pay the royalties to Visual Connections on sales of any products based on the Blunt Technology.

On September 8, 2008, we agreed to amend the Technology Agreement, which was a condition to our receiving a commitment from the holders of our Series J warrants to exercise those warrants in full for cash by November 1, 2008.  The amendment:

• increased the portion of the exercise price to be paid in cash from $2,500,000 to $3,345,000, which amount included all amounts SGPF had paid to date under its agreement with the original holders of the technology; and

• reduced the portion of the exercise price payable in shares of newly issued shares of our common stock from $2,500,000 to $1,250,000, based on a value of $1.81 per common share.

The amendment took effect on September 30, 2008, when the following events occurred (a) the holders of our Series J Warrants had exercised them for at least $6.5 million in cash by that date, and (b) we exercised our option to purchase the Blunt Technology.  The purchase closed in October 2008, at which time MedPro paid the cash portion of the purchase price, and the parties further amended the Technology Agreement to provide that the stock portion of the purchase price would be issued to SGPF only upon the occurrence of one of the following events:

• Within 30 days of MedPro’s realization, on a cumulative basis, of $5,000,000 of gross sales revenue from the Blunt Technology, or

• A ‘change of control’ of MedPro, defined as any event or set of circumstances, including but not limited to the termination of his employment, whereby W. Craig Turner ceases to possess, directly or indirectly, the power to direct or cause the direction of the management and policies of MedPro; or

• The sale or licensing of any part of the Blunt Technology intellectual property to another entity.

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As a result of its exercise of the option, MedPro assumed the obligation to pay the six quarterly patent transfer payments of $250,000 then remaining, or a total of $1,500,000.   These payments totaled $1,250,000   in 2009, and the final payment of $250,000 was made in 2010.

Ongoing Relationships

Lease

Until April 2011, our offices were located in leased space in Lexington, Kentucky. The lease is non-cancelable and runs through August 2012 at a monthly rent of $6,975. The lessor is a partnership in which MedPro’s Chairman and CEO holds an interest.

Advisory Agreements with SC Capital Partners

SC Capital Partners, LLC served as a financial adviser in connection with the December 2007 private placement to VOMF and other investors.  For those services, SC Capital received a total of $1,040,000 in cash, 593,931 newly issued shares of common stock and warrants to purchase 533,458 shares of common stock.  The warrants, which SC Capital assigned, are exercisable at an exercise price of $1.81 and have substantially the same terms as our Series A warrants.  Upon completion of the merger, Warren Rustand, Managing Partner of SC Capital, became a MedPro Director.

In March 2008, we entered into a financial advisory agreement with SC Capital. SC Capital has agreed to provide us with advisory services, finder services, merger and acquisition services and strategic alliances services.  On January 11, 2010, we signed a new agreement with SC Capital on substantially similar terms.  The current contract has an initial 24 month term and may continue on a month to month basis until terminated by 30 day notice.

We pay SC Capital a consulting fee of $15,000 per month until the agreement is terminated.  We agreed to pay additional compensation to SC Capital in connection with any definitive agreements we enter into with parties specifically identified by SC Capital during and within 24 months after termination of the agreement.  For an equity financing transaction, we must pay SC Capital a consulting fee equal to 8% of the principal cash amount of all securities and institutional and secondary financings introduced by SC Capital and provide SC Capital with warrants to purchase a number of shares or units equal to 8% of the number of shares or units sold under the equity financing.  In a debt financing transaction, we must pay SC Capital a consulting fee equal to 3% of any gross proceeds received by MedPro in connection with a debt financing.  In a committed debt facility, the fee owed to SC Capital is to be calculated on the gross available amount committed to us.  In connection with any merger and acquisition transaction occurring during the term of the agreement, SC Capital would be entitled to 2.5% of the total transaction consideration for the first $20 million and 2.0% for any amount over $20 million.  For strategic alliances or other business realignments resulting from SC Capital’s services, we must pay a consulting fee equal to 8% of the value of the transaction.

During 2009 we paid SC Capital a financing fee of $240,000, equal to 8% of the $3,000,000 received in connection with the March 24, 2009 exchange of warrants for Series “C” Preferred Stock with VCAF and VMOF.  During 2010, we paid SC Capital $600,000 in fees in connection with our issuance of $30,000,000 of Notes.

2010 VOMF Bridge Loans

During 2010, MedPro borrowed a total of $2,800,000 from VOMF under the terms of a series of short-term bridge loans to MedPro with additional financial flexibility.  The annual interest rate on these loans was 6%.

Under the terms of the financing agreements, we agreed to add a representative of VOMF to our board of directors upon VOMF’s request.  Other covenants provided that without the written consent of VOMF, we would not guarantee or incur additional indebtedness in excess of $100,000, other than trade accounts payable incurred in the ordinary course of business, refinancing of current indebtedness, and financing secured by purchase money liens, liens on equipment and other permitted liens.  We also agreed not to sell any of our properties, assets and rights including, without limitation, our software and intellectual property, to any person except for sales to customers in the ordinary course of business; or with the prior written consent of VOMF.

In consideration of these loans, we issued to VOMF warrants to purchase shares of our common stock at either $4.00 or $3.00 per share.  Each warrant has a five-year term.  Each warrant provides that the warrant price will adjust if specified corporate transactions occur, including a provision that if we issue any additional shares of common stock at either a price per share less than the warrant exercise price (or the adjusted price then in effect) or without consideration, then the warrant price

51

will adjust to the price per share paid for the additional shares of common stock upon each such issuance.

The $2,800,000 outstanding principal balance of the VOMF bridge loans plus accrued interest of $57,214 were paid in full on September 1, 2010.  The following table shows the dates and amounts of the VOMF bridge loans and information about the related warrants.

Date	Loan Amount		Loan Interest Rate		Common shares underlying warrants	Exercise price per common share
2/26/2010	$	850,000	6	%	212,500	$	4
3/31/2010	450,000		6	%	112,500	$	4
4/30/2010	250,000		7	%	208,334	$	3
6/3/2010	300,000		7	%	50,001	$	3
6/30/2010	450,000		7	%	75,002	$	3
8/5/2010	500,000		7	%	83,335	$	3
	$	2,800,000			741,672

Family Relationships

C. Garyen Denning, MedPro’s Executive Vice President, is the son-in-law of W. Craig Turner, our Chairman.  Mr. Denning was paid an aggregate salary, bonus and taxable perquisites of approximately $221,370 during 2011.

Bethany Denning, MedPro’s Director of Human Resources, is the wife of C. Garyen Denning, our Executive Vice President and the daughter of W. Craig Turner, our Chairman.  Ms. Denning was paid an aggregate salary, bonus and taxable perquisites of approximately $116,114 during 2011.

Item 14.     Principal Accountant Fees and Services.

The following table presents fees for professional services rendered by Rodefer Moss & Co, PLLC for the audit of the company’s annual financial statements for 2011 and 2010 and fees billed for other services rendered by Rodefer Moss & Co, PLLC.

	2011		2010
Audit fees	$	62,000	$	62,000
Audit-related fees for Quarterly Review of Financial Statements	33,000		34,683
Audit and audit-related fees	95,000		96,683
Tax fees	—		—
All other fees	—		300
Total fees	$	95,000	$	96,983

Audit fees include fees for the audit of the annual financial statements and reviews of the condensed financial statements included in our quarterly reports.  Audit-related fees relate principally to audit-related and review services associated with registration statements filed with the Securities and Exchange Commission. These fees were reviewed and approved by the Company's Audit Committee in advance of the engagement of the auditors.

PART IV

Item 15.     Exhibits and Financial Statement Schedules.

(a) Financial Statements

The following financial statements of the company are included at the end of this report:

Report of Independent Registered Public Accounting Firm

52

Balance Sheets as of December 31, 2011 and 2010

Statements of Operations for the Years Ended December 31, 2011 and 2010

Statements of Shareholders' Equity/ (Deficiency) for the Years Ended December 31, 2011 and 2010

Statements of Cash Flows for the Years Ended December 31, 2011 and 2010

Notes to Financial Statements

(b) Financial Statement Schedules

Not applicable.

(c) Exhibits

Exhibit No.	Description
3.1	Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Form 8-K filed on January 4, 2008).
3.2	Bylaws (incorporated by reference to Exhibit 3.2 to Form 8-K filed on January 4, 2008).
3.3	Bylaw amendment dated August 10, 2009 (incorporated herein by reference to Form 8-K filed on August 17, 2008).
4.1	Certificate of Designations, Series A Convertible Preferred Stock Turner (incorporated by reference to Exhibit 4.1 to Amendment No. 1 on Form S-1/A (Reg. No. 333-149163) filed on July 3, 2008).
4.2	Form of Series A Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.3 to Form 8-K/A filed on September 10, 2007).
4.3	Form of Series B Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.4 to Form 8-K/A filed on September 10, 2007).
4.4	Series A Convertible Stock Purchase Agreement dated as of September 5, 2007 (incorporated by reference to Exhibit 4.6 to Form 10-K filed on April 18, 2008).
4.5	Amendment to Certificate of Designations, Series A Convertible Preferred Stock (incorporated by reference to Exhibit 4.6 to Form 10-K filed on March 30, 2009)
4.6	Certificate of Designations, Series B Convertible Preferred Stock (incorporated herein by reference to Exhibit 4.9 to Form 8-K filed on August 22, 2008).
4.7	Omnibus Amendment to Series A, B, and C Warrants held by Vision Opportunity Master Fund, Ltd. (incorporated herein by reference to Exhibit 4.10 to Form 8-K filed on August 22, 2008).
4.8	Certificate of Designations, Series C Convertible Preferred Stock (incorporated herein by reference to Exhibit 4.1 to Form 8-K filed on March 30, 2009).

53

4.9	Form of Common Stock Purchase Warrant for 2010 issuances to Vision Opportunity Master Fund, Ltd.  (incorporated by reference to Exhibit 4.9 to Form 10-K filed on March 30, 2010)
10.1	Technology Acquisition Agreement, dated February 19, 2007, by and among SGPF, LLC, Hooman Asbaghi and Visual Connections, Inc (incorporated by reference to Exhibit 10.1 to Form 10-K filed on April 18, 2008)
10.2	Technology Development and Option Agreement, between SGPF, LLC and MedPro Safety Products, Inc. (incorporated by reference to Exhibit 10.2 to Form 10-K filed on April 18, 2008).
10.3	Amendment to Technology Development and Option Agreement, between SGPF, LLC and MedPro Safety Products, Inc. (incorporated by reference to Exhibit 10.1 to Form 8-K filed on October 6, 2008).
10.4	Second Amendment to Technology Development and Option Agreement, between SGPF, LLC and MedPro Safety Products, Inc. (incorporated by reference to Exhibit 10.4 to Form 10-Q filed on November 15, 2010).
10.5	Financial Advisory Agreement dated January 11, 2010, between MedPro Safety Products, Inc and SC Capital Partners LLC. (incorporated by reference to Exhibit 10.5 to Form 10-Q filed on November 15, 2010).
10.6	Medical Supply Manufacturing Agreement, dated as of July 14, 2010, between MedPro Safety Products, Inc. and Greiner Bio-One GmbH (incorporated by reference to Exhibit 10.1 to Form 10-Q filed on August 16, 2010) (portions of the exhibit have been omitted pursuant to a request for confidential treatment).
10.7	Purchase and Sale Agreement dated as of September 1, 2010, between MedPro Investments, LLC, and MedPro Safety Products, Inc. (incorporated by reference to Exhibit 10.7 to Form 10-Q filed on November 15, 2010).
10.8	Pledge and Security Agreement made by MedPro Safety Products, Inc. to U.S. Bank National Association, as Trustee, dated as of September 1, 2010 (incorporated by reference to Exhibit 10.8 to Form 10-Q filed on November 15, 2010).
10.9	Indenture dated as of September 1, 2010, by and between MedPro Investments, LLC, as issuer of the Notes, and U.S. Bank National Association, as initial trustee of the Notes (portions of the exhibit have been omitted pursuant to a request for confidential treatment) (incorporated by reference to Exhibit 10.9  to Form 10-Q filed on November 15, 2010).
10.10	Continuing Unconditional Guarantee, dated as of September 1, 2010, is made by MedPro Safety Products, Inc., to U.S. Bank National Association, as trustee under the Indenture (incorporated by reference to Exhibit 10.10 to Form 10-Q filed on November 15, 2010).
10.11	MedPro Safety Products, Inc. 2008 Stock and Incentive Compensation Plan (incorporated by reference to Exhibit 10.9 to Form 8-K filed on August 22, 2008).
10.12	Form of Nonqualified Stock Option Award Agreement (incorporated by reference to Exhibit 10.10 to Form 8-K filed on August 22, 2008).
10.13	Form of Incentive Stock Option Award Agreement (incorporated by reference to Exhibit 10.13 to Form 10-K filed on March 30, 2010).

	10.14	Employment Agreement with Marc T. Ray (incorporated by reference to Exhibit 10.1 to Form 8-K filed on April 7, 2009).
	10.15	Employment Agreement with W. Craig Turner (incorporated by reference to Exhibit 10.1 to Form 8-K filed on July 22, 2009).
	10.16	Employment Agreement with Agreement with Walter W. Weller (incorporated by reference to Exhibit 10.1 to Form 8-K filed on October 21, 2009).
	10.17	Employment Agreement with Gregory C. Schupp (incorporated by reference to Exhibit 10.17 to Form 10-K filed March 31, 2011).
	10.18	Employment Agreement with C. Garyen Denning (incorporated by reference to Exhibit 10.18 to Form 10-K filed March 31, 2011).
*	10.19	Non-Employee Director Stock Option Plan
*	31.1	Certification of Chief Executive Officer pursuant to SEC Rule 13(a)-14(a)
*	31.2	Certification of Chief Financial Officer pursuant to SEC Rule 13(a)-14(a)
*	32.1	Certification of Chief Executive Officer pursuant to Section 1350 of Chapter 63 of Title 18 of the U.S. Code
*	32.2	Certifications of Chief Financial Officer, pursuant to Section 1350 of Chapter 63 of Title 18 of the U.S. Code

*    Filed herewith

54

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Lexington, Kentucky on March 28, 2012.

MEDPRO SAFETY PRODUCTS, INC.
By:	/s/ W. Craig Turner
	W. Craig Turner
	Chief Executive Officer,
	Chairman of the Board of Directors

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.

55

Signature	Title	Date
/s/ W. Craig Turner	Chief Executive Officer, Chairman of the Board of Directors	March 28, 2012
W. Craig Turner	(Principal Executive Officer)
/s/ Marc T. Ray	Vice President Finance, Chief Financial Officer	March 28, 2012
Marc T. Ray	(Principal Financial and Accounting Officer)
/s/ Gary A. Peterson	Director	March 28, 2012
Gary A. Peterson
/s/ Warren Rustand	Director	March 28, 2012
Warren Rustand
/s/ Ernest L. Fletcher	Director	March 28, 2012
Ernest L. Fletcher
/s/ W. Leo Kiely III	Director	March 28, 2012
W. Leo Kiely III
/s/ Carl Kleidman	Director	March 28, 2012
Carl Kleidman

56

INDEX TO FINANCIAL STATEMENTS

MedPro Safety Products, Inc.

Opinion of Registered Public Accounting Firm

Balance Sheets as of December 31, 2011 and 2010

Statements of Operations for the Years Ended December 31, 2011 and 2010

Statements of  Shareholders' Equity/(Deficiency) for the Years Ended December 31, 2011 and 2010

Statements of Cash Flows for the Years Ended December 31, 2011 and 2010

Notes to Financial Statements

57

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Shareholders of MedPro Safety Products, Inc.:

We have audited the accompanying balance sheets of MedPro Safety Products, Inc. as of December 31, 2011 and 2010, and the related statements of operations, shareholders’ equity/(deficiency) and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MedPro Safety Products, Inc. as of December 31, 2011 and 2010, and the results of its operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Rodefer Moss & Co., PLLC

Knoxville, Tennessee

March 28, 2012

58

MedPro Safety Products, Inc.

Balance Sheets

December 31, 2011 and 2010

	December 31, 2011		December 31, 2010
ASSETS
Current Assets
Cash	$	6,173,627	$	8,315,644
Restricted cash	1,206,371		3,864,411
Accounts receivable, net	900,865		179,107
Accrued interest income	2,628		3,898
Prepaid expenses and other current assets	53,899		29,368
Escrowed Senior Note Funds	—		7,870,000
Total current assets	8,337,390		20,262,428
Property and Equipment
Equipment and tooling	1,152,702		887,607
Leasehold improvements	787,248		240,411
Computers, network and phones	237,945		210,816
Furniture and fixtures	139,521		117,896
Trade show booth	27,619		7,341
	2,345,035		1,464,071
Less: accumulated depreciation	590,340		422,586
Property and equipment, net	1,754,695		1,041,485
Other Assets
Intangible assets	7,812,726		8,317,810
Recoupable royalties – Visual Connections – Wing	100,000		100,000
Deferred financing costs	1,394,819		1,887,210
Total other assets	9,307,545		10,305,020
Total assets	$	19,399,630	$	31,608,933

See notes to financial statements.

59

MedPro Safety Products, Inc.

Balance Sheets (Continued)

December 31, 2011 and 2010

	December 31, 2011			December 31, 2010
LIABILITIES AND SHAREHOLDERS’ DEFICENCY
Current Liabilities
Accounts payable and accrued expenses	$	951,646		$	762,523
Accrued interest payable	700,000			700,000
Derivative liabilities – fair value of warrants	1,293,754			1,157,823
Total current liabilities	2,945,400			2,620,346
Long-Term Liabilities
Senior Notes - long term portion	30,000,000			30,000,000
	30,000,000			30,000,000
Total liabilities	32,945,400			32,620,346
Shareholders’ Deficiency
Preferred stock $.01 par value: 10,000,000 shares authorized:
Series A Preferred - 6,668,229 shares issued and outstanding.  Liquidation preference $2,426,114 and $1,820,829, respectively	66,682			66,682
Series B Preferred - 1,493,779 shares issued and outstanding	14,937			14,937
Series C Preferred - 1,571,523 shares issued and outstanding	15,715			15,715
Common stock
Common Stock - $.001 par value; 90,000,000 shares authorized; 13,042,213 and 13,091,507 shares issued and outstanding, respectively.	13,043			13,092
Additional paid-in capital	70,842,537			71,344,241
Accumulated deficit	(84,498,684		)	(72,466,080		)
Total shareholders’ deficiency	(13,545,770		)	(1,011,413		)
Total liabilities and shareholders’ deficiency	$	19,399,630		$	31,608,933

See notes to financial statements.

60

MedPro Safety Products, Inc.

Statements of Operations

For the Years Ended December 31, 2011 and 2010

	For the Year Ended December 31, 2011			For the Year Ended December 31, 2010
Revenues
Product royalty income	$	2,303,125		$150,000
Other revenue	10,000
Total revenue	2,313,125			150,000
Cost of revenue	628,579			832,235
Gross profit/(loss)	1,684,546			(682,235		)
Operating Expenses
Salaries, wages, and payroll taxes	3,402,560			6,708,668
Qualified profit sharing plan	207,663			221,075
Advertising and promotion	487,281			260,665
Product development costs	997,069			864,787
Professional fees	1,840,836			1,595,660
Insurance	322,236			243,831
General and administrative	688,072			366,584
Travel and entertainment	545,060			429,455
Settlement of royalty dispute	—			600,000
Write downs of abandoned equipment and technology	150,342			696,331
Depreciation and amortization	265,648			225,526
Total operating expenses	8,906,767			12,212,582
Loss from operations	(7,222,221		)	(12,894,817		)
Other Income (Expenses)
Interest expense	(4,692,406		)	(2,325,972		)
Interest income	17,954			19,910
Change in fair value of derivative liabilities	(135,931		)	(313,335		)
Total other income (expenses)	(4,810,383		)	(2,619,397		)
Provision for income taxes	—			—
Net income /(loss)	$	(12,032,604	)	$	(15,514,214	)
Net earnings /(loss) per common share
Basic net earnings /(loss) per share	$	(0.93	)	$	(1.18	)
Fully diluted net earnings /(loss) per share	$	(0.93	)	$	(1.18	)
Shares used in computing earnings per share
Weighted average number of shares outstanding - basic	12,983,132			13,163,332
Weighted average number of shares outstanding - diluted	12,983,132			13,163,332

See notes to financial statements.

61

MedPro Safety Products, Inc.

Statements of Shareholders’ Equity/(Deficiency)

For the Years Ended December 31, 2011 and 2010

	Common Stock					Preferred Stock			Unearned			Paid-In			Accumulated
	Shares		Amount			Shares	Amount		Compensation			Capital			Deficiency
Balance, January 1, 2010	13,215,311		$	13,215		9,733,531	$	97,334	$	(167,600	)	$	67,023,700		$	(56,951,866	)
Share based vendor compensation	—		—			—	—		167,600			—			—
Earned portion of employee and director options	—		—			—	—		—			4,824,853			—
Derivative liabilities - warrants issued with debt	—		—			—	—		—			(844,488		)	—
Derivative liability discount accretion	—		—			—	—		—			685,000			—
Purchase of treasury stock	(123,804	)	(123		)	—	—		—			(344,824		)	—
Net income through December 31, 2010	—		—			—	—		—			—			(15,514,214		)
Balance December 31, 2010	13,091,507		$	13,092		9,733,531	$	97,334	$	—		$	71,344,241		$	(72,466,080	)
Earned portion of share based compensation	—		—			—	—		—			427,771			—
Purchase of treasury stock	(259,355	)	(259		)	—	—		—			(637,784		)	—
Exercise of employee options	210,161		210			—	—		—			(291,691		)	—
Net loss for the year ended December 31, 2011	—		—			—	—		—			—			(12,032,604		)
Balance December 31, 2011	13,042,313		$	13,043		9,733,531	$	97,334	$	—		$	70,842,537		$	(84,498,684	)

See notes to financial statements.

62

MedPro Safety Products, Inc.

Statements of Cash Flows

For the Years Ended December 31, 2011 and 2010

	For the Year Ended December 31, 2011			For the Year Ended December 31, 2010
Cash Flows From Operating Activities
Net income (loss)	$	(12,032,604	)	$	(15,514,214	)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation	265,648			169,808
Amortization of financing costs and intangible assets	997,475			767,005
Debt discount accretion	—			685,000
Write down of inventory	—			266,085
Loss on abandonment of equipment	150,342			696,331
Share based compensation	427,771			4,992,454
Change in fair value of warrant (derivative liabilities)	135,931			313,335
Changes in operating assets and liabilities
Accounts receivable and accrued interest	(720,487		)	(164,311		)
Inventory	—			(18,104		)
Other current assets	(24,531		)	(7,320		)
Accounts payable and accrued expenses	189,121			356,404
Accrued interest payable	—			689,326
Net cash flows from operating activities	(10,611,334		)	(6,768,201		)
Cash Flows From Investing Activities
Purchase of property, equipment and intangible	(1,129,200		)	(2,451,261		)
Restricted cash, net of releases of $2,658,040 and $635,589	2,658,040			(3,864,411		)
Prepaid royalties	—			(100,000		)
Net cash flows from investing activities	1,528,840			(6,415,672		)
Cash Flows From Financing Activities
Payments on note - technology transfer payments	—			(250,000		)
Repayments on bank borrowings	—			(4,107,977		)
Proceeds from notes payable to and advances from shareholders	—			2,800,000
Payments on notes payable to and advances from shareholders	—			(2,800,000		)
Cash from issuance of notes	—			30,000,000
Escrowed Senior Note Funds	7,870,000			(7,870,000		)
Non-cash proceeds from the issuance of common shares from the exercise of employee options on a cashless basis less the value of shares relinquished to exercise the option and pay withholding taxes	(291,480		)	—
Purchase of treasury stock	(638,043		)	(344,949		)
Net cash flows from financing activities	6,940,477			17,427,074
Net increase / (decrease) in cash	(2,142,017		)	4,243,201
Cash at the beginning of the period	8,315,644			4,072,443
Cash at the end of the period	$	6,173,627		$	8,315,644
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	4,200,000		$	794,355
Non-cash portion of derivative liabilities associated with warrants	$	135,931		$	1,157,823

See notes to financial statements.

63

Notes to Consolidated Financial Statements

NOTE 1 – NATURE OF BUSINESS

Nature of Business – MedPro Safety Products, Inc. (“MedPro” or “the Company”) is a medical device company that develops and acquires safety products that include technology designed to prevent needlestick injuries. A needlestick is a skin puncture by a hypodermic needle, syringe, or other sharp. Injury by a non-sterile device can expose the harmed individual to bloodborne pathogens. MedPro focuses on devices with passive safety features that deploy with little or no effort by the user. The Company is developing seven safety products that target four key segments within the medical device industry, including two traditional fillable and prefilled syringes for medication delivery, an IV shuttle drug delivery device, tube holders and collection sets (3 models) for blood collection (phlebotomy) and a diabetic pen needle. MedPro plans to commercialize these products through global distribution partners.

The Company estimates that the total global market addressed by its present product portfolio could exceed $10 billion. MedPro has a distribution agreement with a global distribution partner for three of its products, including two models of the passive safety blood collection system, which differ in the way that the safety system engages, as well as a winged safety blood collection set. 

MedPro has headquarters in Lexington, Kentucky, and its common stock is quoted on the OTC Bulletin Board (OTC.BB) under the symbol “MPSP.”

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

The following is a summary of the significant accounting policies followed in the preparation of the accompanying financial statements. 

Accounting Estimates – The preparation 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 amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenues and Costs Recognition –  Revenues in 2010 were derived from royalties on our blood collection products pursuant to our minimum volume contract.  Revenues and accounts receivable under our contracts and within existing customer relationships are recognized when the price has been fixed, delivery has occurred and collectability is reasonably assured.  In the case of our royalty income, revenues are recognized when the amount is determined based on contract terms and no possibility of refund exists.  The Company began receiving revenue from its tube-activated blood collection device during the fourth quarter of 2010. The Company completed its ISO 13485 Quality Plan and Registration process in 2008 and a large validation and verification build of the tube-activated product in 2009.  One more validation and verification build of the tube-activated product occurred in  2010.

Cost of revenues sold includes all direct production costs, shipping and handling costs, royalty expenses and amortization of patents.  General and administrative costs are charged to the appropriate expense category as incurred.

Accounts Receivable – As is customary in the industry, the Company does not require collateral from customers in the ordinary course of business.  Accounts receivable are stated at the amount management expects to collect from outstanding balances.  Management provides for probable uncollected amounts through a charge to earnings and a credit to the allowance for doubtful accounts based on its assessment of the current status of individual accounts.  The Company does not accrue finance charges on its past due accounts receivable.  Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance and a credit to accounts receivable.

Property and Equipment – Property and equipment are stated at cost less accumulated depreciation and amortization.  Depreciation and amortization for assets placed in service is provided using the straight line method over their estimated useful lives.  The cost of normal maintenance and repairs is charged against earnings.  Expenditures which significantly increase asset values or extend useful lives are capitalized.  The gain or loss on the disposition of property and equipment is recorded in the year of disposition.  In 2010, management elected to abandon approximately $500,000 for the Key-Lok™ assembly and manufacturing equipment.

Intangible Assets – Intangible assets consist principally of intellectual properties such as regulatory product approvals and patents. Intangible assets are amortized using the straight line method over their estimated period of benefit, ranging from one to ten years upon being placed in full production.  We evaluate the recoverability of intangible assets periodically and take into

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account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists.  During 2010 we recorded an impairment charge on our Key-Lok™ technology of $195,649.   The Key-Lok™ intellectual property is still in the process of being evaluated for reintroduction into the marketplace.  Amortization of the Vacumate technology began in December 2009 when products were shipped for human use evaluation by our customer.  Management believes that future revenue from an existing minimum volume contract for this product insures that the carrying value of this asset is not impaired.

Research and Development Costs – Research and development costs are charged to expense as incurred.  These expenses do not include an allocation of salaries and benefits for the personnel engaged in these activities.  Although not expensed as research and development, all salaries and benefits for the years ended December 31, 2011 and 2010, have been expensed.

Advertising – Advertising costs are expensed as incurred.  The Company incurred $487,281 and $260,665 of such costs during the years ended December 31, 2011 and 2010, respectively.

Income Taxes –Income tax expense is provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes.  Deferred taxes are recognized for differences between the basis of assets and liabilities for financial statement and income tax purposes.  The differences relate primarily to the effects of net operating loss carry forwards and differing basis, depreciation methods, and lives of depreciable assets. The deferred tax assets represent the future tax return consequences of those differences, which will be deductible when the assets are recovered.  The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

Cash and Cash Equivalents – For the purposes of the Statements of Cash Flows, the Company considers cash and cash equivalents to be cash in all bank accounts, including money market and temporary investments that have an original maturity of three months or less.

The non cash exercise of employee options was presented net of the value of shares used to exercise the option and pay withholding taxes on the option exercise. The option value not separately reflected on the cash flow statement was $1,900,500 (1,050,000 shares at $1.81 exercise price). Shares used to exercise the option were valued at $2.61 each and totaled 728,161 shares. Another 111,678 shares were relinquished to pay withholding taxes of $291,480.

Concentration of Credit Risk – From time to time during the years ended December 31, 2011 and 2010, certain bank account balances exceeded federally insured limits.  The Company has not experienced losses in such accounts and believes it is not exposed to any significant credit risk on cash.

Recent Accounting Pronouncements

Not Yet Adopted

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820), Amendments to Achieve Common

Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The update contains the results of the work of the FASB and the IASB to develop common requirements for measuring fair value and for disclosing fair value measurements in accordance with U.S. GAAP and IFRSs. The amendments in this update are effective for periods beginning after December 15, 2011 and as a result are not yet applicable to the Company. The Company is evaluating the impact of the update on its financial statements.

Adopted

In April 2010, the FASB issued ASU 2010-17 Revenue Recognition-Milestone Method (Topic 605). The update is intended to assist with the definition of a milestone event and determining when the application of milestone revenue recognition in connection with revenue recognition for research and development transaction. Disclosures will include the description of the milestone payment arrangement, a description of each milestone and the related payment or contingent payment, a determination whether the milestones are substantive, the factors considered in making the determination of the substantive nature of the milestones and the amount of revenue recognized during the period related to the milestone or milestones.  The standard is effective for fiscal years beginning on or after June 15, 2010. The Company has adopted the standard but does not currently have any such contracts.  The adoption of the standard has not had a material impact on its financial statements.

In January 2010, the FASB issued ASU, 2010-06, Fair Value Measurement and Disclosures (Topic 820-10-65-7), which relates to the disclosure requirements for fair value measurements and provides clarification for existing disclosure requirements. This update will require an entity to disclose separately the amounts of significant transfers in and out of Levels 1 and 2 fair value

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measurements and to describe the reasons for the transfers.  It also will require entities to disclose information about purchases, sales, issuances and settlements to be presented separately (i.e. present the activity on a gross basis rather than net) in the reconciliation for fair value measurements using significant unobservable inputs (Level 3 inputs). This guidance clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair valueand requires disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs. The new disclosures and clarifications of existing disclosure are effective for fiscal years beginning after December 15, 2009, except for the disclosure requirements related to the purchases, sales, issuances and settlements in the roll forward activity of Level 3 fair value measurements.  Those disclosure requirements are effective for fiscal years ending after December 31, 2010. The adoption of the disclosure requirement did not have a material impact on the Company's financial statements.

In 2010, the FASB issued ASU 2010-28, Intangibles-Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts.  It is effective for fiscal years beginning after December 15, 2010.  Essentially the FASB is requiring testing be performed at the Reporting Unit level with zero or negative carrying amounts.  For goodwill and other intangible assets, testing for impairment is a two-step test.  When a goodwill impairment test is performed (either on an annual or interim basis), an entity must assess whether the carrying amount of a reporting unit exceeds its fair value (Step 1).  If it does, an entity must perform an additional test to determine whether goodwill has been impaired and to calculate the amount of that impairment (Step 2).  The effect will potentially be an impairment of goodwill or other intangibles that will be required to be reported sooner than under current standards.  The Company has adopted the standard but does not have any negative goodwill issues. Therefore, the adoption did not have a material impact on the Company's financial statements. 

In October 2009, the FASB issued new accounting guidance (Accounting Standards Update (ASU), 2009-13) related to revenue arrangements with multiple deliverables, Revenue Recognition (“Topic 605-25-65-1”): Multiple Deliverable Revenue Arrangements - A Consensus of the FASB Emerging Issues Task Force, that provides principles for allocation of consideration among an arrangement's multiple-elements, allowing more flexibility in identifying and accounting for separate deliverables. The guidance introduces an estimated selling price method for valuing the elements of a bundled arrangement if vendor-specific objective evidence or third-party evidence of selling price is not available, and significantly expands related disclosure requirements. This guidance is effective on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Alternatively, adoption may be on a retrospective basis, and early application is permitted. We have adopted this standard but it has not had a material impact on our financial statements.

In April 2010, the FASB issued ASU 2010-12 - Income Taxes (Topic 740) Accounting for Certain Tax Effects of the 2010 Health Care Reform Acts. This updates makes it clear that the two laws passed a few days apart and commonly known as health care reform will be treated as one for accounting purposes despite the fact that they may have been passed in two different fiscal years for some. Our adoption of ASU 2010-12 did not have a material impact on our financial statements.

Reclassifications

Certain amounts in the 2010 financial statements have been reclassified to conform to the classifications used to prepare the 2011 financial statements.  These reclassifications had no material impact on the Company’s financial position, results of operations, or cash flow as previously reported. 

NOTE 3 – ACQUISITIONS AND CAPITAL FUNDING

From February through August in 2010, Vision Opportunity Master Fund ("VOMF") provided interim financing to the Company. The interest rate on the first $1,300,000 was 6%, and the rate on the remaining $1,500,000 was 7%. As consideration, the Company issued VOMF warrants to purchase a total of 741,672 common shares at either $4 or $3 per share.

In September 2010, the Company formed a wholly owned subsidiary MedPro Investments, LLC (“MPI”), which issued Senior Secured 14% Notes due 2016 in the aggregate principal amount of $30 million in private placements to institutional investors on September 1 and October 1, 2010. MPI is a single member Delaware limited liability company whose accounts are included with MedPro for financial statement purposes and is disregarded for tax purposes. In connection with the Note issuance, MedPro transferred the rights to receive all royalties under the GBO agreement to MPI. All of the royalties payable under the GBO agreement are committed to pay the principal and interest due on the Notes. The Company received approximately $23,294,000 in net proceeds after the establishing a $4,500,000 interest reserve and paying offering expenses. The Company used the net proceeds from the sale of the Notes to pay off all of its bank debt and all principal and accrued interest on the loans made in 2010 by VOMF, which together totaled $4,360,000.

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NOTE 4 – NOTES PAYABLE TO/FROM AND ADVANCES TO/FROM SHAREHOLDERS

Notes payable to or from and advances to or from shareholders represent loans and advances received from officers, directors, shareholders and entities over which they exert significant control. As of the end of 2011 the Company owed employees or related companies $1,387. The amount due employees and related companies in 2010 was $1,038. In 2011, employees and related entities owed the Company $1,724. In 2010, the employee and related Company receivable was $452.

NOTE 5 – RELATED PARTY TRANSACTIONS

On January 11, 2010, we signed a new agreement with SC Capital, which was an extension and modification of our previously existing agreement, to provide the Company with assistance in securing debt or equity and to assist the Company with acquisition or disposition services.  The current contract has an initial 24 month term and may continue on a month to month basis until terminated by 30 day notice.

We pay SC Capital a consulting fee of $15,000 per month until the agreement is terminated.  We agreed to pay additional compensation to SC Capital in connection with any definitive agreements we enter into with parties specifically identified by SC Capital during and within 24 months after termination of the agreement.  For an equity financing transaction, we must pay SC Capital a consulting fee equal to 8% of the principal cash amount of all securities and institutional and secondary financings introduced by SC Capital and provide SC Capital with warrants to purchase a number of shares or units equal to 8% of the number of shares or units sold under the equity financing.  In a debt financing transaction, we must pay SC Capital a consulting fee equal to 3% of any gross proceeds received by MedPro in connection with a debt financing.  In a committed debt facility, the fee owed to SC Capital is to be calculated on the gross available amount committed to us.  In connection with any merger and acquisition transaction occurring during the term of the agreement, SC Capital would be entitled to 2.5% of the total transaction consideration for the first $20 million and 2.0% for any amount over $20 million.  For strategic alliances or other business realignments resulting from SC Capital’s services, we must pay a consulting fee equal to 8% of the value of the transaction. During 2010, we paid SC Capital $600,000 in fees in connection with our issuance of $30,000,000 of Notes.

During 2010, MedPro borrowed a total of $2,800,000 from VOMF under the terms of a series of short-term bridge loans to MedPro with additional financial flexibility.  The annual interest rates on $1,300,000 of these loans was 6% and 7% on the balance. The $2,800,000 outstanding principal balance of the VOMF bridge loans plus accrued interest of $57,214 were paid in full on September 1, 2010.

In consideration of these loans, we issued to VOMF warrants to purchase 416,672 shares of our common stock at $3.00 per share and 325,000 shares of our common stock at $4.00 per share.  Each warrant has a five-year term.  Each warrant provides that the warrant price will adjust if specified corporate transactions occur, including a provision that if we issue any additional shares of common stock at either a price per share less than the warrant exercise price (or the adjusted price then in effect) or without consideration, then the warrant price will adjust to the price per share paid for the additional shares of common stock upon each such issuance.

The following table lists the loans and terms:

	Principal		Interest		Shares Subject to	Exercise Price
Date	Amount		Rate		Warrants	Per Share
February 8, 2010	$	500,000	6.00	%	—	—
February 26, 2010	350,000		6.00	%	212,500	$	4.00
March 31, 2010	450,000		6.00	%	112,500	$	4.00
May 4, 2010	250,000		7.00	%	208,334	$	3.00
May 28, 2010	300,000		7.00	%	50,001	$	3.00
June 30, 2010	450,000		7.00	%	75,002	$	3.00
August 5, 2010	500,000		7.00	%	83,335	$	3.00
	$	2,800,000			741,672

During 2011 and 2010, the Company leased its office and storage facility in Lexington, Kentucky from a company owned by the Company’s Chairman, which is described in Note 10.

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The Company is obligated to issue 690,608 common shares to its CEO in the event the Company recognizes $5,000,000 or more in revenue on the Syringe Guard family of products. Additional triggers for these shares to be awarded include a change in control of the Company, the termination of the CEO or the sale or licensing of any part of the technology to another entity.

NOTE 6 – INTANGIBLE ASSETS

The Company’s intangible assets consist primarily of intellectual properties (medical device patents) that give the Company the right to produce or license certain medical devices. These various patents include the skin and tube-activated blood collection devices with a cost of $2,525,425, the Key-Lok™ patent at $489,122, the syringe guard prefilled family of products at $4,845,000 and the winged infusion set at $1,250,000.  In 2010, the Company wrote the Key-Lok™ patent down to 50% of the $489,122 original cost.

In 2011, amortization expenses of $997,475 included $505,085 of intellectual property amortization reflected in cost of goods sold and $492,390 of loan fee amortization on the Company's Senior Notes. Amortization expense in 2010 was $767,006 which included amortization of $553,998 for the intellectual property included in cost of revenue and the charge off of the remaining prepaid loan fees of $55,717.  Loan fee amortization on the 2010 Senior Note loan fees was $157,291.  The Company recorded a loss on write down of the Key-Lok intellectual property of $195,648 resulting in a combined charge off of 50% of the original cost as of December 31, 2010.  Estimated future amortization of these intangibles is expected to consist of the following amounts for the twelve month periods ended on December 31:

12 month periods ended December 31,
2012	$	1,302,225
2013	$	2,156,412
2014	$	2,002,149
2015	$	1,356,638
2016	$	1,231,310
After 2016	$	1,158,811

NOTE 7 – LONG-TERM DEBT

Long-term debt at December 31, 2011 and 2010 consisted of the following:

	December 31, 2011		December 31, 2010
Senior Notes Payable, Interest at 14%, payable quarterly beginning on October 30, 2010, secured by the royalty contract on blood collection devices, guaranteed by MedPro Safety Products, Inc. on behalf of MedPro Investments, LLC, the issuer	$	30,000,000	$	30,000,000
	$	30,000,000	$	30,000,000
Less: current portion	—		—
Long-term portion	$	30,000,000	$	30,000,000

The Company issued $30,000,000 of Senior Secured 14% Notes due 2016 in two tranches on September 1 and October 1, 2010.  Gross proceeds from the issuance of the Notes were reduced by $2,165,500 of issuance expenses, $4,500,000 of funds held in reserve to pay interest during the ramp up of royalty income, and $7,870,000 held in a reserve payable to the Company upon the receipt of FDA clearance for the Wing device.  The Company used the net proceeds of the issuance of the Notes to pay off all of its outstanding bank debt in September 2010. The FDA cleared the Wing device in November 2010, and the Company received the $7,870,000  plus interest on January 30, 2011.

The interest reserve is used to supplement royalty revenues received under the GBO agreement.  Royalty revenues are deposited into a collection account held in trust and are supplemented from the interest reserve as necessary to complete the scheduled payments on the Notes.  The balance in the interest reserve account at December 31, 2011 was $1,206,371 and was

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$3,864,411 at end of 2010. The 2011 ending balance is less than the total amount of payments due in the next twelve months.  Accordingly, the Company has classified the entire balance of the restricted cash account as a current asset.  However, because royalties increase as minimum product purchases increase over the term of the GBO agreement, the full amount of the interest reserve account is not expected to be used to pay the entire interest payments on the Notes.  Payments of principal and interest to the Noteholders are guaranteed by the Company.

Interest payments are subject to adjustment should our proceeds exceed minimum payments specified in the GBO agreement.

The Notes indenture limits the debt the Company can incur while the Notes are outstanding to an additional $7,500,000 of new senior debt and $15,000,000 of unsecured debt.

The following table summarizes the maturities of long-term debt:

12 month periods ended December 31,
2012	$	—
2013	5,606,029
2014	7,957,317
2015	13,254,329
2016	3,182,325
Total	$	30,000,000

NOTE 8 – SHAREHOLDERS’ EQUITY

The Company is authorized to issue 90,000,000 shares of common stock with a par value of $0.001 per share, and 10,000,000 shares of preferred stock with a par value of $.01 per share, which is issuable in series. Of the 10,000,000 shares of preferred stock authorized, 6,668,229 shares are designated as Series A Convertible Preferred Stock (“Series A Stock”), 1,493,779 shares are designated as Series B Convertible Preferred Stock (“Series B Stock”) and 1,571,523 are designated as Series C Convertible Preferred (“Series C Stock”) during 2009.

The following table sets forth the number of the shares of the Company’s capital stock issued and outstanding at the end of each of the last two fiscal years:

	Shares outstanding at December 31,
	2011	2010
Common stock	13,042,313	13,091,507
Series A Preferred	6,668,229	6,668,229
Series B Preferred	1,493,779	1,493,779
Series C Preferred	1,571,523	1,571,523
Common stock underlying outstanding stock purchase warrants	2,301,012	2,476,012

The following is a summary of the material rights, preferences, privileges, and restrictions of the Company's three series of convertible preferred Stock. Three Series A Stockholders also hold warrants to purchase common stock that were issued with the Series A Stock.  See Note 11 for a description of the terms of these warrants and how they have been valued under the Black-Scholes methodology.

Series A Convertible Preferred Stock

Dividends. The Series A Stockholders are entitled to receive cash dividends at the rate of 5% of the stated liquidation preference amount ($1.81 per share). Dividends are cumulative, and will only accrue and be payable upon any liquidation of

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the Company. Dividends on Series A Stock will be paid before dividends on any junior stock.

Liquidation Rights. Upon any liquidation, dissolution or winding up of the affairs of the Company, the holder of Series A Stock is entitled to receive $1.81 per share, plus any accrued and unpaid dividends, before any amounts are paid on common stock or any junior stock. The amount of this preferential liquidation distribution would have been $2,426,114 through December 31, 2011 and $1,820,829 through December 31, 2010. These amounts have not been recorded in the financial statements.

Voting Rights.     The Series A Stockholders have no voting rights, except that as long as there are 200,000 shares of Series A Stock outstanding, the affirmative vote of 75% of the Series A Stock is required for the Company to take the following actions:

• To authorize the issuance of a series of stock ranking equal or senior to the Series A Stock with respect to liquidation rights.

• To repurchase, redeem, or pay dividends on shares of common stock other than de minimus repurchases or contractual redemption obligations.

• To reclassify any outstanding securities in a way that materially and adversely affects the rights of Series A Stock.

• To make any unauthorized distribution to the holders of stock junior to the Series A Stock.

• To voluntarily file for bankruptcy, liquidate assets or make an assignment for the benefit of our creditors.

• To discontinue involvement in the Company's current business.

Conversion Rights. The Series A Stock is convertible into common stock at any time, in whole or in part, at the option of the holder. Each share of Series A Stock is convertible into the number of common shares equal to the quotient of: (1) $1.95, divided by (2) the conversion price then in effect.

The conversion price is initially $1.95 per share, but is subject to adjustment for certain events, including stock splits, stock dividends, distributions, reclassifications or reorganizations. In addition, the conversion price is subject to adjustment if the Company issues additional shares of common stock or securities convertible into, or exchangeable for, common stock, in either case at a price per common share less than the conversion price then in effect. The conversion price adjustment does not apply to the issuance of shares in certain transactions identified in the certificate of designations.

The Series A Stock cannot be converted if it would result in the holder beneficially owning in the aggregate more than 9.9% of our common stock outstanding unless the holder of the Series A Stock waives the restriction.

Buy-In Rights. If the Company fails to timely deliver common stock issuable upon conversion of Series A Stock, and the holder is required to purchase common stock to deliver in satisfaction of a sale of the shares to have been issued upon the conversion, then the Company must pay the holder in cash the difference between the total purchase price the holder paid to acquire the common stock to complete the sale and the amount obtained by multiplying (1) the number of shares of common stock issuable upon conversion of the Series A Stock times (2) the price at which the holder's sell order for those shares was executed.

Redemption Rights. Upon the occurrence of a “major transaction,” each holder of Series A Stock can require the Company to redeem all or a portion of the holder's Series A Stock equal to 100% of the liquidation preference amount plus any accrued but unpaid dividends. The Company can elect to pay in common shares based on the conversion price then in effect. A “major transaction” includes a change of control of our company, the sale of more than 50% of our assets, or the purchase of more than 50% of the outstanding shares of our common stock.

Upon the occurrence of one of the triggering events listed below, each holder of Series A Stock can require the Company to redeem all or a portion of the holder's Series A Stock at a price per share equal to 120% of the liquidation preference amount plus any accrued but unpaid dividends and liquidated damages.

(1) The holder's common stock cannot be sold in the public securities market due to the lapse of the effectiveness or unavailability of a resale registration statement for 20 consecutive trading days, unless due to factors solely within the control of the holder.

(2) Our common stock is suspended from listing or trading on the OTC Bulletin Board or a stock exchange for five consecutive trading days.

(3) Our inability to convert Series A Stock into shares of common stock.

(4) Our failure to comply with a conversion notice for 15 days.

(5) Our common stock is deregistered under the Securities Exchange Act of 1934.

(6) We consummate a “going private” transaction so that our common stock is no longer registered under the

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Securities Exchange Act of 1934.

(7) We breach a term of the Series A Stock purchase agreement, the certificate of designation or any related agreement that has a materially adverse effect on the Series A Stock and is not curable or continues for more than 10 business days.

For triggering events (1), (2), (3), and (7), the Company can elect to pay in cash or shares of common stock (the price per share is the conversion price then in effect). For (4), (5), and (6), the Company will redeem for cash. See Note 11 regarding the classification of the Series A Stock as equity.     

Registration Rights. The Company entered into a registration rights agreement with the Series A Stockholders at the time of their investment. The agreement required us to register shares of common stock issuable upon the conversion of the Series A Stock and the exercise of the accompanying warrants with the SEC for resale by the holders. The agreement also provides that the Series A Stockholders have certain “piggy-back” registration rights if the Company registers securities for an offering (other than registrations in connection with the acquisition of a business or with employee benefit plans).

In addition, Series A Stockholders may make a written request for registration of shares of common stock not previously registered that are issued upon the occurrence of a "major transaction" or "triggering event." A "major transaction" includes certain consolidation or merger transactions, the sale of more than 50% of the Company's assets, or the purchase of more than 50% of the outstanding shares of our common stock. “Triggering events” are events (1), (2), (3), and (7) listed under “Redemption Rights” above.

Series B Convertible Preferred Stock

Each share of Series B Stock converts into 4 shares of common stock at the present conversion price of $2.18 per share, which is subject to adjustment. The Series B Stock ranks equal to the Company’s common stock, but ranks junior to the Series A Stock and to our indebtedness. If the Company declares dividends, the Series B Stockholders will receive dividends on a pro rata basis with the common stockholders. Upon liquidation, dissolution or winding up of the Company, the holder of Series B Stock is entitled to an amount equal to the amount distributable per share of common stock multiplied by the number of shares of common stock into which the Series B Stock can be converted. The Series B Stock has no general voting rights.

Series C Convertible Preferred Stock

Each share of Series C Stock converts into 10 shares of common stock, which ratio is subject to adjustment. The Series C Stock ranks equal to the Company’s Series B Stock and common stock, but ranks junior to the Series A Stock and to our indebtedness. If the Company declares dividends, the Series C Stockholders will receive dividends on a pro rata basis with the common stockholders. Upon liquidation, dissolution or winding up of the Company, the holder of Series C Stock is entitled to an amount equal to the amount distributable per share of common stock multiplied by the number of shares of common stock into which the Series C Stock can be converted. The Series C Stock has no general voting rights.

NOTE 9 – INCOME TAXES

The Company incurred no current or net deferred income tax expense or benefit for the years ended December 31, 2011 and 2010.  Income tax expense (benefit) varies from the amounts expected by applying ordinary federal income tax rates to income before income taxes versus taxable income as determine after applying permanent and temporary differences.  The Company has provided allowances for the entire amount of its operating losses for both 2011 and 2010.  Deferred income taxes reflect the net effects of temporary differences between the carrying amount of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. Our open tax years include all returns filed for 2008 and later.

The tax effects of temporary differences that give rise to significant portions of the deferred assets at December 31, 2011 and 2010 are presented below:

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Deferred tax assets (liabilities):	2011			2010
Inventory	$	—		$	84,314
Fixed assets	201,809			338,655
Write off of intangible assets	66,521			66,521
Unearned share based compensation	4,923,311			5,063,468
State deferred tax asset	1,958,413			1,627,062
Net operating loss carryforwards	11,623,017			8,416,769
Less: valuation allowance	(18,773,071		)	(15,596,789		)
Net deferred tax assets	$	—		$	—

The Company had no net deferred tax liabilities as of December 31, 2011 and 2010.  As of those dates, the majority of its deferred tax asset consisted of net operating loss carryforwards (tax effect) of $11,623,017 and $8,416,769, respectively, directly related to its total net operating loss carryforwards of $34,185,345 and $24,755,203, respectively. These net operating loss carryforwards begin expiring in 2015 and are entirely offset by valuation allowances at December 31, 2011 and 2010, respectively.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax assets, projected future taxable income and tax planning strategies in making this assessment.  Management believes it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Management has evaluated the positions taken in connection with the tax provisions and tax compliance for the years included in these financial statements as required by ASC 740.  The Company does not believe that any of the positions it has taken will not prevail on a more likely than not basis.  As such no disclosure of such positions was deemed necessary.

In 2010, the Company wrote off the remainder of the Needlyzer™ inventory and a small amount of raw materials for our blood collection devices.  The write off amounted to $247,981.  The inventory was scrapped in 2011.

As a result of its reverse merger on December 28, 2007, the Company’s ability to utilize loss carryforwards from the former MedPro (the loss corporation and the acquired corporation for tax purposes) to offset taxable income will be limited by Internal Revenue Code Section 382.  Future utilization of net operating loss will be based on the long-term tax exempt rate at the date of merger applied against the value of the loss corporation.  The value of the loss corporation, $(22,000,000) for purposes of the merger, was established by arms-length negotiation.  The available net operating loss will be further adjusted by the recognition, for tax purposes, of built-in gains or losses as of the date of acquisition.

The following table reconciles the federal statutory tax rate to the Company’s effective tax rate:

	2011		2010
Federal statutory tax rate	(35.00	)%	(35.00	)%
State and local income taxes, net of federal tax benefit	(4.12	)%	(1.72	)%
Derivative (gain) / loss and permanent differences	0.55	%	0.76	%
Share-based compensation	(1.20	)%	10.88	%
Loss on write down of intangibles	—	%	1.57	%
Valuation allowance	38.37	%	22.99	%
Amortization	1.33	%	0.87	%
Other differences	(0.76	)%	(0.99	)%
Effect of lower brackets	0.83	%	0.64	%
	—	%	—	%

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NOTE 10 – LEASE COMMITMENT

Until April 2011, our Lexington, Kentucky offices were located in space we leased from a partnership in which our Chairman and CEO owns an interest. The lease is non-cancelable and runs through August 2012 at a monthly rent of $6,975. Total expense for this property was $83,700 for the years ended December 31, 2011 and 2010.  

In 2011, we leased new office space at 145 Rose Street, Lexington, Kentucky. The owner of the building is an LLC owned by unrelated parties. Our monthly rent for the initial five year term is $8,000 per month. We have an option to terminate the lease by giving 90 days notice before the third anniversary of the lease and by paying one year's rent as a penalty for early termination. The initial term of the lease is five years commencing on April 1, 2011 through March 31, 2016. We have three renewal options of three years each. Rent will escalate based on the Consumer Price Index for all U.S. City Average, all items (1982-1984 = 100).

Future minimum annual lease payments, including renewals, at December 31, 2011, were as follows:

12 Month Period Ended December 31	Amount
2012	$	151,800
2013	96,000
2014	96,000
2015	96,000
2016	24,000
	$	463,800

NOTE 11 – STOCK OPTIONS, WARRANTS AND DERIVATIVE LIABILITIES

Stock Option Awards

The table below identifies of the Company's 2010 and 2011 options granted for Officers, employees and Directors and the factors used to value the share-based compensation expense for each option.

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Option Schedule and Valuation Assumptions for 2011 and 2010 Options
Grant Date	Expiration Date	Option Term in Years	Number of Options	Exercise Price		Market Price at Grant Date		Estimated Life for Valuation (Years)	Volatility Factor		Risk Free Return Factor		Valuation Per Option		Total Compensation Expense
9/29/2010	9/29/2020	10.00	300,000	$	2.70	$	2.70	2.50	34.79	%	0.0067		$	0.600	180,000
9/29/2010	9/29/2020	10.00	275,500	$	2.70	$	2.70	5.00	34.79	%	0.0128		$	0.880	242,440
2/2/2011	2/2/2021	10.00	100,000	$	2.62	$	2.62	3.50	72.15	%	0.0112		$	1.344	134,350
2/2/2011	2/2/2021	10.00	100,000	$	2.62	$	2.62	4.50	72.15	%	0.021		$	1.523	152,272
2/2/2011	2/2/2021	10.00	100,000	$	2.62	$	2.62	5.50	72.15	%	0.021		$	1.578	157,843
8/15/2011	8/15/2021	10.00	50,000	$	2.96	$	2.96	3.00	78.36	%	0.0034		$	1.496	74,794
8/23/2011	1/31/2013	1.44	50,000	$	1.81	$	2.96	1.44	0.77821		0.22	%	$	1.543	77,139
8/23/2011	8/23/2021	10.00	125,000	$	2.96	$	2.96	3.00	0.77821		0.38	%	$	1.488	186,001
12/9/2011	12/9/2021	10.00	300,000	$	2.25	$	2.25	9.95	1.04088		0.82	%	$	1.712	513,480
12/9/2011	12/9/2021	10.00	275,000	$	2.25	$	2.25	9.95	1.04088		1.82	%	$	2.045	562,507

During the year ended December 31, 2010

On September 29, 2010, theCompany issued non-qualified stock options to purchase 575,500 shares of common stock to all of its employees, excluding the CEO, pursuant to the MedPro Safety Products, Inc. 2008 Stock and Incentive Compensation Plan (“2008 Plan”).  The shares are exercisable immediately, have a ten year term and were issued at $2.70 per share exercise price, the closing price on the grant date.   The valuation and the factors used to value these options are listed in the table above.

As a result of our former COO/President's resignation and failure to exercise his options within 90 days, 150,000 of these options lapsed in late December 2011.

During the year ended December 31, 2011

On February 2, 2011, the Compensation Committee of the Board granted three options to the CEO of 100,000 options each year for three years for one common share each, exercisable if the CEO stays through December 31st of the current and the next two succeeding years. The first option became exercisable on December 31, 2011. The valuation and the factors used to value these options are listed in the table above.

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In connection with the employment of the Company's new COO, an option for 50,000 shares was granted on August 15, 2011. It may be exercised on the one year anniversary of the grant date. The valuation and the factors used to value these options are listed in the table above.

On August 23, 2011, the Company issued options to acquire 25,000 common shares to each of our five non-employee directors pursuant to a newly adopted 2011 Non-Employee Director Stock Option Program. The valuation and the factors used to value these options are listed in the table above. A total of 500,000 shares were reserved to accommodate the current 125,000 options granted and future awards.

In addition, Mr. Kleidman was granted an option to acquire 50,000 common shares on August 23, 2011 under the same terms granted to the officers, employees and directors present for the August 18, 2008 award. The valuation and the factors used to value these options are listed in the table above.

On December 9, 2011, the Company awarded options to acquire common shares to the officers and employees, excluding the CEO. The total award consisted of 575,000 options to acquire one share each of common stock. The valuation and the factors used to value these options are listed in the table above.

Stock option activity for 2010 and 2011 is as follows:

	Shares		Average weighted exercise price
Outstanding at January 1, 2010	3,332,971		$	1.95
Granted	575,500		$	2.70
Exercised	—		n/a
Expired/Forfeited	—		n/a
Outstanding at December 31, 2010	3,908,471		$	2.06
Granted	1,100,000		$	2.44
Exercised	(1,050,000	)	$	1.81
Expired/Forfeited	(187,662	)	$	2.93
Outstanding at December 31, 2011	3,770,809		$	2.20

The following table summarizes information about stock options outstanding and exercisable at December 31, 2011:

Weighted average exercise price			Options outstanding	Average weighted remaining contractual life (years)	Options exercisable
$	1.81		1,950,000	1.088	None
$	1.81		100,000	1.088	None
$	3.90		148,053	6.531	148,053
$	3.65		47,256	7.770	47,256
$	2.70		425,500	8.753	575,500
$	2.62		100,000	2.093	100,000
$	2.62	*	100,000	3.093	None
$	2.62	*	100,000	4.093	None
$	2.96	*	50,000	9.630	None
$	2.96	*	125,000	9.652	None
$	1.81		50,000	1.088	None
$	2.25		575,000	9.950	575,000
$	2.23		3,770,809	4.158	1,445,809

* - Non-vested at December 31, 2011.

The following table summarizes information about non-vested options for the year ended December 31,2011:

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	Shares		Weighted Average Grant Date Fair Value			Per Share Fair Value
Outstanding Non-Vested Options 1/1/2011	—		$	—		$	—
Granted 2011	1,100,000		1,858,386			$	1.69
Vested 2011	(725,000	)	(1,287,476		)	$	1.78
Forfeited 2011	—		—
Outstanding Non-Vested Options at 12/31/2011	375,000		$	570,910		$	1.52

The weighted average fair value per share of options granted was $1.69 and $0.73 for 2011 and 2010, respectively. The fair value of each grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	2011	2010
Dividend yield	—%	—%
Expected volatility	90.03%	34.79%
Expected lives	5.63	3.70
Risk-free interest rate	1.23%	0.96%

The following table summarizes the weighted average price, remaining contractual life and aggregate intrinsic vale of the outstanding options at December 31, 2011 and 2010:

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	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value of Options Exercised
Outstanding January 1, 2010	3,332,971		$	1.95	3.49
Options granted under 2008 Plan	575,500		$	2.70	9.74
Options exercised under 2008 Plan	—		$	—	—
Outstanding December 31, 2010	3,908,471		$	2.06	3.56
Options granted under 2008 Plan	975,000		$	2.38	9.21
Options granted under 2011 Non-employee Director Stock Option Plan	125,000		$	2.96	9.65
Options Exercised under 2008 Plan	(1,050,000	)				$	840,000
Options Forfeited under 2008 Plan	(187,662	)
Outstanding December 31, 2011	3,770,809		$	2.20	4.64	$	840,000
Exercisable December 31, 2011	1,295,809		$	2.67	9.02	$	321,775
Currently Vested Options at December 31, 2011	3,395,809		$	2.75	4.11	$	2,321,775
Options Not Vested at December 31, 2011	375,000		$	2.78	9.35	$	26,000
Options Vested but Not Exercisable Due to Exercise Date Restrictions at December 31, 2011	2,100,000		$	1.81	1.088	$	1,974,000

The weighted average remaining contractual life of all options outstanding at December 31, 2011 is 4.16 years. Excluding outstanding stock options, our stockholders have authorized an additional 1,816,529 shares of common stock that may be issued under the share-based payment plans.

The following table summarizes our outstanding non-vested stock options:

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Grant	Number	Exercise		Contractual
Date	of Shares	Price		Life in Years
2/2/2011	200,000	$	2.62	9.09
8/15/2011	50,000	$	2.96	9.63
8/23/2011	125,000	$	2.96	9.65
	375,000	$	2.78	9.35

As of December 31, 2011, we had $484,816 of total unrecognized compensation cost related to unvested options, net of expected forfeitures, which is expected to be recognized over the following periods: 2012 - $149,816, 2013 - $149,816, 2014 - $118,434, 2015 - $49,254 and 2016 - $17,496.

The intrinsic value of all the "in the money options" outstanding at December 31, 2011 was $0.68 per share on 3,400,500 shares or $2,321,775. The intrinsic value of options exercisable at December 31, 2011 was $0.29 per share on 1,100,500 shares or $321,775. The intrinsic value of the total options exercised for the year ended December 31, 2011 was $0.80 per share or $840,000. No options have been exercised in any other period.

Of the 3,770,809 options outstanding and expected to be exercised, 3,400,500 were "in the money" at the balance sheet date but only 1,100,500 of those were currently exercisable. The difference of 2,300,000 are the options that are either restricted by a future exercise date (2,100,000 options) or are "in the money" but not vested at year end (200,000 options). The Company has issued 195,309 options that are exercisable and vested but out of the money at yearend and 175,000 that were both out of the money and not vested at the balance sheet date.

Stock purchase warrants

Our preferred stockholders received one Series A warrant and one Series B warrant for each of the 6,668,229 shares of Series A Stock they purchased on December 28, 2007. For making a total investment of at least $5 million, VOMF also received one Series J warrant and one C warrant for each of the 5,975,116 shares of Series A Stock it purchased. In 2008, VOMF and VCAF exercised the Series J warrants in full for cash and received 1,493,779 shares of new Series B Stock, which is convertible into four common shares for each share of Series B Stock. In 2009, VMOF and VCAF delivered $3,000,000 of cash and all of the A, B and C warrants they held, receiving in exchange 1,571,523 shares of new Series C Stock, which is convertible into ten common shares for each share of Series C Stock.

Series A and Series B Warrants.

As of December 31, 2011, 512,941 Series A warrants and 512,941 Series B warrants remained outstanding. Each Series A warrant entitles holder to purchase one share of common stock at a purchase price of $1.81 per share. Each Series B warrant entitles holder to purchase one share of common stock at a purchase price of $1.99 per share. Both the Series A and Series B warrants may be exercised through December 28, 2012.

The purchase price per share of both the Series A and Series B warrants is subject to adjustment in the event of any stock dividend, stock split, recapitalization, reclassification, merger or similar event. In addition, the purchase price is subject to adjustment in the event of the issuance of additional shares of common stock or common stock equivalents, or other distributions made to the holders of common stock other than permitted issuances.

The warrant holders have the same buy-in rights and registration rights as holders of Series A preferred described in Note 8, above.

If the resale registration statement covering the common shares underlying the Series A and Series B warrants is no longer in effect, the holders may, in lieu of exercising their warrants for cash, make a cashless exercise and receive a number of common shares having a market value equal to the difference between the then-current market value of the number of shares for which the warrant is exercised and the exercise price for those shares.

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Series AA Warrants.

The Company issued Series AA warrants to purchase 533,458 common shares for $1.81 per share as compensation for financial advisory services rendered by SC Capital Partners, LLC in connection with the sale of the preferred stock and warrants on December 28, 2007. The terms of the Series AA warrants are similar to the Series A warrants and expire on December 28, 2012.

As consideration for interim financing provided to the Company by VOMF from February through August in 2010, the Company issued VOMF warrants to purchase 325,000 common shares at $3 per share and 416,672 shares at $4 per share. These warrants expire at various dates in 2015.

See the table below for information about the valuation of the Company's outstanding warrants pursuant to the Black-Scholes method.

Derivative Liabilities and Valuation

The Series A Stockholders have the right to redeem their shares if certain events occur. In accounting for this embedded conversion feature, the Company considered ASC 815 (formerly FASB SFAS 133, Accounting for Derivative Instruments and Hedging Activities and EITF 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company’s own stock) and ASC 470 (formerly EITF 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Features, and EITF 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments).  Under this guidance, the classification of an issuer’s convertible preferred stock as permanent equity depends upon the issuer having control with respect to the manner of redemption of the convertible preferred stock.

The right of Series A Stockholders to redeem their shares arises first in the event of a consolidation or merger that would result in a change of control of the Company, the sale of 50% of its assets, or a purchase of 50% of the outstanding shares of the Company’s common stock.  Mergers, consolidations and asset sales require approval by the board of directors.  A third party could purchase 50% of the outstanding shares only from the Company directly or in a voluntary sale by one or more common shareholders.These circumstances, being characteristic of all equity, do not preclude classification as equity.

Of the other seven events triggering the right of Series A Stockholders to redeem their shares, four are events for which the issuer has the option to redeem in either cash or common shares.  The redemption ratio is fixed and adjusts only if the Company sells common shares at a price less than the price per share at which the preferred stock converts into common stock. In other words, the adjustments to the ratio are not of a dilutive nature that would generally give rise to liability treatment.

The other triggering events would occur only through purposeful actions by the Company or otherwise within its control.

• As of December 31, 2010, the Company had 90,000,000 common shares authorized and 13,091,507common shares issued and outstanding.  Therefore, the Company had a sufficient number authorized and unissued common shares to convert all of the preferred stock at the conversion ratio then in effect had a notice of conversion been presented as of that date, meeting the “current status” test of ASC 815 (formerly EITF 00-19).

• The deregistration of Company’s common stock is within its control;

• The consummation of a going private transaction is within the Company’s control.

Based on the foregoing analysis, the Company concluded that the embedded conversion feature would not be separately accounted for as a derivative liability from the Series A Stock.

In accordance with this guidance, the Company recorded a deemed dividend in the amount of $3,975,120 by increasing the retained deficit and increasing additional paid in capital by that amount effective on December 28, 2007 to reflect the estimated fair value of the embedded conversion feature in the Series A Stock. The $3,975,120 amount represents the approximately $0.60 difference per share between the $1.81 liquidation value per share of the preferred stock and the $1.21 per share value of the warrants.  This amount would normally be amortized over the period between the issue date and the conversion date, but because the Series A Stock is convertible immediately upon issuance, the entire amount was charged to retained earnings as a deemed dividend and an increase to additional paid in capital.

We have used the Black-Scholes option valuation model to value our stock purchase warrants. However, the Black-Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of subjective assumptions including the expected stock price volatility and appropriate adjustments for restrictions on exercising the options. Because our warrants have characteristics

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significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, this model does not necessarily provide a reliable single measure of the fair value of its warrants. Assumptions used in valuing the Series A and Series B warrants included an expected term of 2.5 years, volatility of 43.54 %, and an equivalent bond yield of 4.36%.

Effective for financial statements issued for fiscal periods beginning after December 15, 2008, or interim periods therein, ASC 815 (formerly, EITF 07-05) requires that warrants and convertible instruments with certain conversion or exercise price protection features be recorded as derivative liabilities on the balance sheet based on the fair value of the instruments.

The warrants we issued on December 28, 2007, possess features covered by ASC 815. The warrants provide for cashless exercise after one year. They also provided that if before January 1, 2009, we issued any additional shares of common stock at a price per share less than $1.81 (or the adjusted warrant exercise price then in effect) or without consideration, then the exercise price would adjust to the price per share paid for the additional shares of common stock upon each such issuance.

To reflect the cumulative effect of adopting ASC 815, the Company reduced Additional Paid in Capital by $6,321,081, increased its Accumulated Deficiency by $35,081,114 and recorded a liability of $41,402,196 as of January 1, 2009. The amount of the liability was determined by reference to the fair value of the warrants on that date under FASB ASC 820 (formerly SFAS 157).

ASC 820 defines fair value 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. ASC 820 establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:

• Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and must be used to measure fair value whenever available.

• Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

• Level 3: Significant unobservable inputs that reflect a reporting entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability. For example, level 3 inputs would relate to forecasts of future earnings and cash flows used in a discounted future cash flows method.

We concluded there was insufficient trading frequency and volume in MedPro's shares to use the Level 1 inputs to value our warrants in a Black-Scholes calculation under ASC 820 as of January 1, 2009. In particular, we considered that nearly 99% of our outstanding common shares were restricted securities that could not be traded in public markets through January 4, 2009, and our stock continued to trade sporadically thereafter. We also considered the volatility of the trading price, and the time it would take the market to absorb an influx of over 19,000,000 shares underlying the warrants based on then current trading volumes. Accordingly, we used level 2 inputs and level 3 inputs for purposes of our ASC 815 and ASC 820 analysis.

The liability for the warrants exchanged for $3,000,000 of cash and a total of 1,571,523 shares of new Series C Stock in March 2009 was recomputed using the Black-Scholes method with updated inputs, and the difference was recorded as income from the decline in debt due to the reduction in fair value of the outstanding warrants at March 24, 2009, immediately before the exchange. The valuation difference on these warrants was $21,237,919, which accounts for the substantial portion of the total gain of $21,603,185 reported for the year ended December 31, 2009.

As of August 12, 2009, the Company's registration statement became effective, terminating the cashless exercise feature. A total of 1,025,882 Series A and B warrants remained outstanding at December 31, 2009, and all of the derivative liability had been written off or recognized as gain.

All of the warrants we issued in 2010 possess cashless exercise and anti-dilution features covered by ASC 815.

The following factors were used to value the warrants since they were issued beginning in the first quarter of 2010:

Factors Used and Valuation of Warrants for 2010 and 2011
	2/26/2010	3/31/2010	4/30/2010	6/3/2010	6/30/2010	8/5/2010	Total
Exercise Price	$4.00	$4.00	$3.00	$3.00	$3.00	$3.00

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Number of Warrants	212,500	112,500	208,334	50,001	75,002	83,335	741,672
3/31/2010
Term	5.00	5.00
Stock Price	$3.10	$3.10
Volatility	48.00%	48.00%
Risk Free Return	2.30%
Valuation	$241,940	$128,086					$	370,026
6/30/2010
Term	4.67	4.75	4.83	4.92	5.00
Stock Price	$3.00	$3.00	$3.00	$3.00	$3.00
Volatility	42.26%	42.26%	42.26%	42.26%	42.26%
Risk Free Return	1.79%	1.79%	1.79%	1.79%	1.79%
Valuation	$183,281	$98,246	$241,007	$58,323	$88,198		$	669,055
9/30/2010
Term	4.42	4.50	4.58	4.67	4.75	4.83
Stock Price	$2.70	$2.70	$2.70	$2.70	$2.70	$2.70
Volatility	34.79%	34.79%	34.79%	34.79%	34.79%	34.79%
Risk Free Return	1.27%	1.27%	1.27%	1.27%	1.27%	1.27%
Valuation	$100,901	$54,339	$154,003	$37,357	$56,623	$63,560	$	466,783
12/31/2010
Term	4.17	4.25	4.33	4.42	4.42	4.58
Stock Price	$3.00	$3.00	$3.00	$3.00	$3.00	$3.00
Volatility	69.62%	69.62%	69.62%	69.62%	69.62%	69.62%
Risk Free Return	2.01%	2.01%	2.01%	2.01%	2.01%	2.01%
Valuation	$301,888	$161,576	$344,703	$83,396	$125,095	$141,165	$	1,157,823
3/31/2011
Term	3.92	4.00	4.08	4.17	4.17	4.33
Stock Price	$2.24	$2.24	$2.24	$2.24	$2.24	$2.24
Volatility	72.15%	72.15%	72.15%	72.15%	72.15%	72.15%
Risk Free Return	2.24%	2.24%	2.24%	2.24%	2.24%	2.24%
Valuation	$193,690	$104,068	$227,144	$55,118	$82,678	$93,828	$	756,526
6/30/2011
Term	3.67	3.75	3.83	3.92	3.92	4.08
Stock Price	$2.50	$2.50	$2.50	$2.50	$2.50	$2.50
Volatility	82.90%	82.90%	82.90%	82.90%	82.90%	82.90%
Risk Free Return	0.81%	0.81%	0.81%	0.81%	1.76%	1.76%
Valuation	$253,160	$135,822	$287,018	$69,577	$105,820	$119,852	$	971,249
9/30/2011
Term	3.41	3.50	3.58	3.68	3.75	4.08

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Stock Price	$2.40	$2.40	$2.40	$2.40	$2.40	$2.40
Volatility	76.27%	76.27%	76.27%	76.27%	76.27%	76.27%
Risk Free Return	0.42%	0.42%	0.42%	0.42%	0.42%	0.42%
Valuation	$213,339	$114,609	$248,563	$60,307	$90,461	$102,626	$	829,905
12/31/2011
Term	3.17	3.25	3.33	3.42	3.50	3.58
Stock Price	$2.75	$2.75	$2.75	$2.75	$2.75	$2.75
Volatility	106.74%	106.74%	106.74%	106.74%	106.74%	106.74%
Risk Free Return	0.36%	0.36%	0.36%	0.36%	0.36%	0.36%
Valuation	$346,734	$185,867	$376,774	$91,286	$138,187	$154,906	$	1,293,754

The warrants we issued in the first quarter of 2010 had an exercise price of $4.00 per share.  The Company recorded a liability for the fair market value of these warrants at their respective issue dates of $412,954.  The derivative liability was adjusted to $370,026 due to a decline in the market value of the warrants of $42,928 as of March 31, 2010.

These inputs, coupled with the individual warrant exercise prices resulted in a Black-Scholes value of $1.34 for the February 26, 2010 warrants and $1.14 for the March 31, 2010 warrants.  The $0.20201 decline in the 212,500 warrants from February 26, 2010 to March 31, 2010 resulted in a gain of $42,928 on the derivative liability as of March 31, 2010.

As of June 30, 2010, these warrants were revalued to $281,527.  The Company recorded an additional gain of $88,499 for these warrants in the second quarter of 2010.

The warrants we issued in the second quarter of 2010 had an exercise price of $3.00 per share.  The Company recorded a liability associated with these warrants at their respective issue dates of $410,902.  The derivative liability for these warrants was adjusted to $387,529 due to a decline in the market value of the warrants of $23,374 as of June 30, 2010.

The combined gain on derivative valuation for the quarter was $99,147.  Gain on derivative valuation for the six months ended June 30, 2010 was $142,075.

The inputs used to value the derivative liability as of the issue date of the respective warrants and at June 30, 2010 were:

• The market price of the Company’s stock on April 30, 2010, June 3, 2010 and June 30, 2010 were all $3.00  per share;

• Specific Company Volatility for the valuation dates were  – 44.51, 43.32 and 42.26%, respectively;

• Risk free return rates were – 2.43%, 2.17% and 1.79%, respectively; and

• Estimated life of the warrants - 5 years.

These inputs, coupled with the individual warrant exercise prices resulted in a Black-Scholes value of approximately $1.25, $1.22 and $1.18 for the respective warrant grant dates.  The quarter end valuations of these warrants were determined based on the valuation factors reflected in the table above.  The adjustments to the derivative liabilities were previously stated above.

The warrants we issued in the third quarter of 2010 also have an exercise price of $3.00 per share.  The Company recorded a liability associated with these warrants at their respective issue dates of $82,631.  The derivative liability for these warrants was adjusted to $63,698 due to a decline in the market value of the warrants of $18,933 as of September 30, 2010.  The combined gain on derivative valuation for the quarter was $297,514.  Gain on derivative valuation for the nine months ended September 30, 2010 was $439,589.

The inputs used to value the derivative liability as of the issue date of the respective warrants and at September 30, 2010 were:

• The market price of the Company’s stock on August 5, 2010 was $3.00 per share;

• Specific Company Volatility for the valuation date was  – 34.79%;

• Risk free return rate was – 1.57% at issue date and 1.27 at quarter end; and

• Estimated life of the warrants - 5 years.

These inputs, coupled with the individual warrant exercise prices resulted in a Black-Scholes value of approximately $0.99 for

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the warrant grant date.  The quarter end valuations of these warrants were determined based on a $3.00 market price, a 34.79% volatility, 1.27% risk free return and estimated remaining lives of the warrant based on their respective maturity dates.  The adjustments to the derivative liabilities were previously stated above.

No additional warrants were issued in the fourth quarter of 2010.  At December 31, 2010, the derivative liability for the warrants issued in 2010 was adjusted to $1,157,823, changing the previously recorded gain from $439,589 to a loss of $313,335.  The change in value was caused by a change in volatility of the stock from 34.79% to 69.62%, an increase in the market price of the stock from $2.70 to $3.00 and an increase in the risk free return rate from 1.27% to 2.01%.

The inputs used to value the derivative liability as of December 31,  2010 are reflected in the table above. No additional warrants were issued in 2011.

Liabilities measured at fair value on a recurring or non-recurring basis as December 31, 2011 and 2010 were as follows:

	Level 1		Level 2		Level 3		Total
2011
Derivative liabilities	$	—	$	1,293,754	$	—	$	1,293,754
Total Liabilities at Fair Value	$	—	$	1,293,754	$	—	$	1,293,754
2010
Derivative liabilities	$	—	$	1,157,823	$	—	$	1,157,823
Total Liabilities at Fair Value	$	—	$	1,157,823	$	—	$	1,157,823

Note- No assets were measured at fair value during 2011 or 2010.

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The following table summarizes the terms and values of the Company’s stock purchase warrants outstanding at December 31, 2011 and 2010:

Warrant Holder	Exercise Price		Warrants Outstanding	Weighted Average Remaining Life	Shares Exercisable	Black-Scholes Valuation
2011 Warrant Details
VOMF 2/26/2010	$	4.00	212,500	4.16	212,500	$	346,734
VOMF 3/31/2010	$	4.00	112,500	4.25	112,500	$	185,867
VOMF 4/30/2010	$	3.00	208,334	4.33	208,334	$	376,774
VOMF 6/3/2010	$	3.00	50,001	4.42	50,001	$	91,286
VOMF 6/30/2010	$	3.00	75,002	4.50	75,002	$	138,188
VOMF 8/5/2010	$	3.00	83,335	4.60	83,335	$	154,905
A Warrants	$	1.81	512,941	2.00	512,941	$	203,777
B Warrants	$	1.99	512,941	2.00	512,941	$	164,994
AA Warrants	$	1.81	533,458	2.00	533,458	$	211,928
December 31, 2011 Totals Exercisable at the end of the period.			2,301,012	1.74	2,301,012	$	1,874,453
Weighted average exercise price						$	2.37
2010 Warrant Details
VOMF 2/26/2010	$	4.00	212,500	4.16	212,500	$	301,889
VOMF 3/31/2010	$	4.00	112,500	4.25	112,500	$	161,575
VOMF 4/30/2010	$	3.00	208,334	4.33	208,334	$	344,703
VOMF 6/3/2010	$	3.00	50,001	4.42	50,001	$	83,396
VOMF 6/30/2010	$	3.00	75,002	4.50	75,002	$	125,095
VOMF 8/5/2010	$	3.00	83,335	4.60	83,335	$	141,165
A Warrants	$	1.81	512,941	2.00	512,941	$	203,777
B Warrants	$	1.99	512,941	2.00	512,941	$	164,994
AA Warrants	$	1.81	533,458	2.00	533,458	$	211,928
Crystal Research	$	1.99	100,000	0.53	100,000	$	85,509
Crystal Research	$	3.75	75,000	0.53	75,000	$	82,091
December 31, 2010 Totals Exercisable at the end of the period.			2,476,012	2.59	2,301,112	$	1,824,031
Weighted average exercise price						$	2.40

NOTE 12 – EARNINGS PER SHARE

Basic earnings/ (loss) per common share represents the amount of earnings/ (loss) for the period available to each share of common stock outstanding during the reporting period.  Diluted earnings (loss) per common share is the amount of earnings (loss) for the period available to each share of common stock outstanding during the reporting period and to each share that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares outstanding during the period.

The Company’s potentially dilutive securities consist of options, warrants and convertible preferred stock.  Since the Company had a loss in 2011, the potentially dilutive options (3,770,809), warrants (2,301,012) and preferred shares (9,733,531) were not considered and earnings per share were only presented on a non-dilutive basis.  In 2010, the Company had 2,476,012 warrants, 3,908,471 options and 9,733,531 preferred shares (in three different Series which had different conversion features) which had

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no impact on calculating fully diluted earnings per share due to net losses for the period.  

No outstanding options and warrants were included in the computation of diluted net income (loss) per share in 2011 or 2010.  

NOTE 13 – EMPLOYEE BENEFIT PLAN

MedPro Safety Products, Inc. Defined Contribution Plan

The Company adopted a retirement savings 401(k) and profit-sharing plan covering substantially all employees on October 1, 2008.  Employees may contribute up to 100% of their compensation, up to allowable limits, with the Company matching the first four percent of compensation under a safe harbor plan.  

The Company may make a discretionary contribution to the plan up to the maximum contribution allowable for a defined contribution plan.  The expected amount of the 2011 Company’s discretionary contribution is $141,930 and $150,000 was contributed for 2010.  The Company’s matching contributions for 2011 were $76,389, before reduction for 2010 forfeitures of $10,349 credited to current year matching contributions, and $71,075 for 2010.

Participants have full and immediate vesting in any deferrals and in any employer contributions.  Eligibility begins on the first day of the month coincident with or following the start of employment.  The employee must be 21 years of age to be eligible.  Employer contributions charged to expense for the years ended December 31, 2011 and 2010, were $207,663 and $221,075, respectively. 

NOTE 14 – SUBSEQUENT EVENTS

The Company has an employment agreement with each of its executive officers that among other things, authorizes the Executive Compensation Committee of the Board of Directors (the “Committee”) to grant bonuses to these officers up to pre-authorized limits as a percentage of their base salaries. Bonuses that may be granted, if any, may be entirely at the discretion of the Committee and have not been based on any pre-determined formula. Accordingly, for financial statement purposes the Company has only recognized such compensation in expense when declared by the Committee. On February 24, 2012, the Company paid a $200,000 bonus to the Company’s CEO for his 2011 performance based on the direction and approval of the Compensation Committee of the Board. This amount was not accrued in these financial statements.

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INDEX TO EXHIBITS

Exhibit No.	Description
3.1	Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Form 8-K filed on January 4, 2008).
3.2	Bylaws (incorporated by reference to Exhibit 3.2 to Form 8-K filed on January 4, 2008).
3.3	Bylaw amendment dated August 10, 2009 (incorporated herein by reference to Form 8-K filed on August 17, 2008).
4.1	Certificate of Designations, Series A Convertible Preferred Stock Turner (incorporated by reference to Exhibit 4.1 to Amendment No. 1 on Form S-1/A (Reg. No. 333-149163) filed on July 3, 2008).
4.2	Form of Series A Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.3 to Form 8-K/A filed on September 10, 2007).
4.3	Form of Series B Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.4 to Form 8-K/A filed on September 10, 2007).
4.4	Series A Convertible Stock Purchase Agreement dated as of September 5, 2007 (incorporated by reference to Exhibit 4.6 to Form 10-K filed on April 18, 2008).
4.5	Amendment to Certificate of Designations, Series A Convertible Preferred Stock (incorporated by reference to Exhibit 4.6 to Form 10-K filed on March 30, 2009)
4.6	Certificate of Designations, Series B Convertible Preferred Stock (incorporated herein by reference to Exhibit 4.9 to Form 8-K filed on August 22, 2008).
4.7	Omnibus Amendment to Series A, B, and C Warrants held by Vision Opportunity Master Fund, Ltd. (incorporated herein by reference to Exhibit 4.10 to Form 8-K filed on August 22, 2008).
4.8	Certificate of Designations, Series C Convertible Preferred Stock (incorporated herein by reference to Exhibit 4.1 to Form 8-K filed on March 30, 2009).
4.9	Form of Common Stock Purchase Warrant for 2010 issuances to Vision Opportunity Master Fund, Ltd.  (incorporated by reference to Exhibit 4.9 to Form 10-K filed on March 30, 2010)
10.1	Technology Acquisition Agreement, dated February 19, 2007, by and among SGPF, LLC, Hooman Asbaghi and Visual Connections, Inc (incorporated by reference to Exhibit 10.1 to Form 10-K filed on April 18, 2008)
10.2	Technology Development and Option Agreement, between SGPF, LLC and MedPro Safety Products, Inc. (incorporated by reference to Exhibit 10.2 to Form 10-K filed on April 18, 2008).
10.3	Amendment to Technology Development and Option Agreement, between SGPF, LLC and MedPro Safety Products, Inc. (incorporated by reference to Exhibit 10.1 to Form 8-K filed on October 6, 2008).
10.4	Second Amendment to Technology Development and Option Agreement, between SGPF, LLC and MedPro Safety Products, Inc. (incorporated by reference to Exhibit 10.4 to Form 10-Q filed on November 15, 2010).

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	10.5	Financial Advisory Agreement dated January 11, 2010, between MedPro Safety Products, Inc and SC Capital Partners LLC. (incorporated by reference to Exhibit 10.5 to Form 10-Q filed on November 15, 2010).
	10.6	Medical Supply Manufacturing Agreement, dated as of July 14, 2010, between MedPro Safety Products, Inc. and Greiner Bio-One GmbH (incorporated by reference to Exhibit 10.1 to Form 10-Q filed on August 16, 2010) (portions of the exhibit have been omitted pursuant to a request for confidential treatment).
	10.7	Purchase and Sale Agreement dated as of September 1, 2010, between MedPro Investments, LLC, and MedPro Safety Products, Inc. (incorporated by reference to Exhibit 10.7 to Form 10-Q filed on November 15, 2010).
	10.8	Pledge and Security Agreement made by MedPro Safety Products, Inc. to U.S. Bank National Association, as Trustee, dated as of September 1, 2010 (incorporated by reference to Exhibit 10.8 to Form 10-Q filed on November 15, 2010).
	10.9	Indenture dated as of September 1, 2010, by and between MedPro Investments, LLC, as issuer of the Notes, and U.S. Bank National Association, as initial trustee of the Notes (portions of the exhibit have been omitted pursuant to a request for confidential treatment) (incorporated by reference to Exhibit 10.9  to Form 10-Q filed on November 15, 2010).
	10.10	Continuing Unconditional Guarantee, dated as of September 1, 2010, is made by MedPro Safety Products, Inc., to U.S. Bank National Association, as trustee under the Indenture (incorporated by reference to Exhibit 10.10 to Form 10-Q filed on November 15, 2010).
	10.11	MedPro Safety Products, Inc. 2008 Stock and Incentive Compensation Plan (incorporated by reference to Exhibit 10.9 to Form 8-K filed on August 22, 2008).
	10.12	Form of Nonqualified Stock Option Award Agreement (incorporated by reference to Exhibit 10.10 to Form 8-K filed on August 22, 2008).
	10.13	Form of Incentive Stock Option Award Agreement (incorporated by reference to Exhibit 10.13 to Form 10-K filed on March 30, 2010).
	10.14	Employment Agreement with Marc T. Ray (incorporated by reference to Exhibit 10.1 to Form 8-K filed on April 7, 2009).
	10.15	Employment with W. Craig Turner (incorporated by reference to Exhibit 10.1 to Form 8-K filed on July 22, 2009).
	10.16	Employment Agreement with Agreement with Walter W. Weller (incorporated by reference to Exhibit 10.1 to Form 8-K filed on October 21, 2009).
	10.17	Employment Agreement with Gregory C. Schupp (incorporated by reference to Exhibit 10.17 to Form 10-K filed March 31, 2011).
	10.18	Employment Agreement with C. Garyen Denning (incorporated by reference to Exhibit 10.18 to Form 10-K filed March 31, 2011).
*	10.19	Non-Employee Director Stock Option Plan
*	31.1	Certification of Chief Executive Officer pursuant to SEC Rule 13(a)-14(a)
*	31.2	Certification of Chief Financial Officer pursuant to SEC Rule 13(a)-14(a)
*	32.1	Certification of Chief Executive Officer pursuant to Section 1350 of Chapter 63 of Title 18 of the U.S. Code
*	32.2	Certifications of Chief Financial Officer, pursuant to Section 1350 of Chapter 63 of Title 18 of the U.S. Code
	*    Filed herewith

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