Net interest income for the three months ended March 31, 2009 amounted to $8, which is an increase of $24 from the same period in 2008. In the first quarter of 2008, we had interest expense from notes payable, we have no notes payable in the first quarter 2009. Our average daily cash balances outstanding were higher during the three months ended March 31, 2009 over the same period in 2008, which generated more interest income.

Our businesses are currently organized into the following two reportable segments; reconstructive products (the "Reconstructive Division") and spine products (the "Spine Division"). The Reconstructive Division segment is comprised of activity relating to the Company's unicompartmental knee, patella-femoral products, and reconstructive knee products. The Spine Division segment is comprised of the spinal lumbar fusion system and cervical plate and screw systems.

These reportable segments are based on the nature of the products offered. Management evaluates performance and allocates resources based on several factors, of which the primary financial measure is segment operating results. Due to the distinct nature of the products in the Company's Reconstructive Division, and the fact that it has a more developed market for its products, it is considered by management as a separate segment. The Company's Spine Division is still in the process of developing the market and obtaining instrumentation necessary to sell the products in greater quantities. As a result, the Spine Division is considered by management as a separate segment. The accounting policies of the reportable segments are the same as those described in Note 1.

As of March 31, 2009, the Company's Reconstructive Division includes $1,233 of goodwill and $4,840 in other intangible assets relating to the Company's unicompartmental knee product. These amounts are expected to be deductible for income tax purposes.

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The following table sets forth financial information by reportable segment (in thousands):

All of the Company's net sales were attributable to activity in the United States. There were no long-lived assets held in foreign countries.

Net cash used in operating activities was $983 for the three months ended March 31, 2009 in contrast to $277 from the same period in 2008. The main use of cash was related to salaries.

Net cash used in investing activities was $432 for the three months ended March 31, 2009 in contrast to net cash used by investing activities of $1,303 from the same period in 2008. The cash used by investment activities during the three months ended March 31, 2009 primarily was attributable to the purchase of additional instrumentation for use in conjunction with our products.

Our net cash provided by financing activities was $0 for the three months ended March 31, 2009 in contrast to $1,200 from the same period in 2008.

At May 15, 2009, we have $845 thousand in cash which is not projected to meet all of our working capital needs for the next twelve months. The fact that the Company sustained losses in 2008 and 2009 and still requires outside sources of additional capital to sustain operations has created an uncertainty about the Company's ability to continue as a going concern.

We have available to us an approximate aggregate of $845 thousand in cash and cash equivalents, which will not be sufficient for us to meet our anticipated cash requirements for the next 12 months. Management intends to use borrowings and securities sales to mitigate the effects of our use of that cash. However, we cannot assure you that

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debt or equity financing, if and when required, will be available. Our ability to continue as a going concern is dependent upon receiving additional funds either through the issuance of debt or through common and/or preferred stock and the success of management's plan to expand sales. Although we may obtain external financing through the sales of our own securities, there can be no assurance that such financing will be available, or if available, that any such financing would be on terms acceptable to us. If we are unable to fund our cash flow needs, we may have to reduce or stop planned growth or scale back operations and reduce staff.

Some of the statements in this Quarterly Report on Form 10-Q are "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not relate strictly to historical or current matters. Rather, forward-looking statements are predictive in nature and may depend upon or refer to future events, activities or conditions. Although we believe that these statements are based upon reasonable assumptions, we cannot provide any assurances regarding future results. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements.

These factors include the following:

• We will need to raise additional funds in the future to fund our operations and research, and these funds may not be available on acceptable terms, if at all.
• We expect to incur significant losses, either directly or indirectly through the companies in which we develop our products, for at least the next several years, and we cannot assure you that we will ever be profitable.
• We have a limited number of products currently available for sale and there is a high risk that our research and development efforts might not successfully generate any viable product candidates in the future.
• Cost containment measures, pressure from our competitors and availability of medical reimbursement may impact our ability to sell our products at prices necessary to expand our operations and reach profitability.
• The market for orthopedic, knee and hip surgery devices is large and growing at a significant rate.
• Sales of our products will depend on the availability of adequate reimbursement from third-party payors (such as governmental programs, for example, Medicare and Medicaid, private insurance plans and managed care programs) both in terms of the sales volumes and prices for our products.
• Legislative or administrative reforms to the United States or international reimbursement systems in a manner that significantly reduces reimbursement for procedures using our medical devices or denies coverage for those procedures could have a material adverse effect on our business, financial condition or results of operations.
• We must convince orthopedic and spine surgeons that our products are an attractive alternative to existing surgical treatments of orthopedic and spine disorders.
• We generally do not have long-term contracts with our customers.
• Our business plan relies on certain assumptions about the market for our products, which, if incorrect, may adversely affect our business and profitability.
• We expect to face significant competition as a result of the rapid technological changes in the medical devices industry, which could have an adverse effect on our business, financial condition or results of operations.
• Hospitals, surgeons, distributors and agents may have existing relationships with other medical device companies that make it difficult for us to establish new relationships with them. As a result, we may not be able to sell and market our products effectively.
• Our manufacturers may be unsuccessful in manufacturing products at the levels required to meet future market demand.
• We rely on single source manufacturers, which could impair our ability to meet demand for delivering our products in a timely manner or within our budget.

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• If a natural or man-made disaster strikes a facility in which our products are manufactured, we could be unable to deliver our products for a substantial amount of time and our sales could decline.
• Our growth will depend on developing new products or product enhancements, requiring significant research and development, clinical trials and regulatory approvals, all of which are expensive and time-consuming and may not result in a commercially viable product.
• If we choose to grow our business by acquiring new and complementary businesses, products or technologies, we may be unable to complete these acquisitions or successfully integrate them in a cost-effective and non-disruptive manner.
• We rely on our independent sales distributors and sales representatives to market and sell our products.
• We are dependent on the services of Andrew A. Brooks, M.D. and Mikhail Kvitnitsky, and the loss of either of them could harm our business.
• Failure to attract and retain skilled personnel and cultivate key academic collaborations will delay product development programs and business development efforts.
• If conflicts arise between collaborators or advisors and us, any of these parties may act in its self-interest, which may be adverse to our interests and the interests of our stockholders.
• If we fail to properly manage our anticipated growth, our business could suffer.
• If we fail to upgrade our management information systems, or if those systems do not operate as expected, we could experience significant disruption of our business and product developments and our results could suffer.
• If we decide to market and sell our devices and products internationally, we would be subject to various risks relating to our international activities, which could negatively impact our business and financial results.
• We are subject to substantial governmental regulation that could change and thus force us to make modifications to how we develop, manufacture and price our products.
• Federal regulatory reforms may adversely affect our ability to sell our products profitably.
• We have not yet collected long-term clinical data to support the safety of our products, and our products may, therefore, prove to be less safe and effective than initially thought.
• The FDA requires us to obtain new Section 510(k) clearances or premarket approvals for modifications to our approved products. Otherwise, we may have to cease marketing, or to recall, the modified products until clearances are obtained.
• If we or our third-party manufacturers fail to comply with the FDA's Quality System Regulations, the manufacture of our products could be interrupted and our product sales and operating results could suffer.
• We are subject to various complex laws and regulations. Compliance with these laws and regulations is costly and time-consuming, and failure to comply with them can have adverse consequences on our business.
• Some proponents have advocated the creation of a national database or registry that tracks how patients with artificial joints fare. Any requirement for surgeons to participate in such a registry may adversely affect our ability to sell our products profitably.
• We are an early-stage orthopedic medical device company with a limited operating history and our business may not become profitable.
• We acquired all of the ownership interests in an existing entity that may have undisclosed liabilities.
• Cardo's acquisition of Accin's assets in May 2007 may make it difficult for you to evaluate our historical and future performance.
• Our quarterly financial results are likely to fluctuate significantly because our sales prospects are uncertain.
• If we cannot adequately protect our patents and other intellectual property rights, we may lose market share to our competitors and be unable to operate our business profitably.
• Changes to intellectual property laws may negatively impact our ability to protect our intellectual property.
• Our commercial success depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties.
• The medical device industry is characterized by patent and other intellectual property litigation, and we could become subject to litigation that could be costly, result in diverting management's time and efforts, require us to pay damages, and/or prevent us from marketing our existing or future products.
• Patent infringement lawsuits brought against us could have a material adverse affect on our ability to develop and sell our products and to operate profitably.

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• We may be subject to damages resulting from claims that we or our employees or consultants have wrongfully used or disclosed alleged trade secrets of their former employers.
• Some countries may require us to grant compulsory licenses to third parties. These licenses could be extended to include some of our products or potential product, which may limit our potential revenue opportunities.
• Fluctuations in the cost and availability of insurance could adversely affect our profitability or our risk management profile.
• Potential future product liability claims and other litigation, including contract litigation, may adversely affect our business, reputation and ability to attract and retain customers.
• Any claims relating to our making improper payments to physicians for consulting services, or other potential violations of regulations governing interactions between us and healthcare providers, could be time-consuming and costly.
• Our common stock may be thinly traded.
• We expect that the price of our common stock will fluctuate substantially, potentially adversely affecting the ability of investors to sell their shares.
• We may become involved in securities class action litigation that could divert management's attention and harm its business.
• Securities analysts may elect not to report on our common stock or may issue negative reports that adversely affect the price of our common stock.
• Because we acquired Cardo by means of a reverse merger, we may not be able to attract the attention of major brokerage firms.
• Anti-takeover provisions in our charter documents and Delaware law may discourage or prevent a change in control, even if an acquisition would be beneficial to our shareholders, which could affect our stock price adversely and prevent attempts by our shareholders to replace or remove our current management.
• Because our common stock may be a "penny stock," it may be more difficult for investors to sell shares of our common stock, and the market price of our common stock may be adversely affected.
• A significant number of shares will become eligible for future sale by our shareholders and the sale of those shares could adversely affect the stock price.
• Directors, executive officers, principal shareholders and affiliated entities own a significant percentage of our capital stock, and they may make decisions that you do not consider to be in the best interests of our shareholders.
• Our stock price could decline as a result of our failure to meet reporting and other regulatory requirements.
• If we do not implement necessary improvements to our internal control over financial reporting in an efficient and timely manner, or if we discover additional deficiencies and weaknesses in existing systems and controls, we could be subject to regulatory enforcement and investors may lose confidence in our ability to operate in compliance with existing internal control rules and regulations, either of which could result in a decline in our share price.
• Our status as a public company may make it more difficult to attract and retain officers and directors.
• Compliance with changing regulations concerning corporate governance and public disclosure may result in additional expenses.
• We do not intend to pay cash dividends. Any return on investment may be limited to the value of our common stock, if any.
• Shareholders may experience significant dilution if future equity offerings are used to fund operations or acquire complementary businesses.
• Our Certificate of Incorporation grants our Board of Directors the power to designate and issue additional shares of common and/or preferred stock.

Additional information concerning these factors can be found in our filings with the SEC. Forward-looking statements in this Quarterly Report on Form 10-Q should be evaluated in light of these important factors.

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ITEM 4 - EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in company reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. As required by Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, our chief executive officer and chief financial officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2009. Based upon their evaluation, and as a result of the material weakness in internal control over financial reporting as discussed below, they concluded that our disclosure controls and procedures were not effective as of March 31, 2009. Management assessed the effectiveness of the Company's internal control over financial reporting as of March 31, 2009. In making this assessment, management used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of our assessment, our Chief Financial Officer identified material weaknesses in internal control over financial reporting in September 2008, related to (1) adequate qualified staff necessary to effectively apply the process, and (2) methods and practices employed to report unusual transactions such as our reverse merger. Based on this assessment, management concluded that the Company's internal control over financial reporting was not effective as of March 31, 2009. Our management has discussed the material weakness described above with our audit committee. In an effort to remediate the identified material weaknesses, we have documented our process and procedures governing our internal reporting. We also plan to implement further changes to our internal control over financial reporting, including (1) a re-evaluation of our staffing needs, and (2) analysis of unusual transactions as they are occurring to allow adequate time for multiple levels of review.

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PART II - OTHER INFORMATION

The following exhibits are filed as part of, or incorporated by reference into this Report:

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SIGNATURES

Pursuant to the requirements 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.

Date: May 15, 2009

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INDEX TO EXHIBITS

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