**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-K**


(Mark
      One)





ý ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the
      fiscal year ended December
      31, 2007




or





 ̈ TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





Commission
      file number 000-33187




**instaCare
      Corp.**


(Exact
      name of registrant as specified in its charter)





**Nevada**
            
            **91-2105842**(State
                or other jurisdiction of incorporation or
              organization)
            
            (I.R.S.
                Employer Identification No.)





**2660
                Townsgate Road, Suite 300**
              **Westlake
                Village, California**
            
            **91361**(Address
                of principal executive offices)
            
            (Zip
                Code)





Registrant’s
      telephone number, including area code (805)
      466-1973





Securities
      registered pursuant to Section 12(b) of the Exchange Act: None




Securities
      registered pursuant to Section 12(g) of the Exchange Act: Common
      Stock, $0.001 par value





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


 ̈ Yes  þ  No




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or 15(d) of the Act.


 ̈ Yes  þ  No




Indicate
      by checkmark 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. þ  Yes  ̈ No





Indicate
      by checkmark 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, 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.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.




Large accelerated filer  ̈
            Accelerated filer  ̈Non-accelerated filer  ̈
            Smaller reporting company þ(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 þ





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      last sold, or the average bid and asked price of such common equity, as of
      the
      last business day of the registrant’s most recently completed fiscal year. $911,883
      based on a share value of $0.03.





Indicate
      the number of shares outstanding of each of the registrant’s classes of common
      stock, as of the latest practicable date. 34,700,688
      shares of common stock, $0.001 par value, outstanding on March 31,
      2008.





DOCUMENTS
      INCORPORATED BY REFERENCE





List
      hereunder the following documents if incorporated by reference and the Part
      of
      the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
      incorporated: (1) Any annual report to security holders; (2) Any proxy or
      information statement; and (3) Any prospectus filed pursuant to Rule 424(b)
      or
      (c) under the Securities Act of 1933. The listed documents should be clearly
      described for identification purposes (e.g., annual report to security holders
      for fiscal year ended December 24, 1980).


2


**INSTACARE
      CORP**


**FORM
      10-K**


**TABLE
      OF CONTENTS**





**Page****PART
                I**
            
            5Item
                1. Business
            
            5Item
                1A. Fisk Factors
            
            21Item
                B. Unresolved Staff Comments
            
            27Item
                2. Properties
            
            27Item
                3. Legal Proceedings
            
            27Item
                4. Submission of Matters to a Vote of Security Holders
            
            29**PART
                II**
            
            **29**Item
                5. Market for Registrant’s Common Equity, Related Stockholder Matters and
                Issuer Purchases of Equity Securities
            
            29Item
                6. Selected Financial Data
            
            39Item
                7. Management’s Discussion and Analysis of financial Condition and Results
                of Operations
            
            39Item
                7A. Quantitative and Qualitative Disclosures about Market
                Risk
            
            48Item
                8. Financial Statements and Supplementary Data
            
            48Item
                9. Changes and Disagreements with Accountants on Accounting and Financial
                Disclosure
            
            49Item
                9A. Controls and Procedures
            
            49Item
                9B. Other Information
            
            49**Part
                III**
            
            **50**Item
                10. Directors, Executive Officers and Corporate Governance
            
            50Item
                11. Executive Compensation
            
            51Item
                12. Security Ownership of Certain Beneficial Owners and Management
                and
                Related Stockholder Matters
            
            53Item
                13. Certain Relationships and Related Transactions, and Director
                Independence
            
            54Item
                14. Principal Accountant Fees and Services
            
            55**Part
                IV**
            
            **56**15.
                Exhibits, Financial Statement Schedules
            
            56


3





**FORWARD-LOOKING
      STATEMENTS**





This
      document contains “forward-looking statements” within the meaning of the Private
      Securities Litigation Reform Act of 1995. All statements other than statements
      of historical fact are “forward-looking statements” for purposes of federal and
      state securities laws, including, but not limited to, any projections of
      earnings, revenue or other financial items; any statements of the plans,
      strategies and objections of management for future operations; any statements
      concerning proposed new services or developments; any statements regarding
      future economic conditions or performance; any statements or belief; and any
      statements of assumptions underlying any of the foregoing.





Forward-looking
      statements may include the words “may,” “could,” “estimate,” “intend,”
“continue,” “believe,” “expect” or “anticipate” or other similar words. These
      forward-looking statements present our estimates and assumptions only as of
      the
      date of this report. Accordingly, readers are cautioned not to place undue
      reliance on forward-looking statements, which speak only as of the dates on
      which they are made. We do not undertake to update forward-looking statements
      to
      reflect the impact of circumstances or events that arise after the dates they
      are made. You should, however, consult further disclosures we make in future
      filings of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and
      Current Reports on Form 8-K.





Although
      we believe that the expectations reflected in any of our forward-looking
      statements are reasonable, actual results could differ materially from those
      projected or assumed in any of our forward-looking statements. Our future
      financial condition and results of operations, as well as any forward-looking
      statements, are subject to change and inherent risks and uncertainties. The
      factors impacting these risks and uncertainties include, but are not limited
      to:





·
            increased
                competitive pressures from existing competitors and new
                entrants;




·
            increases
                in interest rates or our cost of borrowing or a default under any
                material
                debt agreements;




·
            deterioration
                in general or regional economic
                conditions;




·
            adverse
                state or federal legislation or regulation that increases the costs
                of
                compliance, or adverse findings by a regulator with respect to existing
                operations;




·
            loss
                of customers or sales weakness;




·
            inability
                to achieve future sales levels or other operating
                results;




·
            the
                unavailability of funds for capital expenditures and/or general working
                capital; and




·
            operational
                inefficiencies in distribution or other
                systems.




·
            our
                ability to recruit and hire key employees;


·
            the
                inability of management to effectively implement our strategies and
                business plans; and


·
            the
                other risks and uncertainties detailed in this
                report.


4


In
      this
      form 10-K references to “instaCare”, “the Company”, “we,” “us,” and “our” refer
      to INSTACARE CORP. and its wholly owned Nevada corporation operating
      subsidiaries, Medicius,
      Inc., Pharma Tech Solutions, Inc., Pharmtech Direct Corp., and PDA Services,
      Inc.





**AVAILABLE
      INFORMATION**





We
      file
      annual, quarterly and special reports and other information with the SEC. You
      can read these SEC filings and reports over the Internet at the SEC’s website at
      www.sec.gov or on our website at www.instacare.net. You can also obtain copies
      of the documents at prescribed rates by writing to the Public Reference Section
      of the SEC at 100 F Street, NE, Washington, DC 20549 on official business days
      between the hours of 10:00 am and 3:00 pm. Please call the SEC at (800) SEC-0330
      for further information on the operations of the public reference facilities.
      We
      will provide a copy of our annual report to security holders, including audited
      financial statements, at no charge upon receipt of written request to us at
      instaCare Corp, 2660 Townsgate Road, Suite 300, Westlake Village, California
      91361.





**PART
      I**





**Item
      1. Business.**





**Overview**





InstaCare
      Corp. (ISCR) is a nationwide prescription drug, prescription diagnostics and
      home testing products distributor. Our subsidiaries, Medicius, Inc., Pharma
      Tech
      Solutions, Inc., Pharmtech Direct Corp. and PDA Services, Inc. operate in
      several healthcare products distribution channels. We distribute brand name
      prescription drug and prescription diagnostics products as well as several
      lines
      of ostomy, wound care and post-surgery medical products. The company directs
      its
      marketing efforts to ambulatory and semi-ambulatory older Americans afflicted
      with diabetes and complications caused by diabetes and old age. The company,
      formerly a medical IT company with proprietary IT product lines, acquired its
      medical products distribution business in late 2004 through a merger with
      Phoenix, AZ based CareGeneration, Inc. We have grown the original CareGeneration
      business through subsequent acquisitions of private businesses and strategic
      partnerships with larger private pharmacies. We intend to acquire additional
      private companies in this industry to achieve our goal of becoming a full
      service value added DME provider of products and services.





We
      also
      offer information technology solutions in several medical care market channels
      by providing physicians with information at the point of care. Our products,
      unlike many other medical information, use palm-sized computers (PDA's), which operate
      on any Microsoft Mobiles "Pocket PC" based handheld device, either in a wireless
      or "wired" mode, which allow
      physicians to carry, access and update their patients' histories, medication
      data, and best care guidelines - *all
      at the point of care* .





During
      the last fiscal year we have executed definitive agreements with New York based
      R&R Drugs and Phoenix Arizona based Genrich United Pharmacy. We believe that
      we will be able to provide value added services to our customers by cost
      reductions brought about by increased efficiencies and cross marketing
      opportunities.


5





We
      currently employ 3 full-time staff at our executive office located at 2660
      Townsgate Road, Suite 300, Westlake Village, California 91361. We also employ
      one full time and six part time personnel. These people are located in Florida,
      California and New Jersey and act as sales and customer service representatives.
      Our telephone number is (805) 446-1973 and our website address is www.instacare. net.




**Business
      Development**




We
      were
      originally incorporated in the State of Nevada on March 2, 2001 as ATR Search
      Corporation (“ATR”). In June of 2002, ATR merged with Medicius, Inc. whereby
      Medicius remained as a wholly owned subsidiary of ATR. Following the merger
      the
      operations of Medicius were conducted through ATR and the former operations
      of
      ATR were conducted through CareTechnologies, LLC, a wholly owned subsidiary
      of
      ATR. Under the terms of the merger agreement, the stockholders of Medicius
      received 412,110 shares of ATR’s common stock and 103,028 warrants in exchange
      for 100% of the outstanding shares of Medicius’ common stock. On August 2, 2002,
      we amended our Articles of Incorporation to change our name from ATR to
      CareDecision Corporation. CareTechnologies, LLC was dissolved on May 20, 2003,
      but CareDecision continued conducting all operations of CareTechnologies. On
      November 19, 2004, we incorporated two Nevada subsidiary companies, Pharma
      Tech
      Solutions, Inc. and PDA Services, Inc. In March 2006 we incorporated an
      additional Nevada corporation subsidiary, Pharmtech Direct corp.





On
      April
      1, 2005, we amended our Articles of Incorporation to change our name from
      CareDecision Corporation to instaCare Corp. Our
      common stock trades on the over-the-counter securities market through the Financial
      Industry Regulatory Authority Automated Quotation Bulletin Board System, under the trading symbol “ISCR”.





Throughout
      this filing all references to shares have been restated to reflect an 80:1
      reverse stock split enacted on February 3, 2006.




**OUR
      BUSINESS**




We
      have
      recently focused our business attention towards providing prescription drugs,
      prescription diagnostics, at-home testing and medical/surgical products through
      several medical distribution channels. Our secondary business objective has
      been
      to provide medical information technology (IT) for use with Internet-based
      communication, and network software systems and applications, that reside on
      and
      function through a Windows CE-Based PDA- available from most major computer
      brands such as Sony, Dell, IBM and Palm -to the medical fields and the lodging
      and time-share real estate industries.





We
      are
      distributing prescription drugs, prescription diagnostics, at-home testing,
      post-surgical products and developing medical IT products that offer solutions
      in medical care and management by providing physicians with information at
      the
      point of care. Unlike other medical information systems using standard computer
      terminals, we use palm-sized computers (PDA's), which operate
      on any Microsoft Windows CE "Pocket PC" based handheld device, either in a
      wireless or "wired" mode, and allows
      physicians to carry, access and update their patients' histories, medication
      data, and best care guidelines - *all
      at the point of care* .


6


The
      local
      host for our PDA devices is a Windows (9X, NT, XP, 2003 or later) based PC,
      which, in turn, permits one to eight of the aforementioned PDA's to be linked
      to
      either a medical network or hotel/motel wide area network, or help-desk network,
      and allows each PDA to become a uniquely identified mobile node on that network,
      independent of PC linkage, thereby, assisting the professional, whether he
      be a
      doctor, hotel owner, hotel guest or satellite broadcast technician.





We
      have
      established a core management team experienced in all phases of health care,
      data management and the Web.





Through
      December 31, 2007, our operations have been conducted through instaCare Corp.
      and our subsidiaries PDA Services, Inc., Pharma Tech Solutions, Inc., Pharmtech
      Direct Corp. and Medicius, Inc. On June 30, 2007 we ceased operating through
      our
      subsidiary Medicius, Inc.





Our
      business objectives include:





1.
            Providing
                medical communication devices based on networks of personal digital
                assistants (PDA). These products are believed to provide benefits
                of on
                demand medical information to private practice physicians, licensed
                medical service providers such as diagnostic testing laboratories,
                and
                medical insurers. We have created PDA-centric products and a suite
                of
                Internet enhanced software applications that include those features
                that
                specifically respond to the requirements of the practicing physician.


2.
            Provide,
                as an emerging Internet pharmacy, retail drug prescriptions fulfillment
                with the goal of delivering affordable, discounted prescriptions
                to the
                millions of uninsured and underinsured consumers in the United States.


3.
            Combining
                our newly acquired wholesale and retail drug distribution with our
                PDA
                technologies, creating wholesale and retail ePharmacies similar in
                function to existing Internet pharmacies but directed to serving
                the large
                base of underinsured and uninsured Americans; and


4.
            The
                practice of specializing in the distribution of medical diagnostic
                and
                medical disposable products associated with the on-going care of
                diabetes
                inflicted patients now that our new prescription drug distribution
                business is coming on-line.





We
      also
      have adapted our medical communications technologies to service the real estate
      management and hotel/motel/convenience industries. Our real estate and
      hotel/motel objectives include building electronic commerce networks based
      on
      personal digital assistants (PDA) to the hotels, motels and single building,
      multi-unit apartment buildings with a desire to offer local advertising and
      electronic services to their tenants/guests.


7


**Prescription
      Drug Distribution**





On
      January 4, 2006, we transacted our first commerce by distributing at home
      diabetic test strips to the patient base then serviced by CareGeneration, Inc.,
      the company’s acquisition target. This commerce was initiated under a
“work-through” agreement by and between us, our subsidiaries Pharma Tech
      Solutions, Inc. and Medicius, Inc., CareGeneration, Inc., Ronald Kelly and
      his
      Kelly Company World Group, Inc. private corporation. Subsequently, we accepted
      additional orders for future business and fulfilled these orders thereby
      building the foundation for our current business. Later, because of the issues
      that arose between the Company and Mr. Kelly and his controlled entities,
      inclusive of Mr. Kelly’s failure to transfer a certain drug distribution license
      and Mr. Kelly’s on-going competition with the Company and our subsidiary, Pharma
      Tech Solutions, Inc., we concluded that it would be best if the company
      transacted all commerce through instaCare and our wholly owned subsidiary,
      Medicius, Inc. The company then initiated litigation against Mr. Kelly, his
      daughter and others. Ultimately we reached a settlement with Mr. Kelly whereby
      he stipulated to pay the company $200,000 and further agreed not to compete.
      This then allowed us to apply for additional drug distribution licenses in
      the
      states of New Jersey, New York, North Dakota and Arizona, in an effort to allow
      us to increase our operational efficiency. Also,some prescription drug
      distribution operations are currently being conducted through PDA Services,
      Inc., which is in the process of establishing a facility in Hope, North Dakota.
      In addition, we have established, through Pharma Tech Solutions, Inc., “direct
      to patient” prescription and prescription diagnostics fulfillment programs which
      are maintained in New Jersey, New York and Arizona.





Our
      new
      prescription drug distribution business came on-line during the third and fourth
      quarters 2006 and throughout 2007. This has in turn allowed Instacare to
      specialize in the distribution of medical diagnostic and medical disposable
      products associated with the on-going care of diabetes inflicted patients.
      This
      decision was made because the treatment and care of diabetes patients is an
      on-going lifetime process. Included in our current business plan is the
      distribution of wound care, ostomy and post-surgical products to diabetes
      inflicted patients and other parallel markets.





In
      the
      first quarter of 2006, we announced the execution of contracts with two large
      multinational pharmaceutical companies for the distribution of their lines
      of
      diabetic monitoring and testing products. We originally forecast revenues of
      approximately $12 million for fiscal 2006 based upon these contracts alone.
      We
      exceeded these forecasts. We continue to purchase products for resale from
      these
      manufacturers. Our management also believes that there is potential for
      collateral business through these companies and is in the process of expanding
      its product lines accordingly. Subsequently, we entered into agreements with
      additional pharmaceutical companies and group medical buying organizations to
      add more of these diagnostic products as we further specialize into this medical
      niche. Further, we have recently expanded our offerings to include asthma
      control, coagulation testing, ostomy, post-surgical and wound care products.





Specializing
      in rapid delivery of prescription drugs and diagnostic products, we are in
      the
      final stages of augmenting our prescription drug and prescription diagnostics
      distribution business by creating a nationwide network. Through a proprietary
      use of the Internet, we have completed a pharma distribution management system
      that allows our mail order pharmacy to begin the servicing of the 40+ million
      Americans who are either uninsured or underinsured.


8


We
      have
      also created a fully integrated Prescription Fulfillment Program through which
      physicians can directly submit prescriptions to our mail order pharmacy through
      the use of our proprietary hand-held device, tablet PC, or PDA that is enabled
      with a Wi-Fi link to the Internet — instead of issuing a standard
      prescription for the patient to fill at a local drugstore.





Using
      our
      technology, prescriptions for medication or diabetic supplies are submitted
      instantaneously and securely. We fill the prescription immediately and the
      customer receives his/her medications at his/her home within 24 hours, usually
      by the next morning 24/7. We then bill Medicare, Medicaid, or the patient's
      insurance company directly.





This
      concept is directed towards practitioners who treat long term care patients,
      the
      uninsured and underinsured. This concept already has enlisted organizations
      that
      manage or finance the indigent practices of more than 2,500 doctors. We are
      establishing our first fulfillment center to service these uninsured and
      underinsured patients in Phoenix, Arizona. We have also secured, through a
      strategic partnership the use of a retail prescription license to transact
      prescription fulfillment in Arizona.





By
      using
      wireless technology to link our centrally located drug distribution center
      with
      an established wholesale prescription distributor, we are positioned to bring
      economic and administrative efficiencies to the projected $8 billion marketplace
      for delivering prescriptions to the uninsured and underinsured.





The
      retail prescription business - often subsidized or funded by government benefits
      -- is a development stage enterprise moving to take advantage of the tremendous
      opportunity in retail pharmacy business via direct mail order distribution
      of
      prescriptions and related products and supplies. As part of our acquisition
      of
      CareGeneration, Inc., we also acquired from CareGeneration a proprietary, retail
      mail order methodology for the distribution of pharmaceutical and healthcare
      supplies which includes:





1.
            Discounted
                pharmaceutical and healthcare supplies marketed by mail order to
                minority
                and citizen organizations (religious groups, unions, etc.)


2.
            A
                proprietary "biometric" secured bankcard primarily targeted to the
                under-insured. The bankcard is honored by any FDIC bank within the
                United
                States.


3.
            Discounted
                pharmaceutical and healthcare supplies marketed by mail order to
                state
                Medicaid and the Federal Medicare plans.





We
      subsequently learned that CareGeneration did not own or have exclusive rights
      to
      the biometric technology and as a result we undertook a conversion of some
      of
      our own medical information technology to replace this needed and secure device
      through our own efforts.





**Retail
      Prescription**





The
      retail prescription business is often subsidized or funded by government
      benefits which seems to be aggressively moving to take advantage of the
      tremendous opportunity in retail pharmacy business via direct mail order
      distribution of prescriptions and related products/supplies. We acquired a
      retail mail order business concept for the distribution of pharmaceutical and
      healthcare supplies. We are focusing our distribution activities to patients
      who lack prescription drug coverage and patients who qualify for government
      or
      institutional programs such as Medicare, Medicaid, children's health insurance
      programs and long term care institutions and organizations.


9





Our
      retail prescription business maintains three operating units:





1.
            Licensed
                wholesale prescription drug distribution business, where we deliver
                bulk
                prescription drugs on a wholesale basis to
                clients;




2.
            Licensed
                distribution of diabetes diagnostics and supplies, where we deliver
                diabetic testing strips and associated diagnostic products under
                several
                business models; and




3.
            Internet
                pharmacy/prescription fulfillment, which we are methodically, but
                cautiously, entering.





Our
      plan
      is to combine the wholesale and retail drug distribution businesses and couple
      these businesses with the capabilities to connect physicians, using our PDA
      technologies, creating wide-ranging ePharmacies similar in function to existing
      Internet pharmacies but directed to serving the large base of institutionalized,
      underinsured and uninsured Americans.





**Retail
      prescription distribution methods**





On
      December 27, 2004, pursuant to the agreement and plan of merger with
      CareGeneration, Ronald Kelly, a former director, agreed to transfer to Pharma
      Tech a Wholesale Drug Distribution License (license no. 004-001681, expiring
      12/31/2007 issued to Kelly Company world Group, Inc, Ronald R. Kelly, 96 S.
      Madison St., Carthage, IL. 82321, by the State of Illinois and jointly governed
      by regulators from the State of Illinois, the U. S. Drug Enforcement Agency
      and
      the U.S. Food and Drug Administration). Additionally, Mr. Kelly agreed to seek
      transfer of a reciprocal drug distribution license issued by the State of
      Indiana, a client list and know-how in the form of written (published) drug
      distribution policies and procedures applicable to independent prescription
      drug
      and diagnostic distributors. After learning that these licenses had not been
      transferred and were not in the process of transfer, we filed suit against
      Mr.
      Kelly, his wife, daughter and several of his controlled entities. The complaint
      expressed the impact of Mr. Kelly’s deceit. In December 2007, we settled this
      lawsuit in return for a $200,000 judgment against Mr. Kelly’s major entity. We
      are in the process of enforcing this judgment.





To
      augment our drug distribution efforts, our subsidiary, PDA Services, Inc.,
      applied for and was granted a prescription drug distribution license in the
      state of North Dakota (License No. 463, Wholesale Drug (Device) Manufacturing
      (Reverse) Distributor/Warehouse License, expiring on June 30, 2008). In
      addition, our subsidiary Pharma Tech Solutions, Inc. has applied for and been
      granted a retail prescription drug fulfillment license in the state of Arizona
      (Permit No. 4374). The company allowed this license to lapse when we entered
      into a strategic partnership with Genrich United Pharmacy (Genrich) in Phoenix,
      AZ, saving the company the need to build what would have amounted to duplicate
      pharma distribution facilities. The company is pleased with the initial business
      it has transacted through the partnership with Genrich.


10


**PDA
      Services, Inc.**





On
      June
      7, 2006, we and our subsidiary PDA Services, Inc. entered into an Intangible
      Property, License Acquisition Agreement with Colonia Natural Pharmacy, Inc.,
      a
      New Jersey corporation (Colonia), also known as CN Pharmacy, and individuals
      Mr.
      Svetislav Milic and Mr. Nathan Kaplan. There are no material relationships
      between us or our affiliates and any of the parties, other than in respect
      of
      the material definitive agreement.





Under
      the
      terms of the Intangible Property License Acquisition Agreement, Mr. Milic,
      will
      transfer, register and convey, and we shall receive, free and clear of all
      liens, encumbrances and liabilities, the wholesale drug distribution license
      (License Number 5003178) granted to Mr. Milic by the State of New Jersey, and
      all rights and benefits thereto, plus the goodwill and know-how of Mr. Milic,
      and other related rights granted the Licensee by virtue of this conveyance.
      Unless otherwise agreed to, Mr. Milic shall remain the control party of the
      transferred license for a period of three years after transfer, registration
      and
      conveyance.





In
      tandem
      with the Intangible Property License Acquisition Agreement, the parties entered
      into an Exclusive Agreement Regarding Wholesale Drug Distribution License and
      Wholesale Drug Distribution Operations wherein the conveyance included the
      rights to the use of Colonia Natural Pharmacy Inc.’s office and warehouse
      facility approved for the storage and delivery of pharmaceuticals, and Colonia
      will have no role, and thus, no responsibility or liability, in the conduct
      of
      the “d/b/a” business, including ordering, distribution, or business management
      of the wholesale business conducted by us or our subsidiaries.





The
      company has subsequently “cloned” this series of agreements with Colonia into
      similar agreements with R&R Drugs in Brooklyn, NY and Genrich United
      Pharmacy in Phoenix, AZ. We have begn transacting commerce in New York and
      in
      Arizona as result of our agreements.





**Medical
      Field Applications**





Our
      medical technologies are grounded in the central need/desire to furnish the
      practicing physician with crucial point-of-care patient information rapidly
      and
      reliably via a PDA. The technologies utilize the power of the Internet to move
      large amounts of data to and from a variety of platforms securely via a powerful
      Windows CE based PDA designed for portability and upgradeability. Compliant
      with
      the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and
      the regulations that have since been promulgated, this PDA technology offers
      real-time point of care applications.





Our
      software is designed to integrate point of service applications. The medical
      appliance, the longest available product, monitors treatment protocols and
      up to
      the moment patient histories coupled with real-time on-line medical insurance
      claims submission. Our ultimate key to success resides in providing the private
      practice physician with the capability to, sequentially, learn about the history
      of the patient during, or prior to, entering the examining room, treat the
      patient and update the insurer of the episode of care. Accomplishing these
      objectives resolves a major dilemma for the health care provider; instantaneous
      communication of vital patient related information at or before the patient
      encounter.


11


**Medical
      field distribution methods**





Since
      inception, we have and will continue to focus our marketing efforts towards
      general medical and pharmaceutical medical applications through our E-Health
      handheld information appliance (PDA) software application package, and a
      permanently affixed handheld information appliance and Wi-Fi (wireless) network.
      Specifically we have marketed our line of MD@Hand PDA-based medical
      communication network products to the medical insurance and pharmacy benefits
      management segments of the healthcare markets.





We
      have
      implemented a targeted marketing campaign to educate healthcare providers about
      our medical technology solutions; targeting the physician providers who
      specialize in care for the indigent through the provision of technology,
      products and services that specifically respond to the needs and requirements
      of
      that market. We market our suite of medical software products by emphasizing
      their simplicity, portability, convenience and ease of use. We have chosen
      this
      focus due in part that State Medicaid and state and local welfare service
      providers are agencies who do not typically participate in electronic services
      networks. This is primarily because care for the poor and indigent is
      logistically and financially burdensome due to a lack of resources at
      administrative levels. Put another way, there is usually no shortage of
      volunteer physicians but there is a shortage of program administrators, clinics,
      medical supplies and patient access. Additionally, we believe that a company
      that enters this loop to complete the link by providing utility and value to
      participants will be embraced. It is incumbent on us to therefore extend our
      marketing strategy to facilitate this reality.





Implicit
      to our medical marketing strategy is the contracting of state Medicaid and
      welfare programs, pharmacy benefit management entities, and medical case
      management entities within a targeted region that provides for system
      integration to our products and services. Once the network has been established
      our IT driven mail order pharmacy services will be distributed to those
      physicians included within the Medicaid or welfare agency Provider Network.
      We
      will rely on those contracted agencies to support and assist in the distribution
      of the product to the physicians





**Medical
      field competition**





The
      medical industry is highly competitive in the attraction and retention of
      physician customers, insurers, government agency payors/sponsors and other
      medical providers. The number of competing companies and the size of such
      companies vary in different geographic areas. Generally, we are in competition
      with other PDA technology companies that offer medically related software
      suites, with the most effective competition coming from companies that possess
      greater capital resources, have longer operating histories, larger customer
      bases, greater name recognition and significantly greater financial, marketing
      and other resources than do we.


12


There
      are
      a number of small and large companies that provide some type of IT services
      at
      the point of care tying physicians to the healthcare systems. There is
      substantial turnover and business failure in this industry as well as
      substantial consolidation:





1.
            Large
                publicly traded companies:


a.
            WebMD,
                formerly known as Healtheon (HLTH);


b.
            The
                former MedicaLogic/Medscape (merged into HLTH);


c.
            Cerner/Citation
                (CERN);


d.
            IDX
                Corporation (IDXC); and


e.
                The
                    former Shared Medical Corp. (acquired by
                    Siemens).





These
      companies, and others, are involved in healthcare based services including
      consumer services, E-commerce and connectivity.





2.
            PDA-based
                companies:


a.
            PatientKeeper
                Corp’s. (formerly Virtmed) product allows physicians to capture billing
                information for hospital-based accounts and purports to manage receivable
                transactions (a mix of 1st generation features on a 3rdgeneration
                tech platform);


b.
            ePhysician,
                which four years ago was acquired in an asset sale by Ramp Corp.
                (RCO).
                Ramp filed for bankruptcy protection in 2006 leaving a promising
                technology in flux;


c.
            iScribe,
                which four years ago was reorganized and then merged into AdvacePCS,
                has
                announced products that reside on 3-Com's Palm PC. 3-Com no longer
                manufactures the Palm leaving another promising technology with business
                model issues;


d.
            AllScripts
                (MDRX) employs a "pull-through" business model whereby their technology
                is
                employed at the physician's point of care in an effort to provide
                medical
                utility and medical content to that physician, but with the greater
                goal
                of selling that physician bulk pharmaceuticals. MDRX appears to be
                positioned to advance to a market leadership position with a product
                distribution channel of approximately 5,500 physicians' office sites
                (3%
                of the total market); and


e.
            PocketScripts
                ("PS") is another market entrant that specializes in the electronic
                prescriptions. Zixcorp (ZIXI) acquired PS in 2003 and is currently
                creating a market for the product and technology.





These
      companies, and others, offer products and services similar to ours: delivering
      PDA based data management to physicians.





There
      can
      be no assurance that we will be able to compete successfully against current
      and
      future competitors, and competitive pressures faced by us may have a material
      adverse effect on our business, prospects, financial condition and results
      of
      operations. Further, as a strategic response to changes in the competitive
      environment, management may from time to time make certain pricing, service
      or
      marketing decisions or acquisitions that could have a material adverse effect
      on
      our business, prospects, financial condition and results of operations.


13


*Advancing
      the Practice of Medicine at the Point of Care*




We
      are
      also a developer of products that offer unique solutions in medical care and
      management by providing physicians with essential information instantaneously
      as
      they meet with their patients.  Unlike other medical information systems
      using standard computer terminals, we use palm-sized computers (PDA's) that
      allow physicians to carry, access and update their patients' histories,
      medication data, and best care guidelines – *all
      at the point of care* –
      streamlining and revolutionizing the practice of medicine.





In
      addition, **** we
      market
      our *MD@HandTM* software
      application, which also leverages the connectivity of handheld devices via
      the
      Internet. This first-in-class PDA software application offers the user access
      to
      job specific information (I.E. patient histories or databases), instant
      messaging, and prescription fulfillment for pharmacists. Our versatile,
      PDA-based software application is also used in other, information-intensive
      industries.  Our proprietary *ResidenceWareTM* is a
      similar collection of Internet-enhanced communication, integration, and
      networking tools developed for the real estate marketplace in cooperation with
      prominent commercial and residential real estate management companies.
 Numerous sales professionals, lodging managers and hoteliers currently use
      the software to access such information as tenant histories and property
      databases, as well as for instant messaging directly with occupying
      tenants.





MD@Hand





Information
      supplied to and from the physician via the handheld device
      includes:





*Case/Episode
      diagnosis and Treatment Information:*





·
            Episode
                by episode multiple diagnosis and physician chosen treatment
                pathways


·
            Patient
                cumulative treatment (electronic medical record) histories, including
                hospitalizations and histories from patient encounters with other
                physicians


·
            Eight
                levels best care medical
                protocols


·
            Tentacle
                links to the physician desktop reference (PDR) and prescription drug
                databases





*Medical
      Order Entry and Fulfillment:*





·
            Full
                Pharmacy Benefits Management programs with electronic script writing
                with
                drug formulary and drug to drug interaction checks prior to script
                transmission


·
            Lab
                Order Entry with complete reporting including results, pending, ticklers,
                out of limits, historical, summary,
                etc.


·
            Accident/Worker's
                Compensation intervention modules. In addition, instaCare software
                applications provide both on-line and off-line (fax) order
                entry.





*Payor-Related
      Applications*





·
            Plan
                and Procedure Eligibility


·
            Procedure/Drug
                Authorization


14


·
            Patient
                Referral


·
            Hospitalization
                Admit Decision Tree and schema.




*Benefit
      for Physicians*





·
            All
                access to medication and drug data, interaction databases and formulary
                information is provided free of charge to all participating physicians
                via
                the PDA through instaCare's network


·
            Lowers
                office costs by centralizing all formulary and prescription
                m


·
            Medical
                data on one or multiple PDAs and by reducing paperwork and phone
                time


·
            Improves
                quality of care by providing timely information including*Best
                Care Guidelines*to
                help assure an excellent standard of care


·
            Improves
                office workflow by providing a compendium of prescription, lab results,
                referable physicians


·
            Reduces
                time pulling and refilling charts reduces errors by offering immediate
                access to drug data, current formulary tables, lab results and*Best
                Care Guidelines*




*Benefit
      For Health Plans*





·
            High
                degree of formulary compliance


·
            Expedites
                claims and Improves outcomes


·
            Helps
                in creating excellent standard for quality healthcare for all patients


·
            Reduces
                cost of operations in many ways (i.e.: cutting down paperwork and
                phone
                support)


·
            Reduces
                errors


·
            Assures
                correct utilization of resources





*How
      Does it Work*


The
      following diagram shows how the PDA's communicate with remote host
      systems:


15









**Source
      of Principal Suppliers**





Our
      suite
      of software-both medical and real estate and hotel/motel related- is proprietary
      code and does not require raw materials or principal suppliers. Our software
      is
      utilized through over-the-counter PDA's and computer products, as previously
      discussed. However, our ResidenceWare product is manufactured by third parities.
      Of the units placed, approximately one half (1/2) are units manufactured and/or
      distributed by companies such as ASUS, Casio and Viewsonic. The remaining units
      were manufactured by Dell Computer, Inc. (Dell). Since October 1, 2004, all
      units placed have been Dell units. However, since we are now in the process
      of
      installing units at hotels that were referrals from existing customers we have
      recently placed an order for additional ASUS units. We do not foresee any
      additional change or additions of in PDA manufacturers in the near future.


16


**Dependence
      on a Few Major Customers**





Beginning
      with the first quarter 2007 and throughout the remainder of the year we
      generated revenues primarily through our medical and retail pharmaceutical
      distributions from five companies. We maintain strategic relationships with
      these companies whereby these companies place orders and then we service these
      orders and supply product directly to the patients and/or those entities where
      the patients reside. We then accept assignment for the billing and future
      servicing of these patients. We maintain relationships with these original
      five
      resellers but have also added fourteen additional customers and books of
      business with institutional care clients whereby we sell product and then
      receive revenues form the direct filing of reimbursement claims with medical
      insurance companies. In the future we expect the majority of the growth in
      our
      business to come as a direct result of our direct to patient distribution.





**Government
      Approval and Effect on Us**





Medical
      applications





Recent
      government and industry legislation and rulemaking, especially the Health
      Insurance Portability and Accountability Act of 1996 ("HIPAA"), and industry
      groups such as the Joint Commission on Accreditation of Healthcare Organizations
      ("JCAHO"), require the use of standard transactions, standard identifiers,
      security and other standards and requirements for the transmission of certain
      electronic health information. New national standards and procedures under
      HIPAA
      include the "Standards for Electronic Transactions and Code Sets" (the
      "Transaction Standards"); the "Security Standards" (the "Security Standards");
      and "Standards for Privacy of Individually Identifiable Health Information"
      (the
      "Privacy Standards"). The Transaction Standards require the use of specified
      data coding, formatting and content in all specified "Health Care Transactions"
      conducted electronically.  However, because all HIPAA Standards are subject
      to change or interpretation and because certain other HIPAA Standards, not
      discussed above, are not yet published, we cannot predict the future impact
      of
      HIPAA on our business and operations. Additionally, certain state laws are
      not
      pre-empted by the HIPAA Standards and may impose independent obligations upon
      our customers or us.





Failure
      to comply with HIPAA, as well as other government organizations, may have a
      material adverse effect on our business. Government regulation of healthcare
      and
      healthcare information technology, are in a period of ongoing change and
      uncertainty and creates risks and challenges with respect to our compliance
      efforts and our business strategies. The healthcare industry is highly regulated
      and is subject to changing political, regulatory and other influences. Federal
      and state legislatures and agencies periodically consider programs to reform
      or
      revise the United States healthcare system. These programs may contain proposals
      to increase governmental involvement in healthcare or otherwise change the
      environment in which healthcare industry participants operate. Particularly,
      compliance with HIPAA and related regulations are causing the healthcare
      industry to incur substantial cost to change its procedures. Healthcare industry
      participants may respond by reducing their investments or postponing investment
      decisions, including investments in our products and services. Although we
      expect these regulations to have the beneficial effect of spurring adoption
      of
      our software products, we cannot predict with any certainty what impact, if
      any,
      these and future healthcare reforms might have on our business. Existing laws
      and regulations also could create liability, cause us to incur additional cost
      or restrict our operations.


17


Specific
      risks include, but are not limited to, risks relating to:





*Electronic
      Prescribing* *:* The
      use
      of our software by physicians to perform a variety of functions, including
      electronic prescribing, electronic routing of prescriptions to pharmacies and
      dispensing, is governed by state and federal law. States have differing
      prescription format requirements, which we have programmed into our software.
      Many existing laws and regulations, when enacted, did not anticipate methods
      of
      e-commerce now being developed. While federal law and the laws of many states
      permit the electronic transmission of prescription orders, the laws of several
      states neither specifically permit nor specifically prohibit the practice.
      Given
      the rapid growth of electronic transactions in healthcare, and particularly
      the
      growth of the Internet, we expect the remaining states to directly address
      these
      areas with regulation in the near future. It is possible that aspects of our
      MD@Hand software tools could become subject to government regulation. Compliance
      with these regulations could be burdensome, time-consuming and expensive. We
      also could become subject to future legislation and regulations concerning
      the
      development and marketing of healthcare software systems. These could increase
      the cost and time necessary to market new services and could affect us in other
      respects not presently foreseeable. We cannot predict the effect of possible
      future legislation and regulation; and,




*Medical
      Devices:* ** The
      United States Food and Drug Administration (the "FDA") has promulgated a draft
      policy for the regulation of computer software products as medical devices
      under
      the 1976 Medical Device Amendments to the Federal Food, Drug and Cosmetic Act.
      To the extent that computer software is a medical device under the policy,
      we,
      as a manufacturer of such products, could be required, depending on the product,
      to:





·
            register
                and list our products with the FDA;


·
            notify
                the FDA and demonstrate substantial equivalence to other products
                on the
                market before marketing such products; or


·
            obtain
                FDA approval by demonstrating safety and effectiveness before marketing
                a
                product.





Depending
      on the intended use of a device, the FDA could require us to obtain extensive
      data from clinical studies to demonstrate safety or effectiveness, or
      substantial equivalence. If the FDA requires this data, we would be required
      to
      obtain approval of an investigational device exemption before undertaking
      clinical trials. Clinical trials can take extended periods of time to complete.
      We cannot provide assurances that the FDA will approve or clear a device after
      the completion of such trials. In addition, these products would be subject
      to
      the Federal Food, Drug and Cosmetic Act's general controls, including those
      relating to good manufacturing practices and adverse experience reporting.
      Although it is not possible to anticipate the final form of the FDA's policy
      with regard to computer software, we expect that the FDA is likely to become
      increasingly active in regulating computer software intended for use in
      healthcare settings.





*Anti-Kickback
      Regulation* *:* As
      a
      distributor of prescription drugs along the distribution chain that ultimately
      supply physicians, we are subject to the federal anti-kickback statute, which
      applies to Medicare, Medicaid and other state and federal programs. The statute
      prohibits the solicitation, offer, payment or receipt of remuneration in return
      for referrals or the purchase, or in return for recommending or arranging for
      the referral or purchase, of goods, including drugs, covered by the programs.


18


*Licensure
      and Prescription Drug Distribution* *:* As
      a
      distributor of drugs, we are subject to regulation by and licensure with the
      Food and Drug Administration (FDA), the Drug Enforcement Agency (DEA) and
      various state agencies that regulate wholesalers or distributors. We are subject
      to periodic inspections of our facilities by regulatory authorities, and
      adherence to policies and procedures for compliance with applicable legal
      requirements.





Currently,
      we do not bear any costs or any effects regarding compliance with environmental
      laws (federal, state, and local).





**Personnel**





We
      currently employ 10 employees, of which 4 are full-time employees, and 6
      sales/service representatives. No full-time employees are covered by labor
      agreements or employment contracts.




Consultants





*Chris
      Knapp.* On July
      15, 2006, we entered into a consulting agreement with Chris Knapp, wherein
      Mr.
      Knapp agreed to assist us in increasing corporate awareness within the
      healthcare industry. The term of the agreement commenced on July 15, 2006 and
      will continue until the agreement is terminated pursuant to written notification
      by either party. We agreed to compensate Mr. Knapp with 100,000 shares of our
      common stock (issued on September 7, 2006) and 100,000 options to purchase
      shares of our common stock at $0.32 per share through December 31, 2006. No
      options have been granted thus far, although Mr. Knapp continues to assist
      the
      Company.





*Waypoint
      Capital Partners.* On
      August 22, 2006, we entered into a consulting agreement with Waypoint Capital
      Partners, wherein Waypoint agreed to assist us in obtaining equity and/or debt
      financing. Pursuant to the agreement we issued 197,370 shares of our common
      stock to Waypoint on September 7, 2006 as compensation for its services. The
      term of the agreement was for six months, however, by mutual agreement the
      parties terminated the agreement on December 10, 2006. The parties continue
      to
      work on an arms length basis.




*Barbara
      Asbell.* On
      August 24, 2006, we entered into a consulting agreement with Barbara Asbell,
      wherein Ms. Asbell agreed to provide the Company with general business,
      recruiting, personnel relations and medical IT consulting. The term of the
      agreement began on August 24, 2006 and terminated on October 31, 2006. We
      continue to engage Ms. Asbell from time to time and did so on February 12,
      2007
      for 90 days, May 17, 2007 for 90 days, September 13, 2007 for 60 days, and
      November 20, 2007 for 90 days.


19


*Leslie
      Abraham Wolf.* On
      August 24, 2006, we entered into a consulting agreement with Leslie Abraham
      Wolf, wherein Ms. Wolf agreed to provide the Company with general business,
      pharmaceutical and diagnostics sales, worker’s compensation and medical claims
      consulting. The term of the agreement began on August 24, 2006 and terminated
      on
      October 31, 2006. We continue to engage Ms. Wolf from time to time and did
      so on
      February 12, 2007 for 90 days, May 17, 2007 for 90 days, and September 13,
      2007
      for 60 days.





*Joseph
      Wolf.* On
      August 24, 2006, we entered into a consulting agreement with Dr. Joseph Wolf,
      wherein Dr. Wolfl agreed to provide the Company with general business,
      recruiting, personnel relations and medical IT consulting. The term of the
      agreement began on August 24, 2006 and terminated on October 31, 2006. We
      continue to engage Dr. Wolf from time to time and did so on February 12, 2007
      for 90 days, May 17, 2007 for 90 days, and September 13, 2007 for 60
      days.





*Michelle
      Thais Abraham.* On
      August 24, 2006, we entered into a consulting agreement with Michelle Thais
      Abraham, wherein Ms. Abraham agreed to provide the Company with general
      business, pharmaceutical and diagnostics sales, worker’s compensation and
      medical claims consulting. The term of the agreement began on August 24, 2006
      and terminated on October 31, 2006. We continue to engage Ms. Abraham from
      time
      to time and did so on February 12, 2007 for 90 days, May 17, 2007 for 90 days,
      and September 13, 2007 for 60 days.





**Patents,
      Proprietary Rights and Licenses**





In
      February 2001, a broad based patent application was filed covering the methods
      and apparatus of our software technology and the integration of our software
      technology into commercial computer networks and commercial personal digital
      assistant (PDA) devices. In May 2001, the inventors of the technology, methods
      and apparatus covered by the patent application sold the technology and assigned
      the intellectual property rights to Medicius, Inc. In July 2002, we prepared
      an
      additional derivative patent application that added additional patent claims
      to
      our claim portfolio. It was our intent to file derivative patent applications
      as
      needed covering the processes, use and functionality of our technologies and
      products as we further developed our methods and processes.





Through
      our merger with Medicius, Inc. in 2002 we gained assignment of proprietary
      systems covered by a portfolio of pending utility patent applications that
      make
      claim to methods and systems for managing medical patient-specific information
      and concurrently implementing fulfillment of this information by multiple
      health-services related providers for medically-related services for use over
      a
      computer network. The proprietary systems allow for patient information to
      be
      gathered from multiple authorized sources and then this information is provided
      at the point-of-care, and coordinated and compared with prescription formulary
      compliance, medical services providers and their payors, and multiple-rules
      based treatment plans provided by various sources (content). Patient case and
      episode information and care management, in coordination with the implementation
      of substantially paperless ordering and fulfillment of lab tests, prescriptions
      and referrals, is made available to attending health care professionals and
      support personnel via networked computer systems and PDA systems running our
      proprietary software methods. The inventive system includes, in seamless
      essentially real-time communication over the Internet, a network of fully secure
      private sub-networks among the participants in the system, anchored by a PC
      as
      the client-server link to the Internet, with each of a plurality of PDA’s either
      docked to it or connected by commercially available wireless communications
      protocols. A suite of software applications, including medical, communications
      and database applications are resident on each PDA, and communications modules
      resident in the system automatically link to the PC via an available ISP to
      update those databases by a novel packet transmission method to maintain
      confidentiality of the transmitted information. Data is transferred by wireless
      link, such as radio frequency links among and between servers and PDA’s used in
      connection with the system.


20


The
      original patent application, Patent Application 09776544, Information Management
      and Communications System and Method, Attorney Docket 0444.002, consisting
      of
      forty-eight separate claims was filed on February 2, 2001. This application
      encompassed the method, system and apparatus of the invention described above.
      In July 2002, we completed a derivative application that added seventeen
      additional claims to the application. These claims specifically augmented the
      original methods and apparatus to include methods surrounding a proprietary
      use
      of what is commonly known as Wi-Fi to transmit the packet data and databases
      described above.





During
      a
      follow-up with the USPTO, our CFO and the Inventor of the above described
      methods and processes was informed by a representative of the USPTO that Patent
      Application 09776544 had been abandoned due to a non-timely filing of a fee
      and
      response by patent counsel. Unable to discuss these issues with counsel due
      to
      his lingering illness, the Inventor has subsequently petitioned the USPTO to
      re-activate the application. We intend to engage new patent counsel to prosecute
      the applications.





**Item
      1A. Risk Factors.**





Risks
      Relating To Our Business and Marketplace





***Our
      limited operating history could delay our growth and result in the loss of
      your
      investment.***





We
      were
      incorporated on March 2, 2001 and have previously been in the development stage
      and thus have had a limited operating history on which to base an evaluation
      of
      our business and prospects. Beginning in 2005, we have commenced operations
      and
      are no longer considered to be in the development stage. However, our prospects
      must be considered in light of the risks, expenses and difficulties frequently
      encountered by companies in their early stage of development. Such risks
      include, but are not limited to, dependence on the growth of use of electronic
      medical information and services, the adoption of PDA based Internet appliances
      for the transmission and display of medical information, the need to establish
      our brand name, the ability to establish a sufficient client base, the level
      of
      use of medical providers and the management of growth. To address these risks,
      we must maintain and increase our customer base, implement and successfully
      execute our business and marketing strategy, continue to develop and improve
      our
      point of care software and patient processing system, provide superior customer
      service, respond to competitive developments and attract, retain, and motivate
      qualified personnel. There can be no assurance that we will be successful in
      addressing such risks, and the failure to do so could lead to an inability
      to
      meet our financial obligations and therefore result in bankruptcy and the loss
      of your entire investment in our common shares.


21





***If
      we fail to remain current on our reporting requirements, we could be removed
      from the OTC Bulletin Board, which would limit the ability of broker-dealers
      to
      sell our securities and the ability of stockholders to sell their securities
      in
      the secondary market.***





Companies
      trading on the OTC Bulletin Board, such as us, generally must be reporting
      issuers under Section 12 of the Securities Exchange Act of 1934, as amended,
      and
      must be current in their reports under Section 13, in order to maintain price
      quotation privileges on the OTC Bulletin Board. More specifically, NASD has
      enacted Rule 6530, which determines eligibility of issuers quoted on the OTC
      Bulletin Board by requiring an issuer to be current in its filings with the
      Commission. Pursuant to Rule 6530(e), if we file our reports late with the
      Commission three times in a two-year period or our securities are removed from
      the OTC Bulletin Board for failure to timely file twice in a two-year period
      then we will be ineligible for quotation on the OTC Bulletin Board. We filed
      our
      Form 10-QSB for the periods ended June 30, 2006 and September 30, 2006 late,
      therefore, one more late filing will result in de-quotation from the OTC
      Bulletin Board. As a result, the market liquidity for our securities could
      be
      severely adversely affected by limiting the ability of broker-dealers to sell
      our securities and the ability of stockholders to sell their securities in
      the
      secondary market.





***We
      have historically lost money and losses are expected to continue in the near
      future, which means that we may not be able to continue operations unless we
      obtain additional funding.***





We
      have
      historically lost money. We had an accumulated deficit as of December 31, 2007,
      and 2006 of $19,525,307 and $18,058,490, respectively. In addition, our
      development activities since inception have been financially sustained by
      capital contributions. Future losses are likely to occur. Accordingly, we may
      experience significant liquidity and cash flow problems if we are not able
      to
      raise additional capital as needed and on acceptable terms. We received a
      substantial number of sales orders and refill orders beginning in mid-September
      2006. However, at this time we have depleted our cash resources and as a result
      we were unable to pre-pay certain diabetic test suppliers for approximately
      $5,400,000 in product to fill these orders, causing our customers to wait
      additional time to receive product from us. Thus, from time to time we might
      need to turn to the capital markets to obtain additional financing to fund
      payment of obligations and to provide working capital for operations. No
      assurances can be given that we will be successful in reaching or maintaining
      profitable operations.





***We
      have been dependent on a small number of major customers to support our
      prescription drug distribution plan and to refer direct to patient
      business.***





In
      2007
      our four largest customers accounted for approximately 98% of our net sales
      through the referral of direct to patient and direct to medical service entity
      businesses. We expect that a small but growing number of customers will continue
      to account for a substantial majority of our sales and that the relative dollar
      amount and mix of products sold can change significantly from year to year
      and
      how we are paid for business generated, assigned and referred by these customers
      can change as well. There can be no assurance that our major customers will
      continue to purchase products or refer the direct to patient and direct to
      medical entity business to us at current levels, or that the mix of products
      purchased will be in the same ratio. The loss of our largest customers, who
      not
      only buy product directly, but also refer substantial “direct to patient”
business upon which we accept assignment or may provide direct billing and
      collection services or accept medical assignment for “direct to patient”
business, or a decrease in product sales would have a material adverse effect
      on
      our business and financial condition.


22


***Our
      internal controls may be inadequate, which could cause our financial reporting
      to be unreliable and lead to misinformation being disseminated to the public.***





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting. As defined in Exchange Act Rule 13a-15(f),
      internal control over financial reporting is a process designed by, or under
      the
      supervision of, the principal executive and principal financial officer and
      effected by the board of directors, management and other personnel, 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 and includes those policies and
      procedures that: (i) pertain to the maintenance of records that in reasonable
      detail accurately and fairly reflect the transactions and dispositions of the
      assets of the Company; (ii) provide reasonable assurance that transactions
      are
      recorded as necessary to permit preparation of financial statements in
      accordance with generally accepted accounting principles, and that receipts
      and
      expenditures of the Company are being made only in accordance with
      authorizations of management and directors of the Company, and (iii) provide
      reasonable assurance regarding prevention or timely detection of unauthorized
      acquisition, use or disposition of the Company’s assets that could have a
      material effect on the financial statements.





We
      have
      one individual performing the functions of all officers and directors. This
      individual is responsible for monitoring and ensuring compliance with our
      internal control procedures. As a result, our internal controls may be
      inadequate or ineffective, which could cause our financial reporting to be
      unreliable and lead to misinformation being disseminated to the public.
      Investors relying upon this misinformation may make an uninformed investment
      decision.





***We
      may not be able to retain our key personnel or attract additional personnel,
      which could affect our ability to generate revenue sufficient to continue as
      a
      going concern diminishing your return on investment.***





Our
      performance is substantially dependent on the services and on the performance
      of
      our Management. instaCare is, and will be, heavily dependent on the skill,
      acumen and services of our CFO, Secretary and Treasurer, Keith Berman and our
      Chairman Robert Jagunich. Our performance also depends on our ability to
      attract, hire, retain and motivate our officers and key employees. The loss
      of
      the services of our executives could result in lost revenue depending on the
      length of time and effort required to find a qualified replacement. We have
      not
      entered into long-term employment agreements with our key personnel and
      currently have no "Key Employee" life insurance policies.


23





Our
      future success may also depend on our ability to identify, attract, hire, train,
      retain and motivate other highly skilled technical, managerial, marketing and
      customer service personnel. Competition for such personnel is intense, and
      there
      can be no assurance that we will be able to successfully attract, assimilate
      or
      retain sufficiently qualified personnel. If we are unable to attract, retain,
      and train the necessary technical, managerial, marketing and customer service
      personnel, our expectations of increasing our clientele could be hindered,
      and
      the profitability of instaCare reduced.





***Recent
      and possible future issuances of common stock will have a dilutive affect on
      existing shareholders.***





instaCare
      is authorized to issue up to 1,250,000,000 Shares of common stock. As of March
      28, 2008, there were 34,700,688  shares
      of
      common stock issued and outstanding. Additional issuances of common stock may
      be
      required to raise capital, to acquire stock or assets of other companies, to
      compensate employees or to undertake other activities without stockholder
      approval. These additional issuances of common stock will increase outstanding
      shares and further dilute stockholders' interests. Because our common stock
      is
      subject to the existing rules on penny stocks and thinly traded, a large sale
      of
      stock, such as the shares we seek to have registered via this registration
      statement, may result in a large drop in the market price of our securities
      and
      substantially reduce the value of your investment.





***Our
      common stock has been relatively thinly traded, may experience high price
      volatility and we cannot predict the extent to which a trading market will
      develop.***





Our
      common stock has traded on the Over-the-Counter Bulletin Board. Our common
      stock
      is thinly traded compared to larger more widely known companies in our industry.
      Thinly traded common stock can be more volatile than common stock trading in
      an
      active public market. We cannot predict the extent to which an active public
      market for the common stock will develop or be sustained after this offering.





***Achieving
      market acceptance of new or newly integrated products and services is likely
      to
      require significant efforts and expenditures.***





Achieving
      market acceptance for new or newly integrated products and services is likely
      to
      require substantial marketing efforts and expenditure of significant funds
      to
      create awareness and demand by participants in the healthcare industry. In
      addition, deployment of new or newly integrated products and services may
      require the use of additional resources for training our existing sales and
      customer service personnel and for hiring and training additional salespersons
      and customer service personnel. There can be no assurance that the revenue
      opportunities from new or newly integrated products and services will justify
      amounts spent for their development, marketing and rollout.





***We
      could be subject to breach of warranty claims if our software products,
      information technology systems or transmission systems contain errors,
      experience failures or do not meet customer expectations.***





We
      could
      face breach of warranty or other claims or additional development costs if
      the
      software and systems we sell or license to customers or use to provide services
      contain undetected errors, experience failures, do not perform in accordance
      with their documentation, or do not meet the expectations that our customers
      have for them. Undetected errors in the software and systems we provide or
      those
      we use to provide services could cause serious problems for which our customers
      may seek compensation from us. We attempt to limit, by contract, our liability
      for damages arising from negligence, errors or mistakes. However, contractual
      limitations on liability may not be enforceable in certain circumstances or
      may
      otherwise not provide sufficient protection to us from liability for damages.


24


***If
      our systems or the Internet experience security breaches or are otherwise
      perceived to be insecure, we could lose existing clients and limit our ability
      to attract new clients.***





A
      security breach could damage our reputation or result in liability. We retain
      and transmit confidential information, including patient health information.
      Despite the implementation of security measures, our infrastructure or other
      systems that we interface with, including the Internet, may be vulnerable to
      physical break-ins, hackers, improper employee or contractor access, computer
      viruses, programming errors, attacks by third parties or similar disruptive
      problems. Any compromise of our security, whether as a result of our own systems
      or systems that they interface with, could reduce demand for our services.





***We
      do not have the financial resources to litigate actions involving our copyrights
      or patent applications.***





We
      have
      applied to receive patent rights, and trademarks relating to our software.
      However, patent and intellectual property legal issues for software programs,
      such as our products, are complex and currently evolving. Patent applications
      are secret until patents are issued in the United States, or published in other
      countries, therefore, we cannot be sure that we are first to file any patent
      application for our technologies, primarily the technology that allows for
      the
      safe, secure and near seamless transmission of sensitive medical information
      from the point of care, directly to our mail order pharmacy. Should any of
      our
      patent claims be compromised or if, for example, one of our competitors has
      filed or obtained a patent before our claims have been prosecuted, or should
      a
      competitor with more resources desire to litigate and force us to defend or
      prosecute any patent rights, our ability to develop the market for our mail
      order pharmacy could be severely compromised, for we do not have the financial
      resources to litigate actions involving our patents and copyrights.





***Our
      auditors have expressed substantial doubt as to our ability to continue as
      a
      going concern.***





Due
      to
      our increasing deficit and our lack of revenue sufficient to support existing
      operations, there is substantial doubt about our ability to continue as a going
      concern. We may need to obtain additional financing in the event that we are
      unable to realize sufficient revenue. We may incur additional indebtedness
      from
      time to time to finance acquisitions, provide for working capital or capital
      expenditures or for other purposes There can be no assurance that we will have
      funds sufficient to continue operations, and the failure to do so could lead
      to
      an inability to meet our financial obligations and therefore result in
      bankruptcy and the loss of your entire investment in instaCare's common
      shares.


25







Risks
      Relating To Our Common Stock





***Because
      our common stock is deemed a low-priced “Penny” stock, an investment in our
      common stock should be considered high risk and subject to marketability
      restrictions.***





Since
      our
      common stock is a penny stock, as defined in Rule 3a51-1 under the Securities
      Exchange Act, it will be more difficult for investors to liquidate their
      investment even if and when a market develops for the common stock. Until the
      trading price of the common stock rises above $5.00 per share, if ever, trading
      in the common stock is subject to the penny stock rules of the Securities
      Exchange Act specified in rules 15g-1 through 15g-10. Those rules require
      broker-dealers, before effecting transactions in any penny stock,
      to:





·
            Deliver
                to the customer, and obtain a written receipt for, a disclosure
                document;


·
            Disclose
                certain price information about the
                stock;


·
            Disclose
                the amount of compensation received by the broker-dealer or any associated
                person of the broker-dealer;


·
            Send
                monthly statements to customers with market and price information
                about
                the penny stock; and ·
            In
              some circumstances, approve the purchaser’s account under certain
              standards and deliver written statements to the customer with information
              specified in the rules.




Consequently,
      the penny stock rules may restrict the ability or willingness of broker-dealers
      to sell the common stock and may affect the ability of holders to sell their
      common stock in the secondary market and the price at which such holders can
      sell any such securities. These
      additional procedures could also limit our ability to raise additional capital
      in the future.





***If
      we fail to remain current on our reporting requirements, we could be removed
      from the OTC Bulletin Board, which would limit the ability of broker-dealers
      to
      sell our securities and the ability of stockholders to sell their securities
      in
      the secondary market.***





Companies
      trading on the OTC Bulletin Board, such as us, must be reporting issuers under
      Section 12 of the Securities Exchange Act of 1934, as amended, and must be
      current in their
      reports under Section 13, in order to maintain price quotation privileges on
      the
      OTC Bulletin Board.  More specifically, FINRA has enacted Rule 6530, which
      determines eligibility of issuers quoted on the OTC Bulletin Board by requiring
      an issuer to be current in its filings with the Commission.  Pursuant to
      Rule 6530(e), if we file our reports late with the Commission three times in
      a
      two-year period or our securities are removed from the OTC Bulletin Board for
      failure to timely file twice in a two-year period then we will be ineligible
      for
      quotation on the OTC Bulletin Board. As a result, the market liquidity for
      our
      securities could be severely adversely affected by limiting the ability of
      broker-dealers to sell our securities and the ability of stockholders to sell
      their securities in the secondary market.




26




***We
      have the ability to issue additional shares of our common stock and shares
      of
      preferred stock without asking for stockholder approval, which could cause
      your
      investment to be diluted.***





Our
      Certificate of Incorporation authorizes the Board of Directors to issue up
      to
      1,250,000,000 shares of common stock and 5,000,000 shares of preferred stock.
      The power of the Board of Directors to issue shares of common stock, preferred
      stock or warrants or options to purchase shares of common stock or preferred
      stock is generally not subject to shareholder approval. Accordingly, any
      additional issuance of our common stock, or preferred stock that may be
      convertible into common stock, may have the effect of diluting one’s
      investment.





***FINRA
      sales practice requirements may also limit a stockholder's ability to buy and
      sell our stock.***





In
      addition to the “penny stock” rules described above, FINRA has adopted rules
      that require that in recommending an investment to a customer, a broker-dealer
      must have reasonable grounds for believing that the investment is suitable
      for
      that customer. Prior to recommending speculative low priced securities to their
      non-institutional customers, broker-dealers must make reasonable efforts to
      obtain information about the customer's financial status, tax status, investment
      objectives and other information. Under interpretations of these rules, the
      FINRA believes that there is a high probability that speculative low priced
      securities will not be suitable for at least some customers. The FINRA
      requirements make it more difficult for broker-dealers to recommend that their
      customers buy our common stock, which may limit your ability to buy and sell
      our
      stock and have an adverse effect on the market for our shares.





**Item
      1B. Unresolved Staff Comments.**





Not
      applicable.





**Item
      2. Properties.** ****





We
      currently maintain an executive office at 2660 Townsgate Road, Suite 300,
      Westlake Village, CA 91361. The space consists of approximately 2,300 square
      feet. The monthly rental for the space is $4,000 per month on a month to month
      basis until March 31, 2009.





On
      June
      7, 2005, we entered into an agreement for the right to use offices, warehouses and
      shipping facilities for the storage and shipping of pharmaceuticals located
      at
      515 Inman Avenue, Colonia, NJ 07067 and 25 Minna Street, Rahway, NJ 07065 for
      a
      monthly rental fee of $3,500. These buildings total 4,000 square feet but our
      right to use is not exclusive.





We
      are
      currently completing leasehold improvements on a 4,000 square foot facility
      in
      Hope, ND to use as our fulfillment center. When this leasehold is completed,
      we
      will pay $1,000 per month on a month to month basis.





**Item
      3. Legal Proceedings.** ****





We
      transact commerce in several medical products market channels. We also
      transact commerce moving confidential medical dats through our proprietary
      medical information technology devices and networks. Healthcare is a very
      litigious industry. The industry is also very intertwined. From time to time,
      we
      may become involved in claims and litigation that arise out of the normal course
      of business or the normal course of the business of our suppliers, payors and
      customers. Other than as noted below there are no pending matters at the current
      time that in management’s judgment may be considered potentially material to
      us




27


*instaCare
      Corp. vs. Ronald Kelly, et. al. (“Kelly”)*





In
      July
      of 2005, the Company filed a complaint in the United States District Court,
      for
      the Central District of California (Case Number CV 05-4932-RSWL), against Ronald
      Kelly, Linda R. Kelly, Kimberly Kelly, and Kelly Company World Group, Inc.,
      seeking damages for:





1.
            Fraud;


2.
            Declaratory
                Relief;


3.
            Breach
                of Fiduciary Duty;


4.
            RICO
                violations;


5.
            Injunctive
                Relief;


6.
            Conversion;


7.
            Breach
                of Contract/Breach of Corporate Merger Agreement;
                and


8.
            Accounting
                and Ancillary Relief.





On
      December 18, 2006, the United States District Court, for the Central District
      of
      California ordered, adjudged and decreed that the Company shall have judgment
      against Kelly in the amount of $200,000, pursuant to the stipulation of the
      parties.





In
      addition, pursuant to a mutual release agreement executed by both parties,
      Kelly
      waived any right, claim or ownership interest in any shares of common stock
      of
      the Company. Kelly returned 31,958,000 (pre-reverse split) shares of common
      stock to the Company, which will be placed in one of the Company’s majority
      owned subsidiaries.





*instaCare
      Corp. vs. Investor Relations Services Inc. (“IRS”), Summit Trading, Ltd.
      (“STL”)*





In
      August
      of 2005, the Company filed suit in the Superior Court for the State of
      California (Case Number BC337976) against IRS and STL, seeking Declaratory
      Relief and rescission
      of the alleged December 2004 agreements between the Company and IRS/STL. The
      complaint also sought damages for Intentional Interference with an Advantageous
      Business Relationship as a result of actions taken by IRS/STL.





On
      January 17, 2007, the Superior Court for the State of California in Los Angeles
      County rendered its tentative decision against Investors Relations Services
      and
      Summit Trading, Ltd., finding that the December 2004 agreements were never
      submitted to the Board of Directors, were never approved or authorized by the
      Board of Directors, and that the Company has no obligations to either IRS or
      STL. In March 2007, the Company filed a motion with the Superior Court for
      the
      State of California for reimbursement of attorney’s fees and costs.




28




**Item
      4. Submission of Matters to a Vote of Security Holders.**





We
      did
      not submit any matters to a vote of our security holders during the fourth
      quarter of 2007.





**PART
      II**





**Item
      5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities.**





**(a)
      Market Information**





Our
      Common Stock was approved for trading on the National Association of Security
      Dealers’ over-the-counter bulletin board market (OTC:BB) under the symbol ISCR
      on February 4,2002. Our common stock has traded infrequently on the OTC:BB,
      which limits our ability to locate accurate high and low bid prices for each
      quarter within the last two fiscal years. Therefore, the following table lists
      the quotations for the high and low bid prices as reported by a Quarterly Trade
      and Quote Summary Report of the OTC Bulletin Board for the fiscal years 2007
      and
      2006. The quotations from the OTC Bulletin Board reflect inter-dealer prices
      without retail mark-up, markdown, or commissions and may not represent actual
      transactions.





2007
            
            2006High
            
            Low
            
            High
            
            Low1stQuarter
            
            $
            0.37
            
            $
            0.27
            
            $
            0.75
            
            $
            0.0072ndQuarter
            
            $
            0.45
            
            $
            0.17
            
            $
            0.50
            
            $
            0.213rdQuarter
            
            $
            0.17
            
            $
            0.04
            
            $
            0.65
            
            $
            0.244thQuarter
            
            $
            0.05
            
            $
            0.03
            
            $
            0.42
            
            $
            0.23





**(b)
      Holders of Common Stock**





As
      of
      March 29, 2008, there were approximately 542 holders of record of our Common
      Stock and 34,700,688  shares
      outstanding. As of March 28, 2008, the closing price of our shares of common
      stock on the OTC:BB was $0.03 per share.




**(c)
      Dividends**





During
      the fiscal years ended December 31, 2007, we accrued Dividends to Mercator
      Momentum Fund, LP and Monarch Pointe Fund, Ltd. and Mercator Advisory Group,
      LLC
      (“MAG”) totaling $241,478. As of December 31, 2006, we paid $206,086 and accrued
      $50,914 pursuant to the rights of the Series “C” convertible preferred. We had
      no earnings and a stockholders’ deficit and therefore no basis for issuance of a
      dividend. In order to prevent potential litigation with the purchaser, the
      Company elected to pay the mandatory dividend. As of December 31, 2007, the
      Company had accrued dividends payable in the amount of $292,392.


29


On
      June
      9, 2006, we declared an 8 1/3% special stock dividend payable to our
      stockholder’s of record as of June 9, 2006. Pursuant to the terms of the
      dividend declaration, each stockholder of record received 8.334 shares for
      each
      100 shares of our common stock they own.





We
      intend
      to follow a policy of retaining earnings, if any, to finance the growth of
      the
      business and do not anticipate paying any cash dividends in the foreseeable
      future. The declaration and payment of future dividends on the Common Stock
      will
      be the sole discretion of the Board of Directors and will depend on our
      profitability and financial condition, capital requirements, statutory and
      contractual restrictions, future prospects and other factors deemed
      relevant.





**(d)
      Securities Authorized for Issuance under Equity Compensation
      Plans**





***2003
      Stock Option Plan***





Effective
      January 1, 2003, we adopted the 2003 Stock Option Plan. The maximum number
      of
      shares that may be issued pursuant to the plan is 312,500 shares. As of December
      31, 2007, 203,125 shares have been granted and subsequently, 166,250 expired
      and
      36,875 have been exercised under this plan.





***2004
      Stock Option Plan***





Effective
      April 21, 2004, we adopted the “2004” Stock Option Plan, as amended, with a
      maximum number of 6,312,500 shares that may be issued. As of December 31, 2007,
      2,978,297 options have been granted under this plan. As of December 31, 2007
      all
      option granted have been exercised.





***2005
      Merger Consolidated Stock Option Plan***





Effective
      February 5, 2005, we adopted the “2005” Merger Consolidated Stock Option Plan.
      The maximum number of shares that may be issued pursuant to the plan is
      1,125,000 shares. As of December 31, 2007, 825,000 shares have been granted
      under this plan.


***2006
      Business Development Stock Option Plan***





Effective
      December 8, 2006, we adopted our “2006” Employee Stock Option Plan” as amended
      with a maximum number of 5,500,000 shares that may be issued. As of
      December 31, 2007, 4,140,867 options have been granted under this
      plan.





All
      of
      our Stock Option Plans are intended to encourage directors, officers, employees
      and consultants to acquire ownership of common stock. The opportunity so
      provided is intended to foster in participants a strong incentive to put forth
      maximum effort for our continued success and growth, to aid in retaining
      individuals who put forth such efforts, and to assist in attracting the best
      available individuals to the Company in the future. As of December 31, 2007,
      5,102,711 options remain available for issuance.


30


Officers
      (including officers who are members of the board of directors), directors (other
      than members of the stock option committee to be established to administer
      the
      stock option plans) and other employees and consultants and its subsidiaries
      (if
      established) will be eligible to receive options under the stock option plans.
      The committee will administer the stock option plans and will determine those
      persons to whom options will be granted, the number of options to be granted,
      the provisions applicable to each grant and the time periods during which the
      options may be exercised. No options may be granted more than ten years after
      the date of the adoption of the stock option plans.





Non-qualified
      stock options will be granted by the committee with an option price equal to
      the
      fair market value of the shares of common stock to which the non-qualified
      stock
      option relates on the date of grant. The committee may, in its discretion,
      determine to price the non-qualified option at a different price. In no event
      may the option price with respect to an incentive stock option granted under
      the
      stock option plans be less than the fair market value of such common stock
      to
      which the incentive stock option relates on the date the incentive stock option
      is granted.





Each
      option granted under the stock option plans will be exercisable for a term
      of
      not more than ten years after the date of grant. Certain other restrictions
      will
      apply in connection with the plans when some awards may be exercised. In the
      event of a change of control (as defined in the stock option plans), the date
      on
      which all options outstanding under the stock option plans may first be
      exercised will be accelerated. Generally, all options terminate 90 days after
      a
      change of control.





The
      following table sets forth information as of December 31, 2007 regarding
      outstanding options granted under the plans, warrants issued to consultants
      and
      options reserved for future grant under the plan.




Plan
                Category
            
            Number
              of shares to be
              issued upon
              exercise of
              outstanding options,
              warrants and rights
              (a)
            
            Weighted-average
              exercise price of
              outstanding options,
              warrants and rights
              (b)
            
            Number of shares
              remaining available for
              future issuance under
              equity compensation
              plans (excluding shares
              reflected in column (a))
              (c)Equity
                compensation plans approved by stockholders
            
            
            —
            
            $
            —
            
            
            —Equity
                compensation plans not approved by stockholders
            
            
            825,000
            
            $
            1.73
            
            
            5,102,711Total
            
            
            825,000
            
            $
            1.73
            
            
            5,102,711




(1)
            Includes
                109,375 options remaining for issuance under the 2003 Option Plan,
                3,334,203 options remaining for issuance under the 2004 Option Plan,
                300,000 options remaining for issuance under the 2005 Option Plan,
                and
                1,359,133 options remaining under the 2006 Option
                Plan.




31




**Recent
      Sales of Unregistered Securities**




On
      January 4, 2007, we issued a total of 227,200 shares of our common stock for
      services rendered to the Company to the following service
      providers:





**Name**
            
            **Number**
              **of
                Shares**BMI
                Consulting, Inc.
            
            
            56,800DCF,
                Inc.
            
            
            56,800Lima
                Capital, Inc.
            
            
            56,800Desert
                Southwest Capital, Inc.
            
            
            56,800





The
      above
      shares issued were registered in a Registration Statement on Form S-8POS filed
      on December 8, 2006.





On
      January 4, 2007, we issued 150,000 shares of our restricted common stock to
      Crescent Fund, LLC for services provided to the Company. We believe that the
      issuance of the shares was exempt from the registration and prospectus delivery
      requirements of the Securities Act of 1933 by virtue of Section 4(2) *.* The
      recipient of the shares was afforded an opportunity for effective access to
      files and records of the Company that contained the relevant information needed
      to make its investment decision, including the Company’s financial statements
      and 34 Act reports. We reasonably believe that the recipient, immediately prior
      to issuing the shares, had such knowledge and experience in our financial and
      business matters that it was capable of evaluating the merits and risks of
      its
      investment. The recipient had the opportunity to speak with our president and
      directors on several occasions prior to its investment
      decision.


On
      February 7, 2007, Mercator Momentum Fund, LP. and Monarch Pointe Fund, LP.
      Converted 500 Series C Preferred Stock into 232,666 shares of our common stock.
      The 232,666 shares of common stock were issued on February 28,
      2007.





On
      February 12, 2007, we issued a total of 250,000 shares of our common stock
      for
      services rendered to the Company to the following service
      providers:





**Name**
            
            **Number**
              **of
                Shares**Jeff
                Stone
            
            
            50,000Barbara
                Asbell
            
            
            70,000Leslie
                Wolf
            
            
            65,000Dr.
                Joseph Wolf
            
            
            65,000


The
        above
        shares issued were registered in a Registration Statement on Form S-8POS
        filed
        on December 8, 2006.


32





On
      February 15, 2007, we issued a total of 242,000 shares of our common stock
      for
      services rendered to the Company to the following service
      providers:





**Name**
            
            **Number**
              **of
                Shares**John
                Heilshorn
            
            
            33,500Keith
                Lippert
            
            
            33,500Jeff
                Stone
            
            
            50,000Michael
                Belcher
            
            
            125,000





The
      above
      shares issued were registered in a Registration Statement on Form S-8POS filed
      on September 8, 2006.





On
      March
      14, 2007, we issued a total of 130,000 shares of our common stock for services
      rendered to the Company to the following service providers:





**Name**
            
            **Number**
              **of
                Shares**Thais
                Abraham
            
            
            65,000Wendy
                Block
            
            
            65,000





The
      above
      shares issued were registered in a Registration Statement on Form S-8POS filed
      on December 8, 2006.





On
      March
      14, 2007, Mercator Momentum Fund, LP. and Monarch Pointe Fund, LP. Converted
      500
      Series C Preferred Stock into 238,095 shares of our common stock.





On
      March
      31, 2007, we issued 50,000 shares of our common stock for services rendered to
      the
      Company to the following service provider:





**Name**
            
            **Number**
              **of
                Shares**Chris
                Knapp
            
            
            50,000





The
      above
      shares issued were registered in a Registration Statement on Form S-8POS filed
      on December 8, 2006.





On
      April
      5, 2007, we issued 50,000 shares of
      our
      restricted common stock to Nathan Kaplan and Svet Milic for license fees. We
      believe that the issuance of the shares was exempt from the registration and
      prospectus delivery requirements of the Securities Act of 1933 by virtue of
      Section 4(2) *.* The
      recipient of the shares was afforded an opportunity for effective access to
      files and records of the Company that contained the relevant information needed
      to make its investment decision, including the Company’s financial statements
      and 34 Act reports. We reasonably believe that the recipient, immediately prior
      to issuing the shares, had such knowledge and experience in our financial and
      business matters that it was capable of evaluating the merits and risks of
      its
      investment. The recipient had the opportunity to speak with our president and
      directors on several occasions prior to its investment decision.





33




On
      May 7,
      2007, Mercator Momentum Fund, LP. and Monarch Pointe Fund, LP. Converted 840
      shares of Series C Preferred Stock into 400,000 shares of our common
      stock.





On
      May
      17, 2007, we issued a total of 625,000 shares of our common stock for services
      rendered to the Company to the following service providers:





**Name**
            
            **Number**
              **of
                Shares**Thais
                Abraham
            
            
            158,000Barbara
                Asbell
            
            
            175,500Leslie
                Wolf
            
            
            145,000Dr.
                Joseph Wolf
            
            
            146,500





The
      above
      shares issued were registered in a Registration Statement on Form S-8POS filed
      on December 8, 2006.





On
      July
      23, 2007, we issued 184,700 shares of
      our
      restricted common stock to three individuals for services rendered to the
      Company. We believe that the issuance of the shares was exempt from the
      registration and prospectus delivery requirements of the Securities Act of
      1933
      by virtue of Section 4(2) *.* The
      recipient of the shares was afforded an opportunity for effective access to
      files and records of the Company that contained the relevant information needed
      to make its investment decision, including the Company’s financial statements
      and 34 Act reports. We reasonably believe that the recipient, immediately prior
      to issuing the shares, had such knowledge and experience in our financial and
      business matters that it was capable of evaluating the merits and risks of
      its
      investment. The recipient had the opportunity to speak with our president and
      directors on several occasions prior to its investment decision.





On
      August
      27, 2007, Mercator Momentum Fund, LP. and Monarch Pointe Fund, LP. Converted
      300
      shares of Series C Preferred Stock into 500,000 shares of our common
      stock.





On
      September 11, 2007, we issued a total of 1,000,000 shares of our common stock
      for services rendered to the Company to the following service
      providers:





**Name**
            
            **Number**
              **of
                Shares**Thais
                Abraham
            
            
            250,000Barbara
                Asbell
            
            
            250,000Leslie
                Wolf
            
            
            250,000Dr.
                Joseph Wolf
            
            
            250,000





The
      above
      shares issued were registered in a Registration Statement on Form S-8POS filed
      on August 31, 2007.




34




On
      September 19, 2007, we issued 200,000 shares of
      our
      restricted common stock to an individual for cash. We believe that the issuance
      of the shares was exempt from the registration and prospectus delivery
      requirements of the Securities Act of 1933 by virtue of Section 4(2) *.* The
      recipient of the shares was afforded an opportunity for effective access to
      files and records of the Company that contained the relevant information needed
      to make its investment decision, including the Company’s financial statements
      and 34 Act reports. We reasonably believe that the recipient, immediately prior
      to issuing the shares, had such knowledge and experience in our financial and
      business matters that it was capable of evaluating the merits and risks of
      its
      investment. The recipient had the opportunity to speak with our president and
      directors on several occasions prior to its investment decision.




On
      October 3, 2007, we issued a total of 5,250,000 shares of
      our
      restricted common stock to our officers and directors as a bonus for services
      to
      the Company. We believe that the issuance of the shares was exempt from the
      registration and prospectus delivery requirements of the Securities Act of
      1933
      by virtue of Section 4(2) *.* The
      recipient of the shares was afforded an opportunity for effective access to
      files and records of the Company that contained the relevant information needed
      to make its investment decision, including the Company’s financial statements
      and 34 Act reports. We reasonably believe that the recipient, immediately prior
      to issuing the shares, had such knowledge and experience in our financial and
      business matters that it was capable of evaluating the merits and risks of
      its
      investment. The recipient had the opportunity to speak with our president and
      directors on several occasions prior to its investment decision.





On
      October 3, 2007, we issued 7,500,000 shares of
      our
      restricted common stock to our CFO for the conversion of $150,000 of debt.
      We
      believe that the issuance of the shares was exempt from the registration and
      prospectus delivery requirements of the Securities Act of 1933 by virtue of
      Section 4(2) *.* The
      recipient of the shares was afforded an opportunity for effective access
      to
      files and records of the Company that contained the relevant information needed
      to make its investment decision, including the Company’s financial statements
      and 34 Act reports. We reasonably believe that the recipient, immediately prior
      to issuing the shares, had such knowledge and experience in our financial and
      business matters that it was capable of evaluating the merits and risks of
      its
      investment. The recipient had the opportunity to speak with our president and
      directors on several occasions prior to its investment decision.





On
      November 20, 2007, we issued 833,334 shares of our common stock for services
      rendered to the Company to the following service provider:





**Name**
            
            **Number**
              **of
                Shares**Barbara
                Asbell
            
            
            833,334





The
      above
      shares issued were registered in a Registration Statement on Form S-8POS filed
      on August 31, 2007.





35




On
      November 26, 2007, we issued 10,500 shares of our common stock for services
      rendered to the Company to the following service provider:





**Name**
            
            **Number**
              **of
                Shares**J.
                Barry Johnson
            
            
            10,500





The
      above
      shares issued were registered in a Registration Statement on Form S-8POS filed
      on August 31, 2007.





On
      November 27, 2007, we issued 400,000 shares of
      our
      restricted common stock to two individuals for services provided to the Company.
      We believe that the issuance of the shares was exempt from the registration
      and
      prospectus delivery requirements of the Securities Act of 1933 by virtue of
      Section 4(2) *.* The
      recipient of the shares was afforded an opportunity for effective access to
      files and records of the Company that contained the relevant information needed
      to make its investment decision, including the Company’s financial statements
      and 34 Act reports. We reasonably believe that the recipient, immediately prior
      to issuing the shares, had such knowledge and experience in our financial and
      business matters that it was capable of evaluating the merits and risks of
      its
      investment. The recipient had the opportunity to speak with our president and
      directors on several occasions prior to its investment decision.





On
      December 5, 2007, we issued 231,559 shares of
      our
      restricted common stock to Centurion Credit Resources as financing fees in
      connection with our line of credit. We believe that the issuance of the shares
      was exempt from the registration and prospectus delivery requirements of the
      Securities Act of 1933 by virtue of Section 4(2) *.* The
      recipient of the shares was afforded an opportunity for effective access to
      files and records of the Company that contained the relevant information needed
      to make its investment decision, including the Company’s financial statements
      and 34 Act reports. We reasonably believe that the recipient, immediately prior
      to issuing the shares, had such knowledge and experience in our financial and business
      matters that it was capable of evaluating the merits and risks of its
      investment. The recipient had the opportunity to speak with our president and
      directors on several occasions prior to its investment decision.





On
      December 5, 2007, we issued 200,000 shares of
      our
      restricted common stock to Parallel Marketing Resources for services rendered
      to
      the Company. We believe that the issuance of the shares was exempt from the
      registration and prospectus delivery requirements of the Securities Act of
      1933
      by virtue of Section 4(2) *.* The
      recipient of the shares was afforded an opportunity for effective access to
      files and records of the Company that contained the relevant information needed
      to make its investment decision, including the Company’s financial statements
      and 34 Act reports. We reasonably believe that the recipient, immediately prior
      to issuing the shares, had such knowledge and experience in our financial and
      business matters that it was capable of evaluating the merits and risks of
      its
      investment. The recipient had the opportunity to speak with our president and
      directors on several occasions prior to its investment decision.





On
      December 5, 2007, we issued 833,333 shares of our common stock for services
      rendered to the Company to the following service provider:





**Name**
            
            **Number**
              **of
                Shares**Barbars
                Asbel in the name of Yoel Grun
            
            
            833,333





36


The
      above
      shares issued were registered in a Registration Statement on Form S-8POS filed
      on August 31, 2007.





Subsequent
      Issuances After Year-End .





On
      January 2, 2008, we issued 446,071 shares of
      our
      restricted common stock to Centurion Credit Resources as financing fees in
      connection with our line of credit. We believe that the issuance of the shares
      was exempt from the registration and prospectus delivery requirements of the
      Securities Act of 1933 by virtue of Section 4(2) *.* The
      recipient of the shares was afforded an opportunity for effective access to
      files and records of the Company that contained the relevant information needed
      to make its investment decision, including the Company’s financial statements
      and 34 Act reports. We reasonably believe that the recipient, immediately prior
      to issuing the shares, had such knowledge and experience in our financial and
      business matters that it was capable of evaluating the merits and risks of
      its
      investment. The recipient had the opportunity to speak with our president and
      directors on several occasions prior to its investment decision.





On
      January 2, 2008, we issued 750,000 shares of our common stock to employees
      for
      services rendered to the Company to the following service provider:





**Name**
            
            **Number**
              **of
                Shares**Alan
                Binder
            
            
            250,000Dale
                Richter
            
            
            250,000Shabnam
                Shahrabi
            
            
            100,000Frank
                Schwenden
            
            
            150,000





The
      above
      shares issued were registered in a Registration Statement on Form S-8POS filed
      on August 31, 2007.





On
      January 4, 2008, we issued 4,223 shares of
      our
      restricted common stock to Centurion Credit Resources as financing fees in
      connection with our line of credit. We believe that the issuance of the shares
      was exempt from the registration and prospectus delivery requirements of the
      Securities Act of 1933 by virtue of Section 4(2) *.* The
      recipient of the shares was afforded an opportunity for effective access to
      files and records of the Company that contained the relevant information needed
      to make its investment decision, including the Company’s financial statements
      and 34 Act reports. We reasonably believe that the recipient, immediately prior
      to issuing the shares, had such knowledge and experience in our financial and
      business matters that it was capable of evaluating the merits and risks of
      its
      investment. The recipient had the opportunity to speak with our president and
      directors on several occasions prior to its investment decision.





37




On
      January 4, 2008, we issued 1,250,000 shares of
      our
      restricted common stock to our CFO for services provided to the Company. We
      believe that the issuance of the shares was exempt from the registration and
      prospectus delivery requirements of the Securities Act of 1933 by virtue of
      Section 4(2) *.* The
      recipient of the shares was afforded an opportunity for effective access to
      files and records of the Company that contained the relevant information needed
      to make its investment decision, including the Company’s financial statements
      and 34 Act reports. We reasonably believe that the recipient, immediately prior
      to issuing the shares, had such knowledge and experience in our financial and
      business matters that it was capable of evaluating the merits and risks of
      its
      investment. The recipient had the opportunity to speak with our president and
      directors on several occasions prior to its investment decision.





On
      January 4, 2008, we issued 1,250,000 shares of
      our
      restricted common stock to Michael Petras for services provided to the Company.
      We believe that the issuance of the shares was exempt from the registration
      and
      prospectus delivery requirements of the Securities Act of 1933 by virtue of
      Section 4(2) *.* The
      recipient of the shares was afforded an opportunity for effective access to
      files and records of the Company that contained the relevant information needed
      to make its investment decision, including the Company’s financial statements
      and 34 Act reports. We reasonably believe that the recipient, immediately prior
      to issuing the shares, had such knowledge and experience in our financial and
      business matters that it was capable of evaluating the merits and risks of
      its
      investment. The recipient had the opportunity to speak with our president and
      directors on several occasions prior to its investment decision.





On
      January 14, 2008, we issued 400,000 shares of
      our
      restricted common stock to two individuals for services provided to the Company.
      We believe that the issuance of the shares was exempt from the registration
      and
      prospectus delivery requirements of the Securities Act of 1933 by virtue of
      Section 4(2) *.* The
      recipient of the shares was afforded an opportunity for effective access
      to
      files and records of the Company that contained the relevant information needed
      to make its investment decision, including the Company’s financial statements
      and 34 Act reports. We reasonably believe that the recipient, immediately prior
      to issuing the shares, had such knowledge and experience in our financial and
      business matters that it was capable of evaluating the merits and risks of
      its
      investment. The recipient had the opportunity to speak with our president and
      directors on several occasions prior to its investment decision.





On
      January 31, 2008, we issued 648,630 shares of
      our
      restricted common stock to Centurion Credit Resources as financing fees in
      connection with our line of credit. We believe that the issuance of the shares
      was exempt from the registration and prospectus delivery requirements of the
      Securities Act of 1933 by virtue of Section 4(2) *.* The
      recipient of the shares was afforded an opportunity for effective access to
      files and records of the Company that contained the relevant information needed
      to make its investment decision, including the Company’s financial statements
      and 34 Act reports. We reasonably believe that the recipient, immediately prior
      to issuing the shares, had such knowledge and experience in our financial and
      business matters that it was capable of evaluating the merits and risks of
      its
      investment. The recipient had the opportunity to speak with our president and
      directors on several occasions prior to its investment decision.





38





**Issuer
      Purchases of Equity Securities**





We
      did
      not repurchase any of our equity securities during the years ended December
      31,
      2007 or 2006.





**Item
      6. Selected Financial Data.** ****





Not
      applicable.





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





**Overview
      of Current Operations**





We
      are a
      publicly-traded distributor of life-saving prescription drugs and diagnostics
      to
      several channels in the healthcare industry, a Wi-Fi PDA technology provider
      to
      the lodging and satellite media industries, and a developer of patent-pending
      technologies for e-health and EMR applications that we employ to leverage and
      add value to our prescription drug and diagnostics business. Our proprietary
      ResidenceWare, MD@Hand and Satelink technologies manage critical data, enhance
      productivity and e-commerce, and facilitate communication with applications
      in
      the healthcare, apartment, hotel/motel and satellite rebroadcast industries.
      We
      have recently focused our business attention towards providing prescription
      drugs and medical diagnostics through several medical distribution channels.





During
      the next 12 months we plan to continue to focus our efforts on the following
      primary businesses:





·
            Providing
                medical communication devices based on networks of personal digital
                assistants (PDA). These products are believed to provide benefits
                of on
                demand medical information to private practice physicians, licensed
                medical service providers such as diagnostic testing laboratories,
                and
                medical insurers;


·
            The
                distribution of medical diagnostic products primarily aimed at
                institutions that service patients with diabetic and asthma related
                diseases and ailments. Our current market focus for these products
                is the
                long term care sector of the larger healthcare market, however we
                plan to
                expand into additional sectors where we can service certain chronic
                ambulatory disease states;


·
            The
                distribution and fulfillment of prescriptions for ethical pharmaceuticals
                primarily aimed at the indigent and uninsured sectors of the greater
                medical service markets. Our first market focus for these products
                will be
                those state Medicaid and Federally chartered clinics (and initiatives)
                where funding for pharmaceutical fulfillment enterprises
                exists;


·
            Building
                electronic commerce networks based on personal digital assistants
                (PDA) to
                the hotels, motels and single building, multi-unit apartment buildings
                with a desire to offer local advertising and electronic services
                to their
                tenants/guests; and


·
            Enter
                the cable and wireless communication industries and media enterprises
                with
                networks of personal digital assistant (PDA) technologies that link
                field-based installation and repair personnel with central offices
                for the
                exchange of customer order and subscription
                information.




39




**Seasonality**





We
      have
      completed the second full year of operation of our prescription drug and
      diabetes diagnostics. Our experiences point to a business that displays certain
      seasonal trends. In each of the last two operating years our order intake was
      concentrated in the first five months of the calendar year and then again in
      the
      last two months of the calendar year. One explanation is that these months
      correspond with the beginning of a prescription drug plan year where new
      prescription drug cards are distributed by insurers to their insured in January
      along with new plan formularies (price schedules). This in turn trends to
      influence “stocking up” buying/ordering behavior on the part of the
      insured.





**Results
      of Operations for the fiscal years ended December 31, 2007 and
      2006.**





The
      following table summarizes selected items from the statement of operations
      at
      December 31, 2007 compared to December 31, 2006.





**INCOME:**





**For
                the Year Ended**
              **December
                31,**
            
            **Increase
                (Decrease)****2007**
            
            **2006**
            
            **$**
            
            **%**Revenue
            
            $
            6,254,278
            
            $
            19,220,265
            
            $
            (12,965,987
            )
            
            (67
            )%Cost
                of Sales
            
            
            5,845,782
            
            
            19,186,237
            
            $
            (13,340,455
            )
            
            (70
            )%Gross
                Profit
            
            
            408,496
            
            
            34,028
            
            
            374,468
            
            
            1,100
            %Gross
                Profit Percentage of Sales
            
            
            6
            %
            
            0.18
            %
            
            
            
            
            5.82
            %





**Revenue**





Our
      revenue for the fiscal year ended December 31, 2007 was $6,254,278 compared
      to
      revenue of $19,220,265 in the fiscal year ended December 31, 2006. This resulted
      in a decrease in revenue of $12,965,987, or 67%, from the same period a year
      ago. The decrease in revenue over the fiscal year ended December 31, 2006 was
      a
      result of our market focus towards the direct sale of diabetic test strips
      into
      several prescription drug channels and our efforts to increase our gross profit
      margin.





**Cost
      of sales / Gross profit percentage of sales**





Our
      cost
      of sales for the fiscal year ended December 31, 2007 was $5,845,782, a decrease
      of $13,340,455, or 70% from $19,186,237 for the fiscal year ended December
      31,
      2006. The decrease in the cost of sales in the current period was a direct
      result of our decreased sales during the year and an increase in retail market
      sales. In addition, pursuant to supplier agreements, we were to receive volume
      rebates on bulk purchases totaling $564,107. At December 31, 2006 we had not
      received payment on the accrued rebates and had doubt as to future
      collectibility therefore we wrote down the amount due at December 31,
      2006.





40


Gross
      profit as a percentage of sales increased from 0.18% for the fiscal year ended
      December 31, 2006 to 0.18% for the fiscal year ended December 31, 2006. The
      increase in gross profit margin was caused by a change in our product mix
      whereby we increased our sales levels in the retail verses wholesale markets,
      which historically have a lower profit margin.




**EXPENSES:**





**For
                the Year Ended**
              **December
                31,****2007**
            
            **2006**
            
            **Increase
                / (Decrease)****Amount**
            
            **Amount**
            
            $
            
            %Expenses:General
                & administrative expenses
            
            $
            270,317
            
            $
            637,463
            
            $
            (367,146
            )
            
            (58
            )%Consulting
                services
            
            
            728,438
            
            
            569,743
            
            
            158,695
            
            
            28
            %Payroll
                expense
            
            
            342,777
            
            
            485,627
            
            
            (143,150
            )
            
            (29
            )%Professional
                fees
            
            
            148,079
            
            
            592,968
            
            
            (444,889
            )
            
            (75
            )%Depreciation
            
            
            46,726
            
            
            48,027
            
            
            (1,301
            )
            
            (3
            )%Total
                expenses
            
            
            1,536,337
            
            
            2,334,128
            
            
            (797,791
            )
            
            (34
            )%Net
                operating (loss)
            
            
            (1,127,841
            )
            
            (2,300,100
            )
            
            1,172,259
            
            
            (51
            )%Other
                income (expense):Financing
                costs
            
            
            (45,429
            )
            
            (249,408
            )
            
            203,979
            
            
            (82
            )%Interest
                (expense)
            
            
            (236,509
            )
            
            (205,302
            )
            
            (31,207
            )
            
            (15
            )%Net
                (loss)
            
            $
            (1,409,779
            )
            $
            (2,754,810
            )
            $
            1,345,031
            
            
            (49
            )%





**General
      and Administrative Expenses**


General
      and administrative expenses for the fiscal year ended December 31, 2007 were
      $270,317, a decrease of $367,146, or 58%, from $637,463 for the fiscal year
      ended December 31, 2006. The decrease in general and administrative expenses
      was
      due over all overhead decrease from the decline in sales revenue.





**Consulting
      Services**


Consulting
      services for the fiscal year ended December 31, 2007 were $728,438, an increase
      of $158,695, or 28%, from $569,743 for the fiscal year ended December 31, 2006.
      The increase in consulting services was due to our decreased sales limiting
      our
      ability to maintain internal staff.





41




**Payroll
      expense**


Payroll
      expenses for the fiscal year ended December 31, 2007 were $342,777, a decrease
      of $143,150, or 29%, from $485,627 for the fiscal year ended December 31, 2006.
      The decrease was due to the elimination full time employees who were replaced
      be
      regional part-time and at-will specialists.





**Professional
      Fees**


Professional
      fees for the fiscal year ended December 31, 2007 were $148,079, a decrease
      of
      $444,889, or 78%, from $592,968 for the fiscal year ended December 31, 2006.
      The
      decrease in professional fees was due to the elimination of previous legal
      fees
      required in connection with litigation surrounding the Ronald Kelly, etal and
      Investor Relations Services, Inc. matters.





**Depreciation**


Depreciation
      for the fiscal year ended December 31, 2007 was $46,726, a decrease of $1,301
      from $48,027 for the fiscal year ended December 31, 2006. The decrease in
      depreciation is the expected result of asset reaching there expected useful
      lives.





**Total
      Expenses**


Total
      expenses for the fiscal year ended December 31, 2007 were $1,536,337, a decrease
      of $797,791, or 34%, from $2,334,128 for the fiscal year ended December 31,
      2006. The decrease in total expenses was primarily due to a reduction in general
      and administrative expenses and professional fees.





**Net
      Operating Loss**


Net
      operating loss for the fiscal year ended December 31, 2007 was $1,127,841,
      versus a net operating loss of $2,300,100 for the fiscal year ended December
      31,
      2006, a change of net operating loss of $1,172,259. The decrease in net
      operating loss for the year ended December 31, 2007 was primarily attributable
      to the decrease in overall expenses due to our limited sales activity during
      the
      year ended December 31, 2007.





**Financing
      Costs**


Financing
      costs for the fiscal year ended December 31, 2007 were $45,429, a decrease
      of
      $203,979, or 82%, from $249,408 for the fiscal year ended December 31, 2006.
      During the year ended December 31, 2006, we paid various penalties related
      to
      our financing activities. In 2007 we did not experience the same penalties
      and
      were able to minimize our financing costs.




**Interest
      Expense**


Interest
      expense for the fiscal year ended December 31, 2007 was $236,509, an increase
      of
      $31,207, or 15%, from $205,302 for the fiscal year ended December 31, 2006.
      The
      increase in interest expense was the result of changes in interest rates during
      the year.





**Net
      Loss**


Net
      loss
      for the fiscal year ended December 31, 2007 was $1,409,779, a decrease of
      $1,345,031, or 49%, from $2,754,810 for the fiscal year ended December 31,
      2006.
      The decrease in net loss was the result of our overall decrease in professional
      fees and general and administrative expenses during the year.




42




**Liquidity
      and Capital Resources**





A
      critical component of our operating plan impacting our continued existence
      is
      the ability to obtain additional capital through additional equity and/or debt
      financing. We do not anticipate generating sufficient positive internal
      operating cash flow until such time as we can deliver our product to market,
      complete additional financial service company acquisitions and generate
      substantial revenues, which may take the next few years to fully realize. In
      the
      event we cannot obtain the necessary capital to pursue our strategic plan,
      we
      may have to cease or significantly curtail our operations. This would materially
      impact our ability to continue operations.





The
      following table summarizes our current assets, liabilities and working capital
      at December 31, 2007 compared to December 31, 2006.




December
                  31,
              
              December
                  31,
              
              **Increase
                  / (Decrease)**2007
              
              2006
              
              **$**
              ****
              **%**Current
                  Assets
              
              $
              773,660
              
              $
              286,667
              
              $
              486,993
              
              
              170
              %Current
                  Liabilities
              
              $
              2,758,243
              
              $
              2,604,610
              
              $
              153,633
              
              
              6
              %Working
                  Capital (deficit)
              
              $
              (1,984,583
              )
              $
              (2,317,943
              )
              $
              (333,360
              )
              
              (14
              )%




*Internal
      and External Sources of Liquidity*





MAG
      Entities Agreement





On
      February 7, 2005, we entered into agreements with Mercator Momentum Fund, LP
      and
      Monarch Pointe Fund, Ltd. (collectively, the “Purchasers”) and Mercator Advisory
      Group, LLC (“MAG”). Under the terms of the agreement, we agreed to issue and
      sell to the Purchasers, and the Purchasers agreed to purchase from the Company,
      20,000 shares of Series “C” Convertible Preferred Stock at $100.00 per share.
      During the year ended December 31, 2007 MAG converted 2,140 shares of their
      Series “C” preferred into 1,370,761 shares of our restricted common
      stock.





Additionally,
      we issued the following warrants: 103,125 warrants to purchase share of our
      common stock at $1.60 per share and 103,125 warrants to purchase shares of
      our
      common stock at $2.40 to Mercator Momentum Fund, LP; 209,375 warrants to
      purchase shares of our common stock at $1.60 per share and 209,375 warrants
      to
      purchase shares of our common stock at $2.40 per share to Monarch Pointe Fund,
      Ltd.; and 312,500 warrants to purchase shares of our common stock at $1.60
      per
      share and 312,500 warrants to purchase shares of our common stock at $2.40
      per
      share to MAG. All of the warrants expire on February 7, 2008.




43




Pinnacle
      Investment Partners, LP Promissory Note


On
      March
      24, 2004, we entered into a Secured Convertible Promissory Note with Pinnacle
      Investment Partners, LP for the principal amount of $700,000 with an interest
      rate of 12% per annum. The note was secured by 212,500 shares of our common
      stock. Pinnacle may, at its option, at any time from time to time, elect to
      convert some or all of the then-outstanding principal of the Note into shares
      of
      our common stock at a conversion price of $0.08 per share, unless such
      conversion would result in Pinnacle being deemed the “beneficial owner” of 4.99%
      or more of the then-outstanding common shares within the meaning of Rule 13d-3
      of the Securities Exchange Act of 1934, as amended. In the event we fail to
      pay
      any installment or principal or interest when due, the interest rate will then
      accrue at a rate of 24% per annum on the unpaid balance until the payment
      default is cured.





On
      February 10, 2005, we entered into a Note Extension Agreement with Pinnacle
      Investment Partners, LP. Subject to the terms of the new agreement; on March
      24,
      2005, Pinnacle agreed to pay us $340,000 and (2) pay to Pinnacle's designee,
      CJR
      Capital, LLC, $60,000 towards Pinnacle's due diligence and legal expenses
      related to this new agreement. This new agreement has the following
      consequences: (1) the principal amount due under the Note automatically
      increases by $400,000 to $1,100,000; (2) the Maturity Date of the newly revised
      Note was extended to April 24, 2006; and (3) the conversion price for those
      shares that underlie the Note was changed to $2.00.





On
      July
      1, 2006, we entered into a fourth Note Extension Agreement with Pinnacle
      Investment Partners, LP. Subject to the terms of the new agreement Pinnacle
      agreed to pay us $35,000 and pay to Pinnacle's designee, CJR Capital, LLC,
      $35,000 towards Pinnacle's due diligence and legal expenses related to the
      new
      agreement. The new agreement has the following consequences: (1) the principal
      amount due under the Note automatically increases from $1,010,309 to $1,100,000;
      (2) the Maturity Date of the newly revised Note was extended to December 24,
      2006; and (3) the conversion price for those shares that underlie the Note
      was
      changed to $0.30.





In
      addition to the above, we agreed: (1) to deliver to Pinnacle's counsel an
      additional 2,000,000 shares of our common stock (over and above current escrow
      holdings) as additional escrow security, (2) issue 150,000 shares of our common
      stock to Pinnacle in consideration for their willingness to enter into the
      extension agreement; and (3) upon receipt of any properly crafted Seller's
      Representation Letter, deliver to Pinnacle an opinion of counsel to the effect
      that commencing July 1, 2006 , Pinnacle may sell under Rule 144 promulgated
      under the Securities Act of 1933, as amended, shares surrendered to Pinnacle
      in
      accordance with this agreement, on condition that (1) Pinnacle uses the proceeds
      to pay down the indebtedness under the Note as of immediately prior to
      effectiveness of this agreement and (2) ceases to sell any of those Shares
      once
      that indebtedness has been paid off in full. On August 3, 2006, we were informed
      through media outlets and the printed press that the principals of Pinnacle
      Investment Partners, LP had been charged with several financial crimes and
      that
      the fund had been frozen and its officers remanded. Since August 3, 2006, the
      Company has not had contact with any of the Pinnacle fund management or attorney
      in fact. We have not delivered the shares called for under the July 1, 2006
      extension after being advised by the fund management to “stand
      still.”


44





Promissory
      Notes with Dennis Cantor and Novex International





On
      May
      23, 2006, we entered into a promissory note with Dennis Cantor and Novex
      International for the principal amount of $255,000. Pursuant to the note we
      promised to pay Dennis Cantor and Novex International the sum of $255,000
      together with interest at a rate of one half of one percent (0.5%) every ten
      days beginning on May 23, 2006 and running through the maturity date of June
      30,
      2006. In the case of a default in payment of principal, all overdue amounts
      under the note shall bear a penalty obligation at a rate of twelve percent
      (12%)
      per annum accruing from the maturity date. On July 1, 2006, we extended the
      note
      to July 31, 2006. We have made principal payments of $125,000 through the year
      ended December 31, 2007. As of December 31, 2007, the remaining principal
      balance was $130,000 and we are currently negotiating a revised payment
      schedule.





Convertible
      Loan Payment Agreement





On
      July
      17, 2006, we entered into a convertible loan payment agreement with Wayne G.
      Knapp wherein Mr. Knapp agreed to loan the Company the sum of $200,000. The
      loan
      is for 120 days. On October 17, 2006, we renewed the note. On January 17, 2007,
      the parties verbally agreed to a renewal that expires on May 16, 2007. The
      note
      accrues monthly interest at a rate of 1.50% and the interest is payable
      quarterly in cash. The total amount owing pursuant to the agreement, was
      convertible at the option of Mr. Knapp at any time from July 17, 2006 until
      November 30, 2006, at the strike price equal to $0.32 per share or 90% of the
      final bid price of our common stock on the day prior to conversion with a floor
      price of $0.10 per share. We renewed Mr. Knapp’s conversion option on January
      17, 2007. We also issued Mr. Knapp a warrant to purchase 50,000 shares of our
      common stock at $0.32 per share through December 31, 2008. Mr. Knapp exercised
      his option on March 30, 2007.





Centurion
      Credit Resources





On
      November 17, 2007, we entered into an agreement with Centurion Credit Resources,
      LLC to secure a $1,000,000 revolving credit facility that is geared specifically
      to our business. This facility, offered to us at market credit rates. Terms
      of
      the credit facility allow us to increase the available credit in increments
      of
      $250,000 as our business grows. We drew down on this credit line for the first
      time on November 30, 2007 and have subsequently accomplished seventeen
      additional draw downs through December 31, 2008 and twenty two additional draw
      downs through March 28, 2008. We believe that this facility will adequately
      finance our at home diabetes diagnostics business through revenues rates of
      $7.5
      million per quarter, and with the added credit increments offered, through
      $12.5
      million per quarter. We are also entertaining additional proposed credit
      facilities.





*Cash
      Flow.* Since
      inception, we have primarily financed our cash flow requirements through the
      issuance of common stock, the issuance of notes and sales generated income.
      With
      the growth of our current business in 2006 we may, during our normal course
      of
      business, experience net negative cash flows from operations, pending receipt
      of
      revenue which often are delayed
      as a result of the nature of the healthcare industry. Further, we may be
      required to obtain financing to fund operations through additional common stock
      offerings and bank or other debt borrowings, to the extent available, or to
      obtain additional financing to the extent necessary to augment our available
      working capital.


45




***Satisfaction
      of our cash obligations for the next 12 months.***





As
      of
      December 31, 2007, our cash balance was $4,353. Our plan for satisfying our
      cash
      requirements for the next twelve months is through additional equity, third
      party financing, and/or debt financing. We anticipate sales-generated income
      during that same period of time, but do not anticipate generating sufficient
      amounts of positive cash flow to meet our working capital requirements.
      Consequently, we intend to make appropriate plans to insure sources of
      additional capital in the future to fund growth and expansion through additional
      equity or debt financing or credit facilities.





As
      we
      expand operational activities, we may continue to experience net negative cash
      flows from operations, pending receipt of sales or development fees, and will
      be
      required to obtain additional financing to fund operations through common stock
      offerings and debt borrowings to the extent necessary to provide working
      capital. We received a substantial number of sales orders and refill orders
      beginning in mid-September 2006 which we could not fill. It was not until the
      company entered into the agreement with Centurion Credit Resources, LLC that
      the
      company could fill orders for patients and customers on a continuous basis.
      Until the Centurion credit line was put in place we managed to keep a small
      portion of our distribution activities going when our limited resources allowed
      us.





Although
      we recorded an operating profit in the period ending March 31, 2006, we have
      incurred additional operating losses for the remainder of 2006 and in each
      quarter in 2007. Given our recent operating history, predictions of future
      operating results difficult to ascertain. The recent addition of a credit line
      has helped but we have found it increasingly difficult to transact commerce
      in
      the very cash intensive prescription drug industry. Thus, our prospects must
      be
      considered in light of the risks, expenses and difficulties frequently
      encountered by companies in their early stages of commercial viability,
      particularly companies in new and rapidly evolving technology markets. Such
      risks include, but are not limited to, an evolving and unpredictable business
      model and the management of growth. To address these risks we must, among other
      things, implement and successfully execute our business and marketing strategy,
      continue to develop and upgrade technology and products, respond to competitive
      developments, and continue to attract, retain and motivate qualified personnel.
      There can be no assurance that we will be successful in addressing such risks,
      and the failure to do so can have a material adverse effect on our business
      prospects, financial condition and results of operations.





***Expected
      purchase or sale of plant and significant equipment.***





We
      do not
      anticipate the purchase or sale of any plant or significant equipment; as such
      items are not required by us at this time.


46




***Going
      Concern***





The
      financial statements included in this filing have been prepared in conformity
      with generally accepted accounting principles that contemplate the continuance
      of the Company as a going concern. The Company's cash position is currently
      inadequate to pay all of the costs associated with testing, production and
      marketing of products. Management intends to use borrowings and security sales
      to mitigate the effects of its cash position, however no assurance can be given
      that debt or equity financing, if and when required will be available. The
      financial statements do not include any adjustments relating to the
      recoverability and classification of recorded assets and classification of
      liabilities that might be necessary should the Company be unable to continue
      existence.





**Off-Balance
      Sheet Arrangements**





We
      do not
      have any off-balance sheet arrangements that have or are reasonably likely
      to
      have a current or future effect on our financial condition, changes in financial
      condition, revenues or expenses, results or operations, liquidity, capital
      expenditures or capital resources that is material to investors.





**Critical
      Accounting Policies and Estimates**





*Revenue
      Recognition* :
      The
      Company recognizes revenue on multi-deliverables in compliance with the
      requirements of EITF 00-21. As previously disclosed, the Company recognizes
      revenue based on contractual milestones achieved pursuant to terms outlined
      in
      each individual contract. Typical milestones would include completion of
      installation and functionality testing of hardware and/or software in the
      prescribed environment. Upon effective use, the client is invoiced, and the
      Company recognizes revenue. In addition, the company’s business model assumes
      several types of follow-on sales, such as paid advertising and additional
      hardware/software sales. Paid advertising consists of commercial use of the
      Company’s Residence Ware message management system whereby each company
      advertising on the Residence Ware pay a fee to the Company based on each sale
      generated through the advertisements. All revenue generated through the on-line
      adverting is recognized upon receipt of payment per SOP 97-2. Aftermarket sales
      and services are recognized upon shipment of product or completion of
      services





*Stock-based
      Compensation:* In
      December 2004, the Financial Accounting Standards Board (FASB) issued Statement
      of Financial Accounting Standard No. 123 (revised 2004) “Share-Based Payment”
(“SFAS 123R), which is a revision of FASB Statement No. 123, Accounting for
      Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25,
      Accounting for Stock Issued to Employees, and amends FASB Statement No. 95,
      Statement of Cash Flows. Generally, the approach in Statement 123R is similar
      to
      the approach described in Statement 123.  However, Statement 123R requires
      all share-based payments to employees, including grants of employee stock
      options, to be recognized in the income statement based on their fair values.
      Pro forma disclosure is no longer an alternative.


47




**Recent
      Accounting** **Developments**





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS
      No. 159 allows the company to choose to measure many financial assets and
      financial liabilities at fair value. Unrealized gains and losses on items for
      which the fair value option has been elected are reported in earnings. SFAS
      159
      is effective for fiscal years beginning after November 15, 2007. The adoption
      of
      SFAS 159 is not expected to have a material impact on our financial position,
      results of operation or cash flows.





In
      December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
      Consolidated Financial Statements”. This statement amends ARB 51 to establish
      accounting and reporting standards for the non-controlling (minority) interest
      in a subsidiary and for the de-consolidation of a subsidiary. It clarifies
      that
      a non-controlling interest in a subsidiary is equity in the consolidated
      financial statements. SFAS No. 160 is effective for fiscal years and interim
      periods beginning after December 15, 2008. The adoption of SFAS 160 is not
      expected to have a material impact on our financial position, results of
      operation or cash flows.





In
      December 2007, the FASB issued SFAS No. 141 (Revised), “Business Combinations”.
      SFAS 141 (Revised) establishes principals and requirements for how an acquirer
      of a business recognizes and measures in its financial statements the
      identifiable assets acquired, the liabilities assumed, and any non-controlling
      interest in the acquiree. This statement also provides guidance for recognizing
      and measuring the goodwill acquired in the business combination and determines
      what information to disclose to enable users of the financial statements to
      evaluate the nature and financial effects of the business combination. The
      guidance will become effective for the fiscal year beginning after December
      15,
      2008. The adoption of SFAS 141(Revised) is not expected to have a material
      impact on our financial position, results of operation or cash
      flows.





**Item
      7A. Quantitative and Qualitative Disclosures about Market
      Risk.**





Not
      applicable.





**Item
      8. Financial Statements and Supplementary Data.** ****





**Management
      Responsibility for Financial Information**





We
      are
      responsible for the preparation, integrity and fair presentation of our
      financial statements and the other information that appears in this annual
      report on Form 10-K. The financial statements have been prepared in accordance
      with accounting principles generally accepted in the United States and include
      estimates based on our best judgment.


We
      maintain a comprehensive system of internal controls and procedures designed
      to
      provide reasonable assurance, with an appropriate cost-benefit relationship,
      that our financial information is accurate and reliable, our assets are
      safeguarded, and our transactions are executed in accordance with established
      procedures.





We
      retained Weaver & Martin, LLC, an independent registered public accounting
      firm, to audit our consolidated financial statements. Its accompanying report
      is
      based on audits conducted in accordance with the standards of the Public Company
      Accounting Oversight Board (United States).


48




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





None.





**Item
      9A. Controls and Procedures.** ****





Our
      Chief
      Financial Officer, Keith Berman, has evaluated the effectiveness of our
      disclosure controls and procedures (as defined in Rule 13a-15(e) under the
      Securities Exchange Act of 1934, as amended) as of the end of the period covered
      by this Report. Based on the evaluation, Mr. Berman concluded that our
      disclosure controls and procedures are not effective in timely altering them
      to
      material information relating to us (including our consolidated subsidiaries)
      required to be included in our periodic SEC filings.





There
      were no changes in our internal control over financial reporting that occurred
      during our most recent fiscal quarter that have materially affected, or are
      reasonably likely to materially affect, our internal control over financial
      reporting.





**Management’s
      Report on Internal Control Over Financial Reporting**





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting, as is defined in the Securities Exchange
      Act
      of 1934. These internal controls are designed to provide reasonable assurance
      that the reported financial information is presented fairly, that disclosures
      are adequate and that the judgments inherent in the preparation of financial
      statements are reasonable. There are inherent limitations in the effectiveness
      of any system of internal control, including the possibility of human error
      and
      overriding of controls. Consequently, an effective internal control system
      can
      only provide reasonable, not absolute, assurance, with respect to reporting
      financial information.





Management
      conducted an evaluation of the effectiveness of our internal control over
      financial reporting based on the framework and criteria established in Internal
      Control — Integrated Framework, issued by the Committee of Sponsoring
      Organizations of the Treadway Commission. Based on this evaluation, management
      concluded that our internal control over financial reporting was not effective
      as of December 31, 2007.





/s/
      Keith
      Berman


Keith
      Berman


Chief
      Financial Officer




**Item
      9B. Other Information.**





None.


49




**PART
      III**





**Directors
      and Executive Officers**





Our
      executive officers, directors, and key employees are:




**Name**
            
            **Age**
            
            **Position**Keith
                Berman
            
            53
            
            Chief
                Financial Officer and DirectorRobert
                Jagunich
            
            60
            
            Director





Our
      shareholders elect our directors annually and our board of directors appoints
      our officers annually. Vacancies in our board are filled by the board itself.
      Set forth below are brief descriptions of the recent employment and business
      experience of our executive officers and directors.





***Keith
      Berman*** **** has
      served as Chief Financial Officer, Secretary, Treasurer and Director of the
      Company since January of 2003. For over the past 15 years, Mr. Berman has been
      involved in the development of healthcare software including Intranet and
      Internet systems. From July 1999 to present, Mr. Berman has held the position
      of
      President, founder and director of Caredecision.net, Inc. a private company
      engaged in e-health technology development. From March 2001 through June 2002
      Mr. Berman also held the Position of President and Director or Medicius, Inc.
      From January 1996 to June 1999 Mr. Berman was the President and founder of
      Cymedix, the operating division of Medix Resources, Inc., now Ramp Corp. (RCO).
      Cymedix was a pioneer company in what was then known as i-health (Internet
      healthcare) now the e-health industry. Mr. Berman received a BA in 1975 and
      an
      MBA in 1977, from Indiana University.





***Robert
      Jagunich*** **** has
      served as a **** Director
      of the Company since January of 2003. Mr. Jagunich has 27 years of experience
      in
      the medical systems and device industry. From August 1992 to present, he has
      held the position of President at New Abilities Systems, a privately held
      manufacturer of advanced electronic systems used in rehabilitation. He also
      provides consulting services to companies such as Johnson and Johnson and has
      served as a senior executive in such publicly held companies as Laserscope
      and
      Acuson. From April 1996 to December 1997 Mr. Jagunich acted as a director of
      Cymedix Corporation, the operating entity of Medix Resources, Inc., now Ramp
      Corp. (AMEX:RCO). He received his BS in 1969, and his MS and MBA in 1971, from
      the University of Michigan.





Mr.
      Berman, officer and director, devotes his complete business time to the Company. Mr.
      Jagunich attends meetings of the board of directors when held and provides
      33%
      of his business time in a professional capacity to the Company.




50




**Code
        of Ethics**




We
      have
      not yet adopted a code of ethics that applies to our principal executive
      officers or persons performing similar functions, since we have been focusing
      our efforts on obtaining financing for the company. We expect to adopt a code
      by
      the end of the current fiscal year.





**Audit
      Committee**





The
      entire board of directors acts as our audit committee. We do not have an audit
      committee financial expert serving on our audit committee at this time. We
      propose to expand our board of directors in the near future to include a
      financial expert.





**Section
      16(a) Beneficial Ownership Reporting Compliance**





Section
      16(a) of the Securities Exchange Act of 1934 requires our officers, directors,
      and persons who beneficially own more than 10% of our common stock to file
      reports of securities ownership and changes in such ownership with the
      Securities and Exchange Commission (“SEC”). Officers, directors and greater than
      10% beneficial owners are also required by rules promulgated by the SEC to
      furnish us with copies of all Section 16(a) forms they file.





Based
      solely upon a review of the copies of such forms furnished to us, or written
      representations that no Form 5 filings were required, we believe that during
      the
      fiscal year ended December 31, 2007, there was compliance with all Section
      16(a)
      filing requirements applicable to our officers, directors and greater than
      10%
      beneficial owners.





**ITEM
      10.**  **EXECUTIVE
      COMPENSATION**





The
      following table sets forth information the remuneration of our chief executive
      officers and our two most highly compensated executive officers who served
      as
      executive officers at the end of December 31, 2007 and earned in excess of
      $100,000 per annum during any part of our last two fiscal years:





**Summary
      Compensation Table**


**Name
                  and Principal Position**
              
              **Year**
              
              **Salary**
                **($)**
              
              **Bonus**
                **($)**
              
              **Stock**
                **Awards**
                **($)**
              
              **Option**
                **Awards**
                **($)**
              
              **Non-**
                **Equity
                  Incentive**
                **Plan**
                **Compensation**
                **($)**
              
              **Nonqualified**
                **Deferred**
                **Compensation**
                **Earnings
                  ($)**
              
              **All**
                **Other
                  Compensation**
                **($)**
              
              **Total
                  ($)**Robert
                  Cox,
              
              
              2007
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-Former
                  CEO (1)
              
              
              2006
              
              $
              66,500
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              $
              66,500Keith
                  Berman,
              
              
              2007
              
              $
              18,340
              
              
              -0-
              
              $
              91,125
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              $
              109,465CFO
                  (2)
              
              
              2006
              
              $
              36,200
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              $
              36,200Robert
                  Jagunich,
              
              
              2007
              
              
              -0-
              
              
              -0-
              
              $
              86,250
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              $
              86,250Director
                  (3)
              
              
              2006
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-




(1) On
      August 15, 2006, Mr. Cox resigned as Chief Executive Officer and
      Chairman.


51


(2)  Mr.
      Berman has served as Chief Financial Officer since January 2003.


(3)  Mr.
      Jagunich has served as a Director since January 2003.





**OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR-END**





**Name**
              **(a)**
            
            **Number of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options (#)**
              **Exercisable**
              **(b)**
            
            **Number of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options****(#)**
              **Unexercisable**
              **(c)**
            
            **Equity**
              **Incentive**
              **Plan**
              **Awards:**
              **Number****of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Unearned**
              **Options (#)**
              **(d)**
            
            **Option**
              **Exercise**
              **Price****(S) (e)**
            
            **Option**
              **Expiration**
              **Date (f)**
            
            **Number**
              **ofSharesor Unitsof Stock ThatHaveNotVested(#)**
              **(g)**
            
            **Market Value of Shares or Units of Stock That Have Not Vested ($) (h)**
            
            **Equity**
              **Incentive**
              **Plan**
              **Awards:**
              **Number****ofUnearned**
              **Shares,**
              **Units**
              **or**
              **Other**
              **Rights****That Have Not**
              **Vested****(#) (i)**
            
            **Equity Incentive**
              **Plan Awards:**
              **Market or Payout**
              **Value of****Unearned Shares,**
              **Units or Other**
              **Rights That Have**
              **Not Vested****(j)****Robert Cox,**Former CEO (1)
            
            
            337,500
            
            
            -0-
            
            
            -0-
            
            $
            1.76
            
            
            2/15/10
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-**Keith
                Berman,**Secretary/Treasurer
            
            
            337,500
            
            
            -0-
            
            
            -0-
            
            $
            1.76
            
            
            2/15/10
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-Robert
                JagunichDirector
            
            
            112,500
            
            
            -0-
            
            
            -0-
            
            $
            1.76
            
            
            02/15/10
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-




(1)  On
      August
      15, 2006, Mr. Cox resigned as Chief Executive Officer and Chairman.





**Compensation
      of Directors**





All
      directors will be reimbursed for expenses incurred in attending Board or
      committee, when established, meetings. From time to time, certain directors
      who
      are not employees may receive shares of our common stock.





**Stock
      Option Plans**





*2003
      Stock Option Plan*


Effective
      January 1, 2003, we adopted the 2003 Stock Option Plan. The maximum number
      of
      shares that may be issued pursuant to the plan is 312,500 shares. As of December
      31, 2007, 166,250 shares have been granted and subsequently expired under this
      plan.





*2004
      Stock Option Plan*


Effective
      April 21, 2004, we adopted the “2004” Stock Option Plan, as amended, with a
      maximum number of 6,312,500 shares that may be issued. As of December 31, 2007,
      2,978,297 options have been granted, and exercised under this plan.





*2005
      Merger Consolidated Stock Option Plan*


On
      February 5, 2005, we adopted our “2005” Merger Consolidated Stock Option Plan.
      The maximum number of shares that may be issued pursuant to the plan is
      1,125,000 shares. As of December 31, 2007, 825,000 shares have been granted
      under this plan.


52


*2006
      Stock Option* *Plan*


On
      December 8, 2006 we adopted our “2006 Employee Stock Option Plan and granted
      incentive and nonqualified stock options with rights to purchase 1,500,000
      shares of our $0.001 par value common stock. On August 24, 2006, we authorized
      an increase of 4,000,000 shares to the plan. As of December 31, 2007, 4,140,867
      have been granted and exercised under this plan.




**ITEM
      11.**  **SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS.**





The
      following table sets forth certain information, as of March 28, 2007, concerning
      shares of our common stock, the only class of our securities that are issued
      and
      outstanding, held by (1) each stockholder known by us to own beneficially
      more than five percent of the common stock, (2) each of our directors,
      (3) each of our executive officers, and (4) all of our directors and
      executive officers as a group:





**Name
                and Address of Beneficial Owner (1)**
            
            **Amount and Nature of**
              **Beneficial Ownership**
            
            **Percent of Class (2)**Keith Berman, CFO
              1623 Elmsford
              Westlake Village,
                CA 91361
            
            
            11,939,299
            
            
            34.4
            %Robert
                Jagunich, Director (3)
              765
                Christine Drive
              Palo
                Alto, CA 94303
            
            
            5,189,809
            
            
            15.0
            %Officers
                and directors as a group (6 persons)
            
            
            15,879,108
            
            
            49.4
            %




(1)
            To
                our knowledge, except as set forth in the footnotes to this table
                and
                subject to applicable community property laws, each person named
                in the
                table has sole voting and investment power with respect to the shares
                set
                forth opposite such 34,700,688shares
                of Common Stock outstanding as of March 28, 2008.


(2)
            If
                a person listed on this table has the right to obtain additional
                shares of
                Common Stock within 60 days from March 28, 2008 the additional shares
                are
                deemed to be outstanding for the purpose of computing the percentage
                of
                class owned by such person, but are not deemed to be outstanding
                for the
                purpose of computing the percentage of any other
                person.


(3)
            Includes
                1,250,000 shares r/n/o Michael Petras, an affiliate of Mr.
                Jagunich.





**Equity
      Compensation Plans**





We
      did
      not have any equity compensation plans outstanding as of December 31,
      2007.





**Changes
      in Control**





None.


53


**ITEM
      12.**  **CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE**





Other
      than as disclosed below; our present directors, officers or principal
      shareholders, nor any family member of the foregoing, nor, to the best of our
      information and belief, any of our former directors, senior officers or
      principal shareholders, nor any family member of such former directors, officers
      or principal shareholders, has or had any material interest, direct or indirect,
      in any transaction, or in any proposed transaction which has materially affected
      or will materially affect us.





**Keith
      Berman**





We
      have
      received cash advances from our chief executive officer for operational
      expenses. The advances are due on demand and accrued interest at a rate of
      9.5%.
      On September 28, 2007, he elected to convert $150,000 of the principal balance
      into 7,500,000 shares of our common stock or $0.02 per share. The market value
      of our shares on the date of conversion was $0.04. As of December 31, 2007,
      the
      remaining principal balance was $280. In addition, we have accrued interest
      totaling $9,883, which is unpaid at December 31, 2007.





**Future
      Transactions**





All
      future affiliated transactions will be made or entered into on terms that are
      no
      less favorable to us than those that can be obtained from any unaffiliated
      third
      party. A majority of the independent, disinterested members of our board of
      directors will approve future affiliated transactions. We believe that of the
      transactions described above have been on terms as favorable to us as could
      have
      been obtained from unaffiliated third parties as a result of arm’s length
      negotiations.





**Conflicts
      of Interest**





In
      accordance with the laws applicable to us, our directors are required to act
      honestly and in good faith with a view to our best interests. In the event
      that
      a conflict of interest arises at a meeting of the board of directors, a director
      who has such a conflict will disclose the nature and extent of his interest
      to
      the meeting and abstain from voting for or against the approval of the matter
      in
      which he has a conflict.





**Director
      Independence**





Our
      common stock trades in the OTC Bulletin Board. As such, we are not currently
      subject to corporate governance standards of listed companies, which require,
      among other things, that the majority of the board of directors be
      independent.





Since
      we
      are not currently subject to corporate governance standards relating to the
      independence of our directors, we choose to define an “independent” director in
      accordance with the NASDAQ Global Market’s requirements for independent
      directors (NASDAQ Marketplace Rule 4200). The NASDAQ independence definition
      includes a series of objective tests, such as that the director is not an
      employee of the company and has not engaged in various types of business
      dealings with the company.


54


We
      do not
      have any directors that may be considered an independent director under the
      above definition. We do not list that definition on our Internet
      website.





We
      presently do not have an audit committee, compensation committee, nominating
      committee, executive committee of our Board of Directors, stock plan committee
      or any other committees.





**ITEM
      13.**  **PRINCIPAL
      ACCOUNTANT FEES AND SERVICES**





(1)
      AUDIT
      FEES


The
      aggregate fees billed for professional services rendered by Weaver & Martin,
      LLC, for the audit of our annual financial statements and review of the
      financial statements included in our Form 10-QSB or services that are normally
      provided by the accountant in connection with statutory and regulatory filings
      or engagements for fiscal years 2007 and 2006 were $42,550 and $—,
      respectively.





(2)
      AUDIT-RELATED FEES





NONE.





(3)
      TAX
      FEES





NONE.




(4)
      ALL
      OTHER FEES





NONE.





(5)
      AUDIT
      COMMITTEE POLICIES AND PROCEDURES





We
      do not
      have an audit committee.





(6)
      If
      greater than 50 percent, disclose the percentage of hours expended on the
      principal accountant’s engagement to audit the registrant’s financial statements
      for the most recent fiscal year that were attributed to work performed by
      persons other than the principal accountant’s full-time, permanent
      employees.





Not
      applicable.


55


**PART
      IV**





**Item
      15. Exhibits, Financial Statement Schedules.** ****





The
      following information required under this item is filed as part of this
      report:





(a)
      1.
      Financial Statements





PageReport
                of Independent Registered Public Accounting Firm
            F-1Consolidated
                Balance Sheets
            F-2Consolidated
                Statements of Operations
            F-4Consolidated
                Statements of Stockholders Equity
            F-5Consolidated
                Statements of Cash Flows
            F-6Footnotes
                to Consolidated Financial Statements
            F-8





(b)
      2.
      Financial Statement Schedule





None.





(c)
      3.
      Exhibit Index





**Incorporated
                by reference****Exhibit**
              **number**
            
            **Exhibit
                description**
            
            **Filed**
              **herewith**
            
            **Form**
            
            **Period**
              **ending**
            
            **Exhibit**
              **No.**
            
            **Filing**
              **date**3(i)(a)
            
            Articles
                of Incorporation – Filed March 2, 2001
            
            
            
            10-SB
            
            
            
            3a
            
            9/27/013(i)(b)
            
            Articles
                of Amendments to Articles of Incorporation – Filed May 9,
                2001
            
            
            
            10-SB
            
            
            
            3b
            
            9/27/013(i)(c)
            
            Articles
                of Amendments to Articles of Incorporation – Filed August 2,
                2002
            
            
            
            10-QSB
            
            6/30/02
            
            3.1c
            
            8/22/023(ii)
            
            Bylaws
                of CareDecision Corporation – March 16, 2001
            
            
            
            10-SB
            
            
            
            3c
            
            9/27/0110.1
            
            Business
                Consulting Agreement – Mark W. Lancaster – February 17,
                2002
            
            
            
            S-8
            
            
            
            4.11
            
            3/1/0210.2
            
            Consulting
                Agreement – Mark Chaim Drizin – February 26, 2002
            
            
            
            S-8
            
            
            
            4.12
            
            3/1/0210.3
            
            Consulting
                Agreement – Barbara Asbell – July 30, 2002
            
            
            
            S-8
            
            
            
            4.11
            
            8/7/0210.4
            
            Consulting
                Agreement – Barbara Asbell – August 13, 2002
            
            
            
            S-8
            
            
            
            4.11
            
            9/4/0210.5
            
            Service
                Agreement – Robert Jagunich – September 1, 2002
            
            
            
            S-8
            
            
            
            4.11
            
            10/1/0210.6
            
            Consulting
                Agreement – Glen E. Greenfelder Jr. – October 1, 2002
            
            
            
            S-8
            
            
            
            4.11
            
            12/17/0210.7
            
            Consulting
                Agreement – Dr. Joseph Wolf – January 3, 2003
            
            
            
            S-8
            
            
            
            4.11
            
            1/24/0310.8
            
            Consulting
                Agreement – Thomas Chillemi – January 10, 2003
            
            
            
            S-8
            
            
            
            4.12
            
            1/24/03




56




**Incorporated
                by reference****Exhibit**
              **number**
            
            **Exhibit
                description**
            
            **Filed**
              **herewith**
            
            **Form**
            
            **Period**
              **ending**
            
            **Exhibit**
              **No.**
            
            **Filing**
              **date**10.9
            
            Consulting
                Agreement – Dailyfinancial.com Inc. – October 21, 2002
            
            
            
            SB-2/A
            
            
            
            10.1
            
            4/29/0310.10
            
            Agent’s
                Representation Agreement – CareDecision.net – August 20,
                2002
            
            
            
            SB-2/A
            
            
            
            10.2
            
            4/29/0310.11
            
            Service
                Agreement – Robert Jagunich – September 1, 2002
            
            
            
            SB-2/A
            
            
            
            10.3
            
            4/29/0310.12
            
            Secured
                Convertible Revolving Promissory Note –
              M
                & E Equities, LLC – April 23, 2002
            
            
            
            SB-2/A
            
            
            
            10.4
            
            4/29/0310.13
            
            Service
                Agreement – Robert Jagunich – December 11, 2002
            
            
            
            SB-2/A
            
            
            
            10.5
            
            4/29/0310.14
            
            Consulting
                Agreement – Wizard Enterprises –
              December
                13, 2002
            
            
            
            SB-2/A
            
            
            
            10.6
            
            4/29/0310.15
            
            Consulting
                Agreement – Wizard Enterprises –
              December
                20, 2002
            
            
            
            SB-2/A
            
            
            
            10.7
            
            4/29/0310.16
            
            Consulting
                Agreement – Barbara Asbell –
              December
                13, 2002
            
            
            
            SB-2/A
            
            
            
            10.8
            
            4/29/0210.17
            
            Program
                Agreement between PharmaCare Management Services, Inc. and
                CareDecision.net Incorporated –
              May
                4, 2001
            
            
            
            SB-2/A
            
            
            
            10.9
            
            4/29/0210.18
            
            Consulting
                Agreement – Paradigm Partners
              September
                15, 2002
            
            
            
            SB-2/A
            
            
            
            10.10
            
            4/29/0210.19
            
            Letter
                of Intent between ATR Search and Medicius
              April
                3, 2002
            
            
            
            SB-2/A
            
            
            
            10.11
            
            4/29/0210.20
            
            Consulting
                Agreement – Ely Mandell – August 5, 2003
            
            
            
            SB-2/A
            
            
            
            4.12
            
            8/14/0310.21
            
            Consulting
                Agreement – Dr. Joseph A. Wolf –July
                15, 2003
            
            
            
            SB-2/A
            
            
            
            4.13
            
            8/14/0310.22
            
            Consulting
                Agreement – Leslie – Michelle Abraham -
              July
                15, 2003
            
            
            
            SB-2/A
            
            
            
            4.14
            
            8/14/0310.23
            
            Consulting
                Agreement – Thomas Chillemi –
              July
                10, 2003
            
            
            
            SB-2/A
            
            
            
            4.15
            
            8/14/0310.24
            
            Consulting
                Agreement – Anthony Quintiliana –
              July
                1, 2003
            
            
            
            SB-2/A
            
            
            
            4.16
            
            8/14/0310.25
            
            Consulting
                Agreement – Barbara Asbell –
              July
                1, 2003
            
            
            
            SB-2/A
            
            
            
            4.17
            
            8/14/0310.26
            
            Consulting
                Agreement – Thomas Chillemi –
              March
                28, 2003
            
            
            
            SB-2/A
            
            
            
            10.13
            
            8/29/0310.27
            
            Consulting
                Agreement – Dr. Joseph A. Wolfe –
              December
                1, 2003
            
            
            
            S-8
            
            
            
            4.13
            
            12/16/0310.28
            
            Consulting
                Agreement – Leslie – Michelle Abraham –
              December
                1, 2003
            
            
            
            S-8
            
            
            
            4.14
            
            12/16/03


57





**Incorporated
                by reference****Exhibit**
              **number**
            
            **Exhibit
                description**
            
            **Filed**
              **herewith**
            
            **Form**
            
            **Period**
              **ending**
            
            **Exhibit**
              **No.**
            
            **Filing**
              **date**10.29
            
            Consulting
                Agreement – Thomas Chillemi –
              December
                1, 2003
            
            
            
            S-8
            
            
            
            4.15
            
            12/16/0310.30
            
            Consulting
                Agreement – Anthony Quintiliano –
              December
                1, 2003
            
            
            
            S-8
            
            
            
            4.16
            
            12/16/0310.31
            
            Subscription
                Agreement – Mercator Momentum Fund, LP, Monarch Pointe Fund, LTD &
                Mercator Advisory Group, LLC – February 7, 2005
            
            
            
            SB-2/A
            
            
            
            10.1
            
            2/11/0510.32
            
            Certificate
                of Designation of Preferences and Rights of Series C Convertible
                Preferred
                Stock – Mercator Momentum Fund, LP, Monarch Pointe Fund, LTD &
                Mercator Advisory Group, LLC – February 2005
            
            
            
            SB-2/A
            
            
            
            10.2
            
            2/11/0510.33
            
            Registration
                Rights Agreement – Mercator Momentum Fund, LP, Monarch Pointe Fund, LTD
                & Mercator Advisory Group, LLC – February 2005
            
            
            
            SB-2/A
            
            
            
            10.3
            
            2/11/0510.34
            
            Warrant
                Agreement ($0.02) – Mercator Advisory Group, LLC – February 7,
                2005
            
            
            
            SB-2/A
            
            
            
            10.4
            
            2/11/0510.35
            
            Warrant
                Agreement ($0.02) – Mercator Momentum Fund, LP – February 7,
                2005
            
            
            
            SB-2/A
            
            
            
            10.5
            
            2/11/0510.36
            
            Warrant
                Agreement ($0.02) - Monarch Pointe Fund, Ltd. – February 7,
                2005
            
            
            
            SB-2/A
            
            
            
            10.6
            
            2/11/0510.37
            
            Warrant
                Agreement ($0.03) - Mercator Advisory Group, LLC – February 7,
                2005
            
            
            
            SB-2/A
            
            
            
            10.7
            
            2/11/0510.38
            
            Warrant
                Agreement ($0.03) - Mercator Momentum Fund, LP – February 7,
                2005
            
            
            
            SB-2/A
            
            
            
            10.8
            
            2/11/0510.39
            
            Warrant
                Agreement ($0.03) – Monarch Pointe Fund, Ltd. – February 7,
                2005
            
            
            
            SB-2/A
            
            
            
            10.9
            
            2/11/0510.40
            
            Secured
                Convertible Promissory Note – Pinnacle Investment Partners, LP – March 24,
                2004
            
            
            
            SB-2/A
            
            
            
            10.10
            
            2/11/0510.41
            
            Pledge
                and Security Agreement – Pinnacle Investment Partners, LP – March 24,
                2004
            
            
            
            SB-2/A
            
            
            
            10.11
            
            2/11/0510.42
            
            Securities
                Purchase Agreement – Pinnacle Investment Partners, LP – March 24,
                2004
            
            
            
            SB-2/A
            
            
            
            10.12
            
            2/11/0510.43
            
            Note
                Extension Agreement – Pinnacle Investment Partners, LP – September 24,
                2004
            
            
            
            SB-2/A
            
            
            
            10.13
            
            2/11/0510.44
            
            Note
                Extension – Pinnacle Investment Partners, LP – February 10,
                2005
            
            
            
            SB-2/A
            
            
            
            10.14
            
            2/11/0510.45
            
            The
                2004 Stock Option Plan - Amended
            
            
            
            S-8
            
            
            
            99
            
            9/8/0610.46
            
            Intangible
                Property, License Acquisition Agreement – CN Pharmacy, Svetislav Milic,
                & Nathan Kaplan – June 7, 2005
            
            
            
            8-K
            
            
            
            10.1
            
            10/21/0510.47
            
            Secured
                Promissory Note – Mercator Momentum Fund, LP – August 25,
                2005
            
            
            
            8-K
            
            
            
            10.2
            
            10/21/05


58





**Incorporated
                by reference****Exhibit**
              **number**
            
            **Exhibit
                description**
            
            **Filed**
              **herewith**
            
            **Form**
            
            **Period**
              **ending**
            
            **Exhibit**
              **No.**
            
            **Filing**
              **date**10.48
            
            Secured
                Promissory Note – Monarch Pointe Fund,LTD – August 25,
                2005
            
            
            
            8-K
            
            
            
            10.3
            
            10/21/0517
            
            Resignation
                letter of Robert L. Cox, August 15, 2006
            
            
            
            10-QSB
            
            6/30/06
            
            17
            
            9/1/0631.1
            
            Certification
                of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002
            
            X31.2
            
            Certification
                of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002
            
            X32.1
            
            Certification
                of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002
            
            X32.2
            
            Certification
                of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002
            
            X


59




**SIGNATURES**






In
      accordance with Section 13 or 15(d) of the Securities Exchange Act, the
      registrant caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorized.




**instaCare
                Corp.**By:Keith
              Berman, Chief Financial Officer




Date:




Pursuant
      to the requirements of the Securities Exchange Act of 1934, the following
      persons on behalf of the Registrant and in the capacities and on the dates
      indicated have signed this report below.




Name
              Title
              DateChief
                  Financial OfficerKeith
                  BermanDirectorRobert
                  Jagunich


1




Report
      of
      Independent Registered Public Accounting Firm





Stockholders
      and Directors


Instacare
      Corp


Westlake
      Village, California





We
      have
      audited the accompanying consolidated balance sheet of Instacare Corp as of
      December 31, 2007 and 2006 and the related consolidated statements of
      operations, shareholders’ equity, and cash flows for the years then ended. These
      consolidated financial statements are the responsibility of the Company’s
      management. Our responsibility is to express an opinion on these consolidated
      financial statements based on our audit.





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 misstatements. The Company is not
      required to have, nor were we engaged to perform, an audit of its internal
      control over financial reporting. Our audit 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 includes examining,
      on a test basis, evidence supporting the amounts and disclosures in the
      financial statements. An audit also includes 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 consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Instacare Corp as of
      December 31, 2007 and 2006 and the consolidated results of its operations,
      shareholders’ equity, and cash flows for the years then ended in conformity with
      U.S. generally accepted accounting principles





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 2 to the financial
      statements, the Company has suffered recurring losses from operations. This
      factor raises substantial doubt about the Company’s ability to continue as a
      going concern. Management’s plans with regard to these matters are also
      described in Note 2. The financial statements do not include any adjustments
      that might result from the outcome of this uncertainty.





Weaver
      & Martin, LLC


Kansas
      City Missouri


**March
      31, 2008**


F-1


instaCare
      Corp.


Consolidated
      Balance Sheet




**December
                    31,****2007**
                
                **2006****Assets**Current
                    assets:Cash
                
                $
                4,353
                
                $
                19,501Accounts
                    receivable
                
                
                669,041
                
                
                267,166Inventory
                
                
                96,450
                
                
                -Prepaid
                    expenses
                
                
                3,816
                
                
                --Total
                    current assets
                
                
                773,660
                
                
                286,667Fixed
                    assets:Furniture
                    and fixtures
                
                
                2,530
                
                
                2,530Computer
                    equipment
                
                
                232,365
                
                
                232,365234,895
                
                
                234,895Less
                    accumulated depreciation
                
                
                198,645
                
                
                151,919Fixed
                    assets, net
                
                
                36,250
                
                
                82,976Other
                    assets:Deposits
                
                
                3,412
                
                
                3,412$
                813,322
                
                $
                373,055**Liabilities
                    and Stockholders’ Equity**Current
                    liabilities:Accounts
                    payable
                
                $
                120,107
                
                $
                408,438Accrued
                    liabilities
                
                
                199,265
                
                
                225,486Accrued
                    interest
                
                
                412,837
                
                
                205,285Line
                    of credit
                
                
                467,044
                
                
                -Demand
                    note - related party
                
                
                280
                
                
                63,000Notes
                    payable, current portion
                
                
                181,021
                
                
                -Convertible
                    notes payable
                
                
                1,377,689
                
                
                1,702,401Total
                    current liabilities
                
                
                2,758,243
                
                
                2,604,610Long-term
                    debt, less current portion
                
                
                85,109
                
                
                -Stockholders’
                    Equity:Preferred
                    stock, $0.001 par value, 3,249,000 shares authorized207,526
                    shares authorized, no shares issued and outstanding
                
                
                207
                
                
                208Preferred
                    series “A stock, $0.001 par value, 750,000 sharesauthorized,
                    no shares outstanding
                
                
                -
                
                
                -Preferred
                    series “C” stock, $0.001 par value, 1,000,000 sharesauthorized,
                    17,860 and 20,000 shares issued and outstanding
                
                
                18
                
                
                20Preferred
                    series “D” stock, $0.001 par value, 1,000 sharesauthorized,
                    no shares issued and outstanding
                
                
                -
                
                
                -Common
                    stock, $0.001 par value, 1,250,000,000 shares authorized29,200,026
                    and 9,461,621 shares issued and outstanding
                
                
                29,200
                
                
                9,462Shares
                    authorized and un-issued, 3,700,294
                
                
                3,700
                
                
                -Prepaid
                    share-based compensation
                
                
                (105,000
                )
                
                (29,934
                )Additional
                    paid-in capital
                
                
                17,459,200
                
                
                15,796,265Dividend
                    payable
                
                
                292,392
                
                
                50,914Accumulated
                    (deficit)
                
                
                (19,709,747
                )
                
                (18,058,490
                )(2,030,030
                )
                
                (2,231,555
                )$
                813,322
                
                $
                373,055




The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-2


instaCare
      Corp.


Consolidated
      Statements of Operations




For
                  the Years EndedDecember
                  31,2007
              
              2006Revenue
              
              $
              6,254,278
              
              $
              19,220,265Cost
                  of sales
              
              
              5,845,782
              
              
              19,186,237Gross
                  profit
              
              
              408,496
              
              
              34,028Expenses:General
                  and administrative expenses
              
              
              270,317
              
              
              637,463Consulting
                  services
              
              
              728,438
              
              
              569,743Payroll
                  expense
              
              
              342,777
              
              
              485,627Professional
                  fees
              
              
              148,079
              
              
              592,968Depreciation
              
              
              46,726
              
              
              48,027Total
                  expenses
              
              
              1,536,337
              
              
              2,334,128Net
                  operating (loss)
              
              
              (1,127,841
              )
              
              (2,300,100
              )Other
                  income (expense):Financing
                  costs
              
              
              (45,429
              )
              
              (249,408
              )Interest
                  expense, net
              
              
              (236,509
              )
              
              (205,302
              )Total
                  other income (expense)
              
              
              (281,938
              )
              
              (454,710
              )Provision
                  for income taxes
              
              
              -
              
              
              -Net
                  (loss)
              
              $
              (1,409,779
              )
              $
              (2,754,810
              )Weighted
                      average number of Common shares outstanding – basic and fully
                      diluted
              
              
              15,717,861
              
              
              8,073,584Net
                  (loss) per share – basic and fully diluted
              
              $
              (0.09
              )
              $
              (0.34
              )





The
      accompanying notes are an integral part of these consolidated financial
      statements.




F-3


**instaCare,
      Corp.**


**Consolidated
      Statement of Changes of Stockholders’ Deficit**





Preferred
                Stock
            
            Common
                Stock
            
            Additional
              Paid-in
              Capital
            
            Shares
              Authorized
                and
              Un-issued
            
            Unamortized
              Warrant
                & Options
            
            Prepaid
              Stock
                Comp
            
            Dividend
              Payable
            
            Accumulated
              (Deficit)
            
            Total
              Stockholders'
              (Deficit)Shares
            
            Amount
            
            Shares
            
            AmountBalance,
                December 31, 2005
            
            
            227,526
            
            $
            228
            
            
            7,236,013
            
            $
            7,236
            
            $
            14,964,989
            
            $
            56
            
            $
            (13,517
            )
            $
            (60,000
            )
            $
            -
            
            $
            (15,046,680
            )
            $
            (147,688
            )Shares
                previously authorized
            
            
            -
            
            
            -
            
            
            68,355
            
            
            68
            
            
            (12
            )
            
            (56
            )
            
            -
            
            
            -
            
            
            -
            
            
            --
            
            
            243,491Shares
                issued for services
            
            
            -
            
            
            -
            
            
            1,448,610
            
            
            1,449
            
            
            609,820
            
            
            -
            
            
            -
            
            
            (296,934
            )
            
            -
            
            
            -
            
            
            581,335Escrow
                shares issued for debt repayment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            162,311
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            162,311Shares
                issued for license renewal
            
            
            -
            
            
            -
            
            
            87,050
            
            
            87
            
            
            37,576
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            37,663Options
                issued for services
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            7,359
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            7,359Warrants
                issued for financing
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            14,844
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            14,844Shares
                issued as dividend
            
            
            -
            
            
            -
            
            
            621,593
            
            
            622
            
            
            (622
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Amortization
                of prepaid compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            60,000
            
            
            -
            
            
            -
            
            
            60,000Amortization
                of warrants and options
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            13,517
            
            
            -
            
            
            -
            
            
            -
            
            
            13,517Dividend
                payable
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            50,914
            
            
            (257,000
            )
            
            (206,086
            )Net
                (loss)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,754,810
            )
            
            (2,754,810
            )Balance,
                December 31, 2006
            
            
            227,526
            
            
            228
            
            
            9,461,621
            
            
            9,462
            
            
            15,796,265
            
            
            -
            
            
            -
            
            
            (29,934
            )
            
            50,914
            
            
            (18,058,490
            )
            
            (2,231,555
            )Shares
                issued for cash
            
            
            -
            
            
            -
            
            
            200,000
            
            
            200
            
            
            9,800
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            10,000Shares
                issued for services
            
            
            -
            
            
            -
            
            
            7,106,118
            
            
            7,106
            
            
            555,026
            
            
            3,250
            
            
            -
            
            
            (105,000
            )
            
            -
            
            
            -
            
            
            460,385Shares
                issued for license fees
            
            
            -
            
            
            -
            
            
            139,100
            
            
            139
            
            
            37,572
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            37,711Options
                and warrants issued for services
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            443,335
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            443,335Option
                exercised for cash
            
            
            -
            
            
            -
            
            
            2,357,534
            
            
            2,357
            
            
            253,314
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            255,670Options
                exercised for services
            
            
            -
            
            
            -
            
            
            833,333
            
            
            833
            
            
            21,667
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            22,500Shares
                issued for debt conversion
            
            
            -
            
            
            -
            
            
            7,500,000
            
            
            7,500
            
            
            322,500
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            330,000Shares
                issued for conversion of preferred
            
            
            (2,140
            )
            
            (1
            )
            
            1,370,761
            
            
            1,371
            
            
            (1,371
            )
            
            -
            
            
            -
            
            
            
            
            
            -
            
            
            -
            
            
            -Shares
                issued for financing
            
            
            -
            
            
            -
            
            
            231,559
            
            
            232
            
            
            21,085
            
            
            450
            
            
            -
            
            
            -
            
            
            
            
            
            -
            
            
            21,767Amortization
                of prepaid compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            29,934
            
            
            -
            
            
            -
            
            
            29,934Dividend
                payable
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            241,478
            
            
            (241,478
            )
            
            -Net
                (loss)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,409,779
            )
            
            (1,409,779
            )Balance,
                December 31, 2007
            
            
            225,386
            
            $
            227
            
            
            29,200,026
            
            $
            29,200
            
            $
            17,459,200
            
            $
            3,700
            
            $
            -
            
            $
            (105,000
            )
            $
            292,392
            
            $
            (19,709,747
            )
            $
            (2,030,030
            )





The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-4


**instaCare,
      Corp.**


**Consolidated
      Statements of Cash Flows**




**For
                  the year ended****December
                  31,****2007**
              
              **2006****Cash
                  flows from operating activities**Net
                  (loss)
              
              $
              (1,409,779
              )
              $
              (2,754,810
              )Adjustments
                      to reconcile net (loss) to net cash (used) by operating
                      activities:Shares
                  issued for services
              
              
              460,385
              
              
              641,334Shares
                  issued for license fees
              
              
              37,711
              
              
              37,663Shares
                  issued for financing
              
              
              21,767
              
              
              -Options
                  and warrants issued for services
              
              
              465,835
              
              
              -Amortization
                  of options issued for services
              
              
              29,934
              
              
              20,876Amortization
                  of warrants issued for financing
              
              
              -
              
              
              147,181Depreciation
              
              
              46,726
              
              
              48,027Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              (236,902
              )
              
              (247,584
              )Inventory
              
              
              (96,450
              )
              
              127,373Prepaid
                  expenses
              
              
              (3,816
              )
              
              55,956Accounts
                  payable
              
              
              (288,331
              )
              
              364,588Accrued
                  interest
              
              
              213,254
              
              
              190,984Accrued
                  expenses
              
              
              (26,221
              )
              
              202,543Net
                  cash (used) by operating activities
              
              
              (785,887
              )
              
              (991,710
              )**Cash
                  flows from financing activities**Proceeds
                  from line of credit
              
              
              1,007,967
              
              
              -Payments
                  on line of credit
              
              
              (540,923
              )
              
              -Proceeds
                  from note payable - related party
              
              
              155,580
              
              
              96,000Payments
                  on note payable - related party
              
              
              (68,300
              )
              
              (33,000
              )Payments
                  on notes payable
              
              
              (24,254
              )
              
              -Proceeds
                  from convertible note payable
              
              
              -
              
              
              545,000Payments
                  on convertible note payable
              
              
              (25,000
              )
              
              (100,000
              )Dividend
                  paid
              
              
              -
              
              
              (206,086
              )Issuance
                  of common stock
              
              
              265,670
              
              
              -Net
                  cash provided by financing activities
              
              
              770,740
              
              
              301,914Net
                  increase in cash
              
              
              (15,148
              )
              
              (689,794
              )Cash
                  – beginning
              
              
              19,501
              
              
              709,295Cash
                  – ending
              
              $
              4,353
              
              $
              19,501Supplemental
                  disclosures:Interest
                  paid
              
              $
              29,256
              
              $
              321,283Income
                  taxes paid
              
              $
              -
              
              $
              -Non-cash
                  transactions:Number
                  of shares issued for services
              
              
              7,939,451
              
              
              1,448,610Number
                  of shares issued for debt conversion
              
              
              7,500,000
              
              
              -Number
                  of shares issued for licensing
              
              
              139,100
              
              
              87,050Number
                  of shares issued for financing
              
              
              231,559
              
              
              -Number
                  of shares issued for dividend
              
              
              -
              
              
              621,593




The
      accompanying notes are an integral part of these consolidated financial
      statements




F-5


**instaCare
      Corp.**


**Notes
      to Consolidated Financial Statements**




**Note
      1 – Significant accounting policies and procedures**





Organization


We
      were
      organized July 6, 2000 (Date of Inception) under the laws of the State of Nevada
      as Promedicius, Inc. In May 2001, we changed our name to Medicius, Inc. On
      June
      21, 2002, we merged with ATR Search Corp., a development stage company, and
      a
      Nevada corporation. The merger has been accounted for as a recapitalization
      and
      the historical financial statements of Medicius Inc. are presented
      herein.





On
      June
      21, 2002, we filed an amendment to its articles of incorporation changing our
      name to CareDecision Corporation and subsequently changed our name to InstaCare
      Corp. effective April 14, 2005.





On
      November 19, 2004, we incorporated two Nevada subsidiary companies, Pharma
      Tech
      Solutions, Inc. and PDA Services, Inc. On November 24, 2004, we entered into
      an
“Agreement and Plan of Merger”, as amended on December 27, 2004, between Pharma
      Tech Solutions, Inc. and CareGeneration, Inc. (“CareGen”), a Nevada corporation.
      This agreement included CareGen’s private acquisition of retail pharmaceutical
      license applications, client lists, receivables, business contacts,
      relationships, goodwill and the rights to use the wholesale pharmaceutical
      distribution license, trade names and sales names of Kelly Company World Group,
      Inc., a Delaware corporation. On February 25, 2005, the merger was completed
      whereby CareGen merged with Pharma Tech wherein CareGen ceased to exist and
      Pharma Tech continued as a majority owned subsidiary.





On
      January 4, 2005, we commenced prescription drug distribution operations which
      are, currently being conducted through PDA Services, Inc. and is in the process
      of establishing facility in Hope, North Dakota. Specializing in rapid delivery
      of prescription drugs and diagnostic products, we are in the final stages of
      augmenting its prescription drug and prescription diagnostics distribution
      business by creating a nationwide network over the internet. We have also
      created a fully integrated prescription fulfillment program through which
      physicians can directly submit prescriptions using a hand-held device, tablet
      PC, or PDA that is enabled through a Wi-Fi link to the Internet.





We
      have
      established its first fulfillment center to service uninsured and underinsured
      patients in Phoenix, AZ, while also securing its retail prescription license
      in
      the state of Arizona.





Through
      the acquisition of CareGen, we acquired a retail mail order business concept
      for
      the distribution of pharmaceutical and healthcare supplies and is currently
      developing our distribution platform.


F-6


Cash
      and cash equivalents


Cash
      and
      cash equivalents include all cash balances in non-interest bearing accounts
      and
      money-market accounts. We places our temporary cash investments with quality
      financial institutions. At times such investments may be in excess of Federal
      Deposit Insurance Corporation (FDIC) insurance limit. We do not believe it
      is
      exposed to any significant credit risk on cash and cash equivalents. For the
      purpose of the statements of cash flows, all highly liquid investments with
      an
      original maturity of three months or less are considered to be cash equivalents.
      There are no cash equivalents as of December 31, 2007 and 2006.





Accounts
      receivable


We
      have
      elected to record bad debts using the direct write-off method. Generally
      accepted accounting principles require that the allowance method be used to
      recognize bad debts; however, the effect using the direct method is not
      materially different from the results that would have been obtained under the
      allowance method.





Investments


Investments
      in companies over which we exercise significant influence are accounted for
      by
      the equity method whereby we includes our proportionate share of earnings and
      losses of such companies in earnings. Other long-term investments are recorded
      at cost and are written down to their estimated recoverable amount if there
      is
      evidence of a decline in value, which is other than temporary.





Inventory


Inventories
      are stated at the lower of cost or market. Cost is determined on a standard
      cost
      basis that approximates the first-in, first-out (FIFO) method. Market is
      determined based on net realizable value. Appropriate consideration is given
      to
      obsolescence, excessive levels, deterioration, and other factors in evaluating
      net realizable value. As of December 31, 2007 and 2006, inventory was $96,450
      and $0, respectively.




Fixed
      assets


Fixed
      assets are stated at the lower of cost or estimated net recoverable amount.
      The
      cost of property, plant and equipment is depreciated using the straight-line
      method based on the lesser of the estimated useful lives of the assets or the
      lease term based on the following life expectancy:





Computer
                equipment
            5
                yearsSoftware
            5
                yearsOffice
                furniture and fixtures
            7
                years





Repairs
      and maintenance expenditures are charged to operations as incurred. Major
      improvements and replacements, which extend the useful life of an asset, are
      capitalized and depreciated over the remaining estimated useful life of the
      asset. When assets are retired or sold, the costs and related accumulated
      depreciation and amortization are eliminated and any resulting gain or loss
      is
      reflected in operations.




F-7


Consolidation
      policy


The
      accompanying consolidated financial statements include our accounts and the
      accounts of our wholly-owned subsidiary corporations, after elimination of
      all
      material inter-company accounts, transactions, and profits. Investments in
      unconsolidated subsidiaries representing ownership of at least 20% but less
      than
      50% are accounted for under the equity method. Non-marketable investments in
      which the Company has less than 20% ownership and in which it does not have
      the
      ability to exercise significant influence over the investee are initially
      recorded at cost and periodically reviewed for impairment. As of December 31,
      2007 and 2006, we did not have non-marketable investments.




Revenue
      recognition


We
      recognize revenue from our sales of pharmaceutical supplies upon delivery to
      its
      customer where the fee is fixed or determinable, and collectibility is probable.
      Cash payments received in advance are recorded as deferred revenue. We are
      not
      generally obligated to accept returns, except for defective products.





Revenue
      from proprietary software sales that does not require further commitment from
      the company is recognized upon shipment. Consulting revenue is recognized when
      the services are rendered. License revenue is recognized ratably over the term
      of the license.





The
      cost
      of services, consisting of staff payroll, outside services, equipment rental,
      communication costs and supplies, is expensed as incurred.





Advertising
      costs




We
      expense all costs of advertising as incurred. There were no advertising costs
      included in general and administrative expenses as of December 31, 2007 and
      2006, respectively.




Use
      of
      estimates


The
      preparation of financial statements in conformity with generally accepted
      accounting principles 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 amounts of revenue and expenses during the reporting period. Actual
      results could differ from those estimates.





Fair
      value of financial instruments


Fair
      value estimates discussed herein are based upon certain market assumptions
      and
      pertinent information available to management as of December 31, 2007 and 2006.
      The respective carrying value of certain on-balance-sheet financial instruments
      approximated their fair values. These financial instruments include cash,
      accounts receivable, accounts payable and notes payable. Fair values were
      assumed to approximate carrying values because they are short term in nature
      and
      their carrying amounts approximate fair values or they are payable on
      demand.


F-8





Impairment
      of long-lived assets


We
      reviews our long-lived assets and intangibles periodically to determine
      potential impairment by comparing the carrying value of the long-lived assets
      with the estimated future cash flows expected to result from the use of the
      assets, including cash flows from disposition. Should the sum of the expected
      future cash flows be less than the carrying value, we would recognize an
      impairment loss. An impairment loss would be measured by comparing the amount
      by
      which the carrying value exceeds the fair value of the long-lived assets and
      intangibles. We recognized impairment losses in the amount of $0 and $0 as
      of
      December 31, 2007 and 2006, respectively.





Loss
      per share


Net
      loss
      per share is provided in accordance with Statement of Financial Accounting
      Standards No. 128 (SFAS #128) “Earnings Per Share”. Basic loss per share is
      computed by dividing losses available to common stockholders by the weighted
      average number of common shares outstanding during the period. There were no
      securities considered to be dilutive in the computation of earnings (loss)
      per
      share.





Income
      Taxes


We
      account for income taxes in accordance with SFAS No. 109, "Accounting for Income
      Taxes”. Deferred taxes are provided on the liability method whereby deferred tax
      assets are recognized for deductible temporary differences, and deferred tax
      liabilities are recognized for taxable temporary differences. Temporary
      differences are the differences between the reported amounts of assets and
      liabilities and their tax bases. Deferred tax assets are reduced by a valuation
      allowance when, in the opinion of management, it is more likely than not that
      some portion or all of the deferred tax assets will be realized. Deferred tax
      assets and liabilities are adjusted for the effects of changes in tax laws
      and
      rates on the date of enactment.





We
      adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes
      -
      an interpretation of FASB Statement No. 109 (“FIN 48”) as of January 1, 2007.
      FIN 48 clarifies the accounting for uncertainty in income taxes recognized
      in
      companies’ financial statements in accordance with FASB Statement No. 109,
      Accounting for Income Taxes. As a result, we apply a more-likely-than-not
      recognition threshold for all tax uncertainties. FIN 48 only allows the
      recognition of those tax benefits that have a greater than fifty percent
      likelihood of being sustained upon examination by the taxing authorities. As
      a
      result of implementing FIN 48, we have reviewed our tax positions and determined
      there were no outstanding, or retroactive tax positions with less than a 50%
      likelihood of being sustained upon examination by the taxing authorities,
      therefore the implementation of this standard has not had a material affect
      on
      the Company.





We
      classify tax-related penalties and net interest as income tax expense. As of
      December 31, 2007 and 2006, no income tax expense has been incurred. See Note
      6.


F-9





Concentrations





In
      2007,
      five customers of the Company accounted for approximately 99% of our net sales
      compared to 96% of total sales being attributable to four major customers in
      2006. Since January 1, 2006 t he
      company’s operations require maintaining strategic relationships with its
      customers whereby the Company delivers product and services the patient base
      that underlies these strategic relationships, accepting assignment of insurance
      benefit through its Colonia Natural Pharmacy strategic partnership for the
      billing and future servicing of these patients. The Company also maintains
      relationships with the entities where the patients reside. As
      of
      December 31, 2007 and 2006, we obtained the majority of its pharmaceutical
      products from five and three major suppliers, respectively. There can be no
      assurance that our major customers will continue to purchase products. The
      loss
      of our largest customers or a decrease in product sales would have a material
      adverse effect on our business and financial condition.





Reclassifications


Certain
      reclassifications have been made to prior periods to conform to current
      presentation.





Recent
      pronouncements


In
      February 2007, the FASB issued SFAS No.159, “The Fair Value Option for Financial
      Assets and Financial Liabilities” (“SFAS No.159”). SFAS No.159 allows the
      company to choose to measure many financial assets and financial liabilities
      at
      fair value. Unrealized gains and losses on items for which the fair value option
      has been elected are reported in earnings. SFAS 159 is effective for fiscal
      years beginning after November 15, 2007. The adoption of SFAS 159 is not
      expected to have a material impact on our financial position, results of
      operation or cash flows.





In
      December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
      Consolidated Financial Statements”. This statement amends ARB 51 to establish
      accounting and reporting standards for the non-controlling (minority) interest
      in a subsidiary and for the de-consolidation of a subsidiary. It clarifies
      that
      a non-controlling interest in a subsidiary is equity in the consolidated
      financial statements. SFAS No. 160 is effective for fiscal years and interim
      periods beginning after December 15, 2008. The adoption of SFAS 160 is not
      expected to have a material impact on our financial position, results of
      operation or cash flows.





In
      December 2007, the FASB issued SFAS No. 141 (Revised), “Business Combinations”.
      SFAS 141 (Revised) establishes principals and requirements for how an acquirer
      of a business recognizes and measures in its financial statements the
      identifiable assets acquired, the liabilities assumed, and any non-controlling
      interest in the acquiree. This statement also provides guidance for recognizing
      and measuring the goodwill acquired in the business combination and determines
      what information to disclose to enable users of the financial statements to
      evaluate the nature and financial effects of the business combination. The
      guidance will become effective for the fiscal year beginning after December
      15,
      2008.The adoption of SFAS 141(Revised) is not expected to have a material impact
      on our financial position, results of operation or cash flows.


F-10


Year
      end


The
      Company has adopted December 31 as its fiscal year end.





**Note
      2 – Going concern**





The
      accompanying consolidated financial statements have been prepared assuming
      that
      we will continue as a going concern. Our ability to continue as a going concern
      is dependent upon attaining profitable operations based on the development
      of
      distributions platforms through which our products that can be sold. We intend
      to use borrowings and security sales to mitigate the affects of our cash
      position, however, no assurance can be given that debt or equity financing,
      if
      and when required, will be available. The condensed consolidated financial
      statements do not include any adjustments relating to the recoverability and
      classification of recorded assets and classification of liabilities that might
      be necessary should we be unable to continue in existence.





**Note
      3 – Inventory**





Inventory
      consisted of diabetic test strips valued at $96,450 and $0 at December 31,
      2007
      and 2006, respectively.





**Note
      4 – Fixed assets**





Fixed
      assets consisted of the following at December 31:





**2007**
            
            **2006**Furniture
                and fixtures
            
            $
            2,530
            
            $
            2,530Computers
                and equipment
            
            
            232,365
            
            
            232,365Subtotal
            
            
            234,895
            
            
            234,895Less
                accumulated depreciation
            
            
            (198,645
            )
            
            (151,919
            )Total
                fixed assets, net
            
            $
            36,250
            
            $
            82,976





Depreciation
      expense totaled $46,726 and $48,027 for the years ended December 31, 2007 and
      2006, respectively.





**Note
      5 – Notes payable and related parties**





As
      of
      December 31, 2007 we have received cash advances from our chief executive
      officer for operational expenses. The advances are due on demand and accrued
      interest at a rate of 9.5%. On September 28, 2007, he elected to convert
      $150,000 of the principal balance into 7,500,000 shares of our common stock
      or
      $0.02 per share. The market value of our shares on the date of conversion was
      $0.04. As of December 31, 2007, the remaining principal balance was $280. In
      addition, we have accrued interest totaling $9,883, which is unpaid at December
      31, 2007.




Notes
      payable consisted of the following as of December 31:




F-11





2007
            
            2006Demand
                note from a related party, bearing interest at 9.5%
            
            $
            280
            
            $
            63,000Promissory
                note, bearing interest at 9.5% per annum,Matured
                August 25, 2006, currently in default.
            
            
            87,309
            
            
            87,309Convertible
                promissory note, bearing interest at 12%per
                annum, matured December 24, 2006, currently in default.
            
            
            920,379
            
            
            1,100,379Convertible
                promissory note, bearing interest at 1.25% per month, matured on
                October
                31, 2007, currently in default.
            
            
            170,000
            
            
            159,713Promissory
                note, bearing interest at 12% per annum,Matured
                July 31, 2006, currently in default.
            
            
            130,000
            
            
            155,000Convertible
                promissory note, bearing interest at 1.5%Monthly,
                matured December 31, 2007.
            
            
            200,000
            
            
            200,000Promissory
                note, bearing interest at 9%Per
                annum, maturing June 20, 2010
            
            
            136,131
            
            
            —Line
                of credit, with interest being paid in shares equal to 5% of each
                advance.
            
            
            467,044
            
            
            —Total
                notes payable
            
            
            2,111,143
            
            
            1,765,401Less:
                Current portion
            
            
            2,026,034
            
            
            1,765,401Total
                long term notes payable
            
            $
            85,109
            
            $
            —





We
      have
      recorded interest expense totaling $236,509 and $205,302 during the years ended
      December 31, 2007 and 2006, respectively.





**Note
      6 – Income taxes**





For
      the
      year ended December 31, 2007, the Company incurred net operating losses and
      accordingly, no provision for income taxes has been recorded. In addition,
      no
      benefit for income taxes has been recorded due to the uncertainty of the
      realization of any tax assets. At December 31, 2007, the Company had
      approximately $19,525,307 of federal and state net operating losses. The net
      operating loss carry forwards, if not utilized will begin to expire in
      2018-2021.





The
      components of the Company’s deferred tax asset are as follows:


F-12





**As
                of December 31,***2007*
            
            *2006*Deferred
                tax assets:Net
                operating loss carry forwards
            
            $
            6,833,857
            
            $
            6,320,500Total
                deferred tax assets
            
            
            6,833,857
            
            
            6,320,500Deferred
                tax liabilities:Depreciation
            
            
            -0-
            
            
            -0-Net
                deferred tax assets before valuation allowance
            
            
            6,833,857
            
            
            6,320,500Less:
                Valuation allowance
            
            
            (6,833,857
            )
            
            (6,320,500
            )Net
                deferred tax assets
            
            $
            -0-
            
            $
            -0-





For
      financial reporting purposes, the Company has incurred a loss since inception
      to
      December 31, 2007. Based on the available objective evidence, including the
      Company’s history of its loss, management believes it is more likely than not
      that the net deferred tax assets will not be fully realizable. Accordingly,
      the
      Company provided for a full valuation allowance against its net deferred tax
      assets at December 31, 2007.





A
      reconciliation between the amount of income tax benefit determined by applying
      the applicable U.S. and State statutory income tax rate to pre-tax loss is
      as
      follows:





Year
                ended December 31,*2007*
            
            *2006*Federal
                and state statutory rate
            
            
            35
            %
            
            35
            %Change
                in valuation allowance on deferred tax assets
            
            
            (35
            )%
            
            (35
            )%-
            
            
            -





**Note
      7 – Stockholder’s equity**





Common
      stock


We
      are
      authorized to issue up to 1,250,000,000 shares of $0.001 par value common
      stock.




Preferred
      stock


We
      are
      authorized to issue 5,000,000 shares of $0.001 par value preferred stock; of
      which 750,000 shares are designated as Series A, 1,000,000 shares are designated
      as Series C, and 1,000 shares are designated as Series D.




Series
      “A” convertible preferred stock


Holders
      of series “A”: convertible stock shall not have the right to vote on matters
      that come before the shareholders. Series “A” Convertible Preferred stock may be
      converted at a rate of .225 shares of common stock for each share of Series
“A”
Convertible Preferred stock. Series “A” Convertible Preferred stock shall rank
      senior to common stock in the event of liquidation. Holders’ of Series “A”
convertible stock shall be entitled to a 6% annual dividend payable in common
      stock, accrued and payable at the time of conversion, subject to adjustments
      resulting from stock splits, recapitalization, or share combination.


F-13





Series
      “C” convertible preferred stock


Holders
      of series “C”: convertible stock shall not have the right to vote on matters
      that come before the shareholders. Series “C” convertible preferred stock may be
      converted, the number of shares into which one share of Series “C” Preferred
      Stock shall be convertible shall be determined by dividing the Series “C”
Purchase price by the existing conversion price which shall be equal to eighty
      percent of the market price rounded to the nearest thousandth, not to exceed
      $1.60 per share. Series “C” convertible stock shall rank senior to common stock
      in the event of liquidation. Holders’ of Series “C” convertible stock shall be
      entitled to a mandatory monthly dividend equal to the share price multiplied
      by
      the prime interest rate plus five tenths percent. Series “C” convertible stock
      shall have a redemptions price of $100 per share, subject to adjustments
      resulting from stock splits, recapitalization, or share combination.





Series
      D convertible preferred stock


Holders
      of series “D”: convertible stock shall not have the right to vote on matters
      that come before the shareholders. Series “D” convertible preferred stock may be
      converted, the number of shares into which one share of Series “D” Preferred
      Stock shall be convertible shall be determined by dividing the Series “D”
Purchase price by the existing conversion price which shall be equal to eighty
      percent of the market price rounded to the nearest thousandth, not to exceed
      $1.60 per share. Series “D” convertible stock shall rank senior to common stock
      in the event of liquidation. Holders’ of Series “D” convertible stock shall be
      entitled to a mandatory monthly dividend equal to the share price multiplied
      by
      the prime interest rate plus five-tenths percent. Series “D” convertible stock
      shall have a redemptions price equal to 101% of the purchase price per share,
      subject to adjustments resulting from stock splits, recapitalization, or share
      combination.





*2006
      Issuances*


During
      January 2006, the Company issued 68,355 shares of common stock as previously
      authorized in December 2005.




During
      the fiscal year ended December 31, 2006, the Company issued 1,448,610 shares
      of
      its common stock for services relating to various consulting agreements. The
      Company recorded consulting expense in the amount of $581,335 and prepaid
      shares-based compensation of $29,934 which was expensed during the year ended
      December 31, 2007.





On
      April
      17 and May 22, 2006, the Company issued 62,050 and 25,000 shares of common
      stock
      valued at $37,663 to Messer’s Millic and Kaplan for licensing fees.





On
      June
      16, 2006 the Company issued 621,593 shares of its common stock pursuant to
      the
      dividend grant dated June 9, 2006. Pursuant to the grant, each share holder
      of
      record on the date of grant was entitled to receive a stock dividend in the
      amount of 8.334% shares for each 100 shares of our common stock
      owned.


F-14





*2007
      Issuances*


During
      the year ended December 31, 2007 we issued 810,500 shares of our common stock
      for the exercise of options issued pursuant to our 2004 stock option plan to
      various consultants for cash totaling $11,100 and services valued at
      $23,081.





During
      the year ended December 31, 2007 we issued 4,140,867 shares of our common stock
      for the exercise of options issued pursuant to our 2006 stock option plan to
      various consultants for cash totaling $244,614 and services valued at $99,500.
      As of December 31, 2007,750,000 of these shares were un-issued.





On
      January 4, 2007, we issued 150,000 shares of restricted common stock for
      services valued at $49,500, the fair value of the underlying
      shares.





During
      the year ended December 31, 2007, we issued 1,370,761 shares of common stock
      for
      the conversion of 2,140 shares of our preferred “C” stock to Mercator Momentum
      Fund and Monarch Pointe Fund pursuant to the 2005 purchase agreement.





On
      April
      5, 2007, we issued 50,000 shares of common stock for license renewal fees to
      two
      individuals. We recorded licensing fees in the amount of $19,000, the fair
      value
      of the shares.





On
      July
      23, 2007, we issued of 184,700 shares of our restricted common stock for accrued
      expenses totaling $38,787.





On
      September 19, 2007, we issued 200,000 shares of restricted common stock for
      cash
      totaling $10,000.





On
      September 28, 2007, we authorized the issuance of 7,500,000 shares of our
      restricted common stock at a price of $0.02 per share to our chief executive
      officer for the conversion of $150,000 of the principal balance of his note.
      The
      market price per share on the date of conversion was $0.04. The shares were
      subsequently issued on October 3, 2007.





On
      September 28, 2007, we authorized the issuance of 5,250,000 shares of our
      restricted common stock to its two directors as compensation for services from
      July 1, 2007 through July 1, 2008. The fair value of the shares on the date
      of
      grant was $210,000 and will be amortized over the one-year service period.
      As of
      December 31, 2007, we have recorded compensation expense in the amount of
      $105,000 and unamortized cost of shares issued for services of $105,000. The
      shares were subsequently issued on October 3, 2007.





On
      November 26, 2007, we issued a total of 400,000 shares of our restricted common
      stock for services valued at $12,000, the fair value of the underlying
      shares.





On
      December 5, 2007, we issued 200,000 shares of our restricted common stock for
      services valued at $6,000, the fair value of the underlying shares.





On
      December 5, 2007, issued 231,559 shares of our restricted common stock for
      financing expenses valued at $11,249, the fair value of the underlying
      shares.




F-15


On
      December 21, 2007, we authorized the issuance of 446,071 shares of our
      restricted common stock for financing expenses valued at $13,382, the fair
      value
      of the underlying shares. As of December 31, 2007, the shares are
      un-issued.





On
      December 28, 2007, we authorized the issuance of 2,500,000 shares of our
      restricted common stock to our two directors for services valued at $75,000,
      the
      fair value of the underlying shares. As of December 31, 2007, the shares are
      un-issued.





On
      December 28, 2007, we authorized the issuance of 4,223 shares of our common
      stock for financing expenses valued at $127, the fair value of the underlying
      shares. As of December 31, 2007, the shares are un-issued.





**Note
      8 – Options**





*2004
      Stock Option Plan*


Effective
      April 21, 2004, we adopted the “2004” Stock Option Plan, as amended, with a
      maximum number of 6,312,500 shares that may be issued. As of December 31, 2007,
      2,978,297 options have been granted, and exercised under this plan.





During
      the year ended December 31, 2007, we issued options to purchase up to 810,500
      shares of par value common stock at a weighted average exercise price of $0.05
      per share for various consulting services received. We recorded an expense
      in
      the amount of $22,766 the fair value of the options using the Black-Scholes
      pricing model. As of December 31, 2007, all options were exercised in exchange
      for cash in the amount of $11,100 and services valued at $23,081.




The
      following is a summary of activity of outstanding stock options under the 2004
      Stock Option Plan:





**Weighted****Average****Number**
            
            **Exercise****Of
                Shares**
            
            **Price**Balance,
                January 1, 2006
            
            
            -
            
            $
            -0-Options
                granted
            
            
            1,141,610
            
            
            0.46Options
                cancelled
            
            
            -
            
            
            -Options
                exercised
            
            
            1,141,610
            
            
            0.46Balance,
                December 31, 2006
            
            
            -
            
            $
            -0-Balance,
                January 1, 2007
            
            
            -
            
            $
            -0-Options
                granted
            
            
            810,500
            
            
            0.05Options
                cancelled
            
            
            -
            
            
            -Options
                exercised
            
            
            810,500
            
            
            0.05Balance,
                December 31, 2007
            
            
            -
            
            $
            -0-Exercisable,
                December 31, 2007
            
            
            -
            
            $
            -0-




F-16


*2005
      Merger Consolidated Stock Option Plan*


On
      February 5, 2005, we adopted our “2005” Merger Consolidated Stock Option Plan.
      The maximum number of shares that may be issued pursuant to the plan is
      1,125,000 shares. As of December 31, 2007, 825,000 shares have been granted
      under this plan.





The
      following is a summary of activity of outstanding stock options under the 2004
      Stock Option Plan:




**Weighted****Average****Number**
            
            **Exercise****Of
                Shares**
            
            **Price**Balance,
                January 1, 2006
            
            
            825,000
            
            $
            1.73Options
                granted
            
            
            -
            
            
            -0-Options
                cancelled
            
            
            -
            
            
            -0-Options
                exercised
            
            
            -
            
            
            -0-Balance,
                December 31, 2006
            
            
            825,000
            
            $
            .73Balance,
                January 1, 2007
            
            
            825,000
            
            $
            1.73Options
                granted
            
            
            -
            
            
            -0-Options
                cancelled
            
            
            -
            
            
            -0-Options
                exercised
            
            
            -
            
            
            -0-Balance,
                December 31, 2007
            
            
            825,000
            
            $
            1.73Exercisable,
                December 31, 2007
            
            
            825,000
            
            $
            1.73





*2006
      Stock Option Plan*


On
      December 8, 2006 we adopted our “2006 Employee Stock Option Plan and granted
      incentive and nonqualified stock options with rights to purchase 1,500,000
      shares of our $0.001 par value common stock. On August 24, 2006, we authorized
      an increase of 4,000,000 shares to the plan.




F-17





During
      the year ended December 31, 2007, we issued options to purchase up to 4,140,867
      shares of par value common stock at a weighted average exercise price of $0.15
      per share for various consulting services received. We recorded an expense
      in
      the amount of $252,324 the fair value of the options using the Black-Scholes
      pricing model. As of December 31, 2007, all options were exercised for cash
      totaling $244,614 and services valued at $99,500.





The
      following is a summary of activity of outstanding stock options under the 2006
      Stock Option Plan:




**Weighted****Average****Number**
            
            **Exercise****Of
                Shares**
            
            **Price**Balance,
                January 1, 2006
            
            
            -
            
            $
            -0-Options
                granted
            
            
            -
            
            
            -0-Options
                cancelled
            
            
            -
            
            
            -Options
                exercised
            
            
            -
            
            
            -0-Balance,
                December 31, 2006
            
            
            -
            
            $
            -0-Balance,
                January 1, 2007
            
            
            -
            
            $
            -0-Options
                granted
            
            
            4,140,867
            
            
            0.15Options
                cancelled
            
            
            -
            
            
            -Options
                exercised
            
            
            4,140,867
            
            
            0.15Balance,
                December 31, 2007
            
            
            -
            
            $
            -0-Exercisable,
                December 31, 2007
            
            
            -
            
            $
            -0-





**Note
      8 – Warrants**





During
      the year ended December 31, 2007, we issued warrants to purchase up to 1,233,340
      shares of par value common stock at a weighted average exercise price of $.06
      per share for various services. We recorded an expense in the amount of $37,620
      the fair value of the warrants using the Black-Scholes pricing model.





The
      following is a summary of activity of outstanding warrants as of December 31,
      2007:


F-18





**Weighted****Average****Number**
            
            **Exercise****Of
                Shares**
            
            **Price**Balance,
                January 1, 2006
            
            
            1,378,750
            
            $
            1.92Warrants
                granted
            
            
            50,000
            
            
            0.32Warrants
                cancelled
            
            
            -
            
            
            -Warrants
                exercised
            
            
            -
            
            
            -Balance,
                December 31, 2006
            
            
            1,428,750
            
            $
            1.86Balance,
                January 1, 2007
            
            
            1,428,750
            
            $
            1.86Warrants
                granted
            
            
            1,233,340
            
            
            0.06Warrants
                cancelled
            
            
            -
            
            
            -Warrants
                exercised
            
            
            -
            
            
            -Balance,
                December 31, 2007
            
            
            2,662,090
            
            $
            1.03Exercisable,
                December 31, 2007
            
            
            2,662,090
            
            $
            1.03





**Note
      9 – Commitments and Contingencies**





Leases





The
      following is a schedule by years of future minimum rental payments required
      under operating leases that have non-cancelable lease terms in excess of one
      year as of December 31, 2007:





2008
            
            $
            48,0002009
            
            
            12,000Total
            
            $
            60,000





Rent
      expense amounted to $72,860 and $101,024 for the years ended December 31, 2007
      and 2006, respectively.





**Note
      10 – Subsequent events**





During
      January 2008, we issued 3,700,294 shares previously authorized as of December
      31, 2007.





During
      January, 2008, we issued 616,775 shares of our restricted common stock to two
      consultants for services.





In
      2008,
      we issued 1,183,593 shares of our restricted common stock to Centurion Credit
      Resources pursuant to our financing agreement dated November 19,
      2007.




F-19