UNITED STATES SECURITIES AND EXCHANGE
COMMISSION


Washington, D.C.
20549




FORM 10-K


(Amendment No.1)





(Mark One)





x
                ANNUAL REPORT UNDER SECTION 13 OR
      15(d) OF THE SECURITIES EXCHANGE ACT OF
  1934





For the fiscal year
ended:December
31, 2008





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





For the transition period from ________
to ________





Commission
File No.000-52117





IMPACT MEDICAL SOLUTIONS, INC.





(Exact
name of registrant as specified in its charter)





Delaware
              
              20-515331(State
      or other jurisdiction of
              
              (I.R.S.
      employerincorporation
      or formation)
              
              identification
      number)





17011
Beach Blvd., Suite 900


Huntington Beach,
CA  92647


(Address
of principal executive offices)




Issuer’s
      telephone number:
                  (514)
      843-5959 ext. 110Issuer’s
      facsimile number:
                  (905)
      248-5353





N/A


(Former
name, former address and former


fiscal
year, if changed since last report)





Copies
to:


The
Sourlis Law Firm


Virginia
K. Sourlis, Esq.


The
Galleria


2
Bridge Avenue


Red
Bank, New Jersey 07701


(732) 530-9007


www.SourlisLaw.com





Securities registered under Section
12(b) of the Exchange Act:





None





Securities registered under Section
12(g) of the Exchange Act:





Common
Stock, par value $0.0001 per share


(Title of
Class)





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





Yes ̈Nox





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


Yes ̈Nox





Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Exchange Act during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.


Yes xNo ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes  ̈ No x




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


x





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,” "non-accelerated filer" and “smaller reporting
company” in Rule 12b-2 of the Exchange Act. (Check one):




Large accelerated
      filer
                
                 ̈
                Accelerated
      filer
                
                 ̈Non-accelerated
      filer
                
                 ̈
                Smaller reporting
      company
                
                x





Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ̈Nox





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 second fiscal quarter.





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
sold, or the average bid and asked price of such common equity, as a specified
date within the past 60 days:  $2,503,587 based on a sales price of
$0.35 per share on May 6, 2009.





Indicate the number of shares
outstanding of each of the registrant’s classes of common stock, as of the
latest practicable date:





As ofthe date of this Amendment No. 1,there were 20,718,477 shares of our common stock and
outstanding.





DOCUMENTS INCORPORATED BY
REFERENCE:


None





EXPLANTORY
NOTE





The Registrant is filing this Amendment
No. 1 to its Form 10-K for the fiscal year ended December 31, 2008 pursuant to a
comment letter, dated April 27, 2009, received from the Securities and Exchange
Commission on April 27, 2009.





The Auditors’ report included in the
Company’s original Form 10-K for the fiscal year ended December 31, 2008 did not
refer to the balance sheet for the year ended December 31, 2007 in so far as it
relates to their conclusion that the financial statements present fairly the
financial position of the Company.





The amended Auditors’ report included in
this Amendment No. 1 has been amended to comply with the SEC’s comment and is
included in this Amendment No. 1.





This Amendment No.1 on Form 10-K for the
Registrant’s year ended December 31, 2008 incorporates by reference all of the
other items of the originally filed Form 10-K.





The financial statements included in
this Amendment No. 1 have not been changed from the original
filing.





Item 8.  Financial Statements
and Supplementary Data.




Impact
Medical Solutions, Inc.


Financial
Statements


For the
fiscal year ended December 31, 2008





Contents




Index
      to Financial Statements
                
                
                F-1Report
      of Farber Hass Hurley LLP, a PCAOB Registered Accounting
    Firm
                
                
                F-2Audited
      Financial StatementsBalance
      Sheets
                
                
                F-3Statements
      of Operations
                
                
                F-4Statements
      of Cash Flows
                
                
                F-5Statements
      of Changes in Stockholders’ Equity
                
                
                F-6Notes
      to Financial Statements
                
                
                F-8




F-1


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the
Shareholders and Board of Directors of Impact Medical Solutions,
Inc.





We have
audited the accompanying balance sheet of Impact Medical Solutions, Inc. (the
“Company”), as of December 31, 2008, and December 31, 2007, and the related
statements of operations, shareholders’ equity (deficit), and cash flows for
each of the years ended December 31, 2008, 2007 and 2006 and October 20, 1997
(date of inception) to December 31, 2008.  These financial statements
are the responsibility of the Company’s management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company has determined that it is not required to have, nor were we engaged to
perform, an audit of its internal control over financial
reporting.  Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting.  Accordingly, we express no such opinion.  An
audit 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 financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31, 2008
and December 31, 2007, and the results of its operations and its cash flows for
each of the years ended December 31, 2008, 2007 and 2006 and October 20, 1997
(date of inception) to December 31, 2008, in conformity with accounting
principles generally accepted in the United States.





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  As discussed in Note 1 to the
financial statements, the Company’s significant operating losses raise
substantial doubt about its ability to continue as a going
concern.  The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.





/s/  Farber
      Hass Hurley LLPApril
      14, 2009Camarillo,
      California


F-2





Impact
Medical Solutions, Inc.


(A
Development Stage Company)


Balance
Sheets





December 31,2008
                
                
                2007ASSETSCurrent
      assetsCash
                
                $
                34,015
                
                
                $
                15,144Prepaid
      expenses
                
                
                5,218
                
                
                
                26,686Total
      current assets
                
                
                39,233
                
                
                
                41,830Furniture
      and equipment, net of accumulated depreciation of $58,119 and $43,704 at
      December 31, 2008 and 2007, respectively
                
                
                17,270
                
                
                
                27,171Patent,
      net of accumulated amortization of $156,864 and $127,452 at December 31,
      2008 and 2007, respectively
                
                
                343,136
                
                
                
                372,548$
                399,639
                
                
                $
                441,549LIABILITIES
      AND SHAREHOLDERS' DEFICITCurrent
      liabilitiesLoans
      from related parties, net of unamortized discount of $3,258 and $65,447 at
      December 31, 2008 and 2007, respectively
                
                $
                311,896
                
                
                $
                257,366Convertible
      debt, net of unamortized discount of $4,267 and $16,910 at December 31,
      2008 and 2007, respectively
                
                
                448,724
                
                
                
                316,081Other
      loan payable, net of unamortized discount of $116 at December 31,
      2008
                
                
                9,884
                
                
                
                -Note
      payable
                
                
                34,613
                
                
                
                34,613Accounts
      payable
                
                
                279,282
                
                
                
                269,875Accrued
      interest
                
                
                153,229
                
                
                
                83,391Accrued
      vacation
                
                
                64,133
                
                
                
                64,133Accrued
      salaries, bonuses and other payroll related items
                
                
                589,600
                
                
                
                330,350Other
      accrued liabilities
                
                
                30,000
                
                
                
                -Total
      current liabilities
                
                
                1,921,361
                
                
                
                1,355,809Commitments
      and contingencies
                
                
                -
                
                
                
                -Shareholders'
      deficitPreferred
      stock, 10,000,000 shares authorized, $.0001 par value, no shares issued
      and outstanding
                
                
                -
                
                
                
                -Common
      stock, 100,000,000 shares authorized, $.0001 par value, 18,768,466 and
      16,478,465 shares issued and outstanding at December 31, 2008 and 2007,
      respectively
                
                
                1,877
                
                
                
                1,648Additional
      paid-in capital
                
                
                6,432,631
                
                
                
                5,226,178Deferred
      option and warrant costs
                
                
                (612,081
                )
                
                
                (387,437
                )Deficit
      accumulated during the development stage
                
                
                (7,344,149
                )
                
                
                (5,754,649
                )Total
      shareholders' deficit
                
                
                (1,521,722
                )
                
                
                (914,260
                )$
                399,639
                
                
                $
                441,549





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


F-3


Impact
Medical Solutions, Inc.


(A
Development Stage Company)


Statements
of Operations





Year
      ended December 31,
                            
                            
                            Cumulative
                              from
      inception
                              (October
      20,
                              1997)
      to
                              December
      31,2008
                            
                            
                            2007
                            
                            
                            2006
                            
                            
                            2008Costs
      and expenses:Research
      and development
                            
                            $
                            134,327
                            
                            
                            $
                            151,217
                            
                            
                            $
                            212,060
                            
                            
                            $
                            872,052Medical
      and clinical
                            
                            
                            123,852
                            
                            
                            
                            105,767
                            
                            
                            
                            249,165
                            
                            
                            
                            1,229,565General
      and administrative
                            
                            
                            960,683
                            
                            
                            
                            666,632
                            
                            
                            
                            1,368,915
                            
                            
                            
                            4,231,987Operating
      loss
                            
                            
                            (1,218,862
                            )
                            
                            
                            (923,616
                            )
                            
                            
                            (1,830,140
                            )
                            
                            
                            (6,333,604
                            )Other
      income (expense):Interest
      expense
                            
                            
                            (369,775
                            )
                            
                            
                            (338,294
                            )
                            
                            
                            (246,450
                            )
                            
                            
                            (1,004,601
                            )Interest
      income
                            
                            
                            -
                            
                            
                            
                            15
                            
                            
                            
                            20
                            
                            
                            
                            290(369,775
                            )
                            
                            
                            (338,279
                            )
                            
                            
                            (246,430
                            )
                            
                            
                            (1,004,311
                            )Loss
      before provision for taxes
                            
                            
                            (1,588,637
                            )
                            
                            
                            (1,261,895
                            )
                            
                            
                            (2,076,570
                            )
                            
                            
                            (7,337,915
                            )Provision
      for taxes
                            
                            
                            863
                            
                            
                            
                            1,594
                            
                            
                            
                            577
                            
                            
                            
                            6,234Net
      loss
                            
                            $
                            (1,589,500
                            )
                            
                            $
                            (1,263,489
                            )
                            
                            $
                            (2,077,147
                            )
                            
                            $
                            (7,344,149
                            )Basic
      and diluted net loss per share
                            
                            $
                            (0.09
                            )
                            
                            $
                            (0.08
                            )
                            
                            $
                            (0.13
                            )Basic
      and diluted weighted average number of common shares
      outstanding
                            
                            
                            16,833,629
                            
                            
                            
                            15,996,205
                            
                            
                            
                            15,426,710





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


F-4


Impact
Medical Solutions, Inc.


(A
Development Stage Company)


Statements
of Cash Flow





Year
      ended December 31,
                                      
                                      
                                      Cumulative
                                        from
      inception
                                        (October
      20,
                                        1997)
      to
                                        December
      31,2008
                                      
                                      
                                      2007
                                      
                                      
                                      2006
                                      
                                      
                                      2008Cash
      flows from operating activities:Net
      loss
                                      
                                      $
                                      (1,589,500
                                      )
                                      
                                      $
                                      (1,263,489
                                      )
                                      
                                      $
                                      (2,077,147
                                      )
                                      
                                      $
                                      (7,344,149
                                      )Adjustments
      to reconcile net loss to net cash used by operating
      activities:Depreciation
      and amortization
                                      
                                      
                                      43,827
                                      
                                      
                                      
                                      43,970
                                      
                                      
                                      
                                      43,584
                                      
                                      
                                      
                                      215,279Amortization
      of loan discount
                                      
                                      
                                      287,262
                                      
                                      
                                      
                                      290,227
                                      
                                      
                                      
                                      233,708
                                      
                                      
                                      
                                      822,899Issuance
      of common stock for services
                                      
                                      
                                      440,259
                                      
                                      
                                      
                                      81,464
                                      
                                      
                                      
                                      50,000
                                      
                                      
                                      
                                      631,883Issuance
      of stock options and warrants for services
                                      
                                      
                                      59,233
                                      
                                      
                                      
                                      64,119
                                      
                                      
                                      
                                      927,257
                                      
                                      
                                      
                                      1,179,837Decrease
      (increase) in prepaid expenses
                                      
                                      
                                      21,468
                                      
                                      
                                      
                                      (21,677
                                      )
                                      
                                      
                                      (2,410
                                      )
                                      
                                      
                                      (5,218
                                      )Increase
      (decrease) in accounts payable
                                      
                                      
                                      9,407
                                      
                                      
                                      
                                      103,402
                                      
                                      
                                      
                                      61,486
                                      
                                      
                                      
                                      279,282Increase
      (decrease) in accrued expenses
                                      
                                      
                                      359,088
                                      
                                      
                                      
                                      171,474
                                      
                                      
                                      
                                      51,778
                                      
                                      
                                      
                                      836,962Net
      cash used by operating activities
                                      
                                      
                                      (368,956
                                      )
                                      
                                      
                                      (530,510
                                      )
                                      
                                      
                                      (711,744
                                      )
                                      
                                      
                                      (3,383,225
                                      )Cash
      flows from investing activities:Capital
      expenditures
                                      
                                      
                                      (4,514
                                      )
                                      
                                      
                                      (564
                                      )
                                      
                                      
                                      (3,358
                                      )
                                      
                                      
                                      (75,685
                                      )Net
      cash used by investing activities
                                      
                                      
                                      (4,514
                                      )
                                      
                                      
                                      (564
                                      )
                                      
                                      
                                      (3,358
                                      )
                                      
                                      
                                      (75,685
                                      )Cash
      flows from financing activities:Proceeds
      from loans from related parties
                                      
                                      
                                      21,500
                                      
                                      
                                      
                                      175,000
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      341,500Proceeds
      from convertible debt
                                      
                                      
                                      120,000
                                      
                                      
                                      
                                      332,991
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      452,991Proceeds
      from loans from others
                                      
                                      
                                      10,000
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      10,000Payments
      on note payable
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (4,000
                                      )
                                      
                                      
                                      (65,387
                                      )Issuance
      of common stock, net of costs
                                      
                                      
                                      270,000
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      517,305
                                      
                                      
                                      
                                      2,780,168Net
      cash provided by financing activities
                                      
                                      
                                      421,500
                                      
                                      
                                      
                                      507,991
                                      
                                      
                                      
                                      513,305
                                      
                                      
                                      
                                      3,519,272Effect
      of exchange rate changes
                                      
                                      
                                      (29,159
                                      )
                                      
                                      
                                      27,320
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (26,347
                                      )Net
      increase (decrease) in cash
                                      
                                      
                                      18,871
                                      
                                      
                                      
                                      4,237
                                      
                                      
                                      
                                      (201,797
                                      )
                                      
                                      
                                      34,015Cash,
      beginning of period
                                      
                                      
                                      15,144
                                      
                                      
                                      
                                      10,907
                                      
                                      
                                      
                                      212,704
                                      
                                      
                                      
                                      -Cash,
      end of period
                                      
                                      $
                                      34,015
                                      
                                      
                                      $
                                      15,144
                                      
                                      
                                      $
                                      10,907
                                      
                                      
                                      $
                                      34,015Non-cash
      investing and financing activities:Issuance
      of common stock & note payable for patent
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      500,000Issuance
      of warrants with debt
                                      
                                      $
                                      212,546
                                      
                                      
                                      $
                                      353,036
                                      
                                      
                                      $
                                      244,282
                                      
                                      
                                      $
                                      830,539





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


F-5


Impact
Medical Solutions, Inc.


(A
Development Stage Company)


Statements
of Changes in Shareholders’ Equity (Deficit)


From
Inception (October 20, 1997) to December 31, 2008





DeficitCommon
      Stock
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        AccumulatedAdditional
                                        
                                        
                                        Deferred
      Share,
                                        
                                        
                                        During
      the
                                        
                                        
                                        TotalNumber
                                        
                                        
                                        
                                        
                                        
                                        Paid-in
                                        
                                        
                                        Option
      &
                                        
                                        
                                        Development
                                        
                                        
                                        Shareholders'of
      Shares
                                        
                                        
                                        Total
                                        
                                        
                                        Capital
                                        
                                        
                                        Warrant
      Cost
                                        
                                        
                                        Stage
                                        
                                        
                                        Equity
      (Deficit)Initial
      capitalization
                                        
                                        
                                        3,000,000
                                        
                                        
                                        $
                                        1,500
                                        
                                        
                                        $
                                        1,250
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        2,750Net
      loss for 1997
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (2,750
                                        )
                                        
                                        
                                        (2,750
                                        )Balance,
      December 31, 1997
                                        
                                        
                                        3,000,000
                                        
                                        
                                        
                                        1,500
                                        
                                        
                                        
                                        1,250
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (2,750
                                        )
                                        
                                        
                                        -Net
      loss for 1998
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Balance,
      December 31, 1998
                                        
                                        
                                        3,000,000
                                        
                                        
                                        
                                        1,500
                                        
                                        
                                        
                                        1,250
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (2,750
                                        )
                                        
                                        
                                        -Net
      loss for 1999
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Balance,
      December 31, 1999
                                        
                                        
                                        3,000,000
                                        
                                        
                                        
                                        1,500
                                        
                                        
                                        
                                        1,250
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (2,750
                                        )
                                        
                                        
                                        -Net
      loss for 2000
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Balance,
      December 31, 2000
                                        
                                        
                                        3,000,000
                                        
                                        
                                        
                                        1,500
                                        
                                        
                                        
                                        1,250
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (2,750
                                        )
                                        
                                        
                                        -Net
      loss for 2001
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Balance,
      December 31, 2001
                                        
                                        
                                        3,000,000
                                        
                                        
                                        
                                        1,500
                                        
                                        
                                        
                                        1,250
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (2,750
                                        )
                                        
                                        
                                        -Net
      loss for 2002
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Balance,
      December 31, 2002
                                        
                                        
                                        3,000,000
                                        
                                        
                                        
                                        1,500
                                        
                                        
                                        
                                        1,250
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (2,750
                                        )
                                        
                                        
                                        -Net
      loss for 2003
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (181,023
                                        )
                                        
                                        
                                        (181,023
                                        )Shares
      issued for patent
                                        
                                        
                                        8,000,000
                                        
                                        
                                        
                                        4,000
                                        
                                        
                                        
                                        396,000
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        400,000Shares
      issued for cash net of share issue costs of $86,096
                                        
                                        
                                        2,086,000
                                        
                                        
                                        
                                        1,043
                                        
                                        
                                        
                                        434,361
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        435,404Balance,
      December 31, 2003
                                        
                                        
                                        13,086,000
                                        
                                        
                                        
                                        6,543
                                        
                                        
                                        
                                        831,611
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (183,773
                                        )
                                        
                                        
                                        654,381Net
      loss for 2004
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (733,248
                                        )
                                        
                                        
                                        (733,248
                                        )Stock
      option costs
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        5,009
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        5,009Warrants
      issued with loans payable
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        4,225
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        4,225Shares
      issued for cash net of share issue costs of $17,602
                                        
                                        
                                        895,000
                                        
                                        
                                        
                                        448
                                        
                                        
                                        
                                        561,950
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        562,398Balance,
      December 31, 2004
                                        
                                        
                                        13,981,000
                                        
                                        
                                        
                                        6,991
                                        
                                        
                                        
                                        1,402,795
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (917,021
                                        )
                                        
                                        
                                        492,765Net
      loss for 2005
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (1,496,992
                                        )
                                        
                                        
                                        (1,496,992
                                        )Stock
      warrant costs
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        238,892
                                        
                                        
                                        
                                        (199,946
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        38,946Amortization
      of stock warrant costs
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        85,273
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        85,273Warrants
      issued with loans payable
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        16,450
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        16,450Shares
      issued for services
                                        
                                        
                                        60,160
                                        
                                        
                                        
                                        30
                                        
                                        
                                        
                                        60,130
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        60,160Shares
      issued for cash net of share issue costs of $52,689
                                        
                                        
                                        1,045,000
                                        
                                        
                                        
                                        522
                                        
                                        
                                        
                                        991,789
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        992,311Balance,
      December 31, 2005
                                        
                                        
                                        15,086,160
                                        
                                        
                                        $
                                        7,543
                                        
                                        
                                        $
                                        2,710,056
                                        
                                        
                                        $
                                        (114,673
                                        )
                                        
                                        $
                                        (2,414,013
                                        )
                                        
                                        $
                                        188,913




(continued)





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


F-6


Impact
Medical Solutions, Inc.


(A
Development Stage Company)


Statements
of Changes in Shareholders’ Equity (Deficit)


From
Inception (October 20, 1997) to December 31, 2008





Common
      Stock
                          
                          
                          
                          
                          
                          
                          
                          
                          AccumulatedAdditional
                          
                          
                          Deferred
      Share,
                          
                          
                          During
      the
                          
                          
                          TotalNumber
                          
                          
                          
                          
                          
                          Paid-in
                          
                          
                          Option
      &
                          
                          
                          Development
                          
                          
                          Shareholders'of
      Shares
                          
                          
                          Total
                          
                          
                          Capital
                          
                          
                          Warrant
      Cost
                          
                          
                          Stage
                          
                          
                          Equity
      (Deficit)Balance,
      December 31, 2005
                          
                          
                          15,086,160
                          
                          
                          $
                          7,543
                          
                          
                          $
                          2,710,056
                          
                          
                          $
                          (114,673
                          )
                          
                          $
                          (2,414,013
                          )
                          
                          $
                          188,913Shares
      issued for cash
                          
                          
                          517,305
                          
                          
                          
                          259
                          
                          
                          
                          517,046
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          517,305Shares
      issued for services
                          
                          
                          50,000
                          
                          
                          
                          25
                          
                          
                          
                          49,975
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          50,000Impact
      shares converted to Freedom 1 at 1 to 1
                          
                          
                          -
                          
                          
                          
                          (6,262
                          )
                          
                          
                          6,262
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Shares
      issued upon merger
                          
                          
                          200,000
                          
                          
                          
                          20
                          
                          
                          
                          (20
                          )
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Value
      of warrants issued
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,101,523
                          
                          
                          
                          (430,046
                          )
                          
                          
                          -
                          
                          
                          
                          671,477Amortization
      of stock warrant costs
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          500,062
                          
                          
                          
                          -
                          
                          
                          
                          500,062Net
      loss for 2006
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (2,077,147
                          )
                          
                          
                          (2,077,147
                          )Balance,
      December 31, 2006
                          
                          
                          15,853,465
                          
                          
                          
                          1,585
                          
                          
                          
                          4,384,842
                          
                          
                          
                          (44,657
                          )
                          
                          
                          (4,491,160
                          )
                          
                          
                          (149,390
                          )Shares
      issued for services
                          
                          
                          625,000
                          
                          
                          
                          63
                          
                          
                          
                          454,937
                          
                          
                          
                          (455,000
                          )
                          
                          
                          -
                          
                          
                          
                          -Value
      of warrants issued
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          386,399
                          
                          
                          
                          (33,363
                          )
                          
                          
                          -
                          
                          
                          
                          353,036Amortization
      of share, option and warrant cost
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          145,583
                          
                          
                          
                          -
                          
                          
                          
                          145,583Net
      loss for 2007
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (1,263,489
                          )
                          
                          
                          (1,263,489
                          )Balance,
      December 31, 2007
                          
                          
                          16,478,465
                          
                          
                          
                          1,648
                          
                          
                          
                          5,226,178
                          
                          
                          
                          (387,437
                          )
                          
                          
                          (5,754,649
                          )
                          
                          
                          (914,260
                          )Shares
      issued for cash, net of issuance costs of $30,000
                          
                          
                          400,001
                          
                          
                          
                          40
                          
                          
                          
                          269,960
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          270,000Settlement
      of liability
                          
                          
                          100,000
                          
                          
                          
                          10
                          
                          
                          
                          69,990
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          70,000Shares
      issued for services
                          
                          
                          1,790,000
                          
                          
                          
                          179
                          
                          
                          
                          468,321
                          
                          
                          
                          (356,000
                          )
                          
                          
                          -
                          
                          
                          
                          112,500Value
      of warrants issued
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          398,182
                          
                          
                          
                          (185,636
                          )
                          
                          
                          -
                          
                          
                          
                          212,546Amortization
      of share, option and warrant cost
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          316,992
                          
                          
                          
                          -
                          
                          
                          
                          316,992Net
      loss for 2008
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (1,589,500
                          )
                          
                          
                          (1,589,500
                          )18,768,466
                          
                          
                          $
                          1,877
                          
                          
                          $
                          6,432,631
                          
                          
                          $
                          (612,081
                          )
                          
                          $
                          (7,344,149
                          )
                          
                          $
                          (1,521,722
                          )





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


F-7


Impact
Medical Solutions, Inc.


(A
Development Stage Company)


Notes to
Financial Statements


December 31,
2008





1.           Organization
and summary of significant accounting policies





Organization and Line of
Business


Impact
Medical Solutions, Inc. (a development stage company) (the "Company" or “IMS”),
a Nevada corporation, was incorporated on October 20, 1997.  On
September 9, 2003, IMS acquired a patent from MPR Health Systems, Inc., a
California corporation; a patented medical information system called Muscle
Pattern Recognition (“MPR”) with a value of $500,000.  Since
inception, Impact Medical has been involved in the development and pre-market
clinical testing of the MPR system.





Merger of Impact Medical
Solutions, Inc. into Freedom 1, Inc.


On
December 27, 2006, Freedom 1, Inc., a Delaware corporation (“Freedom 1”),
entered into a Plan and Agreement of Merger (the “Merger Agreement”) with Impact
Medical Solutions, a privately held Nevada corporation (“Impact Medical”),
pursuant to which Impact Medical purchased 1 share of Freedom 1 for $1.00, and
Freedom 1 became a wholly owned subsidiary of Impact Medical (the
“Sale”).  Following the Sale, Freedom 1 effected a short-form
parent-subsidiary merger pursuant to the Merger Agreement of Impact Medical with
and into Freedom 1, pursuant to which the separate existence of Impact Medical
terminated and Freedom 1 changed its name to “Impact Medical Solutions,
Inc.”





Concurrently
with the merger, stockholders of Impact Medical received 1 share of Freedom 1’s
common stock for each issued and outstanding share of Impact Medical’s common
stock.  As a result, at closing Freedom 1 issued 15,653,465 shares of
its common stock to the stockholders of Impact Medical, representing 100% of
Freedom 1’s outstanding common stock immediately following the
Merger.  In addition, 200,000 shares of the Company’s stock were
issued to the former shareholder of Freedom 1.





Common
stock options and warrants exercisable into 11,010,241 shares of Impact Medical
before the merger will be exercisable into the same number of shares of IMS
after the merger.





Development Stage
Company


The
Company is a development stage company as defined in Statement of Financial
Accounting Standards ("SFAS") 7, Accounting and Reporting by
Development Stage Enterprises. The Company is devoting substantially all
of its present efforts to establish a new business, and its planned principal
operations have not yet commenced.  The Company has not generated any
material revenues throughout its history. The Company's ability to continue in
business is dependent upon obtaining sufficient financing or attaining future
profitable operations.





Going
Concern


The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States that contemplate
continuation of the Company as a going concern.  However, during the
years ended December 31, 2008, 2007 and 2006, the Company incurred a net loss of
$1,588,487, $1,263,489 and $2,077,147, respectively, and is in the development
stage at December 31, 2008. The Company has not earned any revenue since
inception.  These factors raise substantial doubt about the Company’s
ability to continue as a going concern.





Recovery
of the Company's assets is dependent upon future events, the outcome of which is
indeterminable. In addition, successful completion of the Company's clinical
development program and its transition to the attainment of profitable
operations is dependent upon obtaining adequate financing to fulfill its
development activities and achieving a level of sales adequate to support the
Company's cost structure. In view of these matters, realization of a major
portion of the assets in the accompanying balance sheets is dependent upon the
Company's ability to meet its financing requirements and the success of its
plans to sell its products.  The Company is attempting to raise
approximately $2,000,000 in additional funds over the next year through private
placements.  However, there can be no assurance that the Company will
be successful in raising such additional funds.  The Company may also
seek to compensate providers of services by issuance of stock in lieu of
cash.


F-8





1.           Organization
and summary of significant accounting policies (continued)





Cash and cash equivalents,
other cash flow statement supplemental information and concentration of
risk


The
Company considers all liquid investments with a maturity of three months or less
from the date of purchase that are readily convertible into cash to be cash
equivalents.  Balances in bank accounts may, from time to time, exceed
insured limits.  The Company believes that its loss exposure is
limited due to quality of the financial institutions that hold its
deposits.





Income
taxes of $863, $1,594 and $800 were paid in 2008, 2007 and 2006,
respectively.  No interest payments were made in 2008, 2007 and
2006.





Use of
estimates


The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect certain reported amounts and
disclosures.  Accordingly, actual results could differ from those
estimates.





Furniture and
Equipment


Furniture
and equipment are stated at cost. Depreciation and amortization are computed
using the straight-line method over the estimated useful lives of the related
assets, which is 5 years.





Expenditures
for maintenance and repairs are charged to operations as incurred while renewals
and betterments are capitalized. When furniture and equipment are retired or
disposed of, the related costs and accumulated depreciation are eliminated from
the accounts, and any gain or loss on such disposition is reflected in
operations.





Patent


Patent
consists of U.S. Patent No. 6,280,395 and legal fees incurred in maintaining the
patent for the Company's product. These costs are amortized over a period of
seventeen years using the straight-line method.





Long-lived
assets


Long-lived
assets (primarily furniture and equipment and patents) are reviewed annually for
impairment whenever events or changes in circumstances indicate that carrying
amount of an asset may not be recoverable.  Impairment is necessary
when the undiscounted cash flows estimated to be generated by the asset are less
than the carrying amount of the asset.





Research and Development
Costs


Costs and
expenses that can be clearly identified as research and development are charged
to expense as incurred in accordance with SFAS 2, Accounting for Research and
Development Costs.





Income
Taxes


The
Company accounts for income taxes under the liability method required by SFAS
109 which requires the recognition of deferred tax liabilities and assets for
the expected future tax consequences of events that have been included in the
financial statements or tax returns.  Under this method, deferred
income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each period end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized. The provision for
income taxes represents the tax payable for the period and the change during the
period in deferred tax assets and liabilities.


F-9





1.           Organization
and summary of significant accounting policies (continued)





Share-based
payments


The
Company adopted the provisions of SFAS 123(R), Share-Based Payments, on
January 1, 2006.  Accordingly, compensation costs for all share-based
awards to employees are measured based on the grant date fair value of those
awards and recognized over the period during which the employee is required to
perform service in exchange for the award (generally over the vesting period of
the award). The Company has no awards with market or performance conditions.
Excess tax benefits, as defined by SFAS 123(R), are recognized as an addition to
additional paid-in-capital.





Share-based
compensation expense recognized during the period is based on the value of the
portion of share-based payment awards that is ultimately expected to vest during
the period. Forfeitures are estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those
estimates. Based on the Company’s historical experience, the Company expects no
forfeitures.





The
Company had no share-based compensation expenses for the years ended December
31, 2008, 2007 and 2006.





Since the
Company has a net operating loss carryforward as of December 31, 2008, no excess
tax benefits for the tax deductions related to share-based awards were
recognized in the statement of operations.  Additionally, no
incremental tax benefits were recognized from stock options exercised in the
years ended December 31, 2008, 2007 and 2006 which would have resulted in a
reclassification to reduce net cash provided by operating activities with an
offsetting increase in net cash provided by financing activities.





Fair Value of Financial
Instruments


The
Company measures its financial assets and liabilities in accordance with
accounting principles generally accepted in the United States. For certain of
the Company's financial instruments, including cash, accounts payable and
accrued expenses, the carrying amounts approximate fair value due to their short
maturities. The amounts shown for convertible debt, note payable, loans from
related parties and other loans also approximate fair value because current
interest rates offered to the Company for notes payable of similar maturities
are substantially the same.





Net Loss Per
Share


Basic
loss per common share is computed by dividing net loss by the weighted-average
number of shares of common stock outstanding during the
period.  Diluted loss per share is computed similar to basic loss per
share except that the denominator is increased to include dilutive options,
warrants and other potential common stock outstanding during the
period.  None of the outstanding options or warrants were included in
the computation of loss per share because they were anti-dilutive.





Reclassifications


Certain
items in the 2007 and 2006 financial statements have been reclassified to
conform to the 2008 presentation.





Recent accounting
pronouncements


In
February 2007, the FASB issued SFAS 159 – The Fair Value Option for Financial
Assets and Financial Liabilities – Including an amendment of FASB Statement No.
115(SFAS 159).  SFAS 159 permits entities to choose to measure
eligible items at fair value at specified election dates and report unrealized
gains and losses on items for which the fair value option has been elected in
earnings at each subsequent reporting date. SFAS 159 is effective for fiscal
years beginning after November 15, 2007 and interim periods within those fiscal
years. The Company has implemented this statement in the current fiscal year and
there is no material effect.





In
September 2006, the FASB issued Statement of Financial Accounting Standards 157
(“SFAS 157”), Fair Value
Measurements, which defines fair value, establishes guidelines for
measuring fair value and expands disclosures regarding fair value
measurements.  SFAS 157 does not require any new fair value
measurements but rather eliminates inconsistencies in guidance found in various
prior accounting pronouncements.  SFAS 157 is effective for fiscal
years beginning after November 15, 2007 with earlier adoption
permitted.  The Company has implemented this statement in the current
fiscal year and there is no material effect.


F-10





1.           Organization
and summary of significant accounting policies (continued)





Recent Account
Pronouncements (continued)


In
October 2008, the FASB issued Financial Staff Position 157-3, Determining the
Fair Value of a Financial Asset When the Market for That Asset Is Not Active,
("FSP 157-3"). FSP 157-3 clarifies the application of SFAS 157 in a market that
is not active, and addresses application issues such as the use of internal
assumptions when relevant observable data does not exist, the use of observable
market information when the market is not active, and the use of market quotes
when assessing the relevance of observable and unobservable data. FSP 157-3 is
effective for all periods presented in accordance with SFAS 157. The adoption of
FSP 157-3 did not have a significant impact on our consolidated financial
statements or the fair values of our financial assets and
liabilities.





In
December 2008, the FASB issued Financial Staff Position ("FSP") Financial
Accounting Standard No. 140-4 and FASB Interpretation 46(R)-8, Disclosures by
Public Entities (Enterprises) about Transfers of Financial Assets and Interests
in Variable Interest Entities ("FSP FAS 140-4" and "FIN 46(R)-8"). The document
increases disclosure requirements for public companies and is effective for
reporting periods (interim and annual) that end after December 15, 2008. FSP FAS
140-4 and FIN 46(R)-8 became effective for us on December 31, 2008. The adoption
of FSP FAS 140-4 and FIN 46(R)-8 did not have a significant impact on our
consolidated financial statements.





2.           Furniture
and equipment





2008
                      
                      
                      2007
                      
                      
                      2006Furniture
      and equipment
                      
                      $
                      75,389
                      
                      
                      $
                      70,875
                      
                      
                      $
                      70,311Less
      accumulated depreciation
                      
                      
                      (58,119
                      )
                      
                      
                      (43,704
                      )
                      
                      
                      (29,146
                      )$
                      17,270
                      
                      
                      $
                      27,171
                      
                      
                      $
                      41,165Depreciation
      expense
                      
                      $
                      14,415
                      
                      
                      $
                      14,558
                      
                      
                      $
                      14,172





3.           Patents





2008
                    
                    
                    2007
                    
                    
                    2006PatentsGross
      carrying amount
                    
                    $
                    500,000
                    
                    
                    $
                    500,000
                    
                    
                    $
                    500,000Accumulated
      amortization
                    
                    $
                    156,864
                    
                    
                    $
                    127,452
                    
                    
                    $
                    98,040Amortization
      expense
                    
                    $
                    29,412
                    
                    
                    $
                    29,412
                    
                    
                    $
                    29,412





Amortization
of patents is expected to be $29,412 in each of the next five
years.





4.          
Loans from related parties





During
2008, the Company borrowed a total of $1,500 from Wayne Cockburn, its
CEO.  This loan, evidenced by a short-term promissory note issued on
June 17, 2008, bears interest at 10% per annum and matured on September 17,
2008.  Mr. Cockburn was also granted 1,500 Series B common stock
purchase warrants to purchase 1,500 shares of common stock at $1.00 per share
until December 31, 2009.  The fair value of the warrants using the
Black-Scholes valuation method totaled $470 at the time of issuance, and was
reflected as a discount on the loan in the accompanying financial statements and
was amortized over the life of the loan as interest expense.  On
September 17, 2008, the maturity date of the $1,500 promissory note to Mr.
Cockburn was extended to December 17, 2008.  Mr. Cockburn was granted
an additional 1,500 Series B common stock purchase warrants to purchase 1,500
shares of common stock at $1.00 per share until December 31, 2009 for the
extension.  The fair value of the warrants using the Black-Scholes
valuation method totaled $144 at the time of issuance, and was reflected as a
discount on the loan in the accompanying financial statements and was amortized
over the life of the loan as interest expense.  On December 17, 2008,
the maturity date of the $1,500 promissory note to Mr. Cockburn was extended to
April 30, 2009.  Mr. Cockburn was granted an additional 1,500 Series B
common stock purchase warrants to purchase 1,500 shares of common stock at $1.00
per share until December 31, 2009 for the extension.  The fair value
of the warrants using the Black-Scholes valuation method totaled $77 at the time
of issuance, and is reflected as a discount on the loan in the accompanying
financial statements and is being amortized over the life of the loan as
interest expense.


F-11





4.          
Loans from related parties (continued)





During
2008, the Company borrowed a total of $10,000 from Wayne Cockburn, its
CEO.  This loan, evidenced by a short-term promissory note issued on
June 2, 2008, bears interest at 10% per annum and matured on September 2,
2008.  Mr. Cockburn was also granted 10,000 Series B common stock
purchase warrants to purchase 10,000 shares of common stock at $1.00 per share
until December 31, 2009.  The fair value of the warrants using the
Black-Scholes valuation method totaled $3,695 at the time of issuance, and was
reflected as a discount on the loan in the accompanying financial statements and
was amortized over the life of the loan as interest expense.  On
September 2, 2008, the maturity date of the $10,000 promissory note to Mr.
Cockburn was extended to December 2, 2008.  Mr. Cockburn was granted
an additional 10,000 Series B common stock purchase warrants to purchase 10,000
shares of common stock at $1.00 per share until December 31, 2009 for the
extension.  The fair value of the warrants using the Black-Scholes
valuation method totaled $2,582 at the time of issuance, and was reflected as a
discount on the loan in the accompanying financial statements and was amortized
over the life of the loan as interest expense.  On December 2, 2008,
the maturity date of the $10,000 promissory note to Mr. Cockburn was extended to
April 30, 2009.  Mr. Cockburn was granted an additional 10,000 Series
B common stock purchase warrants to purchase 10,000 shares of common stock at
$1.00 per share until December 31, 2009 for the extension.  The fair
value of the warrants using the Black-Scholes valuation method totaled $389 at
the time of issuance, and is reflected as a discount on the loan in the
accompanying financial statements and is being amortized over the life of the
loan as interest expense.





During
2008, the Company borrowed a total of $10,000 from Wayne Cockburn, its
CEO.  This loan, evidenced by a short-term promissory note issued on
April 1, 2008, bears interest at 10% per annum and matured on July 1,
2008.  Mr. Cockburn was also granted 10,000 Series B common stock
purchase warrants to purchase 10,000 shares of common stock at $1.00 per share
until December 31, 2009.  The fair value of the warrants using the
Black-Scholes valuation method totaled $2,879 at the time of issuance, and was
reflected as a discount on the loan in the accompanying financial statements and
was amortized over the life of the loan as interest expense.  On July
1, 2008, the maturity date of the $10,000 promissory note to Mr. Cockburn was
extended to October 31, 2008.  Mr. Cockburn was granted an additional
10,000 Series B common stock purchase warrants to purchase 10,000 shares of
common stock at $1.00 per share until December 31, 2009 for the
extension.  The fair value of the warrants using the Black-Scholes
valuation method totaled $1,901 at the time of issuance, and was reflected as a
discount on the loan in the accompanying financial statements and was amortized
over the life of the loan as interest expense. On October 31, 2008, the maturity
date of the $10,000 promissory note to Mr. Cockburn was extended to January 31,
2009.  Mr. Cockburn was granted an additional 10,000 Series B common
stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per
share until December 31, 2009 for the extension.  The fair value of
the warrants using the Black-Scholes valuation method totaled $462 at the time
of issuance, and is reflected as a discount on the loan in the accompanying
financial statements and is being amortized over the life of the loan as
interest expense.  On January 31, 2009, this loan was extended to
April 30, 2009 and Mr. Cockburn was granted 10,000 Series B warrants for
extending the due date.  The fair value of the warrants using the
Black-Scholes valuation method will be reflected as a discount on the loan and
will be amortized over the extended life of the loan as interest
expense.


F-12





4.          
Loans from related parties (continued)





During
2007, the Company borrowed a total of $40,000 from Alan Goldman, one of its
officers.  This loan, evidenced by a short-term promissory note issued
on December 3, 2007, bears interest at 10% per annum and matured on March 3,
2008.  Mr. Goldman was also granted 40,000 Series B common stock
purchase warrants to purchase 40,000 shares of common stock at $1.00 per share
until December 31, 2009.  The fair value of the warrants using the
Black-Scholes valuation method totaled $14,126 at the time of issuance, and was
reflected as a discount on the loan in the accompanying financial statements and
was amortized over the life of the loan as interest expense.  On March
3, 2008, the maturity date of the $40,000 promissory note to Mr. Alan Goldman
was extended to June 3, 2008.  Mr. Goldman was granted an additional
40,000 Series B common stock purchase warrants to purchase 40,000 shares of
common stock at $1.00 per share until December 31, 2009 for the
extension.  The fair value of the warrants using the Black-Scholes
valuation method totaled $11,920 at the time of issuance, and was reflected as a
discount on the loan in the accompanying financial statements and was amortized
over the life of the loan as interest expense.  On June 3, 2008, the
maturity date of the $40,000 promissory note to Mr. Alan Goldman was extended to
October 31, 2008.  Mr. Goldman was granted an additional 40,000 Series
B common stock purchase warrants to purchase 40,000 shares of common stock at
$1.00 per share until December 31, 2009 for the extension.  The fair
value of the warrants using the Black-Scholes valuation method totaled $14,780
at the time of issuance, and was reflected as a discount on the loan in the
accompanying financial statements and was amortized over the life of the loan as
interest expense.  On October 31, 2008, the maturity date of the
$40,000 promissory note to Mr. Alan Goldman was extended to January 31,
2009.  Mr. Goldman was granted an additional 40,000 Series B common
stock purchase warrants to purchase 40,000 shares of common stock at $1.00 per
share until December 31, 2009 for the extension.  The fair value of
the warrants using the Black-Scholes valuation method totaled $1,846 at the time
of issuance, and is reflected as a discount on the loan in the accompanying
financial statements and is being amortized over the life of the loan as
interest expense.  On January 31, 2009, this loan was extended to
April 30, 2009 and Mr. Goldman was granted 40,000 Series B warrants for
extending the due date.  The fair value of the warrants using the
Black-Scholes valuation method will be reflected as a discount on the loan and
will be amortized over the extended life of the loan as interest
expense.





During
2007, the Company borrowed a total of $10,000 from Wayne Cockburn, its
CEO.  This loan, evidenced by a short-term promissory note issued on
October 26, 2007, bears interest at 10% per annum and matured on January 26,
2008.  Mr. Cockburn was also granted 10,000 Series B common stock
purchase warrants to purchase 10,000 shares of common stock at $1.00 per share
until December 31, 2009.  The fair value of the warrants using the
Black-Scholes valuation method totaled $3,148 at the time of issuance, and was
reflected as a discount on the loan in the accompanying financial statements and
was amortized over the life of the loan as interest expense.  On
January 26, 2008 the maturity date of the promissory note was extended to April
30, 2008.  Mr. Cockburn was granted an additional 10,000 Series B
common stock purchase warrants to purchase 10,000 shares of common stock at
$1.00 per share until December 31, 2009 for the extension.  The fair
value of the warrants using the Black-Scholes valuation method totaled $1,901 at
the time of issuance, and was reflected as a discount on the loan and was
amortized over the extended life of the loan as interest expense.  On
April 30, 2008 the maturity date of the promissory note was extended to July 1,
2008.  Mr. Cockburn was granted an additional 10,000 Series B common
stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per
share until December 31, 2009 for the extension.  The fair value of
the warrants using the Black-Scholes valuation method totaled $1,167 at the time
of issuance, and was reflected as a discount on the loan and was amortized over
the extended life of the loan as interest expense.  On July 1, 2008,
the maturity date of the $10,000 promissory note to Mr. Cockburn was extended to
October 31, 2008.  Mr. Cockburn was granted an additional 10,000
Series B common stock purchase warrants to purchase 10,000 shares of common
stock at $1.00 per share until December 31, 2009 for the
extension.  The fair value of the warrants using the Black-Scholes
valuation method totaled $1,901 at the time of issuance, and was reflected as a
discount on the loan in the accompanying financial statements and was amortized
over the life of the loan as interest expense.  On October 31, 2008,
the maturity date of the $10,000 promissory note to Mr. Cockburn was extended to
January 31, 2009.  Mr. Cockburn was granted an additional 10,000
Series B common stock purchase warrants to purchase 10,000 shares of common
stock at $1.00 per share until December 31, 2009 for the
extension.  The fair value of the warrants using the Black- Scholes
valuation method totaled $462 at the time of issuance, and was reflected as a
discount on the loan in the accompanying financial statements and was amortized
over the life of the loan as interest expense.  On January 31, 2009,
this loan was extended to April 30, 2009 and Mr. Cockburn was granted 10,000
Series B warrants for extending the due date.  The fair value of the
warrants using the Black-Scholes valuation method will be reflected as a
discount on the loan and will be amortized over the extended life of the loan as
interest expense.




F-13





4.          
Loans from related parties (continued)





During
2007, the Company borrowed a total of $100,000 from Frans Berndsen, one of its
shareholders.  During the second quarter, $65,000 of these loans were
issued and treated as 12% convertible notes payable as described in note
5.  As such, the shareholder was granted one Series B warrant for
every $2.00 loaned for a total of 32,500 Series B common stock purchase warrants
to purchase 32,500 shares of common stock at $1.00 per share until December 31,
2009, and a total debt discount of $23,599 was recorded to be amortized over the
life of the loan.  On September 27, 2007 the Company and the lender
agreed there had been a misunderstanding and a debt restructuring
occurred.  The original $65,000 in loans were restructured to modify
the original terms, as well as for the remaining $35,000 which was received in
the third quarter and for which 17,500 Series B warrants had been
issued.  These loans, evidenced by short-term promissory notes issued
on May 31, 2007, June 8, 2007 and July 17, 2007, bear interest at 10% per annum
and matured on September 27, 2007.  The 50,000 Series B warrants
previously issued were cancelled and in connection with the short-term
promissory notes, the shareholder was granted 100,000 Series B common stock
purchase warrants to purchase 100,000 shares of common stock at $1.00 per share
until December 31, 2009.  The fair value of the warrants using the
Black-Scholes valuation method totaled $44,154 at the time of issuance, and was
reflected as a discount on the loan in the accompanying financial statements and
was amortized over the original life of the loan as interest
expense.  The future cash payments of the new loan exceed the carrying
value of the loan as of the restructuring date, so no gain was
recorded.  On September 27, 2007 the maturity date of the promissory
note was extended to December 27, 2007.  The shareholder was granted
an additional 100,000 Series B common stock purchase warrants to purchase
100,000 shares of common stock at $1.00 per share until December 31, 2009 for
the extension.  The fair value of the warrants using the Black-Scholes
valuation method totaled $18,023 at the time of issuance, and was reflected as a
discount on the loan in the accompanying financial statements and was amortized
over the extended life of the loan as interest expense.  On December
27, 2007, the maturity date of the promissory note was extended to March 31,
2008.  Mr. Berndsen was granted an additional 100,000 Series B common
stock purchase warrants to purchase 100,000 shares of common stock at $1.00 per
share until December 31, 2009 for the extension.  The fair value of
the warrants using the Black-Scholes valuation method totaled $34,624 at the
time of issuance, and was reflected as a discount on the loan and was amortized
over the extended life of the loan as interest expense.  On March 31,
2008, the maturity date of the promissory note was extended to July 1,
2008.  Mr. Berndsen was granted an additional 100,000 Series B common
stock purchase warrants to purchase 100,000 shares of common stock at $1.00 per
share until December 31, 2009 for the extension.  The fair value of
the warrants using the Black-Scholes valuation method totaled $28,793 at the
time of issuance, and was reflected as a discount on the loan and was amortized
over the extended life of the loan as interest expense.  On July 1,
2008, the maturity date of the $100,000 promissory note to Mr. Berndsen was
extended to October 31, 2008.  Mr. Berndsen was granted an additional
100,000 Series B common stock purchase warrants to purchase 100,000 shares of
common stock at $1.00 per share until December 31, 2009 for the
extension.  The fair value of the warrants using the Black-Scholes
valuation method totaled $19,008 at the time of issuance, and was reflected as a
discount on the loan in the accompanying financial statements and was amortized
over the life of the loan as interest expense.  On October 31, 2008,
the maturity date of the $100,000 promissory note to Mr. Berndsen was extended
to January 31, 2009.  Mr. Berndsen was granted an additional 100,000
Series B common stock purchase warrants to purchase 100,000 shares of common
stock at $1.00 per share until December 31, 2009 for the
extension.  The fair value of the warrants using the Black-Scholes
valuation method totaled $4,616 at the time of issuance, and was reflected as a
discount on the loan in the accompanying financial statements and was amortized
over the life of the loan as interest expense.  On January 31, 2009,
this loan was extended to April 30, 2009 and Mr. Berndsen was granted 100,000
Series B warrants for extending the due date.  The fair value of the
warrants using the Black-Scholes valuation method will be reflected as a
discount on the loan and will be amortized over the extended life of the loan as
interest expense.


F-14





4.           Loans
from related parties (continued)





During
2007, the Company borrowed $25,000 from George Angelidis, one of its
directors.  This loan, evidenced by a short-term promissory note
issued on March 21, 2007, bears interest at 10% per annum and matured on June 1,
2007.  Mr. Angelidis was also granted 25,000 Series B common stock
purchase warrants to purchase 25,000 shares of common stock at $1.00 per share
until December 31, 2009.  The fair value of the warrants using the
Black-Scholes valuation method totaled $11,291 at the time of issuance, and was
reflected as a discount on the loan in the accompanying financial statements and
was amortized over the original life of the loan as interest
expense.  On June 1, 2007 the maturity date of the promissory note was
extended to August 1, 2007.  Mr. Angelidis was granted an additional
25,000 Series B common stock purchase warrants to purchase 25,000 shares of
common stock at $1.00 per share until December 31, 2009 for the
extension.  The fair value of the warrants using the Black-Scholes
valuation method totaled $11,121 at the time of issuance, and was reflected as a
discount on the loan in the accompanying financial statements and was amortized
over the extended life of the loan as interest expense.  On August 1,
2007 the maturity date of the promissory note was extended to December 31,
2007.  Mr. Angelidis was granted an additional 50,000 Series B common
stock purchase warrants to purchase 50,000 shares of common stock at $1.00 per
share until December 31, 2009 for the extension.  The fair value of
the warrants using the Black-Scholes valuation method totaled $22,320 at the
time of issuance, and was reflected as a discount on the loan in the
accompanying financial statements and was amortized over the extended life of
the loan as interest expense.  Effective January 1, 2008, the maturity
date of the promissory note was extended to March 31, 2008.  Mr.
Angelidis was granted an additional 25,000 Series B common stock purchase
warrants to purchase 25,000 shares of common stock at $1.00 per share until
December 31, 2009 for the extension.  The fair value of the warrants
using the Black-Scholes valuation method totaled $8,656 at the time of issuance,
and was reflected as a discount on the loan and amortized over the extended life
of the loan as interest expense.  On March 31, 2008, the maturity date
of the promissory note was extended to July 1, 2008.  Mr. Angelidis
was granted an additional 25,000 Series B common stock purchase warrants to
purchase 25,000 shares of common stock at $1.00 per share until December 31,
2009 for the extension.  The fair value of the warrants using the
Black-Scholes valuation method totaled $7,198 at the time of issuance, and was
reflected as a discount on the loan and amortized over the extended life of the
loan as interest expense. On July 1, 2008, the maturity date of the $25,000
promissory note to Mr. Angelidis was extended to October 31,
2008.  Mr. Angelidis was granted an additional 25,000 Series B common
stock purchase warrants to purchase 25,000 shares of common stock at $1.00 per
share until December 31, 2009 for the extension.  The fair value of
the warrants using the Black-Scholes valuation method totaled $4,752 at the time
of issuance, and was reflected as a discount on the loan in the accompanying
financial statements and was amortized over the life of the loan as interest
expense.  On October 31, 2008, the maturity date of the $25,000
promissory note to Mr. Angelidis was extended to January 31,
2009.  Mr. Angelidis was granted an additional 25,000 Series B common
stock purchase warrants to purchase 25,000 shares of common stock at $1.00 per
share until December 31, 2009 for the extension.  The
fair  value  of  the warrants using the
Black-Scholes valuation method totaled $1,154 at the time of issuance, and was
reflected as a discount on the loan in the accompanying financial statements and
was amortized over the life of the loan as interest expense. On January 31,
2009, this loan was extended to April 30, 2009 and Mr. Angelidis was granted
25,000 Series B warrants for extending the due date.  The fair value
of the warrants using the Black-Scholes valuation method will be reflected as a
discount on the loans and will be amortized over the extended life of the loans
as interest expense.





In 2004,
the Company borrowed a total of CD$145,000 from Cavandale Corporation, a Company
owned by one of the directors.  The loans bear interest at 10% and
matured November 1, 2004.  Cavandale was also granted 211,270 Series A
warrants at $.50 per share.  The fair value of the warrants using the
Black-Scholes valuation method totaled $4,225 at the time of issuance, and was
reflected as a discount on the loans, and amortized over the life of the loan as
interest expense.  In February 2005, the due date of the loans was
extended to July 1, 2005 in exchange for 100,000 Series B
warrants.  The fair value of the warrants using the Black-Scholes
valuation method totaled $19,246 at the time of issuance, and was reflected as a
discount on the loans and amortized over the extended life of the loan as
interest expense.  In August 2005, the due date of the loans was
extended to July 1, 2006 in exchange for 100,000 Series B
warrants.  The fair value of the warrants using the Black-Scholes
valuation method totaled $16,450 at the time of issuance, and was reflected as a
discount on the loans in the accompanying financial statements and amortized
over the extended life of the loan as interest expense.  In July 2006,
the due date of the loans was extended to July 1, 2007 in exchange for 100,000
Series B warrants.  The fair value of the warrants using the
Black-Scholes valuation method totaled $39,095 at the time of issuance, and was
reflected as a discount on the loans in the accompanying financial statements
and amortized over the extended life of the loan as interest
expense.  In July 2007, the due date of the loans was extended to July
1, 2008.  Cavandale was granted an additional 100,000 Series B common
stock purchase warrants to purchase 100,000 shares of common stock at $1.00 per
share until December 31, 2009 for the extension.  The fair value of
the warrants using the Black-Scholes valuation method totaled $44,484 at the
time of issuance, and was reflected as a discount on the loan in the
accompanying financial statements and was amortized over the extended life of
the loan as interest expense.  On July 1, 2008, the due date of the
loans was extended to October 1, 2008.  Cavandale was granted an
additional 145,000 Series B common stock purchase warrants to purchase 145,000
shares of common stock at $1.00 per share until December 31, 2009 for the
extension.  The fair value of the warrants using the Black-Scholes
valuation method totaled $27,562 at the time of issuance, and was reflected as a
discount on the loan in the accompanying financial statements and was amortized
over the extended life of the loan as interest expense.  On October 1,
2008, the due date of the loans was extended to January 1,
2009.  Cavandale was granted an additional 145,000 Series B common
stock purchase warrants to purchase 145,000 shares of common stock at $1.00 per
share until December 31, 2009 for the extension.  The fair value of
the warrants using the Black-Scholes valuation method totaled $12,642 at the
time of issuance, and was reflected as a discount on the loan in the
accompanying financial statements and was amortized over the extended life of
the loan as interest expense.  On January 1, 2009, this loan was
extended to July 1, 2009 and Cavendale was granted 290,000 Series B warrants for
extending the due date.  The fair value of the warrants using the
Black-Scholes valuation method will be reflected as a discount on the loans and
will be amortized over the extended life of the loans as interest
expense.


F-15





4.           Loans
from related parties (continued)





The
Company intends to extend all loans to related parties that came due on April
30, 2009 to July 30, 2009.





5.           Convertible
debt





On
December 22, 2008, the Company issued a convertible promissory note totaling
$50,000 to an individual who qualifies as an accredited investor under
Regulation D of the Securities Act of 1933, as amended.  The note
bears interest at 12%, matures on April 30, 2009 and is convertible into common
shares at a rate of $1.00 per share.  The note holder was also granted
one Series B warrant for every $2.00 loaned, for a total of 25,000 Series B
warrants.  In accordance with emerging Issues Task Force Issue 00-27,
Application of Issue No. 98-5 to Certain Convertible Instruments (“EITF 00-27”),
the Company recognized the value attributable to the warrants in the amount of
$1,283 to additional paid-in capital and a discount against the convertible
promissory notes.  The debt discount is being amortized to interest
expense over the life of the loan.  The Company valued the warrants in
accordance with EITF 00-27 using the Black-Scholes valuation method and the
following weighted average assumptions:  term of 1 year, risk-free
interest rate of 1.125%, volatility of 85% and a weighted fair value of
$.0513.





On
January 4, 2008, the Company issued a convertible promissory note totaling
$70,000 to an individual who qualifies as an accredited investor under
Regulation D of the Securities Act of 1933, as amended.  The note
bears interest at 12%, matured on January 25, 2008 and is convertible into
common shares at a rate of $1.00 per share.  The note holder was also
granted one Series B warrant for every $2.00 loaned, for a total of 35,000
Series B warrants.  In accordance with EITF 00-27, the Company
recognized the value attributable to the warrants in the amount of $7,424 to
additional paid-in capital and a discount against the convertible promissory
notes.  The debt discount was amortized to interest expense over the
life of the loan.  The Company valued the warrants in accordance with
EITF 00-27 using the Black-Scholes valuation method and the following weighted
average assumptions: term of 1.92 years, risk-free interest rate of 3.25%;
volatility of 84% and a weighted fair value of $.2121.





During
2007, the Company issued convertible promissory notes totaling $332,991 to
eleven individuals (after restructuring), each of whom qualifies as an
accredited investor under Regulation D of the Securities Act of 1933, as
amended.  The notes bear interest at 12%, matured on January 25, 2008
and are convertible into common shares at a rate of $1.00 per
share.  The note holders were also granted one Series B common stock
purchase warrant for every $2.00 loaned, for a total of 166,496 Series B
warrants.  In accordance with guidance issued by the Financial
Accounting Standards Board and the Emerging Issues Task Force regarding
Accounting for Convertible Securities with a Beneficial Conversion Feature or
Contingently Adjustable Conversion Ratios, the company recognized an embedded
beneficial conversion feature present in the convertible promissory
notes.  The Company recognized and measured an aggregate of $72,511 of
the proceeds, which is equal to the intrinsic value of embedded beneficial
conversion feature, to additional paid-in capital and a discount against the
convertible promissory notes. In accordance with EITF 00-27, the Company
recognized the value attributable to the warrants in the amount of $78,248 to
additional paid-in capital and a discount against the convertible promissory
notes.  The Company valued the warrants in accordance with EITF 00-27
using the Black-Scholes valuation method and the following assumptions: term of
2-2.92 years, risk-free interest rate of 3.25% - 4.875%; volatility of 63-83%
and a weighted fair value of $.3190- $.4533.  The total debt discount
of $149,745 was amortized to interest expense over the life of the
loan.





During
the quarter ended September 30, 2007, $65,000 of this debt was
restructured.  See note 4.





On
January 25, 2008, the due date of the convertible loans issued to that time was
extended to April 30, 2008 in exchange for 100,748 Series B
warrants.  The fair value of the warrants using the
Black-





Scholes
valuation method totaled $19,150 at the time of issuance, and was reflected as a
discount on the loan and was amortized over the extended life of the loan as
interest expense.


F-16


5.          
Convertible debt (continued)





On April
30, 2008, the due date of the convertible loans issued to that time was extended
to October 31, 2008 in exchange for 100,748 Series B warrants.  The
fair value of the warrants using the Black-Scholes valuation method totaled
$11,758 at the time of issuance, and was reflected as a discount on the loan and
was amortized over the extended life of the loan as interest
expense.





On
October 31, 2008, the due date of the convertible loans issued to that time was
extended to April 30, 2009 in exchange for 100,748 Series B
warrants.  The fair value of the warrants using the Black-Scholes
valuation method totaled $4,650 at the time of issuance, and is reflected as a
discount on the loan and is being amortized over the extended life of the loan
as interest expense.





The
Company intends to extend all convertible loans that came due on April 30, 2009
to July 30, 2009.





6.          
Other loan payable





On April
22, 2008, the Company borrowed a total of $10,000 from Gregory Harrison, an
individual who has also loaned the Company $100,000 in the convertible note
program.  This loan, evidenced by a short-term promissory note issued
on April 22, 2008, bears interest at 10% per annum and matures on July 22,
2008.  Mr. Harrison was also granted 10,000 Series B common stock
purchase warrants to purchase 10,000 shares of common stock at $1.00 per share
until December 31, 2009.  The fair value of the warrants using the
Black-Scholes valuation method totaled $3,346 at the time of issuance, and was
reflected as a discount on the loan and was amortized over the life of the loan
as interest expense.  On July 22, 2008, the maturity date of the
$10,000 promissory note to Mr. Harrison was extended to October 1,
2008.  Mr. Harrison was granted an additional 10,000 Series B common
stock purchase warrants to purchase 10,000 shares of common stock at $1.00 per
share until December 31, 2009 for the extension.  The fair value of
the warrants using the Black-Scholes valuation method totaled $2,503 at the time
of issuance, and was reflected as a discount on the loan in the accompanying
financial statements and was amortized over the life of the loan as interest
expense.  On October 1, 2008, the maturity date of the $10,000
promissory note to Mr. Harrison was extended to January 31, 2009.  Mr.
Harrison was granted an additional 10,000 Series B common stock purchase
warrants to purchase 10,000 shares of common stock at $1.00 per share until
December 31, 2009 for the extension.  The fair
value  of  the  warrants  using the
Black-Scholes valuation method totaled $462 at the time of issuance, and was
reflected as a discount on the loan in the accompanying financial statements and
was amortized over the life of the loan as interest expense. On January 31,
2009, this loan was extended to April 30, 2009 and Mr. Harrison was granted
10,000 Series B warrants for extending the due date.  The fair value
of the warrants using the Black-Scholes valuation method will be reflected as a
discount on the loans and will be amortized over the extended life of the loans
as interest expense.





The
Company intends to extend all loans to Mr. Harrison that came due on April 30,
2009 to July 30, 2009.





7.          
Note payable





In 2003,
the Company purchased a patent from MPR Health Systems, Inc. for 8,000,000
shares of the Company’s common stock and a 5-year $100,000 Demand Promissory
Note (the “Note”). The Note bears interest at 2% and was due and payable on
August 23, 2008.  On August 23, 2008, the due date of the note was
extended to January 31, 2009 with the same terms.  On January 31, 2009
the due date of the note was extended to April 30, 2009 with the same
terms.





The
Company intends to extend the loan to MPR Health Systems that came due on April
30, 2009 to July 30, 2009.


F-17





8.          
Shareholders’ equity





Stock
splits


In April
2000, the Board of Directors approved a 7 for 1 stock split.  In March
2003, the Board approved a 3 for 7 reverse stock split.  Per-share
amounts in the accompanying financial statements have been adjusted for these
splits.





Preferred
stock


Preferred
stock may be issued in any one or more series, and any series shall be comprised
of such number of shares and may have such voting powers and such designations,
preferences and rights as shall be stated and expressed in resolutions of the
Board of Directors of the Company.  To date, the Board has not
designated any series of preferred stock.





In 1997,
the Company issued 3,000,000 shares of common stock for $2,750.





In 2003,
the Company sold 2,086,000 shares of common stock for $.25 per share or a total
of $521,500 in connection with a private placement.  Costs relating to
these shares totaled $86,096.  A Series A Warrant was issued with each
share sold.  Holders of the Series A Warrants are entitled to purchase
additional shares of common stock at $0.50 per common share prior to June 30,
2009.





During
2003, the Company also issued 8,000,000 shares of common stock and a $100,000
Promissory Note for a patent of MPR Health Systems, Inc.





Between
January and June of 2004, the Company sold 420,000 shares of common stock for
$.25 per share, for a total of $105,000 in a private placement.  A
Series A Warrant was issued with each share sold.  Holders of the
Series A Warrants are entitled to purchase additional shares of common stock at
$0.50 per common share prior to June 30, 2009.  Between September and
November of 2004, the Company sold 475,000 shares for $1.00 per share or a total
of $475,000 in a private placement.  A Series B Warrant was issued
with each share sold.  Holders of the Series B Warrants are entitled
to purchase additional shares of common stock at $1.00 per common share prior to
December 31, 2009.  Costs relating to shares sold in 2004 totaled
$17,602.





During
2005, the Company sold 1,045,000 shares for $1.00 per share or a total of
$1,045,000 in a private placement.  A Series B Warrant was issued with
each share sold.  Holders of the Series B Warrants are entitled to
purchase additional shares of common stock at $1.00 per common share prior to
December 31, 2009.  Costs relating to shares sold in 2005 totaled
$52,689.





During
April and May 2005, the Company issued a total of 60,160 shares to two vendors
for services.  The services were valued at $1.00 per
share.





During
2006, the Company sold 517,305 shares for $1.00 per share or a total of $517,305
in a private placement.  A Series B Warrant was issued with each share
sold.  Holders of the Series B Warrants are entitled to purchase
additional shares of common stock at $1.00 per common share prior to December
31, 2009.





In
September 2006, the Company issued a total of 50,000 shares to an individual to
settle a dispute.  The shares were valued at $1.00 per
share.





In
December 2006, the Company issued a total of 200,000 shares to the former
shareholder of Freedom 1 as part of the merger agreement described in Note
1.





During
2007, the Company issued a total of 625,000 shares to three vendors for
consulting services.  The services were valued at $.71 - $1.00 per
share for a total of $455,000, and the value of the services is being amortized
over the period of the consulting agreements.





On June
12, 2008, the Board authorized a private placement of 1,000,000 units of common
stock and Series C and D purchase warrants.  The unit price is $0.75
and each unit is comprised of one share of common stock, one Series C warrant
and one half Series D warrant.  In addition, for each Series D warrant
exercised, the holder will receive an additional Series C warrant.  In
June and July 2008, the Company sold 400,001 units of its private placement for
gross proceeds of $300,000 less issuance costs of $30,000.




F-18





8.          
Shareholders’ equity (continued)





Common stock
issuances





In July
2008, the Company negotiated a settlement with one of its
creditors.  The creditor agreed to take $75,000 cash and 100,000 of
the Company’s common shares valued at $70,000 (the trading price on the date of
settlement was $.70) to settle a $117,400 account payable, resulting in a
$27,600 loss on settlement of debt.  The loss on settlement of debt is
included in general and administrative expenses in the accompanying statement of
operations.





In August
2008, the Company entered into a consulting contract for the period August 5,
2008 to December 31, 2008.  Payment for the consulting services will
be 30,000 shares of the Company’s common stock.  At
September


30, 2008,
the consultant had not begun work, so the commencement of the contract was
re-negotiated from August 5, 2008 to December 1, 2008.  This contract
was ultimately cancelled and no shares were issued.





On August
1, 2008, the Company entered into a one year consulting
contract.  Payment for consulting services will be 240,000 shares of
the Company’s common stock and 300,000 Series C common stock purchase
warrants.  At September 30, 2008, the consultant had not begun work,
so the commencement of the contract was re-negotiated from August 1, 2008 to
December 1, 2008.  The services were valued at $.40 per share for the
common stock and $31,472 for the entire amount of the warrants (using the
Black-Scholes method) for a total of $127,472, and the value of the services is
being amortized over the period of the consulting agreement.





On
December 9, 2008, the Company issued a total of 1,300,000 shares of the
Company’s common stock to two vendors and a related party for consulting
services.  The services were valued at $.20 per share for a total of
$260,000, and the value of the services is being amortized over the period of
the consulting agreements.  These vendors have the ability to earn an
additional 1,000,000 shares upon reaching a certain milestone defined in the
agreements.





On
December 13, 2008, the Board granted 250,000 shares of the Company’s common
stock to a related party, for services rendered.  The services were
valued at $.45 per share for a total of $112,500 and was expensed to general and
administrative expenses in the accompanying statement of
operations.





Warrants


During
2003, the Company issued 2,086,000 Series A common stock purchase warrants in
connection with a private placement.





During
2004, the Company issued 420,000 Series A common stock purchase warrants and
475,000 Series B common stock purchase warrants in connection with private
placements.





In
addition, the Company issued 211,270 Series A common stock purchase warrants
along with loans payable from July to October 2004.  See note
4.





The
Company also issued 250,000 Series A common stock purchase warrants to an
individual for corporate finance consulting services in July 2004.





During
2005, the Company issued 1,045,000 Series B common stock purchase warrants in
connection with private placements.





In
addition, the Company issued 100,000 Series B common stock purchase warrants in
February 2005 and 100,000 in August 2005 to extend the due date of loans payable
to July 2005.  See note 4.





Other
2005 issuances include 1,100,000 Series B common stock purchase warrants in
connection with three, two year consulting agreements and 41,250 Series B common
stock purchase warrants as share issuance costs.  The warrants issued
for consulting fees were valued at $238,892 using the Black-Scholes method and
are being amortized over the life of the consulting agreement.  The
warrants issued as share issuance costs were valued at $7,939.


F-19





8.          
Shareholders’ equity (continued)





Warrants
(continued)





The
following weighted average assumptions were used to calculate the warrants
issued in 2005: term of 2.5 years, risk-free interest rate of 3.255%; volatility
of 25% and a weighted fair value of $.0011.





Between
January and July 2006, the Company issued 517,305 Series B common stock purchase
warrants in connection with private placements.





In
September 2006, the Company extended the expiration dates of both the Series A
and Series B common stock purchase warrants.  The Series A expiration
date was extended from September 9, 2008 to June 30, 2009 and the


Series B
expiration date was extended from July 31, 2007 to December 31,
2009.





As a
result of the due date extensions, the 250,000 Series A and 1,100,000 Series B
warrants issued for consulting fees were re-valued at $580,324 and the resulting
expense is included in general and administrative expenses in the accompanying
statement of operations.  In addition, the 211,270 Series A and
200,000 Series B warrants issued to extend the loan due date were re-valued at
$205,187 and the resulting expense is included in interest expense in the
accompanying statement of operations.





The
following weighted average assumptions were used to calculate the warrants
re-valued in 2006: term of 2.75 - 3.25 years, risk-free interest rate of 4.625%;
volatility of 49% and a weighted fair value of $.39 - $.60.





Other
2006 Series B common stock purchase warrant issuances include 100,000 warrants
issued in July to extend the due date of loans payable (see note 4), 50,000
issued to settle a dispute and 658,316 issued for consulting
fees.  The 100,000 shares were valued at $39,095, as described in note
4.  The remaining warrants were valued at a total of $276,917 and
expensed as general and administrative expenses in the accompanying statements
of operations.





The
following weighted average assumptions were used to calculate the warrants
issued in 2006: term of 3.25 years, risk-free interest rate of 4.625%;
volatility of 49% and a weighted fair value of $.39.





During
2007, the Company issued 550,000 Series B warrants in connection with loans to
related parties or the extension of due dates for those loans.  See
note 4.  In addition, the Company issued 166,496 Series B warrants in
connection with convertible debt.  See note 5.





Other
2007 Series B common stock purchase warrant issuances include 75,000 issued for
consulting fees.  These warrants were valued at a total of $33,363 and
are being expensed as general and administrative expenses in the accompanying
statements of operations.





The
following weighted average assumptions were used to calculated the warrants
issued in 2007:  term of 2 – 2.92 years, risk-free interest rate of
3.25% - 4.875%, volatility ranging from 66% - 83% and a weighted fair value
ranging from $.1802 - $.4533.





During
2008, the Company issued 944,500 Series B warrants in connection with loans or
the extension of due dates for loans.  See note 4.  In
addition, the Company issued 362,244 Series B warrants in connection with
convertible debt or the extension of due dates for convertible
debt.  See note 5.





The
following weighted average assumptions were used to calculate the warrants
issued in 2008:  term of 1-2 years, risk-free interest rate of 1.125%
- 3.25%, volatility ranging from 70% - 94% and a weighted fair value ranging
from $.0389 - $.3695.





During
2008, the Board passed resolutions to authorize 1,500,000 Series C warrants and
500,000 Series D warrants.  The Series C warrants may be used to
purchase an equivalent number of common shares at $1.25 per share and expire
September 1, 2011, while the Series D warrants may be used to purchase an
equivalent number of common shares at $0.95 per share and expire on September 1,
2009.




F-20





8.          
Shareholders’ equity (continued)





Warrants
(continued)





During
2008, the Company issued 1,000,000 Series C common stock purchase warrants for
three consulting contracts to be provided over the next two
years.  These warrants were valued at a total of $185,636 and were
classified as deferred warrants on the accompanying balance sheet and are being
amortized to general and administrative expenses over the lives of the
contracts.  The following weighted average assumptions were used to
calculate the Series C warrants issued: term of 2.75 - 3.25 years, risk-free
interest rate of 1.25% - 2.625%; volatility of 72% – 85% and a weighted fair
value of $.1049 - $.2202.





During
2008, the Company issued 400,001 Series C common stock purchase warrants and
200,001 Series D warrants in connection with the private placement described
above.





Stock
options





2003 stock option
plan


In
October 2003, the Company adopted the Stock Option Plan (the "2003 Plan"), which
was also approved by its stockholders in October 2003. The purpose of the 2003
Plan is to attract, retain, and motivate certain key employees of the Company by
giving them incentives which are linked directly to increases in the value of
the common stock of the Company.  Each director, officer, employee, or
consultant of the Company is eligible to be considered for the grant of awards
under the 2003 Plan. The maximum number of shares of common stock that may be
issued pursuant to awards granted under the 2003 Plan was increased on March 19,
2004 from 2,250,000 to 4,850,000, subject to certain adjustments to prevent
dilution. Any shares of common stock subject to an award, which for any reason
expires or terminates unexercised, are again available for issuance under the
2003 Plan.  Grants under the 2003 Plan are exercisable at the market
value of the Company's stock on the date of such grant.  All options
under the 2003 Plan are exercisable at times as determined by the board of
directors, not to exceed 10 years from the date of grant.  On March
10, 2004 a total of 4,173,600 options were granted.  The grant price
was $.25, with 2,120,000 options vesting immediately and the remaining 2,053,600
options vesting on March 10, 2005.  305,000 options were cancelled in
2006 and the remaining 3,868,600 options expire on March 10, 2014.





In
February 2008, the company adopted the 2008 Equity Incentive Plan (the “2008
Plan”).  The purpose of the 2008 Plan is to attract, retain, and
motivate certain key employees of the Company by giving them incentives which
are linked directly to increases in the value of the common stock of the
Company.  Each director, officer, employee, or consultant of the
Company is eligible to be considered for the grant of awards under the 2008
Plan.  The maximum number of shares of common stock that may be issued
pursuant to awards granted under the 2008 Plan is 1,000,000, subject to certain
adjustment to prevent dilution.  Any shares of common stock subject to
an award, which for any reason expires or terminates unexercised, are again
available for issuance under the 2008 Plan.  Grants under the 2008
Plan are exercisable at the market value of the Company’s stock on the date of
such grant.  All options under the 2008 Plan are exercisable at times
as determined by the board of directors, not to exceed 10 years from the date of
grant.  To date, no options have been granted under the 2008
Plan.





9.        
  Income taxes





The
Company recognizes deferred tax assets and liabilities for temporary differences
between the financial reporting and tax bases of its assets and
liabilities.  Deferred tax assets are reduced by a valuation allowance
when deemed appropriate. For 2008, 2007 and 2006 there are no material
differences between income tax expense and the amount computed by applying the
federal statutory income tax rate.





At
December 31, 2008, the Company has a net operating loss carryforward for federal
tax purposes of approximately $6,580,000, which, if unused to offset future
taxable income, will begin to expire in 2023.  The Company also has a
California net operating loss carryforward of approximately $6,584,000 which, if
unused to offset future taxable income, will begin to expire in
2013.


F-21





9.        
  Income taxes (continued)





The
Company had deferred tax assets of $2,869,000 at December 31, 2008, relating to
its net operating loss.  A valuation allowance has been recognized to
offset the entire related deferred tax asset due to the uncertainty of realizing
the benefit.  The valuation allowance increased $372,000 in 2008 and
$1,059,000 in 2007, primarily related to the net taxable loss and to change in
estimate for certain deductions.





10.       
Commitments and contingencies





Lease


The
Company leases its office space in Huntington Beach, California and Toronto,
Canada on a month-to-month basis.  Effective August 1, 2008, the
Company also leases three rooms in a medical clinic in Salt Lake City, Utah on a
month-to-month basis.  Additionally, effective October 2008, the
Company leased office space in Toronto, Canada on a month-to-month basis.
Effective December 9, 2008, the Company entered into a General Services
Agreement with Roy Bonnell and Associates  to lease 2 office spaces in
Montreal, Canada.  Under the terms of the agreement, the lease
payments for 2009 for 2 offices are deemed to be paid in full against a payment
of 342,858 shares of common stock to Roy Bonnell and Associates; however, if
additional office space is required, an escalation agreement goes into effect.
During all of 2006 and a portion of 2007, the Company leased space in Quebec,
Canada as well.  Total rent expense charged to operations totaled
$42,811 in 2008, $58,803 in 2007 and $45,295 in 2006.





11.       
Subsequent events (unaudited)





Apartment
lease


Effective
January 1, 2009, the Company entered into a short term lease for apartment space
in Montreal, Canada.  Monthly rent will be CD$1,300 through April 30,
2009.





Private
placement


In March
2009, the Board of Directors authorized a private placement to sell up to
500,000 units of the Company’s common stock and Series A warrants at $.30 per
unit.  Each unit shall be comprised of one share of the Company’s
common stock and one Series A warrant.  To date, 200,000 units have
been sold for total proceeds of $60,000.





Stock
issuance


On
February 3, 2009 the Company issued 500,000 shares of its common stock in
exchange for a two year promissory note with 3974715 Canada Ltd.  The
note bears interest at 5%.





In
December 2008, the Company issued a total of 1,300,000 shares of the Company’s
common stock to two consultants and a related party for consulting
services.  Under the terms of the consulting agreements, the vendors
had the ability to earn an additional 1,000,000 shares upon reaching a certain
milestone defined in the agreements.  All shares issued pursuant to
the consulting agreements were subject to resale restrictions under Rules 504
and 505, Regulation D of the Securities Act of 1933.





In
February 2009, the agreements were amended whereby the 1,000,000 additional
shares were issued immediately to the vendors however the resale restrictions
were amended to reflect Regulation S of the Securities Act of 1933 (Rules
Governing Offers and Sales Made Outside the United States Without
Registration).  The 1,300,000 shares, issued in December 2008 under
Regulation D, were returned to the Company to be held until April 30,
2009.  If a certain milestone is not met by April 30, 2009, the
vendors have agreed to have the 1,300,000 shares cancelled and returned to the
Company.  If the milestone is met, the shares will be returned to the
vendors.





In June
2008, the Company entered into a two year consulting agreement with a related
party.  Payment on this contract was 500,000 Series C warrant to
purchase 500,000 shares of the Company’s common stock.  In March 2009,
this contract was extended for an additional year in exchange for 250,000 shares
of common stock.


F-22





11.      
 Subsequent events (unaudited) (continued)





Loans from related
parties


On
February 20, 2009, the Company borrowed a total of $25,000 from MPR Health
Systems, Inc.  This loan, evidenced by a short-term promissory note
issued on February 20, 2009, bears interest at 10% per annum and matures on May
20, 2009.  MPR Health Systems, Inc. was also granted 25,000 Series C
common stock purchase warrants to purchase 25,000 shares of common stock at
$1.25 per share until September 1, 2011.  The fair value of the
warrants using the Black-Scholes valuation method will be reflected as a
discount on the loans and will be amortized over the extended life of the loans
as interest expense.





On April
2, 2009, the Company borrowed a total of $20,000 from MPR Health Systems,
Inc.  This loan, evidenced by a short-term promissory note issued on
April 2, 2009, bears interest at 10% per annum and matures on July 2,
2009.  MPR Health Systems, Inc. was also granted 20,000 Series B
common stock purchase warrants to purchase 20,000 shares of common stock at
$1.00 per share until December 31, 2009.  The fair value of the
warrants using the Black-Scholes valuation method will be reflected as a
discount on the loans and will be amortized over the extended life of the loans
as interest expense.





Other


In
February 2009, the Company’s common shares were accepted for trading on the
Frankfurt Stock Exchange under the ticker symbol "0IM". The International
Security Identification Number (ISIN) number is US45257K1007.




F-23


Item 15. Exhibits and Financial
Statement Schedules.





Exhibit
      No.
                  
                  Description3.2
      (1)
                  
                  Bylaws
      of Impact Medical Solutions, Inc.10.3(1)
                  
                  Code
      of Ethics31.1(2)
                  
                  Certification
      of the Company’s Principal Executive Officer and Principal Financial and
      Accounting Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002,
      with respect to the registrant’s Amendment No. 1 to its Annual Report on
      Form 10-K for the year ended December 31, 2008.32.1(2)
                  
                  Certification
      of the Company’s Principal Executive Officer and Principal Financial and
      Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
      to Section 906 of the Sarbanes Oxley Act of
  2002.





(1)
            Filed as an exhibit to the
      Registrant’s Current Report on Form 8-K filed with the Commission on
      December 29, 2006 and incorporated by reference
    herein.


(2)
            Not deemed to be "filed" for
      purposes of Section 18 of the Exchange Act, or otherwise subject to the
      liability of that
section.





SIGNATURES





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





Date:  May
      7, 2009
              IMPACT
      MEDICAL SOLUTIONS, INC.By:
              /s/ Wayne CockburnWayne
      CockburnPresident
      Chief Executive Officer,Secretary,
      Treasurer and Interim ChiefFinancial
      Officer and a Member of theBoard
      of Directors (Principal ExecutiveOfficer
      and Principal Financial andAccounting
      Officer)




In accordance with the Exchange
Act,  this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.




Signature  Title  Date





/s/ Wayne D. Cockburn
                            
                            President,
      Chief Executive Officer,
                            
                            May
      7, 2009Wayne
      D. Cockburn
                            
                            Secretary,
      Treasurerand
      Interim Chief Financial Officer anda
      Member of the Board of Directors(Principal
      Executive Officer andPrincipal
      Financial Officer)/s/ Donald Paterson
                            
                            Chairman
      of the Board of Directors
                            
                            May
      7, 2009Donald
      Paterson/s/ George Angelidis
                            
                            Director
                            
                            May
      7, 2009George
      Angelidis/s/ Craig Lunsman
                            
                            Director
                            
                            May
      7, 2009Craig
      Lunsmans/ Stephen Schectman
                            
                            Director
                            
                            May
      7, 2009Stephen
      Schectman