**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-KSB**









**x**
            **Annual
                report under Section 13 or 15(d) of the Securities Exchange Act of
                1934**


**For
      the fiscal year ended December 31, 2006**




**o**
            **Transition
                report under Section 13 or 15(d) of the Securities Exchange Act of
                1934**


**For
      the transition period from ________** **to_________**




**Commission
      file number 000-52117**







**IMPACT
      MEDICAL SOLUTIONS, INC.**


**(Name
      of small business issuer in its charter)**









**Delaware**
            
            **20-5153331****(State
                or Other Jurisdiction of**
              **Incorporation
                or Organization)**
            
            **(IRS
                Employer**
              **Identification
                No.)**




**17011
                Beach Blvd., Suite 900, Huntington Beach, CA**
            
            **92647****(Address
                of Principal Executive Offices)**
            
            **(Zip
                Code)**





**(714)
      841-2670**


**(Issuer’s
      Telephone Number, Including Area Code)**





**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 pursuant to Section 12(b) of the Act:**Title
                of Each Class
            
            Name
                of Each Exchange on Which RegisteredCommon
                Stock, par value $0.001 per share
            
            None**Securities
                registered pursuant to Section 12(g) of the Act:**
            
            None




1





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. £




Check
      whether the issuer: (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 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. x Yes  No
£





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B is not contained in this form, and no disclosure will 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-KSB
      or any amendment to this Form 10-KSB £





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





The
      registrant had no revenues for the fiscal year ended December 31, 2006.





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. $7,653,465 based on a sales price of $1.00 per
      share on April 16, 2007.





As
      of
      April 16, 2007 there were 15,853,465 shares of the registrant’s Common Stock
      outstanding.





**DOCUMENTS
      INCORPORATED BY REFERENCE:**





None





Transitional
      Small Business Disclosure Format (check one): £ Yes  
      x No


2


**TABLE
      OF CONTENTS**


**PART
      I**




Page3Item
                1.
            
            Description
                of Business
            
            6Item
                2.
            
            Description
                of Property
            
            16Item
                3.
            
            Legal
                Proceedings
            
            16Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            
            16**PART
                II**Item
                5.
            
            Market
                for Common Equity and Related Stockholder Matters
            
            17Item
                6.
            
            Management’s
                Discussion and Analysis or Plan of Operation
            
            18Item
                7.
            
            Financial
                Statements
            
            38Item
                8.
            
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            
            38Item
                8A
            
            Controls
                and Procedures
            
            38Item
                8B
            
            Other
                Information
            
            39**PART
                III**Item
                9.
            
            Directors,
                Executive Officers, Promoters and Control Persons and Corporate
                Governance; Compliance with Section 16(a) of the Exchange Act
            
            40Item
                10.
            
            Executive
                Compensation
            
            40Item
                11.
            
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            40Item
                12.
            
            Certain
                Relationships and Related Transactions and Director
                Independence
            
            40Item
                13.
            
            Exhibits
                and Reports on Form 8-K
            
            40Item
                14.
            
            Principal
                Accountant Fees and Services
            
            40Signatures
            
            41




3


**FORWARD-LOOKING
      STATEMENTS** ****




Certain
      statements made in this Annual Report on Form 10-KSB are “forward-looking
      statements” (within the meaning of the Private Securities Litigation Reform Act
      of 1995) regarding the plans and objectives of management for future operations.
      Such statements involve known and unknown risks, uncertainties and other factors
      that may cause actual results, performance or achievements of Impact Medical
      Solutions, Inc. (the “Company”) to be materially different from any future
      results, performance or achievements expressed or implied by such
      forward-looking statements. The forward-looking statements included herein
      are
      based on current expectations that involve numerous risks and uncertainties.
      The
      Company’s plans and objectives are based, in part, on assumptions involving the
      continued expansion of business. Assumptions relating to the foregoing involve
      judgments with respect to, among other things, future economic, competitive
      and
      market conditions and future business decisions, all of which are difficult
      or
      impossible to predict accurately and many of which are beyond the control of
      the
      Company. Although the Company believes its assumptions underlying the
      forward-looking statements are reasonable, any of the assumptions could prove
      inaccurate and, therefore, there can be no assurance the forward-looking
      statements included in this Report will prove to be accurate. In light of the
      significant uncertainties inherent in the forward-looking statements included
      herein, the inclusion of such information should not be regarded as a
      representation by the Company or any other person that the objectives and plans
      of the Company will be achieved.







**PART
      I**




*As
      used in this annual report and unless otherwise indicated, the terms the
“Company,” “Impact Medical,” “we,” “us,” and “our” refer to Impact Medical
      Solutions, Inc., a Delaware corporation.*







**Item
      1.**  **Description
      of Business**





Impact
      Medical Solutions, Inc. was incorporated pursuant to the laws of the State
      of
      Nevada on October 20, 1997. Impact Medical purchased the assets of MPR Health
      Systems, Inc. on September 9, 2003, including a patent and trademark for the
      Muscle Pattern Recognition (MPR TM )
      System.
      Since December 2002, Impact Medical has been involved in the development and
      pre-market clinical testing of the MPR TM System.





MPR TM is a
      non-invasive, bio-mechanically and mathematically based evaluation that
      objectively discriminates between normal and abnormal musculoskeletal function
      as it relates to the back and neck. MPR TM analyzes
      patterns of muscle recruitment - the engagement of muscles in order to perform
      specific body movements. MPR TM test
      results provide detailed physiological information on muscle function that
      we
      believe can assist in the diagnosis and treatment of back and neck injuries
      and
      illness. The results of an MPR TM evaluation are presented in a comprehensive report that confirms normal muscle
      recruitment patterns or provides clinically relevant information on the nature
      and severity of dysfunction at each recorded muscle site.





We
      believe that the capabilities of the MPR TM System
      are unique and that the system addresses an unmet market need for an objective,
      evidence-based test that can be used by physicians and other health care
      professionals to better assess and manage patients with impaired musculoskeletal
      function. We believe the MPR TM System
      supports the cost-containment and risk management goals of insurers, workers
      compensation carriers, self-insured employers and managed care providers by
      providing objective information to help control health care costs associated
      with back and neck injuries.





Central
      to the MPR TM System
      is the fact that muscles in the back and the neck function as an interactive
      system. In order to determine whether a particular muscle is functioning
      normally or abnormally, it must be examined in concert with all of the other
      muscle groups required for the body to make specific movements. Muscles also
      interact in a predictable manner that can be expressed in a kinesiological
      relationship. These principles have been incorporated into the MPR TM test and
      form the basis of a unique system that measures the relationships among muscles
      in a given movement. By comparing relationships of muscles, MPR TM is able
      to normalize subjects against each other.





4


The
      standardized protocol of movements that make up the MPR TM test
      provides the ability to compare patients to a normal database. When patients
      replicate the same carefully administered, standardized movements performed
      by
      subjects in the normalized database, an accurate comparison can be made. Using
      a
      data analysis system (described in greater detail below), the comparison of
      a
      patient's patterns with those of the "normal" subjects in our database is the
      basis of the MPR TM System.





**Market
      Opportunity**




***Overview***


Back
      pain
      is one of the most common and significant musculoskeletal medical problems
      in
      the world. Back injuries are the leading cause of disability in the United
      States for people younger than 45 years of age and have been the most expensive
      health care problem for the 20 to 50 year-old age group. Eighty percent of
      adults seek care at some time for low back pain, and approximately one third
      of
      all disability costs in the United States are due to back disorders.





For
      most
      patients, the cause or causes of persistent back pain remain poorly understood.
      Although imaging procedures, including computerized tomography (CT) and magnetic
      resonance imaging (MRI), are able to accurately define structural anomalies,
      the
      correlation of these anatomic findings with physiology, back pain, and other
      clinical complaints is imprecise.





Back
      pain
      is classified into three categories based on the duration of symptoms:





•
            *Acute*back pain is arbitrarily defined as pain that has been present for
                six
                weeks or less.•
            *Sub
                acute*back pain has a six- to 12-week duration and


•
            *Chronic*back pain lasts longer than 12 weeks.





Acute
      low
      back pain is often recurrent, and most patients with a history of acute episodes
      eventually have more chronic symptoms. Also, persons who seek medical attention
      for back pain are thought to be at increased risk for chronic pain and
      disability. We believe patients in all three groups (acute, sub acute and
      chronic) are appropriate candidates for MPR TM .





***Key
      Market Trends***


Several
      trends have expanded the market for better solutions to diagnosing back
      problems:





•
            increased
                employer and payor aggressiveness in quantifying and seeking ways
                to
                reduce the economic toll of back injuries, one of the largest segments
                of
                health care costs;•
            growing
                awareness of the need for objective information in medical-legal
                injury
                litigation;


•
            need
                for measuring patient treatment effectiveness and managing patients
                to
                successful outcomes;•
            increased
                health care purchaser and provider attention to injury prevention;
                and,


•
            increased
                patient awareness of treatment
                alternatives.





We
      believe the convergence of these trends has magnified the large business
      opportunity to provide clinically proven tools to reduce the costs and improve
      the outcomes of patients with back pain.





***Target
      Markets for MPR*** **TM**


The
      target markets for MPR TM are
      large and include the following:




•
            Primary
                care physicians, who initially treat the majority of patients with
                back
                pain;•
            Specialists
                including neurologists, orthopedic surgeons, physical medicine and
                rehabilitation physicians (PM&R) and occupational medicine
                practitioners (occmed);


•
            The
                employer market;




5




•
            The
                Workers’ Compensation market;


•
            Heath
                Maintenance Organizations (HMOs);
                and,


•
            Insurance
                companies.




***Primary
      Care Physicians***


Primary
      care physicians typically include family practice physicians, internists,
      obstetricians, gynecologists, and pediatricians. As back pain is extremely
      common, these physicians actually see most of these private patients and often
      have extensive experience in treating acute back pain due to muscle
      dysfunctions.





Primary
      care physicians provide a non-invasive (non-surgical) approach and often utilize
      prescription medications to help reduce pain and inflammation, as well as using
      the services of physical therapists to assist in maintaining range of motion
      and
      muscle tone. Often, they may order a variety of spinal diagnostic procedures
      to
      more fully investigate the potential causes of persistent back and neck pain
      and
      refer patients to a specialist for further diagnosis and treatment.





***Specialists***


There
      are
      several areas of specialty medicine that we believe represent target markets
      for
      MPR TM .
      They
      include:





•
            *Neurologists*-
                A neurologist is a medical doctor who has trained in the diagnosis
                and
                treatment of nervous system disorders, which include diseases of
                the
                brain, the spinal cord, the nerves, and the muscles.•
            *Orthopedic
                Surgeons*-
                Orthopedic surgeons treat the surgical diseases, conditions and injuries
                of the bones, muscles and joints.


•
            *Physical
                Medicine and Rehabilitation*-
                Physical Medicine and Rehabilitation (PM&R), also called physiatry, is
                the branch of medicine that emphasizes the prevention, diagnosis
                and
                non-surgical treatment of disorders - including those of the
                musculoskeletal system - that may produce temporary or permanent
                impairment.•
            *Occupational
                Medicine*-
                Occupational Medicine is concerned with the treatment of patients
                with
                occupational and environmental illnesses and/or
                injuries.





***Employers***


We
      believe employers can directly benefit from reductions in the medical and income
      continuation costs due to better diagnosis and treatment of back problems.





The
      second component of this market - and a market segment unto its own - is the
      use
      of MPR TM as
      an
      occupational assessment tool to prevent injuries from occurring in the first
      place. For these employers, we believe screening new and veteran employees
      to
      identify those with positive MPR TM tests
      could improve job placement and identify high-risk groups for future injury
      that
      may benefit from back strengthening and flexibility exercises. This use of
      MPR TM as
      a
      predictive tool also blends well with the trend towards preventative
      medicine.





Additionally,
      the Company may look at other occupational medicine applications once
      MPR TM is
      fully
      tested for the back/neck.





***Workers’
      Compensation Market***


Work-related
      back and neck injuries - or musculoskeletal disorders - are caused or aggravated
      by the work environment. Work-related back and neck injuries can result in
      reduced worker productivity, inability to perform job tasks, work loss, and
      temporary or permanent disability.





We
      believe that Workers’ Compensation carriers stand to generate savings and
      improve their competitive market position through the adoption of the
      MPR TM technology.
      Although state laws vary, carriers are usually able to dictate or influence
      the
      sources of care for back problems, particularly in the crucial early period.
      Increasingly, managed care organizations provide workers’ compensation services
      through contractual relationships with physician groups. These organizations
      have the authority to recommend the incorporation of MPR TM into
      their assessment and treatment protocols.




6




***Health
      Maintenance Organizations (HMOs)***


HMOs
      contract with large medical groups to provide services under both health benefit
      and workers’ compensation plans. We believe the use of MPR TM can
      reduce the need for more expensive tests, reduce the number of physician and
      non-essential therapy visits, and assist physicians in recommending appropriate
      rehabilitative therapy. For this reason, we believe managed care organizations
      such as HMOs will be highly motivated to adopt the cost-effective
      MPR TM technology.





***Insurance
      Companies***


We
      believe the insurance companies are large targets because their reimbursement
      policies and practices have a profound impact on the medical diagnostic
      industry; they largely dictate pricing policies, methods of distribution and
      growth strategies. Insurance companies are also playing an increasingly
      important role as prescribers. We believe MPR TM **** has
      the
      potential to control direct medical costs and indirect costs such as lost time,
      disability claims, and litigation expenses and therefore we believe that
      MPR TM will
      be
      well received by insurers. We also believe they can become a major source of
      referrals, particularly in the workers’ compensation market.





MPR TM has the
      potential to serve all of the above markets. Because these markets are
      inter-related, we believe marketing simultaneously to all markets will reduce
      the sales cycle, sales and marketing costs and increase market penetration
      in
      each segment.





A
      common
      trend in each of the market segments is increased competition based not solely
      on price but also on health outcomes. For employers, reduced toll of back
      injuries translates directly into higher employee productivity and enhanced
      profits. Health care risk-bearing and delivery organizations find that clients
      are demanding better health outcomes, which in turn translate into higher
      productivity and profitability. National organizations such as the National
      Committee for Quality Assurance (NCQA) and the Joint Commission on Accreditation
      of Healthcare Organizations (JCAHO) are promoting outcome-oriented standards
      and
      requiring that organizations maintain records and report on outcomes in a
      growing range of health domains. In this environment, improved treatment of
      back
      injuries would provide a significant competitive advantage, with demonstrably
      improved health and economic outcomes. Given the potential use of MPR in
      measuring treatment outcomes, we believe our company is well positioned to
      benefit from the current health care environment.





**Our
      Product Offerings**





**The**  **MPR** **TM** **System**


The
      MPR TM System
      is a new clinical tool that performs a biomechanical and mathematical analysis
      of muscle function based on the simultaneous measurement of surface
      electromyography (sEMG) signals produced by 14 back and neck muscles during
      the
      execution of nine distinct body movements (an MPR TM Test). A
      patient's muscle contractions are digitized and processed by a data analysis
      system that generates graphic images of recognizable muscle activity patterns.
      A
      computer-assisted comparison of a patient's patterns with those produced by
      normal subjects in our database is then provided in a report that forms the
      basis of the MPR TM evaluation.





Technologists
      who perform MPR TM tests on
      patients are required to receive training from us. We do not believe that any
      special governmental or regulatory license, certification or approval is
      required for a Technologist to perform MPR TM Tests.





The
      MPR TM System
      consists of three components:





•
            the
                MPRTMData Acquisition Device


•
            the
                MPRTMData Analysis System


•
            the
                MPRTMReport




7




**The**  **MPR** **TM** **Data Acquisition Device**


The
      MPR TM Data
      Acquisition Device consists of a commercially available laptop computer system
      and a recording system equipped with a set of signal amplifiers. The amplifiers
      are attached to disposable skin-surface electrodes that pick up the electrical
      signals produced by the underlying muscles. The recording system and signal
      amplifiers are purchased from one of several suppliers in the market place.





The
      Data
      Acquisition Device is controlled by proprietary data collection software
      developed and owned by us. The software prompts and guides the Technologist
      (operator) in performing the required data collection tasks; it assists patient
      and operator in the execution of body movements by providing visual and audio
      prompts; and it provides a real-time graphical display of muscle activity.
      Another important feature of our software is its ability to provide a visual
      analysis of signal quality to the Technologist at each electrode/muscle site
      that recognizes and warns the operator of signal irregularities. The
      MPR TM Technologist
      is therefore assisted in completing successfully and reliably the data
      collection process, and is further guided in archiving and transmitting data
      for
      clinical analysis.





**The**  **MPR** **TM** **Data Analysis System**


The
      data
      collected during each MPR TM Test
      is
      processed by our computerized Data Analysis System which we maintain at a
      central location. Our proprietary analytical software assesses the quality
      of
      the MPR TM data and
      derives a number of complex measures which characterize the patient’s muscle
      recruitment patterns. These measures are then compared to their respective
      equivalent derivations from a normative database of non-injured and pain-free
      subjects. The results of the analysis are presented in an MPR TM Report,
      which is electronically transmitted to the referring health care
      provider.





**The
      MPR** **TM** **Report**


The
      MPR TM Report
      provides the health care provider with findings that we believe can assist
      in
      classifying the patient as normal or with a graded level of muscle dysfunction
      (abnormal). The MPR TM Report
      includes graphic, statistical and narrative representations of each muscle
      group’s recruitment patterns as compared to normative patterns and provides
      important information about the muscle groups examined. This information
      includes:





**Evidence
                of dysfunction:**
            Reports
                if muscle recruitment is normal or abnormal and, if abnormal, the
                location
                of the abnormality.**Conditions
                of occurrence and**
              **severity
                of dysfunction:**
            Reports
                the severity of the dysfunction as compared to normal, and the motor
                movement(s) in which a dysfunction was observed.**Patterns
                of abnormal muscle recruitment:**
            Provides
                a graphic presentation of the abnormal muscle patterns, including
                the
                patterns of abnormal muscle
                compensation.




**MPR** **TM**  **-
      based Clinical Evaluation**


The
      MPR TM Report
      and a health care provider clinical examination would form the basis of an
      MPR TM -
      based
      evaluation. At the discretion of the referring health care provider, patients
      may be retested to measure the progress of treatment and assist in making a
      decision for discharge. We believe several other critical questions are
      implicitly addressed when a patient is retested to ascertain if additional
      treatment is advisable. For example:





•
            Is
                the patient's muscle recruitment pattern now within the range of
                normal?•
            If
                not, have the patient’s recruitment patterns improved through
                treatment?


•
            Should
                the payer continue to fund further (or alternative)
                treatment?





These
      questions address issues of rehabilitation, short and long term disability,
      and
      the ability of a person to return to work.





***Manufacturing
      and Service***


We
      use
      commercially available data recording equipment and disposable electrodes from

      Thought Technology Ltd., (“ *Thought
      Technology* ”)
      an
      unaffiliated biofeedback and psycho-physiological instrument manufacturer based
      in Montreal, Canada. Thought Technology maintains all relevant manufacturing
      facility registrations and Quality System certifications (ISO 13485) for the
      sEMG/ECG equipment and disposables used in the MPR TM System,
      and is in full compliance with FDA, Health Canada and European (CE Marking)
      requirements.




8




We
      also
      plan on establishing and maintaining Quality System certification (ISO 13485)
      and establishment registrations in full compliance with FDA, Health Canada
      and
      European (CE Marking) requirements.




We
      perform the final assembly of the MPR TM Data
      Acquisition Device, which includes software installation on a commercially
      available laptop computer, system configuration, and final system testing.
      The
      MPR TM software
      is produced and released by us. We are also responsible for first-line service,
      including software support. Individual equipment is serviced by their
      corresponding manufacturers.





The
      MPR TM Data
      Analysis System (central application server and related software) is configured,
      maintained, and operated by us.





***Regulatory
      Requirements***


The
      Food
      and Drug Administration (FDA), under the authority of the Federal Food, Drug,
      & Cosmetic (FD&C) Act and the Safe Medical Devices Act (SMDA), regulates
      all medical devices manufactured, imported or offered for import in the United
      States. FDA’s Center for Devices and Radiological Health (CDRH) is charged with
      assuring the public that a device is safe and effective for its intended use.
      CDRH is also responsible for regulating the firms who manufacture, re-package,
      re-label, and/or import medical devices sold in the United States. In
      particular, Quality System requirements for medical device companies are set
      out
      in the Quality System Regulation (QSR), Part 820 of 21 CFR (Code of Federal
      Regulations).





The
      level
      of regulatory scrutiny is determined in good part by the class of a device.
      Device classification is risk-based, depending on the intended use of the device
      and its indications for use. Devices fall into three classes: Class I, II and
      III, with Class I devices requiring the least stringent controls and Class
      III
      devices requiring the most stringent controls. All classes of devices are
      subject to General Controls, which include establishment (manufacturing/assembly
      site) registration, device listing, labeling, and Good Manufacturing Practices
      (GMP) in compliance with the Quality System Regulation.





The
      FDA
      does not actually test devices, but through various committees, it reviews
      pre-marketing applications for devices to assure their safety and effectiveness
      in accordance with their classification. For the majority of diagnostic devices,
      a manufacturer placing a new device on the market must first demonstrate that
      the device is “substantially equivalent” to a legally marketed device that has
      already been classified (known as a “predicate” device). This is accomplished by
      submitting a Premarket Notification under Section 510(k) of the FD&C Act. If
      after the 510(k) review the new device is found to be “substantially equivalent”
to its “predicate” device, the FDA will allow the interstate sale of the new
      device.





Thought
      Technology’s sEMG equipment used in the Data Acquisition Device of the
      MPR TM System
      has already been cleared by the FDA under Section 510(k). We plan on seeking
      our
      own 510(k) approval from the FDA in 2007. We are working with experienced
      FDA/regulatory consultants and have already identified suitable predicate
      devices, which we believe are substantially equivalent to the MPR TM System.
      A 510(k) premarket notification to the FDA is planned for 2007 to approve the
      system for sale as an adjunct diagnostic device. We anticipate additional
      performance and marketing claims will be filed with the FDA after the completion
      of our clinical studies - the results of which we believe will determine the
      degree of clinical utility for the MPR TM test as
      a diagnostic tool in its own right.




***Reimbursement
      for MPR*** **TM** **-
      CPT Coding**


When
      billing insurance companies for services like MPR TM ,
      health
      practitioners use “codes”. Reimbursement claims require the use of two coding
      systems: one that identifies the patient's disease or medical condition (the *International
      Classification of Diseases, 9th Revision, Clinical
      Modification,* or
      ICD-9-CM, codes) and another that describes the procedures, services or supplies
      a practitioner provides to their patients (the *Current
      Procedural Terminology,* or CPT,
      codes).




9




CPT
      coding was developed by the American Medical Association (AMA) in 1966 in
      response to the increasing need for standardized terminology and clarity so
      that
      physicians and other health care providers could describe their work for
      purposes of billing health insurers. CPT is also used for administrative
      management purposes such as claims processing and developing guidelines for
      medical care review.





The
      process for requesting a new CPT code is well defined and the AMA has developed
      a formal process for evaluating coding suggestions. Requests are sent to the
      CPT
      Editorial Panel and reviewed by appropriate members of the CPT Advisory
      Committee. Coding proposals must contain detailed information on the procedure
      described, including a clinical vignette of the typical patient and, if a
      surgical procedure, an operative report. Copies of peer-reviewed articles
      published in U.S. journals describing the safety and effectiveness of the
      procedure must also be included.





MPR TM has
      been
      reimbursed under a general CPT code for “Alternative Neuromuscular Disorders”
(Code #95999). We believe that to obtain broad acceptance of the MPR TM System
      with health care practitioners, it may be important for us to obtain a more
      specific CPT code for the test than Code #95999. We are working with a leading
      specialized consulting firm that provides financial and regulatory services
      to
      companies like ours and we expect to complete a thorough analysis of this issue
      before a decision is made regarding a specific reimbursement code.




**Patents
      and Trademarks**


Our
      technology is protected by the following patent:





**Patent**
            **Information**
            **Dates**
            **Status**
            **US
                Serial**Muscle
                Pattern Recognition
            Full
                application
            August,
                2001
            Approved
            6,280,395





Our
      Muscle Pattern Recognition patent protects the *method* for
      determining muscle dysfunction of a subject; the *system* for
      determining muscle dysfunction of a subject; the *computer
      readable medium having stored instructions* (computer programs) for analyzing the muscle dysfunction of a subject; a *muscle
      dysfunction evaluation network* (data
      collection, analysis, reporting and communications links) for determining muscle
      dysfunction of subjects; and a *muscle
      dysfunction report* .





We
      have
      not applied for patent protection for the MPR technology in any country other
      than the United States, although we anticipate doing so if and when any U.S.
      patents are issued.





**Competition**


The
      market for our solutions is very competitive and is constantly changing. Our
      competitors vary in the size and scope of the products and services they offer.
      We may encounter competition from a number of sources, including:





***Myosymmetries
      International Inc.***


Myosymmetries
      International is a privately-owned, Canadian-based pain treatment clinic
      specializing in the application of integrated psychological, massage and
      physical therapies for the treatment of chronic musculoskeletal pain resulting
      from either traumatic or repetitive strain injuries. We believe the bulk of
      their research is applied to patients who have been diagnosed with Fibromyalgia
      or Chronic Fatigue Syndrome although some of their work involves the evaluation
      of patients with lower back pain. The focus of their research into back pain
      appears to involve comparing sEMG signals between one side of the lower back
      versus the other (i.e. left side versus right side). We believe this approach
      is
      limiting because it does not look at the entire musculoskeletal system of the
      back and the neck.





***Biotonix
      Inc.***


Biotonix
      is a Canadian-based health care company that has developed a non-invasive
      technology for assessing musculoskeletal form and function called BioPrint.
      BioPrint involves the placement of a number of reflective markers on the
      patient, taking four digital photographs of the patient, and comparing the
      digital results against an expert system. The system does not involve the use
      of
      sEMG and appears to be based more on bone structure than muscle physiology.
      The
      primary purpose of BioPrint is to analyze posture and to use certain exercises
      to correct any postural deviations. The primary market for BioPrint appears,
      at
      this time, to be the chiropractic market. Although we do not believe that the
      Biotonix technology can compete directly with MPR TM ,
      it is
      mentioned here because it is used in the assessment of musculoskeletal form
      and
      function.




10




***Precision
      Biometrics, Inc.***


Precision
      Biometrics, Inc. is a private U.S. company that manufactures and sells
      electrophysiological equipment including a static sEMG system called the
      MyoVision 8000. The MyoVision 8000 appears to be used primarily by chiropractors
      to evaluate patients with back problems. The system looks at left side of the
      back versus the right side and the results are displayed on a screen for the
      patient to view. We believe the results have limited value because it appears
      they can be affected by the improper placement of the hand-held units, the
      cleaning fluid used on the terminals, patient sweat and technician error.
      Precision Biometrics reports that the underlying technology has been undergoing
      research for over 13 years and has not yet been subjected to peer review or
      any
      independent clinical trials.





***Noromed***


Noromed
      is the medical division of Myotronics-Noromed, Inc., a private U.S. dental
      electronics company. Noromed designs and manufactures sEMG, Dynamic Range of
      Motion and muscle testing devices for evaluation and rehabilitation applications
      in physical medicine, physical therapy, chiropractic and university research.
      Noromed believes their sEMG instrumentation has additional applications as
      a
      therapeutic device in muscle re-education. i.e. treatment of stroke patients
      and
      treatment of injured muscles.





We
      believe Noromed has two products that may be viewed as competitive. The first
      is
      a sEMG device and the other is a Dynamic Range of Motion device. The sEMG device
      is used to compare one side of the back to the other (i.e. right side versus
      left side) and can be used as either a hand-held device or as a patient-mounted
      device. As a hand-held device, the results from the sEMG equipment may be viewed
      as subjective because placement of the electrodes is at the discretion of the
      technician doing the test. As a patient-mounted device, the sEMG device is
      limited to collecting signals from the lower back and the results are measured
      against a patient’s earlier test rather than a normative database. Noromed’s
      Dynamic Range of Motion instrumentation is used to measure lumbar flexion
      extension and range of motion, We do not believe this is a direct competitor
      to
      MPR TM which
      measures muscle function.





We
      believe our MPR TM System
      offers the following advantages compared to our competition:





•
            Our
                research has been subjected to independent scientific peer review
                and
                published in highly regarded journals;•
            Our
                test is objective and not influenced by the
                Technician;


•
            We
                have independent clinical results to support our
                research;•
            We
                have a Medical Advisory Board that we believe is comprised of some
                of the
                leading back experts in North America;•
            We
                believe our business model blends well with the current cost-conscious
                health care market.





**Sales
      and Marketing**





***Overview***


We
      believe today’s health care environment in the U.S. is very complex, and the
      development and introduction of a new medical device such as MPR TM involves
      not just an FDA approval process, but overcoming significant reimbursement
      hurdles and complex commercial challenges associated with training and educating
      physicians, patients and payors.





We
      believe the traditional delivery of health care, when decision-making was based
      on the sole discretion of the treating physicians, has evolved toward a more
      financially based, protocol-driven medical care that is now known as
      evidence-based medicine. We believe this new healthcare paradigm has created
      new
      and complex relationships between all organizations that populate every point
      of
      the health care compass - integrated insurers, self-insured employers, managed
      care organizations, third party administrators, risk managers and physician
      networks. We believe complicated new relationships have evolved and must all
      be
      considered as part of the marketing effort of MPR TM .




11




***The
      Marketing Plan***


We
      believe there are three broad markets for MPR TM under
      which all other target markets fall. The three markets are the Major Medical
      market, the Workers’ Compensation market and the Medical/Legal market. Our
      initial target market for MPR TM is the
      Major Medical market because we believe successfully penetrating this market
      will allow us to reach the largest audience of potential users and referrers
      of
      the test.





**Major
      Medical Market**


The
      target markets for MPR TM within
      the medical profession include Neurologists, Orthopedic Surgeons, Physical
      Medicine and Rehabilitation Specialists (Physiatrists), Occupational Medicine
      Practitioners (OccMed), Primary Care Physicians (GPs) and Physical
      Therapists.





For
      MPR TM to be
      accepted by this market we believe there are three important conditions that
      must be met:





1.
            The
                clinical effectiveness of MPRTMmust be demonstrated in independent clinical studies and the results
                must
                be published in one or more peer-reviewed journals;2.
            Medical
                professionals must be certain that they will be reimbursed if they
                prescribe the test; and,


3.
            There
                must be minimal disruption in the way physicians treat their patients
                when
                introducing MPRTMinto their practice.




To
      meet
      the first condition, we have started an independent clinical trial of
      MPR TM at two
      North American sites with plans to expand to four. Patient recruitment to this
      trial is currently on hold and will remain so until we obtain further funding.





Integrated
      medical practices (physicians with rehabilitation capability) and independent
      rehabilitation hospitals and clinics were approached to participate in our
      clinical trial. Site selection was important and was ultimately based on three
      criteria:





1.
            The
                participating site should be, in our view, recognized as a leading
                center
                for the treatment of back and neck
                injuries;


2.
            Each
                site must meet certain commitments regarding patient recruitment;
                and,


3.
            Each
                site must have the potential of becoming an MPRTMcustomer after the trial has been
                completed.




We
      believe each of the four participating centers also has the potential to serve
      as a provider of the technical services (i.e. perform the MPR TM test)
      for potential new customers such as Workers’ Compensation members and local
      employers.




We
      believe successful completion of the clinical trial will allow us to receive
      all
      necessary regulatory bodies’ clearance for the U.S., Canadian and European
      markets. Concomitantly, we believe it will provide all necessary data for the
      preparation and submission of independent scientific papers to peer-reviewed
      journals and the participation in selected scientific and medical
      conferences.





Following
      the clinical trial, we intend to use the recognition and influence of our
      Medical Advisory Board (MAB) members to assist in the process of MPR TM methodology acceptance in the medical community at key scientific and medical
      conferences.





We
      anticipate target marketing will follow from industry and trade awareness
      campaigns to specific executions directed at specific customers and customer
      segments. We expect individual physicians and occupational clinic settings
      involved in Workers’ Compensation will be an early initiative under our
      marketing plan.




12




The
      Workers’ Compensation system is a legally-driven medical delivery system and we
      believe that many physicians do not wish to become involved in litigated matters
      and defer such cases to those specialists who are familiar with the compensation
      laws. It is this latter group of health care providers who take care of the
      overwhelming majority of such cases. The specialties of Occupational Medicine,
      Orthopedic Surgery, Neurology and Physical Medicine and Rehabilitation
      (Physiatry) are the most common care providers to the injured worker. It is
      to
      these groups of providers that we will initially concentrate our efforts.
      Through publications in medical journals, presentations at national medical
      conferences, lectures at smaller local medical societies and hospitals,
      discussions with selected teaching hospitals and universities, and the writings
      and endorsements of the members of our MAB members, we believe we can
      appropriately present the MPR TM technology to a wide audience of users. As the members of a medical community
      tend to speak freely amongst themselves about emerging technologies, we believe
      we can also expect a greater awareness of MPR TM from
      simple doctor-to-doctor word of mouth.





We
      believe that as the awareness of the MPR TM technology increases, it will be easier for a physician to request a test just
      as he/she can request an x-ray or an MRI. And because it is only the physician
      who can institute a rehabilitative treatment program for an injured patient,
      he/she can also order follow-up MPR TM testing
      to monitor a patient’s progress during their rehabilitative recovery phase and
      assist in bringing that case to closure.





At
      approximately the same time, we expect to contact and begin all of the necessary
      activity to join with other high-profile providers of healthcare and work with
      them as beta-sites to help spread the word and independently demonstrate the
      benefits of the MPR TM technology in the diagnosis and treatment of back and neck injuries.





Discussions
      have already begun with healthcare providers and large key national employers
      and insurers. They have all indicated their interest and intention to become
      involved with us both as users and buyers of the MPR TM services
      upon completion of the clinical trial and with our FDA clearance, if
      obtained.





Under
      these ‘joint ventures’, we believe that we will soon thereafter generate the
      support and data necessary to obtain our own CPT code (reimbursement code),
      a
      key, we believe, to more widely spreading the awareness and utilization of
      the
      MPR TM technology and a key, we believe, to meeting the second condition in obtaining
      acceptance by the medical profession.





Finally,
      we believe that it is well-known that health care providers, specifically
      medical doctors, use testing and examination methodologies that they have
      learned through their years of training and practice and that changing the
      way
      in which they treat their patients is a difficult challenge for companies like
      ours. To overcome this challenge (the third condition listed above), we expect
      to start contacting medical schools after the completion of the clinical trial
      to begin training those specialists that have been identified as the main
      prospective users of MPR TM (i.e.
      occupational medicine doctors, physiatrists, neurologists, and orthopedic
      surgeons). We intend to approach influential medical schools to start such
      a
      program that we believe will allow the MPR TM methodology to become a part of the training curriculum for the clinical
      evaluation of patients with non-surgical back and /or neck injuries.





**Workers’
      Compensation**





***History
      and Overview***


In
      almost
      all states, employers are required to purchase insurance for their employees
      from a workers' compensation insurance company - also called an insurance
      carrier. In some states, larger employers who are clearly solvent are allowed
      to
      self-insure or act as their own insurance company, while smaller companies
      (with
      fewer than three or four employees) are not required to carry workers'
      compensation insurance at all. When a worker is injured, his or her claim is
      filed with the insurance company - or self-insuring employer - who pays medical
      and disability benefits according to a state-approved formula.





The
      workers' compensation system provides replacement income, medical expenses
      and
      sometimes vocational rehabilitation benefits (i.e. on the job training,
      schooling or job placement assistance). An employee temporarily unable to work
      due to work-related injury is often entitled to receive two-thirds of their
      average wage up to a fixed ceiling. These payments are tax-free, so they would
      fare reasonably well in most states. Many employees are eligible for these
      wage-loss replacement benefits as soon as they've lost a few days of work
      because of an injury (i.e. back injury) that is covered by workers'
      compensation.




13




Although
      state laws vary, insurance carriers are usually able to dictate or influence
      the
      sources of care for back problems, particularly in the crucial early period.
      These organizations have the authority to recommend the use of MPR TM in
      their
      assessment and treatment protocols. We believe Workers' Compensation boards
      and
      self-insured companies stand to generate substantial savings by using
      MPR TM because
      of the enormous costs involved in lost productivity associated with employee
      time away from work.





There
      are
      many players involved in the many facets of the implementation of the workers'
      compensation system. They include:





•
            the
                medical profession in the broadest definition of 'medical'•
            insurance
                companies


•
            employers
                and employer organizations•
            injured
                workers


•
            labor
                unions and workers' organizations•
            attorneys
                and their organizations


•
            the
                state agencies that regulate and implement the workers’ compensation
                program




We
      believe all of the players are in some way linked to each other under the
      workers’ compensation system, and we believe each stakeholder represents a
      distinct market for MPR TM and
      requires a unique marketing approach. The one common element however that
      underscores each of these markets is that to be successful, we believe
      MPR TM must
      gain the acceptance of the medical profession and the insurance
      companies.





**Insurance
      Companies and Medical/Legal Market**


Addressing
      the needs of the insurance companies will be one of the other prime focuses
      of
      our marketing plan. Their reimbursement policies and practices may have a
      profound impact on our methods of distribution, our growth strategy and
      ultimately on our revenues because their reimbursement procedures largely
      dictate the pricing policies for our product. We believe that by addressing
      the
      needs of the insurance companies, we are also addressing the needs of the
      medical professionals who use MPR TM .
      Third
      party payers can be very controlling and onerous for physicians to deal with
      on
      a day-to-day basis and if we are successful in establishing clear reimbursement
      policies for MPR TM ,
      we
      believe physicians will be more likely to use the test because they may be
      saved
      the aggravation of fighting the insurance company over billing and payment
      for
      the test.





When
      billing insurance companies for services like MPR TM ,
      health
      practitioners use reimbursement codes. Reimbursement claims require the use
      of a
      coding system: one that identifies the patient's disease or medical condition
      and another that describes the procedures, services or supplies a practitioner
      provides to their patients (the Current Procedural Terminology, or CPT code).




The
      process for requesting a new CPT code is well defined by the American Medical
      Association which has developed a formal process for evaluating coding
      suggestions for products like MPR TM .
      In the
      past, MPR TM has
      been
      reimbursed under a general CPT code for “Alternative Neuromuscular Disorders”
(Code #95999). To obtain broad acceptance of the MPR TM System
      with insurance companies and other third party payers, we believe it may be
      necessary to obtain a more specific CPT code for the test than Code #95999.
      To
      help us achieve this goal, we are working with a leading specialized consulting
      firm that provides financial and regulatory services to companies that operate
      in regulated industries.





If
      we are
      successful in obtaining a CPT code for MPR TM ,
      the
      marketing emphasis with the insurance companies is likely to shift from proving
      the safety and effectiveness of MPR TM to
      demonstrating the economic benefits associated with using the test to identify
      and treat muscle dysfunction of the back and the neck. We believe this shift
      can
      be accomplished through one or more independent cost/benefit studies which
      we
      plan on beginning after the current clinical trial has been completed.




14




We
      believe the value of these cost/benefit studies to us is great because insurance
      companies are also playing an increasingly important role as prescribers. And
      because we believe MPR TM has the
      potential to control direct medical costs and indirect costs such as lost time,
      disability claims, and litigation expenses, we believe that MPR TM will be
      well received by insurers who have the potential to become a major source of
      referrals, particularly in the workers’ compensation market. The cost of these
      studies is expected to be less than those associated with the current clinical
      trial and may be absorbed by one or more potential customers.





**Other
      Target Markets**





**Employers**


Most
      employers are experience-rated for workers’ compensation. They can directly
      benefit from reductions in the medical and income continuation costs due to
      better discernment in the diagnosis and treatment of back problems. In addition,
      many employers retain significant financial risk for disability and lost wages
      as well as health care costs under health benefit plans they purchase on behalf
      of their employees and dependents. We believe these employers stand to reduce
      their health care costs by using MPR TM .





Self-insurance,
      in the context of workers’ compensation (WC), is a program under which an
      employer assumes the risk for the vast majority of its WC liabilities, and
      purchases some form of excess, or stop-loss coverage, designed to protect the
      employer from catastrophic losses. We will initially focus our sales and
      marketing efforts with those employers where we believe the MPR TM System’s
      strengths and economic advantages are most easily recognized and quantified.
      Some of these employers include previous users of MPR TM .





We
      will
      also target specific employers where MPR TM has
      the
      ability to serve as an occupational health assessment tool that we believe
      can
      be used not only to reduce the overall cost of health care and health care
      insurance but also as an assessment tool to prevent back injuries in those
      employees who may have a pre-existing condition. Examples of these employers
      include those companies working in the automobile manufacturing sector,
      airlines, ground transportation and heavy manufacturing.





Health
      Care Plan Administrators will also be targeted. These large organizations
      provide services to public and private self-insured employers. In their role
      to
      manage private plans, they can influence care strategies and/or treatment
      selection criteria, and they may have authority to commit funds for evaluation
      and treatment. Most of them have financial incentives to contain costs and
      limit
      payors' exposure related to ongoing treatment and disability.





Other
      target markets include firms servicing insurance companies, third-party plan
      administrators for self-insured employers, and risk and case management
      companies. We plan on targeting the medical care providers that service these
      markets such as hospitals, rehabilitation clinics, industrial clinics,
      diagnostic centers, physical therapists and MRI imaging centers. We feel this
      second group is also an important component of our strategy because, in addition
      to its capacity to prescribe MPR TM ,
      it may
      serve as a delivery vehicle for the test.


Health
      Maintenance Organizations (HMOs) are expected to be of vital importance to
      us
      due to their leadership role in the cost containment drive and the considerable
      market share they enjoy.





We
      will
      also attempt to recruit hospitals, independent clinics and diagnostic centers
      as
      evaluation centers for MPR TM evaluations. We believe these providers have the potential to become the
      delivery system for corporate clients and insurance companies. They have the
      ability to service the medical/legal market and may later become the sites
      for
      entry into the medical back pain and physical medicine market.





We
      also
      believe that the MPR TM technology can have a significant impact on the cost containment related to
      the
      conservative management of back and neck patients in the rehabilitation
      industries. The large increase in the cost of treatments over the last decade
      has resulted in more and more reimbursement being based on capitation. Under
      the
      capitation system, health care providers are awarded a fixed maximum in their
      fees for services. At this time, we believe there are no known objective
      measures that can monitor if a patient needs more treatment or not. We believe
      we can provide this objective evidence, and we are planning to build
      relationships with major national rehabilitation organizations that we believe
      will result in the establishment of best care practices for the delivery of
      back
      and neck rehabilitation protocols.




15




We
      also
      expect to enter into agreements with local and regional medical product
      distributors to reinforce the sales and marketing of MPR TM ,
      and to
      act as service providers to their customers and to other strategic partners.
      We
      believe that developing longer sales cycle opportunities will be accomplished
      through more comprehensive strategic marketing and foreign and domestic
      partnerships. We anticipate that this combination of efforts will establish
      the
      product awareness and acceptance.





**Regional
      Reference Centers**


We
      also
      plan on establishing several Regional Reference Centers to service specific
      geographic markets. These Centers are expected to include:





a.
            *Company-owned
                and operated Centers*-
                by establishing key company-owned and operated MPRTMCenters,
                we hope to demonstrate the economic and business models of high volume
                centers. We plan to do this prior to creating the value proposition
                of
                (b).b.
            *Franchised
                MPR**TM**Centers*-
                we plan for providing opportunities for entrepreneurs to own and
                operate
                certain Regional Reference Centers which we believe will provide
                us with
                additional revenue streams.




**Growth
      Through Partnership**


We
      are in
      the process of developing corporate alliances for the development, sales and
      marketing of MPR TM in
      a
      number of important markets. Initially, we are targeting strategic alliances
      with corporate partners to gain ‘footholds’ in specific markets outside the
      United States.





The
      second level of partnerships is expected to be with U.S. corporate partners
      to
      gain access to our key domestic markets. Together we hope to encourage pilot
      projects with carefully selected customers - employers, workers' compensation
      carriers, managed care organizations and physicians groups that deliver
      significant services under workers' compensation.





We
      have
      entered into discussions with a European-based company for the sales, marketing
      and distribution of MPR TM in
      the
      European Union (EU) but no agreement has been reached. We have also entered
      into
      discussions with another company for a similar deal in Canada but no agreement
      has been reached.





**Research
      and Development**


We
      continue to develop and enhance the features and performance of our technology
      with the goal of introducing new products based on our research and development
      activities. Two of our four employees and two of our three independent
      consultants devote at least a portion of their time to research and development
      activities.





**Employees**


We
      have
      four full-time employees including one research and development employee, one
      medical and clinical employee and two administrative employees. Three of our
      employees are members of management. To the best of our knowledge, we are in
      compliance with local prevailing wage, contractor licensing and insurance
      regulations. None of our employees is represented by any collective bargaining
      agreement, and our relationship with our employees is good.




**Available
      Information**


Our
      website is www.impactmedsol.com . On
      our
      website we make available at no cost our annual reports on Form 10-KSB,
      quarterly reports on Form 10-QSB, current reports on Form 8-K and amendments
      to
      those reports filed or furnished as soon as reasonably practicable after we
      electronically file such material with, or furnish them to, the United States
      Securities and Exchange Commission (“SEC”). The information contained on our
      website is not a part of this annual report on Form 10-KSB.




16




**Item
                2.**
            **Description
                of Property.**


We
      lease
      approximately 200 square feet of office space at 17011 Beach Boulevard, Suite
      900, Huntington Beach, California, 92647 pursuant to a month-to-month lease
      which expires in March 2007. Our lease provides for an annualized rental of
      approximately $20,220 which is subject to adjustments every six months. The
      space can house approximately two staff. We believe that our facilities are
      adequate for our needs and that additional space is readily available should
      we
      need it.




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


We
      are
      not a party to any material legal proceedings and there are no material legal
      proceedings pending with respect to our property. We are not aware of any legal
      proceedings contemplated by any governmental authorities involving either us
      or
      our property. None of our directors, officers or affiliates is an adverse party
      in any legal proceedings involving us, or has an interest in any proceeding
      which is adverse to us.




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


None
      during the fourth quarter of the 2006 fiscal year covered by this report.




**PART
      II**




**Item
                5.**
            **Market
                for Common Equity and Related Stockholder Matters.**


There
      is
      no public market for the Company's Common Stock. As of April 16, 2007, there
      were 106 holders of record of our Common Stock.





**Dividends**


To
      date,
      we have neither declared nor paid any dividends on our common stock nor do
      we
      anticipate that such dividends will be paid in the foreseeable future. Rather,
      we intend to retain any earnings to finance the growth and development of our
      business. Any payment of cash dividends on our common stock in the future will
      be dependent, among other things, upon our earnings, financial condition,
      capital requirements and other factors which the board of directors deems
      relevant. In addition, restrictive covenants contained in any financing
      agreements entered into in the future may preclude us from paying any dividends.




**Item
                6.**
            **Management’s
                Discussion and Analysis or Plan of Operation.**





*The
      information set forth and discussed in this Management’s Discussion and Analysis
      or Plan of Operation is derived from the Financial Statements of Impact Medical
      Solutions, Inc. and the related notes thereto which are included as exhibits
      to
      this current report. The following information and discussion should be read
      in
      conjunction with such Financial Statements and notes. Additionally, this
      Management’s Discussion and Analysis or Plan of Operation constitutes
      forward-looking statements. We encourage you to review our “Cautionary Note
      Regarding Forward-Looking Statements” at the front of this current report, and
      our “Risk Factors” set forth above.*




**Overview**


We
      were
      formed on October 20, 1997 to pursue a business combination. We purchased the
      assets of MPR Health Systems, Inc. on September 9, 2003, including a patent
      and
      trademark for the Muscle Pattern Recognition (MPR TM )
      System.
      On December 27, 2006, we entered into a Plan and Agreement of Merger (the
“Merger Agreement”) with Freedom 1, Inc. (“Freedom 1”), a “blank check company,”
as defined under the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”). Since December 2002 and continuing after the Merger, we have been
      involved in the development and pre-market clinical testing of the MPR System.





**Plan
      of Operations**





In
      the
      next 12 months, we will strive to implement our business strategy described
      in
      Item 1. Description of Business included in this Annual Report on Form 10-KSB.




17




During
      the years ended December 31, 2006 and 2005, we incurred a net loss of $2,077,147
      and $1,496,992, respectively. We are in the development stage and have not
      earned any revenue since our inception. Current funds available to us will
      not
      be adequate for us to complete our clinical program. Therefore, we will need
      to
      raise additional funds in order to fully implement our business plan. We will
      attempt to raise approximately $1,500,000 in additional funds over the next 12
      months through private placements. However, there can be no assurance that
      we
      will be successful in raising such additional funds. Regardless of whether
      our
      cash assets prove to be inadequate to meet our operational needs, we might
      seek
      to compensate providers of services by issuance of stock in lieu of
      cash.





Our
      continued operations therefore will depend upon our ability to raise additional
      funds through bank borrowings, equity or debt financing. There is no assurance
      that we will be able to obtain additional funding when needed, or that such
      funding, if available, can be obtained on terms acceptable to us. If we cannot
      obtain needed funds, we may be forced to curtail or cease our activities. We
      may
      encounter difficulty in obtaining these funds and/or credit lines. Moreover,
      even if additional financing or credit lines were to become available, it is
      possible that the cost of such funds or credit would be high and possibly
      prohibitive. See “Results of Operations -- Liquidity and Capital Resources” and
“Risk Factors -- **** We
      may
      need to raise additional capital in the future, but that capital may not be
      available.”





We
      continue to develop and enhance the features and performance of our technology
      with the goal of introducing new products based on our core research and
      development activities. Two of our four employees and two of our three
      independent consultants currently devote at least a portion of their time to
      our
      research and development activities. We anticipate increasing levels of
      resources will be dedicated to research and clinical development in the
      implementation of our business strategy within the next 12 months.





As
      our
      business grows, we anticipate hiring additional employees and retaining
      additional consultants.




**Critical
      Accounting Policies**


The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosures of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenue and expenses during
      the reporting period. We rely on historical experience and on other assumptions
      we believe to be reasonable under the circumstances in making our judgment
      and
      estimates. Actual results could differ from those estimates. We consider our
      critical accounting policies to be those that are complex and those that require
      significant judgments and estimates, including the following: recognition of
      revenue, expensing of software development costs and valuation of our intangible
      assets and the determination of the valuation allowance of our deferred income
      taxes.


Development
      Stage Company


We
      are a
      development stage company as defined in Statement of Financial Accounting
      Standards ("SFAS") No. 7, "Accounting and Reporting by Development Stage
      Enterprises." We are devoting substantially all of our present efforts to
      establish a new business, and our planned principal operations have not yet
      commenced. We have not generated any material revenues throughout our history
      and our ability to continue in business is dependent upon obtaining sufficient
      financing or attaining future profitable operations.





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


We
      consider 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 federally insured
      limits. We believe that our loss exposure is limited due to quality of the
      financial institutions that hold our deposits.





Income
      taxes of $800 and $2,400 were paid in 2006 and 2005, respectively. No interest
      payments were made in 2006 and 2005.





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.




18




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 our 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 FASB Statement No. 2, “Accounting for
      Research and Development Costs”.





Income
      Taxes


We
      account for income taxes under the liability method required by SFAS No. 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.





Stock-based
      Compensation


We
      have
      adopted the provisions of SFAS 123(r) and have measured compensation cost
      related to stock options issued to employees at their fair value using the
      Black-Scholes method. Stock based compensation issued to persons other than
      employees is also reflected in the financial statements at fair value computed
      using the Black-Scholes method.





Fair
      Value of Financial Instruments


We
      measure our financial assets and liabilities in accordance with accounting
      principles generally accepted in the United States. For certain of our financial
      instruments, including cash, accounts payable and accrued expenses, the carrying
      amounts approximate fair value due to their short maturities. The amounts shown
      for notes payable also approximate fair value because current interest rates
      offered to Impact Medical for notes payable of similar maturities are
      substantially the same.





**Results
      of Operations**





***Research
      and Development***


****** We
      expense our research and developments expenses. Research and development
      expenses consisted of costs associated with the design, development, testing,
      and enhancement of the MPR TM System.
      The primary costs are salaries, consulting fees and non-recurring software
      development costs. Research and development expenses increased slightly to
      $212,060 in 2006 from $207,159 in 2005 primarily due to the ongoing work in
      the
      development of our analytical software.




19




***Medical
      and Clinical***


Medical
      and clinical expenses consisted of costs associated with the preparation for
      the
      clinical trials for the MPR TM System.
      The primary costs are salaries, consulting fees, clinical trial protocol
      development costs and clinical research organization costs. Medical and clinical
      expenses decreased to $249,165 in 2006 from $558,556 in 2005 primarily due
      to
      the suspension of patient enrollment in our multi-center clinical trial. The
      clinical trial was suspended in 2005 due to lack of adequate funding. We are
      currently working on securing new financing so that we can re-commence the
      clinical trial in the second half of 2007. Should our funding efforts be
      unsuccessful, the re-commencement of our clinical program would remain on hold
      until such time as appropriate financial resources were available.





**Year
      Ended December 31, 2006 Compared to Year Ended December 31,
      2005**





We
      had no
      revenues for the year ended December 31, 2006 and no revenues for the year
      ended
      December 31, 2005.


Direct
        costs for the year ended December 31, 2006 were approximately $461,225 compared
        to approximately $765,715 for the same period in 2005, a decrease of
        approximately $304,490 or 39.8%. This was a result of the suspension of patient
        enrollment in our multi-center clinical trial. We expect that we will require
        approximately $1.5 million of cash for operating activities in 2007. This
        increase will be due primarily to the recommencement of the clinical trial
        for
        MPR system.


Indirect
      expenses, which include indirect labor, professional fees, advertising,
      consulting and general and administrative, increased approximately $681,064
      from
      approximately $687,851 for the period ended December 31, 2005 to approximately
      $1,368,915 for the same period in 2006. This represents an increase of 101.0%.
      This was a result of the issuance of common stock and warrants for professional
      services.





**Interest
      Income and Expense**


Interest
      expense for the year ended December 31, 2006 was $246,450 as compared with
      an
      interest expense of $42,759 for the year ended December 31, 2005. The increase
      in 2006 as compared to 2005 was primarily due to the issuance of warrants to
      extend the due date of debt.





**Liquidity
      and Capital Resources**





During
      the years ended December 31, 2006 and 2005, we incurred a net loss of $2,077,147
      and $1,496,992. We are in the development stage and have not earned any revenue
      since our inception. These factors have caused our auditors to express
      substantial doubt as to our ability to continue as a going concern.


At
        December 31, 2006, we had cash and cash equivalents of $10,907 on hand. We
        utilized cash of approximately $989,036 in the period ended December 31,
        2006
        compared to $1,104,915 for the same period ended December 31, 2005. The cash
        used in operating activities in 2006 is lower than 2005 due to the suspension
        of
        our patient enrollment in our multi-center clinical trial. We have funded
        our
        operations primarily through private placements of equity securities. In
        2006,
        we raised gross proceeds of approximately $517,305 through a private placement
        of 517,305 units at a price of $1.00 per unit, each unit consisting of one
        share
        of common stock and one Series B Warrant. Each Series B Warrant provides
        the
        holder thereof the right to purchase one share of common stock for $1.00
        at any
        time prior to December 31, 2009. In 2005, we raised gross proceeds of $1,045,000
        through private placements of 1,045,000 units at a purchase price of $1.00
        per
        unit, each unit consisting of one share of common stock and one Series B
        Warrant. The costs relating to the units sold in 2005 totaled $52,689.


We
      will
      need to generate significant additional revenue to support our projected
      increases in staffing and other operating expenses, which we cannot give any
      assurance we will be able to accomplish. If we are unable to generate increased
      revenue, it may be necessary for us to significantly reduce expenses or raise
      additional capital to stay in business. Although we believe the additional
      capital we will require will be provided through increased revenue, we cannot
      assure you that we can generate sufficient revenue to maintain projected
      operating levels. Accordingly, we may need to try to secure additional equity
      or
      debt financing which we cannot assure you would be available to us at prices
      that would be acceptable. Our failure to generate such revenue, reduce expenses
      or obtain necessary financing could impair our ability to stay in business.
      See
“Risk Factors -- **** We
      may
      need to raise additional capital in the future, but that capital may not be
      available.”





20




**RISK
      FACTORS**





*You
      should carefully consider the risks described below before making an investment
      decision in our securities. These risk factors are effective as of the date
      of
      this Form 10-KSB and shall be deemed to be modified or superseded to the extent
      that a statement contained in our future filings incorporated herein by
      reference modifies or replaces such statement. All of these risks may impair
      our
      business operations. The forward-looking statements in this Form 10-KSB and
      in
      the documents incorporated herein by reference involve risks and uncertainties
      and actual results may differ materially from the results we discuss in the
      forward-looking statements. If any of the following risks actually occur, our
      business, financial condition or results of operations could be materially
      adversely affected.*





**We
      are a development stage company with a limited operating history and no
      revenues.**


As
      a
      development stage company, our operations are subject to all the risks inherent
      in launching a new business enterprise, in developing and marketing a new
      product or service, and in establishing a name and a business reputation. The
      likelihood of our success must be considered in light of problems, expenses,
      difficulties and delays frequently encountered in converting prototype designs
      into viable production designs, and in achieving market acceptance with a new
      type of product or service. We have had no product revenues to date, have
      operated at a loss since inception, and will likely sustain operating losses
      for
      an indeterminate time period. There can be no assurance that we will ever
      generate material revenues or that we will ever be profitable.





**We
      may need to raise additional capital in the future, but that capital may not
      be
      available.**


During
      the years ended December 31, 2006 and 2005, we incurred a net loss of $2,077,147
      and $1,496,992, respectively. We are in the development stage and have not
      earned any revenue since our inception. Current funds available to us will
      not
      be adequate for us to complete our clinical program. Therefore, we will need
      to
      raise additional funds in order to fully implement its business plan. We will
      attempt to raise approximately $1,500,000 in additional funds over the next
      12
      months through private placements. However, there can be no assurance that
      we
      will be successful in raising such additional funds. Regardless of whether
      our
      cash assets prove to be inadequate to meet our operational needs, we might
      seek
      to compensate providers of services by issuance of stock in lieu of
      cash.





Our
      continued operations therefore will depend upon our ability to raise additional
      funds through bank borrowings, equity or debt financing. There is no assurance
      that we will be able to obtain additional funding when needed, or that such
      funding, if available, can be obtained on terms acceptable to us. If we cannot
      obtain needed funds, we may be forced to curtail or cease our activities. We
      may
      encounter difficulty in obtaining these funds and/or credit lines. Moreover,
      even if additional financing or credit lines were to become available, it is
      possible that the cost of such funds or credit would be high and possibly
      prohibitive.





If
      additional shares are issued to obtain financing, current shareholders may
      suffer a dilutive effect on their percentage of stock ownership in the
      Company.





A
      large
      portion of our financing to date has been through the issuance of shares or
      through equity financing. There can be no assurances that we will become
      self-sufficient. Therefore, we may continue to issue shares to further the
      business, and existing shareholders may suffer a dilutive effect on the price
      of
      their shares as well as a loss of voting power in the Company.





**We
      operate in a new and uncertain market.**


Until
      now, muscle injuries have always been diagnosed and evaluated subjectively
      by
      physicians through physical examination. Accordingly, there is no established
      demand for a computer assisted procedure to assist in the diagnosis of such
      injuries, and it is difficult to predict if, and when, the procedure will gain
      wide acceptance by prescribers. A prerequisite to our success will be our
      ability to establish MPR TM as
      a
      standard medical practice for use in the diagnosis of muscle dysfunction. We
      believe it will take a minimum of three to five years for such awareness to
      be
      achieved, if it can be achieved at all. Factors that may affect market
      acceptance could include resistance to change, concerns over the lack of track
      record of the procedure, and the risk for insurance companies to use the results
      of the procedure to challenge or overrule the diagnostic or treatment decisions
      of a physician.




21




**We
      may not be able to protect important intellectual property, and we could incur
      substantial costs defending against claims that our products infringe on the
      proprietary rights of others.**


We
      currently hold one United States patent on the MPR TM technology.
      While we believe that we have a proprietary position for our product, we believe
      that our ability to be successful will be contingent on our ability to protect
      the MPR technology, its future developments and its know how. There can be
      no
      assurance, however, that this patent will provide substantial protection of
      the
      MPR TM technology
      or that its validity will not be challenged. We could incur substantial costs
      in
      prosecuting or defending patent infringement suits or otherwise protecting
      our
      intellectual property rights. While we have attempted to safeguard and maintain
      our proprietary rights, we do not know whether we have been or will be
      completely successful in doing so.





We
      presently have no patent protection of the MPR TM technology
      outside the United States.





**We
      have only developed a single product which has no sales. The failure of such
      product to achieve market acceptance would result in our having to raise
      additional funds for research and development for new
      products.**


Since
      our
      incorporation, we have been involved in the research and development of a single
      product: the Muscle Pattern Recognition System. The MPR TM System
      uses patented technology to analyze muscle function in the back and neck. To
      date, we have achieved no sales of this product and it has yet to achieve market
      acceptance. Unless we are able to successfully market its MPR TM System,
      we will need to raise additional funds to engage in the research and development
      of new products. We may be unable to raise additional funds on terms acceptable
      to us, if at all. We have a limited operating history and will continue to
      incur
      costs in launching our products.





**We
      may not be able to grow at a rapid pace.**


There
      is
      no established demand for the MPR TM System
      and we may be unable to create such a demand. We can not predict whether or
      not
      the MPR TM System
      will gain acceptance by doctors, chiropractors or other health professionals.
      In
      the event we are unable to create such acceptance, we will be unable to achieve
      significant revenues and may have to raise additional funds for research and
      development of additional products.





**Our
      management controls a substantial percentage of our stock and therefore has
      the
      ability to exercise substantial control over our affairs.**


As
        of the
        date of this Annual Report on Form 10-KSB, our directors and executive officers
        beneficially owned approximately 11,808,600 shares, or approximately 59.88%,
        of
        our outstanding common stock in the aggregate. Because of the large percentage
        of stock held by our directors and executive officers, these persons could
        influence the outcome of any matter submitted to a vote of our stockholders
        and
        resist any takeover bids, thereby precluding our stockholders from receiving
        a
        premium bid price on their common stock.


**The
      loss of our executive officers and certain other key personnel could hurt our
      business.**


Our
      success wholly depends upon the personal efforts and abilities of our executive
      officers, Wayne Cockburn, Alan Goldman and Steeve Asselin. The loss of or
      unavailability of the services of any one of these individuals would have a
      material adverse effect on our business prospects and/or potential earning
      capacity.





**We
      may not be able to hire and retain qualified personnel.**


Competition
      for qualified personnel in the healthcare industry is intense, and we may not
      be
      successful in attracting and retaining such personnel. Failure to attract
      qualified personnel could harm the proposed growth of our business. In addition,
      companies in our industry whose employees accept positions with competitors
      frequently claim that the competitors have engaged in unfair hiring practices.
      We may receive such notices in the future as we seek to hire qualified personnel
      and such notices may result in material litigation and related disruption to
      our
      operations.





**Because
      we became public by means of a reverse merger, we may not be able to attract
      the
      attention of major brokerage firms.**


There
      may
      be risks associated with our becoming public through a “reverse merger.”
Securities analysts of major brokerage firms may not provide coverage of us
      because there is no incentive to brokerage firms to recommend the purchase
      of
      our common stock. We cannot assure you that brokerage firms will ever want
      to
      conduct any secondary offerings on our behalf.




22




**Currently,
      there is no liquid trading market for our common stock, which may adversely
      impact your ability to sell your shares and the price you receive for your
      shares.**


There
      is
      currently no liquid trading market for our common stock. Outstanding shares
      of
      our common stock cannot be offered, sold, pledged or otherwise transferred
      unless subsequently registered pursuant to, or exempt from registration under,
      the Securities Act of 1933, as amended (the “Securities Act”) and any other
      applicable federal or state securities laws or regulations. Although we
      anticipate applying for approval to have trades in our common stock quoted
      on
      the OTC Bulletin Board, we cannot assure you that a liquid market for our common
      stock will ever develop.





**Our
      common stock may be deemed a “penny stock,” which would make it more difficult
      for our investors to sell their shares.**


Our
      common stock may be subject to the “penny stock” rules adopted under Section
      15(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
      The penny stock rules apply to companies whose common stock is not listed on
      the
      NASDAQ Stock Market or other national securities exchange and trades at less
      than $5.00 per share or that have tangible net worth of less than $5,000,000
      ($2,000,000 if the company has been operating for three or more years).





These
      rules require, among other things, that brokers who trade penny stock to persons
      other than “established customers” complete certain documentation, make
      suitability inquiries of investors and provide investors with certain
      information concerning trading in the security, including a risk disclosure
      document and quote information under certain circumstances. Many brokers have
      decided not to trade penny stocks because of the requirements of the penny
      stock
      rules and, as a result, the number of broker-dealers willing to act as market
      makers in such securities is limited. If we remain subject to the penny stock
      rules for any significant period, it could have an adverse effect on the market,
      if any, for our securities. If our securities are subject to the penny stock
      rules, investors will find it more difficult to dispose of our securities.





Furthermore,
      for companies whose securities are quoted on the OTC Bulletin Board, it is
      more
      difficult (1) to obtain accurate quotations, (2) to obtain coverage for
      significant news events because major wire services generally do not publish
      press releases about such companies, and (3) to obtain needed capital.





**Item
                7.**
            **Financial
                Statements.**


Our
      audited financial statements are included at the end of this Annual Report.




**Item
                8.**
            **Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure.**


None




**Item
                8A.**
            **Controls
                and Procedures.**




**Evaluation
      of Disclosure Controls and Procedures**


We
        carried out an evaluation, with the participation of our chief executive
        and
        chief financial officer, of the effectiveness, as of December 31, 2006, of
        our
        disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
        of the Securities Exchange Act of 1934). Due to the fact that we have a limited
        number of employees and are not able to have proper segregation of duties
        based
        on the cost/benefit of hiring additional employees solely to address the
        segregation of duties issue, we have concluded that our disclosure controls
        and
        procedures are not effective to ensure that information required to be disclosed
        by us in reports that we file or submit under the Exchange Act is recorded,
        processed, summarized and reported within the time periods specified in the
        Securities and Exchange Commission rules and forms. However, we have determined
        that the risks associated with the lack of segregation of duties are partially
        mitigated based on the close involvement of management in day-to-day operations.
        We have limited resources available. As we obtain additional funding and
        employ
        additional personnel, we will implement programs to ensure the proper
        segregation of duties and reporting channels.


23





In
      addition, our management with the participation of our principal executive
      officer and principal financial officer or persons performing similar functions
      has determined that no change in our internal control over financial reporting
      occurred during the fourth quarter of our fiscal year ended December 31, 2006
      that has materially affected, or is (as that term is defined in Rules
      13(a)-15(f) and 15(d)-15(f) of the Securities Exchange Act of 1934) reasonably
      likely to materially affect, our internal control over financial
      reporting.





**Item
                8B.**
            **Other
                Information.**


None.




**PART
      III**




**Item
                9.**
            **Directors,
                Executive Officers, Promoters and Control Persons and Corporate
                Governance; Compliance with Section 16(a) of the Exchange Act.**





The
      name,
      initial year of service as a director, age, and position or office of each
      member of our board of directors, is as follows:





**Name**
            
            **Director
                Since**
            
            **Age**
            
            **Position**Wayne
                D. Cockburn
            
            2003
            
            50
            
            President,
                Chief Executive Officer
              and
                DirectorDonald
                Paterson(1)(2)(3)
            
            2003
            
            74
            
            Chairman
                of the Board
              and
                DirectorGeorge
                Angelidis(4)(5)(6)
            
            2003
            
            61
            
            DirectorStephen
                Schectman(1)(2)(3)
            
            2004
            
            59
            
            Director





(1)
            Member
                of the Audit Committee since January
                2004.





(2)
            Member
                of the Compensation Committee since January
                2004.





(3)
            Member
                of the Corporate Governance Committee since January
                2004.





(4)
            Member
                of the Audit Committee and Stock Option Committee since January 2004.





(5)
            Member
                of the Nominating Committee since January
                2004.





(6)
            Member
                of the Compensation Committee since January
                2004.





24





The
      business experience, principal occupations and directorships in publicly-held
      companies of the members of our board of directors are set forth
      below.





**Wayne
      Cockburn - President and CEO, Director**


Mr.
      Cockburn joined Impact Medical in September 2003. Prior to Impact Medical,
      Mr.
      Cockburn was President at MPR Health Systems from January 2002 until September
      2003 and Executive Vice President from January 2000 until January 2002. From
      January 1995 to December 1999, Mr. Cockburn was Vice President, Business
      Development for Lorus Therapeutics, a public biotechnology company. Mr.
      Cockburn’s background includes strategic planning, corporate finance, corporate
      partnering, corporate governance and mergers and acquisitions. Mr. Cockburn
      has
      served on the board of directors of several private and public companies. Mr.
      Cockburn currently serves on the board of directors of MPR Health Systems,
      Inc.,
      Red Juggernaut, Inc. and Next Millennium Commercial Corp.





**Donald
      W. Paterson - President, Cavandale Corporation**


Since
      May
      1986, Mr. Paterson has been President of Cavandale Corporation, a company
      principally engaged in providing strategic corporate consulting to emerging
      growth companies within the technology and healthcare industries. Prior to
      founding Cavandale Corporation, Mr. Paterson was a Director and Vice-President
      of Wood Gundy Inc., a Canadian investment bank, from Jan. 1982 to Sep. 1988
      where he was directly involved in leading the firm’s activities in financing
      Canadian and international high technology companies. Mr. Paterson currently
      serves on the board of directors of Angoss Software Corp., EFOS Corp., Lorus
      Therapeutics Inc., Homeservice Technologies Inc., Inc., NewGrowth Corp.,
      Telepanel Systems Inc., Utility Corp. and Impatica Inc.





**George
      D. Angelidis - President and CEO, Hospital Network, Inc.**


Mr.
      Angelidis has been the President of Hospital Network, Inc., a partnership
      initially consisting of 6 Michigan-based hospitals, since 1998. Since that
      time
      Mr. Angelidis has expanded Hospital Network to 17 hospitals by adding 11 new
      hospital members and structuring a new entity, Hospital Network Healthcare
      Services L.L.C. He is directly responsible for the company's mobile MRI, bone
      density and TUMT services, mobile Occupational Wellness, and Medical Waste
      Disinfection programs. Additionally, the Network is providing medical record
      scanning and archiving, a regional PACs archiving service, and a member
      Telehealth service. Mr. Angelidis also manages three affiliated ventures for
      the
      fifteen healthcare partners.


Prior
      to
      joining Hospital Network, Mr. Angelidis spent eighteen years with Eastman Kodak
      Company where his most recent position was Senior Technical Sales Representative
      for the Health Sciences Division. Mr. Angelidis spent time with Picker
      International in Cleveland, Ohio as their Regional Sales Manager, Manager Group
      Accounts and Zone Sales Manager and was responsible for over five hundred
      million dollars in annual sales.





Prior
      to
      Picker International, Mr. Angelidis was Vice President of Sales and Manager
      at
      King’s Medical in Hudson, Ohio where he gained experience in capital equipment
      programs. Once introduced to mobile services Mr. Angelidis spent five years
      with
      Medical Consultants Imaging, Co. located in Cleveland as Vice President of
      Sales, Marketing and Business Development. Medical Consultants Imaging Co.
      was
      the first joint venture partner of Hospital Network in 1986.





**Stephen
      Schectman, Ph.D. - Healthcare Consultant**


Mr.
      Schectman joined Impact Medical on January 1, 2004. Immediately prior to joining
      Impact Medical, Mr. Schectman was a partner in NewHealth Solutions Group, a
      healthcare consulting firm. From June 1996 until February 2003, Mr. Schectman
      was Senior Director, Health Care Strategy Unit at Schering-Plough, and
      Vice-President, Business Development, Schering MyHealth Solutions, Inc. Mr.
      Schectman’s experience includes positions of Senior Management Associate of JRB
      Associates, Inc., Director, Washington Office for IMPACT Americas Ltd.,
      President, Alpha 1 Biomedicals, Inc., President, Research Data Corporation,
      President & CEO, Large Scale Biology Corporation, Executive Vice President
& Founder, the Encore Group, Consultant for Medco Containment Services,
      Inc., and Managing Partner for Hudson Bio Capital, Inc. He has served on the
      board of directors of several private and public companies.





25




Mr.
      Schectman holds a BS in Biology and General Science from Randolph-Macon College,
      a Doctor of Philosophy in Physiological Psychology from the University of
      Tennessee, and a Special Research Fellowship at Georgetown University of
      Medicine, Department of Medical Physiology.





There
      are
      no family relationships among the officers and directors.





**Audit,
      Nominating and Compensation Committees**





Donald
      Paterson, George Angelidis and Stephen Schectman constitute the Board of
      Director’s Audit, Nominating and Compensation Committees. The Board does not
      have an “audit committee financial expert” (as defined in Item 407(d)(5)(ii) to
      Regulation S-B promulgated under the Exchange Act) serving on its Audit
      Committee. The Board anticipates appointing a financial expert to its Audit
      Committee in the near future.





**Involvement
      in Certain Legal Proceedings**


During
      the past five years no director or executive officer of the company (i) has
      been
      involved as a general partner or executive officer of any business which has
      filed a bankruptcy petition; (ii) has been convicted in any criminal proceeding
      nor is subject to any pending criminal proceeding; (iii) has been subjected
      to
      any order, judgment or decree of any court permanently or temporarily enjoining,
      barring, suspending or otherwise limiting his involvement in any type of
      business, securities or banking activities; and (iv) has been found by a court,
      the Commission or the Commodities Futures Trading Commission to have violated
      a
      federal or state securities or commodities law.





**Information
      Concerning Non-Director Executive Officers**


The
      name,
      age, position or office, and business experience of each of our non-director
      executive officers is as follows:





**Name**
            
            **Age**
            
            **Position**Wayne
                D. Cockburn
            
            50
            
            President,
                Chief Executive Officer and Chief Financial OfficerAlan
                J. Goldman, MD
            
            61
            
            Vice
                President, Clinical and Medical AffairsSteeve
                Asselin
            
            44
            
            Vice
                President, Research and
                Development


**Alan
      J. Goldman, M.D. - Vice President, Clinical and Medical
      Affairs**


Dr.
      Goldman joined Impact Medical in September 2003. Prior to joining Impact
      Medical, Dr. Goldman was a practicing Board Certified neurologist for 31 years
      and an Associate Clinical Professor of Neurology at the University of California
      (Irvine). Through his practice, Dr. Goldman attained extensive experience with
      work-related injuries. He served as a neurology consultant to numerous insurers
      and served for four years on the Medical Advisory Board of Blue Cross. Dr.
      Goldman serves as an expert witness in Workers’ Compensation and general
      liability litigation matters and was recently appointed as a Medical Panel
      Chairperson for the State of Utah Labor Commission. His Workers’ Compensation
      appointments include Independent Medical Examiner for the State of California
      in
      1990, Qualified Medical Evaluator, State of California in 1991 and Agreed
      Medical Evaluator, State of California in 1992. Dr. Goldman is also a member
      of
      the American Academy of Neurology, the California Medical Association, the
      Utah
      Medical Association and a Past-President of the Orange County Neurological
      Society.





At
      Impact
      Medical, Dr. Goldman is responsible for all the clinical and medical affairs
      of
      the Company. In addition to being a key member of the management team, Dr.
      Goldman also serves as Chairman of the Company's Medical Advisory
      Board.





**Steeve
      Asselin - Vice President, Research and Development**


Prior
      to
      joining Impact Medical in September 2003, Mr. Asselin was the Director of the
      Biomechanics Lab at HealthSouth Inc. from September 2000 to December 2002.
      Mr.
      Asselin was responsible for the development of the Biomechanics Lab at
      HealthSouth to enhance and support the clinical programs and services of the
      company. From May 1994 until September 1999, Mr. Asselin was Research
      Coordinator at Spinex Medical Technologies. From February 1992 until March
      1994,
      Mr. Asselin was Director, Clinical and Spinoscopy Affairs with a physician
      group
      in Boston, Mass. Prior to that, Mr. Asselin was a Research Assistant at Spinex
      Medical Technologies from September 1989 until February 1992. Mr. Asselin is
      coauthor of six scientific publications dealing with back injuries and back
      function and author and/or coauthor of approximately 30 scientific
      abstracts.




26




**Information
      Concerning Non-Director, Non-Executive Medical Consultants**


The
      name,
      position or office, and business experience of each of our non-director,
      non-executive medical consultants is as follows:





**Medical
      Advisory Board**


The
      Company has established a Medical Advisory Board (MAB) whose members provide
      advice on the clinical, medical and scientific affairs of IMS, and who work
      with
      the Company on new product development. The MAB is chaired by Alan Goldman,
      MD,
      the Company’s Vice President of Clinical and Medical Affairs.





**Gunnar
      B.J. Andersson, MD, PhD**


Dr.
      Andersson is the Chairman of Orthopedic Surgery at the Rush University Medical
      Center in Chicago; managing partner of Midwest Orthopedic, and; past-President
      of the International Society for the Study of the Lumbar Spine. Dr. Andersson
      is
      also the Chairman of the American Academy of Orthopedic Surgeons Research
      Development Committee.





**V.
      Reggie Edgerton, PhD**


Dr.
      Edgerton is Professor and Vice Chairman of the Departments of Physiological
      Sciences and Neurobiology at the UCLA Medical Center, and; Project Program
      Director for the evaluation of neurophysiological changes in microgravity for
      NASA.





**Scott
      Haldeman DC, MD, PhD**


Dr.
      Haldeman is a Clinical Professor of Neurology at the University of California,
      Irvine and Adjunct Professor in the Research Division at the UCLA Medical
      Center. Dr. Haldeman is also Chairman of the Research Council of the World
      Federation of Chiropractic and a Past-President of the North American Spine
      Society.


**Steven
      L. Wolf, PhD**


Dr.
      Wolf
      is a Professor in the Department of Rehabilitation Medicine; a Professor in
      Geriatrics in the Department of Medicine, and; Associate Professor in the
      Department of Cell Biology at the Emory School of Medicine. Dr. Wolf is also
      a
      Professor in Health and Elder Care in the Nursing School at Emory and the Former
      Chair of the Advisory Council of the American Physical Therapy
      Association.





**Item
                10.**
            **Executive
                Compensation.**




**Summary
      Compensation Table**


The
      following table sets forth certain compensation information for: (i) each person
      who served as the chief executive officer of Impact Medical Solutions at any
      time during the year ended December 31, 2006, regardless of compensation level,
      and (ii) each of our other executive officers, other than the chief executive
      officer, serving as an executive officer at any time during 2006. The foregoing
      persons are collectively referred to in this Form 10-KSB as the “Named Executive
      Officers.” Compensation information is shown for fiscal years 2006 and
      2005.





Name/Principal
                Position
            
            Year
            
            Salary
              ($)
            
            Bonus
              ($)
            
            Stock
                Awards
              ($)
            
            Option
              Awards
              ($)
            
            Non-Equity
                Incentive Plan Compensation
              ($)
            
            Nonqualified
                Deferred Compensation Earnings
              ($)
            
            All
                Other Compensation
              ($)
            
            Total
              ($)Wayne
                D. CockburnPresident
                and
            
            
            2006
            
            
            90,000
            
            
            
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            90,000Chief
                Executive Officer
            
            
            2005
            
            
            90,000
            
            
            
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            90,000Alan
                J. Goldman, MDVice
                President,
            
            
            2006
            
            
            90,000
            
            
            
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            90,000Clinical
                and Medical Affairs
            
            
            2005
            
            
            90,000
            
            
            
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            90,000Steeve
                AsselinVice
                President,
            
            
            2006
            
            
            90,000
            
            
            
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            90,000Research
                and Development
            
            
            2005
            
            
            90,000
            
            
            
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            90,000




27




There
      are
      no employment agreements between Impact Medical Solutions and any executive
      officer of Impact Medical Solutions.





**Outstanding
      Option Awards at Year End**


The
      following table provides certain information regarding unexercised options
      to
      purchase common stock, stock options that have not vested, and equity-incentive
      plan awards outstanding at December 31, 2006, for each Named Executive
      Officer.




**Outstanding
                Equity Awards At Fiscal Year-End**


**Option
                Awards**
            
            **Stock
                Awards****Name**
            
            Number
                of Securities Underlying Unexercised Options
              (#)
              Exercisable
            
            Number
                of Securities Underlying Unexercised Options
              (#)
              Unexercisable
            
            Equity
                Incentive Plan Awards: Number of Securities Underlying Unexercised
                Unearned Options (#)
            
            Option
                Exercise Price ($)
            
            Option
                Expiration Date
            
            Number
                of Shares or Units of Stock That Have Not Vested (#)
            
            Market
                Value of Shares or Units of Stock That Have Not Vested ($)
            
            Equity
                Incentive Plan Awards: Number of Unearned Shares, Units or Other
                Rights
                That Have Not Vested (#)
            
            Equity
                Incentive Plan Awards: Market or Payout Value of Unearned Shares,
                Units or
                Other Rights That Have Not Vested ($)Wayne
                Cockburn
            
            
            1,060,200
            
            
            0
            
            
            0
            
            $
            0.25
            
            
            3/10/14
            
            
            0
            
            
            n/a
            
            
            0
            
            
            0Alan
                Goldman
            
            
            511,200
            
            
            0
            
            
            0
            
            $
            0.25
            
            
            3/10/14
            
            
            0
            
            
            n/a
            
            
            0
            
            
            0Steeve
                Asselin
            
            
            412,200
            
            
            0
            
            
            0
            
            $
            0.25
            
            
            3/10/14
            
            
            0
            
            
            n/a
            
            
            0
            
            
            0




**Director
      Compensation**


The
      following table sets forth the compensation paid to our directors for our fiscal
      year ended December 31, 2006, excluding Impact Medical Solutions’ Chief
      Executive Officer Wayne D. Cockburn, whose compensation is set forth in the
      Summary Compensation Table for Named Executive Officer, set forth
      above.





**Director
                Compensation**Name
            
            Fees
                Earned or Paid in Cash
              ($)
            
            Stock
                Awards(1)
              ($)
            
            Option
                Awards
              ($)
            
            Non-Equity
                Incentive Plan Compensation ($)
            
            Nonqualified
                Deferred Compensation Earnings
              ($)
            
            All
                Other Compensation ($)
            
            Total
              ($)George
                Angelidis(1)
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Donald
                Paterson(2)
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Stephen
                Schectman(3)
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0





28


(1)
            At
                December 31, 2006, Mr. Angelidis had exercisable options to purchase
                280,000 shares of our common stock at $0.25 per share. These options
                were
                granted in March 2004.


(2)
            At
                December 31, 2006, Mr. Paterson had exercisable options to purchase
                310,000 shares of our common stock at $0.25 per share. These options
                were
                granted in March 2004.




(3)
            At
                December 31, 2006, Mr. Schectman had exercisable options to purchase
                915,000 shares of our common stock at $0.25 per share. These options
                were
                granted in March 2004.







**Item
                11.**
            **Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholders Matters.**


The
      following table sets forth, as of April 16, 2007, certain information concerning
      the beneficial ownership of common stock by (i) each person known by the Company
      to be the owner of more than 5% of the outstanding Common Stock, (ii) each
      director, (iii) each Named Executive Officer, and (iv) all directors and
      executive officers as a group. In general, “beneficial ownership” includes those
      shares a shareholder has the power to vote or the power to transfer, and stock
      options and other rights to acquire Common Stock that are exercisable currently
      or become exercisable within 60 days. Except as indicated otherwise, the persons
      named in the table below have sole voting and investment power with respect
      to
      all shares shown as beneficially owned by them. The calculation of the
      percentage owned is based on 15,853,465 shares of Common Stock outstanding.
      The
      address of each of the directors and executive officers listed below is c/o
      Impact Medical Solutions, Inc., 17011 Beach Boulevard, Suite 900, Huntington
      Beach, California, 92647.




29




**Amount
                and Nature of**
              **Beneficial
                Ownership****Number**
            **Percent
                of Outstanding Shares**Wayne
                Cockburn
              23
                Valley Trail
              Newmarket,
                Ontario
              Canada
                L3Y 4V8
            9,080,200(1)(2)
            46.04%MPR
                Health Systems, Inc.
              23
                Valley Trail
              Newmarket,
                Ontario
              Canada
                L3Y 4V8
            8,000,000(1)
            40.56%Steeve
                Asselin
              930,
                rue de Calais
              Mont-Saint-Hilaire
                Quebec
              Canada
                J3H 4R1
            412,200(3)
            2.09%Alan
                Goldman
              9
                Sun Ridge Court
              Park
                City, Utah
              84060
            511,200(4)
            2.59%George
                Angelidis
              6212
                American Avenue
              Portage,
                MI
              49002
            380,000(5)
            1.93%Donald
                Paterson
              24
                Elgin Avenue
              Toronto,
                Ontario.
              Canada
                M5R 1G6
            8,510,000(6)(7)
            43.15%Stephen
                Schectman
              609
                West South Orange Avenue
              Unit
                4D
              South
                Orange, New Jersey 07079
            915,000(8)
            4.64%Vespa
                Family Entities
              1075
                Old Mohawk Road
              Ancaster
                Ontario
              Canada
                L9G 3K9
            1,510,000
            7.66%All
                Officers and Directors as a Group (6 people)
            11,808,600(9)
            59.88%




30







(1)
            Includes
                8,000,000 shares held by MPR Health Systems, Inc.; Mr. Cockburn may
                be
                deemed to share voting and investment power with respect to these
                shares
                by virtue of being a director and the chief executive officer of
                that
                corporation.


(2)
            Includes
                1,060,200 shares of common stock issuable upon the exercise of an
                option
                at $0.25 per share.


(3)
            Includes
                412,200 shares of common stock issuable upon the exercise of an option
                at
                $0.25 per share.


(4)
            Includes
                511,200 shares of common stock issuable upon the exercise of an option
                at
                $0.25 per share.


(5)
            Includes
                280,000 shares of common stock issuable upon the exercise of an option
                at
                $0.25 per share.


(6)
            Includes
                8,000,000 shares held by MPR Health Systems, Inc.; Mr. Paterson may
                be
                deemed to share voting and investment power with respect to these
                shares
                by virtue of being a director of that
                corporation.


(7)
            Includes
                100,000 shares of common stock and 310,000 shares of common stock
                issuable
                upon the exercise of an option at $0.25 per share held by Cavandale
                Corporation. Mr. Paterson is President and sole owner of Cavandale
                Corporation.


(8)
            Includes
                915,000 shares of common stock issuable upon the exercise of an option
                at
                $0.25 per share.


(9)
            Includes
                securities in footnotes (1), (2), (3), (4), (5), (6), (7) and (8).







**Item
                12.**
            **Certain
                Relationships and Related Transactions and Directors Independence.**


Immediately
      prior to the consummation of the Merger, the Company acquired an aggregate
      of
      100,000 shares of our common stock from Ms. Sourlis for an aggregate purchase
      price of $1.00 and 200,000 shares of our Common Stock.




**Item
                13.**
            **Exhibits.**





**Exhibit
                No.**
            
            **Description**3.1(1)
            
            Certificate
                of Incorporation, dated June 27, 20063.2
            
            Bylaws
                of Impact Medical Solutions, Inc.4.1(1)
            
            Form
                of common stock certificate10.1(1)
            
            Lease
                of the registrant’s principal executive offices, as
                amended10.2(1)
            
            Plan
                and Agreement of Merger by and between Freedom 1, Inc. and Impact
                Medical
                Solutions, Inc., dated December 27, 200610.3(1)
            
            Subscription
                Agreement by and between Freedom 1, Inc. and Impact Medical Solutions,
                Inc., dated December 27, 200621.1(1)
            
            Subsidiaries
                of the registrant




31




31.1
            
            Certification
                of the Company’s Principal Executive Officer and Chief Financial Officer
                pursuant to Section 302 of Sarbanes Oxley Act of 2002, with respect
                to the
                registrant’s Annual Report on Form 10-KSB for the year ended December 31,
                2006.32.1
            
            Certification
                of the Company’s Principal Executive Officer and Chief Financial 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.







**Item
                14.**
            **Principal
                Accountant Fees and Services.**


Our
      independent registered public auditors are Farber Hass Hurley & McEwen LLP.
      Their office is located at 888
      W.
      Ventura Blvd. Suite A, Camarillo, CA 93010 .





**Audit
      Fees**


The
      aggregate fees billed by the Company’s auditors for professional services
      rendered in connection with the audit of the Company's annual consolidated
      financial statements for the fiscal years ended December 31, 2005 and 2006
      were
      approximately $39,271 and $36,942, respectively.





**Audit-Related
      Fees**


The
      Company’s auditors did not bill any additional fees for assurance and related
      services that are reasonably related to the performance of the audit or review
      of the Company's financial statements.





**Tax
      Fees**


The
      aggregate fees billed by the Company's auditors for professional services for
      tax compliance, tax advice, and tax planning were $0 for each of the fiscal
      years ended December 31, 2005 and 2006.





**All
      Other Fees**


The
      aggregate fees billed by the Company's auditors for all other non-audit
      services, such as attending meetings and other miscellaneous financial
      consulting, for each of the fiscal years ended December 31, 2005 and 2006 were
      $0.




32


Impact
      Medical Solutions, Inc.


Financial
      Statements


Years
      ended December 31, 2006 and 2005


**Contents**




Index
                to Financial Statements
            
            F-1Report
                of Farber Hass Hurley & McEwen LLP, a PCAOB Registered Accounting
                Firm
            
            F-2Audited
                Financial StatementsBalance
                Sheet
            
            F-3Statements
                of Operations
            
            F-4Statements
                of Changes in Stockholders’ Equity
            
            F-5Statements
                of Cash Flows
            
            F-6Notes
                to Financial Statements
            
            F-7




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.,
        a
        Development State Company (the “Company”) as of December 31, 2006 and the
        related statements of operations, shareholders’ equity (deficit), and cash flows
        for each of the years ended December 31, 2006 and 2005, and October 20, 1997
        (date of inception) to December 31, 2006. 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 Impact Medical Solutions, Inc.
        as
        of December 31, 2006, and the results of its operations and its cash flows
        for
        each of the years ended December 31, 2006 and 2005, and October 20, 1997
        (date
        of inception) to December 31, 2006 in conformity with accounting principles
        generally accepted in the United States of America.
 
 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 & MCEWEN LLP
 
 Camarillo,
        California
 April
        16,
        2007
  F-2




Impact
      Medical Solutions, Inc.


Balance
      Sheet


December
      31, 2006


**December
                  31,****2006****ASSETS****Current
                  assets**Cash
                  and cash equivalents
              
              $
              10,907Prepaid
                  expenses
              
              
              5,009**Total
                  current assets**
              
              
              15,916**Furniture
                  and equipment, net of accumulated depreciation of
                  $29,146**
              
              
              41,165**Patent,
                  net of accumulated amortization of $98,040**
              
              
              401,960$
              459,041**LIABILITIES
                  AND SHAREHOLDERS' EQUITY (DEFICIT)****Current
                  liabilities**Loans
                  from director, net of unamortized discount of $19,548
              
              $
              100,945Accounts
                  payable
              
              
              166,473Accrued
                  interest
              
              
              29,898Accrued
                  vacation
              
              
              62,402Accrued
                  salaries, bonuses and other payroll related items
              
              
              214,100**Total
                  current liabilities**
              
              
              573,818**Long-term
                  debt**Note
                  payable
              
              
              34,613**Total
                  long-term debt**
              
              
              34,613**Commitments
                  and contingencies**
              
              
              -**Shareholders'
                  equity (deficit)**Preferred
                  stock, 10,000,000 shares authorized, $.0001 par value,no
                  shares issued and outstanding
              
              
              -Common
                  stock, 100,000,000 shares authorized, $.0001 par value,15,853,465
                  shares issued and outstanding
              
              
              1,585Additional
                  paid-in capital
              
              
              4,384,842Deferred
                  option and warrant costs
              
              
              (44,657
              )Deficit
                  accumulated during the development stage
              
              
              (4,491,160
              )**Total
                  shareholders' equity (deficit)**
              
              
              (149,390
              )$
              459,041




*See
      accompanying Report of Independent Registered Public Accounting Firm and notes
      to the financial statements.*




F-3





Impact
      Medical Solutions, Inc.


Statements
      of Operations


**Cumulative****from
                  inception****(October
                  20, 1997)****Year
                  ended December 31,**
              
              **to
                  December 31,****2006**
              
              **2005**
              
              **2006****Costs
                  and expenses:**Research
                  and development
              
              $
              212,060
              
              $
              207,159
              
              $
              586,508Medical
                  and clinical
              
              
              249,165
              
              
              558,556
              
              
              999,946General
                  and administrative
              
              
              1,368,915
              
              
              687,851
              
              
              2,604,672**Operating
                  loss**
              
              
              1,830,140
              
              
              1,453,566
              
              
              4,191,126**Other
                  income (expense):**Interest
                  expense
              
              
              (246,450
              )
              
              (42,759
              )
              
              (296,532
              )Interest
                  income
              
              
              20
              
              
              133
              
              
              275(246,430
              )
              
              (42,626
              )
              
              (296,257
              )**Loss
                  before provision for taxes**
              
              
              2,076,570
              
              
              1,496,192
              
              
              4,487,383**Provision
                  for taxes**
              
              
              577
              
              
              800
              
              
              3,777**Net
                  loss**
              
              $
              2,077,147
              
              $
              1,496,992
              
              $
              4,491,160**Basic
                  and diluted net loss per share**
              
              $
              (0.13
              )
              $
              (0.10
              )**Basic
                  and diluted weighted average number****of
                  common shares outstanding**
              
              
              15,426,710
              
              
              14,533,718




*See
      accompanying Report of Independent Registered Public Accounting Firm and notes
      to the financial statements.*


F-4




Impact
      Medical Solutions, Inc.


Statements
      of Changes in Stockholders’ Equity


Years
      ended December 31, 2006 and 2005




**Common
                  Stock**
              
              
              
              
              
              **Accumulated****Additional**
              
              **Deferred**
              
              **During
                  the**
              
              **Total****Number**
              
              
              
              **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 cashnet
                  of share issue costs of $86,096
              
              
              2,086,000
              
              
              1,043
              
              
              434,361
              
              
              -
              
              
              -
              
              
              435,404**Balance,
                  December 31, 2003**
              
              
              **13,086,000**
              
              
              **6,543**
              
              
              **831,611**
              
              
              **-**
              
              
              **(183,773**
              **)**
              
              **654,381**Net
                  loss for 2004
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (733,248
              )
              
              (733,248
              )Stock
                  option costs
              
              
              -
              
              
              -
              
              
              5,009
              
              
              -
              
              
              -
              
              
              5,009Warrants
                  issued with loans payable
              
              
              -
              
              
              -
              
              
              4,225
              
              
              -
              
              
              -
              
              
              4,225Shares
                  issued for cashnet
                  of share issue costs of $17,602
              
              
              895,000
              
              
              448
              
              
              561,950
              
              
              -
              
              
              -
              
              
              562,398**Balance,
                  December 31, 2004**
              
              
              **13,981,000**
              
              
              **6,991**
              
              
              **1,402,795**
              
              
              **-**
              
              
              **(917,021**
              **)**
              
              **492,765**Net
                  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 cashnet
                  of share issue costs of $52,689
              
              
              1,045,000
              
              
              522
              
              
              991,789
              
              
              -
              
              
              -
              
              
              992,311**Balance,
                  December 31, 2005**
              
              
              **15,086,160**
              
              **$**
              **7,543**
              
              **$**
              **2,710,056**
              
              **$**
              **(114,673**
              **)**
              **$**
              **(2,414,013**
              **)**
              **$**
              **188,913**Shares
                  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**
              **)**





*See
      accompanying Report of Independent Registered Public Accounting Firm and notes
      to the financial statements.*




F-5




Impact
      Medical Solutions, Inc.


Statements
      of Cash Flows


**Cumulative****from
                  inception****(October
                  20, 1997)****Year
                  ended December 31,**
              
              **to
                  December 31,****2006**
              
              **2005**
              
              **2006****Cash
                  flows from operating activities:**Net
                  loss
              
              $
              (2,077,147
              )
              $
              (1,496,992
              )
              $
              (4,491,160
              )Adjustments
                  to reconcile net loss to net cashused
                  by operating activities:Depreciation
                  and amortization
              
              
              43,584
              
              
              40,872
              
              
              127,482Amortization
                  of loan discount
              
              
              233,708
              
              
              10,654
              
              
              245,410Issuance
                  of common stock for services
              
              
              50,000
              
              
              60,160
              
              
              110,160Issuance
                  of stock options and warrants for services
              
              
              927,257
              
              
              124,219
              
              
              1,056,485Decrease
                  (increase) in prepaid expenses
              
              
              (2,410
              )
              
              7,884
              
              
              (5,009
              )Increase
                  (decrease) in accounts payable
              
              
              61,486
              
              
              26,203
              
              
              166,473Increase
                  (decrease) in accrued expenses
              
              
              51,778
              
              
              173,611
              
              
              306,400Net
                  cash used by operating activities
              
              
              (711,744
              )
              
              (1,053,389
              )
              
              (2,483,759
              )**Cash
                  flows from investing activities:**Capital
                  expenditures
              
              
              (3,358
              )
              
              (50,486
              )
              
              (70,607
              )Net
                  cash used by investing activities
              
              
              (3,358
              )
              
              (50,486
              )
              
              (70,607
              )**Cash
                  flows from financing activities:**Proceeds
                  from loans from director
              
              
              -
              
              
              -
              
              
              120,492Payments
                  on note payable
              
              
              (4,000
              )
              
              (5,000
              )
              
              (65,387
              )Issuance
                  of common stock, net of costs
              
              
              517,305
              
              
              992,311
              
              
              2,510,168Net
                  cash provided by financing activities
              
              
              513,305
              
              
              987,311
              
              
              2,565,273Net
                  increase (decrease) in cash
              
              
              (201,797
              )
              
              (116,564
              )
              
              10,907**Cash,
                  beginning of period**
              
              
              212,704
              
              
              329,268
              
              
              -**Cash,
                  end of period**
              
              $
              10,907
              
              $
              212,704
              
              $
              10,907**Non-cash
                  investing and financing activities:**Issuance
                  of common stock & note payable for patent
              
              $
              -
              
              $
              -
              
              $
              500,000Issuance
                  of warrants with note payable
              
              $
              244,282
              
              $
              16,450
              
              $
              264,957




*See
      accompanying Report of Independent Registered Public Accounting Firm and notes
      to the financial statements.*




F-6




Impact
      Medical Solutions, Inc.


Notes
      to
      Financial Statements


December
      31, 2006





**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.





If
      the
      newly formed public entity is trading within 90 days of the merger agreement,
      a
      $50,000 cash bonus is due to The Sourlis Law Firm, payable upon the closing
      of a
      $1,000,000 financing.





Development
      Stage Company


The
      Company is a development stage company as defined in Statement of Financial
      Accounting Standards ("SFAS") No. 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, 2006 and 2005, the Company incurred a net loss of $2,077,147 and
      $1,496,992 respectively, and is in the development stage at December 31, 2006.
      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.





F-7


**1.**  **Organization
      and summary of significant accounting policies (con’t)**





In
      addition to the capital raised in 2006 through private equity offerings, the
      Company is negotiating with several investors about raising additional capital
      through private placement offerings. Management of the Company believes that
      its
      current cash on hand plus the additional capital that is expected to be raised
      in the future will be sufficient to cover its working capital needs until the
      Company's sales volume reaches a sufficient level to cover operating expenses.





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 federally
      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 $800 and $2,400 were paid in 2006 and 2005. No interest payments were
      made in 2006 and 2005.





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 FASB Statement No. 2, “Accounting for
      Research and Development Costs”.





Income
      Taxes


The
      Company accounts for income taxes under the liability method required by SFAS
      No. 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-8


**1.**  **Organization
      and summary of significant accounting policies (con’t)**





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). We have no awards with market or performance conditions. Excess tax
      benefits, as defined by SFAS 123(R), will be recognized as an addition to
      additional paid-in-capital. Effective January 1, 2006 and for all periods
      subsequent to that date, SFAS 123(R) supersedes our previous accounting under
      Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
      Employees *”* (“APB
      25”). In March 2005, the Securities and Exchange Commission issued Staff
      Accounting Bulletin No. 107 (“SAB 107”) relating to SFAS 123(R). The Company has
      applied the provisions of SAB 107 in its adoption of SFAS 123(R).





The
      Company adopted SFAS 123(R) using the modified prospective transition method,
      which provides for certain changes to the method for valuing share-based
      compensation. The valuation provisions of SFAS 123(R) apply to new awards and
      to
      awards that are outstanding at the effective date and subsequently modified
      or
      cancelled. Estimated compensation expense for awards outstanding at the
      effective date will be recognized over the remaining service period using the
      compensation cost calculated for pro forma disclosure purposes under FASB
      Statement No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). Our
      financial statements for the year ended December 31, 2006 reflect the impact
      of
      SFAS 123(R). In accordance with the modified prospective transition method,
      our
      financial statements for prior periods were not restated to reflect, and do
      not
      include, the impact of SFAS 123(R).





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. Share-based compensation expense should also include compensation
      expense for share-based payment awards granted prior to, but not yet vested
      as
      of, December 31, 2005 based on the grant date fair value estimated in accordance
      with the pro forma provisions of SFAS 123(R). For share awards granted prior
      to
      2006, expenses are amortized under the straight-line method prescribed by SFAS
      123(R). The Company had no unvested share-based payment awards as of December
      31, 2005. As share-based compensation expense recognized in the statement of
      operations for the year ended December 31, 2006 is based on awards ultimately
      expected to vest, it has been reduced for estimated forfeitures. SFAS 123(R)
      requires forfeitures to be estimated at the time of grant and revised, if
      necessary, in subsequent periods if actual forfeitures differ from those
      estimates. Based on our historical experience, we expect no forfeitures. In
      our
      pro forma information required under SFAS 123(R) for the periods prior to 2006,
      we accounted for forfeitures as they occurred.





The
      Company had no share-based compensation expenses for the year ended December
      31,
      2006.





Since
      we
      have a net operating loss carryforward as of December 31, 2006, 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 year ended December 31, 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.





*Pro
      Forma Information under SFAS 123(R) for Periods Prior to 2006* .
      Through
      2005, we accounted for share-based awards to employees using the intrinsic
      value
      method in accordance with APB 25 and related interpretations and provided the
      required pro forma disclosures of SFAS 123.





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 notes payable also approximate fair value
      because current interest rates offered to the Company for notes payable of
      similar maturities are substantially the same.





F-9


**1.**  **Organization
      and summary of significant accounting policies (con’t)**





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.





Recent
      accounting pronouncements


In
      February 2007, the FASB issued SFAS No. 159, *The
      Fair Value Option for Financial Assets and Financial Liabilities.* SFAS
      No.
      159 provides companies with an option to report many financial instruments
      and
      certain other items at fair value that are not currently required to be measured
      at fair value. The objective of SFAS No. 159 is to reduce both complexity in
      accounting for financial instruments and the volatility in earnings caused
      by
      measuring related assets and liabilities differently. The FASB believes that
      SFAS No. 159 helps to mitigate accounting-induced volatility by enabling
      companies to report related assets and liabilities at fair value, which would
      likely reduce the need for companies to comply with detailed rules for hedge
      accounting. SFAS No. 159 also establishes presentation and disclosure
      requirements designed to facilitate comparisons between companies that choose
      different measurement attributes for similar types of assets and liabilities,
      and would require entities to display the fair value of those assets and
      liabilities for which the company has chosen to use fair value on the face
      of
      the balance sheet. The new statement does not eliminate disclosure requirements
      included in other accounting standards, including requirements for disclosures
      about fair value measurements included in SFAS No. 157, *Fair
      Value Measurements* .
      This
      statement is effective as of the beginning of an entity’s first fiscal year
      beginning after November 15, 2007. The Company is in the process of evaluating
      the impact, if any, that the adoption of SFAS No. 159 will have on the Company’s
      financial statements.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      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. We
      are
      currently evaluating the impact of SFAS 157, but do not expect the adoption
      of
      SFAS 157 to have a material impact on our financial position, results of
      operations or cash flows.





In
      September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, *Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements* .
      SAB No.
      108 addresses quantifying the financial statement effects of misstatements
      or,
      more specifically, how the effects of prior year uncorrected errors must be
      considered in quantifying misstatements in the current year financial
      statements. SAB No. 108 does not change the SEC staff’s previous positions in
      SAB No. 99, *Materiality* regarding qualitative considerations in assessing the materiality of
      misstatements. SAB No. 108 is effective for fiscal years ending after November
      15, 2006. The adoption of SAB No. 108 did not have a material impact on the
      Company’s financial statements.





In
      July
      2006, the FASB issued Financial Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes - an interpretation of FASB Statement No.
      109* (“FIN
      48”), which is a change in accounting for income taxes. FIN 48 specifies how tax
      benefits for uncertain tax positions are to be recognized, measured, and
      derecognized in financial statements; requires certain disclosures of uncertain
      tax matters; specifies how reserves for uncertain tax positions should be
      classified on the balance sheet; and provides transition and interim period
      guidance, among other provisions. FIN 48 is effective for fiscal years beginning
      after December 15, 2006. We do not expect the adoption of FIN 48 to have a
      material impact on our financial position, results of operations or cash
      flows.





In
      July
      2006, the Emerging Issues Task Force promulgated Issue No. 06-3 (“Issue”), *How
      Taxes Collected from Customers and Remitted to Governmental Authorities Should
      be Presented in the Income Statement (i.e., Gross Versus Net
      Presentation)* .
      The
      Task Force concluded that entities should present these taxes in the income
      statement on either a gross or a net basis based upon their accounting policy.
      However, this Issue states


F-10


**1.**  **Organization
      and summary of significant accounting policies (con’t)**





that
      if
      such taxes are significant, and are presented on a gross basis, the amounts
      of
      those taxes should be disclosed. This Issue should be applied to financial
      reports for interim and annual reporting periods beginning after December 15,
      2006. We do not expect the adoption of this Issue to have a material impact
      on
      our financial position, results or operations or cash flows.





In
      February 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      155 (“SFAS 155”), *Accounting
      for Certain Hybrid Financial Instruments* .
      SFAS
      155 simplifies the accounting for certain derivatives embedded in other
      financial instruments by allowing them to be accounted for as a whole if the
      holder elects to account for the whole instrument on a fair value basis. SFAS
      155 is effective for all financial instruments acquired, issued or subject
      to a
      re-measurement event occurring in fiscal years beginning after September 15,
      2006. Earlier adoption is permitted, provided the company has not yet issued
      financial statements, including for interim periods, for that fiscal year.
      The
      Company will adopt SFAS 155 in the first quarter of 2007. We do not expect
      the
      adoption of SFAS 155 to have a material impact on our financial position,
      results of operations or cash flows.





**2.**  **Furniture
      and equipment**


**2006**Furniture
                  and equipment
              
              $
              70,311Less
                  accumulated depreciation
              
              
              (29,146
              )$
              41,165




Depreciation
      expense for the years ended December 31, 2006 and 2005 was $14,172 and $11,460,
      respectively.





**3.**  **Patents**


**2006**
              
              **2005**PatentsGross
                  carrying amount
              
              $
              500,000
              
              $
              500,000Accumulated
                  amortization
              
              $
              98,040
              
              $
              68,628Amortization
                  expense
              
              $
              29,412
              
              $
              29,412




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





**4.**  **Loans
      from director**





From
      July
      through October 2004, the Company borrowed a total of $120,492 from one of
      its
      directors. The loans bear interest at 10% and matured November 1, 2004. The
      director 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 31, 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.


F-11


**4.**  **Loans
      from director (con’t)**





The
      fair
      value of the warrants using the Black-Scholes valuation method totaled $39,095
      at the time of issuance, and is reflected as a discount on the loans in the
      accompanying financial statements and is being amortized over the extended
      life
      of the loan as interest expense.





**5.**  **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 is due and payable on
      August 23, 2008.





**6.**  **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.





Common
      stock issuances


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.





F-12


**6.**  **Shareholders’
      equity (con’t)**





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.





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 200,000 Series B common stock purchase warrants
      to
      extend the due date of loans payable in 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.





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 8, 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 to 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 warrants were valued at $39,095, as described in note 4. The
      remaining warrants were valued at a





F-13


**6.**  **Shareholders’
      equity (con’t)**





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.





Stock
      options


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.





**7.**  **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 2006 and 2005 there are no material differences between income
      tax expense and the amount computed by applying the federal statutory income
      tax
      rate.


At
      December 31, 2006, the Company has a net operating loss carryforward for federal
      tax purposes of approximately $3,300,000, 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 $3,293,000 which, if unused
      to
      offset future taxable income, will begin to expire in 2013.


The
      Company had deferred tax assets of $1,438,000 at December 31, 2006, 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 $389,000 in 2006, primarily related
      to the net taxable loss.





**8.**  **Commitments
      and contingencies**


Lease


The
      Company leases its office space on a month-to-month basis. Rent expense charged
      to operations totaled $24,888 in 2006 and $22,777 in 2005.





**9.**  **Subsequent
      Events (Unaudited)**


Since
      December 31, 2006, we have raised $113,389 through two debt offerings.
      Approximately $88,389 was raised through a convertible note offering where
      each
      investor received an unsecured promissory note paying an annual coupon rate
      of
      12% and carrying a maturity date of January 25, 2008. Each promissory note
      is
      convertible at any time on or prior to the maturity date into one share of
      common stock of the Company. At any time during the term of the note, if the
      Company consummates a private equity or equity-linked financing, the investors
      may exchange any remaining notes at their stated value for the securities in
      the
      new financing. Each investor also received one Series B Warrant for each dollar
      of debt. Each Series B Warrant provides the holder the right to purchase one
      share of common stock for $1.00 at any time prior to December 31,
      2009.





F-14





The
      balance of the debt financing completed by the Company was a short-term note
      for
      $25,000 with one of the Company’s directors. This note carries an annual coupon
      rate of 12% and is due on June 1, 2007. The director received 25,000 Warrants
      for undertaking the loan.


F-15





**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:
                April 17, 2007
            **IMPACT
                MEDICAL SOLUTIONS, INC.**By:
            /s/
                Wayne CockburnWayne
                CockburnPresident






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,
            
            April
                17, 2007Wayne
                D. Cockburn
            
            Secretary,
                Treasurer and Interim ChiefFinancial
                Officer and a Member of the Board of Directors (Principal Executive
                Officer and Principal Financial Officer)/s/
                Donald Paterson
            
            Chairman
                of the Board of Directors
            
            April
                17, 2007Donald
                Paterson/s/
                George Angelidis
            Director
            April
                17, 2007George
                AngelidisDirector
            April
                17, 2007Stephen
                Schectman


33


**Exhibit
      Index**





**Exhibit
                No.**
            
            **Description**3.2
            
            Bylaws
                of Impact Medical Solutions, Inc.31.1
            
            Certification
                of the Company’s Principal Executive Officer and Chief Financial Officer
                pursuant to Section 302 of Sarbanes Oxley Act of 2002, with respect
                to the
                registrant’s Annual Report on Form 10-KSB for the year ended December 31,
                2006.32.1
            
            Certification
                of the Company’s Principal Executive Officer and Chief Financial Officer
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes Oxley Act of 2002.





34