**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,
      2007**




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 under Section 12(b) of the Act:   **None**





Securities
      registered under Section 12(g) of the Exchange Act: **Common
      Stock, par value $0.0001 per share**





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 o 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 o





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





The
      registrant had no revenues for the fiscal year ended December 31, 2007.





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. $12,194,064 based on a sales price of $0.74 per
      share on March 31, 2008.





As
      of
      March 31, 2008 there were 16,478,465 shares of the registrant’s Common Stock
      outstanding.





**DOCUMENTS
      INCORPORATED BY REFERENCE:**





None





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










2


**TABLE
      OF CONTENTS**


**Page****PART
                  I**Item 1.
              
              Description
                  of BusinessItem 2.
              
              Description
                  of PropertyItem 3.
              
              Legal
                  ProceedingsItem 4.
              
              Submission
                  of Matters to a Vote of Security Holders**PART
                  II**Item 5.
              
              Market
                  for Common Equity and Related Stockholder MattersItem 6.
              
              Management’s
                  Discussion and Analysis or Plan of OperationItem 7.
              
              Financial
                  StatementsItem 8.
              
              Changes
                  in and Disagreements with Accountants on Accounting and Financial
                  DisclosureItem 8A
              
              Controls
                  and ProceduresItem 8B
              
              Other
                  Information**PART
                  III**Item 9.
              
              Directors,
                  Executive Officers, Promoters and Control Persons and Corporate
                  Governance; Compliance with Section 16(a) of the Exchange ActItem 10.
              
              Executive
                  CompensationItem 11.
              
              Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholder MattersItem 12.
              
              Certain
                  Relationships and Related Transactions and Director
                  IndependenceItem 13.
              
              Exhibits
                  and Reports on Form 8-KItem 14.
              
              Principal
                  Accountant Fees and ServicesSignatures







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. (a development stage company) (the "Company" or “IMS”),
      a Delaware corporation, was incorporated on October 20, 1997 as a Nevada
      corporation. 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. On December
      27, 2006, IMS entered into a Plan and Agreement of Merger (the “reverse merger”)
      with Freedom 1, Inc., a Delaware corporation and a “blank check company,” as
      defined under the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”), whereby IMS was the surviving entity. Since December 2002 and continuing
      after the reverse merger, IMS has been involved in the development and
      pre-market clinical testing of the MPR System.





MPR
      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 analyzes patterns of muscle recruitment
      - the engagement of muscles in order to perform specific body movements. MPR
      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 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 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
      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 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 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
      is
      able to normalize subjects against each other.


4





The
      standardized protocol of movements that make up the MPR 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 System.





During
      the years ended December 31, 2007 and 2006, we incurred a net loss of $1,263,489
      and $2,077,147, respectively, and had $15,144 cash on hand as of December 31,
      2007. We are in the development stage and have not earned any revenue since
      our
      inception. Due to the foregoing facts, our auditors have expressed their doubt
      as to our ability to continue as a going concern. 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.
      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.





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.





**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 System. The primary costs are salaries, consulting
      fees and non-recurring software development costs. Research and development
      expenses decreased to $151,217 in 2007 from $212,060 in 2006 primarily due
      to
      less working capital available to pursue our programs. Our 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 2008. 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.





**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 (80%)
      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.


5





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.





***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***





The
      target markets for MPR 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;·
            The
                Workers’ Compensation market;·
            Health
                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.


6





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. 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 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 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 as a preventative
      tool
      also blends well with the trend towards preventative medicine.





Additionally,
      the Company may look at other occupational medicine applications once MPR 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
      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
      into their assessment and treatment protocols.





7


***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 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
      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 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 will be well received
      by insurers. We also believe they can become a major source of referrals,
      particularly in the workers’ compensation market.





MPR
      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** **** **System**


The
      MPR
      System is a clinical tool that performs a biomechanical and mathematical
      analysis of muscle function. Test results are based on the simultaneous
      measurement of surface electromyography (sEMG), signals produced by specific
      back and neck muscles during the execution of distinct body movements (an MPR
      Test). A patient's readings are digitized and processed by a proprietary 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 is then provided in a report that forms the basis
      of
      the clinical evaluation.





The
      MPR
      System consists of three components:





·
            MPR
                Data Acquisition Device;


·
            MPR
                Data Analysis System; and


·
            MPR
                Report





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


The
      MPR
      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 customized 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.





8


The
      Data
      Acquisition Device is controlled by proprietary data collection software
      developed and owned by IMS. The software prompts and guides the Technician
      (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.
      The
      MPR  Technician
      is therefore assisted in completing successfully and reliably the data
      collection process, and is further guided in archiving and transmitting the
      data
      for clinical analysis.





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


The
      data
      collected during each MPR  Test
      is
      transmitted electronically to a central location (application server) for
      processing by our computerized Data Analysis System. Proprietary analytical
      software, also developed and owned by IMS, is used to assess the quality of
      the
      MPR data and to derive 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 Report,
      which is electronically transmitted to the referring health care
      provider.





***The
      MPR Report***


The
      MPR  Report
      provides the health care provider with findings that help to classify the
      patient as normal or with a graded level of muscle dysfunction (abnormal).
      The
      MPR  Report
      includes graphic, statistical and narrative representations of each muscle
      group’s recruitment patterns as compared to normative patterns and provides
      critical 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. Also reports if
                the
                dysfunction is due to*hyperactivity*(muscle spasm) or*hypoactivity*(muscle weakness).*Patterns
                of abnormal muscle recruitment:*
            Provides
                a graphic presentation of the abnormal muscle patterns, including
                the
                patterns of abnormal muscle
                compensation.







**MPR
      - based Clinical Evaluation**





The
      MPR
      Report and a health care provider clinical examination would form the basis
      of
      an MPR - 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., 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  System,
      and is in full compliance with FDA, Health Canada and European (CE Marking)
      requirements.


9





IMS
      currently performs the final assembly of the MPR  Data
      Acquisition Device, which includes software installation, system configuration,
      and final system testing. The MPR  software
      is produced and released by IMS. IMS is currently responsible for first-line
      service, including software support. Individual equipment is serviced by their
      corresponding manufacturers.





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





***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 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.





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. 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 current 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
      Class
      I and Class II diagnostic devices, a manufacturer 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 sale of the new device.





For
      Class
      III devices, a premarket approval (PMA) is required. PMA is the most stringent
      type of device marketing application required by FDA. Class III devices are
      those that support or sustain human life, are of substantial importance in
      preventing impairment of human health, or which present a potential,
      unreasonable risk of illness or injury. Due to the level of risk associated
      with
      Class III devices, FDA has determined that general and special controls alone
      are insufficient to assure the safety and effectiveness of Class III devices.
      Therefore, these devices require a PMA application under section 515 of the
      FD&C Act in order to obtain marketing clearance.





Thought
      Technology’s EMG equipment used in the Data Acquisition Device of the MPR System
      is a Class II device and has been cleared by the FDA under Section 510(k).
      The
      MPR Data Analysis System has not yet been cleared and may be treated as a Class
      III medical device by FDA. IMS is working with experienced FDA/regulatory
      consultants and plans to meet with the FDA in the second half of 2008 to
      determine the classification of the MPR System. The Company believes the MPR
      System will be treated as a Class II device and has already identified suitable
      predicate devices which it believes are substantially equivalent to the MPR
      System and will support a new 510(k) submission. There is however no certainty
      at this time that the FDA supports this belief.





Additional
      performance and marketing claims will be filed with the FDA after the completion
      of an independent clinical trial - the results of which will determine the
      degree of clinical utility for the MPR test as a diagnostic tool in its own
      right. *(For
      more information on the clinical trial, see Major Medical
      Market)*




10


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





When
      billing insurance companies for services like MPR, 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).





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
      has been reimbursed in the past under a general CPT code for “Alternative
      Neuromuscular Disorders” (Code #95999). We believe that to obtain broad
      acceptance of the MPR 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**
            **Expiration**Muscle
                Pattern Recognition
            Full
                application
            August,
                2001
            Approved
            6,280,395
            August,
                2021





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.





**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 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.





11


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.





***The
      Marketing Plan***





We
      believe there are three broad markets for MPR 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 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 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
      to be accepted by this market we believe there are three important conditions
      that must be met:




1.
            The
              clinical effectiveness of MPR must 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 MPR into their
                practice.




To
      meet
      the first condition, we have started an independent clinical trial of MPR 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 MPR customer 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 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.





12


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 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.





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 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
      from simple doctor-to-doctor word of mouth.





We
      believe that as the awareness of the MPR 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
      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 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 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 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 (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
      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.


13





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.





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 in their
      assessment and treatment protocols. We believe Workers' Compensation boards
      and
      self-insured companies stand to generate substantial savings by using MPR
      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; and





·
            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 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 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. 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, 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, 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. In the past, MPR has been reimbursed under
      a
      general CPT code for “Alternative Neuromuscular Disorders” (Code #95999). 
To obtain broad acceptance of the MPR 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.


14





If
      we are
      successful in obtaining a CPT code for MPR, the marketing emphasis with the
      insurance companies is likely to shift from proving the safety and effectiveness
      of MPR 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.





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 has the potential to control direct medical costs and
      indirect costs such as lost time, disability claims, and litigation expenses,
      we
      believe that MPR 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.





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 System’s
      strengths and economic advantages are most easily recognized and quantified.
      Some of these employers include previous users of MPR.





We
      will
      also target specific employers where MPR 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, it may serve as a delivery vehicle for the
      test.





15


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 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 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.





We
      also
      expect to enter into agreements with local and regional medical product
      distributors to reinforce the sales and marketing of MPR, 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.





**Growth
      through Partnership**





We
      are in
      the process of developing corporate alliances for the development, sales and
      marketing of MPR 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 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, one of which spends 100% of his time
      on
      research and development activities and the other who spends a portion of his
      time on such activities, and two independent consultants who devote 100% of
      their time on research and development activities. We engage consultants on
      an
      as needed basis and pay them on a hourly basis. In 2007, we paid our research
      and development consultants an aggregate of $11,936, compared to $57,176 in
      2006. We anticipate increasing our research and development activities upon
      our
      obtainment of additional funds, of which there can be no assurances.





**Employees**





We
      have
      four full-time employees including one research and development employee, one
      medical and clinical employee who devotes a portion of his time to research
      and
      development activities, 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.


16





We
      also
      engage three independent consultants on an “as needed” basis, two of which are
      engaged for research and development activities and the third engaged in
      computer activities. In 2007, we paid our three consultants an aggregate of
      $22,016, compared to $67,256 in 2006.




**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”). These documents are also publicly
      available free of charge at the SEC’s website. www.sec.gov. The information
      contained on our website is not a part of this annual report on Form 10-KSB
      nor
      is it incorporated herein.




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





We
      lease
      approximately 200 square feet of office space from Premier Business Centers
      at
      17011 Beach Boulevard, Suite 900, Huntington Beach, California, 92647 pursuant
      to a month-to-month lease. We paid an aggregate amount of $25,570 under this
      lease in 2007, which is subject to adjustments every six months. The space
      can
      house approximately two employees. We also leased approximately 300 square
      feet
      of office space at 181 University Avenue, Suite 1812, Toronto, Ontario, M5H
      3M7,
      Canada pursuant to a month-to-month lease. We paid an aggregate amount of
      $25,268 under this lease in 2007. During all of 2006 and a portion of 2007,
      we
      leased space in Quebec, Canada as well. We paid $7,965 through March 2007.
      We
      did not extend this lease.




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


We
      are
      not a party to any material legal proceedings and to our knowledge, there are
      no
      material legal proceedings pending or threatened with respect to our company.
      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 2007 fiscal year covered by this report.







**PART
      II**




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





Since
      September 4, 2007, o ur
      common shares have been quoted on the Over-the-Counter Bulletin Board (OTCBB)
      administered by the Financial Regulatory Authority (FINRA), formerly the NASD,
      under the symbol IMSU.OB, as well as the Pink Sheets under the symbol IMSU.PK.
      Stocks traded on the OTCBB and Pink Sheets are usually thinly traded, highly
      volatile, and not followed by analysts. Investors in our common stock may
      experience a loss or liquidity problem with their share holdings. The table
      below gives the range of high low bid information for our common stock for
      each
      quarter since September 4, 2007, the date our common stock has been quoted
      on
      the OTCBB and the Pink Sheets. The source of the data is Finance 500, Inc.
      and
      the quotations reflect inter-dealer prices, without retail mark-up, mark-down
      or
      commission, and may not represent actual transactions.





17





**Stock
                Price Information****Range
                of Bid Prices**Period
            HIGH
            LOW10-1-2007
                to 12/31/07
            $1.20
            $0.609-04-2007
                to 09/30/07
            $0.75
            $0.45





The
      ability of individual stockholders to trade their shares in a particular state
      may be subject to various rules and regulations of that state. A number of
      states require that an issuer's securities be registered in their state or
      appropriately exempted from registration before the securities are permitted
      to
      trade in that state. Presently, the Company has no plans to register its
      securities in any particular state. Further, the Company's shares are be subject
      to the provisions of Section 15(g) and Rule 15g- 9 of the Exchange Act, commonly
      referred to as the "penny stock" rule. Section 15(g) sets forth certain
      requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
      the definition of penny stock as that used in Rule 3a51-1 of the Exchange
      Act.





The
      SEC
      generally defines penny stock to be any equity security that has a market price
      less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides
      that any equity security is considered to be a penny stock unless that security
      is: registered and traded on a national securities exchange meeting specified
      criteria set by the SEC; authorized for quotation on The NASDAQ Stock Market;
      issued by a registered investment company; excluded from the definition on
      the
      basis of price (at least $5.00 per share) or the issuer's net tangible assets;
      or exempted from the definition by the SEC. Broker- dealers who sell penny
      stocks to persons other than established customers and accredited investors
      (generally persons with assets in excess of $1,000,000 or annual income
      exceeding $200,000, or $300,000 together with their spouse), are subject to
      additional sales practice requirements.





For
      transactions covered by these rules, broker-dealers must make a special
      suitability determination for the purchase of such securities and must have
      received the purchaser's written consent to the transaction prior to the
      purchase. Additionally, for any transaction involving a penny stock, unless
      exempt, the rules require the delivery, prior to the first transaction, of
      a
      risk disclosure document relating to the penny stock market. A broker-dealer
      also must disclose the commissions payable to both the broker-dealer and the
      registered representative, and current quotations for the securities. Finally,
      monthly statements must be sent to clients disclosing recent price information
      for the penny stocks held in the account and information on the limited market
      in penny stocks. Consequently, these rules may restrict the ability of
      broker-dealers to trade and/or maintain a market in the Company's common stock
      and may affect the ability of stockholders to sell their shares.





**Shares
      Held by Affiliates.**





Of
      the 16,478,465 shares currently issued and outstanding, 8,300,000 are held
      by
      affiliates and are therefore “restricted” in some fashion and can be sold only
      in compliance with the resale restrictions of Rule 144 under the Securities
      Act.
      This means that there are 8,178,465 shares that are not "restricted" in any
      way.
 These 8,178,465 shares thus comprise what is called “the float,” that is,
      the shares that can trade freely in interstate commerce.





**Holders**





As
      of the date of this Annual Report, we have 63 holders of record of our Common
      Stock.





**Description
      of Our Securities**





Our
      authorized capital stock consists of 100,000,000 shares of common capital stock,
      $0.0001 par value, of which 16,478,465 shares are considered issued and
      outstanding as of our fiscal year-end, December 31, 2007, and 10,000,000 shares
      of “blank check” preferred stock, $0.0001 par value, of which none are
      outstanding. As of the date of this annual report, no additional shares have
      been issued. “Blank check” p referred
      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.


18





**Shares
      Held by Affiliates.**





Of
      the 16,478,465 shares currently issued and outstanding, 8,000,000 are held
      by
      affiliates and deemed “control securities.” Control securities are subject,
      among other things, to the volume limitations of Rule 144 under the Securities
      Act of 1933, as amended.





**Voting
      Rights**





Stockholders
      are entitled to one vote on all matters to be voted upon for each share of
      common stock held. The shares do not have the right to cumulative voting for
      directors, meaning that holders of more than 50 percent of the shares voting
      for
      the election of directors can elect all of the directors if they choose to
      do
      so.





**Liquidation
      Rights**





In
      the event of liquidation, dissolution or a winding up of us or our affairs,
      holders of common stock would be entitled to receive pro rata all of our
      remaining assets that are available and distributable to the shareholders after
      first satisfying claims of creditors and anyone else having rights that are
      superior to those of the common stockholders (e.g., Preferred Stockholder).





**Preemptive
      Rights**





Stockholders
      do NOT have a preemptive right to acquire our unissued shares of common
      stock.





**Dividends
      and Dividend Policy**





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.





**Securities
      Issuances/Recent Sales of Unregistered Securities**





These
      following securities were issued pursuant to the exemption from the registration
      requirements of the Securities Act of 1933, as amended (the “Securities Act”),
      afforded the Company by Section 4(2) promulgated under the Securities Act in
      light of the fact that the issuances did not involve a public offering of
      securities of the Company:




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


19





· During
      2007, the Company borrowed a total of $40,000 from Alan Goldman, one of its
      officers. This loan, evidenced by a short-term promissory note issued on
      December 3, 2007, bears interest at 10% per annum and matured on March 3, 2008.
      Mr. Goldman was also granted 40,000 Series B common stock purchase warrants
      to
      purchase 40,000 shares of common stock at $1.00 per share until December 31,
      2009. The fair value of the warrants using the Black-Scholes valuation method
      totaled $14,126 at the time of issuance, and is reflected as a discount on
      the
      loan in the accompanying financial statements and is being amortized over the
      life of the loan as interest expense.





· During
      2007, the Company borrowed a total of $10,000 from Wayne Cockburn, its CEO.
      This
      loan, evidenced by a short-term promissory note issued on October 26, 2007,
      bears interest at 10% per annum and matured on January 26, 2008. Mr. Cockburn
      was also granted 10,000 Series B common stock purchase warrants to purchase
      10,000 shares of common stock at $1.00 per share until December 31, 2009. The
      fair value of the warrants using the Black-Scholes valuation method totaled
      $3,148 at the time of issuance, and is reflected as a discount on the loan
      in
      the accompanying financial statements and is being amortized over the life
      of
      the loan as interest expense. On January 26, 2008 the maturity date of the
      promissory note was extended to April 30, 2008. Mr. Cockburn was granted an
      additional 10,000 Series B common stock purchase warrants to purchase 10,000
      shares of common stock at $1.00 per share until December 31, 2009 for the
      extension. The fair value of the warrants using the Black-Scholes valuation
      method totaled $1,901 at the time of issuance, and will be reflected as a
      discount on the loan and amortized over the extended life of the loan as
      interest expense, beginning January 27, 2008.





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


20





· In
      2004,
      the Company borrowed a total of $147,813 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 $0.50 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. 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.
      In July 2007, the due date of the loans was extended to July 1, 2008. The
      director was granted an additional 100,000 Series B common stock purchase
      warrants to purchase 100,000 shares of common stock at $1.00 per share until
      December 31, 2009 for the extension. The fair value of the warrants using the
      Black-Scholes valuation method totaled $44,484 at the time of issuance, and
      is
      reflected as a discount on the loan in the accompanying financial statements
      and
      is being amortized over the extended life of the loan as interest expense.





· During
      2007, the Company issued convertible promissory notes totaling $332,991 to
      eleven individuals (after restructuring), each of whom qualifies as an
“accredited investor” under Regulation D of the Securities Act. The notes bear
      interest at 12%, matured on January 25, 2008 and are convertible into common
      shares at a rate of $1.00 per share. The note holders were also granted one
      Series B common stock purchase warrant for every $2.00 loaned, for a total
      of
      166,496 Series B warrants. The table below set forth the dates and the aggregate
      principal amounts of the issued promissory notes:







**Date**
            **Amount**January
                25
            $50,000March
                5
            $30,000March
                14
            $8,389April
                10
            $50,000July
                12
            $35,000July
                13
            $10,000July
                16
            $14,602July
                19
            $75,000July
                26
            $25,000December
                10
            $5,000December
                17
            $30,000**Total**
            **$332,991**




21





·
            During
                2007, the Company issued a total of 625,000 shares to three vendors
                for
                consulting services. The services were valued at $0.71 - $1.00 per
                share
                for a total of $455,000, and the value of the services is being amortized
                over the period of the consulting
                agreements.





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





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





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




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





·
            In
                September 2006, the Company extended the expiration dates of both
                the
                Series A and Series B common stock purchase warrants. The Series
                A
                expiration date was extended from September 9, 2008 to June 30, 2009
                and
                the Series B expiration date was extended from July 31, 2007 to December
                31, 2009.





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





The
                following weighted average assumptions were used to calculate the
                warrants
                re-valued in 2006: term of 2.75 to 3.25 years, risk-free interest
                rate of
                4.625%; volatility of 49% and a weighted fair value of $0.39 -
                $0.60.





·
            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
                of the accompanying financial statements), 50,000 issued to settle
                a
                dispute and 658,316 issued for consulting fees. The 100,000 shares
                were
                valued at $39,095, as described in note 4. The remaining warrants
                were
                valued at a total of $276,917 and expensed as general and administrative
                expenses in the accompanying statements of
                operations.





The
                following weighted average assumptions were used to calculate the
                warrants
                issued in 2006: term of 3.25 years, risk-free interest rate of 4.625%;
                volatility of 49% and a weighted fair value of
                $0.39.





·
            During
                2007, the Company issued 550,000 Series B warrants in connection
                with
                loans to related parties or the extension of due dates for those
                loans.
                (see note 4 of the accompanying financial statements). In addition,
                the
                Company issued 166,496 Series B warrants in connection with convertible
                debt.





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





The
                following weighted average assumptions were used to calculate the
                warrants
                issued in 2007: term of 2 - 2.92 years, risk-free interest rate of
                3.25% -
                4.875%, volatility ranging from 66% - 83% and a weighted fair value
                ranging from $0.1802 - $0.4533.





22


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 2003 Plan expired
      on
      December 31, 2007. The maximum number of shares of common stock that could
      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. On March 10, 2004, a total of 4,173,600 options were granted. The
      grant price was $0.25, 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.
      Options under the 2003 Plan were granted under Item 701 of the Securities Act.





In
      February 2008, the Company adopted the 2008 Equity Incentive Plan (the “2008
      Plan”). The purpose of the 2008 Plan is to attract, retain, and motivate certain
      key employees of the Company by giving them incentives which are linked directly
      to increases in the value of the common stock of the Company. Each director,
      officer, employee, or consultant of the Company is eligible to be considered
      for
      the grant of awards under the 2008 Plan. The maximum number of shares of common
      stock that may be issued pursuant to awards granted under the 2008 Plan
      1,000,000, 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 2008 Plan. Grants under
      the 2008 Plan are exercisable at the market value of the Company's stock on
      the
      date of such grant. All options under the 2008 Plan are exercisable at times
      as
      determined by the board of directors, not to exceed 10 years from the date
      of
      grant. No options have been granted during the quarter ended March 31,
      2008.







***Securities
      Authorized for Issuance under Equity Compensation
      Plans***





As
      described above, 3,868,600 shares of our common stock are authorized for
      issuance upon the exercise of 3,868,600 outstanding options awards granted
      under
      the 2003 Plan at $0.25 per share. The 2003 Plan, which was approved by
      stockholders in October 2003, expired on December 31, 2007.





In
      February 2008, we adopted the 2008 Plan. Under the 2008 Plan, there are
      1,000,000 shares authorized for issuance under awards granted under the 2008
      Plan. To date, no awards have been granted under the 2008 Plan.





We
      have not registered the shares issuable upon the exercise of options granted
      under our 2003 Plan or 2008 Plan.





The
      table below sets forth information regarding our equity compensation awards
      issued as of December 31, 2007:










**EQUITY
                COMPENSATION PLAN INFORMATION**
              **AS
                OF DECEMBER 31, 2007****Number
                of securities to be issued upon the exercise of outstanding option,
                warrants and rights**
              **(a)**
            **Weighted
                average exercise price of outstanding options, option, warrants
                and**
              **rights**
              **(b)**
            **Number
                of securities remaining available for issuance under equity compensation
                plans (excluding securities reflected in column (a))**
              **(c)****Equity
                compensation plans approved by security holders**
            3,868,600
            $0.25
            0**Equity
                compensation plans not approved by securities
                holders**
            0
            0
            0**Total**
            3,868,600
            $0.25
            0





23







**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 ) 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.
      This is dependent on our ability to obtain sufficient capital to fund our
      operations, of which there can be no assurances.





During
      the years ended December 31, 2007 and 2006, we incurred a net loss of $1,
      263,489 and $2,077,147, respectively, and had $15,144 cash on hand as of
      December 31, 2007. 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. However, there
      can be no assurance that we will be successful in raising such additional funds
      on favorable terms if at all. 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.





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.


24


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.





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”.





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.





**Results
      of Operations**





**Year
      Ended December 31, 2007 Compared to Year Ended December 31,
      2006**





We
      incurred net losses of $1,263,489 for the year ended December 31, 2007 and
      $2,077,147 for the year ended December 31, 2006. We had no revenues for the
      year
      ended December 31, 2007 and no revenues for the year ended December 31, 2006.





***Research
      and Development***





****** We
      expense our research and developments costs as occurred. Research and
      development expenses consisted of costs associated with the design, development,
      testing, and enhancement of the MPR System. The primary costs are salaries,
      consulting fees and non-recurring software development costs. Research and
      development expenses decreased to $151,217 in 2007 from $212,060 in 2006
      primarily due to less working capital available to pursue our
      programs.


25





***Medical
      and Clinical***





Medical
      and clinical expenses consisted of costs associated with the preparation for
      the
      clinical trials for the MPR System. The primary costs are salaries, consulting
      fees, clinical trial protocol development costs and clinical research
      organization costs. Medical and clinical expenses decreased to $105,767 in
      2007
      from $249,165 in 2006 primarily due to less working capital available to pursue
      our clinical programs. Our 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 2008. 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.





***General
      and Administrative***





General
      and administrative expenses decreased to $666,632 in 2007 from $1,368,915 in
      2006 primarily due to a decrease of $748,910 in warrants issued for services.
      Accounts payable increased from $166,473 in 2006 to $269,875 in 2007 and accrued
      expenses increased from $306,400 in 2006 to $477,874 in 2007.We expect that
      we
      will require approximately $2.0 million of cash for operating activities in
      2008. This increase will be due primarily to the work required to complete
      the
      MPR analytical software and the recommencement of the clinical trial for MPR
      system.





**Interest
      Income and Expense**





Interest
      expense for the year ended December 31, 2007 was $338,294 as compared with
      an
      interest expense of $246,450 for the year ended December 31, 2006. The increase
      in 2007 as compared to 2006 was primarily due to the issuance of short term
      borrowings.





During
      2007, we relied heavily on short term borrowings to finance our activities.
      The
      average borrowing was approximately $30,000, and when discounts from warrants
      and conversion features are taken into account, the average interest expense
      for
      each note was approximately $18,000. The weighted average interest rate for
      the
      short term borrowings outstanding at December 31, 2007 is 126%, after taking
      into account the discounts from warrants and conversion features.





**Liquidity
      and Capital Resources**





During
      the years ended December 31, 2007 and 2006, we incurred a net loss of $1,263,489
      and $2,077,147, and had $15,144 cash on hand as of December 31, 2007. 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, 2007, we had cash of $15,144 on hand. We utilized cash of
      approximately $530,510 in the period ended December 31, 2007 compared to
      $711,744 for the same period ended December 31, 2006. The cash used in operating
      activities in 2007 is lower than 2006 due to less working capital available
      for
      our research and clinical programs. We have funded our operations primarily
      through private placements of equity securities. In 2007, we raised gross
      proceeds of approximately $202,320 from loans from related parties and
      approximately $332,991 from convertible debt from 11 investors. 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.


26





We
      will
      need to raise additional capital 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 raise additional capital, it will be
      necessary for us to significantly reduce expenses to stay in business. In
      addition, any new equity or debt financing which we secure may not be available
      to us at prices that would be acceptable. Our failure to 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.”




**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, 2007 and 2006, we incurred a net loss of $1,263,489
      and $2,077,147, respectively, and had $15,144 cash on hand as of December 31,
      2007. We are in the development stage and have not earned any revenue since
      our
      inception. Due the foregoing facts, our auditors have expressed their doubt
      as
      to our ability to continue as a going concern. 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.
      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 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.





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 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.


27





**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 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 knowhow. There can be no assurance,
      however, that this patent will provide substantial protection of the MPR
      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 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 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 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 System and we may be unable to create such
      a
      demand. We cannot predict whether or not the MPR 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 12,949,870 shares, or approximately 78.59%,
      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 Steve 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.


28





**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.





**The
      limited prior public market and trading market may cause possible volatility
      in
      our stock price** .





To
      date,
      there has only been a limited public market for our securities and there can
      be
      no assurance that we can attain an active trading market for our securities.
      Our
      common stock trades on the OTC Bulletin Board (“OTCBB”) under the ticker symbol, IMSU.OB.
      The OTCBB which
      is
      an unorganized, inter-dealer, over-the-counter market that provides
      significantly less liquidity than the national securities exchanges.





Quotes
      for securities quoted on the OTCBB are not listed in the financial sections
      of
      newspapers as are those for the national securities exchanges. Moreover, in
      recent years, the overall market for securities has experienced extreme price
      and volume fluctuations that have particularly affected the market prices of
      many smaller companies. The trading price of our common stock is expected to
      be
      subject to significant fluctuations including, but not limited to, the
      following:




·
            Quarterly
              variations in operating results and achievement of key business
              metrics;·
            Changes
              in earnings estimates by securities analysts, if any;·
            Any
                differences between reported results and securities analysts’ published or
                unpublished expectations;·
            Announcements
                of new products by us or our
                competitors;


·
            Market
                reaction to any acquisitions, joint ventures or strategic investments
                announced by us or our competitors;·
            Demand
                for our products;


·
            Shares
                sold pursuant to Rule 144 or upon exercise of warrants and options;
                and·
            General
                economic or stock market conditions unrelated to our operating
                performance.





These
      fluctuations, as well as general economic and market conditions, may have a
      material or adverse affect on the market price of our common stock.





**The
      OTCBB is a quotation system, not an issuer listing service, market or exchange.
      Therefore, buying and selling stock on the OTCBB is not as efficient as buying
      and selling stock through an exchange. As a result, it may be difficult for
      you
      to sell your common stock or you may not be able to sell your common stock
      for
      an optimum trading price.**





The
      OTCBB
      executes trades and quotations using a manual process and cannot guarantee
      the
      market information for securities. In some instances, quote information, or
      even
      firm quotes, may not be available. The OTCBB’s manual execution process may
      delay order processing and as a result, a limit order may fail to execute or
      a
      market order may execute at a significantly different price due to intervening
      price fluctuations. Trade execution, execution reporting and legal trade
      confirmation delivery may be delayed significantly. Consequently, one may not be
      able to sell shares of our common stock at the optimum trading
      prices.


29





OTCBB
      securities are frequent targets of fraud or market manipulation not only because
      of their generally low price, but also because the OTCBB reporting requirements
      for these securities are less stringent than for listed or Nasdaq traded
      securities, and no exchange requirements are imposed. Dealers may dominate
      the
      market and set prices that are not based on competitive forces. Individuals
      or
      groups may create fraudulent markets and control the sudden, sharp increase
      of
      price and trading volume and the equally sudden collapse of the market price
      for
      shares of our common stock.





When
      fewer shares of a security are being traded on the OTCBB, the security’s market
      price may become increasingly volatile and price movement may outpace the
      ability to deliver accurate quote information. Due to lower trading volumes
      of
      our common stock, there may be a lower likelihood that one's orders for our
      common stock will be executed, and current prices may differ significantly
      from
      the price one was quoted by the OTCBB at the time of one's order
      entry.





Orders
      for OTCBB securities may be canceled or edited like orders for other securities.
      All requests to change or cancel an order must be submitted to, received and
      processed by the OTCBB. As mentioned earlier in this document, the OTCBB
      executes trades using a manual process, which could cause delays in order
      processing and reporting, and could hamper one’s ability to cancel or edit one's
      order. Consequently, selling shares of our common stock at the optimum trading
      prices may be impossible.





The
      dealer's spread (the difference between the bid and ask prices) may be large
      and
      may result in substantial losses to the seller of our common stock on the OTCBB
      if the stock must be sold immediately. Further, purchasers of our common stock
      may incur an immediate "paper" loss due to the price spread. Moreover, dealers
      may not have a bid price for our common stock on the OTCBB. Due to the foregoing
      factors, demand for our common stock on the OTCBB may be decreased or
      eliminated.





**Our
      common stock is considered a “penny stock.” The application of the “penny stock”
rules to our common stock could limit the trading and liquidity of the common
      stock, adversely affect the market price of our common stock and increase your
      transaction costs to sell those shares.**





The
      Commission has adopted regulations which generally define a “penny stock” to be
      any equity security that has a market price (as defined) of less than $5.00
      per
      share or an exercise price of less than $5.00 per share, subject to certain
      exceptions. As a result, our shares of common stock are subject to rules that
      impose additional sales practice requirements on broker-dealers who sell such
      securities to persons other than established clients and “accredited investors”.
      For transactions governed by these rules, the broker-dealer must make a special
      suitability determination for the purchase of such securities, must obtain
      the
      purchaser's written consent to the transaction, and must deliver to the
      purchaser a SEC-mandated, penny stock risk disclosure document, all prior to
      the
      purchase. The broker-dealer must also disclose the commission payable to both
      the broker-dealer and the registered representative, current quotations for
      the
      securities and, if the broker-dealer is the sole market maker, the broker-dealer
      must disclose this fact and the broker-dealer's presumed control over the
      market. Finally, monthly statements must be sent disclosing recent price
      information for the penny stock held in the account and information on the
      limited market in penny stocks. Consequently, the “penny stock” rules may
      restrict the ability of broker-dealers to sell our shares of common stock and
      may affect the ability of investors to sell such shares of common stock in
      the
      secondary market and may affect the price at which investors can sell such
      shares.




Investors
      should be aware that the market for penny stocks has suffered in recent years
      from patterns of fraud and abuse, according to the Commission. Such patterns
      include:





·
            Control
                of the market for the security by one or a few broker-dealers that
                are
                often related to the promoter or issuer;·
            Manipulation
                of prices through prearranged matching of purchases and sales and
                false
                and misleading press releases;




30





·
            “Boiler
                room” practices involving high pressure sales tactics and unrealistic
                price projections by inexperienced sales persons;·
            Excessive
                and undisclosed bid-ask differentials and markups by selling
                broker-dealers; and





·
            The
                wholesale dumping of the same securities by promoters and broker-dealers
                after prices have been manipulated to a desired level, along with
                the
                inevitable collapse of those prices with consequent investor
                losses.





Our
      management is aware of the abuses that have occurred historically in the penny
      stock market.




**Future
      sales of our common stock could put downward selling pressure on our common
      stock, and adversely affect the per share price. There is a risk that this
      downward pressure may make it impossible for an investor to sell shares of
      common stock at any reasonable price, if at all.**





From
      time
      to time, certain of our stockholders may be eligible to sell all or some of
      their shares of common stock by means of ordinary brokerage transactions in
      the
      open market pursuant to Rule 144, promulgated under the Securities Act of 1933
      (Securities Act), subject to certain limitations. In general, Rule 144 permits
      the unlimited sale of securities by our stockholders that are non-affiliates
      that have satisfied a six month holding period and affiliates of our Company
      may
      sell within any three month period a number of securities that does not exceed
      1% of our then outstanding shares of common stock. Any substantial sale of
      our
      common stock pursuant to Rule 144 or pursuant to any resale prospectus may
      have
      material adverse effect on the market price of our securities.





**Limitations
      on director and officer liability and our indemnification of officers and
      directors may discourage shareholders from bringing suit against a
      director.**





Our
      certificate of incorporation and bylaws provide, with certain exceptions as
      permitted by governing Delaware law, that a director or officer shall not be
      personally liable to us or our shareholders for breach of fiduciary duty as
      a
      director, except for acts or omissions which involve intentional misconduct,
      fraud or knowing violation of law, or unlawful payments of dividends. These
      provisions may discourage shareholders from bringing suit against a director
      for
      breach of fiduciary duty and may reduce the likelihood of derivative litigation
      brought by shareholders on our behalf against a director. In addition, our
      certificate of incorporation and bylaws provide for mandatory indemnification
      of
      directors and officers to the fullest extent permitted by Delaware law.





**We
      may experience difficulties in the future in complying with Sarbanes-Oxley
      Section 404**





Commencing
      with this Annual Report, we are required to evaluate our internal controls
      under
      Section 404 of the Sarbanes-Oxley Act of 2002. If we fail to maintain the
      adequacy of our internal controls, we could be subject to regulatory scrutiny,
      civil or criminal penalties and/or stockholder litigation. Any inability to
      provide reliable financial reports could harm our business. Section 404 of
      the
      Sarbanes-Oxley Act also requires that our independent registered public
      accounting firm report on management’s evaluation of our system of internal
      controls. Furthermore, any failure to implement required new or improved
      controls, or difficulties encountered in the implementation of adequate controls
      over our financial processes and reporting in the future, could harm our
      operating results or cause us to fail to meet our reporting obligations.





If
      we
      fail to maintain proper and effective internal controls in future periods,
      it
      could adversely affect our operating results, financial condition and our
      ability to run our business effectively and could cause investors to lose
      confidence in our financial reporting.





**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


31




**Item 8A(T).**
            **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, 2007, 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.





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, 2007
      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.





**Changes
      in Internal Controls over Financial Reporting**





There
      are
      been no changes in the Company’s internal control over financial reporting
      during the last quarterly period covered by this report that have materially
      affected, or are reasonably likely to materially affect, the Company’s internal
      control over financial reporting.




REPORT
      OF
      MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING




Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting for the company. Internal control over
      financial reporting is a process to provide reasonable assurance regarding
      the
      reliability of our financial reporting for external purposes in accordance
      with
      accounting principles generally accepted in the United States of America.
      Internal control over financial reporting includes maintaining records that
      in
      reasonable detail accurately and fairly reflect our transactions; providing
      reasonable assurance that transactions are recorded as necessary for preparation
      of our financial statements; providing reasonable assurance that receipts and
      expenditures of company assets are made in accordance with management
      authorization; and providing reasonable assurance that unauthorized acquisition,
      use or disposition of company assets that could have a material effect on our
      financial statements would be prevented or detected on a timely basis. Because
      of its inherent limitations, internal control over financial reporting is not
      intended to provide absolute assurance that a misstatement of our financial
      statements would be prevented or detected.





Although
      management did not conduct an evaluation of the effectiveness of our internal
      control over financial reporting based on the framework in *Internal
      Control - Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission, it
      has
      concluded that notwithstanding the foregoing, the Company’s internal controls
      over financial reporting are not effective. This is based on the fact that
      we
      have only four employees. As noted in this Annual Report, 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.





32


Our
      independent public accountant has not conducted an audit of our controls and
      procedures regarding internal control over financial reporting and expresses
      no
      opinion with regards to the effectiveness or implementation of our controls
      and
      procedures with regards to internal control over financial reporting.




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





None.




33





**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
            
            51
            
            President,
                Chief Executive Officer
              and
                DirectorDonald
                Paterson(1)(2)(3)
            
            2003
            
            75
            
            Chairman
                of the Board
              and
                DirectorGeorge
                Angelidis(4)(5)(6)
            
            2003
            
            62
            
            DirectorCraig
                Lunsman(7)
            
            2007
            
            61
            
            DirectorStephen
                Schectman(1)(2)(3)
            
            2004
            
            60
            
            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.(7)
            Member
                of the Audit, Compensation and Corporate Governance Committees since
                September 2007.




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., Homeservice
      Technologies Inc., Inc., NewGrowth Corp. and Utility Corp..


34





**George
      D. Angelidis - Healthcare Consultant**


Mr.
      Angelidis is an independent healthcare consultant. From 1998 until 2008, Mr.
      Angelidis was the President of Hospital Network, Inc. (HNI), a partnership
      initially consisting of 6 Michigan-based hospitals. During his tenure, Mr.
      Angelidis expanded HNI to 17 hospitals by adding 11 new hospital members and
      structuring a new entity, Hospital Network Healthcare Services L.L.C. He was
      directly responsible for the company's mobile MRI, bone density and TUMT
      services, mobile Occupational Wellness, and Medical Waste Disinfection programs.
      Additionally, the Network provided medical record scanning and archiving under
      Mr. Angelidis, and was a regional PACs archiving service, and a member
      Telehealth service. Mr. Angelidis also managed 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.





**Craig
      Lunsman, President, William Jamieson Group**


Mr.
      Lunsman is the Founder and Managing Director of William Jamieson Group, LLC,
      a
      consulting group that provides securities valuation and corporate advisory
      services to public and private small cap companies. Prior to founding William
      Jamieson Group in 1993, Mr. Lunsman was a Co- Founder and Principal in Houlihan
      Valuation Advisors, Inc., a company specializing in providing services related
      to business valuations, fairness opinions and other valuation and economic
      issues. Mr. Lunsman received his BS from the University of Southern California
      in 1970 and graduate work for his MBA and has been involved in providing
      strategic planning, financing and other corporate advisory services since that
      time. He has served as an Expert Witness on business valuation and other related
      financial matters in California and other states, and has also testified before
      the Internal Revenue Service relative to valuation matters. He has been a member
      of the American Society of Appraisers, San Francisco Chapter and has been a
      published author and a frequent speaker on issues relating to business
      valuation. As an outside director, Mr. Lunsman acts as Chairman of the Company's
      Audit Committee as well as serve on each of the Compensation and Corporate
      Governance Committees.




**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.





35


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.





**Familial
      Relationships**





There
      are
      no family relationships among the officers and directors.





**Audit,
      Nominating and Compensation Committees**





Donald
      Paterson, George Angelidis, Craig Lunsman and Stephen Schectman constitute
      the
      Board of Director’s Audit, Corporate Governance 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.





**Code
      of Ethics**





On
      April
      23, 2004, our Board adopted a Code of Ethics which is filed as an
      exhibit to this Annual Report.





**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**Alan
              J. Goldman, MD
            
            62
            
            Vice
              President, Clinical and Medical AffairsSteeve
                Asselin
            
            45
            
            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 32 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.





36


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.





**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 are 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.







***Compliance
      with Section 16(a) of the Securities Exchange Act of
      1934*** **




Section  16(a)
      of
      the Exchange Act requires the Company’s directors and officers, and persons who
      beneficially own more than 10% of a registered class of the Company’s equity
      securities, to file reports of beneficial ownership and changes in beneficial
      ownership of the Company’s securities with the SEC of Forms 3, 4 and 5.
      Officers, directors and greater than 10% stockholders are required by SEC
      regulation to furnish the Company with copies of all Section 16(a) forms they
      file.




37


Item
      405
      of Regulation S-1 requires every small business issuer that has a class of
      equity securities registered pursuant to Section 12 of the Exchange Act to
      identify each person who, at any time during the fiscal year, was a director,
      officer or beneficial owner of more than 10 percent of any class of equity
      securities registered pursuant to Section 12 of the Exchange Act that failed
      to
      file on a timely basis, as disclosed in the above forms as well as other
      information. As of the date hereof, our executive officers and directors and
      the
      stockholders listed in Item 11 who beneficially own more than 10% of our common
      stock have filed their Forms 3, 4 or 5 with the Securities and Exchange
      Commission. Other than the foregoing, the Company believes that no other person
      who, at any time during such fiscal year, was a director, officer or beneficial
      owner of more than 10% of the Company’s common stock failed to comply with all
      Section 16(a) filing requirements during such fiscal year.







**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, 2007, 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 2007. The foregoing
      persons are collectively referred to in this Form 10-KSB as the “Named Executive
      Officers.” Compensation information is shown for fiscal years 2007 and
      2006.




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
                
                
                2007
                
                
                90,000
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                90,000Chief
                    Executive Officer
                
                
                2006
                
                
                90,000
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                90,000Alan
                    J. Goldman, MDVice
                    President,
                
                
                2007
                
                
                90,000
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                90,000Clinical
                    and Medical Affairs
                
                
                2006
                
                
                90,000
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                90,000Steeve
                    AsselinVice
                    President,
                
                
                2007
                
                
                90,000
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                90,000Research
                    and Development
                
                
                2006
                
                
                90,000
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                90,000




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, 2007, 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




38





**Director
      Compensation**





The
      following table sets forth the compensation paid to our directors for our fiscal
      year ended December 31, 2007, 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
              ($)
            
            Option
                Awards
              ($)
            
            Non-Equity
                Incentive Plan Compensation ($)
            
            Nonqualified
                Deferred Compensation Earnings
              ($)
            
            All
                Other Compensation ($)
            
            Total
              ($)George
                Angelidis(1)
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Craig
                Lunsman(2)
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Donald
                Paterson(3)
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Stephen
                Schectman(4)
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0




(1)
            At
              December 31, 2007, 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, 2007, Mr. Lunsman had exercisable options to purchase
                100,000
                shares of our common stock at $0.25 per share. These options were
                granted
                in March 2004.




(3)
            At
                December 31, 2007, 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.





(4)
            At
                December 31, 2007, 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 March 31, 2008, 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 16,478,465 shares of Common Stock outstanding
      plus
      shares of common stock the reporting person has the right to acquire within
      the
      next 60 days. Unless otherwise stated, 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.




39







**Name
                and Address**
              **of
                Beneficial Owner**
            **Amount
                and Nature of**
              **Beneficial
                Ownership****Amount
                and Nature of Beneficial Ownership**
            **Percent
                of Class**Wayne
                Cockburn
              23
                Valley Trail
              Newmarket,
                Ontario
              Canada
                L3Y 4V8
            9,110,200(1)(2)
            51.85%MPR
                Health Systems, Inc.
              23
                Valley Trail
              Newmarket,
                Ontario
              Canada
                L3Y 4V8
            8,000,000(1)
            48.55%Steeve
                Asselin
              930,
                rue de Calais
              Mont-Saint-Hilaire
              Quebec,
                Canada J3H 4R1
            412,200(3)
            2.44%Alan
                Goldman
              9
                Sun Ridge Court
              Park
                City, Utah 84060
            551,200(4)
            3.24%George
                Angelidis
              6212
                American Avenue
              Portage,
                MI 49002
            580,000(5)
            3.42%Craig
                Lunsman
              154
                Lombard Street
              Suite
                60
              San
                Francisco, California 94111
            260,000(9)
            1.56%Donald
                Paterson
              24
                Elgin Avenue
              Toronto,
                Ontario
              Canada
                M5R 1G6
            9,121,270(6)(7)
            52.12%




40




Stephen
                Schectman
              609
                West South Orange Avenue
              Unit
                4D
              South
                Orange, New Jersey 07079
            915,000(8)
            5.26%Vespa
                Family Entities
              1075
                Old Mohawk Road
              Ancaster
                Ontario
              Canada
                L9G 3K9
            2,100,000
            12.20%All
                Officers and Directors as a Group (7 people)
            12,949,870(10)
            61.29%





(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, 20,000 shares of common stock issuable upon the
                exercise of a Series A Warrant at $0.50 per share, and 10,000 shares
                of
                common stock issuable upon the exercise of a Series B Warrant at
                $1.00 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, and 40,000 shares of common stock issuable upon
                the
                exercise of a Series B Warrant at $1.00 per share.


(5)
            Includes
                280,000 shares of common stock issuable upon the exercise of an option
                at
                $0.25 per share, 100,000 shares of common stock issuable upon the
                exercise
                of a Series A Warrant at $0.50 per share, and 100,000 shares of common
                stock issuable upon the exercise of a Series B Warrant at $1.00 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. Also includes 311,270 shares of common stock issuable
                upon
                the exercise of a Series A Warrant at $0.50 per share, and 400,000
                shares
                of common stock issuable upon the exercise of a Series B Warrant
                at $1.00
                per share.


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


(9)
            Includes
                80,000 shares of common stock issuable upon the exercise of a Series
                A
                Warrant at $0.50 per share.


(10)
            Includes
                securities in footnotes (1), (2), (3), (4), (5), (6), (7), (8) and
                (9).







*Changes
      in Control.* There
      are
      no arrangements which may result in a change of control of the Company.




Our
      Certificate of Incorporation authorizes 10,000,000 shares of “blank check”
preferred stock, $0.0001 par value. “Blank check” p referred
      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. Accordingly, under our Certificate of
      Incorporation, the Board is authorized to designate one or more classes of
      preferred stock which could be issued to effect a change in control. To date,
      the Board has not designated any series of preferred stock.


41





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







During
      2007, the Company borrowed a total of $40,000 from Alan Goldman, one of its
      officers. This loan, evidenced by a short-term promissory note issued on
      December 3, 2007, bears interest at 10% per annum and matures on March 3, 2008.
      Mr. Goldman was also granted 40,000 Series B common stock purchase warrants
      to
      purchase 40,000 shares of common stock at $1.00 per share until December 31,
      2009. The fair value of the warrants using the Black-Scholes valuation method
      totaled $14,126 at the time of issuance, and is reflected as a discount on
      the
      loan in the accompanying financial statements and is being amortized over the
      life of the loan as interest expense.





During
      2007, the Company borrowed a total of $10,000 from Wayne Cockburn, its CEO.
      This
      loan, evidenced by a short-term promissory note issued on October 26, 2007,
      bears interest at 10% per annum and matured on January 26, 2008. Mr. Cockburn
      was also granted 10,000 Series B common stock purchase warrants to purchase
      10,000 shares of common stock at $1.00 per share until December 31, 2009. The
      fair value of the warrants using the Black-Scholes valuation method totaled
      $3,148 at the time of issuance, and is reflected as a discount on the loan
      in
      the accompanying financial statements and is being amortized over the life
      of
      the loan as interest expense. On January 26, 2008 the maturity date of the
      promissory note was extended to April 30, 2008. Mr. Cockburn was granted an
      additional 10,000 Series B common stock purchase warrants to purchase 10,000
      shares of common stock at $1.00 per share until December 31, 2009 for the
      extension. The fair value of the warrants using the Black-Scholes valuation
      method totaled $1,901 at the time of issuance, and will be reflected as a
      discount on the loan and amortized over the extended life of the loan as
      interest expense, beginning January 27, 2008.





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


42





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





In
      2004,
      the Company borrowed a total of $147,813 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 $0.50 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. 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.
      In July 2007, the due date of the loans was extended to July 1, 2008. The
      director was granted an additional 100,000 Series B common stock purchase
      warrants to purchase 100,000 shares of common stock at $1.00 per share until
      December 31, 2009 for the extension. The fair value of the warrants using the
      Black-Scholes valuation method totaled $44,484 at the time of issuance, and
      is
      reflected as a discount on the loan in the accompanying financial statements
      and
      is being amortized over the extended life of the loan as interest expense.





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. There was a balance of $34,613 outstanding as of December
      31,
      2007.







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








43


**Exhibit
                  No.**
              
              **Description**3.1(1)
              
              Certificate
                  of Incorporation, dated June 27, 20063.2
                  (1)
              
              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, 200614.1
              
              Code
                  of Ethics21.1(1)
              
              Subsidiaries
                  of the registrant31.1
              
              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 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 and quarterly reviews for the fiscal years ended December
      31, 2006 and 2007 were approximately $36,942 and $58,000,
      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, 2006 and
      2007.





**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, 2006 and 2007 were
      $0.







44


Impact
      Medical Solutions, Inc.


Financial
      Statements


Years
      ended December 31, 2007 and 2006


**Contents**




Index
                  to Financial Statements
              
              F-1Report
                  of Farber Hass Hurley LLP, a PCAOB Registered Accounting
                  Firm
              
              F-2Audited
                  Financial StatementsBalance
                  Sheet
              
              F-3Statements
                  of Operations
              
              F-4Statements
                  of Cash Flows
              
              F-5Statements
                  of Shareholders’ (Deficit) Equity
              
              F-6Notes
                  to Financial Statements
              
              F-8


F-1


REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





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





We
      have
      audited the accompanying balance sheet of Impact Medical Solutions, Inc., a
      Development Stage Company (the “Company”) as of December 31, 2007 and the
      related statements of operations, shareholders’ equity (deficit), and cash flows
      for each of the years ended December 31, 2007 and 2006, and October 20, 1997
      (date of inception) to December 31, 2007. 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, 2007, and the results of its operations and its cash flows
      for
      each of the years ended December 31, 2007 and 2006, and October 20, 1997 (date
      of inception) to December 31, 2007 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 LLP


(formerly
      Farber Hass Hurley McEwen, LLP)





Camarillo,
      California


March
      27,
      2008







F-2


Impact
      Medical Solutions, Inc.


(A
      Development Stage Company)


Balance
      Sheet




**December
                  31,****2007****ASSETS****Current
                  assets**Cash
              
              $
              15,144Prepaid
                  expenses
              
              
              26,686**Total
                  current assets**
              
              
              41,830**Furniture
                  and equipment, net of accumulated depreciation of
                  $43,704**
              
              
              27,171**Patent,
                  net of accumulated amortization of $127,452**
              
              
              372,548$
              441,549**LIABILITIES
                  AND SHAREHOLDERS' DEFICIT****Current
                  liabilities**Loans
                  from related parties, net of unamortized discount of
                  $65,447
              
              $
              257,366Convertible
                  debt, net of unamortized discount of $16,910
              
              
              316,081Note
                  payable
              
              
              34,613Accounts
                  payable
              
              
              269,875Accrued
                  interest
              
              
              83,391Accrued
                  vacation
              
              
              64,133Accrued
                  salaries, bonuses and other payroll related items
              
              
              330,350**Total
                  current liabilities**
              
              
              1,355,809**Commitments
                  and contingencies**
              
              
              -**Shareholders'
                  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,
                16,478,465
                  shares issued and outstanding
              
              
              1,648Additional
                  paid-in capital
              
              
              5,226,178Deferred
                  option and warrant costs
              
              
              (387,437
              )Deficit
                  accumulated during the development stage
              
              
              (5,754,649
              )**Total
                  shareholders' deficit**
              
              
              (914,260
              )$
              441,549


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


F-3


Impact
      Medical Solutions, Inc.


(A
      Development Stage Company)


Statements
      of Operations




**Cumulative****from
                  inception****(October
                  20, 1997)****Year
                  ended December 31,**
              
              **to
                  December 31,****2007**
              
              **2006**
              
              **2007****Costs
                  and expenses:**Research
                  and development
              
              $
              151,217
              
              $
              212,060
              
              $
              737,725Medical
                  and clinical
              
              
              105,767
              
              
              249,165
              
              
              1,105,713General
                  and administrative
              
              
              666,632
              
              
              1,368,915
              
              
              3,271,304**Operating
                  loss**
              
              
              923,616
              
              
              1,830,140
              
              
              5,114,742**Other
                  income (expense):**Interest
                  expense
              
              
              (338,294
              )
              
              (246,450
              )
              
              (634,826
              )Interest
                  income
              
              
              15
              
              
              20
              
              
              290(338,279
              )
              
              (246,430
              )
              
              (634,536
              )**Loss
                  before provision for taxes**
              
              
              1,261,895
              
              
              2,076,570
              
              
              5,749,278**Provision
                  for taxes**
              
              
              1,594
              
              
              577
              
              
              5,371**Net
                  loss**
              
              $
              1,263,489
              
              $
              2,077,147
              
              $
              5,754,649**Basic
                  and diluted net loss per share**
              
              $
              (0.08
              )
              $
              (0.13
              )**Basic
                  and diluted weighted average number of common shares
                  outstanding**
              
              
              15,996,205
              
              
              15,426,710


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


F-4




Impact
      Medical Solutions, Inc.


(A
      Development Stage Company)


Statements
      of Cash Flows




**Cumulative****from
                  inception****(October
                  20, 1997)****Year
                  ended December 31,**
              
              **to
                  December 31,****2007**
              
              **2006**
              
              **2007****Cash
                  flows from operating activities:**Net
                  loss
              
              $
              (1,263,489
              )
              $
              (2,077,147
              )
              $
              (5,754,649
              )Adjustments
                  to reconcile net loss to net cash used by operating
                  activities:Depreciation
                  and amortization
              
              
              43,970
              
              
              43,584
              
              
              171,452Amortization
                  of loan discount
              
              
              290,227
              
              
              233,708
              
              
              535,637Issuance
                  of common stock for services
              
              
              81,464
              
              
              50,000
              
              
              191,624Issuance
                  of stock options and warrants for services
              
              
              64,119
              
              
              927,257
              
              
              1,120,604Decrease
                  (increase) in prepaid expenses
              
              
              (21,677
              )
              
              (2,410
              )
              
              (26,686
              )Increase
                  (decrease) in accounts payable
              
              
              103,402
              
              
              61,486
              
              
              269,875Increase
                  (decrease) in accrued expenses
              
              
              171,474
              
              
              51,778
              
              
              477,874Net
                  cash used by operating activities
              
              
              (530,510
              )
              
              (711,744
              )
              
              (3,014,269
              )**Cash
                  flows from investing activities:******Capital
                  expenditures
              
              
              (564
              )
              
              (3,358
              )
              
              (71,171
              )Net
                  cash used by investing activities
              
              
              (564
              )
              
              (3,358
              )
              
              (71,171
              )**Cash
                  flows from financing activities:**Proceeds
                  from loans from related parties
              
              
              202,320
              
              
              -
              
              
              322,812Proceeds
                  from convertible debt
              
              
              332,991
              
              
              -
              
              
              332,991Payments
                  on note payable
              
              
              -
              
              
              (4,000
              )
              
              (65,387
              )Issuance
                  of common stock, net of costs
              
              
              -
              
              
              517,305
              
              
              2,510,168Net
                  cash provided by financing activities
              
              
              535,311
              
              
              513,305
              
              
              3,100,584Net
                  increase (decrease) in cash
              
              
              4,237
              
              
              (201,797
              )
              
              15,144**Cash,
                  beginning of period**
              
              
              10,907
              
              
              212,704
              
              
              -**Cash,
                  end of period**
              
              $
              15,144
              
              $
              10,907
              
              $
              15,144**Non-cash
                  investing and financing activities:**Issuance
                  of common stock & note payable for patent
              
              $
              -
              
              $
              -
              
              $
              500,000Issuance
                  of warrants with debt
              
              $
              353,036
              
              $
              244,282
              
              $
              617,993




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


F-5




Impact
      Medical Solutions, Inc.


(A
      Development Stage Company)


Statements
      of Shareholders’ Equity (Deficit)


From
      Inception (October 20, 1997) to December 31, 2007




**Common
                  Stock****Number**
                **of
                  Shares**
              
              **Total**
              
              **Additional**
                **Paid-in**
                **Capital**
              
              **Deferred
                  Share,**
                **Option
                  &**
                **Warrant
                  Cost**
              
              **Accumulated**During
                  the
                **Development**
                **Stage**
              
              
              
              **Total**
                **Shareholders'**
                **Equity
                  (Deficit)**Initial
                  capitalization
              
              
              3,000,000
              
              $
              1,500
              
              $
              1,250
              
              $
              -
              
              $
              -
              
              
              
              
              $
              2,750Net
                  loss for 1997
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,750
              )
              
              
              
              
              (2,750
              )**Balance,
                  December 31, 1997**
              
              
              **3,000,000**
              
              
              **1,500**
              
              
              **1,250**
              
              
              **-**
              
              
              **(2,750**
              **)**
              
              
              
              
              **-**Net
                  loss for 1998
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              -**Balance,
                  December 31, 1998**
              
              
              **3,000,000**
              
              
              **1,500**
              
              
              **1,250**
              
              
              **-**
              
              
              **(2,750**
              **)**
              
              
              
              
              **-**Net
                  loss for 1999
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              -**Balance,
                  December 31, 1999**
              
              
              **3,000,000**
              
              
              **1,500**
              
              
              **1,250**
              
              
              **-**
              
              
              **(2,750**
              **)**
              
              
              
              
              **-**Net
                  loss for 2000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              -**Balance,
                  December 31, 2000**
              
              
              **3,000,000**
              
              
              **1,500**
              
              
              **1,250**
              
              
              **-**
              
              
              **(2,750**
              **)**
              
              
              
              
              **-**Net
                  loss for 2001
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              -**Balance,
                  December 31, 2001**
              
              
              **3,000,000**
              
              
              **1,500**
              
              
              **1,250**
              
              
              **-**
              
              
              **(2,750**
              **)**
              
              
              
              
              **-**Net
                  loss for 2002
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              -**Balance,
                  December 31, 2002**
              
              
              **3,000,000**
              
              
              **1,500**
              
              
              **1,250**
              
              
              **-**
              
              
              **(2,750**
              **)**
              
              
              
              
              **-**Net
                  loss for 2003
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (181,023
              )
              
              
              
              
              (181,023
              )Shares
                  issued for patent
              
              
              8,000,000
              
              
              4,000
              
              
              396,000
              
              
              -
              
              
              -
              
              
              
              
              
              400,000Shares
                  issued for cash
                net
                  of share issue costs of $86,096
              
              
              2,086,000
              
              
              1,043
              
              
              434,361
              
              
              -
              
              
              -
              
              
              
              
              
              435,404**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 cash
                net
                  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 cash
                net
                  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**


*(continued)*








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


F-6


Impact
      Medical Solutions, Inc.


(A
      Development Stage Company)


Statements
      of Shareholders’ Equity (Deficit) (continued)


From
      Inception (October 20, 1997) to December 31, 2007




**Common
                  Stock****Number**
                **of
                  Shares**
              
              **Total**
              
              **Additional**
                **Paid-in**
                **Capital**
              
              **Deferred
                  Share,**
                **Option
                  &**
                **Warrant
                  Cost**
              
              **Accumulated**During
                  the
                **Development**
                **Stage**
              
              **Total**
                **Shareholders'**
                **Equity
                  (Deficit)****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
                at1
                  to 1
              
              
              -
              
              
              (6,262
              )
              
              6,262
              
              
              -
              
              
              -
              
              
              -Shares
                  issued upon merger
              
              
              200,000
              
              
              20
              
              
              (20
              )
              
              -
              
              
              -
              
              
              -Value
                  of warrants issued
              
              
              -
              
              
              -
              
              
              1,101,523
              
              
              (430,046
              )
              
              -
              
              
              671,477Amortization
                  of stock warrant costs
              
              
              -
              
              
              -
              
              
              -
              
              
              500,062
              
              
              -
              
              
              500,062Net
                  loss for 2006
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,077,147
              )
              
              (2,077,147
              )**Balance,
                  December 31, 2006**
              
              
              **15,853,465**
              
              
              **1,585**
              
              
              **4,384,842**
              
              
              **(44,657**
              **)**
              
              **(4,491,160**
              **)**
              
              **(149,390**
              **)**Shares
                  issued for services
              
              
              625,000
              
              
              63
              
              
              454,937
              
              
              (455,000
              )
              
              -
              
              
              -Value
                  of warrants issued
              
              
              -
              
              
              -
              
              
              386,399
              
              
              (33,363
              )
              
              -
              
              
              353,036Amortization
                  of share, option and
                warrantcosts
              
              
              -
              
              
              -
              
              
              -
              
              
              145,583
              
              
              -
              
              
              145,583Net
                  loss for 2007
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,263,489
              )
              
              (1,263,489
              )**Balance,
                  December 31, 2007**
              
              
              **16,478,465**
              
              **$**
              **1,648**
              
              **$**
              **5,226,178**
              
              **$**
              **(387,437**
              **)**
              **$**
              **(5,754,649**
              **)**
              **$**
              **(914,260**
              **)**




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


F-7


Impact
      Medical Solutions, Inc.


(A
      Development Stage Company)


Notes
      to
      Financial Statements


December 31,
      2007





**1.****Organization
      and summary of significant accounting policies**





Organization
      and Line of Business


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





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


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





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





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





Development
      Stage Company


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





Going
      Concern


The
      accompanying financial statements have been prepared in conformity with
      accounting principles generally accepted in the United States that contemplate
      continuation of the Company as a going concern. However, during the years ended
      December 31, 2007 and 2006, the Company incurred a net loss of $1,263,489 and
      $2,077,147, respectively, and is in the development stage at December 31, 2007.
      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 sheet is dependent upon the
      Company's ability to meet its financing requirements and the success of its
      plans to sell its products. The Company is attempting to raise approximately
      $2,000,000 in additional funds over the next year through private
      placements. However, there can be no assurance that the Company will be
      successful in raising such additional funds. The Company may also see to
      compensate providers of services by issuance of stock in lieu of
      cash.


F-8


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





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


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





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





Use
      of
      estimates


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





Furniture
      and Equipment


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





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





Patent


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





Long-lived
      assets


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





Research
      and Development Costs


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





Income
      Taxes


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








F-9


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





Share-based
      payments


The
      Company adopted the provisions of SFAS 123(R), *Share-Based
      Payments,* on
      January 1, 2006. Accordingly, compensation costs for all share-based awards
      to
      employees are measured based on the grant date fair value of those awards and
      recognized over the period during which the employee is required to perform
      service in exchange for the award (generally over the vesting period of the
      award). 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 25, *Accounting
      for Stock Issued to Employees* (“APB
      25”). In March 2005, the Securities and Exchange Commission issued Staff
      Accounting Bulletin 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 SFAS 123, *Accounting
      for Stock-Based Compensation* .
      Our
      financial statements for the year ended December 31, 2006 and 2007 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. For share awards granted prior to
      2006, expenses are amortized under the straight-line method prescribed by SFAS
      123. 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 for the periods prior to 2006,
      we
      accounted for forfeitures as they occurred.





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





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





*Pro
      Forma Information under SFAS 123 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 convertible debt, note payable and loans
      from
      related parties also approximate fair value because
      current interest rates offered to the Company for notes payable of similar
      maturities are substantially the same.


F-10


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





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 159, *The
      Fair Value Option for Financial Assets and Financial Liabilities.* SFAS
      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 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 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 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 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 159 will have on the Company’s
      financial statements.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      157
      (“SFAS 157”), *Fair
      Value Measurements,* which
      defines fair value, establishes guidelines for measuring fair value and expands
      disclosures regarding fair value measurements. SFAS 157 does not require any
      new
      fair value measurements but rather eliminates inconsistencies in guidance found
      in various prior accounting pronouncements. SFAS 157 is effective for fiscal
      years beginning after November 15, 2007 with earlier adoption permitted. The
      Company is currently evaluating the impact of SFAS 157, but do not expect the
      adoption of SFAS 157 to have a material impact on financial position, results
      of
      operations or cash flows.





In
      July
      2006, the FASB issued Financial Interpretation 48, *Accounting
      for Uncertainty in Income Taxes - an interpretation of FASB Statement
      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. Adoption of FIN 48 had no material impact on the
      Company’s financial position, results of operations or cash flows.





In
      July
      2006, the Emerging Issues Task Force promulgated Issue 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 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. Adoption of this Issue had no material impact
      on the Company’s financial position, results or operations or cash
      flows.








F-11


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





Recent
      accounting pronouncements (continued)





In
      February 2006, the FASB issued Statement of Financial Accounting Standards
      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 adopted SFAS 155 in the first quarter of 2007, and it had no material
      impact on the Company’s financial position, results of operations or cash
      flows.




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




**2007**Furniture
                  and equipment
              
              $
              70,875Less
                  accumulated depreciation
              
              
              (43,704
              )$
              27,171




Depreciation
      expense for the years ended December 31, 2007 and 2006 was $14,558 and $14,172,
      respectively.




**3.** **Patents**




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




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





**4.** **Loans
      from related parties**





During
      2007, the Company borrowed a total of $40,000 from Alan Goldman, one of its
      officers. This loan, evidenced by a short-term promissory note issued on
      December 3, 2007, bears interest at 10% per annum and matured on March 3, 2008.
      Mr. Goldman was also granted 40,000 Series B common stock purchase warrants
      to
      purchase 40,000 shares of common stock at $1.00 per share until December 31,
      2009. The fair value of the warrants using the Black-Scholes valuation method
      totaled $14,126 at the time of issuance, and is reflected as a discount on
      the
      loan in the accompanying financial statements and is being amortized over the
      life of the loan as interest expense.





During
      2007, the Company borrowed a total of $10,000 from Wayne Cockburn, its CEO.
      This
      loan, evidenced by a short-term promissory note issued on October 26, 2007,
      bears interest at 10% per annum and matured on J anuary
      26, 2008. Mr. Cockburn was also granted 10,000 Series B common stock purchase
      warrants to purchase 10,000 shares of common stock at $1.00 per share until
      December 31, 2009. The fair value of the warrants using the Black-Scholes
      valuation method totaled $3,148 at the time of issuance, and is reflected as
      a
      discount on the loan in the accompanying financial statements and is being
      amortized over the life of the loan as interest expense. On January 26, 2008
      the
      maturity date of the promissory note was extended to April 30, 2008. Mr.
      Cockburn was granted an additional 10,000 Series B common stock purchase
      warrants to purchase 10,000 shares of common stock at $1.00 per share until
      December 31, 2009 for the extension. The fair value of the warrants using the
      Black-Scholes valuation method totaled $1,901 at the time of issuance, and
      will
      be reflected as a discount on the loan and amortized over the extended life
      of
      the loan as interest expense, beginning January 27, 2008.


F-12


**4.** **Loans
      from related parties (continued)**





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





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


F-13


**4.** **Loans
      from related parties (continued)**





In
      2004,
      the Company borrowed a total of $147,813 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. The fair value of the warrants using the
      Black-Scholes valuation method totaled $39,095 at the time of issuance, and
      was
      reflected as a discount on the loans in the accompanying financial statements
      and amortized over the extended life of the loan as interest expense. In July
      2007, the due date of the loans was extended to July 1, 2008. The director
      was
      granted an additional 100,000 Series B common stock purchase warrants to
      purchase 100,000 shares of common stock at $1.00 per share until December 31,
      2009 for the extension. The fair value of the warrants using the Black-Scholes
      valuation method totaled $44,484 at the time of issuance, and is reflected
      as a
      discount on the loan in the accompanying financial statements and is being
      amortized over the extended life of the loan as interest expense.





**5.** **Convertible
      debt**





During
      2007, the Company issued convertible promissory notes totaling $332,991 to
      eleven individuals (after restructuring), each of whom qualifies as an
      accredited investor under Regulation D of the Securities Act of 1933, as
      amended. The notes bear interest at 12%, matured on January 25, 2008 and are
      convertible into common shares at a rate of $1.00 per share. The note holders
      were also granted one Series B common stock purchase warrant for every $2.00
      loaned, for a total of 166,496 Series B warrants.





In
      accordance with guidance issued by the Financial Accounting Standards Board
      and
      the Emerging Issues Task Force regarding Accounting for Convertible Securities
      with a Beneficial Conversion Feature or Contingently Adjustable Conversion
      Ratios, the company recognized an embedded beneficial conversion feature present
      in the convertible promissory notes. The Company recognized and measured an
      aggregate of $71,497 of the proceeds, which is equal to the intrinsic value
      of
      embedded beneficial conversion feature, to additional paid-in capital and a
      discount against the convertible promissory notes.





In
      accordance with Emerging Issues Task Force Issue 00-27, Application of Issue
      No.
      98-5 to Certain Convertible Instruments (“EITF 00-27”), the Company recognized
      the value attributable to the warrants in the amount of $78,248 to additional
      paid-in capital and a discount against the convertible promissory notes. The
      Company valued the warrants in accordance with EITF 00-27 using the
      Black-Scholes valuation method and the following assumptions: term of 2-2.92
      years, risk-free interest rate of 3.25% - 4.875%; volatility of 63-83% and
      a
      weighted fair value of $.3190- $.4533.





The
      total
      debt discount of $149,745 is being amortized to interest expense over the life
      of the loan.


F-14





**5.** **Convertible
      debt (continued)**





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





On
      January 25, 2008, the due date of the loans was extended to April 28, 2008
      in
      exchange for 83,248 Series B warrants. The fair value of the warrants using
      the
      Black-Scholes valuation method totaled $15,823 at the time of issuance, and
      will
      be reflected as a discount on the loan and amortized over the extended life
      of
      the loan as interest expense, beginning January 26, 2008.





**6.** **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.





**7.** **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.


F-15





**7.** **Shareholders’
      equity (continued)**





Common
      stock issuances (continued)





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





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





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





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





Warrants


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





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





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





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





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





In
      addition, the Company issued 100,000 Series B common stock purchase warrants
      in
      February 2005 and 100,000 in August 2005 to extend the due date of loans payable
      to July 2006. 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 9, 2008 to June 30, 2009 and the Series B expiration
      date was extended from July 31, 2007 to December 31, 2009.








F-16


**7.** **Shareholders’
      equity (continued)**





Warrants
      (continued)





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





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





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





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





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





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





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





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.





**8.** **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 2007 and 2006 there are no material differences between
      income tax expense and the amount computed by applying the federal statutory
      income tax rate.


F-17


**8.** **Income
      taxes (continued)**





At
      December 31, 2007, the Company has a net operating loss carryforward for federal
      tax purposes of approximately $5,730,000, 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 $5,721,000 which, if unused
      to
      offset future taxable income, will begin to expire in 2013.





The
      Company had deferred tax assets of $2,498,000 at December 31, 2007, 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 $1,059,000 in 2007, primarily related
      to the net taxable loss and to change in estimate for certain
      deductions.





**9.** **Commitments
      and contingencies**





Lease


The
      Company leases its office space in Huntington Beach, California on a
      month-to-month basis. Effective March 1, 2007, the Company entered into a
      month-to month lease for office space in Toronto, Canada. During all of 2006
      and
      a portion of 2007, the Company leased space in Quebec, Canada as well. Total
      rent expense charged to operations totaled $58,803 in 2007 and $45,295 in
      2006.





**10. Subsequent
      events (unaudited)**





Convertible
      debt


On
      January 4, 2008, the Company issued a convertible promissory note totaling
      $70,000 to an individual who qualifies as an accredited investor under
      Regulation D of the Securities Act of 1933, as amended. The note bears interest
      at 12%, matured on January 25, 2008 and is convertible into common shares at
      a
      rate of $1.00 per share. The note holder was also granted one Series B common
      stock purchase warrant for every $2.00 loaned, for a total of 35,000 Series
      B
      warrants.





On
      January 25, 2008, the due date for all the convertible notes was extended to
      April 30, 2008 in exchange for additional Series B common stock purchase
      warrants. Each note holder was granted one Series B common stock purchase
      warrant for every $4.00 loaned. See note 5.





Loans
      from related parties


Effective
      January 1, 2008, the maturity date of the $25,000 promissory note to Mr. George
      Angelidis was extended to March 31, 2008. Mr. Angelidis was granted an
      additional 25,000 Series B common stock purchase warrants to purchase 25,000
      shares of common stock at $1.00 per share until December 31, 2009 for the
      extension. See note 4.





On
      January 26, 2008 the maturity date of the $10,000 promissory note to Mr. Wayne
      Cockburn was extended to April 30, 2008. Mr. Cockburn was granted an additional
      10,000 Series B common stock purchase warrants to purchase 10,000 shares of
      common stock at $1.00 per share until December 31, 2009 for the extension.
      See
      note 4.





On
      March
      3, 2008, the maturity date of the $40,000 promissory note to Mr. Alan Goldman
      was extended to June 3, 2008. Mr. Goldman was granted an additional 40,000
      Series B common stock purchase warrants to purchase 40,000 shares of common
      stock at $1.00 per share until December 31, 2009 for the extension. See note
      4.




F-18


**10. Subsequent
      events (continued) (unaudited)**




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














F-19





**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:
                March 31, 2008
            **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
                Wayne
                  D. Cockburn
              President,
                  Chief Executive Officer,
                Secretary,
                  Treasurer and Interim Chief
                Financial
                  Officer and a Member of the Board of Directors (Principal Executive
                  Officer and Principal Financial Officer)
              March
                  31, 2008/s/
                  Donald Paterson
              Chairman
                  of the Board of Directors
              March
                  31, 2008Donald
                  Paterson/s/
                  George Angelidis
              Director
              March
                  31, 2008George
                  Angelidis/s/
                  Craig Lunsman
              Director
              March
                  31, 2008Craig
                  Lunsman/s/
                  Stephen Schectman
                Stephen
                  Schectman
              Director
              March
                  31, 2008







45


**Exhibit
      Index**




**Exhibit
              No.**
            
            **Description**14.1
            
            Code
                of Ethics31.1
            
            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,
                2007.32.1
            
            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.





46