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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q





(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED: September 27, 2008



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

FOR THE TRANSITION PERIOD FROM  TO

Commission File Number: 000-13858





MEDICAL SOLUTIONS MANAGEMENT INC.

(Exact Name Of Registrant As Specified In
Its Charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Nevada                                                         |  | 86-0214815                          
|(State or other jurisdiction of Incorporation or organization) |  | (I.R.S. Employer Identification No.)

237 Cedar Hill Street, Marlborough, Massachusetts 01752

(Address of principal executive offices)(Zip Code)

(508) 597-6300

(Registrants telephone number, including area code)



(Former name, former address and former fiscal year, if changed since last
report)





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the 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.    Yes  x    No   ̈

Indicate by check mark whether the registrant is
a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule
12b-2 of the Exchange Act.



|                                                                       |  |                             
|---------------------------------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈                                             |  | Accelerated filer   ̈        
|                                                                       | 
|Non-accelerated filer   ̈ (Do not check if a smaller reporting company) |  | Smaller reporting company  x

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

As of November 10, 2008, there were 58,218,007 shares of the issuers common stock issued and outstanding.









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TABLE OF CONTENTS



|                             |  |          |  |                                                                                       |  |   
|---------------------------- |  | -------- |  | ------------------------------------------------------------------------------------- |  | --
|                             |  |          |  | Page                                                                                 
|                             | 
|PART I FINANCIAL INFORMATION |  | 1       
|                             |  |          | 
|                             |  | ITEM 1.  |  | FINANCIAL STATEMENTS                                                                  |  | 1 
|                             |  |          | 
|                             |  | ITEM 2.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 12
|                             |  |          | 
|                             |  | ITEM 3.  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |  | 16
|                             |  |          | 
|                             |  | ITEM 4T. |  | CONTROLS AND PROCEDURES                                                               |  | 16
|                             | 
|PART II OTHER INFORMATION    |  | 17      
|                             |  |          | 
|                             |  | ITEM 1.  |  | LEGAL PROCEEDINGS                                                                     |  | 17
|                             |  |          | 
|                             |  | ITEM 1A. |  | RISK FACTORS                                                                          |  | 17
|                             |  |          | 
|                             |  | ITEM 2.  |  | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                           |  | 17
|                             |  |          | 
|                             |  | ITEM 3.  |  | DEFAULTS UPON SENIOR SECURITIES                                                       |  | 17
|                             |  |          | 
|                             |  | ITEM 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   |  | 18
|                             |  |          | 
|                             |  | ITEM 5.  |  | OTHER INFORMATION                                                                     |  | 18
|                             |  |          | 
|                             |  | ITEM 6.  |  | EXHIBITS                                                                              |  | 18



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Special Note Regarding Forward-Looking Information

This Quarterly Report on Form 10-Q, including the information incorporated by reference herein, contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which include information concerning our plans, objectives, goals, strategies, future revenues or
performance, and other information that is not historical information. Many of these statements appear, in particular, under the heading Managements Discussion and Analysis of Financial Condition and Results of Operations in
ITEM 2 of Part I of this report. When used in this report, the words estimates, expects, anticipates, projects, plans, intends, believes and variations of such
words or similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon our current expectations and various assumptions. There can be no assurance that we will realize our expectations or
that our beliefs will prove correct.

There are a number of risks and uncertainties that could cause our actual results to differ
materially from the forward-looking statements contained in this report. Important factors that could cause our actual results to differ materially from those expressed as forward-looking statements are set forth in this report, including under the
heading Risk Factors under ITEM 1A of Part I of our Form 10-KSB for the year ended December 31, 2007. There may be other factors that may cause our actual results to differ materially from the forward-looking statements.

All forward-looking statements attributable to us apply only as of the date of this Quarterly Report on Form 10-Q and are expressly
qualified in their entirety by the cautionary statements included in this Quarterly Report on Form 10-Q. Except as may be required by law, we undertake no obligation to publicly update or revise any of the forward-looking statements, whether as a
result of new information, future events, or otherwise.

Explanatory Notes

Unless the context otherwise requires, in this Quarterly Report on Form 10-Q the term MSMI refers Medical Solutions Management Inc., the term
OrthoSupply refers to MSMIs wholly-owned subsidiary, OrthoSupply Management, Inc., and the terms the Company, we, us and our refer to MSMI and OrthoSupply collectively.



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PART I FINANCIAL INFORMATION



|ITEM 1 | FINANCIAL STATEMENTS
|------ | --------------------

Medical Solutions Management
Inc.

Consolidated Balance Sheets



|                                                                                                                                                                                                                                                                      |  |                               |              |   |                            |   |              |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | ------------ | - | -------------------------- | - | ------------ | -
|                                                                                                                                                                                                                                                                      |  | September 27, 2008(unaudited) |              |   | December 31, 2007(audited) |  
|Assets                                                                                                                                                                                                                                                                |  |                               |              |   |                            |   |              |  
|Current Assets:                                                                                                                                                                                                                                                       |  |                               |              |   |                            |   |              |  
|Cash and cash equivalents                                                                                                                                                                                                                                             |  | $                             | 978,216      |   |                            | $ | 1,091,939    |  
|Trade accounts receivable, net                                                                                                                                                                                                                                        |  |                               | 1,203,097    |   |                            |   | 1,254,483    |  
|Other receivables, net                                                                                                                                                                                                                                                |  |                               | 5,598,989    |   |                            |   | 3,603,681    |  
|Inventory                                                                                                                                                                                                                                                             |  |                               | 177,528      |   |                            |   | 129,152      |  
|Prepaid expenses                                                                                                                                                                                                                                                      |  |                               | 55,014       |   |                            |   | 26,317       |  
|                                                                                                                                                                                                                                                                      |  |                               |              |   |                            |   |              |  
|Total current assets                                                                                                                                                                                                                                                  |  |                               | 8,012,844    |   |                            |   | 6,105,572    |  
|Property and equipment, net                                                                                                                                                                                                                                           |  |                               | 74,288       |   |                            |   | 110,420      |  
|Debt issuance costs, net                                                                                                                                                                                                                                              |  |                               | 15,938       |   |                            |   | 159,362      |  
|                                                                                                                                                                                                                                                                      |  |                               |              |   |                            |   |              |  
|Total Assets                                                                                                                                                                                                                                                          |  | $                             | 8,103,070    |   |                            | $ | 6,375,354    |  
|                                                                                                                                                                                                                                                                      |  |                               |              |   |                            |   |              |  
|Liabilities, Preferred Stock and Stockholders Deficiency                                                                                                                                                                                                             |  |                               |              |   |                            |   |              |  
|Current Liabilities:                                                                                                                                                                                                                                                  |  |                               |              |   |                            |   |              |  
|Accounts payable                                                                                                                                                                                                                                                      |  | $                             | 1,031,598    |   |                            | $ | 650,394      |  
|Accrued expenses                                                                                                                                                                                                                                                      |  |                               | 975,013      |   |                            |   | 636,024      |  
|Borrowings under revolving line of credit                                                                                                                                                                                                                             |  |                               | 3,000,000    |   |                            |   | 3,000,000    |  
|Convertible notes payable due in less than one year (net of discounts of $192,906 and $599,650 at September 27, 2008 and
December 31, 2007, respectively)                                                                                                             |  |                               | 3,098,092    |   |                            |   | 3,925,350    |  
|                                                                                                                                                                                                                                                                      |  |                               |              |   |                            |   |              |  
|Total current liabilities                                                                                                                                                                                                                                             |  |                               | 8,104,703    |   |                            |   | 8,211,768    |  
|Long-term Debt:                                                                                                                                                                                                                                                       |  |                               |              |   |                            |   |              |  
|Convertible notes payable  long term (net of discounts of $0 and $316,061 at September 27, 2008 and December 31, 2007,
respectively)                                                                                                                                 |  |                               |             |   |                            |   | 949,939      |  
|                                                                                                                                                                                                                                                                      |  |                               |              |   |                            |   |              |  
|Total Liabilities                                                                                                                                                                                                                                                     |  |                               | 8,104,703    |   |                            |   | 9,161,707    |  
|                                                                                                                                                                                                                                                                      |  |                               |              |   |                            |   |              |  
|Series D Convertible Preferred stock  798,906 authorized, $0.0001 par value, 798,906 issued and outstanding as of September 27,
2008 and 0 issued and outstanding at December 31, 2007, respectively (preference in liquidation of $8,124,432 at September 27, 2008) |  |                               | 8,124,432    |   |                            |   |             |  
|                                                                                                                                                                                                                                                                      |  |                               |              |   |                            |   |              |  
|Commitments and contingencies                                                                                                                                                                                                                                         |  |                               |              |   |                            |   |              |  
|Stockholders Deficiency:                                                                                                                                                                                                                                             |  |                               |              |   |                            |   |              |  
|Common stock  200,000,000 authorized, $0.0001 par value, 58,218,007 issued and outstanding at September 27, 2008 and
December 31, 2007                                                                                                                               |  |                               | 5,822        |   |                            |   | 5,822        |  
|Additional paid in-capital                                                                                                                                                                                                                                            |  |                               | 150,516,899  |   |                            |   | 150,674,080  |  
|Accumulated deficit                                                                                                                                                                                                                                                   |  |                               | (158,648,786 | ) |                            |   | (153,466,255 | )
|                                                                                                                                                                                                                                                                      |  |                               |              |   |                            |   |              |  
|Total Stockholders Deficiency                                                                                                                                                                                                                                        |  |                               | (8,126,065   | ) |                            |   | (2,786,353   | )
|                                                                                                                                                                                                                                                                      |  |                               |              |   |                            |   |              |  
|Total Liabilities, Preferred Stock and Stockholders Deficiency                                                                                                                                                                                                       |  | $                             | 8,103,070    |   |                            | $ | 6,375,354    |  
|                                                                                                                                                                                                                                                                      |  |                               |              |   |                            |   |              |  

See Notes to Unaudited Interim Financial Statements.



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Medical Solutions Management Inc.

Consolidated Statements of Operations for the Three and

Nine Months Ended
September 27, 2008 and September 29, 2007

(unaudited)



|                                                                      |  |                   |             |   |                    |   |              |                   |  |   |                   |   |  |   |              |  
|--------------------------------------------------------------------- |  | ----------------- | ----------- | - | ------------------ | - | ------------ | ----------------- |  | - | ----------------- | - |  | - | ------------ | -
|                                                                      |  | Nine Months Ended |             |   | Three Months Ended |  
|                                                                      |  | September 27,2008 |             |   | September 29,2007  |   |              | September 27,2008 |  |   | September 29,2007 |  
|Revenue:                                                              |  |                   |             |   |                    |   |              |                   |  |   |                   |   |  |   |              |  
|Sales of Medical Products                                             |  | $                 | 2,099,035   |   |                    | $ | 1,627,829    |                   |  | $ | 642,446           |   |  | $ | 523,108      |  
|Service Revenue                                                       |  |                   | 1,253,011   |   |                    |   | 947,721      |                   |  |   | 301,737           |   |  |   | 536,423      |  
|                                                                      |  |                   |             |   |                    |   |              |                   |  |   |                   |   |  |   |              |  
|Total revenue                                                         |  |                   | 3,352,046   |   |                    |   | 2,575,550    |                   |  |   | 944,183           |   |  |   | 1,059,531    |  
|                                                                      |  |                   |             |   |                    |   |              |                   |  |   |                   |   |  |   |              |  
|Cost of Revenue:                                                      |  |                   |             |   |                    |   |              |                   |  |   |                   |   |  |   |              |  
|Cost of Medical Products                                              |  |                   | 1,424,401   |   |                    |   | 1,111,927    |                   |  |   | 436,528           |   |  |   | 395,401      |  
|Cost of Services                                                      |  |                   | 1,351,191   |   |                    |   | 806,677      |                   |  |   | 381,381           |   |  |   | 392,171      |  
|                                                                      |  |                   |             |   |                    |   |              |                   |  |   |                   |   |  |   |              |  
|Total Cost of Revenue                                                 |  |                   | 2,775,592   |   |                    |   | 1,918,604    |                   |  |   | 817,909           |   |  |   | 787,572      |  
|                                                                      |  |                   |             |   |                    |   |              |                   |  |   |                   |   |  |   |              |  
|Gross Profit                                                          |  |                   | 576,454     |   |                    |   | 656,946      |                   |  |   | 126,274           |   |  |   | 271,959      |  
|Selling, General and Administrative Expenses                          |  |                   | 4,473,826   |   |                    |   | 3,541,540    |                   |  |   | 1,641,877         |   |  |   | 1,250,499    |  
|                                                                      |  |                   |             |   |                    |   |              |                   |  |   |                   |   |  |   |              |  
|Operating Loss                                                        |  |                   | (3,897,372  | ) |                    |   | (2,884,594   | )                 |  |   | (1,515,603        | ) |  |   | (978,540     | )
|                                                                      |  |                   |             |   |                    |   |              |                   |  |   |                   |   |  |   |              |  
|Other Income (Expense)                                                |  |                   |             |   |                    |   |              |                   |  |   |                   |   |  |   |              |  
|Interest Income                                                       |  |                   | 7,532       |   |                    |   | 9,807        |                   |  |   | 4,265             |   |  |   | 7,417        |  
|Interest Expense, net                                                 |  |                   | (1,040,711  | ) |                    |   | (629,548     | )                 |  |   | (302,609          | ) |  |   | (199,917     | )
|Revolving line of credit financing expense                            |  |                   |            |   |                    |   | (21,494,876  | )                 |  |   |                  |   |  |   |             |  
|Note extension expense                                                |  |                   |            |   |                    |   | (8,676,888   | )                 |  |   |                  |   |  |   |             |  
|Debt extinguishment loss                                              |  |                   | (247,339    | ) |                    |   | (112,513,239 | )                 |  |   | (247,339          | ) |  |   | (112,513,239 | )
|                                                                      |  |                   |             |   |                    |   |              |                   |  |   |                   |   |  |   |              |  
|Other Income (Expense), net                                           |  |                   | (1,280,518  | ) |                    |   | (143,304,744 | )                 |  |   | (545,683          | ) |  |   | (112,705,739 | )
|                                                                      |  |                   |             |   |                    |   |              |                   |  |   |                   |   |  |   |              |  
|Net Loss Before Income Taxes                                          |  |                   | (5,177,890  | ) |                    |   | (146,189,338 | )                 |  |   | (2,061,286        | ) |  |   | (113,684,279 | )
|Provision for Income Taxes                                            |  |                   | 4,641       |   |                    |   | 5,133        |                   |  |   |                  |   |  |   | 1,971        |  
|                                                                      |  |                   |             |   |                    |   |              |                   |  |   |                   |   |  |   |              |  
|Net Loss                                                              |  |                   | (5,182,531  | ) |                    |   | (146,194,471 | )                 |  |   | (2,061,286        | ) |  |   | (113,686,250 | )
|Accretion of Series D Convertible Preferred Stock to redemption value |  |                   | (7,989,062  | ) |                    |   |             |                   |  |   | (7,989,062        | ) |  |   |             |  
|Accretion of dividends on Series D Convertible Preferred Stock        |  |                   | (135,370    | ) |                    |   |             |                   |  |   | (135,370          | ) |  |   |             |  
|                                                                      |  |                   |             |   |                    |   |              |                   |  |   |                   |   |  |   |              |  
|Net Loss applicable to common stockholders                            |  | $                 | (13,306,963 | ) |                    | $ | (146,194,471 | )                 |  | $ | (10,185,718       | ) |  | $ | (113,686,250 | )
|                                                                      |  |                   |             |   |                    |   |              |                   |  |   |                   |   |  |   |              |  
|Basic and Diluted Net Loss Per Common Share                           |  | $                 | (0.23       | ) |                    | $ | (4.61        | )                 |  | $ | (0.18             | ) |  | $ | (2.10        | )
|                                                                      |  |                   |             |   |                    |   |              |                   |  |   |                   |   |  |   |              |  
|Weighted Average Common Shares Outstanding (Basic and Diluted)        |  |                   | 58,218,007  |   |                    |   | 31,696,102   |                   |  |   | 58,218,007        |   |  |   | 54,060,240   |  
|                                                                      |  |                   |             |   |                    |   |              |                   |  |   |                   |   |  |   |              |  

See Notes to Unaudited Interim Financial Statements.



2



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Medical Solutions Management Inc.

Consolidated Statements of Cash Flows for the

Nine Months Ended September 27, 2008
and September 29, 2007

(unaudited)



|                                                                                                                                     |  |                   |            |   |                   |   |              |  
|------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | ---------- | - | ----------------- | - | ------------ | -
|                                                                                                                                     |  | Nine Months Ended |           
|                                                                                                                                     |  | September 27,2008 |            |   | September 29,2007 |  
|Cash Flows from Operating Activities:                                                                                                |  |                   |            |   |                   |   |              |  
|Net loss                                                                                                                             |  | $                 | (5,182,531 | ) |                   | $ | (146,194,471 | )
|Adjustments required to reconcile net loss to cash flows used by operating activities:                                               |  |                   |            |   |                   |   |              |  
|Increase in allowance for doubtful accounts                                                                                          |  |                   | 267,055    |   |                   |   | 59,521       |  
|Depreciation and amortization                                                                                                        |  |                   | 52,674     |   |                   |   | 43,702       |  
|Non-cash interest expense related to amortization of debt discounts and debt issuance costs                                          |  |                   | 620,773    |   |                   |   | 417,772      |  
|Fair value of warrants issued for revolving line of credit financing                                                                 |  |                   |           |   |                   |   | 21,494,876   |  
|Fair value of warrants issued for extension on maturity of convertible notes                                                         |  |                   |           |   |                   |   | 8,676,888    |  
|Fair value of warrants issued as part of separation agreement                                                                        |  |                   | 266,304    |   |                   |   |             |  
|Debt extinguishment loss                                                                                                             |  |                   | 247,339    |   |                   |   | 112,513,239  |  
|Changes in Operating Assets and Liabilities:                                                                                         |  |                   |            |   |                   |   |              |  
|Trade accounts receivable                                                                                                            |  |                   | (215,669   | ) |                   |   | (834,104     | )
|Other receivables                                                                                                                    |  |                   | (1,995,308 | ) |                   |   | (2,919,852   | )
|Inventory                                                                                                                            |  |                   | (48,376    | ) |                   |   | 42,075       |  
|Prepaid expenses                                                                                                                     |  |                   | (28,697    | ) |                   |   | 25,153       |  
|Accounts payable                                                                                                                     |  |                   | 381,204    |   |                   |   | 562,780      |  
|Accrued expenses                                                                                                                     |  |                   | 567,846    |   |                   |   | 198,125      |  
|                                                                                                                                     |  |                   |            |   |                   |   |              |  
|Net cash used by operating activities                                                                                                |  |                   | (5,067,386 | ) |                   |   | (5,914,296   | )
|                                                                                                                                     |  |                   |            |   |                   |   |              |  
|Cash Flows from Investing Activities:                                                                                                |  |                   |            |   |                   |   |              |  
|Purchases of property and equipment                                                                                                  |  |                   | (16,542    | ) |                   |   | (47,297      | )
|                                                                                                                                     |  |                   |            |   |                   |   |              |  
|Cash Flows from Financing Activities:                                                                                                |  |                   |            |   |                   |   |              |  
|Proceeds from convertible notes payable                                                                                              |  |                   |           |   |                   |   | 650,000      |  
|Proceeds from debt modification                                                                                                      |  |                   |            |   |                   |   | 2,100,000    |  
|Proceeds from borrowings under revolving line of credit                                                                              |  |                   |           |   |                   |   | 3,000,000    |  
|Proceeds from other advances payable                                                                                                 |  |                   | 2,260,205  |   |                   |   |             |  
|Proceeds from preferred stock offering, net                                                                                          |  |                   | 2,710,000  |   |                   |   |             |  
|Proceeds from the exercise of common stock options and warrants                                                                      |  |                   |           |   |                   |   | 377,447      |  
|                                                                                                                                     |  |                   |            |   |                   |   |              |  
|Net cash provided by financing activities                                                                                            |  |                   | 4,970,205  |   |                   |   | 6,127,447    |  
|                                                                                                                                     |  |                   |            |   |                   |   |              |  
|Net Increase (Decrease) in Cash and Cash Equivalents                                                                                 |  |                   | (113,723   | ) |                   |   | 165,854      |  
|Cash and Cash Equivalents - Beginning                                                                                                |  |                   | 1,091,939  |   |                   |   | 353,058      |  
|                                                                                                                                     |  |                   |            |   |                   |   |              |  
|Cash and Cash Equivalents - Ending                                                                                                   |  | $                 | 978,216    |   |                   | $ | 518,912      |  
|                                                                                                                                     |  |                   |            |   |                   |   |              |  
|Supplemental disclosure of cash flow information:                                                                                    |  |                   |            |   |                   |   |              |  
|Cash paid for interest                                                                                                               |  | $                 | 84,750     |   |                   | $ | 55,869       |  
|                                                                                                                                     |  |                   |            |   |                   |   |              |  
|Cash paid for income taxes                                                                                                           |  | $                 | 4,641      |   |                   | $ | 4,369        |  
|                                                                                                                                     |  |                   |            |   |                   |   |              |  
|                                                                                                                                     |  |                  
|Supplemental disclosure of non-cash transactions:                                                                                    |  |                   |            |   |                   |   |              |  
|Convertible notes payable and advances payable exchanged for Series D Convertible Preferred Stock                                    |  | $                 | 4,760,205  |   |                   | $ |             |  
|                                                                                                                                     |  |                   |            |   |                   |   |              |  
|Accrued interest on convertible notes payable exchanged for Series D Convertible Preferred Stock                                     |  | $                 | 228,857    |   |                   | $ |             |  
|                                                                                                                                     |  |                   |            |   |                   |   |              |  
|Discounts on convertible notes payable recorded as additional paid-in-capital                                                        |  | $                 |           |   |                   | $ | 1,266,000    |  
|                                                                                                                                     |  |                   |            |   |                   |   |              |  
|Incremental fair value of modified warrants recorded as debt issuance costs and additional paid-in capital                           |  | $                 |           |   |                   |   | 254,978      |  
|                                                                                                                                     |  |                   |            |   |                   |   |              |  
|Incremental fair value of modified warrants recorded as debt extinguishment loss and additional paid-in capital                      |  | $                 |           |   |                   |   | 9,267,179    |  
|                                                                                                                                     |  |                   |            |   |                   |   |              |  
|Fair value of embedded conversion feature of modified debentures recorded as debt extinguishment loss and additional paid-in
capital |  | $                 |           |   |                   |   | 103,906,879  |  
|                                                                                                                                     |  |                   |            |   |                   |   |              |  
|Adjustment of debenture carrying value to fair value recorded as a debt extinguishment loss                                          |  | $                 |           |   |                   | $ | 1,439,181    |  
|                                                                                                                                     |  |                   |            |   |                   |   |              |  

See Notes to Unaudited Interim Financial Statements



3



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##### Table of Contents

MEDICAL SOLUTIONS MANAGEMENT INC.

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS



|1. | Basis of Presentation
|-- | ---------------------

The financial statements
presented herein have been prepared by Medical Solutions Management Inc., a Nevada corporation (MSMI and collectively with its wholly-owned subsidiary, OrthoSupply Management, Inc., a Delaware corporation, the Company) in
accordance with the accounting policies described in the Companys Annual Report on Form 10-KSB for fiscal year ended December 31, 2007 filed with the Securities and Exchange Commission (the SEC) on April 15, 2008 and
should be read in conjunction with the notes to consolidated financial statements which appear in that report.

The preparation of these
financial statements in conformity with accounting principles generally accepted in the United States (GAAP) requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. Amounts from the Companys fiscal year 2007 may also be reclassified to conform to current fiscal year 2008 classifications. On an on going basis, the Company evaluates its
estimates, including those related intangible assets, income taxes, insurance obligations and contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results may differ from these estimates under different
assumptions or conditions.

In the opinion of management, the information furnished in this Quarterly Report on Form 10-Q reflects all
adjustments necessary for a fair statement of the financial position and results of operations and cash flows as of and for the nine-month month periods ended September 27, 2008 and September 29, 2007. All such adjustments are of a normal
recurring nature. The consolidated financial statements have been prepared in accordance with the instructions to Quarterly Report on Form 10-Q and therefore do not include some information and notes necessary to conform to annual reporting
requirements.

The consolidated financial statements include the accounts of Medical Solutions Management Inc. and its wholly-owned
subsidiary, OrthoSupply Management, Inc. All significant inter-company balances and transactions have been eliminated in consolidation.

The Companys fiscal year is on a calendar year basis consisting of four thirteen week quarters with the last month in each quarter being five weeks. The fiscal years ending December 31, 2008 and 2007 include 52 weeks.

Reorganization Agreement

On July 25, 2008,
MSMI, Andover Medical, Inc., a Delaware corporation (Andover) and Certified Diabetics Services, Inc., a Delaware corporation (CDIP) entered into an Asset Purchase Agreement and Plan of Reorganization (the Reorganization
Agreement), pursuant to which MSMI will acquire substantially all of the assets of Andover and CDIP, including Andovers and CDIPs subsidiaries. Andover and CDIP are collectively referred to as the Target Companies.

Pursuant to the Reorganization Agreement, MSMI will acquire the following subsidiaries of the Target Companies: (i) Certified
Diabetic Supplies, Inc., (ii) CDS Health Management, Inc., (iii) CDS Medical Supplies, Inc., (iv) CDS Pharmacies, Inc., (v) Diabetic Plus, Inc., (vi) Ortho-Medical Products, Inc. and (vii) Rainier Surgical Incorporated.

The Reorganization Agreement provides that in exchange for substantially all of the assets of the Target Companies, including all of the
capital stock of the above referenced subsidiaries, the Target Companies shareholders will receive shares of MSMIs common stock and preferred stock, as described below. As a result, the percentage of beneficial ownership of
MSMIs common stock owned by each of the parties shall be as follows: (i) CDIP shareholders will own forty-five (45%) percent of the outstanding MSMI common stock, (ii) the existing shareholders will own twenty (20%) percent
of the outstanding MSMI common stock, and (iii) Andover shareholders will own thirty-five (35%) percent of the outstanding MSMI common stock (calculated on an as-converted basis, inclusive of common stock, preferred stock and convertible
debentures, but exclusive of options and warrants which will be assumed by MSMI). An additional eight (8%) percent of the issued and outstanding shares of common stock of MSMI (calculated on the date of the closing of the transactions
under the Reorganization Agreement (the Closing Date) in the same manner as set forth in the prior sentence) shall be placed in escrow to be issued to the former common and preferred shareholders of Andover and CDIP following the Closing
Date based upon the respective performances of Andover and CDIP in achieving revenue and earnings targets during calendar year 2008.

The
closing of the proposed transactions is conditioned upon and subject to respective shareholder approval, the effectiveness of a registration statement covering the shares of MSMI common stock and preferred stock to be issued to the shareholders of
the Target Companies, as well as shares of MSMI common stock issuable upon the exercise of new warrants to be issued by MSMI to former warrant holders of the Target Companies, all third-party consents and waivers being obtained, no material adverse
change having occurred with respect to any of the three parties to the Reorganization Agreement, and other customary closing conditions.

The Company is in the process of determining the appropriate accounting for the Reorganization Agreement.



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|2. | Going Concern and Managements Plan
|-- | -----------------------------------

The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Companys losses have resulted in an accumulated deficit of $158,648,786 as of September 27, 2008. Operating activities
consumed $5,067,386 in cash in the nine months ended September 27, 2008. In addition, the Company has negative working capital of $91,859 as of September 27, 2008. These conditions raise substantial doubt about the Companys ability
to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Companys plan for organic growth for fiscal year 2008 includes increasing its sales with existing customers through on-site assessments of their operations along with expanding the Companys client base in the markets the
Company currently operates. The plan includes support programs for the sales efforts including marketing, communications and program literature. The Company plans to increase its current sales force to 5 regional sales people and maximizing growth
in their respective regions.

The Company plans to hire additional field support resources to enhance the effectiveness of its services and
support the growth in new clinics during 2008. From time to time, the Company also engages outside consultants to assist the Company with marketing, advertising and web development. The Company expects these additional resources to drive the
continuous improvement of the billing and inventory processes that support the clinics. The Company also plans to increase its resources in accounting and administration, including hiring additional employees to assist with transaction processing
and internal control over financial reporting.

The Company does not anticipate devoting its resources to research and development in
fiscal year 2008. The Company intends to continue adding to its product and service offerings that will generate new revenue opportunities, including but not limited to strategic acquisitions and mergers (see Note 1, Basis of Presentation).



|3. | New Accounting Standards
|-- | ------------------------

In May 2008, the
Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement). FSP
APB 14-1 clarifies that convertible debt instruments that may be settled in cash upon either mandatory or optional conversion (including partial cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for
Convertible Debt and Debt issued with Stock Purchase Warrants. Additionally, FSP APB 14-1 specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the
entitys nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. FSP APB 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years. We will adopt FSP APB 14-1 beginning in the first quarter of 2009, and this standard must be applied on a retrospective basis. We are evaluating the impact the adoption of FSP APB 14-1 will have on our consolidated financial
position and results of operations.

In May 2008, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 162, The Hierarchy of Generally Accepted Accounting Principles. This standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing
financial statements that are presented in conformity with generally accepted accounting principles in the United States for non-governmental entities. SFAS No. 162 is effective 60 days following approval by the U.S. Securities and Exchange
Commission (SEC) of the Public Company Accounting Oversight Boards amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. We do not expect SFAS
No. 162 to have a material impact on the preparation of our consolidated financial statements.

In March 2008, the FASB issued
Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. This Statement changes the disclosure requirements for derivative instruments and hedging activities.
Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations,
and (c) how derivative instruments and related hedged items affect an entitys financial position, financial performance, and cash flows. This Statement is effective for fiscal years and interim periods beginning after November 15,
2008 and is not expected to have a material impact on the consolidated financial statements of the Company.

In December 2007, the Financial Accounting Standards Board (FASB) issued Statement No. 141 (revised) (No. 141 R), Business Combinations. This Statement replaces
FASB Statement No. 141, and applies to all business entities that previously used the pooling-of-interests method of accounting for some business combinations. Under Statement No. 141R, an acquirer is required to recognize, at fair value,
the assets acquired, liabilities assumed, and any non-controlling interest in the entity acquired at the acquisition date. Further, it requires that acquisition costs and expected restructuring costs be recognized separately from the acquisition,
and that the acquirer, in a business combination executed in stages, recognize the identifiable assets and liabilities as well as the non-controlling interest in the entity acquired, at the full amounts of their fair values. SFAS No. 141R also
requires an acquirer to recognize the assets acquired and liabilities assumed arising from contractual contingencies as of the acquisition date. Also under this Statement, an acquirer is required to recognize contingent consideration as of the
acquisition date and eliminates the concept of negative goodwill and requires gain recognition in instances in which the fair value of the identifiable net assets exceeds the fair value of the consideration plus any non-controlling interest in the
entity acquired as of the acquisition date. SFAS No. 141R makes significant amendments to other Statements and other authoritative guidance, and applies prospectively to business combinations on or after the acquiring entities first fiscal year
that begins after December 15, 2008. It may not be applied prior to that date.



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|4. | Earnings (Loss) Per Share
|-- | -------------------------

Basic earnings (loss)
per share are computed by dividing net income (loss) (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. Diluted earnings per share assume that any dilutive convertible securities outstanding
were converted, with related preferred stock dividend requirements and outstanding common shares adjusted accordingly. It also assumes that outstanding common shares were increased by shares issuable upon exercise of those stock options for which
market price exceeds the exercise price, less shares which could have been purchased by us with the related proceeds. In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other
potential shares outstanding would be anti-dilutive.



|5. | Revolving Line of Credit
|-- | ------------------------

The Company has a
Revolving Line of Credit Agreement (the Line of Credit Agreement) with Sovereign Bank (Sovereign Bank) pursuant to which Sovereign Bank established a revolving line of credit in favor of the Company in the aggregate principal
amount of $3,000,000. The Companys right to request loans under this Line of Credit Agreement terminates 120 days prior to expiration of the letter of credit described below. Any loans made to the Company under the Line of Credit Agreement
bear interest at a fluctuating rate per annum equal to, at the election of the Company, (i) the sum of the then LIBOR rate plus a margin ranging from .75% to 1.25% or (ii) the then Prime rate less 200 basis points. At September 27,
2008, the interest rate on the revolving line of credit was 2.50%. The Company is required to pay to Sovereign Bank a monthly fee on any unused amounts under the line of credit equal to the product obtained by multiplying the average unused amount
for a given month by a fraction, the numerator of which ranges from .125% to .25% and the denominator of which is 12.

In connection with
the transactions consummated with the Line of Credit Agreement, (i) Custodial Trust Company (CTC) issued an irrevocable letter of credit in favor of Sovereign Bank up to an aggregate amount of $3,060,000, which the letter of credit
expires on March 15, 2009, and (ii) the Company, CTC and Vicis Capital Master Fund (Vicis) entered into a Letter of Credit Reimbursement, Guarantee, Security and Pledge Agreement (the CTC Agreement) pursuant to
which the Company agreed to reimburse CTC for any payments CTC is required to make under the letter of credit it issued in favor of Sovereign Bank. Vicis guaranteed the Companys performance of such obligations and in connection therewith
deposited with CTC certain of its assets.

MSMI, Vicis and OrthoSupply entered into a Guarantee Fee, Reimbursement and Indemnification
Agreement pursuant to which MSMI agreed to reimburse Vicis for any payment Vicis is required to make under the CTC Agreement. OrthoSupply guaranteed MSMIs performance of its obligations under this agreement. In the event Vicis is required to
make any payment under the CTC Agreement or any assets of Vicis deposited with CTC are foreclosed or otherwise taken, the Company is obligated to immediately reimburse Vicis for the amount paid or the value of the assets taken. If the Company does
not timely reimburse Vicis it is obligated to issue to Vicis and to Midtown Partners & Co., LLC (Midtown) warrants to purchase a number of shares of common stock equal to 200% (in the case of Vicis) and 10% (in the case of
Midtown) of the value of the Vicis assets taken, which warrants shall be exercisable for five years at a per share exercise price of $1.00.

Interest expense on the Sovereign Bank revolving line of credit was approximately $78,000 and $70,000 for the nine months ended September 27, 2008 and September 29, 2007, respectively. Interest expense on the Sovereign Bank
revolving line of credit was approximately $23,000 and $42,000 for the three months ended September 27, 2008 and September 29, 2007, respectively. At September 27, 2008, the Company had an outstanding balance of $3,000,000 under this
revolving line of credit.



|6. | Notes Payable
|-- | -------------

Convertible Notes Payable - $2,000,000 Vicis
Capital Master Fund

On June 28, 2006, the Company entered into a Securities Purchase and Exchange Agreement (the SPA)
with Vicis. This SPA affirmed that the financing was a private placement to accredited investors and accordingly exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended. Pursuant to the SPA, Vicis purchased a
Senior Secured Convertible Note (2006 Note) in aggregate the principal amount of which was $2,000,000 together with warrants (Warrants) to purchase an aggregate of 16,000,000 shares of its common stock. The Company also
entered into a Security Agreement dated June 28, 2006 by and between the Company and Vicis (the Security Agreement), pursuant to which the 2006 Note is secured by substantially all of the assets of the Company, including its
intellectual property.

In connection with issuance of the 2006 Note and Warrants, on June 28, 2006 the Company entered into an
Amended and Restated Investor Rights Agreement (the Investor Rights Agreement) with Vicis and certain other stockholders, pursuant to which the Company is obligated to register with the SEC the shares of common stock underlying the 2006
Note, Warrants and shares held by certain other stockholders. As of September 27, 2008, accrued expenses include $160,000 related to this and no liquidated damages have been paid.

The face amount and carrying amount of the 2006 Note was $2,000,000 at September 27, 2008.

Interest expense on the 2006 Note was approximately $100,000 and $95,000 for the nine months ended September 27,
2008 and September 29, 2007, respectively. Interest expense on the 2006 Note was approximately $34,000 and $32,000 for the three months ended September 27, 2008 and September 29, 2007, respectively.



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Convertible Notes Payable - $1,266,000 Vicis Capital Master Fund and Apogee Financial Investments

On April 17, 2007, the Company entered into a Securities Purchase and Exchange Agreement (Purchase Agreement) with Vicis and Apogee
Financial Investments Inc. (Apogee). Pursuant to the Purchase Agreement, the Company issued (1) 6% convertible senior secured debentures in the aggregate principal amount of $1,050,000 to Vicis, as amended, convertible into shares
of the Companys common stock at a conversion price of $0.10 per share (the Vicis Debentures) and $216,000 to Apogee convertible into shares of the Companys common stock at a conversion price of $0.30 (the Apogee
Debentures and collectively with the Vicis Debentures, the Debentures), (2) warrants to purchase an aggregate of 7,500,000 shares of the Companys common stock to Vicis, as amended, at an exercise price of $0.01 per share
and (3) warrants to purchase an aggregate of 1,440,000 shares of the Companys common stock to Apogee, as amended, at an exercise price of $0.20 per share. The Debentures mature on April 17, 2009 and are secured by a lien on all the
personal property and assets of the Company. The warrants are exercisable for a period of five years.

In connection with this transaction,
the Company, Vicis and Apogee entered into a Subordination Agreement whereby the lien on all the personal property and assets of the Company securing the obligations of the Company under the Debentures is subordinated to the lien granted by the
Company to Vicis to secure the obligations of the Company under a separate debenture previously issued by the Company to Vicis on June 28, 2006 (see Convertible Notes Payable  $2,000,000 Vicis Capital Master Fund above).

A schedule of the carrying value of the Vicis Debentures, as amended, and corresponding amortization of the discount is as follows:



|                                                    |  |   |           |  
|--------------------------------------------------- |  | - | --------- | -
|Face amount of note                                 |  | $ | 1,050,000 |  
|Discount on face value                              |  |   | (156,820  | )
|                                                    |  |   |           |  
|Carrying value                                      |  |   | 893,180   |  
|Amortization of discount through September 27, 2008 |  |   | 105,855   |  
|                                                    |  |   |           |  
|Current carrying value at September 27, 2008        |  | $ | 999,035   |  
|                                                    |  |   |           |  

A schedule of accretion of the carrying value of the Apogee Debentures and corresponding
amortization of the discounts is as follows:



|                                                    |  |   |          |  
|--------------------------------------------------- |  | - | -------- | -
|Face amount of note                                 |  | $ | 216,000  |  
|Discount on face value                              |  |   | (209,311 | )
|                                                    |  |   |          |  
|Carrying value                                      |  |   | 6,689    |  
|Amortization of discount through September 27, 2008 |  |   | 67,370   |  
|Carrying value at September 27, 2008                |  | $ | 74,059   |  
|                                                    |  |   |          |  

Interest expense on the Debentures was approximately $48,000 and $37,000 for the nine months ended
September 27, 2008 and September 29, 2007, respectively. Interest expense on the Debentures was approximately $8,000 and $19,000 for the three months ended September 27, 2008 and September 29, 2007, respectively.

Convertible Notes Payable - $1,500,000 Vicis Capital Master Fund

On October 18, 2007, the Company issued a convertible note in the principal amount of $1,500,000 to Vicis. The maturity date of the note is October 12, 2008 and bears interest on the principal amount
outstanding and unpaid from time to time at a rate of 10% per annum from the date hereof until paid in full. Interest shall be calculated on the basis of a 360-day year and paid for the actual number of days elapsed, and shall accrue and be
payable upon the maturity date or, thereafter, if any amounts are due and owing by the Company under this Note, then upon demand. The Company received $1,500,000 as consideration for the convertible note. If the Company completes a subsequent
financing of convertible debentures and warrants, the convertible note issued to Vicis shall be converted into securities issuable in such financing. This note is only convertible upon the occurrence of a future financing, the price at which any
such financing would occur is not known and the number of shares into which the note will convert is not known as of the date of issuance. Therefore, the Company is unable to determine if a beneficial conversion feature exists. Any contingent
beneficial conversion feature will be recognized in the period in which these contingencies are resolved. On July 30, 2008, this note and related accrued interest were converted into Series D Convertible Preferred Stock (see Note 7).

Interest expense on the note was approximately $13,000 and $91,000 for the three and nine months ended September 27, 2008,
respectively.

Convertible Notes Payable - $1,000,000 Vicis Capital Master Fund

On December 16, 2007, the Company entered into a note purchase agreement with Vicis pursuant to which the Company issued a promissory note in the principal amount
of $1,000,000 in favor of Vicis and a warrant for 2,500,000 shares of the Companys common stock. The Company received $1,000,000 in cash in consideration for the issuance of the promissory note and the warrant. The maturity date of the
promissory note is December 16, 2008. Interest accrues under the note at the rate of 5% per annum. The Company is not permitted to prepay principal or interest under the promissory note. Under the note purchase agreement, Vicis has the
option to convert the promissory note into equity or convertible debt securities sold by the Company in connection with a future financing on the terms and conditions of such financing, subject to a discount of 16.67% of the price per security
offered by the Company. Upon such conversion, the Company shall have no obligations under the promissory note. The exercise price of the warrant is $0.40 per share (subject to adjustment upon the occurrence of certain events) and will be exercisable
for 5 years. The Company and Vicis also entered into a Registration Rights Agreement with respect to the shares to be issued upon exercise of the warrant, whereby Vicis would be allowed to participate in any future registration of the Companys
shares of common stock, subject to the limitations in the agreement.



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The Debentures are only convertible upon the occurrence of a future financing, the price at which any
such financing would occur is not known and the number of shares into which the Debentures will convert is not known as of the date of issuance. Therefore, the Company is unable to determine if a beneficial conversion feature exists. Any contingent
beneficial conversion feature will be recognized in the period in which these contingencies are resolved. On July 30, 2008, this note and related accrued interest was converted into Series D Convertible Preferred Stock (see Note 7).

Interest expense on the note was approximately $4,000 and $30,000 for the three and nine months ended September 27, 2008, respectively.

Advances Payable - Vicis

In the nine
months ended September 27, 2008, Vicis made advances to the Company totaling $2,260,205 (the Advances Payable). The Advances Payable have no stated interest rate and are due on demand. On July 30, 2008, the Advances Payable
were exchanged for Series D Convertible Preferred Stock (see Note 7). As part of this exchange, the Company agreed to pay 10% interest on the Advances Payable through the date of the exchange. Therefore, included in interest expense for the three
months ended September 27, 2008 is approximately $78,000 related to Advances Payable.

Other

Also included in interest expense in the three and nine months ended September 27, 2008 is the amortization of discounts of approximately $52,000 and
$429,000, respectively, and amortization of deferred financing costs of approximately $48,000 and $143,000, respectively.



|7. | Series D Convertible Preferred Stock Financing
|-- | ----------------------------------------------

On
July 29, 2008, the Company filed a Certificate of Designations with the Nevada Secretary of State to create a new class of preferred stock, the Series D Voting Convertible Preferred Stock, $0.0001 par value per share (the Series D
Preferred Stock). Of the 5,000,000 shares of authorized Preferred Stock, 798,906 shares are designated Series D Convertible Preferred Stock. On July 30, 2008 the Company entered into a Securities Purchase Agreement (the
Agreement) and issued a total of 798,906 shares of Series D Convertible Preferred Stock. The Company issued 300,000 shares of Series D Convertible Preferred Stock for gross cash proceeds of $3,000,000. In addition, the convertible notes
payable, advances payable and accrued interest totaling $4,989,062 converted into 498,906 shares of Series D Convertible Preferred Stock. As of September 27, 2008, the Company had 789,906 shares of its Series D Preferred Stock issued and
outstanding, which, in the aggregate, converts into 7,989,062 shares of Common Stock. The Series D Preferred Stock has the following rights, preferences, privileges and restrictions:



| |  | Stated Value - $10.00 per share of Series D Preferred Stock.
|- |  | ------------------------------------------------------------



| |  | Dividends - A holder of Series D Preferred Stock is entitled to receive a dividend at a rate per annum equal to ten percent (10%) of the stated
value (initially $10.00 per share), payable semi-annually, at the option of the company in cash, to the extent funds are legally available, or in shares of common stock at a ten percent (10%) discount to the market price (as such price is
determined pursuant to the designations for the Series D Preferred Stock).
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Voting Rights - The holders of Series D Preferred stock have the right to vote on an as-converted basis with the Companys holders of Common
Stock on all matters submitted to a vote of common stockholders. In addition, as long as twenty percent (20%) of the shares of Series D Preferred Stock issued and outstanding on the original issue date remain issued and outstanding, the Company
cannot, without the prior approval of at least a majority of the holders of the then issued and outstanding shares of Series D Preferred Stock, voting as a separate class, take the following actions:
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | amend or otherwise restate the Companys articles of incorporation in any manner that adversely affects the rights of the holders of Series D Preferred Stock;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | alter or change adversely the voting or other powers, preferences, rights, privileges or restrictions of the Series D Preferred Stock;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | increase the authorized number of shares of preferred stock;
| | - |  | ------------------------------------------------------------



| | ¡ |  | redeem, purchase or otherwise acquire directly or indirectly any shares junior or pari passu with the Series D Preferred Stock;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | directly or indirectly pay or declare any dividend or make any distribution in respect of any junior stock, or set aside any monies for the purchase or redemption
(through a sinking fund or otherwise) of any junior stock or any shares pari passu with the Series D Preferred Stock; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a liquidation senior to or otherwise pari passu with the
Series D Preferred Stock.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Election of Directors - As long as fifty percent (50%) of the shares of Series D Preferred Stock issued and outstanding on the original issue
date remain issued and outstanding, the holders of a majority of the shares of Series D Preferred Stock are entitled to nominate and elect four (4) members to the Companys board of directors.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  | Liquidation Rights - In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of shares of
Series D Preferred Stock are entitled to be paid out of the assets available for distribution, before any payment shall be made to the holders of common stock or any other class or series of stock ranking on liquidation junior to the Series D
Preferred Stock, an amount equal to the stated value of the Series D Preferred Stock (initially $10.00 per share), plus accrued, unpaid dividends.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Redemption - Upon the occurrence of any of the following events, the holders of not less than a majority of the then issued and outstanding shares of
Series D Preferred Stock may require the Company to redeem the Series D Preferred Stock at an amount equal to the stated value of the Series D Preferred Stock (initially $10.00 per share), plus accrued, unpaid dividends:
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | a transaction in which (a) the Company merges or consolidates with or into another entity and, after giving effect to such transaction, the stockholders of the
Company own less than sixty-six percent (66%) of the aggregate voting power of the company or the successor entity of such transaction; (b) the Company sells all or substantially all of its assets in one transaction or a series of related
transactions, and the stockholders of the Company own less than sixty-six percent (66%) of the aggregate voting power of the acquiring entity immediately after the transaction; (c) any tender offer or exchange offer is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property; or (d) the Company reclassifies its Common Stock or effects any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other securities, cash or property;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | the Company fails to have available a sufficient number of authorized and unreserved shares of Common Stock to issue to the holders of the Series D Preferred Stock
upon a conversion of the Series D Preferred Stock;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | the Company fails to observe or perform any other covenant, agreement or warranty contained in its articles of incorporation (as amended by the Series D
designation), and such failure or breach, if subject to the possibility of a cure by the Company, is not cured within twenty (20) calendar days after the date on which written notice of such failure or breach is delivered;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | the Company files bankruptcy; or
| | - |  | --------------------------------



| | ¡ |  | any monetary judgment shall be entered or filed against the Company or its assets for greater than $100,000.
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  | Conversion - Each share of Series D Preferred Stock, at its stated value of $10.00 per share, together with any accrued and unpaid dividends, is
convertible at the option of the holder at any time into common stock at a price of $0.10 per share of common stock; provided, however, the holder is not entitled to convert any Series D Preferred Stock to the extent that, after such conversion, the
sum of the number of shares of common stock beneficially owned by such holder and its affiliates, will result in beneficial ownership of more than 4.99% of the outstanding shares of the Common Stock.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Accounting Treatment

The Company has concluded the
Series D Preferred Stock does not meet the definition of mandatorily redeemable under SFAS 150, Accounting For Certain Instruments with Characteristics of Both Liabilities and Equity due to the conversion rights. The Company
also concluded that certain of the events triggering redemption, as described above, are not entirely within the control of the Company. Therefore, in accordance with ASR 268 and EITF Topic D-98, the Series D Preferred Stock will be recorded as
temporary equity (i.e. in the mezzanine), separate from permanent equity.

For the Series D Preferred Stock issued for gross cash proceeds
of $3,000,000, the Company determined that the fair value of the Series D Preferred Stock was $3,000,000. Next, the Company considered the embedded conversion feature of the Series D Preferred Stock in accordance with EITF 98-5 and EITF 00-27. Since
the effective conversion price of $0.10 per share was less than the $1.01 fair value of the common stock on the date of issuance, the Company determined that there was a beneficial conversion feature of $27,300,000, which was limited to the proceeds
received of $3,000,000. Since the Series D Preferred Stock has no stated redemption date and is convertible immediately, the Company accreted the Series D Preferred Stock to its redemption amount of $3,000,000 immediately. The net impact of these
entries was offsetting debits and credits to Series D Preferred Stock and additional paid-in capital with no net impact. The accretion of the Series D Preferred Stock to its redemption value is reflected as a deemed dividend in arriving at net loss
applicable to common stockholders.

For the Series D Preferred Stock issued in exchange for convertible notes payable, advances payable and
accrued interest, the Company concluded that, since the liabilities did not originally contain the right to convert into Series D Preferred Stock, the exchange represented an extinguishment of the liabilities in accordance with FASB Technical
Bulletin 80-1. However, the Company determined that the fair value of the Series D Preferred Stock equaled the face value of the liabilities extinguished. On the date of the extinguishment, the carrying value of the liabilities was $247,339 less
than its face value so the Company recorded extinguishment loss for this amount in the three months ended September 27, 2008. Since the effective conversion price of $0.10 per share was less than the $1.01 fair value of the common stock on the
date of issuance, the Company determined that there was a beneficial conversion feature of $45,400,000, which was limited to the fair value of the liabilities extinguished of $4,989,062. The Company accreted the Series D Preferred Stock to its
redemption amount of $4,989,062 immediately. The net impact of these entries was offsetting debits and credits to Series D Preferred Stock and additional paid-in capital with no net impact. The accretion of the Series D Preferred Stock to its
redemption value is reflected as a deemed dividend in arriving at net loss applicable to common stockholders.



9



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##### Table of Contents

The Company incurred stock issuance costs of $290,000 related to the issuance of Series D Preferred Stock
which were net against the proceeds. In the three and nine months ended September 27, 2008, the Company accreted dividends of the Series D Preferred Stock of $135,370 which is also reflected as a deemed dividend in arriving at net loss
applicable to common stockholders.



|8. | Stock Option Plan And Warrants
|-- | ------------------------------

Stock Option Plan

On July 31, 2006, the Company adopted the 2006 Equity Incentive Plan (the Plan). The Plan is intended to encourage
ownership of common stock by employees, consultants and directors of the Company and its affiliates and to provide additional incentive for them to promote the success of the Companys business. The term of the Plan is ten years from the date
of its adoption unless earlier terminated by the Board. The number of shares of common stock to be issued pursuant to incentive stock options may not exceed three million (3,000,000) shares of common stock. Both incentive stock options and
non-qualified options, as well as restricted stock awards, may be issued under the Plan. The Plan shall be administered by the Committee, however, the Board may itself exercise any of the powers and responsibilities assigned the Committee. The
Committee may grant awards to any employee or consultant to the Company and its affiliates or to any non-employee member of the Board. However, only employees of the Company are eligible for the grant of an incentive stock option. Further, in no
event shall the number of shares of common stock covered by options or other awards granted to any one person in any one calendar year (or portion of a year) ending after such date exceed fifty percent (50%) of the aggregate number of shares of
common stock subject to the Plan.

Summary of Option Activity

In estimating the fair value of share-based compensation, the Company uses the quoted market price of common stock as determined in the most active market for stock awards, and the Black Scholes Option Pricing Model
for stock options. The Company estimates future volatility based on historical volatility of its common stock; and the Company estimates the expected term of the option on several criteria, including the vesting period of the grant, and the
contractual term. No options were granted in the three and nine months ended September 27, 2008 and September 29, 2007.



|                                          |  |                                               |  |                              |      |                                                |     |                         |   |       
|----------------------------------------- |  | --------------------------------------------- |  | ---------------------------- | ---- | ---------------------------------------------- | --- | ----------------------- | - | ------
|                                          |  | All Plan & Non-Plan Compensatory Type Options
|                                          |  | Shares                                        |  | Weightedaverageexerciseprice |      | Weightedaverageremainingcontractualterm(years) |     | Aggregateintrinsicvalue
|Options outstanding at December 31, 2007  |  | 500,000                                       |  | $                            | 0.01 |                                                | 7.3 |                         |   |       
|Granted                                   |  |                                              |  |                              |     |                                                |     |                         |   |       
|Exercised                                 |  |                                              |  |                              |     |                                                |     |                         |   |       
|Lapsed/forfeited                          |  |                                              |  |                              |     |                                                |     |                         |   |       
|                                          |  |                                               |  |                              |      |                                                |     |                         |   |       
|Options outstanding at September 27, 2008 |  | 500,000                                       |  | $                            | 0.01 |                                                | 7.0 |                         | $ | 95,000
|                                          |  |                                               |  |                              |      |                                                |     |                         |   |       
|Options exercisable at September 27, 2008 |  | 375,000                                       |  | $                            | 0.01 |                                                | 7.0 |                         | $ | 71,250
|                                          |  |                                               |  |                              |      |                                                |     |                         |   |       

As of September 27, 2008, there was no unrecognized compensation costs related to options.

Summary of Warrant Activity

In
estimating the fair value of warrants, the Company uses the Black Scholes option pricing model. The Company uses the quoted market price of common stock as determined in the most active market for stock awards; future volatility is estimated based
on historical volatility of its common stock; and the Company uses the contractual term of the warrant. In computing the fair value of warrants issued in the nine months ended September 27, 2008, the Company used the following assumptions:



|                            |  |      |  
|--------------------------- |  | ---- | -
|Risk-free interest rate     |  | 2.81 | %
|Dividend yield              |  | 0    |  
|Expected volatility         |  | 107  | %
|Contractual term (in years) |  | 3    |  



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##### Table of Contents

In connection with a Separation Agreement (the Agreement) dated January 24, 2008 with
Brian Lesperance, the Companys former President and Chief Executive Officer, on February 23, 2008 the Company issued to Mr. Lesperance a warrant (the Warrant) to purchase an aggregate of 500,000 shares of the
Companys common stock, exercisable in whole or in part for three (3) years after the date of grant at an exercise price of $0.55 per share (subject to adjustment in the event of stock splits, stock dividends and other similar events
affecting Companys common stock). The Company estimated the fair value of the warrant to be $266,304 which is included in Selling, General and Administration expense in the nine months ended September 27, 2008.

The following table summarizes the warrant activity in the nine months ended September 27, 2008:



|                                           |  |           |  |                              |     
|------------------------------------------ |  | --------- |  | ---------------------------- | ----
|                                           |  | Shares    |  | Weightedaverageexerciseprice
|Warrants outstanding at December 31, 2007  |  | 8,754,736 |  | $                            | 0.36
|Granted                                    |  | 500,000   |  |                              | 0.55
|Exercised                                  |  |          |  |                              |    
|Lapsed/forfeited                           |  |          |  |                              |    
|                                           |  |           |  |                              |     
|Warrants outstanding at September 27, 2008 |  | 9,254,736 |  | $                            | 0.37
|                                           |  |           |  |                              |     
|Warrants exercisable at September 27, 2008 |  | 9,254,736 |  | $                            | 0.37
|                                           |  |           |  |                              |     
|Weighted average years remaining           |  |           |  |                              | 3.7 
|                                           |  |           |  |                              |     

The following table summarizes the status of the Companys aggregate warrants as of
September 27, 2008:



|                         |  |                      |  |                              |      |                                       |     |        |           |                              |   |     
|------------------------ |  | -------------------- |  | ---------------------------- | ---- | ------------------------------------- | --- | ------ | --------- | ---------------------------- | - | ----
|                         |  | Warrants Outstanding |  |                              |      | Warrants Exercisable                 
|Range of exercise prices |  | Shares               |  | weightedaverageexerciseprice |      | Weightedaverageremaininglife in years |     | Shares |           | weightedaverageexerciseprice
|$0.55                    |  | 500,000              |  | $                            | 0.55 |                                       | 2.4 |        | 500,000   |                              | $ | 0.55
|$0.50                    |  | 3,060,000            |  | $                            | 0.50 |                                       | 4.2 |        | 3,060,000 |                              | $ | 0.50
|$0.40                    |  | 2,500,000            |  | $                            | 0.40 |                                       | 4.2 |        | 2,500,000 |                              | $ | 0.40
|$0.20                    |  | 2,894,736            |  | $                            | 0.20 |                                       | 3.0 |        | 2,894,736 |                              | $ | 0.20
|$0.01                    |  | 300,000              |  | $                            | 0.01 |                                       | 2.5 |        | 300,000   |                              | $ | 0.01
|                         |  |                      |  |                              |      |                                       |     |        |           |                              |   |     
|Total Shares             |  | 9,254,736            |  | $                            | 0.37 |                                       | 3.7 |        | 9,254,736 |                              | $ | 0.37
|                         |  |                      |  |                              |      |                                       |     |        |           |                              |   |     



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##### Table of Contents

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|------- | --------------------------------------------------------------------------------------

The following discussion and analysis of our financial condition and plan of operation should be read in conjunction with the financial statements and the
related notes contained herein. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Our actual results and the timing
of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the factors set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and as set
forth in Part I, Item 1A of our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007 under the headings Risk Factors, Managements Discussion and Analysis or Plan of Operations and
Business.

Our Business

We are a provider of orthopedic and podiatric durable medical equipment, specializing in the provision of products to clinics using our turnkey program. Through our turnkey program, we enable orthopedic and podiatric practices to dispense
an array of orthotics and limited durable medical equipment directly to their patients during office visits. The system, which is transportable to other types of medical practices, also provides billing services, inventory management and insurance
verifications.

Background

Our
wholly-owned subsidiary and operating company, OrthoSupply Management, Inc., has generated revenue from its operation since February 2005. Prior to February 2005, OrthoSupply had no operations, but the management team was in the research and
development phase of determining a market need for the services intended to be offered by OrthoSupply. Prior to December 30, 2005, Medical Solutions Management Inc. held no assets, generated no revenue and existed solely as a shell corporation.

On December 30, 2005, Medical Solutions Management Inc. consummated a merger transaction with its then wholly-owned subsidiary, CMNW
Acquisition Corporation, OrthoSupply Management, Inc., Thunderbird Global Corporation and Mark L. Baum. Pursuant to the merger, CMNW Acquisition Corporation merged with and into OrthoSupply Management, Inc, CMNW Acquisition Corporation ceased to
exist, and OrthoSupply continued as the surviving corporation and wholly-owned subsidiary of Medical Solutions Management Inc. OrthoSupply Management, Inc. acts as our operating company and Medical Solutions Management Inc. is the parent holding
company, and sole stockholder, of OrthoSupply Management, Inc.

On July 25, 2008, Medical Solutions Management Inc. entered into an Asset
Purchase Agreement and Plan of Reorganization (the Reorganization Agreement) with Andover Medical, Inc., a Delaware corporation (Andover) and Certified Diabetics Services, Inc., a Delaware corporation (CDIP)
pursuant to which Medical Solutions Management Inc. will acquire substantially all of the assets of Andover and CDIP, including Andovers and CDIPs subsidiaries, in exchange for shares of our common stock and preferred stock. As a result,
the percentage of beneficial ownership of our common stock owned by each of the parties shall be as follows: (i) CDIP shareholders will own forty-five (45%) percent of our outstanding common stock, (ii) our existing shareholders will own twenty
(20%) percent of our outstanding common stock, and (iii) Andover shareholders will own thirty-five (35%) percent of our outstanding common stock (calculated on an as-converted basis, inclusive of common stock, preferred stock and convertible
debentures, but exclusive of options and warrants which will be assumed by us). The closing of the proposed transactions is conditioned upon and subject to respective shareholder approval, the effectiveness of a registration statement covering the
shares of our common stock and preferred stock to be issued, all third-party consents and waivers being obtained, no material adverse change having occurred with respect to any of the three parties to the Reorganization Agreement, and other
customary closing conditions. The transactions contemplated by the Reorganization Agreement have not been consummated, and we can provide no assurances as to when the transactions will be completed.

The discussion below focuses upon Medical Solutions Management Inc.s and Ortho Supply Management, Inc.s financial condition, results of
operations and liquidity and capital resources for the three and nine months ended September 27, 2008 and September 29, 2007. The terms Company, we, us or our refer to Medical Solutions
Management Inc. and OrthoSupply Management, Inc. collectively.

Results of Operations

We operate our business on a calendar year basis, consisting of four thirteen week quarters with the last month in each quarter being five weeks and with
our fiscal year ending on December 31.

Three Months Ended September 27, 2008 Compared to Three Months Ended September 29, 2007

Revenue. Set forth below are our net revenues.



|                          |  |                    |         |                    |   |           |                     |   |          |   |  |       |  
|------------------------- |  | ------------------ | ------- | ------------------ | - | --------- | ------------------- | - | -------- | - |  | ----- | -
|                          |  | Three Months Ended |         | Increase(Decrease) |   |           | %Increase(Decrease) |  
|                          |  | September 27,2008  |         | September 29,2007  |   |          
|Sales of Medical Products |  | $                  | 642,446 |                    | $ | 523,108   |                     | $ | 119,338  |   |  | 22.8  |  
|Service Revenue           |  |                    | 301,737 |                    |   | 536,423   |                     |   | (234,686 | ) |  | (43.7 | )
|                          |  |                    |         |                    |   |           |                     |   |          |   |  |       |  
|Total Revenue             |  | $                  | 944,183 |                    | $ | 1,059,531 |                     | $ | 115,348  |   |  | (10.9 | )
|                          |  |                    |         |                    |   |           |                     |   |          |   |  |       |  

Revenue decreased overall in the three months ended September 27, 2008 compared to the three
months ended September 29, 2007 primarily due to the decrease in service revenue arising from reduced collections from the pharmaceutical claims. The number clinics under agreement in the third quarter 2008 stayed relatively flat between the
third quarter 2007 and that of 2008. Clinics gained within the three months ended September 27, 2008 were offset by clinics lost within this same period as seven clinics were added while six were lost. Product revenue increased from $523,108 in
the third quarter of 2007 to $642,446 in the third quarter of 2008 due to higher producing clinics under agreement. Service revenue decreased from $536,423 in the third quarter of 2007 to $301,737 in the third quarter of 2008 mainly due to the
decrease in collections on the pharmaceutical claims. Increases in both billing and collection revenue and service revenue slightly offset the decrease in revenue from the collections on pharmaceutical claims. Billing and collection revenue
increased from $43,784 in the third quarter of 2007 to $80,809 in the third quarter of 2008. Service revenue of increased from $92,257 in the third quarter of 2007 to $102,020 in the third quarter of 2008 due to new clinics requiring on-site
personnel.



12



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##### Table of Contents

Cost of Revenue. Set forth below are our cost of revenue.



|                         |  |                    |         |                    |       |                   |                     |             |  |      |  |   |         |   |  |      |  
|------------------------ |  | ------------------ | ------- | ------------------ | ----- | ----------------- | ------------------- | ----------- |  | ---- |  | - | ------- | - |  | ---- | -
|                         |  | Three Months Ended |         | Increase(Decrease) |       |                   | %Increase(Decrease) |            
|                         |  | September 27,2008  |         | % ofRevenue        |       | September 29,2007 |                     | % ofRevenue |  |     
|Cost of Medical Products |  | $                  | 436,528 |                    | 67.9  |                   | $                   | 395,401     |  | 75.6 |  | $ | 41,127  |   |  | 10.4 |  
|Cost of Services         |  |                    | 381,381 |                    | 126.4 |                   |                     | 392,171     |  | 73.1 |  |   | (10,790 | ) |  | (2.7 | )
|                         |  |                    |         |                    |       |                   |                     |             |  |      |  |   |         |   |  |      |  
|Costs of Revenue         |  | $                  | 817,909 |                    | 86.6  |                   | $                   | 787,572     |  | 74.3 |  | $ | 30,337  |   |  | 3.8  |  
|                         |  |                    |         |                    |       |                   |                     |             |  |      |  |   |         |   |  |      |  

Cost of revenue increased in the third quarter 2008 primarily due to higher revenue from the
operating clinics over the comparative period in 2007. Cost of medical products as a percentage of revenue was lower than the comparative period in 2007 due to product mix and continued negotiations with our suppliers. Cost of services increased as
a percentage of service revenue due to an increase in personnel expenses of $334,045 for the third quarter of 2008 compared to $251,609 for the third quarter of 2007.

Selling, General and Administrative Expenses. Set forth below are the selling, general and administrative expenses.



|                                             |  |                    |           |                    |       |                   |                     |             |  |       |  |   |         |   |  |       |  
|-------------------------------------------- |  | ------------------ | --------- | ------------------ | ----- | ----------------- | ------------------- | ----------- |  | ----- |  | - | ------- | - |  | ----- | -
|                                             |  | Three Months Ended |           | Increase(Decrease) |       |                   | %Increase(Decrease) |            
|                                             |  | September 27,2008  |           | % ofRevenue        |       | September 29,2007 |                     | % ofRevenue |  |      
|Salaries and benefits                        |  | $                  | 286,017   |                    | 30.3  |                   | $                   | 378,790     |  | 35.8  |  | $ | (92,773 | ) |  | (24.5 | )
|Legal, consulting and insurance              |  |                    | 720,459   |                    | 76.3  |                   |                     | 363,514     |  | 34.3  |  |   | 356,945 |   |  | 98.2  |  
|All other                                    |  |                    | 635,401   |                    | 67.2  |                   |                     | 508,195     |  | 48.0  |  |   | 127,206 |   |  | 25.0  |  
|                                             |  |                    |           |                    |       |                   |                     |             |  |       |  |   |         |   |  |       |  
|Selling, General and Administrative Expenses |  | $                  | 1,641,877 |                    | 173.8 |                   | $                   | 1,250,499   |  | 118.1 |  | $ | 391,378 |   |  | 31.3  |  
|                                             |  |                    |           |                    |       |                   |                     |             |  |       |  |   |         |   |  |       |  

Salaries and Benefits Expense.

Salaries and benefits expense decreased during the third quarter 2008 due to a decrease in sales and administrative staff. Total employees for these two
departments for the three months ended September 27, 2008 were 9 compared to 11 in the comparative period in 2007. We expect to add additional sales and service support staff as we expand our operation.

Legal, Consulting and Insurance Expenses.

Legal
expenses were $661,852 for the three months ended September 27, 2008, compared to $219,695 for the comparative period in 2007. The legal expenses incurred in the three months ended September 27, 2008 are primarily related to the filing of
a registration statement, securing new financing and expenses related to the reorganization agreement, further described below. This compares to costs incurred in 2007 related to services rendered to secure additional financing, review of our
periodic filings, as well as general counsel services. Consulting expenses were $23,288 for the three months ended September 27, 2008 compared to $101,464 in the three month period ended September 29, 2007, which included services to
obtain financing, marketing, and strategic services related to potential acquisitions and partnerships. Insurance costs were $35,319 for the three months ended September 27, 2008, compared to $44,356 in the comparative period in 2007 primarily
due to the allocation of costs over an extended period of time in 2008 compared to that in 2007.

All Other Expenses.

Other significant operating expenses that comprise the increase in Other Expenses include personnel fees related to temporary staffing of $91,709, or an
increase of $33,428 compared to the three months ended September 29, 2007; doubtful allowance expense of $158,980, or an increase of $142,672 compared to the three months ended September 29, 2007; marketing program expenses of $1,646, or
an decrease of $15,874; recruitment expense of $500, or a decrease of $24,165; telephone and data expense of $13,135, or a decrease of $3,783; software and IT support of $10,295, or a decrease of $38,852; billing services fees of $55,356, or a
decrease of $16,189; and bad debt expense related to uncollectible stock and bill claims of $19,140, compared to none for the same period in 2007.

Other Income (Expense)

For the three months ended September 27, 2008, interest
expense was $302,609 compared to $199,917 for the same period in 2007. The increased expense is a direct result of additional debt instruments outstanding during the three months ended September 27, 2008 compared to the same period in 2007. In
the three months ended September 27, 2008 we recognized a debt extinguishment loss as a result of the exchange of convertible notes payable, advances payable and accrued interest for our Series D Preferred Stock on July 30, 2008, of
$247,339. In the three months ended September 29, 2007, we recognized a debt extinguishment loss as a result of our entry into a Warrant and Debenture Amendment Agreement on July 10, 2007, of $112,513,239. In exchange for $2,100,000 in
cash from Vicis Capital Master Fund (Vicis), pursuant to a Warrant and Debenture Amendment Agreement, we agreed to reduce the warrant exercise price of the outstanding warrants issued to Vicis from ranging from $2.00 through $.345 down
to $0.01 and to reduce the conversion price of the outstanding debentures issued to Vicis (with a face value of $3,050,000) ranging from $0.207016 through $0.30 down to $0.10, as well as to eliminate certain exercise limitations provisions. The
reduction in the conversion price had the effect of increasing the number of common shares into which the debentures can be converted from 13,161,088 to 30,500,000 shares. The Warrant and Debenture Amendment Agreement also provides for the reduction
of the warrant exercise price of the outstanding warrants held by certain other holders from $0.345 from $1.00 down to $0.20. Interest expense in relation to the discount on the convertible notes and amortization of the debt issuance costs were
$106,523 for the three months ending September 29, 2007.



13



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##### Table of Contents

Net Loss. Set forth below is our Net loss.



|         |  |                    |            |   |             |        |           |                   |   |              |             |  |           |   |  |   |             |  |     
|-------- |  | ------------------ | ---------- | - | ----------- | ------ | --------- | ----------------- | - | ------------ | ----------- |  | --------- | - |  | - | ----------- |  | ----
|         |  | Three Months Ended |            |   | Decrease    |        | %Decrease
|         |  | September 27,2008  |            |   | % ofRevenue |        |           | September 29,2007 |   |              | % ofRevenue |  |           |  
|Net Loss |  | $                  | (2,061,286 | ) |             | (218.3 | )         |                   | $ | (113,686,250 | )           |  | (10,729.9 | ) |  | $ | 111,624,964 |  | 98.2

The net loss for the three months ended September 27, 2008 was attributable to interest
expense and the related expenses surrounding merger transaction and filing of a registration statement. Operationally, our loss was driven mainly from selling, general and administrative costs incurred to continue to grow revenue and lower than
anticipated revenue to support such costs. We continue to evaluate our operational costs to increase our efficiencies internally as our operation continues to grow. The net loss for the three months ended September 29, 2007 was primarily
attributable to non-cash charges for debt extinguishment loss in conjunction with debt modification and the change in estimated fair value of warrants in relation to the Warrant and Debenture Amendment Agreement entered into on July 10, 2007,
of $103,246,060 and $9,267,179 respectively. Operationally, our loss was driven mainly from selling, general and administrative costs incurred to continue to grow revenue and support our operations.

Nine Months Ended September 27, 2008 Compared to Nine Months Ended September 29, 2007

Revenue. Set forth below are our net revenues.



|                          |  |                   |           |                   |   |           |  |   |         |  |     
|------------------------- |  | ----------------- | --------- | ----------------- | - | --------- |  | - | ------- |  | ----
|                          |  | Nine Months Ended |           | Increase          |   | %Increase
|                          |  | September 27,2008 |           | September 29,2007 |   |          
|Sales of Medical Products |  | $                 | 2,099,035 |                   | $ | 1,627,829 |  | $ | 471,206 |  | 28.9
|Service Revenue           |  |                   | 1,253,011 |                   |   | 947,721   |  |   | 305,290 |  | 32.2
|                          |  |                   |           |                   |   |           |  |   |         |  |     
|Total Revenue             |  | $                 | 3,352,046 |                   | $ | 2,575,550 |  | $ | 776,496 |  | 30.1
|                          |  |                   |           |                   |   |           |  |   |         |  |     

Revenue from medical products increased in the nine months ended September 27, 2008 compared
to the nine months ended September 29, 2007 primarily due to the increase in the number of clinics under agreement for most of the nine months ended September 27, 2008 compared to the nine months ended September 29, 2007. Expansion
into new regions throughout the United States has been the driving factor for the increase in clinics as we continue to grow our operations. Service revenue increased due to the increase in the number of clinics resulting in the increase of billing
and collection revenue to $186,602 in the nine months ended September 27, 2008 from $96,989 in the nine months ended September 29, 2007, plus additional revenue from physician extenders of $330,007, an increase of $111,636 over the
comparable period in 2007. Additional service revenue of $708,764 in the nine months ended September 27, 2008 compared to $632,362 in the nine months ended September 29, 2007 from the collections on pharmaceutical claims also attributed to
the overall increase in service revenue.

Cost of Revenue. Set forth below are the cost of revenue.



|                               |  |                   |           |             |       |                   |   |             |  |      |  |   |         |  |     
|------------------------------ |  | ----------------- | --------- | ----------- | ----- | ----------------- | - | ----------- |  | ---- |  | - | ------- |  | ----
|                               |  | Nine Months Ended |           | Increase    |       | %Increase        
|                               |  | September 27,2008 |           | % ofRevenue |       | September 29,2007 |   | % ofRevenue |  |     
|Cost of Medical Products       |  | $                 | 1,424,401 |             | 67.8  |                   | $ | 1,111,927   |  | 68.3 |  | $ | 312,474 |  | 28.1
|Cost of services               |  |                   | 1,351,191 |             | 107.8 |                   |   | 806,677     |  | 85.1 |  |   | 544,514 |  | 67.5
|                               |  |                   |           |             |       |                   |   |             |  |      |  |   |         |  |     
|Costs of Products and Services |  | $                 | 2,775,592 |             | 82.8  |                   | $ | 1,918,604   |  | 74.5 |  | $ | 856,988 |  | 44.6
|                               |  |                   |           |             |       |                   |   |             |  |      |  |   |         |  |     

Cost of revenue increased in the nine months ended September 27, 2008 primarily due to higher
revenue from the increase in the number of operating clinics, 56, compared to 52 for the same period in 2007. Cost of medical products sales decreased in the nine months ended September 27, 2008 as a percentage of revenue over the comparative
period in 2007 due to product mix and continued negotiations with our suppliers. Cost of services revenue increased significantly as a percentage of revenue over the comparative period in 2007 mainly due to the additional service personnel, both on
and off-site, required provide the current menu of services to our customers.

Selling, General and Administrative Expenses. Set forth below
are our selling, general and administrative expenses.



|                                             |  |                   |           |                    |       |                     |   |             |  |       |  |   |         |  |     
|-------------------------------------------- |  | ----------------- | --------- | ------------------ | ----- | ------------------- | - | ----------- |  | ----- |  | - | ------- |  | ----
|                                             |  | Nine Months Ended |           | Increase(Decrease) |       | %Increase(Decrease)
|                                             |  | September 27,2008 |           | % ofRevenue        |       | September 29,2007   |   | % ofRevenue |  |      
|Salaries and benefits                        |  | $                 | 1,443,273 |                    | 43.0  |                     | $ | 1,231,574   |  | 47.8  |  | $ | 211,699 |  | 17.2
|Legal, consulting and insurance              |  |                   | 1,108,119 |                    | 33.0  |                     |   | 862,000     |  | 33.5  |  |   | 246,119 |  | 28.5
|All other                                    |  |                   | 1,922,434 |                    | 57.4  |                     |   | 1,447,966   |  | 56.2  |  |   | 474,468 |  | 32.8
|                                             |  |                   |           |                    |       |                     |   |             |  |       |  |   |         |  |     
|Selling, General and Administrative Expenses |  | $                 | 4,473,826 |                    | 133.4 |                     | $ | 3,541,540   |  | 137.5 |  | $ | 932,286 |  | 26.3
|                                             |  |                   |           |                    |       |                     |   |             |  |       |  |   |         |  |     



14



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##### Table of Contents

Salaries and Benefits Expense.

Salaries and benefits expense increased primarily due to the severance agreement related to the departure of our President and Chief Executive Officer, Brian Lesperance, during the first quarter of 2008. Total
employees for the nine months ended September 27, 2008 were 33, compared to 37 for the comparative period in 2007. We expect to continue to add additional sales and service support staff as we expand our operations.

Legal, Consulting and Insurance Expenses.

Legal
expense was $886,281 and consulting expense was $132,048 for the nine months ended September 27, 2008 compared to $457,579 and $277,111 respectively for the comparative period in the nine months ended September 29, 2007. The expenses
incurred in the nine months ended September 27, 2008, as well as the nine months ended September 29, 2007, are primarily related to services rendered to secure additional financing, review of our periodic and other filings, as well as
general counsel services. Additional legal expense incurred for the nine months ended September 27, 2008 were related to the filing and preparation of a registration statement and expenses related to the reorganization agreement. Consulting
expenses are lower for the nine months ended September 27, 2008 due to the absence of specific independent contractor arrangements compared to the nine months ended September 29, 2007. Insurance costs were $89,790 for the nine months ended
September 27, 2008 compared to $127,331 in the comparative period in 2007 due to the allocation of costs over an extended period of time in 2008 compared to that in 2007.

All Other Expenses.

Expense of $266,304 was recognized in the nine months ended September 27,
2008 related to the fair value of warrants issued to Brian Lesperance as part of the separation agreement between Mr. Lesperance and the Company. Other expenses for the nine months ended September 27, 2008 include office supplies, printing
and postage expenses of $161,990, or an increase of $13,859 from the nine months ended September 29, 2007; software and IT support of $43,658, or a decrease of $60,567; accounting and audit fees of $166,446, or an increase of $37,710;
recruitment expenses of $2,500, or a decrease of $77,388; billing service charges of $214,953, or an increase of $42,230; personnel services of $279,868, or an increase of $220,219 due to an increase of our temporary personnel compared to direct
labor; telephone and data communications expense of $46,677, or a decrease of $9,469; bad debt expense of $140,124 compared to none in the comparative period in 2007 for uncollectible pharmaceutical and stock and bill claims; doubtful allowance
reserve expense of $267,055, or an increase of $199,795; rent expense of $60,577, or an increase of $30,849 due to additional office space leased beginning in the fourth quarter of 2007; and bank charges of $19,079 or an increase of $13,809 due to
increased usage of lockbox accounts. The increase in expenses over the comparable nine month period reflects the increase in personnel support costs, higher sales volume and other expenses required to support a growing operation.

Other Income (Expense)

For the nine months
ended September 27, 2008, interest expense was $1,040,711 compared to $629,548 for the same period in 2007. The increased expense is a direct result of additional debt instruments in place during the nine months ended September 27, 2008
compared to the same period in 2007. In the nine months ended September 27, 2008 we recognized a debt extinguishment loss as a result of the exchange of convertible notes payable, advances payable and accrued interest for our Series D Preferred
Stock on July 30, 2008, of $247,339. In the nine months ended September 29, 2007, we recognized revolving line of credit financing expense of approximately $21,500,000 and approximately $8,700,000 of note extension expense. In the nine
months ended September 29, 2007, we recognized a debt extinguishment loss as a result of the Companys entry into a Warrant and Debenture Amendment Agreement on July 10, 2007, of $112,513,239. In exchange for $2,100,000 in cash from
Vicis, we agreed to reduce the warrant exercise price of the outstanding warrants issued to Vicis from ranging from $2.00 through $.345 down to $0.01 and to reduce the conversion price of the outstanding debentures issued to Vicis (with a face value
of $3,050,000) ranging from $0.207016 through $0.30 down to $0.10, as well as to eliminate certain exercise limitations provisions. The reduction in the conversion price had the effect of increasing the number of common shares into which the
debentures can be converted from 13,161,088 to 30,500,000 shares. The Warrant and Debenture Amendment Agreement also provides for the reduction of the warrant exercise price of the outstanding warrants held by certain other holders from $0.345 from
$1.00 down to $0.20. Interest expense in relation to the discount on the convertible notes and amortization of the debt issuance costs were $106,523 for the three months ending September 29, 2007.

Net Loss. Set forth below is our net loss.



|         |  |                   |            |   |             |        |           |                   |   |              |             |  |          |   |  |   |             |  |     
|-------- |  | ----------------- | ---------- | - | ----------- | ------ | --------- | ----------------- | - | ------------ | ----------- |  | -------- | - |  | - | ----------- |  | ----
|         |  | Nine Months Ended |            |   | Decrease    |        | %Decrease
|         |  | September 27,2008 |            |   | % ofRevenue |        |           | September 29,2007 |   |              | % ofRevenue |  |          |  
|Net Loss |  | $                 | (5,182,531 | ) |             | (154.6 | )         |                   | $ | (146,194,471 | )           |  | (5,676.2 | ) |  | $ | 141,011,940 |  | 96.5

Approximately one-third of the net loss for the nine months ended
September 27, 2008 was attributable to interest expense, debt extinguishment loss and the cash and non-cash charges in relation to the separation agreement with Brian Lesperance. Operationally, our loss was driven mainly from selling, general
and administrative costs incurred to continue to grow revenue and support our operations. We continue to invest in additional service support personnel to drive additional revenue growth in the future.



15



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##### Table of Contents

Liquidity and Capital Resources

During the nine months ended September 27, 2008, cash used in operating activities was $5,067,386, compared to $5,914,296 in the comparative period
in 2007. Financing activities, including advances from Vicis totaling $2,260,205 and the offering of our Series D Preferred Stock, offset the overall net decrease in cash to $113,723. As of September 27, 2008, we had $8,103,070 in total assets,
compared to $6,375,354 as of December 31, 2007. Total liabilities at the end of the period were $8,104,703 compared to $ 9,161,707 as of December 31, 2007.

Off Balance Sheet Arrangements

We do not have any off - balance sheet arrangements that have
or are reasonably likely to have a material impact of our financial condition or results of operations.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|------- | -----------------------------------------------------------

Not applicable.



|ITEM 4T. | CONTROLS AND PROCEDURES.
|-------- | ------------------------

Evaluation of disclosure controls
and procedures.

As required by Rule 13a-15 under the Exchange Act, as of the end of the period covered by this report, we carried
out an evaluation under the supervision and with the participation of our management, including our Interim Chief Executive Officer and Vice President and Controller (our principal executive officer and principal accounting and financial officer),
of the effectiveness of the design and operation of our disclosure controls and procedures. In designing and evaluating our disclosure controls and procedures, we and our management recognize that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. The term
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act), means controls and other procedures of a company that are designed to
ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms.
Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and
communicated to the companys management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this
evaluation, our Interim Chief Executive Officer and Vice President and Controller concluded as of September 27, 2008 that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses
discussed immediately below.

In light of the material weaknesses described below, we performed additional analysis and other post-closing
procedures to ensure that our consolidated financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the consolidated financial statements included in this report fairly present, in
all material respects, our financial condition, results of operations and cash flows for the periods presented.

The Company has identified
the following material weaknesses in our internal control over financial reporting:



| |  |  | The Company did not establish and maintain adequate segregation of duties without appropriate alternative controls particularly in the areas of recording accounting
transactions and administration of accounting applications.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Inadequate controls and procedures were in place to assign, monitor and regulate access to the company computing infrastructure including networks, servers and
applications and access to accounting applications. Additionally the patient billing system has one group account (with non-expiring password and no other restrictive controls) that is shared among ten or more individuals.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company has formulated a strategic plan to remediate the material weaknesses noted above. Those plans include
establishing new procedures and hiring additional personnel, as resources permit, in order to provide for more segregation of duties, using a financial statement disclosure checklist for future reports and replacing the patient billing system with a
new system with better access controls. The Company expects to make additional investments in its internal IT support structure, including systems, applications, processes and personnel. Currently, the Company expects that the implementation of the
internal IT support structure will be completed by the fourth quarter of 2008 and the new patient billing system will be implemented by the end of the fourth quarter of 2008, although the Company cannot provide any assurances that it will be able to
do so in this timeframe.

Internal Control over Financial Reporting.

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the fiscal quarter to which
this report relates that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



16



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##### Table of Contents

PART II OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS.
|------- | ------------------

We are not a party to any
material legal proceedings.



|Item 1A. | Risk Factors.
|-------- | -------------

In addition to the other
information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed below in conjunction with the factors discussed under the heading, Risk Factors in Item 1A of Part I of our Annual
Report on Form 10-KSB. These are risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements contained in this Quarterly Report on Form 10-Q. Because of the
these factors, as well as other variables affecting our operating results, past financial performance should not be considered as a reliable indicator of future performance and investors should not use historical trends to anticipate results or
trends in future periods. These risks are not the only ones facing the Company.

The expenditure of resources and time related to the
pending completion of the reorganization agreement with Andover Medical, Inc. and Certified Diabetic Services, Inc. may cause us to incur substantial expenses.

We are spending substantial resources and time in support of our pending strategic reorganization agreement with Andover Medical, Inc. and Certified
Diabetic Services, Inc. This raises numerous risks for our Company. The combined reorganization of Andover Medical, Inc., Certified Diabetic Services, Inc. and us is a fundamental change, and employees may become distracted from normal
operational duties because of the changes or fear of changes associated with such a transaction. While management continues to focus on its business results as an independent company, diverted time and attention prior to closing the
reorganization agreement could impact business focus and ultimately our results. In addition, litigation is always a risk when strategic deals are pending. If the reorganization agreement were to fail to close, we would have substantial
additional expenses to cover and would not have received the benefit of the transaction. Finally, if the reorganization agreement were to close, current business partners may request to change terms or could cancel their business dealings with
us in response to our new ownership and affiliation.

We have issued and are able to issue additional shares of preferred stock with rights
superior to those of holders of our common stock. Such issuances can dilute the tangible net book value of shares of our common stock.

Our amended and restated articles of incorporation authorize the issuance of 5,000,000 shares of blank check preferred stock. Pursuant to our amended and restated articles of incorporation, our board of
directors is authorized to issue, without shareholder approval, our blank check preferred stock with dividend, liquidation, redemption, voting and other rights that may be superior to the rights of holders of our common stock, at a
purchase price then approved by our board of directors, which purchase price may be substantially lower than the market price of shares of our common stock. On July 29, 2008 our board designated 789,906 shares of our preferred stock as Series D
Convertible Preferred Stock and on July 30, 2008, issued to Vicis 300,000 shares of Series D Convertible Preferred Stock for gross cash proceeds of $3,000,000 and issued to Vicis 498,906 shares of Series D Convertible Preferred Stock in exchange for
convertible notes payable, advances payable and accrued interest totaling $4,989,062. As of September 27, 2008, we had 789,906 shares of our Series D Convertible Preferred Stock issued and outstanding, which, in the aggregate, converts into
7,989,062 shares of our common stock.

The holders of our Series D Preferred Stock have the ability to exercise substantial control over
our affairs and corporate actions. Specifically, as long as fifty (50%) of the shares of the Series D Preferred Stock are outstanding, the holders of a majority of the shares of the Series D Preferred Stock are entitled to elect and nominate four
(4) members to our board of directors. In addition, as long as twenty percent (20%) of the shares of Series D Preferred Stock are outstanding, we may not, without the prior approval of the holders of the Series D Preferred Stock, take the following
actions:



| |  |  | Amend or restate our articles of incorporation in a manner adverse to the holders of the Series D Preferred Stock;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | Alter or change the voting preferences of our Series D Preferred Stock;
| | - |  | -----------------------------------------------------------------------



| |  |  | Increase the authorized number of preferred stock;
| | - |  | --------------------------------------------------



| |  |  | Redeem, purchase or otherwise acquire shares of junior or pari passu with the Series D Preferred Stock;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | Declare or make any dividends with respect to any stock junior to the Series D Preferred Stock; and
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | Authorize or create any class senior to the Series D Preferred Stock.
| | - |  | ---------------------------------------------------------------------

This de facto control could delay, deter or prevent a change in control and could adversely affect the price that investors might be willing to pay in the future for our securities.





|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
|------- | ------------------------------------------------------------

On July 30, 2008, we entered into a Securities Purchase Agreement (the Purchase Agreement) with Vicis, one of our largest stockholders. Pursuant to the Purchase Agreement, Vicis purchased 300,000
shares of our Series D Convertible Preferred Stock, par value $0.0001 per share (Series D Preferred Stock), convertible into 30,000,000 shares of our common stock, par value $0.0001 per share (Common Stock) for a cash
purchase price of $3,000,000 and Vicis tendered, delivered and forgave certain Existing Debts (as defined in the Purchase Agreement), in exchange for 498,906 shares of Series D Preferred Stock, convertible into 49,890,600 shares of Common Stock. The
shares of the Series D Convertible Preferred Stock are convertible at the option of the holder, without payment of additional consideration and subject to certain beneficial ownership limitations set forth in the Certificate of Designations. The
Company relied upon Rule 506 of Regulation D of the Securities Act of 1933, as amended, for the issuance of the shares of the Series D Convertible Preferred Stock.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES.
|------- | --------------------------------

On June 26, 2006, the Company issued to Vicis Capital Master Fund a Senior Secured Convertible Note (2006 Note) in aggregate the principal amount of $2,000,000. The entire
principal amount of the 2006 Note was payable on its maturity date of June 28, 2008, subject to its earlier conversion, acceleration or redemption. However, the 2006 Note was not paid as of June 26, 2008 and has not yet been repaid. Vicis
Capital Master Fund has not requested repayment of the 2006 Note and has not notified the Company of an event of default. Currently, the Company is working with Vicis Capital Master Fund for an extension of the 2006 Note. At the option of the
Company, interest payable upon conversion of all or a portion of the converted principal amount may be settled either in cash or in registered common stock (at a conversion price equal to the then current debt conversion price). Interest is payable,
in cash, at maturity and accrues at 6% per annum. The total principal amount of the default is $2,000,000 and the total arrearage on the 2006 Note as of November 11, 2008 is approximately $314,000.



17



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##### Table of Contents

|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
|------- | ----------------------------------------------------

None.



|ITEM 5. | OTHER INFORMATION.
|------- | ------------------



|(a) | Not applicable.
|--- | ---------------



|(b) | Not applicable.
|--- | ---------------



|ITEM 6. | EXHIBITS
|------- | --------

The following in an index of the exhibits
included in this report:



|            |  |                                                                                                                                                                                                                                                                                               
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                   
|3.1         |  | Amended and Restated Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-KSB filed on April 16, 2007)                                                                                                                       
|            | 
|3.2         |  | Certificate of Amendment to Amended and Restated Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-KSB filed on April 15,
2008)                                                                                           
|            | 
|3.3         |  | Amended and Restated Bylaws of the Registrant (incorporated in reference to Exhibit 3.2 to the Annual Report on Form 10-KSB filed on April 16, 2007)                                                                                                                                          
|            | 
|4.1         |  | Certificate of Designations for Series D Convertible Preferred Stock, as filed with the Secretary of State of the State of Nevada on July 29, 2008.                                                                                                                                           
|            | 
|10.1        |  | Asset Purchase Agreement and Plan of Reorganization dated as of July 25, 2008 by and among Medical Solutions Management Inc., Andover Medical, Inc. and Certified Diabetic Services, Inc.
(incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on July 31, 2008)
|            | 
|10.2        |  | Securities Purchase Agreement dated as of July 30, 2008 by and between Medical Solutions Management Inc. and Vicis Capital Master Fund (incorporated by reference to Exhibit 10.2 of the Current
Report on Form 8-K filed on July 31, 2008)                                                   
|            | 
|10.3        |  | Side Letter Agreement dated as of July 30, 2008 by and among Medical Solutions Management Inc., Vicis Capital Master Fund and Midtown Capital Partners and Co. LLC (incorporated by reference to
Exhibit 10.3 of the Current Report on Form 8-K filed on July 31, 2008)                       
|            | 
|31.1        |  | Certification of Principal Executive Officer, pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                                        
|            | 
|31.2        |  | Certification of Principal Accounting and Financial Officer, pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                         
|            | 
|32.1        |  | Certification of Principal Executive Officer and Principal Accounting and Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                                                                         



18



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##### Table of Contents

MEDICAL SOLUTIONS MANAGEMENT INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                        |  |                                   |  |                                
|----------------------- |  | --------------------------------- |  | -------------------------------
|                        |  | MEDICAL SOLUTIONS MANAGEMENT INC.
|                        |  |                                  
|Date: November 14, 2008 |  | By:                               |  | /s/    Lowell M. Fisher        
|                        |  |                                   |  | Lowell M. Fisher               
|                        |  |                                   |  | Interim Chief Executive Officer
|                        |  |                                   |  | (principal executive officer)  



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##### Table of Contents

EXHIBIT INDEX

The following in an index of the exhibits included in this report:



|            |  |                                                                                                                                                                                                                                                                                               
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                   
|3.1         |  | Amended and Restated Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-KSB filed on April 16, 2007)                                                                                                                       
|            | 
|3.2         |  | Certificate of Amendment to Amended and Restated Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-KSB filed on April 15,
2008)                                                                                           
|            | 
|3.3         |  | Amended and Restated Bylaws of the Registrant (incorporated in reference to Exhibit 3.2 to the Annual Report on Form 10-KSB filed on April 16, 2007)                                                                                                                                          
|            | 
|4.1         |  | Certificate of Designations for Series D Convertible Preferred Stock, as filed with the Secretary of State of the State of Nevada on July 29, 2008.                                                                                                                                           
|            | 
|10.1        |  | Asset Purchase Agreement and Plan of Reorganization dated as of July 25, 2008 by and among Medical Solutions Management Inc., Andover Medical, Inc. and Certified Diabetic Services, Inc.
(incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on July 31, 2008)
|            | 
|10.2        |  | Securities Purchase Agreement dated as of July 30, 2008 by and between Medical Solutions Management Inc. and Vicis Capital Master Fund (incorporated by reference to Exhibit 10.2 of the Current
Report on Form 8-K filed on July 31, 2008)                                                   
|            | 
|10.3        |  | Side Letter Agreement dated as of July 30, 2008 by and among Medical Solutions Management Inc., Vicis Capital Master Fund and Midtown Capital Partners and Co. LLC (incorporated by reference to
Exhibit 10.3 of the Current Report on Form 8-K filed on July 31, 2008)                       
|            | 
|31.1        |  | Certification of Principal Executive Officer, pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                                        
|            | 
|31.2        |  | Certification of Principal Accounting and Financial Officer, pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                         
|            | 
|32.1        |  | Certification of Principal Executive Officer and Principal Accounting and Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.