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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-QSB



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(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED September 29, 2007



| ̈ | 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



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MEDICAL SOLUTIONS MANAGEMENT
INC.

(Exact Name Of Registrant As Specified In Its Charter)



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|                         |  |                                     
|------------------------ |  | ------------------------------------
|Nevada                   |  | 86-0214815                          
|(State of Incorporation) |  | (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)



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Check whether the
issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.    Yes  x    No ̈

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 9, 2007, there were 58,217,994 shares of the issuers common stock issued and outstanding.

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



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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 OR PLAN OF OPERATION   |  | 23  
|        |  |                                                                    
|        |  | ITEM 3. CONTROLS AND PROCEDURES                                     |  | 33  
|        |  |                                                                    
|PART II |  | OTHER INFORMATION                                                   |  | 35  
|        |  |                                                                    
|        |  | ITEM 1. LEGAL PROCEEDINGS                                           |  | 35  
|        |  |                                                                    
|        |  | ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |  | 35  
|        |  |                                                                    
|        |  | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                             |  | 35  
|        |  |                                                                    
|        |  | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS         |  | 35  
|        |  |                                                                    
|        |  | ITEM 5. OTHER INFORMATION                                           |  | 35  
|        |  |                                                                    
|        |  | ITEM 6. EXHIBITS                                                    |  | 35  



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Explanatory Notes

Unless the context otherwise requires, in this Quarterly Report on Form 10-QSB 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.

Note on Forward-Looking Information

Except for historical facts, the statements in this
Quarterly Report on Form 10-QSB are forward-looking statements. Forward-looking statements are merely our current predictions of future events. These statements are inherently uncertain, and actual events could differ materially from our
predictions. Important factors that could cause actual events to vary from our predictions include those discussed under the headings Risk Factors, Managements Discussion and Analysis or Plan of Operations and
Business in our Annual Report on Form 10-KSB/A for fiscal year ended December 31, 2006 filed on November 2, 2007. We assume no obligation to update our forward-looking statements to reflect new information or developments. We
urge readers to review carefully the risk factors described in the Annual Report on Form 10-KSB/A for fiscal year ended December 31, 2006 filed on November 2, 2007 and the other documents that we file with the SEC. You can read these
documents at www.sec.gov.



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PART I FINANCIAL INFORMATION



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

Medical Solutions Management
Inc.

Consolidated Balance Sheet

September 29, 2007

(unaudited)



|                                                                                            |  |   |              |  
|------------------------------------------------------------------------------------------- |  | - | ------------ | -
|Assets                                                                                      | 
|Current Assets:                                                                             |  |   |              |  
|Cash and cash equivalents                                                                   |  | $ | 518,912      |  
|Trade accounts receivable, net                                                              |  |   | 1,158,833    |  
|Other receivables, net                                                                      |  |   | 3,045,065    |  
|Inventory                                                                                   |  |   | 179,258      |  
|Prepaid expenses                                                                            |  |   | 10,793       |  
|                                                                                            |  |   |              |  
|Total current assets                                                                        |  |   | 4,912,861    |  
|Property and equipment, net                                                                 |  |   | 106,594      |  
|Debt issuance costs, net                                                                    |  |   | 207,169      |  
|                                                                                            |  |   |              |  
|Total assets                                                                                |  | $ | 5,226,624    |  
|                                                                                            |  |   |              |  
|Liabilities and Stockholders Deficiency                                                    |  |   |              |  
|Current Liabilities:                                                                        |  |   |              |  
|Accounts payable                                                                            |  | $ | 888,943      |  
|Accrued expenses                                                                            |  |   | 633,586      |  
|Borrowings under revolving line of credit                                                   |  |   | 3,000,000    |  
|Convertible notes payable due in less than one year (net of discounts of $127,231)          |  |   | 1,897,769    |  
|                                                                                            |  |   |              |  
|Total current liabilities                                                                   |  |   | 6,420,298    |  
|Convertible notes payable long term (net of discounts of $343,905)                         |  |   | 922,095      |  
|                                                                                            |  |   |              |  
|Total liabilities                                                                           |  |   | 7,342,393    |  
|                                                                                            |  |   |              |  
|Stockholders Deficiency:                                                                   |  |   |              |  
|Preferred stock - 5,000,000 authorized, $0.001 par value, none issued and outstanding       |  |   |              |  
|Common stock - 100,000,000 authorized, $0.0001 par value, 58,217,994 issued and outstanding |  |   | 5,822        |  
|Additional paid-in capital                                                                  |  |   | 148,809,199  |  
|Accumulated deficit                                                                         |  |   | (150,930,790 | )
|                                                                                            |  |   |              |  
|Total Stockholders Deficiency                                                              |  |   | (2,115,769   | )
|                                                                                            |  |   |              |  
|Total Liabilities and Stockholders Deficiency                                              |  | $ | 5,226,624    |  
|                                                                                            |  |   |              |  

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 29, 2007 and September 30, 2006

(unaudited)



|                                                               |  |                    |              |   |                    |   |            |                   |  |   |                   |   |  |   |            |  
|-------------------------------------------------------------- |  | ------------------ | ------------ | - | ------------------ | - | ---------- | ----------------- |  | - | ----------------- | - |  | - | ---------- | -
|                                                               |  | Nine Months Ended  |              |   | Three Months Ended |  
|                                                               |  | September 29, 2007 |              |   | September 30, 2006 |   |            | September 29,2007 |  |   | September 30,2006 |  
|                                                               |  |                    |              |   | (Restated)         |   |            |                   |  |   | (Restated)        |  
|Revenue:                                                       |  |                    |              |   |                    |   |            |                   |  |   |                   |   |  |   |            |  
|Sales of Medical Products                                      |  | $                  | 1,627,829    |   |                    | $ | 595,553    |                   |  | $ | 523,108           |   |  | $ | 239,517    |  
|Service Revenue                                                |  |                    | 947,721      |   |                    |   | 90,151     |                   |  |   | 536,423           |   |  |   | 39,021     |  
|                                                               |  |                    |              |   |                    |   |            |                   |  |   |                   |   |  |   |            |  
|Total revenue                                                  |  |                    | 2,575,550    |   |                    |   | 685,704    |                   |  |   | 1,059,531         |   |  |   | 278,538    |  
|                                                               |  |                    |              |   |                    |   |            |                   |  |   |                   |   |  |   |            |  
|Cost of Revenue:                                               |  |                    |              |   |                    |   |            |                   |  |   |                   |   |  |   |            |  
|Cost of Medical Products                                       |  |                    | 1,111,927    |   |                    |   | 445,027    |                   |  |   | 395,401           |   |  |   | 156,385    |  
|Cost of Services                                               |  |                    | 806,677      |   |                    |   | 99,807     |                   |  |   | 392,171           |   |  |   | 49,263     |  
|                                                               |  |                    |              |   |                    |   |            |                   |  |   |                   |   |  |   |            |  
|Total Cost of Revenue                                          |  |                    | 1,918,604    |   |                    |   | 544,834    |                   |  |   | 787,572           |   |  |   | 205,648    |  
|                                                               |  |                    |              |   |                    |   |            |                   |  |   |                   |   |  |   |            |  
|Gross Profit                                                   |  |                    | 656,946      |   |                    |   | 140,870    |                   |  |   | 271,959           |   |  |   | 72,890     |  
|Selling, General and Administrative Expenses                   |  |                    | 3,541,540    |   |                    |   | 2,139,893  |                   |  |   | 1,250,499         |   |  |   | 814,938    |  
|                                                               |  |                    |              |   |                    |   |            |                   |  |   |                   |   |  |   |            |  
|Operating Loss                                                 |  |                    | (2,884,594   | ) |                    |   | (1,999,023 | )                 |  |   | (978,540          | ) |  |   | (742,048   | )
|                                                               |  |                    |              |   |                    |   |            |                   |  |   |                   |   |  |   |            |  
|Other Income (Expense)                                         |  |                    |              |   |                    |   |            |                   |  |   |                   |   |  |   |            |  
|Interest Income                                                |  |                    | 9,807        |   |                    |   | 12,943     |                   |  |   | 7,417             |   |  |   | 9,429      |  
|Interest Expense                                               |  |                    | (629,548     | ) |                    |   | (920,042   | )                 |  |   | (199,917          | ) |  |   | (128,070   | )
|Revolving line of credit financing expense                     |  |                    | (21,494,876  | ) |                    |   |           |                   |  |   |                  |   |  |   |           |  
|Note extension expense                                         |  |                    | (8,676,888   | ) |                    |   |           |                   |  |   |                  |   |  |   |           |  
|Debt extinguishment loss                                       |  |                    | (112,513,239 | ) |                    |   |           |                   |  |   | (112,513,239      | ) |  |   |           |  
|                                                               |  |                    |              |   |                    |   |            |                   |  |   |                   |   |  |   |            |  
|Other Income (Expense), net                                    |  |                    | (143,304,744 | ) |                    |   | (907,099   | )                 |  |   | (112,705,739      | ) |  |   | (118,641   | )
|                                                               |  |                    |              |   |                    |   |            |                   |  |   |                   |   |  |   |            |  
|Net Loss Before Income Taxes                                   |  |                    | (146,189,338 | ) |                    |   | (2,906,122 | )                 |  |   | (113,684,279      | ) |  |   | (860,689   | )
|Provision for Income Taxes                                     |  |                    | 5,133        |   |                    |   | 669        |                   |  |   | 1,971             |   |  |   |           |  
|                                                               |  |                    |              |   |                    |   |            |                   |  |   |                   |   |  |   |            |  
|Net Loss                                                       |  | $                  | (146,194,471 | ) |                    | $ | (2,906,791 | )                 |  | $ | (113,686,250      | ) |  | $ | (860,689   | )
|                                                               |  |                    |              |   |                    |   |            |                   |  |   |                   |   |  |   |            |  
|Basic and Diluted Net Loss Per Common Share                    |  | $                  | (4.61        | ) |                    | $ | (0.14      | )                 |  | $ | (2.10             | ) |  | $ | (0.04      | )
|                                                               |  |                    |              |   |                    |   |            |                   |  |   |                   |   |  |   |            |  
|Weighted Average Common Shares Outstanding (Basic and Diluted) |  |                    | 31,696,102   |   |                    |   | 20,663,215 |                   |  |   | 54,060,240        |   |  |   | 20,446,729 |  
|                                                               |  |                    |              |   |                    |   |            |                   |  |   |                   |   |  |   |            |  

See Notes to Unaudited Interim Financial Statements.



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Medical Solutions Management Inc.

Consolidated Statements of Cash Flows for the

Nine Months Ended September 29, 2007
and September 30, 2006

(unaudited)



|                                                                                                                                     |  |                                     |              |   |                                     |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------- | ------------ | - | ----------------------------------- | - | ---------- | -
|                                                                                                                                     |  | Nine Months EndedSeptember 29, 2007 |              |   | Nine Months EndedSeptember 30, 2006 |  
|                                                                                                                                     |  |                                     |              |   | (Restated)                          |  
|Cash Flows from Operating Activities:                                                                                                |  |                                     |              |   |                                     |   |            |  
|Net Loss                                                                                                                             |  | $                                   | (146,194,471 | ) |                                     | $ | (2,906,791 | )
|Adjustments required to reconcile net loss to cash flows used by operating activities:                                               |  |                                     |              |   |                                     |   |            |  
|Increase in allowance for doubtful accounts                                                                                          |  |                                     | 59,521       |   |                                     |   | 69,557     |  
|Depreciation and amortization                                                                                                        |  |                                     | 43,702       |   |                                     |   | 27,790     |  
|Non-cash interest expense related to amortization of debt discounts and debt issuance costs                                          |  |                                     | 417,772      |   |                                     |   | 889,892    |  
|Stock and options issued for services                                                                                                |  |                                     |             |   |                                     |   | 102,581    |  
|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    |   |                                     |   |           |  
|Debt extinguishment loss                                                                                                             |  |                                     | 112,513,239  |   |                                     |   |           |  
|Changes in Operating Assets and Liabilities:                                                                                         |  |                                     |              |   |                                     |   |            |  
|Trade accounts receivable                                                                                                            |  |                                     | (834,104     | ) |                                     |   | (219,021   | )
|Other receivables                                                                                                                    |  |                                     | (2,919,852   | ) |                                     |   |           |  
|Inventory                                                                                                                            |  |                                     | 42,075       |   |                                     |   | (14,678    | )
|Prepaid expenses                                                                                                                     |  |                                     | 25,153       |   |                                     |   | (14,387    | )
|Accounts payable                                                                                                                     |  |                                     | 562,780      |   |                                     |   | (129,191   | )
|Accrued expenses                                                                                                                     |  |                                     | 198,125      |   |                                     |   | 168,746    |  
|                                                                                                                                     |  |                                     |              |   |                                     |   |            |  
|Net cash used by operating activities                                                                                                |  |                                     | (5,914,296   | ) |                                     |   | (2,025,502 | )
|                                                                                                                                     |  |                                     |              |   |                                     |   |            |  
|Cash Flows from Investing Activities:                                                                                                |  |                                     |              |   |                                     |   |            |  
|Purchases of property and equipment                                                                                                  |  |                                     | (47,297      | ) |                                     |   | (27,680    | )
|                                                                                                                                     |  |                                     |              |   |                                     |   |            |  
|Cash Flows from Financing Activities:                                                                                                |  |                                     |              |   |                                     |   |            |  
|Proceeds from convertible notes payable                                                                                              |  |                                     | 650,000      |   |                                     |   | 2,000,000  |  
|Proceeds from debt modification                                                                                                      |  |                                     | 2,100,000    |   |                                     |   |           |  
|Proceeds from borrowings under revolving line of credit                                                                              |  |                                     | 3,000,000    |   |                                     |   |           |  
|Proceeds from the exercise of common stock options and warrants                                                                      |  |                                     | 377,447      |   |                                     |   |           |  
|                                                                                                                                     |  |                                     |              |   |                                     |   |            |  
|Net cash provided by financing activities                                                                                            |  |                                     | 6,127,447    |   |                                     |   | 2,000,000  |  
|                                                                                                                                     |  |                                     |              |   |                                     |   |            |  
|Net Increase (Decrease) in Cash and Cash Equivalents                                                                                 |  |                                     | 165,854      |   |                                     |   | (53,182    | )
|Cash and Cash Equivalents - Beginning                                                                                                |  |                                     | 353,058      |   |                                     |   | 699,740    |  
|                                                                                                                                     |  |                                     |              |   |                                     |   |            |  
|Cash and Cash Equivalents - Ending                                                                                                   |  | $                                   | 518,912      |   |                                     | $ | 646,558    |  
|                                                                                                                                     |  |                                     |              |   |                                     |   |            |  
|Supplemental disclosure of cash flow information:                                                                                    |  |                                     |              |   |                                     |   |            |  
|Cash paid for interest                                                                                                               |  | $                                   | 55,869       |   |                                     | $ |           |  
|                                                                                                                                     |  |                                     |              |   |                                     |   |            |  
|Cash paid for income taxes                                                                                                           |  | $                                   | 4,369        |   |                                     | $ |           |  
|                                                                                                                                     |  |                                     |              |   |                                     |   |            |  
|Supplemental disclosure of non-cash transactions:                                                                                    |  |                                     |              |   |                                     |   |            |  
|Discounts on convertible notes payable recorded as additional paid-in capital                                                        |  | $                                   | 1,266,000    |   |                                     | $ |           |  
|                                                                                                                                     |  |                                     |              |   |                                     |   |            |  
|Fair value of common stock warrants issued for services                                                                              |  | $                                   |             |   |                                     | $ | 87,581     |  
|                                                                                                                                     |  |                                     |              |   |                                     |   |            |  
|Fair value of common stock warrants issued for interest expenses                                                                     |  | $                                   |             |   |                                     | $ | 1,208,028  |  
|                                                                                                                                     |  |                                     |              |   |                                     |   |            |  
|Fair value of discount to convertible debenture arising from computed beneficial conversion feature                                  |  | $                                   |             |   |                                     | $ | 791,972    |  
|                                                                                                                                     |  |                                     |              |   |                                     |   |            |  
|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    |   |                                     | $ |           |  
|                                                                                                                                     |  |                                     |              |   |                                     |   |            |  



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MEDICAL SOLUTIONS MANAGEMENT INC.

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS



|1. | Basis of Presentation and Summary of Significant Accounting Policies
|-- | --------------------------------------------------------------------

The financial statements presented herein have been prepared by us in accordance with the accounting policies described in our Annual Report on Form 10-KSB/A for fiscal year ended December 31, 2006 filed on November 2, 2007 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 us 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 our fiscal year 2006 may also be reclassified to conform to current fiscal year 2007 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 Form 10-QSB reflects all adjustments necessary for a fair statement of the financial
position and results of operations and cash flows as of and for the three-month and nine month periods ended September 29, 2007 and September 30, 2006. All such adjustments are of a normal recurring nature. The consolidated financial
statements have been prepared in accordance with the instructions to Form 10-QSB 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.
(collectively, the Company). All significant inter-company balances and transactions have been eliminated in consolidation.

Accounting
Period: 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 year ended December 31, 2006 includes 52 weeks and the fiscal
year ending December 31, 2007 includes 52 weeks.

Use of Estimates: The preparation of financial statements in conformity with GAAP
requires our management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from the estimates.

Cash and Cash Equivalents: For financial statement
presentation purposes, we consider those short-term, highly liquid investments with original maturities of three months or less to be cash or cash equivalents.

Fair Value of Financial Instruments: Our financial instruments consist of cash and cash equivalents, trade accounts receivable, other receivables, accounts payable, accrued expenses, and long and short-term borrowings. The
fair value of these instruments approximates their recorded value. We do not have financial instruments with off-balance sheet risk. The fair value estimates were based on market information available to management as of September 29, 2007.

Financial instruments that potentially subject us to concentrations of market/credit risk consist principally of cash and cash equivalents and trade
accounts receivable. We invest cash through a high credit-quality financial institution, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.

A concentration of credit risk may exist with respect to trade receivables. We perform ongoing credit evaluations of customers and generally do not require collateral
from our customers. We review accounts receivable on a regular



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basis to determine if any such amounts may be potentially uncollectible. We establish a general reserve based on percentages applied to certain customers and
accounts receivable aging categories. These percentages are based on managements judgment and historical collection and write-off experience. We include any balances that are determined to be uncollectible, along with the general reserve, in
the overall allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on our best estimate, we believe the allowance for doubtful accounts of $79,552 is
adequate as presented. Historically, we have not experienced significant losses related to receivables from individual customers or groups of customers in any particular discipline or geographic area.

We do not manufacture the products that we provide to our customers. Instead, we rely on manufacturers and other suppliers for these products. We submit purchase orders
for the products to one of our manufacturers or suppliers. Our manufacturers and suppliers have no written contractual obligation to accept any purchase order that we submit for customer product orders. If any of these parties are unable or
unwilling to supply these products to us, we would be unable to distribute our products until a replacement supplier could be found.

Other
Receivables: Other receivables consist of third party claims for pharmaceuticals dispensed by physicians under workers compensation. These claims are acquired from a management company which aggregates the claims on behalf of a group of
physician clinics that dispense the pharmaceuticals to their patients. The company advances funds to the management company at a discounted percentage from the face amount of the claims being transferred. In return, the ownership and all rights to
full payment of the claims from third party payers are assigned exclusively to the Company. The Company is free to pledge or exchange the transferred assets, and the transferor is not entitled to repurchase or redeem the claims. However, if any
claims are rejected by a payor as an invalid workers compensation claim, the claim reverts back to the management company for credit to the Company equal to our original cost to acquire the claim. The claims are recorded at cost to the Company.

Inventories: Inventories are valued at the lower of cost (determined by the first-in, first-out method) or market and consist of finished
goods.

Revenue Recognition:Our principal sources of revenues are from the sale of medical products and from providing related management
services. Our revenue recognition policies are in compliance with Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition, SAB No. 101, Revenue Recognition in Financial Statements, EITF Issue No. 00-21,
Revenue Arrangements with Multiple Deliverables, and EITF Issue No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent. Revenue is recognized when persuasive evidence of an agreement with the customer
exists, products are shipped or title passes pursuant to the terms of the agreement with the customer, the amount due from the customer is fixed or determinable, collectibility is reasonably assured, and there are no significant future performance
obligations. Service revenues are recognized at the time of performance is completed usually billed monthly. Revenues from separate service maintenance agreements are recognized ratably over the term of the agreements.

These policies require management, at the time of the transaction, to assess whether the amounts due are fixed or determinable, collection is reasonably assured, and no
future performance obligations exist. These assessments are based on the terms of the agreement with the customer, past history and creditworthiness of the customer. If management determines that collection is not reasonably assured or future
performance obligations exist, revenue recognition is deferred until these conditions are satisfied.

Our sources of revenue are generated from the sale of
products and services.

Sales of productssales of durable medical equipment, or DME, primarily to orthopedic and podiatry clinical
practices:



| |  |  | Direct Purchase Model-Under this arrangement the clinic places an order with the Company, which then places the actual DME product order to one of its suppliers.
Title to the product is transferred to the Company upon shipment from the supplier. The Company bills the clinic upon confirmation of receipt and acceptance of the delivered products. Upon billing, the Companys performance obligation is
considered fulfilled and, accordingly, revenue is recognized at that time.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Purchase as Dispensed Model- Under the purchase as dispensed model, the order and shipping process, payment terms, and pricing is the same as described
above. However, in this model, the product remains the property of the Company upon delivery to the clinic. The product is included in the Companys
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| | inventory held at the clinic site until it is dispensed to a patient. Once dispensed, it becomes billable to the clinic. Upon billing, the Companys
performance obligation is considered fulfilled and, accordingly, revenue is recognized at that time.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We have evaluated the gross sales
reporting criteria set forth in paragraphs 7-14 of EITF 99-19. We have determined that the following criteria are applicable to our specific facts and circumstances:



| |  |  | The Company is the primary obligor in the arrangement with clinics.
| | - |  | -------------------------------------------------------------------



| |  |  | The Company has general inventory risk.
| | - |  | ---------------------------------------



| |  |  | The Company has discretion in supplier selection.
| | - |  | -------------------------------------------------



| |  |  | The Company has physical loss inventory risk.
| | - |  | ---------------------------------------------



| |  |  | The amount the Company earns is not fixed.
| | - |  | ------------------------------------------

Based on
the Companys consideration of all relevant facts and circumstances, the Company accounts for sales of products on a gross basis.

The Company
provides clinics with one-stop shopping for the handling of all their DME needs. The Company acts as the primary obligor to supply the DME to the clinics and physicians dispensing the orthotics and limited durable medical equipment
items. Pursuant to the written contracts that we enter into with our customers, we provide the personal and management services identified by the customer in order to facilitate customers on-site provision of orthotics and limited durable
medical equipment items and related services to its patient. During the marketing process with our customers, we make certain unwritten representations with respect to our responsibilities and obligations to the clinics. Our marketing materials used
during the process of enlisting new clinics assure potential new clients that we will be responsible for fulfilling all of their orthotics and limited durable medical equipment items needs. We successfully provide orthotics and limited durable
medical equipment items to the clinic regardless of its source and we fulfill our obligations to provide services relating to the provision of orthotics and limited durable medical equipment items. We believe that this unique orthotics and limited
durable medical equipment items fulfillment and service approach sets us apart from our competitors and constitutes one of the primary reasons the clinic enters into the arrangement with us. We believe that the assurances, both in our contractual
agreements and our marketing materials, that we are responsible for fulfilling the orthotics and limited durable medical equipment items product requirements of the clinics, make us the primary obligor for the orthotics and limited durable medical
equipment items to the clinic, including the acceptability of the product ordered by the clinic.

Product sales are made without the right of return.
However, the Company has established a business practice of accepting product returns under certain circumstances. The Company provides for estimated sales returns when the underlying sale is made, based upon historical experience and known events
or trends, in accordance with SFAS No. 48, Revenue Recognition when Right of Return Exists. The Company is able to reasonably estimate returns due to the relatively short time period during which the Company generally accepts
returns, the Companys historical experience with similar types of sales of similar products and a large volume of homogenous transactions. For all periods presented, reserves for estimated returns have been immaterial.

Sales of servicessales of third party billing and collection services and Physician Extenders services:



| |  |  | Billing and Collection services model-The Company also provides certain clinics with third party billing and collection services. Under this program, the Company
provides clinics with patient agreements which are filled in with DME product information dispensed to a patient along with proper coding. The Company periodically receives this information from the clinic and inputs it into an electronic billing
system for transmittal, on behalf of the clinic, to the appropriate third party payers. The Company charges a fee for this service equal to a fixed percentage of the amounts actually collected by the clinic. The service fee revenue is recognized, on
a net basis, upon collection of the third party billings and is invoiced to clinics on a monthly basis. We have evaluated the net sales reporting criteria set forth in paragraph 16 of EITF 99-19 and determined all our billing and collection services
are required to be reported on a net basis. Billing and collection contract terms are for one to two years with termination subject to thirty days notice for cause, and 90 to 120 day notice without cause.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Physician Extenders (PE) services model- PEs are generally Certified Athletic Trainers. These health care professionals are employed by the Company but work
on site at one or more clinics. They assist the
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | clinic in DME dispensing, inventory management, injury evaluation, prevention and rehabilitation. The Company charges a contractually agreed upon flat fee to
the clinic for this service. The fee is invoiced monthly. Related fee revenue is recognized at the end of each month that the service has been provided and costs are included in cost of sales. Contract terms are generally the same as those of
Billing and Collecting services.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pharmacy Claims Servicing RevenueDuring the fourth quarter, the Company entered into an arrangement whereby it would acquire dispensed workers compensation
pharmaceutical claims from a management company which aggregates the claims on behalf of a group of physician clinics that dispense the pharmaceuticals to their patients. Under the arrangement, the company advances funds to the management company at
a discounted percentage from the face amount of the claims being transferred. In return, the ownership and all rights to full payment of the claims from third party payers are assigned exclusively to the Company. The Company is free to pledge or
exchange the transferred assets, and the transferor is not entitled to repurchase or redeem the claims. The Company has full responsibility for servicing the claims, including submission of the claims to third party payers (such as insurance
companies and state workers compensation funds) and follow-up until settlement occurs. However, if any claims are rejected by a payer as an invalid workers compensation claim, the claim reverts back to the management company for credit to the
Company equal to our original cost to acquire the claim.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company evaluated the accounting for the acquisition and disposition of the
pharmacy claims in accordance with SFAS 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, as amended by SFAS 156, Accounting for Servicing of Financial Assets (as amended). In
accordance with paragraph 9 of SFAS 140, the Company has treated the acquisition of the claims as a purchase since the management company (transferor) has surrendered control over these assets to OrthoSupply, our wholly owned operating company. The
claim assets are recorded in other receivables, separately from our trade receivables, at the Companys cost. . We earn servicing revenue by processing, submitting and collecting the claims as described above. Servicing revenue is
recognized at the time the claim is collected, and is calculated as the difference between the amount actually collected on the claim from third party payers and our cost basis in the claim.

In accordance with EITF Issue 00-10, Accounting for Shipping and Handling Fees and Costs, we included all shipping and handling billings to customers in
revenues, and freight costs incurred for product shipments have been included in cost of products sold.

Accounting For Obligations And Instruments
Potentially To Be Settled In The Companys Common Stock: We account for obligations and instruments potentially to be settled in the Companys stock in accordance with EITF Issue No. 00-19, Accounting for Derivative Financial
Instruments Indexed To, and Potentially Settled In a Companys Common Stock. This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Companys own
stock.

Under EITF Issue No. 00-19 contracts are initially classified as equity or as either assets or liabilities, in the following situations:

Equity

Contracts that require physical settlement or
net-share settlement; and

Contracts that give the company a choice of net-cash settlement or settlement in its own shares (physical settlement or
net-share settlement), assuming that all the criteria for equity classification have been met.

Assets or Liabilities

Contracts that require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the
company); and

Contracts that give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).



7



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All contracts are initially measured at fair value and subsequently accounted for based on the current classification.
Contracts initially classified as equity do not recognize subsequent changes in fair value as long as the contracts continue to be classified as equity. For contracts classified as assets or liabilities, the Company reports changes in fair value in
earnings and discloses these changes in the financial statements as long as the contracts remain classified as assets or liabilities. If contracts classified as assets or liabilities are ultimately settled in shares, any previously reported gains or
losses on those contracts continue to be included in earnings. The classification of a contract is reassessed at each balance sheet date.

In accordance
with EITF Issue No. 00-19, a transaction which includes a potential for net-cash settlement, including liquidated damages, requires that derivative financial instruments, including warrants and additional investment rights, initially be recorded at
fair value as an asset or liability and subsequent changes in fair value be reflected in the statement of operations. The recorded value of the liability for such derivatives can fluctuate significantly based on fluctuations in the market value of
the underlying common stock of the issuer of the derivative instruments, as well as in the volatility of the stock price during the term used for observation and the remaining term. To date, the Company has never been required to classify issued
warrants as derivative liabilities.

Warrant Derivative Liabilities: We account for warrants issued in connection with financing arrangements
in accordance with EITF Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Companys Own Stock. Pursuant to EITF Issue No. 00-19, an evaluation of specifically identified conditions is
made to determine whether the fair value of warrants issued is required be classified as a derivative liability. The fair value of warrants classified as derivative liabilities is adjusted for changes in fair value at each reporting period, and the
corresponding non-cash gain or loss is recorded in current period earnings. To date, the Company has never been required to classify issued warrants as derivative liabilities.

Registration Rights: We have issued financial instruments that are convertible into or exchangeable for our common stock. In some cases, in conjunction with the issuance of these financial instruments,
we issued rights that under certain circumstances provide that we will register the underlying common stock shares with the Securities and Exchange Commission (SEC) so that such common stock shares may be resold by the holders
(registration rights). For purposes of determining the accounting treatment for the financial instruments and any related registration rights, we assess whether the financial instrument and related registration rights represent one
combined instrument or whether the financial instrument and related registration rights represent separate instruments.

We initially adopted View C as
described in the EITF Issue No. 05-4 Issue Summary No. 1. Under View C, registration rights agreements and the associated financial instruments are accounted for as separate instruments. View C of EITF 05-4 takes the position that the
registration rights should be accounted for separately from the financial instrument as the payoff of the financial instruments is not dependent on the payoff of the registration rights agreement, and according to DIG K-1, registration rights
agreements and the financial instruments do not meet the combining criteria as they relate to different risks.

We elected early adoption of FASB Staff
Position (FSP) EITF No. 00-19-2 This FSP specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration rights agreement, whether issued as a separate agreement or included as a provision of
a financial instrument or other agreement, should be separately recognized and measured in accordance with FASB Statement No. 5, Accounting for Contingencies.

Reclassifications: Certain amounts reported in the previous periods have been reclassified to conform to the 2007 presentation.



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

The accompanying
financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in the notes to the unaudited financial statements, the Companys losses have resulted in an accumulated deficit of $150,930,790 as
of September 29, 2007. Operating activities consumed $5,914,296 in cash in the nine months ended September 29, 2007. In addition, the Company has negative working capital of $1,507,437 as of September 29, 2007. 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.



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The Companys two main objectives for fiscal year 2007 are to continue its ability to finance the Company and to
focus on expanding revenue in key locations across the country. The Company also plans to expand its billing and collecting services to new markets, including pharmaceutical prescriptions. In connection with this expansion, the Company may seek
asset based financing to support this business. The Company expects that its current cash availability will support current operations through March 2008. On April 17, 2007, the Company successfully restructured four short-term notes payable
into two long-term convertible debentures in the aggregate principal amount of $1,266,000 due on April 17, 2009. The Companys current monthly cash burn rate during the nine month period was approximately $500,000, primarily driven by its
entry into the acquisition and financing of pharmaceutical billing and collection claims processing. The Company anticipates that it will need to complete additional financing to support current working capital needs and potential acquisitions.
Through these financings, the Company hopes to expand the business organically and through acquisitions.

The Companys plan for organic growth
includes increasing its sales force in key locations across the country. In fiscal year 2007, the Company plans to build its sales force from its current level of four sales people to ten sales people. The Company has hired two regional sales
managers, one in the Southwest and one in the west coast of the United States. The plan also includes support programs for the sales efforts including marketing, communications and program literature.

The Company has increased its resources in accounting and administration by recently hiring a staff accountant. We also hired a Director of Operations and added seven
additional employees to enhance and support our service group. During the nine months ended September 29, 2007, the Company also hired seven additional physician extenders in order to further support its current service model. The Company
expects to hire additional administrative and field support resources to support the growth in new clinics during 2007 and beyond.

The Company does not
anticipate devoting its resources to research and development in fiscal year 2007.



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

In September 2006, the FASB issued SFAS
No. 157,Fair Value Measurements (SFAS 157). SFAS 157 provides guidance for using fair value to measure assets and liabilities. It also responds to investors requests for expanded information about the extent to which companies
measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. SFAS 157 applies whenever other standards required (or permit) assets or liabilities to be measured at
fair value, and does not expand the use of fair value in any new circumstances. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are currently evaluating the effect that the adoption
of SFAS 157 will have on our results of operations and financial condition and are not yet in a position to determine such effects.

In June 2006, the
FASB issued FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement 109 (FIN 48), which clarifies the accounting for uncertain tax positions. This Interpretation allows
the tax effects from an uncertain tax position to be recognized in the Companys financial statements if the position is more likely than not to be sustained upon audit, based on the technical merits of the position. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. Effective January 1, 2007, the Company
adopted the provisions FIN 48. The implementation of FIN 48 had no impact on the Companys financial statements as the Company has no unrecognized tax benefits. The Company is primarily subject to U.S. federal and Massachusetts state income
tax. Tax years subsequent to 2003 remain open to examination by U.S. federal and state tax authorities. The Companys policy is to recognize interest and penalties related to income tax matters in income tax expense. As of January 1 and
September 29, 2007, the Company had no accruals for interest or penalties related to income tax matters.



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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. | Other Receivables
|-- | -----------------

Other receivables consist of third party claims
for pharmaceuticals dispensed by physicians under workers compensation. These claims are acquired from a management company which aggregates the claims on behalf of a group of physician clinics that dispense the pharmaceuticals to their patients.
The Company advances funds to the management company at a discounted percentage from the face amount of the claims being transferred. In return, the ownership and all rights to full payment of the claims from third party payers are assigned
exclusively to the Company. The Company is free to pledge or exchange the transferred assets, and the transferor is not entitled to repurchase or redeem the claims. However, if any claims are rejected by a payor as an invalid workers compensation
claim, the claim reverts back to the management company for credit to the Company equal to our original cost to acquire the claim. The claims are recorded at cost to the Company.



|6. | Revolving Line of Credit
|-- | ------------------------

On March 16, 2007, the Company
entered into 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 $1,500,000. 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. 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 Sovereign 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 $1,530,000, which letter of credit expires on March 15, 2008, and (ii) the Company, CTC and
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.

Medical Solutions Management Inc., Vicis and OrthoSupply Management, Inc. (OrthoSupply), a wholly-owned subsidiary of Medical Solutions Management Inc., also entered into a Guarantee Fee, Reimbursement and
Indemnification Agreement pursuant to which the Company agreed to reimburse Vicis for any payment Vicis is required to make under the CTC Agreement and issued to Vicis a warrant to purchase 3,060,000 shares of the Companys common stock, which
warrant is exercisable for five years at a per share exercise price of $1.00. The Company also issued a warrant to purchase 153,000 shares of its common stock, which warrant is exercisable for five years at a per share exercise price of $1.00, to
Midtown Partners & Co., LLC (Midtown) for services rendered to the Company in connection with the transactions described herein. OrthoSupply guaranteed the Company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 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.



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The warrants, issued on March 16, 2007, to purchase an aggregate of 3,213,000 shares, were estimated to have a fair
value of $11,471,023. The Company evaluates and accounts for such securities in accordance with Emerging Issues Task Force (EITF) Issue Nos. 98-5, 00-19, 00-27, 05-02, 05-04 (superseded by FSP EITF 00-19-2) and 05-08, and SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities as amended. The estimated fair market value of the warrants was calculated using the Black Scholes Option Pricing model as of the date of issuance (see Note 8). The fair
value of these warrants was recorded as additional paid-in capital and revolving line of credit financing expense in the quarter ended March 31, 2007.

On May 18, 2007, the Company amended its Line of Credit Agreement with Sovereign Bank pursuant to which Sovereign Bank increased the Companys revolving line of credit by an additional principal amount of $1,500,000, so that the
aggregate principal amount available to the Company is $3,000,000.

In connection with the amendment to the Line of Credit Agreement with Sovereign Bank,
CTC increased the irrevocable letter of credit previously issued in favor of Sovereign Bank to an aggregate amount of $3,060,000, which letter of credit expires on March 15, 2008. In addition, the Company, CTC and Vicis amended Letter of Credit
Reimbursement, Guarantee, Security and Pledge Agreement (the CTC Amendment) pursuant to which the Company agreed to reimburse CTC for any additional payments CTC is required as a result of the amendment to the letter of credit it issued
in favor of Sovereign Bank. Vicis guaranteed the Companys performance of the additional obligations as a result of the CTC Amendment and therefore deposited certain of its assets with CTC.

The Company, Vicis and OrthoSupply, also amended the Guarantee Fee, Reimbursement and Indemnification Agreement (Guarantee Amendment) pursuant to which the
Company agreed to reimburse Vicis for any additional payments Vicis is required to make as a result of the CTC Amendment and issued to Vicis a warrant to purchase 3,060,000 shares of the Companys common stock, which warrant is exercisable for
five years at a per share exercise price of $1.00. The Company also issued a warrant to purchase 153,000 shares of its common stock, which warrant is exercisable for five years at a per share exercise price of $1.00, to Midtown for services rendered
to the Company in connection with the transactions described herein. OrthoSupply guaranteed the Companys performance of its additional obligations as a result of Guarantee Amendment. In the event Vicis is required to make any payment under the
CTC Amendment 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.

The warrants, issued on May 18, 2007, to purchase an aggregate of 3,213,000 shares, were estimated to have a fair value of $10,023,853. The Company evaluates and
accounts for such securities in accordance with EITF Issue Nos. 98-5, 00-19, 00-27, 05-02, 05-04 (superseded by FSP EITF 00-19-2) and 05-08, and SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities as amended. The
estimated fair market value of the warrants was calculated using the Black Scholes Option Pricing model as of the date of issuance (see Note 8). The fair value of these warrants was recorded as additional paid-in capital and revolving line of credit
financing expense in the quarter ended June 30, 2007.

Pursuant to the terms of the Guarantee Amendment, if the Company does not timely reimburse
Vicis for any additional payments Vicis is required to make as a result of the CTC Amendment, the Company is obligated to issue to Vicis additional warrants to purchase a number of shares of common stock equal to 200% of the value payments required
of Vicis, which warrants shall be exercisable for five years at a per share exercise price of $1.00. If the Registrant does not timely reimburse Vicis any payments Vicis is required to make pursuant to the CTC Amendment, the Company is also
obligated to issue a number of shares of common stock to Midtown equal to 10% of the value of the payments required of Vicis, which warrants shall be exercisable for five years at a per share exercise price of $1.00.

In the three and nine months ended September 29, 2007, interest expense on the Sovereign Bank revolving line of credit was $42,112 and $69,807 respectively. At
September 29, 2007, the Company had borrowed a total of $3,000,000 under this revolving line of credit.



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|7. | Notes Payable
|-- | -------------

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

On June 28, 2006, the Company entered into a Securities Purchase 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 our 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 our intellectual property.

The Warrants permit Vicis to purchase 8,000,000 shares of common stock at an exercise price of $0.375 per share and to purchase 8,000,000 shares of common
stock at an exercise price of $0.345 per share and are exercisable from June 28, 2006 until June 27, 2011. The Warrants contain anti-dilution provisions similar to the convertible debt and are required to be reduced to an exercise price
not less than amounts received for new issues of common stock or rates granted to newly issued convertible securities, or exercise prices of options in an equity financing.

The 2006 Note is convertible at the option of the holder at any time and from time to time into common stock of the Company at a conversion price of $0.207016 per share, subject to certain anti-dilution adjustments.
Pursuant to the terms of the 2006 Note, the conversion price will be reset (the Reset Provision) in the event the Company issues shares, convertible securities or options entitling the recipient to subscribe for or purchase shares at a
price per share less than the fixed conversion price then in effect.

Interest is payable, in cash, at maturity and accrues at 6% per annum. The
entire principal amount of the 2006 Note is payable on its maturity date of June 28, 2008, subject to its earlier conversion, acceleration or redemption. 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).

The terms of the convertible debentures include a reset conversion feature which provides for a reduction in conversion price of the debentures into shares of the Companys common stock at a rate equal to the terms of any future
offering. The Company has determined that the current conversion rate is fixed and determinate and will change only in circumstances under managements control. Also, because the conversion option is indexed to its own stock and a separate
instrument with the same terms would be classified in stockholders equity in the statement of financial position, the written option is not considered to be a derivative instrument for the issuer under SFAS 133 paragraph 11(a) and,
accordingly, was not separated from the host contract.

The 2006 Note contains customary negative covenants for loans of this type, including limitations
on the Companys ability to incur indebtedness, issue securities, make loans and investments, make capital expenditures, dispose of assets and enter into mergers and acquisition transactions. Events of default under the 2006 Note are described
below and include breaches of the Companys obligations under the 2006 Note and other agreements relating to the transaction, certain defaults under any other indebtedness of at least $250,000 and certain bankruptcy events. Upon an event of
default, all outstanding principal plus all accrued and unpaid interest become immediately due and payable. As of September 29, 2007, the Company is not in default on any of its debt covenants.

Material events that would cause default under the 2006 Note include:



| |  |  | failure to pay principal or any premium on any 2006 Note when due;
| | - |  | ------------------------------------------------------------------



| |  |  | failure to pay any interest, late fees or liquidated damages on any 2006 Note after a period of ten business days;
| | - |  | ------------------------------------------------------------------------------------------------------------------



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| |  |  | failure to perform other covenants under any 2006 Note that is not cured by thirty-five days after notice;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | any representation or warranty under the financing documents that is untrue or incorrect in any material respect;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | certain events such as bankruptcy or assignment for the benefit of creditors of the Company or any of its subsidiaries;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | any default by the Company or its subsidiaries under any instrument in excess of $250,000 that results in such obligation becoming due and payable prior to
maturity;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Company becoming party to a change of control transaction; and
| | - |  | ------------------------------------------------------------------



| |  |  | failure to maintain the required reservation of additional shares of authorized common stock.
| | - |  | ---------------------------------------------------------------------------------------------

In accordance with SFAS No. 133, the Company evaluated that the holders conversion right provision, interest rate adjustment provision, liquidated damages
clause, cash premium option (if applicable), and the redemption option (collectively, the debt features) contained in the terms governing the 2006 Note to determine whether they are or are not clearly and closely related to the characteristics of
the 2006 Note. Accordingly, if the features qualify as embedded derivative instruments at issuance and, furthermore if they do or do not qualify for any scope exception within SFAS No. 133 (paragraphs 12-32), then they are required by SFAS
No. 133 to be accounted for separately from the debt instrument and recorded as derivative financial instruments.

The Company allocated the
$2,000,000 cash proceeds to the 2006 Note and Warrants based on the relative fair value of the two instruments. The fair value of the Warrants was determined using the Black-Scholes option pricing model (see Note 8). The fair value of the 2006 Note
was determined based on a number of factors including the fair value of the common stock into which the 2006 Note could convert, the terms of the 2006 Note and the terms of other commercially available debt. Based on this analysis, the proceeds were
allocated as follows:



|                         |  |   |          
|------------------------ |  | - | ---------
|Convertible note payable |  | $ | 791,972  
|Warrants                 |  |   | 1,208,028
|                         |  |   |          
|Gross proceeds           |  | $ | 2,000,000
|                         |  |   |          

In accordance with the FASB Emerging Issues Task Force (EITF) Issue No. 98-5 Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios and EITF Issue No. 00-27 Application of Issue No. 98-5 to Certain Convertible Instruments, the Company determined
that the 2006 Note contained an embedded beneficial conversion feature resulting in a discount to the carrying amount of the 2006 Note equal to:



|(i) | the difference between the effective conversion rate (after allocation of the proceeds) and the market price of our common stock on the date of issuance; multiplied by
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(ii) | the number of shares into which the 2006 Note is convertible.
|---- | -------------------------------------------------------------

The
beneficial conversion feature was limited to the proceeds allocated to the 2006 Note. Therefore, upon issuance, the Company recorded a further discount on the 2006 Note of $791,972 related to the beneficial conversion feature.

The discount resulting from the allocation of proceeds to the beneficial conversion feature was recorded as interest expense in the period in which the 2006 Note was
issued.

The discount arising from the allocation of a portion of the proceeds to the equity component based upon relative fair value is being amortized to
interest expense over the term of the 2006 Note using the effective yield method. In the three and nine months ended September 29, 2007, the Company recorded non-cash interest expense related to the amortization of this discount of $36,489 and
$295,577, respectively.



13



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##### Table of Contents

On July 10, 2007, the 2006 Note was modified (see Warrant and Debenture Agreement below).

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. Under the Investor Rights Agreement, the Company is required to file a registration statement with respect to certain securities within thirty days of the date of the Investor Rights Agreement and to have the registration statement
declared effective by the SEC within 120 days of the date of the Investor Rights Agreement. Additionally, the Company is required to keep the registration statement effective at all times until all of the shares registered have been sold or may be
resold pursuant to Rule 144(k) under the Securities Act of 1933, as amended. If the Company does not satisfy these registration obligations, it would constitute an event of default, and the Company would have to pay Vicis an amount in cash or
unregistered stock, as partial liquidated damages, as provided in the Investor Rights Agreement, as discussed further below.

The Investor Rights Agreement
provides for liquidated damages for failure to register or maintain an effective registration statement for the shares underlying the 2006 Notes and Warrants. If the Company fails to have the registration statement declared effective within the
specified period, we would be required to pay liquidated damages to the investor(s) until:



| |  |  | the registration statement is declared effective;
| | - |  | -------------------------------------------------



| |  |  | effectiveness is maintained for a prescribed period; or
| | - |  | -------------------------------------------------------



| |  |  | the purchasers are no longer incurring damages for the Companys failure to register the securities (e. g., if the securities become freely transferable after
a holding period under Rule 144(k) of the Securities Act of 1933).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Liquidated damages are paid in cash or unregistered shares, at our
discretion and the amount is determined by a formula in the Investor Rights Agreement. The liquidated damages are 1% per month of the aggregate purchase price paid by the holder of the 2006 Note and are capped at 8% and a maximum period of
eight (8) months. In accordance with FSP EITF 00-19-2, at December 31, 2006, the Company determined the transfer of consideration under the registration payment arrangement was probable and could be reasonably estimated. The Company
estimated the penalty amount to be $160,000, the maximum penalty that could be payable in the event of a breach of the Investor Rights Agreement, and recognized the related contingent liability and expense for this amount. As of September 29,
2007, accrued expenses include $160,000 related to this and no liquidated damages have been paid.

In the three and nine months ended September 29,
2007, interest expense on 2006 Note was approximately $32,000 and $95,000, respectively.

Convertible Notes Payable - $1,266,000 Vicis 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) two 6% convertible senior secured debentures in the aggregate principal amount of $1,266,000 convertible into
shares of common stock at a conversion price of $0.30 per share (the Debentures), (2) two warrants to purchase an aggregate of 4,220,000 shares of common stock at an exercise price of $0.345 per share and (3) two warrants to
purchase an aggregate of 4,220,000 shares of common stock at an exercise price of $0.375 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.



14



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##### Table of Contents

As consideration for the Debentures and warrants, Vicis surrendered a promissory note in the principal amount of $450,000
issued on February 20, 2007, a promissory note in the principal amount of $200,000 issued on January 18, 2007, and a promissory note in the principal amount of $400,000 issued on December 21, 2006. As consideration for the Debenture
and warrants, Apogee surrendered an original discount note in the principal amount of $216,000 issued on November 28, 2006. These promissory notes and the original discount note are more fully described in Other Notes Payable below.

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).

The Company allocated the $1,266,000 principal of
promissory and original discount note to the Debentures and warrants based on the relative fair value of the instruments. The fair value of the warrants was determined using the Black-Scholes option pricing model (see Note 8). The fair value of the
Debentures was determined based on a number of factors including the fair value of the common stock into which the Debentures could convert, the terms of the Debentures and the terms of other commercially available debt. Based on this analysis, the
proceeds were allocated as follows:



|               |  |   |          
|-------------- |  | - | ---------
|Debentures     |  | $ | 440,820  
|Warrants       |  |   | 825,180  
|               |  |   |          
|Gross proceeds |  | $ | 1,266,000
|               |  |   |          

In accordance with the FASB Emerging Issues Task Force (EITF) Issue No. 98-5 Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios and EITF Issue No. 00-27 Application of Issue No. 98-5 to Certain Convertible Instruments, the Company determined
that the Debentures contain an embedded beneficial conversion feature resulting in a discount to the carrying amount of the Debentures equal to:



|(i) | the difference between the effective conversion rate (after allocation of the proceeds) and the market price of our common stock on the date of issuance; multiplied by
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(ii) | the number of shares into which the Debentures are convertible.
|---- | ---------------------------------------------------------------

The
beneficial conversion feature was limited to the proceeds allocated to the Debentures. Therefore, upon issuance, the Company recorded a further discount on the Debentures of $440,820 related to the beneficial conversion feature.

In accordance with EITF Issue No. 00-27, Issue #6, the discounts arising from the allocation of a portion of the proceeds to the warrants based upon relative fair value
and the beneficial conversion feature are being amortized to interest expense over the stated term of the Debentures using the effective yield method. In the three and nine months ended September 29, 2007, the Company recorded non-cash interest
expense related to the amortization of these discounts of $22,226 and $61,429, respectively.

On July 10, 2007, the Vicis Debentures were modified
(see Warrant and Debenture Agreement below).

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  |  
|Unamortized discount at June 30, 2007               |  |   | (209,311 | )
|                                                    |  |   |          |  
|Carrying value at June 30, 2007                     |  |   | 6,689    |  
|Amortization of discount through September 29, 2007 |  |   | 3,722    |  
|                                                    |  |   |          |  
|Carrying value at September 29, 2007                |  | $ | 10,411   |  
|                                                    |  |   |          |  



15



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##### Table of Contents

On April 17, 2007, the Company also issued to Vicis an additional warrant to purchase 4,000,001 shares of common
stock at an exercise price of $2.00, exercisable for five years. This warrant was issued to Vicis in order to satisfy the extension requirement of the promissory notes issued to Vicis on December 21, 2006 in the principal amount of $400,000 and
the promissory note issued on January 18, 2007 in the principal amount of $200,000, which were not repaid by their original stated maturity dates of February 21, 2007 and March 31, 2007, respectively (see Other Notes Payable below).
The Company evaluates and accounts for such securities in accordance with EITF Issue Nos. 98-5, 00-19, 00-27, 05-02, 05-04 (Superseded by FSP EITF 00-19-2) and 05-08, and SFAS No. 133,Accounting for Derivative Instruments and Hedging
Activities as amended. The estimated fair market value of the warrant was calculated to be $8,676,888 using the Black Scholes Option Pricing model as of the date of issuance (see Note 8). This amount was accounted for as an accrued note
extension expense in the quarter ended March 31, 2007, in order to recognize the expense in the period in which the obligation to issue the warrant occurred. In April, 2007, the period in which the warrant was issued, the $8,676,888 was
reclassified from accrued note extension expense to additional paid-in capital.

In the three and nine months ended September 29, 2007, interest
expense on Debentures was approximately $19,000 and $37,000, respectively.

Other Notes Payable

On November 28, 2006, the Company issued an unsecured promissory note in the original principal amount of $216,000 in exchange for $200,000 in cash. The original
principal amount of this note is payable at maturity, May 15, 2007 after which time interest will accrue at 18% per annum. This note may be converted to common stock, at the election of the holder, upon the completion of qualified
financing of at least $2.5 million. The conversion formula will be set at the time the qualified financing terms are determined.

On December 21,
2006, the Company issued an unsecured promissory note in the amount of $400,000. This note bears interest at 5% and interest is payable at maturity, February 21, 2007. The Company is permitted to prepay principal and interest under this note at
any time without penalty. In the event the Company does not repay all outstanding principal and interest under this note on or before February 21, 2007, the maturity date of this note will be extended to April 21, 2007 and the Company will
be obligated to issue to Vicis a warrant to purchase 2,666,667 shares of common stock, which warrant will have an exercise price of $2.00 per share (subject to adjustment upon the occurrence of certain events) and will be exercisable for five years.
Because the Company did not repay this note and accrued interest thereon on or before the maturity date of February 21, 2007, the maturity date was automatically extended to April 21, 2007, and the Company issued the warrant in conjunction
with the convertible note financing dated April 17, 2007.

On January 18, 2007, the Company issued a promissory note in the principal amount of
$200,000 in favor of Vicis. The maturity date of this note is March 31, 2007 and interest accrues under this note at the rate of 5% per annum. The Company is permitted to prepay principal and interest under this note at any time without
penalty. In the event the Company does not repay all outstanding principal and interest under this note on or before March 31, 2007, the maturity date of this note will be extended to May 30, 2007 and the Company will be obligated to issue
to Vicis a warrant to purchase 1,333,334 shares of common stock, which warrant will have an exercise price of $2.00 per share (subject to adjustment upon the occurrence of certain events) and will be exercisable for five years. Because the Company
did not repay this note and accrued interest thereon on or before the maturity date of March 31, 2007, the maturity date was automatically extended to May 30, 2007, and the Company issued the warrant in conjunction with the convertible
note financing dated April 17, 2007.

On February 20, 2007, the Company issued a promissory note in the principal amount of $450,000 in favor of
Vicis. The maturity date of this note is April 30, 2007. Interest accrues under this note at the rate of 5% per annum. The Company is permitted to prepay principal and interest under this note at any time without penalty. In the event the
Company does not repay all outstanding principal and interest under this note on or before April 30, 2007, the maturity date of this note will be extended to June 30, 2007 and the Company will be obligated to issue to Vicis a warrant to
purchase 3,000,000 shares of the our common stock, which warrant will have an exercise price of $2.00 per share (subject to adjustment upon the occurrence of certain events) and will be exercisable for five years.



16



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##### Table of Contents

On April 17, 2007, the Other Notes Payable above were surrendered in consideration of the Debentures and warrants
(see Convertible Notes Payable  $1,266,000 Vicis and Apogee Financial Investments above).

In the three and nine months ended September 29,
2007, interest expense on Other Notes Payable was approximately $3,000 and $15,000, respectively.

Warrant and Debenture Agreement

On July 10, 2007, the Company entered into a Warrant and Debenture Amendment Agreement (the July 2007 Agreement) with Nite Capital, L.P., Apogee
Financial Investments, Inc., Midtown Partners & Co., LLC, Douglas Arnold and Marshall Sterman (collectively, the Investors) and Vicis to amend the outstanding warrants and debentures previously issued to the Investors and Vicis.
In exchange for $2,100,000 in cash from Vicis, the Company agreed to reduce the warrant exercise price of the outstanding warrants issued to Vicis from prices ranging from $2.00 to $.345 to $0.01 per share 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  $0.30 down to $0.10 per share, as well as eliminate certain exercise limitations provisions. The reduction in the conversion price had the effect
of increasing the number of common shares into which the Vicis debentures can be converted from 13,161,088 to 30,500,000 shares. The July 2007 Agreement also provided for the reduction of the warrant exercise price of the outstanding warrants to the
Investors from $0.345  $1.00 down to $0.20 per share.

In accordance with EITF Issue No. 96-19, Debtors Accounting for a
Modification or Exchange of Debt Instruments and EITF Issue No. 06-06, Debtors Accounting for a Modification (or Exchange) of Convertible Debt Instruments, the Company determined that the change in the fair value of the
embedded conversion feature of the debentures increased by more than 10% of the carrying value of the debentures as a result of the modification to the conversion price. Therefore, the Company concluded that the amended debentures are
substantially different from the original debentures. In accordance with EITF Issue No. 96-19, the Company recorded the amended debentures at fair value as of the date of modification.

The Company determined the fair value of the embedded beneficial conversion feature of the amended debentures using the Black-Scholes option pricing model and
assumptions consistent with those described in Note 8. The fair value of the Companys common stock as of the modification date, for purposes of the Black-Scholes calculation, was based on the most recent closing price of $3.50 per the OTC
Bulletin Board. Based on this analysis, the Company calculated the fair value of the embedded beneficial conversion feature to be approximately $103,906,879. This amount was recorded as an Extinguishment Loss and as additional paid-in capital. The
Company performed an analysis of the embedded conversion feature in accordance with EITF Issue No. 00-19 and concluded that it was appropriately recorded as equity rather than as a liability.

The Company estimated the fair value of the debentures (after bifurcation of the embedded conversion feature) using probability weighted estimates of market interest
rates. The estimated market interest rates took into consideration the Companys risk profile, including its credit worthiness, its stage of development, its available collateral, its cash flow and other factors the Company expects a commercial
lender would consider. The Company estimated the market interest rate to range from 12% to 18% and determined a probability weighted market interest rate of approximately 15%. The market interest rate was used to calculate, using a net present value
analysis, the fair value of the amended debentures. The Company determined that the fair value of the amended debentures (with a total face value of $3,050,000) was approximately $2,729,460. The difference between the fair value of the debentures
and the carrying value of the debentures on the date of the modification (approximately $320,540) was recorded as an Extinguishment Loss. The resulting discount on the debentures is being amortized to interest expense, using the effective interest
method, over the remaining term of the debentures.

The cash of $2,100,000 received from Vicis in connection with the July 2007 Agreement was considered a
fee received by the Company from the creditor and, in accordance with EITF Issue No. 96-19 paragraph 6, was net against the Extinguishment Loss. The increase in the fair value of the Vicis warrants as determined on July 10, 2007 using the
Black-Scholes option pricing model and assumptions consistent with those described in Note 8 was considered a fee paid to the creditor by the Company and, in accordance with EITF Issue No 96-19 paragraph 6, was recorded as an Extinguishment Loss and
as additional paid-in capital. The increase in the fair value of the Vicis warrants was estimated to be $9,267,179.



17



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##### Table of Contents

The following summarizes the components of the Debt Extinguishment Loss:



|                                                                               |  |   |             |  
|------------------------------------------------------------------------------ |  | - | ----------- | -
|Fair value of the embedded conversion feature of the modified Vicis debentures |  | $ | 103,906,879 |  
|                                                                               | 
|Adjustment to reflect the fair value of the Vicis debentures                   |  |   | 1,439,181   |  
|                                                                               | 
|Increase in the fair value of the Vicis warrants                               |  |   | 9,267,179   |  
|                                                                               | 
|Cash received from Vicis in exchange for modification                          |  |   | (2,100,000  | )
|                                                                               |  |   |             |  
|Total Extinguishment Loss                                                      |  | $ | 112,513,239 |  
|                                                                               |  |   |             |  

The increase in the fair value of the Investor warrants as determined on July 10, 2007 was considered a cost
incurred with third parties directly related to the modification and was capitalized as debt issuance costs, in accordance with EITF Issue No. 96-19 paragraph 6, and as additional paid-in capital. The debt issuance costs are being amortized to
interest expense over the life of the amended debentures. The increase in the fair value of the Investor warrants was estimated to be approximately $255,000.

Prior to the July 2007 Agreement, the debentures and certain warrants held by Vicis contained certain exercise provisions limiting Vicis beneficial ownership to 4.99% of the Companys outstanding common stock. These exercise
limitation provisions in the debentures and certain warrants held by Vicis were eliminated in the July 2007 Agreement.

In connection with the July 2007
Agreement, the Company and Vicis also entered into a Third Amendment to the Guarantee Fee, Reimbursement and Indemnification Agreement (the Third Amendment). The Third Amendment limits the number of warrants to be issued to Vicis in the
event of non-payment pursuant to the Guarantee Fee, Reimbursement and Indemnification Agreement to warrants totaling 4,000,000 shares of common stock. All other terms of the Guarantee Fee, Reimbursement and Indemnification Agreement remain the same.

A schedule of the carrying value of the 2006 Note and corresponding amortization of the discount is as follows:



|                                                                                                                       |  |   |           |  
|---------------------------------------------------------------------------------------------------------------------- |  | - | --------- | -
|Face amount of note                                                                                                    |  | $ | 2,000,000 |  
|                                                                                                                       | 
|Discount on face value                                                                                                 |  |   | (163,720  | )
|                                                                                                                       |  |   |           |  
|Carrying value after the July 2007 Agreement                                                                           |  |   | 1,836,280 |  
|                                                                                                                       | 
|Amortization of discount through September 29, 2007                                                                    |  |   | 36,489    |  
|                                                                                                                       |  |   |           |  
|Current carrying value at September 29, 2007                                                                           |  | $ | 1,872,769 |  
|                                                                                                                       |  |   |           |  
|                                                                                                                      
|A schedule of the carrying value of the Vicis Debentures and corresponding amortization of the discount is as follows: | 
|                                                                                                                       | 
|Face amount of note                                                                                                    |  | $ | 1,050,000 |  
|                                                                                                                       | 
|Discount on face value                                                                                                 |  |   | (156,820  | )
|                                                                                                                       |  |   |           |  
|Carrying value after the July 2007 Agreement                                                                           |  |   | 893,180   |  
|                                                                                                                       | 
|Amortization of discount through September 29, 2007                                                                    |  |   | 18,504    |  
|                                                                                                                       |  |   |           |  
|Current carrying value at September 29, 2007                                                                           |  | $ | 911,684   |  
|                                                                                                                       |  |   |           |  



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##### Table of Contents

|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. In computing fair value, the Company
used the following assumptions:



|                         |  |                                        |   |  |      |  
|------------------------ |  | -------------------------------------- | - |  | ---- | -
|                         |  | Period EndedSeptember 29/September 30, |  
|                         |  | 2007                                   |   |  | 2006 |  
|Risk-free interest rate  |  | 5.25                                   | % |  | 5.00 | %
|Dividend yield           |  | 0.00                                   | % |  | 0.00 | %
|Expected volatility      |  | 100                                    | % |  | 75   | %
|Expected term (in years) |  | 5.0                                    |   |  | 4.5  |  



|                                          |  |                                               |   |  |                              |      |                                                |     |                         |   |        
|----------------------------------------- |  | --------------------------------------------- | - |  | ---------------------------- | ---- | ---------------------------------------------- | --- | ----------------------- | - | -------
|                                          |  | All Plan & Non-Plan Compensatory Type Options
|                                          |  | Shares                                        |   |  | Weightedaverageexerciseprice |      | Weightedaverageremainingcontractualterm(years) |     | Aggregateintrinsicvalue
|Options outstanding at December 31, 2006  |  | 600,000                                       |   |  | $                            | 0.01 |                                                |     |                         |   |        
|Granted                                   |  |                                              |   |  |                              |     |                                                |     |                         |   |        
|Exercised                                 |  | (25,000                                       | ) |  |                              | 0.01 |                                                |     |                         |   |        
|Lapsed/forfeited                          |  | (75,000                                       | ) |  |                              | 0.01 |                                                |     |                         |   |        
|                                          |  |                                               |   |  |                              |      |                                                |     |                         |   |        
|Options outstanding at September 29, 2007 |  | 500,000                                       |   |  | $                            | 0.01 |                                                | 1.6 |                         | $ | 880,000
|                                          |  |                                               |   |  |                              |      |                                                |     |                         |   |        
|Options exercisable at September 29, 2007 |  | 500,000                                       |   |  | $                            | 0.01 |                                                | 1.6 |                         | $ | 880,000
|                                          |  |                                               |   |  |                              |      |                                                |     |                         |   |        

The intrinsic value of options exercised during the nine months ended September 29, 2007 was $87,250.

As of September 29, 2007, 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 29, 2007, the Company used the following assumptions:



19



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##### Table of Contents

|                            |  |      |       
|--------------------------- |  | ---- | ------
|Risk-free interest rate     |  | 5.25 | %     
|Dividend yield              |  | 0    |       
|Expected volatility         |  | 100  | %-109%
|Contractual term (in years) |  | 5    |       

In connection with the March 16, 2007 Guarantee Fee, Reimbursement and Indemnification Agreement as amended
on May 18, 2007 with Vicis and CTC, more fully explained under the Sovereign Bank Revolving Line of Credit Agreement above, the Company issued two warrants, each to purchase 3,060,000 shares of common stock, with each warrant exercisable for
five years at a per share exercise price of $1.00. The Company also issued two warrants, each to purchase 153,000 shares of its common stock, with each warrant exercisable for five years at a per share exercise price of $1.00, to Midtown for
services rendered to the Company in connection with the transactions noted above. These warrants, issued on March 16, 2007 and May 18, 2007, to purchase an aggregate of 6,426,000 shares, were estimated at a fair value of $21,494,877 using
the Black Scholes Option Pricing model. We evaluate and account for such securities in accordance with EITF Issue Nos. 98-5, 00-19, 00-27, 05-02, 05-04 (Superseded by FSP EITF 00-19-2) and 05-08, and SFAS No. 133,Accounting for Derivative
Instruments and Hedging Activities as amended.

The following table summarizes the warrant activity in the nine months ended September 29, 2007:



|                                           |  |             |   |  |                              |     
|------------------------------------------ |  | ----------- | - |  | ---------------------------- | ----
|                                           |  | Shares      |   |  | Weightedaverageexerciseprice
|Warrants outstanding at December 31, 2006  |  | 22,077,335  |   |  | $                            | 0.03
|Granted                                    |  | 19,950,002  |   |  |                              | 0.04
|Exercised                                  |  | (37,748,600 | ) |  |                              | 0.01
|Lapsed/forfeited                           |  | (1,084,001  | ) |  |                              | 0.37
|                                           |  |             |   |  |                              |     
|Warrants outstanding at September 29, 2007 |  | 3,194,736   |   |  | $                            | 0.18
|                                           |  |             |   |  |                              |     
|Warrants exercisable at September 29, 2007 |  | 3,194,736   |   |  | $                            | 0.18
|                                           |  |             |   |  |                              |     

The following table summarizes the status of our aggregate warrants as of September 29, 2007:



|                         |  |                      |  |                                |      |                                        |     |        |           |                                |   |     
|------------------------ |  | -------------------- |  | ------------------------------ | ---- | -------------------------------------- | --- | ------ | --------- | ------------------------------ | - | ----
|                         |  | Warrants Outstanding |  | Warrants Exercisable          
|Range of exercise prices |  | Shares               |  | Weighted averageexercise price |      | Weighted averageremaining life inyears |     | Shares |           | Weighted averageexercise price
|$0.20                    |  | 2,894,736            |  | $                              | 0.20 |                                        | 3.3 |        | 2,894,736 |                                | $ | 0.20
|$0.01                    |  | 300,000              |  | $                              | 0.01 |                                        | 3.5 |        | 300,000   |                                | $ | 0.01
|                         |  |                      |  |                                |      |                                        |     |        |           |                                |   |     
|Total Shares             |  | 3,194,736            |  | $                              | 0.18 |                                        | 3.4 |        | 3,194,736 |                                | $ | 0.18
|                         |  |                      |  |                                |      |                                        |     |        |           |                                |   |     

Warrant Exercises

On July 23, 2007, Vicis Capital Master Fund exercised certain of its warrants to purchase 37,720,001 shares of the Companys common stock resulting in cash proceeds of $377,201. On August 13, 2007, another warrant holder
exercised its warrants to purchase 28,599 shares of the Companys common stock pursuant to a cashless exercise, resulting in a net share settlement of the issuance of 26,264 shares of the Companys common stock.



|9. | Restatement of Financial Statements
|-- | -----------------------------------

On November 2, 2007, the
Company filed its Annual Report on Form 10-KSB/A for the fiscal year ended December 31, 2005, its Quarterly Report on Form 10-QSB/A for the quarter ended April 1, 2006, its Quarterly Report on Form 10-QSB/A for the quarter ended
July 1, 2006, its Quarterly Report on Form 10-QSB/A for the quarter ended September 30, 2006, its Quarterly Report on Form 10-QSB/A for the quarter ended September 30, 2006 and its Annual Report on Form 10-KSB/A for the fiscal year
ended December 31, 2006. These periodic filings reflect the amendment and restatement of the Companys financial statements for the fiscal years ended December 31, 2006 and 2005.



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In connection with the filing of a registration statement on Form SB-2, the Company received comment letters from the
staff of the Securities and Exchange Commission in August 2006, October 2006 and February 2007 requesting additional information regarding its Preferred Stock. Upon review, the Company determined that it had accounted for its Preferred Stock in
error. Previously, the Company classified the Preferred Stock as a component of stockholders equity, however, the Company has subsequently determined the provision in the certificate of designation allowing the holders of a majority of the
issued and outstanding shares of Series A Preferred Stock to elect, upon a change in control of the Company, to cause the Company to redeem all or a portion of the issued and outstanding shares of Series A Preferred Stock, at a per share price equal
to $1.00 plus accrued dividends to be not solely within its control. United States S.E.C. Reg. S-X Rule 5-02(28) requires public companies to report such redeemable preferred stock outside stockholders equity. The Company also changed the
carrying value from stated redemption value to fair value measured initially at the gross proceeds less direct offering costs incurred. Such costs totaled $353,445. These costs were previously reported as a reduction of additional paid-in capital.
Accordingly the Company has reduced previously stated total stockholders equity by the carrying value of the Preferred Stock, or $1,346,555. These changes also increased additional paid-in capital by the amount of the preferred offering costs
of $353,445. Pursuant to the Exchange Agreement among the Company, Vicis, Midtown Partners & Co., LLC and Nite Capital L.P., dated as of April 13, 2006, such shareholders assigned, exchanged and converted their right, title and
interest to shares of the Companys then outstanding Series A Preferred Stock and, in exchange thereof and upon such conversion, the Company issued such shareholders shares of the Companys common stock. As a result, there are no shares of
Series A Preferred Stock presently outstanding.

The Company has also determined that its previous accounting for the reverse merger was in error. For
financial reporting purposes, OrthoSupply Management, Inc., a wholly-owned subsidiary of the Company, was treated as the acquiring company and the transaction should have been accounted for as a recapitalization. At the date of recapitalization,
December 31, 2005, China Media Networks International, Inc. (n/k/a Medical Solutions Management Inc.) (China Media) was a public shell company, defined as an inactive, publicly-quoted company with nominal assets and liabilities. The
restated Statement of Stockholders Equity in compliance with U.S. GAAP eliminates all references to China Media prior to the recapitalization and replaces it with a reporting of the chronological transactions of the deemed accounting acquiror,
OrthoSupply Management, Inc. Because OrthoSupply Management, Inc. began business in 2005, there are no transactions for all periods preceding 2005. The restated treatment of the acquisition as a recapitalization had no impact on previously stated
stockholders equity accounts but the chronological issuance of shares of OrthoSupply Management, Inc. differed from the chronological issuance of shares of China Media. The change in reporting resulted in the weighted average shares
outstanding during 2005 increased from 503,142 to 16,414,419. The Company has restated its Balance Sheet as of April 1, 2006 and the Statements of Operations and Shareholders Deficit for the period then ended to correctly reflect these
items.

Restatement of Quarterly Financial Statements

The Company recorded certain adjustments, related to the allocation of proceeds between the convertible notes payable and related warrants (see Note 8), in the fourth quarter of 2006 that related to events or transactions in earlier fiscal
quarters in 2006. The following schedule summarizes the adjustments and the revised results of operations in the applicable quarters:



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Medical Solutions Management Inc.

Recalculated Consolidated Balance Sheet



|                                                                                      |  |                |            |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   |            |  
|------------------------------------------------------------------------------------- |  | -------------- | ---------- | - | ------------------------------ | -------- | - | ------------------------------------------------------------------------------ | ---------- | - | ---------------------------------------------------------------------------- | -------- | - | ------------------------------------ | ------- | - | -------------- | - | ---------- | -
|                                                                                      |  | Adjustment 1   |            |   | Adjustment 2                   |          |   | Adjustment 3                                                                   |           
|                                                                                      |  | Sept. 30, 2006 |            |   | unwind andcancel treasurystock |          |   | unwind originalentry ascribingvalues towarrants andbeneficialconversionfeature |            |   | recalculation ofrelative fairvalue ofwarrants andbeneficialconversionfeature |          |   | Amortizationof relateddiscount (net) |         |   | Sept. 30, 2006 |  
|                                                                                      |  | (as filed)     |            |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   | (restated)     |  
|Assets                                                                                |  |                |            |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   |            |  
|Current Assets                                                                        |  |                |            |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   |            |  
|Cash & cash equivalents                                                               |  | $              | 646,558    |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                | $ | 646,558    |  
|Accounts receivable, net                                                              |  |                | 275,820    |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   | 275,820    |  
|Inventory                                                                             |  |                | 123,716    |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   | 123,716    |  
|Prepaid expenses                                                                      |  |                | 41,906     |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   | 41,906     |  
|Due from affiliated entities                                                          |  |                | 0          |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   | 0          |  
|                                                                                      |  |                |            |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   |            |  
|Total current assets                                                                  |  |                | 1,088,000  |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   | 1,088,000  |  
|                                                                                      |  |                |            |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   |            |  
|Property & equipment (net)                                                            |  |                | 102,546    |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   | 102,546    |  
|                                                                                      |  |                |            |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   |            |  
|total assets                                                                          |  | $              | 1,190,546  |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                | $ | 1,190,546  |  
|                                                                                      |  |                |            |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   |            |  
|Liabilities & Stockholders Deficiency                                                |  |                |            |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   |            |  
|Current Liabilities:                                                                  |  |                |            |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   |            |  
|Accounts payable                                                                      |  | $              | 188,800    |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                | $ | 188,800    |  
|Accrued expenses                                                                      |  |                | 201,346    |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   | 201,346    |  
|Convertible notes payable                                                             |  |                | 25,000     |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   | 25,000     |  
|                                                                                      |  |                |            |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   |            |  
|Total current liabilities                                                             |  |                | 415,146    |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   | 415,146    |  
|                                                                                      |  |                |            |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   |            |  
|Convertible note payable                                                              |  |                | 1,260,878  |   |                                |          |   |                                                                                | (1,179,856 | ) |                                                                              | 791,972  |   |                                      | 16,898  |   |                |   | 889,892    |  
|                                                                                      |  |                |            |   |                                |         
|Stockholders Deficiency:                                                             |  |                |            |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   |            |  
|Common stock-100,000,000 authorized $0.0001 par value 20,446,729 issued & outstanding |  |                | 2,044      |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   | 2,044      |  
|Additional paid in capital                                                            |  |                | 4,107,343  |   |                                | (898,327 | ) |                                                                                |            |   |                                                                              | 359,712  |   |                                      |         |   |                |   | 3,568,728  |  
|Treasury stock                                                                        |  |                | (898,327   | ) |                                | 898,327  |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   | 0          |  
|Accumulated Deficit                                                                   |  |                | (3,696,538 | ) |                                |          |   |                                                                                | 820,144    |   |                                                                              | (791,972 | ) |                                      | (16,898 | ) |                |   | (3,685,264 | )
|                                                                                      |  |                |            |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   |            |  
|Total Stockholders Deficiency                                                        |  |                | (485,478   | ) |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   | (114,492   | )
|                                                                                      |  |                |            |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   |            |  
|total Liabilities & Stockholder Deficiency                                            |  | $              | 1,190,546  |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                | $ | 1,190,546  |  
|                                                                                      |  |                |            |   |                                |          |   |                                                                                |            |   |                                                                              |          |   |                                      |         |   |                |   |            |  

The adjustments had no impact on the statement of cash flows of either interim period.



|10. | Subsequent Events
|--- | -----------------

On October 18, 2007, the
Company entered into a Note Purchase Agreement (the Purchase Agreement) with Vicis Capital Master Fund, one of its existing shareholders (Vicis). Pursuant to the Purchase Agreement, the Company sold to Vicis a convertible
note in the original principal amount of $1,500,000 in exchange for $1,500,000. Pursuant to the Purchase Agreement, on October 18, 2007, the Company issued a convertible note in the principal amount of $1,500,000 to Vicis. 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. There
is no beneficial conversion feature associated with this convertible note.



On November 16, 2007, the Company entered into an amendment to the Irrevocable Standby Letter of Credit No. 00034 in favor of Sovereign Bank (as amended and in effect from time to time, the Letter of
Credit) to change its expiration date from March 15, 2008 to March 15, 2009 (the Letter of Credit Amendment). In connection with this transaction, the Company, OrthoSupply Management, Inc. and Vicis Capital Master Fund
entered into a third amendment (the Third Amendment) to that certain Guarantee Fee, Reimbursement and Indemnification Agreement between the Company and Vicis (as amended from time to time, the Guarantee Fee
Agreement), whereby Vicis consented to the Companys entering into the Letter of Credit Amendment, which consent was required pursuant to the Guarantee Fee Agreement. All other terms of the Guarantee Fee Agreement and the Letter of
Credit remain the same. In consideration for Vicis consenting in the Third Amendment to the Companys entering into the Letter of Credit Amendment, the Company entered into a Letter Agreement with Vicis whereby the Company agreed to issue
Vicis a warrant for 3,060,000 shares of its common stock, at an exercise price of $.50 per share, immediately upon the filing and subject to the effectiveness of an amendment to the Companys Amended and Restated Articles of Incorporation
increasing the number of the Companys authorized shares of common stock from 100,000,000 to 200,000,000. If and when the Company issues such warrant to Vicis, the Company expects to record the fair value of the warrant as a non-cash financing
expense and additional paid-in capital.



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
|------- | ----------------------------------------------------------

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 those set forth in our Annual Report on Form 10-KSB/A for the fiscal year ended December 31, 2006 filed on November 2, 2007 under the headings Risk Factors,
Managements Discussion and Analysis or Plan of Operations and Business.

Background

In July 2006, we changed our name from China Media Networks International, Inc. to Medical Solutions Management Inc. OrthoSupply Management, Inc., our wholly-owned
subsidiary and operating company, was incorporated in August 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. In February 2005, OrthoSupply began to market and sell the turnkey program. On December 30, 2005, OrthoSupply Management, Inc. merged with one of our subsidiaries and as a result became our wholly-owned subsidiary. MSMI
has no operations, and acts solely as OrthoSupplys holding company.

OrthoSupply has generated revenue from its operations since February 2005. In
May and June 2006, we completed debt financings that raised aggregate gross proceeds of $2,000,000. In November and December 2006, we completed debt financings of $600,000 and in January and February of 2007 we completed additional debt financings
of $650,000. We have used the proceeds of these financings for working capital purposes. In March 2007, we established a revolving line of credit with Sovereign Bank, as amended in May 2007, for $3,000,000, all of which has been utilized through
September 29, 2007. On April 17, 2007, the Company entered into a Securities Purchase and Exchange Agreement with Vicis Capital Master Fund, or Vicis, and Apogee Financial Investments Inc., or Apogee. Pursuant to this Purchase Agreement,
the Company issued two 6% convertible senior secured debentures in the aggregate principal amount of $1,266,000 which replaced the notes issued in November and December for $616,000 and January and February for $650,000. On July 10, 2007, we
entered into a Warrant and Debenture Amendment Agreement, whereby we amended certain outstanding warrants and debentures in exchange for $2,100,000. The proceeds from this financing were also used for working capital purposes

The discussion below focuses upon the Companys financial condition, results of operations and liquidity and capital resources.

Our Business

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

In contrast to the pharmacy program and traditional stock and bill program, we provide
clinics with one-stop shopping for the handling of all their orthotics and limited durable medical equipment items needs. We act as the primary obligor to supply the orthotics and limited durable medical equipment items to the clinics
and physicians dispensing the orthotics and limited durable medical equipment items. Pursuant to the written contracts that we enter into with our customers, we provide the personal and management services identified by the customer in order to
facilitate customers on-site provision of orthotics and limited durable medical equipment items and related services to its patient. During the marketing process with our customers, we make certain unwritten representations with respect to our
responsibilities and obligations to the clinics. Our marketing materials used during the process of



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enlisting new clinics also assure potential new clients that we will be responsible for fulfilling all of their orthotics and limited durable medical
equipment items needs. We successfully provide orthotics and limited durable medical equipment items to the clinic regardless of its source and we fulfill our obligations to provide services relating to the provision of orthotics and limited durable
medical equipment items. We believe that this unique orthotics and limited durable medical equipment items fulfillment and service approach sets us apart from our competitors and constitutes one of the primary reasons the clinic enters into the
arrangement with us. We believe that the assurances, both in our contractual agreements and our marketing materials, that we are responsible for fulfilling the orthotics and limited durable medical equipment items products to the clinics, make us
the primary obligor for the orthotics and limited durable medical equipment items to the clinic, including the acceptability of the product ordered by the clinic.

Critical Accounting Policies

Fair Value of Financial Instruments: Our financial instruments consist of cash and cash
equivalents, trade accounts receivable, other receivables, accounts payable, accrued expenses, and long and short-term borrowings. The fair value of these instruments approximates their recorded value. We do not have financial instruments with
off-balance sheet risk. The fair value estimates were based on market information available to management as of December 31, 2006.

Financial
instruments that potentially subject us to concentrations of market/credit risk consist principally of cash and cash equivalents and trade accounts receivable. We invest cash through a high credit-quality financial institution, which, at times, may
exceed federally insured limits. MSMI has not experienced any losses in such accounts.

A concentration of credit risk may exist with respect to trade
receivables. We perform ongoing credit evaluations of customers and generally do not require collateral from our customers. We review accounts receivable on a regular basis to determine if any such amounts may be potentially uncollectible. We
establish a general reserve based on percentages applied to certain customers and accounts receivable aging categories. These percentages are based on managements judgment and historical collection and write-off experience. We include any
balances that are determined to be uncollectible, along with the general reserve, in the overall allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on
our best estimate, we believe the allowance for doubtful accounts of $72,663 is adequate as presented. Historically, we have not experienced significant losses related to receivables from individual customers or groups of customers in any particular
discipline or geographic area.

We do not manufacture the products that we provide to our customers. Instead, we rely on manufacturers and other suppliers
for these products. We submit purchase orders for the products to one of our manufacturers or suppliers. Our manufacturers and suppliers have no written contractual obligation to accept any purchase order that we submit for customer product orders.
If any of these parties are unable or unwilling to supply these products to us, we would be unable to distribute our products until a replacement supplier could be found.

Other Receivables: Other receivables consist of third party claims for pharmaceuticals dispensed by physicians under workers compensation. These claims are acquired from a management company which
aggregates the claims on behalf of a group of physician clinics that dispense the pharmaceuticals to their patients. The company advances funds to the management company at a discounted percentage from the face amount of the claims being
transferred. In return, the ownership and all rights to full payment of the claims from third party payers are assigned exclusively to the Company. The Company is free to pledge or exchange the transferred assets, and the transferor is not entitled
to repurchase or redeem the claims. However, if any claims are rejected by a payor as an invalid workers compensation claim, the claim reverts back to the management company for credit to the Company equal to our original cost to acquire the claim.
The claims are recorded at cost to the Company.

Inventories: Inventories are valued at the lower of cost (determined by the first-in,
first-out method) or market and consist of finished goods.

Revenue Recognition:Our principal sources of revenues are from the sale of
medical products and from providing related management services. Our revenue recognition policies are in compliance with Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition, SAB No. 101, Revenue Recognition in
Financial Statements, EITF Issue



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No. 00-21, Revenue Arrangements with Multiple Deliverables, and EITF Issue No. 99-19, Reporting Revenue Gross as a Principal versus
Net as an Agent. Revenue is recognized when persuasive evidence of an agreement with the customer exists, products are shipped or title passes pursuant to the terms of the agreement with the customer, the amount due from the customer is fixed
or determinable, collectibility is reasonably assured, and there are no significant future performance obligations. Service revenues are recognized at the time of performance is completed usually billed monthly. Revenues from separate service
maintenance agreements are recognized ratably over the term of the agreements.

These policies require management, at the time of the transaction, to
assess whether the amounts due are fixed or determinable, collection is reasonably assured, and no future performance obligations exist. These assessments are based on the terms of the agreement with the customer, past history and creditworthiness
of the customer. If management determines that collection is not reasonably assured or future performance obligations exist, revenue recognition is deferred until these conditions are satisfied.

Our sources of revenue are generated from the sale of products and services.

Sales of productssales of durable medical equipment, or DME, primarily to orthopedic and podiatry clinical practices:



| |  |  | Direct Purchase Model-Under this arrangement the clinic places an order with the Company, which then places the actual DME product order to one of its suppliers.
Title to the product is transferred to the Company upon shipment from the supplier. The Company bills the clinic upon confirmation of receipt and acceptance of the delivered products. Upon billing, the Companys performance obligation is
considered fulfilled and, accordingly, revenue is recognized at that time.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Purchase as Dispensed Model- Under the purchase as dispensed model, the order and shipping process, payment terms, and pricing is the same as described
above. However, in this model, the product remains the property of the Company upon delivery to the clinic. The product is included in the Companys inventory held at the clinic site until it is dispensed to a patient. Once dispensed, it
becomes billable to the clinic. Upon billing, the Companys performance obligation is considered fulfilled and, accordingly, revenue is recognized at that time.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We have evaluated the gross sales reporting criteria set forth in paragraphs 7-14 of EITF 99-19. We have determined that the following criteria are applicable to our specific facts and circumstances:



| |  |  | The Company is the primary obligor in the arrangement with clinics.
| | - |  | -------------------------------------------------------------------



| |  |  | The Company has general inventory risk.
| | - |  | ---------------------------------------



| |  |  | The Company has discretion in supplier selection.
| | - |  | -------------------------------------------------



| |  |  | The Company has physical loss inventory risk.
| | - |  | ---------------------------------------------



| |  |  | The amount the Company earns is not fixed.
| | - |  | ------------------------------------------

Based on
the Companys consideration of all relevant facts and circumstances, the Company accounts for sales of products on a gross basis.

The Company
provides clinics with one-stop shopping for the handling of all their DME needs. The Company acts as the primary obligor to supply the DME to the clinics and physicians dispensing the orthotics and limited durable medical equipment
items. Pursuant to the written contracts that we enter into with our customers, we provide the personal and management services identified by the customer in order to facilitate customers on-site provision of orthotics and limited durable
medical equipment items and related services to its patient. During the marketing process with our customers, we make certain unwritten representations with respect to our responsibilities and obligations to the clinics. Our marketing materials used
during the process of enlisting new clinics assure potential new clients that we will be responsible for fulfilling all of their orthotics and limited durable medical equipment items needs. We successfully provide orthotics and limited durable
medical equipment items to the clinic regardless of its source and we fulfill our obligations to provide services relating to the provision of orthotics and limited durable medical equipment items. We believe that this unique orthotics and limited
durable medical equipment items fulfillment and service approach sets us apart from our competitors and constitutes one of the primary reasons the clinic enters into the arrangement with us. We believe that the assurances, both in our contractual
agreements and our marketing materials, that we are responsible for fulfilling the orthotics and limited



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##### Table of Contents

durable medical equipment items product requirements of the clinics, make us the primary obligor for the orthotics and limited durable medical equipment
items to the clinic, including the acceptability of the product ordered by the clinic.

Product sales are made without the right of return. However, the
Company has established a business practice of accepting product returns under certain circumstances. The Company provides for estimated sales returns when the underlying sale is made, based upon historical experience and known events or trends, in
accordance with SFAS No. 48, Revenue Recognition when Right of Return Exists. The Company is able to reasonably estimate returns due to the relatively short time period during which the Company generally accepts returns, the
Companys historical experience with similar types of sales of similar products and a large volume of homogenous transactions. For all periods presented, reserves for estimated returns have been immaterial.

Sales of servicessales of third party billing and collection services and Physician Extenders services:



| |  |  | Billing and Collection services model-The Company also provides certain clinics with third party billing and collection services. Under this program, the Company
provides clinics with patient agreements which are filled in with DME product information dispensed to a patient along with proper coding. The Company periodically receives this information from the clinic and inputs it into an electronic billing
system for transmittal, on behalf of the clinic, to the appropriate third party payers. The Company charges a fee for this service equal to a fixed percentage of the amounts actually collected by the clinic. The service fee revenue is recognized, on
a net basis, upon collection of the third party billings and is invoiced to clinics on a monthly basis. We have evaluated the net sales reporting criteria set forth in paragraph 16 of EITF 99-19 and determined all our billing and collection services
are required to be reported on a net basis. Billing and collection contract terms are for one to two years with termination subject to thirty days notice for cause, and 90 to 120 day notice without cause.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Physician Extenders (PE) services model- PEs are generally Certified Athletic Trainers. These health care professionals are employed by the Company but work
on site at one or more clinics. They assist the clinic in DME dispensing, inventory management, injury evaluation, prevention and rehabilitation. The Company charges a contractually agreed upon flat fee to the clinic for this service. The fee is
invoiced monthly. Related fee revenue is recognized at the end of each month that the service has been provided and costs are included in cost of sales. Contract terms are generally the same as those of Billing and Collecting services.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pharmacy Claims Servicing RevenueDuring the fourth quarter, the Company entered into an arrangement whereby it would acquire dispensed workers compensation
pharmaceutical claims from a management company which aggregates the claims on behalf of a group of physician clinics that dispense the pharmaceuticals to their patients. Under the arrangement, the company advances funds to the management company at
a discounted percentage from the face amount of the claims being transferred. In return, the ownership and all rights to full payment of the claims from third party payers are assigned exclusively to the Company. The Company is free to pledge or
exchange the transferred assets, and the transferor is not entitled to repurchase or redeem the claims. The Company has full responsibility for servicing the claims, including submission of the claims to third party payers (such as insurance
companies and state workers compensation funds) and follow-up until settlement occurs. However, if any claims are rejected by a payer as an invalid workers compensation claim, the claim reverts back to the management company for credit to the
Company equal to our original cost to acquire the claim.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company evaluated the accounting for the acquisition and disposition of the
pharmacy claims in accordance with SFAS 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, as amended by SFAS 156, Accounting for Servicing of Financial Assets (as amended). In
accordance with paragraph 9 of SFAS 140, the Company has treated the acquisition of the claims as a purchase since the management company (transferor) has surrendered control over these assets to OrthoSupply, our wholly owned operating company. The
claim assets are recorded in other receivables, separately from our trade receivables, at the Companys cost. . We earn servicing revenue by processing, submitting and collecting the claims as described above. Servicing revenue is
recognized at the time the claim is collected, and is calculated as the difference between the amount actually collected on the claim from third party payers and our cost basis in the claim.

In accordance with EITF Issue 00-10, Accounting for Shipping and Handling Fees and Costs, we included all shipping and handling billings to customers in
revenues, and freight costs incurred for product shipments have been included in cost of products sold.



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Accounting For Obligations And Instruments Potentially To Be Settled In The Companys Common Stock: We
account for obligations and instruments potentially to be settled in the Companys stock in accordance with EITF Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed To, and Potentially Settled In a Companys Common
Stock. This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Companys own stock.

Under EITF Issue No. 00-19 contracts are initially classified as equity or as either assets or liabilities, in the following situations:

Equity

Contracts that require physical settlement or net-share settlement; and

Contracts that give the company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement), assuming that all the
criteria for equity classification have been met.

Assets or Liabilities

Contracts that require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the company); and

Contracts that give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).

All contracts are initially measured at fair value and subsequently accounted for based on the current classification. Contracts initially classified as equity do not
recognize subsequent changes in fair value as long as the contracts continue to be classified as equity. For contracts classified as assets or liabilities, the Company reports changes in fair value in earnings and discloses these changes in the
financial statements as long as the contracts remain classified as assets or liabilities. If contracts classified as assets or liabilities are ultimately settled in shares, any previously reported gains or losses on those contracts continue to be
included in earnings. The classification of a contract is reassessed at each balance sheet date.

In accordance with EITF Issue No. 00-19, a transaction
which includes a potential for net-cash settlement, including liquidated damages, requires that derivative financial instruments, including warrants and additional investment rights, initially be recorded at fair value as an asset or liability and
subsequent changes in fair value be reflected in the statement of operations. The recorded value of the liability for such derivatives can fluctuate significantly based on fluctuations in the market value of the underlying common stock of the issuer
of the derivative instruments, as well as in the volatility of the stock price during the term used for observation and the remaining term. To date, the Company has never been required to classify issued warrants as derivative liabilities.

Warrant Derivative Liabilities: We account for warrants issued in connection with financing arrangements in accordance with EITF Issue No.
00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Companys Own Stock. Pursuant to EITF Issue No. 00-19, an evaluation of specifically identified conditions is made to determine whether the fair
value of warrants issued is required be classified as a derivative liability. The fair value of warrants classified as derivative liabilities is adjusted for changes in fair value at each reporting period, and the corresponding non-cash gain or loss
is recorded in current period earnings. To date, the Company has never been required to classify issued warrants as derivative liabilities.

Our
reserve for doubtful accounts. Our reserve amount is based upon estimated losses for customers who were billed directly for products and services. For the three months ended September 29, 2007, we increased our reserve for
doubtful accounts by $8,678, or 0.3% of revenues for the three months ended September 29, 2007 to a total of $79,552. This compares to an expense of $39,975 or 14.4% of revenue for the comparable three month period in 2006. The reserve amount
is based on the age of the accounts and managements judgment regarding collectibility of certain accounts. We have not written off any accounts receivable to date.



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Our reserve for excess or obsolete inventories. We provide reserves for estimated excess, obsolete and
shrinkage for durable medical equipment inventory maintained at clinics and at our location. Determining a clinics specific inventory levels and product mix can be difficult, particularly during the start-up phase of a clinic, and until proper
controls can be established. Physical inventory counts are performed at clinic sites periodically and reconciled to book value at the end of each quarter. For the three months ended September 29, 2007, we have provided a reserve of $90,573, or
33.6% of total inventory, compared to $42,338 or 25.5% of total inventory, for the quarter ended September 30, 2006. Our reserve formula, modified during the second quarter of 2006, is calculated by reserving approximately 25% of the inventory
value for operating clinics based on prior loss experience and managements judgment as to net realizable value of inventory at the Companys location.

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 29, 2007 Compared to
Three Months Ended September 30, 2006

Revenue. Set forth below are our net revenues.



|                          |  |                    |           |                    |   |          |  |           |         |  |        
|------------------------- |  | ------------------ | --------- | ------------------ | - | -------- |  | --------- | ------- |  | -------
|                          |  | Three Months Ended |           |                    |   |         
|                          |  | September 29,2007  |           | September 30, 2006 |   | Increase |  | %Increase
|Sales of Medical Products |  | $                  | 523,108   |                    | $ | 239,517  |  | $         | 283,591 |  | 118.4  
|Service Revenue           |  |                    | 536,423   |                    |   | 39,021   |  |           | 497,402 |  | 1,274.7
|                          |  |                    |           |                    |   |          |  |           |         |  |        
|Total Revenue             |  | $                  | 1,059,531 |                    | $ | 278,538  |  | $         | 780,993 |  | 280.4  

Revenue increased in the three months ended September 29, 2007 primarily due to the increase in the number of
clinics under agreement with us from approximately 30 in the third quarter of 2006 to approximately 52 in the third quarter of 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. Eight clinics were added during the three months ended September 29, 2007. Service revenue increased from none in the third quarter of 2006 to $400,382 in the third quarter of 2007 mainly due to the increase
in pharmaceutical claims acquisition, and processing the claims. Additional service revenue of $43,784 for the three months ended September 29, 2007 compared to $12,164 in 2006 was earned due to the increase in clinics driving billing, and
collection, revenue. The increase in additional revenue of $92,257 in the third quarter 2007 resulted from additional physician extenders in place during the third quarter of 2007 compared to revenue of $26,857 in the third quarter of 2006.

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



|                         |  |                    |         |             |      |                   |   |             |  |          |  |           |         |  |      
|------------------------ |  | ------------------ | ------- | ----------- | ---- | ----------------- | - | ----------- |  | -------- |  | --------- | ------- |  | -----
|                         |  | Three Months Ended |         |             |      |                  
|                         |  | September 29,2007  |         | % ofRevenue |      | September 30,2006 |   | % ofRevenue |  | Increase |  | %Increase
|Cost of Medical Products |  | $                  | 395,401 |             | 75.6 |                   | $ | 156,385     |  | 65.3     |  | $         | 239,016 |  | 152.8
|Cost of Services         |  |                    | 392,171 |             | 73.1 |                   |   | 49,263      |  | 126.3    |  |           | 342,908 |  | 696.1
|                         |  |                    |         |             |      |                   |   |             |  |          |  |           |         |  |      
|Costs of Revenue         |  | $                  | 787,572 |             | 74.3 |                   | $ | 205,648     |  | 73.8     |  | $         | 581,924 |  | 283.0
|                         |  |                    |         |             |      |                   |   |             |  |          |  |           |         |  |      

Cost of revenue increased primarily due to higher revenue from the increase in operating clinics over the
comparative period in 2006. Cost of medical products as a percentage of revenue was higher over the comparative period in 2006 due to product mix within the expansion into new regions. Cost of services also improved as a percentage of service
revenue mainly due to our collection rate increase on pharmaceutical claims. As discussed more fully in the notes to our financial statements, pharmaceutical claim revenue is recognized on a net basis and as collected.



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



|                                             |  |                    |           |             |       |                   |   |             |  |                    |  |                     |         |  |     
|-------------------------------------------- |  | ------------------ | --------- | ----------- | ----- | ----------------- | - | ----------- |  | ------------------ |  | ------------------- | ------- |  | ----
|                                             |  | Three Months Ended |           |             |       |                  
|                                             |  | September 29, 2007 |           | % ofRevenue |       | September 30,2006 |   | % ofRevenue |  | Increase(Decrease) |  | %Increase(Decrease)
|Salaries and benefits                        |  | $                  | 378,790   |             | 35.8  |                   | $ | 256,507     |  | 92.1               |  | $                   | 122,283 |  | 47.7
|Legal, consulting and insurance              |  |                    | 363,514   |             | 34.3  |                   |   | 262,536     |  | 94.3               |  |                     | 100,978 |  | 38.5
|All other                                    |  |                    | 508,195   |             | 48.0  |                   |   | 295,895     |  | 106.2              |  |                     | 212,300 |  | 71.7
|                                             |  |                    |           |             |       |                   |   |             |  |                    |  |                     |         |  |     
|Selling, General and Administrative Expenses |  | $                  | 1,250,499 |             | 118.1 |                   | $ | 814,938     |  | 292.6              |  | $                   | 435,561 |  | 53.4
|                                             |  |                    |           |             |       |                   |   |             |  |                    |  |                     |         |  |     

Salaries and Benefits Expense.

Salaries and benefits expense increased due to an increase in sales, administrative and service staff as we continue to grow our operation. Total employees for the three months ended September 29, 2007 were 37
compared to 23 in the comparative period in 2006. We expect to continue to add additional sales, administrative and service support staff as we expand our operation.

Legal, Consulting and Insurance Expenses.

Legal expenses were $219,695 for the three months ended
September 29, 2007, compared to $193,795 for the comparative period in the third quarter of 2006. The legal expenses incurred in the three months ended September 29, 2007 are primarily related to services rendered to secure additional
financing, review of our periodic filings, as well as general counsel services. This compares to costs incurred in 2006 relating to new financing, associated registration of securities with SEC, and general counsel expenses. Consulting costs were
$101,464 for the three months ended September 29, 2007 which included services related to obtaining financing, marketing, and strategic services related to potential acquisitions and partnerships. This compares to $50,838 in the three month
period ended September 30, 2006, which includes $30,000 for FP Associates, for services rendered for financing arrangements and potential acquisitions. Insurance costs were $44,356 for the three months ended September 29, 2007, compared to
$17,902 in the comparative period in 2006 due to higher premiums resulting from increased revenue, employees, and related coverage limits.

All Other
Expenses.

Our most significant expenses for the three months ended September 29, 2007 relates to interest and financing expenses, explained below.
Other significant operating expenses that comprise the increase in Other Expenses include office supplies, printing and postage expenses of $54,205 for the three months ended September 29, 2007, or an increase of $9,806 for the three months
ended September 30, 2006; telephone and data communication expense of $21,868 or an increase of $4,977; software and IT support of $49,147 or an increase of $39,600; billing services charges of $71,546 or an increase of $61,675; travel expenses
of $42,007 or an increase of $16,995; and sales commissions of $26,910 or an increase of $21,188; personnel fees related to temporary staffing of $58,281 or an increase of $58,281. The increase in operating expenses in 2007 over the comparable
period in 2006 are mainly driven by higher sales volume, additional personnel support costs and other costs required to support a growing operation.

Other Income (Expense)

Our most significant expenses for the three months ended September 29, 2007 were in relation to 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 Capital Master Fund, the Company 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



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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.



|         |  |                    |              |   |             |           |   |                   |   |          |             |  |        |            |  |   |              |   |  |           |  
|-------- |  | ------------------ | ------------ | - | ----------- | --------- | - | ----------------- | - | -------- | ----------- |  | ------ | ---------- |  | - | ------------ | - |  | --------- | -
|         |  | Three Months Ended |              |   |             |           |   |                   |  
|         |  | September 29,2007  |              |   | % ofRevenue |           |   | September 30,2006 |   |          | % ofRevenue |  |        | (Increase) |  |   | (%Increase)  |  
|Net Loss |  | $                  | (113,686,250 | ) |             | (10,729.9 | ) |                   | $ | (860,689 | )           |  | (309.0 | )          |  | $ | (112,825,561 | ) |  | (13,108.8 | )

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. We continue to invest in building a national sales force and additional service
support personnel to drive additional revenue growth in the future.

Nine Months Ended September 29, 2007 Compared to Nine Months Ended
September 30, 2006

Revenue. Set forth below are our net revenues.



|                          |  |                    |           |                    |   |          |  |           |           |  |      
|------------------------- |  | ------------------ | --------- | ------------------ | - | -------- |  | --------- | --------- |  | -----
|                          |  | Nine Months Ended  |           |                    |   |         
|                          |  | September 29, 2007 |           | September 30, 2006 |   | Increase |  | %Increase
|Sales of Medical Products |  | $                  | 1,627,829 |                    | $ | 595,553  |  | $         | 1,032,276 |  | 173.3
|Service Revenue           |  |                    | 947,721   |                    |   | 90,151   |  |           | 857,570   |  | 951.3
|                          |  |                    |           |                    |   |          |  |           |           |  |      
|Total Revenue             |  | $                  | 2,575,550 |                    | $ | 685,704  |  | $         | 1,889,846 |  | 275.6
|                          |  |                    |           |                    |   |          |  |           |           |  |      

Revenue from medical products increased in the nine months ended September 29, 2007 primarily due to the
increase in the number of clinics under agreement with us from approximately 30 as of the nine months ended September 30, 2006 to approximately 52 as of 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. A total of eighteen clinics were added during the nine months ended September 29, 2007. Service revenue increased mainly due to the
increase in pharmaceutical claims acquisition, and processing the claims from none in the nine months ended September 30, 2006 to approximately $632,000 in the nine months ended September 29,2007. Additionally, service revenue increased
due to the increase in clinics driving billing, and collection revenue to $96,989 in the nine months ended September 29, 2007 from $44,835 in the nine months ended September 30, 2006, plus additional revenue from physician extenders of
$218,371, an increase of $173,055 over the comparable period in 2006.

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



|                               |  |                   |           |             |      |                   |   |             |  |          |  |           |           |  |      
|------------------------------ |  | ----------------- | --------- | ----------- | ---- | ----------------- | - | ----------- |  | -------- |  | --------- | --------- |  | -----
|                               |  | Nine Months Ended |           |             |      |                  
|                               |  | September 29,2007 |           | % ofRevenue |      | September 29,2006 |   | % ofRevenue |  | Increase |  | %Increase
|Cost of Medical Products       |  | $                 | 1,111,927 |             | 68.3 |                   | $ | 445,027     |  | 74.7     |  | $         | 666,900   |  | 149.9
|Cost of services               |  |                   | 806,677   |             | 85.1 |                   |   | 99,807      |  | 110.7    |  |           | 706,870   |  | 708.2
|                               |  |                   |           |             |      |                   |   |             |  |          |  |           |           |  |      
|Costs of Products and Services |  | $                 | 1,918,604 |             | 74.5 |                   | $ | 544,834     |  | 79.5     |  | $         | 1,373,770 |  | 252.2
|                               |  |                   |           |             |      |                   |   |             |  |          |  |           |           |  |      



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Cost of revenue increased primarily due to higher revenue from the increase in operating clinics over the comparative
period in 2006. Cost of medical products sales improved as a percentage of revenue over the comparative period in 2006 due to higher volume, and product mix. Cost of services revenue improved as a percentage of revenue over the comparative period in
2006 mainly due to the additional revenue recognized for the pharmaceutical claims processed, which was non-existent for the comparative period in 2006.

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



|                                             |  |                   |           |             |       |                   |   |             |  |                    |  |                     |           |  |      
|-------------------------------------------- |  | ----------------- | --------- | ----------- | ----- | ----------------- | - | ----------- |  | ------------------ |  | ------------------- | --------- |  | -----
|                                             |  | Nine Months Ended |           |             |       |                  
|                                             |  | September 29,2007 |           | % ofRevenue |       | September 30,2006 |   | % ofRevenue |  | Increase(Decrease) |  | %Increase(Decrease)
|Salaries and benefits                        |  | $                 | 1,231,574 |             | 47.8  |                   | $ | 687,593     |  | 100.2              |  | $                   | 543,981   |  | 79.1 
|Legal, consulting and insurance              |  |                   | 862,000   |             | 33.5  |                   |   | 807,097     |  | 117.7              |  |                     | 54,903    |  | 6.8  
|All other                                    |  |                   | 1,447,966 |             | 56.2  |                   |   | 645,203     |  | 94.1               |  |                     | 802,763   |  | 124.4
|                                             |  |                   |           |             |       |                   |   |             |  |                    |  |                     |           |  |      
|Selling, General and Administrative Expenses |  | $                 | 3,541,540 |             | 137.5 |                   | $ | 2,139,893   |  | 312.0              |  | $                   | 1,401,647 |  | 65.5 

Salaries and Benefits Expense.

Salaries and benefits expense increased due to an increase in sales, administrative and service staff as we continue to grow our operation. Total employees for the nine months ended September 29, 2007 were 37
compared to 23 in the comparative period in 2006. We expect to continue to add additional sales, administrative and service support staff as we expand our operations.

Legal, Consulting and Insurance Expenses.

Legal expense was $457,579 and consulting expense was $277,111 for the
nine months ended September 29, 2007 compared to $538,576 and $215,980 respectively for the comparative period in the nine months ended September 30, 2006. The expenses incurred in 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. This compares to costs incurred in comparable period in 2006 relating to the reverse merger,
securing financing and general counsel expenses. Insurance costs were $127,331 for the nine months ended September 29, 2007 compared to $52,542 in the comparative period in 2006 due to higher premiums resulting from increased revenue,
employees, and related coverage limits.

All Other Expenses.

Our most significant expenses in the nine months ended September 29, 2007 were interest and financing expenses, explained below. Other expenses for the nine months ended September 29, 2007 include office supplies, printing and
postage expenses of $148,132, or an increase of $88,485 from the nine months ended September 30, 2006; software and IT support of $104,225 or an increase of $73,776; accounting and audit fees of $128,737 or an increase of $119,337; recruitment
expenses of $79,888 or an increase of $18,608; billing service charges of $172,723 or an increase of $132,075; travel of $158,005 or an increase of $99,666; telephone and data communications expense of $56,146 or an increase of $16,112; marketing
commission expenses of $105,737 or an increase of $96,859. All other expenses account for an aggregate increase over the comparable nine month period in 2006 of $98,196. 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)

Our most significant expense for the nine months ended September 29, 2007 was for the estimated fair value, $21,494,876, of warrants to purchase an
aggregate of 6,426,000 shares of our common stock at $1.00 per share. The warrants were issued pursuant to a Guarantee Fee, Reimbursement and Indemnification Agreement, as amended, in



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connection to our Revolving Line of Credit Agreement with Sovereign Bank, and the estimated fair value, $8,676,888, of warrants to purchase 4,000,001 shares
at $2.00 per share, accrued to recognize the expense for our obligations for the extension of the maturity and repayment of two promissory notes, and accrued interest thereon. The aggregate expense charge of $30,171,764 resulting from the warrants
had no direct cash impact on the operations of the Company. Interest expense was $629,548, including aggregate amortization of discount of $417,773 on the convertible note payable issued to Vicis on June 28, 2006 and the convertible note
payable issued to Vicis and Apogee on April 17, 2007. Additionally, the Company recorded a debt extinguishment loss of $112,513,239 as a result of the Companys entry into a Warrant and Debenture Amendment Agreement on July 10, 2007.
In exchange for $2,100,000 in cash from Vicis, the Company 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 eliminate certain exercise limitations provisions. The reduction in the conversion price had the effect of
increasing the number of common shares of our common stock 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 to the Investors from $0.345 through $1.00 down to $0.20.

Net Loss. Set forth below is our net loss.



|         |  |                   |              |   |             |          |   |                    |   |            |             |  |        |            |  |   |              |   |  |          |  
|-------- |  | ----------------- | ------------ | - | ----------- | -------- | - | ------------------ | - | ---------- | ----------- |  | ------ | ---------- |  | - | ------------ | - |  | -------- | -
|         |  | Nine Months Ended |              |   |             |          |   |                    |  
|         |  | September 29,2007 |              |   | % ofRevenue |          |   | September 30, 2006 |   |            | % ofRevenue |  |        | (Increase) |  |   | %(Increase)  |  
|Net Loss |  | $                 | (146,194,471 | ) |             | (5,676.2 | ) |                    | $ | (2,906,791 | )           |  | (423.9 | )          |  | $ | (143,287,680 | ) |  | (4,929.4 | )

The Net loss for the nine months ended September 29, 2007 was primarily attributable to non-cash charges for
the estimated fair value, $21,494,876, of warrants to purchase an aggregate of 6,426,000 shares of our common stock at $1.00 per share. The warrants were issued pursuant to a Guarantee Fee, Reimbursement and Indemnification Agreement in connection
to our Revolving Line of Credit Agreement with Sovereign Bank, as amended, and the estimated fair value, $8,676,888, of warrants to purchase 4,000,001 shares at $2.00 per share, accrued to recognize the expense for our obligations for the extension
of the maturity and repayment of two promissory notes, and accrued interest thereon. Additionally $103,246,060 and $9,267,179 of expense was for the debt extinguishment loss in conjunction with debt modification and change in the estimated value of
warrants in relation to the Warrant and Debenture Amendment Agreement entered into on July 10, 2007. 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 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 of our common stock. The Warrant and
Debenture Amendment Agreement also provides for the reduction of the warrant exercise price of the outstanding warrants to the Investors from $0.345 through $1.00 down to $0.20. 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 building a national sales force and additional service support personnel to drive additional revenue growth in the future.

Liquidity and Capital Resources

Cash used in operating
activities during the nine months ended September 29, 2007 was $5,914,296, compared to $2,025,502 in the comparative period in 2006. However, financing activities from loans from Vicis of $650,000, $2,100,000 from the July Warrant and Debenture
Amendment Agreement, $377,201 from the exercise of certain outstanding warrants and $3,000,000 from our revolving line of credit with Sovereign Bank resulted in an overall net increase in cash of $165,854. As of September 29, 2007, we had
$5,226,624 in total assets, compared to $1,190,546 as of September 30, 2006. Total liabilities at the end of the period were $7,342,393 compared to $1,676,024 in the comparable period of 2006. In addition, on April 17, 2007, the Company
successfully restructured four short-term notes payable into two long-term convertible debentures in the aggregate principal amount of $1,266,000 due on April 17, 2009. On May 18, 2007, the Company entered into an amendment to its
Revolving Line



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of Credit Agreement with Sovereign Bank pursuant to which Sovereign Bank increased the Companys revolving line of credit by an additional principal
amount of $1,500,000, so that the aggregate principal amount available to the Company is $3,000,000. In addition, on July 10, 2007, we entered into a Warrant and Debenture Amendment Agreement with Nite Capital, L.P., Apogee Financial
Investments, Inc., Midtown Partners & Co., LLC, Douglas Arnold and Marshall Sterman (collectively, the Investors) and Vicis to amend the outstanding warrants and debentures previously issued to the Investors and Vicis in
exchange for $2,100,000 in cash from Vicis. On July 19, 2007 Vicis exercised certain of its warrants at a price of 0.01 per share for total proceeds of $377,201. Our current cash availability will support current operations through March
2008 based on our current cash burn rate of $500,000 per month.

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 operations.



|ITEM 3. | 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 President and Treasurer (our principal executive officer and our acting principal accounting and finance 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 effectiveness of our disclosure controls and procedures and
our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility
of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance
with policies or procedures may deteriorate over time. Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all
errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.

The Company became aware of
certain material weakness in connection with the receipt of comments from the Staff of the SEC received by the Company on August 31, 2006 and November 3, 2006 with respect to the Companys Registration Statement on Form SB-2, filed by
the Company on August 8, 2006 (File No. File No. 333-136392). A control deficiency exists when the design or operation of a control does not allow management or employees, in the ordinary course of performing their assigned functions, to
prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Companys ability to initiate, authorize, record, process, or report
external financial data reliably in accordance with GAAP, such that there is a more than remote likelihood that a misstatement of the Companys annual or interim financial statements that is more than inconsequential will not be prevented or
detected. A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or
detected.

Based upon an evaluation conducted for the period ended September 29, 2007, our President and Treasurer (our principal executive officer
and our acting principal accounting and finance officer) have concluded that as of the end of the period covered by this report, we have identified the following material weaknesses:



| |  |  | Reliance upon independent financial reporting consultants for review of critical accounting areas and disclosures and material non-standard transactions.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | A limited number of on-site accounting personnel which results in a lack of segregation of duties necessary for a good system of internal control.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------

Managements review of our internal controls is on-going and will take whatever measures necessary to reduce the material
deficiencies noted. Implementation of our remediation plan has included investing in upgrading our accounting and information technology systems, hiring additional permanent employees in accounting, purchasing and field operations, establishing
additional training programs, instituting employee compliance and code of ethics requirements, and engaging outside expert consultants. Our plan is to continue to strengthen our organization and internal controls and it may include hiring additional
management and support personnel. The effectiveness of the steps we have taken to date and the steps we are still in the process of completing is subject to continued management review, and we may make additional changes to our internal controls and
procedures. Although we have undertaken the foregoing initiatives, we cannot assure you that we will not in the future identify further material weaknesses in our internal control over financial reporting that we have not discovered to date. We will
continue to review and document our disclosure controls and procedures, including our internal controls and procedures for financial reporting, on an ongoing basis, and may from time to time make changes aimed at enhancing their effectiveness and to
ensure that our systems evolve with our business.

Based on the evaluation of our disclosure controls and procedures as set forth above as of the end of
the period covered by this report, our President and Treasurer (our principal executive officer and our acting principal accounting and finance officer) concluded that, as of such date, our disclosure controls and procedures were not effective at
the reasonable assurance level.

Changes in internal control over financial reporting.

There were changes during the period covered by this quarterly report on 10-QSB that have materially affected the Companys internal control over financial
reporting. The Companys Chief Financial Officer resigned in the third quarter of 2007 and the Company has not yet hired a replacement or equivalent personnel. The Company expects that if it is unable to hire a Chief Financial Officer, or the
equivalent, in the near future, such absence will have a material affect on the Companys internal control over financial reporting in the future. The Company has implemented other remediation changes, such as engaging outside financial
consultants to serve as an interim solution through the end of 2007. The Company expects these changes to compliment implementing additional internal controls related to the Companys period-end closing and reporting process. These additional
internal controls will likely include the hiring a new Chief Financial Officer, additional staff members and outside consultants.



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PART II OTHER INFORMATION



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

None.



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

On
July 23, 2007, the Registrant issued 33,120,001 shares of its common stock pursuant to the exercise of certain warrants held by Vicis Capital Master Fund, such warrants representing the right to receive 33,120,001 shares of common stock. The
Company received $331,200.00 in consideration for the exercise of these warrants. The Registrant relied upon Rule 506 of Regulation D of the Securities Act of 1933, as amended, for the issuance of these shares of common stock.



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

None



|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.
|------- | ---------



|            |  |                                                                                                                                                                                                                                                                                                                                                        
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                            
|3.1         |  | Amended and Restated Articles of Incorporation of the Registrant (incorporated by reference to Appendix A to the Registrants Definitive Information Statement on Schedule 14C filed on July
11, 2006)                                                                                                                                                 
|            | 
|3.2         |  | Amended and Restated Bylaws of the Registrant (incorporated by reference to Appendix C from the Registrants Definitive Information Statement on Schedule 14C filed on July 11,
2006)                                                                                                                                                                  
|            | 
|10.1        |  | Warrant and Debenture Amendment Agreement dated as of July 10, 2007 by and amount the Registrant and Nite Capital, L.P. Apogee Financial Investments, Inc. Midtown Partners Co., LLC, Douglas
Arnold and Marshall Sterman and Vicis Capital Master fund (incorporated by reference to Exhibit 10.1 to the Registrants Form 8-K filed on July 12, 2007)
|            | 
|10.2        |  | Third Amendment to Guarantee Fee, reimbursement and Indemnification Agreement dated as of July 10, 2007 by and between the Registrant and Vicis Capital Master Fund (incorporated by reference to
Exhibit 10.2 the Registrants Form 8-K filed on July 12, 2007)                                                                                       
|            | 
|31.1        |  | Certification of principal executive officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith)                                                                                                                                                                                                                                
|            | 
|31.2        |  | Certification of principal accounting and finance officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith)                                                                                                                                                                                                                   
|            | 
|32.1        |  | Certification of principal executive officer and principal accounting and finance officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (filed herewith)                                                                                                                                                                                   



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MEDICAL SOLUTIONS MANAGEMENT INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this Form 10-QSB to be signed on its behalf by the undersigned thereunto duly authorized.



|                        |  |                                   |  |                              
|----------------------- |  | --------------------------------- |  | -----------------------------
|                        |  | MEDICAL SOLUTIONS MANAGEMENT INC.
|                        |  |                                  
|Date: November 19, 2007 |  | By:                               |  | /s/ Brian Lesperance         
|                        |  |                                   |  | Brian Lesperance             
|                        |  |                                   |  | President and Treasurer      
|                        |  |                                   |  | (principal executive officer)



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##### Table of Contents

EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                                                                                                                                                        
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                            
|3.1         |  | Amended and Restated Articles of Incorporation of the Registrant (incorporated by reference to Appendix A to the Registrants Definitive Information Statement on Schedule 14C filed on
July 11, 2006)                                                                                                                                                 
|            | 
|3.2         |  | Amended and Restated Bylaws of the Registrant (incorporated by reference to Appendix C from the Registrants Definitive Information Statement on Schedule 14C filed on July 11,
2006)                                                                                                                                                                  
|            | 
|10.1        |  | Warrant and Debenture Amendment Agreement dated as of July 10, 2007 by and amount the Registrant and Nite Capital, L.P. Apogee Financial Investments, Inc. Midtown Partners Co., LLC, Douglas
Arnold and Marshall Sterman and Vicis Capital Master fund (incorporated by reference to Exhibit 10.1 to the Registrants Form 8-K filed on July 12, 2007)
|            | 
|10.2        |  | Third Amendment to Guarantee Fee, reimbursement and Indemnification Agreement dated as of June 11, 2007, July 10, 2007 by and among between the Registrant and Global Healthcare Recovery
Services, LLC (filed herewith Vicis Capital Master Fund (incorporated by reference to Exhibit 10.2 the Registrants Form 8-K filed on July 12, 2007)         
|            | 
|31.1        |  | Certification of principal executive officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith)                                                                                                                                                                                                                                
|            | 
|31.2        |  | Certification of principal accounting and finance officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith)                                                                                                                                                                                                                   
|            | 
|32.1        |  | Certification of principal executive officer and principal accounting and finance officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (filed herewith)