UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K





x ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934


For the
fiscal year ended June 30, 2009





o TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934





Commission
file number: 000-51317





THE
CENTER FOR WOUND HEALING, INC.


(Name of
registrant as specified in its charter)





Nevada
              
              87-0618831(State
      or jurisdiction of
                Incorporation
      or organization)
              
              (IRS
      Employer ID Number)





155 White
Plains Road, Suite 200, Tarrytown, NY 10591


[Address
of Principal Executive Offices]





Registrant's
telephone number, including area code:   (914)
372-3150




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




None




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




Common
Stock, $0.001 par value per share


(Title of
Class)




Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section
13 or J5(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements
for the past 90 days:  YES x NO o





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




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





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





YESo NOx




State the
number of shares outstanding of each of the Issuer's classes of common equity,
as of the latest practicable date:  As of June 30, 2009, there were
24,123,638 shares of common stock issued and outstanding.







10-K





10-K10-K


THE
CENTER FOR WOUND HEALING, INC.


Report
on Form 10-K





For
the Fiscal Year Ended June 30, 2009





TABLE
OF CONTENTS





PAGEPART
      IItem
      1.
                    Business
                    
                    4Item
      2.
                    Properties
                    
                    9Item
      3.
                    Legal
      Proceedings
                    
                    9Item
      4.
                    Submission
      of Matters to a Vote of Security Holders
                    
                    9PART
      IIItem
      5.
                    Market
      for Registrants’ Common Equity, Related Stockholder Matters and Small
      Business Issuer Purchases of Equity Securities
                    
                    10Item
      7.
                    Management’s
      Discussion and Analysis of Financial Condition and Results ofOperations
                    
                    11Item
      8.
                    Financial
      Statements
                    
                    14Item
      9.
                    Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                    
                    34Item
      9A.
                    Controls
      and Procedures
                    
                    34Item
      9B.
                    Other
      Information
                    
                    35PART
      IIIItem
      10
                    Directors,
      Executive Officers and Corporate Governance
                    
                    36Item
      11.
                    Executive
      Compensation
                    
                    39Item
      12.
                    Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                    
                    44Item
      13.
                    Certain
      Relationships and Related Transactions, and Director
      Independence
                    
                    44Item
      14
                    Principal
      Accountant Fees and Services
                    
                    45Signatures
                    
                    
                    48


2




Forward-Looking
Statements




This
Report contains, in addition to historical information, forward-looking
statements regarding The Center for Wound Healing, Inc. (the “Company” or
“CFWH”), which represent the Company’s expectations or beliefs including, but
not limited to, statements concerning the Company’s operations, performance,
financial condition, business strategies, and other information, and that
involve substantial risks and uncertainties.  The Company’s actual
results of operations, some of which are beyond the Company’s control, could
differ materially.  For this purpose, any statements contained in this
Report that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the generality of the foregoing,
words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,”
“could,” “estimate,” or “continue” or the negative or other variations thereof
or comparable terminology are intended to identify forward-looking
statements.  Factors that could cause or contribute to such difference
include, but are not limited to, limited history of operations; need for
additional financing; competition; dependence on management; and other factors
discussed herein and in the Company’s other filings with the Securities and
Exchange Commission.


3





PART
I





ITEM
      1.
            BUSINESS




As used
in this annual report, "we", "us", "our", "CFWH", "Company" or "our company"
refers to The Center for Wound Healing, Inc. and all of its subsidiaries and
affiliated companies.




Business
Development:




The
Center for Wound Healing, Inc. (“CFWH” or the “Company”) (formerly known as
American Hyperbaric, Inc.) was organized in the State of Florida on May 25,
2005.  CFWH develops and manages wound care centers, which are
marketed as “THE CENTER FOR WOUND HEALING TM”
throughout the United States.  These centers render the specialized
service of wound care and hyperbaric medicine.  The centers are
developed in partnerships with acute care hospitals.  CFWH can be
contracted to start up and manage the wound care program as well as offer a
turnkey operation including the furnishing of hyperbaric oxygen chambers to
hospitals.




As of June 30, 2009, CFWH operates
thirty-five (35) wound care centers with various institutions.  Such
centers operate as either a wholly-owned limited liability company of CFWH or
CFWH owns the majority interest in the limited liability company.  The
Company also manages Hypobaric Medical Association, P.C., a New York
professional staffing company, owned by an employee of CFWH, which provides
professional healthcare staffing services, including services of physicians, to
the Company. CFWH is headquartered in Tarrytown, New York.




Business
of Issuer:





Wound
care treatments include a myriad of products and therapies, with the services
ranging from the prosaic, i.e., applying bandages to open wounds, to complex
treatments including debridements and the application of artificial
skin.  Hyperbaric Oxygen Treatment (“HBOT”) is a medical treatment
administered by delivering one-hundred percent (100%) oxygen at pressures
greater than atmospheric (sea level) pressure to a patient inside an enclosed
chamber.  This means that the pressure is typically 21⁄2 times greater
than normal atmospheric pressure, causing blood to carry larger amounts of
oxygen, which is delivered to organs and tissues in the body.  The
increased pressure combined with the increased oxygen dissolves oxygen in the
blood and throughout all body tissues and fluids at up to 20 times normal
concentration.  By doing so, wounds, particularly infected wounds,
heal more quickly.





Hyperbaric
oxygen acts as a drug, eliciting varying levels of response at different
treatment depths, durations and dosages and has been proven effective as
adjunctive therapy for specifically indicated conditions. The amount of pressure
increase and the length of time under pressure are determined by the conditions
being treated.  Treatment pressures are usually between two and
three-times atmospheric pressure and usually last from one to two hours at full
pressure.





The US
Food and Drug Administration (“FDA”) has approved HBOT to treat decompression
sickness, gangrene, brain abscess, air bubbles in the blood, and injuries in
which tissues are not getting enough oxygen.  Oxygen is considered to
be a drug by the FDA that must be prescribed by a physician or a licensed health
care provider in order to help treat illnesses or health
conditions.





HBOT does
not compete with or replace other treatment modalities.  However, it
is now increasingly being used on an adjunctive basis in the management of a
variety of disorders refractory to standard medical and surgical care, and has
been shown to be particularly effective in treating problem wounds, chronic bone
infections, and radiation injury.  In general, physicians are using
HBOT for their patients to help them heal faster from surgeries and
injuries.





We
contract with hospitals to manage their wound care
facilities.  Generally, for each individual wound care center,
appropriate space is allocated to us by the institution.  We are
responsible for the management of the center including patient scheduling and
all non-medical staff, and we assist the hospital in its billing of patient
services, which are billed directly by the hospital to insurance
companies.. We
also are responsible for designing and installing the necessary leasehold
improvements of the hospital-provided space and supplying the appropriate
furniture, fixtures and equipment, including the hyperbaric chambers, used in
the wound center.  We either acquire the chambers under three year
capital leases with $1 buyout arrangements or under operating
leases.  This has allowed us to leverage our resources and maximize
the number of centers that we can support.  As our operation grows, we
have the ability to transfer chambers between individual wound care centers in
order to balance demand and maximize the use of our resources.








CFWH is a
provider of contract services for wound care and hyperbaric medicine in the
United States.  Through medical leadership based upon a
multi-disciplinary team of physicians and defined clinical standards, CFWH is
committed to achieving patient results while simultaneously providing both
physicians and hospitals with professional and economic
opportunities.  For the period ending June 30, 2009, CFWH has entered
into separate multi-year operating agreements to manage the wound care programs
in 35 hospitals.  Although there can be no assurance that we will be
successful in each instance, our plan at each center requires
a  multi-year contract with the hospital providing for a fixed or
variable fee schedule based on the services provided whether for hyperbaric
treatment, wound care procedures, or both.  The expected fees are
adequate for us to recover our investment in leasehold improvements (a sunk cost
and non-transferable asset), our start-up costs, including recruiting and
training of personnel, and the amortization of chamber lease
financing.


4





Management’s
goal is to broaden the Company’s geographic reach and to establish
relationships with community and acute care hospitals across the United
States.  CFWH’s individualized therapies, established protocols and
proactive care and case management has proven successful in treating chronic
wounds that have previously resisted healing with outcomes exceeding national
averages.  In all of its centers, CFWH utilizes a best practice model
enhanced by nationally accepted wound care algorithms to significantly improve
the medical results for patients with chronic non-healing wounds.





In
addition to wound healing management, CFWH also provides HBOT as an adjunct
treatment modality to enhance the body’s natural healing abilities and to
strengthen the body’s immune system.  This is resulting in more rapid
and comprehensive healing powers for patients.  HBOT is a simple,
non-invasive, painless treatment that has been proven to benefit patients
presenting with Center for Medicare and Medicaid Services approved indications,
including:




·
            Acute
      arterial insufficiency·
            Osteomyelitis·
            Radiation
      injury/necrosis·
            Necrotizing
      infection·
            Compromised
      skin grafts and flaps·
            Diabetic
      wounds of the lower extremities·
            Gas
      gangrene





To
measure the effectiveness of our wound management program, CFWH has developed a
functional assessment scoring system to measure the healing of a
wound.  In addition, CFWH has developed a proprietary tracking
software and database of over 1,000 patient outcomes that have been collected
over the past four years.  In reviewing the data collected, CFWH has
registered healing rates in excess of 80 percent for those patients who complete
their HBOT therapy protocols.  This group of patients falls within the
high risk category that would otherwise require amputation.  Instead,
less than eight percent of this patient population will undergo
amputation.  This is well below national benchmarks consistently
reporting amputation rates over 20 percent in the high risk group.





Competition:





Our
principal competition in the chronic wound care market consists of specialty
clinics that have been established by some hospitals or
physicians.  Additionally, there are a number of private companies
that provide wound care and HBOT services.  In the market for disease
management products and services, we face competition from other disease
management entities, general health care facilities and service providers,
biopharmaceutical companies, pharmaceutical companies and other
competitors.  Many of these companies have substantially greater
capital resources and marketing staffs, and greater experience in
commercializing products and services than we have.  In addition,
recently developed technologies, or technologies that may be developed in the
future, are or may be the basis for products which compete with our chronic
wound program.  There can be no assurance that we will be able to
enter into co-marketing arrangements with respect to these products or that we
will be able to compete effectively against such companies in the
future.





As the
FDA issues formal approvals for new applications of HBOT as treatment for
specific illness, both physician and patient awareness will continue to increase
as to the benefits of using HBOT.




Marketing:





CFWH
conducts education and market awareness programs, and advertising to promote the
utilization of its centers among medical professional, care givers, and
patients.  A multifaceted marketing approach is used to create
awareness of our capabilities and to secure appropriate
referrals.  This approach is implemented over several months and
features:




·
            Educational
      lectures and dinners with homecare agencies, nursing homes and physicians
      (both individual and group
practices)





·
            Grand
      opening ceremonies




·
            Outcome
      data presented at vascular, podiatric and wound care
      conferences




·
            Sponsored
      healthcare events for the community served by a
  hospital




·
            Distribution
      of collateral materials to medical referral sources and
      consumers




·
            Media
      advertising





·
            Sponsorship
      of local and national wound care and podiatry society meetings and
      lectures


5





·
            Efforts
      to secure patients from other local hospitals’ medical
    staffs




·
            Efforts
      to engage community medical providers to treat patients in the wound care
      center




Government
Regulation:





Our
operations and the marketing of our services are subject to extensive regulation
by numerous federal and state governmental authorities in the United
States.  We believe that we are currently in substantial compliance
with applicable laws, regulations and rules.  However, we cannot
assure that a governmental agency or a third party will not contend that certain
aspects of our business are either subject to or are not in compliance with such
laws, regulations or rules or that the state or federal regulatory agencies or
courts would interpret such laws, regulations and rules in our
favor.  The sanctions for failure to comply with such laws,
regulations or rules could include denial of the right to conduct business,
significant fines and criminal and civil penalties.  Additionally, an
increase in the complexity or substantive requirements of such laws, regulations
or rules could have a material adverse effect on our business.





Any
change in current regulatory requirements or related interpretations by or
positions of, state officials where we operate could adversely affect our
operations within those states.  In states where we are not currently
located, we intend to utilize the same approaches adopted elsewhere for
achieving state compliance.  However, state regulatory requirements
could adversely affect our ability to establish operations in such other
states.





Various
state and federal laws apply to the operations of health care providers
including, but are not limited to, the following:





Licensure:





Certain
health care providers are required to be licensed by various state regulatory
bodies.  However, if we are found to not be in compliance, we could be
subject to fines and penalties or ordered to cease operations which could have
an adverse effect on our business.





False
Claims Act:





The
Federal False Claims Act and some state laws impose requirements in connection
with the submission of claims for payment for health care services and products,
including prohibiting the knowing submission of false or fraudulent claims and
submission of false records or statements for reimbursement and payment to the
United States government or state government.  Such requirements would
apply to the hospitals to which we provide wound care management
services.  Not only are government agencies active in investigating
and enforcing actions with respect to applicable health laws, but also health
care providers are often subject to actions brought by individuals on behalf of
the government.  As such "whistleblower" lawsuits filed as “qui tam”
actions are generally filed under seal with a court to allow the government
adequate time to investigate and determine whether it will intervene in the
action, health care providers affected are often unaware of the suit until the
government has made its determination and the seal is lifted.  The
Federal False Claims Act provides for penalties equal to three (3) times the
actual amount of any overpayments plus $11,000 per claim. Under legislation
passed in 2009, those who bill third parties are now obligated to discover and
disclose any overpayments received or be subject to False Claims Act penalties
as well.





Fraud
and Abuse Laws:





Since a
significant portion of reimbursement for healthcare products and services are
currently paid through reimbursements under Medicare, Medicaid or similar
programs, the federal government and many states have adopted statutes and
regulations that address fraudulent and/or abusive behavior in connection with
such programs.





As part
of this regulatory scheme, the federal government believes that an “inducement”
to refer a Medicare or Medicaid patient is likely to result in fraud or abuse on
the Medicare or Medicaid programs. Therefore, the federal government adopted a
number of laws and regulations to recoup funds and assess penalties which it
believes were paid inappropriately.  In cases of criminal fraud, the
individuals responsible for the fraudulent activity can be subject to
imprisonment.





One of
the principal federal statutes regulating fraud and abuse is the Anti-Kickback
Statute. The Anti-Kickback statute prohibits the solicitation, payment, receipt
or offering of any direct or indirect remuneration in exchange for the referral
of Medicare and Medicaid patients or for the purchasing, arranging for or
recommending the purchasing, leasing or ordering of Medicare or Medicaid covered
services, items or equipment.  To be convicted of a violation of the
Anti-Kickback Statute, the party must have had specific intent to induce the
referral of Medicare or Medicaid patients or the purchase, lease or ordering of
a good, item or service reimbursable by Medicare or Medicaid.  Some of
the federal courts have broadly construed the Anti-Kickback Statute and held
that the “intent” required to support a criminal conviction will exist if only
one purpose of the referral is to induce a prohibited referral.





To
clarify some of the issues created by the Anti-Kickback Statute, the Center for
Medicare and Medicaid Services issued “safe harbor” regulations identifying
actions which will not be deemed to violate the Anti-Kickback
Statute.  Some of these “safe harbors” are in the area of joint
ventures, personal services, and other arrangements.  Conducting an
activity that falls within a “safe harbor” regulation provides comfort that such
activity will not be prosecuted.  Compliance with each element of a
particular “safe harbor” is required in order to assured of the protection
provided by such “safe harbor.”  Even though a transaction that does
not fall within a “safe harbor” may be perfectly appropriate, the arrangement
will be evaluated based on its facts and circumstances to determine if the
parties intended to induce the referral of Medicare or Medicaid patients or the
purchase, lease or ordering of a good, item or service reimbursable under
Medicare or Medicaid.


6





The
federal government also has adopted an Advisory Opinion procedure where a
proposed transaction can be submitted to the Office of Inspector General for an
opinion as to whether it violates the Anti-Kickback Statute.  If a
proposed arrangement receives a satisfactory Advisory Opinion, then the parties
can take some comfort in that what they are doing does not violate the
Anti-Kickback Statute.





Also, in
many companies, Compliance Plans are adopted.  These plans take a
number of forms.  Should a company ever violate the Anti-Kickback
Statute having a Compliance Plan (the “Plan”) which the Company follows will
mitigate the sentence that might otherwise be imposed on the affected
individuals.  Although there is not necessarily any one right way to
draft or implement a Compliance Plan, there are some elements which the
authorities will be looking for in the Plan, including a “hot” line for the
reporting of suspected fraudulent or abusive activity, dissemination of the
Plan, actions taken or not taken as the result of a report of wrongful activity
including whether those who reported the activity were terminated.





An
allegation of violation and/or a conviction for violation of the Anti-Kickback
Statute and parallel state laws could have a significant impact on our ability
to conduct our business.  As noted earlier, significant fines,
penalties, exclusion from Medicare and Medicaid programs and imprisonment of
individuals can result.  Because the burden to prove specific intent
under the Anti-Kickback Statute can sometimes be difficult, the government has
been pursuing enforcement under statutes that do not require specific intent
such as the False Claims Act. In fact, in recent legislation the Congress has
required that those submitting claims for third party reimbursement are required
to discover and repay any overpayments, or they are subject to additional
penalties.





The
Stark Law:





Federal
and some state laws prohibit physician referrals to an entity in which the
physician or his or her immediate family members have a financial interest for
provision of certain designated health services that are reimbursed by Medicare
or Medicaid.  Outpatient prescription drugs are one of the designated
services.  We believe we have structured our operations to comply with
these provisions but no assurances can be given that a federal or state agency
charged with enforcement of the Stark Law, its regulations, or similar state
laws might not assert a contrary position.  In addition, periodically,
there are efforts to expand the scope of these referral restrictions from its
application to government health care programs to all payors and to additional
health services.  Certain states have adopted similar restrictions or
are considering expanding the scope of existing restrictions.  We
cannot assure you that the federal government, or other states in which we
operate, will not enact similar or more restrictive legislation or restrictions
or interpret existing laws and regulations in a manner that could harm our
business.





Professional
Fee Splitting:





The laws
of many states prohibit physicians from sharing professional fees with
non-physicians and prohibit entities not solely owned by physicians, including
us, from practicing medicine and from employing physicians to practice
medicine.  The laws in most states regarding the corporate practice of
medicine have been subjected to judicial and regulatory interpretation and while
we have attempted to structure our relationships with physicians and our
operations in a manner that complies with these requirements, there is no
assurance that various state regulators will agree that we are in
compliance.





Professional
Licenses:





State
laws prohibit the practice of medicine without a license.  We believe
that our arrangements with physicians and physician groups are structured in a
manner that precludes a determination that we are practicing
medicine.  Nevertheless, a state could consider our activities to
constitute the practice of medicine.  If we are found to have violated
these laws, we could face civil and criminal penalties and be required to
reduce, restructure or even cease our business in that state.





HIPAA:





The Health Insurance Portability and
Accountability Act (HIPAA) was enacted by the United States Congress in 1996.
Title I of HIPAA protects health insurance coverage for workers and their
families when they change or lose their jobs and amends the Employment
Retirement Income Security Act, the Public Health Service Act, and the Internal
Revenue Code.





Title II of HIPAA defines numerous
offenses relating to health care and sets civil and criminal penalties for
them.  It also creates several programs to control fraud and abuse
within the health care system.  However, the most significant
provisions of Title II are its Administrative Simplification rules which require
the establishment of national standards for electronic health care transactions
and national identifiers for providers, health insurance plans, and
employers.  The Administration Simplification provisions also address
the security and privacy of health data.  The standards are meant to
improve the efficiency and effectiveness of the nation's health care system by
encouraging the widespread use of electronic data exchange in the United
States.  These rules apply to "covered entities" as defined by HIPAA
and the Department of Health and Human Services (HHS).  Covered
entities include health care providers, health plans and health care
clearinghouses, such as billing services and community health information
systems that generate, transmit and store health care data.


7





The new Health Information Technology
for Economic and Clinical Health Act (HITECH Act), which is Title XIII of the
American Recovery and Reinvestment Act of 2009 (ARRA), amended HIPAA and
included provisions for its heightened enforcement and stiffer penalties for
privacy and security violations.  The new privacy and security
provisions expand the reach of HIPAA’s privacy and security standards to include
“business associates” of covered entities, mandate certain actions in the event
of a breach of unsecured personal health information that could harm the
reputation or finances of individuals, and establish certification standards for
securing data at different data states through the Certification Commission for
Healthcare Information Technology (CCHIT), among other
provisions.  Covered entities must incorporate these additional
requirements in their agreements with their business associates.  The
stiff new requirements for breach notification of unsecured health information
provide a strong incentive for covered entities and their business associates to
implement CCHIT certified products and solutions.  The new HITECH
penalties privacy and security violations are the same for covered entities and
for their business associates.  These include a tiered increase in the
amount of civil monetary penalties. Where the person did not know, and by
exercising reasonable diligence would not have known, that such person violated
a provision: (i) $100 for each violation; (ii) the total amount per calendar
year for all such violations of an identical requirement may not exceed
$25,000.  Where the violation was due to reasonable cause and not to
willful neglect: (i) $1,000 for each violation, (ii) the total amount per
calendar year for all such violations of an identical requirement may not exceed
$100,000. Where the violation was due to willful neglect and was corrected: (i)
$10,000 for each violation, (ii) the total amount per calendar year for all such
violations of an identical requirement may not exceed $250,000.  Where
the violation was due to willful neglect and was not corrected: (i) $50,000 for
each violation, (ii) the total amount per calendar year for all such violations
of an identical requirement may not exceed $1,500,000.  The Secretary
of HHS will base the amount of the penalty on: (i) the nature and extent of the
violation, (ii) the nature and extent of the harm resulting from such
violation.  Penalties and enforcement measures applicable to vendors
of personal health records (PHRs) and other non-HIPAA covered entities and
business associates.  Violations of the breach notification provisions
related to PHR identifiable health information will also be treated as unfair
and deceptive acts or practices under the Federal Trade Commission
Act.  In addition, many states also have laws that protect the privacy
and security of confidential, personal information.  These laws may be
similar to or even more protective than the federal HIPAA and HITECH
provisions.  Not only may some of these state laws impose fines and
penalties upon violators, but some may afford private rights of action to
individuals who believe that their personal information has been
misused.





The HITECH Act also allocates billions
of dollars for investment in the implementation and exchange of health
information technology, such as electronic health records (EHR) and electronic
networks and interchanges. The HITECH Act contains financial incentives for
certain covered entities to adopt and undertake the meaningful use of qualifying
information technology, with incentives changing to penalties for failure to
adopt such technologies after a period of time.





We must
comply with the various HIPAA standards described above.  The
decentralized nature of our operations could represent significant challenges to
us in the implementation of required compliance.  If we are found to
not be in compliance, we could be subject to fines, penalties and other actions
which could have an adverse effect on our business.





Health
Care Reform:





There are currently a number of
legislative proposals that have been proposed as health care reform in the
United States Congress.  At this time, it is not clear which, if any,
of these proposals will be enacted.  Therefore, although one or more
of these proposals, if enacted, could have an impact on our business, we cannot
predict at this time what that impact will be until there is legislation that
becomes law.





Confidentiality:




Under
federal and state laws, we must adhere to stringent confidentiality regulations
intended to protect the confidentiality of patient records. We believe our
operations are in compliance with these laws but we could be subject to claims
from patients as well as charges of violations from regulators and such claims
or charges could have a material adverse effect on our business.





Ongoing
Investigations:




Federal
and state investigations and enforcement actions continue to focus on the health
care industry, scrutinizing a wide range of items such as joint venture
arrangements and referral and billing practices.  We believe our
current and planned activities are substantially in compliance with applicable
legal requirements.  We cannot assure you, however, that a
governmental agency or a third party will not contend that certain aspects of
our business are subject to, or are not in compliance with, such laws,
regulations or rules, or that state or federal regulatory agencies or courts
would interpret such laws, regulations and rules in our favor, or that future
interpretations of such laws will not require structural or organizational
modifications of our existing business or have a negative impact on our
business.  Applicable laws and regulations are very broad and complex,
and, in many cases, the courts interpret them differently, making compliance
difficult.  Although we try to comply with such laws, regulations and
rules, a violation could result in denial of the right to conduct business,
significant fines and criminal penalties.  Additionally, an increase
in the complexity or substantive requirements of such laws, regulations or
rules, or reform of the structure of health care delivery systems and payment
methods, could have a material adverse effect on our business.




Intellectual
Property:




Our
success depends in part on our ability to maintain trade secret protection and
operate without infringing on or violating the proprietary rights of third
parties.  In addition, we also rely, in part, on trade secrets,
proprietary know-how and technological advances which we seek to protect by
measures, such as confidentiality agreements with our employees, consultants and
other parties with whom we do business.  We cannot assure you that
these agreements will not be breached, that we will have adequate remedies for
any breach or that our trade secrets and proprietary know-how will not otherwise
become known, be independently discovered by others or found to be
unprotected.


8





Employees:





The
Company counts 214 full-time employees coming from various
backgrounds.  In addition to over 100 physicians accredited in
hyperbaric medicine, including some of the top physicians practicing in vascular
surgery today, the Company boasts a number of ex-hospital executives, registered
nurses, financial professionals, and business executives.  To ensure
and facilitate the successful planning, implementation and continued operations
of our numerous wound care centers, our team also utilizes architects,
engineers, contractors, and healthcare counsel.  Currently, CFWH
provides management and operations for 35 hospital-based wound care and HBOT
programs.





ITEM
2. Properties:





The
corporate office is located in Tarrytown, NY and the Company maintains a small
satellite office in Iselin, NJ.  The corporate office lease extends
through November 30, 2012 at a starting base rate of $6,480 per
month.





The
minimum payments under non-cancelable operating lease obligations for office
space at June 30, 2009 are as follows:





Years Ending June 30,2010
                        
                        $
                        108,3542011
                        
                        $
                        105,1322012
                        
                        $
                        99,2482013
                        
                        $
                        28,080




Rent
expense under all operating leases in fiscal years ended June 30, 2009 and 2008
was $125,848 and $225,925, respectively.  As of August, 2009, the
Company acquired additional office space with an annual obligation of
$37,416.  The lease obligation calculation, shown above, does not
include the additional space.




ITEM
      3.
            Legal
      Proceedings:




There is
no action, suit, proceeding, inquiry or investigation before or by any public
board, government agency, self-regulatory organization or body pending or, to
the knowledge of the executive officers of our company or any of our
subsidiaries, threatened against or affecting our company, our common stock, any
of our subsidiaries or of our company's or our company’s subsidiaries’ officers
or directors in their capacities as such, in which an adverse decision could
have a material adverse effect.




ITEM
      4.
            Submission
      of Matters to a Vote of Security
Holders:




No
matters were submitted to shareholders for the quarter ended June 30,
2009.


9





PART
II




ITEM
      5.
            Market
      for Registrant's Common Equity, Related Stockholder Matters and Small
      Business Issuer Purchases of Equity
Securities:




Our
common stock was quoted on the Over-The-Counter Bulletin Board system and the
Financial Industry Regulatory Authority (“FINRA”) Electronic Bulletin Board
under the symbol "CFWH.OB."





The
closing price of our common stock on September 30, 2009, as reported on CFWH.OB
was $0.45 per share.




Quarter
      Ended
                      
                      High
                      
                      
                      LowSeptember
      2007
                      
                      $
                      2.75
                      
                      
                      $
                      2.50December
      2007
                      
                      $
                      2.50
                      
                      
                      $
                      2.50March
      2008
                      
                      $
                      3.00
                      
                      
                      $
                      1.40June
      2008
                      
                      $
                      3.50
                      
                      
                      $
                      0.76September
      2008
                      
                      $
                      1.50
                      
                      
                      $
                      0.75December
      2008
                      
                      $
                      1.10
                      
                      
                      $
                      0.36March
      2009
                      
                      $
                      0.45
                      
                      
                      $
                      0.05June
      2009
                      
                      $
                      0.90
                      
                      
                      $
                      0.10




The
quotations set forth above reflect inter-dealer prices, without retail markup,
markdown, or commission, and may not necessarily represent actual
transactions.




Holders:




As of
September, 30 2009, there were approximately 220 shareholders of record of our
common stock.




Dividends:




We have
never declared or paid any cash dividends on our capital stock and do not
anticipate paying any cash dividends on our capital stock in the foreseeable
future. Instead, we intend to retain our earnings, if any, to finance the
expansion of our business. The declaration and payment of dividends in the
future, if any, will be determined by the board of directors in light of
conditions then existing, including our earnings, financial condition, capital
requirements and other factors.





Equity
Compensation Plan Information:




The
following table gives information about our common stock that may be issued upon
the exercise of options, or rights under our existing equity compensation plan,
the 2006 Stock Option Plan (as amended and restated April 20, 2009). The
information in this table is as of June 30, 2009.





Plan
      Category
                                                        
                                                        Number
      of securities to
                                                          be
      issued upon exercise
                                                          of
      outstanding options
                                                          and
      rights
                                                        
                                                        Weighted
      average
                                                          exercise
      price of
                                                          outstanding
      options
                                                          and
      rights
                                                        
                                                        Number
      of
                                                          securities
                                                          remaining
                                                          availableEquity
      compensation plans approved by security holders (1)
                                                        
                                                        3,402,500
                                                        
                                                        $
                                                        1.15
                                                        
                                                        4,097,500Equity
      compensation plans not approved by security holders
                                                        
                                                        -
                                                        
                                                        
                                                        -
                                                        
                                                        -Total
                                                        
                                                        3,402,500
                                                        
                                                        $
                                                        1.15
                                                        
                                                        4,097,500





(1)
            Our
      2006 Stock Option Plan permits the issuance of restricted stock, stock
      appreciation rights, options to purchase our common stock, deferred stock
      and other stock-based awards, not to exceed 7,500,000 shares of our common
      stock, to employees, outside directors, and
  consultants.


10





ITEM 7.   Management's Discussion and Analysis
of Financial Condition and Results of Operations




GENERAL
OVERVIEW




The
following Management’s Discussion and Analysis (“MD&A”) is intended to help
the reader understand our company. The MD&A is provided as a supplement to,
and should be read in conjunction with, our financial statements and the
accompanying notes (“Notes”).




FORWARD-LOOKING
INFORMATION




This
Annual Report on Form 10-K includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended.  We have based
these forward-looking statements on our current expectations and projections
about future events.  These forward-looking statements are subject to
known and unknown risks, uncertainties and assumptions about us that may cause
our actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking
statements.  In some cases, you can identify forward-looking
statements by terminology such as “may,” “should,” “could,” “would,” “expect,”
“plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such
terms or other similar expressions. Actual operations and results may differ
materially from present plans and projections due to changes in economic
conditions, new business opportunities, changed business conditions, and other
developments.  Other factors that could cause results to differ
materially are described in our filings with the Securities and Exchange
Commission.




There are
several factors that could cause actual results or events to differ materially
from those anticipated, and include, but are not limited to, general economic,
financial and business conditions, changes in and compliance with governmental
laws and regulations, including various state and federal government
regulations, our ability to obtain additional financing from outside investors
and/or bank and mezzanine lenders, and our ability to generate revenues
sufficient to achieve positive cash flow.




Readers
are cautioned not to place undue reliance on the forward-looking statements
contained herein, which speak only as of the date hereof.  We believe
the information contained in this Form 10-K to be accurate as of the date
hereof.  Changes may occur after that date.  We will not
update that information except as required by law in the normal course of its
public disclosure practices.




Additionally,
the following discussion regarding our financial condition and results of
operations should be read in conjunction with the financial statements and
related notes contained in Item 8 of Part II of this Form 10-K.





GENERAL




The
Company develops and manages comprehensive wound care centers, which are
marketed as “THE CENTER FOR WOUND HEALINGtm”
primarily in the mid-Atlantic and northeastern parts of the
country.  These centers render wound care and the specialized service
of hyperbaric medicine, and are developed in partnerships with acute care
hospitals.  We enter into separate multi-year operating agreements to
startup and manage the wound care program with the hospital environment.
Although there can be no assurance that we will be successful in each instance,
our plans for each hospital center requires a multi-year committed contract term
adequate for us to recover our investment in leasehold improvements (a sunk cost
and non-transferable asset); our start-up costs, including recruiting and
training of personnel; and the amortization of chamber lease
financing.  Generally, the hospital provides us with appropriate space
for each of our centers.




We are
responsible for the development and management of the wound care and hyperbaric
centers, including providing direct staff and billing support to ensure
hospitals are reimbursed appropriately.  We also are responsible for
designing and installing necessary leasehold improvements of the
hospital-provided space and to supply the appropriate equipment, including the
hyperbaric chambers.  We acquire the chambers under both operating and
capitalized lease financing transactions with $1 buyout arrangements (treated as
capitalized leases in our accompanying audited consolidated financial
statements).  As our operation grows, we have the ability to transfer
chambers between institutions to balance demand and maximize the use of our
resources.





Patient
service revenue is recognized when the service is rendered in accordance with
the terms of the contracts with hospitals.  Certain hospitals are not
billed for the service until the hospital is paid by the third party
payers.  As a result, accounts receivable include amounts not yet
billed to the hospitals, collection of which by CFWH can take several
months.




RESULTS
OF OPERATIONS:




The
Company was formed on May 25, 2005, and began its operations with six centers on
July 1, 2005.  Generally, hospital contracts are held within a Company
subsidiary, usually an LLC, which is 100% owned by the Company.  The
Company then acquired the interests of two additional LLCs effective January 1,
2006, and 12 additional LLCs effective April 1, 2006.  Since then,
although the Company has added and closed individual centers, it has increased
the total number of centers that we operate to 35.  Our revenues vary
based on the demand for treatments and the utilization of wound care centers and
hyperbaric chambers.  The demand from the hospitals for our services
is dependent upon their abilities to attract patients, their reputation in the
medical communities and the geographic areas they serve, and on the allowable
rates and frequency of reimbursement by health care insurance providers, managed
care providers, Medicare, Medicaid and others.  We conduct market
awareness programs and advertising to promote the utilization of our centers
among medical professionals, care-givers and patients.  Revenues
fluctuate monthly with the number of days per month that the hospitals in which
we operate our centers are open.


11





·
            In
      September 2008 management determined that its contract with one hospital
      was impaired.  Management moved the furniture, fixtures and
      equipment at this facility to a new facility in the second quarter of
      fiscal 2009 and abandoned the remaining assets at the
      hospital.  A charge for the abandonment of assets of
      approximately $190,000 was charged to operations in the fourth quarter of
      fiscal 2008.·
            In
      April 2009 the Company completed the acquisition of the equity interests
      of the minority investors who held interests in various LLC’s, which were
      established by the Company during the early years of its
      formation.  Included in this acquisition were two centers that
      were closed during the year, St. John’s Queens and Newark Beth
      Israel.  A charge for the abandonment of assets of $134,000 was
      charged to operations in the fourth quarter of fiscal year
      2009.





REVENUES:




Revenues
for the years ended June 30, 2009 and 2008 were $29.2 million and $26.4 million,
respectively.  The $2.8 million or 10.6% increase is attributable to
$1.6 million of revenues from centers opened during the year, and $1.2 million
increased revenues from existing centers.  The Company expects
revenues to increase as a result of increasing volumes at existing centers and
business generated from new centers.





OPERATING
EXPENSES:




Cost of
services:  Cost of services, which are comprised principally of
payroll and payroll related costs for administrative, professional and nursing
staff required to administer treatments at our centers, as well as depreciation
relating to hyperbaric medical chambers and leasehold improvements, was $14.9
million or 51% of total revenues for the year ended June 30, 2009 compared with
$13.2 million or 49.9% in the year ended June 30, 2008.  The $1.7
million or 12.9% increase is primarily attributable to higher direct labor and
contract labor costs associated with the operations of new centers; increased
staffing costs at centers where volume increases required higher staffing
levels; increases in medical and commercial insurance costs; and an increase in
depreciation expenses for leasehold improvements and equipment for four
hospitals opened during the year.  The Company expects its costs of
services to increase as its volumes increase at existing centers and as it adds
new centers to its portfolio.




Sales and
marketing:  Sales and marketing expenditures increased by $74
thousand to $254 thousand in 2009 compared with 2008 due to increased commission
expenses paid for business development activities related to new
centers.





General and
administrative:  General and administrative expenses are
comprised primarily of payroll and payroll related costs, insurance, accounting,
travel and entertainment costs, and professional fees.General and
administrative costs increased by $1.3 million to $9.8 million or 33.6% of
revenues during the year ended June 30, 2009, compared to $8.5 million or 32.1%
of revenues during the year ended June 30,2008.  The increase is
primarily due to higher payroll and payroll related costs for regional
management and corporate staff, and higher support costs associated with a
growing organization.  The Company expects general and administrative
expenses to increase as new centers are added to the portfolio and as the
Company invests in its infrastructure necessary to support a larger
organization.





Depreciation
and amortization:  Depreciation and
amortization expense related to corporate property and equipment and intangible
assets aggregated to $1.1 million or 3.8% of revenues in fiscal 2009 compared
with $444 thousand or 1.7% of revenues in fiscal 2008.  The increase
is due to the acquisition and deployment of various software applications and
hardware necessary for the Company to conduct its business, contract
amortization costs associated with the purchase of a hospital contract, and to
the amortization of the intangible assets associated with the buyout of the
minority interests.




Bad debt
expense:  Bad debt expense was $2.1 million or 7.2 % of total
revenues for the year ended June 30, 2009 compared with $800 thousand or 3% of
fiscal 2008 total revenues.  Of this amount, approximately $0.6
million is the write off of receivables balances from two hospitals that filed
bankruptcy during fiscal 2009.  The increase is due to write-offs of old
receivables the Company deemed uncollectable and higher bad debt reserves for
the current year to reflect the more precarious economic
environment.  The Company implemented new systems during fiscal 2009
to better acquire, organize and manage detailed information about customer
receivables.  Then, based on the related analyses, the Company wrote
off substantial receivables against previously established
allowances.  In addition, in view of the difficult economic
environment, including the bankruptcy of certain hospitals served by the
Company, management provided a higher level of reserves against receivables than
was considered necessary in the past.





Abandonment
loss:  Abandonment loss was $134 thousand or 0.5% of total
revenue for the year ended June 30, 2009 compared with $190 thousand or 0.7% of
total revenues for fiscal 2008. These losses resulted from the closing of
centers in both fiscal years.


12





OTHER
INCOME (EXPENSE):




Interest
expense:  The Company incurred interest expense of $4.9 million
or 16.7% of total revenues for the year ended June 30, 2009, of which only $333
thousand was cash interest, compared with $6.8 million and 25.7% in the fiscal
year ended June 30, 2008 of which $2.0 million was cash interest.  The
$1.9 million decrease was attributable to the elimination of noncash interest,
penalties and fees associated with subordinated debt that was repaid from the
proceeds of the Bison Financing and the reduction in cash interest costs due to
reduced borrowing under our working capital line.




Non-controlling interest in
net income or loss of consolidated
subsidiaries:  Non-controlling interest had a $10 thousand
income benefit for the year ended June 30, 2009 compared to an expense of $154
thousand or 0.6% in fiscal year 2008.  In April 2009, the majority of
the Non-controlling interests converted their minority interests into shares of
the Company and cash.




Loss on disposal of property
and equipment: The loss on disposal of property and equipment was $69
thousand or 0.3 % of total revenues in fiscal 2008.




INCOME
TAXES:




Income
tax expense for fiscal year 2009 was $130 thousand compared to $20
thousand in fiscal 2008.  The increase was due to increase in
current state income taxes and true-up for prior periods.





LIQUIDITY
AND CAPITAL RESOURCES:




Operating
Activities:  Net cash provided by operating activities was $6.5
million for the year ended June 30, 2009.  While our net loss was $4.2
million, substantial noncash expenses were incurred during the year including
(a) $4.3 million of interest accrued for the senior collateralized subordinated
promissory note, (b) depreciation and amortization of $4.8 million related to
equipment, leasehold improvements, and certain hospital contracts, (c) $1.6
million for the amortization of stock options, (d) reserves for bad debts of
$2.1 million, (e) and $0.2 million for the amortization of deferred financing
costs.  Gross accounts and notes receivable increased $1.9 million for
the year ended June 30, 2009, which was anticipated as the number of centers
operated by the Company increased from the prior year and our overall revenues
increased.  Accounts payable and accrued expenses declined $0.9
million.





Investing Activities:
Net cash used in investing activities was $2.3 million for the year ended June
30, 2009.  The primary use of cash was for the purchase of leasehold
improvements, property and equipment for new centers; software and hardware
necessary to support the Company’s information technology needs; and purchasing
of non-controlling interests.




Financing Activities:
Net cash used by financing activities was $3.9 million for the year ended June
30, 2009.  In December 2008 the Company entered into a new senior bank
line of credit with its existing lender which, among other things, increased the
total line to $8 million in the form of a revolving line of credit and a term
loan.  During the year the Company repaid $3.5 million of the bank
line of credit, retired $0.9 million of notes and loans, repaid $0.6 million of
capital lease obligations, and made the required distributions of $0.5 million
to former majority members (see note 17).




We participate in a working capital
financing and term loan arrangement with Signature Bank, which matures on
December 1, 2012.  The use of these funds will be required to support
our operations in the future and will be dependent upon satisfying borrowing
base requirements, among other covenants.  As of June 30, 2009, the
Company was in compliance with all required covenants except for the minimum
effective tangible net worth covenant, for which the Company has received a
waiver from the lender.




We
believe that the cash flows from operations and borrowings under the senior bank
line of credit will provide sufficient liquidity for the Company to be able to
finance our operations for at least the next 12 months.




OFF-BALANCE
SHEET ARRANGEMENTS:





We do not
currently have any off-balance sheet arrangements that have, or are likely to
have, a material current or future effect on us.





RECENT ACCOUNTING
PRONOUNCEMENTS:





See Note
2 to the Condensed Consolidated Financial Statements regarding the effects on
the Company’s financial statements of the adoptions of recent accounting
pronouncements.


13




ITEM 8.   Financial
Statements




THE
CENTER FOR WOUND HEALING, INC.




Reports
      of Independent Registered Public Accounting Firms
                  
                  15,16Consolidated
      Balance Sheets as of June 30, 2009 and 2008
                  
                  17Consolidated
      Statements of Operations for the Years Ended June 30, 2009 and
      2008
                  
                  18Consolidated
      Statements of Cash Flows for the Years Ended June 30, 2009 and
      2008
                  
                  19Consolidated
      Statements of Stockholders' Equity for theYears Ended June 30,
      2009 and 2008
                  
                  20Notes
      to Consolidated Financial Statements
                  
                  21-34


14




REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the
Board of Directors and Stockholders of The Center for Wound Healing,
Inc.




We have
audited the accompanying consolidated balance sheet of The Center for Wound
Healing, Inc. and Subsidiaries (the “Company”) as of June 30, 2009, and the
related consolidated statements of operations, stockholders’ equity, and cash
flows for the year then ended.  These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.




We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.




In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of The Center for Wound
Healing, Inc. and Subsidiaries as of June 30, 2009, and the consolidated results
of their operations, and their consolidated cash flows for the year then ended
in conformity with accounting principles generally accepted in the United States
of America.




Eisner
LLP


New York,
New York


October
13, 2009


15





REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and Stockholders of The Center for Wound Healing,
Inc.




We have
audited the accompanying consolidated balance sheet of The Center for Wound
Healing, Inc. and Subsidiaries (the “Company”) as of June 30, 2008, and the
related consolidated statements of operations, stockholders’ equity, and cash
flows for the year then ended.  These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.




We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of The Center for Wound
Healing, Inc. and Subsidiaries as of June 30, 2008, and the consolidated results
of their operations, and their consolidated cash flows for the year then ended
in conformity with accounting principles generally accepted in the United States
of America.





/s/
      Raiche Ende Malter & Co. LLPRaich Ende Malter
      & Co. LLPNew York, NY





September
24, 2008, except for items as restated in the financial statements, as included
in the Company’s Form 10-KSB/A for the year ended June 30, 2008, as filed with
the Commission on October 9, 2009, for which date would be October 9,
2009.


16


THE CENTER FOR WOUND HEALING, INC. AND
SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 JUNE
      30,2009
                            
                            
                            2008ASSETSCURRENT ASSETSCash
                            
                            $
                            339,859
                            
                            
                            $
                            55,139Accounts
      receivable, net of allowance for doubtful accounts of $2,969,974 and
      $2,941,917 respectively
                            
                            
                            14,590,231
                            
                            
                            
                            14,563,325Notes
      receivable, net of allowance of $118,298 and $0
    respectively
                            
                            
                            140,536
                            
                            
                            
                            460,872Income
      tax refunds receivable
                            
                            
                            -
                            
                            
                            
                            2,090Prepaid
      expenses and other current assets
                            
                            
                            295,135
                            
                            
                            
                            398,631Total
      current assets
                            
                            
                            15,365,761
                            
                            
                            
                            15,480,057Notes
      receivable
                            
                            
                            -
                            
                            
                            
                            134,295Property
      and equipment, net
                            
                            
                            7,585,373
                            
                            
                            
                            8,886,005Intangible
      assets, net
                            
                            
                            3,110,378
                            
                            
                            
                            4,402,495Goodwill
                            
                            
                            751,957
                            
                            
                            
                            751,957Other
      assets
                            
                            
                            1,427,391
                            
                            
                            
                            1,507,192TOTAL
      ASSETS
                            
                            $
                            28,240,860
                            
                            
                            $
                            31,162,001LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT LIABILITIESAccounts
      payable and accrued expenses
                            
                            $
                            3,080,796
                            
                            
                            $
                            4,105,548Current
      maturities of obligations under capital leases
                            
                            
                            133,295
                            
                            
                            
                            526,107Current
      maturities of senior collateralized subordinated promissory
      note
                            
                            
                            532,227
                            
                            
                            
                            -Current
      maturities of notes payable
                            
                            
                            1,957,626
                            
                            
                            
                            5,139,856Payable
      to former majority members
                            
                            
                            118,034
                            
                            
                            
                            618,033Total
      current liabilities
                            
                            
                            5,821,978
                            
                            
                            
                            10,389,544Senior
      collateralized subordinated promissory note , net of current
      maturities
                            
                            
                            13,772,810
                            
                            
                            
                            9,968,740Notes
      payable, net of current maturities
                            
                            
                            1,323,629
                            
                            
                            
                            782,133Obligations
      under capital leases, net of current maturities
                            
                            
                            4,850
                            
                            
                            
                            131,774Non-controlling
      interest in consolidated subsidiaries
                            
                            
                            315,150
                            
                            
                            
                            580,558TOTAL
      LIABILITIES
                            
                            
                            21,238,417
                            
                            
                            
                            21,852,749COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS' EQUITYCommon
      stock, $0.001 par value; 290,000,000 shares authorized; 24,123,638 and
      23,373,281 shares issued and outstanding at June 30, 2009 and 2008,
      respectively
                            
                            
                            24,123
                            
                            
                            
                            23,373Additional
      paid-in capital
                            
                            
                            31,625,135
                            
                            
                            
                            29,764,982Accumulated
      deficit
                            
                            
                            (24,646,815
                            )
                            
                            
                            (20,479,103
                            )TOTAL
      STOCKHOLDERS' EQUITY
                            
                            
                            7,002,443
                            
                            
                            
                            9,309,252TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                            
                            $
                            28,240,860
                            
                            
                            $
                            31,162,001
 
 The
accompanying notes are an integral part of these financial
statements.
  17
 THE CENTER FOR WOUND HEALING, INC. AND
SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 For
      the years ended June 30,2009
                        
                        
                        2008REVENUE
                        
                        $
                        29,206,208
                        
                        
                        $
                        26,357,619OPERATING EXPENSESCost
      of services
                        
                        
                        14,854,283
                        
                        
                        
                        13,157,728Sales
      and marketing
                        
                        
                        253,999
                        
                        
                        
                        180,367General
      and administration
                        
                        
                        9,849,924
                        
                        
                        
                        8,466,779Abandonment
      loss
                        
                        
                        133,589
                        
                        
                        
                        189,992Depreciation
      and amortization
                        
                        
                        1,082,914
                        
                        
                        
                        443,581Bad
      debts
                        
                        
                        2,111,499
                        
                        
                        
                        796,027TOTAL
      OPERATING EXPENSES
                        
                        
                        28,286,208
                        
                        
                        
                        23,234,474OPERATING
      INCOME
                        
                        
                        920,000
                        
                        
                        
                        3,123,145OTHER EXPENSES (INCOME)Interest
      expense
                        
                        
                        4,937,657
                        
                        
                        
                        6,783,110Interest
      income
                        
                        
                        (19,550
                        )
                        
                        
                        (41,344
                        )Non-controlling
      interest in net (income) loss of consolidated subsidiaries
                        
                        
                        (10,418
                        )
                        
                        
                        154,254Loss
      on disposal of property and equipment
                        
                        
                        -
                        
                        
                        
                        68,880Other
      expenses
                        
                        
                        49,801
                        
                        
                        
                        20,865TOTAL
      OTHER EXPENSES
                        
                        
                        4,957,490
                        
                        
                        
                        6,985,765LOSS
      BEFORE PROVISION FOR INCOME TAXES
                        
                        
                        (4,037,490
                        )
                        
                        
                        (3,862,620
                        )PROVISION
      FOR INCOME TAXES
                        
                        
                        130,222
                        
                        
                        
                        20,065NET
      LOSS
                        
                        $
                        (4,167,712
                        )
                        
                        $
                        (3,882,685
                        )NET
      LOSS  PER COMMON SHARE-BASIC AND DILUTED
                        
                        $
                        (0.18
                        )
                        
                        $
                        (0.17
                        )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES - BASIC AND DILUTED
                        
                        
                        23,548,029
                        
                        
                        
                        22,997,476
 
 The
accompanying notes are an integral part of these financial
statements.
  18
  THE
CENTER FOR WOUND HEALING, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 For
      The Years Ended June 30,2009
                            
                            
                            2008CASH FLOWS FROM OPERATING
      ACTIVITIESNet
      loss
                            
                            $
                            (4,167,712
                            )
                            
                            $
                            (3,882,685
                            )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Depreciation
      and amortization
                            
                            
                            4,833,943
                            
                            
                            
                            4,046,018Abadonment
      loss
                            
                            
                            133,589
                            
                            
                            
                            189,992Interest
      charged for beneficial conversion features of 8% senior convertible
      debentures
                            
                            
                            -
                            
                            
                            
                            912,524Amortization
      of deferred financing costs
                            
                            
                            245,099
                            
                            
                            
                            2,141,561Bad
      debt expense
                            
                            
                            2,111,499
                            
                            
                            
                            796,027Non-controlling
      interest in net (income) loss of consolidated subsidiaries
                            
                            
                            (10,418
                            )
                            
                            
                            154,254Loss
      on disposal of property and equipment
                            
                            
                            -
                            
                            
                            
                            68,880Interest
      accrued for convertible debenture and notes payable
                            
                            
                            4,336,298
                            
                            
                            
                            1,135,634Share-based
      compensation expense
                            
                            
                            1,572,919
                            
                            
                            
                            1,516,604Amortization
      of 15% convertible debenture original issue discount
                            
                            
                            -
                            
                            
                            
                            -Issuance
      of shares in settlement of obligations
                            
                            
                            79,352
                            
                            
                            
                            -Warrants
      issued in payment of interest expense
                            
                            
                            
                            
                            
                            
                            564,659Changes
      in operating assets and liabilities:Accounts
      and notes receivable
                            
                            
                            (1,863,784
                            )
                            
                            
                            (4,447,000
                            )Prepaid
      expenses and other current assets
                            
                            
                            105,992
                            
                            
                            
                            (357,981
                            )Accounts
      payable and accrued expenses
                            
                            
                            (976,083
                            )
                            
                            
                            (1,517,287
                            )Income
      taxes
                            
                            
                            2,090
                            
                            
                            
                            881,506NET
      CASH PROVIDED BY OPERATING ACTIVITIES
                            
                            
                            6,402,784
                            
                            
                            
                            2,202,706CASH FLOWS FROM INVESTING
      ACTIVITIESPurchases
      of property and equipment
                            
                            
                            (1,594,111
                            )
                            
                            
                            (3,385,296
                            )Proceeds
      from sale of property and equipment
                            
                            
                            -
                            
                            
                            
                            45,000Increase
      in security deposits
                            
                            
                            -
                            
                            
                            
                            (460
                            )Acquisition
      of non-controlling interest
                            
                            
                            (702,714
                            )
                            
                            
                            -NET
      CASH USED IN INVESTING ACTIVITIES
                            
                            
                            (2,296,825
                            )
                            
                            
                            (3,340,756
                            )CASH FLOWS FROM FINANCING
      ACTIVITIESPrincipal
      payments on capital lease obligations
                            
                            
                            (519,736
                            )
                            
                            
                            (1,309,079
                            )Advances
      from affiliates
                            
                            
                            -
                            
                            
                            
                            25,948Net
      proceeds from bank loan - revolving line of credit
                            
                            
                            (3,455,012
                            )
                            
                            
                            (1,300,000
                            )Proceeds
      from issuance of senior secured promissory note
                            
                            
                            -
                            
                            
                            
                            17,500,000Payment
      of deferred financing costs
                            
                            
                            (36,462
                            )
                            
                            
                            (3,138,306
                            )Proceeds
      from bank loan - term note
                            
                            
                            2,000,000
                            
                            
                            
                            1,600,000Repayment
      of bank loan - term note
                            
                            
                            (250,000
                            )Payment
      of 8% senior convertible debenture
                            
                            
                            -
                            
                            
                            
                            (7,398,125
                            )Proceeds
      from issuance of common stock
                            
                            
                            -
                            
                            
                            
                            400,000Payments
      to former majority members
                            
                            
                            (500,000
                            )
                            
                            
                            (45,330
                            )Repayment
      of notes payable
                            
                            
                            (935,722
                            )
                            
                            
                            (4,990,268
                            )Distributions
      to non-controlling interest
                            
                            
                            (124,307
                            )
                            
                            
                            (368,109
                            )NET
      CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
                            
                            
                            (3,821,239
                            )
                            
                            
                            976,731NET
      INCREASE (DECREASE) IN CASH
                            
                            
                            284,720
                            
                            
                            
                            (161,319
                            )CASH  – BEGINNING OF
      YEAR
                            
                            
                            55,139
                            
                            
                            
                            216,458CASH  – END OF
    YEAR
                            
                            $
                            339,859
                            
                            
                            $
                            55,139SUPPLEMENTAL
      DISCLOSURES OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:Cash
      paid during the year:Interest
                            
                            $
                            333,302
                            
                            
                            $
                            2,029,146Income
      taxes
                            
                            $
                            101,351
                            
                            
                            $
                            22,405Non
      -cash financing and investing activities:Issuance
      of common stock  in connection with acquisition of
      non-controlling interest
                            
                            $
                            208,632Issuance
      of shares in settlement of obligations
                            
                            $
                            79,352Equipment
      acquired through capital lease obligation
                            
                            
                            
                            
                            
                            $
                            217,148Warrants
      and common stock issued in payment of accrued interest
                            
                            
                            
                            
                            
                            $
                            839,659Issuance
      of common stock to MedAir
                            
                            
                            
                            
                            
                            $
                            825,000Issuance
      of common stock to Warantz
                            
                            
                            
                            
                            
                            $
                            75,000Debt
      issued in connection with Intangible asset acquired
                            
                            
                            
                            
                            
                            $
                            2,617,744Warrants
      issued in connection with Bison Note
                            
                            
                            
                            
                            
                            $
                            8,391,893
 
 The
accompanying notes are an integral part of these financial
statements.
  19
  THE
CENTER FOR WOUND HEALING, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
 FOR THE
YEARS ENDED JUNE 30, 2009 AND 2008
 Common Stock
                    
                    
                    Additional
      Paid-
                    
                    
                    AccumulatedShares
                    
                    
                    Amount
                    
                    
                    in Capital
                    
                    
                    Deficit
                    
                    
                    TotalBalance
      at July 1, 2007
                    
                    
                    22,655,781
                    
                    
                    $
                    22,656
                    
                    
                    $
                    18,866,478
                    
                    
                    $
                    (16,596,418
                    )
                    
                    $
                    2,292,716Share-based
      compensation
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,783,527
                    
                    
                    
                    -
                    
                    
                    
                    1,783,527Issuance
      of common stock to MedAir
                    
                    
                    300,000
                    
                    
                    
                    300
                    
                    
                    
                    824,700
                    
                    
                    
                    -
                    
                    
                    
                    825,000Issuance
      of common stock in connection to Warantz
                    
                    
                    30,000
                    
                    
                    
                    30
                    
                    
                    
                    74,970
                    
                    
                    
                    -
                    
                    
                    
                    75,000Issuance
      of warrants in connection with Bison Note
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    6,976,035
                    
                    
                    
                    -
                    
                    
                    
                    6,976,035Issuance
      of warrants in connection with Bridge Financing
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    564,659
                    
                    
                    
                    -
                    
                    
                    
                    564,659Issuance
      of shares for cash
                    
                    
                    200,000
                    
                    
                    
                    200
                    
                    
                    
                    399,800
                    
                    
                    
                    -
                    
                    
                    
                    400,000Issuance
      of shares in settlement of accrued interest
                    
                    
                    187,500
                    
                    
                    
                    188
                    
                    
                    
                    274,813
                    
                    
                    
                    -
                    
                    
                    
                    275,000Net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (3,882,685
                    )
                    
                    
                    (3,882,685
                    )Balance
      at June 30, 2008
                    
                    
                    23,373,281
                    
                    
                    
                    23,373
                    
                    
                    
                    29,764,982
                    
                    
                    
                    (20,479,103
                    )
                    
                    
                    9,309,252Issuance
      of shares in settlement of obligations
                    
                    
                    98,381
                    
                    
                    
                    98
                    
                    
                    
                    79,254
                    
                    
                    
                    -
                    
                    
                    
                    79,352Issuance
      of shares in connection with acquisition of
      non-controlling  interest
                    
                    
                    651,976
                    
                    
                    
                    652
                    
                    
                    
                    207,980
                    
                    
                    
                    -
                    
                    
                    
                    208,632Share-based
      compensation
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,572,919
                    
                    
                    
                    -
                    
                    
                    
                    1,572,919Net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (4,167,712
                    )
                    
                    
                    (4,167,712
                    )Balance
      at June 30, 2009
                    
                    
                    24,123,638
                    
                    
                    $
                    24,123
                    
                    
                    $
                    31,625,135
                    
                    
                    $
                    (24,646,815
                    )
                    
                    $
                    7,002,443
 
 The
accompanying notes are an integral part of these financial
statements.
  20




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2009 AND 2008





Note
1 - Organization and Nature of Business




The
Center for Wound Healing, Inc. (“CFWH” or the “Company”) (formerly known as
American Hyperbaric, Inc.) was organized on May 25, 2005.  CFWH
develops and manages comprehensive wound care centers, which are marketed as
“THE CENTER FOR WOUND HEALING tm” throughout the United States.  These
centers render wound care treatments and the specialized service of hyperbaric
medicine, and are developed in partnerships with community and acute care
hospitals.  CFWH is contracted by the hospital on a multi-year basis
to start up and manage the hospital’s wound care program.




As of
June 30, 2009, CFWH operates thirty-five (35) wound care and hyperbaric centers
with various institutions.  Such centers operate as either
wholly-owned or majority-owned limited liability subsidiaries of
CFWH.  CFWH manages and provides administrative services to Hyperbaric
Medical Association, P.C. (“HMA”), a New York professional staffing company,
owned by the Company’s employee, under the terms of the Management Service
Agreement between the Company and HMA.  In return, HMA provides
professional healthcare staffing services to CFWH, its sole customer, under the
terms of the Technical Service Agreement.  CFWH is headquartered in
Tarrytown, New York.





Note
2 - Summary of Significant Accounting Policies





Principles of
Consolidation.  The accompanying consolidated financial
statements include the accounts of CFWH and its wholly-owned and majority-owned
subsidiaries and of Hyperbaric Medical Association, P.C., a variable interest
entity, whose primary beneficiary is CFWH.  Acquisitions of majority
ownership interests are accounted for under the purchase method of accounting
and reflect the fair value of net assets acquired at the date of
acquisition.  All intercompany profits, transactions, and balances
have been eliminated. Non-controlling interests in the net assets and earnings
or losses of the Company’s majority-owned subsidiaries are reflected in the
caption “Non-controlling interest in consolidated subsidiaries” in the
accompanying consolidated balance sheet and the caption “Non-controlling
interest in net (income) loss of consolidated subsidiaries” in the accompanying
consolidated statement of operations.  Non-controlling interest
adjusts the Company's consolidated results of operations to reflect only the
Company's share of the earnings or losses of its subsidiaries, and in the
consolidated balance sheet represents the portion of the net assets of
subsidiaries not attributable to the Company.





Revenue Recognition and
Accounts Receivables.Patient service revenue is
recognized when the service is rendered and the amount due is estimable, in
accordance with the terms of the individual contracts with
hospitals.   Generally, the contracts provide for a flat fee per
patient treatment, which may be derived from amounts allowable by third party
payers.  The reimbursement rates paid by insurance companies for wound
care and hyperbaric treatments vary in accordance with the insurance companies’
contracts with the hospital. Although revenue is recognized at the time of
service, the hospitals are usually not billed for the service until the hospital
is paid by the third party payers.   As a result, the accounts
receivable of the Company include amounts not yet billed to the
hospitals.   As of June 30, 2009 and 2008 approximately $10.7 and
$9.7 million, respectively of accounts receivable, were
unbilled.  Because the collection of receivables from certain
hospitals encompasses two separate billing processes, by the hospital to third
party payers and by CFWH to the hospitals, the elapsed time between rendering of
patent services and collection by CFWH may be several months.





The
allowance for billed and unbilled doubtful accounts is provided based on
historical trends and management estimates. Accounts receivable determined to be
uncollectible are written off when identified.





Property
and Equipment.Property and
equipment are recorded at cost.  The Company provides for depreciation
of property and equipment over their estimated useful lives using the
straight-line method.  Hyperbaric chambers, which are generally
acquired under capital leases, are depreciated over seven
years.  Leasehold improvements, primarily located at hospitals, are
amortized on a straight-line basis over the lesser of the remaining term of the
hospital contract or the economic life of the improvement.




Maintenance
and repairs are charged to operating expenses as they are
incurred.  Improvements and betterments which extend the lives of the
assets are capitalized.  The cost and accumulated depreciation of
assets retired or otherwise disposed of are relieved from the appropriate
accounts and any profit or loss on the sale or disposition of such assets is
credited or charged to income.




Leases.  Leases
are classified as capital leases or operating leases in accordance with the
terms of the underlying lease agreements.  Capital leases are recorded
as property and equipment and the related obligations as liabilities at the
lower of fair market value or present value.  Such assets are
amortized over their estimated useful lives.  The lease payments under
capital leases are applied as a reduction of the capital lease obligation and
accrued expense.





The
operating lease expense for rent, which may have a rent holiday included, is
recorded using the straight-line method over the life of the rent
agreement.


21





Long-Lived
Assets.  The Company reviews its long-lived assets for
impairment whenever events or changes in circumstances indicate the carrying
value may not be recoverable.  Impairment is measured by comparing the
carrying value of the long-lived assets to the estimated undiscounted future
cash flows expected to result from use of the assets and their ultimate
disposition.  If carrying value of the long-lived assets is not
considered to be recoverable, the amount of impairment loss to be recognized is
determined by comparing long-lived assets’ carrying value to their fair value
determined using future discounted cash flows.





Advertising
Costs.  Advertising costs are expensed as
incurred.  Advertising costs incurred for the fiscal years ended June
30, 2009 and 2008 were approximately $25,000 and $15,000, respectively and
included in sales and marketing expenses.





Income
Taxes   The Company uses the asset and liability method of
accounting for income taxes under which, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts and the tax bases of existing assets
and liabilities.  Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which these temporary
differences are expected to be recovered or settled.  The effect on
deferred tax assets or liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.  A valuation
allowance against deferred tax assets is provided when it is more likely than
not that the deferred tax asset will not be fully realized.





Concentrations.  The
Company places its cash primarily with one financial institution. At June 30,
2009 such deposits were in excess of the FDIC insurance limit by approximately
$90,000.





Fair Value of Financial
Instruments.  The carrying amount of cash, accounts and notes
receivable, accounts payable and accrued expenses approximate fair value due to
short-term maturities of the instruments. The carrying amount of the Company’s
Bank Loan, (Note 13), approximates fair value due to the variable interest rates
applicable to such indebtedness.  The fair value of the Company’s
other indebtedness, consisting of notes payable, capital lease obligations and
the Bison Note, (Note 14), was estimated to be approximately $23 million at June
30, 2009, based on the present values of future cash flows discounted at
estimated borrowing rates for similar loans.




Stock Based
Compensation.  The Company recognizes all share based payments,
including grants to employees of common stock options, as an expense based on
fair values of the grants measured on award dates, generally using Black-Sholes
valuation model, over vesting periods of such grants and net of an estimated
forfeiture rate for grants to employees. The Company estimates the expected
life of options granted based on historical exercise patterns and volatility
based on trading patterns of its common stock over a period similar to vesting
period of the grants.





Loss Per
Share.  Basic net earnings (loss) per share are calculated
based on the weighted average number of common shares outstanding for each
period.  Diluted loss per share includes potentially dilutive
securities such as outstanding options and warrants.  Common shares
issuable upon the exercise of warrants and options outstanding that could
potentially dilute basic EPS in the future were not included in the computation
of diluted EPS because to do so would have been anti-dilutive for the periods
presented.  Potential common shares as of June 30 are as
follows:





2009
                  
                  
                  2008Options
      to purchase shares of common stock
                  
                  
                  3,402,500
                  
                  
                  
                  1,857,667Warrants,
      issued and issuable, to purchase shares of common stock
                  
                  
                  14,085,676
                  
                  
                  
                  14,085,676Total
      potential shares of common stock
                  
                  
                  17,488,176
                  
                  
                  
                  15,943,343





Goodwill.  Goodwill
is not amortized but reviewed for possible impairment at least annually or more
frequently upon the occurrence of an event or when circumstances indicate that a
reporting unit’s carrying amount may be greater than its fair
value.  As of the fiscal year ended June 30, 2009, no impairment of
goodwill has occurred.




Amortization of Intangible
Assets.  Intangible assets with finite lives are amortized over
the estimated useful lives of these assets, generally from three to five
years.





Recent accounting
Pronouncements.





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
No. 157”), which defines fair value, establishes a framework for measurement of
fair value and expands disclosures about fair value measurements. SFAS No. 157
clarifies that fair value should be based on assumptions that market
participants will use when pricing an asset or liability and establishes a fair
value hierarchy of three levels that  prioritize the information used
to develop those assumptions. The Company adopted SFAS No. 157 effective July 1,
2008 with respect to financial assets and financial liabilities. The adoption of
SFAS No. 157 did not have a material effect on the Company’s consolidated
financial statements.


22





In
February 2008, the FASB issued FASB Staff Position 157-2 “Partial Deferral of
the Effective Date of Statement 157” (“FSP 157-2”). FSP 157-2 delays the
effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities,
except for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually), to fiscal years beginning
after November 15, 2008.  The Company does not expect adoption of SFAS
157-2 for nonfinancial assets and liabilities on July 1, 2009 to have a material
effect on the Company’s consolidated financial statements.





On
April 1, 2009, the Company adopted the FASB Staff Positions ("FSP")
FAS 157-4, Determining Fair Value When the Volume and Level of Activity for
the Asset and Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly. FSP FAS 157-4 clarifies the objective
and method of fair value measurement even when there has been a significant
decrease in market activity for the asset being measured. The adoption of
SFAS 157-4 did not have a material impact on the Company's consolidated
results of operations, financial position and cash flows.





On
October 1, 2008, the Company adopted FSP 140-4 and FIN 46(R)-8,
Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests in Variable
Interest Entities. FSP 140-4 and FIN 46(R)-8 require additional
disclosures about an entity's involvement with variable interest entities and
transfers of financial assets. The adoption of FSP 140-4 and
FIN 46(R)-8 did not have a material impact on the Company's consolidated
results of operations, financial position and cash flows.





In
February, 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities”.  This statement provides
companies with an option to report selected financial assets and liabilities at
fair value.  Although, this statement became effective for the Company
beginning July 1, 2008, the Company did not elect to value any financial assets
and liabilities at fair value.




On
October 1, 2008, the Company adopted FSP 157-3, Determining Fair Values of a
Financial Asset When the Market for That Asset Is Not Active.
FSP 157-3 clarifies the application of SFAS No. 157 to financial
instruments in an inactive market. The adoption of FSP 157-3 did not have a
material impact on the Company's consolidated results of operations, financial
position and cash flows.




In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
Combinations” (“SFAS No. 141(R)”). SFAS No. 141(R), replaces
SFAS No. 141, “Business Combinations”, and
establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any noncontrolling interest in the acquiree, and any
goodwill acquired in a business combination.  SFAS No. 141(R)
also establishes disclosure requirements to enable the evaluation of the nature
and financial effects of a business combination. SFAS No. 141(R) is to
be applied prospectively to business combinations for which the acquisition date
is on or after the beginning of the first annual reporting period beginning on
or after December 15, 2008.  The impact that the adoption of SFAS No.
141(R) will have on the Company’s financial statements is not presently
determinable, since it is dependant on future acquisitions, if any.




In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests
in Consolidated Financial Statements - an amendment of Accounting Research
Bulletin (“ARB”) No. 51” (“SFAS 160”).  SFAS 160 requires that
ownership interests in subsidiaries held by parties other than the parent, be
clearly identified, labeled, and presented in the consolidated financial
statements within equity, but separate from the parent’s equity.  It also
requires once a subsidiary is deconsolidated, any retained noncontrolling equity
investment in the former subsidiary be initially measured at fair value.
Sufficient disclosures are required to clearly identify and distinguish between
the interests of the parent and the interests of the noncontrolling
owners.  SFAS No. 160 is effective for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2008, and is to
be applied prospectively, except for the presentation and disclosure
requirements, which are required to be applied retrospectively for all
periods presented. The Company is evaluating the effect that SFAS 160 will
have on the Company’s financial statements.





In
April 2008, the FASB issued FSP 142-3, Determination of the Useful Life of
Intangible Assets, which amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible
Assets. FSP 142-3 is effective for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. The
Company will adopt FSP 142-3 beginning in fiscal 2010. The guidance
contained in FSP 142-3 for determining the useful life of a recognized
intangible asset shall be applied prospectively to intangible assets acquired
after the effective date. However, the disclosure requirements of FSP 142-3 must
be applied prospectively to all intangible assets recognized in our financial
statements as of the effective date. The Company does not believe that the
adoption of FSP 142-3 will have a material effect on its consolidated
results of operations, financial position and cash flows.




In
November 2008, the FASB issued Emerging Issues Task Force ("EITF") Issue
No. 08-7, Accounting for Defensive Intangible Assets. EITF No. 08-7
clarifies the accounting for certain separately identifiable intangible assets
which an acquirer does not intend to actively use. EITF No. 08-7 requires
an acquirer in a business combination to account for a defensive intangible
asset as a separate unit of accounting which should be amortized to expense over
the period the asset diminishes in value. EITF No. 08-7 is effective for
fiscal years beginning after December 15, 2008. Early adoption is
prohibited. The Company expects to adopt EITF No. 08-7 beginning in fiscal
2010, but does not believe this guidance will have a significant impact on its
consolidated results of operations, financial position and cash
flows.


23


In March
2008, the FASB issued SFAS No. 161 (“SFAS No. 161”), “Disclosures about
Derivative Instruments and Hedging Activities an amendment of FASB Statement No.
133”. SFAS No. 161 gives financial statement users better information about the
reporting entity's hedges by providing for qualitative disclosures about the
objectives and strategies for using derivatives, quantitative data about the
fair value of and gains and losses on derivative contracts, and details of
credit-risk-related contingent features in their hedged positions.  The
standard is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged, but not required.  The Company does not anticipate that the
adoption of SFAS No. 161 will have a material effect on the Company’s
consolidated financial statements.





In April
2008, the Financial Accounting Standards Board (“FASB”) issued EITF 07-05,
Determining whether an Instrument (or Embedded Feature) Is Indexed to an
Entity’s Own Stock, (“EITF 07-05”). EITF 07-05 provides guidance on determining
what types of instruments or embedded features in an instrument held by a
reporting entity can be considered indexed to its own stock for the purpose of
evaluating the first criteria of the scope exception in paragraph 11(a) of SFAS
133. EITF 07-05 is effective for financial statements issued for fiscal years
beginning after December 15, 2008 and early application is not permitted if
an entity has previously adopted an alternative policy. The adoption of EITF
07-05 as of July 1, 2009 will result in a retrospective reclassification of the
fair value of certain outstanding warrants from stockholders’ equity to
liability. Additionally, upon adoption of EITF 07-05, such warrants will be
marked to market at each reporting period.





In June
2009, the Financial Accounting Standards Board (FASB) issued SFAS No. 168 “The
FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles — a replacement of FASB Statement No. 162”. The
FASB Accounting Standards Codification (“Codification”) will be the single
source of authoritative nongovernmental U.S. generally accepted accounting
principles.  Rules and interpretive releases of the SEC under authority of
federal securities laws are also sources of authoritative GAAP for SEC
registrants.  SFAS 168 is effective for interim and annual periods ending
after September 15, 2009.  All existing accounting standards are superseded
as described in SFAS 168.  All other accounting literature not included in
the Codification is non-authoritative. SFAS No. 168 will not have a significant
impact on the Company’s consolidated financial statements.





In June
2009, the FASB issued SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”
(“SFAS 167”)  to improve financial reporting by enterprises involved with
variable interest entities and to address (1) the effects on certain provisions
of FASB Interpretation No. 46 (revised December 2003), “Consolidation of
Variable Interest Entities”, as a result of the elimination of the qualifying
special-purpose entity concept in SFAS 166 and (2) constituent concerns about
the application of certain key provisions of Interpretation 46(R), including
those in which the accounting and disclosures under the Interpretation do not
always provide timely and useful information about an enterprise’s involvement
in a variable interest entity.  SFAS 167 is effective as of the beginning
of each reporting entity’s first annual reporting period that begins after
November 15, 2009, for interim periods within that first annual reporting
period, and for interim and annual reporting periods thereafter.  The
Company does not believe that adoption of SFAS 167 will have any effect on its
consolidated financial statements.





In June
2009, the FASB issued SFAS No. 166 “Accounting for Transfers of Financial
Assets — an amendment of FASB Statement No. 140” (“SFAS 166”).
 SFAS 166 improves the relevance, representational faithfulness, and
comparability of the information that a reporting entity provides in its
financial statements about a transfer of financial assets; the effects of a
transfer on its financial position, financial performance, and cash flows; and a
transferor’s continuing involvement, if any, in transferred financial assets.
 SFAS 166 is effective as of the beginning of each reporting entity’s first
annual reporting period that begins after November 15, 2009, for interim periods
within that first annual reporting period and for interim and annual reporting
periods thereafter.  The Company does not believe the adoption of SFAS 166
will have any effect on its consolidated financial statements.





In May
2009, the FASB issued SFAS No. 165 “Subsequent Events” (“SFAS 165”).  SFAS
165 establishes general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are
issued or are available to be issued.  SFAS 165 sets forth (1) The period
after the balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for potential recognition
or disclosure in the financial statements, (2) The circumstances under which an
entity should recognize events or transactions occurring after the balance sheet
date in its financial statements and (3) The disclosures that an entity should
make about events or transactions that occurred after the balance sheet date and
(4) Requires the disclosure of the date through which an entity has evaluated
subsequent events and the basis for that date.  The Company adopted SFAS
165 effective April 1, 2009 and has evaluated subsequent events through the time
of filing on the date the financial statements were issued or October 13,
2009.




On April
9, 2009, the FASB issued Staff Position SFAS 107-1 and Accounting Principles
Board (APB) Opinion No. 28-1, “Interim Disclosures about Fair Value of Financial
Instruments” (FSP 107-1 and APB 28-1).  FSP 107-1 amends FASB Statement No.
107, “Disclosures about Fair Value of Financial Instruments,” to require
disclosures about fair value of financial instruments in interim and annual
financial statements. APB 28-1 amends Opinion No. 28, “Interim Financial
Reporting” to require those disclosures in all interim financial statements. FSP
107-1 and APB 28-1 are effective for interim periods ending after June 15, 2009
and the Company does not believe the adoption of FSP 107-1 and APB 28-1 will
have any effect on its consolidated financial statements.





Management
does not believe that any other recently issued but not yet effective accounting
pronouncement, if adopted, would have a material effect on the accompanying
financial statements.





Reclassifications.
Certain items in the prior year’s financial statements have been reclassified to
conform to the current year presentation.


24





Use of
Estimates.  The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
commitments and contingencies, if any, at the date of the financial statements,
and revenue and expenses during the reporting period.  Actual results
could differ from those estimates.  Significant estimates made by
management include the collectability of accounts receivable, the impairment of
long-lived and intangible assets, the fair value of equity, including
Black-Scholes inputs and debt
instruments, and
the deferred tax valuation
allowance.





Note
3 – Capital Transactions





Common
Stock





During
the year ended June 30, 2009, the Company issued 98,381 shares of its common
stock in settlement of various obligations and 651,976 shares as part of the
purchase price for the acquisition of minority interests in subsidiaries in
April 2009 (see Note 4).





During
the year ended June 30, 2008, the Company issued 717,500 shares of its common
stock as follows: 187,500 as a payment of accrued interest for a loan, 300,000
as part of the purchase price for a minority interest acquisition in August 2007
(see Note 4), 30,000 as a part of the purchase price for a minority interest
acquisition in October 2007 (see Note 4), and 200,000 for cash.





The
issuances of common stock for cash or services or in connection with
acquisitions were recorded at fair value, determined by reference to the market
price of the shares as of the dates of issuance.





Warrants





On March 31, 2008, the Company issued
the $20 million 15% Bison Note (see Note 14).  In connection with the
Bison Note, the Company issued 7,941,926 seven year warrants to purchase the
Company’s shares of common stock at an exercise price of $5 per share. Sixty
percent of the warrants or 4,765,156 warrants vest immediately and the remaining
warrants vest ratably over three years on a monthly basis.  Unvested
warrants are subject to cancelation if the Company meets specified EBITDA
targets and/or Bison Note redemption terms.  The fair value of each
warrant was determined to be $1.07 on the grant date based on the Black-Scholes
valuation models using the following assumptions: expected volatility of 101%,
dividend yield of 0%, risk free interest rate of 3.5%, and expected life of
seven years.  The relative fair value of warrants was determined to be
approximately $8,400,000, with an expectation that the Company will meet
redemption requirements and was recorded as debt discount which is being
amortized over the life of the Bison Note under the effective interest rate
method.





In December 2007 and January 2008, the
Company raised $1.6 million from individual investors in the form of an
unsecured note.  Under the terms of the note, the Company could pay
interest expense in cash or in lieu of cash, in warrants to purchase shares of
the Company’s common stock with an exercise price of $2 per share and a five
year term.  The Company issued 300,000 warrants to purchase shares of
its common stock as compensation to the holders of the note with a fair value of
$564,659.





Issuance
of the warrants to the holders of the $1.6 million of notes triggered certain
anti-dilution provisions under the warrant agreement related to 2,750,000
warrants outstanding at June 30, 2007.  As the result, the Company
issued an additional 3,093,750 warrants to purchase shares of its common stock
at an exercise price of $2 per share and the exercise price for 2,750,000
warrants previously outstanding under this warrant agreement was reset to $2 per
share.





Number of
                    Shares
                  
                  
                  Weighted
                    Average
                    Exercise Price
                  
                  
                  Weighted Average
                    Remaining Contractual
                    Terms (Years)
                  
                  
                  Aggregated
                    Intrinsic
                    ValueOutstanding,
      at June 30, 2007
                  
                  
                  2,750,000
                  
                  
                  $
                  2.00
                  
                  
                  
                  3.8
                  
                  
                  $
                  2,062,500Granted
                  
                  
                  11,335,676
                  
                  
                  $
                  4.10
                  
                  
                  
                  6.4Outstanding,
      at June 30, 2008 and 2009
                  
                  
                  14,085,676
                  
                  
                  $
                  3.69
                  
                  
                  
                  5.0,
      4.0
                  
                  
                  
                  0
                  (*)Exercisable
      at June 30, 2009
                  
                  
                  12,232,560
                  
                  
                  $
                  3.49
                  
                  
                  
                  3.8
                  
                  
                  
                  0
                  (*)





(*) The
intrinsic value of stock warrants is the amount by which the market value of the
underlining stock exceeds the exercise price of the warrants.





Note
4 – Acquisitions





In April
2009, the Company completed the acquisition of the remaining minority interests
in 12 subsidiaries not previously owned by the Company.  As a result,
the Company owns 100% of the interests in all but one subsidiary, in which the
Company owns 81.75%.  The purchase price paid by the Company includes
651,976 shares of the Company’s common stock, with a fair value at the date of
issuance of approximately $209,000, and $240,000 in cash.  The Company
incurred approximately $463,000 of transaction costs in connection with these
acquisitions.  As the result of the acquisitions the Company
recognized an intangible asset consisting of hospital contracts, in the amount
of $781,000.


25





In
August 2007, the Company entered into an agreement with Med-Air
Consultants, Inc. (“Med-Air”) whereby the Company terminated several joint
ventures and consulting agreements with Med-Air, purchased 51% of the membership
interest in Raritan Bay LLC and 40% of the membership interest in Bayonne LLC
owned by Med-Air, eliminated Med-Air’s right to participate in a certain number
of wound care centers the Company anticipates opening over several years,
eliminated fees due to Med-Air associated with treatments at three of the
Company treatment centers, and obtained Med-Air’s covenant not to compete with
or solicit employees of the Company.  The purchase price paid by the
Company was 300,000 shares of the Company’s common stock, the fair value of
which at the date of issuance was approximately $825,000; a non-interest bearing
36 month note of $1,692,000, net of imputed interest (Note 13); and the
Company’s interest in Southampton LLC.  The total assets acquired
aggregated approximately $2,300,000 of which $660,000 was allocated to the
non-solicitation agreement and $1,640,000 was allocated to hospital
contracts.




In
October 2007, the Company entered into an agreement with Warantz Healthcare
Group Inc., Rapid Recovery of America, Inc. Millennium Healthcare LLC, SMWNJ,
Inc. SMWNY, Inc and Modern Medical Specialties, LLC (collectively “Warantz”)
whereby the Company terminated several joint venture and consulting agreements
with Warantz and acquired a 40% interest in Modern Medical, LLC.  The
purchase price paid by the Company consisted of: cash of $431,000, 30,000 of
restricted shares of common stock, the fair value of which was approximately
$75,000 and notes payable in the amount of approximately $378,000, net of
imputed interest of approximately $45,000.  The excess of purchase
price over the fair value of the acquired interest was recognized as goodwill in
the amount of $304,000.  The settlement also provided for the
termination of a joint venture for two stand-alone healthcare facilities for
total cash consideration of $96,000, and the elimination of the Company’s joint
venture participation in a potential hospital-based healthcare facility that the
Company believes may compete with an existing wound care center.





Note
5 – Stock options





In April 2009, the Company amended its
2006 Stock Plan (the “Plan”). The Plan is administered by a Committee, appointed
by the Board of Directors of the Company, which consists of at least two
non-executive directors of the Company.  Under the terms of the Plan
the Company can issue, within 10 years of initial adoption of the Plan, equity
grants such as restricted stock or stock appreciation rights and either
incentive or non-statutory stock options to purchase up to 7,500,000 shares of
common stock, to employees, outside directors, and consultants. Not more than
1,500,000 options and stock appreciation rights and 500,000 shares of restricted
stock may be granted to an employee within a calendar year.  The
exercise price of any option granted under the 2006 Plan may not be less than
the fair market value of the common stock at the grant date or, in the case of
incentive stock options granted to a 10% or greater stockholder, 110% of such
fair market value.  The terms of the options shall not exceed 10 years from
a grant date or five years for the grants to a 10% or greater
stockholder.  Unvested options are terminated within a certain period
after termination of employment.  The Company may issue new shares or
use shares held in treasury to deliver shares for equity grants or upon exercise
of non-qualified stock options.  Shares related to terminated,
canceled, forfeited, expired or surrendered equity grants or options become
available for issuance under the future grants.




During
the year ended June 30, 2009 the Company granted options to purchase 777,500
shares of the Company’s common stock to its employees with various vesting
periods ranging from the grant date and up to the third anniversary
date.  The Company determined fair value of the options to be
approximately $474,000 at the grant date using the assumptions described
below.  Additionally, during the year ended June 30, 2009 the Company
granted options to purchase 975,000 shares of the Company’s common stock to its
officers, which will vest if the Company meets certain EBITDA targets over a
three year period provided the officers continue to be employed by the
Company.  At the grant date, the Company determined that it’s probable
that the Company will meet EBITDA targets.  The Company estimated the
aggregate fair value of these options on the date of grant to be $809,444 and,
will recognize compensation expenses over the relevant service
periods.




In July and October 2008 the Company
modified the option exercise prices for 1,310,000 and 350,000, respectively, of
previously granted options to purchase shares of the Company’s common stock
effectively exchanging previous awards for new awards with increased new fair
value for measurement of compensation expenses.  As the result of such
modification the Company recognized additional compensation expense of
approximately $250,000 determined as the increase in the fair value of the
grants as a result of the modification.




During
the year ended June 30, 2008 the Company granted options to purchase 255,000
shares of its common stock to the Company’s employees.  The grants
vest over various periods of time up to four years, assuming continued
employment.  The fair value of the grants was determined to be
approximately $614,000 based on the Black-Scholes valuation model using the
assumptions below, which amount is recognized as compensation expense over the
relevant vesting period.




The fair
value of each time-based option award is estimated on the date of grant using a
Black-Scholes valuation model with the following assumptions for the years ended
June 30, 2009 and 2008.


26





For the Year Ended
                        June 30, 2009
                      
                      
                      For the Year Ended
                        June 30, 2008Average expected life (years)
                      
                      
                      5.8
                      
                      
                      
                      4.6Average risk free interest rate
                      
                      
                      4.48
                      %
                      
                      
                      4.3
                      %Expected volatility
                      
                      
                      104
                      %
                      
                      
                      153
                      %Expected dividend rate
                      
                      
                      0
                      %
                      
                      
                      0
                      %Expected forfeiture rate
                      
                      
                      1.0
                      %
                      
                      
                      1.0
                      %





The
compensation expense related to stock grants to employees was $1.6 million in
2009 and $1.5 million in 2008. The following is a summary of stock options
granted by the Company:





Number of
                          Shares
                        
                        
                        Weighted
                          Average
                          Exercise Price
                        
                        
                        Weighted
                          Average
                          Remaining
                          Contractual
                          Terms (Years)
                        
                        
                        Aggregated
                          Intrinsic
                          ValueOutstanding,
      at June 30, 2007
                        
                        
                        1,672,667
                        
                        
                        $
                        3.39
                        
                        
                        
                        
                        
                        
                        0
                        (*)Granted
                        
                        
                        255,000
                        
                        
                        $
                        3.41Forfeited/expired
                        
                        
                        (70,000
                        )
                        
                        $
                        (3.93
                        )Outstanding,
      at June 30, 2008
                        
                        
                        1,857,667
                        
                        
                        $
                        3.37
                        
                        
                        
                        5.64
                        
                        
                        
                        0
                        (*)Granted
                        
                        
                        1,752,500
                        
                        
                        $
                        1.05Forfeited/expired
                        
                        
                        (207,667
                        )
                        
                        $
                        1.68Outstanding,
      at June 30, 2009
                        
                        
                        3,402,500
                        
                        
                        $
                        1.15
                        
                        
                        
                        5.86
                        
                        
                        
                        0
                        (*)Exercisable
      at June 30, 2009
                        
                        
                        2,137,500
                        
                        
                        $
                        1.21
                        
                        
                        
                        5.27
                        
                        
                        
                        0
                        (*)





(*) The
intrinsic value of stock options is the amount by which the market value of the
underlying stock exceeds the exercise price of the options.





As of
June 30, 2009, there was $704,967 of unrecognized compensation
cost.





Note
6 - Property and Equipment





Property
and equipment consists of the following at June 30, 2009 and 2008:





2009
                  
                  
                  2008Medical
      chambers and equipment, including $569,552 for 2009 and $2,352,934 for
      2008 under capital leases
                  
                  $
                  8,069,417
                  
                  
                  $
                  7,945,838Furniture,
      fixtures and computers
                  
                  
                  2,704,464
                  
                  
                  
                  2,084,382Leasehold
      improvements
                  
                  
                  5,632,550
                  
                  
                  
                  4,807,466Autos
      and Vans
                  
                  
                  494,051
                  
                  
                  
                  494,051Construction
      in progress
                  
                  
                  25,366
                  
                  
                  
                  -16,925,848
                  
                  
                  
                  15,331,737Less:
      Accumulated depreciation and amortization – including $235,880 and
      $780,025 for medical chambers and equipment under capital
      lease
                  
                  
                  9,340,475
                  
                  
                  
                  6,445,732$
                  7,585,373
                  
                  
                  $
                  8,886,005





Depreciation
expense for 2009 was $2,894,742 of which $2,234,127 is included in cost of
services.  2008 depreciation totaled $2,432,890 of which $2,108,107 is
included in cost of services.





In
September 2008, the Company determined that its contract with one hospital was
impaired and abandoned certain assets at the hospital.  A charge for
the abandonment of the assets with remaining book value of approximately
$190,000 was recorded to the statement of operations during the year ended June
30, 2008.


27





Note
7 - Intangible Assets





Intangible
assets consist of the following as of June 30:





2009
                    
                    
                    2008Hospital
      contracts acquired
                    
                    $
                    5,884,745
                    
                    
                    $
                    5,237,661Covenants
      not to compete
                    
                    
                    1,206,462
                    
                    
                    
                    1,206,462Total
      intangible assets with finite lives
                    
                    
                    7,091,207
                    
                    
                    
                    6,444,123Less:
      Accumulated amortization
                    
                    
                    3,980,829
                    
                    
                    
                    2,041,628$
                    3,110,378
                    
                    
                    $
                    4,402,495





Amortization
expense related to intangibles assets for the years ended June 30, 2009 and 2008
was $1,939,201 and $1,613,151 and amortization expense included in cost of
services was $1,516,903 and $1,494,355, respectively.





The
following represents the estimated amortization of the intangible assets over
the next five years:





Year 
      Ending June 30,2010
                    
                    $
                    2,053,0512011
                    
                    
                    684,3782012
                    
                    
                    214,7472013
                    
                    
                    111,8862014
                    
                    
                    46,316$
                    3,110,378





During
the year ended June 30, 2009, the Company recognized an abandonment loss of
approximately $134,000, representing the unamortized balance of hospital
contracts at two hospitals closed during the year





Note
8 – Notes Receivable





In December, 2006 the Company entered
into an agreement with Richmond University Medical Center in connection with the
acquisition of St. Vincent’s Hospital by the Richmond University Medical
Center.  As part of its acquisition, the Richmond University Medical
Center took over the Company’s center located in the hospital for a note of
approximately $137,000 with thirty-six monthly payments and a 9% per annum
interest rate.  As of June 30, 2009 the balance due is approximately
$23,000.





In December, 2006 in connection with
the acquisition by Caritas Health Care Planning, Inc. of St. John’s Queens
Hospital and Mary Immaculate Hospital, located in Queens, NY, the Company
entered into an agreement with Caritas Health Care Planning, Inc whereby in
exchange for a $690,100 note payable in thirty-six monthly installments with 9%
annual interest rate the Company sold its centers located in these hospitals,
including its rights and obligations under the related agreements with the
hospitals. As of June 30, 2009 the outstanding balance of the note is
approximately $118,000.





Note
9 - Other Assets





Other
Assets consist of the following as of June 30:




2009
                  
                  
                  2008Deferred
      financing costs, applicable to the Bison Note, net of amortization of
      approximately $288,000 and $47,000
                  
                  $
                  1,380,222
                  
                  
                  $
                  1,489,432Bank
      loan fees, net of amortization of approximately $5,000
                  
                  
                  31,902
                  
                  
                  
                  -Security
      deposit
                  
                  
                  15,267
                  
                  
                  
                  17,760Total
      other assets
                  
                  $
                  1,427,391
                  
                  
                  $
                  1,507,192





Note
10 - Obligations under Capital Leases




The
Company leases medical and other equipment under capital lease agreements with
annual interest rates ranging from 4.09% to 15.21% over three to seven year
terms.


28





Summary
of obligations under capital leases as of June 30:





2009
                  
                  
                  2008Total
      obligations under capital leases
                  
                  $
                  138,145
                  
                  
                  $
                  657,881Less:
      Current Installments
                  
                  
                  (133,295
                  )
                  
                  
                  (526,107
                  )$
                  4,850
                  
                  
                  $
                  131,774





The
following is a schedule by years of future minimum lease payments under capital
leases, together with the present value of the net minimum lease payments as of
June 30, 2009:





2010
                  
                  $
                  138,2932011
                  
                  
                  5,006Total
      minimum lease payments amount
                  
                  
                  143,299Less:
      Amounts representing interest
                  
                  
                  (5,154)Present
      value of minimum lease payments
                  
                  $
                  138,145





Note
11 - Related Party Transactions





In
January, 2008 the Company raised a total of $1.6 million from individual
investors in the form of a short term unsecured note, (the “Bridge Financing
Note”) the terms of which provided the lenders with interest payable in cash or
in lieu of cash, warrants with an exercise price of $2.00 per share. These funds
were used to fund the $1.5 million payment due to bondholders on January 25,
2008.   Certain members of the Company’s board of directors and
officers of the Company participated in this Bridge Financing and lent the
Company $600,000 of the total $1.6 million raised.





On March
31 2008, the entire $1.6 million Bridge Financing Note was paid in full from the
proceeds of the Bison financing with the exception of the $100 thousand of
interest due to individual directors and officers of the Company who
participated in the financing, which amount was paid in October
2008.





Note
12 – Accounts payable and accrued expenses





Accounts
payable and accrued expenses consist of the following at June 30, 2009 and
2008:





2009
                  
                  
                  2008Accrued
      compensation
                  
                  $
                  1,370,063
                  
                  
                  $
                  990,915Accounts
      payable
                  
                  
                  984,968
                  
                  
                  
                  1,467,937Other
      current liabilities
                  
                  
                  725,765
                  
                  
                  
                  1,524,214Accrued
      interest
                  
                  
                  -
                  
                  
                  
                  122,482$
                  3,080,796
                  
                  
                  $
                  4,105,548





Note
13 – Notes payable





Notes payable consist of the following
at June 30, 2009 and 2008:





2009
                        
                        
                        2008Bank
      Loan - Term Note
                        
                        $
                        1,750,000
                        
                        
                        $
                        -Bank
      Loan - Revolving Line of Credit
                        
                        
                        744,988
                        
                        
                        
                        4,200,000Med-Air
      promissory note
                        
                        
                        554,614
                        
                        
                        
                        1,019,683Warantz
      promissory notes
                        
                        
                        117,999
                        
                        
                        
                        277,227JD
      Keith promissory note
                        
                        
                        79,702
                        
                        
                        
                        359,824Vans
      and auto loans
                        
                        
                        33,952
                        
                        
                        
                        65,2553,281,255
                        
                        
                        
                        5,921,989Less:
      Current maturities
                        
                        
                        1,957,626
                        
                        
                        
                        5,139,856$
                        1,323,629
                        
                        
                        $
                        782,133


29





Maturities
of the long-term portion of notes payable as of June 30, 2009 are as
follows:





Year
      Ending June 30,2011
                    
                    $
                    573,6292012
                    
                    
                    500,0002013
                    
                    
                    250,000$
                    1,323,629





Bank
loan:





On December 18, 2008, the Company
entered into an $8.0 million bank loan with Signature Bank (the “Bank Loan”),
which consists of a $6 million revolving line of credit that matures in two
years (the “Revolving Line of Credit”), and a $2 million term loan that matures
in four years and requires 48 monthly principal payments of $41,667 (the “Term
Note”).  The Bank Loan replaces the prior $6.5 million bank loan that
the Company entered into with the bank on March 31, 2008. The Revolving Line of
Credit interest rate was changed in December 2008 to the prime rate plus .05%
from prime rate or LIBOR plus 2.5%. The Term Note bears interest at a rate per
annum equal to the prime rate plus 1.0%, which was unchanged from the prior loan
requirements. As of June 30, 2009 and 2008, the interest rate for the
Revolving Line of Credit was 3.75% and 5.00%, respectively.  The
interest rate for the Term Note was 4.75% and 6.00% as of June 30, 2009 and
2008, respectively.





Under the
terms of the Bank Loan the Company is subject to certain covenants requiring
minimum or maximum values of quarterly tangible net worth, annual capital
expenditures and various financial ratios.  Additionally, the Bank
Loan restricts the Company in dividend distributions, lending, and
investing activities and sale of its assets.  The Bank Loan is
collateralized by all assets of the Company, except leased
equipment.   As of June 30, 2009, the Company was in compliance
with all required covenants except for the minimum effective tangible net worth
covenant, for which the Company has received a waiver from the
lender.





The
balance outstanding under the Revolving Line of Credit was $744,988 and
$4,200,000 at June 30, 2009 and 2008, respectively.   The unused
amount of the Revolving Line of Credit as of June 30, 2009 and 2008 was
$5,255,012 and $800,000, respectively.  During the fiscal year ended
June 30, 2009 and 2008, the company recorded interest expense of $161,938 and
$476,346, respectively, in relation to the Bank Loan.





Med-Air
Promissory Note:





In
August, 2007, the Company issued a non-interest bearing note of $1,894,000 to
Med-Air as part of the purchase consideration for 51% of the membership interest
of Raritan Bay LLC and 40% of the membership interest of Bayonne LLC (Note
4).  The note is payable over 36 equal monthly
installments.  The Company valued the note at its fair value
calculated using the effective interest rate, which was determined based on
terms of financing available to the Company at that time and recorded a discount
of $202,000 to the note.  The discount is being amortized to interest
expense over the term of the note using the interest method.  The
interest expense related to the amortization of discount for the year ended June
30, 2009 and 2008 was $74,932 and $97,003, respectively and the unamortized
portion of the note discount at June 30, 2009 and 2008 was $30,065 and $104,997,
respectively.





Warantz
promissory notes:





The
Company issued various notes totaling approximately $378,000 to Warantz and
other parties together with shares of common stock as the purchase price for the
additional 40% interest in Modern Medical, LLC in October 2007 (Note
4).  The notes are non-interest bearing and have maturities which
range from six to thirty three months.  The Company determined the
fair value of the notes using an effective interest rate of 8.75% estimated
based on credit facilities available to the Company at the time of the
transaction and recorded a discount of $45,002 on the notes.  The
discount is being amortized to interest expense over the terms of the notes
using the interest method.  Interest expense recorded during the years
ended June 30, 2009 and 2008 was $16,771 and $23,148, respectively and the
remaining portion of the note discount was $5,083 and $21,854,
respectively.





JD
Keith promissory note:





In
September 2007, the Company terminated the five year employment agreement of Ms.
Elise Greenberg, the former Director of Human Resources at the Company, in which
all of the Company’s obligations under the employment agreement were
terminated.  Additionally, the Company terminated a consulting
agreement with Ms. Greenberg’s spouse, under which JD Keith LLC, the spouse’s
consulting firm, was to be paid $10,000 per month for five years as well as
commissions and other compensation.  As part of the settlement, the
Company entered into an agreement with the Greenbergs.  The Company is
obligated to pay JD Keith LLC approximately $600,000 in 52 bi-weekly
installments during the first two years of the five year
agreement.  The fair value of the future payments was determined to be
$548,150 calculated using the effective interest rate.  Interest
expense for the liability related to the Greenbergs for the years ended June 30,
2009 and 2008 was $19,879 and $12,443.


30





Van
and auto loans:





The
Company acquires automotive equipment financed by capital leases and secured by
the leased vehicles.  Interest rates on these leases range from 2% to
11%.  These leases mature in 2011.  Total interest expense
recorded during fiscal year 2009 and 2008 was $ 4,443 and $ 7,268,
respectively.





Note
14 – Senior Collateralized Subordinated Promissory Note





On March
31, 2008, the Company entered into a financing agreement with Bison Capital
Equity Partners II-A, L.P. and Bison Capital Equity Partners II-B, L.P. and
issued a $20 million senior collateralized subordinated promissory note (“Senior
Collateralized Subordinated Note” or “Bison Note”).  The Company
received cash proceeds of $17.5 million, net of a $2.5 million discount, and
incurred approximately $3.1 million of expenses related to this
transaction.  The Company used these proceeds to retire certain debts
with accrued interest, certain accounts payable and other
obligations.





Under the
terms of the Bison Note, the Company is required to pay monthly cash interest at
12% per annum starting from October 2008 and 6% non-cash interest, which is
added to the principal amount.  Upon fulfillment by the Company of
certain conditions, the non-cash interest is reduced to 3% and, provided no
event of default has occurred, the Company can further defer scheduled payments
of cash interest for up to 12 months.  The Company met the required
conditions in September 2008 and therefore the non-cash interest rate reset at
3% and payments of cash interest were deferred until October 31,
2009.  The interest rate increases by 2% upon an event of default and
if such default is not cured within a certain period of time or waived by the
Bison Note holders, the outstanding principal balance and accrued interest
become due and payable.





The Bison
Note is required to be prepaid in annual installments of $2.5 million starting
from the second anniversary and until the fifth year at which point the Company
is required to retire the remaining balance.  The Bison Note and other
obligations under the securities purchase agreement under which the Bison Note
was issued are collateralized by a lien granted by the Company and its
subsidiaries on substantially all of their assets, including all stock held by
either the Company or its subsidiaries.  The Bison Note is
subordinated to the Bank Debt.





Additionally,
the Company entered into a common stock warrant agreement with the holders of
the Bison Note and issued warrants to purchase 7,941,926 shares of its common
stock with an exercise price of $5 per share and a seven year
term.  4,765,156 or 60% of the warrants vested immediately and the
remaining warrants vest monthly over a three year period.  Under the
terms of the common stock warrant agreement, part of the unvested warrants might
be canceled, provided the Company meets certain EBITDA targets and required
Bison Note redemption conditions.





The
Company determined the relative fair value of warrants to be $8,391,893 and
recorded such amount as a discount to the Bison Note in addition to $2.5 million
discount.  Additionally, based on the relative fair values of the
Bison Note and warrants the Company allocated $3.1 million of expenses related
to the transaction as follows: $1.7 million to deferred expenses and $1.4
million to additional paid-in capital.  The Company amortizes the
deferred financing cost and debt discount, and records interest expense at an
effective rate of 37%, using the interest method.





Presented
below are balances and related expenses for the Bison Note as of and for the
years ended June 30, 2009 and 2008:





2009
                            
                            
                            2008Bison
      Note
                            
                            $
                            20,000,000
                            
                            
                            $
                            20,000,000Debt
      discount
                            
                            
                            (10,150,744
                            )
                            
                            
                            (10,944,828
                            )Interest
      payable at maturity
                            
                            
                            4,455,781
                            
                            
                            
                            913,568Senior
      collateralized subordinated promissory note
                            
                            
                            14,305,037
                            
                            
                            
                            9,968,740Less
      current maturities
                            
                            
                            532,227
                            
                            
                            
                            0Non-current
      maturities
                            
                            $
                            13,772,810
                            
                            
                            $
                            9,968,740Interest
      expense, including amortization of debt discount and issuance
      cost
                            
                            $
                            4,576,838
                            
                            
                            $
                            907,898





Under the
terms of the financing agreement the Company is required to maintain certain
financial ratios and covenants related to its indebtedness, is subject to a lien
on its assets and is restricted in respect to certain transactions, including
compensation to its employees and members of its board of directors, and payment
of dividends.


31





Non-current
maturities of the Bison Note as of June 30, 2009, excluding the debt discount,
are as follows:





Year
      ending June 30,2011
                    
                    $
                    2,500,0002012
                    
                    
                    2,500,0002013
                    
                    
                    16,955,781$
                    21,955,781





Note
15 – Income Taxes





The
provision for income taxes is comprised of the following:





For the Year Ended
                                    June 30, 2009
                                  
                                  
                                  For the Year Ended
                                    June 30, 2008Current:Federal
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -State
                                  
                                  
                                  130,222
                                  
                                  
                                  
                                  20,065130,222
                                  
                                  
                                  
                                  20,065Net
      provision
                                  
                                  $
                                  130,222
                                  
                                  
                                  $
                                  20,065





The
provision for fiscal 2009 includes approximately $107,000 for prior year
underaccruals and adjustments.




A
reconciliation of the statutory income tax effective rate to the actual
provision shown in the financial statements is as follows:




For the Year Ended
                              June 30, 2009
                            
                            
                            For the Year Ended
                              June 30, 2008Expected
      tax benefit
                            
                            
                            (34.0
                            )%
                            
                            
                            (34.0
                            )%State
      and local taxes, net of federal benefit
                            
                            
                            3.2
                            %
                            
                            
                            0.5
                            %Minority
      interest
                            
                            
                            2.2
                            %
                            
                            
                            (2.0
                            )%Other
                            
                            
                            (0.2
                            )%
                            
                            
                            (10.0
                            )%Change
      in valuation allowance
                            
                            
                            32.0
                            %
                            
                            
                            46.0Total
      tax provision
                            
                            
                            3.2
                            %
                            
                            
                            0.5
                            %





The
Company has a federal net operating loss carry-forward of approximately $7.1
million at June 30, 2009 which expires through 2029.





The
components of the net deferred tax asset (liability) at June 30, 2009 and 2008
consist of the following:





2009
                                  
                                  
                                  2008Deferred
      tax assets:Allowance
      for doubtful accounts
                                  
                                  $
                                  1,165,000
                                  
                                  
                                  $
                                  986,000Property
      assets
                                  
                                  
                                  (476,000
                                  )
                                  
                                  
                                  273,000Bridge
      Loan Interest
                                  
                                  
                                  -
                                  
                                  
                                  
                                  40,000Accrued
      expenses
                                  
                                  
                                  254,000
                                  
                                  
                                  
                                  283,000Stock
      option compensation
                                  
                                  
                                  2,404,000
                                  
                                  
                                  
                                  1,787,000Net
      operating loss carry-forward
                                  
                                  
                                  2,806,000
                                  
                                  
                                  
                                  1,539,000Total
      deferred tax asset
                                  
                                  
                                  6,153,000
                                  
                                  
                                  
                                  4,908,000Less
      valuation allowance
                                  
                                  
                                  (6,153,000
                                  )
                                  
                                  
                                  (4,908,000Net
      deferred assets (liabilities)
                                  
                                  $
                                  0
                                  
                                  
                                  $
                                  0





In
assessing the realizability of deferred tax assets, management considers whether
it is more likely than not that some portion or all of the deferred tax assets
will not be realized.  The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible.  The Company
maintains a full valuation allowance on its deferred tax
assets.  Accordingly, the Company has not recorded an income tax
benefit applicable to its operating losses and other deferred tax
assets.


32





The
Company adopted the provisions of FIN 48 on July 1, 2007. FIN 48 clarifies
the accounting for uncertainty in income taxes recognized in an enterprise’s
financial statements in accordance with SFAS No. 109, “Accounting for Income
Taxes”, and prescribes a recognition threshold and measurement process for
financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return.  FIN 48 also provides guidance
on derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition.  The adoption of FIN 48 did not
have a material effect on the Company's consolidated financial position or
results of operation.  The Company classifies interest and penalties,
if any, associated with our uncertain tax positions as a component of income tax
expense. No interest and penalties related to uncertain tax positions were
accrued at June 30, 2009.





During
the year ended June 30, 2009, the Company recognized no adjustments for
uncertain tax benefits. The Company is subject to U.S. federal and state
examinations by tax authorities for all years since its
inception.  The Company does not expect any significant changes to its
unrecognized tax positions during the next 12 months.





Note
16 - Defined Contribution Plan





The
Company maintains a 401(k) defined contribution plan in which all employees,
over the age of 21, are eligible to participate after three months of
employment.  The Company is allowed to but chose not to match employee
contributions. Currently there are thirteen employees who are enrolled in this
program. The 401(k) Plan is administered by a third party.





Note
17 – Payable to Former Majority Members





The
Company acquired certain wound care and hyperbaric
centers organized as LLCs from their majority members during
the year ended June 30, 2006, some of whom are also employees, directors and
stockholders of the Company.  As part of the purchase consideration
the Company recognized a liability to former majority members of LLCs in
the amount of $0.6 million.  The Company paid $.5 million of this
liability to the former majority members during the year ended June
30, 2009 and expects to settle the remaining obligation during the
year ending June 30, 2010.





Note
18 - Commitments and Contingencies





Registration
Rights Agreement





In
connection with the issuance of the Bison Note (Note 14), the Company entered
into a Registration Rights Agreement with the holders of the Bison Note under
which the Company is required, after October 15, 2008, to be in a position to
file, within 60 days upon a request, and maintain its effectiveness for at least
180 days, a registration statement with the Securities and Exchange Commission
(“SEC”) covering the resale of the shares of common stock issuable pursuant to
exercise of the warrants issued with Bison Note.  If the Company fails
to file or maintain effectiveness of the registration statement or if the
registration statement is not declared effective by the SEC, the Company is
subject to a penalty equal to 2% of the securities to be registered per
month.  Such penalty is doubled if the Company’s failure extends for
more than 90 days but the maximum amount of penalty cannot exceed 20% of
securities to be registered. The Company has not accrued any amounts in
connection with these commitments, because management believes that it is not
probable that any such penalties will be incurred.





Employment
Agreements





Two
officers and two members of the Company’s board, who are former officers of the
Company, have employment agreements.  In 2009, the Company paid these
four individuals a total of $1,656,202 in salary and bonuses.  The
four employment agreements have terms that run through March 31, 2011 and have
annual minimum compensation obligations of approximately $1,490,300 and
$1,535,200 in fiscal years 2010 and 2011.  The employment agreements
for the Company’s officers, Andrew G. Barnett and David Walz, provide, in
addition to their base salaries, minimum cash bonuses, stock options and other
executive benefits common for these types of employment
arrangements.


33





Note
19 - Lease Commitments:





The
Company leases its corporate office and other office facilities under operating
leases, which expire on various dates through 2013.  Future payments
under non-cancelable operating lease obligations for office space, including the
lease entered into in August 2009 referred to below are as follows:





Years Ending June 30,2010
                    
                    $
                    161,9712011
                    
                    
                    144,3332012
                    
                    
                    137,2862013
                    
                    
                    40,924





Rent
expense under all operating leases in fiscal years ended June 30, 2009 and 2008
was $125,848 and $225,925, respectively.  In August 2009, the Company
acquired additional space for its corporate office with an annual obligation of
$37,416, which is included in the above obligations.





Note
20.  Valuation and qualifying accounts





The
following is a summary of the allowance for doubtful accounts related to
accounts and notes receivable for the years ended June 30, 2009 and
2008:





2009
                  
                  
                  2008Balance
      at beginning of year
                  
                  $
                  2,941,917
                  
                  
                  $
                  2,202,510Provision
      for doubtful accounts and notes
                  
                  
                  2,111,499
                  
                  
                  
                  796,027Uncollectible
      accounts written off, net of recoveries
                  
                  
                  (1,965,144
                  )
                  
                  
                  (56,620
                  )Balance
      at end of year
                  
                  $
                  3,088,272
                  
                  
                  $
                  2,941,917




ITEM 9.     Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure:





We have
not had any disagreements with our accountants on accounting and financial
disclosures during our two recent fiscal years or any later interim
period.





Item
9A. Controls and Procedures:





Disclosure
Controls and Procedures





(a)  Evaluation
of Disclosure Controls and Procedures.





The
Company’s management carried out an evaluation, conducted by its chief executive
officer and chief financial officer, on the effectiveness of the design and
operation of the Company’s disclosure controls and procedures (as such term is
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of Jun 30,
2009, pursuant to Exchange Act Rule 13a-15.  Such disclosure controls
and procedures are designed to ensure that information required to be disclosed
by the Company is accumulated and communicated to the appropriate management on
a basis that permits timely decisions regarding disclosure.  Based
upon that evaluation, the Company’s chief executive officer and chief financial
officer concluded that the Company’s disclosure controls and procedures as they
relate to day-to-day reporting of financial transactions as of June 30, 2009
were effective.    However, the Company’s controls over the
reporting of unusual, one-time, non-operational events or transactions were not
adequate or effective.





(b)  Changes
in Internal Control over Financial Reporting.





During
the quarter ended June 30, 2009, there was no change in our internal control
over financial reporting (as such term is defined in Rule 13a-15(f) under the
Exchange Act) that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.





Management’s
Report on Internal Control over Financial Reporting





Under
Section 404 of the Sarbanes-Oxley Act of 2002, our management is required to
assess the effectiveness of the Company’s internal control over financial
reporting as of the end of each fiscal year and report, based on that
assessment, whether the Company’s internal control over financial reporting is
effective.


34





Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting.  The Company’s internal control over
financial reporting is designed to provide reasonable assurance as to the
reliability of the Company’s financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles.





Internal
control over financial reporting, no matter how well designed, has inherent
limitations.  Therefore, internal control over financial reporting
determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and may not prevent or detect all misstatements.
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, or that the degree of compliance with the policies or procedures may
deteriorate.





The
Company’s management has assessed the effectiveness of the Company’s internal
control over financial reporting as of June 30, 2009.  In making this
assessment, the Company used the criteria established by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in “Internal
Control-Integrated Framework.” These criteria are in the areas of control
environment, risk assessment, control activities, information and communication,
and monitoring.  The Company’s assessment included extensive
documenting, evaluating and testing the design and operating effectiveness of
its internal control over financial reporting.





Based on
the Company’s processes and assessment, as described above, management has
concluded that, as of June 30, 2009, the Company’s internal control over
day-to-day financial reporting was effective, but its internal control over
reporting of unusual, non-operational or one-time transactions was not
effective.





Upon
identification of the weakness in reporting of unusual, non-operational or
one-time transactions, management advised our Audit Committee of the issues
encountered and management’s key decisions related to remediation
efforts.  Our Audit Committee reviewed, advised and concurred with
management’s plan of remediation, which included the hiring of its Vice
President, Finance, and a strengthening of its understanding of the recording
and reporting of one-time, non-operational transactions.





Although
these material weaknesses over preparation of the financial statements and
related disclosures existed at year end, the consolidated financial statements
in this Annual Report on Form 10-K fairly present, in all material respects, our
financial condition as of June 30, 2009 and June 30, 2008, and our results from
operations for the years then ended, in conformity with GAAP.





While we
have taken appropriate steps to remediate the material weaknesses described
above, additional measures may be required. The effectiveness of our internal
controls following our remediation efforts will not be known until we test those
controls in connection with management’s tests of internal control over
financial reporting that will be performed after the close of our first fiscal
quarter of 2009, which ends on September 30, 2009.





This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting. Such
report is not required by the Company’s registered public accounting
firm.





Item 9B.   Other
Information:




None.


35





PART
III




ITEM 10.Directors,
Executive Officers, and Corporate Governance:





Our
directors, executive officers and control persons and their respective ages as
of September 25, 2009 are as follows:





Name
                    
                    Age
                    
                    PositionAndrew G. Barnett
                    
                    55
                    
                    CEO, CFO, Secretary, DirectorDavid Walz
                    
                    49
                    
                    President, TreasurerJohn Capotorto, MD
                    
                    48
                    
                    Chairman
      of the Board and DirectorPaul Basmajian
                    
                    52
                    
                    DirectorJohn DeNobile
                    
                    36
                    
                    DirectorDr. Phillip Forman
                    
                    50
                    
                    DirectorDouglass Trussler
                    
                    38
                    
                    DirectorLouis Bissette
                    
                    40
                    
                    Director




Business
Experience of Current Officers and Directors:





All of
our directors serve a one year term until their successors are elected and
qualified by our shareholders, or until their earlier death, retirement,
resignation or removal. The following is a brief description of the business
experience of our executive officers, directors and significant
employees:





Andrew G.
Barnett has been our Chief Executive Officer since January 19, 2007, our
Chief Financial officer since February 13, 2007 and is also our Corporate
Secretary.  From January 1, 2001 through January, 2007, Mr. Barnett
was a principal of Morris Anderson & Associates, Ltd., a financial and
management consulting firm. Mr. Barnett brings extensive expertise in the
development and implementation of strategic plans, and operational and financial
strategies.  Mr. Barnett has served in advisory and senior management
capacities as CEO, COO, and CFO to both publicly and privately held
companies.  Mr. Barnett has acted in such capacities in many companies
including a $1 billion tobacco and HBA distributor, a $100 million outdoor
security lighting company, a $150 million periodicals agency, a $90 million
consumer products company, a $100 million financial services company, a $100
million industrial parts distributor, and a $50 million professional services
firm. Mr. Barnett has served a broad range of clients with operations throughout
the United States as well as in Europe, the Middle East and
Asia.  Industry experience includes retail, manufacturing, consumer
products, publishing, financial services, wholesale distribution and
professional services.  Mr. Barnett has served as a director since
2008.





David J.
Walz was named President on September 27, 2006 and is also our Treasurer.
Mr. Walz joined the predecessor company in November 2003 as Executive Vice
President and Chief Operating Officer. Mr. Walz is an executive with over 21
years of experience in hospital operations, financial management, business
development and strategic planning within complex healthcare organizations. From
November 2000 to September 2003, Mr. Walz was Executive Director/Vice President
of Operations at St. John’s Queens Hospital, a teaching division of Saint
Vincent’s Catholic Medical Centers in New York, where he was responsible for the
day-to-day operations.  Prior to this role, Mr. Walz held various
positions in finance, including director of finance for a four-hospital system.
Mr. Walz has a Bachelors degree in Finance, Banking and Investments and also
holds a Master Degree in Healthcare Administration.  Mr. Walz is a
Fellow (“FHFMA”) and a Certified Managed Care Professional (“CMCP”) in the
Healthcare Financial Management Association





Phillip Forman,
DPM, who serves as the Company’s Co-Medical Director, was the Medical
Director of the New York Hyperbaric, the predecessor to American Hyperbaric,
Inc., since 2001 and, from July, 2005 through January 18, 2007, served as the
chief executive officer of American Hyperbaric, Inc.  Prior to joining
New York Hyperbaric, he was a private practitioner.  He received his
doctor degree of Podiatric Medicine from the Pennsylvania College of Podiatric
Medicine.  His degree is a Diplomat, American Board of Podiatric
Surgery. His academic appointments include Podiatric Attending, Staten Island
University Hospital and Associate Director, Residency Program, Staten Island
University Hospital.  Dr. Forman has extensive experience in wound
care. He has participated in numerous clinical trials involving diabetic foot
infections, novel antibiotics and new biopharmaceuticals for problem and
non-healing wounds of the lower extremities.  He has participated in
trials with Merck & Co., Inc., Pharmacia, OrthoBiotech,
Novartis/Organogenesis, Johnson & Johnson, Monsanto, Ortho-McNiel, Alpha
Therapeutics and Ortec International. In addition to his clinical trial
participation, Dr. Forman has several research projects underway involving
Osteomyelitis and Vascular Disease in patients with Diabetes.  Dr.
Forman has served as a director since 2005.




John V.
Capotorto, M.D., who serves as the Company’s Chairman of the Board and
Co-Medical Director, was the Chief Medical Director of New York Hyperbaric, the
predecessor to American Hyperbaric, Inc., since 2001 and from July, 2005 through
January 18 was the Vice President of American Hyperbaric, Inc.  Prior
to joining New York Hyperbaric Dr. Capotorto was an attending physician in Adult
and Pediatric Endocrinology and was a clinical assistant professor at SUNY HSCB
since 1996.  He holds board certification in Internal Medicine,
Pediatrics, Adult and Pediatric Endocrinology and Metabolism, and is accredited
in Hyperbaric Medicine. Additionally, he is the Medical Director of the Diabetes
Treatment Center at Staten Island University Hospital and has extensive
experience in both wound care and hyperbaric medicine. Dr. Capotorto graduated
from Vassar College in 1981 and studied Medicine at the University of
Bologna.  He returned to New York where he completed a combined
medical and pediatric internship and residency.  Dr. Capotorto was a
Research Fellow in Islet Cell Transplantation at the Joslin Diabetes Center and
a clinical fellow in Adult and Pediatric Endocrinology at both the Joslin
Diabetes Center and Children’s Hospital, part of the Harvard Medical School
system. In addition to his medical training, Dr. Capotorto has completed an
Executive MBA program at the Baruch College.  He is a member of the
Beta Gamma Sigma Honor Society and has used his combined medical and business
knowledge towards developing and opening comprehensive Hyperbaric and Wound Care
Centers.  Dr. Capotorto has served as a director since
2005.


36




Paul
Basmajian was appointed to the board of directors on July 20, 2006. Mr.
Basmajian has 24 years servicing global asset management and plan sponsor
communities.  He is a Senior Managing Partner and member of the Board
of Directors of BNY ESI & Co., subsequently acquired by the Bank of New York
in 1998.  Currently, Mr. Basmajian serves as the director of trading
operations for BNY Brokerage and part of senior management team for the Bank of
New York.




John
DeNobile founded American Hyperbaric in May 2005. From April 2002 through
May, 2005, Mr. DeNobile invested in real estate development projects, from
pre-construction through rental phase, as well as acting as a consultant to
emerging companies.  From 1995 through April 2002, Mr. DeNobile was a
licensed stock broker at Winchester Investment Securities, Inc. Mr. DeNobile is
currently president of Axcess, Inc., a company dedicated to providing state of
the art imaging, diagnostic and interventional services and education to meet
the vascular access needs of the hemodialysis community. .  Mr.
DeNobile has served as a director of the Company since 2005.





Douglas B.
Trussler co-founded Bison Capital in 2001 and is a partner and serves as
its president. Previously, he was at Windward Capital Partners LP, and at
Credit Suisse First Boston. Mr. Trussler is currently a member of the Board of
Directors of GTS Holdings, Inc., Performance Team Freight Systems, Inc., Royal
Wolf Australia Ltd., Royal Wolf Trading New Zealand Limited, Precision
Assessment Technology Corporation, and Big Rock Sports, LLC. He was formerly a
member of the Board of Directors of Twin Med, LLC and Helinet Aviation,
Inc.  Mr. Trussler earned a BA with honors in Business Administration
from the University of Western Ontario in Canada.  Mr. Trussler has
served as a director of the Company since 2008.





Louis
Bissette is a partner of Bison Capital, having joined the firm in 2005 to
head its east coast operations based in Charlotte, NC.  Previously, he was
a General Partner at Brentwood Associates, a leading Los Angeles-based middle
market private equity firm.  Prior to Brentwood, he worked in the corporate
finance department of Morgan Stanley & Co., where his primary coverage
responsibilities included the firm's private equity clients.  Mr. Bissette
is a member of the Board of Directors of Big Rock Sports, LLC. Mr. Bissette
graduated with a degree in Economics from the University of North Carolina at
Chapel Hill, where he was a John Motley Morehead Scholar.  Mr.
Bissette has served as a director of the Company since 2008.





Directors
are elected at the Company’s annual meeting of stockholders and serve for one
year until the next annual Stockholders’ meeting or until their successors are
elected and qualified.  Officers are elected by the Board of Directors
and their terms of office are, except to the extent governed by employment
contract, at the discretion of the Board. The Company reimburses all directors
for their expenses in connection with their activities as directors of the
Company.  Directors of the Company who are also employees of the
Company will not receive additional compensation for their services as
directors.





Family
and Other Relationships:





There are
no family relationships between any two or more of our former or current
directors or executive officers.  Except as described below, there is
no arrangement or understanding between any of our former or current directors
or executive officers and any other person pursuant to which any director or
officer was or is to be selected as a director or officer, and there is no
arrangement, plan or understanding as to whether non-management shareholders
will exercise their voting rights to continue to elect the current board of
directors. There are also no arrangements, agreements or understandings to our
knowledge between non-management shareholders that may directly or indirectly
participate in or influence the management of our affairs.





Bison
Capital Equity Partners II-A., L.P. Bison Capital Equity Partners II-B., L.P.
(collectively, the “Bison Entities”), the Company and certain executive officers
and stockholders of the Company, including Dr. Capotorto, Dr. Forman, Mr.
Barnett, Mr. Walz, Mr. De Nobile, Mr. Basmajian and the Elise Trust, are parties
to a Voting Agreement dated as of March 31, 2008, pursuant to which such parties
have agreed to vote their shares of common stock of the Company in favor of the
election of two representatives designated by the Bison Entities, initially
Messrs. Trussler and Bissette, as directors of the Company.  Such
voting agreement also provides that, under certain circumstances following an
Event of Default (as defined in the Securities Purchase Agreement dated as of
March 31, 2008, between the Bison Entities and the Company), the Bison Entities
shall be entitled to designate a majority of the Company’s
directors.  The Voting Agreement also provides that the number of
directors constituting the entire board of directors shall not exceed seven
without the written consent of the Bison Entities.





Board
Committees and Independence:





Director
Independence; Audit Committee





Director
Independence





The Board assesses each director’s
independence in accordance with the applicable rules and regulations of
NASDAQ.  This assessment includes a review of any potential conflicts
of interest and significant outside relationships.  In determining
each director’s independence, the Board broadly considers all relevant facts and
circumstances, including specific criteria included in NASDAQ’s corporate
governance standards.  For these purposes, the Board of Directors
considers certain relationships that existed during a three-year look-back
period.  The Board of Directors considers the issue not merely from
the standpoint of a director, but also from the standpoint of persons or
organizations with which the director has an affiliation.  An
independent director is free of any relationship with the Company or management
that impairs the director’s ability to make independent
judgments.


37





Based on this assessment, the Board of
Directors has determined that Messrs.  Basmajian, Bissette and
Trussler are independent.





Audit
Committee





In
October 2008, the Board of Directors established and Audit Committee, and on
March 5, 2009, appointed Messrs. Bissette, Trussler and Barnett as members of
the Audit Committee. The principal functions of the Audit Committee are to
recommend the annual appointment of the Company’s auditors, to discuss with the
auditors matters concerning the scope of the audit and the results of their
examination, to review and approve any material accounting policy changes
affecting the Company’s operating results and to review the Company’s internal
control procedures.




The Board
of Directors has determined that Messrs. Bissette, Trussler and Barnett are
audit committee financial experts within the meaning of applicable SEC
rules.





All of
the directors serve until the next annual meeting of common shareholders and
until their successors are elected and qualified by our common shareholders, or
until their earlier death, retirement, resignation or removal.  Our
bylaws set the authorized number of directors at not less than one or more than
nine, with the actual number fixed by our board of directors. Under our bylaws,
the Board of Directors has fixed the number of directors at
seven.  Our bylaws authorize the Board of Directors to designate from
among its members one or more committees and alternate members thereof, as they
deem desirable, each consisting of one or more of the directors, with such
powers and authority (to the extent permitted by law and these Bylaws) as may be
provided in such resolution.





On March
5, 2009 the Board of Directors authorized the establishment of a Compensation
Committee.  The principal functions of the Compensation Committee are
to review and recommend compensation and benefits for the executives of the
Company.





Compliance
with Section 16(a) of the Exchange Act





Section
16(a) of the Exchange Act requires our directors, executive officers and persons
who own more than 10% of a required class of our equity securities, to file with
the SEC initial reports of ownership and reports of changes in ownership of
common stock and other equity securities of our company.  Officers,
directors and greater than 10% shareholders are required by SEC regulation to
furnish us with copies of all Section 16(a) forms they file.





To our
knowledge, based upon a review of the copies of such reports furnished to us and
based upon written representations that no other reports were required, all
Section 16(a) filing requirements applicable to our officers, directors and
greater than 10% beneficial owners were complied with for the fiscal year ended
June 30, 2009.





Code
of Ethics





A code of
ethics relates to written standards that are reasonably designed to deter
wrongdoing and to promote:





1)  Honest
and ethical conduct, including the ethical handling of actual or apparent
conflicts of interest between personal and professional
relationships;




2)  Full,
fair, accurate, timely and understandable disclosure in reports and documents
that are filed with, or submitted to the Securities and Exchange Commission and
in other public communications made by the company;





3)  Compliance
with applicable government laws, rules and regulations;





4)  The
prompt internal reporting of violations of the code to an appropriate person or
persons identified in the code; and





5)  Accountability
for adherence to the code.





The
company adopted a formal code of ethics statement that is designed to deter
wrong doing and to promote ethical conduct and full, fair, accurate, timely and
understandable reports that the company files or submits to the SEC and
others.  A copy of the code of ethics is filed as an exhibit to the
Company’s Annual Report on Form 10-KSB filed with the SEC on September 24, 2004,
and may be obtained without charge from the Company upon
request.  Such request may be directed to the Company at its principal
executive offices, 155 White Plains Road, Suite 200, Tarrytown, NY 10591,
attention: Corporate Secretary.


38





ITEM 11.   Executive
Compensation:





FISCAL
2009 SUMMARY COMPENSATION TABLE





The
following table summarizes the compensation of the Named Executive Officers for
the fiscal years ended June 30, 2009 and 2008. The Named Executive Officers
are the Company’s Chief Executive Officer and Chief Financial Officer and the
Company’s President. These are the only two executive officers that served
during the year ended June 30, 2009.




Non-QualifiedNon-Equity
                                
                                
                                DeferredStock
                                
                                
                                Option
                                
                                
                                Incentive
      Plan
                                
                                
                                Compensation
                                
                                
                                All
      OtherFiscal
                                
                                Salary
                                
                                
                                Bonus
                                
                                
                                Awards
                                
                                
                                Awards
                                
                                
                                Compensation
                                
                                
                                Earnings
                                
                                
                                Compensation
                                
                                
                                TotalName
      and Principal Position
                                
                                Year
                                
                                ($)
                                
                                
                                ($)
                                
                                
                                ($)
                                
                                
                                ($)(1)
                                
                                
                                ($)
                                
                                
                                ($)
                                
                                
                                ($)
                                
                                
                                ($)Andrew
      G. Barnett (2)
                                
                                2009
                                
                                
                                382,313
                                
                                
                                
                                250,000
                                
                                
                                
                                -
                                
                                
                                
                                767,259
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                35,973
                                (2)
                                
                                
                                1,435,545Chief
      Executive Officer and
                                
                                2008
                                
                                
                                335,880
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                975,185
                                
                                
                                
                                125,000
                                
                                
                                
                                -
                                
                                
                                
                                22,075
                                (2)
                                
                                
                                1,458,140Chief
      Financial OfficerDavid
      J. Walz (5)
                                
                                2009
                                
                                
                                290,557
                                
                                
                                
                                60,000
                                
                                
                                
                                -
                                
                                
                                
                                254,222
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                25,771
                                (2)
                                
                                
                                630,550President
                                
                                2008
                                
                                
                                215,385
                                
                                
                                
                                42,308
                                
                                
                                
                                -
                                
                                
                                
                                204,172
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                16,306
                                (2)
                                
                                
                                478,171










(1)
            The
      values for option awards in this column represent the cost recognized for
      financial statement reporting purposes for fiscal year 2009 and 2008,
      respectively, in accordance with FAS 123R. However, pursuant to SEC
      rules these values are not reduced by an estimate for the probability of
      forfeiture. The assumptions used to value these awards can be found in
      Note 5 to the financial statements in this Form
  10-K.





(2)
            We
      reimbursed automobile expenses for Messrs. Barnett and Walz in the amounts
      of $25,704 and $15,000, respectively, and health benefit expenses in the
      amounts of $10,269 and $10,771,
respectively.




Employment
Agreements with the Named Executive Officers





Employment
Agreement for Andrew G. Barnett





On July
21, 2008, the Company entered into an employment agreement (the amended and
restated employment agreement) with Andrew G. Barnett, effective as of March 31,
2008, which amended and restated the employment agreement dated January 3, 2007
(the 2007 employment agreement).  Pursuant to the amended and restated
employment agreement Mr. Barnett agreed to serve as our Chief Executive
Officer and Chief Financial Officer.  The initial term of the amended
and restated employment agreement commenced on March 31, 2008 and ends on June
30, 2011, and will automatically be renewed for an additional 12 months unless
Mr. Barnett or the Company provides written notice of the intent not to renew on
or before June 30, 2010.  After each 12 month extension, the term will
continue to renew for successive 12 month periods unless Mr. Barnett or the
Company provides written notice of the intent not to renew no less than 180 days
prior to the end of the renewal term.





Under the
terms of the agreement, Mr. Barnett will receive an annual base salary of
$375,000 beginning March 31, 2008, which salary will be reviewed annually by the
board of directors.  In addition, Mr. Barnett is eligible to earn
annual cash performance bonuses based on the Company’s achievement of certain
adjusted EBITDA targets for fiscal years 2009 through 2013 and
thereafter.  The amount of the annual cash performance bonus, if
earned, will be set by the Board in its sole discretion, but will be no less
than $50,000 and no greater than 50% of his then-existing base
salary.  Mr. Barnett is also eligible for all employee benefits
made available generally to other senior executive officers, including
participation in medical and life insurance programs and profit sharing plans,
and is entitled to reimbursement for automobile expenses, provided such expenses
do not exceed $15,000 per year and $3,000 per month. We have agreed to establish
a long-term incentive plan, in which Mr. Barnett will be entitled to
participate.  If Mr. Barnett is subject to an excise tax under
the Internal Revenue Code of 1986, as amended, he will be entitled to a gross-up
payment.





On
January 3, 2007 Mr. Barnett was granted the option to purchase 1,000,000
shares of our common stock pursuant to the Center for Wound Healing, Inc. 2006
Stock Option Plan under the 2007 Employment Agreement. Six hundred thousand of
these options are time vesting options and 400,000 are performance vesting
options.  With respect to the 600,000 shares of time vesting options,
400,000 are fully vested, 100,000 shares will vest on the second anniversary of
the date of grant and 100,000 shares will vest on the third anniversary of the
date of grant, provided for each vestment that Mr. Barnett has remained
continuously employed by us during those terms.  With respect to the
400,000 performance vesting options, 100,000 options are fully vested and
Mr. Barnett will vest in his option to purchase the remaining 300,000
options (100,000 options in each of fiscal years 2009, 2010 and 2011) if we meet
certain financial targets during fiscal years 2009, 2010 and 2011 as set forth
in his agreement.  These options will expire ten years from the date
of grant. Effective July 21, 2008, the exercise price for these options was
reduced from $3.10 per share to $1.05 per share.





Under the
amended and restated employment agreement, on July 21, 2008 Mr. Barnett was
granted an additional 750,000 performance vesting options at an exercise price
of $1.05 per share.  These performance vesting options will vest 33
1/3% per year if we meet certain quarterly Adjusted EBITDA targets during fiscal
years 2009, 2010 and 2011.  Mr. Barnett’s options will vest upon
a change of control as described below. Mr. Barnett’s option to purchase
such shares of our common stock will remain outstanding for 10 years following
the date of its grant.


39





The
agreement provides that we may terminate Mr. Barnett for cause at any time
upon written notice.  For purposes of the agreement, cause means any
of the following: (1) Mr. Barnett’s material breach of the agreement,
breach of fiduciary duty having a material adverse impact on our Company,
material breach of our employment policies applicable to him, or refusal to
follow the lawful directives of our board of directors that is not corrected (to
the extent correctable) within 10 days after delivery of written notice to
Mr. Barnett with respect to such breach; (2) Mr. Barnett’s breach
of a fiduciary duty to us, material breach of our employment policies applicable
to him, refusal to follow the lawful directives of our board of directors, or
repeated breach of the same provision of the agreement, each on more than two
occasions, regardless of whether such breach has been or may be corrected;
(3) Mr. Barnett’s indictment for or conviction of a felony or any
crime involving fraud; (4) Mr. Barnett’s misappropriation of our funds
or material property; or (5) Mr. Barnett’s material dishonesty,
disloyalty or willful misconduct. In addition, we may terminate
Mr. Barnett’s employment without cause upon 30 days’ prior written
notice.  A failure by us to renew the amended and restated employment
agreement is a termination without cause.





Pursuant
to the agreement, Mr. Barnett may terminate his employment for good reason
at any time upon written notice to us.  Mr. Barnett may also
terminate his employment without good reason upon 45 days’ prior written
notice.  For purposes of the agreement, good reason means the
occurrence of: (1) a material change in Mr. Barnett’s duties,
reporting responsibilities, titles or elected or appointed offices as in effect
immediately prior to the effective date of such change, provided, however that
Mr. Barnett’s ceasing to be our chief financial officer does not constitute good
reason; (2) any reduction or failure to pay when due any compensation to
which Mr. Barnett is entitled; (3) our breach of any material
provisions of the amended and restated agreement; (4) the relocation of our
corporate offices more than 100 miles away from Mr. Barnett’s current
residence; (5) us hiring, retaining or promoting any employee or consultant
whose base salary is or becomes greater than Mr. Barnett’s base salary; or
(6) we fail to elect Mr. Barnett a member of the board of
directors.





In
addition, Mr. Barnett may terminate his employment within 60 days of a
change of control, defined to occur at such time as (1) any person is or
becomes the beneficial owner of securities representing 45% or more of the
combined voting power for election of directors of our then outstanding
securities, subject to certain exceptions; (2) during any period of two
years or less, individuals who at the beginning of such period constitute the
board of directors cease to constitute at least a majority of the board of
directors; (3) the consummation of a sale or disposition of 50% or more of
our assets or business; or (4) the consummation of any reorganization,
merger, consolidation or share exchange, subject to certain
exceptions.





If we
terminate Mr. Barnett’s employment without cause or if Mr. Barnett
terminates his employment for good reason, then Mr. Barnett is entitled to:
(1) his then-existing base salary through the end of the term of the
amended and restated agreement, or for two years, whichever is longer;
(2) the full amount of the Accounting Bonus and the Closing Bonus, to the
extent that they have not been paid as of the date of termination; (3) a
pro-rata amount of any annual bonus for which he is eligible and (4) the
continuation of his health or medical benefit plans for a period of two
years.  However, if his employment is terminated as a result of our
failure to renew the initial term of his amended and restated employment
agreement, then he is generally entitled to receive the continuation of his base
salary and his health or medical benefit plans for a period of one
year.  In addition, any unvested time vesting stock options to which
Mr. Barnett may have been entitled will immediately vest.  The
performance vesting options will vest if the adjusted EBITDA for the quarter
meets the adjusted EBITDA targets.  If Mr. Barnett terminates his
employment pursuant to a change of control, Mr. Barnett will be entitled to
receive the payments described above, as well as a cash payment of $800,000 if
the average price per-share sale price resulting in the change of control is
less than $7.50.





Mr. Barnett
may not disclose any confidential information about us, including our financial
condition, our products and services, and information concerning the identity of
individuals affiliated with us, during the term of his employment and for a
period of five years thereafter.





Mr. Barnett
agrees not to manage, operate, participate in, be employed by or perform
consulting services for our competitors listed in the amended and restated
employment agreement during the term of his employment, and during any period
which he is receiving the continuation payments from us as described
above.  During this period, Mr. Barnett agrees to abstain from
soliciting any individual, partnership, corporation, association, or entity who,
within the 36 month period prior to Mr. Barnett’s termination of
employment, contracted with us or was solicited by us for business, and to
abstain from soliciting any of our officers, managers or
salespersons.





To the
fullest extent permitted by law, we agree to indemnify Mr. Barnett pursuant
to our standard indemnification agreement and by any directors’ and officers’
liability insurance we maintain.  We also agree to maintain directors’
and officers’ liability insurance in appropriate amounts for the benefit of
Mr. Barnett throughout the term of his employment with us, and for a period
of three years thereafter.





Employment
Agreement for David Walz





On
December 2, 2008, The Center for Would Healing, Inc. (the “Company”) entered
into an Amended and Restated Employment Agreement with David Walz, the Company’s
President and Treasurer (the “Amended Agreement”).





The
Amended Agreement, effective as of October 7, 2008, amended and restated the
Employment Agreement dated April 1, 2005.  The prior agreement was
filed with the Company’s Form 10-K for the fiscal year ended June 30,
2007.  The material amendments to the Amended Agreement are described
below.  The description is qualified by the Amended Agreement filed as
Exhibit 10.1 to this Form 8-K.


40




The
initial term of the Amended Agreement is three years, commencing October 7, 2008
and ending on June 30, 2011, and will be automatically renewed for an additional
12 months unless Mr. Walz or the Company provides written notice of the intent
not to renew on or before January 1, 2011.  After each 12 month
extension, the term will continue to renew for successive 12 month periods
unless Mr. Walz or the Company provides written notice of the intent not to
renew no less than 180 days prior to the end of the renewal term.





Mr. Walz’s
annual base salary is $285,000 and is subject to annual cost of living increases
not to exceed 4% per year.  The Board will also review the base salary
at least annually and may increase it in its sole discretion.  Mr.
Walz will receive a $10,000 signing bonus upon execution of the Amended
Agreement.  He is eligible to earn annual cash performance bonuses
based on the Company’s achievement of certain gross margin targets for fiscal
years 2009 through 2011 and thereafter.  The amount of the annual cash
performance bonus, if earned, will be set by the Board in its sole discretion,
but will be no less than $50,000 and no greater than 50% of his applicable base
salary.  Mr. Walz’s car allowance is increased to an amount not
exceeding $15,000 per year, and his vacation is increased to 6 weeks per
year.





The
exercise price of the 210,000 time vesting options previously granted to Mr.
Walz is decreased to $1.05 per share, which represents the fair market value of
a share of the Company’s stock as determined by the Board as of October 8, 2008.
The expiration date of the time vesting options is extended to April 1,
2011.  In addition, on October 8, 2008, Mr. Walz was granted (i) an
additional 300,000 time vesting options and (ii) an additional 225,000
performance vesting options, at an exercise price of $1.05 per
share.  The time vesting options will vest 25% per year on each
anniversary of the grant date.  The performance vesting options will
vest 33 1/3% per year if we meet certain quarterly Adjusted EBITDA targets
during fiscal years 2009, 2010 and 2011.





In the
event of a termination of his employment by the Company without cause, by Mr.
Walz for good reason or by Mr. Walz following a change in control, he is
entitled to (1) continuation of his then-existing base salary through the end of
the term or for 24 months, whichever is longer, (2) a pro-rata amount of his
annual bonus, (3) payment of any accrued employment benefits and (4) continued
health or medical benefits for 24 months.  Any unvested time vesting
options will immediately vest and become exercisable.  With respect to
performance vesting options, if the Company’s annualized EBITDA for the quarter
during which the termination takes place exceed any of the EBITDA vesting
thresholds, then any performance vesting options that would have vested as a
result of the Company’s achieving such EBITDA threshold at any time shall vest
and become exercisable.




However,
if his employment is terminated as a result of the Company’s failure to renew
the initial term of this Amended Agreement, then he is generally entitled to
receive the continuation of his base salary and his health or medical benefit
plans for a period of 12 months.


41




OUTSTANDING
EQUITY AWARDS AT 2009 FISCAL YEAR END





The
following table shows the number of shares covered by exercisable and
unexercisable options held by the Company’s Named Executive Officers on
June 30, 2009. All options were granted under the Center for Wound Healing
2006 Stock Option Plan, formerly called the Kevcorp Services Inc. 2006 Stock
Option Plan. 
There were no stock awards outstanding on June 30, 2009.








Option
      AwardsName
                                                      
                                                      Number
                                                        of
                                                        Securities
                                                        Underlying Unexercised
                                                        Options
                                                        (#)
                                                        Exercisable
                                                      
                                                      
                                                      Number of
                                                        Securities
                                                        Underlying
                                                        Unexercised
                                                        Options
                                                        (#)
                                                        Unexercisable
                                                      
                                                      
                                                      Equity
                                                        Incentive Plan Awards:
                                                        Number of
                                                        Securities
                                                        Underlying Unexercised
                                                        Unearned
                                                        Options
                                                        (#)
                                                      
                                                      
                                                      Option
                                                        Exercise
                                                        Price
                                                        ($)
                                                      
                                                      Option
                                                        Grant
    Date
                                                      
                                                      Option
                                                        Expiration
      DateAndrew
      G. Barnett
                                                      
                                                      
                                                      700,000
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      1.05
                                                      
                                                      January 19, 2007
                                                      
                                                      January 19, 2017250,000
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      1.05
                                                      
                                                      July 21, 2008
                                                      
                                                      July 21, 2018100,000
                                                      (1)
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      1.05
                                                      
                                                      January
      19, 2007
                                                      
                                                      January
      19, 2017200,000
                                                      (2)
                                                      
                                                      
                                                      1.05
                                                      
                                                      January
      19, 2007
                                                      
                                                      January
      19, 2017500,000
                                                      (3)
                                                      
                                                      
                                                      1.05
                                                      
                                                      July
      21, 2008
                                                      
                                                      July
      21, 2018David
      J. Walz
                                                      
                                                      
                                                      210,000
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      1.05
                                                      
                                                      April 1, 2006
                                                      
                                                      April 1, 2011150,000
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      1.05
                                                      
                                                      October 8,2008
                                                      
                                                      October 8, 2013225,000
                                                      (4)
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      1.05
                                                      
                                                      October
      8,2008
                                                      
                                                      October
      8,2013150,000
                                                      (5)
                                                      
                                                      
                                                      1.05
                                                      
                                                      October
      8,2008
                                                      
                                                      October
      8,2013




(1)
            Options
      will vest on January 3, 2010.


(2)
            Of
      these options, 100,000 will vest related to each respective fiscal year if
      the Company meets certain financial targets during fiscal 2010 and fiscal
      2011.


(3)
            Of
      these options, 250,000 will vest related to each respective fiscal year if
      the Company meets certain financial targets during fiscal 2010 and fiscal
      2011.


(4)
            Of
      these options, 75,000 will vest in each October of 2009, 2010, and
      2011.


(5)
            Of
      these options, 75,000 will vest related to each respective fiscal year if
      the Company meets certain financial targets during fiscal 2010 and fiscal
      2011.







FISCAL
2009 DIRECTOR COMPENSATION





The
following table sets forth the compensation paid to our non-executive officer
directors in fiscal year 2009.  Mr. Barnett’s compensation is set
forth in the Fiscal 2009 Summary Compensation Table.





Name
                              
                              Fees
                                Earned or
                                Paid
      in
                                Cash
                                ($)
                              
                              Stock
                                Awards
                                ($)
                              
                              Option
                                Awards
                                ($)
      (1)
                              
                              Non-Equity
                                Incentive
      Plan
                                Compensation
                                ($)
                              
                              All
      Other
                                Compensation
                                ($)
                              
                              Total
                                ($)Paul
      Basmajian
                              
                              
                              —
                              
                              —
                              
                              
                              —
                              
                              —
                              
                              
                              —
                              
                              —Louis
      Bissette
                              
                              
                              —
                              
                              —
                              
                              
                              —
                              
                              —
                              
                              
                              —
                              
                              —John
      Capotorto, M.D.
                              
                              
                              —
                              
                              —
                              
                              
                              —
                              
                              —
                              
                              
                              372,338
                              (2)
                              372,338John
      DeNobile
                              
                              
                              —
                              
                              —
                              
                              
                              —
                              
                              —
                              
                              
                              —
                              
                              —Phillip
      Forman, M.D.
                              
                              
                              —
                              
                              —
                              
                              
                              —
                              
                              —
                              
                              
                              347,338
                              (2)
                              347,338Douglas
      B. Trussler
                              
                              
                              —
                              
                              —
                              
                              
                              —
                              
                              —
                              
                              
                              —
                              
                              —




(1)
            As
      of June 30, 2009, Mr. Basmajian held 110,000 vested options that expire on
      July 18, 2012.


(2)
            Dr. Capotorto
      received $ 336,666 in salary, $10,673 in health benefit expense and
      $25,000 for a car allowance for his service as Co-Medical Director, a
      non-executive position; and Dr. Forman received $336,666 in salary, and
      $10,673 for health benefit expense for his service as Co-Medical Director,
      a non-executive officer position.  The employment agreements are
      described below.




42





Employment
Agreements for John Capotorto and Phillip Forman





We have
employment agreements with two of our directors who continue to serve as
non-executive officers of the Company.




On
December 1, 2005, our predecessor, American Hyperbaric, Inc., entered into
short-term and long-term employment agreements with Dr. Phillip Forman and Dr.
John Capotorto pursuant to which Dr. Forman agreed to serve as our Chief
Executive Officer and Dr. Capotorto agreed to serve as our Chairman and Medical
Director.  The term of the short-term agreements was four months,
commencing on December 1, 2005 and ending on April 1, 2006.  The term
of the long-term agreements is five years, commencing on April 1, 2006 and
ending on April 1, 2011.  Both the short-term and long-term agreements
are subject to earlier termination.  As of January 3, 2007, Dr. Forman
resigned as our Chief Executive Officer, although he remains a member of our
board of directors.




Under the
terms of the agreements, Doctors Forman and Capotorto received a base salary at
the rate of $150,000 per year during the term of the short-term agreements, and
will receive $300,000 per year during the term of the long-term
agreements.  In addition, Doctors Forman and Capotorto are eligible
for all employee benefits made available generally to other senior executive
officers, including participation in medical and life insurance programs and
profit sharing plans, and may lease or purchase an automobile at our expense,
provided such purchase or lease does not exceed $25,000 per year.




The
agreements provide that we may terminate the employment of Doctors Forman and
Capotorto for cause upon 15 days’ written notice. For the purpose of the
agreements, cause means (1) conviction for fraud or a felony; (2) embezzlement;
(3) willful and continued material failure to perform the duties and services
required under the employment agreements for a continued period of 45 days
following written notice thereof from us; or (4) the employee voluntarily
leaving our employ other than for good reason.  The employment
agreements also provide that we may terminate the employment of Dr. Forman or
Dr. Capotorto without cause, upon 30 days’ prior written notice to that
employee.  In addition, Dr. Forman or Dr. Capotorto may terminate his
own employment, upon prior written notice to us, for good reason.  For
the purpose of the agreements, good reason means (1) a material adverse
change in the employee’s title, responsibilities or assignment of duties
inconsistent with, or adverse to, his current duties; (2) any failure by us
to comply with the terms of the employment agreements; (3) any requirement
by us that the employee’s office be located more than 15 miles from his or her
current office; (4) any requirement that the employee travel in connection
with his duties to any location located more than 15 miles from his or her
current office location; or (5) 30 days following a material breach by us
of our obligations under the employment agreements that is not cured within 15
days following receipt of written notice from the employee specifying such
breach.




Upon a
change of control of our Company, if (1) an employee is terminated by us at
any time subsequent to a change of control, other than for cause; or (2) an
employee voluntarily terminates such employment within 180 days subsequent to a
change of control, then, in addition to any other amounts we may be obligated to
pay that employee, we agree to pay to the employee within 10 days after such
termination a lump sum payment in cash in an amount equal to 2.99 times the
employee’s base salary.  For purposes of the employment agreements, a
change of control occurs if (1) any person or group of persons becomes the
beneficial owner of more than 35% of our outstanding voting securities; or
(2) when individuals who are members of the board of directors at any one
time shall, within a period of 13 months thereafter, cease to constitute a
majority of the board of directors except where such change is approved by a
majority of such members of the board of directors who both are then serving as
such and were serving as such at the beginning of the period.




Each of
Doctors Forman and Capotorto is bound by a nondisclosure of confidential
information provision included in the employment agreements, pursuant to which
they may not disclose any confidential information about us, including our
financial condition, our products and services, and information concerning the
identity of individuals affiliated with us, during the term of his employment
and for a period of five years thereafter.  In addition, Doctors
Forman and Capotorto agree to abide by the provisions of the covenants not to
compete found in the employment agreements, pursuant to which they agree, during
the period of employment with us and for a period of three years thereafter, not
to engage as, among other things, an officer, director, employee, shareholder
(other than ownership of less than 5% of the issued and outstanding stock of a
public company) or consultant for any entity which is engaged in providing
services in competition with our business.




Under the
terms of the employment agreements, we agree to indemnify Dr. Forman and Dr.
Capotorto to the maximum extent permitted by law against all claims, judgments,
fines, penalties, liabilities, losses, costs and expenses (including reasonable
attorneys’ fees) arising from their position as executive officers, or from acts
or omissions made in the course of performing their duties for
us.  However, such indemnity does not apply to acts or omissions which
constitute willful misconduct, gross negligence, or which resulted in an
improper personal benefit for the employee.  In addition, we agree to
maintain directors’ and officers’ liability insurance on behalf of the
employees.


43




ITEM
12.     Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters:




The
following tables set forth certain information with respect to the beneficial
ownership of The Center for Wound Healing’s Common Stock as of September 15,
2009 by each director and named executive officer of the Company, all executive
officers and directors as a group, and each person known to the Company to own
beneficially more than 5% of the Common Stock.





(A)
            Security
      Ownership of Certain Beneficial
Owners





AMOUNT OF
                          
                          
                          PERCENTNAME AND ADDRESS OF BENEFICIAL OWNER
                          
                          OWNERSHIP (1)
                          
                          
                          OF CLASS (2)The
      Elise Trust
                            P.O.
      Box 562, Goldens Bridge, NY 10526
                          
                          
                          4,209,294
                          
                          
                          
                          12.5
                          %





(B)
            Security
      Ownership of Management





AMOUNT OFNAME OF BENEFICIAL
    OWNER
                                    
                                    OWNERSHIP (1)(2)

                                        (3)
                                    
                                    
                                    PERCENT
                                      OF CLASS (4)Andrew
      G. Barnett
                                    
                                    
                                    1,036,450
                                    
                                    
                                    
                                    3.1
                                    %Paul
      Basmajian
                                    
                                    
                                    337,776
                                    
                                    
                                    
                                    1.0
                                    %Louis
      Bissette (5)
                                    
                                    
                                    7,941,926
                                    
                                    
                                    
                                    23.7
                                    %John
      Capotorto, M.D.
                                    
                                    
                                    4,409,292
                                    
                                    
                                    
                                    13.1
                                    %John
      DeNobile
                                    
                                    
                                    2,050,924
                                    
                                    
                                    
                                    6.1
                                    %Phillip
      Forman, M.D.
                                    
                                    
                                    3,909,292
                                    
                                    
                                    
                                    11.6
                                    %Douglas
      B. Trussler (5)
                                    
                                    
                                    7,941,926
                                    
                                    
                                    
                                    23.7
                                    %David
      Walz
                                    
                                    
                                    525,999
                                    
                                    
                                    
                                    1.6
                                    %Directors
      and executive officers as a group (8 persons)
                                    
                                    
                                    20,211,659
                                    
                                    
                                    
                                    60.2
                                    %





(1)
Unless otherwise indicated, the address of each beneficial owner is c/o The
Center for Wound Healing, Inc., 155 White Plains Road, Suite 200, Tarrytown, NY
10591.





(2) Under
the rules of the Securities and Exchange Commission, a person is deemed to be
the beneficial owner of a security if that person, directly or indirectly has or
shares the powers to direct the voting of the security or the power to dispose
or direct the disposition of the security. Accordingly, more than one person may
be deemed to be a beneficial owner of the same securities.





(3)
Includes shares which may be acquired through stock options exercisable through
November 15, 2009 in the following amounts: Barnett - 950,000; Basmajian -
110,000; and Walz - 435,000.





(4) Based
on 24,123,638 shares of Common Stock issued and outstanding as of September 15,
2009; 1,495,000 exercisable stock options; and 7,941,926 outstanding
warrants.  This totals 33,560,564.





(5)  Includes
the following for which the named person has shares voting and investment
power:  warrants held by Bison Capital Equity Partners II-A, L.P. to
purchase a total of 526,153 shares of Common Stock at the initial exercise price
of $5.00 per share and warrants held by Bison Capital Equity Partners II-B, L.P.
to purchase a total of 7,415,773 shares of Common Stock at the initial exercise
price of $5.00 per share.




ITEM 13.  Certain Relationships and Related
Transactions, and Director Independence





In
January 2008 the Company raised a total of $1.6 million from individual
investors in the form of a short term unsecured note, (the “Bridge Financing
Note”) the terms of which provided the parties purchasing such note with
interest paid in cash or in lieu of cash, warrants with an exercise price of $2
per share. These funds obtained from the issuance of the note were used to fund
the $1.5 million payment due the Bondholders on or before January 31, 2008 (of
the $1.5 million, $1.2 million was used to retire principal and $300 thousand
was paid for a consent fee). John Capotorto, the Company’s Co-Chief Compliance
Officer and Chairman of the Board of Directors, and Paul Basmajian, a director
of the Company; and Andrew Barnett and Dave Walz, respectively, the Chief
Executive Officer and President of the Company, collectively loaned the Company
$600 thousand of the total $1.6 million raised.  On January 25, 2008
the Company used $1.5 million of the Bridge Financing Note to pay the
Bondholders and $100 thousand for working capital purposes. On March 31, 2008
the entire $1.6 million Bridge Financing Note was paid in full from the proceeds
of the Bison financing.


44




Item
14. Principal Accountant Fees and Services:




Audit
Fees:




The
following is a summary of the fees incurred by the Company for professional
services rendered by its principal accountants for fiscal 2009 and
2008:





Year Ended June 30,2009
                                
                                
                                2008Audit
      Fees(a)
                                
                                $
                                316,000
                                
                                
                                $
                                282,000Audit
      related fees (b)
                                
                                
                                –
                                
                                
                                
                                –Tax
      fees (c)
                                
                                
                                –
                                
                                
                                
                                95,000All
      Other(d)
                                
                                
                                –
                                
                                
                                
                                –Total
                                
                                $
                                316,000
                                
                                
                                $
                                377,000




(a)
            Audit
      Fees:




Our
former principal accountant, Raich Ende Malter & Co. LLP, billed
approximately $116,000 for professional services that it provided for the review
of our 2009 interim financials, and approximately $282,000 for work completed
for fiscal year 2008. For the audit work performed on our fiscal 2009
consolidated financial statements, we retained Eisner LLP, which expects to bill
the Company approximately $200,000.





(b)
            Audit
      Related Fees:


None.




(c)
            Tax
      Fees:




Raich
Ende Malter & Co. LLP billed us aggregate fees in the amount of $95,000 for
the fiscal year ended June 30, 2008 for tax compliance, tax advice and tax
planning services.  Our principal accountant, Eisner LLP, does not
provide tax compliance, tax advice or tax planning services to the
Company.





(d)
            All Other
      Fees:




None.




45





ITEM 15.   Exhibits:




The
following exhibits are included as part of this Annual Report.





Exhibit No.
              
              Description of Exhibit3.1
              
              Amended
      and Restated Articles of Incorporation (incorporated by reference to
      Exhibit 3(i) to Form 10-K filed on April 10, 2008)3.2
              
              Amended
      and Restated By-Laws (incorporated by reference to Exhibit 3.1 to Form 8-
      filed on July 25, 2008)4.1
              
              Securities
      Purchase Agreement dated as of April 7, 2006 among the Company and the
      purchasers named therein with respect to $5.5 million principal amount of
      Debentures and Warrants to purchase common stock of the Company, including
      the form of Common Stock Purchase Warrant (incorporated by reference to
      Exhibit 4.1 of Annual Report on Form10-KSB filed on September 25,
      2008)4.3
              
              Securities
      Purchase Agreement dated as of March 31, 2008 among the Company and Bison
      Capital Equity Partners II-A, L.P. and Bison Capital Equity Partners II-B,
      L.P. (“Bison”) (incorporated by reference to Exhibit 4.1 to Form 8-K filed
      on April 7, 2008)4.4
              
              15%
      Senior Secured Subordinated Promissory Note in the principal amount of $20
      million due March 31, 2013 (incorporated by reference to Exhibit 4.2 to
      the Current Report on Form 8-K filed on April 7, 2008)4.5
              
              Common
      Stock Warrant Agreement dated as of March 31, 2008 among the Company and
      Bison, and the related Series W-1 and W-2 Warrants (incorporated by
      reference to Exhibits 4.3, 4.4 and 4.5 to the Current Report on Form 8-K
      filed on April 7, 2008)4.6
              
              Registration
      Rights Agreement dated as of March 31, 2008 among the Company and Bison
      (incorporated by reference to Exhibit 4.6 to the Current Report on Form
      8-K filed on April 7, 2008)9.1
              
              Form
      of Voting Agreement dated as of March 31, 2008 among the Company, Bison
      and certain shareholders of the Company (incorporated by reference to
      Exhibit 4.7 to the Current Report on Form 8-K filed on April 7,
      2008)10.1*
              
              Employment
      Agreement between American Hyperbaric, Inc. and Dr. John Capotorto dated
      December 1, 2005 (incorporated by reference to Exhibit 10.4 to Form 10-QSB
      filed February 21, 2006)10.2*
              
              Employment
      Agreement between American Hyperbaric, Inc. and Dr. Phillip Forman dated
      December 1, 2005 (incorporated by reference to Exhibit 10.5 to Form 10-QSB
      filed February 21, 2006)10.3*
              
              Amended
      and Restated Employment Agreement between The Center for Wound Healing,
      Inc. and David Walz, executed December 2, 2008 (incorporated by reference
      to Exhibit 10.1 to Form 10-QSB filed December 2, 2008)10.5
      *
              
              Amended
      and Restated Employment Agreement between The Center for Wound Healing,
      Inc. and Andrew Barnett executed July 21, 2008 (incorporated by reference
      to Exhibit 10.5 of Annual Report on Form 10-KSB filed on September 25,
      2008)10.6
              
              2006
      Stock Option Plan, as Amended and Restated July 21, 2008 (incorporated by
      reference to Exhibit 10.6 of Annual Report on Form 10-KSB filed on
      September 25, 2008)10.7
              
              Settlement
      Agreement between the Company and Keith Greenberg, Elise Greenberg, the
      Elise Trust, Raintree Development, LLC, JD Keith LLC and Braintree
      Properties LLC dated September 21, 2007 (incorporated by reference to
      Exhibit 10.7 of Annual Report on Form 10-KSB filed on September 25,
      2008)10.8
              
              Settlement
      Agreement between the Company and Med-Air Consultants, Inc., Alan Richer
      and Joel Macher dated August 9, 2007 (incorporated by reference to Exhibit
      10.8 of Annual Report on Form 10-KSB filed on September 25,
      2008)10.10
              
              Seventh
      Amendment to Amended and Restated Loan Agreement dated March 31, 2008 by
      and among the Company, certain borrowers named therein and Signature Bank
      (incorporated by reference to Exhibit 10.10 of Annual Report on Form
      10-KSB filed on September 25, 2008)10.11†
              
              Eighth
      Amendment to Amended and Restated Loan Agreement dated December 18, 2008
      by and among the Company, certain borrowers named therein and Signature
      Bank




46





10.12†
              
              Waiver
      dated as of October 9, 2009, in respect of Amended and Restated Loan
      Agreement dated December 18, 2008 by and among the Company, certain
      borrowers named therein and Signature Bank14.1
              
              Code
      of Ethics (incorporated by reference to Exhibit 99.1 to Form 10-K filed on
      September 24, 2004)21.1†
              
              Subsidiaries31.1†
              
              Certification
      of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act.31.2†
              
              Certification
      of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act.32.1†
              
              Certification
      of Chief Executive Officer and Chief Financial Officer Pursuant to Section
      906 of the Sarbanes-Oxley
Act.




†  
Filed herewith




*  
Management contract


47




Based on
the review and discussions referred to above, the Board approved the inclusion
of the audited consolidated financial statements be included in the Company's
Annual Report on Form 10-K for its 2009 fiscal year for filing with the
SEC.




The Board
pre-approved all fees described above.




SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.





Signature
                        
                        Title
                        
                        Date/s/
      Andrew G. Barnett
                        
                        Chief
      Executive Officer; Chief
                        
                        October
      13, 2009Andrew
      G. Barnett
                        
                        Financial
      Officer;




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




Signature
                                  
                                  Title
                                  
                                  Date/s/
      Andrew G. Barnett
                                  
                                  Chief
      Executive Officer; Chief
                                  
                                  October
      13, 2009Andrew
      G. Barnett
                                  
                                  Financial
      Officer; DirectorDirectorJohn
      DeNobile/s/
      Dr. John Capotorto
                                  
                                  Director
                                  
                                  October
      13, 2009Dr.
      John Capotorto/s/
      Paul Basmajian
                                  
                                  Director
                                  
                                  October
      13, 2009Paul
      Basmajian/s/
      Dr. Phillip Forman
                                  
                                  Director
                                  
                                  October
      13, 2009Dr.
      Phillip Forman/s/Douglas
      B. Trussler
                                  
                                  Director
                                  
                                  October
      13, 2009Douglas
      B. Trussler/s/Louis
      Bissette
                                  
                                  Director
                                  
                                  October
      13, 2009Louis
      Bissette




48