**UNITED
        STATES SECURITIES AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
  **Form
        10-QSB**


**ྈ**
 For
          the
          quarterly period ended November 30, 2006
 **ྑ**
  For
          the
          transition period from _______________to
          ________________


**Commission
        File No.**  **333-86706**
  **PAPERFREE
        MEDICAL SOLUTIONS, INC.**
  (Exact
        Name of Registrant as Specified in its Charter)
  **Nevada**
              **7389**
              **98-0375957**(State
                  or Other Jurisdiction of Incorporation)
              (Primary
                  Standard Industrial Classification Code Number)
              (IRS
                  Employer Identification. No.)**121
                  WEST SYCAMORE ST., KOKOMO, Indiana 46901**(Address
                  of Principal Executive Offices) (Zip Code)Issuer’s
                  telephone number, including area code: ( 765) 456-1089Securities
                  registered pursuant to Section 12(b) of the Exchange Act:
                  None
                Securities
                  registered pursuant to Section 12(g) of the Act: Common Stock,
                  par value
                  $0.001 per share
  Check
        whether the Issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Securities Exchange Act during the past 12 months (or for such
        shorter period that the registrant was required to file such reports), and
        (2)
        has been subject to such filing requirements for the past 90 days.  Yes 
**T********No  
 ̈**
  Indicate
          by check mark whether the registrant is a shell company (as defined in
          Rule
          12b-2 of the Exchange Act.)
 Yes  ** ̈********No  
T**
 State
            issuer’s revenues for its most recent fiscal year:   $
            979,381
 State
          the
          aggregate market value of the voting and non-voting common equity held
          by
          non-affiliates computed by reference to the price at which the common equity
          was
          sold, or the average bid and asked price of such common equity, as of a
          specified date within the past 60 days. (See definition of affiliate in
          Rule
          12b-2 of the Exchange Act.)
 
 $666,557.17 as
          at
          January 12, 2007 based on the last sale price of our shares
  State
          the
          number of shares outstanding of each of the issuer’s classes of common equity,
          as of the latest practicable date. 74,061,908 as
          at January 16, 2007
  
  
  **NOTE
        REGARDING FORWARD-LOOKING STATEMENTS**
  This
        Form
        10-QSB may contain certain forward-looking statements within the meaning
        of the
        Private Securities Litigation Reform Act of 1995. For this purpose any
        statements contained in this Form 10-QSB that are not statements of historical
        fact may be deemed to be forward-looking statements. Without limiting the
        foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,”
“estimate” or “continue” or comparable terminology is intended to identify
        forward-looking statements. It is important to note that our actual results
        could differ materially from those anticipated from the forward-looking
        statements depending on various important factors. These important factors
        include our history of losses and ability to continue as a going concern,
        the
        uncertainty of acceptance of current and new products in our markets,
        competition in our markets, our dependence on our distributors and the other
        factors discussed in our “Risk Factors” found below.
   **FORWARD-LOOKING
        STATEMENTS**
  Portions
        of this Form 10-QSB, including disclosure under “Management’s Discussion and
        Analysis or Plan of Operation,” contain forward-looking statements within the
        meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), Section 21E of the Securities and Exchange Act of 1934, as
        amended (the “Exchange Act”), and the Private Securities Litigation Reform Act
        of 1995, as amended. These forward-looking statements are subject to risks
        and
        uncertainties and other factors that may cause our actual results, performance
        or achievements to be materially different from the results, performance
        or
        achievements expressed or implied by the forward-looking statements. You
        should
        not unduly rely on these statements. Forward-looking statements involve
        assumptions and describe our plans, strategies, and expectations. You can
        generally identify a forward-looking statement by words such as may, will,
        should, expect, anticipate, estimate, believe, intend, contemplate or project.
        Factors, risks, and uncertainties that could cause actual results to differ
        materially from those in the forward-looking statements include, among
        others,
 ·
                our
                    ability to raise capital,·
                our
                    ability obtain and retain customers,·
                our
                    ability to provide our products and services at competitive
                    rates,·
                our
                    ability to execute our business strategy in a very competitive
                    environment,·
                our
                    degree of financial leverage,·
                risks
                    associated with our acquiring and integrating companies into
                    our
                    own,·
                risks
                    related to market acceptance and demand for our services,·
                the
                    impact of competitive services,·
                other
                    risks referenced from time to time in our SEC filings.
 
  With
        respect to any forward-looking statement that includes a statement of its
        underlying assumptions or bases, we caution that, while we believe such
        assumptions or bases to be reasonable and have formed them in good faith,
        assumed facts or bases almost always vary from actual results, and the
        differences between assumed facts or bases and actual results can be material
        depending on the circumstances. When, in any forward-looking statement, we
        or
        our management express an expectation or belief as to future results, that
        expectation or belief is expressed in good faith and is believed to have
        a
        reasonable basis, but there can be no assurance that the stated expectation
        or
        belief will result or be achieved or accomplished. All subsequent written
        and
        oral forward-looking statements attributable to us, or anyone acting on our
        behalf, are expressly qualified in their entirety by the cautionary statements.
        We do not undertake any obligations to publicly release any revisions to
        any
        forward-looking statements to reflect events or circumstances after the date
        of
        this report or to reflect unanticipated events that may occur.
  **PART
        I - FINANCIAL INFORMATION**
  **ITEM
        1. FINANCIAL STATEMENTS**
  The
        accompanying unaudited consolidated financial statements have been prepared
        in
        accordance with the instructions to Form 10-QSB and Item 310 (b) of Regulation
        S-B, and, therefore, do not include all information and footnotes necessary
        for
        a complete presentation of financial position, results of operations, cash
        flows, and stockholders’ equity in conformity with generally accepted accounting
        principles. In the opinion of management, all adjustments considered necessary
        for a fair presentation of the results of operations and financial position
        have
        been included and all such adjustments are of a normal recurring nature.
        Operating results for the nine months ended November 30, 2006 are not
        necessarily indicative of the results that can be expected for the year ending
        February 28, 2007.
   
  **PAPERFREE
        MEDICAL SOLUTIONS, INC.**
 **CONSOLIDATED
        BALANCE SHEETS**
 **(Unaudited)**
  ASSETS
  November
                  30, 2006
              February
                  28, 2006Current
                  assetsCash
              $
                  26,394
              $
                  213,368Accounts
                  receivable, net of allowance of $75,000 and $75,000
              71,870
              68,223Note
                  receivable - current portion
              7,881
              -Deferred
                  financing costs
              31,732
              13,751Total
                  current assets
              137,877
              295,342Fixed
                  assets, net of accumulated depreciation of $125,426 and
                  $111,721
              94,248
              54,255Deferred
                  financing costs
              54,316
              77,916Note
                  receivable
              4,878
              -Goodwill
              1,703,560
              1,632,502Total
                  assets
              $1,994,879
              $
                  2,060,015**LIABILITIES
                  AND STOCKHOLDERS’ EQUITY**Current
                  liabilitiesAccounts
                  payable and accrued liabilities
              $
                  545,252
              $
                  332,862Stock
                  payable
              106,032
              103,849Notes
                  payable - related parties
              201,493
              195,529Note
                  payable for acquisition
              24,540
              -Lines
                  of credit
              10,718
              16,913Mandatorily
                  redeemable Series C Preferred Stock, $0.001
                par
                  value, 90,000 shares authorized, issued and outstanding
              75,600
              75,600Derivative
                  liabilities
              56,986
              160,305Total
                  current liabilities
              1,020,621
              885,058Callable
                  secured convertible notes payable, net of unamortized
                discount
                  of $572,375 and $628,733
              627,625
              171,267Total
                  Liabilities
              1,648,246
              1,056,325Stockholders’
                  equitySeries
                  A Convertible Preferred Stock, $0.001 par value,5,000,000
                  shares authorized, 0 shares issued and outstanding
              -
              -Series
                  B Preferred Stock, $0.001 par value, 5,000,000 sharesauthorized,
                  0 shares issued and outstanding
              -
              -Common
                  stock, $0.001 par value, 500,000,000 shares authorized,69,561,857
                  and 68,561,857 shares issued and outstanding
              69,562
              68,561Additional
                  paid-in capital
              61,825,504
              61,749,888Accumulated
                  deficit
              (61,548,433)
              (60,814,759)Total
                  stockholders’ equity
              346,633
              1,003,690Total
                  liabilities and stockholders’ equity
              $1,994,879
              $
                  2,060,015
  
  **PAPERFREE
        MEDICAL SOLUTIONS, INC.**
  **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **(Unaudited)**
  Three
                  Months ended November 30,
              Nine
                  Months ended November 30,2006
              2005
              2006
              2005Sales
              $235,518
              $
                  229,678
              $604,549
              $
                  803,172Cost
                  of sales
              -
              50,497
              39,249
              136,876Gross
                  profit
              235,518
              179,181
              565,300
              666,296Operating
                  expenses:General
                  and administrative
              449,821
              265,850
              1,154,902
              1,382,250Consulting
                  fees
              -
              25,264
              78,747
              57,467Professional
                  fees
              1,012
              -
              49,700
              91,014Net
                  loss from operations
              (215,315)
              (111,933)
              (718,049)
              (864,435)Gain
                  on derivatives
              172,447
              -
              173,502
              -Law
                  suit settlement
              (2,183)
              (568,000)
              (2,183)
              (568,000)Waiver
                  of registration rights penalties
              96,000
              -
              -
              -Interest
                  expense
              (63,855)
              (50,554)
              (186,944)
              (89,109)Net
                  loss
              $
                  (12,906)
              $
                  (730,487)
              $(733,674)
              $
                  (1,521,544)Basic
                  and dilutednet
                  loss per
                  share
              $(0.00)
              $(0.01)
              $(0.01)
              $(0.03)Weighted
                  averageshares
                  outstanding
              69,067,413
              54,182,409
              68,862,222
              52,219,372
  
 **PAPERFREE
        MEDICAL SOLUTIONS, INC.**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **(Unaudited)**
 Nine
                    Months Ended November 30,2006
                2005**CASH
                    FLOWS FROM OPERATING ACTIVITIES:**Net
                    loss
                $
                    (733,674)
                $
                    (1,521,544)Adjustments
                    to reconcile net loss to cash used in operating
                    activities:Depreciation
                13,706
                14,456Deferred
                    financing costs amortization
                15,619
                -Convertible
                    debt discount amortization
                126,542
                -Stock
                    options for services
                49,169
                -Imputed
                    interest
                13,799
                -Bad
                    debt expense
                -
                73,000Gain
                    on derivatives
                (173,502)
                -Common
                    stock issued for service
                11,900
                353,000Changes
                    in assets and liabilities:Accounts
                    receivable
                (18,015)
                (4,919)Accounts
                    payable and accrued liabilities
                187,415
                23,792Stock
                    payable
                2,183
                486,774**CASH
                    USED IN OPERATING ACTIVITIES**
                (504,858)
                (575,441)**CASH
                    FLOWS FROM INVESTING ACTIVITES:**Acquisition
                    of DBC
                (49,768)Purchase
                    of fixed assets
                (48,669)
                -(98,467)
                -**CASH
                    FLOWS FROM FINANCING ACTIVITIES:**Net
                    change in bank line of credit
                (6,195)
                (11,622)Advances
                    from related party
                90,376
                138,136Repayment
                    of note receivable
                1,609
                -Repayment
                    of advances to related party
                (59,439)
                -Proceeds
                    from exercise of warrants
                -
                232,600Proceeds
                    from notes payable
                -
                15,973Proceeds
                    from convertible debt, net of offering costs
                390,000
                740,000Shares
                    issued for cash, net of offering costs
                -
                112,608**CASH
                    PROVIDED BY FINANCING ACTIVITIES**
                416,351
                1,227,695**NET
                    CHANGE IN CASH**
                (186,974)
                652,254Cash,
                    beginning of period
                213,368
                121,837Cash,
                    end of period
                $
                    26,394
                $
                    774,091Cash
                    paid for:Interest
                $
                    -
                $
                    89,109Income
                    tax
                -
                -**NON-CASH
                    INVESTING AND FINANCING ACTIVITIES:**Acquisition
                    of KMS:Fair
                    value of assets acquired
                $
                    -
                $
                    3,556,246Less:
                    fair value of liabilities assumed
                -
                (556,246)Shares
                    issued for acquisition of KMS
                -
                3,000,000Discount
                    on convertible debt from derivatives
                70,184
                -Stock
                    issued for acquisition of DBC
                1,750
                -Note
                    payable for acquisition of DBC
                24,540
                -Conversion
                    of accounts receivable to note receivable
                14,368
                -
 
 **PAPERFREE
        MEDICAL SOLUTIONS, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
  **NOTE
        1 - BASIS OF PRESENTATION**
 
 The
        accompanying unaudited interim consolidated financial statements of PaperFree
        Medical Solutions, Inc., have been prepared in accordance with accounting
        principles generally accepted in the United States of America and the rules
        of
        the Securities and Exchange Commission, and should be read in conjunction
        with
        the audited financial statements and notes thereto contained in PaperFree’s
        Annual Report filed with the SEC on Form 10-KSB. In the opinion of management,
        all adjustments, consisting of normal recurring adjustments, necessary for
        a
        fair presentation of financial position and the results of operations for
        the
        interim periods presented have been reflected herein. The results of operations
        for interim periods are not necessarily indicative of the results to be expected
        for the full year. Notes to the consolidated financial statements, which
        would,
        substantially duplicate the disclosure contained in the audited financial
        statements for fiscal 2006 as reported in form 10-KSB have been
        omitted.
 
 **NOTE
        2 - CALLABLE SECURED CONVERTIBLE NOTES PAYABLE**
 
 PaperFree
        entered into a securities purchase agreement with four investors (the “note
        holders”) on November 30, 2005, for the sale of (i) $1,500,000 in callable
        secured convertible notes and (ii) warrants to purchase 3,000,000 shares
        of
        common stock at an exercise price of $0.10 per share. The securities purchase
        agreement required the purchase of an aggregate of $1,500,000 of the callable
        secured convertible notes and 3,000,000 warrants occurring in three traunches
        as
        follows:
  (i)
              $800,000
                  on November 30, 2005 and 1,600,000 warrants to purchase common
                  stock, due
                  November 30, 2008;
 
 (ii)
              $400,000
                  within two days after filing a registration statement covering
                  the number
                  of shares of common stock underlying the callable secured convertible
                  notes and 800,000 warrants to purchase common stock; and
 
 (iii)
              $300,000
                  within two days of the effectiveness of the registration statement
                  and
                  600,000 warrants to purchase common
                  stock.
 
 On
        August
        31, 2006, PaperFree received $200,000 and issued 400,000 warrants related
        to the
        second tranche of convertible notes detailed above. On October 27, 2006,
        Paperfree received $200,000 and issued 400,000 warrants also related to the
        second tranche of convertible notes. These notes mature on August 31, 2009
        and
        October 27, 2009, respectively.
 
 The
        callable secured convertible notes bear interest at 8% per annum from the
        date
        of issuance. Interest is computed on the basis of a 365-day year and is payable
        quarterly in cash. The callable secured convertible notes mature three years
        from the date of issuance, and are convertible into common stock at the note
        holders’ option, at the lower of (i) $2.00 or (ii) 65% of the average of the
        three lowest intraday trading prices for the common stock on the OTC Bulletin
        Board for the 20 trading days before but not including the conversion date.
        Accordingly, there is no limit to the number of shares into which the callable
        secured convertible notes may be converted. The callable secured convertible
        notes are secured by PaperFree’s assets, including inventory, accounts
        receivable and intellectual property.
 
 The
        agreement restricts the note holder’s ability to convert their callable secured
        convertible notes or exercise their warrants and receive shares of common
        stock
        such that the number of shares of common stock held by them in the aggregate
        and
        their affiliates after such conversion or exercise does not exceed 4.99%
        of the
        then issued and outstanding shares of common stock. However, the note holders
        may repeatedly sell shares of common stock in order to reduce their ownership
        percentage, and subsequently convert additional callable secured convertible
        notes.
 
 PaperFree
        incurred direct financing costs of $100,000 associated with the first tranche
        of
        the convertible notes and $10,000 associated with the second tranche. These
        costs were recorded as deferred financing costs to be amortized over the
        life of
        the notes using the effective interest method. Costs incurred
        included:
 
 Debt
                  arrangement fees
              $
                  45,000Broker
                  fees
              40,000Key
                  man life insurance single premium
              20,000Legal
                  fees
              5,000Total
                  associated fees
              110,000Less
                  amortization
              (23,952)Deferred
                  financing costs
              $
                  86,048
 
 
 PaperFree
        analyzed the Convertible Notes and the Warrants for derivative financial
        instruments, in accordance with SFAS No. 133. The Convertible Notes are a
        hybrid
        instrument which contains more than one embedded derivative feature which
        would
        individually warrant separate accounting as derivative instruments under
        SFAS
        133. The various embedded derivative features have been bundled together
        as a
        single, compound embedded derivative instrument that has been bifurcated
        from
        the debt host contract, and referred to as the “Single Compound Embedded
        Derivatives within the Convertible Notes”. The single compound embedded
        derivative features include the conversion feature within the Convertible
        Notes,
        the early redemption option and the Contract Rate adjustment. PaperFree valued
        the compound embedded derivatives based on a probability weighted discounted
        cash flow model. The value of the single compound embedded derivative liability
        was bifurcated from the debt host contract and recorded as a derivative
        liability, which resulted in a reduction of the initial carrying amounts
        (as
        unamortized discounts) of the Convertible Notes. The 1 st tranche
        of Convertible Notes for $800,000 was reduced by $555,809 at inception on
        November 30, 2005. The amount received for the second traunch as of August
        31,
        2006 of $200,000 was reduced by $35,465. The second amount received for the
        second traunch as of October 27, 2006 of $200,000 was reduced by $6,576.
        The
        unamortized discounts will be amortized to interest expense using the effective
        interest method over the life of the Convertible Notes, or 36 months.
  The
        Stock
        Purchase Warrants are freestanding derivative financial instruments which
        were
        valued using the Black-Scholes method. The fair value of the derivative for
        the
        1 st tranche
        was computed at $106,089 at inception on November 30, 2005 and for the
        2 nd tranche
        was computed at $18,830 at August 31, 2006 and $9,311 at October 27, 2006.
        The
        fair values of both were recorded as derivative liabilities which resulted
        in a
        reduction of the initial carrying amount (as unamortized discounts) of the
        Convertible Notes. The unamortized discounts will be amortized to interest
        expense using the effective interest method over the life of the Convertible
        Notes, or 36 months.
  Both
        the
        embedded and freestanding derivative financial instruments were recorded
        as
        liabilities in the consolidated balance sheet and measured at fair value.
        These
        derivative liabilities will be marked-to-market each quarter with the change
        in
        fair value recorded in the income statement.
 
 Variables
        used in the Black−Scholes option−pricing model from inception through November
        30, 2006 include (1) 4.41% to 5.03% risk−free interest rate, (2) expected
        warrant lift is the actual remaining life of the warrant as of each period
        end,
        (3) expected volatility is from 130% to 200% and (4) zero expected
        dividends.
 
 The
        impact of the application of SFAS 133 and EITF 00-19 on the balance sheets
        and
        statements of operations as of and through November 30, 2006 was as
        follows:
 
 Liability
                  as of
                February
                  28, 2006
              Discount
                  related
                to
                  2ndtraunch
              2ndDiscount
                  related to 2ndtraunch
              Gain
                  for the nine months ended November 30, 2006
              Liability
                  as of November 30, 2006Convertible
                  notes
              $
                  130,115
              $
                  35,465
              $
                  6,576
              $
                  132,692
              $
                  39,464Warrants
              30,190
              18,830
              9,311
              40,810
              17,522Total
              $
                  160,305
              $
                  54,295
              $15,888
              $
                  173,502
              $
                  56,986
 
 Discount
        related to 2 nd tranche
        of convertible debt is added to derivative liability and has no effect on
        derivative gain or loss.
 
 
 The
        following summarizes the financial presentation of the Convertible Notes
        at
        November 30, 2006:
 Face
                    value of convertible notes
                $
                    1,200,000Adjustments:Discount
                    for derivative liability - convertible notes with compound embedded
                    derivatives
                (597,851)Discount
                    for derivative liability - investors warrant
                (134,230)Amortization
                    of debt discount
                159,706Convertible
                    notes balance, as adjusted
                $
                    627,625
 
 
 Per
        the
        terms of the registration rights agreement associated with the securities
        purchase agreement, PaperFree is required to register shares for both the
        convertible notes and the attached warrants. These shares were to be registered
        by February 28, 2006. The registration rights agreement contains a liquidated
        damages clause that enforces penalties at 2% of the face value of the
        convertible notes for each month the shares remain unregistered. PaperFree
        had
        previously accrued $96,000 in expected registration rights penalties. During
        the
        quarter ended November 30, 2006, PaperFree received waivers from the noteholders
        releasing PaperFree from any liabilities incurred due to liquidated damages.
        The
        waiver was accounted for by debiting the accrued penalties and crediting
        the
        income statement resulting in $0 for the nine months ended November 30, 2006
        and
        a credit of $96,000 for the three months ended November 30, 2006. On December
        8,
        2006, the SEC issued a notice of effectiveness thereby registering the shares.
 
 **NOTE
        3 - COMMON STOCK**
 
 During
        the nine months ended November 30, 2006, PaperFree issued 825,000 shares
        valued
        at $11,900 for services and 175,000 shares valued at $1,750 for the acquisition
        of Doctors Billing Corporation.
 
 **NOTE
        4 - STOCK OPTIONS**
 
 During
        the nine months ended November 30, 2006 PaperFree granted 2,000,000 stock
        options valued at $21,287 to its CFO. The options were valued using a
        Black-Scholes model with the following assumptions: Risk free rate of 4.8%,
        volatility of 220%, and expected option term of 2.08 years.
 
 During
        the nine months ended November 30, 2006 PaperFree granted 2,000,000 stock
        options valued at $27,882 to its CEO. The options were valued using a
        Black-Scholes model with the following assumptions: Risk free rate of 4.76%,
        volatility of 273%, and expected option term of 1.16 years.
 
 **NOTE
        5 - DBC ACQUISITION**
 
 On
        September 28, 2006, PaperFree acquired all of the shares issued and outstanding
        of Doctors Billing Corporation, in exchange for the issuance of 175,000 shares
        of common stock valued at $1,750 and $74,308 of cash due in three instalments
        payable September 28, 2006, October 28, 2006 and November 28, 2006. As of
        November 30, 2006, two payments have been made and the third payment of $24,540
        is recorded as a note payable for acquisition. The third payment was made
        subsequent to November 30, 2006. Doctors Billing Corporation is a developer,
        licensor and maintenance supporter of proprietary Practice Management and
        Occupational Medicine software applications. Doctors Billing Corporation
        at the
        time of acquisition held customer contracts with annual revenues less than
        $15,000; proprietary rights to its software and fixed assets with a fair
        market
        value of $5,000; and no liabilities. The primary reason for the acquisition
        was
        to mitigate revenue risk. Without this pro-active acquisition, Paperfree
        may
        have been put in the position of seeking a new software package, re-training
        all
        billing services personnel, and migrating clients within a very short window.
        The purchase price allocation is preliminary awaiting a final valuation of
        the
        assets acquired. The estimated fair values of the assets acquired at September
        28, 2006 are as follows:
  Property
                    and equipment
                
                $
                    5,000Goodwill
                
                71,058Total
                
                $76,058
  Additional
        consideration, if any, will be allocated to goodwill upon payment. Goodwill
        will
        be tested periodically for impairment as required by FASB Statement No. 142,
        “Goodwill and other Intangible Assets.”
  The
        results of this acquisition are included in the consolidated financial
        statements from the date of acquisition. Unaudited pro forma operating results
        for PaperFree, assuming the acquisition occurred on March 1, 2005 are as
        follows:
 Three
                    months ended
                  November
                    30,
                Nine
                    months ended
                  November
                    30,2006
                2005
                2006
                2005Revenue
                $
                    250,147
                $
                    244,307
                $
                    648,436
                $
                    847,059Net
                    loss
                (12,880)
                (730,461)
                (733,753)
                (1,521,623)Net
                    loss per share
                (0.00)
                (0.01)
                (0.01)
                (0.03)
  
 **NOTE
        6 - COMMITMENTS**
 
 On
        March
        6, 2006, PaperFree entered into an employment agreement with its CEO. The
        terms
        of the agreement are one year, salary of $100,000 and 2,000,000 stock options
        valued at $27,882. The options vest 500,000 immediately and 500,000 every
        for
        each successive three month period. In addition, the agreement contains a
        put
        option from March 7, 2007 through September 6, 2007 that allows the CEO to
        require the company to purchase up to 2,000,000 shares from him from options
        he
        exercises at 90% of the closing price on March 7, 2007.
 
 On
        August
        28, 2006, PaperFree entered into an employment agreement with its CFO. The
        terms
        of the agreement are for four months, salary of $12,000 per month and 2,000,000
        stock options valued at $21,287. The options vest 1,000,000 immediately and
        1,000,000 on January 1, 2007.
 
 **NOTE
        7 - NOTE RECEIVABLE**
 
 In
        September 2006, PaperFree converted certain accounts receivable to a $14,368
        note receivable. The note carries interest at 12%, requires 24 monthly payments
        of $670 with a final payment of $244 in September of 2008, and is unsecured.
        As
        of November 30, 2006, payments of $1,609 had been received and interest income
        of $400 had been recognized.
 
 **NOTE
        8 - SUBSEQUENT EVENT**
 On
        December 13, 2006 PaperFree received $300,000 for the third tranche of the
        convertible notes payable (see note 2).
 
 In
        December 2006, PaperFree issued 1,500,000 shares of common stock for conversion
        of $5,633 of notes payable.
  **ITEM
        2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS.**
  **GENERAL**
  PaperFree
        is in
        the
        business of providing Medical Practitioners with professional and technical
        services, software and associated hardware solutions, which meet or exceed
        security levels specified by the Health Insurance Portability and Accountability
        Act of 1996. We generate revenue from the provision of these services to
        Medical
        Practioners, physician offices, clinics, and hospitals. Inside the medical
        practitioner marketplace, we focus primarily upon sole practitioners, doctors
        and other health providers operating in clinics of up to ten
        providers.
  **OVERVIEW
        AND PLAN OF OPERATION**
  PaperFree
        Medical Solutions, Inc. (the “Company”) was incorporated on January 29th, 2002
        under the laws of the State of Nevada under the name of Link Media Publishing
        Ltd.
  From
        the
        date of its last annual report to November 30, 2006 PaperFree has undertaken
        the
        following activity:
  (1)
        During the period ending May 31, 2006, PaperFree contracted a new Chief
        Executive Officer that has refined the strategy of the company and refocused
        the
        company’s efforts in the market. The results of this effort were to change
        PaperFree’s business model from a Value-Added Reseller and Hosted Services
        Provider to a Service Bureau providing Managed Services. These Managed Services
        support Provider Practices across the full range of business processes necessary
        in today’s healthcare industry.
 
 (2)
        During the period ending May 31, 2006, PaperFree ended its software development
        efforts in line with the company’s new focus; thus reducing operating expenses
        associated with direct labor technical staff on that project. Additionally,
        the
        company began the integration efforts to combine Commercial-Off-The-Shelf Electronic Medical Record software with our Practice Management applications
        and
        Business Productivity Suite Software based on Microsoft technologies to provide
        a complete Medical Office suite of functionality.
 
 (3)
        During the Three Months ended August 31, 2006, the company refreshed its
        executive team by formally appointing the contracted Chief Executive Officer
        to
        the position of President and Chief Executive Officer; and, hiring a Chief
        Financial Officer. These Officers accelerated the transition of the company
        towards its new strategic and market focus by: a) Initiating a restructuring
        of
        the company into a divisional basis to focus on customer and markets; b)
        Creating a corporate website that informs investors of current events and
        filings; c) Starting a complete revision of marketing, product offering
        description, and pricing; and, d) Beginning the development of the Service
        Bureau solution the company will deliver.
 
 
 (4)
        During the second quarter, increases in revenue were accomplished by securing
        a
        contract with St. John’s Healthcare Network to perform billing management
        services. Continued emphasis on technical integration to support our Service
        Bureau business model results were: a) Secure, web-based conferencing capability
        was secured through the purchase of the iLinc software application suite
        which
        will enable the company to deliver training and provider office support over
        the
        Internet; b) Electronic payments posting software extensions were developed;
        and, c) We achieved Microsoft Certified Partner status in our reseller efforts.
 
 (5)
        For
        the period ending November 30, 2006, PaperFree signed another institutional
        client for billing management services, Bona Vista Programs, and secured
        a
        vendor relationship with an EMR software provider. PaperFree
        purchased the software technology company that owned the Practice
        Management/Occupational Medicine software that PaperFree has been using to
        service clients. The
        company delivered the integrated Common Medical Office Environment (representing
        our complete medical office service solution) to Alpha testing with Beta
        Site
        customer selection started.
 
 Internally,
        PaperFree completed the conversion of our Human Resources administration
        to a
        co-employer relationship with Tilson HR. This relationship increases employee
        benefits management while providing a significant reduction in PaperFree’s
        administrative overhead. Operationally, the company completed the restructuring
        of the company into a market-facing subsidiary (LEAPprn Systems, Inc.), a
        services subsidiary (KMS Computer Services, Inc.), and a software technology
        subsidiary (Doctors’ Billing Corporation). With this restructuring, PaperFree
        sets the stage for growth through focusing employee’s efforts on those outcomes
        necessary for our success.
 
 (6)
        For
        the period ended November 30, 2006, PaperFree had total assets of $1,994,879
        (February 28, 2006 - $2,060,015). Current assets were comprised of cash
        resources of $26,394 (February 28, 2006 - $213,368), accounts receivable
        of
        $71,870 after taking into account a bad debt allowance of $75,000 (February
        28,
        2006 accounts receivable of $68,223 net of bad debt allowance of $75,000),
        current portion of deferred financing costs of $31,732 (February 28, 2006
        -
        $13,751) being $110,000 of costs associated with the callable secured notes
        payable net of $23,952 (February 28, 2006 - $8,333) amortization over the
        three
        year term of the notes, and current portion of note receivable of $7,881
        (February 28, 2006 - $0). The cash and equivalents and accounts receivable
        represent PaperFree’s present source of liquidity.
  Long
        term
        assets included fixed assets of $94,248 (February 28, 2006 $54,255) net of
        accumulated depreciation of $ 125,426 (February 28, 2006 - $111,721), deferred
        financing costs of $54,316 (February 28, 2006 - $77,916) and goodwill of
        $
        1,703,560 (February 28, 2006 - $1,632,502).
  PaperFree’s
        current liabilities at November 30, 2006 totalled $1,020,621 (February 28,
        2006
        $885,058) , consisting of $545,252 (February 28, 2006 - $332,862) in accounts
        payables and accrued liabilities and $106,032 (February 28, 2006 - $103,849)
        in
        stock payable, $201,493 (February 28, 2006 $195,529) due to related parties,
        lines of credit of $10,718 (February 28, 2006 $16,913), note payable for
        acquisition of $24,540 (February 28, 2006 - $0) and mandatory redeemable
        preferred stock shown as a current liability item was $75,600 (February 28,
        2006
        - $75,600). Current liabilities also include $56,986 (February 28, 2006 -
        $160,305) of derivative liability associated with (1) warrants and (2) callable
        secured convertible notes payable.
  Long
        term
        liabilities are comprised of the callable secured convertible notes payable
        of
        $1,200,000 (February 28, 2006 - $800,000) net of discount.
  PaperFree
        is presently operating at a loss. PaperFree’s ability to continue as an ongoing
        concern is dependent on its ability to generate revenues from software sales.
        Failing that, PaperFree may need to raise additional capital, either debt
        or
        equity capital, to fund future operation and ultimately to attain profitable
        operation.
  (7)
        During the nine months ended November 30, 2006 we incurred losses of $ 718,049
        from operations and had a net loss of $733,674 after a gain of $173,502 from
        marking derivatives to market and recording interest expense of
        $186,944.
  (8)
        We
        intend to seek financing necessary to fund future operations and to fund
        our
        investigation, negotiation and acquisition of other business acquisition
        opportunities.
  
 **Risk
        Factors**
  In
        addition to the other information set forth in this report, you should carefully
        consider the factors discussed in Part I, Item 1A. Risk Factors in our Annual
        Report on Form 10-KSB for the year ended February 28, 2006, which could
        materially affect our business, financial condition or future results. The
        risks
        described in our Annual Report on Form 10-KSB are not the only risks facing
        our
        Company. Additional risks and uncertainties not currently known to us or
        that we
        currently deem to be immaterial also may materially adversely affect our
        business, financial condition and/or operating results.
  **Unsuccessful
        Operating History**
  We
        have a
        limited operating history upon which an evaluation of our future prospects
        can
        be made. Our prior business history has been limited to the publication and
        distribution of industry and profession specific wall planners Currently
        we are
        engaged in the provision of Billing Services as well as the sale of computerized
        Practice Management and Electronic Medical Record solutions to medical
        practioners. We are not yet profitable. There is no guarantee that we will
        be
        able to raise the financing necessary to develop any future business plan
        we may
        adopt.
  **If
        We Do Not Obtain Additional Financing, We Will Not Be Able to Acquire Any
        Assets**
  As
        of
        November 30, 2006, we had cash on hand in the amount of $ 26,394. We will
        likely
        have to raise funds to acquire new assets and finance operation or acquire
        new
        assets and to finance operations. If we are not able to raise the funds
        necessary to fund our business objectives, we may have to delay the
        implementation of any future business plan.
  We
        do not
        have any arrangements for financing and we can provide no assurance that
        we will
        be able to obtain the required financing when needed. Obtaining additional
        financing will be subject to a number of factors, including:
 *  Market
          conditions;
 *  Investor
          acceptance of potential business assets; and
 *  Investor
          sentiment.
  These
        factors may make the timing, amount, terms and conditions of additional
        financing unattractive or unavailable to us. If we are not successful in
        achieving financing id operation or acquire business assets, our development
        will be delayed.
 **If
        We Are Unable To Generate Significant Revenues From Our Operations, Our Business
        Will Fail.**
 If
        we are
        unable to generate significant revenues from resumption of operations or
        any
        business interest we acquire, we will not be able to achieve profitability
        or
        continue operations.
  **Our
        Securities May Be Subject to Penny Stock Regulation.**
 If
        an
        active trading market for our securities develops and the price of our common
        stock falls below $5.00 per share, then we will be subject to “penny stock”
regulation. “Penny stock” rules impose additional sales practice requirements on
        broker-dealers who sell such securities to persons other than established
        customers and accredited investors (generally those with assets in excess
        of
        $1,000,000 or annual income exceeding $200,000 or $300,000 together with
        a
        spouse). For transactions covered by these rules, the broker-dealer must
        make a
        special suitability determination for the purchase of such securities and
        have
        received the purchaser’s written consent to the transaction prior to the
        purchase. Additionally, for any transaction involving a penny stock, unless
        exempt, the rules require the delivery, prior to the transaction, of a
        disclosure schedule prescribed by the Commission relating to the penny stock
        market. The broker-dealer also must disclose the commissions payable to both
        the
        broker-dealer and the registered representative and current quotations for
        the
        securities. Finally, monthly statements must be sent disclosing recent price
        information on the limited market in penny stocks. Consequently, the “penny
        stock” rules may restrict the ability of broker-dealers to sell our shares of
        common stock. The market price of our shares would likely suffer as a result.
  **Forward-Looking
        Statements**
 This
        prospectus contains forward-looking statements that involve risks and
        uncertainties. We use words such as anticipate, believe, plan, expect, future,
        intend and similar expressions to identify such forward-looking statements.
        You
        should not place too much reliance on these forward-looking statements. Our
        actual results are most likely to differ materially from those anticipated
        in
        these forward-looking statements for many reasons, including the risks faced
        by
        us described in the this Risk Factors section and elsewhere in this prospectus.
  
 **ITEM
        2. DESCRIPTION OF PROPERTY**
 
 PaperFree
        leases office premises from the former owner of KMS Medical Solutions,
        Inc.
  **ITEM
        3. CONTROLS AND PROCEDURES**
 
 Evaluation
        of disclosure controls and procedures:
 Based
        on
        their evaluation of our disclosure controls and procedures (as defined in
        Rule
        13a−15e under the Securities Exchange Act of 1934 (the "Exchange Act")), our
        principle executive officer and principle financial officer have concluded
        that
        as of the end of the period covered by this quarterly report on Form 10−QSB such
        disclosure controls and procedures were not effective to ensure that information
        required to be disclosed by us in reports that we file or submit under the
        Exchange Act is recorded, processed, summarized and reported within the time
        periods specified in Securities and Exchange Commission rules and forms.
        The
        deficiencies in our internal control related to consolidation of subsidiaries
        and recognition of compensation expense related to stock options. These
        deficiencies have been disclosed to our Board of Directors. Additional effort
        is
        needed to fully remedy these deficiencies and we are continuing our efforts
        to
        improve and strengthen our control processes and procedures. We are in the
        process of improving our internal control over financial reporting in an
        effort
        to remediate these deficiencies by improving supervision and increasing training
        of our accounting staff with respect to generally accepted accounting
        principles, providing additional training to our management regarding use
        of
        estimates in accordance with generally accepted accounting principles, adding
        additional accounting personnel to assist daily transactions, and increasing
        the
        frequency of internal financial statement review.
 
 Changes
        in internal controls:
 There
        were no significant changes in PaperFree’s internal controls or in other factors
        that could significantly affect those controls since the most recent evaluation
        of such controls.
  **PART
        II**
   **ITEM
        1 - LEGAL PROCEEDINGS**
  NONE
   **ITEM
        2 - CHANGES IN SECURITIES**
  NONE
   **ITEM
        3 - DEFAULTS UPON SENIOR SECURITIES**
  NONE
   **ITEM
        4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
  NONE
   **ITEM
        5 - OTHER INFORMATION**
  NONE
   
 **ITEM
        6 - EXHIBITS AND REPORTS ON FORM 8-K**
  (a)
        Exhibits
  Exhibit
              Description
                  of Exhibit31.1
              Certification
                  of Chief Executive Officer Pursuant to Rule
                  13a-14(a)/15d-14(a)31.2
              Certification
                  of Chief Financial Officer Pursuant to Rule
                  13a-14(a)/l5d-14(a)32.1
              Certification
                  of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002, 18 U.S.C. 135032.2
              Certification
                  of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002, 18 U.S.C. 1350
  (b)
        Reports on Form 8K
  On
        September 1, 2006, we filed on form 8-K a notice of Change of Directors or
        Principal Officers’; Election of Directors and Appointment of Principal
        Officers, whereby Mr. William L. Sklar resigned as President, CEO and CFO
        and
        Stephen Hawksworth was elected President and CEO and Mr. Craig S. Barrow
        was
        elected CFO.
 **SIGNATURES**
   Pursuant
        to the requirements of Section 13 or 15(d) of the Securities Exchange Act
        of
        1934, PaperFree has duly caused this report to be signed on its behalf by
        the
        undersigned, thereunto duly authorized.
   PAPERFREE
        MEDICAL SOLUTIONS, INC.
  (Registrant)
   By:/s/
                  Stephen Hawksworth
 Stephen
        Hawksworth, Chief Executive Officer
 Date:
         January 16, 2007
    By:/s/
                  Craig S. Barrow
 Craig
        S.
        Barrow, Chief Financial Officer
 Date:
         January 16, 2007
   Pursuant
        to the requirements of Section 13 or 15(d) of the Securities Exchange Act
        of
        1934, PaperFree has duly caused this report to be signed on its behalf by
        the
        undersigned, thereunto duly authorized.