----

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**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-QSB/A**

| **x**                                                                                  |    | Quarterly                Report pursuant to Section 13 or 15(d) of the Securities Exchange                Act of                1934   |
|----------------------------------------------------------------------------------------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                   |         |                                                                                                                                             |
| For                the quarterly period ended May 31, 2006                        |
|                                                                                   |         |                                                                                                                                             |
| **o**                                                                                  |         | TRANSITION                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF                1934                       |
|                                                                                   |         |                                                                                                                                             |
| For                the transition period from _______________to ________________  |

**Commission      File No.**
**333-86706**

**PAPERFREE      MEDICAL SOLUTIONS, INC.**

| **Nevada**                                                                                                                                                                                                                                                    |   **7374**                                                    | **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) 456-1089                                                                                                                                                                          |
|                                                                                                                                                                                                                                                          |                                                                    |                                              |
| Securities                registered pursuant to Section 12(b) of the Exchange Act:                NoneSecurities                registered pursuant to Section 12(g) of the Act: Common Stock, par                value                $0.001 per share |

----

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|    | Yes                   | X   | No                _____ |
|--------------|---------------------------------|---------------|-------------------------|

|    | Yes   | X   | No                _____ |
|--------------|-----------------|---------------|-------------------------|

|    | State                issuer’s revenues for its most recent fiscal year:                   | $979,381 |
|--------------|-----------------------------------------------------------------------------------------------------------|----------|

----

**NOTE      REGARDING FORWARD-LOOKING STATEMENTS**

**FORWARD-LOOKING      STATEMENTS**

|    | o      | our                ability to raise capital,                                                                  |    |
|--------------|--------|---------------------------------------------------------------------------------------------------------------|--------------|
|    | o      | our                ability obtain and retain customers,                                                       |    |
|    | o      | our                ability to provide our products and services at competitive                rates,          |    |
|    | o      | our                ability to execute our business strategy in a very competitive                environment, |
|    | o      | our                degree of financial leverage,                                                              |    |
|    | o      | risks                associated with our acquiring and integrating companies into our                own,     |    |
|    | o      | risks                related to market acceptance and demand for our services,                                |    |
|    | o      | the                impact of competitive services,                                                            |    |
|    | o      | other                risks referenced from time to time in our SEC filings.                                   |    |
|         |   |                                                                                                          |         |   |   |   |   |   |   |   |   |

----

**PART      I - FINANCIAL INFORMATION **

**ITEM      1. FINANCIAL STATEMENTS**

----

**PAPERFREE      MEDICAL SOLUTIONS, INC.**

**CONSOLIDATED      BALANCE SHEETS**

**(Unaudited)**

|                                                                                                                                                  | May                31, 2006                                                                | February                28, 2006 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------|----------------------------------|
|                                                                                                                                                  | (restated)                                                                                 |                             |
| Current                assets                                                                                                                         |                                                                                       |                             |
| Cash                                                                                                                                                  | $                36,658                                                                    | $                213,368         |
| Accounts                receivable, net of the allowance of $75,000 and $75,000                                                                       |               53,182 | 68,223                           |
| Deferred                financing costs                                                                                                               | 33,332                                                                                     | 33,332                           |
| Total                current assets                                                                                                                   | 123,172                                                                                    | 314,923                          |
|                                                                                                                                                  |                                                                                       |                             |
| Fixed                assets, net of accumulated depreciation of $119,207 and                $111,721                                                  | 46,769                                                                                     | 54,255                           |
| Deferred                financing costs                                                                                                               | 50,001                                                                                     | 58,335                           |
| Goodwill                                                                                                                                              |          1,632,502                            | 1,632,502                        |
|                                                                                                                                                  |                                                                                       |                             |
|  Total                assets                                                                                                                     | $                1,852,444                                                                 | $                2,060,015       |
|                                                                                                                                                  |                                                                                       |                             |
| LIABILITIES                AND STOCKHOLDERS’ EQUITY                                                                                             |                                                                                       |                             |
|                                                                                                                                                  |                                                                                       |                             |
| Current                liabilities                                                                                                                    |                                                                                       |                             |
| Accounts                payable and accrued liabilities                                                                                               | $                490,720                                                                   | $                332,862         |
| Deferred                revenue                                                                                                                       | 25,000                                                                                     | -                                |
| Stock                payable                                                                                                                          | 103,849                                                                                    | 103,849                          |
| Notes                payable - related parties                                                                                                        | 203,267                                                                                    | 195,529                          |
| Lines                of credit                                                                                                                        | 14,342                                                                                     | 16,913                           |
| Mandatorily                redeemable Series C Preferred Stock, $0.001par                value, 90,000 shares authorized, issued and outstanding      | 75,600                                                                                | 75,600                           |
| Derivative                liabilities                                                                                                                 | 257,153                                                                                    | 160,305                          |
|                                                                                                                                                  |                                                                                       |                             |
| Total                current liabilities                                                                                                              | 1,169,931                                                                                  | 885,058                          |
|                                                                                                                                                  |                                                                                       |                             |
| Callable                secured convertible notes payable, net of unamortized discount of                $592,114                and $628,733         |  207,886                                                                              |  171,267                    |
|                                                                                                                                                  |                                                                                       |                             |
| Total                liabilities                                                                                                                      | 1,377,817                                                                                  | 1,056,325                        |
|                                                                                                                                                  |                                                                                       |                             |
| Stockholders’                equity                                                                                                             |                                                                                       |                             |
| Series                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 shares authorized,                0 shares                issued and outstanding | -                                                                                          | -                                |
| Common                stock, $0.001 par value, 500,000,000 shares                                                                                     |                                                                                       |                             |
| authorized,                68,761,857 and 68,561,857 shares issued and outstanding                                                                    | 68,761                                                                                     | 68,561                           |
| Additional                paid-in capital                                                                                                             | 61,754,088                                                                                 | 61,749,888                       |
| Accumulated                deficit                                                                                                                    |       (61,348,222)                                           | (60,814,759)                     |
| Total                stockholders’ equity                                                                                                       |          474,627                              | 1,003,690                        |
|                                                                                                                                                  |                                                                                       |                             |
|  Total                liabilities and stockholders’ equity                                                                                 | $                1,852,444                                                                 | $                2,060,015       |

----

**PAPERFREE      MEDICAL SOLUTIONS, INC.**

**CONSOLIDATED      STATEMENTS OF OPERATIONS**

**Three      months ended May 31, 2006 and 2005**

**(Unaudited)**

|                                                | 2006                                                                           | 2005                                                     |
|-----------------------------------------------------|--------------------------------------------------------------------------------|----------------------------------------------------------|
|                                                | (restated)                                                                     |                                                     |
| Sales                                               | $                134,063                                                       | $                205,283                                 |
| Cost                of sales                        |             24,179 |     26,447                           |
| Gross                profit                         | 109,884                                                                        | 178,836                                                  |
|                                                |                                                                           |                                                     |
| Operating                expenses:                  |                                                                           |                                                     |
| General                and administrative           | 321,401                                                                        | 359,994                                             |
| Bad                debt expense                     | -                                                                         | 73,000                                                   |
| Consulting                fees                      | 71,247                                                                         | 15,000                                                   |
| Professional                fees                    |           28,904             |   215,166                                      |
| Net                loss from operations             | (311,668)                                                                      | (484,324)                                                |
|                                                |                                                                           |                                                     |
| Loss                on derivatives                  | (96,848)                                                                       | -                                                   |
| Registration                rights penalties        | (48,000)                                                                       |                                                     |
| Interest                expense                     |           (76,947)           |         (24,928) |
|  Net                loss                       | $                (533,463)                                                     | $                (509,252)                               |
|                                                |                                                                           |                                                     |
| Basic                and diluted net loss per share | $                (0.01)                                                        | $(0.01)                                                  |
|                                                |                                                                           |                                                     |
| Basic                and diluted weighted average   |                                                                           |                                                     |
| shares                outstanding                   | 68,761,857                                                                     | 49,850,066                                               |

----

**PAPERFREE      MEDICAL SOLUTIONS, INC.**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

**Three      months ended May 31, 2006 and 2005**

**(Unaudited)**

|                                                              | 2006                                                                      | 2005                                              |
|-------------------------------------------------------------------|---------------------------------------------------------------------------|---------------------------------------------------|
|                                                              | (restated)                                                                |                                              |
| CASH                FLOWS FROM OPERATING ACTIVITIES:              |                                                                      |                                              |
| Net                loss                                           | $                (533,463)                                                | $                (509,252)                        |
| Adjustments                to reconcile net loss to cash used in  |                                                                      |                                              |
| operating                activities:                              |                                                                      |                                              |
| Depreciation                expense                               | 7,486                                                                     | 6,878                                             |
| Deferred                financing costs amortization              | 8,334                                                                     | -                                                 |
| Convertible                debt discount amortization             | 36,619                                                                    | -                                                 |
| Bad                debt expense                                   | -                                                                         | 73,000                                            |
| Loss                on derivatives                                | 96,848                                                                    | -                                                 |
| Common                stock issued for services                   | 4,400                                                                     | 168,000                                           |
| Changes                in assets and liabilities:                 |                                                                      |                                              |
| Accounts                receivable                                | 15,041                                                                    | 5,430                                             |
| Deferred                revenue                                   | 25,000                                                                    | -                                                 |
| Accounts                payable and accrued liabilities           | 157,858                                                                   | (79,289)                                          |
| CASH                USED IN OPERATING ACTIVITIES                  |        (181,877)                       |    (335,233)                       |
|                                                              |                                                                      |                                              |
| CASH                FLOWS FROM FINANCING ACTIVITIES:              |                                                                      |                                              |
| Net                change in line of credit                       | (2,571)                                                                   | (5,237)                                           |
| Advances                from related party                        | 30,727                                                                    | 25,208                                            |
| Repayment                of advances to related party             | (22,989)                                                                  | -                                                 |
| Proceeds                from exercise of warrants                 | -                                                                         | 33,000                                            |
| Net                change in prepayments for exercise of warrants | -                                                                         | 155,725                                           |
| Shares                issued for cash, net of offering costs      | -                                                                         | 93,051                                            |
| CASH                PROVIDED BY FINANCING ACTIVITIES              | 5,167                                                                     |        301,747 |
|                                                              |                                                                      |                                              |
| NET                CHANGE IN CASH                                 | (176,710)                                                                 | (33,486)                                          |
| Cash,                beginning of period                          |            213,368 |       121,837       |
|  Cash,                end of period                          | $                36,658                                                   | $                88,351                           |
|                                                              |                                                                      |                                              |
| Cash                paid for:                                     |                                                                      |                                              |
| Interest                                                          | $                24,428                                                   | $                24,928                           |
| Income                tax                                         | -                                                                         | -                                                 |
|                                                              |                                                                      |                                              |
|  NON-CASH                INVESTING AND FINANCING ACTIVITIES: |                                                                 |                                         |
| Acquisition                of KMS:                                |                                                                      |                                              |
| Fair                value of assets acquired                      | $                -                                                        | $                3,556,246                        |
| Less:                fair value of liabilities assumed            | -                                                                         | (556,246)                                         |
| Shares                issued for acquisition of KMS               | $                -                                                        | $                3,000,000                        |

----

**PAPERFREE      MEDICAL SOLUTIONS, INC.**

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

**NOTE      1 - BASIS OF PRESENTATION**

**NOTE      2 - CALLABLE SECURED CONVERTIBLE NOTES PAYABLE**

|    | (i) | $800,000                on November 30, 2005 and 1,600,000 warrants to purchase common                stock; |
|--------------|-----|--------------------------------------------------------------------------------------------------------------|

|    | (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. |
|--------------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Debt                arrangement fees                  | $                35,000        |
|------------------------------------------------------------|-------------------------------------|
| Broker                fees                            | 40,000                         |
| Key                man life insurance single premium  | 20,000                         |
|  Legal                fees                       | 5,000                          |
| Total                associated fees                  | 100,000                        |
|  Less                amortization                |  (16,667)                 |
|                                                       |  $                83,333  |

|                             | Transaction                Date (11/30/06) | Liability                as of 2/28/06 | Liability                as of 5/31/06 | Gain                (loss) through 5/31/06 |
|----------------------------------|--------------------------------------------|----------------------------------------|----------------------------------------|--------------------------------------------|
|                             |                                       |                                   |                                   |                                       |
| Convertible                notes | $                555,809                   | $                130,115               | $                234,925               | $                7,964                     |
| Warrants                         | 106,089                                    | 30,190                                 | 22,228                                 | (104,812)                                  |
| Total                            | $                661,898                   | $160,305                               | $                257,153               | $                96,848                    |

| Face                value of convertible notes                                                                         | $                800,000 |
|------------------------------------------------------------------------------------------------------------------------|--------------------------|
|                                                                                                                   |                     |
| Adjustments:                                                                                                           |                     |
| Discount                for derivative liability - convertible notes with compound embedded                derivatives | (555,809)                |
| Discount                for derivative liability - investors warrant                                                   | (106,089)                |
| Amortization                of debt discount                                                                           | 69,784                   |
| Convertible                notes balance, as adjusted                                                                  | $                207,886 |

**NOTE      3 - RESTATEMENT**

**As      of May 31, 2006:**

|                                                                                                                                             | As                PreviouslyReported                         |  Adjustments |                    |  Restated                 |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------|-------------------|-------------------------|--------------------------------|
|                                                                                                                                             |                                                         |              |                    |                           |
| ASSETS                                                                                                                                           |                                                         |              |                    |                           |
| Current                assets                                                                                                                    |                                                         |              |                    |                           |
| Cash                                                                                                                                             | $                36,657                                      | -                 |                    | $                36,657        |
| Accounts                receivable                                                                                                               |          53,182 | 1                 | (a)                     | 53,183                         |
| Deferred                financing costs                                                                                                          | 91,667                                                       | (8,334)           | (f)                     | 83,333                         |
| Total                current assets                                                                                                              | 181,506                                                      | (8,333)           |                    | 173,173                        |
|                                                                                                                                             |                                                         |              |                    |                           |
| Fixed                assets                                                                                                                      |  46,768                                                 | 1                 | (a)                     | 46,769                    |
| Goodwill                                                                                                                                         | 1,632,502                                                    | -                 |                    | 1,632,502                 |
| Total                assets                                                                                                                      | $                1,860,776                                   | (8,332)           |                    | $                1,852,444     |
|                                                                                                                                             |                                                         |              |                    |                           |
| LIABILITIES                & STOCKHOLDERS’ EQUITY                                                                                      |                                                         |              |                    |                           |
| Current                liabilities                                                                                                               |                                                         |              |                    |                           |
| Accounts                payable and accrued liabilities                                                                                          | $                435,885                                     | 54,835            | (a),                (b) | $                490,720       |
| Deferred                revenue                                                                                                                  |          25,000 | -                 |                    |     25,000 |
| Stock                payable                                                                                                                     | 103,849                                                      | -                 |                    | 103,849                        |
| Notes                payable - related parties                                                                                                   |  212,765                                                | (9,498)           | (a)                     |  203,267                  |
| Lines                of credit                                                                                                                   | 11,679                                                       | 2,663             | (a)                     | 14,342                         |
| Mandatorily                redeemable Series C Preferred Stock, $0.001                par value, 90,000 shares authorized, issued andoutstanding | 75,600                                                       | -                 |                    | 75,600                         |
| Derivative                liability                                                                                                              | 64,843                                                       | 192,310           | (c)                     | 257,153                        |
| Total                current liabilities                                                                                                         | 929,621                                                      | 240,310           |                    | 1,169,931                      |
|                                                                                                                                             |                                                         |              |                    |                           |
| Callable                secured convertible notes payable                                                                                        | 204,432                                                      | 3,454             | (c)                     | 207,886                        |
|  Total                liabilities                                                                                                           | 1,134,053                                                    | 243,764           |                    | 1,377,817                      |
|                                                                                                                                             |                                                         |              |                    |                           |
| Stockholders’                equity                                                                                                        |                                                         |              |                    |                           |
|                                                                                                                                             |                                                         |              |                    |                           |
| Stockholders’                equity                                                                                                        |                                                         |              |                    |                           |
| Series                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 Shares                authorized, 0 shares issued and outstanding           | -                                                            | -                 |                    | -                              |
| Common                stock, $0.001 par value, 500,000,000 shares                                                                                |                                                         |              |                    |                           |
| authorized,                68,761,857 and 68,561,857 shares issued and outstanding                                                               | 68,560                                                       | 200               | (d)                     | 68,760                         |
| Additional                paid-in capital                                                                                                        | 61,749,889                                                   | 4,200             | (d)                     | 61,754,089                     |
| Accumulated                deficit                                                                                                               | (61,091,727)                                                 | (256,495)         | (e)                     | (61,348,222)                   |
| Total                stockholders’ equity                                                                                                  | 726,722                                                      | (252,095)         |                    | 474,627                        |
|                                                                                                                                             |                                                         |              |                    |                           |
| Total                liabilities and stockholders’ equity                                                                                  | $                1,860,775                                   | (8,331)           |                    | $                1,852,444     |

**Three      Months Ended May 31, 2006:**

|                                                                 | As                PreviouslyReported                                 | Adjustments |    |  Restated                                                                   |
|----------------------------------------------------------------------|----------------------------------------------------------------------|-------------|---------|----------------------------------------------------------------------------------|
|                                                                 |                                                                 |        |    |                                                                             |
| Sales                                                                | $                134,063                                             |        |    | $                134,063                                                         |
| Cost                of sales                                         |           (24,180) | 1           | **(a)** |             (24,179) |
| Gross                profit                                          | 109,884                                                              |        |    | 109,884                                                                          |
|                                                                 |                                                                 |        |    |                                                                             |
| Operating                expenses:                                   |                                                                 |        |    |                                                                             |
| General                and administrative                            | 318,869                                                              | 2,532       | **(a)** | 321,401                                                                          |
| Consulting                fees                                       | 66,847                                                               | 4,400       | **(d)** | 71,247                                                                           |
| Professional                fees                                     |           28,904   |        |    |           28,904               |
| Net                loss from operations                              | (304,737)                                                            | 6,931       |    | (311,668)                                                                        |
|                                                                 |                                                                 |        |    |                                                                             |
| Gain                (loss) on derivatives                            | 95,462                                                               | (192,310)   | **(c)** | (96,848)                                                                         |
| Registration                rights penalties                         | -                                                                    | (48,000)    | **(b)** | (48,000)                                                                         |
| Interest                expense                                      |           (67,694) | (9,253)     | **(a)** |           (76,947)             |
|  Net                loss                                        | $                (276,968)                                           | (256,495)   |    | $                (533,463)                                                       |
|                                                                 |                                                                 |        |    |                                                                             |
| Basic                and diluted net loss per share                  | $                (0.00)                                              |        |    | $                (0.01)                                                          |
|                                                                 |                                                                 |        |    |                                                                             |
| Basic                and diluted weighted average shares outstanding | 68,561,857                                                           |        |    | 68,761,857                                                                       |

**(a)      **

**(b)      **

**(c)      **

**(d)      **

**(e)      **

**(f)      **

**NOTE      4 - COMMON STOCK**

**NOTE      5 - DEFERRED REVENUE**

**NOTE      6 - SUBSEQUENT EVENTS**

----

**ITEM      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF      OPERATIONS.**

**GENERAL**

**OVERVIEW      AND PLAN OF OPERATION**

**Risk      Factors**

**Unsuccessful      Operating History**

**If      We Do Not Obtain Additional Financing, We Will Not Be Able to Acquire Any      Assets**

|    | * | Market                conditions;                                    |    |
|--------------|---|----------------------------------------------------------------------|--------------|
|    | * | Investor                acceptance of potential business assets; and |
|    | * | Investor                sentiment.                                   |    |

**If      We Are Unable To Generate Significant Revenues From Our Operations, Our Business      Will Fail. **

**Our      Securities May Be Subject to Penny Stock Regulation. **

**Forward-Looking      Statements **

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**ITEM      3. CONTROLS AND PROCEDURES**

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**PART      II**

**ITEM      1.LEGAL PROCEEDINGS**

**ITEM      2. CHANGES IN SECURITIES**

**ITEM      3.DEFAULTS UPON SENIOR SECURITIES**

**ITEM      4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

**ITEM      5.OTHER INFORMATION**

**ITEM      6.EXHIBITS AND REPORTS ON FORM 8-K**

| Exhibit  | Description                of Exhibit                                                                                                             |
|---------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1     | 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. 1350  |
| 32.2     | Certification                of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley                Act of 2002, 18 U.S.C. 1350  |

*.*

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**SIGNATURES**

**PAPERFREE      MEDICAL SOLUTIONS, INC.**

|   | By:                  /s/                William L Sklar |
|--------|-------------------------------------------------------------------|

|   | By:                  /s/                William L. Sklar |
|--------|--------------------------------------------------------------------|