**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





**QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934**





For
      the
      quarterly period ended **March
      31, 2008**





Commission
      file number **001-31608**





**XCORPOREAL,
      INC.**


(Exact
      name of small business issuer as specified in its charter)





**Delaware**
            **75-2242792**(State
                or other jurisdiction of
              incorporation
                or organization)
            (IRS
                Employer Identification Number)





**12121
      Wilshire Blvd., Suite 350, Los Angeles, California 90025**


(Address
      of principal executive offices)





**(310)
      923-9990**


(Issuer’s
      telephone number)





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





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting
      company.




£Large accelerated filer
            £Accelerated filer£Non-accelerated filer
            xSmaller reporting company





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





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date.





**Class**
            **Outstanding
                as of May 5, 2008**Common
                Stock, $0.0001 par value
            14,592,472
                shares








**INDEX**





PART
                I — FINANCIAL INFORMATION
            3Item
                1. Interim Financial Statements
            3Balance
                Sheets at March 31, 2008 (unaudited) and December 31, 2007
            3Statements
                of Operations (unaudited) for the three months ended March 31, 2008
                and
                March 31, 2007 and the period from inception (May 4, 2001) to March
                31,
                2008
            4Statements
                  of Cash Flows (unaudited) for the three months ended March 31,
                  2008 and
                  March 31, 2007 and the period from inception (May 4, 2001) to March
                  31,
                  2008
            5Statement
                  of Stockholders Equity (Deficit) for the three months ended March
                  31, 2008
                  and the period from inception (May 4, 2001) to March 31, 2008
                  (unaudited)
            6Notes
                to the Interim Financial Statements
            7Item
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of Operations
            12Item
                3. Quantitative and Qualitative Disclosures about Market
                Risk
            15Item
                4. Controls and Procedures
            15PART
                II — OTHER INFORMATION
            17Item
                1. Legal Proceedings
            17Item
                1A. Risk Factors
            17Item
                2. Unregistered Sales of Equity Securities ; Use of Proceeds from
                Registered Securities
            17Item
                5. Other Information
            18Item
                6. Exhibits
            18Signatures
            19




2


**PART
      I — FINANCIAL INFORMATION**





**ITEM
      1. Financial Statements**





**XCORPOREAL,
      INC.**


**(a
      Development Stage Company)**


**BALANCE
      SHEETS**


**March
                  31,**
              
              **December
                  31,****2008**
              
              **2007****(Unaudited)****ASSETS**CurrentCash
                  and cash equivalents
              
              $
              19,935
              
              $
              106,495Marketable
                  securities, at fair value
              
              
              12,952,140
              
              
              16,401,898Restricted
                  cash
              
              
              67,943
              
              
              68,016Prepaid
                  Expenses & Other Current Assets
              
              
              480,432
              
              
              408,303Total
                  current assets
              
              
              13,520,450
              
              
              16,984,712Property
                  and equipment, net
              
              
              309,393
              
              
              266,912Other
                  assets
              
              
              907
              
              
              922Total
                  Assets
              
              $
              13,830,750
              
              $
              17,252,546**LIABILITIES**CurrentAccounts
                  payable
              
              $
              1,907,106
              
              $
              1,125,239Accrued
                  compensation
              
              
              115,594
              
              
              196,541Accrued
                  professional fees
              
              
              623,141
              
              
              425,228Accrued
                  royalties
              
              
              145,833
              
              
              83,333Accrued
                  other liabilities
              
              
              114,214
              
              
              68,946Payroll
                  liabilities
              
              
              15,287
              
              
              11,926Other
                  current liabilities
              
              
              115,400
              
              
              115,400Total
                  Current Liabilities
              
              
              3,036,575
              
              
              2,026,613**Commitments
                  and contingencies****STOCKHOLDERS'
                  EQUITY**Preferred
                  Stock, $0.0001 par value, 10,000,000 sharesauthorized,
                  none outstanding
              
              
              -
              
              
              -Common
                  Stock, $0.0001 par value, 40,000,000 sharesauthorized,
                  14,572,472 and 14,372,472 outstanding onMarch
                  31, 2008 and December 31, 2007, respectively
              
              
              1,457
              
              
              1,437Additional
                  paid-in capital
              
              
              38,740,903
              
              
              36,822,316Deficit
                  accumulated during the development stage
              
              
              (27,948,185
              )
              
              (21,597,820
              )Total
                  Stockholders' Equity
              
              
              10,794,175
              
              
              15,225,933Total
                  Liabilities & Stockholders' Equity
              
              $
              13,830,750
              
              $
              17,252,546


See
      accompanying notes to interim financial statements.




3


**XCORPOREAL,
      INC.**


**(a
      Development Stage Company)**


**STATEMENTS
      OF OPERATIONS**


**(Unaudited)**




**May
                  4, 2001 (Date****Three
                  Months Ended**
              
              **of
                  Inception) to****March
                  31,**
              
              **March
                  31,****2008**
              
              **2007**
              
              **2008**Operating
                  Expenses:Selling,general
                  and administrative
              
              $
              3,749,639
              
              $
              4,041,634
              
              $
              18,152,331Research
                  and development
              
              
              2,732,492
              
              
              1,143,563
              
              
              11,160,984Depreciation
                  and amortization
              
              
              22,508
              
              
              1,521
              
              
              54,774Loss
                  before other income and income taxes
              
              
              (6,504,639
              )
              
              (5,186,718
              )
              
              (29,368,089
              )Interest
                  and other income
              
              
              155,874
              
              
              311,866
              
              
              1,423,104Loss
                  before income taxes
              
              
              (6,348,765
              )
              
              (4,874,852
              )
              
              (27,944,985
              )Income
                  taxes
              
              
              1,600
              
              
              -
              
              
              3,200Net
                  Loss
              
              $
              (6,350,365
              )
              $
              (4,874,852
              )
              $
              (27,948,185
              )Basic
                  and diluted loss per share
              
              $
              (0.44
              )
              $
              (0.34
              )Weighted
                  average number of shares outstanding
              
              
              14,383,461
              
              
              14,200,050




See
      accompanying notes to interim financial statements.




4


**XCORPOREAL,
      INC.**


**(a
      Development Stage Company)**


**STATEMENTS
      OF CASH FLOWS**


**(Unaudited)**


**May
                  4, 2001 (Date****Three
                  Months Ended**
              
              **of
                  Inception) to****March
                  31,**
              
              **March
                  31,****2008**
              
              **2007**
              
              **2008****Cash
                  flows used in operating activities**Net
                  Loss for the Period
              
              $
              (6,350,365
              )
              $
              (4,874,852
              )
              $
              (27,948,185
              )**Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:**Non-employee
                  Stock Based Compensation
              
              
              75,489
              
              
              2,657,635
              
              
              5,155,409Stock
                  Based Compensation
              
              
              1,121,118
              
              
              639,064
              
              
              5,106,854Common
                  Stock Issuance for consulting services rendered
              
              
              722,000
              
              
              -
              
              
              820,000Depreciation
                  and amortization
              
              
              22,493
              
              
              1,521
              
              
              54,681Net
                  Change in assets and liabilities:Increase
                  in Prepaid Expenses & Other Current Assets
              
              
              (72,129
              )
              
              (44,239
              )
              
              (480,432
              )(Increase)
                  decrease in Other Assets
              
              
              15
              
              
              (12,031
              )
              
              (907
              )Increase
                  (decrease) in Accounts Payable and Accrued Liabilities
              
              
              1,009,962
              
              
              (629,658
              )
              
              2,883,802Increase
                  in Other Current Liabilities
              
              
              -
              
              
              -
              
              
              115,401Net
                  Cash Used in Operating Activities
              
              
              (3,471,417
              )
              
              (2,262,560
              )
              
              (14,293,377
              )**Cash
                  Flows from Investing Activities**Capital
                  Expenditures
              
              
              (64,974
              )
              
              (36,062
              )
              
              (364,074
              )Restricted
                  Cash
              
              
              73
              
              
              (75,000
              )
              
              (67,943
              )Purchase
                  of marketable securities
              
              
              (8,598,102
              )
              
              (24,623,290
              )
              
              (33,598,102
              )Sale
                  of marketable securities
              
              
              12,047,860
              
              
              -
              
              
              20,645,962Net
                  Cash Provided by (Used in) Investing Activities
              
              
              3,384,857
              
              
              (24,734,352
              )
              
              (13,384,157
              )**Cash
                  Flows from Financing Activities**Capital
                  Stock issued
              
              
              -
              
              
              -
              
              
              27,434,349Advances
                  from related party
              
              
              -
              
              
              -
              
              
              64,620Additional
                  Proceeds from the Sale of Common Stock in 2006
              
              
              -
              
              
              -
              
              
              198,500Net
                  Cash Provided by Financing Activities
              
              
              -
              
              
              -
              
              
              27,697,469Increase/(decrease)
                  in cash during the period
              
              
              (86,560
              )
              
              (26,996,912
              )
              
              19,935Cash,
                  beginning of the period
              
              
              106,495
              
              
              27,440,987
              
              
              -Cash,
                  end of the period
              
              $
              19,935
              
              $
              444,075
              
              $
              19,935Supplemental
                  disclosure of cash flow information; cash paid for:Interest
              
              $
              -
              
              $
              -
              
              $
              -Income
                  taxes
              
              $
              1,600
              
              $
              -
              
              $
              3,200


See
      accompanying notes to interim financial statements.




5




**XCORPOREAL,
      INC.**


**(a
      Development Stage Company)**


**STATEMENTS
      OF STOCKHOLDERS’ EQUITY (DEFICIENCY)**


**For
      the Period May 4, 2001 (Inception) to March 31, 2008**


**(Unaudited)**


**Deficit****Accumulated****Additional**
              
              **During****Common
                  Stock**
              
              **Paid-in**
              
              **Development****Shares**
              
              **Amount**
              
              **Capital**
              
              **Stage**
              
              **Total**Common
                  stock issued for cash at $0.01 per share
              
              
              2,500,000
              
              $
              250
              
              $
              24,750
              
              
              
              
              $
              25,000Net
                  Loss for the year ended December 31, 2001
              
              
              
              
              
              
              
              
              
              
              $
              (40,255
              )
              
              (40,255
              )Balance
                  as of December 31, 2001
              
              
              2,500,000
              
              
              250
              
              
              24,750
              
              
              (40,255
              )
              
              (15,255
              )Common
                  stock issued for cash at $0.05 per share
              
              
              1,320,000
              
              
              132
              
              
              65,868
              
              
              
              
              
              66,000Net
                  Loss for the year ended December 31, 2002
              
              
              
              
              
              
              
              
              
              
              
              (31,249
              )
              
              (31,249
              )Balance
                  as of December 31, 2002
              
              
              3,820,000
              
              
              382
              
              
              90,618
              
              
              (71,504
              )
              
              19,496Net
                  Loss for the year ended December 31, 2003
              
              
              
              
              
              
              
              
              
              
              
              (12,962
              )
              
              (12,962
              )Balance
                  as of December 31, 2003
              
              
              3,820,000
              
              
              382
              
              
              90,618
              
              
              (84,466
              )
              
              6,534Net
                  Loss for the year ended December 31, 2004
              
              
              
              
              
              
              
              
              
              
              
              (23,338
              )
              
              (23,338
              )Balance
                  as of December 31, 2004
              
              
              3,820,000
              
              
              382
              
              
              90,618
              
              
              (107,804
              )
              
              (16,804
              )Net
                  Loss for the year ended December 31, 2005
              
              
              
              
              
              
              
              
              
              
              
              (35,753
              )
              
              (35,753
              )Balance
                  as of December 31, 2005
              
              
              3,820,000
              
              
              382
              
              
              90,618
              
              
              (143,557
              )
              
              (52,557
              )Common
                  stock issued for a licence rights at $0.0001 pershare
              
              
              9,600,000
              
              
              960
              
              
              40
              
              
              
              
              
              1,000Capital
                  stock cancelled
              
              
              (3,420,000
              )
              
              (342
              )
              
              342
              
              
              
              
              
              -Warrants
                  granted for consulting fees
              
              
              
              
              
              
              
              
              2,162,611
              
              
              
              
              
              2,162,611Forgiveness
                  of related party debt
              
              
              
              
              
              
              
              
              64,620
              
              
              
              
              
              64,620Common
                  stock issued for cash at $7.00, net of placementfees
                  of $2,058,024
              
              
              4,200,050
              
              
              420
              
              
              27,341,928
              
              
              
              
              
              27,342,348Stock-based
                  compensation expense
              
              
              
              
              
              
              
              
              264,251
              
              
              
              
              
              264,251Net
                  loss for the period
              
              
              
              
              
              
              
              
              
              
              
              (4,380,212
              )
              
              (4,380,212
              )Balance
                  as of December 31, 2006
              
              
              14,200,050
              
              
              1,420
              
              
              29,924,410
              
              
              (4,523,769
              )
              
              25,402,061Capital
                  stock cancelled
              
              
              (200,000
              )
              
              (20
              )
              
              20
              
              
              
              
              
              -Common
                  stock issued pursuant to consulting agreement at$4.90
                  per share
              
              
              20,000
              
              
              2
              
              
              97,998
              
              
              
              
              
              98,000Recapitalization
                  pursuant to merger
              
              
              352,422
              
              
              35
              
              
              (37,406
              )
              
              
              
              
              (37,371
              )Warrants
                  granted for consulting services
              
              
              
              
              
              
              
              
              2,917,309
              
              
              
              
              
              2,917,309Stock-based
                  compensation expense
              
              
              
              
              
              
              
              
              3,721,485
              
              
              
              
              
              3,721,485Additional
                  Proceeds from the Sale of Common Stock in2006
              
              
              
              
              
              
              
              
              198,500
              
              
              
              
              
              198,500Net
                  loss for the period
              
              
              
              
              
              
              
              
              
              
              
              (17,074,051
              )
              
              (17,074,051
              )Balance
                  as of December 31, 2007
              
              
              14,372,472
              
              
              1,437
              
              
              36,822,316
              
              
              (21,597,820
              )
              
              15,225,933Common
                  stock issued as compensation for consultingservices
                  at $3.61 per share
              
              
              200,000
              
              
              20
              
              
              721,980
              
              
              
              
              
              722,000Warrants
                  granted for consulting services
              
              
              
              
              
              
              
              
              75,489
              
              
              
              
              
              75,489Stock-based
                  compensation expense
              
              
              
              
              
              
              
              
              1,121,118
              
              
              
              
              
              1,121,118Net
                  loss for the period
              
              
              
              
              
              
              
              
              
              
              
              (6,350,365
              )
              
              (6,350,365
              )Balance
                  as of March 31, 2008
              
              
              14,572,472
              
              $
              1,457
              
              $
              38,740,903
              
              $
              (27,948,185
              )
              $
              10,794,175


See
      accompanying notes to interim financial statements.






6




**XCORPOREAL,
      INC.**


**(a
      Development Stage Company)**


**NOTES
      TO INTERIM FINANCIAL STATEMENTS**


**March
      31, 2008**


**(Unaudited)**





**Note
      1 — Interim Reporting**





While
      information presented in the accompanying interim financial statements is
      unaudited, it includes all adjustments, which are, in the opinion of management,
      necessary to present fairly the financial position, results of operations and
      cash flows for the interim period presented. All adjustments are of a normal
      recurring nature. It is suggested that these interim financial statements be
      read in conjunction with our December 31, 2007 financial
      statements.





The
      results of operations for the period ended March 31, 2008 are not necessarily
      indicative of the results that can be expected for the year ended December
      31,
      2008.





**Note
      2 — Nature and Continuance of Operations**





On
      October 12, 2007, pursuant to a merger agreement with Xcorporeal, Inc. (referred
      to hereinafter as pre-merger Xcorporeal),our newly-formed wholly-owned merger
      subsidiary merged with and into pre-merger Xcorporeal, which became our
      wholly-owned subsidiary and changed its name to “Xcorporeal Operations, Inc.” We
      changed our name from CT Holdings Enterprises, Inc. (CTHE) to “Xcorporeal, Inc.”
and amended our certificate of incorporation and bylaws to read substantially
      as
      pre-merger Xcorporeal. As a result, our authorized common stock changed from
      60,000,000 shares to 40,000,000 common shares, and our authorized preferred
      stock changed from 1,000,000 shares to 10,000,000 shares, resulting in total
      authorized capital stock of 50,000,000 shares.





Immediately
      prior to the merger, we caused a one-for-8.27 reverse split of our common stock.
      Each share of pre-merger Xcorporeal common stock was then converted into one
      share of our common stock. In addition, we assumed all outstanding pre-merger
      Xcorporeal options and warrants to purchase pre-merger Xcorporeal common
      stock.





In
      this
      merger, CTHE is considered to be the legal acquirer and Xcorporeal to be the
      accounting acquirer. As the former shareholders of pre-merger Xcorporeal own
      over 97% of the outstanding voting common stock of CTHE after the merger and
      CTHE is a public shell company, pre-merger Xcorporeal is considered the
      accounting acquirer and the transaction is considered to be a recapitalization
      of pre-merger Xcorporeal.





Historical
      financial statements prior to the merger were restated to be those of pre-merger
      Xcorporeal. The merger is accounted for as if it were an issuance of the common
      stock of pre-merger Xcorporeal to acquire our net assets, accompanied by a
      recapitalization. Historical stockholders’ equity of pre-merger Xcorporeal is
      retroactively restated for the equivalent number of shares received in the
      merger, after giving effect to the difference in par value with an offset to
      paid-in capital. The assets and liabilities of pre-merger Xcorporeal are carried
      forward at their predecessor carrying amounts. Retained deficiency of pre-merger
      Xcorporeal is carried forward after the merger. Operations prior to the merger
      are those of pre-merger Xcorporeal. Earnings per share for periods prior to
      the
      merger are restated to reflect the number of equivalent shares received by
      pre-merger Xcorporeal’s stockholders. The costs of the transaction will be
      expensed to the extent they exceed cash received from CTHE.





As
      a
      result of the merger, we transitioned to a development stage company focused
      on
      researching, developing and commercializing technology and products related
      to
      the treatment of kidney failure.





**Note
      3 — Development Stage Company**





We
      are a
      development stage company, devoting substantially all of our efforts to the
      research, development and commercialization of kidney failure treatment
      technologies.





*Risks
      and Uncertainties—* We
      operate in an industry that is subject to intense competition, government
      regulation and rapid technological change. Our operations are subject to
      significant risk and uncertainties including financial, operational,
      technological, regulatory and other risks associated with a development stage
      company, including the potential risk of business failure.




7





**Note
      4 — Cash Equivalents and Marketable Securities**





We
      invest
      available cash in short-term commercial paper, certificates of deposit, money
      market funds, and high grade marketable securities. We consider any liquid
      investment with an original maturity of three months or less when purchased
      to
      be cash equivalents. Investments, including certificates of deposit with
      maturity dates greater than three months when purchased and which have readily
      determined fair values are classified as available-for-sale investments and
      reflected in current assets as marketable securities at fair market value.
      Our
      investment policy requires that all investments be investment grade quality
      and
      no more than ten percent of our portfolio may be invested in any one security
      or
      with one institution. At March 31, 2008, all of our cash was held in high grade
      money market funds and marketable securities.





Restricted
      cash represents deposits secured as collateral for a bank credit card
      program.





**Note
      5 — Fair Value Measurements**





Effective
      January 1, 2008, we adopted SFAS No. 157, “Fair Value Measurements,” (“SFAS
      157”). SFAS 157 defines fair value, establishes a framework for measuring fair
      value, and expands disclosures about fair value measurements, This statement
      does not require any new fair value measurements; rather, it applies to other
      accounting pronouncements that require or permit fair value measurements. In
      February 2008, FSP FAS 157-2, “Effective Date of FASB Statement
      No. 157”, was issued, which delays the effective date of SFAS 157 to
      fiscal years and interim periods within those fiscal years beginning after
      November 15, 2008 for non-financial assets and non-financial liabilities,
      except for items that are recognized or disclosed at fair value in the financial
      statements on a recurring basis (at least annually). We elected to defer the
      adoption of the standard for these non-financial assets and
      liabilities.





Fair
      value is defined under SFAS 157 as the price that would be received to sell
      an
      asset or paid to transfer a liability in the principal or most advantageous
      market in an orderly transaction between market participants on the measurement
      date. SFAS 157 also establishes a three-level hierarchy, which requires an
      entity to maximize the use of observable inputs and minimize the use of
      unobservable inputs when measuring fair value.





Beginning
      January 1, 2008, assets and liabilities recorded at fair value in the balance
      sheet are categorized based upon the level of judgment associated with the
      inputs used to measure their fair value. Level inputs, as defined by SFAS 157,
      are as follows:





·
            Level
                I - inputs are unadjusted, quoted prices for identical assets or
                liabilities in active markets at the measurement
                date.





·
            Level
                II - inputs, other than quoted prices included in Level I, that are
                observable for the asset or liability through corroboration with
                market
                data at the measurement date.





·
            Level
                III - unobservable inputs that reflect management’s best estimate of what
                market participants would use in pricing he asset or liability at
                the
                measurement date.





The
      following tables summarize fair value measurements by level at March 31, 2008
      for assets and liabilities measured at fair value on a recurring
      basis:




**Level
                  I**
              
              **Level
                  II**
              
              **Level
                  III**
              
              **Total**Cash
                  and cash equivalents
              
              $
              19,935
              
              $
              -
              
              $
              -
              
              $
              19,935Marketable
                  securities:Commercial
                  paper
              
              
              7,561,152
              
              
              -
              
              
              -
              
              
              7,561,152Corporate
                  obligation
              
              
              831,272
              
              
              -
              
              
              -
              
              
              831,272Money
                  market fund
              
              
              4,559,716
              
              
              -
              
              
              -
              
              
              4,559,716Restricted
                  cash
              
              
              67,943
              
              
              -
              
              
              -
              
              
              67,943Total
                  assets
              
              $
              13,040,018
              
              $
              -
              
              $
              -
              
              $
              13,040,018




8




**Note
      6 - Property and Equipment**





Property
      and equipment consist of the following at March 31, 2008:





Property
                and equipment
            
            $
            364,074Accumulated
                depreciation
            
            
            (54,681
            )Property
                and equipment, net
            
            $
            309,393





Depreciation
      expense for the three months ended March 31, 2008 and 2007 was $22,493 and
      $1,486, respectively.





**Note
      7 - Leases**





As
      of
      February 22, 2008, we entered into a 5 year lease agreement and relocated our
      corporate office to a location in Los Angeles, CA. The total lease payments
      will
      be $1,096,878 over a 5 year period.





On
      January 14, 2008, we extended the sublease for office and warehouse space from
      Aubrey Group, Inc. through December 31, 2008. Pursuant to the extension, we
      acquired additional office and warehouse space. $82,129 will be the total lease
      payments over the 1 year period.





**Note
      8 — Interest Income**





Interest
      income of $152,468 and $311,866 was reported for the three months ended March
      31, 2008 and 2007, respectively.





**Note
      9 — Related Party Transactions**





Pursuant
      to a consulting agreement effective December 1, 2007, Daniel S. Goldberger,
      director, provides consulting services as interim Chief Executive Officer with
      a
      devotion of at least 80 hours per month of services. In consideration of the
      services, we shall pay Mr. Goldberger $15,000 per month during the first two
      months and $12,500 per month thereafter. The term of the services is effective
      December 1, 2007 and will continue on a month to month basis.





Our
      Chief
      Medical and Scientific Officer maintains an office located in Beverly Hills,
      California. Pursuant to a reimbursement agreement effective January 29, 2008,
      we
      reimburse 50% of the rental and 50% of his monthly parking. The term of the
      agreement commenced on April 23, 2007, the date of the office lease agreement,
      and continue until the date on which he ceases to use the remote office to
      perform his duties as our Chief Medical and Scientific Officer.





**Note
      10 — License Agreement**





On
      August
      31, 2006, we entered into a Contribution Agreement with a company whose sole
      managing member is our current Chairman. We issued 9,600,000 shares of common
      stock in exchange for (a) the right, title, and interest to the name
“Xcorporeal” and related trademarks and domain names, and (b) the right to enter
      into a License Agreement with National Quality Care, Inc. (NQCI) dated September
      1, 2006 pursuant to which we obtained the exclusive rights to the technology
      relating to our kidney failure treatment and other medical devices. Pre-merger
      Xcorporeal was a shell corporation prior to the transaction. We valued the
      License Agreement at the carry-over basis of $1,000. As consideration for being
      granted the License, we agreed to pay a minimum annual royalty of $250,000,
      or
      7% of net sales. We recorded $395,833 in royalty expenses covering the minimum
      royalties from commencement of the License Agreement through March 31, 2008.
      The
      License Agreement expires in 2105. As of March 31, 2008, we made one payment
      of
      the minimum annual royalty of $250,000.





**Note
      11 — Stock Options and Warrants**





***Incentive
      Compensation Plan***





On
      October 12, 2007, we adopted the Xcorporeal, Inc. 2007 Incentive Compensation
      Plan and the related form of option agreement that are substantially identical
      to the 2006 Incentive Compensation Plan in effect at pre-merger Xcorporeal
      immediately prior to the merger.




9




The
      plan
      authorizes the grant of stock options, restricted stock, restricted stock units
      and stock appreciation rights. Effective February 28, 2007, there are 3,900,000
      shares of common stock reserved for issuance pursuant to the plan (subject
      to
      adjustment in accordance with the provisions of the plan). The plan will
      continue in effect for a term of up to ten years.





On
      October 12, 2007, we also assumed options to purchase up to 3,880,000 shares
      of
      common stock, 288,000 of which have since been canceled or expired, that were
      granted by pre-merger Xcorporeal under its 2006 Incentive Compensation
      Plan.





***Stock
      Options to Employees, Officer and Directors***





The
      Compensation Committee of our Board of Directors determines the terms of the
      options granted, including the exercise price, the number of shares subject
      to
      option, and the vesting period. Options generally vest over five years and
      have
      a maximum life of ten years.





On
      January, 14, 2008, we granted options to purchase an aggregate of 20,000 shares
      of common stock to one employee. The options vest over 5 years, are exercisable
      at $7.00 per share, and expire in 2018.





We
      reported $1,121,118 and $639,064 in stock-based compensation expense for
      employees, officers, and directors for the three months ended March 31, 2008
      and
      2007, respectively.





All
      compensation expense for stock options granted has been determined under the
      fair value method using the Black-Scholes option-pricing model with the
      following assumptions:


For
                  the three months endedMarch
                  31, 2008Expected
                  dividend yields
              
              
              zeroExpected
                  volatility
              
              
              136
              %Risk-free
                  interest rate
              
              
              3.81
              %Expected
                  terms in years
              
              
              10
                  years




***Warrants
      and Stock Options to Non-Employees***





In
      the
      three months ended March 31, 2008, there were no issuance of
      warrants.





We
      reported $75,489 and $2,657,635 in stock-based compensation expense for
      consultants for the three months ended March 31, 2008 and 2007,
      respectively.





Compensation
      for options granted to non-employees has been determined in accordance with
      SFAS
      No. 123, EITF 96-18, and EITF 00-18, “Accounting for Equity Instruments that are
      Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
      Goods or Services.” Accordingly, compensation is determined using the fair value
      of the consideration received or the fair value of the equity instruments
      issued, whichever is more reliably measured.





For
      options and warrants issued as compensation to non-employees for services that
      are fully vested and non-forfeitable at the time of issuance, the estimated
      value is recorded in equity and expensed when the services are performed and
      benefit is received as provided by Financial Accounting and Standards Board
      (“FASB”) Emerging Issues Task Force No. 96-18 “Accounting For Equity Instruments
      That Are Issued To Other Than Employees For Acquiring or In Conjunction With
      Selling Goods Or Services.”





All
      charges for warrants granted have been determined under the fair value method
      using the Black-Scholes option-pricing model with the following
      assumptions:




10




For
                  the three months endedMarch
                  31, 2008Expected
                  dividend yields
              
              
              zeroExpected
                  volatility
              
              
              136
              %Risk-free
                  interest rate
              
              
              2.36-3.85
              %Expected
                  terms in years
              
              
              4.58-9.37
                  years






The
      following table shows the change in unamortized compensation expense for stock
      options and warrants issued to employees, officers, directors and non-employees
      during the three months ended March 31, 2008:




Stock
                  Options andWarrants
              
              Unamortized
                  CompensationOutstanding
              
              ExpenseJanuary
                  1, 2008
              
              
              4,674,221
              
              $
              18,228,742Granted
                  in the period
              
              
              20,000
              
              
              82,153Forfeited
                  in the period
              
              
              (15,000
              )
              
              (22,917
              )Expensed
                  in the period
              
              
              -
              
              
              (1,464,034
              )March
                  31, 2008
              
              
              4,679,221
              
              $
              16,823,944
  WeightedNumber
                  of
              
              AverageOptions
                  and
              
              ExerciseWarrants
              
              PriceStock
                  Options and WarrantsBalance
                  at January 1, 2008
              
              
              4,674,221
              
              $
              6.01Granted
              
              
              20,000
              
              
              7.00Exercised
              
              
              -
              
              
              -Forfeited
              
              
              (15,000
              )
              
              7.00Balance
                  at March 31, 2008
              
              
              4,679,221
              
              $
              6.01


**Note
      12 — Stockholders’ Equity**





On
      March
      27, 2008, 200,000 shares of common stock were granted as compensation for
      consulting services rendered to us.





**Note
      13 — Product Development Agreement**





In
      July
      2007, we entered into an agreement with Aubrey Group, Inc., an FDA-registered
      third-party contract developer and manufacturer of medical devices for the
      design and development of a Portable Artificial Kidney ("PAK"). The PAK will
      be
      designed for use as an Intermittent as well as a Continuous Renal Replacement
      Therapy (CRRT) in the hospital with medical supervision. The development is
      expected to be completed by the end of 2008 and projected labor and material
      costs are estimated at approximately $5.1 million over the term. The agreement
      can be terminated at any time with 30 business days notice.





**Note
      14 — Subsequent Events**





On
      April
      2, 2008, we issued 20,000 shares of our common stock for consulting services
      rendered to us.




11




On
      April
      9, 2008, Consolidated National, LLC (CNL), a limited liability company whose
      managing member is our Executive Chairman, sold 3,167,404 shares of our common
      stock in a private placement. Approximately 270,000 shares were sold to our
      officers and directors. We will not receive any proceeds from this sale the
      account of the selling stockholder.





**ITEM
      2. Management’s Discussion and Analysis or Plan of
      Operation.**





*The
      following discussion of our financial condition and results of*  *operations
      should be read in conjunction with our financial statements and
      the*  *related
      notes, and the other financial information included in this
      report.*





**Forward-Looking
      Statements**





This
      report contains “forward-looking statements” within the meaning of the Private
      Securities Litigation Reform Act of 1995 with respect to the financial
      condition, results of operations, business strategies, operating efficiencies
      or
      synergies, competitive positions, growth opportunities for existing products,
      plans and objectives of management, markets for stock of Xcorporeal and other
      matters. Statements in this report that are not historical facts are
“forward-looking statements” for the purpose of the safe harbor provided by
      Section 21E of the Exchange Act and Section 27A of the Securities Act. Such
      forward-looking statements, including, without limitation, those relating to
      the
      future business prospects, revenues and income of Xcorporeal, wherever they
      occur, are necessarily estimates reflecting the best judgment of the senior
      management of Xcorporeal on the date on which they were made, or if no date
      is
      stated, as of the date of this report. These forward-looking statements are
      subject to risks, uncertainties and assumptions, including those described
      in
      the “Risk Factors” described below, that may affect the operations, performance,
      development and results of our business. Because the factors discussed in this
      report could cause actual results or outcomes to differ materially from those
      expressed in any forward-looking statements made by us or on our behalf, you
      should not place undue reliance on any such forward-looking statements. New
      factors emerge from time to time, and it is not possible for us to predict
      which
      factors will arise. In addition, we cannot assess the impact of each factor
      on
      our business or the extent to which any factor, or combination of factors,
      may
      cause actual results to differ materially from those contained in any
      forward-looking statements.





**Overview**





We
      are a
      medical device company developing an innovative *extra-corporeal* platform
      technology to be used in devices to replace the function of various human
      organs. These
      devices will seek to provide patients with improved, efficient and cost
      effective therapy. The
      platform leads to three initial products:




•
            A
                PAK for hospital Renal Replacement Therapy
                (RRT);




•
            A
                PAK for home hemodialysis; and




•
            A
                Wearable Artificial Kidney (WAK) for continuous ambulatory
                hemodialysis.




For
      the
      hospital market, we are developing a portable, multifunctional renal replacement
      device that will offer cost-effective therapy for those patients suffering
      from
      Acute Renal Failure (ARF) causing a rapid decline in kidney function. We have
      completed our functional prototype of the product, which is currently undergoing
      bench testing, and will submit a 510(k) filing with the FDA during the fourth
      quarter of 2008. We plan to commercialize the product after receiving approval
      from the FDA. Timing of FDA approval is uncertain at this time.




We
      also
      plan to commercialize a home hemodialysis device for the End Stage Renal Disease
      (ESRD) market, comprised of patients in whom the kidneys have ceased to
      function. We have also completed our functional prototype of the product, which
      is currently undergoing bench testing, and we will submit a 510(k) with the
      FDA
      during the second half of 2009. Clinical trials are anticipated to commence
      within 12 months.




Our
      WAK
      is a device for the chronic treatment of ESRD. We have successfully demonstrated
      a prototype system that weighs less than 6 kg., is battery operated, and can
      be
      worn by an ambulatory patient. We plan to continue our development of this
      product over the next 12 months.




We
      are a
      development stage company, have been unprofitable since our inception, and
      will
      incur substantial additional operating losses for at least the next twelve
      months as we continue to implement commercial operations and allocate
      significant and increasing resources to research, development, clinical trials
      and other activities. Accordingly, our historical operations and financial
      information are not indicative of our future operating results, financial
      condition or ability to operate profitably as a commercial enterprise.





12





**Research
      and Development**





***R&D
      Team***





We
      have
      recruited and currently employ a talented interdisciplinary team of scientists
      and engineers who are developing our products. The team includes engineering
      leaders from within the dialysis field who provide state of the art as well
      as
      historical insights into dialysis equipment. The team also includes seasoned
      engineers from related medical fields providing us with cutting edge technology
      in the areas of fluidics, sensors and electronics. In addition, we have retained
      a medical device consulting firm, The Aubrey Group, Inc., an FDA-registered
      third-party contract developer and manufacturer of medical devices, to provide
      engineering support in the development of the PAK. We will continue development
      of our products utilizing The Aubrey Group in conjunction with our existing
      team.





We
      incurred $2.7 million and $1.1 million in research and development costs in
      the
      three months ended March 31, 2008 and 2007, respectively.





***Third-party
      Arrangements***





In
      July
      2007, we entered into an agreement with Aubrey for the design and development
      of
      subsystems of the PAK. The PAK will be designed for intermittent hemodialysis
      or
      CRRT in a clinical setting as well as for treatments in a home setting. The
      development is expected to be complete by the end of 2008. Total labor and
      material costs over the term of the Aubrey agreement are budgeted at
      approximately $5.1 million, though we can terminate the agreement at any time
      with 30 business days notice.





We
      also
      contract with other third parties to assist in our research and development
      efforts and to supplement our internal resources while we continue to grow
      our
      organization.





**Management’s
      Discussion and Analysis**





***Results
      of Operations for the three months ended March 31, 2008 and
      2007.***





We
      have
      not generated any revenues since inception. We incurred net loss of $6.4 million
      for the three months ended March 31, 2008, compared to a net loss of $4.9
      million for the three months ended March 31, 2007. The increase in net loss
      was
      primarily due to (i) research, development and other expenses related to
      advancing our kidney failure treatment technologies, (ii) stock compensation
      expense related to options and warrants granted to directors, officers,
      employees, and consultants, and (iii) legal and audit fees. At March 31, 2008,
      we had positive working capital of $10.4 million compared to positive working
      capital of $15.0 million at the beginning of the year.





***Liquidity
      and Capital Resources***





We
      expect
      to incur operating losses and negative cash flows for the foreseeable future.
      During the fourth quarter 2006, we raised approximately $27.3 million (net
      of
      placement fees of $2.1 million) through a private placement. Our ability to
      execute on our current business plan is dependent upon our ability to develop
      and market our products, and, ultimately, to generate revenue.





As
      of
      March 31, 2008, we had cash, cash equivalents and marketable securities of
      approximately $13.0 million. We are currently expending cash at a rate of
      approximately $1.2 million per month. At present rates, we will have to raise
      additional funds during the next twelve months. We may not be successful in
      doing so on terms acceptable to us, and the inability to raise capital could
      require us to curtail our current plans in order to decrease spending, which
      could have a material adverse effect on our plan of operation. Our ability
      to
      execute on our current business plan is dependent upon our ability to obtain
      equity financing, develop and market our products, and, ultimately, to generate
      revenue.





Upon
      receipt of the approximate $27.3 million raised through private placement,
      we
      strategically began our operating activities and research and development
      efforts which resulted in a net loss of $17.1 million in 2007 and $6.4 million
      in the three months ended March 31, 2008. In addition, we invested $25.0 million
      in high grade money market funds and marketable securities of which we sold
      $12.0 million of the investments, leaving a balance of $13.0 million as of
      March
      31, 2008.




13




As
      mentioned above, the final product design of the PAK will be completed by mid
      2008 and units will undergo final verification and validation prior to a 510(k)
      submission to the FDA for clinical use under direct medical supervision. We
      intend to submit this 510(k) filing during the fourth quarter of 2008. It
      generally takes 4 to 12 months from the date of a 510(k) submission to obtain
      clearance from the FDA, although it may take longer. We expect that our monthly
      expenditures will increase as we reduce our spending on research and development
      costs as well as labor and material costs relating to the Aubrey agreement,
      and
      shift resources towards developing a marketing plan for the PAK.





**Research
      and Development**





We
      employ
      an interdisciplinary team of scientists and engineers who are developing the
      PAK
      and the WAK. In addition, we have retained Aubrey to assist with the engineering
      of the PAK. The PAK will be engineered to perform both hemodialysis,
      hemofiltration and ultrafiltration under direct medical supervision. A variation
      of this device will be developed for chronic home hemodialysis. An initial
      prototype of the PAK, capable of performing the functions of a hemodialysis
      machine, and demonstrating our unique new fluidics circuit, was completed at
      the
      end of 2007. Further refinements to this prototype including the addition of
      safety sensors and electronic controls is now in progress. The final product
      design of the PAK will be completed shortly and units will undergo final
      verification and validation prior to a 510(k) submission for clinical use under
      direct medical supervision. A clinical study is not required for this
      submission.





In
      a
      clinical feasibility study conducted in London in March 2007, a research
      prototype of the WAK was successfully demonstrated in eight patients with
      end-stage renal disease. Patients were successfully treated for up to 8 hours
      with adequate clearances of urea and creatinine. The device was well tolerated
      and patients were able to conduct activities of normal daily living including
      walking and sleeping. There were no serious adverse events although clotting
      of
      the dialyzer occurred in two patients. To our knowledge, this is the first
      successful demonstration of a wearable artificial kidney in man. This year
      we
      are making substantial improvements to the WAK. These include improvement of
      the
      heparin pumping system intended to address the dialyzer clotting problem, the
      addition of safety sensors required for commercial dialysis equipment, the
      addition of electrical controls to provide a convenient user interface,
      improvements to the blood flow circuit and further miniaturization of the device
      to improve fit to the human body. Additional clinical studies will be conducted
      upon completion of the prototype





We
      incurred $2.7 million and $1.1 million in research and development costs in
      the
      three months ended March 31, 2008 and 2007, respectively.





**Contractual
      Obligations and Commercial Commitments**




**Less
                  than 1**
              
              
              
              
              
              **More
                  than 5****Contractual
                  Obligations:**
              
              **Total**
              
              **year**
              
              **1
                  - 3 years**
              
              **3
                  - 5 years**
              
              **years****Capital
                  Lease Obligations**
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -**Operating
                  Lease Obligations (1)**
              
              
              1,332,778
              
              
              263,003
              
              
              786,199
              
              
              283,576
              
              
              -**Research
                  & Development Contractual Commitments**
              
              
              342,421
              
              
              342,421
              
              
              -
              
              
              -
              
              
              -**Other
                  Liabilities**
              
              
              220,806
              
              
              220,806
              
              
              -
              
              
              -
              
              
              -$
              1,896,005
              
              $
              826,231
              
              $
              786,199
              
              $
              283,576
              
              $
              -


(1)
      Operating lease commitments for our corporate office facility, product
      development facility, Dr. Gura’s office which is a related party transaction,
      and two corporate apartments.





The
      table
      excludes the agreement with Aubrey in relation to the PAK development which
      can
      be terminated at any time with 30 business days notice. Due to the successful
      rate of the development, we anticipate coming under the agreement’s approximate
      budget of $5.1 million. With the expected completion by end of 2008, we estimate
      we will incur cost of $2.4 million for 2008 under this agreement.





**Off-Balance
      Sheet Arrangements**





As
      of
      March 31, 2008, we had no off-balance sheet arrangements that have or are
      reasonably likely to have a current or future effect on our financial condition,
      results of operations or cash flows.




14




***Legal
      Proceedings***





We
      are
      involved in arbitration against NQCI as described in Item 1 of Part II below.
      From time to time, we may be involved in litigation relating to claims arising
      out of our operations in the normal course of business. As of the date of this
      report, we are not currently involved in any legal proceeding that we believe
      would have a material adverse effect on our business, financial condition or
      operating results.





***Critical
      Accounting Policies and Estimates***





The
      discussion and analysis of our financial condition and results of operations
      is
      based upon our financial statements, which have been prepared in accordance
      with
      accounting principles generally accepted in the United States. Generally
      accepted accounting principles require management to make estimates, judgments
      and assumptions that affect the reported amounts of assets, liabilities,
      revenues and expenses, and the disclosure of contingent assets and liabilities.
      We base our estimates on experience and on various other assumptions that we
      believe to be reasonable under the circumstances, the results of which form
      the
      basis for making judgments about the carrying values of assets and liabilities
      that may not be readily apparent from other sources. Our actual results may
      differ from those estimates.





We
      consider our critical accounting policies to be those that involve significant
      uncertainties, require judgments or estimates that are more difficult for
      management to determine or that may produce materially different results when
      using different assumptions. We consider the following accounting policies
      to be
      critical:





*Marketable
      Securities*





We
      classify investments with maturity dates greater than three months when
      purchased as marketable securities. Investments, including certificates of
      deposit with maturity dates greater than three months when purchased and which
      have readily determined fair values, are classified as available-for-sale
      investments and reflected in current assets as marketable securities at fair
      market value. Our investment policy requires that all investments be investment
      grade quality and no more than ten percent of our portfolio may be invested
      in
      any one security or with one institution.





*Stock-Based
      Compensation*





Statements
      of Financial Accounting Standards (SFAS) No. 123 (revised 2004), *Share-Based
      Payment* ,
      (SFAS
      123(R)) and Securities and Exchange Commission issued Staff Accounting Bulletin
      (SAB) No. 107 (SAB 107) require the measurement and recognition of compensation
      expense for all share-based payment awards made to employees and directors
      based
      on estimated fair values. We have applied the provisions of SAB 107 in our
      adoption of SFAS 123(R).





In
      determining stock based compensation, we consider various factors in our
      calculation of fair value using a Black-Scholes pricing model. These factors
      include volatility, expected term of the options and forfeiture rates. A change
      in these factors could result in differences in the stock based compensation
      expense.





**ITEM
      3. Quantitative and Qualitative Disclosures about Market
      Risk**





We
      invest
      our cash in short term high grade commercial paper, certificates of deposit,
      money market accounts and marketable securities. We consider any liquid
      investment with an original maturity of three months or less when purchased
      to
      be cash equivalents. We classify investments with maturity dates greater than
      three months when purchased as marketable securities, which have readily
      determined fair values and are classified as available-for-sale securities.
      Our
      investment policy requires that all investments be investment grade quality
      and
      no more than ten percent of our portfolio may be invested in any one security
      or
      with one institution.





Investments
      in both fixed rate and floating rate interest earning instruments carry a degree
      of interest rate risk arising from changes in the level or volatility of
      interest rates; however, interest rate movements do not materially affect the
      market value of our portfolio because of the short-term nature of these
      investments. A reduction in the overall level of interest rates may produce
      less interest income from our investment portfolio. The market risk associated
      with our investments in debt securities is substantially mitigated by the
      frequent turnover of our portfolio.





**ITEM
      4. Controls and Procedures**




15




We
      conducted an evaluation, under the supervision and with the participation of
      our
      Executive Chairman (principal executive officer) and Chief Financial Officer
      (principal financial officer), of our disclosure controls and procedures (as
      defined in Rule 13a-15(e) under the Exchange Act) as of March 31, 2008. Based
      upon this evaluation, our Executive Chairman and Chief Financial Officer
      concluded that our disclosure controls and procedures were effective to ensure
      that required material information is included in this quarterly report for
      the
      period ended March 31, 2008.





There
      were no changes in our internal control over financial reporting during the
      quarter ended March 31, 2008 that have materially affected, or are reasonably
      likely to materially affect, our internal control over financial
      reporting.




16


**PART
      II — OTHER INFORMATION**





**ITEM
      1. Legal Proceedings.**





On
      December 1, 2006, we initiated arbitration against National Quality Care, Inc.
      (NQCI) for its failure to fully perform its obligations under our License
      Agreement. On December 29, 2006, NQCI filed a suit against us in Los Angeles
      County Superior Court entitled *National
      Quality Care, Inc. v. Victor Gura, M.D., et al.,* Case
      No.
      BC364140. On January 5, 2007, we filed a petition to compel arbitration, and
      NQCI subsequently stipulated to resolve all claims in the pending arbitration.
      On March 20, 2007, the lawsuit was dismissed without prejudice. The arbitration
      hearing was completed on February 29, 2008, briefing was completed in late
      April, and the arbitrator is expected to render an arbitration award during
      second quarter 2008. Based on the evidence presented at the hearing, we do
      not
      believe there is any reasonable likelihood that NQCI will prevail on its claims,
      and we believe the arbitrator is likely to rule in our favor.





**ITEM
      1A. Risk Factors.**





**** *Investing
      in our common stock involves a high degree of risk. In addition to the
      information in this report, you should carefully consider the risks described
      under Risk Factors in Part I, Item 1 of our Annual Report on Form 10-KSB for
      the
      year ended December 31, 2007, and the revised risk factors noted below. If
      any
      of such risks actually occurs, our business, results of operations and financial
      condition will likely suffer. As a result the trading price of our common stock
      may decline, and you might lose part or all of your
      investment.*





*Approximately
      43% of our stock is controlled by a single stockholder who has the ability
      to
      substantially influence the election of directors and the outcome of matters
      submitted to stockholders.*





As
      of
      April 9, 2008, CNL, a limited liability company whose managing member is our
      Executive Chairman, directly owned 6,232,596 shares, which represent
      approximately 42.7% of our 14,592,472 shares of outstanding common stock. As
      a
      result, CNL presently and is expected to continue to have the ability to
      determine the outcome of issues submitted to our stockholders. The interests
      of
      this stockholder may not always coincide with our interests or the interests
      of
      other stockholders, and it may act in a manner that advances its best interests
      and not necessarily those of other stockholders. One consequence to this
      substantial stockholder’s interest is that it may be difficult for investors to
      remove management of the company. It could also deter unsolicited takeovers,
      including transactions in which stockholders might otherwise receive a premium
      for their shares over then current market prices.





*Sales
      of common stock by our existing stockholders, or the perception that such sales
      may occur, could depress our stock price.*





**** The
      market price of our common stock could decline as a result of sales by, or
      the
      perceived possibility of sales by, our existing stockholders, including
      stockholders who recently purchased their shares from CNL. Most of our
      outstanding shares were registered on a Form S-4 registration statement in
      connection with our October 2007 merger, and are eligible for public resale.
      Approximately half of our shares of common stock are currently held by our
      affiliates and may be sold pursuant to an effective registration statement
      or in
      accordance with the volume and other limitations of Rule 144 under the
      Securities Act of 1933, as amended, or pursuant to other exempt transactions.
      Future sales of common stock by significant stockholders, including those who
      acquired their shares in private placements or who are affiliates, or the
      perception that such sales may occur, could depress the price of our common
      stock.





**ITEM
      2. Unregistered Sales of Equity Securities; Use of Proceeds from Registered
      Securities.**





In
      March
      2008, we issued 200,000 shares of common stock to Summit Trading Limited as
      compensation for consulting services. We issued the shares in reliance upon
      the
      exemption from registration provided by Section 4(2) of the Securities Act
      of
      1933, as amended, in a transaction to an accredited investor not involving
      any
      public offering.





In
      April
      2008, we issued 20,000 shares of restricted common stock to Steven Solomon,
      our
      former Chief Executive Officer, as compensation for business advisory services.
      We issued the shares in reliance upon the exemption from registration provided
      by Section 4(2) of the Securities Act of 1933, as amended, in a transaction
      to
      an accredited investor not involving any public offering.




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In
      April
      2008, we issued 20,000 shares of restricted common stock to Rachel Glicksman
      as
      compensation for investor relations services by CEOCast, Inc. We issued the
      shares in reliance upon the exemption from registration provided by Section
      4(2)
      of the Securities Act of 1933, as amended, in a transaction to an accredited
      investor not involving any public offering.





All
      of
      the above shares were registered for resale in a Registration Statement on
      Form
      S-3 filed under the Securities Act of 1933, which registration statement was
      declared effective on April 18, 2008.





**ITEM
      5. Other Information**





**Departure
      of Officer**





Effective
      May 12, 2008, Winson Tang ceased to be our chief operating officer. He continues
      to be employed by us on an at will basis.





Unless
      otherwise required by law, we disclaim any obligation to release publicly any
      updates or any changes in its expectations or any change in events, conditions,
      or circumstances on which any forward-looking statements are based.





**ITEM
      6. Exhibits.**





**No.**
            
            **Description
                of Exhibit**31.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200231.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200232.1
            
            Certification
                of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of 200232.2
            
            Certification
                of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002





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**SIGNATURES**




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


Date:
                May 14,
                2008
              By:
              /s/ Robert WeinsteinRobert
                  Weinstein
                Chief
                  Financial Officer
                (Principal
                  Financial Officer and Principal
                Accounting
                  Officer)


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