**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-QSB**


(Mark
      One)





[X]
            QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934





For
      the
      quarterly period ended September 30, 2007





[  
                ]
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT





For
      the
      transition period from ___________ to ___________





Commission
      file number: 000-51804





**PEDIATRIC
      PROSTHETICS, INC.**


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





**IDAHO**
            **68-0566694**(State
                or other jurisdiction of
            (IRS
                Employer Identification No.)incorporation
                or organization)





**12926
      Willow Chase Drive, Houston, Texas 77070**


(Address
      of principal executive offices)





**(281)
      897-1108**


(Registrant's
      telephone number)





Check
      whether the registrant (1) has 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 [ 
]





As
      of
      November 7, 2007, 105,925,789 shares of Common Stock of the issuer were
      outstanding ("Common Stock").





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





Transitional
      Small Business Disclosure Format Yes [  ] No [X]














**PART
      I. FINANCIAL INFORMATION**




**ITEM
      1. FINANCIAL STATEMENTS**





**PEDIATRIC
                PROSTHETICS, INC.****UNAUDITED
                BALANCE SHEETS****September
                30, 2007 and June 30, 2007****September
                30, 2007**
            
            
            **June
                30, 2007****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            126,103
            
            
            $
            25,557Trade
                accounts receivable, net of reserve of  $431,904 and $395,915,
                respectively
            
            
            186,721
            
            
            
            249,418Prepaid
                expenses and other current assets
            
            
            8,920
            
            
            
            11,420Current
                portion of deferred financing costs
            
            
            160,295
            
            
            
            152,111Total
                current assets
            
            
            482,039
            
            
            
            438,506Furniture
                and equipment, net of accumulated depreciation of $78,003 and $71,965,
                respectively
            
            
            40,841
            
            
            
            46,879Deferred
                financing costs, net of accumulated amortization of $173,025 and
                $140,450,
                respectively
            
            
            106,861
            
            
            
            139,436Total
                assets
            
            $
            629,741
            
            
            $
            624,821**LIABILITIES
                AND STOCKHOLDERS' DEFICIT**Current
                liabilities:Trade
                accounts payable
            
            $
            134,679
            
            
            $
            243,068Accrued
                liabilities
            
            
            129,009
            
            
            
            143,985Current
                portion of convertible debt
            
            
            -
            
            
            
            75,000Due
                to related party
            
            
            500
            
            
            
            500Derivative
                financial instruments
            
            
            2,084,614
            
            
            
            2,974,683Total
                current liabilities
            
            
            2,348,802
            
            
            
            3,437,236Convertible
                debt, net of discount of $1,090,086 and $810,486,
                respectively
            
            
            352,187
            
            
            
            189,514Deferred
                rent
            
            
            8,954
            
            
            
            10,060Total
                liabilities
            
            
            2,709,943
            
            
            
            3,636,810Commitments
                and contingencies
            
            
            -
            
            
            
            -Stockholders'
                deficit:Preferred
                stock, par value $0.001; 10,000,000 authorized;1,000,000
                issued and outstanding
            
            
            1,000
            
            
            
            1,000Common
                stock, par value $0.001; 950,000,000 shares authorized;104,325,789
                and 100,274,889 shares issued and outstanding,
                respectively
            
            
            104,326
            
            
            
            100,275Additional
                paid-in capital
            
            
            8,659,559
            
            
            
            8,542,869Accumulated
                deficit
            
            
            (10,845,087
            )
            
            
            (11,656,133
            )


Total
                stockholders’ deficit
            
            
            (2,080,202
            )
            
            
            (3,011,989
            )Total
                liabilities and stockholders' deficit
            
            $
            629,741
            
            
            $
            624,821The
                accompanying notes are an integral part of these financial
                statements.


-2-


**PEDIATRIC
                PROSTHETICS,
                INC.****UNAUDITED
                STATEMENTS OF OPERATIONS****For
                the Three Months Ended September 30, 2007 and 2006****Three
                Months Ended****September
                30,****2007**
            
            
            **2006**Revenue
            
            $
            99,920
            
            
            $
            195,230Operating
                expenses:Cost
                of sales, except for items stated separately below
            
            
            47,632
            
            
            
            76,001Selling,
                general, and administrative expenses
            
            
            312,151
            
            
            
            543,239Depreciation
                expense
            
            
            6,038
            
            
            
            5,959Total
                operating expenses
            
            
            365,821
            
            
            
            625,199Loss
                from operations
            
            
            (265,901
            )
            
            
            (429,969
            )Other
                income (expenses):Interest
                income
            
            
            -
            
            
            
            1Interest
                expense
            
            
            (165,186
            )
            
            
            (90,492
            )Gain
                on derivative financial instruments
            
            
            1,242,133
            
            
            
            1,202,540Total
                other income, net
            
            
            1,076,947
            
            
            
            1,112,049Net
                income
            
            $
            811,046
            
            
            $
            682,080Net
                income (loss) per common share :Basic
            
            $
            0.01
            
            
            $
            0.01Diluted
            
            $
            (0.00
            )
            
            
            (0.00
            )Weighted
                average shares of common stock outstanding:Basic
            
            
            102,079,517
            
            
            
            98,274,889Diluted
            
            
            189,781,503
            
            
            
            120,753,460The
                accompanying notes are an integral part of these financial
                statements.


-3-





**PEDIATRIC
                PROSTHETICS,
                INC.****UNAUDITED
                STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT****For
                the Three Months Ended September 30, 2007****Additional****Preferred
                Stock**
            
            
            **Common
                Stock**
            
            
            **Paid-In**
            
            
            **Accumulated****Shares**
            
            
            **Amount**
            
            
            **Shares**
            
            
            **Amount**
            
            
            **Capital**
            
            
            **Deficit**
            
            
            **Total**Balance
                at June 30, 2007
            
            
            1,000,000
            
            
            $
            1,000
            
            
            
            100,274,889
            
            
            $
            100,275
            
            
            $
            8,542,869
            
            
            $
            (11,656,133
            )
            
            $
            (3,011,989
            )Conversions
                ofConvertible
                Debt
            
            
            
            
            
            
            
            
            
            
            4,050,900
            
            
            
            4,051
            
            
            
            82,940
            
            
            
            
            
            
            
            86,991Amortization
                of Stock-Based Compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            33,750
            
            
            
            
            
            
            
            33,750Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            811,046
            
            
            
            811,046Balance
                at September 30, 2007
            
            
            1,000,000
            
            
            $
            1,000
            
            
            
            104,325,789
            
            
            $
            104,326
            
            
            $
            8,659,559
            
            
            $
            (10,845,087
            )
            
            $
            (2,080,202
            )The
                accompanying notes are an integral part of these financial
                statements.


-4-


**PEDIATRIC
                PROSTHETICS, INC.****UNAUDITED
                STATEMENTS OF CASH FLOWS****For
                the Three Months Ended September 30, 2007 and 2006****2007**
            
            
            **2006**Cash
                Flows From Operating ActivitiesNet
                income
            
            $
            811,046
            
            
            $
            682,080Adjustments
                to reconcile net income to net cash used byoperating
                activitiesDepreciation
                expense
            
            
            6,038
            
            
            
            5,959Deferred
                rent
            
            
            (1,106
            )
            
            
            (704
            )Stock-based
                compensation
            
            
            33,750
            
            
            
            261,116Provision
                for doubtful accounts
            
            
            30,302
            
            
            
            9,784Amortization
                of debt discount
            
            
            101,728
            
            
            
            -Amortization
                of debt issue costs
            
            
            39,391
            
            
            
            78,147Gain
                on derivative financial instruments
            
            
            (1,242,133
            )
            
            
            (1,202,540
            )Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            32,395
            
            
            
            (50,521
            )Other
                assets
            
            
            2,500
            
            
            
            1,571Accounts
                payable
            
            
            (108,389
            )
            
            
            (19,804
            )Accrued
                liabilities
            
            
            (14,976
            )
            
            
            26,550Net
                cash used by operating activities
            
            
            (309,454
            )
            
            
            (208,362
            )Cash
                Flows From Investing ActivitiesPurchase
                of furniture and equipment
            
            
            -
            
            
            
            (11,813
            )Net
                cash used by investing activities
            
            
            -
            
            
            
            (11,813
            )Cash
                Flows From Financing Activities:Proceeds
                from issuance of debt
            
            
            500,000
            
            
            
            -Payment
                of debt issue cost
            
            
            (15,000
            )
            
            
            -Payment
                of convertible debt
            
            
            (75,000
            )
            
            
            -Net
                cash provided by financing activities
            
            
            410,000
            
            
            
            -Net
                increase (decrease) in cash and cash equivalents
            
            
            100,546
            
            
            
            (220,175
            )Cash
                and cash equivalents, beginning of period
            
            
            25,557
            
            
            
            274,641Cash
                and cash equivalents, end of period
            
            $
            126,103
            
            
            $
            54,466Supplemental
                Disclosure of Cash Flow Information:Cash
                paid for interest expense
            
            $
            9,592
            
            
            $
            78,942Cash
                paid for income taxes
            
            $
            -
            
            
            $
            -Non-cash
                conversion of Convertible Debt and related Derivative Liability to
                common
                stock
            
            $
            86,991
            
            
            $
            -The
                accompanying notes are an integral part of these financial
                statements.






-5-





**PEDIATRIC
                PROSTHETICS,
                INC.****NOTES
                TO UNAUDITED FINANCIAL STATEMENTS**





**1. 
      BASIS OF PRESENTATION AND CRITICAL ACCOUNTING
      POLICIES**




**GENERAL**





Pediatric
      Prosthetics, Inc. ("Pediatric") is involved in the design, fabrication and
      fitting of custom-made artificial limbs. Pediatric's focus is infants and
      children and the comprehensive care and training needed by those infants and
      children and their parents.





**USE
      OF ESTIMATES**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America ("GAAP") requires management
      to make estimates and assumptions that affect the reported amounts of assets
      and
      liabilities, disclosure of contingent assets and liabilities at the date of
      the
      financial statements, and the reported amounts of revenues and expenses during
      the reporting period. Actual results could differ from those
      estimates.





**INTERIM
      FINANCIAL STATEMENTS**





The
      unaudited condensed financial statements included herein have been prepared
      by
      Pediatric pursuant to the rules and regulations of the Securities and Exchange
      Commission. The financial statements reflect all adjustments that are, in the
      opinion of management, necessary to fairly present such information. All such
      adjustments are of a normal recurring nature. Although Pediatric believes that
      the disclosures are adequate to make the information presented not misleading,
      certain information and footnote disclosures, including a description of
      significant accounting policies normally included in financial statements
      prepared in accordance with accounting principles generally accepted in the
      United States of America (US GAAP), have been condensed or omitted pursuant
      to
      such rules and regulations. These financial statements should be read in
      conjunction with the financial statements and the notes thereto included in
      Pediatric's Annual Report for the year ended June 30, 2007. The results of
      operations for interim periods are not necessarily indicative of the results
      for
      any subsequent quarter or the entire fiscal year ending June 30,
      2008.





**2.****GOING
      CONCERN
      CONSIDERATIONS**





Since
      its
      inception, Pediatric has suffered significant losses and has been dependent
      on
      outside investors to provide the cash resources to sustain its
      operations.  For the three months ended September 30, 2007, Pediatric
      reported a loss from operations of $265,901 and negative cash flows
      from operations of $309,454.





Although
      Pediatric has net income for the three months ended September 30, 2007 of
      $811,046, such net income was the result of non cash changes in the value of
      derivative financial instruments and not the result of core operations. Negative
      operating results have produced a working capital deficit of $1,866,763 and
      a
      stockholders' deficit of $2,080,202 at September 30, 2007. Pediatric's negative
      financial results and its current financial position raise substantial doubt
      about Pediatric's ability to continue as a going concern. The financial
      statements do not reflect any adjustments relating to the recoverability and
      classification of recorded asset amounts or liability amounts that might be
      necessary should Pediatric be unable to continue in existence.


-6-








**PEDIATRIC
                PROSTHETICS, INC.****NOTES
                TO UNAUDITED FINANCIAL STATEMENTS**





**2.****GOING
      CONCERN
      CONSIDERATIONS, continued**





Pediatric
      is currently implementing it plans to deal with going concern
      issues.  Management believes that Pediatric, through private
      placements of its common stock, will be able to raise the capital to expand
      operations to a level that will ultimately produce positive cash flows from
      operations.





Pediatric's
      long-term viability as a going concern is dependent on certain key factors,
      including its ability to:





·
            Obtain
                adequate sources of outside financing to support near term operations
                and
                to allow Pediatric to continue forward with current strategic
                plans.





·
            Increase
                its customer base and broaden its service
                capabilities.





·
            Ultimately
                achieve adequate profitability and cash flows to sustain continuing
                operations.








**3. 
      CONVERTIBLE DEBT**





On
      August
      1, 2007 Pediatric sold an aggregate of $500,000 in Callable Secured Convertible
      Notes (“Debentures"), to various third parties (the “Purchasers”). The sale of
      the Debentures represented the third and final tranche of funding in connection
      with a Securities Purchase Agreement ("Purchase Agreement") entered into with
      the Purchasers on May 30, 2006 for a total of $1,500,000 of such
      Debentures.  In connection with the issuance of the Debentures we paid
      various consultants debt issue cost totaling $15,000, which will be amortized
      over the term of the Debentures.





The
      Debentures are convertible into common stock at a 40% discount to the average
      of
      the three lowest intraday trading prices for which the common stock trades
      on
      the market or exchange over the most recent twenty (20) day trading period,
      ending one day prior to the date a conversion notice is received (the “Trading
      Price”), and bear interest at the rate of six percent (6%) per annum, payable
      quarterly in arrears, provided that no interest shall be due and payable for
      any
      month in which the trading price of common stock is greater than $0.10375 for
      each day that the common stock trades. Any amounts not paid under the Debentures
      when due bear interest at the rate of fifteen percent (15%) per annum until
      paid.





During
      the quarter ended September 30, 2007, the Purchasers converted $57,727 of
      Debentures into 4,050,900 common shares. A proportionate relief of the
      derivative liability related to the converted Debentures was recorded to
      additional paid in capital in the amount of $29,264.





**4. 
      SUBSEQUENT EVENTS**





Between
      October 1, 2007 and November 7, 2007, the Purchasers converted another $20,360
      of principal related to the Debentures resulting in the issuance of an
      additional 1,600,000 common shares.




-7-





**ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**





THIS
      REPORT CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A
      OF
      THE SECURITIES ACT OF 1933, AS AMENDED AND SECTION 21E OF THE SECURITIES
      EXCHANGE ACT OF 1934, AS AMENDED. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
      MATERIALLY FROM THOSE SET FORTH ON THE FORWARD LOOKING STATEMENTS AS A RESULT
      OF
      THE RISKS SET FORTH IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE
      COMMISSION, GENERAL ECONOMIC CONDITIONS, AND CHANGES IN THE ASSUMPTIONS USED
      IN
      MAKING SUCH FORWARD LOOKING STATEMENTS.





Pediatric
      Prosthetics, Inc. (the "Company," "we," and "us") is engaged in the custom
      fitting and fabrication of custom made prosthetic limbs for both upper and
      lower
      extremities to infants and children throughout the United States. We also
      provide our services to families from the international community when the
      parents can bring the child to the United States for fitting. We buy
      manufactured components from a number of manufacturers and combine those
      components to fabricate custom measured, fitted and designed prosthetic limbs
      for our patients. We also create "anatomically form-fitted suspension sockets"
      that allow the prosthetic limbs to fit comfortably and securely with each
      patient's unique residual limb. These suspension sockets must be hand crafted
      to
      mirror the surface contours of a patient's residual limb, and must be
      dynamically compatible with the underlying bone, tendon, ligament, and muscle
      structures in the residual limb.





We
      are
      accredited by the Texas Department of Health as a fully accredited prosthetics
      provider. We began operations as a fully accredited prosthetic facility on
      March
      18, 2004.





We
      have a
      website at www.kidscanplay.com, which contains information which we do not
      desire to be incorporated by reference into this filing.





We
      generate an average of approximately $8,000 of gross profit per fitting of
      the
      prosthetics devices, however, the exact amount of gross profit we will receive
      for each fitting will depend on the exact mix of arms versus legs fitted and
      the
      number of re-fittings versus new fittings. From July 1, 2005 until
      December 31, 2005, we made twenty-seven fittings; from January 1, 2006
      until June 30, 2006, we made thirty-six fittings; from July 1, 2006 to June
      30,
      2007, we made fifty-nine fittings, and from July 1, 2007 until November 15,
      2007, we made twenty-two fittings, two of which were pro bono. We currently
      average 4 fittings per month.





**HISTORY
      OF THE COMPANY**





Pediatric
      Prosthetics, Inc. (“we,” “us,” and the “Company”) was formed as an Idaho
      corporation on January 29, 1954, under the name Uranium Mines, Inc. From
      January 1954 onward, we experienced various restructurings and name changes,
      including a name change effective March 9, 2001, to Grant Douglas Acquisition
      Corp. From approximately February 6, 2001, until the date of the Exchange
      (defined below) we had been a non-operating, non-reporting, corporate shell,
      without assets or operations, but had traded our common stock on the Pinksheets
      under the symbol "GDRG."





On
      October 10, 2003, a separate Texas corporation Pediatric Prosthetics, Inc.
      ("Pediatric Texas"), entered into an acquisition agreement with us, whereby
      Pediatric Texas agreed to exchange 100% of its outstanding stock for 8,011,390
      shares of our common stock and 1,000,000 shares of our Series A Convertible
      Preferred Stock (the "Exchange"). Prior to the Exchange, Pediatric Texas had
      limited operations, consisting solely of hiring Dan Morgan, our current Vice
      President and Chief Prosthetist, and seeking a merger and/or acquisition
      candidate, which was eventually affected in connection with the
      Exchange.





In
      connection with the Exchange, the shareholders of Pediatric Texas (who became
      our shareholders subsequent to and in connection with the Exchange) agreed
      to
      assume $443,632 in liabilities related to the assumption of a $350,000
      convertible note and $93,632 of accrued interest on such note that was held
      by
      us prior to the Exchange. From November 2003 through June of 2005 we repaid
      $148,955 of note principal through the issuance of common stock with a fair
      market value of $2,688,734 and recognized a $2,539,779 loss on extinguishment
      of
      debt. During the year ended June 30, 2006, we negotiated the extinguishment
      of
      the remaining convertible note of $201,045 and accrued interest of $139,754
      for
      a onetime cash payment of $30,000 and recognized a gain on extinguishment of
      debt of $310,799.


-8-





Following
      the Exchange, we remained as the surviving accounting entity and adopted a
      name
      change from Grant Douglas Acquisition Corp. to Pediatric Prosthetics, Inc.
      on
      October 31, 2003. We entered into the Exchange to acquire an operating business
      in the form of Pediatric Texas, and the shareholders of Pediatric Texas entered
      into the Exchange to obtain a shell company in which to place the operations
      of
      Pediatric Texas, and to trade such resulting company’s common stock on the
      Pinksheets.  Since May 25, 2007, our common stock has been quoted on
      the OTCBB under the symbol “PDPR.”.





On
      March
      15, 2007, we filed an amendment to our Articles of Incorporation with the
      Secretary of State of Idaho to increase our authorized shares of common stock
      to
      950,000,000 shares of Common Stock, $0.001 par value per share, and to
      re-authorize 10,000,000 shares of preferred stock, $0.001 par value per share
      (the “Amendment”).





Additionally,
      the Amendment provided that shares of our preferred stock may be issued from
      time to time in one or more series, with distinctive designation or title as
      shall be determined by our Board of Directors prior to the issuance of any
      shares thereof. The preferred stock shall have such voting powers, full or
      limited, or no voting powers, and such preferences and relative, participating,
      optional or other special rights and such qualifications, limitations or
      restrictions thereof, as shall be stated in such resolution or resolutions
      providing for the issue of such class or series of preferred stock as may be
      adopted from time to time by our Board of Directors prior to the issuance of
      any
      shares thereof. The number of authorized shares of preferred stock may be
      increased or decreased (but not below the number of shares thereof then
      outstanding) by the affirmative vote of the holders of a majority of the voting
      power of all the then outstanding shares of the capital stock of the corporation
      entitled to vote generally in the election of directors, voting together as
      a
      single class, without a separate vote of the holders of the preferred stock,
      or
      any series thereof, unless a vote of any such holders is required pursuant
      to
      any preferred stock designation.





The
      effect of the Amendment is reflected throughout this report.





**Warranties**





We
      provide an unlimited one-year warranty on each of our prostheses, which covers
      both materials and workmanship. Our sub-component suppliers also provide us
      a
      one-year warranty on all components, whether electrical or structural, as a
      result, we are in effect only responsible for the cost of the re-installation
      of
      failed sub-components. Warranty repair costs borne by us have been
      limited and totaled approximately $6,379 during the fiscal year ended June
      30, 2007.  Warranty costs for the three months ended September 30,
      2007 totaled $21.





**Convertible
      Loan Agreements**





On
      March
      1, 2006, and March 21, 2006, we entered into two separate loans for $17,500,
      with two shareholders, Robert Castignetti and John Swartz, to provide us with
      an
      aggregate of $35,000 in funding. The loans bear interest at the rate of 12%
      per
      annum until paid. Both loans became due in May 2006, but were subsequently
      verbally extended to May 2007, but were not further extended.  Both
      loans were repaid with all accrued and unpaid interest in August
      2007.





In
      April
      2006, we borrowed $50,000 from a shareholder of the Company and issued a
      promissory note and warrants in connection with such loan. The promissory note
      bears interest at the rate of 12% per annum, and was due and payable on
      September 29, 2006, which date was subsequently extended until May 29, 2007,
      but
      which was not further extended.  The outstanding balance of the loan,
      plus accrued and unpaid interest was repaid by us in August 2007.





**May
      2006 Securities Purchase Agreement**





On
      May
      30, 2006 (the "Closing"), we entered into a Securities Purchase Agreement
      ("Purchase Agreement") with AJW Partners, LLC; AJW Offshore, Ltd.; AJW Qualified
      Partners, LLC; and New Millennium Capital Partners II, LLC (each a "Purchaser"
      and collectively the "Purchasers"), pursuant to which the Purchasers agreed
      to
      purchase $1,500,000 in convertible debt financing from us. Pursuant to the
      Securities Purchase Agreement, we agreed to sell the investors $1,500,000 in
      Callable Secured Convertible Notes (the "Debentures," the “Notes” or the
“Convertible Notes”), which are to be payable in three tranches, $600,000 of
      which was received by the Company on or around May 31, 2006, in connection
      with
the
      entry into the Securities Purchase Agreement; $400,000 which was received in
      February 2007, upon the filing of our registration statement to register shares
      of common stock which the Debentures are convertible into as well as the shares
      of common stock issuable in connection with the exercise of the Warrants
      (defined below); and $500,000 which was received in August 2007, shortly after
      the effectiveness of our registration statement on July 27,
      2007.


-9-





The
      Debentures are convertible into our common stock at a 40% discount to the
      average of the three lowest intraday trading prices over the most recent twenty
      (20) day trading period in which our common stock trades on the market or
      exchange , ending one day prior to the date a conversion notice is received
      (the
“Conversion Price”). Additionally, in connection with the Securities Purchase
      Agreement, we agreed to issue the Purchasers warrants to purchase an aggregate
      of 50,000,000 shares of our common stock at an exercise price of $0.10 per
      share
      (the "Warrants"). We originally agreed to register all of the shares of common
      stock which the Debentures are convertible into and the shares of common stock
      which the Warrants are exercisable for; however, pursuant to the Second Waiver
      of Rights Agreement, described below, the Purchasers agreed to amend the terms
      of the Registration Rights Agreement such that we were only required to register
      9,356,392 shares underlying the Debentures on our Form SB-2 registration
      statement, which was declared effective on July 20, 2007. We secured the
      Debentures pursuant to the Security Agreement and Intellectual Property Security
      Agreement, described below.





We
      also
      agreed in the Purchase Agreement to use our best efforts to increase our key
      man
      life insurance on our President and Director, Linda Putback-Bean and our Vice
      President and Director Kenneth W. Bean, which we have been able to increase
      to
      $3,000,000 and $2,000,000, respectively.





The
      $600,000 we received from the Purchasers at the Closing, in connection with
      the
      sales of the Debentures was used and distributed as follows:





o
            $100,000
                to Lionheart Associates, LLC doing business as Fairhills Capital
                ("Lionheart" or "Fairhills"), as a finder's fee in connection with
                the
                funding (we also have agreed to pay Lionheart an additional $50,000
                upon
                the payment of the next tranche of the funding by the
                Purchasers);





o
            $18,000
                to OTC Financial Network, as a finder's fee in connection with the
                funding
                (we also have agreed to pay OTC Financial Network an additional $27,000
                upon the payment of additional tranches of funding by the
                Purchasers);





o
            $75,000
                in legal fees and closing payments to our counsel, the Purchaser's
                counsel
                and certain companies working on the Purchaser's
                behalf;





o
            $10,000
                to be held in escrow for the payment of additional key man life insurance
                on Linda Putback-Bean and Kenneth W. Bean which policy has been obtained
                and for which the Company will receive such funds as policy beneficiary;
                and





o
            $370,000
                to us, which we spent on legal and accounting fees in connection
                with the
                filing of our amended Form 10-SB, outstanding reports on Form 10-QSB,
                and
                Form SB-2 registration statement, as well as marketing and promotional
                fees and inventory costs, as well as other general working capital
                purposes.





Pursuant
      to the Purchase Agreement, we agreed to sell the Purchasers an aggregate of
      $1,500,000 in Debentures, which Debentures have a three year term and bear
      interest at the rate of six percent (6%) per annum, payable quarterly in
      arrears, provided that no interest shall be due and payable for any month in
      which the trading value of our common stock is greater than $0.10375 for each
      day that our common stock trades. Any amounts not paid under the Debentures
      when
      due bear interest at the rate of fifteen percent (15%) per annum until paid.
      The
      conversion price of the Debentures is equal to 60% of the average of the three
      lowest intraday trading prices over the most recent twenty (20) day trading
      period in which our common stock trades on the market or exchange , ending
      one
      day prior to the date a conversion notice is received (the "Conversion
      Price").





Furthermore,
      the Purchasers have agreed to limit their conversions of the Debentures to
      no
      more than the greater of (1) $80,000 per calendar month; or (2) the average
      daily volume calculated during the ten business days prior to a conversion,
      per
      conversion.


-10-





Pursuant
      to the Debentures, the Conversion Price is automatically adjusted if, while
      the
      Debentures are outstanding, we issue or sell, any shares of common stock for
      no
      consideration or for a consideration per share (before deduction of reasonable
      expenses or commissions or underwriting discounts or allowances in connection
      therewith) less than the Conversion Price then in effect, with the consideration
      paid per share, if any being equal to the new Conversion Price; provided
      however, that each Purchaser has agreed to not convert any amount of principal
      or interest into shares of common stock, if, as a result of such conversion,
      such Purchaser and affiliates of such Purchaser will hold more than 4.99% of
      our
      outstanding common stock.





"Events
      of Default" under the Debentures include:





1.
            Our
                failure to pay any principal or interest when
                due;





2.
            Our
                failure to issue shares of common stock to the Purchasers in connection
                with any conversion as provided in the
                Debentures;




3.
            Our
                failure to file a Registration Statement covering the shares of common
                stock which the Debentures are convertible into within sixty (60)
                days of
                the Closing (July 31, 2006), or obtain effectiveness of such Registration
                Statement within one hundred and forty-five (145) days of the Closing
                (October 22, 2006), which dates were later amended to February 15,
                2007,
                and August 13, 2007, respectively in connection with the Waiver of
                Rights
                Agreement and the Second Waiver of Rights Agreement, described in
                greater
                detail below, and which amended dates were both met by us, or if
                such
                Registration Statement once effective, ceases to be effective for
                more
                than ten (10) consecutive days or more than twenty (20) days in any
                twelve
                (12) month period;





4.
            Our
                entry into bankruptcy or the appointment of a receiver or
                trustee;





5.
            Our
                breach of any covenants in the Debentures or Purchase Agreement,
                if such
                breach continues for a period of ten (10) days after written notice
                thereof by the Purchasers, or our breach of any representations or
                warranties included in any of the other agreements entered into in
                connection with the Closing; or





6.
            If
                any judgment is entered against us or our property for more than
                $100,000,
                and such judgment is unvacated, unbonded or unstayed for a period
                of
                twenty (20) days, unless otherwise consented to by the Purchasers,
                which
                consent will not be unreasonably
                withheld.





Upon
      the
      occurrence of and during the continuance of an Event of Default, the Purchasers
      can make the Debentures immediately due and payable, and can make us pay the
      greater of (a) 130% of the total remaining outstanding principal amount of
      the
      Debentures, plus accrued and unpaid interest thereunder, or (b) the total dollar
      value of the number of shares of common stock which the funds referenced in
      section (a) would be convertible into (as calculated in the Debentures),
      multiplied by the highest closing price for our common stock during the period
      we are in default. If we fail to pay the Purchasers such amount within five
      (5)
      days of the date such amount is due, the Purchasers can require us to pay them
      in shares of common stock at the greater of the amount of shares of common
      stock
      which (a) or (b) is convertible into, at the Conversion Rate then in
      effect.





Pursuant
      to the Debentures, we have the right, assuming (a) no Event of Default has
      occurred or is continuing, (b) that we have a sufficient number of authorized
      but unissued shares of common stock, (c) that our common stock is trading at
      or
      below $0.20 per share, and (d) that we are then able to prepay the Debentures
      as
      provided in the Debentures, to make an optional prepayment of the outstanding
      amount of the Debentures equal to 120% of the amount outstanding under the
      Debentures (plus any accrued and unpaid interest thereunder) during the first
      180 days after the Closing, 130% of the outstanding amount of the Debentures
      (plus any accrued and unpaid interest thereunder) between 181 and 360 days
      after
      the Closing, and 140% thereafter, after giving ten (10) days written notice
      to
      the Purchasers.





Additionally,
      pursuant to the Debentures, we have the right, in the event the average daily
      price of our common stock for each day of any month the Debentures are
      outstanding is below $0.20 per share, to prepay a portion of the outstanding
      principal amount of the Debentures equal to 101% of the principal amount of
      the
      Debentures divided by thirty-six (36) plus one month's interest. Additionally,
      the Purchasers have
      agreed in the Debentures to not convert any principal or interest into shares
      of
      common stock in the event we exercise such prepayment right.





At
      the
      Closing, we entered into a Security Agreement and an Intellectual Property
      Security Agreement (collectively, the "Security Agreements"), with the
      Purchasers, whereby we granted the Purchasers a security interest in, among
      other things, all of our goods, equipment, machinery, inventory, computers,
      furniture, contract rights, receivables, software, copyrights, licenses,
      warranties, service contracts and intellectual property to secure the repayment
      of the Debentures.





-11-


**Stock
      Purchase Warrants**





In
      connection with the Closing, we sold Warrants for the purchase of 50,000,000
      shares of our common stock to the Purchasers, which warrants are exercisable
      for
      shares of our common stock at an exercise price of $0.10 per share (the
      "Exercise Price"). Each Purchaser, however, has agreed not to exercise any
      of
      the Warrants into shares of common stock, if, as a result of such exercise,
      such
      Purchaser and affiliates of such Purchaser will hold more than 4.99% of our
      outstanding common stock.





The
      Warrants expire, if unexercised at 6:00 p.m., Eastern Standard Time on May
      30,
      2013. The Warrants also include reset rights, which provide for the Exercise
      Price of the Warrants to be reset to a lower price if we (a) issue any warrants
      or options (other than in connection with our Stock Option Plans), which have
      an
      exercise price of less than the then market price of the common stock, as
      calculated in the Warrants, at which time the Exercise Price of the Warrants
      will be equal to the exercise price of the warrants or options granted, as
      calculated in the Warrants; or (b) issue any convertible securities, which
      have
      a conversion price of less than the then market price of the common stock,
      as
      calculated in the Warrants, at which time the Exercise Price of the Warrants
      will be equal to the conversion price of the convertible securities, as
      calculated in the Warrants.





Pursuant
      to the Warrants, until we register the shares of common stock which the Warrants
      are exercisable for, the Warrants have a cashless exercise feature, where the
      Purchasers can exercise the Warrants and pay for such exercise in shares of
      common stock, in lieu of paying the exercise price of such Warrants in
      cash.





**Registration
      Rights Agreement**





Pursuant
      to the Registration Rights Agreement entered into at the Closing, we agreed
      to
      file a registration statement on Form SB-2, to register two (2) times the number
      of shares of common stock which the Debentures are convertible into (to account
      for changes in the Conversion Rate and the conversion of interest on the
      Debentures) as well as the shares of common stock issuable in connection with
      the exercise of the Warrants, within sixty (60) days of the Closing which we
      were not able to accomplish, but which date was amended from sixty (60) days
      from the Closing until January 15, 2007, in connection with the Waiver of Rights
      Agreement, and until February 15, 2007, in connection with the Second Waiver
      of
      Rights Agreement (both described below), which filing date was met by us.
      Additionally, the number of shares of common stock we were required to register
      on the Registration Statement has been amended to include only 9,356,392 shares
      of common stock underlying the Debentures, due to amendments to the Registration
      Rights Agreement affected by the Second Waiver of Rights
      Agreement.   We gained effectiveness of the Registration
      Statement on July 20, 2007.





**Waiver
      of Rights Agreement**





On
      October 25, 2006, with an effective date of July 31, 2006, we entered into
      a
      Waiver of Rights Agreement with the Purchasers, whereby the Purchasers agreed
      to
      waive our prior defaults under the Securities Purchase Agreement and
      Registration Rights Agreement. In connection with the Waiver of Rights
      Agreement, the Purchasers agreed to amend the Securities Purchase Agreement
      to
      state that we are required to use our best efforts to timely file our periodic
      reports with the Commission, which amendment waived the previous default caused
      by our failure to timely file our annual report on Form 10-KSB with the
      Commission. The Waiver of Rights Agreement also amended the Securities Purchase
      Agreement to provide for us to use our best efforts to obtain shareholder
      approval to increase our authorized shares of common stock as was required
      by
      the Securities Purchase Agreement, which amendment waived our failure to obtain
      shareholder approval to increase our authorized shares of common stock by August
      15, 2006. Finally, the Waiver of Rights Agreement amended the dates we were
      required to file our registration statement from July 31, 2006 to January 15,
      2007, which filing date was not met, and the date our registration
      statement was required to be effective with the Commission from October 22,
      2006
      to April 16, 2007. The amendments affected by the Waiver of Rights Agreement
      were later modified pursuant to the Second Waiver of Rights Agreement, described
      below.


-12-





**Closing
      of Second Funding Tranche**





On
      or
      about February 16, 2007 (the "Second Closing”) we sold an aggregate of $400,000
      in Callable Secured Convertible Notes (“Debentures," the “Notes” or the
“Convertible Notes”), to the Purchasers. The sale of the Debentures represented
      the second tranche of funding in connection with our Securities Purchase
      Agreement ("Purchase Agreement") entered into with the Purchasers on May 30,
      2006.





The
      Debentures are convertible into our common stock at a 40% discount to the
      average of the three lowest intraday trading prices over the most recent twenty
      (20) day trading period in which our common stock trades on the market or
      exchange , ending one day prior to the date a conversion notice is received
      (the
“Trading Price”), and bear interest at the rate of six percent (6%) per annum,
      payable quarterly in arrears, provided that no interest shall be due and payable
      for any month in which the trading price of our common stock is greater than
      $0.10375 for each day that our common stock trades. Any amounts not paid under
      the Debentures when due bear interest at the rate of fifteen percent (15%)
      per
      annum until paid.





The
      $400,000 we received from the Purchasers at the Second Closing, in connection
      with the sales of the second tranche of Debentures was distributed as follows
      (all amounts listed are approximate):





o
            $50,000
                to Lionheart Associates, LLC doing business as Fairhills Capital
                ("Lionheart"), as a finder's fee in connection with the
                funding;o
            $50,000
                in legal fees owed to our corporate counsel in connection with the
                preparation of our Form 10-SB and Form SB-2 registration statements
                and
                various other of our public filings;o
            $60,000
                in accounting/auditing fees in connection with the audit of and review
                of
                our financial statements contained in our Form 10-SB and Form SB-2
                registration statements and our other quarterly and annual report
                filings;o
            $18,000
                to OTC Financial Network, as a finder's fee in connection with the
                funding
                (we also have agreed to pay OTC Financial Network an additional $9,000
                upon the payment of the final tranche of funding by the
                Purchasers);o
            $5,000
                in closing costs associated with the
                funding;




o
            $40,000
                to be used by us in connection with the purchase of additional equipment
                and machinery in connection with the fitting of
                prosthesises;o
            $100,000
                to be used by us in connection with our continuing marketing and
                advertising plans (as described in greater detail under “Plan of
                Operations” in our latest periodic filing); ando
            $77,000
                to be used by us as needed for general working capital and the purchase
                of
                inventory for our prosthesises on an ongoing
                basis.





**Second
      Waiver of Rights Agreement**





On
      April
      17, 2007, with an effective date of January 15, 2007, we entered into a Second
      Waiver of Rights Agreement (the “Second Waiver”) with the Purchasers. Pursuant
      to the previous Waiver of Rights Agreement we entered into with the Purchasers
      in October 2006 (the “First Waiver”), we agreed to use our best efforts to
      obtain shareholder approval to increase our authorized shares by December 15,
      2006; to file a registration statement with the SEC covering the Underlying
      Shares no later than January 15, 2007, and to obtain effectiveness of such
      registration statement with the SEC by April 16, 2007.





Pursuant
      to the Second Waiver, the Purchasers agreed to waive our failure to file a
      registration statement by the prior January 15, 2007, deadline (we filed the
      registration statement on February 9, 2007), agreed we are not in default of
      the
      Rights Agreement; agreed to waive our inability to maintain effective controls
      and procedures
      as was required pursuant to the Purchase Agreement, that we are required to
      use
      our “best efforts” to maintain effective controls and procedures moving forward;
      to waive the requirement pursuant to the Purchase Agreement that we keep solvent
      at all times (defined as having more assets than liabilities); to waive the
      requirement pursuant to the Purchase Agreement that we obtain authorization
      to
      obtain listing of our common stock on the Over-the-Counter Bulletin Board
      (“OTCBB”), and to allow for us to use our “best efforts” to obtain listing of
      our common stock on the OTCBB, which listing we obtained effective May 25,
      2007.


-13-




We
      also
      agreed along with the Purchasers, pursuant to the Second Waiver, to amend the
      Rights Agreement to reduce the number of shares we are required to register
      pursuant to the Rights Agreement, from all of the Underlying Shares, to only
      9,356,392 of the shares issuable upon conversion of the Notes and to amend
      the
      date we are required to obtain effectiveness of our registration statement
      by
      from April 16, 2007, to August 13, 2007, which registration statement was
      declared effective on July 20, 2007.  The 9,356,392 shares of common
      stock we are required to register pursuant to the Second Waiver is equal to
      the
      amount remaining after calculating approximately 30% of our then public float
      (17,909,961 shares, with our public float equal to approximately 58,866,538
      shares as of the date of the Second Waiver), and subtracting the 8,553,569
      shares of common stock held by other shareholders, which were being registered
      in our Registration Statement, which gave us a total of 9,356,392 shares
      available to be registered for the Purchasers. Because we believe that the
      registration of shares totaling only approximately 30% of our public float
      clearly does not represent a primary offering of our securities, we and the
      Purchasers believe that the registration of only 9,356,392 shares underlying
      the
      Notes would expedite the review and effectiveness of our Registration
      Statement.





It
      is
      anticipated that the Purchasers will rely on Rule 144 under the Securities
      Act
      of 1933, as amended in the future for any sales of shares issuable in connection
      with the conversion of the Notes and/or exercise of the Warrants which are
      no
      longer required to be registered on a registration statement by us pursuant
      to
      the amendments above.





In
      consideration for their entry into the Second Waiver, we granted the Purchasers
      additional warrants to purchase 1,000,000 shares of our common stock at an
      exercise price of $0.10 per share, which warrants shall expire if unexercised
      on
      the same date as the original Warrants expire if unexercised, May 30, 2013,
      which warrants were granted to the Purchasers as follows:





AJW
                Partners, LLC
            102,000AJW
                Offshore, Ltd.
            606,000AJW
                Qualified Partners, LLC
            279,000New
                Millennium Capital Partners II, LLC
            13,000**Total**
            **1,000,000**





**Third
      Funding Tranche**




On
      or
      about July 27, 2007 (the "Third Closing"), we sold an aggregate of $500,000
      in
      Callable Secured Convertible Notes (“Debentures”), to the Purchasers, which
      funds were received by us on or about July 31, 2007. The sale of the Debentures
      represented the third and final tranche of funding in connection with our
      Securities Purchase Agreement ("Purchase Agreement") entered into with the
      Purchasers on May 30, 2006.





The
      $500,000 we received from the Purchasers at the Third Closing, in connection
      with the sales of the Debentures will be used as follows (all amounts listed
      are
      approximate):





Outstanding
                legal expenses in connection withour
                Form SB-2 Registration Statement and periodic filings:
            $40,000Accounting
                fees and expenses
            $40,000Repayment
                of shareholder notes
            $75,000Supplier
                expenses
            $40,000


Closing
                costs and finders fees
            $20,000Equipment
                purchases and capital improvements
            $40,000Marketing
                expenses and general working capital
            $245,000**Total**
            **$500,000**





-14-


**The
      Market Place**





According
      to the Limb Loss Research and Statistics Program ("LLR&SP"), a multi-year
      statistical study done by the American Amputee Coalition in 2001, in concert
      with the Johns Hopkins Medical School, and the United States Center of Disease
      Control, approximately 1,000 children are born each year with a limb loss in
      the
      United States. The LLR&SP can be found at www.amputee-coalition.org. During
      their high growth years, ages 1 through age 12, these children will be
      candidates for re-fitting once per year as they grow. We calculate that there
      are presently approximately up to 12,000 pre-adolescent (younger than age 12)
      children in the United States in need of prosthetic rehabilitation, based on
      the
      fact that there are approximately 1,000 children born each year with a limb-loss
      in the United States.





**Competition**





Although
      there are many prosthetic provider companies in the United States, to the best
      of our knowledge, there is no other private sector prosthetics provider in
      the
      country specializing in fitting infants and children. The delivery of prosthetic
      care in the United States is extremely fragmented and is based upon a local
      practitioner "paradigm." Generally, a local practitioner obtains referrals
      for
      treatment from orthopedic physicians in their local hospitals based on
      geographic considerations. Management believes the inherent limitation of this
      model for pediatric fittings is that the local practitioner may never encounter
      more than a very few small children with a limb loss, even during an entire
      career. The result is that the local practice is a "general practice", and
      in
      prosthetics that is considered an "adult practice" because of the overwhelming
      percentage of adult patients. In any given year, according to The American
      Amputee Coalition, over 150,000 new amputations are performed, suggesting the
      need for prosthetic rehabilitation. The overwhelming majority of those
      amputations are performed upon adults. For children ages 1-14, there will be
      approximately 1,200 limb losses per year due primarily to illness, vascular
      problems, and congenital accidents. Children, especially small children, cannot
      provide practitioners the critical verbal feedback they usually receive from
      their adult patients.





Management
      believes the challenge to effectively treat children with a limb-loss in the
      United States is compounded by the time constraints of local practitioners
      working primarily with their adult patients and a limited overall number of
      board certified prosthetists. To engage in the intensive patient-family focus
      required to fit the occasional infant or small child puts enormous time pressure
      on local practitioners trying to care for their adult patients.





Though
      not competitors in a business sense, the Shriner's Hospital system, a non-profit
      organization with 22 orthopedic hospitals throughout North America, has
      historically extended free prosthetic rehabilitation in addition to providing
      medical and surgical services to children at no charge. The free care offered
      by
      Shriner's may put downward pressure on the prices we charge for our services
      and/or lower the number of potential clients in the marketplace, which may
      in
      turn lower our revenues.


-15-


**PLAN
      OF OPERATIONS**





We
      have
      established working relationships with fifteen (15) Host Affiliates operating
      in
      approximately 21 states. In establishing the relationships with the fifteen
      Host
      Affiliates, we also provided one-on-one pediatric training to fifteen
      prosthetists who are employed by those Host Affiliates. We currently plan to
      hire one more certified prosthetist and two additional support personnel during
      the next twelve months, funding permitting, of which there can be no
      assurance.





As
      of
      September 2007, we believe we can operate for at least the next twelve
      months.  We believe we will require recurring cash for overhead of
      approximately $54,000 per month, and that we will receive monthly gross profits
      of approximately $50,000 per month in connection with fittings of our prosthetic
      limbs, of which there can be no assurance. If we are required to raise
      additional funding, we will likely do so through the sale of debt or equity
      securities.





We
      received $600,000 on May 30, 2006 (less closing costs and structuring fees),
      from the sale of certain Convertible Debentures described above, an additional
      $400,000 through the sale of additional Convertible Debentures in connection
      with our filing of our Registration Statement with the SEC, and a final $500,000
      in connection with the sale of Debentures when our Registration Statement was
      declared effective on or around July 20, 2007.  Increases in our
      advertising and marketing budget during the year ended June 30, 2007, have
      allowed us to undertake the following advertising and marketing
      activities:





o
            The
                composition of and distribution of certain feature newspaper articles;
                and




o
            Publicity
                and marketing campaign, pursuant to which we previously issued 7,000,000
                shares of common stock to certain
                consultants.




Additionally,
      we believe the increases in our advertising and marketing budget will allow
      us
      to undertake the following activities during the next twelve (12) months,
      funding permitting, of which there can be no assurance:





o
            The
                production, filming, editing and narration of informational videos
                on the
                value of modern prosthetic options for children, which videos describe
                the
                success stories we have had in helping children overcome limb loss
                by
                fitting such children with artificial limbs, as well as the distribution
                of such videos to fellow pediatric professionals such as nurses,
                physical
                therapists, doctors and hospital-based family counselors nationally,
                at a
                cost of approximately $10,000;





o
            Costs
                associated with a national internet marketing campaign utilizing
                state of
                the art  S.E.O.P  and pay per click
                advertising  at a cost of approximately
                $50,000





o
            Travel
                and associated costs involved with appearances on television shows,
                medical conventions and nursing schools at a cost of approximately
                $20,000; and travel and components expenses related to pro-bono fittings
                in various cities across the United States of approximately $100,000,
                and
                the establishment of a national internet chat-room for parents and
                kids
                with a limb-loss at a cost of approximately $10,000o
            Sponsorship
                costs of non-profit organizations such as the "Amputee Coalition
                of
                American" and the Para-Olympics, at a cost of approximately
                $10,000.








-16-







**COMPARISON
      OF OPERATING RESULTS**





**RESULTS
      OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO THE
      THREE MONTHS ENDED SEPTEMBER 30, 2006**





We
      had
      revenue of $99,920 for the three months ended September 30, 2007, compared
      to
      revenue of $195,230 for the three months ended September 30, 2006, a decrease
      in
      revenue of $95,310 or 48.8% from the prior period. The decrease in revenue
      was
      mainly due to an unusual number of delayed fittings caused by those clients’
insurance providers requesting additional information regarding the fitting
      process.  From time to time, prospective clients may have their
      fittings delayed by their insurance providers (usually Medicaid and Medicare)
      requesting additional information and/or clarification regarding the procedures
      we perform prior to those insurance providers paying for the prospective
      client’s procedures.  During the three months ended September 30,
      2007, an unusually large amount of our prospective clients had their procedures
      delayed due to an increased number of such questions from their insurance
      providers.  While we believe that we had an unusually high number of
      such delays during the three months ended September 30, 2007, and that such
      delays will not be nearly as extreme or prevalent during the remainder of fiscal
      2007, there can be no assurance that our future revenues will not be impacted
      by
      such delays in the future.





We
      had
      total operating expenses of $365,821 for the three months ended September 30,
      2007, compared to total operating expenses of $625,199 for the three months
      ended September 30, 2006, a decrease in total operating expenses of $259,378
      or
      41.5% from the previous year’s period. The decrease in total operating expenses
      was mainly due to a $28,369 or 37.3% decrease in cost of sales to $47,632 for
      the three months ended September 30, 2007, compared to $76,001 for the three
      months ended September 30, 2006 and a $231,088 or 42.5% decrease in selling,
      general and administrative expenses, to $312,151 for the three months ended
      September 30, 2007, compared to $543,239 for the three months ended September
      30, 2006, offset by a $79 or 1.3% increase in depreciation expense to $6,038
      for
      the three months ended September 30, 2007 compared to $5,959 for the three
      months ended September 30, 2006.





The
      37.3%
      decrease in our cost of sales for the three months ended September 30, 2007,
      compared to the three months ended September 30, 2006, was mainly attributable
      to our decrease in revenue, in connection with a reduced number of fittings
      over
      the same period.





The
      $231,088 or 42.5% decrease in selling, general and administrative expenses
      for
      the three months ended September 30, 2007 as compared to the three months ended
      September 30, 2006, was mainly due to a $227,369 decrease in stock-based
      compensation paid to consultants to $33,750 for the three months ended September
      30, 2007, as compared to $261,119 for the three months ended September 30,
      2006.
      Our selling, general and administrative expenses will remain high as compared
      to
      revenue until we can generate enough revenues to sustain our operations, due
      to
      early stage startup costs associated with building our administrative
      infrastructure and initial marketing and investor relations
      activities.




We
      had a
      loss from operations of $265,901 for the three months ended September 30, 2007,
      compared to $429,969 for the three months ended September 30, 2006, a decrease
      in loss from operations of $164,068 or 38.2% from the prior period. The decrease
      in loss from operations was primarily the result of the decrease in stock-based
      compensation.





We
      had
      total other income, net of $1,076,947 for the three months ended September
      30,
      2007, compared to $1,112,049 for the three months ended September 30, 2006,
      which represented a decrease in other income of $35,102 from the prior period.
      The decrease in net other income was mainly due to an increase of $74,695 in
      net
      interest expense to $165,186 for the three months ended September 30, 2007,
      as
      compared to net interest expense of $90,492 for the three months ended September
      30, 2006, which interest was mainly in connection with the amortization of
      the
      deferred financing cost and accretion of debt discount related to the
      Convertible Notes and other notes which were previously outstanding, but which
      have since been paid in full, as described in greater detail below, offset
      by a
      $39,593 increase in income from the change in value of the derivative financial
      instruments for the three months ended September 30, 2007, as compared to the
      same period in 2006, to $1,242,133 for the three months ended September 30,
      2007, compared to $1,202,540 for the three months ended September 30, 2006,
      .





We
      had
      net income of $811,046 for the three months ended September 30, 2007, compared
      to $682,080 for the three months ended September 30, 2006, an increase of
      $128,966 from the previous period. The increase
      in net income was mainly due to the decrease in cost of sales, selling, general
      and administrative expenses and the increase in income from derivative financial
      instruments, partially offset by the decrease in revenue and increase in
      interest expense, as described above.





Investors
      should keep in mind that our net income for the three months ended September
      30,
      2007 was the result of changes in the value of our derivative financial
      instruments and not the result of our core operations.  Without the
      changes to net income due to the changes in the fair value of derivative
      instruments, we would have had a significant net loss for the
      period.





-17-


**LIQUIDITY
      AND CAPITAL RESOURCES**





We
      had
      total assets of $629,741 as of September 30, 2007, which included current assets
      of $482,039, furniture and equipment, net of accumulated depreciation, of
      $40,841, and deferred financing cost, net of amortization, of $106,861. Current
      assets included cash and cash equivalents of $126,103, trade and accounts
      receivable, net of $186,721, prepaid expenses and other current assets of
      $8,920, and current portion of deferred financing cost of $160,295.




We
      had
      total liabilities of $2,709,943 as of September 30, 2007, which included current
      liabilities of $2,348,802, consisting of trade accounts payable of $134,679;
      accrued liabilities of $129,009; which included deferred salary payable to
      our
      officers; amounts due to related party of $500, which amounts were owed to
      our
      Chief Executive Officer, Linda Putback-Bean, in connection with the initial
      funding of our corporate bank account, which amounts have not been repaid to
      date; derivative financial instruments of $2,084,614, in connection with our
      Convertible Debentures and Warrants; and non-current liabilities consisting
      of
      deferred rent of $8,954 and long term portion of convertible debt, net of
      discount of $352,187.





We
      had a
      working capital deficit of $1,866,763 and an accumulated deficit of $10,845,087
      as of


September
      30, 2007.





We
      had
      total net cash used by operating activities of $309,454 for the three months
      ended September 30, 2007, which was mainly due to  the change in value
      of derivative instruments of $1,242,133, as well as the net decrease of $108,389
      for various trade accounts payable which had accumulated prior to our most
      recent funding related to the Convertible Debentures.





We
      had
      $410,000 in net cash provided by financing activities for the three months
      ended
      September 30, 2007, which included $500,000 raised through the third tranche
      of
      Convertible Debentures sold during the period offset by$15,000 of debt issuance
      costs associated with fees paid to finders in connection with the sale and
      the
      $75,000 repayment of outstanding convertible notes held by certain shareholders
      of the Company.





Our
      trade
      accounts receivable are often for substantial amounts that can generate
      challenges by insurance companies and, in certain cases, the need to pursue
      collections directly from the patients. These challenges have continually
      increased the collection period for our receivables. We believe that our trade
      accounts receivable balances will increase at a greater rate than revenue growth
      until such revenue growth subsides for a meaningful period of time. Management
      constantly reviews receivables for collectability issues and has recognized
      a
      provision for bad debts of approximately 36% of revenue thus far for fiscal
      2008.




These
      collection challenges in trade accounts receivable are expected to present
      liquidity issues in future periods if we do not substantially increase sales
      and/or raise funds from other sources.  Historically, our Host Affiliates,
      which represent the majority of our recievables, have been slow to collect
      receivables and/or answer billing appeals, whick in turn has led to our large
      accounts receivable balances.  During the three months ended September 30,
      2007, we conducted approximately three, three day classes, which were attended
      by six total Host Affiliates to help our Host Affiliates with their collection
      issues. We believe that those classes, and any similar classes we may arrange
      in
      the future, will help us decrease our receivables moving
      forward.





We
      expect
      our accounts payable to grow with the increase in our business over time and
      they include a substantial amount of professional fees related to our SEC
      filings. Accrued liabilities include accrued salaries and accrued stock based
      compensation, and as with accounts payable, the balance of accrued liabilities
      will increase based on the growth of our business. Timely payment of accounts
      payable and accrued liabilities will require that we raise additional debt
      or
      equity funding in the near term.




In
      April
      2006, we borrowed $50,000 from a shareholder of the Company, and issued that
      individual a promissory note and warrants in connection with such loan. The
      promissory note bears interest at the rate


-18-


of
      12%
      per annum, and was due and payable on September 29, 2006, which date was
      extended until May 29, 2007. The balance of the loan, plus accrued and unpaid
      interest, was repaid in August 2007.





On
      March
      1, 2006, and March 21, 2006, we entered into two separate loans for $17,500,
      with two separate shareholders to provide us with an aggregate of $35,000 in
      funding. The loans bear interest at the rate of 12% per annum until paid. Both
      loans became due in March 2007, but were verbally extended to May 2007, and
      were
      repaid with all accrued and unpaid interest in August 2007.





In
      May
      2006, we entered into a Securities Purchase Agreement with certain third parties
      to provide us $1,500,000 in convertible debt financing (the "Purchase
      Agreement"). Pursuant to the Purchase Agreement, we agreed to sell the investors
      an aggregate of $1,500,000 in Convertible Debentures, which were paid in three
      tranches, $600,000 upon signing the definitive agreements on May 30, 2006,
      which
      are due May 30, 2009, $400,000 upon the filing of our original Registration
      Statement filing, which Registration Statement we filed on February 9, 2007,
      and
      which Convertible Debentures we sold shortly thereafter, and $500,000 upon
      the
      effectiveness of our Registration Statement. The Convertible Debentures are
      to
      be convertible into shares of our common stock at a discount to the then trading
      value of our common stock. Additionally, in connection with the Securities
      Purchase Agreement, we agreed to issue the third parties warrants to purchase
      an
      aggregate of 50,000,000 shares of our common stock at an exercise price of
      $0.10
      per share (the "Warrants").





The
      fees
      and costs associated with the $1,500,000 in funding we have received to date
      are
      disclosed in the table below:





***First
                Closing Fees and Costs (in connection with  $600,000 received
                through***
              ***the
                sale of Notes in May 2006)***$100,000
            
            Finder
            
            Lionheart
                Associates, LLC doing business as Fairhills Capital as a finder's
                fee in
                connection with the funding;$18,000
            
            Finder
            
            OTC
                Financial Network, as a finder's fee in connection with the
                funding;$75,000
            
            Legal
                Fees and Closing Payments
            
            To
                our counsel, the Purchasers' counsel and certain companies working
                on the
                Purchasers' behalf$10,000
            
            Held
                in escrow
            
            Held
                in Escrow for the payment of additional Key Man life insurance on
                Linda
                Putback-Bean and Kenneth W. Bean***Total***
            **$203,000**





***Second
                Closing Fees and Costs (in connection with $400,000 received
                through***
              ***the
                sale of Notes in February 2007)***$50,000
            
            Finder
            
            Lionheart
                Associates, LLC doing business as Fairhills Capital as a finder's
                fee in
                connection with the funding;$18,000
            
            Finder
            
            OTC
                Financial Network, as a finder's fee in connection with the
                funding;$5,000
            
            Closing
                costs
            
            Escrow
                fees***Total***
            **$73,000***





*
                Which amount includes funds paid by the Company to its legal counsel
                and
                independent auditor in connection with its reporting requirement
                and the
                drafting and review of our Registration Statement and the financial
                statements contained therein.


-19-




***Third
      Closing Fees and Costs (in connection with $500,000 received
      through***


***the
      sale of Notes in July  2007)***





·
            $75,000
                - Repayment of stockholder loans;·
            $10,000
                - Inventory for our prosthetics operations;·
            $60,000
                - Equipment and building improvements;·
            $200,000
                - Promotional, marketing and travel costs associated with our increased
                marketing campaign;·
            $15,000
                - Closing costs and finders fees in connection with the funding;
                and





·
            $75,000-
                General working capital, including certain amounts for officers and
                directors salaries, rent and office expenses, of which a portion
                may be
                used to pay accrued interest on the Convertible Notes. We have not
                paid
                any of the accrued interest on the Convertible Notes to date, and
                have not
                been requested to pay such interest by the Purchasers to
                date.





Total
                Notes sold to the Purchasers
            
            $1,500,000Minus
                fees described above
            
            $291,000Total
                funds received by the Company
            
            $1,209,000








As
      of
      November 2007, we believe we can operate for at least the next twelve months
      with our current cash on hand and revenues we will receive from our fittings,
      based on our current estimate of non-discretionary and recurring cash overhead
      of approximately $64,000 per month and monthly gross profits of approximately
      $50,000 per month. We currently anticipate that our operations will continue
      to
      grow as a result of our increased advertising and marketing expenditures, which
      has allowed a greater number of potential clients to become aware of our
      operations and services and that  the increase in revenues and gross
      profits associated with such growth will substantially fund future
      operations





If
      we are required to raise additional funding, we will likely do so through the
      sale of debt or equity securities. Other than the funding transaction described
      above, no additional financing has been secured and the Company has no
      commitments from officers, directors or affiliates to provide
      funding.




-20-


**RISK
      FACTORS**





Any
      investment in shares of our common stock involves a high degree of risk. You
      should carefully consider the following information about these risks before
      you
      decide to buy our common stock. If any of the following risks actually occur,
      our business would likely suffer. In such circumstances, the market price of
      our
      common stock could decline, and you may lose all or part of the money you paid
      to buy our common stock.





**WE
      HAVE EXPERIENCED SUBSTANTIAL OPERATING LOSSES AND MAY INCUR ADDITIONAL OPERATING
      LOSSES IN THE FUTURE.**





During
      the fiscal years ended June 30, 2007 and 2006, we incurred net income of
      $843,103 and a net loss of $4,413,417, respectively, and experienced negative
      cash flows from operations of $554,271 and $436,226, respectively. During the
      three months ended September 30, 2007, we had net income of $811,046, which
      net
      income was mainly the result of changes in the value of our derivative financial
      instruments and not the result of our core operations, and negative cash flows
      from operations of $309,454. Additionally, we had negative working capital
      of
      $1,866,763 and a total accumulated deficit of 10,845,087 as of September 30,
      2007. Our historical losses have been related to two primary factors as follows:
      1) we are not currently generating sufficient revenue to cover our fixed costs
      and we believe that the break-even point from a cash flow standpoint may require
      that we fit as many as 100 clients, up from 59 fitted in fiscal 2007; and 2)
      we
      have issued a significant number of our shares of common stock to compensate
      employees and consultants and those stock issuances have resulted in charges
      to
      income of $585,946 and $482,360 during the years ended June 30, 2007 and 2006,
      costs that we believe will not be recurring in such large amounts in future
      periods. In the event we are unable to increase our gross margins, reduce our
      costs and/or generate sufficient additional revenues, we may continue to sustain
      losses and our business plan and financial condition will be materially and
      adversely affected.





**THERE
      IS DOUBT REGARDING OUR ABILITY TO CONTINUE AS A GOING
      CONCERN.**





Since
      our
      inception, we have suffered significant net losses. During the three months
      ended September 30, 2007 we had a loss from operations of $265,901 and we had
      a
      working capital deficit of $1,866,763 as of September 30, 2007. Furthermore,
      we
      had an accumulated deficit of $10,845,087 at September 30, 2007. Due to our
      negative financial results and our current financial position, there is
      substantial doubt about our ability to continue as a going concern.





**OUR
      BUSINESS DEPENDS UPON OUR ABILITY TO MARKET OUR SERVICES TO AND SUCCESSFULLY
      FIT
      CHILDREN BORN WITH A LIMB-LOSS.**





Our
      growth prospects depend upon our ability to identify and subsequently fit the
      small minority of children born with a limb-loss. The LLR&SP Report
      (referred to in our "Description of Business" section herein) indicates that
      approximately 26 out of every 100,000 live births in the United States result
      in
      a possible need for prosthetic rehabilitation. In addition, our business model
      demands that we continue to successfully fit infants and children each year
      as
      they outgrow their prostheses. Because of the relatively small number of these
      children born each year and the fact that each child is different, there can
      be
      no assurance that we will be able to identify and market our services to such
      children (or the parents or doctors of such children) and/or that we will be
      able to successfully fit such children with prosthetic’s devices if retained. If
      we are unable to successfully market our services to the small number of
      children born with a limb-loss each year and/or successfully fit such children
      if marketed to, our results of operations and revenues could be adversely
      affected and/or may not grow.





**DUE
      TO IMPROVED HEALTHCARE, THERE COULD BE FEWER AND FEWER CHILDREN EACH YEAR WITH
      PRE-NATAL LIMB-LOSS.**





Since
      the
      majority of our first-time prospective fittings are assumed to be with children
      with a pre-natal limb-loss, breakthroughs in pre-natal safety regimens and
      treatment could end the need for the vast majority of future fittings of
      pediatric prosthetics. As such, there can be no assurance that the number of
      children requiring our services will continue to grow in the future, and in
      fact
      the number of such children may decline as breakthroughs occur.


-21-


**CHANGES
      IN GOVERNMENT REIMBURSEMENT LEVELS COULD ADVERSELY AFFECT OUR NET SALES, CASH
      FLOWS AND PROFITABILITY.**





We
      derived a significant percentage of our net sales for the years ended June
      30,
      2006 and 2007, from reimbursements for prosthetic services and products from
      programs administered by Medicare, or Medicaid. Each of these programs sets
      maximum reimbursement levels for prosthetic services and products. If these
      agencies reduce reimbursement levels for prosthetic services and products in
      the
      future, our net sales could substantially decline. Additionally, reduced
      government reimbursement levels could result in reduced private payor
      reimbursement levels because fee schedules of certain third-party payors are
      indexed to Medicare. Furthermore, the healthcare industry is experiencing a
      trend towards cost containment as government and other third-party payors seek
      to impose lower reimbursement rates and negotiate reduced contract rates with
      service providers. This trend could adversely affect our net sales. Medicare
      provides for reimbursement for prosthetic products and services based on prices
      set forth in fee schedules for ten regional service areas. Additionally, if
      the
      U.S. Congress were to legislate modifications to the Medicare fee schedules,
      our
      net sales from Medicare and other payors could be adversely and materially
      affected. We cannot predict whether any such modifications to the fee schedules
      will be enacted or what the final form of any modifications might be. As such,
      modifications to government reimbursement levels could reduce our revenues
      and/or cause individuals who would have otherwise retained our services to
      look
      for cheaper alternatives.





**IF
      WE CANNOT COLLECT OUR ACCOUNTS RECEIVABLE OUR BUSINESS, RESULTS OF OPERATIONS,
      AND FINANCIAL CONDITION COULD BE ADVERSELY AFFECTED.**





As
      of
      September 30, 2007, our accounts receivable over 120 days old represented
      approximately one-third of total accounts receivable outstanding. If we cannot
      collect our accounts receivable, our business, results of operations, and
      financial condition could be adversely affected.





**IF
      WE ARE UNABLE TO MAINTAIN GOOD RELATIONS WITH OUR SUPPLIERS, OUR EXISTING
      PURCHASING COSTS MAY BE JEOPARDIZED, WHICH COULD ADVERSELY AFFECT OUR GROSS
      MARGINS.**





Our
      gross
      margins have been, and will continue to be, dependent, in part, on our ability
      to continue to obtain favorable terms from our suppliers. These terms may be
      subject to changes in suppliers' strategies from time to time, which could
      adversely affect our gross margins over time. The profitability of our business
      depends, in part, upon our ability to maintain good relations with these
      suppliers, of which there can be no assurance.





**WE
      DEPEND ON THE CONTINUED EMPLOYMENT OF OUR TWO PROSTHETISTS WHO WORK AT OUR
      HOUSTON PATIENT-CARE FACILITY AND THEIR RELATIONSHIPS WITH REFERRAL SOURCES
      AND
      PATIENTS. OUR ABILITY TO PROVIDE PEDIATRIC PROSTHETIC SERVICES AT OUR
      PATIENT-CARE FACILITY WOULD BE IMPAIRED AND OUR NET SALES REDUCED IF WE WERE
      UNABLE TO MAINTAIN THESE EMPLOYMENT AND REFERRAL
      RELATIONSHIPS.**





Our
      net
      sales would be reduced if either of our two (2) practitioners leaves us. In
      addition, any failure of these practitioners to maintain the quality of care
      provided or to otherwise adhere to certain general operating procedures at
      our
      facility, or among our Host Affiliates, or any damage to the reputation of
      any
      of our practitioners could damage our reputation, subject us to liability and/or
      significantly reduce our net sales.





**WE
      FACE REVIEWS, AUDITS AND INVESTIGATIONS UNDER OUR CONTRACTS WITH FEDERAL AND
      STATE GOVERNMENT AGENCIES, AND THESE AUDITS COULD HAVE ADVERSE FINDINGS THAT
      MAY
      NEGATIVELY IMPACT OUR BUSINESS.**





We
      contract with various federal and state governmental agencies to provide
      prosthetic services. Pursuant to these contracts, we are subject to various
      governmental reviews, audits and investigations to verify our compliance with
      the contracts and applicable laws and regulations, including reviews from
      Medicare and Texas Medicaid, in connection with rules and regulations we are
      required to follow and comply with as a result of our position as a Medicare
      and
      Texas Medicaid approved provider. Any adverse review, audit or investigation
      could result in:


-22-




o
            refunding
                of amounts we have been paid pursuant to our government
                contracts;o
            imposition
                of fines, penalties and other sanctions on us;o
            loss
                of our right to participate in various federal
                programs;o
            damage
                to our reputation in various markets; oro
            material
                and/or adverse effects on the business, financial condition and results
                of
                operations.




**WE
      HAVE NEVER PAID A CASH DIVIDEND AND IT IS LIKELY THAT THE ONLY WAY OUR
      SHAREHOLDERS WILL REALIZE A RETURN ON THEIR INVESTMENT IS BY SELLING THEIR
      SHARES.**





We
      have
      never paid cash dividends on any of our securities. Our Board of Directors
      does
      not anticipate paying cash dividends in the foreseeable future. We currently
      intend to retain future earnings to finance our growth. As a result, the ability
      of our investors to generate a profit our common stock will likely depend on
      their ability to sell our stock at a profit, of which there can be no
      assurance.




**WE
      MAY ISSUE ADDITIONAL SHARES OF COMMON STOCK IN THE FUTURE, WHICH COULD CAUSE
      DILUTION TO OUR THEN EXISTING SHAREHOLDERS.**





We
      may
      seek to raise additional equity capital in the future. Any issuance of
      additional shares of our common stock will dilute the percentage ownership
      interest of all our then shareholders and may dilute the book value per share
      of
      our common stock, which would likely cause a decrease in value of our common
      stock.





**WE
      MAY ISSUE ADDITIONAL SHARES OF PREFERRED STOCK WHICH PREFERRED STOCK MAY HAVE
      RIGHTS AND PREFERENCES GREATER THAN OUR COMMON STOCK.**




The
      Board
      of Directors has the authority to issue up to 10,000,000 shares of Preferred
      Stock. As of November 7, 2007, 1,000,000 shares of the Series A Convertible
      Preferred Shares have been issued. Additional shares of preferred stock, if
      issued, could be entitled to preferences over our outstanding common stock.
      The
      shares of preferred stock, when and if issued, could adversely affect the rights
      of the holders of common stock, and could prevent holders of common stock from
      receiving a premium for their common stock. An issuance of preferred stock
      could
      result in a class of securities outstanding that could have preferences with
      respect to voting rights and dividends and in liquidation over the common stock,
      and could (upon conversion or otherwise) enjoy all of the rights of holders
      of
      common stock. Additionally, we may issue a series of preferred stock in the
      future, which may convert into common stock, which conversion would cause
      immediate dilution to our then shareholders. The Board of Directors’ authority
      to issue preferred stock could discourage potential takeover attempts and could
      delay or prevent a change in control through merger, tender offer, proxy contest
      or otherwise by making such attempts more difficult to achieve or more costly
      and/or otherwise cause the value of our common stock to decrease in
      value.





**OUR
      MANAGEMENT CONTROLS A SIGNIFICANT PERCENTAGE OF OUR CURRENTLY OUTSTANDING COMMON
      STOCK AND THEIR INTERESTS MAY CONFLICT WITH THOSE OF OUR
      SHAREHOLDERS.**





As
      of
      November 7, 2007, our President and Chief Executive Officer, Linda Putback-Bean
      beneficially owned 30,210,251 shares of common stock or approximately 29% of
      our
      outstanding common stock. Additionally, Ms. Putback-Bean owns 900,000 shares
      of
      our Series A Convertible Preferred Stock which represents 90% of the issued
      and
      outstanding shares of preferred stock. Dan Morgan, our Vice President/Chief
      Prosthetist owns 9,198,861 shares of our common stock as well as the remaining
      100,000 shares of our Series A Convertible Preferred Stock which represents
      10%
      of the Series A Convertible Preferred Stock. Thus, management owns 100% of
      our
      Series A Convertible Preferred Stock. The Series A Convertible Preferred Stock
      is convertible on a one-to-one basis for our common stock but has voting rights
      of 20-to-1, giving our management the right to vote a total of 59,409,112 shares
      of our voting shares, representing the 30,210,251 shares held by Ms.
      Putback-Bean, the 900,000 shares of Series A Convertible Preferred Stock which
      has the right to vote 18,000,000 shares of common stock, the 9,198,861 shares
      of
      common stock held by Mr. Morgan, and the 100,000 shares of Series A Convertible
      Preferred Stock which has the right to vote 2,000,000 shares of common stock,
      for a total of a total of approximately 48% of our total
      voting power based on 125,925,789 voting shares, which includes the 105,925,789
      shares of common stock outstanding and the 20,000,000 shares which our Series
      A
      Convertible Preferred Stock are able to vote. This concentration of a
      significant percentage of voting power provides our management substantial
      influence over any matters that require a shareholder vote, including, without
      limitation, the election of Directors and/or approving or preventing a merger
      or
      acquisition, even if their interests may conflict with those of other
      shareholders. Such control could also have the effect of delaying or preventing
      a change in control or otherwise discouraging a potential acquirer from
      attempting to obtain control of the Company. Such control could have a material
      adverse effect on the market price of our common stock or prevent our
      shareholders from realizing a premium over the then prevailing market prices
      for
      their shares of common stock.


-23-





**WE
      MAY BE REQUIRED TO IMMEDIATELY PAY THE $1,500,000 IN OUTSTANDING DEBENTURES
      AND/OR BE FORCED TO PAY SUBSTANTIAL PENALTIES TO THE DEBENTURE HOLDERS UPON
      THE
      OCCURRENCE OF AND DURING THE CONTINUANCE OF AN EVENT OF
      DEFAULT.**





Upon
      the
      occurrence of and during the continuance of any Event of Default under the
      Debentures, which includes the following events:





o
            Our
                failure to pay any principal or interest on the Debentures when
                due;





o
            Our
                failure to issue shares of common stock to the Purchasers in connection
                with any conversion as provided in the
                Debentures;





o
            Our
                Registration Statement ceases to be effective for more than ten (10)
                consecutive days or more than twenty (20) days in any twelve (12)
                month
                period;





o
            Our
                entry into bankruptcy or the appointment of a receiver or
                trustee;




o
            Our
                breach of any covenants in the Debentures or Purchase Agreement,
                or our
                breach of any representations or warranties included in any of the
                other
                agreements entered into in connection with the Closing;
                or





o
            If
                any judgment is entered against us or our property for more than
                $100,000,





the
      Purchasers can make the Debentures immediately due and payable, and can make
      us
      pay the greater of (a) 130% of the total remaining outstanding principal amount
      of the Debentures, plus accrued and unpaid interest thereunder, or (b) the
      total
      dollar value of the number of shares of common stock which the funds referenced
      in section (a) would be convertible into (as calculated in the Debentures),
      multiplied by the highest closing price for our common stock during the period
      we are in default. As we do not currently have sufficient cash on hand to repay
      the debentures, if an Event of Default occurs under the Debentures, we could
      be
      forced to curtail or abandon our operations and/or sell substantially all of
      our
      assets in order to repay all or a part of the Debentures.





**THE
      DEBENTURES ARE CONVERTIBLE INTO SHARES OF OUR COMMON STOCK AT A DISCOUNT TO
      MARKET.**





The
      conversion price of the Debentures is equal to 60% of the trading price of
      our
      common stock, which will likely cause the value of our common stock, if any,
      to
      decline in value as subsequent conversions are made, as described in greater
      detail under the Risk Factors below.


-24-


**THE
      ISSUANCE AND SALE OF COMMON STOCK UPON CONVERSION OF THE CONVERTIBLE NOTES
      AND
      EXERCISE OF THE WARRANTS MAY DEPRESS THE MARKET PRICE OF OUR COMMON
      STOCK.**





As
      sequential conversions of the Debentures and sales of such converted shares
      take
      place, the price of our common stock may decline, and as a result, the holders
      of the Debentures will be entitled to receive an increasing number of shares
      in
      connection with their conversions, which shares could then be sold in the
      market, triggering further price declines and conversions for even larger
      numbers of shares, to the detriment of our investors. Upon the successful
      registration of the shares of common stock which the Debentures are convertible
      into and the Warrants are exercisable for, all of the shares issuable upon
      conversion of the Debentures and upon exercise of the Warrants, may be sold
      without restriction. The sale of these shares may adversely affect the market
      price, if any, of our common stock.





In
      addition, the common stock issuable upon conversion of the Debentures and
      exercise of the Warrants may represent overhang that may also adversely affect
      the market price of our common stock. Overhang occurs when there is a greater
      supply of a company's stock in the market than there is demand for that stock.
      When this happens the price of the company's stock will decrease, and any
      additional shares which shareholders attempt to sell in the market will only
      further decrease the share price. The Debentures may be converted into common
      stock at a discount to the market price of our common stock of 40% of the
      average of the three lowest intraday trading prices which our common stock
      trades on the market or exchange which it then trades over the most recent
      twenty (20) day trading period, ending one day prior to the date a conversion
      notice is received, and such discount to market, provides the holders with
      the
      ability to sell their common stock at or below market and still make a profit.
      In the event of such overhang, holders will have an incentive to sell their
      common stock as quickly as possible. If the share volume of our common stock
      cannot absorb the discounted shares, then the value of our common stock will
      likely decrease.





**THE
      ISSUANCE OF COMMON STOCK UPON CONVERSION OF THE DEBENTURES AND UPON EXERCISE
      OF
      THE WARRANTS WILL CAUSE IMMEDIATE AND SUBSTANTIAL
      DILUTION.**





The
      issuance of common stock upon conversion of the Debentures and exercise of
      the
      Warrants will result in immediate and substantial dilution to the interests
      of
      other stockholders since the Debenture holders may ultimately receive and sell
      the full amount issuable on conversion or exercise. Although the Debenture
      holders may not convert the Debentures and/or exercise their Warrants if such
      conversion or exercise would cause them to own more than 4.99% of our
      outstanding common stock, this restriction does not prevent the Debenture
      holders from converting and/or exercising some of their holdings, selling those
      shares, and then converting the rest of their holdings, while still staying
      below the 4.99% limit. In this way, the Debenture holders could sell more than
      this limit while never actually holding more shares than this limit allows.
      If
      the Debenture holders choose to do this it will cause substantial dilution
      to
      the then holders of our common stock.





**THE
      CONTINUOUSLY ADJUSTABLE CONVERSION PRICE FEATURE OF OUR DEBENTURES COULD REQUIRE
      US TO ISSUE A SUBSTANTIALLY GREATER NUMBER OF SHARES, WHICH MAY ADVERSELY AFFECT
      THE MARKET PRICE OF OUR COMMON STOCK AND CAUSE DILUTION TO OUR EXISTING
      STOCKHOLDERS.**





Our
      existing stockholders will
      experience substantial dilution of their investment upon conversion of the
      Debentures and exercise of the Warrants. The Debentures will be convertible
      into
      shares of our common stock at a discount to market of 40% of the trading value
      of our common stock. As a result, the number of shares issuable could prove
      to
      be significantly greater in the event of a decrease in the trading price of
      our
      common stock, which decrease would cause substantial dilution to our existing
      stockholders. As sequential conversions and sales take place, the price of
      our
      common stock may decline and if so, the holders of the Debentures would be
      entitled to receive an increasing number of shares, which could then be sold,
      triggering further price declines and conversions for even larger numbers of
      shares, which would cause additional dilution to our existing stockholders
      and
      would likely cause the value of our common stock to decline.




-25-


**THE
      CONTINUOUSLY ADJUSTABLE CONVERSION PRICE FEATURE OF OUR DEBENTURES MAY ENCOURAGE
      INVESTORS TO SELL SHORT OUR COMMON STOCK, WHICH COULD HAVE A DEPRESSIVE EFFECT
      ON THE PRICE OF OUR COMMON STOCK.**





The
      Debentures will be convertible into shares of our common stock at a discount
      to
      market of 40% of the average of the three lowest intraday trading prices which
      our common stock trades on the market or exchange which it then trades over
      the
      most recent twenty (20) day trading period, ending one day prior to the date
      a
      conversion notice is received (the “Conversion Price”). The significant downward
      pressure on the price of our common stock as the Debenture holders convert
      and
      sell material amounts of our common stock could encourage investors to short
      sell our common stock. This could place further downward pressure on the price
      of our common stock. In addition, not only the sale of shares issued upon
      conversion of the Debentures or exercise of the Warrants, but also the mere
      perception that these sales could occur, may adversely affect the market price
      of our common stock.




**THE
      TRADING PRICE OF OUR COMMON STOCK ENTAILS ADDITIONAL REGULATORY REQUIREMENTS,
      WHICH MAY NEGATIVELY AFFECT SUCH TRADING PRICE.**





Our
      common stock is currently listed on the Pink Sheets, an over-the-counter
      electronic quotation service, which stock currently trades below $4.00 per
      share. We anticipate the trading price of our common stock will continue to
      be
      below $4.00 per share. As a result of this price level, trading in our common
      stock would be subject to the requirements of certain rules promulgated under
      the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These
      rules require additional disclosure by broker-dealers in connection with any
      trades generally involving any non-NASDAQ equity security that has a market
      price of less than $4.00 per share, subject to certain exceptions. Such rules
      require the delivery, before any penny stock transaction, of a disclosure
      schedule explaining the penny stock market and the risks associated therewith,
      and impose various sales practice requirements on broker-dealers who sell penny
      stocks to persons other than established customers and accredited investors
      (generally institutions). For these types of transactions, the broker-dealer
      must determine the suitability of the penny stock for the purchaser and receive
      the purchaser's written consent to the transaction before sale. The additional
      burdens imposed upon broker-dealers by such requirements may discourage
      broker-dealers from effecting transactions in our common stock. As a
      consequence, the market liquidity of our common stock could be severely affected
      or limited by these regulatory requirements.





**IN
      THE FUTURE, WE WILL INCUR SIGNIFICANT INCREASED COSTS AS A RESULT OF OPERATING
      AS A FULLY REPORTING COMPANY UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS
      AMENDED, AND OUR MANAGEMENT WILL BE REQUIRED TO DEVOTE SUBSTANTIAL TIME TO
      NEW
      COMPLIANCE INITIATIVES.**





Moving
      forward, we anticipate incurring significant legal, accounting and other
      expenses in connection with our status as a fully reporting public company.
      The
      Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and new rules subsequently
      implemented by the SEC have imposed various new requirements on public
      companies, including requiring changes in corporate governance practices. As
      such, and as a result of the filing of our Form 10-SB to become a publicly
      reporting company, our management and other personnel will need to devote a
      substantial amount of time to these new compliance initiatives. Moreover, these
      rules and regulations will increase our legal and financial compliance costs
      and
      will make some activities more time-consuming and costly. For example, we expect
      these new rules and regulations to make it more difficult and more expensive
      for
      us to obtain director and officer liability insurance, and we may be required
      to
      incur substantial costs to maintain the same or similar coverage. In addition,
      the Sarbanes-Oxley Act requires, among other things, that we maintain effective
      internal controls for financial reporting and disclosure of controls and
      procedures. In particular, commencing in fiscal 2008, we must perform system
      and
      process evaluation and testing of our internal controls over financial reporting
      to allow management and our independent registered public accounting firm to
      report on the effectiveness of our internal controls over financial reporting,
      as required by Section 404 of the Sarbanes-Oxley Act. Our testing, or the
      subsequent testing by our independent registered public accounting firm, may
      reveal deficiencies in our internal controls over financial reporting that
      are
      deemed to be material weaknesses. Our compliance with Section 404 will require
      that we incur substantial accounting expense and expend significant management
      efforts. We currently do not have an internal audit group, and we will need
      to
      hire additional accounting and financial staff with appropriate public company
      experience and technical accounting knowledge. Moreover, if we are not able
      to
      comply with the requirements of Section 404 in a timely manner, or if we or
      our
      independent registered public accounting firm identifies deficiencies in our
      internal controls over financial reporting that are deemed to be material
      weaknesses, the market price of our stock
      could decline, and we could be subject to sanctions or investigations by the
      SEC
      or other regulatory authorities, which would require additional financial and
      management resources.


-26-





**Government
      Regulation**





We
      are
      subject to a variety of federal, state and local governmental regulations.
      We
      make every effort to comply with all applicable regulations through compliance
      programs, manuals and personnel training. Despite these efforts, we cannot
      guarantee that we will be in absolute compliance with all regulations at all
      times. Failure to comply with applicable governmental regulations may result
      in
      significant penalties, including exclusion from the Medicare and Medicaid
      programs, which could have a material adverse effect on our business. In
      November 2003, Congress initiated a three-year freeze on reimbursement
      levels for all orthotic and prosthetic services starting January 1, 2004.
      The effect of this legislation has been a downward pressure on our gross profit;
      however, we have initiated certain purchasing and efficiency programs which
      we
      believe will minimize such effects. The most important efficiency program we
      have instituted to date was entering into contracts with our Host affiliates.
      By
      acquiring laboratory access from such Host Affiliates, and acquiring the Host
      Affiliates help in billing and collections from third party payers such as
      insurance companies and their respective state-centered Medicaid programs,
      we
      have also cut down our travel costs, and our costs of added staff to invoice
      and
      collect receivables. Additionally, in an attempt to maximize our efficiency,
      we
      modified our "just in time" inventorying of components for prosthetic devices
      to
      allow sufficient time for us to send such components via less expensive ground
      freight instead of higher priced overnight delivery. Finally, we have instituted
      a ten day lead-time policy on our airline reservations to achieve lower
      air-fares to our patients, when we are required to travel across the country,
      except in cases of emergencies.





HIPAA
      Violations. The Health Insurance Portability and Accountability Act ("HIPAA")
      provides for criminal penalties for, among other offenses, healthcare fraud,
      theft or embezzlement in connection with healthcare, false statements related
      to
      healthcare matters, and obstruction of criminal investigation of healthcare
      offenses. Unlike the federal anti-kickback laws, these offenses are not limited
      to federal healthcare programs. In addition, HIPAA authorizes the imposition
      of
      civil monetary penalties where a person offers or pays remuneration to any
      individual eligible for benefits under a federal healthcare program that such
      person knows or should know is likely to influence the individual to order
      or
      receive covered items or services from a particular provider, practitioner
      or
      supplier. Excluded from the definition of "remuneration" are incentives given
      to
      individuals to promote the delivery of preventive care (excluding cash or cash
      equivalents), incentives of nominal value and certain differentials in or
      waivers of coinsurance and deductible amounts. These laws may apply to certain
      of our operations. Our billing practices could be subject to scrutiny and
      challenge under HIPAA.





Physician
      Self-Referral Laws. We are also subject to federal and state physician
      self-referral laws. With certain exceptions, the federal Medicare/Medicaid
      physician self-referral law (the "Stark II" law) (Section 1877 of the Social
      Security Act) prohibits a physician from referring Medicare and Medicaid
      beneficiaries to an entity for "designated health services" - including
      prosthetic and orthotic devices and supplies - if the physician or the
      physician's immediate family member has a financial relationship with the
      entity. A financial relationship includes both ownership or investment interests
      and compensation arrangements. A violation occurs when any person presents
      or
      causes to be presented to the Medicare or Medicaid program a claim for payment
      in violation of Stark II. With respect to ownership/investment interests, there
      is an exception under Stark II for referrals made to a publicly traded entity
      in
      which the physician has an investment interest if the entity's shares are traded
      on certain exchanges, including the New York Stock Exchange, and had
      shareholders' equity exceeding $75.0 million for its most recent fiscal year,
      or
      an average of $75.0 million during the three previous fiscal years.




With
      respect to compensation arrangements, there are exceptions under Stark II that
      permit physicians to maintain certain business arrangements, such as personal
      service contracts and equipment or space leases, with healthcare entities to
      which they refer. We believe that our compensation arrangements comply with
      Stark II, either because the physician's relationship fits within a regulatory
      exception or does not generate prohibited referrals. Because we have financial
      arrangements with physicians and possibly their immediate family members, and
      because we may not be aware of all those financial arrangements, we must rely
      on
      physicians and their immediate family members to avoid making referrals to
      us in
      violation of Stark II or similar state laws. If, however, we receive a
      prohibited referral without knowing that the referral was prohibited, our
      submission of a bill for services rendered pursuant to a referral could subject
      us to sanctions under Stark II and applicable state laws.


-27-


Certification
      and Licensure. Most states do not require separate licensure for practitioners.
      However, several states currently require practitioners to be certified by
      an
      organization such as the American Board for Certification ("ABC"). Our
      Prosthetists are certified by the State of Texas and by the ABC. When we fit
      children in other States which have state licensure laws, we work, under the
      supervision of licensed Prosthetists in those states.





The
      American Board for Certification Orthotics and Prosthetics conducts a
      certification program for practitioners and an accreditation program for
      patient-care centers. The minimum requirements for a certified practitioner
      are
      a college degree, completion of an accredited academic program, one to four
      years of residency at a patient-care center under the supervision of a certified
      practitioner and successful completion of certain examinations. Minimum
      requirements for an accredited patient-care center include the presence of
      a
      certified practitioner and specific plant and equipment requirements. While
      we
      endeavor to comply with all state licensure requirements, we cannot assure
      that
      we will be in compliance at all times with these requirements. Failure to comply
      with state licensure requirements could result in civil penalties, termination
      of our Medicare agreements, and repayment of amounts received from Medicare
      for
      services and supplies furnished by an unlicensed individual or
      entity.





Confidentiality
      and Privacy Laws. The Administrative Simplification Provisions of HIPAA, and
      their implementing regulations, set forth privacy standards and implementation
      specifications concerning the use and disclosure of individually identifiable
      health information (referred to as "protected health information") by health
      plans, healthcare clearinghouses and healthcare providers that transmit health
      information electronically in connection with certain standard transactions
      ("Covered Entities"). HIPAA further requires Covered Entities to protect the
      confidentiality of health information by meeting certain security standards
      and
      implementation specifications. In addition, under HIPAA, Covered Entities that
      electronically transmit certain administrative and financial transactions must
      utilize standardized formats and data elements ("the transactions/code sets
      standards"). HIPAA imposes civil monetary penalties for non-compliance, and,
      with respect to knowing violations of the privacy standards, or violations
      of
      such standards committed under false pretenses or with the intent to sell,
      transfer or use individually identifiable health information for commercial
      advantage, criminal penalties.  The privacy standards and transactions/code
      sets standards went into effect on April 16, 2003 and required compliance by
      April 21, 2005. We believe that we are subject to the Administrative
      Simplification Provisions of HIPAA and have taken steps necessary to meet
      applicable standards and implementation specifications; however, these
      requirements have had a significant effect on the manner in which we handle
      health data and communicate with payors. Our added costs of complying with
      the
      HIPPA requirements relate primarily to attaining the on-going educational
      credits needed for our Prosthetists to remain current with the professional
      standards of practice. These credits are achieved by attending work-shops and
      seminars in various locations throughout North America. During fiscal year
      ended
      June 30, 2006 we spent approximately $5,000 complying with these on-going
      educational needs. However, since our original formation, we have been aware
      of
      impending HIPPA regulations, and have set up our systems and procedures to
      comply with HIPPA requirements in view of such regulations. As a result, added
      costs due to compliance with HIPPA guidelines have been minimal and
      immaterial.





In
      addition, state confidentiality and privacy laws may impose civil and/or
      criminal penalties for certain unauthorized or other uses or disclosures of
      individually identifiable health information. We are also subject to these
      laws.
      While we endeavor to assure that our operations comply with applicable laws
      governing the confidentiality and privacy of health information, we could face
      liability in the event of a use or disclosure of health information in violation
      of one or more of these laws.





-28-


**ITEM
      3. CONTROLS AND PROCEDURES**





(a)
      Evaluation of disclosure controls and procedures. Our Chief Executive Officer
      and Principal Financial Officer, after evaluating the effectiveness of our
      "disclosure controls and procedures" (as defined in the Securities Exchange
      Act
      of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the quarterly period
      covered by this Report (the "Evaluation Date"), have concluded that as of the
      Evaluation Date, our disclosure controls and procedures were not effective
      to
      provide reasonable assurance that information we are required to disclose in
      reports that we file or submit under the Exchange Act is recorded, processed,
      summarized and reported within the time periods specified in the Securities
      and
      Exchange Commission rules and forms, and that such information is accumulated
      and communicated to our management, including our Chief Executive Officer and
      Chief Financial Officer, as appropriate, to allow timely decisions regarding
      required disclosure. Our controls were not effective, as our auditors discovered
      significant adjustments relating to revenue recognition related to bad debt
      expense, derivative liability valuation, accrued liabilities, prepaid expenses,
      and amortization of debt discount.  Moving forward, our management believes
      that as we become more familiar and gain more experience in providing our
      outside auditors with the required financial information on a timely basis,
      we
      will be able to file our periodic reports within the time periods set forth
      by
      the Securities and Exchange Commission.





(b)
      Changes in internal control over financial reporting. There were no changes
      in
      our internal control over financial reporting during our most recent fiscal
      quarter that materially affected, or were reasonably likely to materially
      affect, our internal control over financial reporting.













-29-


**PART
      II - OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





We
      are
      not aware of any pending or threatened legal proceeding to which we are a
      party.





**ITEM
      2. CHANGES IN SECURITIES**





**We
      issued the following securities subsequent to the period covered by this
      report:**





On
      or
      about July 27, 2007, we sold an aggregate of $500,000 in Callable Secured
      Convertible Notes, which bear interest at the rate of 6% per annum to the
      Purchasers in connection with a Securities Purchase Agreement entered into
      with
      the Purchasers on May 30, 2006. We claim an exemption from registration provided
      by Rule 506 of Regulation D for the above issuances.





Between
      July 23, 2007 and November 7, 2007, the Purchasers individually provided us
      notice of their intention to convert an aggregate of approximately $78,975
      of
      principal of the May 30, 2006, Debentures into an aggregate of approximately
      5,650,900 shares of our common stock (the “Shares”) based on Conversion Prices
      of between $0.0165 and $0.0126 per share, as of the date of each of the
      Notices of Conversions.   We subsequently issued the Purchasers the
      Shares, which Shares were registered by us on our Form SB-2 Registration
      Statement declared effective by the Commission on July 20, 2007.  As a
      result of the conversions, we owed an aggregate of approximately $1,421,025
      to
      the Purchasers in connection with the principal amount of the outstanding
      Debentures as of November 7, 2007 (not including any accrued and unpaid interest
      on such Debentures).





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES.**





None.





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





None.





**ITEM
      5. OTHER INFORMATION**





None.





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




**(a)
      EXHIBITS:**








Exhibit
                3.1(A)
            Articles
                of Incorporation (Pediatric Prosthetics, Inc.-Texas) dated September
                15,
                2003Exhibit
                3.2(4)
            Restated
                Articles of Incorporation of the Company  (March 9,
                2001)Exhibit
                3.3(4)
            Reinstatement
                (June 29, 2003)Exhibit
                3.4(A)
            Amendment
                to Articles of Incorporation of the Company (October 31,
                2003)Exhibit
                3.5(A)
            Amendment
                to Articles of Incorporation of the Company (November 7,
                2003)(Series
                A Convertible Preferred Stock Designation of Rights)Exhibit
                3.6(6)
            Amendment
                to Articles of Incorporation of the Company (March 15,
                2007)Exhibit
                3.7(4)
            Bylaws
                of the Company





Exhibit
                10.1(4)
            Sample
                Host Affiliate Agreement


-30-





Exhibit
                10.2(2)
            Settlement
                Agreement with Secured Releases, LLCExhibit
                10.3(3)
            Securities
                Purchase AgreementExhibit
                10.4(3)
            Callable
                Secured Convertible Note with AJW Offshore, Ltd.Exhibit
                10.5(3)
            Callable
                Secured Convertible Note with AJW Partners, LLCExhibit
                10.6(3)
            Callable
                Secured Convertible Note with AJW Qualified Partners,
                LLCExhibit
                10.7(3)
            Callable
                Secured Convertible Note with New Millennium Capital Partners II,
                LLCExhibit
                10.8(3)
            Stock
                Purchase Warrant with AJW Offshore, Ltd.Exhibit
                10.9(3)
            Stock
                Purchase Warrant with AJW Partners, LLCExhibit
                10.10(3)
            Stock
                Purchase Warrant with AJW Qualified Partners, LLCExhibit
                10.11(3)
            Stock
                Purchase Warrant with New Millennium Capital Partners II,
                LLCExhibit
                10.12(3)
            Security
                AgreementExhibit
                10.13(3)
            Intellectual
                Property Security AgreementExhibit
                10.14(3)
            Registration
                Rights AgreementExhibit
                10.15(4)
            Consulting
                Agreement with National Financial Communications
                Corp.Exhibit
                10.16(4)
            Warrant
                Agreement with Lionheart Associates, LLC doing business as Fairhills
                CapitalExhibit
                10.17(4)
            Investor
                Relations Consulting Agreement with Joe GordonExhibit
                10.18(5)
            Waiver
                of Rights AgreementExhibit
                10.20(6)
            Kertes
                Convertible Note and WarrantExhibit
                10.21(6)
            Global
                Media AgreementExhibit
                10.22(7)
            Second
                Closing - Callable Secured Convertible Note with AJW Offshore,
                Ltd.Exhibit
                10.23(7)
            Second
                Closing - Callable Secured Convertible Note with AJW Partners,
                LLCExhibit
                10.24(7)
            Second
                Closing - Callable Secured Convertible Note with AJW Qualified Partners,
                LLCExhibit
                10.25(7)
            Second
                Closing - Callable Secured Convertible Note with New Millennium Capital
                Partners II, LLCExhibit
                10.26(8)
            Second
                Waiver of Rights AgreementExhibit
                10.27(9)
            Stock
                Purchase Warrant with AJW Offshore, Ltd.Exhibit
                10.28(9)
            Stock
                Purchase Warrant with AJW Partners, LLCExhibit
                10.29(9)
            Stock
                Purchase Warrant with AJW Qualified Partners,
                LLC


-31-





Exhibit
                10.30(9)
            Stock
                Purchase Warrant with New Millennium Capital Partners,
                LLCExhibit
                10.31(10)
            Third
                Closing - Callable Secured Convertible Note with AJW Offshore,
                Ltd.Exhibit
                10.31(10)
            Third
                Closing - Callable Secured Convertible Note with AJW Partners,
                LLCExhibit
                10.32(10)
            Third
                Closing - Callable Secured Convertible Note with AJW Qualified Partners,
                LLCExhibit
                10.33(10)
            Third
                Closing - Callable Secured Convertible Note with New Millennium Capital
                Partners II, LLCExhibit
                31.1*
            Certificate
                of the Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002Exhibit
                31.2*
            Certificate
                of the Principal Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002Exhibit
                32.1*
            Certificate
                of the Chief Executive Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002Exhibit
                32.2*
            Certificate
                of the Principal Financial Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002





*
      Filed
      Herein.





(A)
      Filed
      as exhibits to our Form 10-SB, filed with the Commission on February 13, 2006,
      and incorporated herein by reference.





(1)
      Filed
      as an exhibit to our report on Form 8-K filed with the Commission on March
      20,
      2007, and incorporated herein by reference.





(2)
      Filed
      as an exhibit to our quarterly report on Form 10-QSB, filed with the Commission
      on July 5, 2006, and incorporated herein by reference.





(3)
      Filed
      as exhibits to our report on Form 8-K, filed with the Commission on June 2,
      2006, and incorporated herein by reference.





(4)
      Filed
      as exhibits to our Form 10-SB, filed with the Commission on July 14, 2006,
      and
      incorporated herein by reference.





(5)
      Filed
      as an exhibit to our Form 10-KSB filed with the Commission on October 27, 2006,
      and incorporated herein by reference.





(6)
      Filed
      as exhibits to our Form SB-2 Registration Statement filed with the Commission
      on
      February 9, 2007, and incorporated herein by reference.





(7)
      Filed
      as exhibits to our report on Form 8-K filed with the Commission on February
      26,
      2007, and incorporated herein by reference.





(8)
      Filed
      as an exhibit to our report on Form 8-K filed with the Commission on April
      18,
      2007, and incorporated herein by reference.





(9)
      Filed
      as exhibits to our Form SB-2A Registration Statement filed with the Commission
      on April 30, 2007, and incorporated herein by reference.


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(10)
      Filed as exhibits to our Form 8-K, filed with the Commission on August 1, 2007,
      and incorporated herein by reference.





**(b)
      REPORTS ON FORM 8-K**





We
      filed
      the following reports on Form 8-K during the period ended September 30,
      2007:





·
            We
                filed a report on Form 8-K on
                August 1, 2007, to report the closing of the third funding tranche
                with
                the Purchasers, as described in greater detail
                above.





We
      filed the following reports on Form 8-K subsequent to the period covered by
      this
      report:





·
            We
                filed a report on Form 8-K on November 5, 2007, to report our change
                in
                auditors from Malone & Bailey, PC, Certified Public Accountants to GBH
                CPAs, PC, Certified Public Accountants, effective November 1,
                2007.




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**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.





**PEDIATRIC
      PROSTHETICS, INC.**





DATED:
      November 19, 2007





*By:
      /s/ Kenneth W. Bean*


Kenneth
      W. Bean


Chief
      Financial Officer (Principal Accounting Officer)




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