Pediatric Prosthetics Inc - Amended Quarterly Report of Financial Condition (10QSB/A)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB/A

Amendment No. 1

(Mark One)

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

For the quarterly period ended March 31, 2008

[ ]	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 June 17, 2008, 117,925,789 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]

The Registrant is filing this Amended Report on Form 10-QSB to include restated financial statements to record stock based compensation for shares issued in February 2008 for investor relations services and to correct some typographic errors for amounts previously filed for the 2007 financial statements.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PEDIATRIC PROSTHETICS, INC.
UNAUDITED BALANCE SHEETS
March 31, 2008 and June 30, 2007

	March 31, 2008			June 30, 2007
ASSETS	(Restated)

Current assets:
Cash and cash equivalents	$	9,205		$	25,557
Trade accounts receivable, net of reserve of $491,680 and $395,915, respectively		490,526			249,418
Prepaid expenses and other current assets		36,920			11,420
Current portion of deferred financing costs		160,295			152,111
Total current assets		696,946			438,506

Furniture and equipment, net of accumulated depreciation of $88,521 and $71,965, respectively		30,323			46,879
Deferred financing costs, net of accumulated amortization of $251,807 and $140,450, respectively		28,079			139,436

Total assets	$	755,348		$	624,821

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Trade accounts payable	$	203,152		$	243,068
Accrued liabilities		150,309			143,985
Current portion of convertible debt		-			75,000
Due to related party		500			500
Derivative financial instruments		1,425,671			2,974,683
Total current liabilities		1,779,632			3,437,236

Convertible debt, net of discount of $900,913 and $810,486 respectively		496,558			189,514
Deferred rent		6,742			10,060

Total liabilities		2,282,932			3,636,810

Commitments and contingencies		-			-

Stockholders' deficit:
Preferred stock, par value $0.001; authorized
10,000,000; issued and outstanding 1,000,000 shares		1,000			1,000
Common stock, par value $0.001; authorized 950,000,000;
issued and outstanding 116,368,573 and 100,274,889 shares, respectively		116,369			100,275
Additional paid-in capital		8,789,385			8,542,869
Accumulated deficit		(10,434,338	)		(11,656,133	)
Total stockholders’ deficit		(1,527,584	)		(3,011,989	)

Total liabilities and stockholders' deficit	$	755,348		$	624,821

The accompanying notes are an integral part of these financial statements.

F-1

PEDIATRIC PROSTHETICS, INC.
UNAUDITED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended March 31,2008 and 2007

	Three Months Ended						Nine Months Ended
	March 31						March 31
	2008			2007			2008			2007
	( Restated )						( Restated )

Revenue	$	319,528		$	133,323		$	746,154		$	595,086

Operating expenses:
Cost of sales, except for items stated separately below		42,111			62,707			122,356			199,743
Selling, general and administrative expenses		173,687			406,155			816,337			1,334,606
Depreciation expense		5,259			6,038			16,556			18,035

Total operating expenses		221,057			474,900			955,249			1,552,384

Income (loss) from operations		98,471			(341,577	)		(209,095	)		(957,298	)

Other income (expenses):
Interest income		18			-			18			1
Interest expense		(130,741	)		(70,141	)		(457,627	)		(229,726	)
Gain on derivative financial instruments		-			411,778			1,875,767			2,764,979
Other income		246			-			12,732			-

Total other income, expense net		(130,477	)		341,637			1,430,890			2,535,254

Net income (loss)	$	(32,006	)	$	60		$	1,221,795		$	1,577,956

Net income (loss) per common share:
Basic	$	(0.00	)	$	0.00		$	0.01		$	0.02
Diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)

Weighted average shares of common stock outstanding:
Basic		106,467,093			98,274,889			104,273,305			98,274,889
Diluted		106,467,093			120,753,460			195,124,480			120,753,460

The accompanying notes are an integral part of these financial statements.

F-2

PEDIATRIC PROSTHETICS, INC.
UNAUDITED STATEMENTS OF CASH FLOWS
For the Nine Months Ended March 31, 2008 and 2007

	2008			2007
Cash Flows From Operating Activities:	(Restated)

Net income	$	1,221,795		$	1,577,956
Adjustments to reconcile net income to net cash used by
operating activities:
Depreciation expense		16,556			18,035
Deferred rent		(3,318	)		(1,409	)
Stock-based compensation		105,508			506,997
Provision for doubtful accounts		95,765			120,094
Amortization of debt discount		290,901			96,269
Amortization of debt issue costs		111,357			102,424
Gain on derivative financial instruments		(1,875,767	)		(2,764,979	)

Changes in operating assets and liabilities:
Accounts receivable		(336,873	)		(126,101	)
Other assets		(18,684	)		(10,496	)
Accounts payable		(39,916	)		(11,716	)
Accrued liabilities		6,324			(7,726	)

Net cash used by operating activities		(426,352	)		(500,652	)

Cash Flows From Investing Activities:
Purchase of furniture and equipment		-			(11,814	)

Net cash used by investing activities		-			(11,814	)

Cash Flows From Financing Activities:
Proceeds from issuance of debt		500,000			400,000
Payment of debt issuance cost		(15,000	)		(73,000	)
Repayment of convertible debt		(75,000	)		(10,000	)

Net cash provided by financing activities		410,000			317,000

Net decrease in cash and cash equivalents		(16,352	)		(195,466	)

Cash and cash equivalents, beginning of period		25,557			274,641

Cash and cash equivalents, end of period	$	9,205		$	79,175

Supplemental Disclosure of Cash Flow Information:
Cash paid for interest expense	$	10,859		$	6,500
Cash paid for income taxes	$	-		$	-

Non-Cash Disclosures:
Conversion of convertible debt and related derivative liability into common stock	$	157,102		$	-
Discount related to issuance of convertible debt	$	381,328		$	291,396
Shares re-issued to officer	$	4,000		$	-



The accompanying notes are an integral part of these financial statements.

F-3

PEDIATRIC PROSTHETICS, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND CRITICAL ACCOUNTING POLICIES

GENERAL

Pediatric Prosthetics, Inc. ("Pediatric") is a company 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 on Form 10-KSB 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 nine months ended March 31, 2008, Pediatric reported net income of $1,221,795 and negative cash flows from operations of $426,352.

Although Pediatric had net income of $1,221,795 for the nine months ended March 31, 2008, 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 $1,082,686 and a stockholders' deficit of $1,527,584 at March 31, 2008. 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.

F-4

PEDIATRIC PROSTHETICS, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

2. GOING CONCERN CONSIDERATIONS, continued

Pediatric is currently implementing it's 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 July 27, 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 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 a consultant debt issue costs totaling $15,000, which will be amortized over the term of the Debentures and we also repaid $75,000 of previously issued convertible debt with cash.

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, which are due May 31, 2009, bear interest at the rate of fifteen percent (15%) per annum until paid. The following is a summary of convertible debt as of March 31, 2008 and June 30, 2007:

	March 31, 2008		June 30, 2007

Convertible debentures	$	1,500,000	$	1,075,000
Debt converted to common stock		(102,529)		-
Unamortized debt discount		(900,913)		(810,486	)
Convertible debentures, net		496,558		264,514

Convertible debentures, net (current)		-		(75,000	)
Convertible debentures, net (long-term)	$	496,558	$	189,514
Total	$	496,558	$	264,514

F-5

PEDIATRIC PROSTHETICS, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

3. CONVERTIBLE DEBT continued

In accordance with Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended ("SFAS 133"), the debt conversion feature provision (the "Debt Feature") contained in the terms of the Notes is not clearly and closely related to the characteristics of the Note. Accordingly, the Debt Feature qualified as an embedded derivative instrument at issuance and, because it does not qualify for any scope exception within SFAS 133, it was required by SFAS 133 to be accounted for separately from the debt instrument and recorded as a derivative financial instrument.

Pursuant to the terms of the Notes, these notes are convertible at the option of the holder, at anytime on or prior to maturity. The Debt Feature represents an embedded derivative that is required to be accounted for apart from the underlying Notes. At issuance of the Notes of $500,000 for the nine months ended March 31, 2008, the Debt Feature had an estimated initial fair value of $381,328, which was recorded as a discount to the note and will be accreted over the term of the debt using the effective interest method.

During the nine months ended March 31, 2008, the Purchasers converted $97,715 of Debentures to common stock resulting in the issuance of 8,250,900 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 $49,573.

4. EQUITY

In February 2008, Pediatric reissued its President, Linda Putback-Bean an aggregate of 4,000,000 shares of our common stock which she cancelled on or around September 30, 2005, to reduce the number of issued shares of Pediatric and to increase the number of authorized but unissued shares of Pediatrics to allow us sufficient shares of common stock to pay various consultants for services rendered. The shares were earned prior to their original issuance in December 2004.

In February 2008, Pediatric issued 3,000,000 shares of common stock for investor relations services to be provided for a period of six months. The shares were valued at $42,000 which will be amortized over the six-month period. We recorded $14,000 of share based compensation for the three months ended March 31, 2008.

5. SUBSEQUENT EVENTS

In June 2008, we sold $150,000 in Callable Secured Convertible Notes to New Millennium Capital Partners II, LLC, which are due and payable on June 2, 2011. The debentures bear interest at the rate of 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 $0.05 for each day that our common stock trades. Any amounts not paid when due bear interest at the rate of 15% per annum until paid. The conversion price of the debentures is equal to 40% of the average of the lowest three trading prices for the common stock during the twenty trading day period ending one trading day prior to the date of conversion. Additionally, we granted New Millennium warrants to purchase 20,000,000 shares of our common stock at an exercise price of $0.001 per share. We also agreed to grant New Millennium registration rights in connection with the shares of common stock which the debentures are convertible into and the shares of common stock which the warrants are exercisable pursuant to a registration rights agreement. We secured the debentures by granting New Millennium 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.

6. RESTATEMENT

We restated the financial statements to record stock-based compensation related to shares issued in February 2008 for investor relations services. The impacts of the restatement are as follows:

	Amount Previously Reported		Adjusted Amount
Prepaid expenses and other current assets	$	8,920	$	36,920
Common stock		109,369		116,369
Additional paid-in capital		8,754,385		8,789,385
Selling general and administrative expenses		159,686		173,687

F-6

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

CERTAIN STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-QSB (THIS "FORM 10-QSB"), CONSTITUTE "FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1934, AS AMENDED, AND THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (COLLECTIVELY, THE "REFORM ACT"). CERTAIN, BUT NOT NECESSARILY ALL, OF SUCH FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "BELIEVES", "EXPECTS", "MAY", "SHOULD", OR "ANTICIPATES", OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY, OR BY DISCUSSIONS OF STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF PEDIATRIC PROSTHETICS, INC., AN IDAHO CORPORATION ("PEDIATRIC", "THE COMPANY", "WE", "US" OR "OUR") TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. REFERENCES IN THIS FORM 10-QSB/A, UNLESS ANOTHER DATE IS STATED, ARE TO MARCH 31, 2008.

BUSINESS HISTORY

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 $6,000 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, from July 1, 2007 until December 31, 2007, we made thirty-seven fittings, one of which was pro bono, and from January 1, 2008 through June 15, 2008, we made forty-one fittings, two of which were pro bono. We currently average between 4 and 5 fittings per month.

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 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 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.

-2-

On February 16, 2007 (the "Second Closing”), we sold an aggregate of $400,000 in Debentures to the Purchasers. The sale of the Debentures represented the second tranche of funding in connection with our Purchase Agreement.

On July 27, 2007 (the "Third Closing"), we sold an aggregate of $500,000 in Debentures to the Purchasers, which funds were received by us on July 31, 2007. The sale of the Debentures represented the third and final tranche of funding in connection with our Purchase Agreement.

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.

Pursuant to the Purchase Agreement, we agreed to sell the Purchasers an aggregate of $1,500,000 in Debentures, which Debentures mature May 31, 2009 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.

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.

Upon the occurrence of and during the continuance of an Event of Default (as defined in the Debentures), 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.

-3-

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.

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.

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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.

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.

We also agreed 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.

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

June 2008 Funding

On or about June 2, 2008 (the "June 2008 Closing"), we entered into a Securities Purchase Agreement ("Purchase Agreement") with New Millennium Capital Partners II, LLC ("New Millennium"), pursuant to which New Millennium agreed to purchase an aggregate of $150,000 in Callable Secured Convertible Notes (the "June 2008 Debentures"), which are due and payable on June 2, 2011. Additionally, in connection with the Securities Purchase Agreement, we granted New Millennium warrants to purchase an aggregate of 20,000,000 shares of our common stock at an exercise price of $0.001 per share (the "Warrants"). We also agreed to grant New Millennium registration rights in connection with the shares of common stock which the June 2008 Debentures are convertible into and the shares of common stock which the Warrants are exercisable pursuant to a Registration Rights Agreement. We secured the June 2008 Debentures pursuant to the Security Agreement and Intellectual Property Security Agreement, described below. Additionally, the amount outstanding under the June 2008 Debentures was guaranteed by our wholly owned subsidiary, Pediatric Prosthetics, Inc., a Texas corporation pursuant to a Subsidiary Guaranty.

The $150,000 we received from New Millennium at the June 2008 Closing in connection with the sale of the June 2008 Debentures is anticipated to be used as follows:

	● Auditor, Accounting and Attorneys Fees	$75,000
	● Payables to Suppliers of Inventory	$20,000
	● Promotional, Marketing and Travel Costs	$15,000
	● Working Capital	$40,000

	Total	$150,000

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Callable Secured Convertible Notes

Pursuant to the Purchase Agreement, we agreed to sell New Millennium $150,000 in June 2008 Debentures, which June 2008 Debentures 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 $0.05 for each day that our common stock trades. Any amounts not paid under the June 2008 Debentures when due bear interest at the rate of fifteen percent (15%) per annum until paid. The conversion price of the June 2008 Debentures is equal to 40% of the average of the lowest three (3) Trading Prices (as defined below) for the common stock during the twenty (20) Trading Day (as defined below) period ending one Trading Day prior to the date of conversion (the “Conversion Price”). “Trading Price” means, for any security as of any date, the intraday trading price on the Over-the-Counter Bulletin Board (the “OTCBB”), or if not traded on the OTCBB or other exchange or market, the average of the intraday trading prices of any market makers for such security that are listed on the “pink sheets” by the National Quotation Bureau, Inc. “Trading Day” shall mean any day on which the common stock is traded for any period on the OTCBB, or on the principal securities exchange or other securities market on which the common stock is then being traded.

Also pursuant to the June 2008 Debentures, the Conversion Price is automatically adjusted if, while the June 2008 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.

Upon the occurrence of and during the continuance of an Event of Default under the June 2008 Debentures (as defined therein), New Millennium can make the June 2008 Debentures immediately due and payable, and can make us pay the greater of (a) 130% of the total remaining outstanding principal amount of the Debenture, 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 Debenture), multiplied by the highest closing price for our common stock during the period we are in default. If we fail to pay New Millennium such amount within five (5) days of the date such amount is due, New Millennium can require us to pay them in the number of shares of common stock equal to (b) divided by the Conversion Price then in effect.

Pursuant to the June 2008 Debentures, we have the right, in the event our common stock is trading at or below $0.10 per share, to prepay the outstanding principal amount of the June 2008 Debentures in an amount equal to (i) 120% for prepayments occurring within one hundred eighty (180) days of the issue date, (ii) 130% for prepayments occurring between one hundred eighty-one (181) and three hundred sixty (360) days of the issue date, or (iii) 140% for prepayments occurring after the three hundred sixtieth (360th) day following the issue date, of the principal amount of the June 2008 Debentures plus any unpaid interest, plus any unpaid default interest, plus any amounts owed pursuant to the Registration Rights Agreement.

Additionally, pursuant to the June 2008 Debentures, we have the right, in the event the average daily price of our common stock for each day of any month the June 2008 Debentures are outstanding is below $0.10 per share, to prepay a portion of the outstanding principal amount of the June 2008 Debentures equal to 101% of the principal amount of such June 2008 Debentures divided by thirty-six (36) plus one month's interest, which payment will stay all conversions for that month.

At the June 2008 Closing, we entered into a Security Agreement and an Intellectual Property Security Agreement (collectively, the "Security Agreements"), with New Millennium, whereby we granted New Millennium 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 June 2008 Debentures.

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Stock Purchase Warrants

In connection with the June 2008 Closing, we granted an aggregate of 20,000,000 Warrants to New Millennium, which warrants are exercisable for shares of our common stock at an exercise price of $0.001 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 4.9% of our outstanding common stock.

The Warrants expire, if unexercised at 6:00 p.m., Eastern Standard Time on June 2, 2015. 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 or sell any shares of common stock for no consideration or for a consideration per share less than the market price on the date of issuance; (b) 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 (c) 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 New Millennium 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 June 2008 Closing, we agreed to provide New Millennium demand registration rights, exercisable any time after the expiration of six months from the date of the June 2008 Closing for the shares of common stock which the June 2008 Debentures are convertible into and the shares of common stock issuable in connection with the exercise of the Warrants (the “Registrable Securities”), provided however that we are not required to file a registration statement at any time that New Millennium can rely on Rule 144 for the sale of the Registrable Securities. If New Millennium exercises its demand registration rights, we are required to file a registration statement on or prior to thirty (30) days from the date of receipt of written demand of New Millennium (the “Filing Date”), to register the number of Registrable Securities equal to thirty percent (30%) of our then public float.

If the registration statement is not filed by the Filing Date or declared effective by the SEC on or prior to one hundred forty-five (145) days from the date of receipt of written demand of New Millennium, or after the registration statement has been declared effective by the SEC, sales of all of the Registrable Securities cannot be made pursuant to the registration statement, or the common stock is not listed or included for quotation on the Over-the-Counter Bulletin Board (the "OTCBB") or any equivalent replacement exchange, then we are required to make payments to New Millennium in connection with their inability and/or delay to sell their securities. The payments are to be equal to the then outstanding amount of the principal amount of the Debenture, multiplied by $0.02, multiplied by the number of months after such one hundred and forty-five (145) day period and/or the date sales are not able to be effected under the registration statement, pro rated for partial months. For example, for each month that passes in which we fail to obtain effectiveness of our registration statement, after the end of the one hundred and forty-five (145) day period, we would owe New Millennium an aggregate of $3,000 in penalty payments, based on $150,000 then outstanding under the June 2008 Debentures.

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In the event that New Millennium sells substantially all of the shares then registered under an effective registration statement, the Company will be required to be file additional registration statements.

Third Waiver of Rights Agreement

In connection with the June 2008 Closing, we and the Purchasers entered into a Third Waiver of Rights Agreement (the “3 rd Waiver”). Pursuant to the 3 rd Waiver, the Purchasers agreed to waive any and all anti-dilution, reset rights, rights to prior notice of and/or rights of first refusal in connection with the June 2008 Closing and funding, which they may have had pursuant to the $1,500,000 in three tranches of Callable Secured Convertible Notes (the “Prior Notes”) which we sold to the Purchasers and the Warrants to purchase shares of our common stock at an exercise price of $0.10 per share, which we previously granted the Purchasers. Pursuant to the 3 rd Waiver, the Purchasers also agreed to and approved the June 2008 Closing and the funding in connection with the June 2008 Closing.

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.

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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.

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, 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.

On June 2, 2008, pursuant to our entry into a Securities Purchase Agreement, we sold $150,000 in June 2008 Debentures to New Millennium, which funds are anticipated to be used as follows:

	● Auditor, Accounting and Attorneys Fees	$75,000
	● Payables to Suppliers of Inventory	$20,000
	● Promotional, Marketing and Travel Costs	$15,000
	● Working Capital	$40,000

	Total	$150,000

Additionally, we believe the increases in our advertising and marketing budget and the $150,000 raised in June 2008, will allow us to undertake the following activities during the next twelve (12) months, funding permitting, of which there can be no assurance:

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;

Costs associated with a national internet marketing campaign utilizing state of the art Search Engine Optimization Planning (“S.E.O.P”) and pay per click advertising at a cost of approximately $50,000, which has been operational since August 2007, at a cost of approximately $4,000 per month, increasing to $7,000 per month, funding permitting;

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 $10,000; and

o	Sponsorship costs of non-profit organizations such as the "Amputee Coalition of American" and the Para-Olympics, at a cost of approximately $50,000.

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COMPARISON OF OPERATING RESULTS

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2008 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2007

We had revenue of $319,528 for the three months ended March 31, 2008, compared to revenue of $133,323 for the three months ended March 31, 2007, an increase in revenue of $186,205 or 140% from the prior period. The increase in revenue was mainly due to a larger number of fittings and more complex fittings, which generated higher revenues for the Company during the three months ended March 31, 2008, compared to the three months ended March 31, 2007.

We had total operating expenses of $221,057 for the three months ended March 31, 2008, compared to total operating expenses of $474,900 for the three months ended March 31, 2007, a decrease in total operating expenses of $253,843 or 53.5% from the previous period. The decrease in total operating expenses was mainly due to a $232,468 or 57.2% decrease in selling, general and administrative expenses to $173,687 for the three months ended March 31, 2008, compared to $406,155 for the three months ended March 31, 2007, which decrease was mainly due to higher than normal administrative expenses during the three months ended March 31, 2007, in connection with certain one-time legal and accounting fees associated with the revision of and filing of our amended Form 10-SB, Form SB-2, Schedule 14c and Form 8-K filings and correspondence filings, which expenses were not represented during the three months ended March 31, 2008, and a $20,596 or 32.8% decrease in cost of sales, to $42,111 for the three months ended March 31, 2008, compared to $62,707 for the three months ended March 31, 2007, mainly in connection with greater component sales and travel expenses during the three months ended March 31, 2008, compared to the three months ended March 31, 2007. The decrease in our cost of sales for the three months ended March 31, 2008, compared to the same period in 2007 was mainly due to a reduced number of re-fittings during the three month period ended March 31, 2008, compared to the same period in 2007, which re-fittings require less new components and generate higher margins for the Company. Also included in total operating expenses was depreciation expense of $5,259 for the three months ended March 31, 2008, compared to $6,038 for the three months ended March 31, 2007.

Our cost of sales as a percentage of revenue for the three months ended March 31, 2008 was 13.2%, compared to 47.0% for the three months ended March 31, 2007, a decrease in cost of sales as a percentage of revenues of 33.8% from the prior period, which was mainly due to the increase in revenue and the decrease in cost of sales.

We had income from operations of $98,471 for the three months ended March 31, 2008, compared to a loss from operations of $341,577 for the three months ended March 31, 2007, an increase in income from operations of $440,048 or 129% from the prior period. The increase in income from operations was primarily the result of the increase in revenue and the decrease in selling, general and administrative expenses, as described above.

We had total other expense, net, of $130,477 for the three months ended March 31, 2008, compared to total other income, net of $341,637 for the three months ended March 31, 2007, which represented a $472,114 decrease in net other income from the prior period. The decrease in net other income was mainly due to an increase of $60,600 or 86.4% in interest expense, to $130,741 for the three months ended March 31, 2008, compared to $70,141 for the three months ended March 31, 2007, and a $411,778 decrease in gain on derivative financial instrument from the prior period. The 86.4% increase in interest expense was mainly in connection with the amortization of the deferred financing cost and accretion of debt discount related to the Convertible Notes.

We had net loss of $32,006 for the three months ended March 31, 2008, compared to net income of $60 for the three months ended March 31, 2007, a decrease in net income of $32,066 from the previous period. The decrease was mainly attributable to the decrease in total other income; partially offset by the increase in revenue and the decrease in selling, general and administrative expenses for the three month period ended March 31, 2008 compared to the three month period ended March 31, 2007.

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RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 2008 COMPARED TO THE NINE MONTHS ENDED MARCH 31, 2007

We had revenue of $746,154 for the nine months ended March 31, 2008, compared to revenue of $595,086 for the nine months ended March 31, 2007, an increase in revenue of $151,068 or 25.4% from the prior period. The increase in revenue was mainly due to a larger number of fittings and re-fittings, which generated higher revenues for the Company during the nine months ended March 31, 2008, compared to the nine months ended March 31, 2007.

We had total operating expenses of $955,249 for the nine months ended March 31, 2008, compared to total operating expenses of $1,552,384 for the nine months ended March 31, 2007, a decrease in total operating expenses of $597,135 or 44.7% from the previous period. The decrease in total operating expenses was mainly due to a $518,269 or 38.8% decrease in selling, general and administrative expenses, to $816,337 for the nine months ended March 31, 2008, compared to $1,334,606 for the nine months ended March 31, 2007, mainly resulting from a decrease in share based compensation for the nine months ended March 31, 2008 and higher than normal administrative expenses during the nine months ended March 31, 2007, in connection with certain one-time legal and accounting fees associated with the revision of and filing of our amended Form 10-SB, Form SB-2, Schedule 14c, reports on Form 8-K and correspondence filings, and a $77,387 or 38.7% decrease in cost of sales, to $122,356 for the nine months ended March 31, 2008, compared to $199,743 for the nine months ended March 31, 2007, which was mainly due to a larger number of re-fittings during the nine month period ended March 31, 2008, compared to the same period in 2007, which re-fittings require less new components and generate higher margins for the Company. Also included in total operating expenses was depreciation expense of $16,556 for the nine months ended March 31, 2008, compared to $18,035 for the nine months ended March 31, 2007.

Our cost of sales as a percentage of revenue for the nine months ended March 31, 2008 was 16.4%, compared to 33.6% for the nine months ended March 31, 2007, a decrease in cost of sales as a percentage of revenues of 17.2% from the prior period, which was mainly the result of the increase in revenues and the decrease in cost of sales for the nine months ended March 31, 2008, compared to the nine months ended March 31, 2007.

We had a loss from operations of $209,095 for the nine months ended March 31, 2008, compared to $957,298 for the nine months ended March 31, 2007, a decrease in loss from operations of $748,203 or 78.2% from the prior period. The decrease in loss from operations was mainly the result of lower share-based compensation expense and legal and accounting expenses during the nine months ended March 31, 2008, compared to the nine months ended March 31, 2007. Share-based compensation decreased as a result of consulting contracts expiring during the nine months ended March 31, 2008. Legal and accounting expenses decreased as a result of higher than normal administrative expenses during the nine months ended March 31, 2007, in connection with certain one-time legal and accounting fees associated with the revision of and filing of our amended Form 10-SB, Form SB-2, Schedule 14c, reports on Form 8-K and correspondence filings, compared to the three months ended March 31, 2008.

We had total other income, net, of $1,430,890 for the nine months ended March 31, 2008, compared to $2,535,254 for the nine months ended March 31, 2007, which represented a decrease in other income of $1,104,364 or 43.6% from the prior period. The decrease was mainly due to an increase of $227,901 in interest expense to $457,627 for the nine months ended March 31, 2008, as compared to interest expense of $229,726 for the nine months ended March 31, 2007, 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 a $889,212 or 32.2% decrease in change in value of derivative financial instruments, to $1,875,767 for the nine months ended March 31, 2008, compared to $2,764,979 for the nine months ended March 31, 2007.

We had net income of $1,221,795 for the nine months ended March 31, 2008, compared to $1,577,956 for the nine months ended March 31, 2007, a decrease of $356,161 or 29.2% from the prior period. The decrease in net income was mainly due to the decrease in other income, net, offset by the increase in revenue and the decrease in cost of sales and selling, general and administrative expenses for the nine months ended March 31, 2008, compared to the nine months ended March 31, 2007.

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Investors should keep in mind that our net income for the nine months ended March 31, 2008 and 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 net loss for the period.

LIQUIDITY AND CAPITAL RESOURCES

We had total assets of $755,348 as of March 31, 2008, which included current assets of $696,946, furniture and equipment, net of accumulated depreciation, of $30,323, and deferred financing cost, net of amortization, of $28,079. Current assets included cash and cash equivalents of $9,205, trade and accounts receivable, net of $490,526, prepaid expenses and other current assets of $36,920, and current portion of deferred financing cost of $160,295.

We had total liabilities of $2,282,932 as of March 31, 2008, which included current liabilities of $1,779,632; consisting of trade accounts payable of $203,152; accrued liabilities of $150,309; 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 $1,425,671, in connection with our Convertible Debentures and Warrants; and non-current liabilities consisting of deferred rent of $6,742 and long term portion of convertible debt, net of discount of $496,558.

We had a working capital deficit of $1,082,686 and an accumulated deficit of $10,434,338 as of March 31, 2008.

We had net cash used by operating activities of $426,352 for the nine months ended March 31, 2008.

We had $410,000 of net cash provided by financing activities for the nine months ended March 31, 2008, which was due to $500,000 from the sale of Debentures to the Purchasers, offset by $15,000 of expenses associated with the sale of the Debentures and the repayment of $75,000 of convertible debt.

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.

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 receivables, have been slow to collect receivables and/or answer billing appeals, which in turn has led to our large accounts receivable balances. During the nine months ended March 31, 2008, 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 improve our collections moving forward.

We expect our accounts payable to grow with the increase in our business over time. 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.

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As of June 2008, we believe we can operate for at least the next three months with no additional funding, due to the funds raised through the June 2008 Closing. Our current recurring cash overhead is approximately $60,000 per month. We believe we will require additional funds of approximately $450,000 to continue our planned business operations and marketing efforts for the next twelve months. 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.

As of the filing of this report, we owed approximately $1,394,471 to the Purchasers in connection with the principal amount of the outstanding Debentures (not including any accrued and unpaid interest on such Debentures). We also owe an additional $150,000 to New Millennium in connection with the June 2008 Debentures. The Debentures are convertible into shares of our common stock at a discount to the market price of our common stock of between 40% in connection with the May 2006 Debentures, and 60% in connection with the June 2008 Debentures. If the Purchasers do not fully convert the Debentures into shares of our common stock, we will need to repay approximately $494,471 of the Debentures on May 30, 2009, $400,000 of the Debentures on February 16, 2010, $500,000 of the Debentures on July 27, 2010, and $150,000 of the Debentures on June 2, 2011, not including any accrued and unpaid interest on such Debentures.

We do not currently have sufficient funds to repay the outstanding principal amount of the Debentures and/or stay the conversions of such Debentures as provided above. The shares of common stock which the Debentures are convertible into and which the Warrants are exercisable for may be sold without restriction pursuant to Rule 144, as amended, and the Purchasers have expressed their desire to convert an increasing number of shares upon conversion of the Debentures. As a result, the sale of these shares may adversely affect the market price, if any, of our common stock.

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.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based upon our unaudited financial statements, which have been prepared in accordance with accounting principals generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of any contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to uncollectible receivable, investment values, income taxes, the recapitalization and contingencies. We base our estimates on various assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Recently issued accounting pronouncements. The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flows.

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RISK FACTORS

Any investment in shares of our common stock involves a high degree of risk. You should carefully consider the following information in 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 generated 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 nine months ended March 31, 2008, we had net income of $1,430,890, 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 $426,352. Additionally, we had negative working capital of $1,082,686 and a total accumulated deficit of $10,434,338 as of March 31, 2008. 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 non-cash 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 nine months ended March 31, 2008 we had a loss from operations of $209,095 and we had a working capital deficit of $1,082,686 as of March 31, 2008. Furthermore, we had an accumulated deficit of $10,434,338 at March 31, 2008. Due to our negative financial results and our current financial position, there is substantial doubt about our ability to continue as a going concern.

WE OWE THE PURCHASERS A SUBSTANTIAL AMOUNT OF MONEY WHICH WE DO NOT HAVE.

We raised $1,500,000 from the sale of Debentures pursuant to a Securities Purchase Agreement entered into with the Purchasers in 2006 and an additional $150,000 from the sale of Debentures to New Millennium in June 2008. The Debentures are convertible into shares of our common stock at a discount to the market price of our common stock of between 40% in connection with the May 2006 Debentures, and 60% in connection with the June 2008 Debentures. If the Purchasers do not fully convert the Debentures into shares of our common stock, we will need to repay $600,000 of the Debentures on May 30, 2009, $400,000 of the Debentures on February 16, 2010, $500,000 of the Debentures on July 27, 2010, and $150,000 of the Debentures on June 2, 2011. We do not currently have and may not have sufficient funds to repay these Debentures when due.

We can provide no assurance that additional financing will be available on favorable terms, if at all. If we are not able to raise the capital necessary to continue our business operations and repay the Debentures, we may be forced to abandon or curtail our business plan and/or suspend our operations. If we fail to raise money, we could be forced to abandon or curtail our business operations, which could cause any investment in the Company to become worthless.

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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 above) 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 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.

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 March 31, 2008, our accounts receivable over 120 days old represented a significant portion of our total accounts receivable outstanding. If we cannot collect our accounts receivable, our business, results of operations, and financial condition could be adversely affected.

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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:

	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; or
	o	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.

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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 June 17, 2008, 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 June 17, 2008, our President and Chief Executive Officer, Linda Putback-Bean beneficially owned 34,210,251 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 63,409,112 shares of our voting shares, representing the 34,210,251 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 approximately 46% of our total voting power based on 137,925,789 voting shares, which includes the 117,925,789 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.

WE MAY BE REQUIRED TO IMMEDIATELY PAY THE $1,650,000 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:

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

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

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;

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

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

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 $1,500,000 of the Debentures is equal to 60% of the trading price of our common stock and the conversion price of $150,000 of the Debentures is equal to 40% 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.

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. The shares of common stock which the Debentures are convertible into and which the Warrants are exercisable for may be sold without restriction pursuant to Rule 144, as amended and the Purchasers have expressed their desire to convert an increasing number of shares underlying the Debentures. As a result, 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 various Debentures will be convertible into shares of our common stock at a discount to market of 40% in connection with the original amount of $1,500,000 in Debentures and 60% in connection with the June 2008 Debentures, 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.

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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 various Debentures will be convertible into shares of our common stock at a discount to market of 40% in connection with the original amount of $1,500,000 in Debentures and 60% in connection with the June 2008 Debentures, 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.

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 various Debentures will be convertible into shares of our common stock at a discount to market of 40% in connection with the original amount of $1,500,000 in Debentures and 60% in connection with the June 2008 Debentures, 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.

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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 $5.00 per share. We anticipate the trading price of our common stock will continue to be below $5.00 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 $5.00 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 during fiscal 2009. 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.

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. We have initiated certain purchasing and efficiency programs in the past. 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.

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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.

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.

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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 HIPAA 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, 2007 we spent approximately $14,350 complying with these on-going educational needs. However, since our original formation, we have been aware of impending HIPAA regulations, and have set up our systems and procedures to comply with HIPAA requirements in view of such regulations. As a result, added costs due to compliance with HIPAA 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.

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 period covered by this Quarterly Report on Form 10-QSB/A (the "Evaluation Date"), has 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. The controls were not effective as we were not able to timely file this Quarterly Report.

(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.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Between January 1, 2008 and May 13, 2008, the Purchasers individually provided us notice of their intention to convert an aggregate of approximately $6,614 of principal of the May 30, 2006, Debentures into an aggregate of approximately 2,442,784 shares of our common stock (the “Shares”) based on a Conversion Price of between $0.006 and $0.001 per share, as of the date of each of the Notices of Conversions. We subsequently issued the Purchasers the Shares, which Shares were either registered by us on our Form SB-2 Registration Statement declared effective by the Commission on July 20, 2007 and/or sold pursuant to Rule 144.

As a result of the conversions, we owed an aggregate of approximately $1,394,471 to the Purchasers in connection with the principal amount of the outstanding May 30, 2006 Debentures as of the date of this filing (not including any accrued and unpaid interest on such Debentures) and an additional $150,000 to New Millennium in connection with the June 2008 Closing.

In February 2008, the Company reissued its President, Linda Putback-Bean an aggregate of 4,000,000 shares of the Company’s common stock which she cancelled on or around September 30, 2005, to reduce the number of issued shares of the Company and to increase the number of authorized but unissued shares of the Company to allow the Company sufficient shares of common stock to pay various consultants for services rendered. The shares were earned prior to their original issuance in December 2004. We claim an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended, for the above issuance, since the issuance did not involve a public offering, the recipient took the securities for investment and not resale and the Company took appropriate measures to restrict transfer.

Additionally, in February 2008, the Company issued 3,000,000 restricted shares of common stock to Wakabayashi Fund, LLC, a Japanese Limited Liability Company (“Wakabayashi”), in connection with the Company’s entry into an investor relations agreement with Wakabayashi, pursuant to which Wakabayashi agreed to provide investor relations services for a six month period. We claim an exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended, for the above issuance, since the issuance did not involve a public offering, the recipient took the securities for investment and not resale and the Company took appropriate measures to restrict transfer.

On or about June 2, 2008, we entered into a Securities Purchase Agreement, with New Millennium to sell $150,000 in Callable Secured Convertible Notes, which bear interest at the rate of 6% per annum (the "Debentures"). We claim an exemption from registration provided by Rule 506 of Regulation D for the above issuance.

In connection with the sale of the June 2008 Debenture, we granted New Millennium Stock Purchase Warrants to purchase an aggregate of 20,000,000 shares of our common stock at an exercise price of $0.001 per share, which warrants expire if unexercised on June 2, 2015. We claim an exemption from registration provided by Rule 506 of Regulation D for the issuance of the warrants.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

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

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit Number	Description of Exhibit
Exhibit 3.1(A)	Articles of Incorporation (Pediatric Prosthetics, Inc.-Texas) dated September 15, 2003

Exhibit 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

Exhibit 10.2(2)	Settlement Agreement with Secured Releases, LLC

Exhibit 10.3(3)	Securities Purchase Agreement

Exhibit 10.4(3)	Callable Secured Convertible Note with AJW Offshore, Ltd.

Exhibit 10.5(3)	Callable Secured Convertible Note with AJW Partners, LLC

Exhibit 10.6(3)	Callable Secured Convertible Note with AJW Qualified Partners, LLC

Exhibit 10.7(3)	Callable Secured Convertible Note with New Millennium Capital Partners II, LLC

Exhibit 10.8(3)	Stock Purchase Warrant with AJW Offshore, Ltd.

Exhibit 10.9(3)	Stock Purchase Warrant with AJW Partners, LLC

Exhibit 10.10(3)	Stock Purchase Warrant with AJW Qualified Partners, LLC

Exhibit 10.11(3)	Stock Purchase Warrant with New Millennium Capital Partners II, LLC

Exhibit 10.12(3)	Security Agreement

Exhibit 10.13(3)	Intellectual Property Security Agreement

Exhibit 10.14(3)	Registration Rights Agreement

Exhibit 10.15(4)	Consulting Agreement with National Financial Communications Corp.

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Exhibit 10.16(4)	Warrant Agreement with Lionheart Associates, LLC doing business as Fairhills Capital

Exhibit 10.17(4)	Investor Relations Consulting Agreement with Joe Gordon

Exhibit 10.18(5)	Waiver of Rights Agreement

Exhibit 10.20(6)	Kertes Convertible Note and Warrant

Exhibit 10.21(6)	Global Media Agreement

Exhibit 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, LLC

Exhibit 10.24(7)	Second Closing - Callable Secured Convertible Note with AJW Qualified Partners, LLC

Exhibit 10.25(7)	Second Closing - Callable Secured Convertible Note with New Millennium Capital Partners II, LLC

Exhibit 10.26(8)	Second Waiver of Rights Agreement

Exhibit 10.27(9)	Stock Purchase Warrant with AJW Offshore, Ltd.

Exhibit 10.28(9)	Stock Purchase Warrant with AJW Partners, LLC

Exhibit 10.29(9)	Stock Purchase Warrant with AJW Qualified Partners, LLC

Exhibit 10.30(9)	Stock Purchase Warrant with New Millennium Capital Partners, LLC

Exhibit 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, LLC

Exhibit 10.32(10)	Third Closing - Callable Secured Convertible Note with AJW Qualified Partners, LLC

Exhibit 10.33(10)	Third Closing - Callable Secured Convertible Note with New Millennium Capital Partners II, LLC

Exhibit 10.34(11)	June 2008 Securities Purchase Agreement

Exhibit 10.35(11)	June 2008 Callable Secured Convertible Note with New Millennium Capital Partners II, LLC

Exhibit 10.36(11)	June 2008 Stock Purchase Warrant with New Millennium Capital Partners II, LLC

Exhibit 10.37(11)	June 2008 Registration Rights Agreement

Exhibit 10.38(11)

June 2008 Security Agreement

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Exhibit 10.39(11)	June 2008 Intellectual Property Security Agreement

Exhibit 10.40(11)	June 2008 Subsidiary Guaranty

Exhibit 10.41(11)	June 2008 Third Waiver of Rights Agreement

Exhibit 31.1*	Certificate of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2*	Certificate of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1*	Certificate of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 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.

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

(11) Filed as exhibits to our Form 8-K, filed with the Commission on June 11, 2008, and incorporated herein by reference.

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SIGNATURES

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