Internal Fixation Systems, Inc. - FORM 10-Q

Attached files

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EXCEL - IDEA: XBRL DOCUMENT - Internal Fixation Systems, Inc.	Financial_Report.xls
EX-32.1 - CERTIFICATION - Internal Fixation Systems, Inc.	f10q0612ex32i_internalfix.htm
EX-31.1 - CERTIFICATION - Internal Fixation Systems, Inc.	f10q0612ex31i_internalfix.htm
EX-32.2 - CERTIFICATION - Internal Fixation Systems, Inc.	f10q0612ex32ii_internalfix.htm
EX-31.2 - CERTIFICATION - Internal Fixation Systems, Inc.	f10q0612ex31ii_internalfix.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2012

o Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to ____________

Commission file number: 000-54363

	INTERNAL FIXATION SYSTEMS, INC.
	(Exact name of Registrant as specified in its charter)

	Florida		20-4580923
	(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

	5901 SW 74th Street, Suite 408 South Miami, FL 33143
	(Address of principal executive offices) (zip code)

	(786)-268-0995
	(Registrant’s telephone number, including area code)

	N/A
	(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition of “accelerated filer” and “large accelerated filer” in rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer o	Accelerated Filer	o
Non-accelerated filer o	Smaller reporting company	x

Indicate by check mark whether the Registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.

Yes o No x

As of August 20, 2012, 2012 there were 61,619,369 shares of the Company's Common Stock, par value $0.001 per share, issued and outstanding.

INTERNAL FIXATION SYSTEMS, INC.

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements	1

	Condensed Balance Sheets as of June 30, 2012 (unaudited) and December 31, 2011	1

	Condensed Statements of Operations for the Three Months Ended June 30, 2012 and 2011 (unaudited)	2

	Condensed Statements of Cash Flows for the Three Months ended June 30, 2012 and 2011 (unaudited)	3

	Notes to Condensed Financial Statements (unaudited)	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15

Item 4.	Controls and Procedures	15

PART II	OTHER INFORMATION

Item 6.	Exhibits	16

Signature		17

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INTERNAL FIXATION SYSTEMS, INC.

CONDENSED BALANCE SHEETS

	June 30,			December 31,
	2012			2011
ASSETS	(Unaudited)
CURRENT ASSETS
Cash	$	-		$	1,633
Accounts receivable, net		74,280			96,593
Inventory, current portion		181,781			403,845
Deferred offering costs		50,000			-
Prepaid expenses and other		13,124			95,046
Total current assets		381,852			597,117

PROPERTY AND EQUIPMENT, net		314,761			356,264

OTHER ASSETS
Inventory, long term, net		1,071,319			811,087
Licenses and security deposit		24,960			20,741

TOTAL ASSETS	$	1,730,225		$	1,785,209

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
Bank overdraft	$	21,393		$	-
Accrued salaries and related expenses		389,707			270,206
Accounts payable and accrued expenses		846,882			480,022
Capital lease obligations, current portion		64,230			49,440
Loans and notes payable - related parties, net of discount		36,173			207,190
Loans and notes payable - bridge loan financing, net of discount		36,250			90,000
Loans and notes payable - convertible note, net of discount		79,110			72,437
Loans and notes payable - other, current portion		41,448			41,448
Derivative liability		59,167			69,959
Total current liabilities		1,574,360			1,280,702

LONG-TERM LIABILITIES
Capital lease obligations, less current portion		61,159			87,143
Convertible loans and notes payable		246,000			245,265
Loans and notes payable - other, less current portion		54,801			54,801

TOTAL LIABILITIES		1,936,320			1,667,911

COMMITMENTS AND CONTINGENCIES		-			-

STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock, no par value, 50,000,000 shares authorized
0 shares issued and outstanding		-			-
Common stock, $0.001 par value; 200,000,000 shares authorized,
54,799,367 and 5,729,037 issued and outstanding respectively		54,800			5,729
Additional paid in capital		5,289,170			4,319,982
Accumulated deficit		(5,550,065	)		(4,208,413	)

TOTAL STOCKHOLDERS' EQUITY (DEFICIT)		(206,095	)		117,298

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	1,730,225		$	1,785,209

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

INTERNAL FIXATION SYSTEMS, INC.

CONDENSED STATEMENTS OF OPERATIONS (Unaudited)

	Three Months ending						Six Months ending
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011

Sales, net	$	136,808		$	60,994		$	293,272		$	127,401
Cost of sales		53,357			15,819			87,772			32,537

Gross profit		83,451			45,175			205,500			94,864

Selling, general and administrative expenses
Officer compensation		51,870			332,430			110,374			519,878
Professional fees and other compensation		381,577			293,511			801,515			412,753
General and administrative expenses		101,542			50,524			265,720			108,775
Selling expenses		73,828			37,925			97,674			62,464
Total selling, general and administrative expenses		608,817			714,390			1,275,283			1,103,870

Operating loss		(525,366	)		(669,215	)		(1,069,783	)		(1,009,006	)
Other expense
Interest expense		(51,130	)		(53,842	)		(121,565	)		(113,063	)
Gain on change in fair value of derivative liability		4,794						99,032
Other Non-operating Loss		(49,970	)					(154,336	)
Loss on debt conversion		-			-			(95,000	)
Loss before taxes		(621,672	)		(723,057	)		(1,341,652	)		(1,122,069	)
Benefit from income taxes		-			-			-			-
Net loss		(621,672	)		(723,057	)		(1,341,652	)		(1,122,069	)
Basic and diluted loss per share		(0.06	)		(0.23	)		(0.17	)		(0.38	)
Weighted average shares outstanding
basic and diluted		9,815,231			3,133,068			7,782,742			2,966,193

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

INTERNAL FIXATION SYSTEMS, INC.

CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)

For the six months ended June 30,

	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(1,341,652	)	$	(1,122,069	)
Adjustments to reconcile net loss to net cash
provide by (used in) operating activities:
Amortized interest on discount on loans and notes payable - related parties		28,862			2,861
Amortized interest on discount on loans and notes payable - convertible notes		48,040			62,538
Stock based compensation		252,262			324,370
Loss on debt conversion		95,000			-
Gain on change in fair value of derivative liability		(99,032	)		-
Bad debt (benefit) expense		13,694			(362	)
Depreciation expense		53,408			47,379
Changes in operating assets and liabilities:
Accounts receivable		8,619			5,328
Inventory		(38,168	)		(177,122	)
Deferred offering costs		-			(91,442	)
Prepaid expenses		86,900			(52,489	)
Other assets		(4,500	)		(5,924	)
Accounts payable and accrued expenses		711,301			432,990

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		185,266			(570,343	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(11,905	)		(41,968	)

NET CASH USED IN INVESTING ACTIVITIES		11,905			(41,968

CASH FLOWS FROM FINANCING ACTIVITIES
Increase in bank overdraft		21,393			-
Proceeds from notes payable - convertible debenture		90,500			891,500
Proceeds from exercise of warrants and options		75,000
Proceeds from notes payable - related parties		-			13,000
Proceeds from notes payable - convertible notes		27,500			-
Net payments of notes payable – related parties		-			(28,472	)
Payments of capital lease obligations		(11,194	)		(22,744	)
Payments of notes payable - convertible debenture		(7,661	)		-
Payments of notes payable - other		-			(17,810	)

NET CASH PROVIDED BY FINANCING ACTIVITIES		195,538			835,474

NET (DECREASE) INCREASE IN CASH		(1,633	)		223,163

CASH - Beginning		1,633			12,691

CASH - Ending	$	-		$	235,854

SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for interest	$	2,261		$	20,161
Non-cash investing and financing activities -
Notes and interest payable converted to common stock	$	178,500		$	880,700
Shares issued as discount on convertible debenture		7,500		$	100,000
Beneficial conversion feature of convertible debenture	$	37,500		$	17,164
Stock options issued in connection with related-party loan	$	-		$	31,346
Accounts payable settled with issuance of common stock	$	115,000		$	-
Accrued compensation settled with issuance of common stock	$	95,000		$	-

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

INTERNAL FIXATION SYSTEMS

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2012

NOTE 1. MANAGEMENT REPRESENTATION

The accompanying unaudited interim condensed financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed financial statements furnished reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2011 and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed with the Securities and Exchange Commission.

NOTE 2. BASIS OF PRESENTATION

Description of Business

Internal Fixation Systems, Inc. ("the Company" “we”, “us” or “our”) was organized and incorporated under the laws of the State of Florida in 2006 and commenced operations in 2007. Our corporate headquarters are located in South Miami, Florida, where we conduct the majority of our management operations. We market and sell FDA approved orthopedic and podiatric surgical implants intended for bone fixation surgery. We have all inventory currently being manufactured for us by contract manufacturers to our designs and specifications.

Fair Value of Financial Instruments

The Company calculates the fair value of its assets and liabilities which qualify as financial instruments and includes this additional information in the notes to financial statements when the fair value is different than the carrying value of these financial instruments. The estimated fair value of accounts receivable, prepaid expenses, accounts payable and accrued liabilities approximate their carrying amounts due to the relatively short maturity of these instruments. The carrying value of short and long-term debt also approximates fair value since these instruments bear market rates of interest.

Net income (loss) per common share

Net loss per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period.

Diluted per share loss is the same as basic per share loss when there is a loss from continuing operations. Accordingly, for purposes of dilutive earnings per share, the Company excluded the effect of warrants, options and convertible debt totaling 10,839,717 and 2,948,883 shares as of June 30, 2012 and 2011, respectively. Loss per share for the six months ending June 30, 2012 was $0.17 compared to $0.38 per share for the period ending June 30, 2011.

Accounts Receivable

Accounts receivable are recorded at the time a sale is made. There is an evaluation of the aging of receivables as compared to the historic collection rates from various customers, with consideration of the aging. Account receivables with an aging between 0-180 days are reserved at 15% and accounts receivables which have been unpaid for over 180 days are fully reserved. The allowance for doubtful accounts was $44,245 and $30,551 as of June 30, 2012 and December 31, 2011, respectively.

Inventory

The Company’s inventory consists primarily of finished goods available for sale. Inventory is valued at the lower of cost or market determined by the weighted average method. Inventory that the Company estimates will not be sold within the next business cycle is considered non-current inventory.

Property and Equipment

Property and equipment is stated at cost. Expenditures for maintenance and repairs are charged to expense as incurred with improvements and betterments capitalized. Upon disposition, original asset cost and related accumulated depreciation are removed from the accounts with any gain or loss recognized. Depreciation expense is computed using the straight-line method over related assets estimated useful lives for financial statement purposes. All of the assets in service have a 5 year estimated useful life. Depreciation expense for the six months ended June 30, 2012 and 2011 amounted to $53,408 and $47,379, respectively. Of these amounts, $33,242 and $33,675 respectively, were capitalized within inventory, and $20,166 and $13,704, respectively, were included within selling, general and administrative expenses.

Intangible Asset

The Company capitalizes costs associated with legal fees paid in connection with obtaining approval of the Food and Drug Administration (FDA) for the sale of the medical devices. In accordance with FASB ASC 350, the license is determined to have an indefinite useful life.

Capital Lease Obligations

Certain long-term lease transactions relating to the financing of equipment are accounted for as capital leases. Capital lease obligations reflect the present value of future rental payments, less an interest amount implicit in the lease. A corresponding amount is capitalized as property and equipment, and depreciated over the individual asset’s estimated useful life.

Income Tax Matters

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due and deferred taxes. Deferred taxes are recognized for differences between the basis of assets and liabilities for financial statement and income tax purposes. The differences relate primarily to net operating losses and temporary differences in depreciation calculated for book and tax purposes. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be taxable or deductible when assets or liabilities are recovered or settled.

Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense (benefit) is the income tax payable (receivable) for the year and the change during the year in deferred tax assets and liabilities.

The Company follows the provisions of the Financial Accounting Standards Board (“FASB”) Interpretation (FIN) No. 48, “Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109” (“FIN 48”). FASB Statement No. 109 has been codified in FASB ASC Topic 740-10. FASB ASC Topic 740-10 contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with FASB ASC Topic 740-10. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. FASB ASC Topic 740-10 did not result in any adjustment to the Company’s provision for income taxes.

Research and Development Costs

The Company expenses research and development costs as incurred. For the six months ending June 30, 2012 and 2011, the Company had $6,689 and $14,809 in research and development costs, respectively.

Stock-Based Compensation

The Company applies FASB ASC 718, “Compensation – Stock Compensation”, to stock-based compensation awards. FASB ASC 718 requires the measurement and recognition of non-cash compensation expense for all share-based payment awards made to employees and directors. The Company records common stock issued for services or for liability extinguishments at the closing market price for the date in which obligation for payment of services is incurred.

Stock compensation arrangements with non-employee service providers are accounted for in accordance with FASB ASC 505-50, “Equity-Based Payments to Non-Employees“ using a fair value approach. The compensation costs of these arrangements are subject to re-measurement over the vesting terms as earned. FASB ASC 505-50 replaces EITF No. 96-18, “Accounting for Equity Instruments that are issued to Other than Employees for Acquiring or in Conjunction with Selling, Goods or Services”.

Stock Purchase Warrants

The Company has issued warrants to purchase shares of its common stock. Warrants have been accounted for as equity in accordance with FASB ASC 480, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity”.

Reclassifications

Certain accounts in the prior-year financial statements have been reclassified for comparative purposes to conform with the current year presentation.

NOTE 3. GOING CONCERN

Our independent registered public accounting firm’s report on our financial statements for the year ended December 31, 2011 includes an explanatory paragraph regarding our ability to continue as a going concern. As shown in the accompanying financial statements, we have incurred substantial net losses for the six months ended June 30, 2012 of $1,341,652. Our cumulative net losses since inception are $5,550,065. We have a working capital deficit at June 30, 2012 of $1,255,174. There is no guarantee that we will be able to generate sufficient revenue and/or raise sufficient capital to support our operations. This raises substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

We are seeking to raise capital through the sale of our securities. Without additional funding, there can be no assurances that we will be able to continue our operations. Our ability to continue as a going concern is dependent upon our ability to raise additional capital, further implement our business plan and generate sufficient revenues.

NOTE 4. INVENTORY

Our inventory consists primarily of finished implants and products for use in surgical operations plus $13,046 of raw materials. Total inventory as of June 30, 2012 and December 31, 2011 was $1,253,100 and $1,214,932, respectively. At June 30, 2012 and December 31, 2011, $1,071,319 and $811,087, respectively, of inventory is classified as a long term asset; which is not expected to be sold in the next business cycle. Inventory is presented net of the allowance for obsolete inventory of $116,234 in the condensed balance sheet as of June 30, 2012 and December 31, 2011

NOTE 5. COMMITMENTS AND CONTINGENCIES

Capital Lease Obligations

We lease manufacturing equipment under capital leases with terms extending through 2014. Assets acquired under these capital leases are presented within property and equipment in the accompanying balance sheets.

Future minimum payments required under capital leases are as follows as of June 30, 2012:

	Amount
2013	$	72,687
2014		57,258
2015		6,688
		136,633
Less amounts representing interest		(11,244	)
Present value of minimum lease payments		125,389
Less: current portion		(64,230	)
Capital lease obligations, net of current portion	$	61,159

Legal Proceedings

On April 19, 2012, the Company settled a lawsuit alleging breach of employment contract by its former Vice President (“plaintiff”) for $150,000. The settlement calls for the Company to make payments to the plaintiff over a period from May 1, 2012 to May 1, 2013. If the Company fails to make a payment within a reasonable time as stipulated in the settlement, the entire settlement amount will be $200,000. The settlement calls for the plaintiff to return 175,000 shares of common stock on June 1, 2012 if the Company has delivered payments totaling $20,000 by that date. The Company has missed several payments and the plaintiff has moved to have a judgment entered for the $200,000. The liability is included in Accounts payable and accrued expenses at June 30, 2012.

We sublet our manufacturing space and we rent certain manufacturing equipment from a former shareholder. Following a dispute over late fees, in December 2011, the former shareholder caused the power to be turned off in our manufacturing space resulting in damage to machines we use in manufacturing. In December 2011, we filed suit against the former shareholder to recover our damages caused by his turning off the power and the former shareholder counterclaimed against us for eviction and payments under a promissory note and the sublease. This matter is the subject to ongoing litigation before the court and it is doubtful the parties will be able to reach an amicable settlement.

The Company was notified on August 17, 2012 by an attorney representing Ken West, former director and officer and Laura Cattabriga, former officer that he had received a letter from an attorney claiming to represent a group of shareholders who allegedly suffered damages as a result of the conduct of his clients and that a formal claim would be made in the “very near future.” At this point, there has only been a demand for certain documentation. The Company has put the insurance carrier on notice of a potential claim and has requested additional information from the two former officers regarding this claim. At this time, management cannot determine the potential effect or outcome of such a claim against the Company.

NOTE 6. LOANS AND NOTES PAYABLE – RELATED PARTIES

In October 2011, we entered into a $200,000 secured revolving credit agreement with Stephen J. Dresnick, MD, our Chairman of the Board, CEO and President. Under the credit agreement, we may borrow from time to time up to $200,000 to be used for working capital or general corporate purposes. Borrowings under the credit agreement mature on September 30, 2012 and bear interest at a rate of 10% per year, payable on the maturity date. The Company’s repayment obligations under the revolving credit agreement are secured by all of the Company’s assets. The note issued under the credit agreement contains customary events of default, which if uncured, entitle the holders to accelerate the due date of the unpaid principal amount of and all accrued and unpaid interest on, such note. Amounts may be repaid and re-borrowed under the revolving credit agreement without penalty. We have borrowed the full amount available under the credit agreement. In connection with the original issuance of the revolving credit agreement we issued to Dr. Dresnick warrants to purchase 200,000 shares of our common stock, at any time and from time to time through September 30, 2013, at $2.00 per share. Dr. Dresnick has elected to convert $150,000 of the outstanding principal of the Note into 15 million shares of Common Stock

NOTE 7. LOANS AND NOTES PAYABLE – OTHER

In May, 2009, we became obligated to pay to note to a former shareholder on or before May 2014, in consecutive monthly installments of $3,577, including interest payments of 6% annually, an original principal amount of $185,000.The principal balance outstanding on this obligation as of June 30, 2012 is $96,249.

NOTE 8. CONVERTIBLE DEBENTURE FINANCING

As of June 30, 2012 there was $246,000 of principal amount of our 5% to 8% convertible debentures due December 1, 2014 (the "Convertible Debentures”) still outstanding. Under the Convertible Debentures, we are obligated to pay interest semi-annually. The Convertible Debentures are convertible into shares of our common stock at a per share conversion price equal to 85% of the volume weighted average daily price for the Common Stock, as reported by Bloomberg L.P., for the ten (10) trading days prior to conversion not to be converted for less than $1.00 per share to $2.00 per share depending on the debenture.

In March 2010, we borrowed $100,000 from an unaffiliated third party non-institutional lender and issued to the lender (i) a 9% secured promissory note in the principal amount of $100,000; and (ii) warrants to purchase 100,000 shares of our common stock at any time and from time to time through March 31, 2013 at $0.10 per share. The secured promissory note was scheduled to mature in December 2010. In December 2010, the maturity date of the note was extended to June 15, 2011, and then again to December 15, 2011. In May 2011, the note was amended to provide the holder thereof the right to convert into shares of common stock of the Company. This note was amended a third time in March 2012 to provide for the transfer of the payee under the note and to provide that the repayment obligations under the note would be personally guaranteed by our President, CEO and interim CFO Stephen J. Dresnick, MD. Since March 1, 2012, the payees under the Note have elected to convert $75,000 of the outstanding balance and accrued interest into 1,750,000 shares of common stock. The Company recorded the conversion in accordance with ASC 470-20-46 “Induced Conversions.” Under ASC 470-20-46 the fair value of the securities transferred in the transaction in excess of the fair value of consideration issuable in accordance with the original conversion terms is recognized as a loss. The fair value of the shares issued was $145,000 and accordingly the Company recognized $95,000 as a Loss on Debt Conversion. As of June 30, 2012, there was $36,250 of remaining principal.

On March 21, 2012, The Company entered into a Securities Purchase Agreement (“SPA”) with Peak One Investments. whereby the Company may sell securities consisting of Secured Convertible Debentures with total principal of up to $600,000 and restricted shares of the Company’s common stock. Under the terms of the SPA, upon execution, and through the first anniversary of the date of execution, the Company may commence a mandatory sale of the debentures and common stock with written notice to the buyer no more than one time in a calendar month (the “Put” or “Funding”). The buyer has sole discretion as to whether the put will be honored. The SPA and related put obligation can be terminated by the buyer in the event of default or a material adverse event or through written notice if the termination date is not less than 90 days from the execution of the agreement. The Company is responsible for payment of legal and other closing fees totaling $22,500 over the first three fundings. All obligations under the agreement are securitized by a first priority interest in all of the assets of the Company.

The Company is required to maintain a reserve of shares for issuance equal to 300% of the number of shares issuable upon conversion of debentures. In addition, if the closing price of the Company’s common stock is less than $0.10 per share for twenty consecutive trading days, the Company is required to seek shareholder approval for authorization of a reverse stock-split within 60 days.

The total proceeds the Company may receive under the put is equal to 90% of the principal amount of the debentures to be issued. In addition, upon closing of a put, the Company is required to issue restricted shares of common stock with a total value equal to 15% of the principal of the debentures issued based on the closing bid price on the date of closing date of the put. The Company may only receive proceeds of between $22,500 and $45,000 (90% of stated principal of debentures between $25,000 and $50,000) for each put.

On March 26, 2012, under the term of the SPA, we issued a 6% convertible note for principal of $50,000, net of the 10% discount and legal fees. The Note bears interest at the rate of 6% per annum. All interest and principal must be repaid by March 26, 2015. The Note is convertible into common stock, at the holder’s option, at a 40% discount to lowest closing bid price for the 20 days prior to the date of conversion. In the event we prepay the Note in full, we are required to pay off all principal, interest and any other amounts owing multiplied by (i) 135% if prepaid during the period commencing on the issuance date through 6 months thereafter and (ii) 140% if prepaid 6 months after the issuance date After the expiration of 180 days following the date of the Note, we have no right of prepayment. Per the terms of the SPA we issued to the Holder 9,493 shares of unregistered Common Stock upon sale of the debenture.

The note contained a beneficial conversion feature which resulted in a discount upon issuance. The discount is amortized over the life of the notes on a straight line basis. The total discount resulting from the beneficial conversion feature, the issuance of common stock and the stated discount at origination was $50,000 upon issuance. The balance of the debenture at June 30, 2012, net of the discount was $4,167.

The convertible debenture is convertible into common stock of the Company at variable conversion rates that provides a fixed return to the holder. Under the terms of the notes, the Company could be required to issue additional shares in the event of a default. Due to these provisions, the conversion feature is subject to derivative liability treatment under Section 815-40-15 of the FASB Accounting Standard Codification (“Section 815-40-15”) (formerly FASB Emerging Issues Task Force (“EITF”) 07-5). The notes have been measured at fair value using the Black Sholes model upon issuance and at the end of the year with gains or losses from the change in fair value of derivative liabilities recognized on the consolidated statement of operations. The conversion feature was recorded as a discount to the notes due to the beneficial conversion feature upon origination.

The fair Value of the embedded derivative of these notes upon issuance was $63,961. The fair value at June 30, 2012 is $59,167.

NOTE 9. LOANS AND NOTES PAYABLE – CONVERTIBLE NOTES

In October and December 2011 we issued two 8% convertible notes which generated proceeds to us of $53,000 and $42,500. The Notes bear interest at the rate of 8% per annum. All interest and principal must be repaid on October 31, 2012 and September 8, 2012, respectively. The Notes are convertible into common stock, at the holder’s option, at a 41% and 49% discount, respectively, to the average of the five lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. In the event we prepay the Note in full, we are required to pay off all principal, interest and any other amounts owing multiplied by (i) 135% if prepaid during the period commencing on the closing date through 90 days thereafter, (ii) 140% if prepaid 91 days following the closing through 150 days following the closing, and (iii) 150% if prepaid 151 days following the closing through 180 days following the closing. After the expiration of 180 days following the date of the Note, we have no right of prepayment.

In February 2012 we issued an 8% convertible note for $27,500. The Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on October 31, 2012. The Note is convertible into common stock, at the holder’s option, at a 41% discount to the average of the five lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. In the event we prepay the Note in full, we are required to pay off all principal, interest and any other amounts owing multiplied by (i) 135% if prepaid during the period commencing on the closing date through 90 days thereafter, (ii) 140% if prepaid 91 days following the closing through 150 days following the closing, and (iii) 150% if prepaid 151 days following the closing through 180 days following the closing. After the expiration of 180 days following the date of the Note, we have no right of prepayment.

The notes contained a beneficial conversion feature which resulted in a discount upon issuance of $12,383 for the October note, $14,241 for the December note and $26,706 for the February note. The discounts are amortized over the life of the notes on a straight line basis. As of June 30, 2012 and December 31, 2011, the total balance of the notes net of their respective discounts was $74,935 and $72,437, respectively.

The convertible notes are convertible into common stock of the Company at variable conversion rates that provide a fixed return to the note-holder. Under the terms of the notes, the Company could be required to issue additional shares in the event of a default. Due to these provisions, the conversion feature is subject to derivative liability treatment under Section 815-40-15 of the FASB Accounting Standard Codification (“Section 815-40-15”) (formerly FASB Emerging Issues Task Force (“EITF”) 07-5). The notes have been measured at fair value using the Black Sholes model upon issuance and at the end of the year with gains or losses from the change in fair value of derivative liabilities recognized on the consolidated statement of operations. The conversion feature was recorded as a discount to the notes due to the beneficial conversion feature upon origination.

In February 2012, these three convertible notes were amended to establish a floor of $.00009 per share on the conversion rate. As a result of the amendment, the derivative liability associated with these notes was eliminated and the Company recognized a gain on the change in fair value for the remaining derivative liability at the date of amendment.

NOTE 10. RELATED PARTY TRANSACTIONS

As of June 30, 2012 we have accrued but have not paid salaries and benefits to the Company’s current and former officers in the amount of $233,855.

NOTE 11. WARRANTS AND OPTIONS

Options

During the six months ending June 30, 2012, no stock options were issued. 1,257,507 options were forfeited due to the departure of certain employees and sales representatives. 75,000 options were exercised for an exercise price of $1.00 per share. The Company has 2,346,708 options outstanding. Compensation expense of approximately $252,262 was recognized during the six months ending June 30, 2012 due to the vesting of these options.

Warrants

During the six months ending June 30, 2012, no warrants were issued, expired or forfeited. The Company has 200,000 warrants outstanding and exercisable at June 30, 2012.

NOTE 12. EQUITY

On April 24, 2012 the Board of Directors authorized the Company to amend the articles of incorporation to increase the number of authorized common stock of the Company from 10,000,000 to 200,000,000 shares, adjust the Company’s par value of its common stock from $0.05 per share to $0.001 per share, to authorize 50,000,000 shares of preferred stock to be designated in series or class as determined by the Board at a future date. Stockholders’ deficit has been reflected retroactive to the change in par value.

In connection with the Securities Purchase Agreement discussed further in Note 8, the Company issued 9,493 shares upon closing of a funding.

In March 2012, the Company issued 75,000 shares of common stock at $1.00 in connection with an option exercise.

Between March and June 2012, the Company converted $118,000 of principal on convertible debentures to 6,050,000 shares of common stock. In March and June 2012, the Company converted $28,000 in principal on convertible notes to approximately 787,000 in common stock.

In June 2012, the Company issued 773,993 at $.065 per share for services related to offering fees. Also in June 2012, the Company also converted a note payable due to a related party of $53,750 to 5,375,000 shares of common stock, $150,000 of a line of credit due to a related party to 15,000,000 shares of common stock and $210,000 in accrued salaries and accounts payable were converted to 21,000,000 shares of common stock

NOTE 13. CONCENTRATION AND CREDIT RISK

During the six months ended June 30, 2012, we derived revenues from three significant customers, each of which exceeded 10% of our total revenue during these periods. For the six months ended June 30, 2012, revenues from these customers totaled $114,482.

We extend credit to our customers in the normal course of business and generally require no collateral on such credit sales.

NOTE 14. SUBSEQUENT EVENTS

We have evaluated all events that occurred after the balance sheet date through the date these financial statements were issued.

On July 2 we entered into a consulting Agreement with a shareholder who has provided extensive input into the Company’s designs. The terms of the agreement are that the Consultant will be paid $1,100 per month for a twelve month period. Payment will be in stock valued at $0.01 per share.

On July 26, we issued an 8% convertible note for $32,500. The Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on October 31, 2012. The Note is convertible into common stock, at the holder’s option, at a 41% discount to the average of the five lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. In the event we prepay the Note in full, we are required to pay off all principal, interest and any other amounts owing multiplied by (i) 135% if prepaid during the period commencing on the closing date through 90 days thereafter, (ii) 140% if prepaid 91 days following the closing through 150 days following the closing, and (iii) 150% if prepaid 151 days following the closing through 180 days following the closing. After the expiration of 180 days following the date of the Note, we have no right of prepayment.

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

FORWARD-LOOKING STATEMENTS

Certain statements that the Company may make from time to time, including all statements contained in this report that are not statements of historical fact, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and the safe harbor provisions set forth in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may be identified by words such as “plans,” “expects,” “believes,” “anticipates,” “estimates,” “projects,” “will,” “should,” and other words of similar meaning used in conjunction with, among other things, discussions of future operations, financial performance, product development and new product launches, market position and expenditures. The Company assumes no obligation to update any forward-looking statements.

OVERVIEW

General

We are a designer, manufacturer and marketer of value priced orthopedic, podiatric and spinal implants that was organized and incorporated under the laws of the state of Florida in 2006 and commenced operations in 2007. We focus on commonly used, market proven products that have been the standard of care for many years. Our mission is to redesign these implants to incorporate features desired by surgeons and sell them at “value pricing” which isless competitive products. Our current customers include ambulatory surgery centers, hospitals, surgeons, and Group Purchasing Organizations (GPOs).

In order to deliver quality, value priced implants, we seek to be innovative in all aspects of our business from product design to distribution and sales. We continually look for ways to enhance products, promote better inventory management, reduce redundancy and streamline distribution. We do not seek to develop and design new classes of implants, but rather to be innovative regarding existing implant products more commonly used in the trade.

We currently have FDA 510(k) approval for 25 products which cover a majority of fractures treated and procedures performed. Our approved products include mini to large cannulated screw systems used for bone fixation as well as locking plate and screw systems for use in the ankle, wrist, elbow, clavicle and shoulder. We have entered into distribution agreements for large cannulated screw systems as well as an external fixator.

Our revenues to date have been derived from sales of screws and plates used for bone fixation of extremities. In addition to the cannulated screws, we also sell K-wires and drill bits used to implant our products. In late September 2011, we had a limited initial release of small fragment locking plate and screw system, used primarily to treat fractures in the ankle, foot, and forearm. This system can be used to treat fractures in the shoulder, pelvis, tibia and hip and has trauma applications as well.

Our products are manufactured in the United States using only U.S. medical grade alloys. Until April 2012, A portion of our products were manufactured by us at our Medley, Florida facility. Currently all of our manufacturing is outsourced. All of our suppliers are based in the United States, have FDA certified facilities and use only medical grade alloys.

Our customers include ambulatory surgery centers and hospitals. In addition to selling to individual facilities and doctors, we currently are targeting to sell to national operators of ambulatory surgery centers as well as national Group Purchasing Organizations (GPOs).

Since inception, we have financed our operations from the sale of securities and from advances from investors and related parties. If our sales over the next several months do not meet or exceed our expectations, our resources will not be sufficient to meet our cash flow requirements. Likewise, if our expenses exceed our expectations and our sales do not exceed our expectations sufficient to cover our expenses, we will need additional funds to implement our business plan. We will not be able to fully establish our business if we do not have adequate working capital and if we do not generate adequate working capital through operations, we will need to raise additional funds, whether through a stock offering or otherwise.

We will need to raise additional capital in order to establish a sales network to market and distribute our products. In addition, we will need to hire personnel to run our day to day operations and currently do not have the capital to do so. We will seek to obtain the necessary funds through increased sales of our products and if required, the sale of securities. If we are unable to obtain this additional working capital, or if we encounter unexpected expenses, we will not have sufficient working capital to implement our business plan and will need to scale back or discontinue our operations.

We have incurred significant losses due to, among other things, negative cash flows and have an accumulated deficit of $5,550,065 as of June 30, 2012. Our independent registered public accounting firm’s report on our financial statements for the fiscal year ended December 31, 2011 includes an explanatory paragraph regarding our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We rely on historical experience and on other assumptions we believe to be reasonable under the circumstances in making our judgment and estimates. Actual results could differ from those estimates. We consider our critical accounting policies to be those that are complex and those that require significant judgments and estimates, including the following: inventory valuation and classification, recognition of revenue, impairment of long-lived assets, the determination of the valuation allowance of our deferred income taxes and stock-based compensation.

RESULTS OF OPERATIONS

Three months ended June 30, 2012 compared to Three Months Ended June 30, 2011

Revenue - During the three months ended June 30 2012 as compared to the three months ended June 30, 2011, our net sales increased 124% to $136,808 from $60,994. The increase in revenue was due to the release of additional sets of our redesigned cannulated screw systems, the limited initial release of our modular locking small fragment system, and the hiring of new distributors. Currently we have distribution in 16 states compared to 2 states in the same period in 2011.

Cost of Goods Sold - For the three months ended June 30, 2012, cost of goods sold as a percentage of sales was 39% compared to 26% for the three months ended June 30, 2011. This slight increase was due to the fact that during the period, we sold products that we were selling on consignment and the underlying products cost us more than products that we were manufacturing ourselves or having manufactured for us by other vendors.

Gross Margin – For the three months ended June 30, 2012, gross margin 61% compared to 74% for the three months ended June 30, 2011. This decrease was due to the fact that we sold products we previously were not selling and these products had a higher cost than products we manufactured or designed and had manufactured for us.

Selling, General and Administrative Expenses - For the three months ended June 30, 2012 selling, general and administrative expense decreased 15% to $608,817 as compared to $714,390 for the three months ended June 30, 2011. For the three months ended June 30, 2012, professional fees and other compensation increased 30% to $381,577 as compared to $293,511 for the three months ended June 30, 2011. For the three months ended June 30, 2012 general and administrative expenses increased 101% to $101,542 as compared to $50,524 for the three months ended June 30, 2011. For the three months ended June 30, 2012 selling expense increased 95% to 73,828 compared to $37,925 for the three months ended June 30, 2011. The increase in selling expense was the result of increased commissions paid to sales representatives as a result of increased sales.

Operating Loss/Net Loss – Our operating loss for the three months ended June 30, 2012 was $525,366 compared to an operating loss of $669,215 for the three months ended June 30, 2011. Interest expense decreased to $51,130 for the three months ended June 30, 2012 as compared to $53,842 of interest expense for the three months ended June 30, 2011. Net loss for the three months ended June 30, 2012 was $0.06 per weighted average share outstanding as compared to $0.23 for the three months ended June 30, 2011.

Six months ended June 30, 2012 compared to Six Months Ended June 30, 2011

Revenue - During the six months ended June 30 2012 as compared to the six months ended June 30, 2011, our net sales increased 130% to $293,272 from 127,401. The increase in revenue was due to the release of additional sets of our redesigned cannulated screw systems, the limited initial release of our modular locking small fragment system, and the hiring of new distributors. Currently we have distribution in 16 states compared to 2 states in the same period in 2011.

Cost of Goods Sold - For the six months ended June 30, 2012, cost of goods sold as a percentage of sales was 30% compared to 26% for the six months ended June 30, 2011. This slight increase was due to the fact that during the period, we sold products that we were selling on consignement and the underlying products cost us more than products that we were manufacturing ourselves or having manufactured for us by other vendors.

Gross Margin – For the six months ended June 30, 2012, gross margin was 70% compared to 74% for the six months ended June 30, 2011. This decrease was due to the fact that we sold products we previously were not selling and these products had a higher cost than products we manufactured or designed and had manufactured for us.

Selling, General and Administrative Expenses - For the six months ended June 30, 2012 selling, general and administrative expense increased 16% to $1,275.283 as compared to $1,103,870 for the six months ended June 30, 2011. For the six months ended June 30, 2012, professional fees and other compensation increased 94% to $801,515 as compared to $412,753 for the six months ended June 30, 2011. For the six months ended June 30, 2012 general and administrative expenses increased 144% to $265,720 as compared to $108,775 for the six months ended June 30, 2011. For the six months ended June 30, 2012 selling expense increased to $97,674 compared to $62,464 for the six months ended June 30, 2011. The increase in selling expense was the result of increased commissions paid to sales representatives as a result of increased sales.

Operating Loss/Net Loss – Our operating loss for the six months ended June 30, 2012 was $1,069,783 compared to an operating loss of $1,009,006 for the six months ended June 30, 2011. Interest expense increased to $121.565 for the six months ended June 30, 2012 as compared to $113,063 of interest expense for the six months ended June 30, 2011. Net loss for the six months ended June 30, 2012 was $0.17 per weighted average share outstanding as compared to $0.38 for the six months ended June 30, 2011.

LITIGATION

On April 19, 2012, the Company settled a lawsuit alleging breach of employment contract by its former Vice President (“plaintiff”) for $150,000. The settlement calls for the Company to make payments to the plaintiff over a period from May 1, 2012 to May 1, 2013. If the Company fails to make a payment within a reasonable time as stipulated in the settlement, the entire settlement amount will be $200,000. The settlement calls for the plaintiff to return 175,000 shares of common stock on June 1, 2012 if the Company has delivered payments totaling $20,000 by that date. We have missed several payments and the plaintiff has moved to have a judgement entered for the $200000. We have recorded this additional liability on our books for the period ended June 30, 2012

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2012, we had a bank overdraft of $21,393 and total liabilities of $1,936,320 as compared to cash of $1,633 and total liabilities of $1,667,911 as of December 31, 2011.

Our independent registered public accounting firm’s report on our financial statements for the year ended December 31, 2011 includes an explanatory paragraph regarding our ability to continue as a going concern. We are seeking to raise capital through the sale of our securities and from advances from investors and related parties. Without additional funding, there can be no assurances that we will be able to continue our operations. Our ability to continue as a going concern is dependent upon our ability to raise additional capital, further implement our business plan and generate sufficient revenues.

In March 2010, we borrowed $100,000 from an unaffiliated third party non-institutional lender and issued to the lender (i) a 9% secured promissory note in the principal amount of $100,000; and (ii) warrants to purchase 100,000 shares of our common stock at any time and from time to time through March 31, 2013 at $0.10 per share. The secured promissory note was scheduled to mature in December 2010. In December 2010, the maturity date of the note was extended to June 15, 2011, and then again to December 15, 2011. In May 2011, the note was amended to provide the holder thereof the right to convert into shares of common stock of the Company. This note was amended a third time in March 2012 to provide for the transfer of the payee under the note and to provide that the repayment obligations under the note would be personally guaranteed by our President, CEO and interim CFO Stephen J. Dresnick, MD. Since March 1, 2012, the payees under the Note have elected to convert elected $75,000 of the outstanding balance and accrued interest into 1,750,000 shares of common stock. The Company recorded the conversion in accordance with ASC 470-20-46 “Induced Conversions.” Under ASC 470-20-46 the fair value of the securities transferred in the transaction in excess of the fair value of consideration issuable in accordance with the original conversion terms is recognized as a loss. The fair value of the shares issued was $145,000 and accordingly the Company recognized $95,000 as a Loss on Debt Conversion.

On March 21, 2012, The Company entered into a Securities Purchase Agreement (“SPA”) with Peak One Investments whereby the Company may sell securities consisting of Secured Convertible Debentures with total principal of up to $600,000 and restricted shares of the Company’s common stock. Under the terms of the SPA, upon execution, and through the first anniversary of the date of execution, the Company may commence a mandatory sale of the debentures and common stock with written notice to the buyer no more than one time in a calendar month (the “Put” or “Funding”). The buyer has sole discretion as to whether the put will be honored. The SPA and related put obligation can be terminated by the buyer in the event of default or a material adverse event or through written notice if the termination date is not less than 90 days from the execution of the agreement. The Company is responsible for payment of legal and other closing fees totaling $22,500 over the first three fundings. All obligations under the agreement are securitized by a first priority interest in all of the assets of the Company.

Discussion of Cash Flows

As reflected in the accompanying unaudited condensed financial statements, we have incurred substantial net losses for the six months ended June 30, 2012 of $1,341,652, and we have a working capital deficit of $1,255,174 and an accumulated deficit of $5,550,065 as of June 30, 2012.

Net cash used for operating activities for the six months ended June 30, 2012 was $185,266, which includes a net loss of $1,341,652 offset by depreciation expense of $53,408, amortization of discount on the loans of $48,040, stock based compensation and shares issued for services of $252,262, an increase in accounts payable and accrued expenses of $711,301, and a decrease in inventory of $38,168.

Net cash used in investing activities for the six months ended June 30, 2012 was $11,905.

Net cash provided by financing activities for the six months ending June 30, 2012 was $195,538 compared to net cash provided by financing activities for the six months ended June 30, 2011 of $835,474.

Current and Future Financing Needs

We have incurred negative cash flow from operations since inception and as of June 30, 2012 we have an accumulated deficit of $5,550,065. We have expended, and expect to continue to expend, substantial amounts in connection with implementing our business strategy, including our advertising and marketing campaign, our research and development efforts and regulatory compliance and corporate governance. The actual amount of capital we will require to operate is subject to many factors, some of which are beyond our control. If our anticipated sales for the next several months do not meet our expectations and/or our expenses are higher than expected and/or we are unable to acquire additional financing, our existing resources will not be sufficient to meet our cash flow requirements and we may be unable to continue our operations. Whether we can continue operations will depend on whether we are able to generate sufficient revenue from operations and/or raise additional funds; neither of which can be assured.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk due to changes in interest rates relates primarily to the increase or decrease in the amount of interest income we can earn on our cash equivalents. Our risk associated with fluctuating interest rates is limited to our investments in interest rate sensitive financial instruments. We currently do not use interest rate derivative instruments to manage exposure to interest rate changes. We attempt to increase the safety and preservation of our invested principal funds by limiting default risk, market risk and reinvestment risk. We mitigate default risk by investing in investment grade securities. A hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would not materially affect the fair value of our interest sensitive financial instruments due to their relatively short term nature. Declines in interest rates over time will, however, reduce our interest income while increases in interest rates over time will increase our interest income.

ITEM 4. CONTROLS AND PROCEDURES

An evaluation was conducted by our Chief Executive Officer (CEO) and Chief Financial Officer (“CFO”) of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2012. Based on that evaluation, the CEO and CFO concluded that our internal control over financial reporting was not effective because we create, review and process financial data without internal independent review due to not having adequate personnel. Due to this material weakness, there is more than a remote likelihood that a material misstatement of our financial statements could occur and not be detected, prevented or corrected. Notwithstanding this material weakness, we believe that the financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods and dates presented.

Management is aware of the lack of an independent audit committee or audit committee financial expert. Although our board of directors serves as the audit committee it has no independent members. Further, we have not identified an audit committee financial expert on our board of directors. These factors are counter to corporate governance practices as defined by the various stock exchanges and may lead to less supervision over management.

The was no change in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a–15 or Rule 15d–15 under the Securities Exchange Act of 1934 that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 6. Exhibits

Exhibit No.		Description
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Labels Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

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.

INTERNAL FIXATION SYSTEMS, INC.



/s/ Stephen J. Dresnick, MD
Name: Stephen J. Dresnick, MD
Title: President/Chief Executive Officer/interim Chief Financial Officer (Principal Accounting Officer)/Director

Dated: August 20, 2012

Internal Fixation Systems, Inc. - FORM 10-Q - August 20, 2012

Attached files

Internal Fixation Systems, Inc. Reports