Urban 10-Q 2009 Q1 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
  Washington, D.C. 20549

Form 10-Q

 [X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934  
 For the quarterly period ended March 31, 2009

 or

 [  ]      Transitional Report under Section 13 or 15(d) of the Securities Exchange Act of 1934

000-52327

(Commission file number)

    AQUAMER MEDICAL CORP.

(Exact name of registrant as specified in its charter)

Delaware	04-3516924
(State of incorporation)	(IRS Employer   Identification Number)

510 Turnpike Street
North Andover, MA 01845

(Address of principal executive offices)

(978) 557-1001

(Registrant's telephone number)

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 period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. (Check one):

 Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ]

 Smaller Reporting Company [X]

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

As of May 15, 2009, there were 89,729,176 shares of the registrant's common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

None

FORWARD-LOOKING STATEMENTS

Certain statements made in this Quarterly Report on Form 10-Q are "forward-looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Aquamer Medical Corp. (the "Company") to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impo ssible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.

AQUAMER MEDICAL CORP.  FORM 10-Q TABLE OF CONTENTS
PART I  FINANCIAL INFORMATION
Item 1	Financial Statements
	Balance Sheets
	Statements of Operations
	Statements of Cash Flows
	Notes to Financial Statements
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3	Quantitative and Qualitative Disclosures about Market Risk
Item 4T	Controls and Procedures
PART II  OTHER INFORMATION
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds
Item 6	Exhibits
SIGNATURES

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

AQUAMER MEDICAL CORP.
  (a development stage company)

 Balance Sheet

		March 31,  2009 (unaudited)			December 31,   2008
Assets
Current assets:
Cash	$	83		$	397
Total current assets		83			397
Property and equipment, net of accumulated depreciation, $6,900		-			-
Patents		100,000			100,000
	$	100,083		$	100,397
Liabilities and Stockholders' Deficiency
Current liabilities:
Accounts payable	$	74,503		$	73,502
Accrued expenses payable		204,176			128,126
Secured note payable		15,000			15,000
Total current liabilities		293,679			216,628
Stockholders' deficiency
Preferred stock,
10,000,000 shares authorized, none issued		-			-
Common stock, $.0001 par value
200,000,000 shares authorized          54,004,176 shares, issued and outstanding		5,400			5,400
Additional paid-in capital		1,010,779			1,010,779
Deficit accumulated during development stage		(1,209,775	)		(1,132,411	)
Total stockholders' deficiency		(193,596	)		(116,231	)
	$	100,083		$	100,397

See accompanying notes to financial statements.

F-2

AQUAMER MEDICAL CORP.
 (a development stage company)

 Statements of Operations 

		Three Months Ended						February 4,   2000  (inception)  through  March 31,  2009 (unaudited)
		March 31,  2009 (unaudited)			March 31,  2008 (unaudited)
Revenue	$	-		$	-		$	-
Costs and expenses:
General and administrative		76,914			51,180			822,873
Research and development		-			15,000			276,645
Depreciation		-			-			6,900
Interest, net of interest income		450			450			(6,952	)
Impairment of  purchase commitment		-			-			145,000
Total costs and expenses		77,364			66,630			1,244,466
Loss before other income and income taxes		(77,364	)		(66,630	)		(1,244,466	)
Income from forgiveness of related party debt		-			-			34,691
Loss before income taxes		(77,364	)		(66,630	)		(1,209,775	)
Income taxes		-			-			-
Deficit accumulated during development stage	$	(77,364	)	$	(66,630	)	$	(1,209,775	)
Basic and diluted loss per share	$	(0.00	)	$	(0.00	)
Weighted average number of shares outstanding		54,004,176			30,644,286

See accompanying notes to financial statements.

F-3

AQUAMER MEDICAL CORP.
(a development stage company)
Statements of Cash Flows
		Three Months Ended March  31,  2009 (unaudited)			Three Months Ended March 31, 2008 (unaudited)			February 4,  2000  (inception)  through March 31,  2009 (unaudited)
Cash flows from operating activities:
Deficit accumulated during development stage	$	(77,364	)	$	(66,630	)	$	(1,209,775	)
Adjustments to reconcile deficit accumulated during     development stage to net cash used in operating activities:
Depreciation		-			-			6,900
Expenses paid by issuance of common stock		-			50,000			398,002
Change in operating assets and liabilities:
Decrease (increase) in prepaid expenses and other assets		-			-			(106,000	)
Increase in accounts payable and accrued expenses		77,050			16,500			386,511
Decrease in prepayments under supply agreement		-			-			140,000
Net cash used in operating activities		(314	)		(130	)		(384,362	)
Cash flows from investing activities:
Purchase of equipment		-			-			(6,900	)
Net cash used in investing activities		-			-			(6,900	)
Cash flows from financing activities:
Proceeds from issuance of common stock		-			-			52,050
Proceeds from issuance of preferred stock		-			-			175,000
Proceeds from issuance of secured convertible note		-			-			15,000
Repayment of loans to related parties		-			-			(73,500	)
Loans from former parent company		-			-			213,295
Repayment of related party loans		-			-			39,500
Loans to Bellacasa Productions, Inc.		-			-			(30,000	)
Net cash generated by financing activities		-			-			391,345
Change in cash		(314	)		(130	)		83
Cash at beginning of period		397			1,773			-
Cash at end of period	$	83		$	1,643		$	83

See accompanying notes to financial statements.

F-4

AQUAMER MEDICAL CORP.
(a development stage company)
Notes to Financial Statements
March 31, 2009
(unaudited)

Note 1 - Organization

             Aquamer Medical Corp. ("Aquamer" or the "Company") was formed as a Delaware corporation on February 4, 2000, for the purpose of developing medical products, using water-based tissue-bulking technology, for the fields of dermatology, gastroenterology and urology.

             On January 26, 2005, pursuant to a stock purchase agreement and share exchange among Bellacasa Productions, Inc. ("Bellacasa"), Aquamer, and the shareholders of Aquamer, Bellacasa purchased all of the outstanding shares of Aquamer through the issuance of 28,504,148 shares of Bellacasa common stock directly to the Aquamer shareholders. Pursuant to the agreement, Aquamer became a wholly owned subsidiary of Bellacasa.

             On March 5, 2007, the Company's parent, Bellacasa Productions, Inc., distributed all of the outstanding common stock of Aquamer to the shareholders of Bellacasa on a pro-rata basis, whereby Bellacasa shareholders received .7219996 shares of Aquamer common stock for each share of Bellacasa common stock held as of the record date, February 2, 2007. Bellacasa transferred all of its assets to Aquamer and contributed capital to Aquamer equivalent to the total of all sums owed by Aquamer to Bellacasa, which as of March 5, 2007 was approximately $183,000.

            In March  2008, the Company acquired all patent rights for the Hydropatella Implant, which pertains to a patella (kneecap) made of a hydrogel, which can be implanted in a surgical procedure to replace the damaged natural patella of a subject or as part of a component system for a total knee replacement

Note 2 - Basis of Presentation

           The interim financial statements include all adjustments, which, in the opinion of management, are necessary in order to make the financial statements not misleading. The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by Generally Accepted Accounting Principles for complete financial statements. The interim financial statements presented herein have been prepared by the Company in accordance with the accounting policies described in the Company's December 31, 2008 Annual Report on Form 10-K and should be read in conjunction with the Notes to Financial Statements which appear in that report.

           The financial statements have been presented in a "development stage" format. Since inception, the primary activities of Aquamer have been research and development of medical products and equity fund raising activities. The Company has not commenced principal revenue producing activities.

           The preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to intangible assets, income taxes, insurance obligations and contingencies and litigation. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results may differ from these estimates under different assumptions or conditions.

           In the opinion of management, the information furnished herein reflects all adjustments necessary for a fair statement of the financial position and results of operations and cash flows as of and for the three-month period ended March 31, 2009 and 2008. All such adjustments are of a normal recurring nature.

Note 3 - Patents

           In March 2008, the Company acquired all rights, title and interest in the pending U.S. Patent for the Hydropatella Implant.   The invention, which is the subject of the Patent, relates to an improved patella (kneecap) with improved biocompatible properties such as high surface lubricity, reduced component-to-component wear, and drug delivery capabilities. The patent rights were acquired for 10 million shares of the Company's common stock that were valued at $0.01 per share, or a total of $100,000.

            The Company's policy requires a review of the carrying value of long-lived assets, including patents, goodwill, and other intangible assets, on an annual basis, or when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. The primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.

Note 4 - Impairment of Purchase Commitment

            Pursuant to a product supply agreement entered into by Aquamer with Partners in Biomaterials ("PIB") in October 1999, the Company, in July 2005, prepaid $90,000 for the purchase of hydrogel product, based on poly-N-vinylpyrrolidone, as specified in certain U.S. patents. In December 2005, the Company also paid $20,000 and recorded $30,000 as an account payable, which was paid in January 2006, for additional prepayment under the product supply agreement, which mandated minimum purchases of $50,000 per year.  The $110,000 cash payments and $30,000 additional billing satisfied the Company's purchase obligations for 2003, 2004 and 2005. No date had been set for the manufacturing of the product or delivery of the product to the Company. In January 2007, the Company paid $5,000 and entered into an amendment to its agreement that extended the time to pay the $45,000 balance of the 2006 minimum purchase obligation.

            During the quarter ended March 31, 2008, PIB expressed to the Company that it would not deliver the product under the terms of the agreement and that it considered the purchase commitment agreement and patent license agreement to no longer be in effect. The Company has been in discussions with PIB to modify the terms of the agreements. There is no assurance that the Company will be able to renegotiate new terms of the agreement or to reinstate the current agreements. The Company has also been in discussions with alternate providers of product with similar chemical characteristics.

            As a consequence of the notification by PIB, the Company determined that as of December 31, 2007, the carrying value of the asset, Prepayments under product supply agreement, had been impaired and the value of the asset was reduced to $0, with a concurrent charge to Impairment Expense in the amount of $145,000.

Note 5 - Related Party Transactions

Marshall Sterman - President and Chairman

            For the period April 1, 2007 through December 31, 2007, the Company accrued $45,000 as compensation expense for Mr. Sterman's services as President and Chairman. As of December 31, 2007, a balance of $45,000 had been accrued but remained unpaid. In March 2008, the Company issued to Mr. Sterman 6,000,000 shares of its common stock, which was valued at $60,000 as payment of the accrued salary of $45,000 and additional salary of $15,000 through March 31, 2008. For the remainder of 2008, the Company accrued an additional $35,000, which was unpaid as of December 31, 2008 and March 31, 2009.

Steven Preiss - Research Coordinator and Director

            For the period April 1, 2007 through December 31, 2007, the Company accrued, as research and development expense, $45,000 for the services of Mr. Preiss as its research coordinator. Of the $45,000, which was accrued, $35,423 was applied as payment of a loan from the Company of $29,000 with accrued interest on that loan of $6,523. The balance of $9,477 remained accrued but unpaid as of December 31, 2007. In 2008, the Company accrued an additional $25,533 for the research services of Mr. Preiss, which resulted in a balance of $35,000 owed to Mr. Preiss on December 31, 2008 and March 31, 2009.

Note 6 - Secured Note Payable

           On August 22, 2007, the Company issued a one-year, 12% secured convertible note in the principal amount of $15,000. The note was secured by all of the Company's assets and was convertible, prior to maturity, at the option of the holder, into 375,000 shares of the Company's common stock. The issuance of the note was made in reliance on Section 4(2) of the Securities Act of 1933 and was made without general solicitation or advertising. On August 22, 2008, upon maturity of the note, the conversion feature expired and the note was renewed for five months with a maturity date of January 22, 2009, at which time the note was further renewed until March 31, 2009.

Note 7 - Stockholders' Deficiency          

Capital Structure

            Effective June 22, 2007, the Company's Certificate of Incorporation was amended to increase the authorized shares of $0.0001 par value common stock from 30 million shares to 200 million shares. The Company is also authorized to issue 10 million shares of preferred stock. As of March 31, 2009 and December 31, 2008, there were 54,004,176 shares of common stock issued and outstanding.  As of March 31, 2009 and December 31, 2008, no preferred shares had been issued.

Common Stock Issuances

            Issued for Cash

             In August 2008, the Company issued 1,500,000 and 250,000 shares of its common stock for $15,000 and $2,500, respectively. The shares, which are restricted as to transferability, were issued to two accredited investors in private transactions at $0.01 per share. The Company relied upon Section 4(2) of the Securities Act of 1933, as amended, for an exemption from registration.

            Issued for Patent

           On March 24, 2008, the Company issued 10,000,000 shares of its common stock as payment for all rights, title and interest in the pending U.S. Patent for the Hydropatella Implant described above in Note 3 - Patents.  The shares, which are restricted as to transferability, were valued at $0.01 per share, or a total of $100,000, which was representative of the market value at the date of issuance.  The Company relied upon Section 4(2) of the Securities Act of 1933, as amended, for an exemption from registration.          

            Issued for Services

           On March 24, 2008, the Company issued 11,500,000 shares of its common stock as payment for services, of which 6,000,000 shares were issued to the Company's president for $60,000 of accrued compensation; and 5,500,000 shares were issued for $55,000 of consulting services, of which $35,000 had been accrued. The shares, which are restricted as to transferability, were valued at $0.01 per share, or a total of $115,000, which was representative of the market value at the date of issuance.            

           On July 10, 2008, the Company entered into a one-year financial consulting agreement with an investment banking firm. The Company issued 2,000,000 shares of its common stock as consideration for the agreement. The shares, which are restricted as to transferability, were valued at $120,000, or $0.06 per share, which was the last closing price prior to the date of issuance.

            The Company relied upon Section 4(2) of the Securities Act of 1933, as amended, for an exemption from registration for the shares issued for services.        

Note 8 - Going Concern

         The Company's financial statements have been presented on a going concern basis, which contemplates the realization and the satisfaction of liabilities in the normal course of business.  The liquidity of the Company has been adversely affected by losses since inception of approximately $1,200,000, which raises substantial doubt about the Company's ability to continue as a going concern without additional capital contributions and/or achieving profitable operations. 

   ��        Management's plans are to raise additional capital either in the form of common stock or convertible securities and continue research and development and pursue clinical trials to obtain necessary approvals to market its products and to acquire additional patents and licenses for medical and non-medical technologies. There can be no assurance, however, that the Company will be successful in accomplishing its objectives.

Note 9 - Subsequent Events

            On April 13, 2009, the Company issued a total 35,725,000 shares of common stock. Of these, 19,000,000 shares were issued, in lieu of payment of $95,000 cash, for expenses that were included as a liability and reflected in the December 31, 2008 and March 31, 2009 balance sheets as Accrued expenses payable; 1,725,000 shares were issued in payment of a $15,000 secured promissory note payable and interest accrued through March 31, 2009; and the balance of 15,000,000 shares were issued for consulting services, for which $75,000 was accrued as of March 31, 2009.  The issued shares, which are restricted as to transferability, were valued at $0.005 per share, which was the last trade of the Company's common stock prior to issuance. All of the issuances were made in reliance on Section 4(2) of the Securities Act of 1933 and were made without general solicitation or advertising. The recipients represented to the Company that the secu rities were being acquired for investment purposes.   

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations

General

           Aquamer, Medical Corp. ("we," "us," "our," the "Company", the "Registrant" or "Aquamer"), a Delaware corporation, was formed in February 2000 to operate as a medical device company focused on the development and commercialization of three injectable biocompatible products.  The products we are developing consist of a water-based polymer technology utilized as a tissue-bulking agent in the fields of dermatology (AquaDerm), urology/gynecology (AquaGen), and gastroenterology (AquaFlux).  Although we are a development stage company, our products are based on the results of several years of research and development, whereby we are now in the stage of preparing for, and executing on, clinical evaluation milestones.

           AquaDerm has received an Investigational Device Exemption ("IDE") from the U.S. Food and Drug Administration ("FDA") and is undergoing pilot clinical evaluation. This product is being developed for the potential treatment of deep wrinkles, facial scars and various cosmetic plastic surgery procedures such as lip augmentation.  AquaGen has been designed for use as a bulking agent in minimally invasive treatment of stress urinary incontinence, the most common form of urinary incontinence.  AquaFlux is being developed as a bulking agent in the minimally invasive treatment of chronic heartburn or gastroesophogeal reflux disease ("GERD").

           In January 2005, we were acquired by Bellacasa Productions, Inc. ("Bellacasa") in a transaction that was structured as a reverse takeover, whereby former shareholders of Aquamer obtained voting control over Bellacasa upon issuance of 28,504,148 shares of Bellacasa common stock, which represented approximately 78% of the total shares outstanding.  As a result, Aquamer became a wholly owned subsidiary of Bellacasa.

           In August 2006, Bellacasa determined that it was in its best interests to spin off its Aquamer subsidiary pursuant to a stock distribution. Effective March 5, 2007, Bellacasa completed the distribution of the stock of its then wholly owned subsidiary, Aquamer, Inc. to Bellacasa shareholders of record February 2, 2007.  The shares were distributed pro rata on the basis of .721996 shares of Aquamer stock for each share of Bellacasa stock owned on the record date. Fractional shares were rounded up to the next whole share.

            In June 2007, we changed our corporate name from Aquamer, Inc. to Aquamer Medical Corp.

            In March  2008, we acquired all patent rights for the Hydropatella Implant, which pertains to a patella (kneecap) made of a hydrogel, which is durable and wear resistant that can be implanted in a surgical procedure to replace the damaged natural patella of a subject or as part of a component system for a total knee replacement

Business Overview

           Aquamer Medical Corp.  is a clinical development stage company with a platform technology that builds on over ten years of scientific effort.  We intend our water-based injectable products to be utilized as a bulking agent in the respective fields of use. We believe that our products will have competitive advantages pertaining to increased maintenance of efficacy or tissue "bulking," safety, ease of injection and non-cumbersome operational management issues associated with shipping and storage.  Inherent in our technology is its biocompatibility, non-immunogenicity and lack of migration/absorption.  We seek to become a leading provider of minimally invasive injectable modalities for dermatology, urology, gastroenterology and orthopedic surgery.

Technology

           The bulking agent that comprises our initial products involves the use of a polymeric component from the poly-n-vinyl pyrrolidinone (PVP) family, which is recognized for its biocompatibility and extensive clinical use in other Class III (permanent implantable) medical devices.  PVP is a non-toxic, non-metabolized hydrogel that has been approved for use as a plasma volume expander, a plasma detoxifying agent, an orally-ingested diagnostic aid (complex of PVP and iodine), a component of soft contact lenses, a variety of dental applications, a filler for a permanent implantable urological device and as an excipient in the manufacturing of tablets containing a variety of drugs.  The dose of PVP used in our products is minimal; approximately 95% of the injected volume is water contained in the polymer matrix.

           The bulking agent that we have been using was created under two patents owned by Partners in Biomaterials Inc. ("PIB"), an independent third party based in California.  PIB granted us a license to the patents, which expire in May 2009 and July 2010. We have been seeking regulatory approval, so as to commercialize various products. In addition to entering into a patent license agreement with PIB, we also entered into a Product Supply Agreement with PIB, whereby PIB was to supply us with polymer products in accordance with an agreed upon procedure and established price.

            Status of Agreements with PIB 

            During the first quarter of 2008, PIB expressed to us that it would not deliver the committed product under the terms of our agreement and that it considered both the purchase commitment agreement and patent license agreement to no longer be in effect. We have discussed the possibility of a new agreement with PIB and plan to continue discussions with PIB to modify the terms of the agreements. There is no assurance that we will be able to renegotiate a new agreement with PIB. We have also been in discussions with alternate providers of a polymer product with chemical characteristics similar to the PIB materials. We believe, although there can be no assurance, that if necessary, we will be able to acquire rights to use an alternative product that offers both price acceptability and reliability of supply. As a consequence of the notification by PIB, the Company determined that as of December 31, 2007, the carrying value of the asset, Prep ayments under product supply agreement, had been impaired and the value of the asset was reduced to $0, with a concurrent charge to Impairment Expense in the amount of $145,000.

Products in Development

           We are developing the following products designed for use in orthopedic surgery, dermatology, urology, and gastroenterology:

           Orthopedic Surgery

            We plan to exploit our recent acquisition of the patent rights to the Hydropatella Implant.

            When, due to disease or injury, the surfaces of a knee joint become sufficiently disabling and painful (arthritic), these surfaces are commonly replaced using a surgical operation, either in whole or in part by prosthetic implants. A need exists for a patella (kneecap) component that provides greater wear resistance, yet has the capacity to sustain ambulatory tension with strength comparable to that of a healthy patella. A need also exists for a replacement patella that can be used to deliver a therapeutic agent to the knee.

            The invention, which is the subject of the acquired patent rights, relates to an improved patella with improved biocompatible properties such as high surface lubricity, reduced component-to-component wear, and drug delivery capabilities.

            The invention is based, in part, on the discovery that structural elements for joint replacement (e.g., a patella), can be made of a biocompatible material that absorbs an aqueous solution to form a hydrogel. The biocompatible hydrogel has improved structural and biomechanical properties without the problem of disintegrating under stress conditions. In particular, the invention pertains to a patella made of a hydrogel referred to as "hydropatella implant," which provides a durable, wear resistant patella that can be implanted in a surgical procedure to replace the damaged natural patella of a subject or as part of a component system for a total knee replacement.           

           Dermatology

           AquaDerm is targeted at the long-term corrective effects of skin treatment.  AquaDerm addresses conditions of tissue atrophy due to aging, facial wrinkles and depressed scars, as well as soft tissue defects resulting from surgery and inflammatory skin diseases. PVP has infinite molecular weight as a base polymer matrix, which impedes absorption and migration of polymer substrate into the surrounding tissue, thus lengthening the cosmetic effect. Most other injectable materials are suspensions (leading to the absorption of suspension media and migration of suspended particles) or biological in nature (such as collagen, which the body digests). Our product will be injected into the affected areas and filled to the appropriate point, making the defect flush with the surrounding tissue, or in the case of lip augmentation "plumped" to the desired size. Most products in the facial aesthetics/dermatology market today have the common drawback of migration/absorption.  Animal trials and initial human clinical trials indicate longer-term maintenance of results for AquaDerm .

           Urology

           AquaGen has been developed for use as a bulking agent in the minimally invasive treatment of stress urinary incontinence ("SUI"), the most common form of urinary incontinence.  AquaGen is injected into the urethra/bladder junction (urinary sphincter muscle), reinforcing the muscle tissues around the bladder neck, the "bulking" of the closure mechanism that prevents accidental urine leakage.

           SUI relates to the accidental or unintentional leakage of urine. It afflicts, worldwide, more than 25 million people, 85% of whom are female.  Incontinence is a significant health issue, with millions experiencing complications related to incontinence at some point in their lives.  More than half of all women will suffer from SUI during their lifetime. The "stress" in stress urinary incontinence is not associated with mental or emotional stress, but rather with increases in physical stress or pressures exerted on the body. One cause of stress incontinence is a condition called Intrinsic Sphincter Deficiency or ISD. This condition is present when the urinary sphincter (the muscle surrounding the urethra that controls urine flow) is not strong enough to close the bladder neck. This open bladder neck allows urine to leak out whenever there is an increase in intra-abdominal pressure.

           Gastroenterology

           AquaFlux has been designed for use as a bulking agent in the minimally invasive treatment of chronic heartburn or gastroesophageal reflux disease ("GERD").  AquaFlux is utilized as a bulking agent to strengthen and build the sphincter muscle at the base of the esophagus through a minimally invasive procedure, reinforcing and augmenting the closure mechanism that prevents reflux or gastric heartburn.

           GERD is a condition whereby gastric contents from the stomach rise into the esophagus, known as reflux. In a normal stomach, the sphincter at the bottom of the esophagus (lower esophageal sphincter, or LES) opens to let food pass into the stomach and then closes to prevent the gastric contents in the stomach from rising into the esophagus. When a patient suffers from GERD, the lower esophageal sphincter relaxes at random times, allowing gastric contents from the stomach to reflux into the esophagus.  Afflicting 7% to 10% of the U.S. adult population, GERD is different from regular heartburn in that it can have serious health consequences beyond the persistent burning pain of heartburn. It can lead to more serious medical problems such as difficulty swallowing (dysphagia), painful swallowing (odynophagia), narrowing of the esophagus (strictures), and Barrett's esophagus, believed to be a premalignant lesion. Chronic hoarseness or laryngi tis, respiratory problems (e.g., coughing, wheezing, asthma, recurrent pneumonia), and non-cardiac chest pain are sometimes associated with GERD. GERD patients may need to sleep sitting up or avoid bending over to prevent fluids from coming up from the stomach.

Market Opportunity

Orthopedic Surgery

           According to the Journal of Bone & Joint Surgery, Volume 89-A, Number 12, December 2007

           * The upward trends in the utilization of total hip and knee replacement between 1969 and 2003 detail the national need for these procedures.

           * The age and gender-adjusted incidence per 100,000 person-years significantly increased from 1971 to 2003, representing a greater than 400% increase in the incidence of total knee replacement (as compared with a 55% increase in total hip replacement during the same period).

           * The incidence increased with the patient's age for total knee replacement, except in patients more than eighty years old.

           * The largest percentage increase was in patients less than fifty years old.

           * There was a significant increase in the proportion of total knee replacements performed for the treatment of osteoarthritis, from 51% during 1971-1975 to 92% in 2000- 2003.

           * It is projected that the number of primary total knee replacements will increase from 450,400 to 3.48 million by 2030, compared with a growth in the number of primary total hip replacements from 208,600 to 572,100 during the same interval.

           * The volume of revision total knee replacements is projected to grow from 38,300 in 2005 to 268,200 in 2030 (a 600% increase).

           * The continued and rapid growth of utilization of total knee replacement reflects a trend that will require additional resources in the future.

           * This dramatically increased demand for replacement procedures will require additional discussions regarding the distribution of economic resources; the allocation of surgeons, facilities and resources; and improved operative efficiency.

           * Additionally, given the growth in the number of procedures in the younger, more active patients, implant longevity will require further enhancement.

           To date, devices currently used to correct patella injuries, total and unicompartmental knee replacement, typically use a patella component formed of a thermoplasit or elastomer, both of which can become liable and disintegrate under stress. Accordingly, a rapidly growing need exists for a patella component that provides greater wear resistance, yet has the capacity to sustain ambulatory tension with strength comparable to that of a healthy patella.

           Like any surgery, knee joint replacement carries certain life-threatening risks, such as infection, blood clots and complications from anesthesia. Infection is an ongoing risk for all people with joint replacements. Not only can it occur in the hospital, but it can happen years later if bacteria travel through the bloodstream to the replacement area. In the rare case that an infection spreads to the new joint and does not clear up with antibiotic treatment, the joint must be replaced. This usually requires two surgeries--one to remove the infected joint and another surgery later to insert the new joint. Between surgeries, the infection is treated with antibiotics. Therefore, a need also exists for a replacement patella that can be used as a vehicle to deliver a localized therapeutic agent, such as a pain relieving agent, antibiotic, anti-clotting agent, growth factor or anti-inflammatory. The hydrogel composition of the "hydropatella implant ," is capable of meeting this need by eluting the therapeutic agent at a controlled rate or dose regimen over time.

Dermatology

           The market for aesthetic facial products has expanded at an estimated annual rate in excess of 35% since 2000. The range of products encompasses invasive and non-invasive treatment modalities to remedy aging and defective soft tissues of the face.  Products such as Botox® and collagen (Zyderm® and Zyplast®) are currently  "the gold standards" used by plastic surgeons and dermatologists in an office environment and now even by consumers under medical guidance (Botox® injections can be administered within a patient's home).  As the average age of the population increases, interest in skin rejuvenation and correction has increased.  More than 8.3 million surgical and non-surgical cosmetic procedures were performed in 2003, including rhytidectomy (facelift), liposuction, laser resurfacing, chemical peeling and soft tissue augmentation (American Society for Aesthetic Plastic Surgery). In addition, more than one million patients undergo surgery each year for skin cancer in the United States alone. Many of these lesions are resected from the face and necessitate reconstruction. As a result of the number of patients affected, there is great interest in filling substances for the skin for both cosmetic and reconstructive purposes.

Urology

           Urinary incontinence afflicts more than 25 million people worldwide, 85 percent of whom are female.  The condition may have negative emotional, social and hygienic consequences. The Agency for Health Policy and Research (AHCPR), a division of the Public Health Service, U.S. Department of Health and Human Services, estimates that urinary incontinence affects approximately 13 million people in the United States, of which 85% or 11 million are women. The same agency estimates the total cost (utilizing all management and curative approaches) of treating incontinence of all types in the United States as $15 billion.  Urethral bulking agents ("UBA") are currently recommended by AHCPR as first-line treatment for women with ISD who do not have coexisting urethral hypermobility. Male patients can also benefit from a urethral bulking agent procedure, which is recommended as a first-line surgical treatment for men with ISD, according to the A gency for Health Policy and Research. According to the American College of Surgeons, there are approximately 400,000 prostate surgeries performed each year in the United States, and up to 20% of these men develop incontinence following the procedure. Additionally, urinary incontinence can result in a substantial decrease in a person's quality of life, and it is often the main reason a family may move an elderly relative into nursing home care.  We expect the incidence of urinary incontinence will rise as the percentage of elderly people continues to increase.  The Agency for Healthcare Research and Quality ("AHRQ") reported that vesicoureteral reflux (VUR) is primarily a pediatric concern, with a prevalence estimated to be as high as 3% of the U.S. pediatric population. Approximately 15,000 surgical procedures are performed per year to address this VUR issue. Patients with VUR grades 1 through 4 in this population are candidates for minimally invasive surgery using a bulking agent. Globally, the us e of a bulking agent to correct the VUR condition can reduce patient costs related to continued use of antibiotics for treatment of chronic urinary tract infections, which can lead to more serious related complications.

Gastroenterology

           There is a large market for the treatment of chronic heartburn or gastroesophogeal reflux disorder.  More than 60 million Americans suffer from heartburn symptoms at least once a month.  Roughly 25 million or 4% to 7% of Americans, suffer from reflux on a daily basis.  PPIs or Proton Pump Inhibitors are the current standard in treatment.

           While the market opportunities are attractive, potential investors must be aware additional funds will be required to carry out more clinical trials and seek regulatory approvals.

Intellectual Property

            Hydropatella Implant Patent Rights

            On March 24, 2008, we purchased all rights, title and interest in the pending U.S. Patent for the Hydropatella Implant, identified as Attorney Docket No. 105554-2, which application was filed in the United States Patent and Trademark Office on September 30, 2005, as Application No. 60/722,277.

Clinical Trials

           We have received an approved Investigational Device Exemption ("IDE") from the FDA to conduct a pilot clinical trial study of the AquaDerm product. The study enrolled 20 patients at one site and all patients completed their follow-up per the protocol. No additional patients are expected to be enrolled at this site. Both our company and the principal study investigator concluded that the results of this feasibility study to date demonstrate the device is potentially both safe and efficacious, warranting further study under this IDE in a multi-center trial. Additional funds will be required to do more clinical trials and seek regulatory approval to market the product.

Government Regulation

           The potential production and marketing of our products and our ongoing research and development, pre-clinical testing and clinical trial activities are subject to extensive regulation and review by numerous governmental authorities both in the United States and abroad.   Delays in or rejection of FDA or other government entity approval of our products may also adversely affect our business.   AquaDerm has received an Investigational Device Exemption ("IDE") from the U.S. Food and Drug Administration ("FDA") and is undergoing pilot clinical evaluation.

           Periodically, legislative or regulatory proposals are introduced that could alter the review and approval process relating to medical devices. It is possible that the FDA will issue additional regulations further restricting the sale of our present or proposed products. Any change in legislation or regulations that govern the review and approval process relating to our current and future products could make it more difficult and costly to obtain approval for new products, or to produce, market, and distribute existing products.

           If national healthcare reforms, or other legislation or regulations are passed that impose limits on the number or type of allowable medical products or restrict a physician's ability to select specific products used in patient procedures, such changes could have a material adverse effect on the demand for our products.

Research and Development

           During 2008, our research and development expenses totaled $25,524, all of which was for services rendered by Steven Preiss, our research coordinator. In the first quarter of 2009, we did not expend cash for our research and development expense. If we are able to raise the necessary capital, we expect to substantially increase our expense for research and development in the second-half of 2009 and in 2010.

Acquisition of Intellectual Property

            We are actively pursuing the acquisition of additional patents and licenses for promising and innovative technologies in medical and non-medical fields that have the potential to generate revenues in a relatively short time period. There is no assurance that we will able to complete the acquisition of any such intellectual property.

Employees

           Other than our president, Marshall Sterman, who devotes such time as necessary to our operations, we do not have any employees. We utilize independent contractors, including Mr. Preiss, and consultants from time to time to assist us with our compliance requirements.

RESULTS OF OPERATIONS

           The following discussion and analysis provides information, which our management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read in conjunction with the financial statements and related notes that appear elsewhere in this report.

           The financial statements included in this report are those of Aquamer Medical Corp. for all historical periods.    

Three months ended March 31, 2009 and March 31, 2008 and since inception

           Sales - We did not have any sales during the three-month periods ended March 31, 2009 and March 31, 2008. Aquamer is a development stage company and has not had any revenue since its incorporation in February 2000.

           Costs and Expenses - Total expenses for the three months ended March 31, 2009 were $77,364, compared to $66,630 in the three months ended March 31, 2008.

            Expenses in the first quarter of 2009 consisted of consulting expense, $75,000, all of which was accrued and paid in stock in April 2009, in lieu of cash; audit expense, $1,000; interest expense, $450; and miscellaneous expenses, $914.

           Expenses in the first quarter of 2008 consisted of accrued officer's compensation, $15,000, accrued compensation for research and development, $15,000; consulting expense, $35,000, of which $15,000 was accrued; interest expense, $450; and miscellaneous expenses, $1,180.

           Costs and expenses since inception, as a development stage enterprise, were $1,244,466. These costs and expenses consist of Aquamer's costs and expenses from its date of incorporation, February 4, 2000.

           Net Loss - Net loss, before taxes, for the three months ended March 31, 2009 was $77,364. Net loss before taxes, for the three months ended March 31, 2008 was $66,630.           

           We have not reduced our net loss, for the three months ended March 31, 2009 or for the three months ended March 31, 2008, by any tax benefit, consequently, for both periods, our net loss was the same before and after taxes.

           Net loss per share for the three months ended March 31, 2009 was $nil (less than $0.005) per share. Net loss per share for the three months ended March 31, 2008 was also $nil.  Per share net losses for the first fiscal quarters of 2009 and 2008 were based on 54,004,176 and 30,644,286 weighted average common shares outstanding, respectively.

           Since inception, our losses through March 31, 2009 totaled $1,209,775.

Liquidity and Capital Resources

           As of March 31, 2009, our cash balance was $83.

           As of March 31, 2009, our liabilities, all of which are current liabilities or due in less than one year, totaled approximately $294,000. The liabilities consist primarily of accounts payable for professional services of approximately $74,000; accrued expenses for officer's salary and professional and consulting services, approximately $200,000; and a secured note, including accrued interest, approximately $17,000. 

            On April 13, 2009, we converted approximately $187,000 of our liabilities into common stock. Previously, in March 2008, we had converted $84,000 of accrued expenses payable into common stock.   We intend to meet our cash needs for the next 12 months by the sale of securities or borrowings. We need to raise additional capital in order to pursue our business plan, and the required additional financing may not be available on terms acceptable to us, or at all. No binding commitment for an investment of funds in our company has been made, and a number of factors beyond our control may make any future financings uncertain.  Although, we believe that becoming an independent public company and having our common stock approved for trading on the OTC Bulletin Board, has enhanced our capital raising ability, there is no assurance that we will be able to sell our securities or borrow funds to pursue our business objectives. We will require the infusion of capital to sustain planned growth and continue the process for regulatory approval of the Aquamer products. Failure to raise enough capital to continue clinical trials may hold a significant risk to our shareholders.

           During 2009 and 2010, we plan to initiate clinical trials for the Hydropatella Implant, expand enrollment in our clinical trial for dermatology, file for an Investigational Device Exemption, initiate a small clinical trial for stress urinary incontinence, and file for an Investigational Device Exemption for gastroesophageal reflux disease.  The cost to carry out these activities will be approximately $1,500,000 during the two-year period.  Depending on when the activities commence in 2009, the approximate cost for the fiscal year ending December 31, 2009 will be $400,000. We plan to raise the necessary funds through investment banks and/or private investors. There can be no assurance, however, that we will be successful in raising the necessary capital.

            We are actively pursuing the acquisition of additional patents and licenses for promising and innovative technologies in medical and non-medical fields that have the potential to generate revenues in a relatively short time period. There is no assurance that we will able to complete the acquisition of any such intellectual property.

Ability to Continue as a Going Concern and Plan of Operation

           Our financial statements, which are included in this Form 10-Q, have been presented on a going concern basis, which contemplates the realization and the satisfaction of liabilities in the normal course of business.  Our liquidity has been adversely affected by losses of approximately $1,200,000 since Aquamer's incorporation date, February 4, 2000, which raises substantial doubt about our ability to continue as a going concern without additional capital contributions and/or achieving profitable operations.  Our management's plan includes raising additional capital either in the form of common stock or convertible securities, continuing our research and development efforts and pursuing clinical trials to obtain the necessary approvals to market our products, and to acquire additional patents and licenses in both medical and non-medical fields. There can be no assurance, however, that we will be successful in accomplishing our objecti ves.

Capital Expenditures

           In the year ended December 31, 2008, we did not make any capital expenditures and we do not expect to make significant capital expenditures in 2009.

Acquisitions

           We are reviewing various opportunities to acquire technology assets to add to our intellectual property portfolio. There is no assurance that we will be successful in completing an acquisition or that we will able to commercialize our acquisitions. In July 2008, we retained Meyers Associates, LP, an investment banking firm, to assist us in pursuing acquisitions.

Item 3 - Quantitative and Qualitative Disclosures about Market Risk

               Not applicable.

Item 4T - Controls and Procedures

            Evaluation of disclosure controls and procedures

            We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2009. This evaluation was accomplished under the supervision and with the participation of our chief executive officer, principal executive officer, chief financial officer/principal accounting officer who concluded that our disclosure controls and procedures are not effective to ensure that all material information required to be filed in the quarterly report on Form 10-Q has been made known to him.

            Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

            Based upon an evaluation conducted for the period ended March 31, 2009, Marshall Sterman who served as our Chief Executive Officer and Chief Financial Officer (which duties include that of principal accounting officer) as of March 31, 2009 and as of the date of this Report, has concluded that as of the end of the period covered by this report, we have identified the following material weakness of our internal controls: 

            ·     Reliance upon independent financial reporting consultants for review of critical accounting areas and disclosures and material non-standard transactions.  

             ·    Lack of sufficient accounting staff which results in a lack of segregation of duties necessary for a good system of internal control.

            In order to remedy our existing internal control deficiencies, as soon as our finances allow, we will hire a Chief Financial Officer who will be sufficiently versed in public company accounting to implement appropriate procedures for timely and accurate disclosures 

            Changes in internal control over financial reporting  

            We have not yet made any changes in our internal control over financial reporting that occurred during the period covered by this report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

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

            We did not issue any shares of common stock or preferred stock in the three months ended March 31, 2009.

            As previously reported in our April 15, 2009 Form 10-K filing, we issued, on April 13, 2009, a total 35,725,000 shares of common stock. Of these, 19,000,000 shares were issued, in lieu of payment of $95,000 cash, for expenses that were included as a liability and reflected in our March 31, 2009 balance sheet as Accrued expenses payable; 1,725,000 shares were issued in payment of a $15,000 secured promissory note payable and interest accrued through March 31, 2009; and the balance of 15,000,000 shares were issued for consulting services, for which $75,000 was accrued as of March 31, 2009.  The issued shares, which are restricted as to transferability, were valued at $0.005 per share, which was the last trade of the Company's common stock prior to issuance.

             None of the above shares have been registered under the Securities Act of 1933, as amended (the “Act”), and therefore, may not be transferred in the absence of an exemption from registration under such laws and will be considered "restricted securities" as that term is defined in Rule 144 of the Act, and may be sold only in compliance with the resale provisions set forth therein. .We relied upon Section 4(2) of the Act, for an exemption from registration.    

ITEM 6 – EXHIBITS

Exhibit 31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Aquamer Medical Corp.
	(Registrant)
By:	/s/ Marshall Sterman
	Marshall Sterman President and Chief Executive Officer

Date: March 19, 2009