ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Results of Operations for the Three Months Ended March 31, 2008 and March 31, 2007.

The net loss of $458,297 for the three months ended March 31, 2008 was higher by $190,656 compared to last year due largely to general and administrative expenses which increased by $291,758. Increased salaries and consulting fees accounted for a large part of this increase. The increase in general & administrative was partially offset by the increase in gross profit of $77,390.

Revenues

Revenues of $348,384 during the three months ended March 31, 2008 increased by $158,004 or 82.99% from last year. This increase can be attributed to higher bulk tag, reader and revenues from the recently acquired wholly owned subsidiary, Pneu-Logic. These sales increases are attributed to increased sales focus on animal shelters and broadening of sales of readers and sale of newly developed RFID reader, PR500.

The Company is actively promoting the ISO microchip throughout Canada and Asia. Of the total revenues earned of $348,384 for the three months ended March 31, 2008, $145,690 or 41.82% were from our companion animal/biological sciences division in Canada and the remainder $202,694 or 58.18% were comprised from our ultra high frequency (UHF) division with sales throughout the world, the newly acquired Pneu-Logic in UK.

Cost of Revenues

Cost of Revenues of $201,515 for the three months ended March 31, 2008 increased by $78,030 or 63.19% over same period in the previous year. The increase in Cost of Revenues is attributed to higher sales levels and slight changes in the product sales mix to higher margin items. Gross profit of $146,869 for the current period increased by $79,974 from the corresponding three month period ending March 31, 2007. The gross profit margin increased from 35.14% to 42.16%, reflecting the slight change in product mix.

Research and Development

Research and development expenses of $12,930 for the three months ended March 31, 2008 decreased by $35,842 or 73.50% from last year's comparable period. This decrease is in part due to the fact that the research and development expenses for PR500 completed.

General, administrative and selling expense

For the three months ended March 31, 2008, general and administrative and selling expenses of $591,363 were higher by $291,758 or 97.4% than last year due to a higher payroll costs as a result of addition of

Pneu-Logic employees, higher non-cash compensation expense, increased investor relations and public relation expenses and higher cost due to consolidation of the new subsidiary, Pneu-Logic.

Additionally, a team of four employees at Pneu-Logic in UK will be expanding their sales efforts in Europe, China, India and other Asian countries for all the product line.

Other income (expense)

During the three months ended March 31, 2008, interest expense was $873 as compared to income of $92 during the same period last year.

Liquidity and Capital Resources

As at March 31, 2008, we had cash and cash equivalents of $103,615.

During the three months ended March 31, 2008, net cash used in operating activities of $307,361 was higher by $119,369 or 63.5% as compared to the quarter ended March 31, 2007. The increase in cash used by operating activities during 2008 resulted primarily from the increased net loss and the buildup of accounts receivable, offset in part by the increases in non-cash compensation and accounts payable.

During the three months ended March 31, 2008, net cash used by investing activities of $13,989 compared to $3,567, an increase of $10,422 from the three months ended March 31, 2007. Cash used by investing activities resulted primarily from our purchase of office furniture and equipment, computer hardware, and software. We have no commitments for future purchases of capital assets.

During the three months ended March 31, 2008, net cash provided by financing activities of $372,158 was higher by $322,346 or 647.13% as compared to the three months ended March 31, 2007. The higher cash generated is a result of higher proceeds from sales of stock offset by the principal payments on the balance due to the Pneu-Logic seller.

Our internal and external sources of liquidity have included cash generated from the exercise of options and warrants, proceeds raised from subscription agreements and private placements, and advances from related parties. We are currently not aware of any trends that are reasonably likely to have a material impact on our liquidity. We are attempting to increase the sales to raise much needed cash for the remainder of the year, which will be supplemented by our efforts to raise cash through the issuance of equities securities. It is our intent to secure a market share in the livestock and inanimate identification industry which we feel will require additional capital over the long term to undertake sales and marketing initiatives, further our research and development, and to manage timing differences in cash flows from the time product is manufactured to the time it is sold and cash is collected from the sale. Our capital strategy is to increase our cash balance through financing transactions, including the issuance of debt and/or equity securities.

Additionally, we will require additional cash resources of $180,000 to fund the remainder and unpaid part of our acquisition of Pneu-Logic which we expect to fund through the issuance of stock and from funding through the sale of stock.