Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations

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 annual report are those of Aquamer Medical Corp. for all historical periods.

Years ended December 31, 2008 and December 31, 2007 and since inception

Sales - We did not have any sales during the years ended December 31, 2008 and 2007. 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 year ended December 31, 2008 were $289,470 compared to $315,358 in the year ended December 31, 2007. Expenses in 2008 included general and administrative expenses, $262,146; research and development, $25,524; and interest expense, $1,800.

The major components of 2008 general and administrative expenses were professional and consulting fees, $206,500, of which $140,000 was paid in stock in lieu of cash in 2008 and $50,000 was accrued, but unpaid, at year-end; and officer's salary, $50,000, all of which was accrued, but unpaid, at year end. Research and development expenses of approximately $26,000, were also accrued by us, but unpaid.

In 2007, the bulk of the total expenses was for professional and consulting fees, approximately $71,000; officer's salary, $45,000; research and development expenses of $45,000 and impairment expense of $145,000, which resulted from our write-off, as of year end, of product under a supply agreement.

Costs and expenses since inception, as a development stage enterprise, were $1,167,102. 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 year ended December 31, 2008 was $289,470. Net loss before taxes, for the year ended December 31, 2007 was $315,358.

Since inception, our losses, through December 31, 2007, have totaled $1,132,411.

We have not reduced our net loss, for the fiscal year ended December 31, 2008, or for the fiscal year ended December 31, 2007, by any tax benefit, consequently, for both years, our net loss was the same before and after taxes.

Net loss per share for the year ended December 31, 2008, was $0.01 per share. Net loss per share for the year ended December 31, 2007, was also $0.01. Per share net losses for 2008, and 2007, were based on 47,005,236 and 28,525,910 weighted average common shares outstanding, respectively.

Liquidity and Capital Resources

As of December 31, 2008, our cash balance was $397.

As of December 31, 2008, our liabilities, all of which are current liabilities or due in less than one year, totaled $216,628. The liabilities consist of accounts payable for professional services of approximately $71,000; accrued expenses for officer's salary and professional and consulting services, approximately $128,000 and a secured promissory note, including accrued interest, approximately $18,000.

On April 13, 2009, we converted $95,000 of accrued expenses payable 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-K, 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 $1,132,000 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 objectives.

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.

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