PHOENIX MEDICAL SOFTWARE, INC. - FORM 10-Q

Attached files

file	filename
EX-31.2 - CERTIFICATION - PHOENIX MEDICAL SOFTWARE, INC.	ex31two.htm
EX-31.1 - CERTIFICATION - PHOENIX MEDICAL SOFTWARE, INC.	ex31one.htm
EX-32.1 - CERTIFICATION - PHOENIX MEDICAL SOFTWARE, INC.	ex32one.htm

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2009

[ ] TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934

From the transition period from ___________ to ____________.

Commission File Number 000-51750

TRIPLE A MEDICAL, INC.

(Exact name of small business issuer as specified in its charter)

Nevada	20-4846807
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

604 Creekview, Ovilla, Texas 75154

(Address of principal executive offices)

(800) 843-8179

(Issuer's telephone number)

N/A

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

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:. Yes [ X ] No [ ].

Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” ”accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

	Large Accelerated Filer [ ]		Accelerated Filer [ ]

	Non-Accelerated Filer [ ]		Smaller Reporting Company [X]

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

As of November 11, 2009 there were 14,050,500 shares of Common Stock of the issuer outstanding.

TABLE OF CONTENTS

	PART I FINANCIAL STATEMENTS

Item 1	Financial Statements	3

Item 2	Management's Discussion and Analysis or Plan of Operation	9

	PART II OTHER INFORMATION

Item 1	Legal Proceedings	16
Item 2	Changes in Securities	16
Item 3	Default upon Senior Securities	16
Item 4	Submission of Matters to a Vote of Security Holders	16
Item 5	Other Information	16

TRIPLE A MEDICAL, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(Unaudited)

ASSETS
	September 30, 2009			December 31, 2008
CURRENT ASSETS:
Cash	$	22,923		$	47,954
Accounts receivable, net of allowance for doubtful accounts of $95,799 in 2009 and 2008		90,965			22,083

Total current assets		113,888			70,037

Computer equipment, net		8,897			15,057
Developed software, net		228,649			286,035

TOTAL ASSETS	$	351,434		$	371,129


LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	108,701		$	95,140
Line of credit		39,803			-
Short-term debt		62,050			40,398
Total Current Liabilities		210,554			135,538

Commitments and contingencies		-			-

STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value, 20,000,000 authorized,
-0- issued and outstanding		-			-
Common stock, $0.01 par value, 50,000,000 authorized,
14,050,500 and 14,050,500 issued and outstanding, respectively		14,051			14,051
Additional paid-in-capital		1,769,697			1,655,697
Accumulated deficit		(1,669,868	)		(1,434,157	)
Total stockholders’ equity		140,880			235,591

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	351,434		$	371,129

See accompanying summary of accounting policies and notes to consolidated financial statements.

TRIPLE A MEDICAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2009 and 2008
(Unaudited)



	Three Months Ended		Three Months Ended			Nine Months Ended			Nine Months Ended
	September 30, 2009		September 30, 2008			September 30, 2009			September 30, 2008
REVENUE	$	256,599	$	37,605		$	647,319		$	458,461

OPERATING EXPENSES:
Depreciation and amortization		21,181		7,061			63,545			21,182
Selling, general and administrative		177,570		224,954			819,499			823,458
Software development costs		-		7,582			-			8,810
Total operating expenses		198,751		239,597			883,044			853,450
Income (loss) from operations		57,848		(201,992	)		(235,725	)		(394,989	)
OTHER INCOME
Interest income		3		77			14			2,283
Net income (loss)	$	57,851	$	(201,915	)	$	(235,711	)	$	(392,706	)

Basic and diluted weighted average shares outstanding		14,050,500		14,050,500			14,050,500			13,992,734

Basic and diluted net income (loss) per share	$	0.01	$	(0.01	)	$	(0.02	)	$	(0.03	)

See accompanying summary of accounting policies and notes to consolidated financial statements.

TRIPLE A MEDICAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2009 and 2008
(Unaudited)

	Nine Months Ended			Nine Months Ended
	September 30, 2009			September 30, 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(235,711	)	$	(392,706	)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization		63,546			21,182
Stock issued for services		-			15,000
Imputed rent		-			2,000
Write-off of subscription receivable		2,000			-
Change in operating assets and liabilities:
Accounts receivable		(68,882	)		(97,919	)
Other receivables		-			(19,021	)
Prepaid expenses and other current assets		-			29,363
Accounts payable and accrued expenses		13,561			(35,295	)
NET CASH USED IN OPERATING ACTIVITIES		(225,486	)		(477,396	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock		-			136,249
Payments on line of credit		(595	)		-
Advances from shareholder		79,050			-
Payments to shareholder		(17,000	)		-
Contributed capital		139,000			137,000
NET CASH PROVIDED BY FINANCING ACTIVITIES		200,455			273,249

NET DECREASE IN CASH		(25,031	)		(204,147	)
CASH, BEGINNING OF PERIOD		47,954			270,906
CASH, END OF PERIOD	$	22,923		$	66,759

NON-CASH TRANSACTIONS
Common stock issued for subscription receivable	$	-		$	2,000
SUPPLEMENTAL DISCLOSURES
Interest paid	$	-		$	-
Income taxes paid	$	-		$	-

See accompanying summary of accounting policies and notes to consolidated financial statements.

TRIPLE A MEDICAL, INC.

Notes to the Consolidated Financial Statements

September 30, 2009

NOTE 1--BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements of Triple A Medical, Inc. (“Triple A”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the rules and regulations of the Securities and Exchange Commission. They do not include all information and notes required by U.S. generally accepted accounting principles for complete financial statements. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes contained in Triple A’s Annual Report on Form 10-K filed on April 15, 2009 for the year ended December 31, 2008.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented have been included. The results of operations for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the full year.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Accounting Policies

Customer Deposits

Customer deposits reflect payments received from customers prior to service being rendered.

NOTE 2--STOCK BASED COMPENSATION

Triple A adopted ASC 718, on January 1, 2008. ASC 718 requires companies to measure the cost of employee services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. We account for non-employee share-based awards in accordance with ASC 505-50, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquisition, or in Conjunction with Selling, Goods or Services.” During the three and nine months ended September 30, 2009 Triple A did not issue shares for services. During the three month period ended September 30, 2008 Triple A did not issue any shares for services and issued 30,000 shares valued at $15,000 in the three months ended March 31, 2008.

NOTE 3--GOING CONCERN

Triple A's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Triple A has recurring losses and an accumulated deficit. Additionally, Triple A has incurred recurring deficits in cash flows from operating activities.

Triple A's ability to continue as a going concern is dependent upon its ability to successfully market and implement its developed software product and to achieve profitable operations. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.

NOTE 4--RELATED PARTY TRANSACTIONS

In order to fund the development of the software, Triple A entered into an ‘Investment and Net Revenue Agreement’ with Phoenix Ortho, LLC (ORTHO), an entity controlled by a relative of the President of Triple A. In connection with this agreement, ORTHO provided Triple A $745,000 during 2006, $108,000 in 2007, $244,000 in 2008, and $139,000 during the nine months ended September 30, 2009. This cash is reflected as additional paid-in capital as of September 30, 2009, and December 31, 2008. In exchange for this contributed capital, Triple A provided ORTHO with an income participation interest in its operations. The terms of this agreement require Triple A to pay ORTHO 33.1% of the net revenues generated by the business in the immediately preceding month.

In addition, office space was contributed by related parties from January 1 through March 31, 2008 rent-free. Two thousand of expense has been imputed related to this office space in the first quarter of 2008. During the nine months ended September 30, 2009, the Company paid a related party $45,000 for office space rent.

On January 16, 2009 and February 2, 2009, Triple A borrowed an aggregate of $40,000 in the form of short term debt from Paul McCune, President of Triple A. On June 16, 2009, Triple A borrowed an additional $20,000 in the form of short term debt from Paul McCune. The loan has no definitive repayment terms. On September 30, 2009 the Company borrowed an additional $19,050 and had paid back $17,000 during the three month period ending September 30, 2009. The balance at September 30, 2009 is $62,050.

NOTE 5-RECENTLY ADOPTED ACCOUNTING PROUNCEMENTS

In 2009, the FASB issued the following guidance:

FASB ASC 825-10-65-1: Interim Disclosures about Fair Value of Financial Instruments.

ASC 320-10-65-1: Recognition and Presentation of Other-Than-Temporary Impairments.

FASB ASC 820-10-35: Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.

The following authoritative standards are not yet integrated into the Codification:

SFAS No. 166: "Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140"

SFAS No. 167: "Accounting for Transfers of Financial Assets"

Management has reviewed these new standards and believes that they will have no material impact on the financial statements of the Company.

In May 2009, the FASB issued new accounting guidance for the disclosure of subsequent events at ASC 855, which establishes general standards for accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. The pronouncement requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, whether that date represents the date the financial statements were issued or were available to be issued. ASC 855 is effective with interim and annual financial periods ending after June 15, 2009. Management is currently evaluating the impact of the adoption of ASC 855 but does not expect the adoption of ASC 855 to impact the Company’s results of operations, financial position or cash flows.

In July 2009, the FASB issued new guidance relating to the “FASB Accounting Standards Codification” at ASC 105, as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards are superseded as described in ASC 105. All other accounting literature not included in the Codification is nonauthoritative. Management is currently evaluating the impact of the adoption of ASC 105 but does not expect the adoption of ASC 105 to impact the Company’s results of operations, financial position or cash flows.

NOTE 6 – STOCKHOLDERS’ EQUITY

In the first quarter of 2008, the Company received $2,000 for subscription receivable. The $2,000 was written-off in September 2009 as the client no longer expected to receive the amount.

NOTE 7 – RECLASSIFICATION

Certain 2008 amounts have been reclassed to agree with the 2009 classifications.

NOTE 8 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through November 11, 2009 which is the date the consolidated financial statements were issued.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

This report contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. The Company’s actual results could differ materially from those set forth on the forward looking statements as a result of the risks set forth in the Company’s filings with the Securities and Exchange Commission, general economic conditions, and changes in the assumptions used in making such forward looking statements.

General

The Company was founded to create electronic healthcare software applications. The initial development is an Electronic Health Record (EHR), specifically designed to meet the needs of orthopedic physicians. For the past four years, our President, Morgan McCune, has worked directly with dozens of orthopedic physicians in more than 40 states. He has reviewed orthopedic clinical research and extensively surveyed reference materials. Based upon the research, Mr. McCune created a database with a graphical interface to assist orthopedic physicians with the documentation of the patient encounter.

The Market

Phoenix Ortho is participating in an $18 billion market for Electronic Health Records (EHR). The Orthopedics market approaches $2 billion. There are more than 20,500 board certified orthopedists and 12,872 orthopedic group practices. Research indicates that this market is less than 10% penetrated. Recent surveys indicate that 58% of medical practices are looking at purchasing an EHR in the next two years. In 2005 the average orthopedic EHR sale was $171,000. (2001 AAOS Census, 2004 MGMA Survey) Recent growth rate in new sales has averaged about 30%. We expected this growth rate will accelerate sharply over the next two years.

Keys to Success

Focus: We believe focus is the essential ingredient to successful EHR development and deployment. Phoenix Ortho is unique in its extensive experience and singular focus on orthopedics. By focusing on one specialty, we can avoid the wholesale generalities that have plagued EHR vendors and frustrated their orthopedic clients. Phoenix Ortho understands the unique requirements of orthopedic physicians. Focus promotes the creation of relevant content and specialty specific application functionality. Content relevance is a significant factor in physician adoption.

In mid-2007 we began marketing our new orthopedic EHR software. The new project was focused on resolving the key problems that have historically posed barriers to adoption, successful implementation, and client satisfaction. These obstacles can be grouped together in four categories; Product Functionality, Product Implementation, Product Support, and Product Acquisition Cost.

Product Functionality: The software will establish new standards for ease of use, efficiency, stability, and availability facilitating end user adoption. The software is designed and scaled specifically for the pen tablet environment. We believe the pen tablet is the device of choice for EHR end users. Our development will utilize input tools such as sliders, combo boxes, role over images and other custom designed tools to provide a truly keyboard free interface. Other tablet input options such as “Pen and Ink” and “Voice to Text” will be available as needed to capture representative content. The ODClient will improve stability, performance, and availability by utilizing .NET automatic versioning and auto-recovery from deadlock errors and memory leaks. Advanced compilation and caching techniques substantially lower CPU utilization. The ODClient (smart client) will support both disconnected and low bandwidth clients supporting end user mobility and minimizing the frustration of “Systems Down”.

Product Implementation: We have developed an orthopedic, client focused implementation methodology we call the “AAA” implementation plan. This plan focuses on the three critical aspects of implementation; Assessment, Adoption, and Adaptation. All implementations will begin with Assessment. During the assessment phase the unique needs of the end users are identified. Each user is profiled to determine their needs and potential road blocks to success. The physicians are identified as Champions, Contenders, or Challengers. An implementation strategy is designed around these “Adoption Profiles”. The Champions are the eager adopters and should be the first users. The Contenders are frequently indifferent but, usually agreeable adopters. The Challengers represent approximately 30% of the physicians who will resist implementation for a variety of reasons. Sometimes they feel they are too technology challenged and fearful, some are too busy and may fear loss of revenue by adoption, while others are just resistant to anything new. When these objections are clearly understood, “Adaptation” can take place and in most cases mitigate the Challengers objection(s). Adaptation is the process of introducing (training) the end users to the application “Best Practices”. It also takes into account the “Profile” of the end user to create a “Best Practices” by provider (See Challengers above).

Product Support: The ODClient on the .NET framework makes it easier than ever to update and deploy new applications. Thanks to intelligent, one touch updates and intelligent support client PCs can be updated by copying the application to the target directory. Client PCs may be updated automatically with no interruption or the may be updated on demand.

Product Acquisition Cost: We will provide alternative acquisition models to help overcome purchase resistance due to capital costs. Although we will make the EHR software available on the traditional for- purchase basis, through our innovative 3-Tier ODClient architecture we will also offer a service based model. Our customers will be able to utilize the full function and features of the EHR software for an affordable monthly service charge.

Utilizing their extensive experience and knowledge of orthopedics, coupled with state of the art rapid development tools, we believe these obstacles can be overcome and their goals are achievable. The recent completion of their fully functional prototype, suggests that their development strategies are on track.

Technology Overview

For many technologists and software developers, 2006 is a “watershed year.” With the official release of Visual Studio 2005, providing a seamless integration between C#, the .Net Framework 2.0 and SQL Server 2005, a new paradigm for software development has arrived. According to Bill Gates “the transition to .NET is as dramatic as the move from MS-DOS to Windows.” The emergence of these companion technologies has created an opportunity for rapid development, application flexibility, architectural mobility, simplified deployment and support/updates that did not exist prior to November 2005.

We are positioned to take full advantage of this shifting technological paradigm. The software is the first orthopedic EHR to be developed utilizing innovative 3-Tier architecture on SQL 2005, the .NET framework, C#, Visual Studio 2005 and the Microsoft Enterprise Library.

Implementation of 3-Tier Architecture

ODClient: Combines the best of traditional rich client functionality with the ease of thin client deployment and maintenance. ODClient raises the standard by adding support for mobile, offline or low bandwidth users with intelligent connection management (data caching and batch requests). Even fully connected clients will see performance and stability benefits. ODClient will reduce management costs by avoiding the complexities and “application fragility” of traditional rich client deployments (shared code, registered components, and DLLs in a common folder). ODClient will utilize a seamless, simplified, predictable “no touch deployment”. Updates may occur in the background or on demand. Tools: Visual C# 2005, Microsoft Office 2003, and XML underlying structure.

Application Server Tier: Business-objects that implement the business rules reside here. This tier isolates the data from direct access by the clients. Tools: .Net Framework 2.0 and Microsoft Enterprise Library.

Data Server Tier: This tier is responsible for data storage. SQL Server 2005 with .NET integration is the database of choice. However, the 3-Tier architecture supports application portability and database independence. Tools: SQL Server 2005, T-SQL, CLR Execution Environment, .Net Code Integration, Business Intelligence, Indexed, and Full Text Search.

Mission

We develop, document, and market EHR solutions that are efficient, intuitive, easy to use, and promote physician acceptance. This software will reduce the cost and risks associated with manual paper based systems. This will in turn improve the quality of care by more completely documenting patient care, eliminating common errors and tracking relevant procedures, events, and outcomes. The EHR will provide an excellent ROI to the physician by reducing costs and enhancing revenues do to improved documentation and optimal billable code levels.

Conclusion

The orthopedic EHR market is emerging rapidly with nearly $2 billion in potential sales. We believe that our software is uniquely positioned to fill a substantial void in the orthopedic vertical market for EHR. Our extensive orthopedic experience, our singular focus, our dedicated, proactive approach to training, implementation and support, coupled with our utilization of state of the art development tools will distinguish us from every alternative EHR in the orthopedic vertical market space. The result will be a uniquely relevant orthopedic encounter management solution that is efficient, intuitive, easy to use, and promotes physician acceptance. We expect this EHR to be well received, quickly adopted, and widely endorsed by the orthopedic community.

RESULTS FOR THE FISCAL QUARTER ENDED September 30, 2009

During the three months ended September 30, 2009, we continued marketing our software and following up on sales leads. The sales cycle can be anywhere from three months to one year. In addition to a couple independent sales persons and alliances with marketing partners, we hired a full time salesman on commission only. Our sales leads continue to be generated and followed up on as we receive them from our own efforts by attendance at trade shows and from referrals from our industry cross marketing agreements. We have hit a stage in our business where we have our software developed and running smoothly and our infrastructure built so that we can install and maintain a multiple number of installations. During the first nine months of 2009 we ran into a cash squeeze whereby the cost to maintain our infrastructure, which we estimate we need sales of approximately $500,000 per quarter, was considerably more than our sales. However, we believe that we are well positioned to increase sales in the final three months of 2009 as we retained a full time salesman who started in the last quarter of 2008 and has generated many leads in the first six months of 2009. We have a pipeline of sales presentations and commitments which we expect to give us the momentum and the cash flow to get past our cash flow hurdles and propel us into the last quarter of 2009.

REVENUE. Revenue in the three months ended September 30, 2009 was $256,599 compared to $37,605 in the three months ended September 30, 2008. Revenue in the nine months ended September 30, 2009 was $647,319 compared to $458,461 in the nine months ended September 30, 2008.

The fluctuation in sales is due to the timing of closing sales contracts. Please reference the table below to view the Installation Contracts quarter-to-date (QTD) and year-to-date (YTD) for 2009 versus 2008.

	2009		2008
	QTD	YTD	QTD	YTD
Installation Contracts	220,900	535,190	22,328	393,084
Maintenance/Other	35,699	112,129	15,277	65,377
TOTAL	256,599	647,319	37,605	458,461

Revenue for the three month period ended September 30, 2009 was impacted by two new implementation contracts with and the difference related to maintenance/service on existing installations. During the three and nine month periods ended September 30, 2009 there were a total of seven and six customers respectively making up the service/maintenance revenue of $35,699 and $112,129, respectively. Monthly service agreements can vary from $500 to over $2,000 depending on the installation and support contracted. In contrast, during the three and nine month periods ended September 30, 2008 there were a total of three customers making up the service revenue of $15,277 and $65,377, respectively. Monthly maintenance revenue is important to establishing consistent cash flow and profitability once the Company reaches the right level of critical mass.

Installation contract revenue for the three and nine months ended September 30, 2009 was $220,900 and $535,190 compared to $22,328 and $393,084 for the three and nine months ended September 30, 2008. In 2009 there were seven new installation contracts averaging $76,455. In 2008 there were four new installation contracts averaging $98,270. The 2008 numbers are larger due to one agreement that was $220,000; backing this out the average contract was $57,700 or comparable to 2009.

EXPENSES. Total operating expenses, not including depreciation expense, were $177,570 for the three months September 30, 2009 compared to $224,954 for the three months ended September 30, 2008. Total operating expenses, not including depreciation expense, were $819,499 for the nine months September 30, 2009, compared to $823,458 for the nine months ended September 30, 2008.

The decrease in expenses of about $47,000 in the three month period ended September 30, 2009 is due to four main factors. First, employee leasing was down $101,100 as the utilization of an agent has significantly reduced the amount of employee leasing costs incurred; second, travel was up $3,600 as the Company was utilizing an agent for part of the revenue; third, this was partially off-set by third party commissions of $57,400; fourth, contract services was down $11,500. By paying a third party agent commissions on sales the Company saves at least an equivalent amount in travel and installations costs.

The decrease in expenses of about $4,000 in the nine month period ended September 30, 2009 is comprised mainly of five components. First, commissions were up $178,000 as in 2008 the Company was not using a third party agent; second, bad debt expense of $23,800 was recognized to provide for an old account; third, reduced travel by $95,700 as the third party agent is responsible for the installations; four, reduced employee leasing by $103,200 due to lower sales; and five, lower contract services of $7,000.

Depreciation and amortization expense was $21,181 for the three months ended September 30, 2009 and $7,061 for the three months ended September 30, 2008. Depreciation and amortization expense was $63,545 for the six months ended September 30, 2009 and $21,182 for the nine months ended September 30, 2008.

OTHER INCOME. We had interest income of $3 and $77 for the three months ended September 30, 2009 and 2008, respectively; and $14 and $2,283 for the nine months ended September 30, 2009 and 2008, respectively. The reduction in other income is due to less cash-on-hand drawing interest income.

NET LOSS. Net income for the three months ended September 30, 2009 was $57,851 compared to a net loss of $201,915 for the three months ended September 30, 2008. Net loss for the nine months ended September 30, 2009 was $235,711 compared to a net loss of $392,706 for the nine months ended September 30, 2008.

Net income for the three month period ended September 30, 2009 improved by $259,766 compared to the three month period ended September 30, 2008. The increase is directly related to the increase in installation contract sales of $220,900 impacting net margins about $198,000 in the quarter and being supported by the decrease in expenses discussed above by about $53,000.

Net loss for the nine month period ended September 30, 2009 improved by $156,995 compared to the nine month period ended September 30, 2008. The improvement in loss is made up of the decrease in expense of $4,000 discussed above and the increase in installation contract sales of $142,100 impacting net margins about $135,000.

LIQUIDITY AND CAPITAL RESOURCES. Our cash balance at September 30, 2009 was $22,923 compared to $47,954 at December 31, 2008. The Company plans for liquidity needs on a short term and long term basis as follows:

Short Term Liquidity:

The company currently relies on short-term financing of working capital from individual investors and also shareholder advances, when necessary, to fund operations.

Long Term Liquidity:

The long term liquidity needs of the Company are projected to be met primarily through the cash flow provided by operations. Although our operating cash flow from operations is negative $227,486 for the nine months ended September 30, 2009 it is an improvement versus the same period in 2008 which has a negative operating cash flow of $477,396. As we sign new contracts and perpetuate maintenance revenue we expect cash flow from operations to fund itself.

Capital Resources

During the nine months ended September 30, 2009, the Company was advanced a net of $62,050 by a shareholder. There is no interest associated with this advance and it is expected to be repaid in the third quarter of 2009.

Over the past few years we have noticed that our business does not have a seasonal trend. Currently our revenue stream is geared toward installation contracts and as we grow we expect to see a more balanced revenue line between installation and maintenance sales.

We do not expect any significant change to our equity or debt structure and do not anticipate entering into any off-balance sheet arrangements.

Material Changes in Financial Condition

WORKING CAPITAL: Working capital decreased by $31,165 to ($96,666). This reduction is due to four main items.

Firstly: We now have a line-of-credit that had an unfavorable impact of $39,803

Secondly: Accounts receivable increased $68,882 (favorable)

Thirdly: Cash decreased $25,031

Fourthly: Amounts due Shareholder: $62,050 (unfavorable)

Employees

As of September 30, 2009, the Company had seven employees which it pays through an employee leasing agreement. Four of the employees are support and/or technical personnel.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4: CONTROLS AND PROCEDURES

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2009. This evaluation was accomplished under the supervision and with the participation of our chief executive officer / principal executive officer, and chief financial officer / principal financial 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 Form 10-Q has been made known to them.

For purposes of this section, the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seg.) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure, controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by in our reports filed under the Securities Exchange Act of 1934, as amended (the "Act") is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based upon an evaluation conducted for the period ended September 30, 2008, our Chief Executive and Chief Financial Officer as of September 30, 2008 and as of the date of this Report, has concluded that as of the end of the periods 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 transaction.

• 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 our finances allow, we will hire additional accounting staff.

Changes in Internal Controls over Financial Reporting

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

PART II

Items No. 1, 2, 3, 4, 5 - Not Applicable.

Item No. 6 - Exhibits and Reports on Form 8-K

(a) No reports on Form 8-K were filed during the three months ended September 30, 2009.

(b) Exhibits

Exhibit Number	Name of Exhibit

31.1	Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

In accordance with 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.

TRIPLE A MEDICAL, INC.

By /s/ P. Morgan McCune

P. Morgan McCune, President, CFO

Date: November 11, 2009

PHOENIX MEDICAL SOFTWARE, INC. - FORM 10-Q - November 12, 2009

Attached files

PHOENIX MEDICAL SOFTWARE, INC. Reports