Attached files
| file | filename |
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| 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 |
| EX-99.1 - ADDENDUM TO THE AGREEMENT - PHOENIX MEDICAL SOFTWARE, INC. | ex99one.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, 2010
OR
[ ] 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)
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Nevada
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20-4846807
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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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.
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Large Accelerated Filer [ ]
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Accelerated Filer [ ]
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Non-Accelerated Filer [ ]
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Smaller Reporting Company [X]
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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 15, 2010 there were 14,270,500 shares of Common Stock of the issuer outstanding.
TABLE OF CONTENTS
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PART I FINANCIAL STATEMENTS
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Item 1
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Financial Statements
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3
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Item 2
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Management's Discussion and Analysis or Plan of Operation
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8
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PART II OTHER INFORMATION
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Item 1
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Legal Proceedings
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12
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Item 2
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Changes in Securities
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12
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Item 3
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Default upon Senior Securities
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12
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Item 4
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Submission of Matters to a Vote of Security Holders
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12
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Item 5
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Other Information
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12
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2
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TRIPLE A MEDICAL, INC.
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||||||||
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CONSOLIDATED BALANCE SHEETS
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||||||||
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SEPTEMBER 30, 2010 AND DECEMBER 31, 2009
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(Unaudited)
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September 30, 2010
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December 31, 2009
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ASSETS
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||||||||
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CURRENT ASSETS:
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||||||||
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Cash and cash equivalents
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$
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4,226
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$
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132,993
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||||
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Accounts receivable, net of allowance for doubtful accounts of $57,705
and $17,576
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168,289
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14,522
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Total Current Assets
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172,515
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147,515
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Computer equipment, net
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684
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6,844
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Developed software, net
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152,135
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209,521
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TOTAL ASSETS
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$
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325,334
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$
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363,880
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LIABILITIES AND STOCKHOLDERS' EQUITY
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||||||||
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CURRENT LIABILITIES:
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Accounts payable and accrued expenses
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$
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134,793
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$
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96,479
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Line of credit
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35,842
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39,707
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Convertible short term debt
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-
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15,000
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Advanced from shareholder
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3,500
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22,910
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Total Current Liabilities
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174,135
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174,096
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STOCKHOLDERS' EQUITY
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Preferred stock, $0.01 par value, 20,000,000 authorized,
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none issued and outstanding
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-
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-
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Common stock, $0.01 par value, 50,000,000 authorized,
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14,270,500 and 14,050,500 issued and outstanding, respectively
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14,271
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14,051
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Additional paid-in-capital
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2,011,477
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1,896,697
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Subscription deposits
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2,625
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-
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Accumulated deficit
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(1,877,174
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)
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(1,720,964
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)
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Total stockholders’ equity
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151,199
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189,784
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
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$
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325,334
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$
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363,880
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See accompanying summary of accounting policies and notes to unaudited consolidated financial statements.
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3
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TRIPLE A MEDICAL, INC.
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CONSOLIDATED STATEMENTS OF OPERATIONS
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For the Three and Nine Months Ended September 30, 2010 and 2009
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(Unaudited)
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Three Months Ended
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Nine Months Ended
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September 30,
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September 30,
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|||||||||||||||
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2010
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2009
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2010
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2009
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REVENUE
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$ | 468,017 | $ | 256,599 | $ | 1,422,204 | $ | 647,319 | ||||||||
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OPERATING EXPENSES:
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Depreciation and amortization
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21,181 | 21,181 | 63,545 | 63,545 | ||||||||||||
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Selling, general and administrative
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494,424 | 177,570 | 1,514,958 | 819,499 | ||||||||||||
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Total operating expenses
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515,605 | 198,751 | 1,578,503 | 883,044 | ||||||||||||
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Income (loss) from operations
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(47,588 | ) | 57,848 | (156,299 | ) | (235,725 | ) | |||||||||
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OTHER INCOME
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Interest income
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29 | 3 | 89 | 14 | ||||||||||||
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Net income (loss)
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$ | (47,559 | ) | $ | 57,851 | $ | (156,210 | ) | $ | (235,711 | ) | |||||
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Basic and diluted weighted average shares outstanding
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14,270,500 | 14,050,500 | 14,217,057 | 14,050,500 | ||||||||||||
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Basic and diluted net loss per share
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$ | 0.00 | $ | 0.01 | $ | (0.01 | ) | $ | (0.02 | ) | ||||||
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See accompanying summary of accounting policies and notes to unaudited consolidated financial statements.
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4
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TRIPLE A MEDICAL, INC.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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For the Nine Months Ended September 30, 2010 and 2009
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(Unaudited)
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Nine Months Ended
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September 30,
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2010
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2009
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss
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$
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(156,210
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)
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$
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(235,711
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)
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Adjustments to reconcile net loss to net
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cash used in operating activities:
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Depreciation and amortization
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63,546
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63,546
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Stock issued for services
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85,000
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-
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Write-off of subscription receivable
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-
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2,000
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Bad debt expense
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51,820
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-
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Change in operating assets and liabilities:
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Accounts receivable
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(205,587
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)
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(68,882
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)
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Accounts payable and accrued expenses
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38,314
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13,561
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NET CASH USED IN OPERATING ACTIVITIES
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(123,117
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)
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(225,486
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)
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Proceeds from sale of stock, including stock subscription deposits
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17,625
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-
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Payments on line of credit
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(3,865
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)
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(595
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)
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Advances from shareholder
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3,500
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79,050
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Payments to shareholder
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(22,910
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)
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(17,000
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)
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Contributed capital
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-
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139,000
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
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(5,650
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)
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200,455
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NET DECREASE IN CASH
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(128,767
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)
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(25,031
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)
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CASH, BEGINNING OF PERIOD
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132,993
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47,954
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CASH, END OF PERIOD
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$
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4,226
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$
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22,923
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NON-CASH TRANSACTIONS
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Common stock issued for conversion of debt
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$
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15,000
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$
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-
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SUPPLEMENTAL DISCLOSURES
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Interest paid
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$
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-
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$
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-
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Income taxes paid
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-
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-
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See accompanying summary of accounting policies and notes to unaudited consolidated financial statements.
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5
TRIPLE A MEDICAL, INC.
Notes to the Consolidated Financial Statements
(Unaudited)
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 March 31, 2010 for the year ended December 31, 2009.
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.
Certain 2009 amounts have been reclassed to agree with the 2010 classifications.
NOTE 2--GOING CONCERN
Triple A has recurring losses and an accumulated deficit. Additionally, Triple A has incurred recurring deficits in cash flows from operating activities. These factors raise substantial doubt about the Company’s ability to continue as a going concern. However, 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'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 3—SHORT-TERM NOTES PAYABLE
On December 31, 2009, the Company owed advances of $15,000 to shareholders. The note is convertible into common shares at $0.50 per share. The note was converted into common stock on January 8, 2010 at $0.50 per share, or 30,000 shares.
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 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.
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. As of December 31, 2010 the balance due Mr. McCune was $22,910. As of June 29, 2010, the company made payments of $22,910 bringing the balance to $0. On September 29, 2010 the Company borrowed $3,500, again with no interest or definitive repayment terms, and the unpaid balance at September 30, 2010 was $3,500.
6
The Company leases employees from ORTHO-DEV LLC, a company controlled by a relative of the President, and in the three months ended September 30, 2010 and 2009 the employee leasing expense was $79,668 and $38,896 respectively. The expense for the nine months ended September 30, 2010 and 2009 was $387,821 and $286,176, respectively.
The Company rents office space from the President at $5,000. The expense for the three months ended September 30, 2010 and 2009 was $15,000, and the expense for the nine months ended September 30, 2010 and 2009 was $$45,000.
NOTE 5 – STOCKHOLDERS’ EQUITY
In the nine months ended September 30, 2010, the Company received an advance of $2,625 for 3,500 shares of common stock. The Company expects to issue 3,500 shares during the fiscal fourth quarter of 2010 for these advances.
During the nine months ended September 30, 2010, the Company issued 20,000 shares of common stock for cash of $15,000.
During the nine months ended September 30, 2010 Triple A issued 170,000 shares for services. The shares vested immediately and were valued based on closing stock price on the date of grant.
As discussed in Note 3, Triple A issued 30,000 shares of common stock in connection with the conversion of a $15,000 note payable during January 2010.
NOTE 6 –MERGERS
On August 10, 2010 the Company filed an S-4 Registration Statement with the Securities and Exchange Commission, under The Securities Act of 1933. Disclosed in the statement was:
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·
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The Company was redomiciling from the State of Nevada to the Cayman Islands ("CAYMAN"). The change of our domicile from the State of Nevada to the CAYMAN’S will be accomplished through a merger (the “Merger”) of the Company into our wholly-owned subsidiary, Grand Silver, Inc. (“Grand Silver”), a company organized under the laws of the CAYMAN’S.
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·
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The Company is changing its name from Triple A Medical, Inc., to Phoenix Medical Software, Inc.
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·
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The Company authorized a 2 for 3 reverse stock split of the Company's outstanding common stock, changing the authorized common stock to 40,000,000 and leaving the par value of the common stock at $0.001 per share.
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·
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The Merger will be finalized when Articles of Merger are filed with the Registrar of Corporate Affairs in the Cayman Islands and with the Department of Commerce, Division of Corporations of the State of Nevada. Under federal securities laws, the Articles of Merger cannot be filed until at least 20 days after the mailing of this Joint Information Statement/ Prospectus.
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NOTE 7 – SUBSEQUENT EVENTS
In May 2009, the FASB issued ASC 855-10, “Subsequent Events”, 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. On November 8, 2010 the Company’s merger with Grand Silver, Inc. was approved. As a result of the merger, the company will affect a 2 for 3 stock split. The stock split will become effective upon the filing with FINRA and approval of a new ticker symbol. The outstanding shares after the stock split will be 9,513,667.
7
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 nine months ended September 30, 2010 saw the Company to continue to drive revenue through both system contracts (one new one in 2010) and legacy maintenance revenue.
RESULTS FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 2010
During the nine months ended September 30, 2010, we continued marketing our software and following up on sales leads and experienced moderate growth over the first nine months of 2009. 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 have 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 of the year ending December 31, 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. The first quarter of 2010, although better than the first quarter of 2009, fell short of the cash-flow neutral sales target; our second quarter of 2010, our best quarter ever at $596,388, generated a small operating profit of $4,680: our third quarter of 2010, generated $468,017. We feel we are well positioned to for the fourth quarter of 2010 and for 2011.
REVENUE. Revenue in the three months ended September 30, 2010 was $468,017 compared to $256,599 in the three months ended September 30, 2009.
Revenue in the nine months ended September 30, 2010 was $1,422,204 compared to $647,319 in the nine months ended September 30, 2009.
The fluctuation in sales is due to the timing of closing sales contracts. Please reference the table below to view the Installation Contracts quarter-to-date (QTD) and year-to-date (YTD) for 2010 versus 2009.
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2010
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2009
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|||||||||||||||
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QTD
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YTD
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QTD
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YTD
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Installation Contracts
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$ | 386,516 | $ | 1,158,883 | $ | 220,900 | $ | 535,190 | ||||||||
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Maintenance/Other
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81,501 | 263,321 | 35,699 | 112,129 | ||||||||||||
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TOTAL
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$ | 468,017 | $ | 1,422,204 | $ | 256,599 | $ | 647,319 | ||||||||
8
Revenue for the three month period ended September 30, 2010 was impacted by two new implementation contracts with the difference related to maintenance/service on existing installations. During the three and nine month period ended September 30, 2010 there were a total of nineteen customers making up the service/maintenance revenue of $81,501 and $263,321, respectively. Monthly service agreements can vary from $500 to over $5,000 depending on the installation and support contracted. In contrast, during the three and nine month periods ended September 30, 2009 there were a total of seven customers making up the service revenue of $35,699 and $112,129, 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 months ended September 30, 2010 was $386,516 compared to $220,900 for the three months ended September 30, 2009. Installation contract revenue for the nine months ended September 30, 2010 was $1,158,883 compared to $535,190 for the nine months ended September 30, 2009. In 2010 there have been 11 new installation contracts averaging $105,000. In 2009 there were five new installation contracts averaging $98,000.
EXPENSES. Total operating expenses, not including depreciation expense, were $494,424 for the three months September 30, 2010 compared to $177,570 for the three months ended September 30, 2009. Total operating expenses, not including depreciation expense, were $1,514,958 for the nine months September 30, 2010 compared to $819,499 for the nine months ended September 30, 2009.
The increase in expenses of about $316,854 in the three month period ended September 30, 2010 is due to three main factors. First, increased commissions of $85,000 (increased installation contracts), increased travel of $85,000, and increased contract services and employee leasing of $93,000, plus increases in insurance ($37,000) and bad debt expense ($28,000)
The increase in expenses of about $695,459 in the nine month period ended September 30, 2010 is due to the following three main factors: increased commissions of $186,000, increased travel of $224,000, and increased contract services and employee leasing of $247,000.
Depreciation and amortization expense was $21,181 for the three months ended September 30, 2010 and $21,181 for the three months ended September 30, 2009. Depreciation and amortization expense was $63,545 for the nine months ended September 30, 2010 and $63,545 for the nine months ended September 30, 2009.
OTHER INCOME. We had interest income of $29 and $3 for the three months ended September 30, 2010 and 2009, respectively; and $89 and $14 for the nine months ended September 30, 2010 and 2009, respectively. The increase in other income is due to increased cash-on-hand drawing interest income.
NET LOSS. Net loss for the three months ended September 30, 2010 was $47,559 compared to net income of $57,851 for the three months ended September 30, 2009. Net loss for the nine months ended September 30, 2010 was $156,210 compared to a net loss of $235,711 for the nine months ended September 30, 2009.
Net loss for the three month period ended September 30, 2010 increased by $105,410 compared to the three month period ended September 30, 2009. The increase is directly related to the net impact of revenue and expenses as discussed above.
Net loss for the nine month period ended September 30, 2010 decreased by $79,501. The decrease in loss is directly related to the increase in sales and margin as discussed above.
LIQUIDITY AND CAPITAL RESOURCES. Our cash balance at September 30, 2010 was $4,226 compared to $132,993 at December 31, 2009. As discussed in Note 2 the Company has recurring losses and an accumulated deficit. Additionally, Triple A has incurred recurring deficits in cash flows from operating activities. These factors raise substantial doubt about the Company’s ability to continue as a going concern. 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 $123,117 for the nine months ended September 30, 2010 it is an improvement versus the same period in 2009 which has a negative operating cash flow of $225,486. As we sign new contracts and perpetuate maintenance revenue we expect cash flow from operations to fund itself.
9
Capital Resources
During the three months ended March 31, 2010, the Company repaid an advance of $22,910 by a shareholder.
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 improved by $22,335 to negative $1620 since December 31, 2009. This reduction is due to four main items.
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|
Firstly: Accounts receivable increased by a net of $153,767 (favorable)
|
|
|
Secondly: Cash decreased $128,767
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|
|
Thirdly: Other Liabilities: Amounts due Shareholder: $19,410 (favorable)
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|
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Fourthly: AP/Accrued Expenses: $38,314 (unfavorable)
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Employees
As of September 30, 2010, 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, 2010. 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.
10
Based upon an evaluation conducted for the period ended September 30, 2009, our Chief Executive and Chief Financial Officer as of September 30, 2009 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.
11
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, 2010.
(b) Exhibits
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Exhibit Number
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Name of Exhibit
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31.1
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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.
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31.2
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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.
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32.1
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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.
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| 99.1 |
Addendum to the Agreement & Plan of Merger between Grand Silver, Inc. and Triple A Medical, Inc.
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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 15, 2010
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