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, 2011

 

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

 

PHOENIX MEDICAL SOFTWARE, 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 21, 2011 there were 9,663,667 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	8
	PART II OTHER INFORMATION
Item 1	Legal Proceedings	10
Item 2	Changes in Securities	10
Item 3	Default upon Senior Securities	10
Item 4	Submission of Matters to a Vote of Security Holders	10
Item 5	Other Information	10

 

 

 

 

 

 

 

 

 

 

PHOENIX MEDICAL SOFTWARE, INC.

(FORMERLY TRIPLE A MEDICAL, INC.)

CONSOLIDATED BALANCE SHEETS

(Unaudited)

  

						(Audited)
		September 30, 2011				December 31, 2010
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	—			$	222,348
Accounts receivable, net of allowance for doubtful accounts of $0       and $216,825			—				107,439
Total Current Assets			—				329,787
Developed software, net			—				133,007
Note Receivable-related party			250,000				—
TOTAL ASSETS		$	250,000			$	462,794
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses		$	3,000			$	153,483
Line of credit			—				34,691
Advanced from shareholder			—				5,200
Total Current Liabilities			3,000				193,374
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value, 20,000,000 authorized,
none issued and outstanding			—				—
Common stock, $0.001 par value, 50,000,000 authorized,
9,663,667 and 9,513,667 issued and outstanding, respectively			9,664				9,514
Additional paid-in-capital			2,093,027				2,016,234
Subscription deposits			2,625				2,625
Accumulated deficit			(1,858,316	)			(1,758,953	)
Total stockholders’ equity			247,000				269,420
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	250,000			$	462,794

 

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

 

 

 

 

 

PHOENIX MEDICAL SOFTWARE, INC.

(FORMERLY TRIPLE A MEDICAL, INC.)

CONSOLIDATED STATEMENTS OF OPERATIONS

   

		Three Months Ended								Nine months Ended
		September 30								September 30,
		2011				2010				2011				2010
REVENUE			—				—			$	—			$	—
OPERATING EXPENSES:
Depreciation and amortization			—				—				—				—
Selling, general and administrative			38,463				15,516				65,208				123,078
Total operating expenses			38,463				15,516				65,208				123,078
Income (loss) from operations			(38,463	)			(15,516	)			(65,208	)			(123,078	)
OTHER INCOME
Interest income			—				—				—				—
Net income (loss) from continuing operations			(38,463	)			(15,516	)		$	(65,208	)		$	(123,078	)
Net income (loss) from discontinued operations			32,991				(32,043	)			(34,155	)			(33,132	)
_
NET INCOME (LOSS)			(5,472	)			(47,559	)			(99,363	)			(156,210	)
_
Basic and diluted weighted average shares outstanding			9,515,297				9,513,667				9,514,216				9,478,038
Basic and diluted net loss per share from continuing operations			(0.00	)			(0.00	)		$	(0.01	)		$	(0.01	)
Basic and diluted net loss per share from discontinued operations			(0.00	)			(0.00	)		$	(0.00	)		$	(0.00	)
Basic and diluted net loss per share			(0.00	)			(0.00	)		$	(0.01	)		$	(0.02	)

 

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

 

PHOENIX MEDICAL SOFTWARE, INC.

(FORMERLY TRIPLE AMEDICAL, INC.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2011 and 2010

(Unaudited)

   

 

		Nine Months Ended
		September 30,
		2011				2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(99,363	)		$	(156,210	)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization			57,385				63,546
Stock issued for services			22,500				85,000
Bad debt expense			230,634				51,820
Change in operating assets and liabilities:
Accounts receivable			(341,922	)			(205,587	)
Accounts payable and accrued expenses			14,633				38,314
NET CASH USED IN OPERATING ACTIVITIES			116,133				(123,117	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Transfer of cash in sale of subsidiary			(117,016	)			—
NET CASH PROVIDED USED IN INVESTING ACTIVITIES			(117,016	)			—
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock, including stock subscription deposits			—				17,625
Payments on line of credit			—				(3,865	)
Borrowings on line of credit			25,000
Advances from shareholder			—				3,500
Payments to shareholder			(14,199	)			(22,910	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES			(10,801	)			(5,650	)
NET DECREASE IN CASH			(222,348	)			(128,767	)
CASH, BEGINNING OF PERIOD			222,348				132,993
CASH, END OF PERIOD		$	—			$	4,226
NON-CASH TRANSACTIONS
Common stock issued for conversion of debt		$	—			$	15,000
Gain on sale of subsidiary			54,443				—
SUPPLEMENTAL DISCLOSURES
Interest paid		$	—			$	—
Income taxes paid			—				—
See accompanying summary of accounting policies and notes to unaudited consolidated financial statements

  

 

 

 

 PHOENIX MEDICAL SOFTWARE, INC.

(FORMERLY TRIPLE A MEDICAL, INC.)

Notes to the Consolidated Financial Statements

(Unaudited)

 

 

NOTE 1--BASIS OF PRESENTATION

 

The accompanying unaudited interim consolidated financial statements of Phoenix Medical Software, Inc. (formerly Triple A Medical, Inc.) (“Phoenix Medical”) 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 Phoenix Medical’s Annual Report on Form 10-K filed on March 31, 2011 for the year ended December 31, 2010.

 

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.

 

On September 30, 2011, due to continuing losses and continuing related expenses, the Company sold its wholly owned subsidiary Phoenix Ortho, LLC to a related party of the President. The terms of the sale included taking a Note in the amount of $250,000 carrying a four and a half percent (4.5%) interest rate. The buyer also assumed liabilities of the Company of $69,068. The Note is interest only for one year and paid after that time on a five year amortization. The Note Receivable exceeded the Company’s net assets sold resulting in a gain of approximately $54,000 which was recorded to additional paid in capital. Accordingly the Company has reported results from operations for nine months ending September 30, 2011 and have reported the balance sheet of only Phoenix Medical Software, Inc. at September 30, 2011.

 

Certain 2010 amounts have been reclassed to agree with the 2011 classifications.

 

 

NOTE 2--RECENT ACCOUNTING PRONOUNCEMENTS

 

There are no recent accounting pronouncements that are expected to have a material impact on the Company’s present or future consolidated financial statements.

 

 

 

 

 

NOTE 3--GOING CONCERN

 

Phoenix Medical has recurring losses and an accumulated deficit.  Additionally, Phoenix Medical 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, Phoenix Medical'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.

 

 

 NOTE 4--RELATED PARTY TRANSACTIONS

 

In order to fund the development of the software, Phoenix Medical entered into an ‘Investment and Net Revenue Agreement’ with Phoenix Ortho, LLC (ORTHO), an entity controlled by a relative of the President of Phoenix Medical. In exchange for this contributed capital, Phoenix Medical provided ORTHO with an income participation interest in its operations.  The terms of this agreement require Phoenix Medical to pay ORTHO 33.1% of the net revenues generated by the business in the immediately preceding month.

 

As of December 31, 2010 and September 30, 2011, Phoenix Medical had unpaid advances owed to Paul McCune, the sole Director of the Company. The unpaid advance totaling to $0 as of September 30, 2011 and $5,200 as of December 31, 2010 is unsecured, bears no interest and is due on demand. This was assumed in the sale of the subsidiary.

  

The Company rents office space from the President at $5,000 per month. The expense for the three months ended September 30, 2011 and 2010 was $15,000. The expense for the nine months ended September 30, 2011 and 2010 was $45,000. This is included in the net income (loss) from discontinued operations.

 

On September 30, 2011 the Company sold its wholly owned subsidiary Phoenix Ortho, LLC to a related party of the President (see Note 1).

 

 

NOTE 5--STOCKHOLDERS’ EQUITY

 

During the nine months ended September 30, 2011 the Company issued 150,000 shares of common stock for services provided valued at $22,500.

 

NOTE 6-SALE OF SUBSIDIARY

 

On September 30, 2011, the company sold its wholly owned subsidiary Phoenix Ortho, LLC to a related party of the President. A majority of shareholders other than the President approved the sale. The terms of the sale included taking a Note in the amount of $250,000 carrying a four and a half percent (4.5%) interest rate. The buyer also assumed liabilities of the Company of $69,068. The Note is interest only for one year and paid after that time on a five year amortization. Accordingly the company has reported results from operations for nine months ending September 30, 2011 and have reported the balance sheet of only Phoenix Medical Software, Inc at September 30, 2011.

 

 

 

 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.

 

On September 30, 2011, due to continuing losses and continuing related expenses, the company sold its wholly owned subsidiary Phoenix Ortho, LLC to a related party of the President. A majority of shareholders other than the President approved the sale. The terms of the sale included taking a Note in the amount of $250,000 carrying a four and a half percent (4.5%) interest rate. The buyer also assumed liabilities of the Company of $69,068. The Note is interest only for one year and paid after that time on a five year amortization. Accordingly the company has reported results from operations for nine months ending September 30, 2011 and have reported the balance sheet of only Phoenix Medical Software, Inc at September 30, 2011.

 

 

RESULTS FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 2011

 

Due to continuing losses and continued related expenses, the company, as referenced above, sold its wholly owned subsidiary Phoenix Medical Software. As a result the company has reported results from operations for nine months ending September 30, 2011 and have reported the balance sheet of only Phoenix Medical Software, Inc at September 30, 2011.

 

 

REVENUE. There was no revenue in either 2011 or 2010 for the three and nine month periods..

 

 

EXPENSES. Total operating expenses were $38,463 for the three months September 30, 2011 compared to $15,516 for the three months ended September 30, 2010.  Total operating expenses were $65,208 for the nine months September 30, 2011 compared to $123,078 for the nine months ended September 30, 2010.

 

The increase in expenses of about $23,000 in the three month period ended September 30, 2011 is due to increased services of $30,000 and off-set by reduced fees of $7,000.

 

The decrease in expenses of about $58,000 in the nine month period ended September 30, 2011 is due to decreased services of $48,000 and reduced fees of $10,000.

 

There was no depreciation or amortization expense in the three or nine month periods ended September 30, 2011 and 2010.  

 

OTHER INCOME. None.

 

 

  

DISCONTINUED OPERATIONS. The net income (loss) related to discontinued operations for the three month period ended September 30, 2011 and 2010 was income of $32,991 and a loss of $32,043, respectively. The increased revenue is what contributed to the net income in 2011 versus 2010.

 

The net loss related to discontinued operations for the nine month period ended September 30, 2011 and 2010 was $34,155 and $33,132, respectively. The year-over-year increase in revenue was off-set by increased expenses.

 

NET LOSS. Net income for the three months ended September 30, 2011 was $5,472 compared to a loss of $47,559 for the three months ended September 30, 2010.  Net loss for the nine months ended September 30, 2011 was $99,363 compared to net loss of $156,210 for the nine months ended September 30, 2010. The change in income (loss) for both the three and nine month periods is directly related to the net impact of revenue and expenses as discussed above

 

LIQUIDITY AND CAPITAL RESOURCES. Our cash balance at September 30, 2011 was $0 compared to $222,348 at December 31, 2010.  As discussed in Note 2 the Company has recurring losses and an accumulated deficit.  As discussed in Notes 2 and 6 the company sold its wholly owned subsidiary as of September 30, 2011. We now have minimal cash flow requirements as we have to cover the costs of audits and filings while we search for a suitable acquisition candidate. 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 vendors and also shareholder advances, when necessary, to fund operations.

 

Long Term Liquidity:

The company has no long term liquidity plans as it is searching for a suitable acquisition candidate.

 

Capital Resources

 

The company now has no operations and therefore has no seasonality.

 

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 declined by $133,413 to negative $3,000 since December 31, 2010.  This reduction is due to the sale of its operating subsidiary.

 

Employees

 

As of September 30, 2011, the Company had one employee, the president

 

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, 2011.  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, 2010, our Chief Executive and Chief Financial Officer as of September 30, 2010 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) One report on Form 8-K was filed relating to the nine months ended September 30, 2011. It was filed for an event dated September 30, 2011.

 

 

  

 

(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.

 

PHOENIX MEDICAL SOFTWARE, INC.

 

By /s/ P. Morgan McCune

 

P. Morgan McCune, President, CFO

 

Date: November 21, 2011