PCYS PrimeCare Systems Inc (CE)

(Unaudited)

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

PrimeCare Systems, Inc. (“PrimeCare” or the “Company”) was incorporated in Delaware in 1994.  PrimeCare has developed and is marketing software and diagnostic products for the healthcare industry.  

The accompanying financial statements have been prepared assuming that PrimeCare will continue as a going concern.  At December 31, 2010 (unaudited), PrimeCare had working capital of $3,303 and  stockholders’ equity of $122,672, respectively.  PrimeCare incurred net losses for the six months ended December 31, 2010 and for the year ended June 30, 2010 of $194,412 (unaudited) and $340,081, respectively.  These conditions raise substantial doubt as to PrimeCare’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if PrimeCare is unable to continue as a going concern.  Management plans on achieving profitable operations through successful marketing of its PrimeCare V9 software.  However, there is no assurance that the Company will be successful in this effort.

NOTE 2 – INTERIM FINANCIAL STATEMENTS

The unaudited financial statements as of December 31, 2010 and for the three months ended December 31, 2010 and 2009 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with instructions to Form 10-Q. In the opinion of management, the unaudited financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of December 31, 2010 and the results of operations and cash flows for the three months ended December 31, 2010 and 2009.  The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited.  The results for the six months ended December 31, 2010 is not necessarily indicative of the results to be expected for any subsequent quarter of the entire year ending June 30. 2011. The balance sheet at June 30, 2010 has been derived from the audited financial statements at that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations.  These unaudited financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended June 30, 2010 as included in our Form 10-K filed with the Securities and Exchange Commission on October 12, 2010.

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NOTE 3 - NOTES PAYABLE

Notes payable consisted of:                                                                                                                 

NOTE 4 - SOFTWARE LICENSE AGREEMENT AND DEFERRED INCOME

On September 29, 2005, PrimeCare entered into a ten year license agreement with Telemédica SLR (Licensee), a company based in Argentina.  As part of the consideration for becoming the exclusive licensee within the free trade association known as Mercosur, whose members are Argentina, Brazil, Chile, Paraguay and Uruguay, the Licensee paid PrimeCare $60,000 and has agreed to fund the translation and internationalization of PrimeCare V9 in both Spanish and Portuguese.  The Spanish version was completed during 2005.  The Licensee will sub-license PrimeCare V9 to health care providers in the Mercosur and train them in its use.  In the event that the gross revenues derived by Licensee from sub licensing PrimeCare V9 are less than $2,500,000 for the third year of the Term of the agreement, or any year thereafter, the Agreement will become non-exclusive for the balance of the term.  The License provides that the fee to be charged to a sub-licensee shall be not less than $4 per annum, per patient of each sub-licensee, without regard to the number of patient uses of the software during that year, unless PrimeCare agrees, in writing, to a lower fee.

PrimeCare recorded the $60,000 as deferred income in September 2005 and is amortizing this amount to income over ten years, the term of the Licensee distribution agreement.

The agreement was amended as of June 30, 2008 and now provides that the Licensee will pay PrimeCare a license fee equal to 30% of the gross fees charged by Licensee with an annual minimum License Fee of $100,000 per fiscal year commencing July 1, 2008.  

NOTE 5 - STOCKHOLDERS’ EQUITY

Effective September 30, 2008, the Company issued a total of 11,200,000 shares of the Company’s Common Stock, par value $0.001 per share, in full satisfaction of $560,000 of notes payable plus accrued interest thereon of $29,900.

Each share of Series A Preferred Stock is convertible into 100 shares of the Company’s common stock.  In the event that dividends are simultaneously paid or declared on any parity stock, the holders of the Series A Preferred Stock are entitled to receive out of any funds or other property legally available therefore, when and as declared by the Board of Directors, (i) dividends in cash at the annual rate of $0.60 per share, and (ii) in addition, each share of Series A Preferred Stock shall receive 100 times the dividend paid per share of common stock.

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NOTE 6 - WARRANTS

Warrants to purchase 3,100,000 shares of the Company’s Common Stock, par value $0.01 per share, with an exercise price of $.02 per share were exercised between October 8, 2008 and November 14, 2008.  The aggregate amount received by the Company was $62,000.

On November 17, 2008 warrants to purchase 11,366,262 shares of the Company’s common stock expired.  The expired warrants consist of:

On February 23, 2009, the Company issued warrants to eighteen parties to purchase a total of 10,055,000 shares of common stock (4,425,000 to officers and directors); 1,200,000 are exercisable at $.03 per share and 8,855,000 are exercisable at $.05 per share.  The warrants may be exercised at any time or from time to time, prior to February 22, 2011.  The $82,197 fair value of the warrants on the date of issue was charged as follows:  $75,664 to selling, general and administrative expenses and $6,533 to research and development expenses.  The fair value was estimated using the Black-Scholes option pricing model and the following assumptions: expected life of 2 years, expected volatility of 249%, expected dividend yield of 0%, and risk free interest rate of 1.3%.  

The Company issued warrants on  April 11, 2009 to ten parties to purchase a total of 4,795,000 shares of common stock (3,850,000 to officers and directors) at $.03 per share.  The warrants may be exercised at any time or from time to time, prior to April 10, 2012.  The $46,144 fair value of the warrants on the date of issue was charged as follows:  $29,111 to selling, general and administrative expenses and $17,033 to research and development expenses.  The fair value was estimated using the Black-Scholes option pricing model and the following assumptions: expected life of 3 years, expected volatility of 263%, expected dividend yield of 0%, and risk free interest rate of 1.3%.  

At December 31, 2010, warrants consist of:

The 14,850,000 warrants outstanding and exercisable at September 30, 2010 have a weighted-average exercise price of $.0419 per warrant.  The weighted-average grant-date fair value of these warrants was $.0086 per warrant.

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NOTE 7 - INCOME TAXES

No provisions for income taxes have been recorded since the Company has incurred net losses since inception.  Based on management’s assessment, the Company has not yet determined it to be more likely

than not that a deferred tax asset attributable to the future utilization of the net operating loss carry forward will be realized.  Accordingly, the Company has provided a 100% allowance against the deferred tax asset in the financial statements.  The Company will continue to review this valuation allowance and make adjustments as appropriate.  The net operating loss carry forward of approximately $5,700,000 at June 30, 2010 expires in varying amounts from the year 2011 to year 2030.  

Current tax laws limit the amount of loss available to offset against future taxable income when a substantial change in ownership occurs.  Therefore, the amount available to offset future taxable income may be limited.

NOTE 8 - COMMITMENTS

PrimeCare leases office space under an operating leases.  The lease provides for an annual increase of 4%.  For the six months ended December 31, 2010 and 2009 (unaudited), rent expense pursuant to the operating lease was $28,343 and $27,258, respectively.  At December 31, 2010 (unaudited), the future minimum lease payments due in the year ending June 30, 2011 was $28,720.

NOTE 9 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the filing date of this Form 10-Q and has determined that there were no subsequent events to recognize or disclose in these financial statements.

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Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The following discussion and analysis should be read in conjunction with the Financial Statements and Notes thereto appearing elsewhere herein. The following discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and the Company intends that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements include predictions, estimates and other statements that involve a number of risks and uncertainties. While this outlook represents the Company's current judgment on the future direction of the business, such risks and uncertainties could cause actual results to differ materially from any future performance suggested herein.

The Company has experienced recurring losses from operations and has relied on loans and the sale of equity interests in the Company to fund its operations.  If necessary, the Company intends to provide additional working capital through the sale of equity interests in the Company.  Although, in the past, the Company has been able to provide working capital through the sale of equity interests in the Company, there can be no assurances that the Company will succeed in its efforts, which creates a doubt about its ability to continue as a going concern.  

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a working capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Overview

In May 1994, the PrimeCare© Patient Management System (the PrimeCare© System) was MS DOS based.  In 1997, PrimeCare completed the development of its Windows® 95 and Windows® NT based version of the PrimeCare© System (“PrimeCare© V8”).  To increase the compatibility and versatility of Version Eight, PrimeCare added an interface that enabled PrimeCare© V8 to communicate with medical office management systems (billing software, appointment scheduling software, etc.).  Shortly thereafter, PrimeCare commenced a test marketing program in areas where it could install and service the product and train the office personnel in the use of the product.

In April 1998, PrimeCare completed development of CodeComplier©.  During a patient office visit, the CodeComplier© organizes each item of the recorded data in the proper classification and, using the CMS Documentation Guidelines, automatically calculates the proper Evaluation & Management code level used for determining the physician’s reimbursement from Medicare and other third party payers for the office visit.

During December 1998, PrimeCare completed development of its PrimeCareOnTheWeb “PCW”.  The PCW Web site enables a physician to have patients answer one or more of PrimeCare=s 280 Questionnaires via the Internet.  At that time, PrimeCare’s V8 was updated to include the changes.

During the period between late 1998 through 2000, PrimeCare exhibited at several industry conferences in an attempt to generate product recognition and to foster sales.  The response was positive.  Some licenses were sold.  However, many private practice physicians were reluctant to make the capital investment for the hardware necessary to operate the software.  Software updates were labor intensive.  The software had to be updated at each computer.  This discouraged large groups from using the system.  This reluctance caused PrimeCare to redesign the system to overcome those problems.  The feasibility of its product redesign was established in 2001, and the development of PrimeCare’s PrimeCare© V9 began.

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PrimeCare discontinued the marketing of its PrimeCare V8, and subsequently ceased supporting it.  Therefore, in 2003, PrimeCare wrote off as an expense the unamortized capitalized software costs relating to its Version Eight.  Since 1994, PrimeCare has written off capitalized software development costs in excess of $5,500,000.

The Company’s main operational focus has been, and continues to be, the PrimeCare© System.  The Company believes that this business segment has excellent growth potential.

In 2008, as a result of feedback from marketing efforts in South America, the company began to add additional features to PrimeCare©, including specialized capabilities for remote patient scheduling, and Argentine-specific insurance documentation.  The company’s addition of specific support for the Argentine “Plan Nacer” (Healthy Child) program resulted in notification that the Argentine Ministry of Health had approved PrimeCare’s computer-generated Plan Nacer forms for use in place of the manual forms previously used.  This capability was instrumental in supporting marketing efforts in Argentina.

In late 2008, the company recognized that the architecture of the PrimeCare© V9 system required additional modifications to support additional requirements from Argentina more flexibly.  As a result, the company began planning and design for the next edition of the PrimeCare© System, PrimeCare© Version Ten (PrimeCare© V10).  Initial testing of V10 began in 2009, and field evaluations in mid 2010.  During the second quarter of 2010, construction of a new data center dedicated to PrimeCare© V10 was completed.  PrimeCare© Version Ten scheduled for initial release in the third quarter of 2010.

Significant enhancements in PrimeCare© Version Ten over previous versions include a new user interface that reflects lessons learned from field experience, increased modularity, further enhanced security, and a more robust tolerance of intermittent internet connection outages.  More user-level configuration options, include user-defined assess and security roles, increased use of optional bar code technology and support of additional languages have also been incorporated into PrimeCare© Version Ten.  In addition, PrimeCare© Version Ten explicitly incorporates the ability to support multiple data centers in dispersed geographic locations, providing additional flexibility for end users who wish to host their own independent data centers.

PrimeCare© Version Ten maintains the multi-tier architecture of its predecessor, PrimeCare V9, with its inherent advantages, including easy client installation; reduced on-site hardware and support requirements; enhanced data security; and maximum flexibility.   These reduced installation and maintenance costs and increased flexibility enables the PrimeCare© System  to be adapted to a wide variety of health care organizational uses, potentially including national and local health care systems, military organizations, correctional facilities, HMOs, hospitals with outpatient services, clinics, group practices and solo practitioners.  The PrimeCare© System is HIPAA compliant.

During the fourth quarter of 2010, PrimeCare Systems, Inc., further enhanced the utility and stability of Version Ten by re-engineering the data center communications portion of the software.  The new software resulted in a substantial improvement of system stability when clients communicate over unreliable internet connections.  Because of the substantial modifications made to the underlying software, the new edition of Version Ten is now referred to as Version Ten Dot One (V10.1).

PrimeCare has experienced recurring losses from operations, and, in the past, has relied on OCGT, its former parent company, to fund its operations.  Since PrimeCare is no longer a subsidiary of OCGT, it has had to provide its own funding.  To improve its financial position, PrimeCare issued 21,570 shares of Series A Preferred Stock in payment of $215,700 of notes payable assumed from OCGT during January 2006.  To overcome its cash shortfall, in part, during January 2006, PrimeCare issued 3,000 shares of Series A Preferred Stock in payment of $30,000 of loans payable and thereafter, during the month of July 2006, PrimeCare completed a Private Offering of the Series A Preferred Stock, in which it sold 40,000 shares for $400,000 or $10 per share.  $375,000 of the Offering was received during the year ended June

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30, 2006 and $25,000 was received during the June 30, 2007 year.  During the three months ended September 30, 2007, the Company issued a total of 3,000 shares of Series A Preferred Stock in consideration of $15,000 in cash.  On March 23, 2009, a shareholder converted 970 shares of Series A Preferred Stock into 97,000 shares of Common Stock.

These Preferred Shares are convertible into a total of 6,660,000 shares of PrimeCare’s common stock.  The issuance of shares in payment of the debt was made in reliance on the exemption from registration provided under Section 4(2) of the Securities Act of 1933 (the “Act”) and issuance of shares in the Private Offering was pursuant to the exemption provided under Section 4(2) of the Act and the exemption provided by Rule 504 of Regulation D.  The issuances were made in a private transaction without means of any public solicitation.  The shares are restricted securities and the certificates representing the ownership of the shares contain a legend restricting further transfer unless the shares are registered or qualify for an exemption.  If necessary, PrimeCare intends to provide additional working capital through the sale of additional equity interests, or obtain loans.  However, there can be no assurances that it will succeed in its efforts, which creates a doubt as to its ability to continue as a going concern.

During the three months ended September 30, 2008, the Company issued a total of 11,200,000 shares of the Company’s Common Stock, par value $0.001 per share, in full satisfaction of $560,000 of notes payable plus accrued interest thereon of $29,900.  The issuance of shares in payment of the debt was made in reliance on the exemption from registration provided under Section 4(2) of the Securities Act of 1933 (the “Act”) and issuance of shares in the Private Offering was pursuant to the exemption provided under Section 4(2) of the Act and the exemption provided by Rule 504 of Regulation D.  The issuances were made in a private transaction without means of any public solicitation.  The shares are restricted securities and the certificates representing the ownership of the shares contain a legend restricting further transfer unless the shares are registered or qualify for an exemption.

Results of PrimeCare’s Operations for the six months ended December 31, 2010, compared to the six months ended December 31, 2009:

PrimeCare’s total revenue was $3,000 for the six months ended December 31, 2009 compared to $15,000 for the six months ended December 31, 2010.

PrimeCare follows the Accounting Standards Codification (“ASC”) 350, "Intangibles – Goodwill and Other”.  There was no impairment charge to capitalized software costs during the three months ended December 31, 2010 or 2009.

Research and development costs increased from $88,872 for the six months ended December 31, 2009 to $89,595 for the six months ended December 31, 2010, an increase of $723.  The increase primarily resulted from increases in salaries, payroll taxes, travel and utilities during the six months ended December 31, 2010.

Selling, general and administrative costs were $69,354 for the six months ended December 31, 2010 compared to $50,065 for the six months ended December 31, 2009.

Liquidity and Capital Resources

Cash was $3,303 at December 31, 2010.  The Company has a $20,000 credit line from its bank, $0 of which was drawn down as of December 31, 2010.  In the past, PrimeCare’s principal means of overcoming its cash shortfalls, caused by recurring losses from operations, was to receive capital contributions from its former parent.  This source is no longer available as a result of the spin-off effective on December 31, 2005.  The Company has raised $400,000 in a private placement and has retired debt through the issuance of shares of stock as previously discussed.

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During the quarter ended September 30, 2005, PrimeCare entered into a ten year license agreement for the use of PrimeCare J V9, with Telemédica, S.R.L., a company organized and based in Argentina (Telemédica).  Telemédica has advised PrimeCare that they have successfully completed a very successful pilot project for the use of PrimeCare V9, at Hospital Isola in Puerto Madryn and Puerto Pirámides Rural Hospital in the Province of Chubut, Argentina.  In addition, Telemédica signed, a contract with Chubut’s Secretary of Health to provide PrimeCare V9 in the North Sector (el Sector Norte), one of the four health sectors in Chubut (population 450,000).  The North Sector contract was signed by the North Sector’s Director with approval from Chubut’s Secretary of Health.  The North Sector’s central hospital is Hospital Isola, around which it is organized.  The use of the PrimeCare System as a key component of the health care system of the Province of Chubut and the relationship of PrimeCare and the Ministry of Health in the Province of Chubut and its three year history is discussed in an article appearing in a newspaper in the city of Puerto Madryn, which can be viewed in English at PrimeCare’s Web site http://www.pcare.com/pcnews/press074.aspx, as per our translation, or as published in Spanish, at http://www.diariodemadryn.com/vernoti.php?ID=94173 .

The original contract for the use of PrimeCare V9 was a one year rolling contract paying a fixed amount to integrate the Sector Norte’s health system.  This contract was not considered as a “final” contract.  The general terms of the final agreement were agreed to and the agreement written and finalized in the last quarter of 2009.  The PrimeCare V9 System has been thoroughly evaluated by Chubut’s Secretary of Health and an advisor from Argentina’s Ministry of Health, who has been assigned by Argentina’s President to help Chubut to reform its health system.  At the request of the medical authorities of Chubut and to meet the medical system needs of Chubut, in the spirit of cooperation, PrimeCare created and added software programs to the PrimeCare System to give it the ability to: (a) input and store a physician's availability schedule and to display appointment schedules by clinic, location, and physician (It is being used as the basis for appointment scheduling by hospitals in the Sector Norte); (b) enable local users to provide internal procedure billing codes for use in the appointment billing module (Note that this is written specifically for insurance requirements in Argentina and does not have applicability in any other locality); (c) track source of patient personal identifier with user specified source options (e.g, the user can create a list of ID sources, such as SSAN, Passport, Driver's License, DNI, LE, LC - the last three are specific to Argentina); (d) enable installations to specify images / logos to show for their users, and to override the default program name with a locally defined name; (e) identify and color code “out of limits” lab values, as well as charting lab values which have numeric results (some lab values are only positive / negative, and cannot be charted graphically); (f) convert Argentina supplied patient demographic information into PrimeCare compatible information; (g) incorporate ICD-10 diagnostic codes in parallel with existing ICD-9 codes, with ability for each installation to supply up to two additional codes for each diagnosis; and (h) record data for patient pregnancies and deliveries, supporting Argentina's Plan Nacer ("Healthy Child" initiative).  

Puerto Madryn, which is the North Sector's largest city, has approximately 90,000 residents.  The sector's population represents between 15% and 20% of the province's population.  The PrimeCare System already has incorporated 60,000 North Sector electronic medical records; has been interfaced with its laboratory; and has been installed in Hospital Isola and four rural hospitals in the communities of Gan Gan, Telsen, Gastre, and Puerto Pirámides.    

Telemédica said the fee structure will be changed from the original concept, which anticipated a flat rate of $4 per year, per patient.  They say that Chubut prefers to pay a flat, negotiated service fee.  Telemédica has advised PrimeCare that on October 23rd, 2009, they entered into a ten year contract with the Argentine province of Chubut (population 450,000) for use of the PrimeCare Patient Management System, in the province's hospitals, clinics, and primary health centers.  The Chubut contract pays Telemédica a fixed amount for the first two years with provisions for possible increases over the balance of the contract as the PrimeCare System is implemented throughout the Province.  The PrimeCare System

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was thoroughly evaluated by Chubut’s Secretary of Health, who is now an Argentine senator serving on the senate's healthcare committee.

Telemédica continues to market PrimeCare V9 in other areas of Argentina and has had expressions of serious interest from places in Patagonia, Santa Fe, Entre Ríos, and a health system in Buenos Aires province.  Telemédica believes that other provinces in Argentina will follow the lead of Chubut.  In addition, Telemédica is in talks with two insurance companies about using the PrimeCare System as the IT backbone of their workplace risk operations.

Although PrimeCare’s license agreement with Telemédica provides that the fee to be charged to a sub-licensee shall be not less than four US dollars (US$4.00) per annum, per patient of each sub-licensee, without regard to the number of patient uses of the software during that year, PrimeCare has agreed that it will change the basis for charging fees to the end user.

Telemédica anticipates that additional provinces of Argentina will commence using PrimeCare V9 in the near future and the Company’s revenues from such use will keep increasing.

Assuming our current spending levels of approximately $33,000 per month, management believes that PrimeCare can raise the funds that might be necessary to meet cash shortfalls from operations until sufficient revenues will be generated from the Argentine License to overcome the Company’s cash shortfalls.  As of December 31, 2010 the Company had cash balances of $3,303 and had the availability of $20,000 of its line of credit in the amount of $20,000.  In addition, the amended distribution agreement with Telemédica, S.R.L. provides for a minimum annual payment to the Company of $100,000 per year.   Since January 1, 2007, the Company has received $950,000 in loans, with interest payable thereon at 6% per annum, fromTelemedicine International LLC, the majority shareholder of Telemédica, S.R.L.and PrimeCare’s President to cover the Company’s cash shortfalls, of which $560,000, together with interest thereon, was repaid through the issuance of the Company’s common shares as previously discussed.   There can be no assurance that these loans will continue to be available or that they can be repaid through issuing the Company’s stock

The Company has a $20,000 line of credit from RBC Centura Bank with whom the Company maintains a checking account, of which $20,000 was available as of December 31, 2010.  The terms of the agreement call for interest to be paid monthly on the outstanding balance computed at the per annum rate of Wall Street Journal Prime Rate plus 3%.  The agreement also calls for repayment in monthly installments equal to or greater than 3% of the outstanding balance.  The loan is personally guaranteed by an officer of the Company.

PrimeCare’s management believes that the Argentina License will provide sufficient revenues from operations to overcome its cash shortfalls caused by recurring losses from operations and will make PrimeCare profitable

Currently, the Company has no material commitments for capital expenditures outstanding.

Item 3.  Controls and Procedures

An evaluation was carried out under the supervision and with the participation of the Company's management, including the President/Chief Financial Officer ("CFO"), of the effectiveness of the Company's disclosure controls and procedures.  Based on that evaluation, the President/CFO have concluded that as of the end of the period covered by this report, the Company's disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and timely reported as provided in the Securities and Exchange Commission rules and forms.  The Company periodically reviews the design and effectiveness of our internal controls over

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financial reporting, including compliance with various laws and regulations that apply to the Company's operations.  The Company makes modifications to improve the design and effectiveness of its internal control structure, and may take other corrective action, if the Company's reviews identify deficiencies or weaknesses in its controls.  No changes occurred during the quarter ended December 31, 2004 in the Company's internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

None

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

During the three months ended September 30, 2008, the Company issued a total of 11,200,000 shares of the Company’s Common Stock, par value $0.001 per share, in full payment of $560,000 of notes payable plus accrued interest of $29,900 or approximately $0.05 per share. The issuance of shares in payment of the debt was made in reliance on the exemption from registration provided under Section 4(2) of the Securities Act of 1933 (the “Act”) and issuance of shares in the Private Offering was pursuant to the exemption provided under Section 4(2) of the Act and the exemption provided by Rule 504 of Regulation D.  The issuances were made in a private transaction without means of any public solicitation.  The shares are restricted securities and the certificates representing the ownership of the shares contain a legend restricting further transfer unless the shares are registered or qualify for an exemption.

During the three months ended September 30, 2007, the Company issued a total of 3,000 shares of Series A Preferred Stock in consideration of $15,000 in cash.  The proceeds were used as working capital.

Each share of Series A Preferred Stock is convertible into 100 shares of the Company’s common stock.  In the event that dividends are simultaneously paid or declared on any parity stock, the holders of the Series A Preferred Stock are entitled to receive out of any funds or other property legally available therefore, when and as declared by the Board of Directors, (i) dividends in cash at the annual rate of $0.60 per share, and (ii) in addition, each share of Series A Preferred Stock shall receive 100 times the dividend paid per share of common stock.

In consummating the above described sale, the Company relied upon the exemptions from registration provided by Sections 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), and based upon: representations from the investor that he, she or it, (a) was acquiring the securities for his, her or its own account and not with a view towards further distribution and (b) had such sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks connected with the applicable investment, and the fact that (c) no general solicitation of the securities was made by the Company, (d) the securities issued were “restricted securities” as that term is defined under Rule 144 promulgated under the Securities Act, (e) the Company placed appropriate restrictive legends on the certificates representing the securities regarding the restricted nature of these securities and (f) prior to the completion of the transaction, each investor was informed in writing of the restricted nature of the securities, provided with all information regarding the Company as required under Rule 502 of Regulation D and was given the opportunity to ask questions of and receive additional information from the Company regarding its financial condition and operations.

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Item 6.

Exhibits and Reports on Form 8-K

(a)

Exhibits

Exhibit No.

Exhibit Name

*

Incorporated by reference to Form SB -2, as amended, filed September 29, 2006

(b)

Reports on Form 8-K

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers, filed 25 October 2010.

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SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned , thereunto duly authorized.

PRIMECARE SYSTEMS, INC.

By:  /s/Robert A. Shiver    

      Robert A. Shiver, President

By: /s/ W. Jordan Fitzhugh

    W. Jordan Fitzhugh, Treasurer/Chief Financial Officer

DATED: February 19, 2011

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Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302(a)
OF THE SARBANES-OXLEY ACT OF 2002

I, Robert A. Shiver, certify that:

1. I have reviewed this quarterly report on Form 10-Q of PrimeCare Systems, Inc. for the period ending December 31, 2010;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d- 15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986]

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: Date: February 19, 2011

By:  /s/Robert A. Shiver    

      Robert A. Shiver, President

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Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302(a)
OF THE SARBANES-OXLEY ACT OF 2002

I, W. Jordan Fitzhugh, certify that:

1. I have reviewed this quarterly report on Form 10-Q of PrimeCare Systems, Inc. for the period ending December 31, 2010;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d- 15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) [Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986]

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: Date: February 19, 2011

By: /s/ W. Jordan Fitzhugh

      W. Jordan Fitzhugh, Treasurer/Chief Financial Officer

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Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss. 1350), the undersigned, Robert A. Shiver, President of PrimeCare Systems, Inc., a Delaware corporation, (the "Company"), does hereby certify, to his knowledge, that:

The Quarterly Report on Form 10-Q for the period ended December 31, 2010 of the Company (the "Report") fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and the information contained in the report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: February 19, 2011

By:  /s/Robert A. Shiver    

      Robert A. Shiver, President

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Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss. 1350), the undersigned, W. Jordan Fitzhugh, Treasurer/Chief Financial Officer of PrimeCare Systems, Inc., a Delaware corporation, (the "Company"), does hereby certify, to his knowledge, that:

The Quarterly Report on Form 10-Q for the period ended December 31, 2010 of the Company (the "Report") fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and the information contained in the report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: February 19, 2011

By: /s/ W. Jordan Fitzhugh

W. Jordan Fitzhugh, Treasurer/Chief Financial Officer

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