Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable.  When required impairment losses on assets to be held and used are recognized based on the fair value of the asset.  The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required.  If the carrying amount of the long-lived asset is not recoverable

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from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset.  When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets.  We did not recognize any impairment losses for any periods presented.

Marketable Securities

The Company's marketable securities are classified as available-for-sale, are presented in the balance sheets at fair market value, and consist entirely of equity securities. Gains and losses are determined using the specific identification method.

Comprehensive income (loss)

The Company accounts for comprehensive income (loss) under ASC 220, “Comprehensive Income”, which establishes standards for reporting and display of comprehensive income and its components. Unrealized gains (losses) from marketable securities are reported as other comprehensive income (loss) in the consolidated statements of income and comprehensive income and as accumulated other comprehensive income (loss) in stockholders’ equity.

Stock-based compensation

The Company accounts for employee and non-employee stock awards under ASC 718, “Compensation-Stock Compensation”, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable.

Recently Issued Accounting Pronouncements

Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the FASB Accounting Standards Codification (“ASC) is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company.  Management has reviewed the aforementioned rules and releases and believes any effect will not have a material impact on the Company’s present or future consolidated financial statements.

Note 2. GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has a history of losses, primarily due to its product development stage, resulting in an accumulated deficit. The Company is dependent on financing from its majority shareholder and related parties and other

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funding activities to meet its current operating obligations. In view of these matters, the Company’s ability to continue as a going concern is dependent upon the Company’s ability to generate revenues from operations and to achieve a level of profitability. The Company intends on financing its future development activities, marketing plan and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including term notes until such time that funds provided by operations are sufficient to fund working capital requirements.

The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 3.   BUSINESS ACQUISITIONS AND ASSET PURCHASES

Effective January 1, 2012, The Company purchased fixed assets in the amount of $525,000 in return for equity in the Company’s first accountable care organization and the assumption of certain accounts payable. On January 24, 2012, the Company acquired certain intangible assets in the amount of $104,000 in return for a $24,000 note payable and the issuance of 4,000 shares of Peer Review Mediation and Arbitration, Inc.

Note 4.  SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date the financial statements were issued.  Management is not aware of any significant events that occurred subsequent to the balance sheet date that would have a material effect on the financial statements thereby requiring adjustment or disclosure.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. The statements regarding Peer Review Mediation and Arbitration, Inc. and its subsidiaries contained in this Report that are not historical in nature, particularly those that utilize terminology such as “may,” “will,” “should,” “likely,” “expects,” “anticipates,” “estimates,” “believes” or “plans,” or comparable terminology, are forward-looking statements based on current expectations and assumptions, and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements.

Overview

We were incorporated under the laws of the state of Florida on April 16, 2001.  We have been conducting business operations ever since, primarily focused on the creation and continual development of our core initiatives to partner with health care providers in their pursuit to achieve medical excellence. Through our family of core operating systems and solutions, we will introduce investment, technology, innovation and intellectual capital and expertise to modernize and optimize the health care provider’s practice.

Results Of Operations

Comparison of Results of Operations for the Three Months Ended September 30, 2012 and 2011

Sales were $2,239,125 for the three months ended September 30, 2012, as compared to sales of $2,069,437 for the three months ended September 30, 2011, an increase of $169,688, or 8.0%.  This increase in revenue for the three months ending September 30, 2012 is due to the continuation of the Company’s transition from developmental to operational combined with additional revenues generated from our first accountable care organization.

Cost of sales was $1,883,620 for the three months ended September 30, 2012, as compared to cost of sales of $1,674,386 for the comparable period in 2011, an increase of $209,234, or 12.0%. Cost of sales increased due to the corresponding increase in revenues.

For the three months ended September 30, 2012, we incurred operating expenses of $1,105,008, which consisted of selling, general and administrative expenses of $1,035,310 and depreciation expense of $69,698, compared to operating expense of $549,252 during the three months ended September 30, 2011, which consisted of selling, general and administrative expenses of $504,701 and depreciation expenses of $44,821 for the same period last year.  This increase is due an increase in business development activity as the Company continues to execute its business plan.

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During the three months ended September 30, 2012, we had interest expenses of $69,859.  During the three months ended September 30, 2011, we had interest income of $12, interest expenses of $67,372, and beneficial conversion feature expenses of $5,938.  As a result, we incurred a loss of ($819,360) during three months ended September 30, 2012, or ($0.088) per share, compared with a loss of ($227,769) during the three months ended September 30, 2011, or ($0.02) per share.

Comparison of Results of Operations for the Nine Months Ended September 30, 2012 and 2011

Sales were $7,059,606 for the nine months ended September 30, 2012, as compared to sales of $6,265,010 for the nine months ended September 30, 2011, an increase of $794,596, or 12.7%. This increase in revenue for the nine months ending September 30, 2012 is due to the continuation of the Company’s transition from developmental to operational combined with additional revenues generated from our first accountable care organization.

Cost of sales was $5,922,985 for the nine months ended September 30, 2012, as compared to cost of sales of $5,352,824 for the comparable period in 2011, an increase of $570,161, or 10.6%. Cost of sales increased due to the corresponding increase in revenues.

For the nine months ended September 30, 2012, we incurred operating expenses of $2,685,720, which consisted of depreciation expenses of $221,023and selling, general and administrative expenses of $2,464,697, compared to operating expense of $2,847,306 during the nine months ended September 30, 2011, which consisted of depreciation expenses of $161,908, write-offs of $1,051,900, and  selling, general and administrative expenses of $1,633,498 for the same period last year, or a 50% increase in selling, general and administrative expense. This increase is due an increase in business development activity as the Company continues to execute its business plan.

During the nine months ended September 30, 2012, we had interest expenses of $232,460 and beneficial conversion feature expenses of $200.  During the nine months ended September 30, 2011, we had interest income of $12, interest expenses of $205,187, and beneficial conversion feature expenses of $56,626.  As a result, we incurred a loss of ($1,781,760) during the nine months ended September 30, 2012, or ($0.193) per share, compared with a loss of ($2,196,921) during the nine months ended September 30, 2011, or ($.024) per share.

Liquidity and Capital Resources

For the nine months ended September 30, 2012, we had fixed asset purchases of $88,280 and business acquisition – net expenses of $51,353, resulting in net cash used for

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investing activities for the period of $139,633.  Comparatively, for the nine months ended September 30, 2011, we had fixed asset purchases of $967,072 and business acquisition – net decrease of $724,948, resulting in net cash used for investing activities for the period of $1,692,020.

For the nine months ended September 30, 2012, we had notes payable – payments of $96,965, capital lease obligation – payments of $35,236, equity sales – subsidiary of $2,000 and option exercises of $1,089,568, resulting in net cash provided by financing activities for the period of $959,367.  Comparatively, for the nine months ended September 30, 2011, we had notes payable – borrowings of $605,007, capital lease obligation – payments of $36,848, equity sales – subsidiary of $453,000 and option exercises of $366,023, resulting in net cash provided by financing activities for the period of $1,460,878.

As reflected in the financial statements we have a negative cash flow from operations of $(836,866) for the nine months ended September 30, 2012. This raises doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and execution of its business plan. Our independent auditor has expressed doubt about our ability to continue as a going concern and believes that our ability is dependent on executing our business plan, raising capital and generating revenues. See Note 2 of our financial statements. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

At September 30, 2012, the Company had $72,198 in cash resources to meet current obligations. Management does not consider our current cash position sufficient to sustain our operations. We estimate that our current available cash will satisfy approximately one month of our operating cash flow requirements. We have depended and continue to depend on monthly cash contributions from related parties and the sale of shares, to meet any shortfall in meeting our obligations. We expect to generate increasing revenue during the rest of the year, minimizing our need for support; however we will require capital to market our product and achieve our operating plan. In the absence of generating revenue, we anticipate that over the next twelve months we will require cash contributions from Mr. Willis or other related parties and to sell more shares. However, there is no guarantee that these parties will make any contributions or we will find a market for our stock. We have not identified any other source of funding to meet the shortfall; thus, without such support, we may go out of business.

Completion of our plan of operation is subject to attaining adequate revenue through increased volume of existing products and services, the development of additional products and services, business acquisition and the integration of medical practice partnerships. We cannot assure investors that adequate revenues will be generated. Without adequate revenues, we may be unable to proceed with our plan of operations. In the event we are not successful in reaching our revenue targets, additional funds may be

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required, and we would then not be able to proceed with our business plan for the development and marketing of our core services. Should this occur, we would likely seek additional financing to support the continued operation of our business. We anticipate that depending on market conditions and our plan of operations, we would incur operating losses in the foreseeable future. We base this expectation, in part, on the fact that we may not be able to generate enough gross profit from our services to cover our operating expenses. Consequently, there is substantial doubt about the Company’s ability to continue to operate as a going concern.

In an effort to accelerate revenue growth and profitability and to most effectively achieve our business plan, the Company is focusing its efforts on the optimization of existing products and services and the development of new products and services centric to our practice partnership and accountable care organization business models. Consistent with these efforts, we intend to focus our environmental service offerings on the medical community and discontinue construction related environmental services. Management believes this will better position us to effectively service our current and targeted medical customer base and maximize related growth opportunities.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures:  Our chief executive officer and chief financial officer have concluded that the disclosure controls and procedures were  effective as of September 30, 2012.  These controls are meant to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms and to ensure that information required to be disclosed by an issuer in the reports that it files or submits under 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.  

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PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

None

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.  MINE SAFETY DISCLOSURE

Not applicable

ITEM 5.  OTHER INFORMATION

None

ITEM 6.  EXHIBITS

   Exhibit 31* - Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

   Exhibit 32* - Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

   Exhibit 101.INS**   XBRL Instance Document

   Exhibit 101.SCH**   XBRL Taxonomy Extension Schema Document

   Exhibit 101.CAL**   XBRL Taxonomy Extension Calculation Linkbase Document

   Exhibit 101.DEF**   XBRL Taxonomy Extension Definition Linkbase Document

   Exhibit 101.LAB**   XBRL Taxonomy Extension Label Linkbase Document

   Exhibit 101.PRE**   XBRL Taxonomy Extension Presentation Linkbase Document

*  Filed herewith

**XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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SIGNATURES

Pursuant to 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.

PEER REVIEW MEDIATION AND ARBITRATION, INC.

Dated:  November 20, 2012

By: /s/Willis Hale

          Willis Hale

          Chief Executive Officer

By: /s/Marc E. Combs

          Marc E. Combs

          Chief Financial Officer

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