SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2011

Acquisition of Z-sleep Diagnoztics, Inc. - On January 1, 2012, the Company acquired all the business and assets of Z-sleep Diagnoztics, Inc., a Colorado corporation for 150,000 shares of the Company common stock, issued February 14, 2012, and valued at $0.083 per share, based on the quoted trading price on the closing date or $12,450, plus two payments of $7,500 on April 1, 2012 and July 1, 2012, for a total purchase price of $27,750. The allocation of the final purchase price is summarized as follows:

Fair market value of assets acquired:
Provisional accreditation - American Academy of Sleep Medicine	$	22,150
Furniture and equipment		1,175
Total fair value of assets purchased	$	27,450

The assets were recorded at their fair market value and the purchase price was recorded as a liability until the common shares were issued and the payments are made.

Reverse Stock Split and Stock Sale - On April 2, 2012 the Company signed a “Stock Acquisition Agreement” (Agreement) whereby Queste Capital (Queste) will purchase approximately 95% of the Company’s common stock for $425,000. Prior to the purchase the Agreement calls for the Company to declare a 1 for 12 reverse stock split for all classes of stock and then subsequently issue additional shares to Queste Capital and its investors. After the transaction the Company will have approximately 84,500,000 common shares outstanding and approximately 95% of those shares will be owned by Queste Capital and its investors. The reverse split and stock sale are not completed as of the date of this report.

Extinguishment/Repayment of Note Payable to Related Party - On February 17, 2012, the Company agreed to offset 1) the $21,656 December 31, 2011 related party receivable resulting from 2011 costs paid on behalf of Physicians Healthcare Management Group, Inc. (an affiliate) and 2) any and all claims the Company has against AccessKey as described in Note 3, against the note payable of $50,000 owed to Physicians Healthcare Management Group, Inc. as of December 31, 2011. Since the Company recognized a 100% impairment loss on the AccessKey investment in 2011, it recognized a gain of $28,344 on February 17, 2012 when offsetting the $50,000 note payable against the assets described above.

Related Party Funding - Subsequent to 2011, the President, Chief Executive Officer, and Chairman of the Board (CEO) and his spouse have loaned the Company an additional $142,500 in short-term unsecured loans with 12% interest to fund the operations of the Company. These loans are due on demand.

PHYHEALTH Corp 10-K