UNITED
STATES


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 March 31,
2009





[   ]  TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the transition period from _____________ to
  _____________





COMMISSION
FILE #333-30176





NEW
MEXICO SOFTWARE, INC.


(Exact
name of Registrant as specified in charter)





NEVADA
            91-1287406(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification No.)








5021
Indian School Road, Suite 100


Albuquerque,
New Mexico 87110


(Address
of principal executive offices)    (Zip Code)





(505)
255-1999


(Registrant’s
telephone number, including area code)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 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 check mark whether the registrant has submitted electronically and
      posted on its corporate Web site, if any, every Interactive Data File
      required to be submitted and posted pursuant to Rule 405 of Regulation S-T
      (§232.405 of this chapter) during the preceding 12 months (or for such
      shorter period that the registrant was required to submit and post such
      files).
            YES
      [X] NO [  ]





Indicate
      by 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 check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act).
            YES
      [  ] NO [X]





The
number of shares outstanding of each of the issuer’s classes of common stock at
May 15, 2009 was 129,081,987.














TABLE OF
CONTENTS











PART I FINANCIAL
      INFORMATIONITEM 1.  FINANCIAL STATEMENTS
      (UNAUDITED)Balance SheetsStatements of OperationsStatements of Cash FlowsNotes to the Financial StatementsITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES
      ABOUT MARKET RISKITEM 4T.  CONTROLS AND
PROCEDURESPART II OTHER
      INFORMATIONITEM 1.  LEGAL PROCEEDINGSITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND
      USE OF PROCEEDSITEM 3.  DEFAULTS UPON SENIOR
      SECURITIESITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERSITEM 5.  OTHER INFORMATIONITEM 6.  EXHIBITSSIGNATURES




















2


PART I  
 FINANCIAL INFORMATION





ITEM 1.   FINANCIAL STATEMENTS





New
Mexico Software, Inc.


Balance Sheets


(Rounded
to the nearest thousand)


(UNAUDITED)


March
      31,
                        
                        
                        December
      31,2009
                        
                        
                        2008Assets
                        
                        
                        
                        
                        (Audited)Current
      assets:Cash
      and equivalents
                        
                        $
                        103,000
                        
                        
                        $
                        68,000Accounts
      receivable, net
                        
                        
                        517,000
                        
                        
                        
                        363,000Inventory
                        
                        
                        18,000
                        
                        
                        
                        18,000Prepaid
      expenses and other assets
                        
                        
                        5,000
                        
                        
                        
                        5,000Total
      current assets
                        
                        
                        643,000
                        
                        
                        
                        454,000Furniture,
      equipment and improvements, net
                        
                        
                        95,000
                        
                        
                        
                        96,000Security
      deposits
                        
                        
                        4,000
                        
                        
                        
                        4,000Total
      Assets
                        
                        $
                        742,000
                        
                        
                        $
                        554,000Liabilities
      and Stockholders' EquityCurrent
      liabilities:Accounts
      payable
                        
                        $
                        415,000
                        
                        
                        $
                        282,000Accrued
      expenses
                        
                        
                        157,000
                        
                        
                        
                        134,000Customer
      deposits
                        
                        
                        20,000
                        
                        
                        
                        20,000Deferred
      revenue
                        
                        
                        13,000
                        
                        
                        
                        28,000Notes
      payable
                        
                        
                        1,000
                        
                        
                        
                        58,000Capital
      lease
                        
                        
                        19,000
                        
                        
                        
                        17,000Total
      current liabilities
                        
                        
                        625,000
                        
                        
                        
                        539,000Long-term
      liabilitiesCapital
      lease - long-term portion
                        
                        
                        6,000
                        
                        
                        
                        8,000Total
      long-term liabilities
                        
                        
                        6,000
                        
                        
                        
                        8,000Total
      liabilities
                        
                        
                        631,000
                        
                        
                        
                        547,000Stockholders'
      equity:Preferred
      stock, $0.001 par value, 500,000 shares authorized,0
      shares issued and outstanding as of 3/31/09 and
      12/31/08,  respectively
                        
                        
                        -
                        
                        
                        
                        -Common
      stock, $0.001 par value, 200,000,000 sharesauthorized,
      129,081,987 and 127,948,261 shares issued and outstandingas
      of 3/31/09 and 12/31/08, respectively
                        
                        
                        129,000
                        
                        
                        
                        128,000Paid-in
      capital
                        
                        
                        14,662,000
                        
                        
                        
                        14,606,000Subscriptions
      payable
                        
                        
                        46,000
                        
                        
                        
                        21,000Deferred
      compensation
                        
                        
                        (68,000
                        )
                        
                        
                        (102,000
                        )Accumulated
      deficit
                        
                        
                        (14,658,000
                        )
                        
                        
                        (14,646,000
                        )Total
      stockholders' equity
                        
                        
                        111,000
                        
                        
                        
                        7,000Total
      Liabilities and Stockholders' Equity
                        
                        $
                        742,000
                        
                        
                        $
                        554,000





The
accompanying notes are an integral part of these financial
statements.





3





New
Mexico Software, Inc.


Statements of Operations


(Rounded
to the nearest thousand)


(UNAUDITED)








For
      the three months endedMarch
      31,2009
                      
                      
                      2008RevenuesRadiological
      services
                      
                      $
                      708,000
                      
                      
                      $
                      -Software
      usage fees
                      
                      
                      122,000
                      
                      
                      
                      133,000Software
      hosting and maintenance
                      
                      
                      62,000
                      
                      
                      
                      71,000Software
      sales and licenses
                      
                      
                      -
                      
                      
                      
                      15,000Custom
      programming
                      
                      
                      3,000
                      
                      
                      
                      11,000Hardware
      sales
                      
                      
                      -
                      
                      
                      
                      5,000Scanning
      services
                      
                      
                      20,000
                      
                      
                      
                      -Gross
      revenues
                      
                      
                      915,000
                      
                      
                      
                      235,000Cost
      of services
                      
                      
                      656,000
                      
                      
                      
                      74,000Gross
      profit
                      
                      
                      259,000
                      
                      
                      
                      161,000Operating
      costs and expenses:General
      and administrative
                      
                      
                      250,000
                      
                      
                      
                      195,000Depreciation
                      
                      
                      9,000
                      
                      
                      
                      8,000Research
      and development
                      
                      
                      15,000
                      
                      
                      
                      31,000Total
      operating costs and expenses
                      
                      
                      274,000
                      
                      
                      
                      234,000Net
      operating loss
                      
                      
                      (15,000
                      )
                      
                      
                      (73,000
                      )Other
      income (expense):Interest
      income
                      
                      
                      10,000
                      
                      
                      
                      -Interest
      expense
                      
                      
                      (7,000
                      )
                      
                      
                      -Total
      other income (expense)
                      
                      
                      3,000
                      
                      
                      
                      -Net
      loss
                      
                      $
                      (12,000
                      )
                      
                      $
                      (73,000
                      )Earnings
      per share - basic
                      
                      $
                      (0.00
                      )
                      
                      $
                      (0.00
                      )Weighted
      average number of common sharesoutstanding
      - basic
                      
                      
                      128,741,869
                      
                      
                      
                      107,520,558








The
accompanying notes are an integral part of these financial
statements.





4





New
Mexico Software, Inc.


Statements of Cash Flows


(Rounded
to the nearest thousand)


(UNAUDITED)








For
      the three months endedMarch
      31,2009
                      
                      
                      2008Cash
      flows from operating activitiesNet
      loss
                      
                      $
                      (12,000
                      )
                      
                      $
                      (73,000
                      )Adjustments
      to reconcile net loss tonet
      cash used by operating activities:Common
      stock issued for salaries
                      
                      
                      -
                      
                      
                      
                      13,000Common
      stock issued for services
                      
                      
                      34,000
                      
                      
                      
                      6,000Depreciation
                      
                      
                      9,000
                      
                      
                      
                      8,000Depreciation
      allocated to cost of services
                      
                      
                      2,000
                      
                      
                      
                      2,000Changes
      in operating assets and liabilities:Accounts
      receivable
                      
                      
                      (154,000
                      )
                      
                      
                      (14,000
                      )Inventory
                      
                      
                      -
                      
                      
                      
                      (2,000
                      )Accounts
      payable
                      
                      
                      133,000
                      
                      
                      
                      36,000Accrued
      expenses
                      
                      
                      23,000
                      
                      
                      
                      12,000Deferred
      revenue
                      
                      
                      (15,000
                      )
                      
                      
                      (1,000
                      )Net
      cash (used) provided by operating activities
                      
                      
                      20,000
                      
                      
                      
                      (13,000
                      )Cash
      flows from investing activitiesAcquisition
      of fixed assets
                      
                      
                      -
                      
                      
                      
                      (27,000
                      )Capital
      lease
                      
                      
                      (5,000
                      )
                      
                      
                      13,000Net
      cash used by investing activities
                      
                      
                      (5,000
                      )
                      
                      
                      (14,000
                      )Cash
      flows from financing activitiesRepayment
      of principal under capital lease
                      
                      
                      (5,000
                      )
                      
                      
                      -Subscriptions
      payable
                      
                      
                      25,000
                      
                      
                      
                      -Net
      cash provided by financing activities
                      
                      
                      20,000
                      
                      
                      
                      -Net
      increase (decrease) in cash equivalents
                      
                      
                      35,000
                      
                      
                      
                      (27,000
                      )Cash
      equivalents - beginning
                      
                      
                      68,000
                      
                      
                      
                      59,000Cash
      equivalents - ending
                      
                      $
                      103,000
                      
                      
                      $
                      32,000Supplemental
      disclosures:Interest
      paid
                      
                      $
                      1,000
                      
                      
                      $
                      -Shares
      issued for exercise of warrants
                      
                      $
                      -
                      
                      
                      $
                      10,000Notes
      payable converted to shares
                      
                      $
                      57,000
                      
                      
                      $
                      -








The
accompanying notes are an integral part of these financial
statements.





5


New
Mexico Software, Inc.


Notes to the Financial Statements


(Unaudited)








NOTE
A – BASIS OF PRESENTATION





The
interim financial statements included herein, presented in accordance with
United States generally accepted accounting principles and stated in US dollars,
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission.  Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading.





These
statements reflect all adjustments, consisting of normal recurring adjustments,
which, in the opinion of management, are necessary for fair presentation of the
information contained therein.  It is suggested that these interim
financial statements be read in conjunction with the financial statements of the
Company for the year ended December 31, 2008 and notes thereto included in the
Company's Form 10-K.  The Company follows the same accounting policies
in the preparation of interim reports.





Results
of operations for the interim periods are not indicative of annual
results.





NOTE
B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





[1]
Revenue recognition:





During
2008 and the first quarter of 2009, our revenues generally can be classified
into four main categories: radiological services, software usage fees, software
hosting and maintenance contracts, and software licenses that require us to
provide production, customization or modification to our core software product.
The Company also occasionally derives revenue from the sale of customized
software, hardware sales associated with sales of our various software products,
scanning services and other services such as consulting, training and
installation.  The Company recognizes revenue in accordance with
Statement of Position (SOP) 97-2 Software Revenue Recognition
as amended.





The
Company offers with certain sales of its software products a software
maintenance, upgrade and support arrangement. These contracts may be elements in
a multiple-element arrangement or may be sold in a stand-alone basis. Revenues
from maintenance and support services are recognized ratably on a straight-line
basis over the term that the maintenance service is provided. The Company
typically charges 17% to 21% of the software purchase price for a 12-month
maintenance contract with discounts available for longer-term agreements. The
complexity of the software determines the percentage that is charged to any
individual customer, and that percentage remains consistent upon renewal unless
there is a change in the software or the terms of the agreement.





Charges
for hosting are likewise spread ratably over the term of the hosting agreement,
with the typical hosting agreement having a term of 12 months, with renewal on
an annual basis.  The Company sells some hosting contracts in
conjunction with the sale of software, and some hosting contracts without an
associated software sale.  When the hosting arrangement is sold in
conjunction with a software sale, the Company allocates a portion of the fee to
the software license.  Hostingservices do not require
the customer to purchase the software license, and for those hosting contracts
that are sold without an associated software sale, the customer does not have
the right nor the ability to operate the software on its own.






6


New
Mexico Software, Inc.


Notes to
the Financial Statements


(Unaudited)








NOTE
B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





[1]
Revenue recognition (continued):





Should
the sale of software involve an arrangement with multiple elements (for example,
the sale of a software license along with the sale of maintenance and support to
be delivered over the contract period), the Company allocates revenue to each
component of the arrangement using the residual value method based on the fair
value of the undelivered elements. The Company defers revenue from the
arrangement equivalent to the fair value of the undelivered elements and
recognizes the remaining amount at the time of the delivery of the product or
when all other revenue recognition criteria have been met. Fair values for the
ongoing maintenance and support obligations are based upon separate sales of
renewals of maintenance contracts. Fair value of services, such as training or
consulting, is based upon separate sales of these services to other
customers.  The Company follows the guidance in SOP 81-1, Accounting for Performance of
Construction-Type and Certain Production-Type Contracts for custom
software development arrangements that require significant production,
customization or modification to its core software.  Revenue is
generally recognized for such arrangements under the percentage-of-completion
method.  Under percentage-of-completion accounting, both the product
license and custom software development revenue are recognized as work
progresses based on specific milestones in accordance with paragraphs 85 – 91 of
SOP 97-2.  The Company believes that project milestones based on
completion of specific tasks provide the best approximation of progress toward
the completion of the contract.  At March 31, 2009 and March 31, 2008,
there were no custom software development arrangements in progress.





The
Company also derives revenue from the sale of third party hardware, which is
billed as a separate deliverable under consulting or custom development
contracts.  Revenue from radiological services, software installation,
training and consulting services is recognized when the services are
rendered.  These revenues include services that are not essential to
the functionality of the software.  If these services are included in
a software agreement with multiple elements, amounts are allocated to these
categories based on the estimated number of hours required to complete the work,
which is the same criteria used to bill for the services
separately.  License revenue is recognized ratably over the term of
the license.





Amounts
collected prior to satisfying the above revenue recognition criteria are
included in deferred revenue.





The
application of SOP 97-2, as amended, requires judgment, including a
determination that collectibility is probable and the fee is fixed and
determinable.  On occasion, the Company has approved extended payment
arrangements for certain customers.  These arrangements generally do
not exceed 120 days, therefore collectibility is considered probable at the time
of delivery.  If an installment payment is allowed which exceeds
twelve months, revenue for that installment is recognized at the time payment is
received.





The
Company follows the guidance provided by SEC Staff Accounting Bulletin (SAB) No.
101, Revenue Recognition in
Financial Statements and SAB No. 104, Revenue Recognition, which
provide guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the SEC.





Due to
uncertainties inherent in the estimation process it is at least reasonably
possible that completion costs for contracts in progress will be further revised
in the near-term.






7


New
Mexico Software, Inc.


Notes to
the Financial Statements


(Unaudited)








NOTE
B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





[1]
Revenue recognition (continued):





The cost
of services, consisting of staff payroll, radiologists’ fees, outside services,
professional licenses and insurance, communication costs and supplies, is
expensed as incurred.





[2] Cash
and cash equivalents:




The
Company considers all highly liquid instruments purchased with a maturity of
three months or less to be cash equivalents.  At March 31, 2009, the
Company had no cash and cash equivalents that exceeded federally insured
limits.





[3] Trade
Accounts Receivable:





The
Company extends unsecured credit to customers under normal trade agreements
which generally require payment within 30 - 45 days.  Accounts not
paid within 15 days after their original due date are considered
delinquent.  Unless specified by the customer, payments are applied to
the oldest unpaid invoice.  Accounts receivable are presented at the
amount billed.





The
Company also estimates an allowance for doubtful accounts, which amounted to
$30,000 and $20,000 at March 31, 2009 and 2008, respectively.  The
estimate is based upon management’s review of all accounts and an assessment of
the Company’s historical evidence of collections.  Specific accounts
are charged directly to the reserve when management obtains evidence of a
customer’s insolvency.  Charge-offs, net of recoveries, amounted to
$2,000 and $0 for the quarters ended March 31, 2009 and 2008,
respectively.





[4]
Inventory:





Inventory,
composed of component parts and finished goods, is valued at cost on a specific
identity basis for those items with serial numbers.  The remainder of
the inventory is valued at the lower of first-in-first-out (FIFO) cost or
market.  On a quarterly basis, management compares the inventory on
hand with our records to determine whether write-downs for excess or obsolete
inventory are required.





[5]
Furniture, equipment and improvements:





Furniture,
equipment and improvements are recorded at cost. The cost of maintenance and
repairs is charged against results of operations as incurred. Depreciation is
charged against results of operations using the straight-line method over the
estimated economic useful life. Leasehold improvements are amortized on a
straight-line basis over the life of the related lease.





[6] Per
share data:





The basic
and diluted per share data has been computed on the basis of the net loss
available to common stockholders for the period divided by the historic weighted
average number of shares of common stock.  All potentially dilutive
securities have been excluded from the computations since they would be
antidilutive, however, these dilutive securities could potentially dilute
earnings per share in the future. Options and warrants exercisable for 2,561,545
and 5,416,545 shares of common stock have been excluded from the diluted loss
per share calculation for the years ended March 31, 2009 and 2008, respectively,
because inclusion of such would be antidilutive.




8


New
Mexico Software, Inc.


Notes to
the Financial Statements


(Unaudited)




NOTE
B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





[7]
Advertising expenses:





The
Company expenses advertising costs which consist primarily of direct mailings,
promotional items and print media, as incurred. Advertising expenses amounted to
$0 and $0 for the quarters ended March 31, 2009 and 2008,
respectively.





[8] Use
of estimates:





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.





[9]
Stock-based compensation:





The
Company adopted Statement of Financial Accounting Standards No. 123
(revised 2004), Share-Based Payment (SFAS 123R), effective January 1, 2006. SFAS
123R requires the recognition of the fair value of stock-based compensation in
net income. Stock-based compensation primarily consists of stock options. Stock
options are granted to employees at exercise prices equal to the fair market
value of our stock at the dates of grant. The Company now recognizes the
stock-based compensation expense over the requisite service period of the
individual grantees, which generally equals the vesting period. The Company
provides newly issued shares to satisfy stock option
exercises.  During the quarters ended March 31, 2009 and 2008, the
Company did not have expenses related to option grants to employees and
directors.





[10]
Software development:





The
Company accounts for computer software development costs in accordance with
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed". As such, all costs
incurred prior to the product achieving technological feasibility are expensed
as research and development costs. Technological feasibility is generally
achieved upon satisfactory beta test results. Upon achieving technological
feasibility, programming costs are capitalized and amortized over the economic
useful live which is estimated to be two years. There were no capitalized
software development costs as of March 31, 2009 and 2008.




NOTE C – GOING CONCERN




The
accompanying financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The Company has incurred cumulative net losses
of approximately $14,658,000 since its inception and requires capital for its
contemplated operational and marketing activities to take place. The Company’s
ability to raise additional capital through the future issuances of the common
stock is unknown. The obtainment of additional financing, the successful
development of the Company’s contemplated plan of operations, and its
transition, ultimately, to the attainment of profitable operations are necessary
for the Company to continue operations. The ability to successfully resolve
these factors raise substantial doubt about the Company’s ability to continue as
a going concern. The financial statements of the Company do not include any
adjustments that may result from the outcome of these aforementioned
uncertainties.






9


New
Mexico Software, Inc.


Notes to
the Financial Statements


(Unaudited)








NOTE
D - FURNITURE, EQUIPMENT, AND IMPROVEMENTS





Furniture,
equipment, and improvements as of March 31, 2009, consisted of the
following:





Computers
                  
                  $
                  421,000Furniture,
      fixtures and equipment
                  
                  
                  122,000Automobiles
                  
                  
                  41,000Leasehold
      improvements
                  
                  
                  20,000604,000Accumulated
      depreciation
                  
                  
                  (509,000
                  )$
                  95,000





Depreciation
expense for the three months ended March 31, 2009 and 2008 was $9,000 and
$8,000, respectively.





NOTE
E – CAPITAL TRANSACTIONS





Common
stock:





During
the three month period ended March 31, 2009, the Company effected the following
stock transactions:





The
Company issued a total of 1,133,726 shares of the Company’s $0.001 par value
common stock as repayment of notes payable totaling approximately
$57,000.





Warrants:





During
the three month period ended March 31, 2009, there were no warrants issued and
none were exercised.





The
following is a summary of warrants outstanding as of March 31,
2009:





Number of Warrants
                      Exercise Price
                      Expiration
      Date771,545
                      $0.21
                      July
      24, 2009700,000
                      $0.15
                      June
      29, 20111,471,545
                      $0.181
      (average)





Stock
options:







The
Company adopted Statement of Financial Accounting Standards No. 123
(revised 2004), Share-Based Payment (SFAS 123R), effective January 1, 2006. SFAS
123R requires the recognition of the fair value of stock-based compensation in
net income. Stock-based compensation primarily consists of stock options. Stock
options are granted to employees at exercise prices equal to the fair market
value of our stock at the dates of grant.  The Company now recognizes
the stock-based compensation expense over the requisite service period of the
individual grantees, which generally equals the vesting
period.  Exercise prices and weighted-average contractual lives of
stock options outstanding as of March 31, 2009, are as follows:




10


NOTE
E – CAPITAL TRANSACTIONS (CONTINUED)




Options
      Outstanding
                              
                              
                              Options
      ExercisableWeighted
      Average
                              
                              
                              Weighted
      Average
                              
                              
                              
                              
                              
                              Weighted
      AverageExercise
      Prices
                              
                              
                              Number
      Outstanding
                              
                              
                              Remaining
      Contractual Life
                              
                              
                              Exercise
      Prices
                              
                              
                              Number
      Exercisable
                              
                              
                              Exercise
      Price$
                              0.01-$0.049
                              
                              
                              
                              12,500,000
                              
                              
                              
                              7.6
                              
                              
                              $
                              0.03
                              
                              
                              
                              12,500,000
                              
                              
                              $
                              0.03$
                              0.05-$0.30
                              
                              
                              
                              2,205,000
                              
                              
                              
                              3.8
                              
                              
                              $
                              0.06
                              
                              
                              
                              2,205,000
                              
                              
                              $
                              0.06$
                              0.31-$0.50
                              
                              
                              
                              100,000
                              
                              
                              
                              2.0
                              
                              
                              $
                              0.39
                              
                              
                              
                              100,000
                              
                              
                              $
                              0.39





Summary
of Options Granted and Outstanding:





For
      the three months ended March 31,2009
                
                
                2008Shares
                
                
                Weighted
      Average Exercise Price
                
                
                Shares
                
                
                Weighted
      Average Exercise PriceOptions:Outstanding
      at beginning of year
                
                
                14,805,000
                
                
                $
                0.04
                
                
                
                15,835,000
                
                
                $
                0.04Granted
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Cancelled
                
                
                -
                
                
                
                -
                
                
                
                (900,000
                )
                
                $
                0.06Exercised
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Outstanding
      at end of period
                
                
                14,805,000
                
                
                $
                0.04
                
                
                
                14,935,000
                
                
                $
                0.04





NOTE
F - MAJOR CUSTOMERS





During
the three month period ended March 31, 2009, one customer accounted for 12% or
approximately $113,000 of the Company's revenue.





As of
March 31, 2009, balances due from four customers comprised 52% or approximately
$268,000 of total accounts receivable.











11


NOTE
G - REPORTABLE SEGMENTS





Management
has identified the Company's reportable segments based on separate lines of
business. New Mexico Software (NMS) derives revenues from the development and
marketing proprietary internet technology-based software and Telerad Service
(TRS) provides radiological services. Information related to the Company's
reportable segments for the quarter ended March 31, 2009 is as
follows:





NMS
                                
                                
                                TRS
                                
                                
                                TOTALRevenue
                                
                                $
                                207,000
                                
                                
                                $
                                708,000
                                
                                
                                $
                                915,000Cost
      of services
                                
                                
                                77,000
                                
                                
                                
                                579,000
                                
                                
                                
                                656,000General
      and administrative
                                
                                
                                96,000
                                
                                
                                
                                154,000
                                
                                
                                
                                250,000Depreciation
                                
                                
                                8,000
                                
                                
                                
                                1,000
                                
                                
                                
                                9,000Research
      and development
                                
                                
                                15,000
                                
                                
                                
                                -
                                
                                
                                
                                15,000Operating
      income (loss)
                                
                                $
                                11,000
                                
                                
                                $
                                (26,000
                                )
                                
                                $
                                (15,000
                                )Total
      assets
                                
                                $
                                228,000
                                
                                
                                $
                                514,000
                                
                                
                                $
                                742,000





A
reconciliation of the segments' operating loss to the consolidated net loss is
as follows:





Segment’s
      operating loss
                  
                  $
                  ( 15,000
                  )Other
      income (expense)
                  
                  
                  3,000Consolidated
      net loss
                  
                  $
                  ( 12,000
                  )





NOTE
H – COMMITMENTS AND CONTINGENCIES





Leases:





The
Company leases office space in New Mexico expiring on April 30,
2009.  The Company is currently finalizing the negotiations for a
five-year extension of the lease.   The Company also leases one
automobile which expires in June 2011, as well as computer equipment with lease
expiration dates ranging from March 2010 to December 2010.  Future
minimum lease payments as of March 31, 2009, are as follows:





Year
                  
                  Amount2009
                  
                  $  29,0002010
                  
                  $  17,0002011
                  
                  $    2,000





Rent
expense for the three months ended March 31, 2009 and 2008 amounted to $16,000
and $15,000, respectively.











12


New
Mexico Software, Inc.


Notes to
the Financial Statements


(Unaudited)








NOTE
I – LEGAL PROCEEDINGS





On
February 18, 2009, Premier Medical Enterprise Solutions, Inc. filed a complaint
in the Federal District Court in Albuquerque against us and our chief executive
officer.  Premier has been a customer of our XR-EXpress
application.  The complaint alleges among other things breaches of (i)
fiduciary duty, (ii) covenant of good faith and fair dealing and (iii) contract,
along with claims of conversion and tortuous interference.  The suit
seeks compensatory, punitive and exemplary damages in excess of $75,000,
together with injunctive relief against unfair competition, an accounting (for
three items) and attorney’s fees. The case is Premier Medical Enterprise
Solution, Inc. v. New Mexico Software, Inc. and Richard Govatski, Case
No.  Civ – 09 – 165.





There are
no new events in the working relationship of Premier with New Mexico Software to
give rise to this lawsuit, other than New Mexico Software, Inc.’s demand for
timely payment of invoices and notice of termination of the Agreement with
Premier for nonpayment.  This suit is Premier’s response to our
cancellation of Premier’s agreement for services for nonpayment which was served
on February 2, 2009.  We believe the suit is frivolous and filed
solely to delay payment of amounts owed by Premier.  New Mexico
Software, Inc. on March 9, 2009, filed its Answer and Counterclaims for Breach
of Contract, demanding payment in full for past due and ongoing charges,
attorney’s fees and costs, all of which are provided for in the Agreement with
Premier, and for Declaratory Judgment that the Agreement with Premier has been
properly terminated by New Mexico Software, Inc. for breach of contract and
nonpayment.





NOTE
J – COMMITMENTS AND CONTINGENCIES





Employment
agreement:





The
Company entered into an employment and non-competition agreement with a
stockholder to act in the capacity of President and Chief Executive Officer
(CEO). The term of the employment agreement is for three years commencing on
January 1, 2007. The agreement allows for a one-year renewal option unless
terminated by either party.  Base salary is $60,000 per annum with
available additional cash compensation as defined in the
agreement.  Compensation under this agreement of $15,000 is included
in general and administrative expenses for the quarter ended March 31,
2009.  The non-competition agreement commences upon the termination of
the employment agreement for a period of one year.   At March 31,
2009, there was a total of $0 in accrued payroll for this
executive.





NOTE
K – SUBSEQUENT EVENTS





In May
2009, the Board of Directors approved the issuance of shares of the Company’s
$0.001 par value common stock to two radiologists for stock purchases in the
amount of $40,000.














13





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





OVERVIEW





New
Mexico Software provides Software-as-a-Service (SaaS) solutions for a wide
variety of industries.  We offer our services via our web-based
technology that allows our customers in any type of commercial business and
not-for-profit organization to optimize their operations without spending
significant time and money on upfront costs for hardware, software, tech support
and training.





Our
medical division continues to provide significant growth opportunities for
us.  Because of the potential opportunities in telemedicine in general
and teleradiology in particular as health care reform is pursued in the country,
we will be focusing the majority of our marketing efforts in these areas during
2009.   We believe that we can continue to take advantage of the
growth in the telemedicine market in general and the teleradiology market in
particular during the next few years to further expand our customer base and our
revenues.





Through
March 31, 2009, we have realized revenues from four primary
sources:




1.
            radiological
      services


2.
            software
      usage fees


3.
            software
      hosting and maintenance services


4.
            custom
      programming services




We also
occasionally realize revenues from the sale of customized software, hardware
sales associated with the sales of our software products, scanning services and
from other services.





Telerad
Service, our radiological services business that began operations in May 2008,
continues to add new customers each quarter.  At this time, we have
more than twenty licensed radiologists available to read and report on
radiological studies from customers in 34 states.





In
general, our key indicator of operating progress at this time is still gross
revenue.  During the first quarter of 2009, general personnel-related
expenses (including engineering, administrative, customer support and sales
staff) accounted for approximately 36% of our total operating expenses, with
fixed costs such as office rent, utilities, insurance, communications and
depreciation accounting for an additional 6%.  Radiologist fees, which
account for approximately 50% of total costs and 75% of our cost of sales, are
directly variable with radiological services revenues.  As our
variable costs begin to constitute a greater percentage of our cost of sales,
the gross profit percentage will vary more consistently with revenues, making
gross profit a more useful indicator of our progress.





CRITICAL
ACCOUNTING POLICIES AND ESTIMATES





The
preparation of our financial statements in conformity with accounting principles
generally accepted in the United States of America requires our management to
make certain 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.  As such, in accordance with the
use of accounting principles generally accepted in the United States of America,
our actual realized results may differ from management’s initial estimates as
reported.  A summary of our significant accounting policies is
detailed in the notes to the financial statements, which are an integral
component of this filing.





Revenue
Recognition





With each
sale of our enterprise-level products, the end user enters into a license
agreement for which an initial license fee is paid.  The license
agreement also provides that in order to continue the license, the licensee must
pay an annual software maintenance fee for which the party receives access to
product upgrades and bug fixes or product patches.  Software
maintenance consists primarily of hosting and managing our customers’ data on
our servers, as well as technical support programs for our
products.  Software usage comprises any charges for actual usage of
our software.





Currently,
software usage consists of XR-EX report fees and IMedCon case fees.





14





Our
software recognition policies are in accordance with the American Institute of
Certified Public Accountants’ Statement of Position (“SOP”) 97-2, Software Revenue Recognition
as amended.  Revenue is recognized when (a) persuasive evidence of an
arrangement exists, (b) delivery has occurred, (c) the fee is fixed or
determinable, and (d) collectibility is probable.  We follow the
guidance in SOP 81-1, Accounting for Performance of
Construction-Type and Certain Production-Type Contracts for custom
software development arrangements that require us to provide significant
production, customization or modification to our core
software.  Revenue is generally recognized for such arrangements under
the percentage of completion method.  Amounts collected prior to
satisfying the above revenue recognition criteria are included in deferred
revenue.





We follow
the guidance provided by SEC Staff Accounting Bulletin (“SAB”) No. 101, Revenue Recognition in Financial
Statements and SAB No. 104 Revenue Recognitionwhich
provide guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the SEC.  Revenue from radiological
services, software installation, training and consulting services is recognized
when the services are rendered.





Income
Taxes




Management
evaluates the probability of the utilization of the deferred income tax
assets.  We have estimated a $4,670,400 deferred income tax asset at
December 31, 2008, related primarily to net operating loss carryforwards at
December 31, 2008.  Management determined that because we have not yet
generated taxable income it was not appropriate to recognize a deferred income
tax asset related to the net operating loss carryforward.  Therefore,
the fully deferred income tax asset is offset by an equal valuation
allowance.  When we begin to generate taxable income, we may determine
that some, if not all of the deferred income tax asset may be
recognized.  Recognition of the asset could increase after tax income
in the future.  Management is required to make judgments and estimates
related to the timing and utilization of net operating loss carryforwards,
utilization of other deferred income tax assets, applicable tax rates and
feasible tax planning strategies.





Stock
Based Compensation





We grant
stock awards and stock options to employees and non-employees as consideration
for services.  Management believes that the best indicator of value
for stock awards is the trading value of the shares of stock on the date the
Company enters into the agreements.  For non-employees, that date is
generally the date on which the company is committed to such an
agreement.  At times the Company may grant stock as payment for
accrued but unpaid payroll.  In these cases, the Company values the
shares at the trading price on the date they are granted and reduces the payroll
accrual by the same amount.  We have adopted SFAS 123(R) for stock
options granted to employees and non-employees by estimating the value of those
awards using the Black-Scholes option pricing model.





Contingencies





We are
subject to the possibility of various legal contingencies arising in the
ordinary course of business.  We consider the likelihood of loss or
impairment of an asset or the incurrence of a liability, as well as our ability
to reasonably estimate the amount of the loss contingencies.





Software
Development Costs





We
account for software development costs in accordance with SFAS No. 86, Accounting for Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed.  Product
research and development expenses consist primarily of personnel, outside
consulting and related expenses for development, and systems personnel and
consultants and are charged to operations as incurred until technological
feasibility is established.  The Company considers technological
feasibility to be established when all planning, designing, coding and testing
have been completed to design specifications.  After technological
feasibility is established, costs are capitalized.  Historically,
product development has been substantially completed with the establishment of
technological feasibility and, accordingly, no costs have been
capitalized.





See Note
2 to the Company’s Financial Statements for a full discussion of the Company’s
critical accounting policies and estimates.







15


RESULTS
OF OPERATIONS





Revenues:





For
      the Quarter Ended March 31,2009
                
                
                
                2008$
                915,000
                
                compared
      to
                
                $
                235,000
                
                an
      increase of $680,000 or
289.4%





These
changes are a result of the following factors:





1.  Radiological
services:





For
      the Quarter Ended March 31,2009
                
                
                
                2008$
                708,000
                
                compared
      to
                
                $
                0
                
                an
      increase of $708,000 or
100.0%





In May
2008, we began operating Telerad Service, our new radiological services
business.  Telerad Service provides radiological services to
hospitals, mobile and portable x-ray providers, prisons, urgent care facilities,
and assisted living facilities.





2.  Software
usage fees:





For
      the Quarter Ended March 31,2009
                
                
                
                2008$
                122,000
                
                compared
      to
                
                $
                133,000
                
                a
      decrease of $11,000 or
8.3%





The
decrease in revenue from software usage fees is primarily due to a combination
of factors.  Although we have gained and lost several new customers
since the first quarter of 2008, the net result was a slight decrease in end
users during the first quarter of 2009 as compared to the comparable quarter in
2008.  Approximately 87,000 reports were generated during the first
quarter of 2009, as compared to approximately 100,000 reports during the
comparable quarter in 2008.





3.  Software
hosting and maintenance:





For
      the Quarter Ended March 31,2009
                
                
                
                2008$
                62,000
                
                compared
      to
                
                $
                71,000
                
                a
      decrease of $9,000 or
12.7%





This
decrease is mainly due to a net decrease in customers using our older customized
software products during 2008 and early 2009.  Revenue from hosting
and maintenance for our XR-EXpress and DFC3 products remained essentially stable
from the first quarter of 2008 to the first quarter of 2009.  Software
maintenance consists mainly of hosting and managing our customers’ data on our
systems, and to a lesser extent includes technical support programs associated
with our products.





4.  Custom
programming revenue:





For
      the Quarter Ended March 31,2009
                
                
                
                2008$
                3,000
                
                compared
      to
                
                $
                11,000
                
                a
      decrease of $8,000 or
72.7%





Since we
have reduced our focus on sales of enterprise-level systems requiring
substantial customization, the number of custom programming projects requested
by customers has been inconsistent.  We took on one small programming
project for an existing customer during the first quarter of 2009, as compared
to programming for one large new customer during the first quarter of
2008.  We continue to offer programming services for customer database
integration, and for other projects for our existing customers.





16


5.  Software
sales and licenses:





For
      the Quarter Ended March 31,2009
                
                
                
                2008$
                0
                
                compared
      to
                
                $
                15,000
                
                a
      decrease of $15,000 or
100.0%





Since we
are continuing to focus our efforts on building recurring revenues, we have
modified our policy to include the cost of the XR-EXpress compression software
with the setup for new customers that have at least ten end
users.  This new policy has resulted in no new software sales during
the first quarter of 2009.  As a result of this policy, we expect our
revenues from software sales and licenses to remain low during the coming
year.





6.  Hardware,
scanning and other revenues:





For
      the Quarter Ended March 31,2009
                
                
                
                2008Hardware
                
                $
                0
                
                compared
      to
                
                $
                5,000
                
                a
      decrease of $5,000 or 100.0%Scanning
      and other
                
                $
                20,000
                
                compared
      to
                
                $
                0
                
                an
      increase of $20,000 or
100.0%





All
hardware sales during the first quarter of 2008 were associated with sales of
our XR-EXpress and DFC3 software.  We are no longer offering our jal
camera units for sale to our XR-EXpress customers, and we are no longer focusing
on growing the DFC3 division.  As a result, we expect revenues in this
category to remain low during the coming year.  We had one major
scanning project during the first quarter of 2009, and no scanning projects
during 2008.  Although we still offer scanning, we are not emphasizing
this service, so we do not anticipate any major projects in the
future.





Cost of
services:





For
      the Quarter Ended March 31,2009
                
                
                
                2008$
                656,000
                
                compared
      to
                
                $
                74,000
                
                an
      increase of $582,000 or
786.5%





Cost of
services consists primarily of radiological fees, engineering salaries and
compensation-related expenses, engineering supplies, hardware purchases and
connectivity costs.   During the first quarter of 2009,
approximately 74%, or $492,000, of our cost of services consisted of
radiological fees, as compared to no radiological fees during the comparable
quarter in 2008.  These fees are a component of Telerad Service, our
teleradiological services business that we began operating in May
2008.  In comparison, during the first quarter of 2008, approximately
77% of our cost of sales consisted of salaries, contract services and other
personnel-related expenses for our engineering staff.  We considered
these expenses to be directly associated with our ability to generate revenues,
however, they do not vary with revenues in that much of those costs are
fixed.





General
and administrative expenses:





For
      the Quarter Ended March 31,2009
                
                
                
                2008$
                250,000
                
                compared
      to
                
                $
                195,000
                
                an
      increase of $55,000 or
28.2%





The
increase in general and administrative expenses was primarily due to increased
personnel-related expenses associated with Telerad Service.





Depreciation
expense:





For
      the Quarter Ended March 31,2009
                
                
                
                2008$
                9,000
                
                compared
      to
                
                $
                8,000
                
                an
      increase of $1,000 or
12.5%





The
increase in depreciation expense was due to the addition of several computer
leases for Telerad Service since we began operations in May 2008.





17





Research
and development costs:





For
      the Quarter Ended March 31,2009
                
                
                
                2008$
                15,000
                
                compared
      to
                
                $
                31,000
                
                a
      decrease of $16,000 or
51.6%





This
decrease is primarily due to our shift in focus to growing the radiological
services business.





In
general, over 90% of our research and development costs are directly associated
with staffing.  In the software industry it is common for research and
development costs to be ongoing, since development of the next version of the
software begins as soon as the current version is completed.  In
addition, we are constantly developing new applications for our existing
software that require modification.  Management anticipates that
research and development costs in the future will focus both on the upgrading of
our existing products and the continued development of new products using our
core technology; therefore they will remain relatively steady or increase
slightly during the coming year.





REPORTABLE
SEGMENTS





In May
2008, we began operating Telerad Service (TRS) as a wholly-owned subsidiary of
New Mexico Software (NMS).  Information about the Company’s reportable
segments for the quarter ended March 31, 2009 is reflected in the following
table.  Since Telerad was not in existence during the first quarter of
2008, only 2009 data is included in this table.





2009NMS
                
                
                TRS
                
                
                TOTALRevenue
                
                $
                207,000
                
                
                $
                708,000
                
                
                $
                915,000Cost
      of services
                
                
                77,000
                
                
                
                579,000
                
                
                
                656,000General
      and administrative
                
                
                96,000
                
                
                
                154,000
                
                
                
                250,000Depreciation
                
                
                8,000
                
                
                
                1,000
                
                
                
                9,000Research
      and development
                
                
                15,000
                
                
                
                -
                
                
                
                15,000Operating
      income (loss)
                
                $
                11,000
                
                
                $
                (26,000
                )
                
                $
                (15,000
                )Total
      assets
                
                $
                228,000
                
                
                $
                514,000
                
                
                $
                742,000





A
reconciliation of the segments' operating loss to the consolidated net
loss/comprehensive loss is as follows:





Segment’s
      operating loss
                  
                  $
                  ( 15,000
                  )Other
      income (expense)
                  
                  
                  3,000Consolidated
      net loss
                  
                  $
                  ( 12,000
                  )





LIQUIDITY
AND CAPITAL RESOURCES





As of
March 31, 2009, cash and cash equivalents totaled $103,000, representing a
$35,000 increase from December 31, 2008. The increase in available cash was due
to the following factors during the period:





Operating
activities:





For
      the Quarter Ended March 31,2009
                
                2009provided
      $20,000
                compared
      to
                used
      $(13,000)
                an
      increase in available cash of
$33,000





The
increase in available cash from operations during the first quarter of 2009 was
primarily due to the decrease in net loss to $(12,000) from
$(73,000).







18


Investing
activities:





For
      the Quarter Ended March 31,2009
                
                2008used
      $(5,000)
                compared
      to
                used
      $(14,000)
                an
      increase in available cash of
$9,000





During
the first quarter of 2009, we purchased $5,000 of computer equipment to provide
additional storage capacity for Telerad Service, as compared to the purchase of
$13,000 of computer equipment during the first quarter of 2008.





Financing
activities:





For
      the Quarter Ended March 31,2009
                
                2008provided
      $20,000
                compared
      to
                provided
      $0
                an
      increase in available cash of
$20,000





This
increase is primarily the result of cash received from an investor.





We do not
currently have material commitments for capital expenditures and do not
anticipate entering into any such commitments during the next twelve
months.  Our current commitments consist primarily of lease
obligations for office space, computer equipment and a vehicle.





At March
31, 2009, we had a working capital surplus of $19,000 as opposed to a working
capital deficit of $85,000 at the beginning of the period, an increase of
$104,000.  This increase is primarily due to the increase in cash and
the conversion of notes payable to shares, since receivables and payables
increased by approximately the same amount.  We have incurred
operating losses and negative cash flows for the past two fiscal years that have
been funded through the issuance of additional equity securities.  Our
monthly recurring revenues increased from an average of $60,000 per month in
early 2007 to over $300,000 per month during the first quarter of 2009,
primarily due to the revenue from Telerad Service.  However, the
margins from the Telerad Service operations are still quite low while we are in
the startup phase of the operation, so we may continue to experience some cash
flow shortages.  Although we anticipate meeting our operating cash
flow needs entirely from the increased revenues, we may continue to sell equity
securities and incur debt as needed to meet our operating needs during
2009.





We
anticipate that our primary uses of cash in the next year will be for general
operating purposes.  With the growth of Telerad Service, our operating
cash requirements for the next twelve months will be in the range of $4,000,000
to $5,000,000.  This level of cash flow will allow us to maintain our
current level of operations, and we expect the increased revenues to provide the
necessary operating funds.  Our goal for 2009 remains to become
profitable by the end of the year.  We expect the upward trend in
recurring revenues to continue in 2009, although it is not possible to predict
the rate of increase until our radiological services have been established in
the market for a reasonable period of time.





OFF-BALANCE
SHEET ARRANGEMENTS





We
currently have no off-balance sheet arrangements.





FORWARD-LOOKING
STATEMENTS





This
report contains statements that plan for or anticipate the
future.  Forward-looking statements include statements about the
future of operations involving the marketing and maintenance of products which
manage large volumes of media or digital material, statements about our future
business plans and strategies, and most other statements that are not historical
in nature.  In this report forward-looking statements are generally
identified by the words “anticipate,” “plan,” “believe,” “expect,” “estimate,”
and the like.  Although management believes that any forward-looking
statements it makes in this report are reasonable, because forward-looking
statements involve future risks and uncertainties, there are factors that could
cause actual results to differ materially from those expressed or
implied.  For example, a few of the uncertainties that could affect
the accuracy of forward-looking statements include the following:






19





·
            Rapid
      changes in technology relating to the
Internet


·
            Continued
      growth and use of the Internet


·
            Changes
      in government regulations


·
            Changes
      in our business strategies


·
            Hardware
      failure of a catastrophic
proportion


·
            Terrorist
      interference with the operation of the Internet or effects of terrorist
      activities on the economy


·
            Difficulty
      recruiting and retaining staff of sufficient technical caliber to provide
      adequate and on-going customer support and product maintenance and
      development


·
            Failure
      to successfully market our products through the Internet and our
      representatives


·
            Inability
      to locate sources to retire our line of credit or to obtain alternative
      lending sources


·
            Inability
      to solve cash flow problems





In light
of the significant uncertainties inherent in the forward-looking statements made
in this report, particularly in view of our early stage of operation, the
inclusion of this information should not be regarded as a representation by us
or any other person that our objectives and plans will be achieved.





Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK





Not
applicable.





Item 4T.  CONTROLS AND PROCEDURES





307 – Disclosure controls and
procedures:  As of March 31, 2009, we carried out an evaluation
of the effectiveness of our disclosure controls and procedures, with the
participation of our principal executive and principal financial
officers.   Disclosure controls and procedures are defined in
Exchange Act Rule 15d–15(e) as “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 seq.) is recorded,
processed, summarized and reported, within the time periods specified in the
Commission's rules and forms [and] include, without limitation, controls and
procedures designed 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.”  Based on our evaluation, our President/Chief Executive
Officer and Chief Financial Officer have concluded that, as of March 31, 2009,
such disclosure controls and procedures were not effective.





308T(b) – Changes in internal
control over financial reporting:Based upon an evaluation by
our management of our internal control over financial reporting, with the
participation of our principal executive and principal financial officers, there
were no changes made in our internal control over financial reporting during the
quarter ended March 31, 2009 that have materially affected or are reasonably
likely to materially affect this control.





Limitations on the Effectiveness of
Internal Control:Our management does not expect that our disclosure
controls and procedures or our internal control over financial reporting will
necessarily prevent all fraud and material errors.  An internal
control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met.  Further, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs.  Because of the inherent
limitations on all internal control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected.  These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or
mistake.  Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, and/or by management
override of the control.  The design of any system of internal control
is also based in part upon certain assumptions about risks and the likelihood of
future events, and there is no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Over time,
controls may become inadequate because of changes in circumstances and the
degree of compliance with the policies and procedures may
deteriorate.  Because of the inherent limitations in a cost-effective
internal control system, financial reporting misstatements due to error or fraud
may occur and not be detected on a timely basis.






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PART II





ITEM 1.   LEGAL PROCEEDINGS





On
February 18, 2009, Premier Medical Enterprise Solutions, Inc. filed a complaint
in the Federal District Court in Albuquerque against us and our chief executive
officer.  Premier has been a customer of our XR-EXpress
application.  The complaint alleges among other things breaches of (i)
fiduciary duty, (ii) covenant of good faith and fair dealing and (iii) contract,
along with claims of conversion and tortuous interference.  The suit
seeks compensatory, punitive and exemplary damages in excess of $75,000,
together with injunctive relief against unfair competition, an accounting (for
three items) and attorney’s fees. The case is Premier Medical Enterprise
Solution, Inc. v. New Mexico Software, Inc. and Richard Govatski, Case
No.  Civ – 09 – 165.





There are
no new events in the working relationship of Premier with New Mexico Software to
give rise to this lawsuit, other than New Mexico Software, Inc.’s demand for
timely payment of invoices and notice of termination of the Agreement with
Premier for nonpayment.  This suit is Premier’s response to our
cancellation of Premier’s agreement for services for nonpayment which was served
on February 2, 2009.  We believe the suit is frivolous and filed
solely to delay payment of amounts owed by Premier.  We on March 9,
2009, filed our Answer and Counterclaims for Breach of Contract, demanding
payment in full for past due and ongoing charges, attorney’s fees and costs, all
of which are provided for in the Agreement with Premier, and for Declaratory
Judgment that we have properly terminated the Agreement with Premier for breach
of contract and nonpayment.





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





The
following table sets forth information about our unregistered sales of common
stock during the three months ended March 31, 2009:





Class of Purchaser
                  Aggregate Number of
  SharesDirectors
                  1,133,726





The
shares listed above were issued as repayment of notes payable totaling
approximately $57,000.





We did
not pay and to our knowledge no one acting on our behalf paid any commissions or
other compensation with respect to the sales identified in the foregoing
table.  We made the sale directly to each purchaser for the
consideration stated in the table.  We used any cash proceeds and any
cash which would have been used to pay bonuses and contractor fees, but for the
issue of the shares, for working capital in payment of current
obligations.  Each purchaser acknowledged the investment nature of the
transaction and a legend was placed on each certificate, prohibiting public
resale of the shares, except in compliance with Rule 144.  We believe
each purchaser has either (a) such relationship with us or (b) such knowledge
and experience in business and financial transactions that he or she is able to
understand and evaluate the risks and merits of investment in our common
stock.  We relied upon the exemption from the registration requirement
of the Securities Act of 1933, as amended (the “Act”) provided in Section 4(2)
of the Act and the rules and regulations thereunder, on grounds that these sales
did not involve a public offering within the meaning of the Act.





ITEM
3.  DEFAULTS UPON SENIOR SECURITIES





Not
applicable.





ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS





Not
applicable.





ITEM 5.  OTHER INFORMATION





Not
applicable.







21


ITEM
6.                      EXHIBITS





The
following exhibits are attached to this report:





31.1           Rule
15d-14 (a)  Certification by Principal Executive Officer


31.2
            Rule
      15d-14 (a)  Certification by Principal Financial
      Officer


32           Section
1350 Certification of Principal Executive Officer and Principal Financial
Officer





















































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SIGNATURES





In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.





NEW MEXICO SOFTWARE, INC.














Date:                      May
20,
2009                                                                           By  /s/  Richard F.
Govatski


Richard F. Govatski,
President











Date:                      May
20,
2009                                                                           By  /s/  Teresa B.
Dickey


Teresa B. Dickey,
Treasurer  (Principal Financial Officer)



































23