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
      1934For
      the quarterly period ended September 30,
2010
    ̈
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from ___________
  to ___________
  Commission
File Number 333-144596
 
 MEDICAL DESIGN STUDIOS,
INC.
 (Exact
Name of Registrant as Specified in Its Charter)
 
 Nevada
              
              26-0482524(State
      or Other Jurisdiction of Incorporation or Organization)
              
              (I.R.S.
      Employer Identification No.)
  7231 South Rome
      Street, Aurora, Colorado
                
                80016(Address
      of Principal Executive Offices)
                
                (Zip
      Code)
  (303)
956-7197
 (Registrant’s
Telephone Number, Including Area Code)
   (Former
Name, Former Address and Former Fiscal Year,
 if
Changed Since Last Report)
 
 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   ̈    No   ̈ (not
required)
 
 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. (Check one):
 
 Large
      accelerated filer o
                Accelerated
      filer  oNon-accelerated
      filer o
                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  x    No  o
  As of
November 12, 2010, 7,142,858 shares of the issuer’s common stock were
outstanding.
  
  MEDICAL
DESIGN STUDIOS, INC.
 
 FORM
10-Q
  September
30, 2010
  INDEX
  PagePART
      I-- FINANCIAL INFORMATIONItem
      1.
                  Financial
      Statements
                  
                  2Item
      2.
                  Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  
                  12Item
      3.
                  Quantitative
      and Qualitative Disclosures About Market Risk
                  
                  17Item
      4.
                  Controls
      and Procedures
                  
                  17PART
      II-- OTHER INFORMATIONItem
      1.
                  Legal
      Proceedings
                  
                  19Item
      1A.
                  Risk
      Factors
                  
                  19Item
      2.
                  Unregistered
      Sales of Equity Securities and Use of Proceeds
                  
                  19Item
      3.
                  Defaults
      Upon Senior Securities
                  
                  19Item
      4.
                  Reserved
                  
                  19Item
      5.
                  Other
      Information
                  
                  19Item
      6.
                  Exhibits
                  
                  20Signatures
                  
                  21
 
 1
  PART
I - FINANCIAL INFORMATION
 
 ITEM
1. FINANCIAL STATEMENTS
 
 MEDICAL
DESIGN STUDIOS, INC.
 BALANCE
SHEETS
  September
      30,
                
                
                December
      31,2010
                
                
                2009(Unaudited)ASSETSCURRENT
      ASSETSCash
                
                $
                7,703
                
                
                $
                -Assets
      of discontinued opeartions
                
                
                -
                
                
                
                9,125Total
      current assets
                
                
                7,703
                
                
                
                9,125Assets
      of discontinued operations - equipment, net
                
                
                -
                
                
                
                9,323TOTAL
      ASSETS
                
                $
                7,703
                
                
                $
                18,448LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccrued
      expenses
                
                $
                4,902
                
                
                $
                17,561Total
      current liabilities
                
                
                4,902
                
                
                
                17,561STOCKHOLDERS'
      EQUITYPreferred
      stock, $0.001 par value, 1,000,000 shares authorized,none
      issued or outstanding
                
                
                -
                
                
                
                -Common
      stock, $0.001 par value, 74,000,000 shares authorized, 7,142,946 sharesissued and outstanding
                
                
                7,143
                
                
                
                7,143Additional
      paid in capital
                
                
                129,812
                
                
                
                87,312Accumulated
      deficit
                
                
                (134,154
                )
                
                
                (93,568
                )Total
      stockholders' equity
                
                
                2,801
                
                
                
                887TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                
                $
                7,703
                
                
                $
                18,448
 See
accompanying notes to the financial statements.
  2
  MEDICAL
DESIGN STUDIOS, INC.
 STATEMENTS
OF OPERATIONS
 (UNAUDITED)


NINE
      MONTHS
                
                
                NINE
      MONTHS
                
                
                THREE
      MONTHS
                
                
                THREE
      MONTHSENDED
                
                
                ENDED
                
                
                ENDED
                
                
                ENDEDSEPTEMBER
      30, 2010
                
                
                SEPTEMBER
      30, 2009
                
                
                SEPTEMBER
      30, 2010
                
                
                SEPTEMBER
      30, 2009REVENUE
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -OPERATING
      EXPENSESSelling,
      general and administrative
                
                
                4,015
                
                
                
                -
                
                
                
                3,176
                
                
                
                -Professional
      fees
                
                
                14,378
                
                
                
                -
                
                
                
                9,160
                
                
                
                -Total
      operating expenses
                
                
                18,393
                
                
                
                -
                
                
                
                12,336
                
                
                
                -LOSS
      FROM CONTINUING OPERATIONS
                
                
                (18,393
                )
                
                
                -
                
                
                
                (12,336
                )
                
                
                -LOSS
      BEFORE INCOME TAXES
                
                
                (18,393
                )
                
                
                -
                
                
                
                (12,336
                )
                
                
                -PROVISION
      FOR INCOME TAXES
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -NET
      LOSS FROM CONTINUING OPERATIONS
                
                
                (18,393
                )
                
                
                -
                
                
                
                (12,336
                )
                
                
                -DISCONTINUED
      OPERATIONSIncome
      (loss) from discontinued operations
                
                
                5,961
                
                
                
                9,483
                
                
                
                -
                
                
                
                (1,280
                )Net
      loss on disposal
                
                
                (28,154
                )
                
                
                -
                
                
                
                (28,154
                )
                
                
                -Total
      income (loss) from discontinued operations
                
                
                (22,193
                )
                
                
                9,483
                
                
                
                (28,154
                )
                
                
                (1,280
                )NET
      INCOME (LOSS)
                
                $
                (40,586
                )
                
                $
                9,483
                
                
                $
                (40,490
                )
                
                $
                (1,280
                )NET
      INCOME (LOSS) PER SHARE - BASIC AND DILUTEDCONTINUING
      OPERATIONS
                
                $
                (0.00
                )
                
                $
                0.00
                
                
                $
                (0.00
                )
                
                $
                0.00DISCONTINUED
      OPERATIONS
                
                
                (0.00
                )
                
                
                0.00
                
                
                
                0.00
                
                
                
                (0.00
                )$
                (0.00
                )
                
                $
                0.00
                
                
                $
                (0.00
                )
                
                $
                (0.00
                )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARESOUTSTANDING
      - BASIC AND DILUTED
                
                
                7,142,946
                
                
                
                7,142,946
                
                
                
                7,142,946
                
                
                
                7,142,946


See
accompanying notes to the financial statements.
  3
  MEDICAL
DESIGN STUDIOS, INC.
 STATEMENTS
OF CASH FLOWS
 (UNAUDITED)
 NINE
      MONTHS
                
                
                NINE
      MONTHSENDED
                
                
                ENDEDSEPTEMBER
      30, 2010
                
                
                SEPTEMBER
      30, 2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income (loss)
                
                $
                (40,586
                )
                
                $
                9,483Depreciation
                
                
                3,414
                
                
                
                5,248Net
      loss on disposal of discontinued operations
                
                
                28,154
                
                
                
                -Recovery
      of bad debt
                
                
                -
                
                
                
                (10,000
                )Adjustments
      to reconcile net income (loss) to net cash used in operating
      activitiesIncrease
      in accounts receivable
                
                
                (13,120
                )
                
                
                (10,309
                )Decrease
      in accrued expenses
                
                
                (12,659
                )
                
                
                (24,312
                )Net
      cash used in operating activities
                
                
                (34,797
                )
                
                
                (29,890
                )CASH
      FLOWS FROM INVESTING ACTIVITIES:Cash
      included in assets of discontinued operations
                
                
                (100
                )
                
                
                (9,876
                )Net
      cash used in investing activities
                
                
                (100
                )
                
                
                (9,876
                )CASH
      FLOWS FROM FINANCING ACTIVITIES:Contribution
      to capital
                
                
                42,500
                
                
                
                35,000Net
      cash provided by financing activities
                
                
                42,500
                
                
                
                35,000NET
      CHANGE IN CASH
                
                
                7,603
                
                
                
                (4,766
                )CASH  -
      BEGINNING OF PERIOD
                
                
                100
                
                
                
                4,766CASH -
      END OF PERIOD
                
                $
                7,703
                
                
                $
                -SUPPLEMENTAL
      CASH FLOW INFORMATIONInterest
      paid
                
                $
                -
                
                
                $
                -Income
      taxes paid
                
                $
                -
                
                
                $
                -
 See
accompanying notes to the financial statements.
  4
  MEDICAL
DESIGN STUDIOS, INC.
 
 September
30, 2010 and 2009
 
 Notes
to Financial Statements
 
 (Unaudited)
 
 NOTE
1 ORGANIZATION
 
 Medical
Design Studios, Inc. (“MDS” or the “Company”) was founded as an unincorporated
business in January 2004 and became a C corporation in the State of Nevada on
February 1, 2005.
  On July
5, 2010, the Company transferred to a newly-formed company controlled by Justin
N. Craig, the Company’s former President, Chief Executive Officer, Chief
Financial Officer and Chairman (the "Buyer"), certain operating assets
associated with the operations of the Company's digital medical illustration and
animation business, subject to related liabilities (the
"Business").  Pursuant to the terms of an Agreement of Transfer with
the Buyer (the "Transfer Agreement"), the Company transferred the Business to
the Buyer for $100.00 in cash and other good and valuable consideration
including the assumption by the Buyer of all liabilities and debts of the
Company which relate to or arise out of the operations of the Business and the
indemnification by the Buyer of all losses, liabilities, claims, damages, costs
and expenses that may be suffered by the Company at any time which arise out of
the operations of the Business.  The transfer of the Business pursuant to
the Transfer Agreement was approved by the board of directors of the Company and
the holder of 94.4% of the Company’s outstanding shares of common
stock.
 
 The
financial statements for the quarter ended September 30, 2010 give effect to the
discontinuance of the discontinued operations.
 
 The
Company is currently inactive.
 
 NOTE
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Basis of
Presentation
 
 The
accompanying unaudited interim consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”) for interim financial information
and with the rules and regulations of the United States Securities and Exchange
Commission (“SEC”) to Form 10 and Article 8 of Regulation S-X.
 Accordingly, they do not include all of the information and footnotes
required by U.S. GAAP for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The results of operations
realized during an interim period are not necessarily indicative of results to
be expected for a full year. These financial statements should be read in
conjunction with the financial statements of the Company for the year
ended December 31, 2009 and notes thereto contained in the Company’s Annual
Report Form 10-K as filed with the SEC on March 31, 2010.
 
 Use of
estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amount of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
 
 Reclassifications
 
 Certain
amounts in the prior period financial statements have been reclassified to
conform to the current period presentation. These reclassifications had no
effect on reported losses.
  5
 
 Cash
Equivalents
  The
Company considers all highly liquid investments with maturities of three months
or less at the time of purchase to be cash equivalents.
 
 Accounts Receivable and
Allowance for Doubtful Accounts
 
 Accounts
receivable are recorded at cost. The Company considers the need for an allowance
for doubtful accounts related to its accounts receivables that are deemed to
have a high risk of collectability. Management reviews its accounts receivables
on a monthly basis to determine if any receivables will potentially be
uncollectible. Management analyzes historical collection trends and changes in
its customer payment patterns, customer concentration, and credit worthiness
when evaluating the adequacy of its allowance for doubtful accounts. The Company
includes any receivables balances that are determined to be uncollectible, along
with a general reserve, in its overall allowance for doubtful
accounts.
 
 Equipment
 
 Equipment,
which consists of computers and video equipment, is stated at cost less
accumulated depreciation. Depreciation is calculated on the straight-line basis
over the estimated useful life of three (3) to five (5) years. Depreciation
expense for the periods ended September 30, 2010 and 2009 was $3,414 and $5,248,
respectively.
 
 Impairment of long-lived
assets
  The
Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards
Codification for its long-lived assets. The Company’s long-lived assets, which
include equipment, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.
  The
Company assesses the recoverability of its long-lived assets by comparing the
projected undiscounted net cash flows associated with the related long-lived
asset or group of long-lived assets over their remaining estimated useful lives
against their respective carrying amounts. Impairment, if any, is based on the
excess of the carrying amount over the fair value of those assets. Fair value is
generally determined using the asset’s expected future discounted cash flows or
market value, if readily determinable. If long-lived assets are determined to be
recoverable, but the newly determined remaining estimated useful lives are
shorter than originally estimated, the net book values of the long-lived assets
are depreciated over the newly determined remaining estimated useful
lives.
  The
Company determined that there were no impairments of long-lived assets as of
September 30, 2010 or 2009.
 
 Fair Value of Financial
Instruments
 
 The
Company follows paragraph 825-10-50-10 of the FASB Accounting Standards
Codification for disclosures about fair value of its financial instruments and
has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification
(“Paragraph 820-10-35-37”) to measure the fair value of its financial
instruments.  Paragraph 820-10-35-37 establishes a framework for
measuring fair value in accounting principles generally accepted in the United
States of America (U.S. GAAP), and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value
measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair
value hierarchy which prioritizes the inputs to valuation techniques used to
measure fair value into three (3) broad levels.  The fair value
hierarchy gives the highest priority to quoted prices (unadjusted) in active
markets for identical assets or liabilities and the lowest priority to
unobservable inputs.  The three (3) levels of fair value hierarchy
defined by Paragraph 820-10-35-37 are described below:
 
 Level
      1
              
              Quoted
      market prices available in active markets for identical assets or
      liabilities as of the reporting date.Level
      2
              
              Pricing
      inputs other than quoted prices in active markets included in Level 1,
      which are either directly or indirectly observable as of the reporting
      date.Level
      3
              
              Pricing
      inputs that are generally observable inputs and not corroborated by market
      data.
  6
  The
carrying amounts of the Company’s financial assets and liabilities, such as cash
and accrued expenses, approximate their fair values because of the short
maturity of these instruments.
 
 The
Company does not have any assets or liabilities measured at fair value on a
recurring or a non-recurring basis, consequently, the Company did not have any
fair value adjustments for assets and liabilities measured at fair value at
September 30, 2010 or December 31, 2009, nor gains or losses are reported in the
statement of operations that are attributable to the change in unrealized gains
or losses relating to those assets and liabilities still held at the reporting
date for the interim period ended September 30, 2010 or 2009.
 
 Revenue
Recognition
 
 The
Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards
Codification for revenue recognition.  The Company recognizes revenue
when it is realized or realizable and earned.  The Company considers
revenue realized or realizable and earned when all of the following criteria are
met: (i) persuasive evidence of an arrangement exists, (ii) the product has been
shipped or the services have been rendered to the customer, (iii) the sales
price is fixed or determinable, and (iv) collectability is reasonably
assured.
  Income
Taxes
 
 The
Company accounts for income taxes under Section 740-10-30 of the FASB Accounting
Standards Codification.  Deferred income tax assets and liabilities
are determined based upon differences between the financial reporting and tax
bases of assets and liabilities and are measured using the enacted tax rates and
laws that will be in effect when the differences are expected to
reverse.  Deferred tax assets are reduced by a valuation allowance to
the extent management concludes it is more likely than not that the assets will
not be realized.  Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the statements of operations in the period that includes the
enactment date.
 
 The
Company adopted section 740-10-25 of the FASB Accounting Standards Codification
(“Section 740-10-25”).  Section 740-10-25 addresses the determination
of whether tax benefits claimed or expected to be claimed on a tax return should
be recorded in the financial statements.  Under Section 740-10-25, the
Company may recognize the tax benefit from an uncertain tax position only if it
is more likely than not that the tax position will be sustained on examination
by the taxing authorities, based on the technical merits of the
position.  The tax benefits recognized in the financial statements
from such a position should be measured based on the largest benefit that has a
greater than fifty percent (50%) likelihood of being realized upon ultimate
settlement.  Section 740-10-25 also provides guidance on
de-recognition, classification, interest and penalties on income taxes,
accounting in interim periods and requires increased disclosures.  The
Company had no material adjustments to its liabilities for unrecognized income
tax benefits according to the provisions of Section 740-10-25.
 
 Net income (loss) per common
share
 
 Net
income per common share is computed pursuant to section 260-10-45 of the FASB
Accounting Standards Codification.  Basic net income (loss) per common
share is computed by dividing net income (loss) by the weighted average number
of shares of common stock outstanding during the period. Diluted net income
(loss) per common share is computed by dividing net income (loss) by the
weighted average number of shares of common stock and potentially outstanding
shares of common stock during each period. There were no potentially dilutive
shares outstanding as of September 30, 2010 or 2009.
 
 Commitments and
contingencies
 
 The
Company follows subtopic 450-20 of the FASB Accounting Standards Codification to
report accounting for contingencies.  Liabilities for loss
contingencies arising from claims, assessments, litigation, fines and penalties
and other sources are recorded when it is probable that a liability has been
incurred and the amount of the assessment can be reasonably
estimated.
  7
  Cash flows
reporting
 
 The
Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards
Codification for cash flows reporting, classifies cash receipts and payments
according to whether they stem from operating, investing, or financing
activities and provides definitions of each category, and uses the indirect or
reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25
of the FASB Accounting Standards Codification to report net cash flow from
operating activities by adjusting net income to reconcile it to net cash flow
from operating activities by removing the effects of (a) all deferrals of past
operating cash receipts and payments and all accruals of expected future
operating cash receipts and payments and (b) all items that are included in net
income that do not affect operating cash receipts and payments.
 
 Subsequent
events
 
 The
Company follows the guidance in Section 855-10-50 of the FASB Accounting
Standards Codification for the disclosure of subsequent events.The Company will evaluate subsequent events
through the date when the financial statements were
issued.  Pursuant to ASU 2010-09 of the FASB Accounting Standards
Codification, the Company as an SEC filer considers its financial statements
issued when they are widely distributed to users, such as through filing them on
EDGAR.
 
 Recently issued accounting
standards
 
 In
January 2010, the FASB issued the FASB Accounting Standards Update No.
2010-01 “Equity Topic 505 –
Accounting for Distributions to Shareholders with Components of Stock and
Cash”, which clarifies that the stock portion of a distribution to
shareholders that allows them to elect to receive cash or stock with a potential
limitation on the total amount of cash that all shareholders can elect to
receive in the aggregate is considered a share issuance that is reflected in EPS
prospectively and is not a stock dividend for purposes of applying Topics 505
and 260 (Equity and Earnings Per Share (“EPS”)).  Those distributions
should be accounted for and included in EPS calculations in accordance with
paragraphs 480-10-25- 14 and 260-10-45-45 through 45-47 of the FASB Accounting
Standards codification.  The amendments in this Update also provide a
technical correction to the Accounting Standards Codification.  The
correction moves guidance that was previously included in the Overview and
Background Section to the definition of a stock dividend in the Master
Glossary.  That guidance indicates that a stock dividend takes nothing
from the property of the corporation and adds nothing to the interests of the
stockholders.  It also indicates that the proportional interest of
each shareholder remains the same, and is a key factor to consider in
determining whether a distribution is a stock dividend.
 
 In
January 2010, the FASB issued the FASB Accounting Standards Update No.
2010-02 “Consolidation Topic
810 – Accounting and Reporting for Decreases in Ownership of a Subsidiary – a
Scope Clarification”, which provides amendments to Subtopic 810-10 and
related guidance within U.S. GAAP to clarify that the scope of the decrease in
ownership provisions of the Subtopic and related guidance applies to the
following:
  1.
              A
      subsidiary or group of assets that is a business or nonprofit
      activity2.
              A
      subsidiary that is a business or nonprofit activity that is transferred to
      an equity method investee or joint
venture
 
 3.
              An
      exchange of a group of assets that constitutes a business or nonprofit
      activity for a noncontrolling interest in an entity (including an equity
      method investee or joint venture).
  The
amendments in this Update also clarify that the decrease in ownership guidance
in Subtopic 810-10 does not apply to the following transactions even if they
involve businesses:
  1.
              Sales
      of in substance real estate.  Entities should apply the sale of
      real estate guidance in Subtopics 360-20 (Property, Plant, and Equipment)
      and 976-605 (Retail/Land) to such transactions.2.
              Conveyances
      of oil and gas mineral rights.  Entities should apply the
      mineral property conveyance and related transactions guidance in Subtopic
      932-360 (Oil and Gas-Property, Plant, and Equipment) to such
      transactions.
  8
  If a
decrease in ownership occurs in a subsidiary that is not a business or nonprofit
activity, an entity first needs to consider whether the substance of the
transaction causing the decrease in ownership is addressed in other U.S. GAAP,
such as transfers of financial assets, revenue recognition, exchanges of
nonmonetary assets, sales of in substance real estate, or conveyances of oil and
gas mineral rights, and apply that guidance as applicable. If no other guidance
exists, an entity should apply the guidance in Subtopic 810-10.
 
 In
January 2010, the FASB issued the FASB Accounting Standards Update No.
2010-06 “Fair Value
Measurements and Disclosures (Topic 820) Improving Disclosures about Fair Value
Measurements”, which provides amendments to Subtopic 820-10 that require
new disclosures as follows:
  1.
              Transfers
      in and out of Levels 1 and 2. A reporting entity should disclose
      separately the amounts of significant transfers in and out of Level 1 and
      Level 2 fair value measurements and describe the reasons for the
      transfers.2.
              Activity
      in Level 3 fair value measurements. In the reconciliation for fair value
      measurements using significant unobservable inputs (Level 3), a reporting
      entity should present separately information about purchases, sales,
      issuances, and settlements (that is, on a gross basis rather than as one
      net number).
 
 This
Update provides amendments to Subtopic 820-10 that clarify existing disclosures
as follows:
  1.
              Level
      of disaggregation. A reporting entity should provide fair value
      measurement disclosures for each class of assets and liabilities. A class
      is often a subset of assets or liabilities within a line item in the
      statement of financial position. A reporting entity needs to use judgment
      in determining the appropriate classes of assets and
      liabilities.2.
              Disclosures
      about inputs and valuation techniques. A reporting entity should provide
      disclosures about the valuation techniques and inputs used to measure fair
      value for both recurring and nonrecurring fair value measurements. Those
      disclosures are required for fair value measurements that fall in either
      Level 2 or Level 3.
  This
Update also includes conforming amendments to the guidance on employers'
disclosures about postretirement benefit plan assets (Subtopic 715-20). The
conforming amendments to Subtopic 715-20 change the terminology from major categoriesof assets to
classesof assets and
provide a cross reference to the guidance in Subtopic 820-10 on how to determine
appropriate classes to present fair value disclosures. The new disclosures and
clarifications of existing disclosures are effective for interim and annual
reporting periods beginning after December 15, 2009, except for the disclosures
about purchases, sales, issuances, and settlements in the roll forward of
activity in Level 3 fair value measurements. Those disclosures are effective for
fiscal years beginning after December 15, 2010, and for interim periods within
those fiscal years.
 
 In
February 2010, the FASB issued the FASB Accounting Standards Update No.
2010-09 “Subsequent Events
(Topic 855) Amendments to Certain Recognition and Disclosure
Requirements”, which provides amendments to Subtopic 855-10 as
follows:
 
 1.
              An
      entity that either (a) is an SEC filer or(b) is a conduit bond obligor for
      conduit debt securities that are traded in a public market (a domestic or
      foreign stock exchange or an over-the-counter market, including local or
      regional markets) is required to evaluate subsequent events through the
      date that the financial statements are issued. If an entity meets neither
      of those criteria, then it should evaluate subsequent events through the
      date the financial statements are available to be
  issued.2.
              An
      entity that is an SEC filer is not required to disclose the date through
      which subsequent events have been evaluated. This change alleviates
      potential conflicts between Subtopic 855-10 and the SEC's
      requirements.
 
 3.
              The
      scope of the reissuance disclosure requirements is refined to include
      revised financial statements only. The term revised financial statementsis added to the glossary of Topic 855. Revised financial statements
      include financial statements revised either as a result of correction of
      an error or retrospective application of U.S. generally accepted
      accounting principles.
  9
  All of
the amendments in this Update are effective upon issuance of the final Update,
except for the use of the issued date for conduit debt obligors. That amendment
is effective for interim or annual periods ending after June 15,
2010.
 
 In
April 2010, the FASB issued the FASB Accounting Standards Update No.
2010-17 “Revenue Recognition —
Milestone Method (Topic 605) Milestone Method of Revenue Recognition”,
which provides guidance on the criteria that should be met for determining
whether the milestone method of revenue recognition is appropriate. A vendor can
recognize consideration that is contingent upon achievement of a milestone in
its entirety as revenue in the period in which the milestone is achieved only if
the milestone meets all criteria to be considered substantive.
 
 Determining
whether a milestone is substantive is a matter of judgment made at the inception
of the arrangement. The following criteria must be met for a milestone to be
considered substantive. The consideration earned by achieving the milestone
should:
 
 1.
              Be
      commensurate with either of the following:a.
              The
      vendor's performance to achieve the
milestone
 
 b.
              The
      enhancement of the value of the item delivered as a result of a specific
      outcome resulting from the vendor's performance to achieve the
      milestone2.
              Relate
      solely to past performance
 
 3.
              Be
      reasonable relative to all deliverables and payment terms in the
      arrangement.
 
 A
milestone should be considered substantive in its entirety. An individual
milestone may not be bifurcated. An arrangement may include more than one
milestone, and each milestone should be evaluated separately to determine
whether the milestone is substantive. Accordingly, an arrangement may contain
both substantive and nonsubstantive milestones.
 
 A
vendor's decision to use the milestone method of revenue recognition for
transactions within the scope of the amendments in this Update is a policy
election. Other proportional revenue recognition methods also may be applied as
long as the application of those other methods does not result in the
recognition of consideration in its entirety in the period the milestone is
achieved.
 
 A vendor
that is affected by the amendments in this Update is required to provide all of
the following disclosures:
 
 1.
              A
      description of the overall arrangement2.
              A
      description of each milestone and related contingent
      consideration
 
 3.
              A
      determination of whether each milestone is considered
      substantive4.
              The
      factors that the entity considered in determining whether the milestone or
      milestones are substantive
 
 5.
              The
      amount of consideration recognized during the period for the milestone or
      milestones.
 
 The
amendments in this Update are effective on a prospective basis for milestones
achieved in fiscal years, and interim periods within those years, beginning on
or after June 15, 2010. Early adoption is permitted. If a vendor elects early
adoption and the period of adoption is not the beginning of the entity's fiscal
year, the entity should apply the amendments retrospectively from the beginning
of the year of adoption. Additionally, a vendor electing early adoption should
disclose the following information at a minimum for all previously reported
interim periods in the fiscal year of adoption:
 
 1.
              Revenue2.
              Income
      before income taxes
 
 3.
              Net
      income4.
              Earnings
      per share
 
 5.
              The
      effect of the change for the captions
presented.
 
 10
  A vendor
may elect, but is not required, to adopt the amendments in this Update
retrospectively for all prior periods.
  Management
does not believe that any other recently issued, but not yet effective
accounting pronouncements, if adopted, would have a material effect on the
accompanying financial statements.
 
 NOTE
3 GOING CONCERN
 
 The
accompanying financial statements have been prepared on a going concern basis
which contemplates the realization of assets and satisfaction of liabilities in
the normal course of business. At September 30, 2010, the Company has an
accumulated deficit of $134,154 and had a net loss of $40,586 and net cash
used in operating activities of $34,797 for the period ended September 30, 2010,
respectively.  These factors raise substantial doubt about the
Company’s ability to continue as a going concern and are dependent upon its
ability to obtain adequate financing.
 
 While the
Company is attempting to find acquisition opportunities and produce lost
revenues from discontinued operations, the Company’s cash position may not be
significant enough to support the Company’s daily operations.  The
ability of the Company to continue as a going concern is dependent upon its
ability to find a suitable acquisition or merger candidate, raise additional
capital from the sale of stock, receive additional paid in capital and
ultimately, the achievement of significant positive results.  The
ability of the Company to continue as a going concern is dependent upon the
Company’s ability to further implement its business plan and generate
revenues.
 
 The
financial statements do not include any adjustments related to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue in existence.
 
 NOTE
4 STOCKHOLDERS’ DEFICIT
 
 During
the three months ended September 30, 2010, the majority shareholder contributed
$15,000 to the Company for working capital. During the nine months ended
September 30, 2010, the majority shareholder contributed $42,500 to the Company
for working capital.
 
 NOTE
5 SUBSEQUENT EVENTS
 
 The
Company has evaluated all events that occurred after the balance sheet date
through the date when the financial statements were issued. The management
of the Company determined that there were no reportable subsequent events to be
disclosed.
 
 11
  ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
  Safe
Harbor Statement under the Private Securities Litigation Reform Act of
1995
  Information
set forth herein contains “forward-looking statements” which can be identified
by the use of forward-looking terminology such as “believes,” “expects,” “may,”
“should” or “anticipates” or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy. We cannot assure you that
the future results covered by the forward-looking statements will be achieved.
We caution readers that important factors may affect our actual results and
could cause such results to differ materially from forward-looking statements
made by or on behalf of us.  These factors include our lack of
historically profitable operations, dependence on key personnel, the success of
our business, our ability to manage anticipated growth and other factors
identified in our filings with the U.S. Securities and Exchange Commission,
press releases and/or other public communications.
  The
following discussion and analysis provides information which our management
believes to be relevant to an assessment and understanding of our results of
operations and financial condition. This discussion should be read together with
our financial statements and the notes to financial statements, which are
included in this report. Because of the nature of a relatively new and growing
company such as ours, the reported results will not necessarily reflect the
future.
  Operations
  We were
founded as an unincorporated business in January 2004 and became a C corporation
in the State of Nevada on February 1, 2005.  As of September 30, 2010,
we had one employee, Dennis Neclerio, our President. Mr. Neclerio devotes ten
percent of his time to our business.
  We are a
digital medical illustrator and animator providing digital displays and
enhancements to companies that assist attorneys to prepare or enhance exhibits
for trials involving medical issues. Approximately 85% of our work is ultimately
used by plaintiff counsel and 15% is used by defense counsel.
  Our
customers are almost always companies that assist attorneys to prepare or
enhance a wide range of exhibits for trials. We perform the digital medical
imaging that is needed by these companies. There are a limited number of these
companies.
  Customers
typically hear of our services by word of mouth. They continue with us and
expand or decrease the amount of work that they send to us based on the quality
and timing of our output. We retain rights to the digital images that we
produce. These digital images form a library for us. Some of these digital
images can be sold to users who need generic types of images for their purposes.
This enables us to generate revenue without doing additional work. The longer
that we are in operation, the larger our library becomes.
  12
  Recent
Developments
  On August
31, 2010, we underwent a number of significant management changes, as follows:
(i) Dennis B. Carter, an experienced educator and fundraising coordinator, was
elected to our Board of Directors; (ii) Dennis Neclerio, a custom machine parts
sales manager, was appointed to be our President; (iii) Justin N. Craig resigned
as our President, Chief Executive Officer, Chief Financial Officer and Chairman;
and (iv) Kenneth Craig resigned from our Board of Directors.
  On July
5, 2010, we transferred to a newly-formed company, which we refer to herein as
the “Buyer,” controlled by Justin N. Craig, our former President, Chief
Executive Officer, Chief Financial Officer and Chairman, certain operating
assets associated with the continuing operations of our digital medical
illustration and animation business, subject to related liabilities, which we
refer to herein as the “Business.”  Pursuant to the terms of an
Agreement of Transfer with the Buyer, we transferred the Business to the Buyer
for a cash purchase price of $100.00 and other good and valuable consideration
including the assumption by the Buyer of all of our liabilities and debts which
relate to or arise out of the operations of the Business and the indemnification
by the Buyer of all losses, liabilities, claims, damages, costs and expenses
that may be suffered by us at any time which arise out of the operations of the
Business.  The transfer of the Business was approved by our board of
directors and the holder of 94.4% of our outstanding shares of common
stock.  The purchase price for the transfer of the Business was
determined as a result of arm’s-length negotiation between the
parties.
  Comparison
of the Nine Months ended September 30, 2010 and 2009
  A summary of operations
follows:
  2010
              
              
              2009Revenue
              
              $
              -
              
              
              $
              -Operating
      Expenses:Selling,
      general and administrative
              
              
              4,015
              
              
              
              -Professional
      fees
              
              
              14,378
              
              
              
              -Total
      operating expenses
              
              
              18,393
              
              
              
              -Loss
      from continuing operations
              
              
              (18,393
              )
              
              
              -Discontinued
      operations:Income
      from discontinued operations
              
              
              5,961
              
              
              
              9,483Net
      loss on disposal
              
              
              (28,154
              )
              
              
              -Total
      income (loss) from discontinued operations
              
              
              (28,154
              )
              
              
              9,483Net
      income (loss)
              
              $
              (40,856
              )
              
              $
              9,483
  13
  Revenue – For the nine months
ended September 30, 2010 and 2009, the Company has $-0- of revenue.
  Selling, general and administrativeconsist of:
  2010
              
              
              2009Corporate
      records expense
              
              
              1,913
              
              
              -Office
      expense
              
              
              102
              
              
              -Salaries
              
              
              2,000
              
              
              -Total
              
              $
              4,015
              
              
              $
              -0-
 
 Professional fees consist of
approximately $5,055 for accounting expenses and approximately $9,323 for
attorney expenses.
  Other
  As a
corporate policy, we will not incur any cash obligations that we cannot satisfy
with known resources, of which there are currently none except as described in
“Liquidity” below.  We believe that the perception that many people
have of a public company make it more likely that they will accept restricted
securities from a public company as consideration for indebtedness to them than
they would from a private company.  We have not performed any studies
of this matter.  Our conclusion is based on our own
observations.  However, there can be no assurances that we will be
successful in any of those efforts even if we are a public
entity.  Additionally, issuance of restricted shares would necessarily
dilute the percentage of ownership interest of our stockholders.
  Liquidity
  During
the nine months ended September 30, 2010, our majority shareholder, Vision
Opportunity Master Fund, Ltd., contributed $42,500 to our capital to support our
working capital needs.
  Private
capital, if sought, will be sought from former business associates of our
founder or private investors referred to us by those business associates. To
date, we have not sought any funding source and have not authorized any person
or entity to seek out funding on our behalf. If a market for our shares ever
develops, of which there can be no assurances, we may use restricted shares of
our common stock to compensate employees/consultants and independent contractors
wherever possible.  We believe that operations are generating sufficient
cash to continue operations for the next 12 months provided that our costs of
being a public company remain equal to or below the maximum estimate provided
below.
  We have
become a public company and, by doing so, have incurred and will continue to
incur additional significant expenses for legal, accounting and related
services. Since we became a public entity, subject to the reporting requirements
of the Securities Exchange Act of 1934, we are incurring ongoing expenses
associated with professional fees for accounting, legal and a host of other
expenses for annual reports and proxy statements. These obligations will reduce
our ability and resources to fund other aspects of our business. We will reduce
the compensation levels paid to management if there is insufficient cash
generated from operations to satisfy these costs.
  14
  There are
no current plans to seek private investment.  We do not have any
current plans to raise funds through the sale of securities.  We hope
to be able to use our status as a public company to enable us to use non-cash
means of settling obligations and compensate persons and/or firms providing
services or products to us, although there can be no assurances that we will be
successful in any of those efforts.  We believe that the perception
that many people have of a public company make it more likely that they will
accept restricted securities from a public company as consideration for
indebtedness to them than they would from a private company.  We have
not performed any studies of this matter.  Our conclusion is based on
our own beliefs. Issuing shares of our common stock to such persons instead of
paying cash to them would increase our chances to expand our
business.  Having shares of our common stock may also give persons a
greater feeling of identity with us which may result in
referrals.  However, these actions, if successful, will result in
dilution of the ownership interests of existing shareholders, may further dilute
common stock book value, and that dilution may be material. Such issuances may
also serve to enhance existing management’s ability to maintain control because
the shares may be issued to parties or entities committed to supporting existing
management.
  As part
of our plan to augment our financial resources and consider attractive business
opportunities, our principal stockholders have entered into discussions with
unnamed, unaffiliated third parties with respect to a potential merger
transaction which could result in the discontinuance of our current operations,
change of control/ownership and new management.  There can be no
assurance that a merger or other significant transaction will be consummated
with any such third parties or, if consummated, that we or our stockholders
would realize any benefits from it.
  Off-Balance
Sheet Arrangements
  We have
no off-balance sheet arrangements, obligations under any guarantee contracts or
contingent obligations. We also have no other commitments, other than the costs
of being a public company that will increase our operating costs or cash
requirements in the future.
  Seasonality
  We have
not noted a significant seasonal impact in our business.
  Recently-Issued
Accounting Pronouncements
  In June
2003, the U.S. Securities and Exchange Commission adopted final rules under
Section 404 of the Sarbanes-Oxley Act of 2002, as amended by SEC Release No.
33-9072 on October 13, 2009. Commencing with our annual report for the year
ended December 31, 2010, we will be required to include a report of management
on our internal control over financial reporting. The internal control report
must include a statement.
  §
                of
      management’s responsibility for establishing and maintaining adequate
      internal control over our financial
reporting;
  §
                of
      management’s assessment of the effectiveness of our internal control over
      financial reporting as of year end;
and
  §
                of
      the framework used by management to evaluate the effectiveness of our
      internal control over financial
reporting.
  15
  Furthermore,
in the following fiscal year, management is required to file the registered
accounting firm’s attestation report separately on our internal control over
financial reporting on whether it believes that we have maintained, in all
material respects, effective internal control over financial
reporting.
  In
August 2009, the FASB issued the FASB Accounting Standards Update No.
2009-04 “Accounting for
Redeemable Equity Instruments - Amendment to Section 480-10-S99” which
represents an update to section 480-10-S99, distinguishing liabilities from
equity, per EITF Topic D-98, Classification and Measurement of
Redeemable Securities.  The Company does not expect the
adoption of this update to have a material impact on its consolidated financial
position, results of operations or cash flows.
  In
August 2009, the FASB issued the FASB Accounting Standards Update No.
2009-05 “Fair Value
Measurement and Disclosures Topic 820 – Measuring Liabilities at Fair
Value”, which provides amendments to subtopic 820-10, Fair Value
Measurements and Disclosures – Overall, for the fair value measurement of
liabilities.  This Update provides clarification that in circumstances
in which a quoted price in an active market for the identical liability is not
available, a reporting entity is required to measure fair value using one or
more of the following techniques: 1. A valuation technique that uses: a. The
quoted price of the identical liability when traded as an asset b. Quoted prices
for similar liabilities or similar liabilities when traded as assets. 2. Another
valuation technique that is consistent with the principles of topic 820; two
examples would be an income approach, such as a present value technique, or a
market approach, such as a technique that is based on the amount at the
measurement date that the reporting entity would pay to transfer the identical
liability or would receive to enter into the identical liability. The amendments
in this Update also clarify that when estimating the fair value of a liability,
a reporting entity is not required to include a separate input or adjustment to
other inputs relating to the existence of a restriction that prevents the
transfer of the liability. The amendments in this Update also clarify that both
a quoted price in an active market for the identical liability when traded as an
asset in an active market when no adjustments to the quoted price of the asset
are required are Level 1 fair value measurements.  The Company does
not expect the adoption of this update to have a material impact on its
consolidated financial position, results of operations or cash
flows.
  In
September 2009, the FASB issued the FASB Accounting Standards Update No.
2009-09 “Accounting for
Investments-Equity Method and Joint Ventures and Accounting for Equity-Based
Payments to Non-Employees”.  This Update represents a
correction to Section 323-10-S99-4, Accounting by an Investor for
Stock-Based Compensation Granted to Employees of an Equity Method
Investee. Additionally, it adds observer commentAccounting Recognition for Certain
Transactions Involving Equity Instruments Granted to Other Than Employees
to the Codification. The Company does not expect the adoption to have a material
impact on its consolidated financial position, results of operations or cash
flows.
 16
 In
January 2010, the FASB issued the FASB Accounting Standards Update No. 2010-01
“Equity Topic 505 – Accounting
for Distributions to Shareholders with Components of Stock and Cash”,
which clarifies that the stock portion of a distribution to shareholders that
allows them to elect to receive cash or stock with a potential limitation on the
total amount of cash that all shareholders can elect to receive in the aggregate
is considered a share issuance that is reflected in EPS prospectively and is not
a stock dividend for purposes of applying Topics 505 and 260 (Equity and
Earnings Per Share (“EPS”)).  Those distributions should be accounted
for and included in EPS calculations in accordance with paragraphs 480-10-25- 14
and 260-10-45-45 through 45-47 of the FASB Accounting Standards
codification.  The amendments in this Update also provide a technical
correction to the Accounting Standards Codification.  The correction
moves guidance that was previously included in the Overview and Background
Section to the definition of a stock dividend in the Master
Glossary.  That guidance indicates that a stock dividend takes nothing
from the property of the corporation and adds nothing to the interests of the
stockholders.  It also indicates that the proportional interest of
each shareholder remains the same, and is a key factor to consider in
determining whether a distribution is a stock dividend.
  Management
does not believe that any other recently issued, but not yet effective
accounting pronouncements, if adopted, would have a material effect on the
accompanying consolidated financial statements.
  Critical
Accounting Policies
  The
preparation of financial statements and related notes requires us to make
judgments, estimates, and assumptions that affect the reported amounts of
assets, liabilities, revenue and expenses, and related disclosure of contingent
assets and liabilities.
  An
accounting policy is considered to be critical if it requires an accounting
estimate to be made based on assumptions about matters that are highly uncertain
at the time the estimate is made, and if different estimates that reasonably
could have been used, or changes in the accounting estimates that are reasonably
likely to occur periodically, could materially impact the financial
statements.
  Financial
Reporting Release No. 60 requires all companies to include a discussion of
critical accounting policies or methods used in the preparation of financial
statements.  There are no critical policies or decisions that rely on
judgments that are based on assumptions about matters that are highly uncertain
at the time the estimate is made.
  ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Not
required
  ITEM
4. CONTROLS AND PROCEDURES
  (a)           Evaluation
of Disclosure Controls and Procedures.
  An
evaluation was carried out under the supervision and with the participation of
the our management, including our President (acting in his capacity as the
principal executive officer and principal financial and accounting officer), of
the effectiveness of our disclosure controls and procedures as of September 30,
2010.  Based on that evaluation, our President has concluded that our
disclosure controls and procedures are ineffective to provide reasonable
assurance that: (i) information required to be disclosed by us in reports that
we file or submit under the Securities Exchange Act of 1934 is accumulated and
communicated to our management, including our President, as appropriate to allow
timely decisions regarding required disclosure by us; and (ii) information
required to be disclosed by us in reports that we file or submit under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms.
  17
  (b)           Changes
in Internal Controls.
  During
the quarter ended September 30, 2010, there were no changes in our internal
control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
  18
  PART
II - OTHER INFORMATION
  ITEM
      1.
                  LEGAL
      PROCEEDINGSNoneITEM
      1A.
                  RISK
      FACTORSNot
      requiredITEM
      2.
                  UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDSNoneITEM
      3.
                  DEFAULTS
      UPON SENIOR SECURITIESNoneITEM
      4.
                  RESERVEDITEM
      5.
                  OTHER
      INFORMATIONNone
  19
  ITEM
      6.
                  EXHIBITS
  Exhibit
      Number
              
              Description31.1
              
              Section
      302 Certification of Chief Executive Officer and Chief Financial
      Officer.32.1
              
              Certification
      Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002 – Chief Executive Officer and Chief
      Financial Officer.
  20
  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.
  Medical Design Studios,
      Inc.Date:
      November 15, 2010
                By:
                /s/ Dennis
      NeclerioDennis
      Neclerio
                  President
                  (principal
      executive officer and principal
                  financial
      and accounting officer)
 
 21