SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q SB

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

For the quarterly period ended June 30, 2000

or

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

For the transition period from ____________ to ____________

Commission file number 0-20354

Phoenix Healthcare Corporation
(Exact name of small business issuer as specified in its charter)

4514 Travis Street, Suite 330, Dallas, Texas 75205
(Address of principal executive offices)       (Zip Code)

214-599-9777
(Issuer's telephone number, including area code)

Former name, former address and
former fiscal year, if changed
since last report

          Check whether the Issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter periods that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

__X__  YES     ____  NO

          As of August 5, 2000, there were 51,778,748 shares of Common Stock issued and outstanding, 533,333 shares of Series A Senior Convertible Preferred Stock issued and outstanding, and 100,000 shares of Series B Preferred Stock issued and outstanding.

          Transitional Small Business Disclosure Format     ____  YES      __X__  NO

Signatures

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

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

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

PHOENIX HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED JUNE 30, 2000 AND 1999

During interim periods, Phoenix Healthcare Corporation (the "Company") follows the accounting policies set forth in its Annual Report on Form 10-K SB filed with the Securities and Exchange Commission. Users of financial information produced in interim periods are encouraged to refer to the footnotes contained in the Annual Report when reviewing interim financial results.

In management's opinion, the accompanying interim financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, the results of operations, and the statements of cash flows of the Company for the interim periods.

A summary of the Company's significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements is as follows:

For the six months ended June 30, 2000, the Company reported a net loss from continuing operations of $1,934,554.

For the year ended December 31, 1999, the Company reported a net loss of $10,894,212. This is largely attributable to recent net operating losses and the resultant losses on disposal associated with now discontinued operations totaling $9,274,247. Recent operating losses reported by the Company through June 30, 2000, coupled with the burden of prior period corporate obligations have exhausted the Company's capital resources and had a material adverse effect on short term liquidity and the Company's ability to satisfy its obligations. At June 30, 2000, the Company reports a working capital deficit of $12,139,667 compared with a working capital deficit of $16,835,394 at December 31, 1999. The Company requires an infusion of new capital, an increased business base and a higher level of profitability to meet its short-term obligations.

In light of the Company's current financial position, its inability to independently meet its short-term corporate obligations, its need to further capitalize existing operations and its dependency on revenue growth to support continuing operations, its viability as a going concern is uncertain. While the Company has experienced an infusion of limited new working capital, there can be no assurance that management's efforts to re-direct and re-capitalize the Company will be successful.

During the quarter ended June 30, 2000, the Company acquired all of the rights, titles, properties, business models and intellectual property associated with Converged Media, an 80% owned subsidiary, in exchange for 750,000 shares of common stock, par value $.001, of the Company ("Common Stock"). At the effective date of the transaction, the price of the Common Stock was $.625 per share resulting in an acquisition price of $468,750.

During the quarter ended June 30, 2000, the Company settled litigation with G&L Realty Partnership, L.P. in connection with disputes arising out of certain healthcare operations. Terms of the settlement remain confidential. Among other things, the settlement requires the Company to pay $1,136,950 including interest and issue 250,000 shares of the Common Stock. Confidential terms of the agreement also provide for contingencies upon default of payment. The settlement resulted in an additional charge to Discontinued Operations - net gain (loss) on settlement of discontinued accounts of $243,401. Payment terms are $25,000 on July 1, 2000 and $1,111,950 on September 1, 2000. Correspondingly, net current liabilities of discontinued operations in the June 30, 2000 balance sheet were increased by $161,376.

During 1999, the Company discontinued all remaining business operations associated with providing healthcare management and ancillary services.

Net current accounts of discontinued operations at June 30, 2000 and December 31, 1999 are detailed as follows:

Reductions in net current liabilities of discontinued operations represented the reduction of debt obligations through collection of a major receivable balance that was paid directly to the noteholder in the amount of $646,909, conversion of common stock and disposition of stock of companies that are no longer part of the Company's operating structure offset by an increase in a note obligation attributed to settlement of litigation in the amount of $161,376. $3,856,238 associated with debt foregiveness and disposition of subsidiary companies was credited to Paid-in Capital in the accompanying financial statements. For the quarter ended June 30, 2000, the Company realized a net gain on settlement of accounts of $403,508 attributable to the collection of the major receivable balance described above offset by an additional charge of $243,401 in connection with litigation settlement described in Note 3. The six months ended June 30, 2000 includes a net gain on settlement of accounts of $145,258 attributable to a note payable. The debt foregiveness, disposition of subsidiary companies and the $145,258 gain on settlement of account were with entities controlled by the Company's Chairman, Chief Executive Officer and President .

There were no operating losses from discontinued operations for the quarter or six months ended June 30, 2000. Net losses from discontinued operations reported for the quarter ended June 30, 1999 and for the six months then ended are detailed as follows:

The Company is a defendant in certain lawsuits involving third-party creditors whose claims arise from transactions which largely occurred under prior management and are related to discontinued operations. Management believes that it has sufficiently reserved for these claims in its financial statements at June 30, 2000.

The Company is obligated under the terms of a line of credit agreement to Match, Inc. in the amount of $1,604,885 including $160,795 associated with liabilities of discontinued operations at June 30, 2000. Ronald E. Lusk, Chairman, Chief Executive Officer and President of the Company controls Match, Inc. as its sole stockholder and President. The line of credit agreement with Match, Inc. is available up to a limit of $2,000,000, bears interest at approximately 10.5%, is due on demand and is secured by stock and assets of subsidiary companies. This note obligation includes accrued interest of $98,905 through December 31, 1999. To date, there have been no interest payments made to Match, Inc.

Match, Inc. is the sole holder of all of the issued and outstanding Series A Preferred Stock of the Company at June 30, 2000.

At June 30, 2000, the Company is obligated to the Chairman, Chief Executive Officer and President as well as two stockholders in the amount of $67,355 related to a payment made on an obligation of a discontinued business segment. The amount is included in accrued expenses and other current liabilities in the accompanying consolidated balance sheet and will be repaid through issuance of Common Stock.

As part of the Company's ongoing goal of attracting and retaining key personnel, rewarding past and future contributions and encouraging ownership of the Common Stock by employees, the Board of Directors authorized and approved the Company's 2000 Nonqualified Stock Option Plan (the "Plan"). Concurrently, the Company granted stock options to employees for 2,160,000 shares of Common Stock at the price of $.2125 per share. The options vest and become exercisable at various dates. The Company intends to file a registration statement on Form S-8 with regard to the Plan.

In April 2000, the Company entered into a credit agreement with Level 3 Management to provide the Company a line of credit not to exceed $1,000,000 ("Line"). A stockholder of the Company is an owner of Level 3 Management. At June 30, 2000, $662,696 is outstanding under the Line. Proceeds of the Line were used for working capital purposes and no additional amounts will be borrowed under the Line. The Line bears interest of 1% over the prime commercial lending rate. The agreement also provides for the issuance of warrants for 1,315,789 shares of the Common Stock at an exercise price of $.76 per share. Twenty-five percent of the warrants are exercisable if loans under the Line equal or exceed $250,000 but are less than $350,000. Thereafter, the warrants are exercisable at varying amounts as the borrowings increase under the Line. As of June 30, 2000, 657,896 warrants are exercisable.

In July 2000, the Company converted $62,500 of accrued compensation of the Chairman, Chief Executive Officer and President for the quarter ended June 30, 2000, into 197,002 shares of the Common Stock.

In July 2000, the Company reached an agreement, subject to final documentation, to settle litigation relating to the purchase of Trinity Rehab, Inc., a previously discontinued healthcare business. Under the terms of the settlement, the Company will issue 1,600,000 shares of Common Stock at $.26 per share, pay $90,000 in cash over eighteen months beginning September 1, 2000, and make a one-time cash payment of $100,000 at such time as the Company completes a recapitalization. The total settlement of $606,000 resulted in a credit to Discontinued Operations - gain (loss) on settlement of accounts in the amount of $884,000 and will be recorded in the quarter in which the settlement is finalized, which the Company expects to be in the third quarter of 2000. Concurrently, net current liabilities of discontinued operations will be reduced by $1,300,000. The amount that will be credited to Common Stock and Additional Paid-In-Capital will be $1,600 and $414,400 respectively.

This Quarterly Report on Form 10-QSB includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and business of the Company. When used herein, the words "anticipate," "believe," "estimate" and "expect" and similar expressions are intended to identify forward-looking statements. Such statements reflect significant assumptions, risks and subjective judgments by the Company's management concerning anticipated results. These assumptions and judgments may or may not prove to be correct. Moreover such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated in such forward-looking statements. Forward-looking statements speak only as to the date hereof.

In December 1999, the Company announced the strategic repositioning of the Company through which it completed an exit from under performing healthcare services business and anticipates emerging as a provider of business solutions. This new business is designed to reposition the Company as a technology company.

The Company has embarked on its new initiative to deliver knowledge-based media and communications in a fully interactive environment utilizing broadband and wireless communications technologies. To execute its strategies, the Company is operating on a model that manages the convergence of data, media and communications technologies to provide next level business-to-business solutions.

The Company's triumvirate organizational structure facilitates the operation of three complimentary divisions known as the Knowledge Group, the Media Group, and the Communication Group. The Companies in each group deliver highly specialized products and services to targeted business and consumer profiles while offering development and support capability to the other divisions.

The Knowledge Group provides web-centric software solutions in an Applications Service Provider ("ASP") environment. This model facilitates the transformation of data into knowledge-based systems that permit real time analysis and decision-making. In December of 1999, Healthcare Information Technologies became the first wholly-owned subsidiary in the Knowledge Group and has developed a modular technology platform that provides software solutions for the healthcare industry. MEDeTRACK, the first in a suite of modular applications, is currently under development. This web-enabled application automates the ordering, tracking and billing of medical supplies using patient-specific information for healthcare providers and players.

The Media Group develops and distributes interactive content and programming designed to exploit the convergence of radio, television and telephone with Internet communications technologies. In March of 2000, the Company announced the formation of Converged Media, at www.convergedmediaonline.com, to deliver content rich programming for radio, interactive television and Internet simulcast. In addition to its value as an entertainment medium, this format provides advertisers with an efficient method to reach targeted audiences. The first of such programs, "On Your Side Radio", is expected to debut at www.onyoursideradio.com in the third quarter. In connection with the development and production of "On Your Side Radio," Converged Media has entered into agreements with Yahoo! Broadcast to stream the show to the Internet, Maxpop, Inc. for studio facilities and KRLD Radio in Dallas, Texas to air the show.

The Communications Group is focused on the development and management of broadband and wireless communications software applications and technologies. Its current purpose is to provide technical support for the distribution and operation of products and services provided by the Knowledge and Media Groups.

Phoenix is pioneering the convergence of radio, telephone, television and the Internet through the use of highly specialized products and services with targeted business and consumer profiles.

Consistent with this new strategic direction, the Company will concentrate its efforts on rapidly growing its technology initiatives to establish the Company as a viable player in the development and marketing of software and Internet-based technologies and solutions for business and consumer applications.

The Company's consolidated financial statements reflect a loss from continuing operations of $775,004 for the quarter ended June 30, 2000, compared with a net loss from continuing operations of $364,262 for the prior year quarter ended June 30, 1999.

The losses for both periods include general and administrative expenses reported by the Company and are principally related to corporate expenses and related corporate overhead. In April 2000, Converged Media began operations and incurred operating expenses associated with personnel, initiation of program development, as well as incurrence of promotional expenses and professional fees. Significant components of general and administrative expenses for the quarter ended June 30, 2000 include compensation of $180,000, a non-cash charge for executive compensation related to a stock grant for an executive officer of the company of $34,275, professional fees of approximately $257,000 and other expenses of $105,325. For the quarter and six months ended June 30, 2000, expenses of Converged Media included salaries and related costs of approximately $81,500, professional fees of approximately $10,000, initial production costs of $5,200 and advertising, marketing and other promotional expenses of approximately $12,400.

Other income for the quarter ended June 30, 2000 totaled $30,309, the majority of which represented collections of previously written off accounts receivable of discontinued operations.

For the quarter ended June 30, 1999, general and administrative expenses included professional fees of $223,000 principally for legal fees associated with corporate litigation and settling various corporate obligations and other corporate overhead of $109,693. The higher expense levels in the second quarter of 2000 are generally attributed to costs incurred by Converged Media as described above as well as certain prior year general and administrative expenses being absorbed by then operating business segments.

Depreciation and amortization for the quarter ended June 30, 2000 totaled $29,344 with $20,000 representing amortization of intangibles that were acquired in 1999 compared to $12,924 for the same period in 1999.

Interest expense for the quarter ended June 30, 2000 was $90,349 compared to $18,645 for the quarter ended June 30, 1999. The increase was principally comprised of interest expense attributable to interest on a note associated with a discontinued operation as well as increased borrowings.

In the quarter ended June 30, 2000, the Company incurred a gain on settlement of an account of discontinued operations of $646,909 due to collection of a major customer receivable that was paid directly to the noteholder. The gain was offset by a charge of $243,401 due to the settlement of litigation as described in Note 3. For the quarter ended June 30, 1999, the Company incurred losses from operations of discontinued operations of $792,689. The 1999 amount represents actual losses incurred from operations of the discontinued business segments.

For the six months ended June 30, 2000, the Company incurred a loss from continuing operations of $1,934,554 compared to a loss of $1,160,397 for the same period the prior year. The losses for both periods include general and administrative expenses reported by the Company and are principally related to corporate expenses and professional fees. The expenses for the six months ended June 30, 2000 include non cash charges of $685,475 related to stock grants to officers of the Company, compensation of approximately $438,750, professional fees of approximately $399,825 and other expenses of approximately $172,082. The six months results also reflect expenses of Converged Media described above of approximately $109,100. Significant components of general and administrative expenses for the six months ended June 30, 1999 include salaries of $262,500, professional fees of approximately $604,000 and other corporate overhead approximating $229,351. Other income for the six months ended June 30, 2000 was $72,898. Other income represents principally collections of previously written off account receivables associated with discontinued operations. Depreciation and amortization expense for the six months ended June 30, 2000 was $58,412 compared to $12,924 for the same period in 1999. The increase is principally due to amortization of licensing rights of $40,000 in the current year.

Interest expense for the six months ended June 30, 2000 and 1999 was $143,808 and $51,622 respectively. The increase is principally attributable to interest on notes associated with previously discontinued operations as well as increased borrowings.

As discussed in Note 2 to the Financial Statements, in light of the Company's current financial position, its viability as a going concern is uncertain.

For the six months ended June 30, 2000, the Company reported a net loss of $1,934,554 from continuing operations. Recent operating losses reported by the Company through June 30, 2000 as well as prior year operating losses and the resultant loss on disposal associated with discontinued operations have exhausted the Company's capital resources and had a material adverse effect on short-term liquidity and the Company's ability to satisfy its obligations.

At June 30, 2000, the Company reports a working capital deficit of $12,139,667 compared with a working capital deficit of $16,835,394 at December 31, 1999. The working capital deficit position results largely from the recording of net liabilities and related reserves associated with the discontinuance of the healthcare service business segments in December 1999. The Company requires an infusion of new capital, an increased business base and a higher level of profitability to meet its short-term obligations.

Notes payable at June 30, 2000, totaled $2,272,622 representing principally working capital financing compared to $1,310,021 at December 31, 1999.

Accounts payable at June 30, 2000, totaled $315,675 compared to $392,177 at December 31, 1999.

Accrued expenses and other current liabilities at June 30, 2000 totaled $348,886 compared with $685,694 at December 31, 1999. The December 31, 1999 balance includes $475,000 of accrued compensation to executive officers that was converted into Common Stock in March 2000. Net current liabilities of discontinued operations at June 30, 2000 were $9,259,003 compared to $14,472,208 at December 31, 2000. The decrease was principally attributed to conversion of certain notes into Common Stock, extinguishment of certain other obligations, the disposition of previously discontinued operations, settlement of certain litigation and payment by a major customer directly to a noteholder.

The Company does not engage in trading market risk sensitive instruments. Neither does the Company purchase as investments, hedges or for purposes "other than trading" instruments that are likely to expose the Company to market risk, whether interest rate, foreign currency exchange, commodity price or equity price risk. The Company has issued no debt instruments, entered into no forward or futures contracts, purchased no options and entered into no swaps. The Company's primary market risk exposure is that of interest rate risk.

During the quarter ended June 30, 2000, the Company settled litigation with G&L Realty Partnership, L.P. in connection with disputes arising out of certain healthcare operations. Terms of the settlement remain confidential. Among other things, the settlement requires the Company to pay $1,136,950 including interest and issue 250,000 shares of the Common Stock. Confidential terms of the agreement also provide for contingencies upon default of payment. The settlement resulted in an additional charge to Discontinued Operations - net gain (loss) on settlement of discontinued accounts of $243,401. Payment terms are $25,000 on July 1, 2000 and $1,111,950 on September 1, 2000. Correspondingly, net current liabilities of discontinued operations in the June 30, 2000 balance sheet were increased by $161,376.

In April 2000, the Company converted $118,750 of accrued compensation of executive officers for the quarter ended March 31, 2000 into 540,339 shares of the Common Stock.

In April 2000, the Company issued 250,000 shares of Common Stock to an executive officer in connection with entering into an employment agreement.

In May 2000, the Company issued 250,000 shares of Common Stock in connection with settlement of the litigation described in Note 3.

In June 2000, the Company issued 750,000 shares of Common Stock associated with acquiring rights, titles, properties and intellectual property related to Converged Media.

The issuances of these securities were deemed to be exempt from registration under the Securities Act of 1933, as amended, because they were either sold to a limited group of persons, each of whom was believed to have been a sophisticated investor or to have had a pre-existing business or personal relationship with the Company and to have been purchasing for investment without a view to further distribution, or because the securities were issued pursuant to a compensatory benefit plan pursuant to Rule 701 under the Securities Act.

At June 30, 2000 and to date, the Company is in payment default on senior debt obligations in the principal amount totaling approximately $2,600,000. The interest payment arrearage through June 30, 2000 approximates $30,000.

On June 9, 2000, the Company held its annual meeting of Stockholders at which the Stockholders voted to:

Subsequent to the annual meeting, the Company initiated a process to change the name of the Company to The Phoenix Group Corporation. On July 28, 2000, the Board of Directors approved the proposed name change. The Company will obtain written consent of its stockholders and, after complying with SEC and Delaware rules, the Company will file its amended and restated Certificate of Incorporation with the Secretary of State of Delaware to effect the name change.

Effective June 1, 2000, Gary G. Castleberry was hired by the Company as its Chief Operating Officer. For the past twenty years, Mr. Castleberry has filled various management positions with EDS and Perot Systems.

In April 2000, Converged Media, the Company's 80% owned subsidiary, began operations. During the quarter ended June 30, 2000, the Company acquired the rights, titles, business models, intellectual property, and all other related rights associated with Converged Media for 750,000 shares of the Common Stock. During the quarter, Converged began hiring personnel, developing content for programs and entering into agreements associated with airing the first show "On Your Side Radio." Among others, Converged Media entered into agreements with Yahoo! Broadcast for streaming shows over the Internet, and Maxpop, Inc. for providing studio facilities. Converged Media plans to begin airing "On Your Side Radio" on August 10, 2000.

In June 2000, the Company adopted a new stock option plan to continue its goal of hiring and retaining quality personnel, rewarding past and future contributions and encouraging stock ownership in the Company. Upon adoption of the new stock option plan, options for 2,160,000 shares were granted to various employees of the Company and Converged Media.

As of June 23, 2000, A. Kirk Still, the former President and a former Executive Vice-President of the Company, is no longer employed by the Company.

(a)       Exhibits

27       Financial Data Schedule

*Filed herewith.

(a)       The Company filed the following reports on Form 8-K during the second quarter of 2000:

               None.

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.