MD 8K/A Completion of Acquisition or Disposition of Assets

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): October 31, 2005

MD TECHNOLOGIES INC.

(Exact Name of Registrant as Specified in Charter)

Delaware

(State or Other Jurisdiction of

Incorporation or Organization)


0-50435		72-1491921
(Commission File Number)		(I.R.S. Employer Identification No.)

620 Florida St., Suite 200, Baton Rouge, Louisiana

(Address of principal executive offices including zip code)

(225) 343-7169

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.01 Completion of Acquisition or Disposition of Assets

MD Technologies Inc. (“MDTO”) acquired all the outstanding shares of common stock of Medical Group Services, Inc. (“MGSI”) on October 31, 2005. The shares were acquired from Anthony Maniscalco and Brina Cabrera, the president and CEO, respectively, of MGSI. The purchase price was $3 million in cash and shares of common stock of MDTO, a portion of which was withheld pending satisfaction of certain financial results. The funds from the acquisition came from the $5 million sale of convertible debentures that occurred on July 5, 2005.

MGSI, based in Tampa, Florida, offers comprehensive accounts receivable, practice management, and financial services to physician groups. MGSI currently serves more than 300 clients in six states. MGSI employs 26staff.

MGSI will retain its name, management, staff and operations in Tampa, although MGSI will become a wholly owned subsidiary of MDTO. Brina Cabrera, CEO, and Anthony F. Maniscalco, President, will continue to manage MGSI’s Tampa operations. A copy of the press release announcing the acquisition of MGSI and the related Securities Purchase Agreement, as well as the Employment Agreements for Brina Cabrera and Anthony F. Maniscalco, are attached as exhibits to this Current Report on Form 8-K.

This report on Form 8-K/A amends the Registrant’s Report on Form 8-K dated November 4, 2005, to include the financial statements and pro forma financial information required by Item 9.01 of Form 8-K.

Item 9.01 Financial Statements and Exhibits

(a) Financial Statements of Business Acquired

The financial statements required by Rule 310 of Regulation S-B are attached.

(b) Pro Forma Financial Information

The financial statements required by Rule 3.10 of Regulation S-B are attached.

The following exhibits are furnished as a part of this Current Report on Form 8-K:


99.1*⁺		Securities Purchase Agreement, dated October 31, 2005, by and among MD Technologies Inc., Medical Group Services, Inc., Anthony F. Maniscalco, Catherine A. Maniscalco and Brina Cabrera

99.2⁺		Employment Agreement, dated October 31, 2005, between Medical Group Services, Inc., and Anthony F. Maniscalco

99.3⁺		Employment Agreement, dated October 31, 2005, between Medical Group Services, Inc., and Brina Cabrera.

99.4⁺		Press release issued by MD Technologies Inc. on November 4, 2005.

*	An application has been submitted to the Securities and Exchange Commission for confidential treatment, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, of portions of this exhibit. These portions have been omitted from this exhibit.

⁺	Incorporated by reference from the Registrant’s Report on Form 8-K filed November 4, 2005.

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 hereunto duly authorized.


MD TECHNOLOGIES INC.

By:		/s/ William D. Eglin
		William D. Eglin
		President, Chief Executive Officer and Chief Financial Officer

DATE: January 10, 2006

FINANCIAL STATEMENTS AND EXHIBITS

F-1

TABLE OF CONTENTS


MEDICAL GROUP SERVICES, INC. AUDITED FINANCIAL STATEMENTS DECEMBER 31, 2004 and 2003		F-4

INDEPENDENT AUDITORS’ REPORT		F-6

FINANCIAL STATEMENTS		F-7

Medical Group Services, Inc. Balance Sheet December 31,		F-8

Medical Group Services, Inc. Statement of Income and Expenses For the Years Ended December 31,		F-10

Medical Group Services, Inc. Statement of Change in Retained Earnings For the Years Ended December 31,		F-11

Medical Group Services, Inc. Statement of Cash Flows For the Years Ended December 31,		F-12

NOTES TO FINANCIAL STATEMENTS		F-13

SUPPLEMENTAL INFORMATION		F-18

Medical Group Services, Inc. Supplementary Schedule - Balance Sheet December 31,		F-19

Medical Group Services, Inc. Supplementary Schedule – Income and Expenses For the Years Ended December 31,		F-20

MEDICAL GROUP SERVICES, INC. FINANCIAL STATEMENTS SEPTEMBER 30, 2005		F-23

Medical Group Services, Inc. Balance Sheet September 30, 2005		F-26

Medical Group Services, Inc. Statement of Income and Expenses For the Nine Months Ended September 30, 2005		F-28

Medical Group Services, Inc. Statement of Change in Retained Earnings For the Nine Months Ended September 30, 2005		F-29

Medical Group Services, Inc. Statement of Cash Flows For the Nine Months Ended September 30, 2005		F-30

NOTES TO FINANCIAL STATEMENTS		F-31

F-2


MD TECHNOLOGIES INC. UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 2005 AND DECEMBER 31, 2005		F-36

INTRODUCTION		F-37

MD Technologies Inc. Unaudited Pro Forma Combined Condensed Balance Sheet As Of September 30, 2005		F-38

MD Technologies Inc. Unaudited Pro Forma Combined Condensed Statement Of Operations For The Nine Months Ended September 30, 2005		F-39

MD Technologies Inc. Unaudited Pro Forma Combined Condensed Statement Of Operations For The Twelve Months Ended December 31, 2005		F-40

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS		F-41

F-3

MEDICAL GROUP SERVICES, INC.

AUDITED FINANCIAL STATEMENTS

DECEMBER 31, 2004 and 2003

TABLE OF CONTENTS


INDEPENDENT AUDITORS’ REPORT		F-6

FINANCIAL STATEMENTS		F-7

Medical Group Services, Inc. Balance Sheet December 31,		F-8

Medical Group Services, Inc. Statement of Income and Expenses For the Years Ended December 31,		F-10

Medical Group Services, Inc. Statement of Change in Retained Earnings For the Years Ended December 31,		F-11

Medical Group Services, Inc. Statement of Cash Flows For the Years Ended December 31,		F-12

NOTES TO FINANCIAL STATEMENTS		F-13

SUPPLEMENTAL INFORMATION		F-18

Medical Group Services, Inc. Supplementary Schedule - Balance Sheet December 31,		F-19

Medical Group Services, Inc. Supplementary Schedule – Income and Expenses For the Years Ended December 31,		F-20

F-5

Santana & Byrd, P.A.

Certified Public Accountants


211 South Boulevard		Members of:
Tampa, Florida 33606		American Institute of C.P.A.’s
Office: 813-254-2443		Florida Institute of C.P.A.’s
Fax: 813-258-3224

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors

Medical Group Services, Inc.

Tampa, Florida

We have audited the accompanying balance sheet of Medical Group Services, Inc. (a Florida corporation) as of December 31, 2004 and 2003, and the related statements of income and expense, changes in shareholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Medical Group Services, Inc. as of December 31, 2004 and 2003 and the results of operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.

Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The information contained in the supplementary schedules is presented for the purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

Santana & Byrd, P.A.

Certified Public Accountants

Tampa, Florida

April 22 , 2005

F-6

FINANCIAL STATEMENTS

F-7

Medical Group Services, Inc.

Balance Sheet

December 31,

ASSETS


	2004			2003
Current Assets:

Cash & Equivalents	$	9,719		$	10,459
Notes & Accounts Receivable
Accounts Receivable (Net of Allowance for Uncollectibles)		212,571			172,132
Advances and Loans		550			49
Prepaid Expenses		1,941			17,539

Total Current Assets:		224,781			200,179

Property and Equipment:

Machinery & Equipment		267,203			34,674
Furniture & Fixtures		28,011			20,830
Office Equipment		61,277			42,128
Leasehold Improvements		12,536			12,536
Less: Accumulated Depreciation		(180,323	)		(34,788	)

Total Property and Equipment		188,705			75,380

Other Assets:

Intangibles and Deferred Charges
Goodwill		151,904			—
Software Licenses and Website Assets		103,852			64,303
Less: Accumulated Amortization		(58,216	)		(12,770	)
Investments and Other Assets
Deposits		6,278			6,278
Other Assets		78,867			—

Total Other Assets	$	282,684			57,811

Total Assets		696,170		$	333,370

See accompanying independent auditors’ report and notes to financial statements.

F-8

Medical Group Services, Inc.

Balance Sheet

December 31,

LIABILITIES AND SHAREHOLDERS’ EQUITY


	2004			2003
Current Liabilities:

Accounts Payable	$	204,827		$	144,216
Credit Card Liabilities		9,375			12,249
Current Maturities of Long-Term Debt		223,098			78,500
Other Accrued Expenses		18,452			39,337

Total Current Liabilities:		455,752			274,302

Long-Term Liabilities:

Notes Payable		522,156			358,000
Capital Lease Obligations		198,078			32,018
Shareholder Loans		148,235			—
Less - Current Maturities		(223,098	)		(78,500	)

Total Long-Term Liabilities		645,371			311,518

Total Liabilities		1,101,123			585,820

Common Stock, $ 1 par, 1000 shares authorized, 1000 shares issued and outstanding		1,000			1,000
Retained Earnings		(405,953	)		(253,450	)

Total Shareholders’ Equity		(404,953	)		(252,450	)

Total Liabilities and Shareholders’ Equity	$	696,170		$	333,370

See accompanying independent auditors’ report and notes to financial statements.

F-9

Medical Group Services, Inc.

Statement of Income and Expenses

For the Years Ended

December 31,


	2004			2003
Services and Operating Revenues	$	2,302,487		$	1,899,354

Costs of Services		1,488,109			1,104,199

Gross Profit		814,378			795,155

General and Administrative Expenses		860,609			779,226

Net Operating Income (Loss)		(46,231	)		15,929

Other Income (Expense)

Interest Income		21			—
Other Income/(Expense)		(150	)		1,964
Amortization Expense		(18,792	)		(5,575	)
Depreciation Expense		(66,364	)		(19,600	)
Interest Expense		(67,573	)		(29,777	)

Total Other Income (Expense)		(152,858	)		(52,988	)

Net Income (Loss) before Provision for Income Taxes		(199,088	)		(37,059	)

Provision for Income Taxes

Federal Income Tax Benefit		(74,444	)		(769	)
State Income Tax Benefit		(10,020	)		(108	)

Total Provision for Income Taxes		(84,464	)		(877	)

Net Income (Loss)	$	(114,624	)	$	(36,181	)

See accompanying independent auditors’ report and notes to financial statements.

F-10

Medical Group Services, Inc.

Statement of Change in Retained Earnings

For the Years Ended

December 31,


	2004			2003
Beginning Retained Earnings as previously reported	$	(253,450	)	$	(217,269	)

Prior Period Adjustment		(37,879	)		—

Beginning Retained Earnings, as restated	$	(291,329	)	$	(217,269	)

Net Income (Loss)		(114,624	)		(36,181	)

Ending Retained Earnings	$	(405,953	)	$	(253,450	)

See accompanying independent auditors’ report and notes to financial statements.

F-11

Medical Group Services, Inc.

Statement of Cash Flows

For the Years Ended

December 31,


	2004			2003
Cash Flows from Operating Activities:

Net income (loss)	$	(114,624	)	$	(36,181	)

Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities
Amortization		—			5,575
Depreciation		85,156			19,600
Gain on the disposal of fixed assets		—			—
Loss on the disposal of fixed assets		—			—
(Increase) decrease in:
Accounts Receivable - Trade		(40,440	)		(19,725	)
Advances and Loans		(501	)		451
Prepaid Expenses		15,598			(17,539	)
Deposits		—			(5,000	)
Other Assets		(78,867	)		300
Increase (decrease) in:
Accounts payable		60,611			50,723
Credit card liabilities		(2,874	)		12,201
Other Accrued Expenses		(20,885	)		722

Net cash provided (used) by operating activities		(96,826	)		11,127

Cash Flows from Investing Activities:

Acquisition of property and equipment		(298,408	)		(63,210	)
Goodwill		(151,904	)		—

Net cash provided (used) by investing activities		(450,312	)		(63,210	)

Cash Flows from Financing Activities:

Proceeds from Notes Payable (net)		237,156			30,404
Proceeds from Capital Lease Obligations (net)		234,006			32,018
Proceeds from Shareholder Loan Liabilities		75,235			—

Net cash provided (used) by financing activities		546,397			62,422

Net increase (decrease) in cash		(740	)		10,339

Beginning balance of cash		10,459			120

Ending balance of cash	$	9,719		$	10,459

Supplementary Information:

Interest	$	67,573		$	29,777

See accompanying independent auditors’ report and notes to financial statements.

F-12

NOTES TO FINANCIAL STATEMENTS

F-13

NOTE 1: ORGANIZATION AND NATURE OF BUSINESS

Medical Group Services, Inc. originated in January of 2000 as a Delaware Corporation. The corporation provides professional billing, administrative and support services to healthcare providers throughout Florida. The main offices for the company are located in Tampa, Florida. In 2003, the corporation reorganized as a Florida Corporation.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

In accordance with generally accepted accounting principles, the financial statements of the Company are maintained on an accrual basis of accounting. A cash basis of accounting is used for income tax purposes, resulting in the reflection of deferred tax benefits and/or liabilities on the balance sheet.

Cash and cash equivalents

The Company defines cash and cash equivalents as highly liquid investments, including checking and money market accounts, with original maturities of less than ninety days. This definition does not include investments held for sale in the ordinary course of business.

Accounts receivable

Trade receivables are carried at their estimated collectible amounts. Trade accounts receivable are periodically evaluated for collectibility, and all accounts receivable are deemed collectible as of December 31, 2004.

Use of estimates

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

Property and equipment

Furniture, fixtures, and equipment are carried at cost. Depreciation is computed for financial statement purposes using the straight-line basis of depreciation over the estimated useful lives of the assets. The modified accelerated cost recovery system (MACRS) of depreciation is utilized for income tax reporting purposes.

Goodwill

Goodwill is recorded under the provisions of Statement of Financial Accounting Standards (“SFAS”) 142,Goodwill and Other Intangible Assets.Goodwill is no longer amortized but is tested at least annually in accordance with the provisions of SFAS 142. For income tax purposes, Goodwill continues to be amortized using the staright-line method over the estimated useful life.

NOTE 3: ACQUISITIONS

On March 2, 2004, the Company acquired substantially all assets and service agreements and assumed the liabilities of Professional Medical Recoveries, Inc. for an acquisition price of $244,108. The purchase was financed by issuing two promissory notes. (See Note 6)

F-14

NOTE 4: INCOME TAXES

The Company presently has no federal or state income tax liability. As of December 31, 2004, the Company had a loss carryforward of $440,836 for income tax purposes. Due to the variances in depreciation and amortization methods between tax and book basis, as of December 31, 2004 the company has federal and state deferred tax assets of $56,033 and $7,902, respectively. As of December 31, 2003, the balances for federal and state deferred tax liabilities were $18,411 and $2,596, respectively.

NOTE 5: OPERATING LEASE COMMITMENTS

In September of 2002, the Company entered into a 5-year lease obligation for its office space. Under the lease agreement, the minimum lease obligations are as follows:


2005	$	65,111
2006	$	67,100
2007	$	50,700

In December of 2000, the Company entered into a 5 year lease obligation for office equipment with GE Capital. The lease calls for monthly payments of $1,530 plus applicable taxes.

In January of 2003, the Company entered into a 4 year lease obligation for computer equipment with GE Capital. The lease calls for monthly payments of $1,406 plus applicable taxes.

In January of 2003, the Company entered into a 4 year lease obligation for office furniture with GE Capital. The lease calls for monthly payments of $1,099 plus applicable taxes.

NOTE 6: NOTES PAYABLE

On July 7, 2004, the Company executed a promissory note with First Commercial Bank of Tampa Bay for an original amount of $150,000. The note calls for monthly principal plus interest payments of $3,413, and interest is compounded annually at a rate of 4.33%. This obligation is secured by a Certificate of deposit and a Life insurance policy owned by a shareholder, and is due July 7, 2008. As of December 31, 2004, the principal balance due under this note is $135,483.

On July 7, 2004, the Company executed a promissory note with First Commercial Bank of Tampa Bay for an original amount of $238,500. The note calls for monthly principal plus interest payments of $5,611, and interest is compounded annually at a rate of prime plus 2%. This obligation is secured by a Certificate of deposit and a Life insurance policy owned by a shareholder, and is due July 7, 2008. As of December 31, 2004, the principal balance due under this note is $216,843.

As of December 31, 2004, the Company was obligated to Escape Velocity of Tampa Bay, Inc. under a 5% interest bearing note, which was executed to finance the purchase of Professional Medical Recoveries, Inc. As of December 31, 2004, the principal plus accrued interest due under this note was $62,186. (See Note 3)

As of December 31, 2004, the Company was obligated to Escape Velocity of Tampa Bay, Inc. under a 5% interest bearing convertible note, which was executed to finance the purchase of Professional Medical Recoveries, Inc. The note is convertible at any time subsequent to April 1, 2005 into shares of common stock of Maker at a rate of one share for each $6,000 of principal due. As of December 31, 2004, the principal plus accrued interest due under this note was $107,644. (See Note 3)

As of December 31, 2004, the company was obligated to a shareholder under a non-interest bearing demand note for $148,235.

F-15

NOTE 7: RELATED PARTIES

The Company is obligated under a demand note obligation to its majority shareholder. (See Note 6)

NOTE 8: CAPITAL LEASE OBLIGATION

In February of 2003, the Company entered into long-term capital lease obligation for a telephone system. The lease agreement with GE Capital calls for a monthly payment of $814 plus applicable taxes. As of December 31, 2004, the future payment obligations under this agreement are as follows:


2005	$	6,331
2006	$	7,276
2007	$	8,361
2008	$	5,447

In February of 2004, the Company entered into long-term capital lease obligation for office equipment. The lease agreement with CitiCapital calls for a monthly payment of $1,078 plus applicable taxes. As of December 31, 2004, the future payment obligations under this agreement are as follows:


2005	$	8,906
2006	$	10,225
2007	$	11,739
2008	$	2,113

In March of 2004, the Company entered into long-term capital lease obligation for computer equipment, software, and furniture. The lease agreement with Netbank calls for a monthly payment of $1,090 plus applicable taxes. As of December 31, 2004, the future payment obligations under this agreement are as follows:


2005	$	9,023
2006	$	10,399
2007	$	10,920
2008	$	2,138

In March of 2004, the Company entered into long-term capital lease obligation for computer equipment and software. The lease agreement with Gulfstream calls for a monthly payment of $1,496 plus applicable taxes. As of December 31, 2004, the future payment obligations under this agreement are as follows:


2005	$	11,164
2006	$	12,728
2007	$	14,512
2008	$	16,546
2009	$	1,472

In May of 2001, the Company entered into long-term capital lease obligation for computer equipment and software. The lease agreement with American Express Financial calls for a monthly payment of $3,319 plus applicable taxes. As of December 31, 2004, the future payment obligations under this agreement are as follows:


2005	$	35,828
2006	$	12,948

NOTE 9: PRIOR PERIOD ADJUSTMENT

The Company discovered during 2004 that a capital lease was being incorrectly reported as an operating lease. Computer equipment and software licenses were understated by $ 76,034 and $72,414, capital lease obligations were understated by $ 48,777, and the net effect to retained earnings was $ 11,227.

F-16

The Company discovered during 2004 that software licenses were being amortized incorrectly. Amortization expense was understated by $26,652, accumulated amortization was understated by $26,652, and the net effect to retained earnings was $ 26,652.

F-17

SUPPLEMENTAL INFORMATION

F-18

Medical Group Services, Inc.

Supplementary Schedule - Balance Sheet

December 31,


	2004		2003
Cash & Equivalents
Bank of Tampa-General	$	9,491	$	10,581
Bank of Tampa Distribution Acct		127		(123	)
First Commercial Bank		100		—

Total Cash & Equivalents	$	9,719	$	10,458

Prepaid Expenses:
Prepaid Expenses	$	1,941	$	15,000
Prepaid Insurance		—		2,539

Total Prepaid Expenses:	$	1,941	$	17,539

Other Assets:
Deferred Tax Asset-Federal	$	56,033	$	—
Deferred Tax Asset-State		7,902		—
Capitalized Costs		14,932		—

Total Other Assets:	$	78,867	$	—

Accrued Expenses:
Accrued Expenses	$	18,452	$	—
Deferred Tax Liability - Federal		—		18,411
Deferred Tax Liability - State		—		2,596
Customer Deposits		—		18,330

Total Accrued Expenses:	$	18,452	$	39,337

See accompanying accountants’ report

F-19

Medical Group Services, Inc.

Supplementary Schedule – Income and Expenses

For the Years Ended

December 31,


	2004		2003
Services and Operating Revenues:

Billing & Collection Fees	$	22,470	$	—
Billing and Collection Fees		2,184,189		1,749,858
Billing and Collection Fee - Recovery		2,871		3,725
Consulting & Accounting Income		20,878		46,692
Reimbursed Expenses		69,916		96,633
Refunds		—		(578	)
Late Fee		2,164		9,989
Other		—		(6,965	)

Total Services and Operating Revenues:	$	2,302,487	$	1,899,354

Cost of Services:

Employee Lease Expense	$	372,907	$	458,972
Employee Lease Expense - Production Benefits		114,355		37,481
Employee Lease Expense - Payroll Salaries		54,573		—
Employee Lease Expense - Coding		78,972		—
Billing Services		529,983		401,940
Employee Lease Expense - Contract Labor		260		7,125
Employee Lease Expense - Scanning		44,250		—
Misys Expenses		—		88,397
Misys Charges		93,638		4,540
Misys Lease		34,957		—
Misys Training & Education		2,051		—
Misys Expenses-ASP Charges		28,300		—
Data Lines		19,411		35,799
Other Direct Expenses		4,362		7,679
Courier Expenses		79,628		41,340
Copies		2,984		4,041
Outside Data Base Services		27,479		16,885

Total Cost of Services:	$	1,488,109	$	1,104,199

See accompanying accountants’ report

F-20

Medical Group Services, Inc.

Supplementary Schedule – Income and Expenses

For the Years Ended

December 31,


	2004			2003
General and Administrative Expenses:

Accounting	$	2,700		$	4,000
Automobile Expense		21,168			30,921
Bad Debts		9,681			—
Bank Service Charges		1,495			5,036
Business Insurance		1,355			450
Communications		(2,493	)		217
Communications · Cell Phones		4,964			3,387
Communications · Internet		3,148			2,160
Communications · Telephones		24,502			17,585
Computer Repairs		13,801			11,772
Donations		—			375
Employee Benefits		34,881			26,569
Employee Lease Expense		138,503			266,953
Entertainment		3,491			3,587
Equipment Rental		66,113			113,769
Equipment Rental Taxes		5,487			—
Equipment Repairs & Maintenance		1,283			268
Legal Fees		24,746			17,494
Liability Insurance		2,539			2,269
Lodging		5,138			235
Marketing & Advertising		4,264			7,459
Misc Occupancy Expense		2,100			—
Marketing & Advertising - Gifts		4,646			679
Marketing & Advertising · Commissions		80,850			95,069
Marketing & Advertising · Dues, Subscript, Publications		6,700			3,862
Marketing & Advertising · Printing		7,133			7,843
Marketing & Advertising · Promotional		605			7,996
Meals		5,176			6,944
Miscellaneous		(2,842	)		2,867
Miscellaneous Office Expense		1,394			2,156
Occupancy Expense		1,217			581
Office Expense		7,530			7,060

See accompanying accountants’ report

F-21

Medical Group Services, Inc.

Supplementary Schedule – Income and Expenses

For the Years Ended

December 31,


	2004		2003
Office Supplies		25,309		15,334
Payroll and Employee Benefits		230,409		18,235
Payroll Processing Fees		16		1,765
Postage and Delivery		982		400
Professional Fees		—		137
Payroll Taxes		22		—
Rent		70,781		39,055
Sales Expense		17,696		16,871
Consulting		2,292		—
Taxes		911		3,336
Misc Comp & Equip Purchases		516		—
Taxes · Local		1,829		1,565
Travel		7,335		10,938
Travel & Ent		1,587		3,663
Utilities & Janitoral Services		19,648		13,685
Uncategorized Expenses		—		4,679

Total General and Administrative Expenses	$	860,609	$	779,226

F-22

MEDICAL GROUP SERVICES, INC.

FINANCIAL STATEMENTS

SEPTEMBER 30, 2005

(Unaudited)

F-23

TABLE OF CONTENTS


Medical Group Services, Inc. Balance Sheet September 30, 2005		F-26

Medical Group Services, Inc. Statement of Income and Expenses For the Nine Months Ended September 30, 2005		F-28

Medical Group Services, Inc. Statement of Change in Retained Earnings For the Nine Months Ended September 30, 2005		F-29

Medical Group Services, Inc. Statement of Cash Flows For the Nine Months Ended September 30, 2005		F-30

NOTES TO FINANCIAL STATEMENTS		F-31

F-24

FINANCIAL STATEMENTS

F-25

Medical Group Services, Inc.

Balance Sheet

September 30, 2005

ASSETS


Current Assets

Cash & Equivalents	$	2,274
Marketable Securities		—
Notes & Accounts Receivable
Accounts Receivable (Net of Allowance for Uncollectibles)		207,803
Advances and Loans		1,352
Prepaid Expenses		13,360

Total Current Assets		224,789

Property and Equipment

Equipment		205,215
Furniture & Fixtures		28,011
Office Equipment		61,277
Leasehold Improvements		12,536
Less: Accumulated Depreciation		(171,901	)

Total Property and Equipment		135,138

Other Assets
Intangibles and Deferred Charges
Software Licenses		176,266
Goodwill		151,904
Less: Accumulated Amortization		(136,259	)
Investments and Other Assets
Deposits		5,269
Other Assets		34,718

Total Other Assets		231,898

Total Assets	$	591,825

F-26

Medical Group Services, Inc.

Balance Sheet

September 30, 2005

LIABILITIES AND SHAREHOLDERS’ EQUITY


Liabilities
Current Liabilities

Accounts Payable
Credit Card Liabilities		9,310
Current Maturities of Long-Term Debt		155,083
Other Accrued Expenses		37,614

Total Current Liabilities		389,141

Long-Term Liabilities

Notes Payable		476,586
Capital Lease Obligations		145,374
Shareholder Loans		85,698
Less - Current Maturities		(155,083	)

Total Long-Term Liabilities		552,575

Total Liabilities		941,715

Shareholders’ Equity

Common Stock, $ 1 par, 1000 shares authorized, 1000 shares issued and outstanding		1,000
Retained Earnings(Deficit)		(350,890	)

Total Shareholders’ Equity		(349,890	)

Total Liabilities and Shareholders’ Equity	$	591,825

F-27

Medical Group Services, Inc.

Statement of Income and Expenses

For the Nine Months Ended

September 30, 2005


Services and Operating Revenues	$	2,001,640

Costs of Services		1,163,287

Gross Profit		838,353

General and Administrative Expenses		610,140

Net Operating Income (Loss)		228,213

Other Income (Expense)

Interest Income		48
Amortization Expense		(24,939	)
Depreciation Expense		(44,681	)
Interest Expense		(59,429	)

Total Other Income (Expense)		(129,001	)

Net Income (Loss) before Provision for Income Taxes		99,212


Provision for Income Taxes

Federal Income Tax Expense (Benefit)		38,692
State Income Tax Expense (Benefit)		5,457

Total Provision for Income Taxes		44,149

Net Income (Loss)	$	55,063

F-28

Medical Group Services, Inc.

Statement of Change in Retained Earnings

For the Nine Months Ended

September 30, 2005


Beginning Retained Earnings (Deficit)	$	(405,953	)

Net Income (Loss)		55,063

Ending Retained Earnings (Deficit)	$	(350,890	)

F-29

Medical Group Services, Inc.

Statement of Cash Flows

For the Nine Months Ended

September 30, 2005


Cash Flows from Operating Activities
Net income (loss)	$	55,063

Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:

Amortization		24,939
Depreciation		44,681
(Increase) decrease in:
Accounts Receivable - Trade		4,768
Advances and Loans		(802	)
Prepaid Expenses		(11,419	)
Deposits		1,009
Other Assets		44,149
Increase (decrease) in:
Accounts payable		(17,694	)
Credit card liabilities		(65	)
Other Accrued Expenses		19,162

Net cash provided (used) by operating activities		163,791

Cash Flows from Investing Activities

Acquisition of property and equipment		(10,425	)

Net cash provided (used) by investing activities		(10,425	)

Cash Flows from Financing Activities

Principal Payments on Notes Payable (net)		(45,571	)
Payments on Capital Lease Obligations (net)		(52,704	)
Payments on Shareholder Loan Liabilities (net)		(62,537	)

Net cash provided (used) by financing activities		(160,811	)

Net increase (decrease) in cash		(7,445	)

Beginning balance of cash		9,719

Ending balance of cash	$	2,274

Supplementary Information:

Interest	$	59,429

F-30

NOTES TO FINANCIAL STATEMENTS

F-31

NOTE 1: ORGANIZATION AND NATURE OF BUSINESS

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Cash and cash equivalents

Accounts receivable

Use of estimates

Property and equipment

F-32

Goodwill

NOTE 3: INCOME TAXES

As of September 30, 2005, the Company had a loss carryforward of $536,987 for income tax purposes. Due to the variances in depreciation and amortization methods between tax and book basis, as of September 30, 2005 the company has federal and state deferred tax assets of $17,341 and $2,445, respectively.

NOTE 4: OPERATING LEASE COMMITMENTS

In September of 2002, the Company entered into a 5-year lease obligation for its office space. Under the lease agreement, the minimum lease obligations are as follows:


2008	$	65,111
2009	$	67,100
2010	$	50,700

In December of 2000, the Company entered into a 5 year lease obligation for office equipment with GE Capital. The lease calls for monthly payments of $1,530 plus applicable taxes.

In January of 2003, the Company entered into a 4 year lease obligation for computer equipment with GE Capital. The lease calls for monthly payments of $1,406 plus applicable taxes.

In January of 2003, the Company entered into a 4 year lease obligation for office furniture with GE Capital. The lease calls for monthly payments of $1,099 plus applicable taxes.

NOTE 5: NOTES PAYABLE

On May 09, 2005 the Company refinanced an existing promissory note with First Commercial Bank of Tampa Bay in the amount of $150,000. The note calls for monthly principal plus interest payments of $3,420, and interest is compounded annually at a rate of 4.33%. This obligation is secured by a Certificate of deposit and a Life insurance policy owned by a shareholder, and is due May 25, 2009. As of September 30, 2005 the principal balance due under this note is $138,750.

F-33

On May 09, 2005 the Company refinanced an existing promissory note with First Commercial Bank of Tampa Bay in the amount of $238,500. The note calls for monthly principal plus interest payments of $5,912, and interest is compounded annually at a rate of prime plus 2%. This obligation is secured by a Certificate of deposit and a Life insurance policy owned by a shareholder, and is due May 25, 2009. As of September 30, 2005 the principal balance due under this note is $222,342.

As of September 30, 2005, the Company was obligated to Escape Velocity of Tampa Bay, Inc. under a 5% interest bearing note, which was executed to finance the purchase of Professional Medical Recoveries, Inc in 2004. As of September 30, 2005, the principal plus accrued interest due under this note was $3,798.

As of September 30, 2005, the Company was obligated to Escape Velocity of Tampa Bay, Inc. under a 5% interest bearing convertible note, which was executed to finance the purchase of Professional Medical Recoveries, Inc in 2004. The note is convertible at any time subsequent to April 1, 2005 into shares of common stock of Maker at a rate of one share for each $6,000 of principal due. As of September 30, 2005, the principal plus accrued interest due under this note was $111,696.

As of September 30, 2005, the company was obligated to a shareholder under a non-interest bearing demand note for $85,698.

NOTE 6: RELATED PARTIES

The Company is obligated under a demand note obligation to its majority shareholder. (See Note 5)

NOTE 7: CAPITAL LEASE OBLIGATION

In February of 2003, the Company entered into long-term capital lease obligation for a telephone system. The lease agreement with GE Capital calls for a monthly payment of $814 plus applicable taxes. As of September 30, 2005, the future payment obligations under this agreement are as follows:


2009	$	6,331
2010	$	7,276
2011	$	8,361
2012	$	5,447

In February of 2004, the Company entered into long-term capital lease obligation for office equipment. The lease agreement with CitiCapital calls for a monthly payment of $1,078 plus applicable taxes. As of September 30, 2005, the future payment obligations under this agreement are as follows:


2009	$	8,906
2010	$	10,225
2011	$	11,739
2012	$	2,113

F-34

In March of 2004, the Company entered into long-term capital lease obligation for computer equipment, software, and furniture. The lease agreement with Netbank calls for a monthly payment of $1,090 plus applicable taxes. As of September 30, 2005, the future payment obligations under this agreement are as follows:


2006	$	9,023
2009	$	10,399
2010	$	10,920
2011	$	2,138

In March of 2004, the Company entered into long-term capital lease obligation for computer equipment and software. The lease agreement with Gulfstream calls for a monthly payment of $1,496 plus applicable taxes. As of September 30, 2005, the future payment obligations under this agreement are as follows:


2007	$	11,164
2008	$	12,728
2010	$	14,512
2011	$	16,546
2012	$	1,472

In May of 2001, the Company entered into long-term capital lease obligation for computer equipment and software with American Express Financial. During 2005, the lease was assumed by Key Financial. The lease agreement calls for a monthly payment of $3,319 plus applicable taxes. As of September 30, 2005, the future payment obligations under this agreement are as follows:


2007	$	35,828
2008	$	12,948

F-35

MD TECHNOLOGIES INC.

UNAUDITED PRO FORMA COMBINED

CONDENSED FINANCIAL STATEMENTS.

SEPTEMBER 30, 2005 AND DECEMBER 31, 2005

F-36

MD TECHNOLOGIES INC.

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

INTRODUCTION

The unaudited pro forma combined condensed balance sheet as of September 30, 2005 has been prepared as if the acquisition had occurred on September 30, 2005. The unaudited pro forma combined condensed statements of operations for the year ended December 31, 2004 and for the nine months ended September 30, 2005 include the historical operations of MDTO and MGSI and give effect to the acquisition as if it had occurred at the beginning of each period presented.

The unaudited pro forma combined financial statements are based on available information and the assumptions and adjustments described in the accompanying notes. The unaudited pro forma combined condensed statements of operations do no purport to represent what our results of operations actually would have been if the events described above had occurred as of the dates indicated or what such results will be for any future periods. The unaudited pro forma combined condensed financial statements are based upon assumptions and adjustments that we believe are reasonable. The unaudited pro forma combined condensed financial statements are qualified in their entirety and should be read in conjunction with our historical financial statements and accompanying notes included in our annual report on form 10-KSB for the year ended December 31, 2004, our quarterly report on Form 10-QSB for the three and nine month periods ended September 30, 2005, and with the audited financial statements of MDTO for the year ended December 31, 2004.

The MGSI acquisition has been accounted for using the purchase method of accounting.

The following unaudited pro forma combined condensed balance sheet and statement of operations should be read in conjunction with the “Notes to Unaudited Pro Forma Combined Condensed Financial Statements” presented below and the historical financial statements included elsewhere or incorporated by reference.

F-37

MD Technologies Inc.

Unaudited Pro Forma Combined Condensed Balance Sheet

As Of September 30, 2005


	September 30, 2005
	MDTO		MGSI		Combined		Pro forma Adjustments		Pro forma Combined
ASSETS

Current Assets
Cash and cash Equivalents	5,001,072		2,274		5,003,346	(a)	(2,175,000	)	2,828,346
Accounts Receivable	41,984		209,155		251,139				251,139
Prepaid Expenses	18,138		13,360		31,498				31,498

Total current assets	5,061,194		224,789		5,285,983		(2,175,000	)	3,110,983

Property and Equipment
Computer equipment and software	224,841		65,548		290,389				290,389
Assets under capital leases	64,255		331,825		396,080				396,080
Furniture and fixtures	30,370		9,092		39,462				39,462
Leasehold Improvements			12,536		12,536				12,536

	319,466		419,002		738,468		—		738,468
Less Accumulated depreciation	108,381		308,160		416,541				416,541

	211,085		110,842		321,927		—		321,927
Other Assets
Deferred bond offering costs	77,175		—		77,175				77,175
Capitalized software costs held for sale, net	275,237		—		275,237				275,237
Capitalized software, purchased, net			64,304		64,304				64,304
Goodwill			151,904		151,904	(b)	1,253,383		1,405,287
Intangible Contracts						(c)	709,223		709,223
Deposits & other assets			39,987		39,987				39,987

	352,412		256,195		608,607		1,962,606		2,571,213

Total Assets	5,624,691		591,825		6,216,516		(212,394	)	6,004,122

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities
Accounts payable	17,442		196,443		213,885				213,885
Accrued expenses and interest	198,461		37,614		236,075				236,075
Current portion of note payable	6,720		94,532		101,252	(d)	(94,532	)	6,720
Current portion of obligation under capital leases	13,574		60,551		74,125				74,125
Deferred revenue	9,790		—		9,790				9,790

Total current liabilities	245,987		389,141		635,128		(94,531	)	540,597

Long Term Liabilities
Note payable, net of current portion	13,268		467,752		481,020	(d)	(467,752	)	13,268
Obligation under capital lease, net of current portion	38,892		84,823		123,715				123,715
Bonds payable	5,000,000		—		5,000,000				5,000,000

	5,052,160		552,575		5,604,735		(467,752	)	5,136,983
Stockholders’ Equity
Preferred stock, no par value; 20,000 shares authorized, no shares issued or outstanding
Common stock, $.0004 par value; 30,000,000 authorized, 4,905,561 issued and 3,949,313 outstanding	1,962		1,000		2,962	(e)	(1,000	)	1,962
Additional paid-in capital	4,359,357		—		4,359,357				4,359,357
Treasury stock	(383	)	—		(383	)			(383	)
Retained earnings	(4,034,391	)	(350,890	)	(4,385,281	)(e)	350,890		(4,034,391	)

	326,545		(349,890	)	(23,345	)	349,890		326,545
Total liabilities and stockholders’ equity	5,624,691		591,825		6,216,516		(212,394	)	6,004,122

See Introduction and accompanying notes

F-38

MD Technologies Inc.

Unaudited Pro Forma Combined Condensed Statement Of Operations

For The Nine Months Ended September 30, 2005


	MDTO		MGSI		Combined		Pro forma Adjustments		Pro forma Combined
Revenues
Sales and service revenue	709,700		2,001,640		2,711,340				2,711,340

Total revenues	709,700		2,001,640		2,711,340		—		2,711,340

COSTS OF REVENUES
Salaries direct	127,224		528,792		656,016				656,016
Contracted Services	—		419,824		419,824				419,824
Depreciation	78,711		—		78,711				78,711
Other cost of revenue	48,236		214,671		262,907				262,907

Total cost of revenues	254,171		1,163,287		1,417,458		—		1,417,458

Gross profit (loss)	455,529		838,353		1,293,882		—		1,293,882

OPERATING EXPENSES
Compensation	943,859		266,895		1,210,754				1,210,754
Depreciation and Amortization	53,779		69,630		123,409	(g)	177,319		300,728
Selling, general and	554,140		343,235		897,375				897,375

Total operating expenses	1,551,778		679,760		2,231,538		177,319		2,408,857

Income from operations	(1,096,249	)	158,593		(937,656	)	—		(1,114,975	)

OTHER INCOME (EXPENSE)
Interest income	26,352		48		26,400				26,400
Interest expense	(97,200	)	(59,429	)	(156,629	)(f)	28,413		(128,216	)
Income Tax Accrual			(44,149	)	(44,149	)			(44,149	)

	(70,848	)	(103,530	)	(174,378	)	28,413		(145,965	)
Profit (Loss)	(1,167,097	)	55,063		(1,112,034	)	(148,906	)	(1,260,940	)

Income per share: (Basic and diluted)	(0.30	)							(0.32	)
Wtd average number of shares outstanding	3,949,313								3,949,313

See Introduction and accompanying notes

F-39

MD Technologies Inc.

Unaudited Pro Forma Combined Condensed Statement Of Operations

For The Twelve Months Ended December 31, 2004


	MDTO		MGSI		Combined		Pro forma Adjustments		Pro forma Combined
Revenues
Sales and service revenue	645,621		2,302,487		2,948,108				2,948,108

Total revenues	645,621		2,302,487		2,948,108		—		2,948,108

COSTS OF REVENUES
Salaries direct	88,323		665,117		753,440				753,440
Contracted Services			529,983		529,983				529,983
Depreciation	95,466				95,466				95,466
Other cost of revenue	51,437		293,009		344,446				344,446

Total cost of revenues	235,226		1,488,109		1,723,335		—		1,723,335

Gross profit (loss)	410,395		814,378		1,224,773		—		1,224,773

OPERATING EXPENSES
Compensation	1,012,411		138,503		1,150,914				1,150,914
Depreciation and Amortization	35,786		85,156		120,942	(g)	236,426		357,368
Selling, general and	648,774		722,106		1,370,880				1,370,880

Total operating expenses	1,696,971		945,765		2,642,736		236,426		2,879,162

Income from operations	(1,286,576	)	(131,387	)	(1,417,963	)	—		(1,654,389	)

OTHER INCOME (EXPENSE)
Interest income	10,564		21		10,585				10,585
Interest expense	(11,595	)	(67,723	)	(79,318	)(f)	20,762		(58,556	)
Income Tax Accrual			84,464		84,464				84,464

	(1,031	)	16,762		15,731		20,762		36,493

Profit (Loss)	(1,287,607	)	(114,625	)	(1,402,232	)	(215,664	)	(1,617,896	)

Income per share: (Basic and diluted)	(0.36	)							(0.45	)
Wtd average number of shares outstanding	3,622,317								3,622,317

See Introduction and accompanying notes

F-40

Notes to Unaudited Pro Forma Combined Condensed Financial Statements

(a)	Reflects the use of cash in the acquisition of MGSI as if the acquisition occurred on September 30, 2005.

(b)	Represents the goodwill associated with the acquisition of MGSI as a result of the application of purchase accounting.

(c)	Represents the value assigned to the MGSI contracts associated with the acquisition of MGSI.

(d)	Represents the elimination of MGSI liabilities not assumed in connection with the merger.

(e)	Represents the elimination of MGSI’s common stock and retained deficit as a result of the application of purchase accounting

(f)	Represents the elimination of interest expense related to certain liabilities not assumed in connection with the merger

(g)	Represents amortization of intangible assets. Intangible assets are amortized over a life of three years.

See Introduction and accompanying notes

F-41

MD (MDTO) Inactive 8-K/ACompletion of Acquisition or Disposition of Assets