Washington, D.C. 20549
VIRTUAL MEDICAL CENTRE, INC.
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):
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by Virtual Medical Centre, Inc. (the “Company”) without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at September 30, 2010, and for all periods presented herein, have been made.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's June 30, 2010 audited financial statements. The results of operations for the period ended September 30, 2010 are not necessarily indicative of the operating results for the full fiscal year.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. The Company continues to pursue capital raising activities and is in active discussions with a number of parties that have indicated interest in the Company’s business and growth strategy. The Company, in coordination with its consultants, is engaged in ongoing negotiations as to possible financing terms that will meet its current capital needs necessary to execute its growth plan as it broadens its online footprint in the medical content space.
The Company believes current discussions are positive and that interested parties understand the Company’s current financing needs. The Company is currently working with various third parties towards a funding structure that will satisfy its immediate capital requirements and deliver a return on capital that will satisfy potential investor needs. However, no assurance can be given that the Company will be successful in obtaining any additional capital or that parties that have previously expressed interest in the Company will provide it with the funding necessary to permit it to execute its current plans, or that such financing will be available on terms favorable to the Company.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
VIRTUAL MEDICAL CENTRE, INC.
Notes to the Condensed Financial Statements
September 30, 2010 and 2009
Fiscal Year End
Upon completion of the Exchange Agreement more fully described in Note 4, the Company changed its fiscal year end to June 30.
Recent Accounting Pronouncements
The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company’s financial statements or financial position.
NOTE 4 – SIGNIFICANT EVENTS
On May 27, 2010, Cliff Rock Resources Corp. (“Cliff Rock”), predecessor to the Company, entered into an Exchange Agreement with Virtual Medical Centre Pty Ltd (“VMC”) and a Share Sale Agreement with each of the shareholders and option holders of VMC, pursuant to which Cliff Rock acquired all of the issued and outstanding ordinary shares and options of VMC (the “VMC Shares”). In accordance with the terms of the Exchange Agreement, Cliff Rock issued an aggregate of 71,471,764 shares of its common stock, par value USD $0.001 per share (the “Cliff Rock Shares”), to the shareholders of VMC in exchange for all of the issued and outstanding VMC Shares or approximately 1.16 Cliff Rock Shares for every VMC Share held by the shareholders of VMC.
Prior to May 27, 2010, Cliff Rock cancelled 32,500,000 shares of its common stock. As a result, on May 27, 2010, 84,253,764 Cliff Rock Shares were issued and outstanding, including the 71,471,764 Cliff Rock Shares issued in connection with the Exchange Agreement, which represented approximately 84.8% of the post-exchange issued and outstanding shares of Cliff Rock common stock. Accordingly, the former shareholders of VMC have the capability to substantially control the vote on all significant matters pertaining to the Company without approval of the shareholders. Following May 27, 2010, in accordance with the terms of the Exchange Agreement, the authorized capitalization of the Company was increased from 100,000,000 shares of common stock, USD$0.001 par value, to 200,000,000 shares of common stock, USD$0.001 par value by a Certificate of Amendment effective July 12, 2010.
The Company accounted for this transaction as a reverse-acquisition, with Cliff Rock as the continuing legal entity and VMC presented as the accounting acquirer. Therefore, the historical financial statements presented herein reflect only those of VMC, the accounting acquirer. The reverse-acquisition is presented as a recapitalization of the Company. Accordingly, the historical stockholders’ equity (deficit) of the Company prior to the acquisition transaction has been retroactively restated pursuant to ASC 805.
On August 24, 2010 the Company awarded executive performance bonuses to 2 executive officers who were each granted 100,000 stock options at $0.16 per share, exercisable within 4 years from the date of the grant upon the Company reaching 25,000 subscribers and an additional 100,000 stock options at $0.143 per share upon the Company reaching 300,000 unique visitors over a six month period. As of September 3, 2010 the performance levels were reached and the options were fully vested. The vested options were valued using the Black-Scholes model and assuming a dividend yield of 0.00%, a risk free interest rate of 1.35%, a volatility of 70.46% and a term of 4 years which resulted in an expense of $83,659 during the 3 months ended September 30, 2010.
During the 3 months ended September 30, 2010, the Company received an additional $178,173 in related party notes payable. The Company also repaid $5,000 in convertible debt and extended $80,000 in convertible debt for a forbearance fee of $28,000. The Company is delinquent on $5,000 of convertible debt as of September 30, 2010.
NOTE 5 – WARRANTS
The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company’s common stock issued to the convertible note holders.
| | | Number of Warrants | | | Weighted Average Exercise Price | |
| Outstanding as of June 30, 2009 | | | 429,281 | | | $ | 0.30 | |
| Granted | | | (100,000) | | | | 0.30 | |
| Exercised | | | - | | | | 0.00 | |
| Cancelled | | | - | | | | 0.00 | |
| Outstanding as of June 30, 2010 | | | 329,281 | | | | 0.30 | |
| Granted | | | - | | | | 0.30 | |
| Exercised | | | - | | | | 0.00 | |
| Cancelled | | | - | | | | 0.30 | |
| Outstanding at September 30, 2010 | | | 329,281 | | | $ | 0.30 | |
NOTE 6 – OPTIONS
The following table summarizes the options outstanding and the related prices for the shares of the Company’s common stock issued to employees and non-employees of the Company. These options were granted in lieu of cash compensation for services performed.
| | | Number of Options | | | Weighted Average Exercise Price | |
| Outstanding as of June 30, 2009 | | | 2,416,670 | | | $ | 0.09 | |
| Granted | | | 1,500,000 | | | | 0.19 | |
| Exercised | | | - | | | | 0.00 | |
| Cancelled | | | - | | | | 0.00 | |
| Outstanding as of June 30, 2010 | | | 3,916,670 | | | | 0.19 | |
| Granted | | | 400,000 | | | | 0.14 | |
| Exercised | | | - | | | | 0.00 | |
| Cancelled | | | - | | | | 0.00 | |
| Outstanding at September 30, 2010 | | | 4,316,670 | | | $ | 0.18 | |
NOTE 7 – SUBSEQUENT EVENTS
In accordance with ASC 855, Company management reviewed all material events and determined that there are no material subsequent events to report other than those reported.
Cautionary Statement on Risks Associated With Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. The words “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or other similar expressions are intended to identify such statements. Further, statements concerning projections, predictions, expectations, estimates or forecasts and statements that describe our objectives, future performance, plans or goals are, or may be, forward-looking statements. These forward-looking statements reflect management’s current expectations concerning future results and events and are not guarantees of future performance, anticipated trends or growth in businesses, or other characterizations of future events or circumstances. Although we believe that the expectations reflected in the forward-looking statements are based on reasonable assumptions, we can give no assurance that we will attain these expectations or that any material deviations will not occur.
Forward-looking statements are to be interpreted only as of the date on which they are made, and we undertake no obligation to update or revise any forward-looking statement. You should not place undue reliance on these forward-looking statements.
Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks described below and elsewhere in this Quarterly Report on Form 10-Q, and in other documents we file with the Securities and Exchange Commission (the “SEC”) from time to time.
The following is a list of risks that could affect our ability to generate revenue and have a negative impact on our financial condition. This list is not, and is not intended to be, exhaustive:
| · | our substantial dependence on the commercial success of advertising and sponsorship of the Virtual Medical Centre website; |
| · | our ability to attract and retain consumers and healthcare professionals visiting the Virtual Medical Centre website; |
| · | increased subscriber churn to our e-newsletters; |
| · | our ability to attract and retain qualified employees and key personnel; |
| · | our ability to protect our intellectual property; |
| · | our ability to expand our product offerings; |
| · | our ability to manage our growth; |
| · | our ability to predict our revenue, operating results and gross margin accurately; |
| · | changes in legislation or regulatory conditions affecting the pharmaceutical, healthcare and information technology industries; |
| · | a competitor taking significant market share; |
| · | adverse events or conditions that affect the promotional and/or educational spending by pharmaceutical companies or the proportion of that spend allocated to online; |
| · | adverse economic conditions in the capital markets; |
| · | competition for advertisers and sponsors for our health professional portals; |
| · | any potential loss of or reduction of sponsorship from certain sponsors or partners; |
| · | the length and unpredictability of our sales cycles; and |
| · | foreign currency exchange risk. |
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.
Virtual Medical Centre, Inc. (the “Company”) was incorporated on February 4, 2005 under the laws of the state of Nevada under the name Cliff Rock Resources Corp (“Cliff Rock”) for the purpose of acquiring mineral exploration projects. On July 12, 2010, the Company filed an amendment to its Articles of Incorporation changing its name to “Virtual Medical Centre, Inc.” pursuant to the terms of the Exchange Agreement entered into between the Company and Cliff Rock, as described below.
Our common stock is quoted on the Over-the-Counter Bulletin Board and Pink Sheets under the symbol “VMCT” (formerly “CLFR”).
Recent Transactions: Cliff Rock and VMC Share Exchange
On May 27, 2010 (the “Closing Date”), Cliff Rock entered into an Exchange Agreement (the “Exchange Agreement”) with Virtual Medical Centre, Ltd. (“VMC”), an entity organized originally as “Virtual Cancer Centre Pty Ltd.” under the laws of Australia on April 10, 2002 and a Share Sale Agreement (the “Share Sale Agreement”) with each of the shareholders and option holders of VMC, pursuant to which the Company acquired all of the issued and outstanding ordinary shares (“VMC Shares”) and options (“VMC Options”) of VMC. In accordance with the terms of the Exchange Agreement, Cliff Rock issued an aggregate of 71,471,764 shares of its common stock, par value $0.001 per share (the “Cliff Rock Shares”), to the shareholders of VMC (the ̶ 0;VMC Shareholders”) in exchange for all of the issued and outstanding VMC Shares, or approximately 1.16 Cliff Rock Shares for every VMC Share held by the VMC Shareholders (the “Share Exchange”). In addition, all options currently held by VMC shareholders were exchanged for options to purchase an equal number of Cliff Rock shares. The options to purchase Cliff Rock shares are exercisable upon the same terms and conditions as the options issued by VMC.
The Exchange Agreement further provided that after the Closing Date, the Company would use all reasonable efforts to raise up to USD$5,298,890.07, either through the issuance of equity, convertible securities or debt, or a combination thereof, at a purchase price of not less that USD$0.2652 (AUD$0.30) per share (the “Minimum Purchase Price”). In order to mitigate the effects of future financings, Wayne Hughes, VMC’s Chief Executive Officer, Thomas Maher, VMC’s Chief Operating Officer, and Dr. Andrew Dean, a director of VMC (collectively, the “VMC Officers and Directors”) agreed that an aggregate of 20,000,000 shares of common stock of Cliff Rock otherwise issuable to them under the Share Exchange would be placed into escrow (the &# 8220;Escrow Shares”) for a period of three years from the Closing Date, in accordance with the terms of an escrow agreement (the “Escrow Agreement”). Under the Escrow Agreement, one-sixth (1/6) of the Escrow Shares are to be released to the VMC Officers and Directors, on a pro-rata basis, for every USD$883,614 (AUD$1,000,000) in financing raised by the Company at a price per share equal to or greater than USD$0.2652 (AUD$0.30) (the “Financing Release”). If the Company consummates one or more financing transactions at a price per share that is less than USD$0.2652 (AUD$0.30), the Escrow Shares are to be released to the Company for cancellation at the following rate:
X = Y - (A)(Y)
B
Where:
X = the number of Escrow Shares to be released for cancellation by the Company.
Y = the number of shares of Cliff Rock Shares (and/or Cliff Rock Shares acquirable upon exercise or conversion of securities issued in the financing).
A = the price per share of Cliff Rock Shares (and/or Cliff Rock Shares acquirable upon exercise or conversion of securities issued in the financings) issued in the financing.
B = USD$0.2652 (AUD$0.30).
Any Escrow Shares remaining three years after the Closing Date, after giving effect to the Financing Release and the cancellation of Escrow Shares set forth above, will be released to the VMC Officers and Directors.
Under the Exchange Agreement and the Share Sale Agreement, the VMC Shareholders have agreed that their Cliff Rock Shares issued pursuant to the Share Exchange are subject to a six (6) month voluntary lock up commencing on the Closing Date.
Prior to the Closing Date, Cliff Rock cancelled 32,500,000 shares of its common stock. As a result, on the Closing Date, 84,253,764 Cliff Rock Shares were issued and outstanding, including the 71,471,764 Cliff Rock Shares (approximately 84.8% of the issued and outstanding Cliff Rock Shares) issued in connection with the Exchange Agreement, which represented approximately 84.8% of the post-exchange issued and outstanding shares of Cliff Rock common stock. Following the Closing Date, in accordance with the terms of the Exchange Agreement, the authorized capitalization of the Company was increased from 100,000,000 shares of common stock, USD$0.001 par value, to 200,000,000 shares of common stock, USD$0.001 par value by a Certificate of Amendment effective July 12, 2010.
The issuance of the 71,471,764 Cliff Rock Shares to the VMC Shareholders was deemed by the Company and VMC to be a reverse acquisition for accounting purposes, as VMC will control the Company following the Share Exchange. Accordingly, VMC is regarded as the predecessor entity as of the Closing Date. Further, for accounting purposes, the Company will account for the assets and liabilities of the Company and VMC on a consolidated basis at their historical cost, with VMC being the acquirer for accounting purposes. The Company adopted the fiscal year-end of VMC, the accounting acquirer, which ends June 30.
Cliff Rock Resources Corporation
Cliff Rock Resources Corp. (“Cliff Rock”) was incorporated on February 4, 2005 under the laws of the state of Nevada with the intention of acquiring mineral exploration projects. Cliff Rock proposed conducting mineral exploration activities on its IQUE Claim, located on Vancouver Island, British Columbia, but had not identified any commercially exploitable reserves of copper, gold or other metals at the time of the Share Exchange. In 2010, the Company made the decision to abandon the IQUE Claim with no further obligations or costs in light of the Company’s recent commercial focus and the uncertainty regarding their mineral exploration phases.
Virtual Medical Centre
VMC was originally organized as Virtual Cancer Centre Pty Ltd. under the laws of Australia on April 10, 2002. The corporation’s name was changed to Virtual Medical Centre Pty Ltd. on July 23, 2007.
Virtual Cancer Centre began in August 2001 as an intranet site with credible, evidence-based health information about cancer, created by Dr. Andrew Dean, a senior palliative care specialist in Western Australia. The Virtual Cancer Centre website grew in popularity on the strength of its easy presentation of useful information and successful implementation of the Editorial Advisory Board (“EAB”) model (which afforded participating specialists direct ownership and control of the website and its information). As a result, the appeal of the EAB model to practitioners in other specialties became clear, and demand spread to extend the website’s coverage to include information on non-cancer illnesses. Thus, in 2007, Virtual Cancer Centre became Virtual Medical Centre, Ltd., providing free health information to health professionals and the general public on over 22 specialist areas at its health portal, www.virtualmedicalcentre.com.
VMC has grown to become a leading provider of online medical content, continuing medical education and health information for consumers, patients and medical professionals in Australia. VMC has been expanded to most medical disciplines, including gastroenterology, rheumatology, cardiology, respiratory medicine and neurology, and features more than 1,100 medical specialists from Australia, the U.S., Canada, New Zealand and the United Kingdom. The EAB regularly contributes content in the form of articles and videos, and also edits and reviews other content for quality control purposes
Results of Operations for the Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009
Key Financial Highlights of this Quarter:
Key financial highlights for the quarter ended September 30, 2010 include:
| · | During the three months ended September 30, 2010, total revenue increased by 47% to $213,219, compared to $144,691 in the quarter ended September 30, 2009. |
| · | Loss from operations decreased by 10% to $(409,445), compared to $(457,370) in the quarter ended September 30 2009. |
| · | Net loss decreased by 1% to $(473,573), compared to a loss of $(477,323) in the quarter ended September 30, 2009. |
Revenue
Our total revenue was $213,219 for the three months ended September 30, 2010, an increase of $68,528 from the corresponding period ended September 30, 2009. The reasons for such increase are more fully described below. Our total revenue is comprised of advertising revenue and education fees.
Advertising Revenue
Advertising revenue came from advertising and sponsorship for both our Medical Consumer services (content aimed at general consumers) and Medical Professional services (content aimed at medical professionals).
Advertisement placements appeared on both the VMC website and our fortnightly e-newsletters. Sponsorship included providing educational information relevant to the disease and product area, creating interactive screening and monitoring tools, and promoting educational videos and brochures.
Advertising revenue came from advertising and sponsorship for both the Medical Consumer and Medical Professionals market. Earnings from the Medical Consumer market were primarily a result of increased revenues from VMC’s joint venture with Telstra Australia (BigPond).
Increases in the Medical Professional market were attributable to contracts for 12 month advertising and educational sponsorships with new clients, St Jude Medical, Orphan Australia and Novogen Consumer Healthcare. VMC’s significant growth in revenue in this market as compared to the same periods last year were due to VMC continuing to develop our relationship and reputation within the pharmaceutical industry and also to evolve our product offering to better respond to clients’ needs. VMC will continue to enhance its product offering to the pharmaceutical industry in an effort to further increase revenue.
Education Fees
Advertising revenue came from providing continuing education services to medical professionals in Australia.
Operating Expenses
Our total operating expenses for the three months ended September 30, 2010 was $622,664 compared to $602,061 for the three months ended September 30, 2009, an increase of $20,603. The reasons for such increase are more fully described below.
Employment expenses
We have 9 full-time employees, 4 part-time employees and 11 independent contractors including 8 medical researchers. Employment expenses increased by $73,198, from $239,696 for the three month period September 30, 2009 to $312,894 for the three month period ended September 30, 2010. Included in employment expenses for the three month period ended 2010 is $83,659 for the value of options granted to executives of the Company.
General and administrative expenses
Our general and administrative expense for the three months ended September 30, 2010 increased by $27,181 from $34,724 in the three month period ended September 30, 2009 to $61,905 for the three month period ended September 30, 2009. During the three months ended September 30, 2010, we hired business and capital advisors in the United States to assist us with the re-listing of our stock on the OTCBB, as well as to assist us with the preparation of the filings required by the Securities and Exchange Commission (“SEC”) and in establishing the business for trading and capital raising purposes.
Interest and Other Income/(Expense)
Interest expense
Our interest expense for the three months ended September 30, 2010 and 2009 was $64,128 and $15,857, respectively, an increase of $48,271. This was primarily because we incurred fees of $28,000 relating to the extension of convertible debt previously issued by the Company and an amortized the discount on its convertible debt of $20,562.
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 at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
The Company has analyzed recent accounting pronouncements and determined that no other accounting standards or interpretations issued or recently adopted are expected to have a material impact on the Company’s financial position, operations or cash flows.
Liquidity and Capital Resources
As of September 30, 2010 we had cash of $7,989 compared to $41,475 as of June 30, 2010. We had a deficit in working capital as of September 30, 2010 of $1,975,178 compared to a deficit of $1,440,588 as of June 30, 2010.
During the three months ended September 30, 2010, we used $21,032 in operating activities compared to $106,854 in the three month period ending September 30, 2009. The change is primarily the result of the increase in accounts payable and accrued expenses between the two periods.
During the three months ended September 30, 2010, we used $5,235 in investing activities compared to $715 in the three month period ending September 30, 2009. This increase is the result of additional purchases of fixed assets in connection with the growth of our business.
Cash provided by financing activities totaled $171,214 compared to $62,429 in 2009. The primary source of financing capital in 2010 came from proceeds from notes payable $178,173. We used $6,959 to reduce debt obligations in 2010.
We continue to pursue capital raising activities and are in active discussions with a number of parties that have indicated interest in our business and growth strategy. We, in coordination with our consultants, are engaged in ongoing negotiations as to possible financing terms that will meet our current capital needs necessary to execute our growth plan as we broadens our online footprint in the medical content space.
We believe current discussions are positive and that interested parties understand our current financing needs. We are currently working with various third parties towards a funding structure that will satisfy our immediate capital requirements and deliver a return on capital that will satisfy potential investor needs. However, no assurance can be given that we will be successful in obtaining any additional capital or that parties that have previously expressed interest in us will provide us with the funding necessary to permit us to execute our current plans, or that such financing will be available on terms favorable to us.
Off-Balance Sheet Arrangements
As of September 30, 2010, we did not have any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
Not applicable.
Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”), has evaluated the effectiveness of our disclosure controls and procedures (“Disclosure Controls”) as defined in Rules 13a-15 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report (the “Evaluation Date”). Based on such evaluation, our PEO and PFO have concluded that as of the Evaluation Date, our Disclosure Controls were not effective to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within t he time periods specified by the SEC, and that material information relating to our company and any consolidated subsidiaries is made known to management, including the PEO and PFO , particularly during the period when our periodic reports are being prepared to allow timely decisions regarding required disclosure.
Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. As defined by the Public Company Accounting Oversight Board Auditing Standard No. 5, a material weakness is a deficiency or a combination of deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected.
Management assessed the effectiveness of our internal control over financial reporting as of the Evaluation Date based on criteria for effective internal control over financial reporting described in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has determined that as of the Evaluation Date, there were material weaknesses in our internal control over financial reporting. The material weaknesses identified during management’s assessment were (i) a lack of sufficient internal accounting resources; and (ii) a lack of segregation of duties to ensure adequate review of financial statement preparation. In light of these material weaknesses, management has concluded that we did not maintain effective internal control over financial reporting at the Evaluation Date.
A clear and concise segregation of duties is important to maximize checks and balances so that no single individual has control over two or more phases of a transaction or operation. A strong segregation of duties also is critical to reduce effectively the risk of mistakes and inappropriate actions to prevent fraud and to discourage collusion. It can be difficult for small businesses such as the Company to always have a clear separation of duties because of insufficient personnel to cover each and every process and procedure. Ultimately, checks and balances need to be in place as a supportive measure to the business operations, but also as a fraud prevention measure as well. Because we have limited financial personnel and limited resources, there is a reasonable possibility that a material misstatement of our annual or interim financi al statements will not be prevented or detected on a timely basis by the Company’s internal controls procedures. However, the Company’s management believes that the material weaknesses set forth above were the result of the scale of our operations, are intrinsic to our small size and are of a nature that companies of our size would normally encounter. In order to remediate such weaknesses, the Company has engaged the services of a third-party accountant as well as skilled outside consultants tasked to assist the Company in strengthening its internal control procedures over financial reporting. The addition of these individuals has led management to believe that the weaknesses discussed above did not have a material effect on our financial results.
Changes in Internal Control over Financial Reporting
There have not been any changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)) that occurred during the quarter ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 1. Legal Proceedings.
There are no legal proceedings against the company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. [Removed and reserved].
Item 5. Other Information. None.
Exhibit Number | | Description |
| | | |
| 10.1 | | Exchange Agreement dated May 27, 2010 (previously included as an exhibit to the Form 8-K filed by Virtual Medical Centre, Inc. with the Securities and Exchange Commission on May 28, 2010.) |
| | | |
| 10.2 | | Share Sale Agreement dated May 27, 2010 (previously included as an exhibit to the Form 8-K filed by Virtual Medical Centre, Inc. with the Securities and Exchange Commission on May 28, 2010.) |
| | | |
| 10.3 | | Escrow Agreement dated May 27, 2010 (previously included as an exhibit to the Form 8-K filed by Virtual Medical Centre, Inc. with the Securities and Exchange Commission on May 28, 2010.) |
| | | |
| 31.1 | | Certificate of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*. |
| | | |
| 31.2 | | Certificate of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*. |
| | | |
| 32.1 | | Certificate of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*. |
| | | |
| 32.2 | | Certificate of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*. |
| | | |
* Filed herewith
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto authorized.
Date: November 18, 2010 VIRTUAL MEDICAL CENTRE, INC.
By: /s/ Wayne Hughes
Wayne Hughes
Chief Executive Officer
