EXHIBIT 9.01(a)
MEDICAL CONNECTIONS, INC.
REVIEWED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2005 AND 2004
MEDICAL CONNECTIONS, INC.
REVIEWED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2005 AND 2004
TABLE OF CONTENTS
PAGE(S)
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Report of Independent Registered Public Accounting Firm 2
Reviewed Financial Statements (Unaudited):
Reviewed Balance Sheets as of September 30, 2005 and 2004 (Unaudited) 3
Reviewed Statements of Operations for the nine and three months
ended September 30, 2005 and 2004 (Unaudited) 4
Reviewed Statement of Stockholders' (Deficit for the nine months
ended September 30, 2005 and 2004 5
Reviewed Statements of Cash Flow for the nine months ended
September 30, 2005 and 2004 (Unaudited) 6-7
Notes to Reviewed Financial Statements (Unaudited) 8-18
BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C.
Certified Public Accountants
High Ridge Commons
Suites 400-403
200 Haddonfield Berlin Road
Gibbsboro, New Jersey 08026
(856) 346-2828 Fax (856) 346-2882
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Medical Connections, Inc.
Boca Raton, Florida
We have reviewed the accompanying balance sheets of Medical Connections, Inc.
(the "Company") as of September 30, 2005 and 2004 and the related statements of
operations for the nine and three months then ended, statement of changes in
stockholders' (deficit), and cash flows for the nine months then ended September
30, 2005 and 2004.. These interim financial statements are the responsibility of
the Company's management.
We conducted our reviews in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit in accordance with standards of the
Public Company Accounting Oversight Board, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the financial statements referred to above in order for them to be in
conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 8 to the
financial statements, the Company has sustained operating losses and capital
deficits that raise substantial doubt about its ability to continue as a going
concern. Management's operating and financing plans in regard to these matters
are also discussed in Note 8. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C.
BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C.
Certified Public Accountants
Gibbsboro, New Jersey
December 6, 2005
MEMBER OF: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
NEW JERSEY SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
2
MEDICAL CONNECTIONS, INC
REVIEWED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, 2005 AND 2004
2005 2004
----------- -----------
ASSETS
CURRENT ASSETS
Cash $ 269,405 $ 133,942
Accounts receivable - net 154,757 --
Loan receivable - related party -- 63,500
----------- -----------
TOTAL CURRENT ASSETS 424,162 197,442
----------- -----------
EQUIPMENT
Equipment 149,012 9,425
Less: accumulated depreciation (16,091) (1,990)
----------- -----------
NET EQUIPMENT 132,921 7,435
----------- -----------
OTHER ASSETS
Security deposit 33,213 --
----------- -----------
TOTAL ASSETS $ 590,296 $ 204,877
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Liability for stock to be issued $ 618,189 $ --
----------- -----------
TOTAL CURRENT LIABILITIES 618,189 --
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.001 par value, 50,000,000 shares authorized,
8,263,216 and 6,565,949 shares issued and outstanding
at September 30, 2005 and 2004, respectively 8,263 6,566
Additional paid-in capital 2,260,954 565,383
Subscription receivable (202,800) (6,000)
Accumulated deficit (2,094,310) (361,072)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (27,893) 204,877
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 590,296 $ 204,877
=========== ===========
The accompanying notes are an integral part of
these reviewed financial statements.
3
MEDICAL CONNECTIONS, INC.
REVIEWED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2005 2004 2005 2004
----------- ----------- ----------- -----------
REVENUES $ 412,823 $ 19,639 $ 195,473 $ --
----------- ----------- ----------- -----------
OPERATING EXPENSES
Advertising and marketing 2,865 14,909 -- 2,105
Administrative 233,421 38,033 77,790 14,413
Automotive 3,701 2,580 1,213 954
Commissions -- 11,000 -- --
Contract labor 227,565 -- 40,500 --
Compensation expense 150,000 -- 50,000 --
Computer expense 15,423 -- 4,494 --
Outside services 387,366 124,777 260,130 16,000
Payroll 388,490 -- 158,135 30,615
Payroll taxes 42,017 -- 18,778 5,286
Professional fees 121,878 12,329 57,893 5,038
Rent 48,017 8,480 21,934 3,180
Telephone 23,314 3,686 10,442 2,375
Travel and entertainment 15,359 4,622 248 1,355
Placement fee 27,766 -- 7,966 --
Depreciation 13,936 1,799 6,212 463
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES 1,701,118 222,215 715,735 81,784
----------- ----------- ----------- -----------
NET (LOSS) BEFORE OTHER INCOME (1,288,295) (202,576) (520,262) (81,784)
----------- ----------- ----------- -----------
OTHER INCOME
Interest income 891 -- 891 --
Litigation award -- 13,000 -- 10,500
----------- ----------- ----------- -----------
TOTAL OTHER INCOME 891 13,000 891 10,500
----------- ----------- ----------- -----------
NET (LOSS) BEFORE
PROVISION FOR INCOME TAXES (1,287,404) (189,576) (519,371) (71,284)
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
NET (LOSS) APPLICABLE TO
COMMON SHARES $(1,287,404) $ (189,576) $ (519,371) $ (71,284)
=========== =========== =========== ===========
NET LOSS PER BASIC AND DILUTED
SHARE $ (0.17) $ (0.03) $ (0.06) $ (0.01)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 7,713,906 6,344,135 8,105,675 6,507,066
=========== =========== =========== ===========
The accompanying notes are an integral part of
these reviewed financial statements.
4
MEDICAL CONNECTIONS, INC.
STATEMENT OF STOCKHOLDERS' (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
ADDITIONAL
COMMON STOCK PAID - IN ACCUMULATED SUBSCRIPTION
DESCRIPTION SHARES AMOUNT CAPITAL DEFICIT RECEIVABLES TOTAL
----------- ----------- ----------- ----------- ----------- -----------
Balance, January 1, 2004 6,180,000 $ 6,180 $ 179,820 $ (171,496) $ (6,000) $ 8,504
Common stock issued for cash 385,949 386 385,563 -- -- 385,949
Net loss for the nine month period -- -- -- (189,576) -- (189,576)
----------- ----------- ----------- ----------- ----------- -----------
Balance, September 30, 2004 6,565,949 $ 6,566 $ 565,383 $ (361,072) $ (6,000) $ 204,877
=========== =========== =========== =========== =========== ===========
Balance, January 1, 2005 7,096,916 7,097 1,095,820 (806,906) (6,000) 290,011
Common stock issued for cash 1,066,300 1,066 1,065,234 -- -- 1,066,300
Common stock for compensation 100,000 100 99,900 -- -- 100,000
Cash received stock to be issued -- -- -- -- (196,800) (196,800)
Net loss for the nine month period -- -- -- (1,287,404) -- (1,287,404)
----------- ----------- ----------- ----------- ----------- -----------
Balance, September 30, 2005 8,263,216 $ 8,264 $ 2,260,954 $(2,094,310) $ (202,800) $ (27,893)
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of
these reviewed financial statements.
5
MEDICAL CONNECTIONS, INC
REVIEWED STATEMENTS OF CASH FLOW (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
2005 2004
----------- -----------
CASH FLOW FROM OPERATING ACTIVITIES
Net (loss) $(1,287,404) $ (189,576)
ADJUSTMENTS TO RECONCILE NET (LOSS) TO NET CASH
(USED IN) OPERATING ACTIVITIES:
Depreciation 13,936 1,799
Common stock issued for compensation 100,000 --
CHANGES IN ASSETS AND LIABILITIES
(Increase) in accounts receivable (154,757) --
Decrease in security deposit 7,041 --
Decrease (increase) in subscription receivable (196,800)
----------- -----------
NET CASH (USED IN) OPERATING ACTIVITIES (1,517,984) (187,777)
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of equipment (138,011) (315)
----------- -----------
NET CASH (USED IN) INVESTING ACTIVITIES (138,011) (315)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 1,066,300 385,949
(Increase) in loans receivable - related party -- (63,500)
Liabiltiy for stock to be issued 543,194 (50,000)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,609,494 272,449
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (46,501) 84,357
CASH AND CASH EQUIVALENTS
-BEGINNING OF PERIOD 315,906 49,585
----------- -----------
CASH AND CASH EQUIVALENTS
- END OF PERIOD $ 269,405 $ 133,942
=========== ===========
The accompanying notes are an integral part of
these reviewed financial statements.
6
MEDICAL CONNECTIONS, INC
REVIEWED STATEMENTS OF CASH FLOW (CONTINUED) (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
2005 2004
--------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ -- $ --
========= =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INFORMATION:
Subscription receivable for common stock issued $ 296,800 $ 6,000
========= =========
Common stock issued as compensation $ 100,000 $ --
========= =========
The accompanying notes are an integral part of
these reviewed financial statements.
7
MEDICAL CONNECTIONS, INC.
NOTES TO REVIEWED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2005 AND 2004
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Medical Connections, Inc. (the Company) was incorporated on November
27, 2002 under the laws of the State of Florida. The business purpose
of the Company is to specialize in the recruiting and placing of
healthcare professionals in a variety of settings.
NOTE 2 - SUMMARY OF 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 amounts
reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consists principally of currency on hand,
demand deposits at commercial banks, and liquid investment funds having
an original maturity of three months or less at the time of purchase.
ACCOUNTS RECEIVABLE
The Company conducts business and extends credit based on an evaluation
of the customers' financial condition, generally without requiring
collateral. Exposure to losses on receivables is expected to vary by
customer due to the financial condition of each customer. The Company
monitors exposure to credit losses and maintains allowances for
anticipated losses considered necessary under the circumstances.
PROVISION FOR BAD DEBT
Under SOP 01-6 "Accounting for Certain Entities (including Entities
with Trade Receivables), the Company has intent and belief that all
amounts in accounts receivable are collectible. The Company has
determined that based on their history, no allowance for doubtful
accounts has been established at September 30, 2005 and 2004.
Bad debt expense for the nine months ended September 30, 2005 and 2004
was $0, respectively.
8
MEDICAL CONNECTIONS, INC.
NOTES TO REVIEWED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 2005 AND 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to credit
risk consist of cash equivalents and accounts receivable.
The Company's policy is to review the amount of credit exposure to any
one financial institution and place investments with financial
institutions evaluated as being creditworthy. In the ordinary course of
business, the Company has bank deposits that may exceed federally
insured limits. As of September 30, 2005 and 2004, the Company had
$118,528 and $0 in excess of the $100,000 insured limit.
Concentration of credit risk, with respect to accounts
receivable-customers, is limited through the Company's credit
evaluation process. The Company reviews the credit history before
extending credit. Generally, the Company does not require collateral
from its customers
EQUIPMENT
Equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets,
three to five years. Reviews are regularly performed to determine
whether facts and circumstances exist that indicate carrying amount of
assets may not be recoverable or the useful life is shorter than
originally estimated. The Company assesses the recoverability of its
equipment by comparing the projected undiscounted net cash flows
associated with the related asset or group of assets over their
remaining lives against their respective carrying amounts. Impairment,
if any, is based on the excess of the carrying amount over the fair
value of those assets.
If assets are determined to be recoverable, but the useful lives are
shorter than originally estimated, the net book value of the assets is
depreciated over the newly determined remaining useful lives. When
equipment is retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts and the
resulting gain or loss is included in operations.
9
MEDICAL CONNECTIONS, INC.
NOTES TO REVIEWED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 2005 AND 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATION
Certain amounts for the nine months ended September 30, 2004 have been
reclassified to conform to the presentation of the September 30, 2005
amounts. The reclassifications have no effect on operations for the
nine months ended September 30, 2004.
INCOME TAXES
The Company has adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes. The
Statement requires an asset and liability approach for financial
accounting and reporting of income taxes, and the recognition of
deferred tax assets and liabilities for the temporary differences
between the financial reporting bases and tax bases of the Company's
assets and liabilities at enacted tax rates expected to be in effect
when such amounts are realized or settled.
ADVERTISING
The Company's policy is to expense the costs of advertising and
marketing as they are incurred. Advertising expense for the nine months
ended September 30, 2005 and 2004 was $2,865 and $14,909, respectively.
START-UP COSTS
In accordance with the American Institute of Certified Public
Accountants Statement of Position 98-5, "Reporting on the Costs of
Start-up Activities", the Company expenses all costs incurred in
connection with the start-up and organization of the Company.
10
MEDICAL CONNECTIONS, INC.
NOTES TO REVIEWED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 2005 AND 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
Employee stock awards under the Company's compensation plans are
accounted for in accordance with Accounting Principles Board Opinion
No. 25 ("APB 25"), "Accounting for Stock Issued to Employees", and
related interpretations. The Company provides the disclosure
requirements of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), and related
interpretations. Stock-based awards to non-employees are accounted for
under the provisions of SFAS 123 and has adopted the enhanced
disclosure provisions of SFAS No. 148 "Accounting for Stock-Based
Compensation- Transition and Disclosure, an amendment of SFAS No. 123".
The Company measures compensation expense for its employee stock-based
compensation using the intrinsic-value method. Under the
intrinsic-value method of accounting for stock-based compensation, when
the exercise price of options granted to employees is less than the
estimated fair value of the underlying stock on the date of grant,
deferred compensation is recognized and is amortized to compensation
expense over the applicable vesting period. In each of the periods
presented, the vesting period was the period in which the options were
granted
The Company measures compensation expense for its non-employee
stock-based compensation under the Financial Accounting Standards Board
(FASB) Emerging Issues Task Force (EITF) Issue No. 96-18, "Accounting
for Equity Instruments that are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services". The fair
value of the option or share issued is used to measure the transaction,
as this is more reliable than the fair value of the services received.
The fair value is measured at the value of the Company's common stock
on the date that the commitment for performance by the counterparty has
been reached or the counterparty's performance is complete. The fair
value of the equity instrument is charged directly to compensation
expense, common stock and additional paid-in capital.
11
MEDICAL CONNECTIONS, INC.
NOTES TO REVIEWED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 2005 AND 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COMMON STOCK ISSUED FOR OTHER THAN CASH
Services purchased and other transactions settled in the Company's
common stock are recorded at the estimated fair value of the stock
issued if that value is more readily determinable than the fair value
of the consideration received.
(LOSS) PER SHARE OF COMMON STOCK
Historical net income (loss) per common share is computed using the
weighted average number of common shares outstanding. Diluted earnings
per share (EPS) include additional dilution from common stock
equivalents, such as stock issuable pursuant to the exercise of stock
options and warrants. Common stock equivalents were not included in the
computation of diluted earnings per share when the Company reported a
loss because to do so would be antidilutive for periods presented.
The following is a reconciliation of the computation for basic and
diluted EPS:
SEPTEMBER 30, SEPTEMBER 30,
2005 2004
----------- -----------
Net (loss) $(1,287,404) $ (189,576)
----------- -----------
Weighted average common shares
outstanding (Basic) 7,713,906 6,344,135
Weighted average common stock
equivalents
Stock options -- --
Warrants -- --
----------- -----------
Weighted average common shares
outstanding (Diluted) 7,713,906 6,344,135
=========== ===========
There are no common stock equivalents outstanding at September 30, 2005
and 2004.
12
MEDICAL CONNECTIONS, INC.
NOTES TO REVIEWED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 2005 AND 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
REVENUE RECOGNITION
The Company records its transactions under the accrual method of
accounting whereby income is recognized when the services are rendered
and collection is reasonably assured.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount reported in the balance sheets for cash and cash
equivalents, accounts receivable and liability for stock to be issued
approximate fair value because of the immediate or short-term maturity
of these financial instruments.
RECENT ACCOUNTING PRONOUNCEMENTS
On December 16, 2004, the Financial Accounting Standards Board ("FASB")
published Statement of Financial Accounting Standards No. 123 (Revised
2004), Share-Based Payment ("SFAS 123R"). SFAS 123R requires that
compensation cost related to share-based payment transactions be
recognized in the financial statements. Share-based payment
transactions within the scope of SFAS 123R include stock options,
restricted stock plans, performance-based awards, stock appreciation
rights, and employee share purchase plans. The provisions of SFAS 123R
are effective for small business issuers as of the first interim period
that begins after December 15, 2005. Accordingly, the Company will
implement the revised standard in the fourth quarter of fiscal year
2005. Currently, the Company accounts for its share-based payment
transactions under the provisions of APB 25, which does not necessarily
require the recognition of compensation cost in the financial
statements. Management is assessing the implications of this revised
standard, which may materially impact the Company's results of
operations in the fourth quarter of fiscal year 2005 and thereafter.
13
MEDICAL CONNECTIONS, INC.
NOTES TO REVIEWED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 2005 AND 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
On December 16, 2004, FASB issued Statement of Financial Accounting
Standards No. 153, "Exchanges of Non-monetary Assets, an amendment of
APB Opinion No. 29, Accounting for Non-monetary Transactions" ("SFAS
153"). This statement amends APB Opinion 29 to eliminate the exception
for non-monetary exchanges of similar productive assets and replaces it
with a general exception for exchanges of non-monetary assets that do
not have commercial substance. Under SFAS 153, if a non-monetary
exchange of similar productive assets meets a commercial-substance
criterion and fair value is determinable, the transaction must be
accounted for at fair value resulting in recognition of any gain or
loss. SFAS 153 is effective for non-monetary transactions in fiscal
periods that begin after June 15, 2005. The Company does not anticipate
that the implementation of this standard will have a material impact on
its financial position, results of operations or cash flows.
NOTE 3- EQUIPMENT
Equipment consists of the following at September 30, 2005 and 2004:
2005 2004
--------- ---------
Computer and office equipment $ 58,622 $ 9,425
Furniture 66,885 --
Leasehold improvements 23,505 --
Less: accumulated depreciation (16,091) (1,990)
--------- ---------
Net book value $ 132,921 $ 7,435
========= =========
Depreciation expense for the nine months ended September 30, 2005 and
2004 was $13,936 and $1,799, respectively.
14
MEDICAL CONNECTIONS, INC.
NOTES TO REVIEWED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 2005 AND 2004
NOTE 4 - LOAN RECEIVABLE - RELATED PARTY
This account represents a loan to a company owned by one of the
officer's of the Company. The loan was due on demand, with no stated
interest rate. This loan was repaid in the fourth quarter of 2004.
NOTE 5 - STOCKHOLDERS' EQUITY
COMMON STOCK
As of September 30, 2005, the Company has 50,000,000 shares of common
stock authorized at $0.001 par value and 8,263,216 issued and
outstanding.
In November 2002, the Company issued 2,550,000 shares to one of its
founders. In September of 2004, these shares were cancelled by the
Company. The Company has retroactively reflected the cancellation of
these shares back to 2002.
The following details the stock transactions for the Company for the
nine months ended September 30, 2004:
The Company issued 385,949 shares of par value .001 stock valued at
$1.00 per share for cash for a total of $385,949.
The following details the stock transactions for the nine months ended
September 30, 2005:
The Company issued 1,066,300 shares of par value $.001 stock valued at
$1.00 per share for cash for a total value of $1,066,300.
The Company issued 100,000 shares of common stock to a key employee as
compensation. These shares had a market value of $100,000 and were
charged as compensation.
The Company entered into a subscription agreement with various
individuals for the purchase of 606,204 shares of stock. The Company
received $618,189 for these shares and this amount has been recorded as
a liability for stock to be issued as these certificates have not been
issued as of September 30, 2005.
15
MEDICAL CONNECTIONS, INC.
NOTES TO REVIEWED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 2005 AND 2004
NOTE 6 - PROVISION FOR INCOME TAXES
The Company accounts for income taxes using the liability method. At
September 30, 2005 net deferred tax assets consist of the following:
2005
---------
Deferred tax asset $ 714,000
Less: valuation allowance (714,000)
---------
Net deferred tax assets $ --
=========
At September 30, 2005, the Company had accumulated deficits
approximating $2,100,000, available to offset future taxable income
through 2024. The Company established valuation allowances equal to the
full amount of the deferred tax assets due to the uncertainty of the
utilization of the operating losses in the future period.
NOTE 7- OPERATING LEASES
The Company leases office space under a sixty-three month lease
commencing December 31, 2004 with a renewal option for a five-year
period. The lease did not take effect until March 2005 due to delays in
construction. Monthly payments under the lease are $7,311. According to
the terms of the lease, the rent will increase 3% each year. The
Company is required to pay property taxes, insurance and other costs
relating to the leased facilities. Utilities and common area
maintenance are included in the monthly rent amount.
16
MEDICAL CONNECTIONS, INC.
NOTES TO REVIEWED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 2005 AND 2004
NOTE 7- OPERATING LEASES (CONTINUED)
The following is a schedule by years of future minimum rental payments
required under operating lease that have initial or remaining
noncancelable lease terms in excess of one year as of September 30,
2005:
2005 $ 89,048
2006 91,715
2007 94,468
2008 97,269
2009 100,193
--------
Total minimum payments required $472,693
========
NOTE 8 - GOING CONCERN
The accompanying financial statements have been prepared in accordance
with accounting principals generally accepted in the United States of
America, which contemplates continuation of the Company as a going
concern. The Company has sustained operating losses, and has little
recurring revenues to sustain its operations. These items raise
substantial doubt about the Company's ability to continue as a going
concern.
In view of these matters, realization of the assets of the Company is
dependent upon the Company's ability to meet its financial requirements
and the success of future operations. These financial statements do not
include adjustments relating to the recoverability and classification
of recorded asset amounts and classification of liabilities that might
be necessary should the Company be unable to continue in existence.
17
MEDICAL CONNECTIONS, INC.
NOTES TO REVIEWED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 2005 AND 2004
NOTE 8 - GOING CONCERN (CONTINUED)
The Company's continued existence is dependent upon its ability to
generate sufficient cash flows from equity financing and product
revenues.
NOTE 9 - SUBSEQUENT EVENT
On January 26, 2005, the Company entered into a share for share exchange
agreement with Webb Mortgage Depot, Inc. Webb Mortgage Depot, Inc. is a publicly
traded company on the OTC bulletin board (WBBM). The anticipating closing date
is December 2005.
18
MEDICAL CONNECTIONS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
MEDICAL CONNECTIONS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
TABLE OF CONTENTS
PAGES(S)
Report of Independent Registered Public Accounting Firm 2
Balance Sheets as of December 31, 2004 and 2003 4
Statements of Operations for the Years Ended December 31, 2004
and December 31, 2003 5
Statement of Changes in Stockholders' (Equity) for the Years Ended
December 31, 2004 and December31, 2003 6
Statements of Cash Flow for the Years Ended December 31, 2004
and December 31, 2003 7
Notes to Financial Statements 8-17
BAGELL, JOSEPHS & COMPANY, L.L.C.
Certified Public Accountants
High Ridge Commons
Suites 400-403
200 Haddonfield Berlin Road
Gibbsboro, New Jersey 08026
(856) 346-2828 Fax (856) 346-2882
Report of Independent Registered Public Accounting Firm
-------------------------------------------------------
To the Board of Directors and Stockholders
Medical Connections, Inc.
We have audited the accompanying balance sheet of Medical Connections, Inc.(a
Florida corporation) as of December 31, 2004 and 2003 and the related statements
of operations, changes in stockholders' equity (deficit), 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 audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of 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 audits provide a
reasonable basis for our opinion.
The accompanying financial statements for the years ended December 31, 2004 and
2003 have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 8 to the financial statements, the Company
sustained operating losses and has little recurring operating revenue, which
raises substantial doubt about its ability to continue as a going concern.
Management's operating and financing plans in regard to these matters are also
discussed in Note 8. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Medical Connections, Inc., as
of December 31, 2004 and 2003, and the results of its operations and its cash
flows for the year and period then ended in conformity with accounting
principles generally accepted in the United States of America.
2
As discussed in Note 9 to the financial statements, the Company's previously
issued December 31, 2004 and 2003 financial statements have been amended to
reflect the cancellation of 2,550,000 shares issued to an officer in 2003. The
Company has retroactively reflected the cancellation back to 2002. The
cancellation of shares had no effect on the net loss or the deficits accumulated
during the development stage.
Bagell, Josephs & Company LLC
Bagell, Josephs & Company LLC
Certified Public Accountants
Gibbsboro, New Jersey
February 14, 2005
MEMBER OF: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
NEW JERSEY SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
NEW YORK STATE SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
3
MEDICAL CONNECTIONS, INC
BALANCE SHEETS
DECEMBER 31, 2004 AND 2003
RESTATED
2004 2003
----------- -----------
ASSETS
CURRENT ASSET
Cash $ 315,906 $ 49,585
----------- -----------
TOTAL CURRENT ASSETS 315,906 49,585
----------- -----------
EQUIPMENT
Equipment 11,001 9,110
Less: accumulated depreciation (2,155) (191)
----------- -----------
NET EQUIPMENT 8,846 8,919
----------- -----------
OTHER ASSETS
Security deposit 40,254 --
----------- -----------
TOTAL ASSETS $ 365,006 $ 58,504
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Liability for stock to be issued $ 74,993 $ 50,000
----------- -----------
TOTAL CURRENT LIABILITIES 74,993 50,000
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 50,000,000 shares authorized,
7,096,916 and 6,180,000 shares issued and oustanding
at December 31, 2004 and 2003, respectively 7,096 6,180
Additional paid-in capital 1,095,820 179,820
Subscription receivable (6,000) (6,000)
Accumulated deficit (806,903) (171,496)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 290,013 8,504
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 365,006 $ 58,504
=========== ===========
The accompanying notes are an integral part of these financial statements.
4
MEDICAL CONNECTIONS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
RESTATED
2004 2003
----------- -----------
REVENUES $ 43,532 $ 15,342
----------- -----------
OPERATING EXPENSES
Advertising and marketing 27,534 18,830
Administrative 77,620 21,352
Automotive 4,238 --
Contract Labor 88,300 --
Commissions 136,932 74,302
Compensation expense 232,475 9,332
Outside services 25,541 10,511
Payroll 38,226 10,748
Payroll taxes 3,800 1,198
Professional fees 24,341 10,905
Rent 11,960 15,515
Telephone 8,148 6,575
Travel and entertainment 10,860 7,379
Depreciation 1,964 191
----------- -----------
TOTAL OPERATING EXPENSES 691,939 186,838
----------- -----------
NET (LOSS) BEFORE OTHER INCOME (648,407) (171,496)
----------- -----------
OTHER INCOME
Litigation award 13,000 --
----------- -----------
NET (LOSS) BEFORE
PROVISION FOR INCOME TAXES (635,407) (171,496)
Provision for income taxes -- --
----------- -----------
NET (LOSS) APPLICABLE TO
COMMON SHARES $ (635,407) $ (171,496)
=========== ===========
BASIC AND DILUTED LOSS
PER SHARE (.10) (.04)
=========== ===========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 6,068,386 4,508,203
=========== ===========
The accompanying notes are an integral part of these financial statements.
5
MEDICAL CONNECTIONS, INC.
STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
ADDITIONAL RESTATED
COMMON STOCK Paid - In ACCUMULATED SUBSCRIPTION RESTATED
Description Shares Amount Capital Deficit Receivables Total
- ----------- ---------- ---------- ---------- ---------- ---------- ----------
Balance, January 1, 2003 6,000,000 $ 6,000 $ -- $ -- $ (6,000) $ --
Common stock issued for cash 180,000 180 179,820 -- -- 179,820
Net loss for the year -- -- -- (171,496) -- (171,496)
---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 2003 6,180,000 $ 6,180 $ 179,820 $ (171,496) $ (6,000) $ 8,504
Common stock issued for cash 916,916 916 916,000 -- -- 916,916
Net loss for the year -- -- -- (635,407) -- (635,407)
---------- ---------- ---------- ---------- ---------- ----------
Balance, December 31, 2004 7,096,916 $ 7,096 $1,095,820 $ (806,903) $ (6,000) $ 290,013
---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes are an integral part of these financial statements.
6
MEDICAL CONNECTIONS, INC
STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
RESTATED
2004 2003
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(635,407) $(171,496)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
Depreciation 1,964 191
CHANGES IN ASSETS AND LIABILITIES
(Increase) in security deposit (40,254) --
--------- ---------
NET CASH (USED IN) OPERATING ACTIVITIES (673,697) (171,305)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (1,891) (9,110)
--------- ---------
NET CASH (USED IN) INVESTING ACTIVITIES (1,891) (9,110)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 916,916 180,000
Liabiltiy for stock to be issued 24,993 50,000
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 941,909 230,000
--------- ---------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 266,321 49,585
CASH AND CASH EQUIVALENTS
-BEGINNING OF YEAR 49,585 --
--------- ---------
CASH AND CASH EQUIVALENTS
- END OF YEAR $ 315,906 $ 49,585
========= =========
The accompanying notes are an integral part of these financial statements.
7
MEDICAL CONNECTIONS, INC
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2003 AND FOR THE
PERIOD NOVEMBER 27, 2002 (INCEPTION) TO DECEMBER 31, 2002
(WITH CUMULATIVE TOTALS SINCE INCEPTION)
CUMULATIVE TOTALS
NOVEMBER 27, 2002
(INCEPTION) TO
TO
DECEMBER 31,
2003 2002 2003
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ -- $ -- $ --
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INFORMATION:
Subscription receivable for common stock issued to founders $ -- $ 8,550 $ 8,550
========= ========= =========
The accompanying notes are an integral part of these financial statements.
8
MEDICAL CONNECTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Medical Connections, Inc. (the Company) was incorporated on November
27, 2002 under the laws of the State of Florida. The business purpose
of the Company is to specialize in the recruiting and placing of
healthcare professionals in a variety of settings.
NOTE 2 - SUMMARY OF 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 amounts
reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consists principally of currency on hand,
demand deposits at commercial banks, and liquid investment funds having
a maturity of three months or less at the time of purchase.
EQUIPMENT
Equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets,
three to five years. Reviews are regularly performed to determine
whether facts and circumstances exist that indicate carrying amount of
assets may not be recoverable or the useful life is shorter than
originally estimated. The Company assesses the recoverability of its
equipment by comparing the projected undiscounted net cash flows
associated with the related asset or group of assets over their
remaining lives against their respective carrying amounts. Impairment,
if any, is based on the excess of the carrying amount over the fair
value of those assets.
If assets are determined to be recoverable, but the useful lives are
shorter than originally estimated, the net book value of the assets is
depreciated over the newly determined remaining useful lives. When
equipment is retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts and the
resulting gain or loss is included in operations.
9
MEDICAL CONNECTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATION
Certain amounts for the year ended December 31, 2003 have been
reclassified to conform to the presentation of the December 31, 2004
amounts. The reclassifications have no effect on net income for the
year ended December 31, 2004
INCOME TAXES
The Company has adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes. The
Statement requires an asset and liability approach for financial
accounting and reporting of income taxes, and the recognition of
deferred tax assets and liabilities for the temporary differences
between the financial reporting bases and tax bases of the Company's
assets and liabilities at enacted tax rates expected to be in effect
when such amounts are realized or settled
ADVERTISING
The Company's policy is to expense the costs of advertising and
marketing as they are incurred. Advertising expense for the year ended
December 31, 2004 and 2003 was $27,534 and $18,830, respectively.
START-UP COSTS
In accordance with the American Institute of Certified Public
Accountants Statement of Position 98-5, "Reporting on the Costs of
Start-up Activities", the Company expenses all costs incurred in
connection with the start-up and organization of the Company.
10
MEDICAL CONNECTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
Employee stock awards under the Company's compensation plans are
accounted for in accordance with Accounting Principles Board Opinion
No. 25 ("APB 25"), "Accounting for Stock Issued to Employees", and
related interpretations. The Company provides the disclosure
requirements of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), and related
interpretations. Stock-based awards to non-employees are accounted for
under the provisions of SFAS 123 and has adopted the enhanced
disclosure provisions of SFAS No. 148 "Accounting for Stock-Based
Compensation- Transition and Disclosure, an amendment of SFAS No. 123".
The Company measures compensation expense for its employee stock-based
compensation using the intrinsic-value method. Under the
intrinsic-value method of accounting for stock-based compensation, when
the exercise price of options granted to employees is less than the
estimated fair value of the underlying stock on the date of grant,
deferred compensation is recognized and is amortized to compensation
expense over the applicable vesting period. In each of the periods
presented, the vesting period was the period in which the options were
granted.
The Company measures compensation expense for its non-employee
stock-based compensation under the Financial Accounting Standards Board
(FASB) Emerging Issues Task Force (EITF) Issue No. 96-18, "Accounting
for Equity Instruments that are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services". The fair
value of the option issued is used to measure the transaction, as this
is more reliable than the fair value of the services received. The fair
value is measured at the value of the Company's common stock on the
date that the commitment for performance by the counterparty has been
reached or the counterparty's performance is complete. The fair value
of the equity instrument is charged directly to compensation expense
and additional paid-in capital.
11
MEDICAL CONNECTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COMMON STOCK ISSUED FOR OTHER THAN CASH
Services purchased and other transactions settled in the Company's
common stock are recorded at the estimated fair value of the stock
issued if that value is more readily determinable than the fair value
of the consideration received.
EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Historical net income (loss) per common share is computed using the
weighted average number of common shares outstanding. Diluted earnings
per share (EPS) include additional dilution from common stock
equivalents, such as stock issuable pursuant to the exercise of stock
options and warrants. Common stock equivalents were not included in the
computation of diluted earnings per share when the Company reported a
loss because to do so would be antidilutive for periods presented
The following is a reconciliation of the computation for basic and
diluted EPS:
2004 2003
----------- -----------
Net income (loss) $ (635,407) $ (171,496)
----------- -----------
Weighted average common shares
outstanding (Basic) 6,068,386 4,508,203
Weighted average common stock equivalents
Stock options -- --
Warrants -- --
----------- -----------
Weighted average common shares
outstanding (Diluted) 6,068,386 4,508,203
=========== ===========
There are no common stock equivalents outstanding at December 31, 2004
and 2003.
12
MEDICAL CONNECTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
The Company records its transactions under the accrual method of
accounting whereby income gets recognized when the services are
rendered and collection is reasonably assured.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount reported in the balance sheets for cash and cash
equivalents and liability for stock to be issued approximate fair value
because of the immediate or short-term maturity of these financial
instruments.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2002, the FASB issued Statement No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure, an amendment of
FASB Statement No. 123"("SFAS 148"). SFAS 148 amends FASB Statement No.
123, "Accounting for Stock-Based Compensation," to provide alternative
methods of transition for an entity that voluntarily changes to the
fair value based method of accounting for stock-based employee
compensation. It also amends the disclosure provisions of that
Statement to require prominent disclosure about the effects on reported
net income of an entity's accounting policy decisions with respect to
stock-based employee compensation. Finally, this Statement amends
Accounting Principles Board ("APB") Opinion No. 28, "Interim Financial
Reporting", to require disclosure about those effects in interim
financial information. SFAS 148 is effective for financial statements
for fiscal years ending after December 15, 2002. The Company will
continue to account for stock-based employee compensation using the
intrinsic value method of APB Opinion No. 25, "Accounting for Stock
Issued to Employees," but has adopted the enhanced disclosure
requirements of SFAS 148.
13
MEDICAL CONNECTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In May 2003, the FASB issued SFAS Statement No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities
and Equity". This Statement establishes standards for how an issuer
classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an
issuer classify a financial instrument that is within its scope as a
liability (or an asset in some circumstances). This statement is
effective for financial instruments entered into or modified after May
31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003, except for mandatorily
redeemable financial instruments of nonpublic entities, if applicable.
It is to be implemented by reporting the cumulative effect of a change
in an accounting principle for financial instruments created before the
issuance date of the Statement and still existing at the beginning of
the interim period of adoption. The adoption of this statement did not
have a significant impact on the Company's results of operations or
financial position.
NOTE 3- EQUIPMENT
Equipment consist of the following at December 31, 2003 and 2002:
2004 2003
-------- --------
Computer and office equipment $ 11,001 $ 9,110
Less: accumulated depreciation (2,155) (191)
-------- --------
Net book value $ 8,846 $ 8,919
======== ========
Depreciation expense for the years ended December 31, 2004 and 2003 was
$1,964 and $191, respectively.
14
MEDICAL CONNECTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
NOTE 4 - STOCKHOLDERS' EQUITY (DEFICIT)
COMMON STOCK
As of December 31, 2003, the Company has 50,000,000 shares of common
stock authorized at $0.001 par value and 6,180,000 issued and
outstanding.
The following details the stock transactions for the Company for the
year ended December 31, 2003:
The Company issued 180,000 shares of its common stock for $180,000.
The following details the stock transactions for the year ended
December 31, 2004:
In November 2002, the Company issued 2,550,000 shares to one of its
founders. In September of 2004, 2,550,000 of these shares were
cancelled by the Company. The Company has retroactively reflected the
cancellation of these shares back to 2002.
The Company issued 916,916 shares of par value $.001 stock
valued at $1.00 per share for cash for a total value of
$916,916.
NOTE 5 - PROVISION FOR INCOME TAXES
The Company accounts for income taxes using the liability method. At
December 31, 2004 and 2003 deferred tax assets consist of the
following:
2004 2003
--------- ---------
Deferred tax asset $ 242,100 $ 51,449
Less: valuation allowance (242,100) (51,449)
--------- ---------
Net deferred tax assets $ -- $ --
========= =========
At December 31, 2004, the Company had accumulated deficits
approximating $807,000, available to offset future taxable income
through 2024. The Company established valuation allowances equal to the
full amount of the deferred tax assets due to the uncertainty of the
utilization of the operating losses in the future period.
15
MEDICAL CONNECTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
NOTE 6 - RELATED PARTY TRANSACTION
The Company utilized office space at the personal residence of one of
the shareholders of the Company and was not charged any rental expense
for said office usage for the year ended December 31, 2002. This
agreement ceased to exist on November 1, 2003 as a new office facility
was leased as of that.
NOTE 7- OPERATING LEASES
The Company leases office space under a sixty-three month lease
commencing December 31, 2004 with a renewal option for a five-year
period. Monthly payments under the current lease are $3,978. The
Company is required to pay property taxes, utilities, insurance and
other costs relating to the leased facilities.
The following is a schedule by years of future minimum rental payments
required under operating lease that have initial or remaining
noncancelable lease terms in excess of one year as of December 31,
2004:
For the years ending
December 31,
2005 $ 47,740
2006 49,172
2007 50,647
2008 52,166
2009 53,731
--------
Total minimum payments required $253,456
========
NOTE 8 - GOING CONCERN
The accompanying financial statements have been prepared in accordance
with accounting principals generally accepted in the United States of
America, which contemplates continuation of the Company as a going
concern. The Company has sustained operating losses, and has little
recurring revenues to sustain its operations. These items raise
substantial doubt about the Company's ability to continue as a going
concern.
16
MEDICAL CONNECTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
NOTE 8 - GOING CONCERN (CONTINUED)
In view of these matters, realization of the assets of the Company is
dependent upon the Company's ability to meet its financial requirements
and the success of future operations. These financial statements do not
include adjustments relating to the recoverability and classification
of recorded asset amounts and classification of liabilities that might
be necessary should the Company be unable to continue in existence.
The Company's continued existence is dependent upon its ability to
generate sufficient cash flows from equity financing and product
revenues. The Company anticipates generating revenues in the first
quarter of 2004.
NOTE 9 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
The Company has restated their financial statements due to the
cancellation of 2,550,000 shares issued to a founder in the year ended
2003. The Company has retroactively reflected the cancellation back to
the year ended 2002. This restatement had no effect on net income.
NOTE 10 - SUBSEQUENT EVENT
Effective as of January 26, 2005, the Company entered into a share for
share exchange agreement with Webb Mortgage Depot, Inc. Webb Mortgage
Depot, Inc. is a publicly traded company on the OTC bulletin board
(WBBM). The transaction will be accounted for as a reverse merger with
the operations at Medical Connections, Inc. being the surviving entity.
The anticipating closing date is March 2005.
17