(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Florida
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65-0920373
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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4800 T Rex Avenue Suite 310
Boca Raton, Florida
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33431
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33----dddd33
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(Address of principal executive office)
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(Zip Code)
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Large accelerated filer | o | Accelerated filer | o |
Non-accelerated filer | o | Smaller reporting company | þ |
(Do not check if smaller reporting company) |
September 30,
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December 31,
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2011
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2010
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ASSETS
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Current assets | ||||||||
Cash
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$ | 325,915 | $ | 1,698,030 | ||||
Accounts receivable, net
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791,381 | 1,352,506 | ||||||
Prepaid expenses
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3,995 | 2,996 | ||||||
Total current assets
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1,121,291 | 3,053,532 | ||||||
Property and equipment
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827,228 | 919,763 | ||||||
Less: accumulated depreciation
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280,442 | 313,772 | ||||||
546,786 | 605,991 | |||||||
Other assets
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Security deposit
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200,000 | 200,000 | ||||||
Intangible asset, net of amortization of $210,000 and $142,500, respectively
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61,481 | 128,981 | ||||||
261,481 | 328,981 | |||||||
Total assets
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$ | 1,929,558 | $ | 3,988,504 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
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Accounts payable
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$ | 307,079 | $ | 324,824 | ||||
Accrued expenses
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101,391 | 174,802 | ||||||
Total current liabilities
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408,470 | 499,626 | ||||||
Stockholders' equity
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Preferred stock, Class A, $.001 par value; 100,000 shares
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authorized, 5,546 issued and outstanding
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5 | 5 | ||||||
Preferred stock, Class B, $.001 par value; 50,000 shares
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authorized, -0- and 50,000 issued and outstanding, respectively
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- | 50 | ||||||
Preferred stock, Class C, $.001 par value; 215,000 shares
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authorized, 215,000 and 120,000 issued and outstanding, respectively
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215 | 120 | ||||||
Common stock, $.001 par value, 20,000,000 shares authorized,
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14,129,666 and 11,150,396 issued and outstanding, respectively
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14,130 | 11,150 | ||||||
Additional paid-in capital
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45,580,118 | 44,805,613 | ||||||
Accumulated deficit
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(44,073,380 | ) | (41,328,060 | ) | ||||
Total stockholders' equity
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1,521,088 | 3,488,878 | ||||||
Total liabilities and stockholders' equity
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$ | 1,929,558 | $ | 3,988,504 |
(unaudited)
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(unaudited)
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2011
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2010
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Revenue
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$ | 1,362,871 | $ | 2,264,713 | ||||
Direct costs of revenue
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990,624 | 1,755,751 | ||||||
Advertising and marketing expenses
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60,394 | 30,552 | ||||||
Recruiting - salaries and costs
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340,331 | 420,800 | ||||||
Professional and consulting fees
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62,074 | 73,104 | ||||||
General and administration expenses
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741,454 | 819,505 | ||||||
Total operating expenses
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2,194,877 | 3,099,712 | ||||||
Loss from operations
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(832,006 | ) | (834,999 | ) | ||||
Other expenses, net
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110,800 | 349,636 | ||||||
Loss before income taxes
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(942,806 | ) | (1,184,635 | ) | ||||
Income taxes
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- | - | ||||||
Net loss
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$ | (942,806 | ) | $ | (1,184,635 | ) | ||
Net loss per common share - basic and diluted
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$ | (0.07 | ) | $ | (0.16 | ) | ||
Weighted average common shares outstanding
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- basic and diluted
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13,097,401 | 7,523,182 |
(unaudited)
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(unaudited)
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2011
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2010
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Revenue
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$ | 5,173,448 | $ | 5,603,505 | ||||
Direct costs of revenue
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3,810,790 | 4,214,657 | ||||||
Advertising and marketing expenses
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147,241 | 141,786 | ||||||
Recruiting - salaries and costs
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1,052,939 | 1,276,756 | ||||||
Professional and consulting fees
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205,371 | 412,881 | ||||||
General and administration expenses
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2,415,133 | 2,783,085 | ||||||
Total operating expenses
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7,631,474 | 8,829,165 | ||||||
Loss from operations
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(2,458,026 | ) | (3,225,660 | ) | ||||
Other expenses, net
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287,294 | 2,499,448 | ||||||
Loss before income taxes
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(2,745,320 | ) | (5,725,108 | ) | ||||
Income taxes
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- | - | ||||||
Net loss
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$ | (2,745,320 | ) | $ | (5,725,108 | ) | ||
Net loss per common share - basic and diluted
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$ | (0.23 | ) | $ | (0.86 | ) | ||
Weighted average common shares outstanding
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- basic and diluted
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11,914,010 | 6,666,178 |
(unaudited)
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(unaudited)
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2011
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2010
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Cash flow from operating activities
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Net loss
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$ | (2,745,320 | ) | $ | (5,725,109 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities
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Depreciation and amortization
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155,699 | 108,894 | ||||||
Common stock issued for compensation
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- | 275,000 | ||||||
CHANGES IN ASSETS AND LIABILITIES
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Accounts receivable
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561,125 | (554,669 | ) | |||||
Prepaid expenses
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(999 | ) | 94,520 | |||||
Accounts payable and accrued expenses
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(91,156 | ) | 439,184 | |||||
Net cash used in operating activities
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(2,120,651 | ) | (5,362,180 | ) | ||||
Cash flow from investing activities
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Acquisition of property and equipment
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(28,994 | ) | (530,361 | ) | ||||
Net cash used in investing activities
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(28,994 | ) | (530,361 | ) | ||||
Cash flow from financing activities
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Proceeds from issuance of common stock and warrant exercise
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777,530 | 5,334,648 | ||||||
Net cash provided by financing activities
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777,530 | 5,334,648 | ||||||
Net decrease in cash and cash equivalents
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(1,372,115 | ) | (557,893 | ) | ||||
Cash and cash equivalents at beginning of period
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1,698,030 | 1,017,843 | ||||||
Cash and cash equivalents at end of period
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$ | 325,915 | $ | 459,949 | ||||
Supplemental disclosure of cash flow information:
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Cash paid during the period for:
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Interest
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$ | - | $ | - | ||||
Taxes
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$ | - | $ | - |
Balance, January 1, 2011
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$ | 110,000 | ||
Additions:
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Bad debt expense
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9,273 | |||
Sales allowance
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40,654 | |||
Deductions:
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Write offs
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49,927 | |||
Balance, September 30, 2011
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$ | 110,000 |
No. of Warrants | Grant Date | Exercise Price | Expiration Date | |||||
23,285 | 2009 | $10.00 | December 2011 | |||||
254,728 | 2009 | $7.50 | December 2011 | |||||
223,300 | 2010 | $0.10 | December 2012 |
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2011
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2010
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Deferred tax asset
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$ | 13,004,000 | $ | 10,540,000 | ||||
Less: valuation allowance
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(13,004,000 | ) | (10,540,000 | ) | ||||
Net deferred tax assets
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$ | 0 | $ | 0 |
Exhibit No. | Exhibit Description | |
31.1 | Certification by the Chief Executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.+ | |
31.2 | Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. + | |
32.1 | Certification by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. + | |
32.2 | Certification by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. + |
MEDICAL CONNECTIONS HOLDINGS, INC. | |||
Date: November 14, 2011
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By:
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/s/ Jeffrey Rosenfeld | |
Jeffrey Rosenfeld, | |||
Chief Executive Officer and Director | |||
Date: November 14, 2011
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By:
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/s/ Jeffrey Rosenfeld | |
Jeffrey Rosenfeld, | |||
Chief Executive Officer and Director | |||
(Principal Executive Officer) |
Date: November 14, 2011
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By:
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/s/ Brian Neill | |
Brian Neill, | |||
Chief Financial Officer | |||
(Principal Financial/Accounting Officer) |
Date: November 14, 2011
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By:
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/s/ Jeffrey Rosenfeld | |
Jeffrey Rosenfeld, | |||
Chief Executive Officer and Director |
Date: November 14, 2011
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By:
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/s/ Brian Neill | |
Brian Neill, | |||
Chief Financial Officer |
Date: November 14, 2011
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By:
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/s/ Jeffrey Rosenfeld | |
Jeffrey Rosenfeld, | |||
Chief Executive Officer |
Date: November 14, 2011
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By:
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/s/ Brian Neill | |
Brian Neill, | |||
Chief Financial Officer |
Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2011 | Dec. 31, 2010 |
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ASSETS | ||
Intangible asset, net of amortization | $ 210,000 | $ 142,500 |
Stockholders' equity | ||
Preferred stock, Class A, par value | $ 0.001 | $ 0.001 |
Preferred stock, Class A, authorized shares | 100,000 | 100,000 |
Preferred stock, Class A, issued shares | 5,546 | 5,546 |
Preferred stock, Class A, outstanding shares | 5,546 | 5,546 |
Preferred stock, Class B, par value | $ 0.001 | $ 0.001 |
Preferred stock, Class B, authorized shares | 50,000 | 50,000 |
Preferred stock, Class B, issued shares | 0 | 50,000 |
Preferred stock, Class B, outstanding shares | 0 | 50,000 |
Preferred stock, Class C, par value | $ 0.001 | $ 0.001 |
Preferred stock, Class C, authorized shares | 215,000 | 215,000 |
Preferred stock, Class C, issued shares | 215,000 | 120,000 |
Preferred stock, Class C, outstanding shares | 215,000 | 120,000 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, authorized shares | 20,000,000 | 20,000,000 |
Common stock, issued shares | 14,129,666 | 11,150,396 |
Common stock, outstanding shares | 14,129,666 | 11,150,396 |
Statements of Operations (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
Income Statement [Abstract] | ||||
Revenue | $ 1,362,871 | $ 2,264,713 | $ 5,173,448 | $ 5,603,505 |
Direct costs of revenue | 990,624 | 1,755,751 | 3,810,790 | 4,214,657 |
Advertising and marketing expenses | 60,394 | 30,552 | 147,241 | 141,786 |
Recruiting - salaries and costs | 340,331 | 420,800 | 1,052,939 | 1,276,756 |
Professional and consulting fees | 62,074 | 73,104 | 205,371 | 412,881 |
General and administration expenses | 741,454 | 819,505 | 2,415,133 | 2,783,085 |
Total operating expenses | 2,194,877 | 3,099,712 | 7,631,474 | 8,829,165 |
Loss from operations | (832,006) | (834,999) | (2,458,026) | (3,225,660) |
Other expenses, net | 110,800 | 349,636 | 287,294 | 2,499,448 |
Loss before income taxes | (942,806) | (1,184,635) | (2,745,320) | (5,725,108) |
Income taxes | 0 | 0 | 0 | 0 |
Net (loss) | $ (942,806) | $ (1,184,635) | $ (2,745,320) | $ (5,725,109) |
Net loss per common share - basic and fully diluted | $ (0.07) | $ (0.16) | $ (0.23) | $ (0.86) |
Weighted average common shares outstanding- basic and fully diluted | 13,097,401 | 7,523,182 | 11,914,010 | 6,666,178 |
Document and Entity Information (USD $) | 9 Months Ended | |
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Sep. 30, 2011 | Oct. 31, 2011 | |
Document And Entity Information | ||
Entity Registrant Name | MEDICAL CONNECTIONS HOLDINGS, INC. | |
Entity Central Index Key | 0001140303 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2011 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Public Float | $ 15,777,498 | |
Entity Common Stock, Shares Outstanding | 15,994,333 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2011 |
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Going Concern | 9 Months Ended |
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Sep. 30, 2011 | |
Notes to Financial Statements | |
Going Concern |
NOTE 7 - GOING CONCERN
The accompanying consolidated financial statements have been prepared in accordance with accounting principles 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 does not have enough recurring revenue 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 condensed consolidated 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 operating revenues. The Company has historically issued equity securities to fund operations although there is no guarantee of the Companys ability to do so in the future. |
Stockholders Equity | 9 Months Ended |
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Sep. 30, 2011 | |
Notes to Financial Statements | |
Stockholders Equity |
NOTE 3 - STOCKHOLDERS' EQUITY
Effective as of June 20, 2011, the Company effectuated a 1-for-10 reverse stock split. All share and per share data for all prior periods presented have been revised to give retroactive effect to the reverse stock split.
SERIES A PREFERRED STOCK
As of September 30, 2011, the Company had 100,000 shares of Series A Preferred Stock authorized, $0.001 par value per share, and 5,546 shares were issued and outstanding. Each holder of the Series A Preferred Stock may convert each share of Preferred Stock into 19 shares (the Conversion Ratio) of the Companys Common Stock at any time. The Conversion Ratio is subject to adjustment in the event of any recapitalization or reorganization. Until such shares of Series A Preferred Shares are exchanged for the Companys Common Shares, each holder of a Series A Preferred Share shall be entitled to one vote per share and will vote together with holders of the Companys Common Stock and Series C Preferred Stock on all matters which are brought to a vote of the holders of our Common Stock at an annual or special meeting (or pursuant to a written consent), except with respect to the election of directors and as otherwise required by Florida law. Holders of the Series A Preferred Stock have no other rights or preferences. As of September 30, 2011, a total of 47,727 shares of Series A Preferred Stock have been converted into 906,813 shares of our Common Stock. There were no shares of Series A Preferred Stock converted into Common Stock during the three or nine months ended September 30, 2011.
SERIES B PREFERRED STOCK
As of September 30, 2011, the Company has 50,000 shares of Series B Preferred Stock authorized, $0.001 par value per share, and -0- shares issued and outstanding. Each share of Series B Preferred Stock had 10 votes per share and will vote together with holders of the Company's common stock and Series C Preferred Stock as a single class on all matters presented to the Company's shareholders at an annual or special meeting (or pursuant to written consent), except with respect to the matters relating to the election of directors or as otherwise required by Florida law. The Series B Preferred Stock does not have any dividend or liquidation preferences and is not convertible into shares of the Companys Common Stock.
SERIES C PREFERRED STOCK
As of September 30, 2011, the Company has 215,000 shares of Series C Preferred Stock authorized, $0.001 par value per share, and 215,000 shares issued and outstanding. Each share of Series C Preferred Stock has 100 votes per share and will vote together with holders of the Company's common stock and Series A Preferred Stock as a single class on all matters presented to the Company's shareholders at an annual or special meeting (or pursuant to written consent), except with respect to the matters relating to the election of directors or as otherwise required by Florida law. The holders of a majority of shares of the Company's Series C Preferred Stock will have the right to appoint a majority of the directors serving on the Company's Board. The Series C Preferred Stock does not have any dividend or liquidation preferences and is not convertible into shares of the Companys Common Stock. During the period ended June 30, 2011, 50,000 shares of Series B Preferred Stock were relinquished and replaced by 5,000 shares of Series C Preferred Stock. Also, 90,000 shares of Series C Preferred Stock were issued during that period to management for services rendered to the Company. The Company determined that the fair value of the shares of Series C Preferred Stock was insignificant.
COMMON STOCK
As of September 30, 2011, the Company has 20,000,000 shares of common stock authorized, $0.001 par value per share, and 14,129,666 shares issued and outstanding.
During the nine months ended September 30, 2011, the Company sold 2,979,270 shares of its common stock for total net proceeds of $777,530. In addition, during the same period warrants to purchase 160,000 shares of common stock were exercised for total net proceeds of $1,600. During the three months ended September 30, 2011, the Company sold 2,101,000 shares of its common stock for total net proceeds of $475,250.
In October 2011, the Company sold 1,876,666 shares of its common stock for total net proceeds of $302,500.
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Contingencies | 9 Months Ended |
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Sep. 30, 2011 | |
Notes to Financial Statements | |
Contingencies |
NOTE 8 - CONTINGENCIES
Legal Proceedings: On March 23, 2011, the Company was served with a complaint filed by Nightingale Nurses, LLC ("Nightingale") in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida (the "Litigation'") that alleged that the Company breached the terms of a mutual confidentiality agreement between the Company and Nightingale, including certain confidentiality and non-solicitation provisions. Nightingale also alleged that the Company hired four former employees of Nightingale in violation of loyalty pledges that the employees signed with Nightingale. The Company denied all material allegations alleged in the Litigation and denied any wrongdoing and liability of any kind. However, in an effort to avoid the expense, inconvenience, distraction and uncertainty of litigation, on May 24, 2011, the Company and Nightingale entered into a settlement agreement ("Settlement Agreement") that settled all claims each party had against the other party in the Litigation and the dismissal of the Litigation with prejudice. Each party paid their own legal fees relating to the Litigation and the Company made a settlement payment in the amount of $101,000. This expense was included as a component of general and administrative expenses for the three month period ended June 30, 2011. Pursuant to the terms of the Settlement Agreement, the Company and Nightingale each granted the other party a full release of all claims that were or could have been brought against the other party in the Litigation. Nightingale also gave full releases to the four former employees of Nightingale who were alleged to have violated their loyalty pledges. In December 2010, the Company and our President, Anthony Nicolosi, were served with a Cease and Desist Order (the "Order"), with a Notice of Right To Hearing, from the Alabama Securities Commission styled "In the Matter of Medical Connections Holdings, Inc., Anthony Nicolosi," (Adm. Order No. CD-2010-0062). The Order requires the cessation of offering or selling securities into, within or from the State of Alabama during the pendency of the Order. The Cease and Desist Order alleges that Mr. Nicolosi omitted material facts in the sale of a security to a single Alabama investor and violated the agent registration requirements in Alabama. The Company made a rescission offer to the Alabama investor which included information that the Alabama Securities Commission alleged should have been disclosed to the investor relating to the name change of Mr. Nicolosi and his regulatory history concerning a disciplinary proceeding instituted by the Financial Industry Regulatory Authority (FINRA) and settled by means of an Acceptance Waiver and Consent. The Alabama investor rejected the rescission offer. The Company had an informal meeting with the Alabama Securities Commission in March 2011 and is in the process of attempting to resolve the matter. There has been no adjudication as to the truth of the allegations upon which the Order was based. The Company and certain of its subsidiaries are subject to other various pending or threatened legal proceedings arising out of the normal course of business or operations. In view of the inherent difficulty of predicting the outcome of such matters, the Company cannot state what the eventual outcome of these matters will be. However, based on current knowledge, management believes that current reserves, determined in accordance with ASC 450 (formerly SFAS No. 5, Accounting for Contingencies), are adequate, and the amount of any incremental liability arising from these matters is not expected to have a material adverse effect on the Companys consolidated financial condition or results of operations.
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Organization And Basis Of Presentation | 9 Months Ended |
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Sep. 30, 2011 | |
Notes to Financial Statements | |
Organization And Basis Of Presentation | NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Medical Connections Holdings, Inc. and its wholly-owned subsidiary (the "Company," "we" or "us") is a healthcare staffing company which provides staffing services for allied professionals and nurses to our clients on a national basis. We provide recruiting and staffing services for permanent and temporary positions, with an option for the clients and candidates to choose the most beneficial working arrangements.
The Company operates under a holding company structure and has one direct wholly-owned operating subsidiary, Medical Connections, Inc., a Florida corporation ("Medical Connections") which was formed in 2002. On June 20, 2011, the Company effectuated a 1-for-10 reverse stock split. All share and per share data for all periods presented have been revised to give retroactive effect to the reverse stock split.
In our opinion, the accompanying condensed consolidated balance sheets and related condensed consolidated interim statements of operations and cash flows include the adjustments (consisting of normal and recurring items) necessary for their fair presentation in conformity with United States generally accepted accounting principles ("GAAP") and represent our accounts after the elimination of inter-company transactions. The unaudited information included in this Form 10-Q should be read in conjunction with the consolidated financial statements contained in our 2010 Annual Report on Form 10-K/A which was filed with the Securities and Exchange Commission on July 1, 2011. Interim results are not necessarily indicative of expected results for a full year or for any interim periods in the future. |
Stock Options And Warrants | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options And Warrants |
NOTE 4 - STOCK OPTIONS AND WARRANTS
At September 30, 2011, the Company had one stock option plan, its 2010 Stock Option Plan ("Plan"). We have reserved an aggregate of one million shares of common stock for issuance under the Plan, which provides for the granting of options, restricted stock, stock appreciation rights, performance shares and performance units to our employees, consultants and non-employee directors.
The Company accounts for the fair value of its grants under this plan in accordance with ASC718. The compensation cost that has been charged to operations for this plan is $0 for the three and nine months ended September 30, 2011 and 2010, respectively.
There were no stock options outstanding and exercisable at September 30, 2011.
Warrant Grants
In connection with various equity financings, we have outstanding warrants to purchase a total of 501,313 shares of our common stock.
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Provision For Income Taxes | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision For Income Taxes |
NOTE 5 - PROVISION FOR INCOME TAXES
The Company reported no tax expense or benefit for the three and nine months ended September 30, 2011 and 2010 due to the net operating losses incurred during the periods and a valuation allowance established against 100% of the Companys deferred tax assets. At September 30, 2011 and December 31, 2010, deferred tax assets consist of the following:
As of December 31, 2010, the Company had a net operating loss carry-forward of approximately $31,000,000 available to offset future taxable income through 2026. Under Internal Revenue Service (IRS) Section 382, the future utilization of certain components of the loss carry-forward may be limited. The Company established valuation allowances equal to the full amount of the deferred tax assets due to managements assessment of the uncertainty of the utilization of the operating losses in the future.
The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-thannot threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company had no uncertain tax positions as of September 30, 2011 and December 31, 2010. The Company is subject to income taxes in the U.S. federal jurisdiction and a number of state jurisdictions, including the state of Florida. The tax regulations within each jurisdiction are subject to interpretation of related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state and local examinations by tax authorities for the years before 2008. |
Concentrations Of Credit Risk | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Notes to Financial Statements | |
Concentrations Of Credit Risk |
NOTE 6 CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Company to concentrations of credit risk, consist primarily of trade receivables. The Company has attempted to minimize this risk by monitoring customers credit and payment activities.
During the three and nine months ended September 30, 2011 and 2010, no single customer accounted for greater than 10% of revenue. |
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M^:711`<=PG&1E+S>1V0]F6'!N50Y'X-)ZY NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES
OF CONSOLIDATION The
consolidated financial statements include the accounts of Medical Connections Holdings, Inc., and its wholly-owned subsidiary.
All material inter-company transactions and balances have been eliminated in consolidation. USE
OF ESTIMATES The
preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ materially from those estimates. ALLOWANCES
FOR DOUBTFUL ACCOUNTS / SALES ALLOWANCE Accounts
are written off when management determines that an account is uncollectible. Recoveries of accounts previously written off are
recorded when received. Estimated allowances for doubtful accounts ($50,000 as of September 30, 2011 and December 31, 2010) are
determined to reduce the Company's receivables to their carrying value, which approximates fair value. Estimated allowances for
sales falloffs ($60,000 as of September 30, 2011 and December 31, 2010) provide for that portion of permanent placement
revenue that may be discounted after a reasonable period of time. All allowances are estimated based on historical collection
experience, specific review of individual customer accounts, and current economic and business conditions. A roll forward of the
allowance for doubtful accounts and sales allowances is as follows: ADVERTISING The
Company's policy is to expense the costs of advertising and marketing as they are incurred. Advertising expense for the three
months ended September 30, 2011 and 2010 was $60,394 and $30,552, respectively. For the first nine months ended September 30,
2011 and 2010, advertising expense was $147,241 and $141,786, respectively. INCOME
TAXES We
account for income taxes in accordance with ASC 740, Accounting for Income Taxes, as clarified by ASC 740-10, Accounting
for Uncertainty in Income Taxes. Under this method, deferred income taxes are determined based on the estimated future
tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted
tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In
providing for deferred taxes, we consider tax regulations of the jurisdictions in which we operate, estimates of future taxable
income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning
strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances
are recorded related to deferred tax assets based on the more likely than not criteria of ASC 740. ASC
740-10 requires that we recognize the financial statement benefit of a tax position only after determining that the relevant tax
authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not
threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood
of being realized upon ultimate settlement with the relevant tax authority. 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 Basic
loss per share excludes dilution and is computed by dividing the loss attributable to common shareholders by the weighted-average
number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance
of common stock that shared in the loss of the Company. Diluted loss per share is computed by dividing the loss available to common
stockholders by the weighted average number of common shares outstanding for the period and dilutive potential common shares outstanding
unless consideration of such dilutive potential common shares would result in anti-dilution. Common stock equivalents were not
considered in the calculation of diluted loss per share as their effect would have been anti-dilutive for the periods ended September
30, 2011 and 2010. As of September 30, 2011 and 2010, there were common stock equivalents of 606,687 shares excluded from the
diluted loss per share calculation. REVENUE
RECOGNITION The
Company records its transactions under the accrual method of accounting whereby revenue is recognized when the services are rendered
and collection is reasonably assured. The Company recognizes revenue
from permanent placement services when
it sends an invoice to the contracting employer, which is typically when the candidate has commenced employment. Adjustments to
the fee for these services occur if the candidates performance is not satisfactory or if the candidate does not commence
work requiring the Company to find a replacement candidate. Contract appointments include contracts
for what is commonly known as travel positions, which are for allied health professionals, nurses or physicians
who are willing to take temporary assignments outside their home region. Under this arrangement, we are the employer of record
for the healthcare professional. The healthcare facility remits a fee to us that includes all employment overhead, as well as
a surcharge for the service. The revenue from this activity is earned from the commission and surcharge for the service which
is billed and recognized as services are rendered. FAIR
VALUE OF FINANCIAL INSTRUMENTS The
carrying amount reported in the balance sheets for cash and cash equivalents, accounts receivable, and accounts payable approximate
fair value because of the immediate or short-term maturity of these financial instruments. RECLASSIFICATIONS Certain
amounts in 2010 were reclassified to conform to the 2011 presentation. These reclassifications had no effect on net loss for the
periods presented.*'\B`.BTRB/(R8
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MSJ.P7&B@I:?O9\0#D`LH(JF_B%L=M!P`*9AB59J9 Months Ended Notes to Financial Statements Summary Of Significant Accounting Policies
Balance, January 1, 2011
$ 110,000
Additions:
Bad debt expense
9,273
Sales allowance
40,654
Deductions:
Write offs
49,927
Balance, September 30, 2011
$ 110,000