UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K





x ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934





For
the Fiscal Year Ended June 30, 2008


OR


o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934





For the
transition period from N/A to N/A


Commission
File Number:  0-25474





MedCom
USA, Incorporated


(Name of
small business issuer as specified in its charter)


Delaware
            65-0287558State
      of Incorporation
            IRS
      Employer Identification No.





7975
North Hayden Road, Suite D-333, Scottsdale, AZ 85258


(Address
of principal executive offices)


Registrant's
telephone number, including Area Code: (480) 675-8865


Securities
registered pursuant to Section 12(b) of the Act:  None


Securities
registered pursuant to Section 12(g) of the Act:





Common
Stock, $.0001 Par Value





Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule405 of the Securities Act. Yes No




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes    
No




Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
o




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
(Check one):




Large accelerated filer  o
              Non-acceleratedfilero
            
            Acceleratedfilero
              Small
      Business Issuer  x





Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act. Yes  No x


The
aggregate market value of voting stock held by non-affiliates of the registrant
on June 30, 2008 was approximately $6,460,000




State the
number of shares outstanding of each of the issuer’s classes of equity
securities, as of the latest practicable date: As at June 30, 2008, there were
95,608,,789 shares of Common Stock, $0.0001 par value per share issued and
outstanding and 4,250 Series A preferred stock, $0.001 par value per share,
issued outstanding and 2,850 Series D preferred stock $.0001 par value per
share, issued outstanding.


Documents
Incorporated By Reference





None













TABLEOF CONTENTS





PARTIITEM 1.
            
            BUSINESS
            
            3ITEM 1A.
            
            RISK FACTORS
            
            6ITEM 2.
            
            PROPERTIES
            
            11ITEM 3.
            
            LEGAL PROCEEDINGS
            
            11ITEM 4.
            
            SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS
            
            11PART IIITEM 5.
            
            MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
      MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
            
            11ITEM 6.
            
            SELECTED FINANCIAL DATA
            
            14ITEM 7.
            
            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
      AND RESULTS OF OPERATIONS
            
            14ITEM 7A.
            
            QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK
            
            21ITEM 8.
            
            FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
            
            F-1ITEM 9.
            
            CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
      AND FINANCIAL DISCLOSURE
            
            22ITEM 9A.
            
            CONTROLS AND PROCEDURES
            
            22ITEM 9B.
            
            OTHER INFORMATION
            
            23PART IIIITEM 10.
            
            DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE
      COMPLIANCE WITHSECTION
      16(a) OF THE EXCHANGE ACT.
            
            23ITEM 11.
            
            EXECUTIVE COMPENSATION
            
            24ITEM 12.
            
            SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
      AND RELATED STOCKHOLDER MATTERS
            
            27ITEM 13.
            
            CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
            
            29ITEM 14.
            
            PRINCIPAL ACCOUNTANT FEES AND SERVICES
            
            29PART IVITEM 15.
            
            EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
            
            30SIGNATURES
            
            31





2
 Table of Contents





PARTI





ITEM
1.  BUSINESS.





Except
for historical information contained herein, the following discussion contains
forward-looking statements that involve risks and uncertainties.  Such
forward-looking statements include, but are not limited to, statements regarding
future events and the Company’s plans and expectations.  Actual
results could differ materially from those discussed herein.  Factors
that could cause or contribute to such differences include, but are not limited
to, those discussed elsewhere in this Form 10-KSB or incorporated herein by
reference, including those set forth in Management’s Discussion and Analysis
or Plan of Operation.





History
and General Overview





MedCom
USA, Inc. (the "Company") a Delaware corporation was formed in August 1991 under
the name Sims Communications, Inc.  The Company’s primary business was
providing telecommunications services.  In 1996 the Company introduced
four programs to broaden the Company's product and service mix: (a) cellular
telephone activation, (b) sale of prepaid calling cards, (c) sale of long
distance telephone service and (d) rental of cellular telephones using an
overnight courier service.  With the exception of the sale of prepaid
calling cards and cellular telephone activation the other programs were
discontinued in December 1997.  During the fiscal year of 1998, the
Company redirected its operations and moved into the area of medical information
processing.





The
Company changed its name to MedCom USA, Inc. in October 1999.  During
the fiscal years of 1999 and continuing through 2000, the Company directed its
efforts in medical information processing. From March 31, 2001 through 2005, the
Company operated the MedCom System (“MedCom”) that is deployed through a
point-of-sale terminal or web portal offering electronic transaction processing,
as well as insurance eligibility verification. Since 2005, the Company has
aggressively focused on its primary operations in Electronic Data Interchange
(EDI) and core business in Electronic Medical Transaction
Processing.





Medical Transaction
Processing





MedCom
System





The
Company provides innovative web-based technology solutions for the healthcare
industries that enable medical providers to check patient eligibility and a
variety of financial services to efficiently collect patient co-pays and
deductibles, The MedCom System currently operates through a
web-portal.  The company still supports point-of-sale terminals which
it had previously sold. All new business is sold through its
web-portal.





The
Company’s a “web portal” encourages customers to process their medical claims
through an online portal.   Many customers purchase the terminal
for the front office and the portal system for the back office to take advantage
of the ease of both products.





Financial
Services





The
Company’s credit card center and check services, provides the healthcare
industry a combination of services designed to improve collection and approvals
of credit/debit card payments along with the added benefit and convenience of
personal check guarantee from financial institutions.





3
 Table of Contents





Easy-Pay
is an accounts receivable management program that allows a provider to swipe a
patient’s credit card and store the patient’s signature in the terminals, and
bill the patient’s card at a later date when it is determined what services
rendered were not covered by the patient’s insurance.  Also, Easy- Pay
allows patient’s the added benefit and convenience of a one-time payment option
or a recurring installment payments that will be processed on a specified date
determined by the provider and patient.  These options insure
providers that payments are timely processed with the features of electronic
accounts receivable management.  These services are all deployed
thorough point-of-sale terminals or web portal.  Using the MedCom
system, medical providers are relieved of many of the problems associated with
billings and account management, and results in lower administrative
documentation and costs.





Patient
Eligibility





The
MedCom System is also an electronic processing system that consolidates
insurance eligibility verification, and payment services.  Presently,
the MedCom system was able to retrieve on-line eligibility information from over
450 medical insurance companies and plans in seconds  Included in this
group is the newly activated Medicare Part A & B eligibility for all 50
states.  This gives us access to over 42 million
lives.  These insurance providers include CIGNA, Prudential, Oxford
Health Plan, United Health Plans, Blue Cross, Medicaid, Aetna, Blue Cross/Blue
Shield, and Prudential.


.


Presently,
the MedCom system was able to retrieve on-line eligibility and authorization
information from approximately 450 medical insurance companies and
plans.  Included in this group is the newly activated Medicare Part A
& B eligibility for all 50 states.  This gives us access to over
42 million lives.  The system also electronically processes and
submits claims for its healthcare providers to over 1,700
companies.  These insurance providers include CIGNA, Prudential,
Oxford Health Plan, United Health Plans, Blue Cross, Medicaid, Aetna, Blue
Cross/Blue Shield, and Prudential.





Competition





Competing
health insurance claims processing and/or benefit verification systems include
Endeon and McKesson.  There are similar companies that compete with
the Company with respect to its financial transaction processing services
performed by the MedCom system.  These companies compete with the
Company directly or to some degree.  Many of these competitors are
better capitalized than the Company, and maintain a significant market share in
their respective industries.





Technical
Support Assistance





The
Company offers multiple training options for its products and services and is
easily accessed at www.medcomusa.com.  Training
and teleconferencing, and technical support assistance are also features offered
to health care providers.





Marketing
Strategy





MedCom
has broadened marketing strategy to reduce cost and increase
efficiency.  The Company just completed its final phase of its portal
software development which has broadened the sales model to its Web
Portal.  The completion of the portal will increase sales to hospitals
which results in multiple sales.  In addition, the portal has become
popular for individual doctors, dentist, and other healthcare professionals
which often results in a single or possibly multiple sales.  The
Company has focused its sales to hospitals as a growing revenue
source.





4
 Table of Contents





In the
past the Company built its marketing around a strategy of expanding its sales
capacity by using experienced external Independent Sales Organizations (ISO) and
putting less reliance on an internal sales force.  MedCom has set-up
these Independent Sales Organizations (ISOs) to market and distribute the MedCom
System throughout the U.S.  Financial service companies comprise an
important sales channel that views the healthcare industry as an important
growth opportunity.  Also 6% of all healthcare payments are made with
a credit card today. However, according to a recent survey 55% of all consumers
would prefer to pay doctor and hospital visits by credit/debit
card.





MedCom
has been expanding its position with hospitals and working closely with hospital
consultants and targeted seminars.  The Company, with its new Online
web portal product and Medicare access, is becoming an increasingly valuable
tool for the outpatient and faculty practice areas of
hospitals.  While the ISO groups focus on individual doctors, dentists
and clinics, our hospital team is focusing on multiple unit sales opportunities
with hospitals around the country. The company is working on acquiring strategic
companies with additional services and client bases to increase its market share
and revenue.





Patent





Card
Activation Technologies Inc. (“Card”) is a Delaware corporation headquartered in
Chicago, Illinois that owns proprietary patented payment transaction technology
used for electronic activation of phone, gift and affinity
cards.  MedCom owns approximately 58,000,000 shares of common stock of
Card which represents 41% of the issued and outstanding shares of
Card.





The
patent was transferred to Card by MedCom on the formation of Card and in
exchange for 146,770,504 shares of Common Stock.




Card was
incorporated in August 2006 in order to own and license, the assigned patent
which covers payment transaction technology and the process for taking a card
with a magnetic strip or other data capture mechanism and processing
transactions or activating the card. This process is utilized for prepaid phone
cards, gift cards, and debit-styled cards.  As of the date of this
report, Card has entered into a license agreement with McDonald’s
Corporation. Card has one principal asset, the patented payment transaction
technology assigned from MedCom, and one full time and one part-time employee.
Card does not expect to commence full scale operations or generate additional
revenues until late 2008. Since incorporation, Card has not made any significant
purchases or sale of assets, nor has Card been involved in any mergers,
acquisitions or consolidations. Card has filed six lawsuits to enforce its
patented technology and has sent license agreement requests to a number of
companies in order to obtain license agreements with entities that Card believes
are infringing its patent.





Card has
the ability to market and sell licensing opportunities for the patented
technology of processing debit-styled transactions, including processing
transactions with debit, phone and gift cards and also activating and adding
value to those debit-styled cards.  New View Technologies, which was
acquired by MedCom USA, developed the patent and all patents were ultimately
assigned to Card.





Service
Agreements





During
June 2005, the Company entered into a service agreement with TESIA-PCI,
Inc.  This agreement to replace and service and support POS terminals
inclusive of eligibly, claims processing, credit card processing for TESIA’s
dental providers.





5
 Table of Contents





Additional
Information





MedCom
files reports and other materials with the Securities and Exchange
Commission.  These documents may be inspected and copied at the
Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C.,
20549.  You can obtain information on the operation of the Public
Reference Room by calling the Commission at 1-800-SEC-0330.  You can
also get copies of documents that the Company files with the Commission through
the Commission’s Internet site at www.sec.gov.





Employees





As of
fiscal year end June 30, 2008, the Company had 13 employees.





ITEM1A - Risk Factors




You
should carefully consider the following risk factors before making an investment
decision. If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected. In
such cases, the trading price of our common stock could decline and you may lose
all or a part of your investment.





OUR
COMMON STOCK IS SUBJECT TO PENNY STOCK REGULATION





Our
shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly
referred to as the "penny stock" rule. Section 15(g) sets forth certain
requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The Commission generally defines penny stock to be any equity security that has
a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1
provides that any equity security is considered to be penny stock unless that
security is: registered and traded on a national securities exchange meeting
specified criteria set by the Commission; authorized for quotation on the NASDAQ
Stock Market; issued by a registered investment company; excluded from the
definition on the basis of price (at least $5.00 per share) or the registrant's
net tangible assets; or exempted from the definition by the Commission. Since
our shares are deemed to be "penny stock", trading in the shares will be subject
to additional sales practice requirements on broker/dealers who sell penny stock
to persons other than established customers and accredited
investors.





WE
MAY NOT HAVE ACCESS TO SUFFICIENT CAPITAL TO PURSUE OUR LITIGATION AND THEREFORE
WOULD BE UNABLE TO ACHIEVE OUR PLANNED FUTURE GROWTH:




We intend
to pursue a growth strategy that includes development of the Company business
and technology.  Currently we have limited capital which is
insufficient to pursue our plans for development and growth.  Our
ability to implement our growth plans will depend primarily on our ability to
obtain additional private or public equity or debt financing.  We are
currently seeking additional capital.  Such financing may not be
available at all, or we may be unable to locate and secure additional capital on
terms and conditions that are acceptable to us.  Our failure to obtain
additional capital will have a material adverse effect on our
business.





6
 Table of Contents





OUR
LACK OF DIVERSIFICATION IN OUR BUSINESS SUBJECTS INVESTORS TO A GREATER RISK OF
LOSSES:




All of
our efforts are focused on the development and growth of that business and its
technology in an unproven area.  Although the medical billing is
substantial, we can make no assurances that the marketplace will accept our
products.





WE
DO NOT INTEND TO PAY DIVIDENDS




We do not
anticipate paying cash dividends on our common stock in the foreseeable future.
We may not have sufficient funds to legally pay dividends. Even if funds are
legally available to pay dividends, we may nevertheless decide in our sole
discretion not to pay dividends. The declaration, payment and amount of any
future dividends will be made at the discretion of the board of directors, and
will depend upon, among other things, the results of our operations, cash flows
and financial condition, operating and capital requirements, and other factors
our board of directors may consider relevant. There is no assurance that we will
pay any dividends in the future, and, if dividends are rapid, there is no
assurance with respect to the amount of any such dividend.




BECAUSE
WE ARE QUOTED ON THE OTCBB INSTEAD OF AN EXCHANGE OR NATIONAL QUOTATION SYSTEM,
OUR INVESTORS MAY HAVE A TOUGHER TIME SELLING THEIR STOCK OR EXPERIENCE NEGATIVE
VOLATILITY ON THE MARKET PRICE OF OUR STOCK.




Our
common stock is traded on the OTCBB. The OTCBB is often highly illiquid, in part
because it does not have a national quotation system by which potential
investors can follow the market price of shares except through information
received and generated by a limited number of broker-dealers that make markets
in particular stocks. There is a greater chance of volatility for securities
that trade on the OTCBB as compared to a national exchange or quotation system.
This volatility may be caused by a variety of factors, including the lack of
readily available price quotations, the absence of consistent administrative
supervision of bid and ask quotations, lower trading volume, and market
conditions. Investors in our common stock may experience high fluctuations in
the market price and volume of the trading market for our securities. These
fluctuations, when they occur, have a negative effect on the market price for
our securities. Accordingly, our stockholders may not be able to realize a fair
price from their shares when they determine to sell them or may have to hold
them for a substantial period of time until the market for our common stock
improves.




FAILURE
TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE
WITH SECTION 404 OF THE SARBANES-OXLEY ACT COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS AND OPERATING RESULTS.




It may be
time consuming, difficult and costly for us to develop and implement the
additional internal controls, processes and reporting procedures required by the
Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal
auditing and other finance staff in order to develop and implement appropriate
additional internal controls, processes and reporting procedures. If we are
unable to comply with these requirements of the Sarbanes-Oxley Act, we may not
be able to obtain the independent accountant certifications that the
Sarbanes-Oxley Act requires of publicly traded companies.




If we
fail to comply in a timely manner with the requirements of Section 404 of
the Sarbanes-Oxley Act regarding internal control over financial reporting or to
remedy any material weaknesses in our internal controls that we may identify,
such failure could result in material misstatements in our financial statements,
cause investors to lose confidence in our reported financial information and
have a negative effect on the trading price of our common stock.





7
 Table of Contents





Pursuant
to Section 404 of the Sarbanes-Oxley Act and current SEC regulations,
beginning with our annual report on Form 10-K for our fiscal period ending
December 31, 2007, we will be required to prepare assessments regarding
internal controls over financial reporting and beginning with our annual report
on Form 10-K for our fiscal period ending December 31, 2008, furnish a
report by our management on our internal control over financial reporting. We
have begun the process of documenting and testing our internal control
procedures in order to satisfy these requirements, which is likely to result in
increased general and administrative expenses and may shift management time and
attention from revenue-generating activities to compliance activities. While our
management is expending significant resources in an effort to complete this
important project, there can be no assurance that we will be able to achieve our
objective on a timely basis. There also can be no assurance that our auditors
will be able to issue an unqualified opinion on management’s assessment of the
effectiveness of our internal control over financial reporting. Failure to
achieve and maintain an effective internal control environment or complete our
Section 404 certifications could have a material adverse effect on our
stock price.




In
addition, in connection with our on-going assessment of the effectiveness of our
internal control over financial reporting, we may discover “material weaknesses”
in our internal controls as defined in standards established by the Public
Company Accounting Oversight Board, or the PCAOB. A material weakness is a
significant deficiency, or combination of significant deficiencies, that results
in more than a remote likelihood that a material misstatement of the annual or
interim financial statements will not be prevented or detected. The PCAOB
defines “significant deficiency” as a deficiency that results in more
than a remote likelihood that a misstatement of the financial statements
that is more than inconsequential will not be prevented or
detected.




In the
event that a material weakness is identified, we will employ qualified personnel
and adopt and implement policies and procedures to address any material
weaknesses that we identify. However, the process of designing and implementing
effective internal controls is a continuous effort that requires us to
anticipate and react to changes in our business and the economic and regulatory
environments and to expend significant resources to maintain a system of
internal controls that is adequate to satisfy our reporting obligations as a
public company. We cannot assure you that the measures we will take will
remediate any material weaknesses that we may identify or that we will implement
and maintain adequate controls over our financial process and reporting in the
future.




Any
failure to complete our assessment of our internal control over financial
reporting, to remediate any material weaknesses that we may identify or to
implement new or improved controls, or difficulties encountered in their
implementation, could harm our operating results, cause us to fail to meet our
reporting obligations or result in material misstatements in our financial
statements. Any such failure could also adversely affect the results of the
periodic management evaluations of our internal controls and, in the case of a
failure to remediate any material weaknesses that we may identify, would
adversely affect the annual auditor attestation reports regarding the
effectiveness of our internal control over financial reporting that are required
under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls
could also cause investors to lose confidence in our reported financial
information, which could have a negative effect on the trading price of our
common stock.




THE
REPORT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM CONTAINS EXPLANATORY
LANGUAGE THAT SUBSTANTIAL DOUBT EXISTS ABOUT OUR ABILITY TO CONTINUE AS A GOING
CONCERN




The
independent auditor’s report on our financial statements contains explanatory
language that substantial doubt exists about our ability to continue as a going
concern. The report states that we depend on the continued contributions of our
executive officers to work effectively as a team, to execute our business
strategy and to manage our business. The loss of key personnel, or their failure
to work effectively, could have a material adverse effect on our business,
financial condition, and results of operations. If we are unable to obtain
sufficient financing in the near term or achieve profitability, then we would,
in all likelihood, experience severe liquidity problems and may have to curtail
our operations. If we curtail our operations, we may be placed into bankruptcy
or undergo liquidation, the result of which will adversely affect the value of
our common shares.





8
 Table of Contents





OPERATING
HISTORY AND LACK OF PROFITS WHICH COULD LEAD TO WIDE FLUCTUATIONS IN OUR SHARE
PRICE. THE PRICE AT WHICH YOU PURCHASE OUR COMMON SHARES MAY NOT BE INDICATIVE
OF THE PRICE THAT WILL PREVAIL IN THE TRADING MARKET. YOU MAY BE UNABLE TO SELL
YOUR COMMON SHARES AT OR ABOVE YOUR PURCHASE PRICE, WHICH MAY RESULT IN
SUBSTANTIAL LOSSES TO YOU.THE MARKET PRICE FOR OUR
COMMON SHARES IS PARTICULARLY VOLATILE GIVEN OUR STATUS AS A RELATIVELY UNKNOWN
COMPANY WITH A SMALL AND THINLY TRADED PUBLIC FLOAT, LIMITED




The
market for our common shares is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than a seasoned issuer for the indefinite future.
The volatility in our share price is attributable to a number of factors. First,
as noted above, our common shares are sporadically and thinly traded. As a
consequence of this lack of liquidity, the trading of relatively small
quantities of shares by our shareholders may disproportionately influence the
price of those shares in either direction. The price for our shares could, for
example, decline precipitously in the event that a large number of our common
shares are sold on the market without commensurate demand, as compared to a
seasoned issuer which could better absorb those sales without adverse impact on
its share price. Secondly, we are a speculative or “risky” investment due to our
limited operating history and lack of profits to date, and uncertainty of future
market acceptance for our potential products. As a consequence of this enhanced
risk, more risk-adverse investors may, under the fear of losing all or most of
their investment in the event of negative news or lack of progress, be more
inclined to sell their shares on the market more quickly and at greater
discounts than would be the case with the stock of a seasoned issuer. Many of
these factors are beyond our control and may decrease the market price of our
common shares, regardless of our operating performance. We cannot make any
predictions or projections as to what the prevailing market price for our common
shares will be at any time, including as to whether our common shares will
sustain their current market prices, or as to what effect that the sale of
shares or the availability of common shares for sale at any time will have on
the prevailing market price.




Shareholders
should be aware that, according to SEC Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include (1) control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer;
(2) manipulation of prices through prearranged matching of purchases and
sales and false and misleading press releases; (3) boiler room practices
involving high-pressure sales tactics and unrealistic price projections by
inexperienced sales persons; (4) excessive and undisclosed bid-ask
differential and markups by selling broker-dealers; and (5) the wholesale
dumping of the same securities by promoters and broker-dealers after prices have
been manipulated to a desired level, along with the resulting inevitable
collapse of those prices and with consequent investor losses. Our management is
aware of the abuses that have occurred historically in the penny stock market.
Although we do not expect to be in a position to dictate the behavior of the
market or of broker-dealers who participate in the market, management will
strive within the confines of practical limitations to prevent the described
patterns from being established with respect to our securities. The occurrence
of these patterns or practices could increase the volatility of our share
price.





9
 Table of Contents





VOLATILITY
IN OUR COMMON SHARE PRICE MAY SUBJECT US TO SECURITIES LITIGATION, THEREBY
DIVERTING OUR RESOURCES THAT MAY HAVE A MATERIAL EFFECT ON OUR PROFITABILITY AND
RESULTS OF OPERATIONS.




As
discussed in the preceding risk factors, the market for our common shares is
characterized by significant price volatility when compared to seasoned issuers,
and we expect that our share price will continue to be more volatile than a
seasoned issuer for the indefinite future. In the past, plaintiffs have often
initiated securities class action litigation against a company following periods
of volatility in the market price of its securities. We may in the future be the
target of similar litigation. Securities litigation could result in substantial
costs and liabilities and could divert management’s attention and
resources.




FORWARD-LOOKING
STATEMENTS




This
Annual Report contains certain forward-looking statements regarding management’s
plans and objectives for future operations including plans and objectives
relating to our planned marketing efforts and future economic performance. The
forward-looking statements and associated risks set forth in this Annual Report
include or relate to, among other things, (a)  our growth strategies,
(b) anticipated trends in our industry, (c) our ability to obtain and
retain sufficient capital for future operations, and (d) our anticipated
needs for working capital. These statements may be found under “Management’s
Discussion and Analysis or Plan of Operations” and “Business,” as well as in
this Annual Report  generally. Actual events or results may differ
materially from those discussed in forward-looking statements as a result of
various factors, including, without limitation, the risks outlined under “Risk
Factors” and matters described in this Annual Report generally. In light of
these risks and uncertainties, there can be no assurance that the
forward-looking statements contained in this Annual Report will in fact
occur.




The
forward-looking statements herein are based on current expectations that involve
a number of risks and uncertainties. Such forward-looking statements are based
on assumptions described herein. The assumptions are based on judgments with
respect to, among other things, future economic, competitive and market
conditions, and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond our control.
Accordingly, although we believe that the assumptions underlying the
forward-looking statements are reasonable, any such assumption could prove to be
inaccurate and therefore there can be no assurance that the results contemplated
in forward-looking statements will be realized. In addition, as disclosed
elsewhere in the “Risk Factors” section of this prospectus, there are a number
of other risks inherent in our business and operations which could cause our
operating results to vary markedly and adversely from prior results or the
results contemplated by the forward-looking statements. Management decisions,
including budgeting, are subjective in many respects and periodic revisions must
be made to reflect actual conditions and business developments, the impact of
which may cause us to alter marketing, capital investment and other
expenditures, which may also materially adversely affect our results of
operations. In light of significant uncertainties inherent in the
forward-looking information included in this prospectus, the inclusion of such
information should not be regarded as a representation by us or any other person
that our objectives or plans will be achieved.




Some of
the information in this prospectus contains forward-looking statements that
involve substantial risks and uncertainties. Any statement in this prospectus
and in the documents incorporated by reference into this prospectus that is not
a statement of an historical fact constitutes a “forward-looking statement”.
Further, when we use the words “may”, “expect”, “anticipate”, “plan”, “believe”,
“seek”, “estimate”, “internal”, and similar words, we intend to identify
statements and expressions that may be forward- looking statements. We believe
it is important to communicate certain of our expectations to our investors.
Forward-looking statements are not guarantees of future performance. They
involve risks, uncertainties and assumptions that could cause our future results
to differ materially from those expressed in any forward-looking statements.
Many factors are beyond our ability to control or predict. You are accordingly
cautioned not to place undue reliance on such forward-looking statements.
Important factors that may cause our actual results to differ from such
forward-looking statements include, but are not limited to, the risk factors
discussed herein.





10
 Table of Contents





ITEM2.  PROPERTIES.




As of
fiscal year end June 30, 2008 and 2007, the Company maintains its corporate
executive offices in Scottsdale, Arizona.  The Company leases 1,317
square feet of office space for approximately $32,000 annually.  The
Company entered into a three-year lease in May 2002 for the Scottsdale facility.
The Company also maintains an office in Irvine, California, for executive office
space for approximately $1,300 a month to month basis.  The Company
also leases 1,300 square feet of office space in Islandia, New York, for
approximately $28,800 annually the Company entered into a three-year lease in
April 2008;


Rental
Leases on a Monthly Basis:





Scottsdale
            
            
            Irvine
            
            
            Islandia
            
            
            Total2007
            
            $
            2,666
            
            
            $
            1,300
            
            
            $
            8,699
            
            
            
            12,6652008
            
            $
            2,666
            
            
            $
            1,300
            
            
            $
            2,500
            
            
            
            6,466








ITEM3.  LEGAL PROCEEDINGS





The
Company is also involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, except as discussed
above, the ultimate disposition of these matters will not have a material
adverse effect on the Company's financial position, results of operations, or
liquidity.





ITEM4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.





The
Company submitted no matters to a vote of its security holders during the fiscal
year ended June 30, 2008.





PART
II





ITEM5.  MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.





MedCom
common stock is traded in the over-the-counter market, and quoted in the
National Association of Securities Dealers Inter-dealer Quotation System
(“Electronic Bulletin Board) and can be accessed on the Internet at www.otcbb.com under
the symbol “EMED.”





At June
30, 2008, there were 95,608,789 shares of common stock of MedCom outstanding and
there were approximately 789 shareholders of record of the Company’s common
stock.





The
following table sets forth for the periods indicated the high and low bid
quotations for MedCom’s common stock.  These quotations represent
inter-dealer quotations, without adjustment for retail markup, markdown or
commission and may not represent actual transactions.





11
 Table of Contents




Fiscal
      Year Ended June 30, 2008
            
            High
            
            
            LowFirst
      Quarter (July – September 2006)
            
            $
            .43
            
            
            $
            .37Second
      Quarter (October – December 2006)
            
            $
            .46
            
            
            $
            .45Third
      Quarter (January – March 2007)
            
            $
            .46
            
            
            $
            .45Fourth
      Quarter (April – June 2007)
            
            $
            .43
            
            
            $
            .37First
      Quarter (July – September 2007)
            
            $
            .35
            
            
            $
            .32Second
      Quarter (October – December 2007)
            
            $
            .27
            
            
            $
            .25Third
      Quarter (January – March 2008)
            
            $
            .17
            
            
            $
            .15Fourth
      Quarter (April – June 2008)
            
            $
            .10
            
            
            $
            .07





On June
30, 2008, the closing bid price of our common stock was $.11





Dividends





MedCom
has never paid dividends on any of its common stock shares. MedCom does not
anticipate paying dividends at any time in the foreseeable future and any
profits will be reinvested in MedCom’s business.  MedCom’s Transfer
Agent and Registrar for the common stock is Corporate Stock Transfer located in
Denver, Colorado.





Recent
sales of unregistered securities





Quarter
      Ended
            
            Stock
      issued
            
            
            Cash
      Received
            
            
            Stock
      issuedfor
      Cash
            
            
            
            
            
            for
      ServicesSeptember
      30, 2006
            
            
            7,384,373
            
            
            $
            2,178,991
            
            
            
            1,837,331December
      31, 2006
            
            
            2,579,331
            
            
            $
            1,273,333
            
            
            
            4,726,870March
      31, 2007
            
            
            2,659,000
            
            
            $
            1,302,000
            
            
            
            866,530June
      30, 2007
            
            
            2,201,856
            
            
            $
            768,651
            
            
            
            200,000Year
      Ended June 30, 2007
            
            
            14,824,560
            
            
            $
            5,522,975
            
            
            
            7,630,731September
      30, 2007
            
            
            1,847,357
            
            
            $
            803,000
            
            
            
            -December
      31, 2007
            
            
            310,000
            
            
            $
            155,000March
      31, 2008
            
            
            200,000
            
            
            $
            64,000June
      30, 2008
            
            
            478,572
            
            
            $
            -
            
            
            
            466,645Year
      Ended June 30, 2008
            
            
            2,835,929
            
            
            
            1,022,000
            
            
            
            466,645








During the year ended June 30, 2007 the
Company issued 14,824,560 shares of its common stock for
$5,522,975.  The shares were issued to third parties in a private
placement of the Company’s common stock.  The shares were sold
throughout the year ended June 30, 2007, ranging from $.75 per share at the
beginning of the year to $.25 per share at the end of the
year.  Commissions of approximately $1,350,078 are recorded as a
charge in additional paidin capital as direct costs associated with the
raising of equity capital.  The offer and sale of such shares of our
common stock were effected in reliance on the exemptions for sales of securities
not involving a public offering, as set forth in Rule 506 promulgated under the
Securities Act and in Section 4(2) of the Securities Act, based on the
following: (a) the investors confirmed to us that they were “accredited
investors,” as defined in Rule 501 of Regulation D promulgated under the
Securities Act and had such background, education and experience in financial
and business matters as to be able to evaluate the merits and risks of an
investment in the securities; (b) there was no public offering or general
solicitation with respect to the offering; (c) the investors were provided with
certain disclosure materials and all other information requested with respect to
our company; (d) the investors acknowledged that all securities being purchased
were “restricted securities” for purposes of the Securities Act, and agreed to
transfer such securities only in a transaction registered under the Securities
Act or exempt from registration under the Securities Act; and (e) a legend was
placed on the certificates representing each such security stating that it was
restricted and could only be transferred if subsequent registered under the
Securities Act or transferred in a transaction exempt from registration under
the Securities Act.





12
 Table of Contents





The
Company has issued shares of its common stock as consideration to consultants
for the fair value of the services rendered.  The value of those
shares was determined based on the trading value of the stock at the dates on
which the agreements were entered into for the services.   During
the year ended June 30, 2007, the Company granted to consultants and paid out
obligations of 7,630,731 shares of common stock valued in the aggregate at
$3,900,137 with a strike price range of $.35 to $.75.  The Company
recorded as a charge in additional paid in capital an obligation buyout for the
Royalty arrangement with Dream Technology in the amount of
$4,050,480.  The offer and sale of such
shares of our common stock were effected in reliance on the exemptions for sales
of securities not involving a public offering, as set forth in Rule 506
promulgated under the Securities Act and in Section 4(2) of the Securities Act.
A legend was placed on the certificates representing each such security stating
that it was restricted and could only be transferred if subsequent registered
under the Securities Act or transferred in a transaction exempt from
registration under the Securities Act.





During
the year ended June 30, 2008 the Company issued of 2,357,357 shares of its
common stock for $1,022,000.  The shares were issued to third parties
in a private placement of the Company’s common stock.  The shares were
sold throughout the quarter ended March 31, 2008, ranging from $.35 per share at
the beginning of the period to $.48 per share at the end of the
period.  Commissions of approximately $94,975 are recorded as a charge
in additional paid in capital as direct costs associated with the raising of
equity capital.  The offer and sale of such shares of our common stock
were effected in reliance on the exemptions for sales of securities not
involving a public offering, as set forth in Rule 506 promulgated under the
Securities Act and in Section 4(2) of the Securities Act, based on the
following: (a) the investors confirmed to us that they were “accredited
investors,” as defined in Rule 501 of Regulation D promulgated under the
Securities Act and had such background, education and experience in financial
and business matters as to be able to evaluate the merits and risks of an
investment in the securities; (b) there was no public offering or general
solicitation with respect to the offering; (c) the investors were provided with
certain disclosure materials and all other information requested with respect to
our company; (d) the investors acknowledged that all securities being purchased
were “restricted securities” for purposes of the Securities Act, and agreed to
transfer such securities only in a transaction registered under the Securities
Act or exempt from registration under the Securities Act; and (e) a legend was
placed on the certificates representing each such security stating that it was
restricted and could only be transferred if subsequent registered under the
Securities Act or transferred in a transaction exempt from registration under
the Securities Act.





The
Company has issued shares of its common stock as consideration to consultants
for the fair value of the services rendered.  The value of those
shares was determined based on the trading value of the stock at the dates on
which the agreements were entered into for the services.   During
the year ended June 30, 2008, the Company granted to consultants and paid out
obligations of 478,572 shares of common stock valued in the aggregate at
$466,645.  The offer and sale of such shares of our common stock were
effected in reliance on the exemptions for sales of securities not involving a
public offering, as set forth in Rule 506 promulgated under the Securities Act
and in Section 4(2) of the Securities Act. A legend was placed on the
certificates representing each such security stating that it was restricted and
could only be transferred if subsequent registered under the Securities Act or
transferred in a transaction exempt from registration under the Securities
Act.







Transfer
Agent





On June
30, 2008, the Company engaged Corporate Stock Transfer to serve in the capacity
of transfer agent. Their mailing address and telephone number Corporate Stock
Transfer, 3200 Cherry Creek Drive South, Suite 430. Denver, CO  80209
- Phone is (303) 282-4800.





Stock
Splits





Share
data in this report have been adjusted to reflect the following stock splits
relating to the Company's common stock: June 1995: 2-for-1 forward split,
February 1996: 1-for-10 reverse split, February 1998: 1-for-4 reverse split, May
2001: 1-for-5 reverse split.


13
 Table of Contents


ITEM6.  SELECTED FINANCIAL DATA.





The
following information has been summarized from financial information included
elsewhere and should be read in conjunction with such financial statements and
notes thereto.





Summary
of Statements of Operations of EMED





Year Ended June
30, 2008 and 2007








Statement
      of Operations DataYears
      Ended June 30,
            
            
            Years
      Ended June 30,2008
            
            
            2007Revenues
            
            $
            2,901,482
            
            
            $
            4,004,899Cost
      of Deliverables
            
            
            (1,005,359
            )
            
            
            (1,682,412
            )(2,941,218
            )
            
            
            (4,876,098
            )Net
      Loss
            
            $
            (1,045,095
            )
            
            $
            (2,553,611
            )Balance
      Sheet Data:





Years
      Ended June 30,
            
            
            Years
      Ended June 30,2007
            
            
            2007Current
      Assets
            
            $
            650,968
            
            
            $
            1,013,600Total
      Assets
            
            
            1,177,025
            
            
            
            2,125,107Current
      Liabilities
            
            
            3,565,386
            
            
            
            3,341,144Non
      Current Liabilities
            
            
            3,388,663
            
            
            
            4,909,562Total
      Liabilities
            
            
            6,954,049
            
            
            
            8,250,706Working
      Capital (Deficit)
            
            
            (2,914,418
            )
            
            
            (2,327,544
            )Shareholders'Equity
      (Deficit)
            
            $
            (5,777,024
            )
            
            $
            (6,125,599
            )








ITEM7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OR PLAN OF OPERATION.





The
following is management’s discussion and analysis of certain significant factors
that have affected our financial position and operating results during the
periods included in the accompanying consolidated financial statements, as well
as information relating to the plans of our current management. This report
includes forward-looking statements. Generally, the words “believes,”
“anticipates,” “may,” “will,” “should,” “expect,” “intend,” “estimate,”
“continue,” and similar expressions or the negative thereof or comparable
terminology are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, including the matters set forth
in this report or other reports or documents we file with the Securities and
Exchange Commission from time to time, which could cause actual results or
outcomes to differ materially from those projected. Undue reliance should not be
placed on these forward-looking statements which speak only as of the date
hereof. We undertake no obligation to update these forward-looking
statements.





The
following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes thereto and other
financial information contained elsewhere in this Form 10-K.





Critical
Accounting Policies and Estimates





We
prepare our consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America. The preparation
of these financial statements requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period. Our
management periodically evaluates the estimates and judgments made. Management
bases its estimates and judgments on historical experience and on various
factors that are believed to be reasonable under the circumstances. Actual
results may differ from these estimates as a result of different assumptions or
conditions.





14
 Table of Contents





The
following critical accounting policies affect the more significant judgments and
estimates used in the preparation of the Company’s consolidated financial
statements.





Reclassifications




Certain
prior year amounts have been reclassified to conform to the current period
presentation for comparative purposes.





Stock
Based Compensation





In
December 2004, the FASB issued a revision of SFAS No. 123 ("SFAS No. 123(R)")
that requires compensation costs related to share-based payment transactions to
be recognized in the statement of operations. With limited exceptions, the
amount of compensation cost will be measured based on the grant-date fair value
of the equity or liability instruments issued. In addition, liability awards
will be re-measured each reporting period. Compensation cost will be recognized
over the period that an employee provides service in exchange for the award.
SFAS No. 123(R) replaces SFAS No. 123 and is effective as of the beginning of
January 1, 2006. Based on the number of shares and awards outstanding as of
December 31, 2005 (and without giving effect to any awards which may be granted
in 2006), we do not expect our adoption of SFAS No. 123(R) in January 2006 to
have a material impact on the financial statements.





FSP FAS
123(R)-5 was issued on October 10, 2006. The FSP provides that instruments that
were originally issued as employee compensation and then modified, and that
modification is made to the terms of the instrument solely to reflect an equity
restructuring that occurs when the holders are no longer employees, then no
change in the recognition or the measurement (due to a change in classification)
of those instruments will result if both of the following conditions are met:
(a). There is no increase in fair value of the award (or the ratio of intrinsic
value to the exercise price of the award is preserved, that is, the holder is
made whole), or the antidilution provision is not added to the terms of the
award in contemplation of an equity restructuring; and (b). All holders of the
same class of equity instruments (for example, stock options) are treated in the
same manner. The provisions in this FSP shall be applied in the first reporting
period beginning after the date the FSP is posted to the FASB website. The
Company has adopted SP FAS 123(R)-5 but it did not have a material impact on its
consolidated results of operations and financial condition.




Accounting
Policies and Estimates





The
preparation of our financial statements in conformity with accounting principles
generally accepted in the United States of America requires our management to
make certain estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.  Our management
periodically evaluates the estimates and judgments made. Management bases its
estimates and judgments on historical experience and on various factors that are
believed to be reasonable under the circumstances. Actual results may differ
from these estimates as a result of different assumptions or conditions. As such,
in accordance with the use of accounting principles generally accepted in the
United States of America, our actual realized results may differ from
management’s initial estimates as reported.  A summary of significant
accounting policies are detailed in notes to the financial statements which are
an integral component of this filing.





15
 Table of Contents





Vendor-Specific
Objective Evidence





We have
non-software and software deliverables which have a specific cost per
customer.  The costs of the deliverables are valued at based on
historical cost, usage and delivered charges.  We deliver the
following VSOE:





Provider
enrollment, EDI Connectivity, Payer/Provider, Benefit Verification – Govt.
Billings, Referral Transfers – Govt. billing, Benefit Verification – Commercial,
Referral Transfer – Commercial, Claim Status, Service Authorization,
Maintenance, Training, Support, Program Upgrades, Carrier Editions, and
Customized Reports.  These deliverables are delivered electronically
therefore the average cost is $1.02 per delivery.  The company
assessed its prior electronic costs these costs average between 80 cents to
$1.25 per customers.  Management decided to use the average cost of
$1.02 to value these deliverables.





We
provide non-software deliverables and have valued these costs based on the
average of purchasing the hardware for outside third parties.  The
non-software deliverables are the terminal which cost $394 per terminal, pin
pads which cost $100, check reader which cost $100, Reader Printers which cost
$100, and Portal Wedge costs $100.  The Company has further cost per
terminal to upgrade and update the software to be in compliance with the health
care industry which the per terminal and portal costs are $250.





Revenues





A sales
staff meets with a dental or medical professional.  During that
initial meeting a demo is displayed so the professional has first had knowledge
of the software and is use.  At the time of the meeting a
noncancellable licensing agreement is executed along with a service
agreement.  The license agreement indicates the life of the agreement
if the customer wants check readers, pin pads, portal wedge, etc. with the
software.  These units allow the professional swipe a credit card and
medical card for the software to read.





The
professional executes the licensing agreement which states the terms for a
period of 24 – 60 month agreements, number of portal/units needed, at which
location the portals will be used, the monthly licensing amount, (which varies
per contract) type of contract whether dental or medical, the amount of the
gateway access fee usually $24.95 per month which includes provider enrollment,
EDI connectivity, a the monthly maintenance charges that are billed when used as
commercial benefit verification, Referral transactions, claims status, service
authorizations, maintenance, training, support, programs upgrades, carrier
additions, and customized reports.  The professional then provides
MedCom a voided check or credit card number to automatically withdraw or charge
the licensing fee and gateway access fees on a monthly basis.  Also
those automatic withdrawals include the maintenance charges based upon
usage.  The professional also agrees to allow MedCom to provide
merchant services for Visa/MasterCard.  MedCom further agrees that the
monthly fees charged for gateway access and licensing fees will commence with in
10 day so of the execution of the noncancellable agreements.




The
Company recognizes revenue in accordance with the American Institute of
Certified Public Accountants Statement of Position (“SOP”) 97-2, “Software
Revenue Recognition,” as modified by SOP 98-9 “Modifications of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions,” and
interpreted by the Securities and Exchange Commission Staff Accounting Bulletin
(“SAB”) No. 104 - Revenue Recognition. The Company has also adopted Emerging
Issues Task Force (“EITF”) Issue No. 00-21, Accounting for Revenue Arrangements
with Multiple Deliverables.





16




The
Company recognizes revenue on software related transactions on single element
arrangements and on each element of a multiple element arrangement, when all of
the following criteria are met:





1. Persuasive
evidence of an arrangement exists, which consists of a written, non-cancelable
contract signed by both parties;


2. The
fee is fixed or determinable when we have a signed contract that states the
agreed upon fee for our products and/or services, which specifies the related
payment terms and conditions of the arrangement and it is not subject to refund
or adjustment;


3. Delivery
occurs:


a. For
licenses - due to the Web nature of our software, when the software is shipped
to our customer. Our arrangements are typically not contingent upon the customer
providing the hardware, staff for training or scheduling conflicts in general
nor do our arrangements contain acceptance clauses;


b. Non
Software deliverables- when shipped to our customers;


c.  For
access, authorization, verification and other services – ratably over the annual
service period.


d. For
post-contract customer support - ratably over the annual service
period.


e. For
professional services - as the services are performed for time and materials
contracts or upon achievement of milestones on fixed price
contracts.


4. Collection
upfront cash received fro contracts is probable as determined by a credit
evaluation, the customer’s payment history (either with other vendors or with us
in the case of follow-on sales and renewals) and financial
position.




Our
arrangements typically represent large value “multiple element” arrangements
where a multi-year term license is delivered in the first year with post
contract support (PCS) and certain professional services.  PCS some
through the life of the contract includes technical support, maintenance,
enhancements and upgrades.  In the first year, PCS is packaged with
the license and accordingly the Company allocates the arrangement fees to the
elements using the residual method which generally results in 63% of the first
year’ arrangement fee being allocated to license revenue.  The Company
recognizes revenue from license fees when the software is shipped to the
customer.  PCS subsequent to year one is optional and renewable at a
customer’s discretion on an annual basis.   The PCS revenue
subsequent to year 1 is realized annually, upon customer acceptance, as deferred
revenue and recognized as revenue over the service period of one
year.  Professional services include training and installation
services and are accounted for separately as they are not considered essential
to the functionality of the software.





The
Company charges various fees for other services as utilized by the customer.
These services include, but are not limited to, access fee, provider enrollment
fees, EDI connectivity fees, Payer/Provider fees, benefit verification fees,
referral transfer fees and service authorization fees.





Deferred
Revenue




Deferred
revenue result from fees billed to customers for which revenue has not yet been
recognized or for which the conditions of the arrangement have been modified.
Current deferred revenue generally represents PCS and training services not yet
rendered and deferred until all requirements under SOP 97-2 are satisfied.Non-current
deferred revenue represents license fees which will be deferred until such
time as all SOP 97-2 requirements have been satisfied.





17
 Table of Contents





We have
adopted the Securities and Exchange Commission’s Staff Accounting Bulletin (SAB)
No. 104, which provides guidance on the recognition, presentation and disclosure
of revenue in financial statements.





Recent
Developments





We have
signed letters of intent acquiring PayMed USA, LLC and Absolute Medical Software
Systems, LLC. PayMed USA and Absolute Medical are leading providers of Practice
Management, Electronic Medical Records, and Revenue Cycle Management software to
Hospitals, Surgery Centers and Physician Practices.





We have
renegotiated the credit facility with LEECO Financial Services in July,
2008.  We have agreed to transfer 2,000,000 common shares of its
holdings in Card Activation Technologies, Inc. a Delaware Corporation
(“CDVT”).  Commencing January 1, 2009, LEECO shall be permitted to
sell the CDVT stock in increments and shall prompt apply the proceeds from such
sales to discharge the LEECO Indebtedness, provided that LEECO shall not sell in
any given 30 day period more than a number of shares of CDVT stock that is equal
to the greater of 200,000 shares or 150% of the average daily trading volume for
such shares in the previous 30 day period provided the stock price is over
$2.00.  These common stock sales will be offset against the
outstanding balance with LEECO Financial Services, Inc.  We have been
in agreement to allocate the interest of $500,000 and payments over a period of
18 months effective September 1, 2008.





We are
further renegotiating our agreement with LADCO Financial Services,
Inc.  Presently we have been making minimum payments to reduce our
structured debt agreement.





RESULTS
OF OPERATIONS





Fiscal
Year Ended June 30, 2008, Compared to Fiscal Year Ended June 30,
2007





Revenues
for Fiscal 2008 decreased to $2,901,482 from $4,004,899 during fiscal 2007 as
72% reduction.  This decrease in revenue is directly the result of
changes in the Company's strategic direction in core operations.  This
included discontinuing declining or unprofitable and business
sectors.  We continue to aggressively pursue and devote its resources
and focus its direction in electronic medical transaction
processing.   The Company’s agreement with its credit facility in
connection with the licensing of terminals and portal transactions therewith, We
must defer revenue on licensing agreement of the terminals and portal
software.





We have
further refocused is sales to large practice management groups to sell multiple
web portals and further have expanded its exposure and future sales with a large
dental group.  In year ended 2007 the negotiations and relationship
with the practice management and dental groups were being fostered and the
company will not realize those efforts until fiscal year 2008.





Cost of
deliverables for the quarter ended fiscal 2008 decreased to $1,005,359 as
compared to fiscal 2007 of $1,682,412 a 69% reduction.  We have
developed the MedComConnect portal package that will decrease the cost of
deliverables as the company focuses on the sale of the portal software which
rendered the medical terminals sales no longer the core revenue model for us.
The decrease in cost of deliverables is directly related to the decrease in
revenues from the two fiscal years.  Further we no longer pay
commission on future revenues from its noncancellable licensing
agreements.  Commissions are paid at inception of the licensing
agreement at a 10% rate and there are no future payments on residuals revenues
from gateway access fees and licensing fees.





Selling
expenses for the fiscal 2008 decreased to $52,313 as compared to fiscal 2007 of
$209,998 a 25% reduction.  This decrease is primarily the result of
marketing efforts and includes commissions paid to internal sales personnel to
market the Company’s products and services.  We have introduced the
telesales marketing strategy for less expensive sales force and more effective
in the future.  We have been focused on the practice management and
large dental groups and should see the results of their efforts in fourth
quarter.





18
 Table of Contents





General
and administrative expenses for the fiscal 2008 decreased to $2,467,504 as
compared to fiscal 2007 of $4,127,360 a 62%
reduction.    This decrease is attributed to the Company's
reduction of workforce in their New York operations as We have streamlined
overall employee use.  We have implemented and advanced its in-house
software to perform many of the services the prior employees were performing
manually.  The decrease is related to settling outstanding litigation
which resulted decrease in legal fees.  We do not expect additional
expense related to this expense in the future.





Interest
expense for fiscal 2008 decreased to $512,358 as compared to fiscal 2007 of
$885,189 a 38% reduction.  This decrease is a result of renegotiation
of the Company’s credit facility with Ladco who was charge a higher interest
rate.  Also, expenses were incurred and paid on notes We have
outstanding with LeeCo.  Further We have renegotiation has reduced the
accrual of interest below 3% until paid in full in 2009.  We have also
have been paying down the LeeCo obligation which has grown from the increase in
financing through LeeCo Financial Inc.  The payments to Ladco
represented a high interest rate and it has been a Company initiative to reduce
the Ladco debt to zero.   Interest income for fiscal 2008
decreased to $179,097 as compared to Fiscal 2007 of $395,050. The decrease is
due to the reduction in current sales of the portal software from our license
agreements.  The licensing agreements are noncancellable licensing of
our portal software in which we capitalize the receivable and liability related
to the life of the licensing agreement.  The accrual of these
licensing agreements results in interest income.





The loss
for fiscal 2008 decreased to ($1,045,095) as compared to fiscal 2007 of
($2,553,611).  The decrease is due to the reduction in revenue, sales
force, royalty expense, commissions, and reduction in operations in our New York
facility.





No tax
benefit was recorded on the expected operating loss for fiscal 2008 and 2007 as
required by Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes.  For the quarter ended we do not expect to realize a
deferred tax asset and it is uncertain, therefore we have provided a 100%
valuation of the tax benefit and assets until we are certain to experience net
profits in the future to fully realize the tax benefit and tax
assets.





LIQUIDITY
AND CAPITAL RESOURCES





Our
operating requirements have been funded primarily on its sale of licensing
agreements with hospitals, medical and dental professionals and sales of our
common stock.  During the fiscal 2008, our net proceeds from the
licensing of our software portals were $874,591 as compared to fiscal 2007 of
$1,505,166.  We have received $1,022,000 in fiscal 2008 as compared to
Fiscal 2007 of $5,474,375 in proceeds from the sale of common
stock.  We believe that the cash flows from its monthly service and
transaction fees are inadequate to repay the capital obligations and have relied
upon the sale of common stock through a private place to sustain its
operations.





Cash used
in operating activities for the fiscal year 2008 was $1,567,875 compared to
$3,966,556 for fiscal year 2007.  We have focus on core operations
results in an increase in licenses receivable.  We receive payments
from customers automatically through electronic fund
transfers.  Collection cycles are generally less than thirty
days.  We have grown its operations to begin to reduce the deficit
cash flow positions.  However we are still operating in a
deficit.





19
 Table of Contents





Cash
provided by investing activities was $498,271 for fiscal 2008, compared to
$523,215 for Fiscal 2007.  Streamlining operations and capital budget
curtailment practices promoted a reduction in equipment purchases for
us.  However, we continue to employ software development teams that
are upgrading the existing proprietary software in our terminal and portal
licensing agreement sold.  We have developed its portal software
during fiscal 2008.  Fiscal 2008 the chairman advanced funds of
$1,053,907 as compared to ($489,626) for fiscal 2007.  We have
received advances for fiscal 2008 of $163,250 as compared to $49,541 in fiscal
2007 to Card Activation Technologies, Inc.





Cash
provided by financing activities was $1,105,251 for fiscal 2008 as compared to
$3,407,213 for fiscal 2007.  Financing activities primarily consisted
of proceeds from the licensing of our software portal transactions through our
licensing agreements with hospitals and medical and dental
professionals.  We do not have adequate cash flows to satisfy its
obligations although have improved cash flow and anticipates have adequate cash
flows in the upcoming fiscal period.  We received proceeds from the
sale of common stock for fiscal 2008 of $1,022,000 as compared to fiscal 2007 of
$5,474,375.  We have decreased its licensing debt for fiscal 2008 of
$874,822 as compared to $227,458 for 2007.  We have decrease the cost
of raising capital was $94,975 for fiscal 2008 as compared to $1,350,078 for
fiscal 2007 was due to the increase in the amount of capital
raised.





We have
used funds advanced from an affiliated entity that is controlled by our chairman
and chief executive officer.  As of fiscal 2008 we maintained a note
payable from this entity for the amount of $908,987 as compared to Fiscal 2007
of $305,000 including accrued interest.  We owe the chairman
$908,987.





We have
funding agreements with LeeCo Financial Service Inc. and Ladco Financial Group
who provide exclusive funding for the License agreement between the Licensing
and us.  The funding groups accept contracts and adopt the same terms
and conditions that Licensing and we have agreed.  In prior years
Ladco required to personally guarantee the licensing agreements which were a
financial burden to us.  In Fiscal 2007, we no longer sought funding
through Ladco and have consistently sought the funding of
LeeCo.  LeeCo does not require personal guarantees of licensing
agreements other then hospital agreements.  LeeCo requires us to
personally guarantee the hospital agreements due to the size and volume of
transaction with the terminal and web portals.





We expect
increased cash flow from its existing services fees which include transaction
processing, benefit claims processing, direct terminal sales, and credit card
processing. The decrease in cost of deliverables is directly related to the
sales through our telesales.





We are
looking at expanding the market for its services
and considering prospective acquisitions that would complement
the existing revenue model.  We have investigated two possible
acquisitions but until due diligence is completed and negotiations have been
completed we will continue to look for possible new horizontal business
mergers.




On
September 14, 2006 we have renegotiated the Ladco debt.  We have
agreed to pay penalties and late fees of $268,585.73 in exchange the
renegotiated balance would only carry an interest rate of 3% reduced from 26% in
the original note.  We originally owed $3,015,063 and renegotiated the
balance to $3,880,500 which included the accrued penalties and late
fees.  Further we would be able to pay the remaining balance of the
note for 39 months at $99,500 payments per month until paid in
full.  Under the renegotiated note the note matures on October
2009.  We has paid $895,500 toward the unpaid for fiscal 2007 and
there is an outstanding balance of $2,985,000 of the Ladco
obligation.





20
 Table of Contents





LeeCo
agreement adopts the agreement that we execute with the
customer.  LeeCo collects all funds through ACH and is paid from those
proceeds.  The excess of those proceeds are collected by
us.  LeeCo holds as collateral all the proceeds from the customer
leases, access fees and all cash collections and is secured from all assets of
ours.





The
licensing agreement is executed between the professional and the
MedCom.  During the course of the agreement we ACH’s the accounts of
the professionals and LeeCo collects the fees and reduces the liability for the
licensing fees collected and returns any excess transaction fees to
us.  The professional does not finance their agreement with LeeCo, we
finance the agreement.  LeeCo is not a related party of
ours.  The financing of the licensing agreement is calculated as part
of our revenue recognition process as the monthly collection of the licensing
fee is recorded against the outstanding balance.  Revenue is not
recognized in excess of the cash received from our financing of the likening
agreement in accordance with SAB 101.  The guarantees that are
provided in connection with the hospital agreements have not changed our revenue
recognition process except the accrual of the interest expense related to the
unpaid balances.





We have
renegotiated the credit facility with LEECO Financial Services in July,
2008.  We have agreed to transfer 2,000,000 common shares of its
holdings in Card Activation Technologies, Inc. a Delaware Corporation
(“CDVT”).  Commencing January 1, 2009, LEECO shall be permitted to
sell the CDVT stock in increments and shall prompt apply the proceeds from such
sales to discharge the LEECO Indebtedness, provided that LEECO shall not sell in
any given 30 day period more than a number of shares of CDVT stock that is equal
to the greater of 200,000 shares or 150% of the average daily trading volume for
such shares in the previous 30 day period provided the stock price is over
$2.00.  These common stock sales will be offset against the
outstanding balance with LEECO Financial Services, Inc.  We have been
in agreement to allocate the interest of $500,000 and payments over a period of
18 months effective September 1, 2008.





We are
further renegotiating our agreement with LADCO Financial Services,
Inc.  Presently we have been making minimum payments to reduce our
structured debt agreement.  LadCo and LeeCo have no
affiliation with the Company.





Other
Considerations





There are
numerous factors that affect the business and the results of its
operations.  Sources of these factors include general economic and
business conditions, federal and state regulation of business activities, the
level of demand for product services, the level and intensity of competition in
the healthcare electronic transaction processing industry, and the ability to
develop new services based on new or evolving technology and the market's
acceptance of those new services, our ability to timely and effectively manage
periodic product transitions, the services, customer and geographic sales mix of
any particular period, and our ability to continue to improve our infrastructure
including personnel and systems to keep pace with our anticipated rapid
growth.





ITEM7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK





We do not
hold any derivative instruments and do not engage in any hedging
activities.  We are in the business of Medical Billing through the
delivery of our portal software products.





21
 Table of Contents





ITEM8.  FINANCIAL STATEMENTS





MEDCOM
USA, INC.





TABLE OF
      CONTENTS
            PageINDEPENDENT
      REGISTERED PUBLIC ACCOUNTING FIRM:
            F-2Jewett
      Schwartz Wolfe & AssociatesCONSOLIDATED
      FINANCIAL STATEMENTS:Consolidated
      Balance Sheet at June 30, 2008 and 2007
            F-3Consolidated
      Statements of Operations for the years ended June
      30, 2008 and 2007
            F-4Consolidated
      Statements of Stockholders’ Equity for the years ended June
      30, 2008 and 2007
            F-5Consolidated
      Statements of Cash Flows for the years ended June
      30, 2008 and 2007
            F-6NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
            F-7





F-1
 Table of Contents










REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and Stockholders of


MEDCOM
USA INCORPORATED





We have
audited the accompanying consolidated balance sheet of MedCom USA Incorporated
and Subsidiaries as of June 30, 2008 and 2007, and the related consolidated
statements of operations, changes in shareholders' deficiency and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.





We
conducted our audit in accordance with the 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
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated 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 provided a reasonable basis for our
opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of MedCom USA Incorporated, Inc
and Subsidiaries, as of June 30, 2008 and 2007, and the results of their
operations and their cash flows for the period then ended in conformity with
accounting principles generally accepted in the United States of
America.





These
consolidated financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the consolidated
financial statements, the Company has operating and liquidity concerns, has
incurred an accumulated deficit of approximately $91,271,451 through the period
ended June 30, 2008, and current liabilities exceeded current assets by
approximately $2,914,418 at June 30, 2008. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans as to these matters are also described in Note 2. The consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of these
uncertainties.





JEWETT,
SCHWARTZ, WOLFE & ASSOCIATES


Hollywood,
Florida


September
28, 2007





2514
HOLLYWOOD BOULEVARD, SUITE 508 ● HOLLYWOOD, FLORIDA 33020 ● TELEPHONE (954)
922-5885 ● FAX (954) 922-5957


MEMBER -
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS ● FLORIDA INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS


PRIVATE
COMPANIES PRACTICE SECTION OF THE AICPA ● REGISTERED WITH THE PUBLIC COMPANY
ACCOUNTING OVERSIGHT BOARD OF THE SEC





F-2
 Table of Contents




MEDCOM
USA, INC.
 CONSOLIDATED
BALANCES SHEETS
 FOR
YEARS ENDED JUNE 30, 2008 and 2007
 
 ASSETS:2008
              
              
              2007CURRENT
      ASSETSCash
              
              $
              61,857
              
              
              $
              26,210Licensing
      contracts - current portion, net
              
              
              511,863
              
              
              
              790,250Prepaid
      expenses and other current assets
              
              
              77,247
              
              
              
              197,140Total
      current assets
              
              
              650,966
              
              
              
              1,013,600PROPERTY
      AND EQUIPMENT, net
              
              
              462,431
              
              
              
              483,986Licensing
      contracts - long-term portion. net
              
              
              42,120
              
              
              
              547,223Other
      assets
              
              
              -
              
              
              
              62,641Deposits
              
              
              21,507
              
              
              
              17,657TOTAL
      ASSETS
              
              $
              1,177,025
              
              
              $
              2,125,107LIABILITIES
      AND STOCKHOLDERS' DEFICIENCY:CURRENT
      LIABILITIES:Accounts
      payable
              
              $
              131,523
              
              
              $
              123,156Accrued
      expenses and other liabilities
              
              
              285,344
              
              
              
              54,442Dividend
      payable
              
              
              23,750
              
              
              
              23,750Notes
      from afiliates
              
              
              1,118,957
              
              
              
              305,000Deferred
      revenue - current portion
              
              
              193,809
              
              
              
              498,971Licensing
      obligations - current portion
              
              
              1,812,003
              
              
              
              2,335,825Total
      current liabilities
              
              
              3,565,386
              
              
              
              3,341,144Licensing
      obligations - long-term portion
              
              
              3,006,173
              
              
              
              3,357,175Deferred
      revenue
              
              
              382,490
              
              
              
              1,552,387Total
      liabilities
              
              
              6,954,049
              
              
              
              8,250,706STOCKHOLDERS'
      DEFICIENCY:Convertible
      preferred stock, series A $.001par value, 52,900 shares designated, 4,250
      issued and outstanding
              
              
              4
              
              
              
              4Convertible
      preferred stock, series D $.01par value, 50,000 shares designated, 2,850
      issued and outstanding
              
              
              29
              
              
              
              29Common
      stock, $.0001 par value, 175,000,000 shares authorized, 95,608,789 and
      92,772,860 issued and outstanding as of June 30, 2008 and
    2007
              
              
              9,562
              
              
              
              9,278Treasury
      stock
              
              
              -
              
              
              
              (37,397
              )Paid-in
      capital
              
              
              85,484,832
              
              
              
              84,128,843Accumulated
      deficit
              
              
              (91,271,451
              )
              
              
              (90,226,356
              )Total
      stockholders' deficiency
              
              
              (5,777,024
              )
              
              
              (6,125,599
              )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIENCY
              
              $
              1,177,025
              
              
              $
              2,125,107
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-3
 Table of Contents
  MEDCOM
USA, INC.
 CONSOLIDATED
STATEMENT OF OPERATIONS
 FOR
THE YEARS ENDED JUNE 30, 2008 AND JUNE 30, 2007
 
 2008
              
              
              2007REVENUES:Terminal
      sales
              
              $
              -
              
              
              $
              41,681Service
              
              
              2,026,890
              
              
              
              2,458,052Licensing
      fees
              
              
              874,591
              
              
              
              1,505,1662,901,481
              
              
              
              4,004,899COST
      OF DELIVERABLES:
              
              
              1,005,359
              
              
              
              1,682,413GROSS
      PROFIT
              
              
              1,896,122
              
              
              
              2,322,486OPERATING
      EXPENSES:General
      and administrative expenses
              
              
              2,467,504
              
              
              
              4,127,360Sales
      and marketing expenses
              
              
              52,313
              
              
              
              209,998Total
      operating expenses
              
              
              2,519,817
              
              
              
              4,337,358OPERATING
      LOSS
              
              
              (623,695
              )
              
              
              (2,014,872
              )OTHER
      (INCOME) AND EXPENSESInterest
      expense
              
              
              512,358
              
              
              
              885,189Interest
      Income
              
              
              (179,091
              )
              
              
              (395,050
              )Legal
      settlement
              
              
              10,000
              
              
              
              48,600Impairment
      of assets
              
              
              78,133
              
              
              
              -Total
      other expense
              
              
              421,400
              
              
              
              538,739LOSS
      BEFORE INCOME TAXES
              
              
              (1,045,095
              )
              
              
              (2,553,611
              )INCOME
      TAX BENEFIT
              
              
              -
              
              
              
              -NET
      LOSS
              
              $
              (1,045,095
              )
              
              $
              (2,553,611
              )NET
      LOSS PER SHARE:Basic
      and diluted:
              
              $
              (0.01
              )
              
              $
              (0.03
              )WEIGHTED
      AVERAGE COMMON SHARES OUTSTANDING:Basic
      and diluted:
              
              
              94,837,327
              
              
              
              84,729,836
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-4
 Table of Contents
  MEDCOM
USA, INC.
 CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
 FOR
THE YEARS ENDED JUNE 30, 2008 AND 2007- Continued
 
 \
      ----------- Prefered Stock -----------\Common
      Stock
              
              
              Preferred
      A & B
              
              
              Preferred
      D
              
              
              Paid-in
              
              
              Treasury
              
              
              AccumulatedShares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Capital
              
              
              Stock
              
              
              Deficit
              
              
              TotalJUNE
      30, 2007
              
              
              92,772,860
              
              
              $
              9,278
              
              
              
              4,250
              
              
              $
              4
              
              
              
              2,850
              
              
              $
              29
              
              
              $
              84,128,843
              
              
              $
              (37,397
              )
              
              $
              (90,226,356
              )
              
              $
              (6,125,599
              )Common
      stock issued for cash
              
              
              2,357,357
              
              
              
              236
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,021,764
              
              
              
              -
              
              
              
              -
              
              
              
              1,022,000Common
      stock issued for services
              
              
              278,572
              
              
              
              28
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              277,617
              
              
              
              -
              
              
              
              -
              
              
              
              277,645Common
      stock issued for assets
              
              
              200,000
              
              
              
              20
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              188,980
              
              
              
              -
              
              
              
              -
              
              
              
              189,000Cost
      of raising capital
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (94,975
              )
              
              
              -
              
              
              
              -
              
              
              
              (94,975
              )Cancelled
      stock
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (37,397
              )
              
              
              37,397
              
              
              
              
              
              
              
              -Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,045,095
              )
              
              
              (1,045,095
              )JUNE
      30, 2008
              
              
              95,608,789
              
              
              $
              9,562
              
              
              
              4,250
              
              
              $
              4
              
              
              
              2,850
              
              
              $
              29
              
              
              $
              85,484,832
              
              
              $
              -
              
              
              $
              (91,271,451
              )
              
              $
              (5,777,024
              )
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-5
 Table of Contents
  MEDCOM
USA, INC.
 CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
 FOR
THE YEARS ENDED JUNE 30, 2008 AND 2007 - Continued
 
 \
      ----------- Prefered Stock -----------\Common
      Stock
              
              
              Preferred
      A & B
              
              
              Preferred
      D
              
              
              Paid-in
              
              
              Treasury
              
              
              AccumulatedShares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Capital
              
              
              Stock
              
              
              Deficit
              
              
              TotalJUNE
      30, 2006
              
              
              70,317,569
              
              
              $
              7,032
              
              
              
              4,250
              
              
              $
              4
              
              
              
              2,850
              
              
              $
              29
              
              
              $
              80,108,536
              
              
              $
              (37,397
              )
              
              $
              (87,672,745
              )
              
              $
              (7,594,542
              )Common
      stock issued for cash
              
              
              14,824,560
              
              
              
              1,483
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              5,521,491
              
              
              
              -
              
              
              
              -
              
              
              
              5,522,975Common
      stock issued for services
              
              
              7,630,731
              
              
              
              763
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              3,899,374
              
              
              
              -
              
              
              
              -
              
              
              
              3,900,137Cost
      of raising capital
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,350,078
              )
              
              
              -
              
              
              
              -
              
              
              
              (1,350,078
              )Cost
      of royalty
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (4,050,480
              )
              
              
              -
              
              
              
              -
              
              
              
              (4,050,480
              )Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (2,553,611
              )
              
              
              (2,553,611
              )JUNE
      30, 2007
              
              
              92,772,860
              
              
              $
              9,278
              
              
              
              4,250
              
              
              $
              4
              
              
              
              2,850
              
              
              $
              29
              
              
              $
              84,128,843
              
              
              $
              (37,397
              )
              
              $
              (90,226,356
              )
              
              $
              (6,125,599
              )
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-6
 Table of Contents
  MEDCOM
USA, INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR
THE YEARS ENDED JUNE 30, 2006 AND 2007
 
 2008
              
              
              2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
              
              $
              (1,045,095
              )
              
              $
              (2,553,611
              )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Issuance
      of stock as consideration for services
              
              
              277,645
              
              
              
              3,731,738Issuance
      of stock for legal settlement
              
              
              -
              
              
              
              48,600Cost
      of put royalty option obligation buyout
              
              
              -
              
              
              
              (4,050,480
              )Deprecation
      and amortization
              
              
              223,811
              
              
              
              991,690Allowance
      for doubtful accounts
              
              
              76,587
              
              
              
              57,948Changes
      in operating assets and liablities:Prepaid
      and other current assets
              
              
              131,117
              
              
              
              10,451Other
      assets
              
              
              3,850
              
              
              
              -Accounts
      payable
              
              
              8,368
              
              
              
              (129,058
              )Accrued
      expenses and other liabilities
              
              
              230,901
              
              
              
              (642,652
              )Deferred
      revenue
              
              
              (1,475,059
              )
              
              
              (1,431,182
              )Net
      cash used in operating activities
              
              
              (1,567,875
              )
              
              
              (3,966,556
              )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchasing
      of equipment
              
              
              (13,132
              )
              
              
              -Licensing
      contracts - current portion
              
              
              201,800
              
              
              
              (221,648
              )Licensing
      contracts - long-term portion
              
              
              505,103
              
              
              
              794,404Note
      receivable affiliates
              
              
              (195,500
              )
              
              
              (49,541
              )Net
      cash provided by investing activities
              
              
              498,271
              
              
              
              523,215CASH
      FLOWS FROM FINANCING ACTIVITIES:Licensing
      obligation - current portion
              
              
              (523,820
              )
              
              
              613,284Licensing
      obligation - long-term portion
              
              
              (351,002
              )
              
              
              (840,742
              )Cost
      of raising capital
              
              
              (94,975
              )
              
              
              (1,350,078
              )Proceeds
      from sale of common stock
              
              
              1,022,000
              
              
              
              5,474,375Proceeds
      from notes from affiliates
              
              
              1,053,048
              
              
              
              (489,626
              )Net
      cash (used in) provided by financing activities
              
              
              1,105,251
              
              
              
              3,407,213INCREASE
      (DECREASE) IN CASH
              
              
              35,647
              
              
              
              (36,128
              )CASH,
      BEGINNING OF YEAR
              
              
              26,210
              
              
              
              62,338CASH,
      END OF YEAR
              
              $
              61,857
              
              
              $
              26,210SUPPLEMENTAL
      CASH FLOW INFORMATION:2008
              
              
              2007Taxes
      paid
              
              $
              -
              
              
              $
              -Interest
      paid
              
              $
              490,509
              
              
              $
              533,493NON
      CASH FINANCING AND INVESTING:Issuance
      of common stock for assets
              
              $
              189,000
              
              
              
              168,399
 
 The
accompanying notes are an integral part of these consolidated financial
statements.


F-7
 Table of Contents





MEDCOM
USA, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR
ENDED JUNE 30, 2008and
2007'








NOTE 1 –
BACKGROUND





MedCom
USA, Inc. (the "Company") a Delaware corporation was formed in August 1991 under
the name Sims Communications, Inc.  The Company’s primary business was
providing telecommunications services.  In 1996 the Company introduced
four programs to broaden the Company's product and service mix: (a) cellular
telephone activation, (b) sales of prepaid calling cards, (c) sales of long
distance telephone service and (d) rental of cellular telephones using an
overnight courier service.  With the exception of the sale of prepaid
calling cards, these four programs were discontinued in December
1997.  During the fiscal year of 1998, the Company redirected its
operations and moved into the area of medical information
processing.





The
Company changed its name to MedCom USA, Inc. in October 1999.  During
fiscal year 1999 and continuing through 2000, the Company directed its efforts
in medical information processing. From March 31, 2001 through 2005, the Company
operated the MedCom System (MedCom) that deploys through a point-of-sale
terminal or personal computer offering electronic transaction processing, as
well as insurance eligibility verification.  At the end of fiscal 2005
the Company deployed web portal software that functioned in a similar capacity
of the terminal point-of-sale system.  Since 2005 the Company has
continued to focus on the continual maintenance and upgrade of the web portal
software.  The Company has aggressively focused on its primary
operations in Electronic Data Interchange (EDI) and core business in Electronic
Medical Transaction Processing.





NOTE 2 -
GOING CONCERN





The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America which
contemplate continuation of the Company as a going concern.  However,
the Company has year end losses from operations and had minimal revenues from
operations in 2007 and 2007.  During the year ended June 30, 2008 and
2007 the Company incurred net loss of $1,045,095 and $2,553,611,
respectively.  Further, the Company has inadequate working capital to
maintain or develop its operations, and is dependent upon funds from private
investors and the support of certain stockholders.





These
factors raise substantial doubt about the ability of the Company to continue as
a going concern.  The financial statements do not include any
adjustments that might result from the outcome of these
uncertainties.  In this regard, Management is planning to raise any
necessary additional funds through loans and additional sales of its common
stock. There is no assurance that the Company will be successful in raising
additional capital.





NOTE 3 –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





The
Company prepares its financial statements in accordance with accounting
principles generally accepted in the United States of
America.  Significant accounting policies are as follows:





Principles of
Consolidation





The
accompanying financial statements represent the consolidated financial position
and results of operations of the Company and include the accounts and results of
operations of the Company and its wholly owned subsidiaries.  The
accompanying financial statements include only the active entity of MedCom USA,
Inc. The Company has several inactive subsidiaries.





F-8
 Table of Contents





Use of
Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements.  These estimates and assumptions also affect
the reported amounts of revenues, costs and expenses during the reporting
period.  Management evaluates these estimates and assumptions on a
regular basis.  Actual results could differ from those
estimates.





The
primary management estimates included in these financial statements are the
impairment reserves applied to various long-lived assets, allowance for doubtful
accounts for gateway access fees and licensing fees, and the fair value of its
stock tendered in various non-monetary transactions.





Reclassification





Certain
prior period amounts have been reclassified to conform to current year
presentations.





Advertising
Cost





All
advertising costs were expensed as incurred. Advertising expense for the year
ended June 30, 2008 and 2007 were approximately $0.00 and $7,400,
respectively.




Cash and Cash
Equivalents





The
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.  At June 30, 2008 and
2007, cash and cash equivalents include cash on hand and cash in the
bank.





Property and
Equipment





Property
and equipment is recorded at cost and depreciated over the estimated useful
lives of the assets using principally the straight-line method. When items are
retired or otherwise disposed of, income is charged or credited for the
difference between net book value and proceeds realized
thereon.  Ordinary maintenance and repairs are charged to expense as
incurred, and replacements and betterments are capitalized.  The range
of estimated useful lives used to calculated depreciation for principal items of
property and equipment are as follow:





Asset
      Category
            
            Depreciation/
      Amortization PeriodComputer
      Equipment
            
            3
      YearsTerminal
      Software
            
            3
      YearsNetwork
      Platform
            
            3
      YearsOffice
      equipment
            
            5
      Years





F-9
 Table of Contents





Income
Taxes





Deferred
income taxes are provided based on the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), to
reflect the tax effect of differences in the recognition of revenues and
expenses between financial reporting and income tax purposes based on the
enacted tax laws in effect at June 30, 2008 and 2007, respectively.





Net Loss Per Share





Basic
earnings per share is computed in accordance with FASB No. 128 Earnings Per Share, by
dividing net income (loss) available to common shareholders by the weighted
average number of common shares outstanding during the reporting period. Diluted
earnings per share reflects the potential dilution that could occur if stock
options and other commitments to issue common stock were exercised or equity
awards vest resulting in the issuance of common stock that could share in the
earnings of the Company.  As of June 30, 2008 and 2007, there were no
potential dilutive instruments that could result in share dilution.





Fair Value of Financial
Instruments




The fair
value of a financial instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties other than in a
forced sale or liquidation.





The
following methods and assumptions were used to estimate the fair value of each
class of financial instruments for which it is practicable to estimate that
value:





Cash and
cash equivalents, licensing receivable, prepaid expenses, other assets, and
accounts payable, income tax payable, and other current liabilities carrying
amounts approximate fair value due to their most maturities.





Stock-Based
Compensation




Financial
Statement Position (“FSP”) FAS No. 123(R)-5 was issued on October 10, 2006. The
FSP provides that instruments that were originally issued as employee
compensation and then modified, and that modification is made to the terms of
the instrument solely to reflect an equity restructuring that occurs when the
holders are no longer employees, then no change in the recognition or the
measurement (due to a change in classification) of those instruments will result
if both of the following conditions are met: (a). There is no increase in fair
value of the award (or the ratio of intrinsic value to the exercise price of the
award is preserved, that is, the holder is made whole), or the antidilution
provision is not added to the terms of the award in contemplation of an equity
restructuring; and (b). All holders of the same class of equity instruments (for
example, stock options) are treated in the same manner. The provisions in this
FSP shall be applied in the first reporting period beginning after the date the
FSP is posted to the FASB website. The Company has adopted SP FAS No. 123(R)-5
but it did not have a material impact on its consolidated results of operations
and financial condition.





The
Company accounts for stock awards issued to nonemployees in accordance with the
provisions of SFAS No. 123 and 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.  Under SFAS No. 123
and EITF 96-18, stock awards to nonemployees are accounted for at their fair
value as determined under Black-Scholes option pricing model.




As of
December 31, 2008 all options and warrants awarded that were fully vested have
expired and there were no expenses for the issuance of options and warrants for
June 30, 2008 and 2007.





F-10
 Table of Contents





Goodwill and Other
Intangible Assets




The
Company adopted Statement of Financial Accounting Standard (“SFAS No.”) No. 142,
Goodwill and Other Intangible
Assets, effective July 1, 2002.  As a result, the Company
discontinued amortization of goodwill, and instead annually evaluates the
carrying value of goodwill and other intangible assets for impairment, in
accordance with the provisions of SFAS No. 142.   There was no
impairment of goodwill or other intangible assets in Fiscal 2008





Impairment of Long-Lived
Assets





In
accordance with SFAS No. 144, long-lived assets, such as property, plant, and
equipment, and purchased intangibles, are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Goodwill and other intangible assets are tested for
impairment annually. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to estimated undiscounted future
cash flows expected to be generated by the asset. If the carrying amount of an
asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset.  There were no events or changes in
circumstances that necessitated a review of impairment of long lived
assets.





Concentration of Credit
Risk





The
Company maintains its operating cash balances in banks in Islandia, New York,
and in Scottsdale, Arizona.  The Federal Depository Insurance
Corporation (FDIC) insures accounts at each institution up to
$100,000.





Financial
instruments that potentially subject the Company to concentrations of credit
risk are primarily trade accounts receivable.  The trade accounts
receivable are due primarily from small business customers in numerous
geographical locations throughout the United States.





F-11




The
Company estimates and provides an allowance for uncollectible accounts
receivable.





For the
years ended June 30, 2007, the Company had a major vendor TESIA-PCI for which a
contract was executed specifying that the Company would deliver 1500 unit over
the period of 2007.  The agreement allowed the minimum billing of
$28.50 per month per unit in a pool based on a 15 cent transaction
fee.  The Company has entered into agreements with
TESIA-PCI.  The agreements entered into by and between the Company and
TESIA-PCI represents a major licensor of the Company.





Revenue
Recognition





The
Company recognizes revenue in accordance with the American Institute of
Certified Public Accountants Statement of Position (“SOP”) 97-2, “Software
Revenue Recognition,” as modified by SOP 98-9 “Modifications of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions,” and
interpreted by the Securities and Exchange Commission Staff Accounting Bulletin
(“SAB”) No. 104 - Revenue Recognition. The Company has also adopted Emerging
Issues Task Force (“EITF”) Issue No. 00-21, Accounting for Revenue Arrangements
with Multiple Deliverables.


The
Company recognizes revenue on software related transactions on single element
arrangements and on each element of a multiple element arrangement, when all of
the following criteria are met:





1. Persuasive
evidence of an arrangement exists, which consists of a written, non-cancelable
contract signed by both parties;


2. The
fee is fixed or determinable when we have a signed contract that states the
agreed upon fee for our products and/or services, which specifies the related
payment terms and conditions of the arrangement and it is not subject to refund
or adjustment;


3. Delivery
occurs:


a. For
licenses - due to the Web nature of our software, when the software is shipped
to our customer. Our arrangements are typically not contingent upon the customer
providing the hardware, staff for training or scheduling conflicts in general
nor do our arrangements contain acceptance clauses;


b. Non
Software deliverables- when shipped to our customers;


c.  For
access, authorization, verification and other services – ratably over the annual
service period.


d. For
post-contract customer support - ratably over the annual service
period.


e. For
professional services - as the services are performed for time and materials
contracts or upon achievement of milestones on fixed price
contracts.


4. Collection
upfront cash received fro contracts is probable as determined by a credit
evaluation, the customer’s payment history (either with other vendors or with us
in the case of follow-on sales and renewals) and financial
position.




Our
arrangements typically represent large value “multiple element” arrangements
where a multi-year term license is delivered in the first year with post
contract support (PCS) and certain professional services.  PCS some
through the life of the contract includes technical support, maintenance,
enhancements and upgrades.  In the first year, PCS is packaged with
the license and accordingly the Company allocates the arrangement fees to the
elements using the residual method which generally results in 63% of the first
year’ arrangement fee being allocated to license revenue.  The Company
recognizes revenue from license fees when the software is shipped to the
customer.  PCS subsequent to year one is optional and renewable at a
customer’s discretion on an annual basis.   The PCS revenue
subsequent to year 1 is realized annually, upon customer acceptance, as deferred
revenue and recognized as revenue over the service period of one
year.  Professional services include training and installation
services and are accounted for separately as they are not considered essential
to the functionality of the software.





The
Company charges various fees for other services as utilized by the customer.
These services include, but are not limited to, access fee, provider enrollment
fees, EDI connectivity fees, Payer/Provider fees, benefit verification fees,
referral transfer fees and service authorization fees.





Deferred
Revenue




Deferred
revenue result from fees billed to customers for which revenue has not yet been
recognized or for which the conditions of the arrangement have been modified.
Current deferred revenue generally represents PCS and training services not yet
rendered and deferred until all requirements under SOP 97-2 are satisfied.Non-current
deferred revenue represents license fees which will be deferred until such
time as all SOP 97-2 requirements have been satisfied.





We have
adopted the Securities and Exchange Commission’s Staff Accounting Bulletin (SAB)
No. 104, which provides guidance on the recognition, presentation and disclosure
of revenue in financial statements.





F-12
 Table of Contents





Recent Accounting
Pronouncements




Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities





In
June 2008, the FASB issued FSP Emerging Issues Task Force (“EITF”) Issue
No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities.” The FSP addresses whether
instruments granted in share-based payment transactions are participating
securities prior to vesting and, therefore, need to be included in the earnings
allocation in computing earnings per share under the two-class method. The FSP
affects entities that accrue dividends on share-based payment awards during the
awards’ service period when the dividends do not need to be returned if the
employees forfeit the award. This FSP is effective for fiscal years beginning
after December 15, 2008. The Company is currently assessing the impact of
FSP EITF 03-6-1 on its consolidated financial position and results of
operations.





Determining
Whether an Instrument (or an Embedded Feature) Is Indexed to an entity's Own
Stock





In June
2008, the FASB ratified EITF Issue No. 07-5, "Determining Whether an Instrument
(or an Embedded Feature) Is Indexed to an Entity's Own Stock" (EITF
07-5).  EITF 07-5 provides that an entity should use a two step
approach to evaluate whether an equity-linked financial instrument (or embedded
feature) is indexed to its own stock, including evaluating the instrument's
contingent exercise and settlement provisions.  It also clarifies on
the impact of foreign currency denominated strike prices and market-based
employee stock option valuation instruments on the evaluation.  EITF
07-5 is effective for fiscal years beginning after December 15,
2008.  The Company is currently assessing the impact of EITF 07-5 on
its consolidated financial position and results of operations.





Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)





In
May 2008, the FASB issued FSP Accounting Principles Board (“APB”) Opinion
No. 14-1, “Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash Settlement).” The FSP
clarifies the accounting for convertible debt instruments that may be settled in
cash (including partial cash settlement) upon conversion.  The FSP
requires issuers to account separately for the liability and equity components
of certain convertible debt instruments in a manner that reflects the issuer's
nonconvertible debt (unsecured debt) borrowing rate when interest cost is
recognized.  The FSP requires bifurcation of a component of the debt,
classification of that component in equity and the accretion of the resulting
discount on the debt to be recognized as part of interest expense in our
consolidated statement of operations.  The FSP requires retrospective
application to the terms of instruments as they existed for all periods
presented.  The FSP is effective as of January 1, 2009 and early
adoption is not permitted.  The Company is currently evaluating the
potential impact of FSP APB 14-1 upon its consolidated financial
statements.





The
Hierarchy of Generally Accepted Accounting Principles




In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles" (FAS No.162).  SFAS No. 162 identifies the
sources of accounting principles and the framework for selecting the principles
used in the preparation of financial statements.  SFAS No. 162 is
effective 60 days following the SEC's approval of the Public Company Accounting
Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles".  The
implementation of this standard will not have a material impact on the Company's
consolidated financial position and results of operations.





F-13
 Table of Contents





Determination
of the Useful Life of Intangible Assets




In April
2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff
Position on Financial Accounting Standard (“FSP FAS”) No. 142-3, “Determination
of the Useful Life of Intangible Assets”, which amends the factors that should
be considered in developing renewal or extension assumptions used to determine
the useful life of intangible assets under SFAS No. 142 “Goodwill and Other
Intangible Assets”.  The intent of this FSP is to improve the consistency
between the useful life of a recognized intangible asset under SFAS No. 142 and
the period of the expected cash flows used to measure the fair value of the
asset under SFAS No. 141 (revised 2007) “Business Combinations” and other U.S.
generally accepted accounting principles.    The Company is
currently evaluating the potential impact of FSP FAS No. 142-3 on its
consolidated financial statements.




Disclosure
about Derivative Instruments and Hedging Activities





In March
2008, the FASB issued SFAS No. 161, “Disclosure about Derivative
Instruments and Hedging Activities, an amendment of SFAS No.
133”, (SFAS 161). This statement requires that objectives for using derivative
instruments be disclosed in terms of underlying risk and accounting designation.
The Company is required to adopt SFAS No. 161 on January 1, 2009. The Company is
currently evaluating the potential impact of SFAS No. 161 on the Company’s
consolidated financial statements.




Delay
in Effective Date




In
February 2008, the FASB issued FSP FAS No. 157-2, “Effective Date of FASB
Statement No. 157”. This FSP delays the effective date of SFAS No. 157 for
all nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value on a recurring basis (at least annually)
to fiscal years beginning after November 15, 2008, and interim periods
within those fiscal years. The impact of adoption was not material to the
Company’s consolidated financial condition or results of
operations.




Business
Combinations




In
December 2007, the FASB issued SFAS No. 141(R) “Business Combinations” (SFAS
141(R)).  This Statement replaces the original SFAS No.
141.  This Statement retains the fundamental requirements in SFAS
No. 141 that the acquisition method of accounting (which SFAS No. 141
called the purchase
method) be used for all business combinations and for an acquirer to be
identified for each business combination. The objective of SFAS No. 141(R) is to
improve the relevance, and comparability of the information that a reporting
entity provides in its financial reports about a business combination and its
effects. To accomplish that, SFAS No. 141(R) establishes principles and
requirements for how the acquirer:




a.
            Recognizes
      and measures in its financial statements the identifiable assets acquired,
      the liabilities assumed, and any noncontrolling interest in the
      acquiree.




b.
            Recognizes
      and measures the goodwill acquired in the business combination or a gain
      from a bargain purchase.




c.
            Determines
      what information to disclose to enable users of the financial statements
      to evaluate the nature and financial effects of the business
      combination.




This
Statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008 and may not be applied before
that date. The Company does not expect the effect that its adoption of SFAS No.
141(R) will have on its consolidated results of operations and financial
condition.





F-14
 Table of Contents





Noncontrolling
Interests in Consolidated Financial Statements—an amendment of ARB No.
51




In
December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51” (SFAS No.
160).  This Statement amends the original Accounting Review Board
(ARB) No. 51 “Consolidated Financial Statements” to establish accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in
a subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. This Statement is
effective for fiscal years and interim periods within those fiscal years,
beginning on or after December 15, 2008 and may not be applied before that
date.  The does not expect the effect that its adoption of SFAS No.
160 will have on its consolidated results of operations and financial
condition.




Fair
Value Option for Financial Assets and Financial Liabilities




In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities – Including an amendment of SFAS No.
115” (SFAS No. 159), which becomes effective for the Company on February 1,
2008, permits companies to choose to measure many financial instruments and
certain other items at fair value and report unrealized gains and losses in
earnings. Such accounting is optional and is generally to be applied instrument
by instrument. The Company does not anticipate that the election, of this
fair-value option will have a material effect on its consolidated financial
condition, results of operations, cash flows or disclosures.




Fair
Value Measurements




In
September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS
No. 157). SFAS No. 157 provides guidance for using fair value to measure assets
and liabilities. SFAS No. 157 addresses the requests from investors for expanded
disclosure about the extent to which companies’ measure assets and liabilities
at fair value, the information used to measure fair value and the effect of fair
value measurements on earnings. SFAS No. 157 applies whenever other standards
require (or permit) assets or liabilities to be measured at fair value, and does
not expand the use of fair value in any new circumstances. SFAS No. 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007 and will be adopted by the Company in the first quarter of
fiscal year 2008. The Company is unable at this time to determine the effect
that its adoption of SFAS No. 157 will have on its consolidated results of
operations and financial condition.




Accounting
Changes and Error Corrections




In May
2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections"
(SFAS No. 154), which replaces Accounting Principles Board (APB) Opinion No. 20,
"Accounting Changes," and SFAS No. 3, "Reporting Accounting Changes in Interim
Financial Statements - An Amendment of APB Opinion No. 28”. SFAS No. 154
provides guidance on the accounting for and reporting of accounting changes and
error corrections, and it establishes retrospective application, or the latest
practicable date, as the required method for reporting a change in accounting
principle and the reporting of a correction of an error. SFAS No. 154 is
effective for accounting changes and corrections of errors made in fiscal years
beginning after December 15, 2005. The Company adopted SFAS No. 154 in the first
quarter of fiscal year 2007 and does not expect it to have a material impact on
its consolidated results of operations and financial condition.





F-15
 Table of Contents





NOTE 4 –
LICENSING RECEIVABLE





The
Company’s license receivable current portion, net at June 30, 2008 and 2007
consisted of the following:




2008
            
            
            2007Licensing
      Contracts
            
            $
            588,450
            
            
            $
            929,406Less:
      Allowance for Doubtful Accounts
            
            
            (76,587
            )
            
            
            (139,156
            )Licensing
      Contracts - Net
            
            $
            511,863
            
            
            $
            790,250








The
Company estimated uncollectible accounts balances and provides an allowance for
such estimates.  The allowance for doubtful accounts at June 30, 2008
and 2007 consist of an estimate for potentially uncollectible accounts in the
MedCom division.





Monthly
the Company ACH’s these payments directly from the customers’ account to ensure
timely payment.  The current customer agreement requires customer sign
up of ACH authorization of these fees and other deliverables.  All
licensing agreements are noncancellable and range from a 24 – 60 month licensing
arrangement.





Allowance
for doubtful accounts beginning of the years was $139,156, additions of $88,455
and write-offs $151,024 with the remaining allowance of $76,587 for June 30,
2008.  Allowance for doubtful accounts beginning of the year was
$166,189, additions $57,948, and write-offs of $84,981 with a remaining
allowance of $139,156 for June 30, 2007.





NOTE 5 -
PROPERTY AND EQUIPMENT





Property
and equipment, net at June 30, consist of the following:





Years
            
            
            2008
            
            
            2007Computer
      Equipment
            
            
            3
            
            
            $
            -
            
            
            $
            -Leasehold
      Improvements
            
            
            5
            
            
            
            13,132
            
            
            
            -Network
      Platform
            
            
            3
            
            
            
            996,957
            
            
            
            807,833Total
      property and equipment
            
            
            
            
            
            
            1,010,089
            
            
            
            807,833Less:
      accumulated depreciation
            
            
            
            
            
            
            (547,658
            )
            
            
            (323,847
            )$
            462,431
            
            
            $
            483,986





The
depreciation expense for the years ended June 30, 2008 and 2007, which is
included primarily in cost of deliverables was $223,811 and $991,690,
respectively.





The
Company occupies premises under a non-cancelable operating lease expiring on
2008. At June 30, 2008, the approximate future minimum rental commitments under
this lease are as follows:





2009:
            
            
            61,1922010:
            
            
            7,148Total
            
            $
            68,340





Total
rental payments under the lease agreement totaled $65,580 and $200,881 for the
years ended in June 30, 2008 and 2007, respectively.





F-16
 Table of Contents





NOTE 6 –
NOTE PAYABLE





Notes
payable comprise the following:




2008
            
            
            2007LeeCo
      agreement adopts the agreement that the Company executes with the
      customer.  LeeCo collects all funds through ACH and is paid from
      those proceeds.  The excess of those proceeds are collected by
      the company.  LeeCo holds as collateral all the proceeds from
      the customer leases, access fees and all cash collections and is secured
      from all assets of the company.
            
            $
            2,135,483
            
            
            $
            2,419,784Ladco
      agreement adopts the agreement that the Company executes with the
      customer.  Ladco collects all funds through ACH and is paid from
      those proceeds.  The excess of those proceeds are collected by
      the company.  Ladco holds as collateral all the proceeds from
      the customer leases, access fees and all cash collections and is secured
      from all assets of the company. We are in  on this agreement as
      of June 30, 2008
            
            
            2,487,500
            
            
            
            2,985,000Total
      LeeCo and Ladco debt
            
            
            4,622,983
            
            
            
            5,404,784Plus
      long-term portion of accrued deliverable
            
            
            112,884
            
            
            
            ,847,052Less
      interest
            
            
            178,034
            
            
            
            558,837Total
      long-term note payable
            
            
            4,557,833
            
            
            
            5,692,999Less
      current portion
            
            
            1,551,660
            
            
            
            2,335,824Long-term
      portion of note payable
            
            $
            3,006,173
            
            
            $
            3,357,175





On
September 14, 2006 the Company renegotiates the Ladco debt in order to be able
to pay the remaining balance of the note for 39 months at $99,500 payments per
month until paid in full.  Under the renegotiated note now matures on
October 2009.  The Company is presently renegotiating its agreement
with LEECO Financial Services, Inc.





NOTE 7 -
INCOME TAXES





The
provision (benefit) for income taxes from continued operations for the years
ended June 30, 2008 and 2007 consist of the following:





2008
            
            
            2007Current:Federal
            
            $
            (342,210
            )
            
            $
            (817,100
            )State
            
            
            (89,578
            )
            
            
            (204,300
            )(431,788
            )
            
            
            (1,021,400
            )Deferred:Federal
            
            
            342,210
            
            
            
            817,100State
            
            
            89,578
            
            
            
            204,300431,788
            
            
            
            1,021,400Benefit
      from the operating loss carryforward
            
            
            -
            
            
            
            -(Benefit)
      provision for income taxes, net
            
            $
            -
            
            
            $
            -





F-17
 Table of Contents





The
difference between income tax expense computed by applying the federal statutory
corporate tax rate and actual income tax expense is as follows:





June
      30,2008
            
            
            2007Statutory
      federal income tax rate
            
            
            34.0
            %
            
            
            34.0
            %State
      income taxes and other
            
            
            8.9
            %
            
            
            8.9
            %Effective
      tax rate
            
            
            42.9
            %
            
            
            42.9
            %





Deferred
income taxes result from temporary differences in the recognition of income and
expenses for the financial reporting purposes and for tax purposes. The tax
effect of these temporary differences representing deferred tax asset and
liabilities result principally from the
following:





June
      30,2008
            
            
            2007Allowance
      for contract losses
            
            $
            76,587
            
            
            $
            139,157Net
      operating loss carryforward
            
            
            91,232,858
            
            
            
            94,300,000Valuation
      allowance
            
            
            (91,309,445
            )
            
            
            (94,439,157
            )Deferred
      income tax asset
            
            
            -
            
            
            
            -





The
Company has a net operating loss carryforward of approximately $91,232,858
available to offset future taxable income through 2028.





During
the year ended June 30, 2008, the Company reduced the state portion of the
deferred income tax asset related to net operating loss carryforward by
$3,884,000 resulting from the expiration of the net operating loss carry
forward. The valuation allowance on the deferred income tax asset was decreased
by $2,853,000 in the year ended June 30, 2006, resulting primarily from the
expiration of state net operating loss carryforwards.





NOTE 8 –
COMMITMENTS AND CONTINGENCIES





Licensing
Agreements





In prior
periods customers could arrange to have the purchase of the Company’s terminals
financed through the financial institution.  The Company had an
agreement with financial institution Ladco to guarantee varying amounts
associated with the financial institution’s arrangements with the
customers.  Subsequent to June 30, 2005, the Company entered into a
new master contract with the financial institution that limits the recourse to
the Company to the first payment under the customer’s contract.  The
amount of such payment would not exceed $100.





The
Company has a claim with New York Sales Tax department.  The Company
has identified that this claim is incorrect and has been inflated due to not
filing of sales tax returns.  The Company is uncertain the amount of
this claims and is in communication with the New York Sales Tax division to
identify the errors in calculations.





F-18
 Table of Contents





As of
June 30, 2008 the Company is a party to certain legal proceedings and claims
arising in the ordinary course of business.  Management periodically
assesses the liabilities and contingencies in connection to these matters, based
up on the latest information available.  IN other instances, because
of the uncertainties related to the probable outcome and/or amount or range of
loss, we are unable to make a reasonable estimate of liabilities, if
any.  As additional information becomes available, we adjust our
assessment and estimates of such liabilities accordingly.





NOTE 9 –
NET LOSS PER SHARE





Net loss
per share is calculated using the weighted average number of shares of common
stock outstanding during the year.  Preferred stock dividends are
subtracted from the net income to determine the amount available to common
shareholders.  Preferred stock convertible to 115,396 common shares
and options and warrants exercisable into 517,991 shares of common stock were
not considered in the calculation for diluted earnings per share for the year
ended June 30, 2008 and 2007 respectively because the effect of their inclusion
would be anti-dilutive.





NOTE 10 –
RELATED PARTY TRANSACTIONS





The
Company’s president and chairman is a significant shareholder and is its sole
officer and director of the Company.  The chairman controls American
Nortel Communications, Inc. which is also a significant shareholder of the
Company.  During the year ended June 30, 2002, the Company moved its
administrative offices into space occupied by this related
entity.  The Company shares office space and management and
administrative personnel with this related entity.  Certain of the
Company’s personnel perform functions for the related entity but there was no
allocation of personnel related expenses to the related entity in the years
ended June 30, 2008 and 2007.





The
Company frequently receives advances and advances funds to an entity controlled
by the Company’s president and which is a significant shareholder of the Company
to cover short-term cash flow deficiencies.  In June 30, 2008 the
chairman advanced $908,818 as compared to $305,000 for 2007.  The
balance due to this affiliate at June 30, 2008 was
$908,818.   The advances are generally short term in nature with
an interest rate of 9%.  The Company received advances from affiliates of
$210,109.





The
Company paid management fees of $450,000 to Wilcom, Inc., an entity owned by the
Company’s president.





NOTE 11 –
STOCK BASED COMPENSATION





The
Company can grant options under several stock option plans.  The
Company's Incentive Stock Option Plans, Non-Qualified Stock Option Plans and
Stock Bonus Plans are collectively referred to as the "Plans". The following
sets forth certain information as of June 30, 2008 and 2007 concerning the stock
options and stock bonuses granted by the Company pursuant to the Plans. Each
option represents the right to purchase one share of the Company's Common
Stock.





All
options awarded are fully vested, no options were exercised, and all options
have expired.





Total
      shares reserved under the plan
            
            Remaining
      options under the plan1998
      Incentive Stock Option Plan
            
            1,500,000
            
            400,1672000
      Incentive Stock Option Plan
            
            1,000,000
            
            925,1502000
      Non-Qualified Stock Option Plan
            
            2,000,000
            
            1,820,5751999
      Stock Bonus Plan
            
            900,000
            
            833,2502000
      Stock Bonus Plan
            
            500,000
            
            500,000




NOTE 12 –
SUBSEQUENT EVENTS





We have
renegotiated the credit facility with LEECO Financial Services in July,
2008.  We have agreed to transfer 2,000,000 common shares of its
holdings in Card Activation Technologies, Inc. a Delaware Corporation
(“CDVT”).  Commencing January 1, 2009, LEECO shall be permitted to
sell the CDVT stock in increments and shall prompt apply the proceeds from such
sales to discharge the LEECO Indebtedness, provided that LEECO shall not sell in
any given 30 day period more than a number of shares of CDVT stock that is equal
to the greater of 200,000 shares or 150% of the average daily trading volume for
such shares in the previous 30 day period provided the stock price is over
$2.00.  These common stock sales will be offset against the
outstanding balance with LEECO Financial Services, Inc.  We have been
in agreement to allocate the interest of $500,000 and payments over a period of
18 months effective September 1, 2008.





We are
further renegotiating our agreement with LADCO Financial Services,
Inc.  Presently we have been making minimum payments to reduce our
structured debt agreement.





*  *  *  *  *  *




F-19
 Table of Contents




ITEM9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.




In
February 7, 2007 our prior auditor resigned and the Company engaged the firm of
Jewett, Schwartz, Wolfe & Associates.





We have
had no disagreements on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures with any of our
accountants for the year ended June 30, 2008 and 2007.




We have
not had any other changes in nor have we had any disagreements, whether or not
resolved, with our accountants on accounting and financial disclosures during
our two recent interim periods December 31, 2006, March 31, 2007, and through
September 25, 2007.





ITEM9A. CONTROLS AND PROCEDURES




Our
management team, under the supervision and with the participation of our
principal executive officer and our principal financial officer, evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures as such term is defined under Rule 13a-15(e) promulgated under
the Securities Exchange Act of 1934, as amended (Exchange Act), as of the last
day of the fiscal period covered by this report, May 31, 2008. The term
disclosure controls and procedures means our controls and other procedures that
are designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC’s rules
and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is
accumulated and communicated to management, including our principal executive
and principal financial officer, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure. Based on
this evaluation, our principal executive officer and our principal financial
officer concluded that our disclosure controls and procedures were effective as
of June 30, 2008.





22
 Table of Contents





Our
principal executive officer and our principal financial officer, are responsible
for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act Rules 13a-15(f).
Management is required to base its assessment of the effectiveness of our
internal control over financial reporting on a suitable, recognized control
framework, such as the framework developed by the Committee of Sponsoring
Organizations (COSO). The COSO framework, published in Internal Control-Integrated
Framework, is known as the COSO Report. Our principal executive officer
and our principal financial officer, have has chosen the COSO framework on which
to base its assessment. Based on this evaluation, our management concluded that
our internal control over financial reporting was effective as of June 30,
2008.





This
annual report on Form 10-K does not include an attestation report of our
registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by our registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit us to provide only management’s report in this
annual report on Form 10-K.





There
were no changes in our internal control over financial reporting that occurred
during the last quarter of 2008 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.





This
annual report does not include an attestation report of the company’s registered
public accounting firm regarding internal control over financial reporting.
Our principal executive officer
and our principal financial officer,report was not subject to
attestation by the company’s registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit the
company to provide only management’s report in this annual report.





It should
be noted that any system of controls, however well designed and operated, can
provide only reasonable and not absolute assurance that the objectives of the
system are met. In addition, the design of any control system is based in part
upon certain assumptions about the likelihood of certain events. Because of
these and other inherent limitations of control systems, there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions, regardless of how remote.





Changes
in Internal Control Over Financial Reporting





During
the fiscal quarter ended June 30, 2008, there were no changes in our internal
control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.





ITEM9B. OTHER
INFORMATION





None.








PART
III





ITEM10.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS;





23
 Table of Contents





COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.





Director
and Executive Officer





Mr.
William P. Williams as of August 2001 accepted the position of Chief Executive
Officer and sole Director of the Company.  Information representing
Mr. Williams is set forth below:





William
      P. Williams
            55
            Chairman,
      President, Chief Executive Officer, and Chief Financial
      Officer





The chief
executive officer and sole director and officer of the Company will hold office
until additional members or officers are duly elected and
qualified.  The background and principal occupations of the sole
officer and director of the Company is as follows:





William
P. Williams has been the Chairman, Chief Executive Officer, of MedCom USA since
August 2001. He is also currently Chief Executive Officer and Chairman of the
Board for American Nortel Communications, Inc., a publicly traded company
located in Scottsdale, Arizona, which is in the business of long-distance
telephone service domestically, as well as internationally.  From 1983
to 1995, he was President and Chairman of the Board of Shelton Financial, Inc.,
a financial factoring firm headquartered in San Antonio, Texas.  Mr.
Williams has a Bachelor of Arts and a Master of Business Administration in
Finance from Baylor University.





COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT 9.A. DIRECTORS AND EXECUTIVE OFFICERS,
PROMOTERS, AND CONTROL PERSONS:





The
Company is aware that all filings of Form 4 and 5 required of Section 16(a) of
the Exchange Act of Directors, Officers or holders of 10% of the Company's
shares have not been timely and the Company has instituted procedures to ensure
compliance in the future.





ITEM11.  EXECUTIVE COMPENSATION





Name
      and Principal Position
            
            Year
            
            
            Salary ($)
            
            
            Bonus ($)
            
            
            Stock
              Awards
              ($)
            
            
            Option
              Awards
              ($)
            
            
            Non-Equity
              Incentive
      Plan
              Compensation-
              ion
              ($)
            
            
            Change
      in
              Pension
              Value
      and
              Nonqualified
              Deferred
              Compensation
              Earnings
              ($)
            
            
            All
      Other
              Compensation-
              ion
              ($)
            
            
            Total
              ($)William
      P. Williams
            
            
            2008
              2007
            
            
            
            450,000
              450,000
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            450,000
              450,000Chief
      Executive Officer





General.Mr.
William P. Williams serves as the Company’s sole-director and chief executive
officer.  Pursuant to a Management Services Agreement executed and
approved by the Company Mr. Williams was compensated approximately $450,000 for
management fees, and other sources or forms of compensation was not paid or
collected for Fiscal year ended 2007 and 2007.





24
 Table of Contents





Summary
Compensation Table





The
following table sets forth the cash compensation paid by the Company to its
Chief Executive Officer and to all other executive officers for services
rendered from July 1, 2005 through June 30, 2008. Currently, William P. Williams
is the Chairman, Chief Executive Officer, President and Principle Financial
Officer.





2008
SUMMARY COMPENSATION TABLE





2007
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE




Option
      Awards
            
            
            Stock
      AwardsNumber
      of
              Securities
              Underlying
              Unexercised
              Options
              (#)
            
            
            Number
      of
              Securities
              Underlying
              Unexercised
              Options
              (#)
            
            
            Equity
              Incentive
              Plan Awards:
              Number
      of
              Securities
              Underlying
              Unexercised
              Unearned
              Options
              (#)
            
            
            Option
              Exercise
              Price
              ($)
            
            
            Option
              Expiration
              Date
            
            
            Number of
              Shares
      or
              Units
      of
              Stock That
              Have
      Not
              Vested
              (#)
            
            
            Market
              Value of
              Shares or
              Units
      of
              Stock That
              Have
      Not
              Vested
              ($)
            
            
            Equity
              Incentive
              Plan
      Awards:
              Number
      of
              Unearned
              Shares,
      Units
              or
      Other
              Rights
      That
              Have
      Not
              Vested
              (#)
            
            
            Equity
              Incentive
              Plan Awards:
              Market
      or
              Payout
      Value
              of
      Unearned
              Shares,
      Units
              or
      Other
              Rights
      That
              Have
      Not
              Vested
              ($)Name
            
            Exercisable
            
            
            UnexercisableWilliam
      P. Williams
            
            
            -
            
            
            
            —
            
            
            
            —
            
            
            
            -
            
            
            
            -
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —








2008
OPTION EXERCISES AND STOCK VESTED TABLE




2008
PENSION BENEFITS TABLE




Name
            
            Plan
              Name
            
            
            Number of
              Years
              Credited
      Service
              (#)
            
            
            Present
              Value
      of Accumulated
              Benefit
              ($)
            
            
            Payments During Last
              Fiscal
      Year
              ($)William
      P. Williams
              Chief
      Executive Officer
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —





2008
NONQUALIFIED DEFERRED COMPENSATION TABLE




Name
            
            Executive Contributions
              in
      Last Fiscal Year
              ($)
            
            
            Registrant
              Contributions in Last
              Fiscal
      Year
              ($)
            
            
            Aggregate Earnings
              in
      Last Fiscal Year
              ($)
            
            
            Aggregate
              Withdrawals /
              Distributions
              ($)
            
            
            Aggregate Balance at
              Last
      Fiscal Year-End
              ($)William
      P. Williams
              Chief
      Executive Officer
            
            
            —
            
            
            
            —
            
            
            
            -
            
            
            
            -
            
            
            
            -





25
 Table of Contents





2008
DIRECTOR COMPENSATION TABLE




Name
            
            Fees Earned or
              Paid in Cash
              ($)
            
            
            Stock Awards
              ($)
            
            
            Option Awards
              ($)
            
            
            Non-Equity
              Incentive
      Plan
              Compensation
              ($)
            
            
            Change
              in
      Pension
              Value
      and
              Nonqualified
              Deferred
              Compensation
              Earnings
              ($)
            
            
            All
      Other
              Compensation
              ($)
            
            
            Total
              ($)William
      P. Williams
              Chief
      Executive Officer
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            -
            
            
            
            -








2008
ALL OTHER COMPENSATION TABLE




Name
            Year
            
            Perquisites
              and
      Other
              Personal
              Benefits
              ($)
            
            
            Tax
              Reimbursements
              ($)
            
            
            Insurance
              Premiums
              ($)
            
            
            Company
              Contributions
              to Retirement and
              401(k)
      Plans
              ($)
            
            
            Severance
              Payments /
              Accruals
              ($)
            
            
            Change
              in Control
              Payments /
              Accruals
              ($)
            
            
            Total ($)William
      P. Williams
              Chief
      Executive Officer
            
            
            
            
            
            
            
            3⁄42008
              2007
            
            
            -
            
            
            
            —
            
            
            
            —
              —
            
            
            
            —
              —
            
            
            
            —
              —
            
            
            
            —
              —
            
            
            
            -—
            
            
            
            —





2008
PERQUISITES TABLE


Name
            Year
            
            Personal Use of
              Company
              Car/Parking
            
            
            Financial Planning/
              Legal
      Fees
            
            
            Club Dues
            
            
            Executive Relocation
            
            
            Total Perquisites
              and
              Other Personal
              BenefitsWilliam
      P. Williams
              Chief
      Executive Officer
            2008
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —2007
            
            
            3⁄4
            
            
            
            3⁄4
            
            
            
            3⁄4
            
            
            
            3⁄4
            
            
            
            3⁄4





26
 Table of Contents





2008
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE




Name
            Benefit
            
            Before
              Change in
              Control
              Termination
              w/o Cause
      or for
              Good
      Reason
            
            After Change in
              Control
              Termination w/o Cause
      or
              for Good
              Reason
            Voluntary
              Termination
            Death
            Disability
            
            Change in
              ControlWilliam
      P. Williams
              Chief
      Executive Officer
            Basic salary
            
            
            -
            
            
            
            
            
            
            
            -




(1) Mr.
Williams's employment agreement provides payment of salary for all months of
unemployment which might remain under his employment contract which was signed
on July 2002.




Compensation
of Directors





Mr.
Williams is the sole directors of the Company and is not compensated for those
services.





ITEM12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.




The
following table sets forth certain information regarding beneficial ownership of
the common stock as of June 30, 2008 and September 25, 2007, by (i) each
person who is known by the Company to own beneficially more than 5% of the any
classes of outstanding Stock, (ii) each director of the Company,
(iii) each of the Chief Executive Officers and the two (2) most highly
compensated executive officers who earned in excess of $100,000 for all services
in all capacities (collectively, the “Named Executive Officers”) and
(iv) all directors and executive officers of the Company as a
group.




The
number and percentage of shares beneficially owned is determined in accordance
with Rule 13d-3 and 13d-5 of the Exchange Act, and the information is not
necessarily indicative of beneficial ownership for any other purpose and is
based on 27,810,446 shares beneficially owned as of June 30, 2008. We believe
that each individual or entity named has sole investment and voting power with
respect to the securities indicated as beneficially owned by them, subject to
community property laws, where applicable, except where otherwise noted. Unless
otherwise stated, the address of each person; 7975 North Hayden Rd, Suite D333,
Scottsdale, AZ  85253.





Name and
      Address
            Shares Owned
      (1)
            Common
      StockAmerican
      Nortel Communications
            20,582,562
            22%7975
      North Hayden Road #D-333Scottsdale,
      Arizona 85258William
      P. Williams
            7,227,884
            8%7975
      North Hayden Road #D-333Scottsdale,
      Arizona 85258








(1)
              Wilcom
      Inc., Williams Family Trust, and Bill Williams have beneficial ownership
      of the above stock.





27
 Table of Contents





Changes
in Control




We are
not aware of any arrangements that may result in a change in control of the
Company.




DESCRIPTION
OF SECURITIES




General




Our
authorized capital stock consists of 175,000,000 shares of common stock, par
value $ .0001.




Common
Stock




The
shares of our common stock presently outstanding, and any shares of our common
stock issues upon exercise of stock options and/or warrants, will be fully paid
and non-assessable. Each holder of common stock is entitled to one vote for each
share owned on all matters voted upon by shareholders, and a majority vote is
required for all actions to be taken by shareholders. In the event we liquidate,
dissolve or wind-up our operations, the holders of the common stock are entitled
to share equally and ratably in our assets, if any, remaining after the payment
of all our debts and liabilities and the liquidation preference of any shares of
preferred stock that may then be outstanding. The common stock has no preemptive
rights, no cumulative voting rights, and no redemption, sinking fund, or
conversion provisions. Since the holders of common stock do not have cumulative
voting rights, holders of more than 50% of the outstanding shares can elect all
of our Directors, and the holders of the remaining shares by themselves cannot
elect any Directors. Holders of common stock are entitled to receive dividends,
if and when declared by the Board of Directors, out of funds legally available
for such purpose, subject to the dividend and liquidation rights of any
preferred stock that may then be outstanding.




Preferred
Stock




The
Company is authorized to issue up to 300,000 shares of $.001 par value Preferred
Stock. The Board of Directors has the authority to divide the Preferred Stock
into series and, within the certain limitations, to set the relevant terms of
such series created.





In April
1995, the Company established the Series A Preferred Stock and authorized the
issuance of up to 50,000 shares. Each share of series A Preferred Stock is
entitled to a dividend at the rate of $1.60 per share when, and if declared by
the Board of Directors. Dividends not declared are not cumulative. Additionally,
each share of Series A Preferred Stock is convertible into .20 shares of the
Company's Common Stock at any time after July 1, 1999. A total of 850 shares of
common stock may be issued upon the conversion of the shares of Series A
preferred stock outstanding as of June 30, 2000. Upon any liquidation or
dissolution of the Company, each outstanding share of Series A Preferred Stock
is entitled to distribution of $20 per share prior to any distribution to the
holders of the Company's common stock. As of June 30, 2000, the Company has
4,250 shares of Series A Preferred Stock issued and outstanding.





In April
2000, the Company established the Series D Preferred stock and authorized the
issuance of up to 2,900 shares. The Company issued 494 shares related to a
business acquisition of and 2,356 shares for the acquisition of related
intellectual property.





Each
share of Series D preferred stock is entitled to a dividend at the rate of $0.04
per share and has a stated value of $1,000 per share. Dividends on all Series D
preferred stock begin to accrue and accumulate from the date of issuance.
Additionally, each share of Series D preferred stock is convertible into 40.49
shares of common stock for a total of 576,923 shares at the option of the
stockholders. Upon liquidation or dissolution of the Company, each outstanding
share of Series D preferred stock is entitled to a distribution of the stated
amount per share prior to any distribution to the shareholders of the Company's
common stock. The Company can convert the Series D preferred stock into shares
of common stock using the same conversion ratio at any time after April 15, 2001
so long as the bid price of the Company's common stock exceeds $4.94 per share
and the shares of common stock issuable upon the conversion of the Series D
preferred stock are either covered by an effective registration statement or are
eligible for sale pursuant to rule 144 of the Securities and Exchange
Commission. Each share of Series D preferred stock is entitled to vote in all
matters submitted to the Company's shareholders on an "as converted"
basis.





28
 Table of Contents





Dividend
Policy




We have
never declared any cash dividends on our common stock. We currently intend to
retain future earnings, if any, to finance the expansion of our business. As a
result, we do not anticipate paying any cash dividends in the foreseeable
future.





Options
and Warrants:





As of
June 30, 2008 there were no options and no warrants outstanding to acquire
shares of the Company’s common stock outstanding. The Company will not be
issuing warrants in any future offering.




Convertible
Securities





At June
30, 2008 we have no convertible securities.




Amendment
of our Bylaws




Our
bylaws may be adopted, amended or repealed by the affirmative vote of a majority
of our outstanding shares. Subject to applicable law, our bylaws also may be
adopted, amended or repealed by our board of directors.





ITEM13.  CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDPENDENCE.





In June
30, 2008 our chairman advanced $877,000.  The balance due to this
affiliate at June 30, 2008 was $908,987 and $305,000 for year ended June 30,
2008 and 2007 respectively.   The advances are generally short
term in nature with an interest rate of 9%.  .





The
Company’s president and chairman is an 8% shareholder and its sole officer and
director of the Company.  The chairman controls American Nortel
Communications, Inc. which is a 22% shareholder in the Company.  The
chairman also controls Card Activation Technologies, Inc. (“Card”) in which
MedCom owns 37% of Card.  During the year ended June 30, 2002, the
Company moved its administrative offices into space occupied by this related
entity.  The Company shares office space and management and
administrative personnel with this related entity.  Certain of the
Company’s personnel perform functions for the related entity but there was no
allocation of personnel related expenses to the related entity in the six months
ended December 31, 2007 and 2006.





29
 Table of Contents





The
Company frequently receives advances, and advances funds to an entity controlled
by the Company’s president and which is a significant shareholder of the Company
to cover short-term cash flow deficiencies.





Card’s
operating requirements has been and will be funded primarily from its related
party entity MedCom USA, Inc. Card will use funds advanced by MedCom. Currently,
the Card costs are limited to professional fees and subject to a contingency fee
from our patent litigation attorneys. MedCom will continue to provide funds
through a revolving line of credit of $250,000 which funds will be drawn down on
an as needed basis until Card begin to realize sufficient revenues from royalty
payments.  Once Card begins receiving royalties, we expect the
revenues of such royalties shall permit us to be self-funding.





Card has
financed operations by advancing to MedCom USA Incorporated a total of $210,109
which is the total outstanding as of June 30, 2008.





ITEM14.PRINCIPAL ACCOUNTANT FEES AND
SERVICES




Audit Fees. The aggregate
fees billed by Jewett, Schwartz, Wolfe & Associates for professional
services rendered for the audit of the Company’s annual financial statements for
fiscal years ended June 30, 2008 and 2007 approximated $45,000 and $55,000
respectively.  The aggregate fees billed by Jewett, Schwartz, Wolfe
& Associates for the review of the financial statements included in the
Company’s Forms 10-Q for fiscal year 2008 and 2007 approximated $13,500 per
year.





Audit-Related
Fees.  The aggregate fees billed by Jewett, Schwartz, Wolfe
& Associates for assurance and related services that are reasonably related
to the performance of the audit or review of the Company’s financial statements
for the fiscal years ended June 30, 2008 and 2007, and that are not
disclosed in the paragraph captioned “Audit Fees” above, were $0 and $0,
respectively.





Tax Fees.The
aggregate fees billed by Jewett Schwartz Wolfe & Associates for
professional services rendered for tax compliance, tax advice and tax planning
for the fiscal year ended June 30, 2008 and 2007 were $0.





All Other Fees.  The
aggregate fees billed by Jewett Schwartz Wolfe & Associates for products and
services, other than the services described in the paragraphs “Audit Fees,”
“Audit-Related Fees,” and “Tax Fees” above for the fiscal years ended June 30,
2008 and 2007 approximated $45,000 and $55,000 respectively.





PART
IV





ITEM15.  EXHIBITS AND REPORTS.




Exhibits




3.1
            Articles
      of Incorporation (2)





3.2
            Amendments
      to Articles of Incorporation – Fourth Article
  (2)





3.3
            Amendment
      to Articles of Incorporation – Name Change
(2)


__________________________________________________





(1).
Incorporated by reference to the same exhibit filed with Amendment No. 5 to the
Company’s Registration Statement on Form S-3 (Commission File No.
333-71179)


(2).
Incorporated by reference to the same exhibit filed with the Company’s Annual
Report on Form 10-KSB for the year ending June 30, 2001.





30
 Table of Contents





ITEM15: SIGNATURES





SIGNATURES





In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, there unto duly authorized.





Registrant
            MedCom
      USA IncorporatedDate:
      September 29, 2008
            By:
      /s/ William P. WilliamsWilliam
      P. WilliamsChairman,
      President Chief Executive Officer (Principle Executive
      Officer)








Date:
      September 29, 2008
            By:
      /s/ William P. WilliamsWilliam
      P. WilliamsPrinciple
      Financial Officer








Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been
signed below by the following persons on behalf of the registrant and in the
capacities indicated on the 28th day of
September 2008.








s/    William
      P. Williams
            
            Pres
      Chief Executive Officer, Principal Financial Officer and
      DirectorWilliam
      P. Williams






31