UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

       [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                     FOR THE FISCAL YEAR ENDED JUNE 30, 2005

                                       OR
     [_] 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                                      65-0287558
   State 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

Check  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 past 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
                                   ---        ---

Check  if  disclosure of delinquent filers in response to Item 405 of Regulation
S-B  is  not contained in this form, and no disclosure will be contained, to the
best  of  the  Registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in  Part III of this Form 10-KSB or any
amendment  to  this  Form  10-KSB.  [X]

Registrant's revenues for the most recent fiscal year were $ 2,747,269

The  aggregate  market value of the common stock held by non-affiliates computed
based  on  the  closing  price of such stock on June 30, 2005, was approximately
$41,845,241


1
<PAGE>
                                     PART I

ITEM  1.  DESCRIPTION  OF  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.

OVERVIEW

MedCom USA, Inc. (the "Company") a Delaware corporation was formed in August
1991 with 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, these four programs were discontinued in December 1997.  During the
fiscal year of 1998, the Company diversified 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 2003, the Company directed its
efforts in medical information processing. As of June 30, 2005, the Company
currently operates the MedCard System (MedCard) that is deployed through a
point-of-sale terminal or personal computer offering electronic transaction
processing, as well as insurance eligibility verification. The Company has
aggressively focused on its primary operations in electronic data interchange
and core business in electronic medical transaction processing.

MEDCARD SYSTEM

The Company provides innovative technology-based solutions for the healthcare
industry that enable users to efficiently collect, use, analyze and disseminate
data from payers, health care providers and patients. The MedCard System
currently operates through a point-of-sale terminal or a personal computer. The
point-of-sale terminals are purchased from Hypercom Corporation (Hypercom). The
MedCard System also operates in a PC version and an on-line version. The Company
is in the process of assessing the feasibility of offering a service bundled
package that would have the capability of processing unlimited claims and
eligibility verification for monthly service fees.

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.

Flex-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, an
easy-pay option is offered which 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


2
<PAGE>
accounts receivable management.  These services are all deployed thorough
point-of-sale terminals or a personal computer.  Using the MedCard 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 MedCard System is also an electronic processing system that consolidates
insurance eligibility verification, processes medical claims, and monitors
referrals.  The MedCard System allows a patient's primary care physician to
request approval from the patient's insurance carrier or managed care plan for a
referral to a secondary physician or specialist.  The secondary physician or
specialist can use the MedCard system to verify referrals are approved by the
patient's insurance carrier.  The MedCard system's referral capabilities reduce
documentation and administrative costs which results in increased productivity
and greater patient information for the specialist, as well as a written record
of the referral authorization.

The MedCard System can record and track encounters between patients and health
care providers for performance evaluation and maintenance of records.  After
examining a patient the physician enters a patient's name, procedure code and
diagnostic code at a nearby terminal.  This information is then uploaded to
MedCom's computer network, processed and transmitted back to the provider
formatted in both summary and/or detailed reports, and as a result healthcare
providers' reimbursements are accelerated and account receivables are reduced.
The average time it takes the healthcare providers to collect payments from
insurance carriers and plans decreases from an average of 89 days to 7-21 days.
Health care providers will benefit from a 100% paperless claim processing
system.

As of June 30, 2005 the MedCard system was able to retrieve on-line eligibility
and authorization information from approximately 150 medical insurance companies
and electronically process and submit billings 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.

PATENT

A new division is to be set up to market and sell licensing opportunities for
the MedCom proprietary patented technology for Activating Phone card and Gift
Card at retail.  The patent covers the technology and process for taking a card
with magnetic strip or other data capture mechanism and activating the card by
downloading a determined monetary value onto the card for use at a later date
for different types of transactions.  This process can be utilized for prepaid
phone cards, gift cards, and affinity cards.  New View Technologies, which was
acquired by MedCom USA, developed the patent and all patents were assigned.

COMPETITION

Competing health insurance claims processing and/or benefit verification systems
include WebMD (HLTH), NDCHealth (NDC), and Per-se Technologies (PSTI). There are
similar companies that compete with the Company with respect to its financial
transaction processing services performed by the MedCard 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.

REGULATORY COMPLIANCE

With the passage of the Health Insurance Portability and Accountability Act
(HIPAA) of 1996, the United States Congress has mandated the establishment of
standards for the privacy of individually identifiable


3
<PAGE>
health information. Specifically, the regulation entitled, Standards for Privacy
of Individually Identifiable Health Information ("the Privacy Rule") promulgated
by the Department of Health and Human Services (HHS), provides for a
comprehensive federal protection for the privacy of health information. The Rule
applies only to health plans, health care clearinghouses, and certain health
care providers, which must comply with the new requirements. The Company's core
operating business is not subject to the Privacy Rule, which defines the Company
as a "business associate". A business associate is an entity that provides
certain functions, activities, or services for or to a covered entity. These
covered entities typically obtain contractual assurances that the business
associate will use the information only for the purposes for which they were
contracted and not for independent use by the business.

SERVICE AND PRODUCTS

The Company offers its healthcare providers, and health plan groups, a simple
solution to expedite its Healthcare and financial transactions electronically
through a processing terminal, and the Company maintains its website
www.MedCard.com.  The features of the terminals are as follows:
---------------

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.

Flex-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, an
easy-pay option is offered which 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 a personal computer.  Using the
MedCard system, medical providers are relieved of the problems associated with
billings and account management, and results in lower administrative
documentation and costs.

The MedCard System is also an electronic processing system that consolidates
insurance eligibility verification, processes medical claims, and monitors
referrals.  The MedCard System allows a patient's primary care physician to
request approval from the patient's insurance carrier or managed care plan for a
referral to a secondary physician or specialist.  The secondary physician or
specialist can use the MedCard system to verify referrals are approved by the
patient's insurance carrier.  The MedCard system's referral capabilities reduce
documentation and administrative costs which results in increased productivity
and greater patient information for the specialist, as well as a written record
of the referral authorization.

LICENSING AGREEMENTS

In May 2000 the license agreement with Dream Technologies, LLC was amended
whereby the Company acquired direct ownership of the MedCard System including
all software programs, intellectual property, and trade names and existing
contracts. The amendment effectively terminated the original license agreement,
except for the royalty provisions of the original license agreement.

Subsequently, on January 14, 2002, the Company changed the terms of the
royalties included in the original agreement with Dream Technologies, and as a
result past royalties were waived in good faith, for the exception of $30,000,
which was agreed and payable in equal monthly installments. In connection with
the past royalties, Dream Technologies, LLC was issued a certificate
representing one million unregistered shares of common stock with a par value of
$.001.


4
<PAGE>
The Company is required to pay royalties to Dream equal to twenty percent of the
first $1,000,000 of net monthly revenue and ten percent of net monthly revenue
in excess of $1,000,000.  The term net revenues is defined as gross revenues
received from the use of the MedCard software less (a) terminal lease costs (b)
commissions payable to agents that place terminals with end users (c) network
costs that include: i) claim fees payable to data vendors, ii) charges for
verification of insurance coverage iii) similar telecommunications charges
related to obtaining claims processing and/or benefits verification information;
and (d) cost of the terminal and shipping/handling.

SERVICE  AGREEMENTS

During September 1998, the Company entered into a service agreement with
WebMD/Envoy.  This agreement encompasses the process of electronic data
interchange and related services.  The services provided are complimentary to
the Company's core business, and accomplishes transaction processing services
that allows healthcare providers and payers to process medical transactions
quickly and accurately, and results in reduced administrative costs with the
benefit of accelerated reimbursements to healthcare providers.

During January 2002, the Company has entered into a service agreement with
MedUnite.  This alliance will encompass the utilization of proprietary
technologies and will enhance the existing network of healthcare constituents.
Strategically both companies share the same vision of transforming the
healthcare transactions systems affecting how healthcare providers, health
plans, and other groups transacting business with one another by significantly
reducing claim and payment processing time, and reducing healthcare
administrative costs.

During February 2003, the Company has entered into a service agreement with HD
Brous & Company.  This agreement provides that HD Brous & Company acts as
financial advisor and investment banking representative on the Company's behalf.
Upon the execution of the contract the Company granted to HD Brous & Company
warrants to purchase up to four hundred thousand shares of the Company's common
stock at an exercise price of $.50 per common share.  The warrants will expire
five years from the date of issuance.

During February 2004, the Company entered into a service agreement with CDS
Capital.  This agreement will enable eligible healthcare providers utilizing the
Medcom terminals to finance their accounts receivables.  Health care providers
using the Medcom terminal to secure patient eligibility and process claims will
now be able to receive regular payments for a large percentage of claims
processed from the previous week.  This financial management service will
decrease the time and costs associated with accounts receivable collections.

During June 2005, the Company entered into a service agreement with Tesia-PCI.
This agreement to replace and service and support at a minimum of 1,500 POS
terminals inclusive of eligibly, claims processing, credit card processing for
Tesia's dental providers.

PROCESSING TERMINAL LEASING AGREEMENTS

The Company has entered into leasing agreements with LADCO Financial Group for
the purpose of leasing processing terminals. The Company has pledged in
collateral in connection with the lease agreements one million restricted common
shares of stock. These common stock shares would be surrendered upon the default
of such leasing agreements. This pledge and granting of security interest was
executed on January 3, 2002. The Company further provides direct leasing between
LADCO and the provider and helps facilitate these transactions for the provider.


5
<PAGE>
The Company has arranged its terms with this credit facility as an equipment
lessor whereby the Company sells terminals to the lessor when it has obtained a
service contract with a provider.  Under these agreements, the Company is
leasing back the processing terminals from the lessor and in turn leases them to
the purchaser for a period of 36-60 months however; the customer may terminate
the agreement after 12 months.  The Company is accounting for the transactions
as sale-leasebacks.  The leases with the customers are inclusive with the
monthly service contracts and are effectively accounted for as operating leases.
Gains on terminal sales under sale-leaseback transactions are deferred and are
being amortized to income in proportion to amortization of the assets, generally
over the term of the lease with the credit facility generally for a period of
36-60 months. At June 30, 2005, the remaining deferred equipment gain of
$2,716,526 is shown as "Deferred Revenues" in the Company's Balance Sheet.

GROWTH STRATEGY

The Company's strategy is to become one of the dominant electronic transaction
processing vendors in the Healthcare markets. MedCom USA will focus on providing
health plan administrators, healthcare clearinghouses, and healthcare providers,
financial as well as verification electronic transaction processing solutions.
The Company's strategy to date has included large select markets for its
products and services, however the Company will work with partners who will
ensure national distribution of its products and services.

On March 23, 2005, MedCom USA, Inc. completed an agreement to become a direct
credit card Independent Sales Organization (ISO) for National Processing Company
(NPC) a wholly owned subsidiary of Bank of America for the processing of
credit/debit card transactions.

This agreement allows MedCom USA, Inc. to bypass any intermediaries providing
credit card processing and deal directly with the first level of the Merchant
Bank's processors.  This increases the profit margin for MedCom on these
transactions substantially.  This also allows MedCom more flexibility in
engaging strategic distribution partnerships with major sales organizations,
healthcare carriers, healthcare suppliers and other groups servicing the Medical
and Dental industries by providing ability to compensate these organizations
through residual sales income.

ADDITIONAL INFORMATION

The Company 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 450 Fifth Street, N.W., 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.
------------

ITEM 2.  DESCRIPTION OF PROPERTY.

As of fiscal year end June 30, 2005, 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
five-year lease in May 2005 for the Scottsdale facility. The Company also
maintains an office in Irvine, California, for executive office space for
approximately $2,900 a month.  The Company also leases 5,906 square feet of
office space in Islandia, New York, for approximately $125,000 annually; the
lease expires March 31, 2008.


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<PAGE>
As of fiscal year end June 30, 2005, the Company had 38 employees of which
approximately 37 are full-time equivalent employees.

ITEM 3.  LEGAL PROCEEDINGS

Subsequent to June 30, 2001, several former employees filed complaints against
the Company alleging breach of employment agreements. The total known claims
being sought by the former employees at June 30, 2001 was approximately
$175,000. The Company believes that it has settled all former employee claims in
amounts aggregating to an amount approximating the accrued amount of $104,000. A
former officer has a claim remaining with the Company. The Company is attempting
to settle this claim. At June 30, 2005, there was $243,000 accrued relating to
this matter.

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.


ITEM 4.  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, 2005.

                                     PART II

ITEM 5.  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, 2005, there were 57,664,432 shares of common stock of MedCom
outstanding and there were approximately 551 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.

<TABLE>
<CAPTION>
FISCAL 2005                       HIGH BID   LOW BID
-----------                       ---------  --------
<S>                               <C>        <C>
Quarter Ended June 30, 2005       $    1.29  $    .75

Quarter Ended March 31, 2005           1.75       .75

Quarter Ended December 31, 2004        2.49      1.54

Quarter Ended September 30, 2004       2.50      2.10

FISCAL 2004                       HIGH BID   LOW BID
-----------                       ---------  --------

Quarter Ended June 30, 2004       $    2.70  $   2.60

Quarter Ended March 31, 2004           2.85      2.65

Quarter Ended December 31, 2003        0.69      0.65

Quarter Ended September 30, 2003       0.78      0.66
</TABLE>


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<PAGE>
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.

SALE OF UNREGISTERED SECURITIES

DURING THE PERIOD ENDED JUNE 30, 2005 THE COMPANY ISSUED 6,695,093 SHARES OF ITS
COMMON STOCK FOR $2,727,289 IN A SUBSCRIPTION AGREEMENT FOR QUALIFIED INVESTORS.
THE COMPANY ISSUED 276,000 SHARES OF ITS COMMON STOCK IN A SETTLEMENT OF
LITIGATION WITH RYDER HOLDINGS.  FURTHER THE COMPANY ISSUED TO THIRD PARTIES IN
CASHLESS WARRANTS OF 289,195 SHARES OF ITS COMMON STOCK FOR NO CASH VALUE.   THE
COMPANY ISSUED 276,000 SHARES IN A SETTLEMENT OF AN OUTSTANDING LITIGATION WITH
RYDER HOLDINGS.  THE COMPANY ISSUED 85,000 IN THE SETTLEMENT OF AN OUTSTANDING
ACCOUNT PAYABLE AND CONVERSION FROM DEBT TO EQUITY.  LASTLY, THE COMPANY GRANTED
STOCK FOR COMPENSATION OF SERVICES TO A THIRD PARTY.

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.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

Management's discussion and analysis contains statements that are
forward-looking and involve risks and uncertainties.  Several factors could
cause actual results to differ materially from those described in such
forward-looking statements.  This includes the Company's ability to manage
growth, involvement in litigation, competition in the health electronic
transaction processing, ongoing contractual relationships, dependence upon key
personnel, changes in customer demand for product and services, and the adoption
of new, or changes in, accounting policies, practices and estimates and the
application of such policies, practices, and estimates, and federal and state
governmental regulation, specifically in the areas of electronic transaction
processing in the health care industries.

The following financial data should be read in conjunction with the consolidated
financial statements of MedCom USA and related notes and other financial
information appearing elsewhere in this report.


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<PAGE>
<TABLE>
<CAPTION>
Statement of Operations Data
----------------------------
                                  Years Ended June 30,
                               --------------------------
                                   2005          2004
                               ------------  ------------
<S>                            <C>           <C>
Revenues                       $ 2,747,269   $ 3,029,875
Cost of Services               $  (440,155)  $  (458,656)
Operating and Other Expenses   $(9,422,183)  $(7,180,510)
                               ------------  ------------

Net Loss                       $(7,115,069)  $(4,609,291)

Balance Sheet Data:
                                  Years Ended June 30,
                               --------------------------
                                   2005          2004
                               ------------  ------------
Current Assets                 $   637,728   $ 2,850,032
Total Assets                   $ 4,515,263   $ 7,466,668
Current Liabilities            $ 4,388,644   $ 4,831,497
Non Current Liabilities        $ 5,027,040   $ 4,668,982
Total Liabilities              $ 9,415,684   $ 9,500,479
Working Capital (Deficit)      $(3,750,916)  $(1,981,465)
Shareholders'Equity (Deficit)  $(4,900,421)  $(2,033,811)

---------------------------------------------------------
</TABLE>

The Company has declared no common stock dividends since its inception.

FISCAL  2005  OPERATIONS
------------------------

General.  As of June 30, 2005, the Company currently utilizes the MedCard System
that is deployed through a processing terminal, PC software, or online
processing, and offers electronic transaction processing to the health care
industries.  MedCom USA continues to focus on its primary operations and core
business in medical transaction processing.

YEAR  ENDED  JUNE  30,  2005
----------------------------

RESULTS OF OPERATIONS

     FISCAL YEAR END JUNE 30, 2005, COMPARED TO FISCAL YEAR END JUNE 30, 2004

Revenues for Fiscal 2005 decreased to $2,747,269 from $3,029,875 during Fiscal
2005.  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 business sectors and officer and management changes.
The Company continues to aggressively pursue and devote its resources and focus
its direction in electronic transaction processing.   The Company's agreement
with its credit facility in connection with the sale-leaseback transactions
therewith, the Company must defer revenue gains on the sale of the terminals.
Those gains are generally recognized over a period of 36-60 months.

Selling expenses for Fiscal 2005 decreased to $304,522 from $1,043,634 during
Fiscal 2004.  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.  Presently the company is increasing is sales team and
will increase sales in various target states.


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<PAGE>
General and administrative expenses for Fiscal 2005 increased to $4,803,976 from
$3,488,632 during Fiscal 2004.  This increase is attributed to the Company's
hiring of additional employees as growth has occurred in the area of providing
technical support for our products and services in relation to the increases in
sales.  The company is expanding is marketing services to include additional
sales personal and have incurred additional costs related to ramp up cost of
training sales and marketing teams.

Professional and consulting expenses for Fiscal 2005 increased to $831,593 from
$745,348 during Fiscal 2004. The company incurred additional expenses due the
impairment writedown of goodwill of $433,000 and legal settlement of $276,000
and loss on the disposal of and asset of $25,000. The Company impaired goodwill
after assessing the value of the MedCard asset. MedCard has changed its software
development and further modified the MedCard purchased to that the Company
considered the complete impairment of goodwill. Interest expense for Fiscal 2005
increased to $897,643 from $877,921 for Fiscal 2004. This increase is a result
of increased sales volume and sales-leaseback transactions with the Company's
credit facility. Also, expenses were incurred and paid on notes the Company has
outstanding.

TRADE VENDOR OBLIGATIONS

The Company had in the past incurred obligations in many business segments that
had been sold or divested several years ago.  The Company has accruals of
approximately $586,606 since those business units were divested.  These
obligations were due to trade vendors and property management companies.
Management believes that the statute of limitations for collecting on these
obligations has expired.  Subsequently, the Company has removed approximately
$870,000 of these obligations during the year ended June 30, 2004.  The Company
maintained approximately $243,000 in accruals for these vendor obligations as of
June 30, 2004.  In June 2005, a settlement of one of the remaining obligations
was settled.   The accrual for this obligation of approximately $140,000 was
depleted and additional settlement expense of $233,982 was recognized.  The
remaining accrual for these vendor obligations as of June 30, 2005 is
approximately $98,000.  Although the Company believes that the possibility is
remote, vendors associated with these written-off obligations may make a claim
against the Company.

The loss for Fiscal 2005 was  ($7,115,069) from ($4,609,291) for Fiscal 2004.
Sales and marketing expenses along with interest expenses have increased for
Fiscal 2004.  The Company has incurred these marketing and sales expenses in
relation to increased demand for the Company's products and services.

As of June 30, 2005, MedCom had a federal net operating loss carry forward of
$57,312,820 expiring 2007 to 2023.  MedCom had a state net operating loss carry
forward of $29,603,000 expiring from 2005 to 2008.  The company has incurred net
operating loss in 1993 of $197,688, 1994 of $1,699,456, 1995 of $2,428,673, 1996
of 3,685,557, 1997 of $6,697,029, 1998 of $6,467,303, 1999 of $7,895,428, 2000
of $12,879,733, 2001 of $1,543,591, 2002 of $1,029,889, 2003 of $4,252,651, and
2004 of $6,123,820.  The net operating losses expire at the required period of
15 years from when they have been generated.  The company does not expect to
utilize the net operating loss and therefore had not made a provision for the
assets.

LIQUIDITY AND CAPITAL RESOURCES

The Company's operating requirements have been funded primarily on its capital
sale- leaseback transactions, and sales of the Company's common stock.  During
the year ended June 30, 2005, the Company's net proceeds from the capital sales
leaseback transactions was approximately $1,692,904 and proceeds from the sale
of common stock were approximately $2,919,289.  The Company believes that the
cash flows from its monthly service and transaction fees are adequate to repay
the capital sale-leaseback operations.  The Company has reassessed its monthly
service and transaction fees and reorganized customers that were slow pays that
will increase the cash flow in the upcoming fiscal year.


10
<PAGE>
Cash used in operating activities for Fiscal 2005 was ($4,700,884) compared to
($5,088,511) for Fiscal 2004.  The Company's focus on core operations will
result in lower accounts receivable and inventory levels.  The Company receives
payments from a majority of its customers automatically through electronic fund
transfers.  Collection cycles are generally less than thirty days.

Cash provided by investing activities was $1,307,044 for Fiscal 2005, compared
to cash used in investing activities of  ($1,662,735) for Fiscal 2004.
Streamlining operations and capital budget curtailment practices promoted a
reduction in equipment purchases for the Company.  The Company's cash provided
by investing activities is due to the net advances from affiliates.

Cash provided by financing activities was $3,317,426 in Fiscal 2005, compared to
$6,783,407 for Fiscal 2004.  Financing activities primarily consisted of
proceeds from the sale of the Company's common stock and proceeds from the
sale-leaseback transactions during the fiscal period.

The Company has used funds advanced from an affiliated entity that is controlled
by the Company's chairman and chief executive officer.  As of June 30, 2005 the
Company maintains an account receivable from this entity for the amount of
$368,197.

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, the Company's 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 the
Company's anticipated rapid growth.


11
<PAGE>
<TABLE>
<CAPTION>
ITEM 7.  FINANCIAL STATEMENTS

MEDCOM USA, INC.

TABLE OF CONTENTS                                                          PAGE
-----------------                                                          ----
<S>                                                                        <C>
  INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM:                            F-2
        Epstein, Weber & Conover, PLC

  CONSOLIDATED FINANCIAL STATEMENTS:
      Consolidated Balance Sheet at June 30, 2005                           F-3

      Consolidated Statements of Operations for the years ended
        June 30, 2005 and 2004                                              F-4

      Consolidated Statements of Stockholders' Equity for the years ended
        June 30, 2005 and 2004                                              F-5

      Consolidated Statements of Cash Flows for the years ended
        June 30, 2005 and 2004                                              F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                  F-7
</TABLE>


12
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             -------------------------------------------------------


To the Stockholders and Board of Directors of
  MedCom USA, Inc.:

We  have audited the accompanying consolidated balance sheet of MedCom USA, Inc.
as  of  June  30,  2005  and the related statements of operations, stockholders'
equity  and  cash  flows for the each of the two years in the period then ended.
These  financial  statements are the responsibility of the Company's management.
Our  responsibility is to express an opinion on these financial statements based
on  our  audit.

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

In  our  opinion,  the financial statements referred to above present fairly, in
all material respects, the financial position of MedCom USA, Inc. as of June 30,
2005, and the results of its operations and cash flows for each of the two years
in  the  period  ended  June  30, 2005, in conformity with accounting principles
generally  accepted  in  the  United  States  of  America.

The  accompanying  financial  statements  have  been  prepared assuming that the
Company  will  continue  as  a  going  concern.  The  Company continues to incur
significant  operating  losses.  The  Company has begun to generate revenue from
its  electronic  transaction  business  but  has  continued  to  incur  material
obligations  under sale-leaseback transactions.  These factors raise substantial
doubt  about the Company's ability to continue as a going concern.  Management's
plans  with  regard  to  these  matters  are discussed in Note 1.  The financial
statements  do  not  include  any adjustments relating to the recoverability and
classification  of  asset  carrying  amounts or the amount and classification of
liabilities  that  might  result  should  the Company be unable to continue as a
going  concern.


/s/  Epstein, Weber & Conover, PLC
     Scottsdale, Arizona
     September 28, 2005


13
<PAGE>
<TABLE>
<CAPTION>
MEDCOM USA, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 2005
----------------------------------------------------------------------
<S>                                                                    <C>
CURRENT ASSETS
  Cash                                                                 $     10,207
  Accounts receivable, net of allowance of $84,424                          272,185
  Subscription receivable                                                   308,000
  Inventories                                                                     -
  Prepaid expenses and other current assets                                  47,336
                                                                       -------------
      Total current assets                                                  637,728

PROPERTY AND EQUIPMENT, net                                                 474,097
PROCESSING TERMINALS, net                                                 3,325,782
GOODWILL, net of accumulated amortization and impairment
        reserve of $758,998                                                       -
OTHER ASSETS                                                                 77,656
                                                                       -------------
   TOTAL ASSETS                                                        $  4,515,263
                                                                       =============

LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
  Accounts payable                                                     $    496,741
  Accrued expenses and other liabilities                                    343,873
  Bank Overdraft                                                            252,535
  Reserve sales returns                                                      31,304
  Deferred revenue                                                        1,152,723
  Dividend payable                                                           23,750
  Notes payable - current portion                                           201,313
  Capital lease obligations - current portion                             1,886,405
                                                                       -------------
      Total current liabilities                                           4,388,644

NOTES PAYABLE - Affiliate                                                   368,197
LONG TERM NOTE PAYABLE                                                      164,865
CAPITAL LEASE OBLIGATIONS - long-term portion                             2,929,176
DEFERRED REVENUE - long-term portion                                      1,564,803
                                                                       -------------
      Total liabilities                                                   9,415,684
                                                                       -------------

STOCKHOLDERS' DEFICIT:
  Convertible preferred stock, Series A $.001par value, 52,900 shares
    designated, 4,250 issued and outstanding                                      4
  Convertible preferred stock, Series D $.01par value, 50,000 shares
    designated, 2,850 issued and outstanding                                     28
  Common stock, $.0001 par value, 80,000,000 shares authorized,
    57,664,432 issued, 57,477,445 outstanding                                 5,767
  Subscriptions receivable                                                        -
  Treasury Stock                                                            (37,397)
  Paid in capital                                                        75,700,765
  Accumulated deficit                                                   (80,569,588)
                                                                       -------------
    Total stockholders' deficit                                          (4,900,421)
                                                                       -------------
  TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                          $  4,515,263
                                                                       -------------
</TABLE>

    The accompanying notes are an integral part of these consolidated financial
                                   statements.


14
<PAGE>
<TABLE>
<CAPTION>
MEDCOM USA, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2005 AND JUNE 30, 2004
----------------------------------------------------------------------
                                                  2005          2004
                                              ------------  ------------
<S>                                           <C>           <C>
REVENUES:
  Terminal sales                              $   301,764   $   636,075
  Service                                       1,380,063     1,344,276
  Equipment lease income                        1,065,442     1,049,524
                                              ------------  ------------
                                                2,747,269     3,029,875
COST OF SALES AND SERVICE                         440,155       458,656
                                              ------------  ------------
GROSS PROFIT                                    2,307,114     2,571,219
                                              ------------  ------------

OPERATING EXPENSES:
    General and administrative expenses         4,803,976     3,488,632
    Sales and marketing expenses                  304,522     1,043,634
    Royalties                                     119,741        89,127
    Professional and consulting fees              831,593       745,348
    Depreciation and amortization               1,524,016     1,453,089
                                              ------------  ------------
        Total operating expenses                7,583,848     6,819,830
                                              ------------  ------------
OPERATING LOSS                                 (5,276,734)   (4,248,611)
                                              ------------  ------------

OTHER (INCOME) AND EXPENSES
    Interest expense                              897,643       887,921
    Goodwill Impairment                           436,423             -
    Legal Settlement                              233,982             -
    Loss on Disposal of Assets and Inventory      223,820             -
    Other expenses                                 46,467      (527,241)
                                              ------------  ------------
        Total other expense                     1,838,335       360,680
                                              ------------  ------------
LOSS BEFORE INCOME TAXES                       (7,115,069)   (4,609,291)

INCOME TAX (BENEFIT) PROVISION                          -             -
                                              ------------  ------------
NET LOSS                                      $(7,115,069)  $(4,609,291)
                                              ============  ============
NET LOSS PER SHARE:
  Basic:                                      $     (0.13)  $     (0.11)
                                              ============  ============

  Diluted:                                    $     (0.13)  $     (0.11)
                                              ============  ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
  Basic                                        54,015,797    41,167,477
                                              ============  ============

  Diluted                                      54,015,797    41,167,477
                                              ============  ============
</TABLE>

    The accompanying notes are an integral part of these consolidated financial
                                   statements.


15
<PAGE>
<TABLE>
<CAPTION>
MEDCOM USA, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE
FOR THE YEARS ENDED JUNE 30, 2005 AND 2004
----------------------------------------------------------------------

                                                                 \----------- PREFERED STOCK -----------\
                                          COMMON STOCK      PREFERRED A & B       PREFERRED C       PREFERRED D      PAID-IN
                                        SHARES    AMOUNT    SHARES    AMOUNT    SHARES   AMOUNT   SHARES  AMOUNT     CAPITAL
                                      ----------  -------  --------  ---------  ------  --------  ------  -------  -----------
<S>                                   <C>         <C>      <C>       <C>        <C>     <C>       <C>     <C>      <C>
BALANCE JULY 1, 2003                  36,979,865  $ 3,698     4,250  $       4       -  $      -   2,850  $    29  $63,278,187

Common stock issued for cash           7,144,973      714                                                            5,876,392

Common stock issued to settle claims     298,866       30                                                              657,475

Common stock subscribed                1,000,000      100                                                              499,900

Conversion of affiliate note payable   3,186,499      319                                                              776,673

Exercise of stock options                508,941       51                                                              296,933

Treasury shares taken in settlement

Common stock granted as
  consdieration for services             910,000       91                                                              567,709

  Net loss
                                      ----------  -------  --------  ---------  ------  --------  ------  -------  -----------

BALANCE
    JUNE 30, 2004                     50,029,144  $ 5,003     4,250  $       4       -  $      -   2,850  $    29  $71,953,269
                                      ==========  =======  ========  =========  ======  ========  ======  =======  ===========


                                       TREASURY    SUBSCIRPTION    ACCUMULATED
                                        STOCK       RECEIVABLE       DEFICIT        TOTAL
                                      ----------  --------------  -------------  ------------
<S>                                   <C>         <C>             <C>            <C>
BALANCE JULY 1, 2003                  $       -   $           -   $(68,845,428)  $(5,563,510)

Common stock issued for cash                                                       5,877,106

Common stock issued to settle claims                                                 657,505

Common stock subscribed                                (500,000)                           -

Conversion of affiliate note payable                                                 776,992

Exercise of stock options                                                            296,984

Treasury shares taken in settlement     (37,397)                                     (37,397)

Common stock granted as
  consdieration for services                                                         567,800

  Net loss                                                          (4,609,291)   (4,609,291)
                                      ----------  --------------  -------------  ------------
BALANCE
    JUNE 30, 2004                     $ (37,397)  $    (500,000)  $(73,454,719)  $(2,033,811)
                                      ==========  ==============  =============  ============
</TABLE>

    The accompanying notes are an integral part of these consolidated financial
                                   statements


16
<PAGE>
<TABLE>
<CAPTION>
MEDCOM USA, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE
FOR THE YEARS ENDED JUNE 30, 2005 AND 2004 (CONTINUED)
----------------------------------------------------------------------

                                                                     \----------- PREFERED STOCK -----------\
                                             COMMON STOCK       PREFERRED A & B      PREFERRED C       PREFERRED D      PAID-IN
                                           SHARES    AMOUNT    SHARES    AMOUNT    SHARES   AMOUNT   SHARES  AMOUNT     CAPITAL
                                         ----------  -------  --------  ---------  ------  --------  ------  -------  -----------
<S>                                      <C>         <C>      <C>       <C>        <C>     <C>       <C>     <C>      <C>
BALANCE JULY 1, 2004                     50,029,144  $ 5,003     4,250  $       4       -  $      -   2,850  $    29  $71,953,269

Common stock issued for cash              5,925,093      593                                                            2,418,696

Common stock issued to settle claims        276,000       28                                                              275,972

Common stock for payable conversions         85,000        9                                                              135,992

Exercise of cashless options                289,195       29

Common stock issued for cash
  received subsequent to June 30 2005       770,000       77                                                              307,923

Payment on 2004 subscription receivable

Common stock granted as
  consdieration for services                290,000       29                                                              608,913

  Net loss
                                         ----------  -------  --------  ---------  ------  --------  ------  -------  -----------

BALANCE
    JUNE 30, 2005                        57,664,432  $ 5,767     4,250  $       4       -  $      -   2,850  $    28  $75,700,765
                                         ==========  =======  ========  =========  ======  ========  ======  =======  ===========


                                          TREASURY    SUBSCIRPTION    ACCUMULATED
                                           STOCK       RECEIVABLE       DEFICIT        TOTAL
                                         ----------  --------------  -------------  ------------
<S>                                      <C>         <C>             <C>            <C>
BALANCE JULY 1, 2004                     $ (37,397)  $    (500,000)  $(73,454,519)  $(1,496,214)

Common stock issued for cash                                                          2,419,289

Common stock issued to settle claims                                                    276,000

Common stock for payable conversions                                                    136,001

Exercise of cashless options                                                                 29

Common stock issued for cash
  received subsequent to June 30 2005                                                   308,000

Payment on 2004 subscription receivable    500,000                              0

Common stock granted as
  consdieration for services                                                            608,942

  Net loss                                                             (7,115,069)   (7,115,069)
                                         ----------  --------------  -------------  ------------
BALANCE
    JUNE 30, 2005                        $ (37,397)  $           -   $(80,569,588)  $(4,863,024)
                                         ==========  ==============  =============  ============
</TABLE>

    The accompanying notes are an integral part of these consolidated financial
                                   statements


17
<PAGE>
<TABLE>
<CAPTION>
MEDCOM USA, INC.
STATEMENT OF CASH FLOWS FOR THE
YEARS ENDED JUNE 30, 2005 AND 2004

                                                                  2005          2004
                                                              ------------  ------------
<S>                                                           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

  Net (loss)                                                  $(7,115,069)  $(4,609,291)
  Adjustments to reconcile net income to net cash
    (used in) operating activities:
  Depreciation and amortization                                 1,524,016     1,453,088
  Issuance of stock as consideration for services                 608,942       567,800
  Issuance of stock for settlement of claims                      135,269       657,505
  Issuance of stock for conversion of payables                    136,000             -
Gain on write-off of obligations                                        -      (870,110)
Treasury stock taken in settlement of claims                            -       (37,397)
Allowance for sales returns                                             -        40,270
  Loss on inventory/assets abandoned                              223,820             -
  Impairment of goodwill                                          436,423             -
  Changes in assets and liabilities:
    Trade accounts receivable                                      11,118       (93,690)
    Inventories                                                   113,848      (157,356)
    Prepaid and other current assets                               41,887       (86,096)
    Accounts payable                                              234,049      (145,515)
    Accrued liabilities                                            14,235      (758,195)
    Deferred revenue                                           (1,065,422)   (1,049,524)
                                                              ------------  ------------
        Net cash  (used in) operating activities               (4,700,884)   (5,088,511)
                                                              ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of  equipment                                         (33,453)      (34,351)
  Purchases of software upgrades                                 (448,929)     (208,155)
  Advances from/(to) affiliates                                 1,789,426    (1,420,229)
                                                              ------------  ------------
        Net cash provided by (used in) investing activities     1,307,044    (1,662,735)
                                                              ------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayments on capital leases                         (1,547,302)   (1,200,996)
Proceeds from sale of common stock                              2,919,289     5,877,106
Retirement of Stock                                                     -       296,984
Bank overdraft usage                                              252,535
Proceeds from capital sale-leaseback transactions               1,692,904     1,810,313
                                                              ------------  ------------
        Net cash provided by financing activities               3,317,426     6,783,407
                                                              ------------  ------------

(DECREASE) INCREASE IN CASH                                       (76,414)       32,161
CASH, BEGINNING OF YEAR                                            86,621        54,460
                                                              ------------  ------------
CASH, END OF YEAR                                             $    10,207   $    86,621
                                                              ============  ============
</TABLE>

    The accompanying notes are an integral part of these consolidated financial
                                   statements.


18
<PAGE>
<TABLE>
<CAPTION>
MEDCOM USA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS, (CONTINUED)
FOR THE YEAR ENDED JUNE 30, 2005 AND 2004
-----------------------------------------

SUPPLEMENTAL CASH FLOW INFORMATION:                                      2005        2004
                                                                      ----------  ----------
<S>                                                                   <C>         <C>

    Interest paid                                                     $  850,004  $  892,935
                                                                      ==========  ==========

    Income taxes paid                                                 $      -0-  $      -0-
                                                                      ==========  ==========


SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

    Terminals capitalized under sales/leaseback transactions          $1,692,904  $2,086,489
                                                                      ==========  ==========

    Extinguishment of note payable obligations to affiliate by
      conversion to common stock                                      $        0  $  776,992
                                                                      ==========  ==========

    Exercise of options through cashless transactions                 $  200,000  $  121,166
                                                                      ==========  ==========

    Terminals returned and placed back into inventory at net
      Capitalized cost                                                $  318,602  $  920,060
                                                                      ==========  ==========

    Terminals returned/leases assumed by Company                      $    8,966  $  149,950
                                                                      ==========  ==========
</TABLE>

    The accompanying notes are an integral part of these consolidated financial
                                   statements.


19
<PAGE>
MEDCOM USA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2005
----------------------------------------------------------------------

1. ORGANIZATION AND BASIS OF PRESENTATION

     MedCom USA, Inc. (the "Company"), formally Sims Communications, Inc.,
     provides point-of-sale transaction terminals and personal computer based
     software to perform medical insurance eligibility verification, claims
     processing, and credit card/ATM charges and payments. The Company's
     customers are health care providers, primarily physicians' offices
     throughout the United States.

     The accompanying financial statements represent the consolidated financial
     position and results of operations of the Company and includes 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.

     The accompanying financial statements have been prepared assuming that the
     Company will continue as a going concern. The Company continues to incur
     material operating losses and has failed to generate positive cash flow
     from operations. The Company has a working capital deficit of $3,750,916 at
     June 30, 2005. The Company has generated cash flow through sale-leaseback
     financing transactions to fund its operations. Management believes that the
     Company has begun to generate a level of volume in the sales and service
     contracts of its processing terminals that will allow the Company to meet
     operating cash flow requirements. The Company has recently changed some of
     its operations that may allow the Company to better manage cash flows.

     The Company has begun to experience increased sales of its MedCard System
     and has generated cash through the use of sale-leaseback transactions
     connected to the sales of the terminals for the MedCard System. Management
     is attempting to attain a sustaining level of operating cash flow from the
     Company's MedCard operations. The Company has raised additional equity
     capital in the year ended June 30, 2005 and may attempt to raise additional
     capital to grow the MedCard operations and to fund inventory and receivable
     growth.

     Cash reserves and working capital at June 30, 2005 were insufficient to
     fund currently due obligations. As discussed above, the Company is
     generating cash flow from sales activities and sale-leaseback transactions.
     Such cash flow is only recently provided some evidence that it is
     sufficient to cover current operating expenses. However, this level of cash
     flow does not permit the Company to retire many older debts or expand its
     operations. The Company believes that it needs additional cash, either from
     outside financing or expanded sales activities, in order to retire past due
     debts and significantly expand the Company's operations. If the Company is
     unable to produce sales as planned and/or raise additional investment
     capital to fully implement its business plan, it may jeopardize the ability
     of the Company to continue as a going concern.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Cash includes all short-term highly liquid investments that are readily
     ----
     convertible to known amounts of cash and have original maturities of three
     months or less. Net bank overdrafts are recorded as current liabilities.

     Principles of Consolidation: The consolidated financial statements include
     ----------------------------
     the accounts of the Company and its wholly owned subsidiaries. All
     significant intercompany accounts and transactions are eliminated.


20
<PAGE>
     Inventories consist primarily point-of sale ("POS") terminals and spare
     -----------
     parts that are held for sale. Inventories are recorded at the lower of cost
     or market on a first-in, first-out basis. POS terminals that are returned
     by customers and are held for resale are recorded at the carrying value of
     the terminal, which is the capitalized cost of the underlying
     sale-leaseback transaction, net of accumulated amortization. During the
     year ended June 30, 2005, the Company determined that the POS terminals'
     hardware was in fact incidental to the providing of software and ongoing
     services and that substantially all of the terminals were ultimately part
     of the sale-leaseback transactions described in Note 8. The Company has
     recently made arrangements with its supplier of these terminals where the
     Company will no longer take title to terminals. Additionally, many of the
     Company's customers are now opting to use the service on an Internet based
     system rather than using the terminals. Because of these circumstances and
     the cost associated with tracking terminals out at customer facilities, the
     Company has determined that the terminal hardware has minimal value and has
     written off inventories at June 30, 2005 resulting in a charge of $198,804
     during the year ended June 30, 2005.


     Property and Equipment and Terminals is stated at cost less accumulated
     ------------------------------------
     depreciation. Depreciation is recorded on a straight-line basis over the
     estimated useful lives of the assets ranging from 3 to 5 years. Terminals
     are recorded at the capitalized cost of the underlying sale-leaseback
     transactions. Depreciation expense for the years ended June 30, 2005 and
     2004 was $1,524,016 and $1,453,089, respectively.

     Revenue Recognition - The Company's revenue is generated by the sale of POS
     -------------------
     terminals and transaction fees generated through those terminals. Revenue
     from the sale of POS terminals is recognized when delivered to the customer
     and installed. Customers also may rent terminals without purchasing them
     directly. Rental income is recorded monthly as customers utilize the
     terminals. Transactions fees are recognized upon completion of the
     transaction processing. Sales commissions are determined on the basis of
     the total contract value and are payable and expensed when the terminal is
     installed.

     Gains are deferred on sale-leaseback transactions of terminals and are
     amortized in proportion to the amortization of the leased terminals,
     generally over the term of the related capital leases.

     Customers may return terminals under certain terms outlined in the rental
     agreements. Generally, customer returns do not affect previously recognized
     revenue in that rental/service and transaction fee income is recognized as
     the customer utilizes the terminal. When a customer terminates service, the
     billing process ceases and the terminals are returned and placed into
     inventory.

     Income Taxes - The Company provides for income taxes based on the
     ------------
     provisions of Statement of Financial Accounting Standards No. 109,
     Accounting for Income Taxes, which, among other things, requires that
     recognition of deferred income taxes be measured by the provisions of
     enacted tax laws in effect at the date of financial statements.

     Financial Instruments - Financial instruments consist primarily of accounts
     ---------------------
     receivable, and obligations under accounts payable, accrued expenses,
     capital lease obligations and notes payable. The carrying amounts of
     accounts receivable, accounts payable, accrued expenses and notes payable
     approximate fair value because of the short maturity of those instruments.
     The carrying value of the Company's capital lease arrangements approximates
     fair value because the instruments were valued at the retail cost of the
     equipment at the time the Company entered into the arrangements.

     The Company has applied certain assumptions in estimating these fair
     values. The use of different assumptions or methodologies may have a
     material effect on the estimates of fair values.


21
<PAGE>
     Net  Loss  Per  Share  is  calculated  using the weighted average number of
     ---------------------
     shares of common stock outstanding during the year. The Company has adopted
     the provisions of SFAS No. 128 Earnings Per Share.

     Use  of  Estimates-  The  preparation of financial statements in conformity
     ------------------
     with generally accepted accounting principles requires management to make
     estimates and assumptions that affect the reported amounts of assets and
     liabilities 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. Actual results could differ from
     those estimates.

     Stock-Based Compensation - Statements of Financial Accounting Standards No.
     ------------------------
     123, Accounting for Stock-Based Compensation, ("SFAS 123") established
     accounting and disclosure requirements using a fair-value based method of
     accounting for stock-based employee compensation. In accordance with SFAS
     123, the Company has elected to continue accounting for stock based
     compensation using the intrinsic value method prescribed by Accounting
     Principles Board Opinion No. 25, "Accounting for Stock Issued to
     Employees."

     From time to time, the Company issues stock options to executives, key
     employees and members of the Board of Directors. Generally, when the
     Company grants stock options to employees, there is no intrinsic value of
     those options on the date of grant. Accordingly, no compensation cost has
     been recognized for stock options granted to employees. There were no
     options granted in the years ended June 30, 2005 and 2004. There was no
     additional vesting of options previously granted.

     The Company accounts for stock awards issued to nonemployees in accordance
     with the provisions of SFAS 123 and Emerging Issues Task Force ("EITF")
     Issue No. 96-18 Accounting for Equity Instruments that are Issued to Other
     Than Employees for Aquiring, or in Conjunction with Selling Goods or
     Services. Under SFAS 123 and EITF 96-18, stock awards to nonemployees are
     accounted for at their fair value as determined under Black-Scholes option
     pricing model.

     Intangible Assets at June 30, 2005 consist of goodwill associated with the
     -----------------
     Company's acquisition of MedCard for the difference between the purchase
     price of the acquired business and the fair value of the identifiable net
     assets. Medcard is the only remaining operating subsidiary. The Company
     adopted Statement of Financial Accounting Standard ("SFAS") 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 for impairment, in accordance with
     the provisions of SFAS No. 142. The Company believes that there has been an
     impairment of the carrying value of goodwill of $758,998 as of June 30,
     2005.

     Goodwill had been amortized over 5 years. Due to material continued
     operating losses, the Company determined that its carrying value of
     goodwill was impaired at June 30, 2005. On the basis of that determination
     a charge of $436,423 was made in the year ended June 30, 2005 to write off
     the full remaining carrying value at June 30, 2005.

     Research and Development costs are expensed as incurred.
     ------------------------

     Impairment of Long-Lived Assets is assessed by the Company for impairment
     -------------------------------
     whenever there is an indication that the carrying amount of the asset may
     not be recoverable. Recoverability of these assets is determined by
     comparing the forecasted undiscounted cash flows generated by those assets
     to the assets' net carrying value. The amount of impairment loss, if any,
     is measured as the difference between the net book value of the assets and
     the estimated fair value of the related assets.


22
<PAGE>
     Recently Issued Accounting Pronouncements:  In December 2002, the FASB
     -----------------------------------------
     issued SFAS No. 148, Accounting for Stock-Based Compensation - Transaction
     and Disclosure, which provides alternative methods of transition for a
     voluntary change to fair value based method of accounting for stock-based
     employee compensation as prescribed in SFAS 123, Accounting for Stock-Based
     Compensation. Additionally, SFAS No. 148 requires more prominent and more
     frequent disclosures in financial statements about the effects of
     stock-based compensation. The provisions of this statement are effective
     for fiscal years ending after December 15, 2002, with early application
     permitted in certain circumstances. The Company presently does not intend
     to adopt the fair value based method of accounting for its stock based
     compensation.

     In June 2003 the FASB issued Statement No. 150, "Accounting for Certain
     Financial Instruments with Characteristics of both Liabilities and Equity"
     SFAS No. 150 requires certain instruments, including mandatorily redeemable
     shares, to be classified as liabilities, not as part of shareholders'
     equity or redeemable equity. For instruments that are entered into or
     modified after May 31, 2003, SFAS No. 150 is effective immediately upon
     entering the transaction or modifying the terms. For other instruments
     covered by Statement 150 that were entered into before June 1, 2003,
     Statement 150 is effective for the first interim period beginning after
     June 15, 2003. The Company has evaluated the provisions of SFAS No. 150 and
     implementation of such was not material.

     In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"),
     Guarantor's Accounting and Disclosure Requirements for Guarantees,
     including Indirect Guarantees of Indebtedness of Others. FIN 45 requires a
     company, at the time it issues a guarantee, to recognize an initial
     liability for the fair value of obligations assumed under the guarantees
     and elaborates on existing disclosure requirements related to guarantees
     and warranties. The initial recognition requirements are effective for the
     Company during the third quarter ending March 31, 2003. The adoption of FIN
     45 did not have an impact on the Company's financial position or results of
     operations.

     In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
     Consolidation of Variable Interest Entities, an Interpretation of ARB No.
     51. FIN 46 requires certain variable interest entities to be consolidated
     by the primary beneficiary of the entity if the equity investors in the
     entity do not have the characteristics of a controlling financial interest
     or do not have sufficient equity at risk for the entity to finance its
     activities without additional subordinated financial support from other
     parties. FIN 46 is effective for all new variable interest entities created
     or acquired after January 31, 2003. For variable interest entities created
     or acquired prior to February 1, 2003, the provisions of FIN 46 must be
     applied for the first interim or annual period beginning after June 15,
     2003. The adoption of FIN 46 did not have an impact on the Company's
     financial position or results of operations.


     In December 2004 the FASB issued a revised Statement 123 (SFAS 123R),
     "Accounting for Stock-Based Compensation" requiring public entities to
     measure the cost of employee services received in exchange for an award of
     equity instruments based on grant date fair value. The cost will be
     recognized over the period during which an employee is required to provide
     service in exchange for the award - usually the vesting period. The Company
     is evaluating the impact of this new pronouncement and does not expect the
     effect of implementation will have a significant impact on the Company's
     financial statements.

3. ACCOUNTS RECEIVABLE
     The Company's accounts receivable at June 30, 2005 consisted of:

<TABLE>
<CAPTION>
<S>                                        <C>
Medcard trade accounts receivable          $ 349,609
Other                                          5,000
                                           ----------
    Total                                    354,609

    Less: Allowance for doubtful accounts   ( 82,424)
                                           ----------
                                           $ 272,185
                                           ==========
</TABLE>


23
<PAGE>
The Company estimates uncollectible account balances and provides an allowance
for such estimates.  The allowance for doubtful accounts at June 30, 2005,
consists of an estimate for potentially uncollectible accounts in the MedCard
division.


4. GAIN ON WRITE-OFF OF OLD TRADE VENDOR OBLIGATIONS

The Company had incurred material unpaid obligations in many business segments
that had been sold or abandoned several years ago.  The Company has retained
accruals of approximately $586,606 since those business units were divested.
The Company attempted to pay numerous of these obligations.  Most of the
obligations were due to trade vendors and landlords.  Many of these creditors
ceased collection efforts several years ago and the Company has not had
communications with theses creditors since then.  Upon being advised by legal
counsel, management believes that the statute of limitations for collecting on
these obligations has expired.  On that premise, the Company removed
approximately $870,000 of these obligations during the year ended June 30, 2004.
The $870,000 gain is included in other income in the accompanying statement of
operations for the year ended June 30, 2004.


5. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at June 30, 2005:

<TABLE>
<CAPTION>
<S>                                     <C>
         Software                       $   936,479
         Software upgrades                  649,168
         Office and computer equipment      269,041
         Furnishings and fixtures           126,722
         Leasehold improvements               4,439
                                        ------------

     Total                                1,985,849
     Less accumulated depreciation       (1,511,752)
                                        ------------

         Property and equipment, net    $   474,097
                                        ============
</TABLE>

Software represents the cost of software acquired for the operation of the
Company's MedCard System.  The capitalized cost of the software is amortized on
a straight-line basis over five years.  Additional costs capitalized as software
development during the years ended June 30, 2005 and 2004 were $448,929 and
$208,155, respectively.  These upgrades are amortized on a straight-line basis
over three years.

6. TERMINALS

The Company capitalizes the value of the point of sale terminals that are sold
under capital sale-leaseback transactions (Note 8). The terminals are purchased
from third party vendors and are recorded as inventory at that time. The Company
enters into sale and service agreements with its customers at which time the
terminal is programmed with the Company's proprietary software and installed
with the customer. Many of those terminals are the basis for the sale-leaseback
transactions discussed in Note 8. The terminals are capitalized at the value
determined by the lessor on the basis of the cash flow under the terms of the
sale and service agreements with the customers.


24
<PAGE>
<TABLE>
<CAPTION>
<S>                                 <C>
     Terminals                      $ 6,197,320
     Less accumulated amortization   (2,871,538)
                                    ------------
         Terminals, net             $ 3,325,782
                                    ============
</TABLE>


7. NOTES PAYABLE

Notes payable at June 30, 2005 comprise the following:

<TABLE>
<CAPTION>
<S>                                                       <C>
Convertible note payable to individual. The note bears
interest at 8% per annum and is payable quarterly.  The
note is convertible to common stock at $6.25 per share.
The note had an original maturity date of February 1998
and is currently in default.                              $ 25,000

Note payable to landlord. Collateralized by leasehold
improvements.  Original principal balance of $95,000.
Legal settlement negotiated July 2005 requires quarterly
payments beginning August 2005 through November
2007 (imputed interest at 8% per annum) plus the
issuance of 150,000 shares of the Company's common
stock.                                                     341,178
                                                          --------
                                                           366,178

Less current portion                                       201,313
                                                          --------
                                                          $164,865
                                                          ========
</TABLE>

Maturities on long-term debt at June 30, 2005 are as follows:

<TABLE>
<CAPTION>
<S>                       <C>
2006                      $201,313
2007                       106,630
2008                        58,235
                          --------
                          $366,178
                          ========
</TABLE>

The  convertible  note  payable  is  in  default  as of June 30, 2005.  The note
payable  to  a  former  landlord relates to a court ordered judgment against the
Company  for the past due note, unpaid rent and legal fees.  The Company settled
the terms of this obligation in the year ended June 30, 2005 by issuance of this
note  payable.


25
<PAGE>
8.  CAPITAL LEASE OBLIGATIONS AND SALE-LEASEBACK TRANSACTIONS

The Company leases many of its MedCard terminals under capital lease agreements.

The Company has entered into an arrangement with a third party lessor whereby
the Company sells its terminals that are placed with customers to the lessor.
The lessor in turn leases back the terminals. These transactions are recorded as
sale-leaseback transactions. The leases between the Company and the lessor are
accounted for as capital leases. The Company generates revenue from the
terminals through monthly service and rental fees and transaction fees. The
value of the sale transaction between the Company and lessor is determined by
Company's agreement with the customer relative to the number of terminals,
length of the customer contract and monthly service fee due from the customer.
The Company acquires terminals from its suppliers, programs the terminals with
its software and sells the terminals to the lessor when it enters into an
agreement with a customer for those specific terminals. Any gain on the sale
transaction with the lessor is deferred and amortized proportionately with the
capitalized asset. That period is generally three, four or five years, the
typical length of the lease agreement. At June 30, 2005, the amount of deferred
gain on sale-leaseback transactions was $2,717,526.

Generally, the terms of repayment for the capital lease obligations approximates
the monthly rental charged the customer by the Company. These leases are
collateralized by the underlying equipment, contract with the customer and, in
addition, 1,000,000 shares of the Company's common stock. The projected cash
flow from the customer contract is generally greater than the payments required
under the capital lease arrangement with the customer. There have been
occurrences when customers terminate a contract and the terminals are returned
to the Company. The Company will have the opportunity to resell that unit under
a new contract. The Company may also obtain a new capital lease through a sale
leaseback transaction with the lessor. Therefore, there may be more than a
single capital lease obligation to repay although there is only a single
customer contract. The Company believes that it generates sufficient cash flows
from direct sales and service revenue to cover such variances in capital lease
obligations to customer contracts.

The following presents future minimum lease payments under the capital leases by
year and the present value of minimum lease payments as of June 30, 2005:

<TABLE>
<CAPTION>
          Years ended June 30:

                                     Terminals
                                    ------------
<S>                                 <C>
                     2006           $ 2,697,357
                     2007             1,952,386
                     2008             1,369,501
                     2009               435,459
                     2010                50,255
                                    ------------
Total minimum lease payments          6,504,958
Lees: amount representing interest   (1,689,377)
                                    ------------
Present value of minimum
    lease payments                  $ 4,815,581
                                    ============
</TABLE>


26
<PAGE>
The  capitalized  cost of terminals under capital leases for the year ended June
30,  2005  and  2004  was  $6,197,320  and  $5,884,507 respectively. The related
accumulated  amortization  on  these  assets was $2,871,538 and $2,061,520 as of
June  30,  2005  and  2004,  respectively.

9. INCOME TAXES

The  Company  recognizes  deferred  income  taxes  for  the  differences between
financial  accounting  and tax bases of assets and liabilities. Income taxes for
the  years  ended  June  30,  consisted  of  the  following:

<TABLE>
<CAPTION>
                                           2005          2004
                                       ------------  ------------
<S>                                    <C>           <C>
     Current tax (benefit) provision   $(2,884,109)  $(1,642,362)
     Deferred tax (benefit) provision    2,884,109     1,642,362
                                       ------------  ------------
       Total income tax provision      $     - 0 -   $     - 0 -
                                       ============  ============
</TABLE>

Net deferred tax assets of $22,925,128 were fully offset by an equal valuation
allowance at June 30, 2005.  The deferred income tax assets relate primarily to
net operating loss carryforwards and differences in book and tax bases of
property and equipment, intangible assets and certain accruals.  The net
deferred income tax asset at June 30, 2005 is comprised of:

<TABLE>
<CAPTION>
<S>                                          <C>
Allowance for losses on accounts receivable  $     34,000
Deferred compensation                              79,000
Contingency                                       160,000
Deferred revenue                                1,089,000
Property and equipment                            134,000
Impairment of intangible assets                 1,834,000
Net operating loss carryforwards               22,065,000
                                             -------------
    Deferred income tax asset                  25,394,000
        Less:  valuation allowance            (25,394,000)
                                             -------------
        Total deferred income tax asset             - 0 -

Deferred income tax liability                      (- 0 -)
                                             -------------

        Net deferred income tax asset        $      - 0 -
                                             =============
</TABLE>

Federal  net  operating  loss  carryforwards  of $51,189,000 expire from 2011 to
2023.  State net operating loss carryforwards of $29,603,000 expire from 2005 to
2008.  During  the  year  ended  June 30, 2005, the Company reduced the deferred
income  tax  asset  related  to  net  operating loss carryforwards by $3,484,000
resulting  from  the  expiration  of  such  carryforwards. Due to the conditions
discussed  in  Note  1,  future  utilization  of  the  net  operating  losses is
uncertain.  The  valuation  allowance  on  the  deferred  income  tax  asset was
decreased  by $1,648,702 in the year ended June 30, 2005, resulting primarily to
the  expiration  of  net  operating  loss  carryforwards.


The differences between the statutory and effective tax rates is as follows for
the years ended June 30:

<TABLE>
<CAPTION>
                                    2005                 2004
                                ------------         ------------
<S>                             <C>           <C>    <C>           <C>
Federal statutory rates         $(2,419,000)  (34)%  $(1,563,141)  (34)%
State income taxes                 (427,000)   (6)%     (275,848)   (6)%
Valuation allowance for
  operating loss carryforwards    2,841,000     40%    1,838,989     39%
  Other                               5,000      -%       18,641      1%
                                ------------  -----  ------------  -----
    Effective rate              $   ( - 0 -)     0%  $   ( - 0 -)     0%
                                ============  =====  ============  =====
</TABLE>


27
<PAGE>
10. OPERATING LEASES

     The Company leases its office space under long-term operating leases
     expiring through 2008. Rent expense under these leases was $213,616 and
     $154,238 for the years ended June 30, 2005 and 2004, respectively.

     Future minimum annual lease payments and sublease rentals under operating
     lease agreements for years ended June 30:

<TABLE>
<CAPTION>
<S>                    <C>
          2006          164,432
          2007          158,860
          2008          170,980
          2009          142,404
          2010            7,148
                       --------
                       $643,824
                       ========
</TABLE>

11. STOCKHOLDERS' EQUITY

     During the year ended June 30, 2005, the Company issued 7,635,288 shares of
     its  common  stock.  Of  that  amount, 42,184shares of the Company's common
     stock  were  sold  to  an  entity controlled by the Company's president and
     chairman.  The  balance  of  the  shares  were issued to third parties in a
     private  placement  of  the  Company's  common  stock,  issued  to  settle
     obligations  and  as  consideration  for  services.  The  shares  were sold
     throughout  the  year  ended June 30, 2005, ranging from $0.50 per share at
     the  beginning  of  the  year  to  $1.50  per share at the end of the year.
     Commissions  of  approximately  $426,000  are  recorded  as  a  charge  in
     additional  paid  in capital as direct costs associated with the raising of
     equity  capital.  In  conjunction with the offering of the common stock the
     Company  issued  and  the investors received 1,332,199 warrants to purchase
     the  Company's common stock. The warrants have exercise prices ranging from
     $1.00  to  $4.50  per  share  and  expire  three  years from date of issue.

     The  Company  has  issued  shares  of  its common stock as consideration to
     consultants  for services rendered. The value of those shares is 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,  2005,  the  Company  granted  to consultants, 290,000 shares of common
     stock  valued  in  the aggregate at $608,942. The value of these shares was
     expensed  during  the  year.

     The  Company  issued  276,000  shares of its common stock in the year ended
     June  30, 2005 to settle a legal dispute relating from operations that were
     discontinued  in  the 2001. The shares were at $1.00 per share based on the
     trading  price  of  the  stock  at  the  time  of  the  settlement.


28
<PAGE>
     During  the  year ended June 30, 2005, the Company issued 770,000 shares of
     its  common  stock  under  a notice of conversion of common stock warrants.
     Payment  for  the exercise of $308,000 was not received until July 2005 and
     the  amount has bee recorded as a subscription receivable asset at June 30,
     2005.

     During  the  year  ended June 30, 2004, the Company settled a claim with an
     investor.  The  investor  had  claimed  that  it  was owed shares under the
     investment  agreement  due to substantial dilution and erosion of the stock
     price.  The  settlement required the Company to issue an additional 298,866
     shares  of  the  Company's  common  stock  to the investor. The shares were
     valued  at  $657,505  on  the  basis  of  the trading price on the date the
     settlement  was  entered  into. In a separate settlement, 186,987 shares of
     the  Company's  stock  was  returned  and  placed in treasury. The treasury
     shares  are  recorded at $0.20 per share, the trading price on the date the
     settlement was entered into. The 186,987 shares remain as treasury stock at
     June  30,  2005.

     During  the year ended June 30, 2004, the Company entered into an agreement
     with a third party to sell 1,000,000 shares to the third party at $0.50 per
     share. The shares were issued but the funds have not yet been received. The
     transaction  is  reflected  as  a  common  stock subscription receivable of
     $500,000  at  June  30,  2005.

     An  entity  controlled  by  the  Company's president and chairman regularly
     advances  funds  to the Company to cover short-term cash flow deficiencies.
     During  the  year ended June 30, 2005, this affiliate converted advances of
     $776,992  into  3,186,499  shares  of  the  Company's  common  stock.

     Common  stock  options  for  508,941  shares were exercised during the year
     ended  June  30,  2005.  A total of 607,800 options were exercised. Of that
     amount,  holders  of  257,800 options performed a cashless exercise netting
     only 158,941 shares being issued in those exercises. The balance of 350,000
     options  were  exercised  for  cash  of  $296,984.

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


29
<PAGE>
     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.

     The  Company  has  not declared its dividend on the preferred stock for the
     years  ended  June  30,  2005  and  2004.  At  June  30, 2005, there was an
     accumulated  undeclared and unpaid dividend on the Series D preferred stock
     of  $342,000.  Total  accrued, but unpaid dividends related to the Series D
     preferred  stock  was  $23,750  at  June  30,  2005.

     Common stock warrants issued in the year ended June 30, 2005 consist of the
     following:

<TABLE>
<CAPTION>
               Number of       Exercise
               Warrants          Price
               ---------       ---------
<S>                            <C>
                 628,991       $    4.00
                 678,400       $    1.00
                 390,400       $    2.75
                  94,400       $    3.00
                 148,999       $    4.00
                  20,000       $    4.50
               ---------
               1,961,190
               =========
</TABLE>

12. COMMITMENTS AND CONTINGENCIES

     Employment Agreements

     The Company has entered into numerous employment agreements with officers
     and key employees. Generally, the employment agreements are for three-year
     periods and include, as potential additional compensation, incentive
     bonuses computed based upon Company's operations and other benefits,
     including such items as an automobile allowance, health and life insurance,
     vacation and sick pay benefits. In June 2000, the Company entered into
     employment agreements with several officers. These agreements were
     renegotiated in the year ended June 30, 2002. Total aggregate annual
     compensation under these agreements is $208,000. These individuals may be
     entitled to receive incentive bonuses and other benefits including health
     insurance, disability coverage, vacation and sick pay. These individuals
     received options to purchase a total of 25,000 shares of the Company's
     common stock at $3.00 per share with vesting on an annual basis over two
     years. The agreements terminated on June 19, 2003.

     Royalty Agreement

     In connection with the original licensing and subsequent acquisition of
     MedCard, the Company entered into a royalty agreement with the original
     Licensor. The royalty provisions of the license agreement remained in
     effect after the purchase. This agreement was amended in the year ended
     June 30, 2002. The Company will


30
<PAGE>
     pay the Licensor 20% of the first $1,000,000 of qualified monthly revenues,
     less direct costs, generated by the licensed software and 10% of net
     monthly revenue in excess of $1,000,000.

     Consulting Agreements

     The Company has entered into various consulting agreements with outside
     consultants. These agreements entitle the consultant to issuances of common
     stock and options as well as cash compensation in exchange for consulting
     services relating to such things as raising additional debt and equity
     capital, software development, sales development, investor and public
     relations and general strategic business consulting. However, certain of
     these agreements included additional compensation on the basis of
     performance. The Company has cancelled all of these agreements and
     wrote-off all of the associated prepaid expense balances at June 30, 2001.
     The Company does not believe that it has any further obligation under these
     agreements. However, there have been certain claims made. During the year
     ended June 30, 2003, the Company settled such claim resulting in the
     utilization of a $98,000 accrual made as of June 30, 2002. This agreement
     included the return of 186,000 shares of the Company's common stock held by
     the consultant. These shares were returned as of June 30, 2003, and were
     recorded as treasury stock during the year ended June 30, 2004.

     During February 2004, the Company has entered into a consulting agreement
     whereby the consultant will act as investor relations advisor on the
     Company's behalf. Upon the execution of the contract the Company granted
     the consultant fifty thousand shares of restricted stock and $50,000.

     During February 2003, the Company has entered into a service agreement with
     a consultant whereby the consultant will act as financial advisor and
     investment banking representative on the Company's behalf. Upon the
     execution of the contract the Company granted the consultant warrants to
     purchase up to 400,000 shares of the Company's common stock at an exercise
     price of $0.50 per common share. The warrants expire five years from date
     of issuance.

     Litigation

     Subsequent to June 30, 2001, several former employees filed complaints
     against the Company alleging unpaid payroll and breach of employment
     agreements. The total known claims being sought by the former employees at
     June 30, 2001 was approximately $175,000. The Company has maintained an
     accrual amount of approximately $140,000 as of June 30, 2004 for such
     claims. In June 2005, a settlement with a former officer was settled. The
     accrual for this obligation of approximately $140,000 was depleted and
     additional settlement expense of $233,982 was recognized.

     Several landlords are seeking damages from the Company due to the Company
     defaulting on several lease agreements. Certain landlords have obtained
     legal judgments against the Company. The total amount of such claims was
     $634,000. The Company and its legal counsel believed that ultimate
     settlement will result in a much lower payout. Subsequent to year-end, a
     settlement was reached with such landlord for $341,178. The Company has
     recorded the settlement as a note payable at June 30, 2005 (see Note 7).
     Management believes possibility of further settlements is unlikely;
     therefore, as of June 30, 2005, no accrual for additional claims is
     recorded.

     The Company had obligated shares of the Company's common stock and warrants
     exercisable into common stock under numerous consulting and fund raising
     agreements. Some such agreements obligated shares in cases of the
     occurrence of substantial dilution or price drop in the trading value of
     the Company's common stock. Management believes that it has fulfilled all
     such obligations. The Company settled one such claim in the year ended June
     30, 2005. Management believes that there is a possibility that additional
     claims may arise.


31
<PAGE>
     The Company may be subject other unasserted claims associated with the
     abandonment of its operations. 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.

     At June 30, 2005, there was approximately $56,000 estimated and accrued for
     claims related to the litigation matters described above which were not
     settled as of the date of this report.


     Customer Contracts

     Customers may arrange to have the purchase of the Company's point-of-sale
     terminals financed through the financial institution that provides the
     sale-leaseback financing to the Company. The Company has agreements with
     this financial institution to guarantee varying amounts associated with the
     financial institution's arrangements with the customers. Generally, the
     Company may be required to remit to the financial institution, one to six
     months of scheduled customer payments if the customer defaults on its
     financing arrangement with the financial institution. 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 not experienced material obligations to-date under
     the recourse agreements and believes that the new agreement substantially
     limits potential obligations in the future to an immaterial amount.

13. 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 3,207,224 shares of
     common  stock  were  not considered in the calculation for diluted earnings
     per  share  for  the year ended June 30, 2005 and 2004 respectively because
     the  effect  of  their  inclusion  would  be  anti-dilutive.

     The  following presents the computation of basic and diluted loss per share
     from  continuing  operations:

<TABLE>
<CAPTION>
                                                       2005                               2004
                                                    ----------                         ----------
                                                                  Per                                Per
                                        (Loss)        Shares     Share      (Loss)       Shares     share
                                    --------------  ----------  -------  ------------  ----------  -------
<S>                                 <C>             <C>         <C>      <C>           <C>         <C>
Net (Loss)                          $  (7,115,069)                       $(4,609,291)
Preferred stock dividends                (114,000)                          (114,000)

                                    --------------                       ------------
  Loss from continuing operations      (7,229,069)                        (4,723,291)
BASIC EARNINGS PER SHARE

Loss available to common
stockholders                        $  (7,229,069)  54,015,797  $(0.13)  $(4,723,291)  41,167,477  $(0.11)


Effect of dilutive securities                N/A                                N/A

DILUTED EARNINGS PER SHARE          $(  7,229,069)  54,015,797  $(0.13)  $(4,723,291)  41,167,477  $(0.11)
</TABLE>


32
<PAGE>
14. RELATED PARTY TRANSACTIONS

     The Company's president and chairman is a significant shareholder of the
     Company. This individual controls another entity that 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 that is a significant
     shareholder of the Company. 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, 2005 and 2004.

     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. During the year ended June 30, 2004, the
     Company converted advances of $776,992 into 3,186,499 shares of the
     Company's common stock and advanced funds of $1,420,229 to this entity.
     During the year ended June 30, 2005, repayments were made on these advances
     and additional funds were contributed. The balance due to this affiliate at
     June 30, 2005 was $368,197. The advances are generally short term in nature
     with an interest rate of 3%.

     The Company paid management fees of $450,000 to an entity owned by the
     Company's president during each of the years ended June 30, 2005 and 2004.

     During the year ended June 30, 2005, an affiliate controlled by the
     Company's president and chairman assumed obligations of the Company
     totaling $276,000 in exchange for 276,000 shares of the Company's common
     stock.


15. CONCENTRATIONS

     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.

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

     The Company has raised cash through sale-leaseback transactions. All of
     these transactions have been conducted through two lessors. During the
     years ended June 30, 2005 and 2004, the Company received $1,692,904 and
     $1,810,313 respectively, under sale-leaseback transactions from these
     entities.

16.  STOCK  BASED  COMPENSATION

     The Company issues stock options from time to time to executives, key
     employees and members of the Board of Directors. The Company has adopted
     the disclosure-only provisions of Statement of Financial Accounting
     Standards No. 123, "Accounting for Stock-Based Compensation," and continues
     to account for stock based compensation using the intrinsic value method
     prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
     Stock Issued to Employees". Accordingly, no compensation cost has been
     recognized for the stock options granted to employees.


33
<PAGE>
     There were no options granted in the year ended June 30, 2005 and 2004 and
     all options previously granted have been fully vested and therefore there
     is no pro forma effect for the year ended June 30, 2005. The fair value of
     each option grant is estimated on the date of grant using the Black-Scholes
     option-pricing model.

     In February 2003, 400,000 warrants to acquire the Company's common stock at
     $0,50 per share were issued as consideration for consulting services to be
     rendered. The fair value of these warrants of $150,600 was expensed in that
     year.

     The Company grants 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, 2005 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.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------

                                  TOTAL SHARES RESERVED  REMAINING OPTIONS
                                     UNDER THE PLAN       UNDER THE PLAN
<S>                               <C>                    <C>
1998 Incentive Stock Option Plan              1,500,000            400,167

2000 Incentive Stock Option Plan              1,000,000            925,150

2000 Non-Qualified Stock
    Option Plan                               2,000,000          1,820,575

1999 Stock Bonus Plan                           900,000            833,250

2000 Stock Bonus Plan                           500,000            500,000

--------------------------------------------------------------------------
</TABLE>

     The options under these plans generally expire five years from date of
grant. The summary of activity for the Company's stock options and warrants is
presented below:

<TABLE>
<CAPTION>
                                                     Weighted                 Weighted
                                                      Average                  Average
                                                     Exercise                 Exercise
                                           2005        Price        2004        Price
                                        -----------  ---------  ------------  ---------
<S>                                     <C>          <C>        <C>           <C>
Options/warrants outstanding at
    Beginning of year                    1,875,024   $   12.59    3,877,281   $    9.49
Granted                                    628,991   $    3.25        - 0 -
Exercised                                    - 0 -                 (607,800)  $    0.69
Terminated/Expired                        (542,825)  $    5.35   (1,394,457)  $    5.35
Options outstanding at end of year       1,961,190   $   12.59    1,875,024   $   12.59
Options exercisable at end of year       1,961,190   $   12.59    1,875,024   $   12.59
Options available for grant at end
  of year                                1,961,190                5,873,599
Price per share of options outstanding  $  0.47 to              $   0.47 to
                                        $    40.00              $     40.00

Weighted average remaining contractual
lives                                       0years                1.84years

Weighted Average fair value of options
granted during the year                        N/A              $    0.3765
</TABLE>


34
<PAGE>
     Range of exercise prices of options outstanding at June 30, 2005:

<TABLE>
<CAPTION>
                                     Weighted                      Weighted
                       Number         Average        Number         Average
  Exercise Price     Outstanding  Exercise Price   Exercisable  Exercise Price
-------------------  -----------  ---------------  -----------  ---------------
<S>                  <C>          <C>              <C>          <C>
    $0.47-$1.50          178,125  $          0.49      178,125  $          0.49
    $1.51-$3.00          638,086  $          2.52      638,086  $          2.52
    $3.01-$4.50              -0-              N/A          -0-              N/A
    $4.51-$6.00          189,804  $          5.00      189,804  $          5.00
   $6.01-$10.00           20,000  $          6.25       20,000  $          6.25
   $10.01-15.00           65,000  $         15.00       65,000  $         15.00
$15.01 and greater       870,175  $         24.71      870,175  $         24.71
</TABLE>

     All  warrants issued in the year ended June 30, 2005 were issued as part of
     equity  units  that  included  common  stock  sold  in  private  placement
     transactions.

17.  EMPLOYEE  BENEFIT  PLAN

     The Company maintains a 401(k) profit sharing plan for its employees.  Each
     United States based full-time employee is eligible to participate in that
     plan on the first day of the calendar quarter after completing ninety days
     of employment with the Company. A participating employee can contribute up
     to fifteen percent (15%) of their annual compensation, up to a maximum of
     the federally mandated limit. The Company matches 50% of the contributions
     on the first six percent (6%) of the employee's contribution up to a
     maximum of three percent (3%). Employees are fully vested on their own
     contributions and vest in the Company's contributions twenty percent (20%)
     per year over five years. The Plan was frozen subsequent to June 30, 2001
     and there were no contributions for the years ended June 30, 2005 and 2003.


18.  BUSINESS  SEGMENTS

     The Company previously had three reportable segments: intelligent vending
     machines, healthcare management software development and medical
     transaction processing. During the year ended June 30, 2001, the Company
     determined it would divest or abandon all business segments other than the
     medical transaction processing segment. Therefore, going forward, the
     Company will have only one reportable segment. At June 30, 2005 the Company
     operates only in the medical transaction-processing segment with
     substantially all revenue generated in the United States.


35
<PAGE>
     The medical transaction-processing segment includes revenue from the
     MedCard System, including the sale of terminals, processing fees and
     billing service revenue and the licensing, sales and services related to
     the Company's One Medical Services Network.

     For the years ended June 30, 2005 and 2004, there were no material
     concentrations of revenue to specific customers. However, all gains related
     to sale-leaseback transactions are associated with one lessor but relate to
     numerous customer contracts.


                                *  *  *  *  *  *

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

     Not applicable.

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
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     51          Chairman, President, Chief Executive Officer

     The chief executive officer and sole director 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.

ITEM  10.  EXECUTIVE  COMPENSATION

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


36
<PAGE>
approximately $450,000 for management fees, and other sources or forms of
compensation was not paid or collected for Fiscal year ended 2004.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     As of June 30, 2005 information with respect to the only persons owning
beneficially 5% or more of the outstanding common stock and the number of and
percentage of the outstanding shares owned is represented below:

<TABLE>
<CAPTION>
           Name and Address          Shares Owned (1)  Common Stock
           ----------------          ----------------  ------------
<S>                                  <C>               <C>
     American Nortel Communications        19,024,347        39.13%
     7975 North Hayden Road #D-333
     Scottsdale, Arizona 85258

     William P. Williams                    5,083,397       10.46 %
     7975 North Hayden Road #D-333
     Scottsdale, Arizona 85258
</TABLE>

     (1)  Excludes any shares issuable upon the exercise of any warrants or
          options or upon the conversion of other convertible securities.


ITEM  12.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS.

     The Company frequently advances funds to an affiliated entity, which is
also a significant shareholder of the Company.  During the year ended June 30,
2005, the Company advanced funds of $1,420,229 to this entity.

<TABLE>
<CAPTION>
ITEM  13.  EXHIBITS  AND  REPORTS.
<S>    <C>
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)

10.18  Amendment to License Agreement - Dream Technologies, LLC (1)
</TABLE>

___________________________________________________

(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.

REPORTS ON FORM 8-K
-------------------

     Not applicable.


37
<PAGE>
ITEM 14.  CONTROLS AND PROCEDURES.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

     The Company maintains controls and procedures designed to ensure that
information required to be disclosed in this report is recorded, processed,
accumulated, and reported to its management, including the chief executive
officer to allow timely decisions regarding the required disclosures.  Within
the 90 days prior to the filing date of this report, MedCom's management, with
the participation of its chief executive officer and corporate accounting,
performed an evaluation of the effectiveness of the design and operation of
these disclosure controls and procedures.  This officer and management have
concluded that such disclosure controls and procedures are effective at ensuring
that required information is disclosed in the Company's reports.

CHANGES IN INTERNAL CONTROLS

     There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
evaluation date.

ITEM 15.  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.


38