SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



(Mark One)

|£ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the quarterly period ended June 30, 2012



OR



|£ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -----------------------------------------------------------------------------------------



For the transition period from
_______________ to _______________



Commission File No. 333-72376



MEDICAL CONNECTIONS HOLDINGS, INC.




(Exact name of registrant as specified in its
charter)



|Florida                                                        |  | 65-0920373                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               |  |                                     
|4800 T Rex Avenue Suite 310
        Boca Raton, Florida        |  | 33431                               
|(Address of principal executive office)                        |  | (Zip Code)                          



Registrant’s telephone number, including
area code: (561) 353-1110



Former name, former address and former fiscal
year, if changed since last report.



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



(Explanatory Note: The registrant is a voluntary filer and
is not subject to the filing requirements of the Securities Exchange Act of 1934. However, during the preceding 12 months, the
registrant has filed all report that it would have been required to file by Section 13 or 15(d) of the Securities Exchange Act
of 1934 if the registrant was subject to the filing.)



Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Yes S No £



Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



| | Large accelerated filer                     | £ | Accelerated filer         | £
| | ------------------------------------------- | - | ------------------------- | -
| | Non-accelerated filer                       | £ | Smaller reporting company | S
| | (Do not check if smaller reporting company) |   |                           |  



Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act)
Yes S
No £



APPLICABLE ONLY TO CORPORATE ISSUERS:



Indicate the number of shares outstanding of each of the issuer’s
classes of Common Stock as of the latest practicable date:



24,500,678 shares of Common Stock, $.001
par value as of August 4, 2012











INDEX



|                                |                                                                                                                      |  | PAGE
|------------------------------- | -------------------------------------------------------------------------------------------------------------------- |  | ----
|PART I. – FINANCIAL INFORMATION |                                                                                                                      |  |     
|                                |                                                                                                                      |  |     
|Item 1.                         | Financial Statements                                                                                                 |  | 2   
|                                |                                                                                                                      |  |     
|                                | Condensed Consolidated Balance Sheets at June 30, 2012 (unaudited) and December 31, 2011                             |  | 3   
|                                |                                                                                                                      |  |     
|                                | Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended June 30, 2012 and June 30, 2011 |  | 4   
|                                |                                                                                                                      |  |     
|                                | Unaudited Condensed Consolidated Statements of Operations for the Six Months Ended June 30, 2012 and June 30, 2011   |  | 5   
|                                |                                                                                                                      |  |     
|                                | Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2012 and June 30, 2011   |  | 6   
|                                |                                                                                                                      |  |     
|                                | Notes to Condensed Consolidated Financial Statements as of June 30, 2012 (unaudited)                                 |  | 7   
|                                |                                                                                                                      |  |     
|Item 2.                         | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                |  | 14  
|                                |                                                                                                                      |  |     
|Item 3.                         | Quantitative and Qualitative Disclosures about Market Risk                                                           |  | 20  
|                                |                                                                                                                      |  |     
|Item 4.                         | Controls and Procedures                                                                                              |  | 20  
|                                |                                                                                                                      |  |     
|PART II. – OTHER INFORMATION    |                                                                                                                      |  |     
|                                |                                                                                                                      |  |     
|Item 1.                         | Legal Proceedings                                                                                                    |  | 21  
|                                |                                                                                                                      |  |     
|Item 1A.                        | Risk Factors                                                                                                         |  | 21  
|                                |                                                                                                                      |  |     
|Item 2.                         | Unregistered Sales of Equity Securities                                                                              |  | 27  
|                                |                                                                                                                      |  |     
|Item 3.                         | Defaults upon Senior Securities                                                                                      |  | 28  
|                                |                                                                                                                      |  |     
|Item 4.                         | Mine Safety Disclosures                                                                                              |  | 28  
|                                |                                                                                                                      |  |     
|Item 5.                         | Other Information                                                                                                    |  | 28  
|                                |                                                                                                                      |  |     
|Item 6.                         | Exhibits                                                                                                             |  | 28  













Part I. – FINANCIAL INFORMATION



Item 1. Financial Statements



MEDICAL CONNECTIONS HOLDINGS,
INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED
BALANCE SHEETS

JUNE 30, 2012 (UNAUDITED)
AND DECEMBER 31, 2011





|                                                                                                                                  |  | June 30, |             |   | December 31, |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | -------- | ----------- | - | ------------ | -
|                                                                                                                                  |  | 2012     |             |   | 2011         |  
|ASSETS                                                                                                                            |  |          |             |   |              |  
|                                                                                                                                  |  |          |             |   |              |  
|Cash and cash equivalents                                                                                                         |  | $        | 96,565      |   |              | $
|Accounts receivable, net                                                                                                          |  |          | 1,026,999   |   |              |  
|Prepaid expenses                                                                                                                  |  |          | 1,718       |   |              |  
|Other assets                                                                                                                      |  |          | 16,457      |   |              |  
|Total current assets                                                                                                              |  |          | 1,141,739   |   |              |  
|                                                                                                                                  |  |          |             |   |              |  
|Property and equipment                                                                                                            |  |          | 820,435     |   |              |  
|Less: accumulated depreciation                                                                                                    |  |          | 364,505     |   |              |  
|                                                                                                                                  |  |          | 455,930     |   |              |  
|                                                                                                                                  |  |          |             |   |              |  
|Security deposit                                                                                                                  |  |          | 200,000     |   |              |  
|                                                                                                                                  |  |          |             |   |              |  
|Total assets                                                                                                                      |  | $        | 1,797,669   |   |              | $
|                                                                                                                                  |  |          |             |   |              |  
|LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                              |  |          |             |   |              |  
|                                                                                                                                  |  |          |             |   |              |  
|Accounts payable                                                                                                                  |  | $        | 490,004     |   |              | $
|Accrued expenses                                                                                                                  |  |          | 269,256     |   |              |  
|Short-term notes payable                                                                                                          |  |          | 194,000     |   |              |  
|Secured financing                                                                                                                 |  |          | 411,924     |   |              |  
|Total current liabilities                                                                                                         |  |          | 1,365,184   |   |              |  
|                                                                                                                                  |  |          |             |   |              |  
|Deferred rent                                                                                                                     |  |          | 29,425      |   |              |  
|                                                                                                                                  |  |          |             |   |              |  
|Total liabilities                                                                                                                 |  |          | 1,394,609   |   |              |  
|                                                                                                                                  |  |          |             |   |              |  
|Commitments and contingencies                                                                                                     |  |          |             |   |              |  
|                                                                                                                                  |  |          |             |   |              |  
|Stockholders’ equity                                                                                                              |  |          |             |   |              |  
|Preferred stock 10,000,000 authorized                                                                                             |  |          |             |   |              |  
|Series A,
    $.001 par value; 100,000 shares authorized, 5,554 issued and outstanding                                            |  |          | 5           |   |              |  
|Series B, $.001 par value;
    50,000 shares authorized, no shares issued and outstanding                                         |  |          | —           |   |              |  
|Series C, $.001 par value; 665,000 shares authorized, 665,000 and 215,000 issued and outstanding, respectively                    |  |          | 665         |   |              |  
|Common stock,
    $.001 par value, 100,000,000 shares authorized, 24,500,678 and 17,131,998  issued and outstanding, respectively |  |          | 24,501      |   |              |  
|Additional paid-in capital                                                                                                        |  |          | 47,607,012  |   |              |  
|Accumulated deficit                                                                                                               |  |          | (47,229,123 | ) |              |  
|Total stockholders’ equity                                                                                                        |  |          | 403,060     |   |              |  
|                                                                                                                                  |  |          |             |   |              |  
|Total liabilities and stockholders’ equity                                                                                        |  | $        | 1,797,669   |   |              | $



See the accompanying notes
to the condensed consolidated financial statements



2







MEDICAL
    CONNECTIONS HOLDINGS, INC. AND SUBSIDIARY

UNAUDITED
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDED
JUNE 30, 2012 AND 2011



|                                                                   |  | 2012 |            |   | 2011 |  
|------------------------------------------------------------------ |  | ---- | ---------- | - | ---- | -
|                                                                   |  |      |            |   |      |  
|Revenue:                                                           |  |      |            |   |      |  
|Permanent placement                                                |  | $    | 252,436    |   |      | $
|Contract appointments                                              |  |      | 3,033,622  |   |      |  
|                                                                   |  |      | 3,286,058  |   |      |  
|                                                                   |  |      |            |   |      |  
|Direct costs of revenue:                                           |  |      |            |   |      |  
|Permanent placement                                                |  |      | 1,500      |   |      |  
|Contract appointments                                              |  |      | 2,394,946  |   |      |  
|                                                                   |  |      | 2,396,446  |   |      |  
|                                                                   |  |      |            |   |      |  
|Advertising and marketing expenses                                 |  |      | 201,591    |   |      |  
|Recruiting - salaries and costs                                    |  |      | 786,379    |   |      |  
|Professional and consulting fees                                   |  |      | 203,632    |   |      |  
|General and administrative expenses                                |  |      | 1,691,249  |   |      |  
|                                                                   |  |      |            |   |      |  
|Total operating expenses                                           |  |      | 2,882,851  |   |      |  
|                                                                   |  |      |            |   |      |  
|Loss from operations                                               |  |      | (1,993,239 | ) |      |  
|                                                                   |  |      |            |   |      |  
|Other expenses, net                                                |  |      | 192,914    |   |      |  
|                                                                   |  |      |            |   |      |  
|Loss before income taxes                                           |  |      | (2,186,153 | ) |      |  
|                                                                   |  |      |            |   |      |  
|Income taxes                                                       |  |      | —          |   |      |  
|                                                                   |  |      |            |   |      |  
|Net loss                                                           |  | $    | (2,186,153 | ) |      | $
|                                                                   |  |      |            |   |      |  
|Net loss per common share - basic and diluted                      |  | $    | (0.10      | ) |      | $
|                                                                   |  |      |            |   |      |  
|Weighted
    average common shares outstanding - basic and diluted |  |      | 21,368,072 |   |      |  



See the accompanying notes
to the condensed consolidated financial statements



3











MEDICAL CONNECTIONS HOLDINGS, INC. AND
SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2012
AND 2011



|                                                               |  | 2012 |            |   | 2011 |  
|-------------------------------------------------------------- |  | ---- | ---------- | - | ---- | -
|                                                               |  |      |            |   |      |  
|Revenue:                                                       |  |      |            |   |      |  
|Permanent placement                                            |  | $    | 77,105     |   |      | $
|Contract appointments                                          |  |      | 1,545,632  |   |      |  
|                                                               |  |      | 1,622,737  |   |      |  
|                                                               |  |      |            |   |      |  
|Direct costs of revenue:                                       |  |      |            |   |      |  
|Permanent placement                                            |  |      | 1,000      |   |      |  
|Contract appointments                                          |  |      | 1,207,705  |   |      |  
|                                                               |  |      | 1,208,705  |   |      |  
|                                                               |  |      |            |   |      |  
|Advertising and marketing expenses                             |  |      | 92,884     |   |      |  
|Recruiting - salaries and costs                                |  |      | 348,838    |   |      |  
|Professional and consulting fees                               |  |      | 95,718     |   |      |  
|General and administrative expenses                            |  |      | 586,137    |   |      |  
|                                                               |  |      |            |   |      |  
|Total operating expenses                                       |  |      | 1,123,577  |   |      |  
|                                                               |  |      |            |   |      |  
|Loss from operations                                           |  |      | (709,545   | ) |      |  
|                                                               |  |      |            |   |      |  
|Other expenses, net                                            |  |      | 31,076     |   |      |  
|                                                               |  |      |            |   |      |  
|Loss before income taxes                                       |  |      | (740,621   | ) |      |  
|                                                               |  |      |            |   |      |  
|Income taxes                                                   |  |      | —          |   |      |  
|                                                               |  |      |            |   |      |  
|Net loss                                                       |  | $    | (740,621   | ) |      | $
|                                                               |  |      |            |   |      |  
|Net loss per common share - basic and diluted                  |  | $    | (0.03      | ) |      | $
|                                                               |  |      |            |   |      |  
|Weighted average common shares outstanding - basic and diluted |  |      | 23,429,740 |   |      |  





See the accompanying notes to the condensed consolidated financial statements





4









MEDICAL CONNECTIONS HOLDINGS, INC. AND
SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND
2011





|                                                                           |  | 2012 |            |   | 2011 |  
|-------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | -
|                                                                           |  |      |            |   |      |  
|Cash flow from operating activities                                        |  |      |            |   |      |  
|Net loss                                                                   |  | $    | (2,186,153 | ) |      | $
|                                                                           |  |      |            |   |      |  
|Adjustments to reconcile net loss to net cash used in operating activities |  |      |            |   |      |  
|                                                                           |  |      |            |   |      |  
|Depreciation and amortization                                              |  |      | 52,179     |   |      |  
|Loss on disposal of fixed assets                                           |  |      | 28,617     |   |      |  
|Stock options issued for compensation                                      |  |      | 459,665    |   |      |  
|CHANGES IN ASSETS AND LIABILITIES                                          |  |      |            |   |      |  
|Accounts receivable                                                        |  |      | (218,103   | ) |      |  
|Prepaid expenses                                                           |  |      | 1,278      |   |      |  
|Other assets                                                               |  |      | (16,457    | ) |      |  
|Accounts payable and accrued expenses                                      |  |      | 107,451    |   |      |  
|Deferred rent                                                              |  |      | 2,480      |   |      |  
|                                                                           |  |      |            |   |      |  
|Net cash used in operating activities                                      |  |      | (1,769,043 | ) |      |  
|                                                                           |  |      |            |   |      |  
|Cash flow from investing activities                                        |  |      |            |   |      |  
|Acquisition of property and equipment                                      |  |      | (9,285     | ) |      |  
|                                                                           |  |      |            |   |      |  
|Net cash used in investing activities                                      |  |      | (9,285     | ) |      |  
|                                                                           |  |      |            |   |      |  
|Cash flow from financing activities                                        |  |      |            |   |      |  
|Proceeds from issuance of common stock and warrant exercise                |  |      | 1,060,800  |   |      |  
|Proceeds from short-term notes payable                                     |  |      | 194,000    |   |      |  
|Proceeds from secured financing, net                                       |  |      | 411,924    |   |      |  
|                                                                           |  |      |            |   |      |  
|Net cash provided by financing activities                                  |  |      | 1,666,724  |   |      |  
|                                                                           |  |      |            |   |      |  
|Net decrease in cash and cash equivalents                                  |  |      | (111,604   | ) |      |  
|                                                                           |  |      |            |   |      |  
|Cash and cash equivalents at beginning of period                           |  |      | 208,169    |   |      |  
|                                                                           |  |      |            |   |      |  
|Cash and cash equivalents at end of period                                 |  | $    | 96,565     |   |      | $
|                                                                           |  |      |            |   |      |  
|Supplemental disclosure of cash flow information:                          |  |      |            |   |      |  
|Cash paid during the period for:                                           |  |      |            |   |      |  
|Interest                                                                   |  | $    | —          |   |      | $
|Taxes                                                                      |  | $    | —          |   |      | $



See the accompanying notes to the condensed consolidated financial
statements





5







Medical Connections Holding, Inc. and Subsidiary

Notes to Condensed Consolidated Financial Statements

June 30, 2012

(Unaudited)



NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION



Medical Connections Holdings, Inc. and its
wholly-owned subsidiary (the "Company," "we" or "us") is a healthcare staffing company which provides
staffing services for allied professionals and nurses to our clients on a national basis.  We provide recruiting and
staffing services for permanent and temporary positions, with an option for the clients and candidates to choose the most beneficial
working arrangements.



The Company operates under a holding company
structure and has one direct wholly-owned operating subsidiary, Medical Connections, Inc., a Florida corporation ("Medical
Connections" or "MCI") which was formed in 2002.





On June 20, 2011, the Company effectuated a
1-for-10 reverse stock split. All share and per share data for all periods presented have been revised to give retroactive effect
to the reverse stock split.



In our opinion, the accompanying
condensed consolidated balance sheets and related condensed consolidated interim statements of operations and cash flows include
the adjustments (consisting of normal and recurring items) necessary for their fair presentation in conformity with United States
generally accepted accounting principles ("GAAP") and represent our accounts after the elimination of inter-company transactions.
Preparing financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses. Actual results could differ from these estimates. The unaudited information included in this Form 10-Q should
be read in conjunction with the consolidated financial statements contained in our 2011 Form 10-K which was filed with the Securities
and Exchange Commission on March 30, 2012. Interim results are not necessarily indicative of expected results for a full year or
for any interim periods in the future.



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



PRINCIPLES OF CONSOLIDATION



The consolidated financial statements include
the accounts of Medical Connections Holdings, Inc., and its wholly-owned subsidiary. All material inter-company transactions and
balances have been eliminated in consolidation.



6









USE OF ESTIMATES



The preparation of consolidated
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those
estimates.



CASH AND CASH EQUIVALENTS



Cash and cash equivalents consists principally of currency on hand,
demand deposits at commercial banks, and liquid investment funds having  a maturity of three months or less at the time
of purchase.



The Company maintains
cash and cash equivalent balances at a single financial institution which are insured by the Federal Deposit Insurance Corporation.





ALLOWANCES FOR DOUBTFUL ACCOUNTS / SALES ALLOWANCE



Accounts are written off against the allowance when management determines
that an account is uncollectible. Recoveries of accounts previously written off are recorded when received. Estimated allowances
for doubtful accounts ($50,000 as of June 30, 2012 and December 31, 2011, respectively) are determined to reduce the Company’s
receivables to their carrying value, which approximates fair value. Estimated allowances for sales “falloffs” ($10,000
as of June 30, 2012 and December 31, 2011, respectively) provide for that portion of permanent placement revenue that may be discounted
after a reasonable period of time. All allowances are estimated based on historical collection experience, specific review of individual
customer accounts, and current economic and business conditions. A summary of the allowance of doubtful accounts is as follows:





|Balance January 1, 2012 |  | $ | 60,000   | 
|----------------------- |  | - | -------- | 
|                        |  |   |          | 
|Additions:              |  |   |          | 
|                        |  |   |          | 
|Bad debt expense        |  |   | 15,061   | 
|Sales allowance         |  |   | 6,000    | 
|                        |  |   |          | 
|Deductions:             |  |   |          | 
|                        |  |   |          | 
|Write offs              |  |   | (21,061) | 
|                        |  |   |          | 
|Balance March 31, 2012  |  | $ | 60,000   | 
|                        |  |   |          | 
|Additions:              |  |   |          | 
|                        |  |   |          | 
|Bad debt expense        |  |   | 1,223    | 
|Sales allowance         |  |   | 16,500   | 
|                        |  |   |          | 
|Deductions:             |  |   |          | 
|                        |  |   |          | 
|Write offs              |  |   | (17,723) | 
|                        |  |   |          | 
|Balance June 30, 2012   |  | $ | 60,000   | 





7









SECURED FINANCING



During the three month period ended March 31,
2012, the Company entered into a Factoring and Security Agreement (the “Agreement”) with an unrelated party (the “Purchaser”)
in which the Company receives advances on its Eligible Receivables, as defined in the Agreement.  The Company pays the Purchaser
a service fee of 1.79% of advances outstanding less than 30 days and an additional fee of .67% for each additional ten-day period.
The advances are repaid upon collection of the receivables.  The Purchaser has the ability to require the Company to repurchase
certain of the receivables plus any unpaid fees. The Company accounts for these factoring transactions as secured borrowings. As
of June 30, 2012, the amount of secured borrowings is $411,924. This Agreement was terminated and all amounts outstanding were
repaid upon entering into the Asset Purchase and Sale Agreement on July 31, 2012 (see Note 8).



SHORT-TERM NOTES PAYABLE



During the three month period ended June 30,
2012, the Company borrowed $194,000 from private individuals on a short-term basis to satisfy operating cash flow needs. The loans
were for a 90 day term and carried an annual interest rate of 10.00%. In connection with these loans, the Company issued 144,000
shares of common stock to the individuals. The loans were paid off in full upon entering into the Asset Purchase and Sale Agreement
on July 31, 2012 (See Note 8).



INCOME TAXES



The Company accounts for income taxes in accordance with ASC 740,
Income Taxes.  Under this standard, deferred income taxes are determined based on the estimated future tax effects of differences
between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income
tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes,
the Company considers tax regulations of the jurisdictions in which it operates, estimates of future taxable income, and available
tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments
to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred
tax assets based on the “more likely than not” criteria of ASC 740.



8









ASC 740-10 requires that the Company recognize the financial statement
benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position
following an audit. For tax positions meeting the “more-likely-than-not” threshold, the amount recognized in the financial
statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement
with the relevant tax authority.



The Company recorded no income tax expense or benefit
for the periods presented due to the net operating losses incurred during those periods and a valuation allowance established against
100% of the Company’s net deferred tax assets.



EARNINGS (LOSS) PER SHARE OF COMMON STOCK



Income (Loss) per share: Basic net loss per share excludes dilution
and is computed by dividing the loss attributable to common shareholders by the weighted-average number of common shares outstanding
for the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the loss
of the Company. Diluted loss per share is computed by dividing the loss available to common shareholders by the weighted average
number of common shares outstanding for the period and dilutive potential common shares outstanding unless consideration of such
dilutive potential common shares would result in anti-dilution. Common stock equivalents were not considered in the calculation
of diluted loss per share as their effect would have been anti-dilutive for the three and six month periods ended June 30, 2012
and 2011. Common stock equivalents as of June 30, 2012 include stock options and warrants to purchase 3,085,000 and 243,900 shares,
respectively, of common stock.



REVENUE RECOGNITION



The Company records its transactions under
the accrual method of accounting whereby revenue is recognized when the services are rendered and collection is reasonably assured.
The Company recognizes revenue from permanent placement services when employment commences.   Adjustments to the
fee for these services occur if the candidate’s performance is not satisfactory requiring the Company to find a replacement
candidate.  Contract appointments includes contracts for what is commonly known as “travel positions,” which
are for allied health professionals, nurses or physicians who are willing to take temporary assignments outside their home region.
Under this arrangement, we are the employer of record for the healthcare professional. The healthcare facility remits a fee to
us that includes all employment overhead, as well as a surcharge for the service. The revenue from this activity is earned from
the bill rate for the service which is invoiced and recognized off of weekly time cards.



The Company considers the different services described above to
aggregate into one line of business. Temporary staffing services represented approximately 95.2% and 89.8%, respectively, of the
Company’s consolidated revenue while permanent placements represented approximately 4.8% and approximately 10.2%, respectively,
for the three months ended June 30, 2012 and 2011, respectively. For the six month periods ended June 30, 2012 and 2011, temporary
staffing services revenue represented approximately 92.3% and 91.4%, respectively, while permanent placements revenue represented
approximately 7.7% and 8.6%, respectively.



9









FAIR VALUE OF FINANCIAL INSTRUMENTS



The carrying amount reported in the consolidated balance sheets
for cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, short-term notes payable and secured financing
approximate fair value because of the immediate or short-term maturity of these financial instruments.



RECLASSIFICATIONS



Certain amounts in 2011 were reclassified to conform to the 2012
presentation. These reclassifications had no effect on net loss for the years presented.



NOTE 3- GOING CONCERN



The accompanying consolidated financial statements have been prepared
and are presented assuming the Company’s ability to continue as a going concern. The Company has sustained recurring operating
losses, has had to rely on capital raising activities to meet operating cash needs and has insufficient recurring revenues to sustain
its operations or to fund expenses at this time.  These circumstances raise substantial doubt about the Company’s
ability to continue as a going concern.  The accompanying consolidated 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 from the outcome of this uncertainty. See Note 8 for disclosure regarding July 31, 2012 Asset Purchase and Sale Agreement.



NOTE 4- PROPERTY AND EQUIPMENT



Property and equipment consist of the following
at June 30, 2012 and December 31, 2011:



|                               |  | 2012 |          |   | 2011 |  
|------------------------------ |  | ---- | -------- | - | ---- | -
|                               |  |      |          |   |      |  
|Leasehold Improvements         |  | $    | 240,816  |   |      | $
|Office furniture and equipment |  |      | 579,619  |   |      |  
|                               |  |      |          |   |      |  
|Total:                         |  |      | 820,435  |   |      |  
|                               |  |      |          |   |      |  
|Less: Accumulated depreciation |  |      | (364,505 | ) |      |  
|                               |  | $    | 455,930  |   |      | $



Depreciation expense for the six months ended June 30, 2012 and
2011 was $52,179 and $103,239, respectively.



10







NOTE 5 - SHAREHOLDERS’ EQUITY



On March 16, 2012, the Company filed an amendment to the Company’s
Articles of Incorporation to increase its authorized capital stock to 100 million shares of common stock and 10 million shares
of blank preferred stock.



SERIES A PREFERRED STOCK



As of June 30, 2012, the Company had 100,000
shares of Series A Preferred Stock authorized, $0.001 par value per share, and 5,554 shares were issued and
outstanding.   Each holder of the Series A Preferred Stock may convert each share of Preferred Stock into nineteen
shares (the “Conversion Ratio”) of the Company’s common stock at any time. The Conversion Ratio is subject to
adjustment in the event of any recapitalization or reorganization.   Until such shares of Series A Preferred Shares
are exchanged for shares of the Company’s common stock, each holder of a Series A Preferred Share shall be entitled to one
vote per share on all matters which are brought to a vote by the Company’s shareholders.   Holders of the Series
A Preferred Stock have no other rights or preferences. As of June 30, 2012, a total of 47,726 shares of Series A Preferred Stock
have been converted into 906,794 shares of our Common Stock.



SERIES B PREFERRED STOCK



As of June 30, 2012, the Company has 50,000 shares of Series B Preferred
Stock authorized, $0.001 par value per share, and no shares issued and outstanding.  The par value per share of Series
B Preferred Stock is $0.001.  Each share of Series B Preferred Stock has 10 votes per share and the Series B Preferred
Stock is not convertible into shares of the Company’s Common Stock.



SERIES C PREFERRED STOCK



On April 20, 2012, the Company filed an amendment to its Articles
of Incorporation to increase its authorized Series C preferred stock to 665,000 shares.



As of June 30, 2012, the Company has 665,000 shares of Series C
Preferred Stock authorized, $0.001 par value per share, and 665,000 shares issued and outstanding.  Each share of Series C
Preferred Stock has 100 votes per share and will vote together with holders of the Company’s Common Stock and Series A and
B Preferred Stock as a single class on all matters presented to the Company’s shareholders at an annual or special meeting (or
pursuant to written consent), except with respect to the matters relating to the election of directors.  The holders of a
majority of shares of the Company’s Series C Preferred Stock have the right to appoint a majority of the directors serving
on the Company’s Board. The Series C Preferred Stock does not have any dividend or liquidation preferences and is not convertible
into shares of the Company’s Common Stock. As part of Jeffrey Rosenfeld’s resignation effective July 31, 2012, all
220,000 shares of Preferred C Stock that had been issued to him have been returned to the Company.



COMMON STOCK



As of June 30, 2012, the Company has 100,000,000 shares of common
stock authorized, $0.001 par value per share, and 24,500,678 issued and outstanding.



WARRANTS AND OTHER EQUITY TRANSACTIONS



During the six months ended June 30, 2012, the Company did not issue
any warrants to purchase shares of the Company’s Common Stock. During the three months ended March 31, 2012, the Company granted
an aggregate of 3,085,000 options to its officers, directors and employees at an exercise price of $0.32 per share. The options
are immediately vested and they are exercisable for a period of ten years after the grant date. As a result of this issuance, the
Company recorded compensation expense of $459,665 during the three months ended March 31, 2012.The weighted average grant date
fair value of the options issued were $0.149 per share. As part of Jeffrey Rosenfeld’s resignation effective July 31, 2012,
all options to purchase one million shares of common stock that had been issued to him have been returned to the Company.



11







The fair value of the options was estimated using the Black-Scholes
options pricing model. The following assumptions were used in valuing these options:





|Risk Free Interest Rate  |  |  | 3       | %
|------------------------ |  |  | ------- | -
|Expected Term            |  |  | 5 years
|Expected Volatility      |  |  | 50      | %
|Expected Forfeiture Rate |  |  | 0       | %
|Expected Dividend Yield  |  |  | 0       | %



The expected volatility was based on the historical volatility of
the Company’s common stock over the last five years. The Company has determined the expected holding periods by applying
the simplified method which represents the average of the immediate vesting period and the ten year maturity period. The risk free
interest rate is based on the US Treasury yield for the same period of the expected term of the grant.



During the three month period ended June 30, 2012, the Company sold
1,896,669 shares of its common stock for total net proceeds of $234,250. During the three month period ended June 30, 2011, the
Company sold 662,000 shares of its common stock for total net proceeds of $165,500. During the six months ended June 30, 2012,
the Company sold 7,224,680 shares of its common stock for total net proceeds of $1,039,200. During the six months ended June 30,
2011, the Company sold 2,799,430 shares of its common stock for total net proceeds of $302,280. All sales of common shares during
these periods were in private offerings.



NOTE 6 – STOCK-BASED COMPENSATION, OPTIONS AND WARRANTS



STOCK-BASED COMPENSATION



At June 30, 2012, the Company had a stock-based compensation plan,
its 2010 Stock Incentive and Compensation Plan, which reserved 10 million shares for issuance. The Plan provides for the grant
of options, restricted stock, stock appreciation rights, performance shares and performance units to our employees, consultants
and non-employee directors. The Company measures the grant date fair value of its awards using an option pricing model.  The
related fair value is then amortized over the vesting period of the equity instruments.





12







NOTE 7- CONTINGENCIES



In December 2010, the Company and Anthony Nicolosi, the Company’s
President, were served with a Cease and Desist Order (the "Order"), with a Notice of Right To Hearing, from the Alabama
Securities Commission styled "In the Matter of Medical Connections Holdings, Inc., Anthony Nicolosi," (Adm. Order No.
CD-2010-0062). The Order requires the cessation of offering or selling securities into, within or from the State of Alabama during
the pendency of the Order. The Cease and Desist Order alleges that Mr. Nicolosi omitted material facts in the sale of a security
to a single Alabama investor and violated the agent registration requirements in Alabama. The Company made a rescission offer to
the Alabama investor which included information that the Alabama Securities Commission alleged should have been disclosed to the
investor relating to the name change of Mr. Nicolosi and his regulatory history concerning a disciplinary proceeding instituted
by the Financial Industry Regulatory Authority (“FINRA”) and settled by means of an Acceptance Waiver and Consent.
The Alabama investor rejected the rescission offer. The Company had an informal meeting with the Alabama Securities Commission
in March 2011 in the process of attempting to resolve the matter. There has been no adjudication as to the truth of the allegations
upon which the Order was based. The Company is not able to predict the outcome of this matter and there is no related accrual as
of June 30, 2012.



On April 11, 2012, the Company, along with approximately 25 other
Defendants, had been sued for breach of contract (Count I) and breach of the implied covenant of good faith and fair dealing (Count
II) in a case styled Kimberly Crugnale and Relogent, LLC v. Medical Connections, Inc. et al. –Case No. CV2012 -0044074
which was filed in Superior Court of Arizona, County of Maricopa.   The Plaintiffs allege that they entered into
a written contract with the Company in or about 2006, pursuant to which the Company agreed to compensate the Plaintiffs to house
their traveling healthcare professionals throughout the United States.   The Plaintiff alleges that the Defendants, including
the Company, failed to compensate them pursuant to the terms of the contract and circumvented the Plaintiffs by dealing directly
with certain rental properties in violation of the contract.  The Company denies the material allegations of the Complaint.   
 On May 21, 2012, the plaintiff voluntarily dismissed with prejudice their claim against the Company.



The Company and certain of its subsidiaries are subject to various
other pending or threatened legal proceedings arising out of the normal course of business or operations. In view of the inherent
difficulty of predicting the outcome of such matters, the Company cannot state what the eventual outcome of these matters will
be. However, based on current knowledge, management believes that the amount of any incremental liability arising from these matters
is not expected to have a material adverse effect on the Company’s consolidated financial condition or results of operations.



NOTE 8 – SUBSEQUENT EVENTS



On July 31, 2012, the Company
and MCI executed an Asset Purchase and Sale Agreement (the “Agreement”) with Trustaff Medical Connections, LLC (“Trustaff”),
an Ohio limited liability company, whereby Trustaff agreed to purchase substantially all of the assets of MCI, the Company’s
sole operating subsidiary. The purchase price for the assets was $825,000 plus 90% of MCI’s outstanding accounts receivable
balance which at the date of closing totaled $854,928. The purchase price for the assets, which included an additional $7,525 in
prepaids, totaled $1,687,453 (the “Purchase Price”).







At Closing, the Purchase Price was delivered
to Cors & Basset, LLC (the “Escrow Agent”). The Escrow Agent was obligated to deduct from the Purchase Price all
outstanding Medical Connections liabilities and pay those liabilities on behalf of Medical Connections. These liabilities included
(a) payment of approximately $449,027 to Paragon Financial Group, Inc., representing payment in full of MCI’s outstanding
line of credit with Paragon Financial Group and (b) payment of approximately $242,406 related to accounts payable, professional
fees and related expenses. Additionally, the Company had existing expenses related to accounts payable, notes payable, accrued
and other related expenses totaling $644,250 that were paid in full with proceeds. As a result, the net proceeds received from
the sale of the assets were approximately $351,770, of which $120,000 will be held in escrow pursuant to the terms of an Escrow
Agreement (“Escrow Agreement”) dated as of July 31, 2012 by and between Trustaff, MCI, the Company and the Escrow
Agent. The Escrow Agreement will terminate January 31, 2013.  If Trustaff is unable to collect 90% of accounts receivable
within 90 days of closing, the uncollected portion will be paid from the escrowed funds.  If uncollected portion exceeds
the amount of funds escrowed, the Company would be liable for the excess.



With the sale of the assets of MCI
effective as of July 30, 2012, the Company has no operations.



13







ITEM 2.        MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



In this Quarterly Report on Form
10-Q, the terms "Company," "we," "us," and "our" refer to Medical Connections Holdings,
Inc.  and its wholly-owned subsidiary, Medical Connections, Inc.



Forward Looking Statements



This
Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995. All statements other than statements of historical fact, including statements regarding  industry prospects
or future results of operations or financial position, made in this Quarterly Report on Form 10-Q are forward-looking. We use words
such as anticipates, believes, expects, future, intends, and similar expressions to identify forward-looking statements. Forward-looking
statements reflect management’s current expectations and are inherently uncertain. Actual results could differ materially
for a variety of reasons, including, those risks described in our Annual Report on Form 10-K for the year ended December 31, 2011
filed with the Securities and Exchange Commission (“SEC”) on March 30, 2012, and the risks discussed in other SEC filings.
These risks and uncertainties, as well as other risks and uncertainties, could cause our actual results to differ significantly
from management’s expectations. The forward-looking statements included in this Quarterly Report on Form 10-Q reflect the
beliefs of our management on the date of this report. We undertake no obligation to update publicly any forward-looking statements
for any reason.



General



Until July 31, 2012, we operated as a healthcare staffing company
which provided staffing services for allied professionals and nurses to our clients on a national basis. We provided
recruiting and staffing services for permanent and temporary positions, with an option for the clients and candidates to choose
the most beneficial working arrangements.



We operated under a holding company structure and currently have
one direct wholly-owned operating subsidiary, Medical Connections, Inc., a Florida corporation which was formed
in 2002.



On July 31, 2012, the Company and MCI executed
an Asset Purchase and Sale Agreement (the “Agreement”) with Trustaff Medical Connections, LLC (“Trustaff”),
an Ohio limited liability company, whereby Trustaff agreed to purchase substantially all of the assets of MCI, the Company’s
sole operating subsidiary. The purchase price for the assets was $825,000 plus 90% of MCI’s outstanding accounts receivable
balance which at the date of closing totaled $854,928. The purchase price for the assets, which included an additional $7,525 in
prepaids, totaled $1,687,453 (the “Purchase Price”).



14







At Closing, the Purchase Price was delivered
to Cors & Basset, LLC (the “Escrow Agent”). The Escrow Agent was obligated to deduct from the Purchase Price all
outstanding Medical Connections liabilities and pay those liabilities on behalf of Medical Connections. These liabilities included
(a) payment of approximately $449,027 to Paragon Financial Group, Inc., representing payment in full of MCI’s outstanding
line of credit with Paragon Financial Group and (b) payment of approximately $242,406 related to accounts payable, professional
fees and related expenses. Additionally, the Company had existing expenses related to accounts payable, notes payable, accrued
and other related expenses totaling $644,250 that were paid in full with proceeds. As a result, the net proceeds received from
the sale of the assets were approximately $351,770, of which $120,000 will be held in escrow pursuant to the terms of an Escrow
Agreement (“Escrow Agreement”) dated as of July 31, 2012 by and between Trustaff, MCI, the Company and the Escrow Agent.
The Escrow Agreement will terminate January 31, 2013, if the amount of funds remaining in escrow is less than the remaining claims
against the MCI and the Company.



The Agreement and the transactions contemplated
thereby were approved by the Company’s Board of Directors and majority shareholders owning 73.83% of the Company’s
total voting power effective as of July 26, 2012. You are urged to review the description of the Agreement and the transactions
consummated thereby in the Company’s Form 8-K filed with the SEC on August 6, 2012.



With the sale of the assets of MCI effective
as of July 30, 2012, the Company has no operations. Under Rule 12b-2 of the Exchange Act of 1934, the Company qualifies as a “shell
company,” because it has no or nominal assets (other than cash) and no or nominal operations. The Company’s executive
officers, Anthony Nicolosi and Brian Neill, intend to use the net proceeds to explore other business opportunities including a
business combination through a stock exchange, merger, asset acquisition or other similar business combination (a "Business
Combination") with an operating or development stage business (the "Target Business"). Their investigation will
not be limited to any specific business or industry. The Company may also seek to acquire a foreign or domestic private company
which seeks to take advantage of the Company’s large shareholder base and trading market.



Executive Overview



We generated revenues primarily from travel
contract appointments and permanent placement hires in the six months and quarters ended June 30, 2012 and 2011:



Contract Appointments: This activity represents temporary hires
(typically, 13 week contracts) made by healthcare facilities to cover short term staffing needs at their facilities.  These
shortages in staffing may occur for a variety of reasons, including high-seasonal activity at the healthcare facility, or permanent
employees may be taking vacations or leaves of absence. This also includes contracts for what is commonly known as “travel
positions,” which are for allied health professionals, nurses or physicians who are willing to take temporary assignments
outside their home region. Under this arrangement, we are the employer of record for the healthcare professional. The healthcare
facility remits a fee to us that includes all employment overhead, as well as a surcharge for the service. The revenue from this
activity is earned from the surcharge for the service.



Permanent Placement Hires: This activity includes the hiring of
allied health professionals, nurses, physicians, pharmacists and other medical personnel to be employed in healthcare or research
facilities. Under this arrangement, we receive a placement fee based on a percentage of the employee’s initial annual salary,
or a negotiated fee, which is predetermined based upon medical specialty.



For the three months ended June 30, 2012, our revenue was  $1,622,737,
derived primarily from allied and nursing travel contacts, and our net loss was $740,621 or $(0.03) per share.   Loss
from operations was $709,545 for the three months ended June 30, 2012, which was lower than our operating loss of $873,976 for
the second quarter of 2011.



15







Due to the operating losses and deficits, our independent registered
public accounting firm has raised doubts about our ability to continue as a going concern in their report on our December 31, 2011financial
statements.   Despite historical losses, we believe that we will be able to satisfy ongoing operating expenses. We have
done so to date by raising capital through the sale of equity securities.



We managed our day-to-day operations by focusing on key metrics
such as number of travelers placed with healthcare facilities, permanent placement orders filled with employers, gross margins
on each contract, number of hours worked, and profitability of each contract. We also closely monitor our accounts receivable,
to make sure we are within contract payment terms. Our sales staff is given specific goals by which their performance is consistently
measured.



Three Months Ended June 30, 2012 (“second quarter 2012”)
Compared with Three Months Ended June 30, 2011 (“second quarter 2011”)



Revenue for the second quarter of 2012 was $1,622,737, a decrease
of $157,201, or 8.8%, when compared with $1,779,938 in the second quarter of 2011.   The two main components of
revenue are contract appointments and permanent placement hires.



Revenue from contract appointments was $1,545,632, a decrease of
$52,203 or 3.3% when compared with revenue of $1,597,835 in the second quarter of 2011.  Working traveler hours and billing
rates were similar when comparing quarter-to-quarter.



Revenue from permanent placement hires decreased $104,998, or 57.7%,
to $77,105 for the second quarter of 2012 compared to $182,103 in the second quarter of 2011. The decrease was the result of less
demand for permanent hiring compared to temporary hiring the second quarter. Direct costs of revenue for permanent placement are
minimal, amounting to $1,000 and -0- in the second quarters of 2012 and 2011, respectively.



Direct costs associated with contract appointments decreased $54,154,
or 4.3%, to $1,207,705 in the second quarter of 2012 compared with $1,261,859 in the second quarter of 2011.  The decrease
was primarily the result of lower revenue during the period. The gross profit from contract appointments increased $1,951 to $337,927
or 21.9% of revenue in the second quarter of 2012 compared with $335,976 or 21.0% of revenue in the second quarter of 2011.



Advertising
and marketing expenses were $92,884 in the second quarter of 2012, an increase of $53,148 or 133.8% when compared to the $39,736
expensed in the second quarter of 2011. The increase is related to the Company’s increased marketing efforts to gain new
revenue.



Recruiting salaries and costs remained relatively flat, increasing
$6,020, or 1.8%, to $348,838 in the second quarter of 2012.



Professional and consulting fees decreased
$344,898 or 78.3%, to $95,718 in the second quarter of 2012 compared with $440,616 in the second quarter of 2011 due to expenses
associated with a legal settlement incurred in the second quarter 2011.



General and administrative expenses remained
relatively stable increasing $17,252 to $586,137 in the second quarter of 2012 from $568,885 in the second quarter of 2011.



16







Other expenses, net in
the second quarter of 2012 were $31,076, a decrease of $30,041, or 49.2%, when compared with $61,117 in other expenses, net in
the second quarter of 2011.  The decrease was primarily related to the decrease in expenses for investor relations and
investment banking.



Net loss for the second quarters ended June 30, 2012 and June 30,
2011 were $740,621 and $935,093, respectively, a 20.8% decrease.



Six Months Ended June 30, 2012 (“first six months 2012”)
Compared with Six Months Ended June 30, 2011 (“first six months 2011”)



Revenue for the first six months of 2012 was $3,286,058 a decrease
of $524,519 or 13.8%, when compared with $3,810,577 in the first six months of 2011.   The two main components of
revenue are contract appointments and permanent placement hires.



Revenue from contract appointments was $3,033,622 a decrease of
$450,890 or 12.9% when compared with revenue of $3,484,512 in the first six months of 2011.  The decrease was due primarily
to a shift away from lower margin contracts in the first three months of 2012, which resulted in a higher gross margin of 21.1%
in the first six months of 2012 compared to 19.1% gross profit margin for the same period in 2011.



Revenue from permanent placement hires decreased $73,629, or 22.6%,
to $252,436 for the first six months of 2012 compared to $326,065 in the first six months of 2011. The decrease was the result
of less demand for permanent hiring compared to temporary hiring during the first six months of 2012. Direct costs of revenue for
permanent placement are minimal, amounting to $1,500 and $500 in the first six months of 2012 and 2011, respectively.



Direct costs associated with contract appointments decreased $424,720,
or 15.1%, to $2,394,946 in the first six months of 2012 compared with $2,819,666 in the first six months of 2011.  The
decrease was primarily the result of lower revenue during the period. The gross profit from contract appointments decreased $26,170
to $638,676 or 21.1% of revenue in the first six months of 2012 compared with $664,846 or 19.1% of revenue in the first six months
of 2011.



Advertising
and marketing expenses were $201,591 in the first six months of 2012, an increase of $114,744 or 132.1% when compared to the $86,847
expensed in the first six months of 2011. The increase is related to the Company’s increased marketing efforts to gain new
revenue.



Recruiting salaries and costs increased $73,771 or 10.4%, to $786,379
in the first six months of 2012. The increase was due primarily to the hiring of additional sales staff during the first quarter
of 2012.



Professional and consulting fees decreased
$415,240 or 67.1%, to $203,632 in the first six months of 2012 compared with $618,872 in the first six months of 2011 due to expenses
associated with a legal settlement incurred in the second quarter 2011.



General and administrative expenses increased
$493,145, or 41.2%, to $1,691,249 in the first six months of 2012 from $1,198,104 in the first six months of 2011.  The
increase is due primarily to the expensing of $459,665 for the stock option grants made in the first quarter of 2012.



Other expenses, net in the first six months of 2012 were $192,914,
an increase of $16,420, or 9.3%, when compared with $176,494 in other expenses, net in the first six months of 2011.  The
increase was primarily related to the increase in expenses for investor relations and investment banking during the first quarter
of 2012.





17







Net loss for the first six months ended June 30, 2012 and June 30,
2011 were $2,186,153 and $1,802,514, respectively, a 21.3% increase.



Liquidity and Capital Resources



During the three month period ended March 31, 2012, the Company
entered into a Factoring and Security Agreement with an unrelated party (the “Purchaser”) in which the Company receives
advances on its Eligible Receivables, as defined in the Agreement.  The Company pays the Purchaser a service fee of 1.79%
of advances outstanding less than 30 days and an additional fee of .67% for each additional ten-day period. The advances are repaid
upon collection of the receivables.  The Purchaser has the ability to require the Company to repurchase certain of the receivables
plus any unpaid fees. The Company accounts for these factoring transactions as secured borrowings. As of June 30, 2012, the amount
of secured borrowings is $411,924. This Agreement was terminated and all amounts outstanding were repaid upon entering into the
Asset Purchase and Sale Agreement on July 31, 2012.



As of June 30, 2012, total current assets were $1,141,739 as compared
with $1,020,061 as of December 31, 2011. Total current liabilities increased $713,375 to $1,365,184 as of June 30, 2012
from $651,809 as of December 31, 2011, primarily due to the addition of secured borrowings in the amount of $411,924, the addition
of short term financing in the amount of $194,000 and the deferral of payments to vendors and accrued expenses. Net cash used for
operating activities was $1,769,043 in the first six months of 2012 compared to $1,303,355 for the same period in 2011.
Net cash flow used in investing activities was $9,285 in the first six months of 2012 related to the acquisition of property compared
with net cash flows used for investing activities of $5,192 in the first six months of 2011. Net cash provided by financing activities
was $1,666,724 in the first six months of 2012 from the issuance of common stock, the proceeds from short-term borrowings and the
proceeds from secured financing. For the period ended June 30, 2011, we raised $302,280 from the sale of an aggregate of 718,266
shares of our common stock in private offerings as well as the exercise of warrants to purchase 160,000 shares of common stock.



On July 31, 2012, the Company and MCI executed
an Asset Purchase and Sale Agreement (the “Agreement”) with Trustaff Medical Connections, LLC (“Trustaff”),
an Ohio limited liability company, whereby Trustaff agreed to purchase substantially all of the assets of MCI, the Company’s
sole operating subsidiary. The purchase price for the assets was $825,000 plus 90% of MCI’s outstanding accounts receivable
balance which at the date of closing totaled $854,928. The purchase price for the assets, which included an additional $7,525 in
prepaids, totaled $1,687,453 (the “Purchase Price”).



At Closing, the Purchase Price was delivered
to Cors & Basset, LLC (the “Escrow Agent”). The Escrow Agent was obligated to deduct from the Purchase Price all
outstanding Medical Connections liabilities and pay those liabilities on behalf of Medical Connections. These liabilities included
(a) payment of approximately $449,027 to Paragon Financial Group, Inc., representing payment in full of MCI’s outstanding
line of credit with Paragon Financial Group and (b) payment of approximately $242,406 related to accounts payable, professional
fees and related expenses. Additionally, the Company had existing expenses related to accounts payable, notes payable, accrued
and other related expenses totaling $644,250 that were paid in full with proceeds. As a result, the net proceeds received from
the sale of the assets were approximately $351,770, of which $120,000 will be held in escrow pursuant to the terms of an Escrow
Agreement (“Escrow Agreement”) dated as of July 31, 2012 by and between Trustaff, MCI, the Company and the Escrow Agent.
The Escrow Agreement will terminate January 31, 2013, if the amount of funds remaining in escrow is less than the remaining claims
against the MCI and the Company.





18







The Agreement and the transactions contemplated
thereby were approved by the Company’s Board of Directors and majority shareholders owning 73.83% of the Company’s
total voting power effective as of July 26, 2012. You are urged to review the description of the Agreement and the transactions
consummated thereby in the Company’s Form 8-K filed with the SEC on August 6, 2012.



With the sale of the assets of MCI effective
as of July 30, 2012, the Company has no operations. Under Rule 12b-2 of the Exchange Act of 1934, the Company qualifies as a “shell
company,” because it has no or nominal assets (other than cash) and no or nominal operations. The Company’s executive
officers, Anthony Nicolosi and Brian Neill, intend to use the net proceeds to explore other business opportunities including a
business combination through a stock exchange, merger, asset acquisition or other similar business combination (a "Business
Combination") with an operating or development stage business (the "Target Business"). Their investigation will
not be limited to any specific business or industry. The Company may also seek to acquire a foreign or domestic private company
which seeks to take advantage of the Company’s large shareholder base and trading market.



Our corporate headquarters are located at
4800 T-Rex Avenue, Suite 310, Boca Raton, Florida 33431.  We operate Medical Connections, Inc. from this
office.   We lease approximately 10,000 square feet of space with a monthly base rent expense of $14,245.
Additionally, operating expenses and taxes are approximately $7,400 per month payable to the lessor.  Our current
lease expires on May 15, 2016. Upon entering into the Asset Purchase and Sale Agreement on July 31, 2012, this lease was
assigned to Trustaff. It is anticipated that Trustaff and the landlord will enter into a new leasehold agreement. However,
until the parties enter into a new lease, if Trustaff defaults on the leasehold obligation, MCI will be liable for any
default.



Critical Accounting Policies



The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingencies. Due to the inherent uncertainty
involved in making estimates, actual results reported in future periods may be materially different from those estimates. The following
policies are those that we consider to be the most critical. See Note 2, “Summary of Significant Accounting Policies”
to our consolidated financial statements included in this Annual Report for further description of these and all other accounting
policies.  The following are deemed to be the most significant accounting policies affecting the Company:



Revenue Recognition: The Company records its transactions under
the accrual method of accounting whereby revenue is recognized when the services are rendered and collection is reasonably
assured.  Contract appointments includes contracts for what is commonly known as “travel positions,” which
are for allied health professionals, nurses or physicians who are willing to take temporary assignments outside their home region.
Under this arrangement, we are the employer of record for the healthcare professional. The healthcare facility remits a fee to
us that includes all employment overhead, as well as a surcharge for the service. The revenue from this activity is earned from
the commission and surcharge for the service which is billed and recognized off of weekly time cards.   The Company
recognizes revenue from permanent placement services when employment commences.    Adjustments to the fee for
these services occur if the candidate’s performance is not satisfactory requiring the Company to find a replacement candidate.





19







Allowances for Doubtful Accounts: Accounts are written off when
management determines that an account is uncollectible.  Recoveries of accounts previously written off are recorded when
received. Estimated allowances for doubtful accounts are determined to reduce the Company’s receivables to their carrying value,
which approximates fair value. In addition to maintaining an allowance for bad debt, we also maintain a sales allowance reserve
for that portion of permanent placement revenue that may “falloff” after a reasonable period of time.  A
reasonable period of time means that as each client’s payment history is unique to that client, we take that payment history
into account when determining if payment of a particular invoice will not be forthcoming.   Allowances and reserves are
estimated based on historical collection experience, specific review of individual customer accounts, and current economic and
business conditions and are reviewed on a quarterly basis to determine their adequacy. Historically, we have not incurred any significant
credit related losses.



Off-Balance Sheet Arrangements



We have not entered into any off-balance sheet arrangements. We
do not anticipate entering into any off-balance sheet arrangements during the next 12 months.



ITEM 3.        QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Not applicable.



ITEM 4.      
 CONTROLS AND PROCEDURES

(a)           Evaluation
of Disclosure Controls and Procedures



Our management, with the participation of our Chief Executive Officer
and our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) and determined that our disclosure controls
and procedures were effective as of June 30, 2012. The evaluation considered the procedures designed to ensure that the information
required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated
to our management, including our principal executive officer and principal financial officer, or persons performing similar functions,
as appropriate, to allow timely decisions regarding required disclosure.



(b)           Changes
in Internal Control over Financial Reporting



During the period covered by this Quarterly Report on Form 10-Q,
there was no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(d) and 13d-15(d)
under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.



(c)           
Inherent Limitations of Disclosure Controls and Internal Controls over Financial Reporting



Because of its inherent limitations, internal
controls over financial reporting may not prevent or detect misstatements. Projections of any evaluation or effectiveness to future
periods are subject to risks that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.





20







PART II. OTHER INFORMATION



ITEM 1.        LEGAL PROCEEDINGS.



See Note 7 — Contingenciesin
the Notes to Condensed Consolidated Financial Statements contained in PART I, ITEM I of this Quarterly Report for information about
legal proceedings in which we are involved.



ITEM 1A.     RISK FACTORS.



Before deciding to purchase, hold or sell our common stock, you
should carefully consider the risks described below in addition to the other cautionary statements and risks described elsewhere,
and the other information contained, in this Annual Report and in our other filings with the SEC, including our subsequent reports
on Forms 10-Q and 8-K. The risks and uncertainties described below are not the only ones we face.  Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may also affect our business. If any of these known
or unknown risks or uncertainties actually occurs with material adverse effects on the Company, our business, financial condition,
results of operations and/or liquidity could be seriously harmed. In that event, the market price for our common stock will likely
decline and you may lose all or part of your investment.



The absence of operations and revenues
and our limited financial resources raises substantial doubt about our ability to continue as a going concern.



At July 31, 2012, we had approximately $867,428
in cash and no other assets of any kind, and liabilities of approximately $644,250, consisting principally of amounts due for accounts
payable, notes payable, and other related expenses. As a result of the sale of substantially all of our assets to Trustaff on July
31, 2012, we are not generating any revenues and possess limited capital to fund our operations, including for such purposes as
identifying a Target Business and negotiating a Business Combination. The report of our independent registered public accounting
firm included within our audited financial statements for the fiscal year ended December 31, 2011 and in Note 3 to the financial
statements included in this Form 10-Q indicate that our losses from operations, net capital deficiency, failure to generate cash
flow and ongoing operating expenses without corresponding revenues raise substantial doubt about the Company’s ability to
continue as a going concern.



Because the Company has nominal assets, we are considered
a "shell company" and will be subject to more stringent reporting requirement and our shareholders will not be able to
resell their shares under Rule 144 of the Securities Act



As a result of the sale of substantially all of our assets to Trustaff,
we are deemed to be shell company. Under Rule 405 of the Securities Act of 1933, (the "Securities Act") as amended, and
Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended, (the "Exchange Act") a shell company is
any company with nominal operations and assets consisting of cash and nominal other assets. Applicable securities rules prohibit
shell companies from using a Form S-8 registration statement to register securities pursuant to employee compensation plans. However,
the new rules do not prevent us from registering securities pursuant to registration statements. Additionally, Form 8-K requires
shell companies to provide more detailed disclosure upon completion of a transaction that causes it to cease being a shell company.
To the extent that we acquire a business in the future, we must file a current report on Form 8-K containing the financial and
other information required in a registration statement on Form 10 within four business days following completion of such a transaction.
To the extent that we are required to comply with additional disclosure as we are a shell company, we may be delayed in executing
any mergers or acquiring other assets that would cause us to cease being a shell company.





21







In addition, under Rule 144 of the Securities Act, a holder of restricted
securities of a “shell company” may not be allowed to resell their securities in reliance upon Rule 144. Preclusion
from any prospective purchase using the exemptions from registration afforded by Rule 144 may make it more difficult for us to
sell equity securities. Additionally, the loss of the use of Rule 144 may make investments in our securities less attractive to
investors and may make the offering and sale of our securities to employees, directors and others under compensatory arrangements
more expensive and less attractive to recipients.



We require capital to fund our ongoing
operations. If capital is not available, we may have to discontinue operations.



To date, we funded our operations from raising
capital in private offerings for our operating business, the healthcare staffing business. Since we no longer have an active business,
we are not certain if we will be able to continue raising capital. In the event that we do not obtain the cash to fund our capital
requirements, we may not be able to continue operations and our shareholders could lose the entire amount of their investment in
our Company.



Our officers and directors have never
been principals of, nor have ever been affiliated with, a company formed with a business purpose similar to ours.



Our management has never served in any capacity
with a company the business purpose of which is to acquire an operating business. Accordingly, you may not be able to adequately
evaluate management’s ability to consummate successfully a business combination. Moreover, our management does not have experience
evaluating or conducting due diligence with respect to companies in connection with a Business Combination and may not conduct
adequate or accurate due diligence with respect to a Target Business or its management prior to a Business Combination. Management’s
failure to conduct complete and accurate due diligence or accurately assess the future strength of a Target Business could have
a significant negative impact on our operations and could cause our shareholders to lose their entire investment.



We do not have a specific plan for identifying
Target Businesses and we cannot estimate or predict when or if we ever will affect a Business Combination.



Our management does not have any specific plan
or process for identifying a Target Business or effectuating a Business Combination. The business of the Company is predicated
upon relationships built by management and the ongoing effort to develop new contacts through which management is introduced to
potential Target Businesses. Moreover, given the wide ranging variables inherent in its business, management cannot predict the
amount of time required to effectuate a Business Combination nor the amount of funds required therefore. In light of these factors,
we cannot assure investors that we ever will consummate a Business Combination.



We have no existing agreement for a Business
Combination or other transaction.



We presently have no written arrangement or
agreement with respect to engaging in a Business Combination. We cannot assure you that we will successfully identify and evaluate
suitable business opportunities or that we will enter into a Business Combination. Management has not identified any particular
industry or specific business within an industry for evaluation. We cannot guarantee that we will be able to negotiate a Business
Combination on favorable terms.





22







Our future success is dependent on the
ability of management to complete a Business Combination with a Target Business that operates profitably.



The nature of our operations is highly speculative.
We may not be able to enter into a Business Combination. If we do, the future success of our plan of operation will depend on the
operations, financial condition and management of the Target Business we may acquire. While management is seeking to enter into
a Business Combination with an entity having an established, profitable operating history and effective management, we cannot assure
you that we will be successful in consummating a Business Combination with a candidate that meets that those criteria. We cannot
assure you that, even if we consummate a Business Combination, the Company will realize any short-term or long-term earnings.



We likely will complete
only one Business Combination, which will cause us to be dependent solely on a single business and a limited number of products,
services or assets.



It is likely we will complete a Business Combination
with only one Target Business. Accordingly, the prospects for our success may be solely dependent upon the performance of a single
business and dependent upon the development or market acceptance of a single or limited number of products, processes or services.
In this case, we will not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of
losses, unlike other entities which may have the resources to complete several Business Combinations or asset acquisitions in different
industries or different areas of a single industry so as to diversify risks and offset losses.



Given our limited resources and the significant
competition for Target Businesses, we may not be able to consummate an attractive Business Combination.



We will encounter intense competition from
other entities having a business objective similar to ours, including blank check companies, finance companies, banks, venture
capital funds, leveraged buyout funds, operating businesses and other financial buyers competing for acquisitions. Many of these
entities are well established and have extensive experience in identifying and affecting Business Combinations. Most of these competitors
possess greater financial, technical, human and other resources than we do and our financial resources will be negligible when
contrasted with those of many of these competitors. In addition, we will experience direct competition from other modestly capitalized
shell companies that are seeking to enter into business combinations with targets similar to those we expect to pursue.



Since we have not yet selected a particular
industry or Target Business with which to complete a Business Combination, we are unable to ascertain the merits or risks of the
industry or business in which we may ultimately operate at this time.



We are currently in the process of evaluating
and identifying targets for a Business Combination. However, our plan of operation permits our board of directors to consummate
a Business Combination with a company in any industry it chooses and is not limited to any particular industry or type of business.
Accordingly, there is no current basis to evaluate the possible merits or risks of the particular industry in which we may ultimately
operate or the Target Business that we may ultimately acquire. To the extent we complete a Business Combination with a company
that does not have a stable history of earnings and growth or an entity in a relatively early stage of its development, we will
be affected by numerous risks inherent in the business operations of those entities. If we complete a Business Combination with
an entity in an industry characterized by a high level of risk, we will be affected by the currently unascertainable risks of that
industry. Such risks, among other things, could preclude the Company’s ability to secure financing for operations after a Business
Combination, should it be required. Although our management will endeavor to evaluate the risks inherent in a particular industry
or Target Business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors. Even if
we properly assess those risks, some of them may be outside of our control.





23







Numerous external forces could negatively
affect our businesses, results of operations and financial condition.



Numerous external forces, including the state
of global financial markets and general economic conditions, lack of consumer confidence, lack of availability of credit, interest
rate and currency rate fluctuations and national and international political circumstances (including wars and terrorist acts)
could negatively affect our business, results of operations and financial condition. As a consequence, companies that otherwise
may have considered becoming public as a result of a reverse acquisition may elect to delay or forego entirely such plans because
of the impact of the global financial conditions on their operations, their inability to obtain financing to grow their operations
and the costs they will required to incur associated with being a public company, among other reasons. Accordingly, it may be more
difficult and take more time to identify a suitable and willing Target Business and consummate a Business Combination.



Our compliance with changing laws and
rules regarding corporate governance and public disclosure may result in additional expenses to us which, in turn, may adversely
affect our ability to continue our operations.



Keeping abreast of, and in compliance with,
changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act
of 2002, new SEC regulations and, in the event we are ever approved to trade on either an automated quotation system or a registered
exchange, and system or stock exchange rules, will require an increased amount of management attention and external resources.
We intend to continue to invest all reasonably necessary resources to comply with evolving standards, which may result in increased
general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance
activities. This could have an adverse impact on our operations.



We expect to issue a significant number
of new shares of capital stock in a Business Combination, which we expect will result in substantial dilution and a change in control
of ownership of the Company.



Our articles of incorporation authorize the
issuance of 100 million shares of common stock and 10 million shares of preferred stock. Any Business Combination affected by us
may result in the issuance of additional securities without shareholder approval and may result in substantial dilution in the
percentage of our common stock held by our then existing shareholders. Moreover, the common stock issued in any such transaction
may be valued on an arbitrary or non-arm’s-length basis by our management, resulting in an additional reduction in the percentage
of common stock held by our then existing shareholders. Our board of directors has the power to issue any or all of such authorized
but unissued shares without shareholder approval. To the extent that additional shares of common stock or preferred stock are issued
in connection with a Business Combination or otherwise, dilution to the interests of our shareholders will occur and the rights
of the holders of common stock might be materially adversely affected



We may issue preferred stock which may
have greater rights than our common stock.



Our articles of incorporation authorize our
Company to issue up to 10 million shares of blank check preferred stock. Currently, we have authorized 100,000 shares of Series
A Preferred Stock, 50,000 shares of Series B Preferred Stock and 665,000 shares of Series C Preferred Stock. As such, we have 9,185,000
shares of blank check preferred stock which have not been designated. We can issue the undesignated shares in one or more series
and can set the terms of the preferred stock without seeking any further approval from our common shareholders. Any preferred stock
that we issue may rank ahead of our common stock in terms of dividend priority or liquidation premiums and may have greater voting
rights than our common stock. In addition, such preferred stock may contain provisions allowing those shares to be converted into
shares of common stock, which could dilute the value of common stock to current shareholders and could adversely affect the market
price, if any, of our common stock.





24







We may need additional capital, and the sale of additional
shares or other equity securities could result in additional dilution to our stockholders.



We will require additional cash resources to fully implement our
business plan, including any investments or acquisitions we may decide to pursue. If our resources are insufficient to satisfy
our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional
equity securities could result in additional dilution to our stockholders. The incurrence of indebtedness would result in increased
debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure
you that financing will be available in amounts or on terms acceptable to us, if at all.



We do not expect to pay dividends in the foreseeable future.



We have never paid cash dividends on our common stock and have no
plans to do so in the foreseeable future. We intend to retain earnings, if any, to develop and expand our business.



"Penny stock" rules may make buying or selling the
common stock difficult and severely limit the market for our common stock and its liquidity.



Trading in our common stock is subject to certain regulations adopted
by the SEC commonly known as the "Penny Stock Rules". Our common stock qualifies as penny stock and is covered by Section
15(g) of the Exchange Act which imposes additional sales practice requirements on broker/dealers who sell our common stock in the
market. The "Penny Stock" rules govern how broker/dealers can deal with their clients and "penny stocks". For
sales of our common stock, the broker/dealer must make a special suitability determination and receive from clients a written agreement
prior to making a sale. The additional burdens imposed upon broker/dealers by the "penny stock" rules may discourage
broker/dealers from effecting transactions in our common stock, which could severely limit its market price and liquidity. This
could prevent investors from reselling our common stock and may cause the price of the common stock to decline.



Although our common stock is listed for trading on the Over-the-Counter
Electronic Bulletin Board, the trading market in the common stock has substantially less liquidity than the average trading market
for companies quoted on other national stock exchanges and our price may fluctuate dramatically. A public trading market having
the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and
sellers of our common stock at any given time. This presence depends on the individual decisions of investors and general economic
and market conditions over which we have no control. Due to limited trading volume, the market price of our common stock may fluctuate
significantly in the future, and these fluctuations may be unrelated to our performance. General market price declines or overall
market volatility in the future could adversely affect the price of our common stock, and the current market price may not be indicative
of future market prices.



Our shares may have limited liquidity.



The public float for shares of our common stock is highly limited.
As a result, should you wish to sell your shares into the open market you may encounter difficulty selling large blocks of your
shares or obtaining a suitable price at which to sell your shares.



Our stock price may be volatile, which may result in losses
to our shareholders.



The stock markets have experienced significant price and trading
volume fluctuations, and the market prices of companies quoted on the Over-The-Counter Electronic Bulletin Board such as ours generally
have been very volatile and have experienced sharp share price and trading volume changes.  The market price of our common
stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond
our control, including:





25







| | o | operating results below expectations;                                            
| | - | ---------------------------------------------------------------------------------
| | o | additions or departures of key personnel;                                        
| | o | sales of our common stock;                                                       
| | o | our ability to identify Target Businesses as potential acquisition opportunities;
| | o | our ability to complete a Business Combination with a Target Business;           
| | o | our ability to reduce costs and operating expenses and become profitable;        
| | o | industry developments;                                                           
| | o | economic and other external factors; and                                         
| | o | period-to-period fluctuations in our financial results.                          



In addition, the securities markets have from time to time experienced
significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market
fluctuations may also materially and adversely affect the market price of our common stock.



Domestic and international stock markets often experience significant
price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance,
may adversely affect the price of our common stock.



Our executive officers exercise voting control over 65.3%
of our outstanding securities. As a result, this enables them to exert significant influence over the Company’s corporate actions.



Messrs. Nicolosi and Neill exercise voting control over 65.3 % of
our outstanding securities.   As a result, Messrs. Nicolosi, and Neill will be able to affect the outcome of or
exert significant influence over all matters requiring shareholder approval, including the election and removal of directors, most
corporate actions and any change in control. In particular, this concentration of ownership of our common stock could have the
effect of delaying or preventing a change of control or otherwise discouraging or preventing a potential acquirer from attempting
to obtain control of the Company.



We may be exposed to potential risks relating to our internal
controls over financial reporting and our ability to have those controls attested to by our independent auditors, if required.



As directed by Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX
404”), the Securities and Exchange Commission adopted rules requiring smaller reporting companies, such as our company, to
include a report of management on the company’s internal controls over financial reporting in their annual reports.   While
we make every effort to properly follow internal controls that have been implemented, we may experience situations where procedures
were not followed and, as such, incur expense to correct any related problems that arise.



Our common stock is thinly traded. You may be unable to sell
at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate such shares.



We cannot predict the extent to which an active public market for
our common stock will develop or be sustained. Our common stock has historically been sporadically or “thinly-traded”
on the “Over-The-Counter Electronic Bulletin Board,” meaning that the number of persons interested in purchasing our
common stock at or near bid prices at any given time may be relatively small or non-existent. This situation is attributable to
a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community that generate or influence sales volume. Even if we came to the
attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase
or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods
of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which
has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share
price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or
be sustained, or that current trading levels will be sustained.



26







The market price for our common stock is particularly
volatile given our status as a relatively small company with a small and thinly traded “float”.  This could
lead to wide fluctuations in our share price. You may be unable to sell your common stock at or above your purchase price if at
all, which may result in substantial losses to you. Shareholders should be aware that, according to SEC Release No. 34-29093,
the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of
the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation
of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices
involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed
bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters
and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those
prices and with consequent investor losses.



Our management is aware of the abuses that have occurred historically
in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers
who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns
from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility
of our share price.



Volatility in our common stock price may subject us to securities
litigation.



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



A sale of a substantial number of shares of our common stock
may cause the price of our common stock to decline.



If our shareholders sell substantial amounts
of our common stock in the public market, including shares issued upon the exercise of outstanding options which were 2,085,000
as of July 31, 2012 and outstanding warrants which were 243,900 as of December 31, 2011, the market price of our common
stock could fall. These sales also may make it more difficult for us to sell equity or equity-related securities in the future
at a time and price that we deem reasonable or appropriate.



ITEM 2.        UNREGISTERED
SALES OF EQUITY SECURITIES



During the three month period ended June 30, 2012, we sold 1,896,669
shares of our common stock to accredited or sophisticated investors for aggregate gross proceeds of $234,250. These securities
were issued in transactions that were exempt from registration under Regulation D Rule 506 and/or Section 4(2) of the Securities
Act of 1933, as amended (“Securities Act”), as transactions by an issuer not involving a public offering.   All
of the investors were knowledgeable, sophisticated and had access to comprehensive information about the Company and represented
their intention to acquire the securities for investment only and not with a view to distribute or sell the securities. The Company
placed legends on the securities stating that the securities were not registered under the Securities Act and set forth the restrictions
on their transferability and sale.





27







ITEM 3.        DEFAULTS
UPON SENIOR SECURITIES



None



ITEM 4.        MINE SAFETY
DISCLOSURES



Not Applicable.



ITEM 5.        OTHER INFORMATION



None



ITEM 6.        EXHIBITS



|Exhibit No. |  | Exhibit Description                                                                                      
|----------- |  | ---------------------------------------------------------------------------------------------------------
|            |  |                                                                                                          
|3.1.1       |  | Designation of Series C Preferred Stock filed with the Florida Secretary of State on April 20, 2012. +   
|            |  |                                                                                                          
|31.1        |  | Certification by the Chief Executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  
|            |  |                                                                                                          
|31.2        |  | Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. +
|            |  |                                                                                                          
|32.1        |  | Certification by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. +    
|            |  |                                                                                                          
|32.2        |  | Certification by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. +    





---

+ Filed herewith





28







SIGNATURES



Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized



|                       | MEDICAL CONNECTIONS HOLDINGS, INC.
|---------------------- | ----------------------------------
|                       |                                   
|Date:  August 14, 2012 | By:                               
|                       |                                   
|                       |                                   



In accordance
with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.



|Date:  August 14, 2012 | By: | /s/ Anthony Nicolosi         
|---------------------- | --- | -----------------------------
|                       |     | Anthony Nicolosi,            
|                       |     | President and Director       
|                       |     | (Principal Executive Officer)



|Date:  August 14, 2012 | By: | /s/ Brian Neill                         
|---------------------- | --- | ----------------------------------------
|                       |     | Brian Neill,                            
|                       |     | Chief Financial Officer                 
|                       |     | (Principal Financial/Accounting Officer)



29

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