SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



(Mark One)

þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

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

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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.)
|                                                                    |  |                                     
|2300 Glades Road Suite 202 E
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 þ 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
(Do not check if smaller reporting company) |  ̈ | Smaller reporting company | þ



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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13, or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes  ̈ 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:

50,069,689 shares of Common Stock, $.001 par value as of October 30, 2009













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INDEX

PART I.  FINANCIAL INFORMATION



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|PART I.  FINANCIAL INFORMATION
Item 1.Financial Statements
1
Condensed Consolidated Balance Sheets at September 30, 2009 (unaudited) 
and December 31, 2008
1
Condensed Consolidated Statements Of Operations for the Three Months Ended 
September 30, 2009 and 2008 (unaudited)
2
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended 
September 30, 2009 and 2008 (unaudited)
3
Notes to Condensed Consolidated Financial Statements as of 
September 30, 2009 (unaudited)
4
Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations
8
Item 3.Quantitative and Qualitative Disclosures about Market Risk
11
Item 4.Controls and Procedures
11
Item 4t.Controls and Procedures
11
PART II.  OTHER INFORMATION
Item 1.Legal Proceedings
12
Item 1a.Risk Factors
12
Item 2.Unregistered Sales of Equity Securities
12
Item 3.Defaults upon Senior Securities
12
Item 4.Submission of Matters to a Vote of Security Holders
12
Item 5.Other Information
12
Item 6.Exhibits
13







i



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PART I.  FINANCIAL INFORMATION

Item 1.

Financial Statements

MEDICAL CONNECTIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008

|                                                                                                                                    |  |               |             |   |              |   |             |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | - | ------------ | - | ----------- | -
|                                                                                                                                    |  | September 30, |             |   | December 31, |  
|                                                                                                                                    |  | 2009          |             |   | 2008         |  
|ASSETS                                                                                                                              |  |               |             |   |              |  
|Cash                                                                                                                                |  | $             | 676,757     |   |              | $ | 599,058     |  
|Accounts receivable, net                                                                                                            |  |               | 854,469     |   |              |   | 1,018,322   |  
|Prepaid expenses                                                                                                                    |  |               | 100,161     |   |              |   | 175,309     |  
|Total current assets                                                                                                                |  |               | 1,631,387   |   |              |   | 1,792,689   |  
|                                                                                                                                    |  |               |             |   |              |   |             |  
|Property and equipment                                                                                                              |  |               | 382,703     |   |              |   | 326,907     |  
|Less: accumulated depreciation                                                                                                      |  |               | 229,179     |   |              |   | 183,064     |  
|                                                                                                                                    |  |               | 153,524     |   |              |   | 143,843     |  
|                                                                                                                                    |  |               |             |   |              |   |             |  
|Other assets                                                                                                                        |  |               |             |   |              |   |             |  
|Security deposit                                                                                                                    |  |               | 206,642     |   |              |   | 228,540     |  
|Intangible asset, net of amortization of $7,500                                                                                     |  |               | 241,481     |   |              |   |           |  
|Investment - N. Carolina house                                                                                                      |  |               |           |   |              |   | 400,000     |  
|                                                                                                                                    |  |               | 448,123     |   |              |   | 628,540     |  
|                                                                                                                                    |  |               |             |   |              |   |             |  
|Total assets                                                                                                                        |  | $             | 2,233,034   |   |              | $ | 2,565,072   |  
|                                                                                                                                    |  |               |             |   |              |   |             |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                |  |               |             |   |              |   |             |  
|Current liabilities                                                                                                                 |  |               |             |   |              |   |             |  
|Accounts payable                                                                                                                    |  | $             | 143,332     |   |              | $ | 357,265     |  
|Accrued expenses                                                                                                                    |  |               | 127,090     |   |              |   | 81,539      |  
|Total current liabilities                                                                                                           |  |               | 270,422     |   |              |   | 438,804     |  
|                                                                                                                                    |  |               |             |   |              |   |             |  
|Total liabilities                                                                                                                   |  |               | 270,422     |   |              |   | 438,804     |  
|                                                                                                                                    |  |               |             |   |              |   |             |  
|Stockholders' equity                                                                                                                |  |               |             |   |              |   |             |  
|Preferred stock, Class A, $.001 par value; 1,000,000 shares 
authorized, 86,045 and 110,865 issued and outstanding, respectively    |  |               | 86          |   |              |   | 111         |  
|Preferred stock, Class B, $.001 par value; 
1,000,000 shares authorized, issued and outstanding                                     |  |               | 1,000       |   |              |   | 1,000       |  
|Common stock, $.001 par value, 70,000,000 shares authorized, 
41,028,079 and 29,343,362 shares issued and outstanding, respectively |  |               | 41,028      |   |              |   | 29,343      |  
|Additional paid-in capital                                                                                                          |  |               | 32,894,668  |   |              |   | 27,928,303  |  
|Accumulated deficit                                                                                                                 |  |               | (30,974,170 | ) |              |   | (25,832,489 | )
|Total stockholders' equity                                                                                                          |  |               | 1,962,612   |   |              |   | 2,126,268   |  
|                                                                                                                                    |  |               |             |   |              |   |             |  
|Total liabilities and stockholders' equity                                                                                          |  | $             | 2,233,034   |   |              | $ | 2,565,072   |  





See the accompanying notes to the condensed consolidated financial statements



1



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MEDICAL CONNECTIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)

|                                                                      |  |                    |            |   |                   |   |            |      |  |   |            |   |  |   |            |  
|--------------------------------------------------------------------- |  | ------------------ | ---------- | - | ----------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                      |  | Three Months Ended |            |   | Nine Months Ended |  
|                                                                      |  | September 30,      |            |   | September 30,     |  
|                                                                      |  | 2009               |            |   | 2008              |   |            | 2009 |  |   | 2008       |  
|Revenue                                                               |  | $                  | 1,552,899  |   |                   | $ | 1,855,671  |      |  | $ | 4,637,862  |   |  | $ | 5,346,080  |  
|                                                                      |  |                    |            |   |                   |   |            |      |  |   |            |   |  |   |            |  
|Direct costs of revenue                                               |  |                    | 1,080,345  |   |                   |   | 1,278,044  |      |  |   | 3,343,357  |   |  |   | 3,279,610  |  
|Sales and marketing expenses                                          |  |                    | 65,439     |   |                   |   | 142,002    |      |  |   | 276,170    |   |  |   | 494,229    |  
|Recruiting - salaries and costs                                       |  |                    | 576,576    |   |                   |   | 712,151    |      |  |   | 1,717,809  |   |  |   | 2,007,259  |  
|Professional and consulting fees                                      |  |                    | 681,232    |   |                   |   | 681,791    |      |  |   | 1,574,855  |   |  |   | 2,276,458  |  
|General and administration expenses                                   |  |                    | 908,272    |   |                   |   | 1,053,027  |      |  |   | 2,598,717  |   |  |   | 2,904,009  |  
|                                                                      |  |                    |            |   |                   |   |            |      |  |   |            |   |  |   |            |  
|Total operating expenses                                              |  |                    | 3,311,864  |   |                   |   | 3,867,015  |      |  |   | 9,510,908  |   |  |   | 10,961,565 |  
|                                                                      |  |                    |            |   |                   |   |            |      |  |   |            |   |  |   |            |  
|                                                                      |  |                    | (1,758,965 | ) |                   |   | (2,011,344 | )    |  |   | (4,873,046 | ) |  |   | (5,615,485 | )
|                                                                      |  |                    |            |   |                   |   |            |      |  |   |            |   |  |   |            |  
|Interest expense                                                      |  |                    | 10         |   |                   |   | 0          |      |  |   | 71         |   |  |   | 13,898     |  
|Interest income                                                       |  |                    | (19        | ) |                   |   | (4,459     | )    |  |   | (161       | ) |  |   | (18,194    | )
|Other                                                                 |  |                    | 166,031    |   |                   |   |          |      |  |   | 268,862    |   |  |   |          |  
|                                                                      |  |                    |            |   |                   |   |            |      |  |   |            |   |  |   |            |  
|Total other expenses, net                                             |  |                    | 166,022    |   |                   |   | (4,459     | )    |  |   | 268,772    |   |  |   | (4,296     | )
|                                                                      |  |                    |            |   |                   |   |            |      |  |   |            |   |  |   |            |  
|Loss before income taxes                                              |  |                    | (1,924,987 | ) |                   |   | (2,006,885 | )    |  |   | (5,141,818 | ) |  |   | (5,611,189 | )
|                                                                      |  |                    |            |   |                   |   |            |      |  |   |            |   |  |   |            |  
|Income taxes                                                          |  |                    |          |   |                   |   |          |      |  |   |          |   |  |   |          |  
|                                                                      |  |                    |            |   |                   |   |            |      |  |   |            |   |  |   |            |  
|Net (loss)                                                            |  | $                  | (1,924,987 | ) |                   | $ | (2,006,885 | )    |  | $ | (5,141,818 | ) |  | $ | (5,611,189 | )
|                                                                      |  |                    |            |   |                   |   |            |      |  |   |            |   |  |   |            |  
|Net loss per common share - basic and fully diluted                   |  | $                  | (0.05      | ) |                   | $ | (0.07      | )    |  | $ | (0.15      | ) |  | $ | (0.22      | )
|                                                                      |  |                    |            |   |                   |   |            |      |  |   |            |   |  |   |            |  
|Weighted average common shares 
outstanding - basic and fully diluted |  |                    | 38,743,431 |   |                   |   | 28,075,099 |      |  |   | 33,986,137 |   |  |   | 25,759,629 |  





See the accompanying notes to the condensed consolidated financial statements



2



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MEDICAL CONNECTIONS HOLDINGS, INC., AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)

|                                                    |  |      |            |   |      |   |            |  
|--------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                    |  | 2009 |            |   | 2008 |  
|Cash flow from operating activities                 |  |      |            |   |      |  
|Net loss                                            |  | $    | (5,141,818 | ) |      | $ | (5,611,189 | )
|                                                    |  |      |            |   |      |   |            |  
|Adjustments to reconcile net loss to net cash       |  |      |            |   |      |   |            |  
|Depreciation and amortization                       |  |      | 76,115     |   |      |   | 46,358     |  
|Common stock issued for compensation                |  |      | 372,198    |   |      |   | 115,000    |  
|Common stock issued for intangible asset            |  |      | (271,481   | ) |      |   |          |  
|Decrease in fair value of asset held for investment |  |      |          |   |      |   | 37,432     |  
|CHANGES IN ASSETS AND LIABILITIES                   |  |      |            |   |      |   |            |  
|Accounts receivable                                 |  |      | 163,853    |   |      |   | (324,056   | )
|Security deposit                                    |  |      | 21,898     |   |      |   | (200,000   | )
|Prepaid expenses                                    |  |      | 75,148     |   |      |   | (133,951   | )
|Accounts payable and accrued expenses               |  |      | (168,382   | ) |      |   | (188,122   | )
|                                                    |  |      |            |   |      |   |            |  
|Net cash used in operating activities               |  |      | (4,872,469 | ) |      |   | (6,258,528 | )
|                                                    |  |      |            |   |      |   |            |  
|Cash flow from investing activities                 |  |      |            |   |      |   |            |  
|Acquisition of property and equipment               |  |      | (55,796    | ) |      |   | (11,107    | )
|Proceeds from sale of investment property           |  |      | 400,000    |   |      |   |          |  
|Net cash used in investing activities               |  |      | 344,204    |   |      |   | (11,107    | )
|                                                    |  |      |            |   |      |   |            |  
|Cash flow from financing activities                 |  |      |            |   |      |   |            |  
|Proceeds from issuance of common stock and warrants |  |      | 4,605,964  |   |      |   | 6,529,504  |  
|Payment on loan payable                             |  |      |          |   |      |   | (370,086   | )
|                                                    |  |      |            |   |      |   |            |  
|Net cash provided by financing activities           |  |      | 4,605,964  |   |      |   | 6,159,418  |  
|                                                    |  |      |            |   |      |   |            |  
|Net increase in cash and cash equivalents           |  |      | 77,699     |   |      |   | (110,217   | )
|                                                    |  |      |            |   |      |   |            |  
|Cash and cash equivalents at beginning of period    |  |      | 599,058    |   |      |   | 1,319,944  |  
|                                                    |  |      |            |   |      |   |            |  
|Cash and cash equivalents at end of period          |  | $    | 676,757    |   |      | $ | 1,209,730  |  
|                                                    |  |      |            |   |      |   |            |  
|Supplemental disclosure of cash flow information:   |  |      |            |   |      |   |            |  
|Cash paid during the period for:                    |  |      |            |   |      |   |            |  
|Interest                                            |  | $    | 71         |   |      | $ | 13,898     |  
|Taxes                                               |  | $    |          |   |      | $ |          |  



See the accompanying notes to the condensed consolidated financial statements



3



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MEDICAL CONNECTIONS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009



NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

Medical Connections Holdings, Inc., and subsidiaries, (the "Company") is an employment and executive search firm that provides recruiting services to its clients within the healthcare and medical industries. The Company was formed in Florida for the purpose of specializing in the recruitment and placement of healthcare professionals in a variety of employment settings.

Medical Connections Holdings, Inc. is the parent company of Medical Connections, Inc. and trades on the NASDAQ OTC B/B as a fully reporting company under the ticker symbol MCTH.

In our opinion, the accompanying condensed consolidated balance sheets and related interim statements of condensed consolidated 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 2008 Annual Report on Form 10-K. Interim results are not necessarily indicative of results for a full year.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

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

USE OF ESTIMATES

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

INTANGIBLE ASSETS

As of May 25, 2009, as part of the acquisition of Medical Staffing Direct, the Company allocated the purchase price paid for the assets of Medical Staffing Direct to the fair value of the assets purchased. The purchased intangible asset, an investor list, was recorded at acquisition cost, to be amortized on a straight-line basis over the estimated useful life of 3.0 years.

RECLASSIFICATIONS

Certain 2008 amounts were reclassified to conform to the 2009 presentation. These reclassifications had no effect on net loss for the periods presented.

ADVERTISING

The Company's policy is to expense the costs of advertising and marketing as they are incurred. Advertising expense for the nine months ended September 30, 2009 and 2008 was $276,170 and $494,229, respectively.

INCOME TAXES

The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes. The Statement requires an asset and liability approach for financial accounting and reporting of income taxes, and the recognition of deferred tax assets and liabilities for the temporary differences between the financial reporting bases and tax bases of the Company's assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled.



4



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MEDICAL CONNECTIONS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

COMMON STOCK ISSUED FOR OTHER THAN CASH

Services purchased and other transactions settled in the Company's common stock are recorded at the estimated fair value of the stock issued if that value is more readily determinable than the fair value of the consideration received.

INCOME (LOSS) PER SHARE OF COMMON STOCK

Income (Loss) per share: Basic loss per share excludes dilution and is computed by dividing the loss attributable to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the loss of the Company. Diluted loss per share is computed by dividing the loss available to common 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 nine months ended September 30, 2009 and 2008.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount reported in the balance sheets for cash and cash equivalents, accounts receivable, loans payable, lines of credit, convertible debentures and promissory notes approximate fair value because of the immediate or short-term maturity of these financial instruments.

NOTE 3 - STOCKHOLDERS' EQUITY

PREFERRED STOCK - A

As of September 30, 2009, the Company has 1,000,000 shares of Preferred Stock A authorized at $0.001 par value and86,045were issued and outstanding. Each holder of the Series A Preferred Stock may convert each share of Preferred Stock into nineteen (19) 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. The Holders of the Series A Preferred Stock are required to tender the Series A Preferred Stock Certificate to the Company for redemption prior to issuance of any shares of Common Stock. Until such shares of Series A Preferred Shares are exchanged for the Companys Common Shares, 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 of the holders of our Common Stock. Holders of the Series A Preferred Stock have no other rights or preferences. As of September 30, 2009, a total of 446,635 shares of Series A Preferred Stock have been converted into 8,486,065 shares of our Common Stock. There were 24,820 shares of Series A Preferred Stock converted into 471,580 shares of Common Stock during the nine months ended September 30, 2009.

PREFERRED STOCK - B

As of September 30, 2009, the Company has 1,000,000 shares of Preferred Stock B authorized at $0.001 par value and 1,000,000 issued and outstanding. Holders of the Series B Preferred Shares shall be entitled to ten votes per share for each Series B Preferred Share beneficially owned on all matters brought to a vote of the holders of the Common Stock.

COMMON STOCK

As of September 30, 2009, the Company has 70,000,000 shares of Common Stock authorized at $0.001 par value and 41,028,079 issued and outstanding. For the nine months ended September 30, 2009, sales of 8,003,477 unregistered shares of Common Stock were made to accredited shareholders for $4,141,846. In connection with the acquisition of Medical Staffing Direct the Company issued 1,180,354 units consisting of 1,180,354 shares of common stock and 2,360,708 warrants to purchase an additional share of common stock at $0.75 per share.

For the nine months ended September 30, 2009, the Company issued 238,854 warrants to purchase one share of Common Stock at $1.00 per share. The warrants, which expire two years after issuance, have no value based on computations using the Black-Scholes valuation model. The following assumptions were used in the model to determine the fair value of the warrants:

·

a term of 2 years, risk-free rate of 3.00%, average volatility of 45%, and dividend yield of zero.





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MEDICAL CONNECTIONS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009



NOTE 4 - STOCK OPTIONS AND WARRANTS

No stock options were issued or vested in the nine months ending September 30, 2009. At September 30, 2009, the Company had one stock based compensation plan, which is described below. The Company accounts for the fair value of its grants under this plan in accordance with FASB ASC Topic 718. Under the 2006 Stock Incentive and Compensation Plan, the Company may grant options to its employees. Under this plan, the exercise price of each option equals the market price of the Company's stock on the date of grant and an option's maximum term is 10 years. The options that were granted vest in one third increments commencing one year from the grant date with subsequent vesting at the second and third anniversary of the options grant date. The fair value of each option grant is estimated on the date of the grant using the prospective method of transition as prescribed by FASB ASC Topic 718.

A summary of the status of the Company's stock option plans as of September 30, 2009 is presented below:

Stock options activity for the nine months ended September 30, 2009:

|                                       |  |          |   |       |       | 
|-------------------------------------- |  | -------- | - | ----- | ----- | 
|                                       |  | Options  |   | Price |      
|Options outstanding January 1, 2009    |  | 200,000  |   | $     | 2.45  | 
|Options granted                        |  |        |   |       |     | 
|Options retired                        |  | (200,000 | ) |       | $2.45 | 
|Options outstanding September 30, 2009 |  |        |   | $     |     | 

There were no stock options outstanding and exercisable at September 30, 2009.

Warrant Grants

In connection with various stock sales that we have secured, we have outstanding warrants to purchase a total of 19,623,887 shares of our common stock.

|                |  |            |  |                |  |                
|--------------- |  | ---------- |  | -------------- |  | ---------------
|No. of Warrants |  | Grant Date |  | Exercise Price |  | Expiration Date
|13,606,800      |  | 2007       |  | $1.00          |  | 2009           
|3,553,359       |  | 2008       |  | $1.50          |  | 2010           
|232,854         |  | 2009       |  | $1.00          |  | 2011           
|2,360,708       |  | 2009       |  | $0.75          |  | 2011           

NOTE 5  ACQUISITION

On May 25, 2009, the Company closed an asset purchase agreement with Medical Staffing Direct (MSD), formerly a Florida based staffing company. MSD previously operated as a provider of per-diem nurse staffing for large national hospital clients. MSDs core business was conducted in the Florida and New York markets. The assets purchased include an investor list, accounts receivable, hospital contracts and industry relationships, which include several key MSD directors that will assist Medical Connections in future relationships with national clients. The Company issued 1,180,354 units consisting of one share of common stock and two warrants to purchase an additional share of common stock at $0.75 per share. The units were valued at $271,481, the fair market value of the shares and warrants on the date of acquisition. This amount was assigned to the purchased assets that had value, which was the investor list. The investor list was recorded at acquisition cost, to be amortized on a straight-line basis over the estimated useful life of 3.0 years. Amortization expense of $30,000 is included in general and administrative expense in the statement of operations for the three and nine months ended September 30, 2009.



6



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MEDICAL CONNECTIONS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009



NOTE 6 - PROVISION FOR INCOME TAXES

The Company accounts for income taxes using the liability method. At September 30, 2009 deferred tax assets consist of the following:

|                          |      |            |  
|------------------------- | ---- | ---------- | -
|                          | 2009 |           
|Deferred tax asset        | $    | 7,815,000  |  
|Less: valuation allowance |      | (7,815,000 | )
|Net deferred tax assets   | $    |          |  



As of September 30, 2009, the Company had accumulated deficits approximating $21,075,000 available to offset future taxable income through 2026. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in the future period.

NOTE 7- GOING CONCERN

The accompanying consolidated financial statements have been prepared in accordance with accounting principals generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. The Company has sustained operating losses and its revenue stream is not sufficient to fund expenses at this time. The Company has issued stock to continue to fund operations. The Company's continued existence is dependent upon its ability to generate sufficient cash flows from equity financing and product revenues. These items raise substantial doubt about the Company's ability to continue as a going concern.

In view of these matters, realization of the assets of the Company is dependent upon the Company's ability to meet its financial requirements and the success of future operations. These consolidated financial statements do not include adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.



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Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

The statements contained in this report that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements are made based upon management's current expectations and beliefs concerning future developments and their potential effects upon the Company. There can be no assurance that future developments affecting the Company will be those anticipated by management. Actual results may differ materially from those included in the forward-looking statements.

Readers are also directed to other risks and uncertainties discussed in other documents filed by the Company with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking information, whether as a result of new information, future developments or otherwise.

General

Medical Connections Inc., the Companys wholly owned subsidiary, is a national provider for medical recruitment and staffing services. Established in 2002 to satisfy the increasing need for qualified healthcare professionals, the Companys business is to identify, select and place the best allied health specialists, pharmacists, physicians, nurses and hospital management executives. The Company provides recruiting and staffing services for permanent and temporary positions with options for the clients and candidates to choose the most beneficial working arrangements.

The Company generates revenues primarily from: permanent placement hires, contract appointments and a temporary to permanent model:

·

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 ranging from 10% to 30% of the employees initial annual salary, or a negotiated fee, which is predetermined based upon medical specialty.

·

Contract Appointments: This represents temporary hires (typically, 13 week contracts) made by healthcare facilities to economically cover short staffing during periods of high-seasonal activity, vacations, leave of absences, etc. 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 include all employment overhead, as well as a surcharge for the service. The revenue from this activity comes from the commission and surcharge for the service.

·

Temporary to Permanent Model  Choices Program: This program is a shorter version of the contract appointments, which provides permanent placement hires with greater flexibility.

Potential Acquisitions: We may expand our operations through the acquisition of other medical staffing or placement agencies Acquisitions would enable us to increase revenue and to integrate the acquired companys operations into our existing business. If successful, we will be able to extend our market presence.

Target Market

·

The target market for Medical Connections is the vast array of not-for-profit and for-profit organizations, companies and healthcare institutions, as well as all medical research facilities in the United States. Other recruiting companies or individual recruiters are also an alternative market for our programs, such as split-fee agreements and franchise development.

·

Companies which are hired by the hospitals to outsource their human resource departments are a natural market for our services, and at this point represent a significant portion of the client base for placements.

·

Smaller medical recruiting companies and individual recruiters to offer them cost-effective technological solutions for their businesses, as well as split-fee arrangements.



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Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

Revenue for the period was $1,552,899, a decrease of $302,772, or 16.3%%, when compared to the $1,855,671 in revenue for the same period one year ago. The two main components of revenue are permanent placement hires, including temporary to permanent, and contract appointments. Revenue from permanent placement decreased to $307,576, or 26.7%, from the $419,990 for the third quarter 2008. The decrease in third quarter 2009 permanent placement revenue was due to the overall decline in the economy and resultant decline in nursing employment opportunities.

The revenue from contract appointments decreased to $1,245,323, or 13.3%, from the $1,435,681 in revenue one year ago. This decrease was the result of the impact that the overall economic decline has had on temporary nursing appointments in this period compared to the same period one year ago.

The cost of sales for contract appointments decreased 15.4% from $1,278,044 in 2008 to $1,081,470 in 2009. These costs represent personnel salaries, including benefits, temporary housing and travel costs. The gross profit from contract appointments increased to $163,853, (13.2% of revenue) in 2009 from $157,637 (11.0% of revenue) in 2008 due to a larger percentage of revenue being derived from higher margin contracts during the third quarter 2009.



Sales and marketing expenses were $65,439 in 2009, a decrease of $76,563 or 53.9%, from $142,002 in 2008. The decrease is due to ongoing reductions of expenses for web pages, job posting boards, and display ads in trade journals.

Recruiting salaries and costs decreased $135,575, or 19.1%, to $576,576 in 2009, primarily due to the decline in permanent placement revenue and adjustments made to recruiter commission compensation and staffing levels.

Professional and consulting fees were flat at $681,232 during the period compared, to $681,791 in 2008.

General and administrative expenses decreased $144,755, or 13.7%, to $908,272 in 2009 from $1,053,027 in 2008. The decrease is a reflection of the ongoing efforts by the Company to reduce overhead.

Other expenses (income) for the three months ended September 30, 2009 and 2008 were $166,022 and ($4,459), respectively. The Company incurred $170,330 of costs associated with its potential acquisition during the three month period ended September 30, 2009.

Net losses for the third quarter ended September 30, 2009 and September 30, 2008 were $1,924,987 and $2,006,885, respectively.

Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008

Revenue for the period was $4,637,862, a decrease of $708,218 or 13.2%, when compared to the $5,346,080 in revenue for the same period one year ago. The two main components of revenue are permanent placement hires, including temporary to permanent, and contract appointments. Revenue from permanent placement decreased to $842,550, or 42.0%, from the $1,451,948 for the nine months ended September 30, 2008. The decrease in the permanent placement revenue was due to the overall decline in the economy and resultant decline in nursing employment opportunities.

The revenue from contract appointments declined 2.5% to $3,795,312 from the $3,894,132 in revenue one year ago. This decrease was the result of the impact that the overall economic decline has had on temporary nursing appointments in the third quarter of 2009 compared to the same period one year ago.

The cost of sales for contract appointments revenue also increased 1.6% from $3,279,610 in 2008 to $3,333,511 in 2009. These costs represent personnel salaries, including benefits, temporary housing and travel costs. The gross profit from contract appointments decreased from $614,522, (15.8% of revenue) in 2008 to $461,801 (12.2% of revenue) in 2009 due to a larger percentage of revenue being derived from lower margin third-party billings during the first six months of 2009 partially offset by an improvement in gross margin due to an increase in higher margin contracts during the third quarter 2009.



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Sales and marketing expenses were $276,170 in 2009, a decrease of $218,059 or 44.1%, from $494,229 in 2008. The decrease is due to a reduction of expenses for web pages, job posting boards, and display ads in trade journals.

Recruiting salaries and costs decreased $289,450, or 14.4%, to $1,717,809 in 2009, primarily due to the decline in permanent placement revenue and adjustments to commission compensation and staffing levels.

Professional and consulting fees decreased $701,603, or 30.8%, to $1,574,855 compared to 2008 as the Company relied less on consulting services from outside companies and individuals during the first nine months of this year.

General and administrative expenses decreased $305,292 or 10.5%, to $2,598,717 in 2009 from $2,904,009 in 2008. The decrease is a reflection of the ongoing efforts by the Company to reduce overhead.

Other Expenses for the nine months ended September 30, 2009 and 2008 were $268,772 and ($4,296), respectively. The Company incurred $92,000 of costs associated with its former investment property during the first six months of the year and $170,330 in costs associated with its potential acquisition during the third quarter 2009.

Net losses for the nine months ended September 30, 2009 and September 30, 2008 were $5,141,818 and $5,611,189, respectively.

Liquidity and Capital Resources

Due to the operating losses and deficits, our independent auditors in their audit opinion have raised doubts about our ability to continue as a going concern. Despite these historical losses, management believes that it will be able to satisfy ongoing operating expenses. Management has done so to date by raising capital through the sale of the Companys Common Stock. It will continue to do so, and/or seek third party financing, until such time as revenues from operations satisfy operating expenses. There can be no assurance that a market for its stock or third party financing will be available, or if available, will be offered on terms that will not adversely impact our shareholders.

As of September 30, 2009, total current assets were $1,631,387 as compared to $1,792,689 on December 31, 2008. The change in total current assets is primarily attributable to an increase in cash of $77,699 to $676,757 compared to the December 31, 2008 balance of $599,058 and a decrease in accounts receivable of $163,853 to $854,469. The reduction in accounts receivable is primarily attributable to the decrease in revenue year-to-date. Also, total current liabilities decreased $168,382 to $270,422 when compared to the $438,804 balance as of December 31, 2008. The change is largely due to a reduction in accounts payable of $213,933.

All other assets which we have categorized as property and equipment are office furniture, equipment and software directly related to the operations of Medical Connections, Inc.

For the nine month period ended September 30, 2009, sales of 7,986,111 unregistered shares of common stock were made to accredited shareholders for $4,141,846 in new capital.

The Company currently leases office space under a sixty-three month lease commencing January 1, 2005 with a renewal option for a five-year period. Monthly payments under the current lease are $13,398, for a total of $288,243 in future minimum rental payments. Under the new lease the monthly payments will begin at be $26,078 and will increase by 3% each year. The Company is required to pay property taxes, utilities, insurance and other costs relating to the leased facilities.

In June 2008, the Company entered into a seven-year operating lease for new and larger office space. The lease required a $200,000 security deposit with an occupancy date scheduled after January 2009. The security deposit acts as guarantee for performance under the terms of the lease. Assuming no defaults, the security deposit of $200,000 shall be reduced by $50,000 after expiration of each of the third, fourth, and fifth lease year, with $50,000 remaining as security until lease termination.



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Critical Accounting Policies

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

Income (Loss) per share: basic loss per share excludes dilution and is computed by dividing the loss attributable to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the loss of the Company. Diluted loss per share is computed by dividing the loss available to common 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 nine months ended September  30, 2009 and 2008.

The preparation of financial statements in conformity with generally accepted accounting principles (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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

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 Exchange Act) and determined that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q. 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 communicated to our management 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.

Item 4t.

Controls and Procedures

The information required by Item 4t is contained in Item 4.



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PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

None

Item 1a.

Risk Factors

There has been no material changes in the risk factors associated with the Companys operations since the filing of the Companys Form 10-K which was filed with the Securities and Exchange Commission on March 31, 2009.

Item 2.

Unregistered Sales of Equity Securities

During the period ended September 30, 2009, sales of 3,409,601 unregistered shares of Common Stock were made to accredited shareholders for $1,516,840. There were conversions of 19,743 shares of Series A Preferred Stock to 375,117 shares of Common Stock during the period. The Company relied upon the exemption from registration contained in Section 4(2), as the recipient was deemed to be sophisticated with regard to an investment in the Company.

We issued 700,000 shares of our Common Stock to non-employees for services rendered, at $0.23 per share fair market value, for a total cost of $161,000. The Company relied upon the exemption from registration contained in Section 4(2), as the recipient was deemed to be sophisticated with regard to an investment in the Company.

We issued 418,252 shares of our Common Stock to a former employee for services rendered, at $0.23 per share fair market value, for a total cost of $96,198. The Company relied upon the exemption from registration contained in Section 4(2), as the recipient was deemed to be sophisticated with regard to an investment in the Company.

The securities issued in the foregoing transactions were made pursuant to exemptions from registration pursuant to either Section 4(2) or Rule 506 of Regulation D of the Securities Act.

·

we gave the purchaser the opportunity to ask questions and receive answers concerning the terms and conditions of the offering and to obtain any additional information which we possessed or could acquire without unreasonable effort or expense that is necessary to verify the accuracy of information furnished;

·

at a reasonable time prior to the conversion of the preferred shares, we advised the purchaser of the limitations on resale in the manner contained in Rule 502(d)2; and

·

neither we nor any person acting on our behalf sold the securities by any form of general solicitation or general advertising;

Item 3.

Defaults upon Senior Securities

None

Item 4.

Submission of Matters to a Vote of Security Holders

None

Item 5.

Other Information

None



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Item 6.

Exhibits

|       |  |                                                                                                                                                                                                                                                                                                                  
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  | Exhibit Name and/or Identification of Exhibit                                                                                                                                                                                                                                                                    
|3.1    |  | Articles of Incorporation filed with the Florida Secretary of State on May 11, 1999 (incorporated by reference to Exhibit 3.1 of our registration statement on Form SB-2 filed with the SEC on October 29, 2001).                                                                                                
|3.2    |  | Amendment to Articles of Incorporation filed with the Florida Secretary of State on June 25, 1999 (incorporated by reference to Exhibit 3.2 of our registration statement on Form SB-2 filed with the SEC on October 29, 2001).                                                                                  
|3.3    |  | Articles of Amendment to Articles of Incorporation filed with the Florida Secretary of State on August 10, 1999 (incorporated by reference to Exhibit 3.3 of our registration statement on Form SB-2 filed with the SEC on October 29, 2001).                                                                    
|3.4    |  | Articles of Share Exchange of Webb Mortgage Depot, Inc. with Webb Mortgage Services Corporation and Webb Mortgage Corp. filed with the Florida Secretary of State on March 13, 2000 (incorporated by reference to Exhibit 3.4 of our registration statement on Form SB-2 filed with the SEC on October 29, 2001.)
|3.5    |  | Bylaws (incorporated by reference to Exhibit 3.5 of our registration statement on Form SB-2 filed with the SEC on October 29, 2001).                                                                                                                                                                             
|3.6    |  | Amendment to the Articles of Incorporation filed with the Florida Secretary of State (incorporated by reference to Form 8-K filed on December 29, 2005.)                                                                                                                                                         
|3.7    |  | Amendment to the Articles of Incorporation filed with the Florida Secretary of State on March 31, 2008 (incorporated by reference to Form 10-KSB previously filed with the SEC on April 15, 2008.)                                                                                                               
|3.8    |  | Code of Ethics (incorporated by reference to Form 10-KSB previously filed with the SEC on April 15, 2008.)                                                                                                                                                                                                       
|4.1    |  | Form of Convertible Debenture (incorporated by reference to Form 10-KSB previously filed with the SEC on April 15, 2008.)                                                                                                                                                                                        
|4.2    |  | Form of Warrant (incorporated by reference to Form 10-KSB previously filed with the SEC on April 15, 2008.)                                                                                                                                                                                                      
|10.1   |  | Share for Share Exchange Agreement between the Company and Medical Connections, Inc. filed as an exhibit on Schedule A to the Companys Definitive Proxy statement filed with the Securities and Exchange Commission on October 7, 2005.                                                                         
|10.2   |  | Employment Agreement between the Company and Anthony Nicolosi (incorporated by reference to Form 10-KSB previously filed with the SEC on April 15, 2008.)                                                                                                                                                        
|10.3   |  | Employment Agreement between the Company and Joseph Azzata (incorporated by reference to Form 10-KSB previously filed with the SEC on April 15, 2008.)                                                                                                                                                           
|10.4   |  | Office Lease, BRE/BOCA Corporate Center, LLC. and Medical Connections, Inc., June 22, 2008 (incorporated by reference to Form 10-Q previously filed with the SEC on August 13, 2008.)                                                                                                                            
|10.5   |  | Buy-Sell Agreement for the sale of the property located in North Carolina (incorporated by reference to Form 10-Q previously filed with the SEC on May 15, 2009.)                                                                                                                                                
|31.1*  |  | Certificate of the Chief Executive Officer pursuant Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                
|31.2*  |  | Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                 
|32.1*  |  | Certificate of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                             
|32.2*  |  | Certificate of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                             



*

Filed Herewith



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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: November 14, 2009 |  |                                    |                                     
|                        |  | By:                                | /s/ JOSEPH AZZATA                   
|                        |  |                                    | Joseph Azzata,                      
|                        |  |                                    | Chief Executive Officer and Director



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.

|    |                                      |  |                        
|--- | ------------------------------------ |  | -----------------------
|By: | /s/ JOSEPH AZZATA                    |  | Date: November 14, 2009
|    | Joseph Azzata,                       |  |                        
|    | Chief Executive Officer and Director |  |                        
|    |                                      |  |                        
|    | /s/ BRIAN NEILL                      |  | Date: November 14, 2009
|    | Brian Neill,                         |  |                        
|    | Chief Financial Officer              |  |                        





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