UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 Form
10-K
 
 (Mark
One)
 
 x       
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
 For the
fiscal year ended December 31, 2008
 
 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 number: 333-144596
 
 Medical
      Design Studios, Inc.(Exact
      Name of Registrant as Specified in its
Charter)
 
 Nevada
                  
                  26-0482524(State
      or Other Jurisdiction of Incorporation or
                    Organization)
                  
                  (I.R.S.
      Employer
                    Identification
      No.)7231
      South Rome StreetAurora,
      Colorado
                  
                  80016(Address
      of Principal Executive Offices)
                  
                  (Zip
      Code)
 
 Registrant’s
telephone number, including area code:  303-956-7197
 
 Securities
registered pursuant to Section 12(b) of the Act:
 None
 
 Securities
registered pursuant to Section 12(g) of the Act:
 None
  Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
 Yes  ̈  No
x
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
 Yes  ̈  No
x
  
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
 Yes x  No
 ̈
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
 Yes x  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.  (Check one):
 
 Large accelerated
filer   ̈                                                                                   Accelerated
filer   ̈
 
 Non-accelerated filer   ̈                                                                                     Smaller
reporting company  x
 (Do not check if a smaller reporting
company)
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
 Yes  ̈  No
x
 
 The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant, as of June 30, 2008, was $39,200 based on the
sale price of the shares in a private resale transaction completed on March 14,
2008, of $.07 per share.  The shares of our company did not trade
publicly in 2008.
 
 Number of
shares outstanding of the registrant’s common stock as of March 30, 2009:
7,142,858 shares.
 
 DOCUMENTS
INCORPORATED BY REFERENCE
 
 None
  
 2
  PART
I
 
 Note
Regarding Forward-Looking Statements
 
 Certain
matters discussed in this annual report on Form 10-K are forward-looking
statements.  Such forward-looking statements contained in this annual
report involve risks and uncertainties, including statements as to:
 
 ·
              our
      future operating results,
  ·
              our
      business prospects,
  ·
              our
      contractual arrangements and relationships with third
    parties,
  ·
              the
      dependence of our future success on the general
  economy,
  ·
              our
      possible financings, and
  ·
              the
      adequacy of our cash resources and working
  capital.
 
 These
forward-looking statements can generally be identified as such because the
context of the statement will include words such as we “believe," “anticipate,”
“expect,” “estimate” or words of similar meaning.  Similarly, statements
that describe our future plans, objectives or goals are also forward-looking
statements.   Such forward-looking statements are subject to certain
risks and uncertainties which are described in close proximity to such
statements and which could cause actual results to differ materially from those
anticipated as of the date of this annual report on Form
10-K.  Shareholders, potential investors and other readers are urged
to consider these factors in evaluating the forward-looking statements and are
cautioned not to place undue reliance on such forward-looking
statements.  The forward-looking statements included herein are only
made as of the date of this annual report and we undertake no obligation to
publicly update such forward-looking statements to reflect subsequent events or
circumstances.
 
 We have
obtained a trading symbol for our common stock so that the shares may be quoted
on the OTC Bulletin Board (“OTCBB”). However, no public trades of our common
stock have occurred since April 30, 2007. Our current trading symbol is
MDST.
 
 Item 1.  Business
 
 Overview
 
 We were
founded as an unincorporated business in January 2004 and became a C corporation
in the State of Nevada on February 1, 2005.  As of March 30, 2009, we
had one employee, Justin N. Craig, our founder and President. Mr. Craig devotes
his full time to our business.
 
 We are a
digital medical illustrator and animator providing digital displays and
enhancements to companies that assist attorneys to prepare or enhance exhibits
for trials involving medical issues. Approximately 85% of our work is ultimately
used by plaintiff counsel and 15% is used by defense counsel.
 
 A digital
medical illustrator is a professional who interprets and creates visual material
to help record and disseminate medical, biological and related knowledge.
Medical illustrators create medical illustrations using traditional and digital
techniques which can appear in medical textbooks, medical advertisements,
professional journals, instructional videotapes and films, animations,
computer-assisted learning programs, exhibits, lecture presentations, general
magazines and television.  We specialize in creating and enhancing
digital images that will be used as exhibits in legal trials. Specifically, we
create demonstrative exhibits and animations that are designed to clearly and
concisely communicate the testimony of expert medical witnesses. These exhibits
are developed in a variety of media (including illustrations, diagrams, computer
animations and 3D models) best suited for the type of information that needs to
be conveyed.
  3
 
 Recent
Developments
 
 On March
14, 2008, Justin N. Craig, our President and Chief Executive Officer, privately
sold 9,140,000 shares of our common stock, constituting 91.4% of our outstanding
shares and all of the shares owned beneficially by him, to Vision Opportunity
Master Fund, Ltd. Certain other of our stockholders also sold shares of our
common stock to Vision Opportunity Master Fund. As a result of these
privately-negotiated sales, a change in control occurred from Mr. Craig to
Vision Opportunity Master Fund.
 
 On March
17, 2008, pursuant to prior approvals by our directors and stockholders owning
in excess of a majority of the voting power of our outstanding shares, we
effected a 1-for-2 reverse stock split of our outstanding shares of common
stock.
  Following
the reverse stock split, we had 5,000,000 shares of common stock outstanding. Of
such shares, after giving effect to the privately-negotiated transactions
described above, Vision Opportunity Master Fund owns 4,720,000 shares of our
common stock, or 94.4% of our outstanding shares. Vision Opportunity Master Fund
purchased these shares for a total of approximately $670,000 in cash, inclusive
of related acquisition costs.
 
 Effective
November 21, 2008, we effected a 5-for-1 forward stock split of our outstanding
common stock in the form of a stock distribution.  As a result of the
forward stock split, each holder of record of a certificate for one or more
shares of common stock as of November 21, 2008, received a certificate
representing four additional shares of common stock for every one share of
common stock held by that holder.  We had 5,000,000 shares outstanding
prior to the forward stock split and, as a result of the forward stock split, we
had 25,000,000 shares outstanding following the forward stock
split.
 
 On March 30, 2009, pursuant to prior
approval by our directors and majority stockholder, we effected a 1-for-3.5
reverse stock split of our outstanding shares of common stock, bringing our
total number of outstanding shares of common stock to 7,142,858
shares.
 
 Products
 
 Our
principal output is:
 
 ·
              Image enhancements are
      a dramatic and realistic way of clarifying organic tissues on any type of
      radiographic film. MRIs, CAT scans, myleograms, arteriograms, ultrasound
      images and mammograms, among others, can be enhanced with color to point
      out pertinent structures on the films, making them easier for laypersons
      on a jury to comprehend. Disease processes such as inflammatory arthritis,
      arterial aneurysms, metastasizing cancer and deep vein thrombosis can be
      emphasized as well. This same technique can also be applied to
      radiographic video images such as cardiac catheterizations, ultrasounds
      and arteriorgrams.  These color-enhanced films also make it
      easier for expert witnesses and counsel to describe and highlight key
      points in their testimony or
argument.
  4
 
 ·
              3D Animation software
      is utilized to produce still frames of complex information and products.
      These images can be incorporated into settlement packages, timelines, or
      printed as large trial exhibits.
 
 ·
              Real-time Animation is
      used in certain instances in which issues of a case deal with time,
      complex element relationships or motion, because real-time animation may
      very well be the best medium to accurately demonstrate the facts of these
      types of cases to juries.
 
 We use a
standard price list for much of our work. We also negotiate prices for very
specialized projects. Our typical price list follows:
 Description
      of Visuals
                                              
                                              Sample
                                              
                                              Price2D
      MRI/CT Colorization
                                                
                                                ·Image 01:CTs, MRIs,
      Ultrasounds (and X-rays if the 3D option is not preferred) are colorized
      in such a way that the original film is still seen (as well as included on
      the exhibit in B&W). Fractures and other viewable features are
      illustrated in for best understanding of the radiographic
      film.
                                                Sample
      image = $400
                                              
                                              
                                              
                                              $200/MRI
      or CT3D
      X-ray Colorization
                                                
                                                ·Image
      01: X-rays converted to a 3D illustration, showing fracture
      ends, malformations, degenerative bone loss, internal and external
      hardware.
                                                
                                                ·Hardware
      Design: Hardware cost is in addition to the 3D X-ray. Prices vary
      for the amount of hardware modeled, ranging from 1⁄2 hour to 3hr design time
      at $75/hr
                                                Sample
      image = $675
                                              
                                              
                                              
                                              $300/X-ray
                                                
                                                $75/hr
      for
hardware
  5
  Medical
      Illustration – Custom
                  
                  ·Image
      01: Custom illustration is created to specifically match the
      details of a case, and anytime that a library illustration is not
      available.
                  
                  ·Image
      02: Subsequent images in a series that are based off a custom
      illustration are then treated as modified library (discounted)
      images.
                  Sample
      image = $700
                
                
                
                $300/image
      (custom)Medical
      Illustration – Client Likeness
                  
                  ·Image
      01: If the illustration likeness is to match provided
      photographs of the client, the usual custom illustration is increased to
      reflect the addition work.
                  Sample
      image = $400
                
                
                
                $400/
      client likenessMedical
        Illustration – Library
                  
                  ·Image
      01: Exhibits already created and not needing alterations are
      sold as library exhibits (a library exhibit is copyrighted and usable only
      for the case for which it is purchased).  Some custom illustrated
      series are partly billed as library if they are based off a previous image
      for the same job.
                  
                  ·Image 02:Library
      exhibits needing changes can still be purchased with design time added on
      for the changes.
                  Sample
      image = $350
                
                
                
                $150/
      library image
                  
                  $75/hr
      on alterations
  6
  3D/2D
      Animation
                  
                  ·Animation: All animation is begun with a written storyboard first, then
      progresses to a visual storyboard, which is approved before animation is
      begun.  A cost breakdown of the projected price (ranging from
      $50-$75/hr depending on 2D or 3D animation, illustrations included,
      rendering time, etc.) Additions and revisions beyond the scope of the
      original quote are at an additional cost.
                
                
                
                $50-$75/hr
      for 2D or 3D animation
  For the
year ended December 31, 2008, two unrelated customers, Legal Wizard (60.0%)
and Trial Exhibits, Inc. (10.51%) comprised 70.51% of total
revenues.  For the year ended December 31, 2007, four unrelated
customers (High Impact Litigation (24.81%), The Visual Advantage (23.41%), Legal
Wizard (13.29%) and Trial Exhibits, Inc. (22.54%)) comprised 84.05% of total
revenues. This trend of relying on a very limited number of customers is likely
to continue for the foreseeable future.
 
 Our
customers are almost always companies that assist attorneys to prepare or
enhance a wide range of exhibits for trials. We perform the digital medical
imaging that is needed by these companies. There are a limited number of these
companies. Four of them make up our principal client base, and an additional
four are smaller clients. The loss of business from a significant client or our
failure to continue to obtain new business to replace completed or canceled
projects would have a material adverse effect on our business and
revenues.
 
 Our
images are approved by the expert witness(es) who will use them in their
testimony  and by counsel. We do not release images that are not acceptable
to and approved by the expert witness.
 
 Competition
 
 Mr. Craig
is a member of the Association of Medical Illustrators. We believe that this
Association has approximately 1,000 members, although all members are not
competitors. Medical illustrators create medical illustrations using traditional
and digital techniques which can appear in medical textbooks, medical
advertisements, professional journals, instructional videotapes and films,
animations, computer-assisted learning programs, exhibits, lecture
presentations, general magazines and television. We do not know how many
illustrators perform in the same market niche as do we.
 
 We
compete based on quality and speed of service combined with price. It is
important that counsel is successful in cases in which our illustrations are
used. If counsel does not believe that our products are helping their cases,
they will change the company that assists in preparing their litigation
exhibits.
 
 No
assurances can be given that our competitive strategy will be
successful.
  7
 
 Intellectual
Property
 
 We have
no patents or trademarks.
 
 Employees
 
 As of
March 30, 2009, we had one employee, Justin N. Craig, our founder and President.
Mr. Craig devotes his full time to our business. There are no written employment
contracts or agreements.
 
 Item
1A.  Risk Factors
 
 Risks
Related to our Business
 
 We
have limited financial resources which may make it more difficult for us to
raise capital or other financing. Absent financial resources we will be unable
to undertake programs designed to expand our business.
 
 We have
limited financial resources and has not established a source of equity or debt
financing. In addition, we had negative working capital ($32,230) at December
31, 2008.  If we are unable to generate additional revenue or obtain
financing or if the financing we do obtain is insufficient to cover any
operating losses we may incur, we may have to substantially curtail our
operations.
 
 We
are and will continue to be completely dependent on the services of our founder
and President, Justin N. Craig, the loss of whose services may cause our
business operations to cease, and we will need to engage and retain qualified
employees and consultants to further implement our strategy.
 
 Our
operations and business strategy are completely dependent upon the knowledge and
business contacts of Justin N. Craig, our President, Chief Executive Officer and
Chief Financial Officer.  He is under no contractual obligation to remain
employed by us.  If he should choose to leave us for any reason before we
have hired additional personnel, our operations may fail.  Even if we are
able to find additional personnel, it is uncertain whether we could find someone
who could develop our business along the lines described in this annual report.
We will fail without Mr. Craig or an appropriate replacement(s).
 
 We intend
to acquire key-man life insurance on the life of Mr. Craig naming us as the
beneficiary when and if we obtain the resources to do so and Mr. Craig remains
insurable. We have not yet procured such insurance, and there is no guarantee
that we will be able to obtain such insurance in the future.  Accordingly,
it is important that we are able to attract, motivate and retain highly
qualified and talented personnel and independent contractors.
 
 Justin
N. Craig, also our chief financial officer, has no meaningful accounting or
financial reporting education or experience and, accordingly, our ability to
meet Exchange Act reporting requirements on a timely basis will be dependent to
a significant degree upon others.
 
 Justin N.
Craig has no meaningful financial reporting education or experience. He is
heavily dependent on advisors and consultants. As such, there is risk about our
ability to comply with all financial reporting requirements accurately and on a
timely basis.
  8
 
 We
depend on a small number of industries and clients for all of our business, and
the loss of one such significant client could cause revenues to drop quickly and
unexpectedly.
 
 For the
year ended December 31, 2008, two unrelated customers, Legal Wizard (60.0%) and
Trial Exhibits, Inc. (10.51%) comprised 70.51% of total revenues.  For
the year ended December 31, 2007, four unrelated customers (High Impact
Litigation (24.81%), The Visual Advantage (23.41%), Legal Wizard (13.29%) and
Trial Exhibits, Inc. (22.54%)) comprised 84.05% of total revenues. This trend of
relying on a very limited number of customers is likely to continue for the
foreseeable future.
 
 Our
customers are companies that assist attorneys to prepare or enhance exhibits for
trials involving medical issues. There are a limited number of these companies.
Four of them make up our principal client base, and an additional four are
smaller clients. The loss of business from a significant client or our failure
to continue to obtain new business to replace completed or canceled projects
would have a material adverse effect on our business and revenues.
 
 Changes
in outsourcing trends could adversely affect our operating results and growth
rate.
 
 The
practice of companies that assist counsel to prepare or enhance exhibits for use
in trials has been to engage outside organizations like us to help complete the
projects. This practice has grown in the last decade, and we have benefited from
this trend. However, if this trend changes and companies in these industries
were to perform a greater percentage of projects with their own employees or
seek lower cost services outside of the United States, our business could be
materially adversely affected.
  We
are subject to the periodic reporting requirements of the Securities
Exchange Act of 1934, which requires us to incur audit fees and legal fees in
connection with the preparation of such reports. These additional costs will
reduce or eliminate our future ability to earn a profit.
 
 We are
required to file periodic reports with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934 and the rules and regulations
promulgated thereunder. In order to comply with these requirements, our
independent registered auditors must review our financial statements on a
quarterly basis and audit our financial statements on an annual basis. Moreover,
our legal counsel must review and assist in the preparation of such reports. The
costs charged by these professionals for those services cannot be accurately
predicted at this time because factors such as the number and type of
transactions that we engage in and the complexity of our reports cannot be
determined at this time and will have a major affect on the amount of time to be
spent by our auditors and attorneys. However, the incurrence of such costs will
obviously be an expense to our operations and thus have a negative effect on our
ability to meet our overhead requirements and earn a profit. We may be exposed
to potential risks resulting from new requirements under Section 404 of the
Sarbanes-Oxley Act of 2002. If we cannot provide reliable financial reports or
prevent fraud, our business and operating results could be harmed, investors
could lose confidence in our reported financial information, and the trading
price of our common stock, if a market ever develops, could drop
significantly.
 
 Pursuant
to Section 404 of the Sarbanes-Oxley Act of 2002, we will be required,
beginning with our fiscal year ending December 31, 2008, to include in our
annual report our assessment of the effectiveness of our internal control over
financial reporting as of the end of fiscal 2008. Furthermore, our independent
registered public accounting firm will be required to attest to whether our
assessment of the effectiveness of our internal control over financial reporting
is fairly stated in all material respects and separately report on whether it
believes we have maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2009. We have not yet
completed our assessment of the effectiveness of our internal control over
financial reporting. We expect to incur additional expenses and diversion of
management’s time as a result of performing the system and process evaluation,
testing and remediation required in order to comply with the management
certification and auditor attestation requirements.
  9
  We do not
have a sufficient number of employees to segregate responsibilities and may be
unable to afford increasing our staff or engaging outside consultants or
professionals to overcome our lack of employees. During the course of our
testing, we may identify other deficiencies that we may not be able to remediate
in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance
with the requirements of Section 404. In addition, if we fail to achieve and
maintain the adequacy of our internal controls, as such standards are modified,
supplemented or amended from time to time, we may not be able to ensure that we
can conclude on an ongoing basis that we have effective internal controls over
financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act.
Moreover, effective internal controls, particularly those related to revenue
recognition, are necessary for us to produce reliable financial reports and are
important to help prevent financial fraud. If we cannot provide reliable
financial reports or prevent fraud, our business and operating results would be
harmed, investors could lose confidence in our reported financial information,
and the trading price of our common stock, if a market ever develops, could drop
significantly.
 
 Having
only two directors limits our ability to establish effective independent
corporate governance procedures and increases the control of our
president.
 
 We have
only two directors, one of which is our President.  Accordingly, we
cannot establish board committees comprised of independent members to oversee
functions like compensation or audit issues. In addition, a tie vote of board
members is decided in favor of the chairman, which gives him significant control
over all corporate issues.
 
 Until we
have a larger board of directors that may include some independent members, if
ever, there will be limited oversight of our president’s decisions and
activities and little ability for minority shareholders to challenge or reverse
those activities and decisions, even if they are not in the best interests of
minority shareholders.
 
 Risks
Related to Our Common Stock
 
 Shareholders
may be diluted significantly through our efforts to obtain financing and satisfy
obligations through issuance of additional shares of our common
stock.
 
 We have
no committed source of financing. Wherever possible, our board of directors will
attempt to use non-cash consideration to satisfy obligations. In many instances,
we believe that the non-cash consideration will consist of restricted shares of
our common stock. Our board of directors has authority, without action or vote
of the shareholders, to issue all or part of the authorized but unissued shares
of common stock. In addition, if a trading market develops for our common stock,
we may attempt to raise capital by selling shares of our common stock, possibly
at a discount to market.
 
 We also
believe that the potential of issuing restricted shares of our common stock to
vendors or others who may be in a position to refer business or customers to us
would enable us to operate and expand our business more
effectively.  We will also consider attempting to satisfy vendor
obligations through the issuance of shares.
  10
 
 The
foregoing actions will result in dilution of the ownership interests of existing
shareholders, may further dilute common stock book value, and that dilution may
be material. If the shares distributed to vendors or others are sold into any
trading market that develops, the impact may be to cause share prices to
decrease materially.  Alternatively, we may incur significant expenses that
contractors/vendors will not be willing to accept shares of our stock in lieu of
cash payment.  Such issuances may also serve to enhance existing
management’s ability to maintain control of us because the shares may be issued
to parties or entities committed to supporting existing management.
 
 Our
articles of incorporation provide for indemnification of officers and directors
at our expense and limit their liability which may result in a major cost to us
and hurt the interests of our shareholders because corporate resources may be
expended for the benefit of officers and/or directors.
 
 Our
articles of incorporation and applicable Nevada law provide for the
indemnification of our directors, officers, employees, and agents, under certain
circumstances, against attorney's fees and other expenses incurred by them in
any litigation to which they become a party arising from their association with
or activities on our behalf. We will also bear the expenses of such litigation
for any of our directors, officers, employees, or agents, upon such person's
written promise to repay us therefor if it is ultimately determined that any
such person shall not have been entitled to indemnification. This
indemnification policy could result in substantial expenditures by us which we
will be unable to recoup.
 
 We have
been advised that, in the opinion of the SEC, indemnification for liabilities
arising under federal securities laws is against public policy as expressed in
the Securities Act of 1933 and is, therefore, unenforceable.  In the event
that a claim for indemnification for liabilities arising under federal
securities laws, other than the payment by us of expenses incurred or paid by a
director, officer or controlling person in the successful defense of any action,
suit or proceeding, is asserted by a director, officer or controlling person in
connection with the securities being registered, we will (unless in the opinion
of our counsel, the matter has been settled by controlling precedent) submit to
a court of appropriate jurisdiction, the question whether indemnification by us
is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue. The legal process relating to this
matter if it were to occur is likely to be very costly and may result in us
receiving negative publicity, either of which factors is are likely to
materially reduce the market and price for our shares, if such a market ever
develops.
 
 Currently,
there is no public market for our securities, and there can be no assurances
that any public market will ever develop or that our common stock will be quoted
for trading and, even if quoted, it is likely to be subject to significant price
fluctuations.
 
 We have a
trading symbol for our common stock which permits our shares to be quoted on the
OTCBB. However, no public trades of our shares have occurred since April 30,
2007, and there is currently no public market whatsoever for our securities.
There can be no assurances as to whether:
 
 ·
              any
      market for our shares will develop,
  ·
              the
      prices at which our common stock will trade,
or
  ·
              the
      extent to which investor interest in us will lead to the development of an
      active, liquid trading market.  Active trading markets generally
      result in lower price volatility and more efficient execution of buy and
      sell orders for investors.
  11
 
 In
addition, our common stock is unlikely to be followed by any market analysts,
and there may be few institutions acting as market makers for our common stock.
Either of these factors could adversely affect the liquidity and trading price
of our common stock. Until our common stock is fully distributed and an orderly
market develops in our common stock, if ever, the price at which it trades is
likely to fluctuate significantly. Prices for our common stock will be
determined in the marketplace and may be influenced by many factors, including
the depth and liquidity of the market for shares of our common stock,
developments affecting our business, including the impact of the factors
referred to elsewhere in these Risk Factors, investor perception of us and
general economic and market conditions.  No assurances can be given that an
orderly or liquid market will ever develop for the shares of our common
stock.
 
 Any
market that develops in shares of our common stock will be subject to the penny
stock regulations and restrictions which will create a lack of liquidity and
make trading difficult or impossible.
 
 The
trading of our securities, if any, will be in the over-the-counter market which
is commonly referred to as the OTCBB as maintained by Finra.  As a
result, an investor may find it difficult to dispose of, or to obtain accurate
quotations as to the price of, our securities.
 
 Rule
3a51-1 of the Securities Exchange Act of 1934 establishes the definition of a
"penny stock," for purposes relevant to us, as any equity security that has a
minimum bid price of less than $4.00 per share or with an exercise price of less
than $4.00 per share, subject to a limited number of exceptions which are not
available to us. It is likely that our shares will be considered to be penny
stock for the immediately foreseeable future. This classification severely and
adversely affects any market liquidity for our common stock.
 
 For any
transaction involving a penny stock, unless exempt, the penny stock rules
require that a broker or dealer approve a person's account for transactions in
penny stock and the broker or dealer receive from the investor a written
agreement to the transaction setting forth the identity and quantity of the
penny stock to be purchased.  In order to approve a person's account for
transactions in penny stock, the broker or dealer must obtain financial
information and investment experience and objectives of the person and make a
reasonable determination that the transactions in penny stock are suitable for
that person and that that person has sufficient knowledge and experience in
financial matters to be capable of evaluating the risks of transactions in penny
stock.
 
 The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prepared by the SEC relating to the penny stock market,
which, in highlight form, sets forth:
 
 ·
              the
      basis on which the broker or dealer made the suitability determination,
      and
 
 ·
              that
      the broker or dealer received a signed, written agreement from the
      investor prior to the transaction.
 
 Disclosure
also has to be made about the risks of investing in penny stock in both public
offerings and in secondary trading and commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stock.
  12
 
 Because
of these regulations, broker-dealers may not wish to engage in the
above-referenced necessary paperwork and disclosures and/or may encounter
difficulties in their attempt to sell shares of our common stock, which may
affect the ability of selling shareholders or other holders to sell their shares
in any secondary market and have the effect of reducing the level of trading
activity in any secondary market. These additional sales practice and disclosure
requirements could impede the sale of our securities, if and when our securities
become publicly traded. In addition, the liquidity for our securities may
decrease, with a corresponding decrease in the price of our securities. Our
shares, in all probability, will be subject to such penny stock rules for the
foreseeable future and our shareholders will, in all likelihood, find it
difficult to sell their securities.
 
 The
market for penny stock has experienced numerous frauds and abuses which could
adversely impact investors in our stock.
 
 We
believe that the market for penny stock has suffered from patterns of fraud and
abuse. Such patterns include:
 
 ·
              Control
      of the market for the security by one or a few broker-dealers that are
      often related to the promoter or
issuer,
  ·
              Manipulation
      of prices through prearranged matching of purchases and sales and false
      and misleading press releases,
  ·
              “Boiler
      room" practices involving high pressure sales tactics and unrealistic
      price projections by inexperienced sales
  persons,
  ·
              Excessive
      and undisclosed bid-ask differentials and markups by selling
      broker-dealers, and
  ·
              Wholesale
      dumping of the same securities by promoters and broker-dealers after
      prices have been manipulated to a desired level, along with the inevitable
      collapse of those prices with consequent investor
  losses.
  We
believe that many of these abuses have occurred with respect to the promotion of
lower-priced stock companies that lacked experienced management, adequate
financial resources, an adequate business plan and/or marketable and successful
business or product.
 
 Our
board of directors has the authority, without stockholder approval, to issue
preferred stock with terms that may not be beneficial to common stockholders and
with the ability to affect adversely stockholder voting power and perpetuate
their control over us.
 
 Our
articles of incorporation allow us to issue shares of preferred stock without
any vote or further action by our stockholders. Our board of directors has the
authority to fix and determine the relative rights and preferences of preferred
stock. Our board of directors also has the authority to issue preferred stock
without further stockholder approval, including large blocks of preferred stock.
As a result, our board of directors could authorize the issuance of a series of
preferred stock that would grant to holders the preferred right to our assets
upon liquidation, the right to receive dividend payments before dividends are
distributed to the holders of common stock and the right to the redemption of
the shares, together with a premium, prior to the redemption of our common
stock.
  13
 
 The
ability of our President to control our business may limit or eliminate minority
shareholders’ ability to influence corporate affairs.
 
 Our
President is currently in a position to continue to elect our board of
directors, decide all matters requiring stockholder approval and determine our
policies. The interests of our president may differ from the interests of other
shareholders with respect to the issuance of shares, business transactions with
or sales to other companies, selection of officers and directors and other
business decisions. The minority shareholders would have no way of overriding
decisions made by our president. This level of control may also have an adverse
impact on the market value of our shares because our president may institute or
undertake transactions, policies or programs that result in losses, may not take
any steps to increase our visibility in the financial community and / or may sell sufficient
numbers of shares to significantly decrease our price per share.
 
 We
do not expect to pay dividends in the foreseeable future
 
 We have
never paid any dividends on our common stock. We do not expect to pay cash
dividends on our common stock at any time in the foreseeable future. The future
payment of dividends directly depends upon our future earnings, capital
requirements, financial requirements and other factors that our board of
directors will consider. Since we do not anticipate paying cash dividends on our
common stock, return on your investment, if any, will depend solely on an
increase, if any, in the market value of our common stock.
 
 Because
we are not subject to compliance with rules requiring the adoption of certain
corporate governance measures, our stockholders have limited protections against
interested director transactions, conflicts of interest and similar
matters.
 
 The
Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the
SEC, the New York Stock Exchange and the Nasdaq Stock Market, as a result of
Sarbanes-Oxley, require the implementation of various measures relating to
corporate governance. These measures are designed to enhance the integrity of
corporate management and the securities markets and apply to securities which
are listed on those exchanges or the Nasdaq Stock Market. Because we are not
presently required to comply with many of the corporate governance provisions
and because we chose to avoid incurring the substantial additional costs
associated with such compliance any sooner than legally necessary, we have not
yet adopted these measures.
 
 Because
none of our directors are independent directors, we do not currently have
independent audit or compensation committees. As a result, these directors have
the ability, among other things, to determine their own level of compensation.
Until we comply with such corporate governance measures, regardless of whether
such compliance is required, the absence of such standards of corporate
governance may leave our stockholders without protections against interested
director transactions, conflicts of interest and similar matters and investors
may be reluctant to provide us with funds necessary to expand our operations. We
intend to comply with all corporate governance measures relating to director
independence as, if and when required.
 
 For all
of the foregoing reasons and others set forth herein, an investment in our
securities involves a high degree of risk.  Any person considering an
investment in such securities should be aware of these and other risk factors
set forth in this report.
  14
 
 Item
1B.  Unresolved Staff Comments
 
 None
 
 Item 2.  Properties
 
 Our
office and mailing address is 7231 South Rome Street, Aurora, Colorado 80016,
which is provided to us by our President and serves as our principal executive
offices. We paid rent of $4,800 in each of 2008 and 2007 for use of these
facilities. There is no written lease agreement.
 
 Item 3.  Legal Proceedings
 
 We are
not party to any pending or, to our knowledge, threatened litigation of any
type.
 
 Item 4.  Submission of Matters to a Vote of
Security Holders
 
 No
matters were submitted to a vote of security holders during the fourth quarter
of 2008.
  15




PART
II





Item 5.  Market for Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities





We became
subject to Securities Exchange Act reporting requirements in August 2007. There
is no established current public market for our shares of common stock.  A
symbol was assigned for our securities so that our securities may be quoted for
trading on the OTCBB under MDST.  No public trades have occurred since
April 30, 2007.  There can be no assurance that a liquid market for
our securities will ever develop. Transfer of our common stock may also be
restricted under the securities or blue sky laws of various states and foreign
jurisdictions. Consequently, investors may not be able to liquidate their
investments and should be prepared to hold the common stock for an indefinite
period of time.





We have
never paid any cash dividends on shares of our common stock and do not
anticipate that we will pay dividends in the foreseeable future. We intend to
apply any earnings to fund the development of our business. The purchase of
shares of common stock is inappropriate for investors seeking current or near
term income.





We have
never repurchased any of our equity securities.





Quoting
and Trading of our Common Stock





There
is no established trading market for our common stock.  A symbol was
assigned for our securities so that our securities may be quoted for trading on
the OTCBB under symbol MDST.  Until our common stock is fully
distributed and an orderly market develops, if ever, the price at which it
trades is likely to fluctuate significantly.  Prices for our common stock
will be determined in the marketplace and may be influenced by many factors,
including the depth and liquidity of the market for our shares of common stock,
developments affecting our business generally, including the impact of the
factors referred to in "Risk Factors," investor perception and general economic
and market conditions. No assurance can be given that an orderly or liquid
market will ever develop for the shares of common stock.





General
Market Risks





There is
no established public market for our common stock, and there can be no assurance
that any established market will develop in the foreseeable future.
 Transfer of our common stock may also be restricted under the securities
or securities regulations laws promulgated by various foreign jurisdictions or
states, commonly referred to as “blue sky” laws.  Absent compliance with
such individual state laws, our common stock may not be traded in such
jurisdictions.  Consequently, investors may not be able to liquidate their
investments and should be prepared to hold the common stock for an indefinite
period of time.





The
market price for our common stock is likely to be highly volatile and subject to
wide fluctuations in response to factors, many of which are beyond our control,
including the following:




·
            actual
      or anticipated variations in quarterly operating
  results,




·
            announcements
      by our competitors of significant acquisitions, strategic partnerships,
      joint ventures or capital
commitments,




·
            additions
      or departures of key personnel,




·
            sales
      or issuances of additional shares of common stock,
  and




16




·
            potential
      litigation or regulatory matters.





The
market prices of the securities of microcap companies like us have been
especially volatile.  Broad market and industry factors may adversely
affect the market price of our common stock, regardless of our actual operating
performance.  In the past, following periods of volatility in the market
price of their stock, many companies have been the subject of securities class
action litigation.  A stockholder lawsuit could result in substantial costs
and a diversion of management's attention and resources and would adversely
affect our stock price.





We have
74,000,000 authorized shares of common stock, of which 7,142,858 are currently
outstanding.  The board of directors, without stockholder approval, could
issue up to 66,857,142 shares of common stock upon whatever terms it determines
to whomever it determines, including persons or entities that would help our
present management.




Item
6.  Selected Financial Data




Not applicable





Item 7.  Management's Discussion and Analysis
of Financial Condition and Results of Operations





Safe
Harbor Statement under the Private Securities Litigation Reform Act of
1995





Information
set forth herein contains  "forward-looking  statements"  which
can be identified by the use of forward-looking  terminology such as
"believes," "expects,"  "may," "should" or  "anticipates"  or the
negative  thereof or other variations thereon or comparable terminology,
 or by discussions of strategy. No assurance can be given that the future
results covered by the forward-looking statements will be achieved. We caution
readers that important factors may affect our actual results and could cause
such results to differ materially from forward-looking statements made by or on
our behalf. Such factors include, but are not limited to, changing market
conditions, the impact of competitive services, products, pricing, acceptance of
our services and/or products and other risks set forth  herein  and in
other  filings  that we have made with the SEC.





Recent
Developments





On March
14, 2008, Justin N. Craig, our President, privately sold 9,140,000 shares of our
common stock, constituting 91.4% of our outstanding shares and all of the shares
owned beneficially by him, to Vision Opportunity Master Fund, Ltd. Certain other
of our stockholders also sold shares of our common stock to Vision Opportunity
Master Fund. As a result of these privately-negotiated sales, a change in
control occurred from Mr. Craig to Vision Opportunity Master Fund.




On March
17, 2008, pursuant to prior approvals by our directors and stockholders owning
in excess of a majority of the voting power of our outstanding shares, we
effected a 1-for-2 reverse stock split of our outstanding shares of common
stock.





Following
the reverse stock split, we had 5,000,000 shares of common stock outstanding. Of
such shares, after giving effect to the privately-negotiated transactions
described above, Vision Opportunity Master Fund owns 4,720,000 shares of our
common stock, or 94.4% of our outstanding shares. Vision Opportunity Master Fund
purchased these shares for a total of approximately $670,000 in cash, inclusive
of related acquisition costs.




17





Effective
November 21, 2008, we effected a 5-for-1 forward stock split of our outstanding
common stock in the form of a stock distribution.  As a result of the
forward stock split, each holder of record of a certificate for one or more
shares of common stock as of November 21, 2008, received a certificate
representing four additional shares of common stock for every one share of
common stock held by that holder.  We had 5,000,000 shares outstanding
prior to the forward stock split and, as a result of the forward stock split, we
had 25,000,000 shares outstanding following the forward stock
split.





On March 30, 2009, pursuant to prior
approval by our directors and majority stockholder, we effected a 1-for-3.5
reverse stock split of our outstanding shares of common stock.





Operations





We were
founded as an unincorporated business in January 2004 and became a C corporation
in the State of Nevada on February 1, 2005.  As of March 30, 2009, we
had one employee, Justin N. Craig, our founder and President. Mr. Craig devotes
his full time to our business.





We are a
digital medical illustrator and animator providing digital displays and
enhancements to companies that assist attorneys to prepare or enhance exhibits
for trials involving medical issues. Approximately 85% of our work is ultimately
used by plaintiff counsel and 15% is used by defense counsel.





Our
customers are almost always companies that assist attorneys to prepare or
enhance a wide range of exhibits for trials. We perform the digital medical
imaging that is needed by these companies. There are a limited number of these
companies.





Customers
originally hear of our services from word of mouth. They continue with us and
expand or decrease the amount of work that they send to us based on the quality
and timing of our output. We retain rights to the digital images that we
produce. These digital images form a library for us. Some of these digital
images can be sold to users who need generic types of images for their purposes.
This enables us to generate revenue without doing additional work. The longer
that we are in operation, the larger our library becomes.





A summary
of our operations for the years ended December 31, 2008 and 2007 is as
follows:




2008
                    
                    
                    2007Revenue
                    
                    $
                    160,491
                    
                    
                    $
                    232,992Operating
      Expenses:General
      and administrative
                    
                    
                    69,914
                    
                    
                    
                    53,637Professional
      fees
                    
                    
                    31,546
                    
                    
                    
                    14,500Compensation
                    
                    
                    126,382
                    
                    
                    
                    166,879Total
                    
                    
                    227,842
                    
                    
                    
                    235,016Loss
      before  Income Taxes
                    
                    
                    (67,351
                    )
                    
                    
                    (2,024
                    )Provision
      for Income Taxes
                    
                    
                    -
                    
                    
                    
                    -Net
      Loss
                    
                    
                    (67,351
                    )
                    
                    $
                    (2,024
                    )




18




Revenue - For the year ended
December 31, 2008, two unrelated customers, Legal Wizard (60.0%) and Trial
Exhibits, Inc. (10.51%) comprised 70.51% of total revenues. For the year ended
December 31, 2007, four unrelated customers (High Impact Litigation (24.81%),
The Visual Advantage (23.41%), Legal Wizard (13.29%) and Trial Exhibits, Inc.
(22.54%)) comprised 84.05% of total revenues. This trend of relying on a very
limited number of customers is likely to continue for the foreseeable
future.





Compensation
relates entirely to Justin N. Craig.





General
and administrative expenses consist of:





2008
                    
                    
                    2007Automobile
                    
                    $
                    1,434
                    
                    
                    $
                    1,972Bad
      debts
                    
                    
                    20,000
                    
                    
                    
                    -Computer
      supplies
                    
                    
                    1,122
                    
                    
                    
                    1,552Depreciation
                    
                    
                    7,197
                    
                    
                    
                    3,364Dues
                    
                    
                    782
                    
                    
                    
                    653Employee
      benefits
                    
                    
                    16,092
                    
                    
                    
                    20,778Entertainment
                    
                    
                    874
                    
                    
                    
                    834Internet
      expenses
                    
                    
                    520
                    
                    
                    
                    816Office
      expense
                    
                    
                    2,207
                    
                    
                    
                    3,175Outside
      services
                    
                    
                    8,564
                    
                    
                    
                    10,056Rent
                    
                    
                    4,800
                    
                    
                    
                    4,800Repairs
      and maintenance
                    
                    
                    75
                    
                    
                    
                    312Salaries
                    
                    
                    2,400
                    
                    
                    
                    2,600Taxes
                    
                    
                    184
                    
                    
                    
                    138Telephone
                    
                    
                    1,597
                    
                    
                    
                    1,500Travel
                    
                    
                    2,066
                    
                    
                    
                    1,087Total
                    
                    $
                    69,914
                    
                    
                    $
                    53,637





Other





As a
corporate policy, we will not incur any cash obligations that we cannot satisfy
with known resources, of which there are currently none, except as described in
“Liquidity” below and/or elsewhere in this annual report.  We believe
that the perception that many people have of a public company make it more
likely that they will accept restricted securities from a public company as
consideration for indebtedness to them than they would from a private company.
 We have not performed any studies of this matter.  Our conclusion is
based on our own observations.  However, there can be no assurances that we
will be successful in any of those efforts even if we are a public entity.
 Additionally, issuance of restricted shares would necessarily dilute the
percentage of ownership interest of our stockholders.




19





Liquidity





We do not
know and cannot estimate whether the transaction among certain of our
stockholders and Vision Opportunity Master Fund described above will have any
impact on our liquidity or ability to obtain funds.





Private
capital, if sought, will be sought from former business associates of our
founder or private investors referred to us by those business associates. To
date, we have not sought any funding source and have not authorized any person
or entity to seek out funding on our behalf. If a market for our shares ever
develops, of which there can be no assurances, we may use restricted shares of
our common stock to compensate employees/consultants and independent contractors
wherever possible.  We believe that operations are generating sufficient
cash to continue operations for the next 12 months provided that our costs of
being a public company remain equal to or below the maximum estimate provided
below.





We have
become a public company and, by doing so, have incurred and will continue to
incur additional significant expenses for legal, accounting and related
services. Once we become a public entity, subject to the reporting requirements
of the Securities Exchange Act of 1934, we will incur ongoing expenses
associated with professional fees for accounting, legal and a host of other
expenses for annual reports and proxy statements. We estimate that these costs
will range up to $60,000 per year for the next few years and will be higher if
our business volume and activity increases but lower during the first year of
being public because our overall business volume will be lower, and we will not
yet be subject to the requirements of Section 404 of the Sarbanes-Oxley Act
of 2002. These obligations will reduce our ability and resources to fund other
aspects of our business. We hope to be able to use our status as a public
company to increase our ability to use noncash means of settling obligations and
compensate independent contractors who provide professional services to us,
although there can be no assurances that we will be successful in any of those
efforts. We will reduce the compensation levels paid to management if there is
insufficient cash generated from operations to satisfy these costs.





There are
no current plans to seek private investment.  We do not have any current
plans to raise funds through the sale of securities.  We hope to be able to
use our status as a public company to enable us to use non-cash means of
settling obligations and compensate persons and/or firms providing services or
products to us, although there can be no assurances that we will be successful
in any of those efforts.  We believe that the perception that many people
have of a public company make it more likely that they will accept restricted
securities from a public company as consideration for indebtedness to them than
they would from a private company.  We have not performed any studies of
this matter.  Our conclusion is based on our own beliefs. Issuing shares of
our common stock to such persons instead of paying cash to them would increase
our chances to expand our business.  Having shares of our common stock may
also give persons a greater feeling of identity with us which may result in
referrals.  However, these actions, if successful, will result in dilution
of the ownership interests of existing shareholders, may further dilute common
stock book value, and that dilution may be material. Such issuances may also
serve to enhance existing management’s ability to maintain control because the
shares may be issued to parties or entities committed to supporting existing
management.





In May
2007, we sold 760,000 shares of our common stock to 38 people for $760. The sale
of such shares was not specifically or solely intended to raise financing since
the funds raised were nominal.  It was also intended to get relatives and
business associates of management involved in our business.  Of the 760,000
shares, 300,000 (39.5%) shares were sold to people directly related to at least
one officer or director and 300,000 (39.5%) shares were sold to our counsel.
Although these stockholders have no obligation to provide any services to us,
management hopes that these new stockholders, their families, friends and/or
business associates may provide us with valuable services such as recommending
our services and providing us with business advice in any areas of expertise or
knowledge that they may have that can be of value and assistance to us.




20





Off-Balance
Sheet Arrangements





We have
no off-balance sheet arrangements, obligations under any guarantee contracts or
contingent obligations. We also have no other commitments, other than the costs
of being a public company that will increase our operating costs or cash
requirements in the future.





Recently-Issued
Accounting Pronouncements





In June
2003, the SEC adopted final rules under Section 404 of the Sarbanes-Oxley Act of
2002, as amended by SEC Release No. 33-8889 on February 1, 2008. Commencing with
our annual report for the year ended December 31, 2008, we will be required to
include a report of management on our internal control over financial reporting.
The internal control report must include a statement:





·
            of
      management’s responsibility for establishing and maintaining adequate
      internal control over our financial
reporting;




·
            of
      management’s assessment of the effectiveness of our internal control over
      financial reporting as of year end;
and




·
            of
      the framework used by management to evaluate the effectiveness of our
      internal control over financial
reporting.





Furthermore,
in the following fiscal year, it is required to file the registered accounting
firm’s attestation report separately on our internal control over financial
reporting on whether it believes that we have maintained, in all material
respects, effective internal control over financial reporting.





In
December 2007, the FASB issued FASB Statement No. 141 (Revised 2007) “Business
Combinations” (SFAS No. 141(R)), which requires us to record fair value
estimates of contingent consideration and certain other potential liabilities
during the original purchase price allocation, expense acquisition costs as
incurred and does not permit certain restructuring activities previously allowed
under Emerging Issues Task Force Issue No. 95-3 to be recorded as a component of
purchase accounting.  SFAS No. 141(R) applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008, except for the presentation and disclosure requirements, which shall
be applied retrospectively for all periods presented. We adopted this standard
at the beginning of our year ended December 31, 2008 for all prospective
business acquisitions.  We have not determined the effect that the
adoption of SFAS No. 141(R) will have on our financial results.





In
December 2007, the FASB issued FASB Statement No. 160 “Noncontrolling Interests
in Consolidated Financial Statements - an amendment of ARB No. 51” (SFAS No.
160), which causes noncontrolling interests in subsidiaries to be included in
the equity section of the balance sheet.  SFAS No. 160 applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008, except for the presentation and disclosure requirements,
which shall be applied retrospectively for all periods presented.  We
adopted this standard at the beginning of our year ended December 31, 2008 for
all prospective business acquisitions.  We have not determined the
effect that the adoption of SFAS No. 160 will have on our financial
results.




21





The FASB,
the Emerging Issues Task Force and the SEC have issued certain other accounting
pronouncements and regulations as of December 31, 2008 that will become
effective in subsequent periods; however, management does not believe that any
of those pronouncements would have significantly affected our financial
accounting measurements or disclosures had they been in effect during the years
ended December 31, 2008 and 2007, and it does not believe that any of those
pronouncements will have a significant impact on our financial statements at the
time they become effective.





Critical
Accounting Policies





The
preparation of financial statements and related notes requires us to make
judgments, estimates, and assumptions that affect the reported amounts of
assets, liabilities, revenue and expenses, and related disclosure of contingent
assets and liabilities.





An
accounting policy is considered to be critical if it requires an accounting
estimate to be made based on assumptions about matters that are highly uncertain
at the time the estimate is made, and if different estimates that reasonably
could have been used, or changes in the accounting estimates that are reasonably
likely to occur periodically, could materially impact the financial
statements.





Financial
Reporting Release No. 60 requires all companies to include a discussion of
critical accounting policies or methods used in the preparation of financial
statements.  There are no critical policies or decisions that rely on
judgments that are based on assumptions about matters that are highly uncertain
at the time the estimate is made.





Seasonality





We have
not noted a significant seasonal impact in our business.





Item
7A.  Quantitative and Qualitative Disclosures About Market
Risk





Not applicable





Item 8. Financial Statements and
Supplementary Data





The
financial statements filed as part of this annual report on Form 10-K are set
forth starting on page F-1.





Item 9.  Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure





None





Item
9A.  Controls and Procedures





Management’s
Annual Report on Internal Control over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Our disclosure controls and procedures are
designed to ensure that information required to be disclosed in reports that we
file or submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the SEC.




22





This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the company’s registered
public accounting firm pursuant to temporary rules of the SEC that permit us to
provide only management’s report in this annual report.





Evaluation
of Disclosure Controls and Procedures





Our
principal executive officer and principal financial officer has reviewed the
effectiveness of our "disclosure controls and procedures" (as defined in the
Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) as of the end of
the period covered by this annual report and has concluded that the disclosure
controls and procedures are effective to ensure that material information
relating to our company is recorded, processed, summarized, and reported in a
timely manner. There were no significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
last day they were evaluated by our principal executive officer and principal
financial officer.





Changes
in Internal Control over Financial Reporting





There
have been no changes in our internal control over financial reporting during the
last quarterly period covered by this report that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.





Item
9B.  Other Information





None


23


PART
III





Item 10.  Directors, Executive Officers and
Corporate Governance





Our
management consists of:





Name
                      
                      Age
                      
                      TitleJustin
      N. Craig
                      
                      36
                      
                      President,
      Chief Executive Officer, Chief Financial Officer and
    ChairmanKenneth
       Craig
                      
                      65
                      
                      Secretary
      and
Director





Justin N.
Craigfounded this
company and has been our President, Chief Executive Officer, Chief Financial
Officer and Chairman since inception.  From November 2002 to December 2003,
Mr. Craig was a digital medical imager for High Impact Litigation, now a major
customer. Mr. Craig holds a B.F.A. from Brigham Young University (2000) and an
M.S. degree in Bio Medical Illustration from the University of Illinois, Chicago
(2002).





Kenneth
 Craigbecame
Secretary and a Director in May 2007. He has owned and operated an accounting
practice for more than 30 years with a specialty in taxation. He holds a B.S.
degree from the University of Arizona and is the father of Justin N.
Craig.





Possible
Potential Conflicts





No member
of management is or will be required by us to work on a full time basis,
although our President currently devotes full time to us. Accordingly, certain
conflicts of interest may arise between us and our officer(s) and director(s) in
that they may have other business interests in the future to which they devote
their attention, and they may be expected to continue to do so although
management time must also be devoted to our business.  As a result,
conflicts of interest may arise that can be resolved only through their exercise
of such judgment as is consistent with each officer's understanding of his
fiduciary duties to us.





Currently,
we have only two officers, both of whom also serve as directors. We are in
the process of seeking to add additional officers and/or directors as and when
the proper personnel are located and terms of employment are mutually negotiated
and agreed.





Board
of Directors





All
directors hold office until the completion of their term of office, which is not
longer than one year, or until their successors have been elected.  All
officers are appointed annually by the board of directors and, subject to
existing employment agreements (of which there are currently none), serve at the
discretion of the board. Currently, directors receive no compensation for their
role as directors but may receive compensation for their role as officers. The
terms of office of both directors expire on October 31, 2009.





As long
as we have an even number of directors, tie votes on issues are resolved in
favor of the Chairman’s vote.




24





Committees
of the Board of Directors





Concurrent
with having sufficient members and resources, our board of directors will
establish an audit committee and a compensation committee.  We believe that
we will need a minimum of five directors to have effective committee systems.
The audit committee will review the results and scope of the audit and other
services provided by the independent auditors and review and evaluate the system
of internal controls.  The compensation committee will manage a stock
option plan and review and recommend compensation arrangements for officers. No
final determination has yet been made as to the memberships of these committees
or when we will have sufficient members to establish committees.  See
“Executive Compensation” elsewhere in this annual report.





All
directors will be reimbursed by us for any expenses incurred in attending
directors' meetings provided that we have the resources to pay these
fees.  We will consider applying for officers and directors liability
insurance at such time when we have the resources to do so.





Section
16(a) Beneficial Ownership Reporting Compliance





We were not subject to Section 16(a)
during our fiscal year ended December 31, 2008, as we did not have a class of
equity securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934.





Item
11.  Executive Compensation





The
following table shows for the years ended December 31, 2008 and 2007,
compensation awarded to or paid to, or earned by, our Chief Executive Officer
and our Secretary (the “Named Executive Officers”).





Long Term Compensation AwardsAnnual Compensation
                                
                                
                                
                                
                                
                                
                                
                                
                                PayoutsName and
                                  Principal
                                  Position
                                
                                Year
                                  Ended
                                  Dec. 31
                                
                                Salary
                                  ($)
                                
                                
                                Bonus
                                
                                
                                Other Annual
                                  Compensation
                                
                                
                                Restricted
                                  Stock
                                  Award(s)
                                
                                
                                Securities
                                  Underlying
                                  Options/SARs
                                
                                
                                LTIP
                                  Payouts
                                
                                
                                All Other
                                  CompensationJustin
      N. Craig
                                
                                2008
                                
                                
                                126,382
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -President
                                
                                2007
                                
                                
                                166,879
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Kenneth
      Craig
                                
                                2008
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Secretary
                                
                                2007
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -





There is
no employment contract with Justin N. Craig at this time and no agreements for
compensation in the future. Mr. Craig’s compensation has not been fixed or based
on any percentage calculations. He has made all decisions determining the amount
and timing of his compensation and has received the level of compensation each
month that permitted us to meet our immediate obligations.




25





Item
12.  Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters





The
following table sets forth information known to us regarding beneficial
ownership of our common stock as of March 30, 2009, by:





·
            each
      person known or believed by us to own, directly or beneficially, more than
      5% of our common stock,




·
            each
      of our directors, and




·
            all
      of our officers and directors as a
group.





Except as
otherwise indicated, we believe that the beneficial owners of the common stock
listed below, based on information furnished by the owners, have sole investment
and voting power over the shares.





Name and Address of
                                Beneficial Owner (a)
                              
                              Number of Shares
                                Beneficially Owned (b)
                              
                              
                              Percent of ClassJustin
      N. Craig
                              
                              
                              —
                              
                              
                              
                              —Kenneth
      Craig
                              
                              
                              —
                              
                              
                              
                              —Vision
      Opportunity Master Fund, Ltd.
                              
                              
                              6,742,858
                              
                              
                              
                              94.4
                              %Officers
      and directorsas
       a group (2 members)
                              
                              
                              —
                              
                              
                              
                              —


(a)
            The
      address for each officer and director is 7231 South Rome Street, Aurora,
      Colorado 80016.  The address for Vision Opportunity Master Fund,
      Ltd. is c/o Citi Hedge Fund Services (Cayman) Limited, Cayman Corporate
      Centre, 27 Hospital Road, 5th
      Floor, Grand Cayman KY1-1109, Cayman
Islands.





(b)
            Unless
      otherwise indicated, we believe that all persons named in the table have
      sole voting and investment power with respect to all shares of the common
      stock beneficially owned by them.  A person is deemed to be the
      beneficial owner of securities which may be acquired by such person within
      60 days from the date indicated above upon the exercise of options,
      warrants or convertible securities.  Each beneficial owner’s
      percentage ownership is determined by assuming that options, warrants or
      convertible securities that are held by such person (but not those held by
      any other person) and which are exercisable within 60 days of the date
      indicated above, have been
exercised.





Shareholder
Matters





As an
issuer of "penny stock," the protections provided by the federal securities laws
relating to forward-looking statements do not apply to us if our shares are
considered to be penny stock.  Although the federal securities law provide
a safe harbor for forward-looking statements made by a public company that files
reports under the federal securities laws, this safe harbor is not available to
issuers of penny stock. As a result, we will not have the benefit of this safe
harbor protection in the event of any claim that the material provided by us,
including this annual report, contained a material misstatement of fact or was
misleading in any material respect because of our failure to include any
statements necessary to make the statements not misleading.




26





As a
Nevada corporation, we are subject to the  Nevada Revised Statutes
("NRS" or "Nevada law"). Certain provisions of  Nevada law create
rights that might be deemed material to our shareholders. Other provisions might
delay or make more difficult acquisitions of our stock or changes in our control
or might also have the effect of preventing changes in our management or might
make it more difficult to accomplish transactions that some of our shareholders
may believe to be in their best interests. These provisions are described
below.





Dissenters'
Rights.  Among the rights granted under Nevada law which might
be considered material is the right for shareholders to dissent from certain
corporate actions and obtain payment for their shares (see NRS 92A.380-390).
This right is subject to exceptions, summarized below, and arises in the event
of mergers or plans of exchange. This right normally applies if shareholder
approval of the corporate action is required either by Nevada law or by the
terms of the articles of incorporation.





A
shareholder does not have the right to dissent with respect to any plan of
merger or exchange, if the shares held by the shareholder are part of a class of
shares which are:





·
            listed
      on a national securities exchange,




·
            included
      in the national market system by Finra,
or




·
            held
      of record by not less than 2,000
holders.




This
exception notwithstanding, a shareholder will still have a right of dissent if
it is provided for in the articles of incorporation or if the shareholders are
required under the plan of merger or exchange to accept anything but cash or
owner's interests, or a combination of the two, in the surviving or acquiring
entity, or in any other entity falling in any of the three categories described
above in this paragraph.





Inspection
Right.  Nevada law also specifies that shareholders are to have
the right to inspect company records (see NRS 78.105). This right extends to any
person who has been a shareholder of record for at least six months immediately
preceding his demand. It also extends to any person holding, or authorized in
writing by the holders of, at least 5% of outstanding shares. Shareholders
having this right are to be granted inspection rights upon five days' written
notice. The records covered by this right include official copies of (1) the
articles of incorporation, and all amendments thereto, (2) bylaws and all
amendments thereto, and (3) a stock ledger or a duplicate stock ledger, revised
annually, containing the names, alphabetically arranged, of all persons who are
stockholders of the corporation, showing their places of residence, if known,
and the number of shares held by them, respectively. In lieu of the stock ledger
or duplicate stock ledger, Nevada law provides that the corporation may keep a
statement setting out the name of the custodian of the stock ledger or duplicate
stock ledger, and the present and complete post office address, including street
and number, if any, where the stock ledger or duplicate stock ledger specified
in this section is kept.





Control Share Acquisitions.Sections 78.378 to 78.3793 of Nevada law contain provisions that may
prevent any person acquiring a controlling interest in a Nevada-registered
company from exercising voting rights. To the extent that these rights support
the voting power of minority shareholders, these rights may also be deemed
material. These provisions will be applicable to us as soon as we have 200
shareholders of record with at least 100 of these having addresses in Nevada as
reflected on our stock ledger. While we do not yet have the required number of
shareholders in Nevada or elsewhere, it is possible that at some future point we
will reach these numbers and, accordingly, these provisions will become
applicable. We do not intend to notify shareholders when we have reached the
number of shareholders specified under these provisions of Nevada law.
Shareholders can learn this information pursuant to the inspection rights
described above and can see the approximate number of our shareholders by
checking under Item 5 of this annual report.  This form is required to
be filed with the SEC within 90 days of the close of each fiscal year, absent
timely request for a 15 calendar day extension. You can view these and our other
filings at www.sec.gov.




27





Under NRS
Sections 78.378 to 78.3793, an acquiring person who acquires a controlling
interest in company shares may not exercise voting rights on any of these shares
unless these voting rights are granted by a majority vote of our disinterested
shareholders at a special shareholders' meeting held upon the request and at the
expense of the acquiring person. If the acquiring person's shares are accorded
full voting rights and the acquiring person acquires control shares with a
majority or more of all the voting power, any shareholder, other than the
acquiring person, who does not vote for authorizing voting rights for the
control shares, is entitled to demand payment for the fair value of their
shares, and we must comply with the demand. An "acquiring person" means any
person who, individually or acting with others, acquires or offers to acquire,
directly or indirectly, a controlling interest in our shares. "Controlling
interest" means the ownership of our outstanding voting shares sufficient to
enable the acquiring person, individually or acting with others, directly or
indirectly, to exercise one-fifth or more but less than one-third, one-third or
more but less than a majority, or a majority or more of the voting power of our
shares in the election of our directors. Voting rights must be given by a
majority of our disinterested shareholders as each threshold is reached or
exceeded. "Control shares" means the company's outstanding voting shares that an
acquiring person acquires or offers to acquire in an acquisition or within 90
days immediately preceding the date when the acquiring person becomes an
acquiring person.





These
Nevada statutes do not apply if a company's articles of incorporation or bylaws
in effect on the tenth day following the acquisition of a controlling interest
by an acquiring person provide that these provisions do not apply.





According
to NRS 78.378, the provisions referred to above will not restrict our directors
from taking action to protect the interests of our company and shareholders,
including without limitation, adopting or executing plans, arrangements or
instruments that deny rights, privileges, power or authority to a holder of a
specified number of shares or percentage of share ownership or voting power.
Likewise, these provisions do not prevent directors or shareholders from
including stricter requirements in our articles of incorporation or bylaws
relating to the acquisition of a controlling interest.





Our
articles of incorporation and bylaws do not exclude us from the restrictions
imposed by NRS 78.378 to 78.3793, nor do they impose any more stringent
requirements.





Certain Business
Combinations.  Sections 78.411 to 78.444 of the Nevada law may
restrict our ability to engage in a wide variety of transactions with an
"interested shareholder." As was discussed above in connection with NRS 78.378
to 78.3793, these provisions could be considered material to our shareholders,
particularly to minority shareholders. They might also have the effect of
delaying or making more difficult acquisitions of our stock or changes in our
control. These sections of NRS are applicable to any Nevada company with 200 or
more stockholders of record and that has a class of securities registered under
Section 12 of the Securities Exchange Act, unless the company's articles of
incorporation provide otherwise.




28





These
provisions of Nevada law prohibit us from engaging in any "combination" with an
interested stockholder for three years after the interested stockholder acquired
the shares that cause him to become an interested shareholder, unless he had
prior approval of our board of directors. The term "combination" is described in
NRS 78.416 and includes, among other things, mergers, sales or purchases of
assets, and issuances or reclassifications of securities. If the combination did
not have prior approval, the interested shareholder may proceed after the
three-year period only if the shareholder receives approval from a majority of
our disinterested shares or the offer meets the requirements for fairness that
are specified in NRS 78.441-42. For the above provisions, "resident domestic
corporation" means a Nevada corporation that has 200 or more shareholders. An
"interested stockholder" is defined in NSR 78.423 as someone who is
either:





·
            the
      beneficial owner, directly or indirectly, of 10% or more of the voting
      power of our outstanding voting shares,
or




·
            our
      affiliate or associate and who within three years immediately before the
      date in question, was the beneficial owner, directly or indirectly, of 10%
      or more of the voting power of our outstanding shares at that
      time.




Directors'
Duties.  Section 78.138 of the Nevada law allows our directors
and officers, in exercising their powers to further our interests, to consider
the interests of our employees, suppliers, creditors and customers. They can
also consider the economy of the state and the nation, the interests of the
community and of society and our long-term and short-term interests and
shareholders, including the possibility that these interests may be best served
by our continued independence. Our directors may resist a change or potential
change in control if they, by a majority vote of a quorum, determine that the
change or potential change is opposed to or not in our best interest. Our board
of directors may consider these interests or have reasonable grounds to believe
that, within a reasonable time, any debt which might be created as a result of
the change in control would cause our assets to be less than our liabilities,
render us insolvent, or cause us to file for bankruptcy protection





Amendments to
Bylaws.Our articles of incorporation provide that the power
to adopt, alter, amend, or repeal our bylaws is vested exclusively with the
board of directors. In exercising this discretion, our board of directors could
conceivably alter our bylaws in ways that would affect the rights of our
shareholders and the ability of any shareholder or group to effect a change in
our control; however, the board would not have the right to do so in a way that
would violate law or the applicable terms of our articles of
incorporation.





Item 13.  Certain Relationships and Related
Transactions, and Director Independence





We have
entered into an agreement regarding our President lending funds to us, if
necessary.  No amounts were outstanding under this agreement as of December
31, 2008.





Our
office space is provided to us by our President which serve as our principal
executive offices. We paid rent of $4,800 in each of 2008 and 2007 for use of
these facilities. There is no written lease agreement.





In May
2007, we sold 100,000 shares of our common stock to Kenneth Craig, a director
who is also our President’s father, for $100.





The board
of directors has determined that neither of its two members are currently
“independent directors,” as determined under Nasdaq guidelines, because they are
also executive officers.




29





Item 14.  Principal Accountant Fees and
Services





Audit
Fees





The
aggregate fees billed for professional services rendered by our principal
accountant for the audit of our annual financial statements for the fiscal
periods ended December 31, 2008 and 2007 were $14,500 and $10,000,
respectively.





Audit-Related
Fees





During
the fiscal periods ended December 31, 2008 and 2007, our principal
accountant did not render assurance and related services reasonably related to
the performance of the audit or review of financial statements.





Tax
Fees





During
the fiscal periods ended December 31, 2008 and 2007, our principal
accountant did not render tax services.





All
Other Fees





During
the fiscal periods ended December 31, 2008 and 2007, there were no fees
billed for products and services provided by the principal accountant other than
those set forth above.





Audit
Committee Approval





We
currently do not have an audit committee. However, our board of directors has
approved the services described above.





PART
IV





Item 15.  Exhibits and Financial Statement
Schedules





Exhibit Number and
    Description31.1
                    Certification
      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Chief Executive
      Officer and Chief Financial Officer.32.1
                    Certification
      Pursuant Section 906 of the Sarbanes-Oxley Act of 2002 Chief Executive
      Officer and Chief Financial
Officer.


30


SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.




Date:  March
      30, 2009
              MEDICAL
      DESIGN STUDIOS, INC.By:/s/Justin N.
      CraigJustin
      N. CraigPresident,
      Chief Executive Officer, Chief Financial Officer and
    Chairman(principal
      executive officer and principal financial and accounting
      officer)





Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.





Date:  March
      30, 2009
              /s/Justin N. CraigJustin
      N. CraigPresident,
      Chief Executive Officer, Chief Financial Officer and
    Chairman(principal
      executive officer and principal financial and accounting
      officer)Date:  March 30, 2009
              /s/Kenneth CraigKenneth
      CraigSecretary
      and Director


31


MEDICAL
DESIGN STUDIOS, INC.
 
 FINANCIAL
STATEMENTS
 
 December
31, 2008 and 2007
 
 TABLE
OF CONTENTS
 
 REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                  
                  
                  F-1BALANCE
      SHEETS
                  
                  
                  F-2STATEMENTS
      OF OPERATIONS
                  
                  
                  F-3STATEMENT
      OF STOCKHOLDERS’ DEFICIT
                  
                  
                  F-4STATEMENTS
      OF CASH FLOWS
                  
                  
                  F-5NOTES
      TO FINANCIAL STATEMENTS
                  
                  
                  F-6
  32
  REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors and Stockholders of
 Medical
Design Studios, Inc.
 Aurora,
Colorado
 
 We have
audited the accompanying balance sheets of Medical Design Studios, Inc. as of
December 31, 2008 and 2007 and the related statements of operations,
stockholders’ equity (deficit) and cash flows for the years then ended. These
financial statements are the responsibility of the Company’s
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting.  Accordingly, we express no such opinion. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Medical Design Studios, Inc. as of
December 31, 2008 and 2007 and the results of its operations and its cash flows
for the fiscal years then ended in conformity with accounting principles
generally accepted in the United States of America.
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 3 to the financial
statements, the Company had a negative working capital and an accumulated
deficit at December 31, 2008 and had a net loss and cash used in operations for
the year ended December 31, 2008. These factors raise substantial doubt about
the Company’s ability to continue as a going concern. Management’s plans in
regards to these matters are also described in Note 3. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
 
 /s/ Li
      & Company, PCLi
      & Company, PC
  Skillman,
New Jersey
 March 30,
2009
  F-1
 
 MEDICAL
DESIGN STUDIOS, INC.
 Balance
Sheets
 
 December 31,
                    2008
                  
                  
                  December
      31,
                    2007ASSETSCurrent
      Assets:Cash
                  
                  $
                  4,766
                  
                  
                  $
                  500Accounts
      receivable, net of allowance for doubtful accounts of  $20,000
      and $0, respectively
                  
                  
                  5,734
                  
                  
                  
                  37,825Total
      current assets
                  
                  
                  10,500
                  
                  
                  
                  38,325Equipment:Computer
      equipment
                  
                  
                  29,793
                  
                  
                  
                  18,075Accumulated
      depreciation
                  
                  
                  (13,516
                  )
                  
                  
                  (6,319
                  )Net
                  
                  
                  16,277
                  
                  
                  
                  11,756TOTAL
      ASSETS
                  
                  $
                  26,777
                  
                  
                  $
                  50,081LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)Current
      LiabilitiesAccrued
      expenses
                  
                  $
                  42,730
                  
                  
                  $
                  25,086Stockholders'
      Equity (Deficit):Preferred
      stock: $0.001 par value; authorized, 1,000,000 shares; no shares issued or
      outstanding
                  
                  
                  -
                  
                  
                  
                  -Common
      stock: $0.001 par value; authorized 74,000,000 shares; 7,142,858 shares
      issued and outstanding
                  
                  
                  7,143
                  
                  
                  
                  7,143Additional
      paid-in capital
                  
                  
                  29,260
                  
                  
                  
                  2,857Retained
      earnings (deficit)
                  
                  
                  (52,356
                  )
                  
                  
                  14,995Total
      stockholders’ equity (deficit)
                  
                  
                  (15,953
                  )
                  
                  
                  24,995TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
                  
                  $
                  26,777
                  
                  
                  $
                  50,081
 
 See
accompanying notes to financial statements.
  F-2
 
 MEDICAL
DESIGN STUDIOS, INC.
 
 Statements
of Operations
 
 For
      the Year Ended
                    December
      31,2008
                  
                  
                  2007Revenue
                  
                  $
                  160,491
                  
                  
                  $
                  232,992Operating
      Expenses:Selling,
      general and administrative
                  
                  
                  69,914
                  
                  
                  
                  53,637Professional
      fees
                  
                  
                  31,546
                  
                  
                  
                  14,500Compensation
                  
                  
                  126,382
                  
                  
                  
                  166,879Total
      operating expenses
                  
                  
                  227,842
                  
                  
                  
                  235,016Loss
      before income taxes
                  
                  
                  (67,351
                  )
                  
                  
                  (2,024
                  )Provision
      for income taxes
                  
                  
                  -
                  
                  
                  
                  -Net
      loss
                  
                  $
                  (67,351
                  )
                  
                  $
                  (2,024
                  )Net
      loss per common share - basic and diluted
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.00
                  )Weighted
      average number of common shares outstanding – basic and
      diluted
                  
                  
                  7,142,858
                  
                  
                  
                  6,937,613
 
 See
accompanying notes to the financial statements.
  F-3
 
 MEDICAL
DESIGN STUDIOS, INC.
 
 Statement
of Stockholders’ Equity (Deficit)
 For the
Years Ended December 31, 2008 and 2007
 
 Common
                    Shares
                  
                  
                  Amount
                  
                  
                  Additional
                    Paid-in
      Capital
                  
                  
                  Accumulated
                    Deficit
                  
                  
                  TotalBalance,
      January 1, 2007
                  
                  
                  6,600,000
                  
                  
                  $
                  6,600
                  
                  
                  $
                  2,640
                  
                  
                  $
                  17,019
                  
                  
                  $
                  26,259Sale
      of shares
                  
                  
                  542,858
                  
                  
                  
                  543
                  
                  
                  
                  217
                  
                  
                  
                  
                  
                  
                  
                  760Net
      loss
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (2,024
                  )
                  
                  
                  (2,024
                  )Balance,
      December 31, 2007
                  
                  
                  7,142,858
                  
                  
                  
                  7,143
                  
                  
                  
                  2,857
                  
                  
                  
                  14,995
                  
                  
                  
                  24,995Contribution
      to capital
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  26,403
                  
                  
                  
                  
                  
                  
                  
                  26,403Net
      loss
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (67,351
                  )
                  
                  
                  (67,351
                  )Balance,
      December 31, 2008
                  
                  
                  7,142,858
                  
                  
                  $
                  7,143
                  
                  
                  $
                  29,260
                  
                  
                  $
                  (52,356
                  )
                  
                  $
                  (15,953
                  )
 
 See
accompanying notes to the financial statements.
  F-4
  MEDICAL
DESIGN STUDIOS, INC.
 
 Statements
of Cash Flows
 
 For
      the Year Ended
                    December
      31,2008
                  
                  
                  2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                  
                  $
                  (67,351
                  )
                  
                  $
                  (2,024
                  )Depreciation
                  
                  
                  7,197
                  
                  
                  
                  3,364Adjustments
      to reconcile net loss to net cash used in operating
      activities:Increase
      (decrease) in accounts receivable
                  
                  
                  32,091
                  
                  
                  
                  (16,125
                  )Increase
      in accrued expenses
                  
                  
                  17,644
                  
                  
                  
                  14,025Net
      Cash Used in Operating Activities
                  
                  
                  (10,419
                  )
                  
                  
                  (760
                  )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of computer
                  
                  
                  (11,718
                  )
                  
                  
                  -CASH
      FLOWS FROM FINANCING ACTIVITIESSale
      of common shares
                  
                  
                  -
                  
                  
                  
                  760Contribution
      to capital
                  
                  
                  26,403
                  
                  
                  
                  -Net
      Cash Provided by Operating Activities
                  
                  
                  26,403
                  
                  
                  
                  760NET
      CHANGE IN CASH
                  
                  
                  4,266
                  
                  
                  
                  -CASH
      AT BEGINNING OF YEAR
                  
                  
                  500
                  
                  
                  
                  500CASH
      AT END OF YEAR
                  
                  $
                  4,766
                  
                  
                  $
                  500
 
 See
accompanying notes to the financial statements.
  F-5
 
 MEDICAL
DESIGN STUDIOS, INC.
 
 December
31, 2008 and 2007
 Notes to
the Financial Statements
 
 NOTE 1
-ORGANIZATION
 
 Medical
Design Studios, Inc. (“MDS” or the “Company”) was founded as an unincorporated
business in January 2004 and became a C corporation in the State of Nevada on
February 1, 2005. The Company is a digital medical illustrator and animator
providing digital displays and enhancements to companies that assist attorneys
to prepare or enhance exhibits for trials involving medical issues.
 
 The
acquisition of Medical Design Studios (“Predecessor”) by Medical Design Studios,
Inc. (“MDS”) has been accounted for as a reverse acquisition for financial
accounting purposes. The reverse merger is deemed a capital transaction and the
net assets of Predecessor (the accounting acquirer) are carried forward to MDS
(the legal acquirer and the reporting entity) at their carrying value before the
combination. The acquisition process utilizes the capital structure of MDS and
the assets and liabilities of Predecessor which are recorded at historical cost.
Since MDS had no operations prior to the reverse merger, the financial
statements of Predecessor and MDS are being combined for the period from January
1, 2004 through February 1, 2005. The equity of MDS is the historical equity of
Predecessor retroactively restated to reflect the number of shares issued by MDS
in the transaction.
 
 On March 14, 2008, Justin N. Craig, the
Company’s President and Chief Executive Officer, privately sold 6,528,572 shares
of the Company’s common stock, constituting 91.4% of the Company’s outstanding
shares and all of the shares owned beneficially by him, to Vision Opportunity
Master Fund, Ltd. Certain other of the Company’s stockholders also sold shares
of the Company’s common stock to Vision Opportunity Master Fund. As a result of
these privately-negotiated sales, a change in control occurred from Mr. Craig to
Vision Opportunity Master Fund.
  On March 17, 2008, pursuant to prior
approvals by stockholders owning in excess of a majority of the voting power of
the Company’s outstanding shares, the Company effected a 2-for-1 reverse stock
split of the Company’s outstanding shares of common stock.
  After giving effect to the
privately-negotiated transactions described above, Vision Opportunity Master
Fund owns 6,742,858 shares of the Company’s common stock, or 94.4% of the
Company’s outstanding shares. Vision Opportunity Master Fund purchased these
shares for approximately $670,000 in cash, inclusive of related acquisition
costs. The source of the funding for the cash payment was the general working
capital of Vision Opportunity Master Fund.
  F-6
  The terms of the purchase and sale
transactions were as a result of arm’s-length negotiations between the parties.
None of the parties had any relationship with one another prior to this
transaction.
  The Company’s officers and directors,
and the business focus of our company, were not changed in connection with the
purchase and sale transactions.
 
 On
November 21, 2008, the Company effectuated a 5 for 1 forward stock
split.
 
 On March
30, 2009, the Company effectuated a 1 for 3.5 reverse stock split.
 
 All share and per share amounts in
these financial statements have been adjusted to give retroactive effect to the
reverse stock split.
 
 NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 a. Basis
of presentation
 
 The
Company’s financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (“U.S.
GAAP”).
 
 b.
Year-end
 
 The
Company has elected a fiscal year ending on December 31.
 
 c.
Estimates
 
 The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those
estimates.
 
 d.
Reclassifications
 
 Certain
amounts in the prior period financial statements have been reclassified to
conform to the current period presentation. These reclassifications had no
effect on reported losses.
 
 e. Cash
Equivalents
 
 The
Company considers all highly liquid investments with a maturity of three months
or less when purchased to be cash equivalents.
  F-7
  
 f.
Accounts Receivable and Allowance for Doubtful Accounts
 
 Accounts
receivable are recorded at cost. The Company considers the need for an allowance
for doubtful accounts related to its accounts receivables that are deemed to
have a high risk of collectability. Management reviews its accounts receivables
on a monthly basis to determine if any receivables will potentially be
uncollectible. Management analyzes historical collection trends and changes in
its customer payment patterns, customer concentration, and credit worthiness
when evaluating the adequacy of its allowance for doubtful accounts. The Company
includes any receivables balances that are determined to be uncollectible, along
with a general reserve, in its overall allowance for doubtful accounts. The
allowance for doubtful accounts was $20,000 and $0 at December 31, 2008 and
2007, respectively.
 
 g.
Equipment
 
 Equipment,
which consists of computer equipment, is stated at cost less accumulated
depreciation. Depreciation is calculated on the straight-line basis over the
estimated useful life of three (3) years. Depreciation expense for the years
ended December 31, 2008 and 2007 was $7,197 and $3,364,
respectively.
 
 The
carrying values of fixed assets are evaluated whenever changes in circumstances
indicate the carrying amount of such assets may not be recoverable. If
necessary, the Company recognizes an impairment loss for the difference between
the carrying amount of the assets and their estimated fair value. Fair value is
based on current and anticipated future undiscounted cash flows. As of December
31, 2008 or 2007, no impairment was incurred.
 
 h. Fair
value of financial instruments
 
 The fair
value of a financial instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties.  The carrying
amounts of financial assets and liabilities, such as cash, accounts receivable
and accrued expenses approximate their fair values because of the short maturity
of these instruments.
 
 i.
Revenue Recognition
 
 The
Company follows the guidance of the United States Securities and Exchange
Commission’s Staff Accounting Bulletin (“SAB”) No. 101 Revenue Recognition, as
amended by SAB No. 104 for revenue recognition. The Company recognizes revenue
when all work on a project has been completed and has been accepted by the buyer
and collectability is reasonably assured.
  F-8
 
 j. Income
Taxes
 
 The
Company accounts for income taxes using the asset and liability method. Under
this method, income taxes are provided for amounts currently payable and for
amounts deferred as tax assets and liabilities based on differences between the
financial statement carrying amounts and the tax bases of existing assets and
liabilities. Deferred income taxes are measured using the enacted tax rates that
are assumed will be in effect when the differences reverse.
  k. Net
Loss Per Common Share
 
 Net loss
per common share are computed pursuant to Statement of Financial Accounting
Standards No. 128, Earnings
Per Share, and have been calculated by dividing the net loss for the year
by the basic and diluted weighted average number of shares outstanding assuming
that the Company incorporated as of the beginning of the first period presented.
There were no potentially dilutive shares outstanding as of December 31, 2008 or
2007.
 
 l.
Recently Issued Accounting Standards
 
 In June
2003, the Securities and Exchange Commission (“SEC”) adopted final rules under
Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), as amended by SEC
Release No. 33-8934 on June 26, 2008. Commencing with its annual report for the
fiscal year ending December 31, 2009, the Company will be required to include a
report of management on its internal control over financial reporting. The
internal control report must include a statement
  of
management’s responsibility for establishing and maintaining adequate internal
control over its financial reporting;
  of
management’s assessment of the effectiveness of its internal control over
financial reporting as of year end; and
  of the
framework used by management to evaluate the effectiveness of the Company’s
internal control over financial reporting.
 
 Furthermore,
in the following fiscal year, it is required to file the auditor’s attestation
report separately on the Company’s internal control over financial reporting on
whether it believes that the Company has maintained, in all material respects,
effective internal control over financial reporting.
  F-9
  Business Combinations ”
  In
December 2007, the FASB issued FASB Statement No. 160“Non-controlling Interests in
Consolidated Financial Statements - an amendment of ARB No. 51” (“SFAS
No. 160”), which causes non-controlling interests in subsidiaries to be included
in the equity section of the balance sheet.  SFAS No. 160 applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008, except for the presentation and disclosure requirements,
which shall be applied retrospectively for all periods presented.  The
Company has not determined the effect that the adoption of SFAS No. 160 will
have on the financial results of the Company.
  In March
2008, the FASB issued FASB Statement No. 161“Disclosures about Derivative
Instruments and Hedging Activities an amendment of FASB Statement No.
133” (“SFAS No. 161”), which changes the disclosure requirements for
derivative instruments and hedging activities.  Pursuant to SFAS
No.161, Entities are required to provide enhanced disclosures about (a) how and
why an entity uses derivative instruments, (b) how derivative instruments and
related hedged items are accounted for under Statement 133 and its related
interpretations, and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash
flows.  SFAS No. 161 is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008 with early
application encouraged. SFAS No. 161 encourages but does not require disclosures
for earlier periods presented for comparative purposes at initial
adoption.  In years after initial adoption, this Statement requires
comparative disclosures only for periods subsequent to initial
adoption.  The Company does not expect the adoption of SFAS No. 161 to
have a material impact on the financial results of the Company.
  F-10
   Management
does not believe that any other recently issued, but not yet effective
accounting pronouncements, if adopted, would have a material effect on the
accompanying financial statements.
 
 NOTE 3 -
GOING CONCERN
 
 The
accompanying financial statements have been prepared on a going concern basis
which contemplates the realization of assets and satisfaction of liabilities in
the normal course of business. At December 31, 2008, the Company has an
accumulated deficit of $52,356and a working capital deficiency of $32,230. These factors raise
substantial doubt about the Company’s ability to continue as a going concern and
are dependent upon its ability to achieve profitable operations or obtain
adequate financing. The financial statements do not include any adjustments
related to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might be necessary should the
Company be unable to continue in existence.
 
 While the
Company is attempting to expand operations and produce additional revenues, the
Company’s cash position may not be significant enough to support the Company’s
daily operations. There are no assurances that it will complete the engagements
successfully or that these engagements will be extended or new engagements will
be obtained.
 
 NOTE 4 -
STOCKHOLDERS’ EQUITY (DEFICIT)
 
 The Company was incorporated as a C
corporation on February 1, 2005 at which time 6,528,572 shares of common stock
were issued to the Company’s founder in exchange for the existing business of
Medical Design Studios.
 
 On May
18, 2007, 542,858 shares of the Company’s common stock were sold to 39
shareholders at $.001 per share, including 71,429 shares sold to a director of
the Company. The director is also the father of the Company’s President. Of the
542,858 shares, 214,286 (39.5%) shares were sold to people directly related to
at least one officer or director and 214,286 (39.5%) shares were sold to the
Company’s counsel.
 
 On March 17, 2008, pursuant to prior
approvals by stockholders owning in excess of a majority of the voting power of
the Company’s outstanding shares, the Company effectuated a 2-for-1 reverse
stock split of the Company’s outstanding shares of common stock.
  Vision Opportunity Master Fund owns
6,742,858 shares of the Company’s common stock, or 94.4% of the Company’s
outstanding shares. Vision Opportunity Master Fund purchased these shares for a
total of approximately $670,000 in cash, inclusive of related acquisition costs.
The source of the funding for the cash payment was the general working capital
of Vision Opportunity Master Fund.
  F-11
  The terms of the purchase and sale
transactions were as a result of arm’s-length negotiations between the parties.
None of the parties had any relationship with one another prior to this
transaction.
 
 On
November 21, 2008, the Company effectuated a 5 for 1 forward stock
split.
 
 All share and per share amounts in
these financial statements have been adjusted to give retroactive effect to the
reverse stock split.
 
 Following
the reverse stock split, the majority shareholder contributed $26,403 to the
Company for working capital.
 
 Stock
Option Plan
  Pursuant
to a May 22, 2007 Board of Directors approval and subsequent stockholder
approval, the Company adopted its 2007 Non-Statutory Stock Option Plan (the
“Plan”) whereby it reserved for issuance up to 1,500,000 shares of its common
stock to directors, officers, employees, consultants and professionals. The
purpose of the Plan is to provide recipients with additional incentives by
increasing their ownership interest in the Company.   The Plan
provides for the issuance of Non-Statutory Stock Options only, which are not
intended to qualify as “incentive stock options” within the meaning of Section
422 of the Internal Revenue Code, as amended. The Plan expires in
2017.
  No
options are outstanding or have been issued under the Plan at December 31, 2008
or 2007.
  NOTE
5 – INCOME TAXES
 
 Deferred tax
assets
 
 At
December 31, 2008, the Company had net operating loss (“NOL”) carry–forwards for
Federal income tax purposes of $67,351 that may be offset against future taxable
income through 2028.  No tax benefit has been reported with respect to
these net operating loss carry-forwards in the accompanying financial statements
because the Company believes that the realization of the Company’s net deferred
tax assets of approximately $22,899 was not considered more likely than not and
accordingly, the potential tax benefits of the net loss carry-forwards are fully
offset by a valuation allowance of $22,899.
 
 Deferred
tax assets consist primarily of the tax effect of NOL
carry-forwards.  The Company has provided a full valuation allowance
on the deferred tax assets because of the uncertainty regarding its
realizability.  The valuation allowance increased approximately
$22,211 and $688 for the years ended December 31, 2008 and 2007,
respectively.
  F-12
 
 Components
of deferred tax assets at December 31, 2008 and 2007 are as
follows:
 
 December
      31,
                          2008
                        
                        
                        December
      31,
                          2007Net
      deferred tax assets – Non-current:Expected
      income tax benefit from NOL carry-forwards
                        
                        $
                        22,899
                        
                        
                        
                        688Less
      valuation allowance
                        
                        
                        (22,899
                        )
                        
                        
                        (688
                        )Deferred
      tax assets, net of valuation allowance
                        
                        $
                        -
                        
                        
                        $
                        -
 
 Income taxes in the
statements ofoperations
 
 A
reconciliation of the federal statutory income tax rate and the effective income
tax rate as a percentage of income before income taxes is as
follows:
 
 For
      the Year
                        Ended
                        December
      31,
                        2008
                      
                      
                      For
      the
                        Year
      Ended
                        December
      31,
                        2007Federal
      statutory income tax rate
                      
                      
                      34.0
                      %
                      
                      
                      34.0
                      %Change
      in valuation allowance on net operating loss
carry-forwards
                      
                      
                      (34.0
                      )%
                      
                      
                      (34.0
                      )%Effective
      income tax rate
                      
                      
                      0.0
                      %
                      
                      
                      0.0
                      %
 
 NOTE 6 –
CONCENTRATION OF RISK
 
 For the
year ended December 31, 2008, two unrelated customers, Legal Wizard (60.0%) and
Trial Exhibits, Inc. (10.51%) comprised 70.51% of total revenues. For the year
ended December 31, 2007, four unrelated customers (High Impact Litigation
(24.81%), The Visual Advantage (23.41%), Legal Wizard (13.29%) and Trial
Exhibits, Inc. (22.54%) comprised 84.05% of total revenues.
 
 NOTE 7 –
RELATED PARTY TRANSACTIONS
 
 The
Company’s office space which serves as its principal address is provided to it
by its President. The Company paid rent of $4,800 in each of 2008 and 2007 for
use of these facilities. There is no written lease agreement.
  F-13