MediaG3 (MDGC)

[Cassandra]

This annual report is just as bogus as all of the previous financial reports issued by Val Westergard.

Here's just the start of my analysis. It would take hours to type up all of of my observations in detail. I'll keep posting observations as time allows. There are MANY problems and blatant inconsistencies and contradictions with the report. Since the new CFO is a CPA, he should be knowledgeable of GAAP, yet didn't follow them. It seems he is just as willing to report false numbers as was Ed Steinback, the previous accountant.

By comparing the balance sheet with previous periods (including those Val made "inactive" on OTC Markets) it's not difficult to find apparent fraud. The same can be said for the accounting of the shares issued and outstanding, which are referred to as "unaudited."

With the exception of cash, assets and working capital are MASSIVELY overstated or outright bogus. The only source of working capital appears be cash on hand of $55.

Working capital comprises only current assets (those that are expected to be converted to cash or allocated to an expense within 12 months). MDGC has been carrying the same prepaid expenses of $122,100 every quarter and essentially the same inventory quarter after quarter.

In the last quarter, they actually increased the value of the inventory without explanation -- in fact there is no explanation anywhere in the report as to the nature of this "inventory." Clearly inventory is impaired and the value should be written down or more likely written off. It was considered "work in progress" before the merger. It certainly should not be carried as a current asset.

The prepaid expenses carried at the same value for several quarters have never been expensed and are also inappropriate to be classified as current assets. The nature of these expenses is also not explained.

Equipment and software were almost fully depreciated before the 2009 merger with Imperial Wireless yet were inexplicably MASSIVELY inflated beyond even their original value and were booked at a net value of $7,060,730 at 12/31/13.

There is no basis for the company too claim "goodwill" of $1,564,037. MediaG3 put this on its balance sheet before the merger but the company has continued to book it as a valid asset. It appears to have arisen out of the asset purchase from ADML. MediaG3 was not allowed to claim goodwill when it was registering its stock with the SEC. See page F-20, item 18 for details: http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=5353411

Revenue of $22,000 for the year was booked with CGS of $66,820 for a gross profit (loss) of negative $44,820. Like the mysterious $475,000 revenue booked in 2011, there is no explanation as to what comprised that revenue. The 2011 revenue to was all written off as bad debt in the last quarter. Is this more bogus revenue? Why was there no explanation?

The report shows that shares were issued for cash of $160,530 in 2012. There may have been more cash raised and shares issued as the share issuance numbers have varied in various reports. In fact, I believe that MDGC may have issued more than the 1.5 billion authorized.

Where did this money go? Most of it seems to have gone to pay professional, consulting and accounting fees of $193,204. Since MediaG3 claims to have no employees and books no salary expense, the officers appear to be independent contractors who are paid fees instead of salaries. The amount paid to each should be disclosed. It appears they are quite well paid considering that MediaG3 does not have any actual business.

Accounts payable increased by $421,736 between YE 2011 and YE 2012 with AP being an astounding $1,244,188 at 12/31/12, so cash raised through stock sales does not seem to be used for paying bills. Why does the company have such high AP? Notes payable are listed separately, so AP is separate. What caused such a massive increase in AP in 2012???

Again, there is much, MUCH more that is wrong with the MDGC annual report. I haven't even begun to address the narrative portion.

http://www.otcmarkets.com/financialReportViewer?symbol=MDGC&id=101772