10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934   For the quarterly period ended December 31, 2013

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT   For the transition period from N/A to N/A

Commission File No. 000-28745

Cloud Medical Doctor Software Corporation

(Name of small business issuer as specified in its charter)

(formerly National Scientific Corporation)

Texas	86-0837077
( State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

1291 Galleria Drive, Suite 200

Henderson, NV 89014

(Address of principal executive offices) (Zip Code)

(702) 818-9011

Registrant’s telephone number, including area code

Indicate by check mark whether the Registrant (1) has filed all reports required 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  o   No  x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o     No x

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

Large accelerated filer	¨	Accelerated filer	¨
Non–Accelerated filer	¨	Smaller reporting company	x

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

 Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at March 18, 2014
Common stock, $0.01 par value	215,079,216

CLOUD MEDICAL DOCTOR SOFTWARE CORPORATION

INDEX TO FORM 10-Q FILING

FOR THE THREE MONTHS ENDED DECEMBER 31, 2013 AND 2012

TABLE OF CONTENTS

		PAGE
PART I - FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (Unaudited)	3
	Balance Sheets	4
	Statements of Operations	5
	Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management Discussion & Analysis of Financial Condition and Results of Operations	17
Item 3	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mining Safety Disclosures	23
Item 5	Other information	23
Item 6.	Exhibits	24
CERTIFICATIONS

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

Table of Contents 2

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

The accompanying interim financial statements have been prepared in accordance with the instructions to Form 10-Q.  Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles.  Except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements included in the Company's Annual Report on Form 10-K for the year ended September 30, 2013.  In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.  Operating results for the three months ended December 31, 2013 are not necessarily indicative of the results that can be expected for the year ending September 30, 2014.

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CLOUD MEDICAL DOCTOR SOFTWARE CORPORATION
(Formerly National Scientific Corporation)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
	December 31, 2013			September 30, 2013
ASSETS
CURRENT ASSETS:
Cash	$	15,907		$	8,587
Accounts receivable		10,493			8,338
Total current assets		26,400			16,925
Software, net		762,766			817,921
TOTAL ASSETS	$	789,166		$	834,846
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities	$	374,995		$	361,994
Liabilities attributable to discontinued operations		46,071			35,356
Lines of credit		68,370			9,796
Total current liabilities		489,436			407,146
Deferred revenue		4,350			—
TOTAL LIABILITIES		493,786			407,146
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 4,000,000 shares authorized;
4,000,000 shares issued and outstanding		40,000			40,000
Common stock, $0.01 par value, 650,000,000 shares authorized;
214,969,216 and 214,624,216 shares issued and outstanding, respectively		2,149,692			2,146,242
Additional paid-in capital		24,854,578			24,783,723
Accumulated deficit		(26,748,890	)		(26,542,265	)
Total stockholders' equity		295,380			427,700
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	789,166		$	834,846
The accompanying notes are an integral part of these unaudited financial statements.

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CLOUD MEDICAL DOCTOR SOFTWARE CORPORATION
(Formerly National Scientific Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	Three Months Ended
	December 31,
	2013			2012
REVENUES	$	117,557		$	149,357
COST OF REVENUES		61,155			60,005
GROSS PROFIT		56,402			89,352
OPERATING EXPENSES:
Selling, general and administrative		222,076			118,871
Research and development		30,000			40,000
Total operating expenses		252,076			158,871
OPERATING LOSS		(195,674	)		(69,519	)
OTHER INCOME (EXPENSE)
Interest expense		(236	)		(127	)
Total other income (expense)		(236	)		(127	)
LOSS FROM CONTINUING OPERATIONS		(195,910	)		(69,646	)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS		(10,715	)		58,984
NET LOSS	$	(206,625	)	$	(10,662	)
NET LOSS PER COMMON SHARE:
Basic and diluted
Continuing operations	$	(0.00	)	$	0.00
Discontinued operations	$	(0.00	)	$	0.00
Total	$	(0.00	)	$	0.00
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic and diluted		214,873,781			212,195,098
The accompanying notes are an integral part of these unaudited financial statements.

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CLOUD MEDICAL DOCTOR SOFTWARE CORPORATION
(Formerly National Scientific Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Three Months Ended December 31,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(206,625	)	$	(10,662	)
(Income) loss from discontinued operations		10,715			(58,984	)
Loss from continuing operations		(195,910	)		(69,646	)
Adjustments to reconcile loss from continuing operations to net cash from operating activities:
Depreciation and amortization		61,155			60,005
Stock issued for compensation		—			3,060
Stock issued for license agreements		3,600			4,100
Changes in operating assets and liabilities:
Accounts receivable		(2,155	)		4,454
Accounts payable and accrued liabilities		72,706			15,000
Deferred revenue		4,350			—
Net cash provided by (used in) provided by operating activities		(56,254	)		16,973
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of advances from officer		—			(25,591	)
Proceeds from lines of credit		58,574			—
Repayment of line of credit		—			(21,763	)
Common stock issued for cash		5,000			31,000
Net cash provided by (used in) financing activities		63,574			(16,354	)
INCREASE IN CASH		7,320			619
CASH, BEGINNING OF PERIOD		8,587			51,356
CASH, END OF PERIOD	$	15,907		$	51,975
SUPPLEMENTAL DISCLOSURES:
CASH PAID FOR:
Interest	$	—		$	—
Taxes	$	—		$	—
NONCASH OPERATING, INVESTING AND FINANCING ACTIVITIES:
Write-off of related party debt to additional paid-in capital	$	59,704		$	—
Common stock issued for purchase of intangible assets	$	6,000		$	2,800
The accompanying notes are an integral part of these unaudited financial statements.

Table of Contents 6

CLOUD MEDICAL DOCTOR SOFTWARE CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED DECEMBER 31, 2013 AND 2012

(Unaudited)

NOTE 1 - DESCRIPTION OF BUSINESS

Cloud Medical Doctor Software Corporation (the “Company”) was incorporated in Texas on June 22, 1953 as American Mortgage Company. On May 16, 1996, the Company changed its name to National Scientific Corporation. On April 3, 2012, the Company changed its name to Cloud Medical Doctor Software Corporation. 

In the year ended September 30, 2011, Cloud-MD introduced the Cloud-MD Office, a “Cloud Based”, 5010 ready and ICD-10 compliant, fully integrated and interoperable suite of medical software and services, designed by experienced healthcare analysts and programmers for healthcare providers, that produces “Actionable Information” to help Independent Physician Practices, New Care Delivery Models (ACO), Healthcare Systems and Billing Services optimize a wide range of business processes resulting in Increased Profits, Higher Quality, Greater Efficiency, Noticeable Cost Reductions and Better Patient Care. Current software product offerings include Practice Management, Electronic Medical Records, Revenue Management, Patient Financial Solutions, Medical and Pharmaceutical Supply Management, Claims Management and PHI Exchange.

In the year ended September 30, 2012, Cloud-MD launched Cloud-MD Billing Services which provides management of medical claims from posting physician charges and payments into our medical billing software. The software uses a continuous insurance claim follow-up system to track and research all rejected or denied medical claims; a Comprehensive Reporting module that includes monthly financial statements sent to our clients so they can see how their practice is performing and a variety of detailed reports giving our clients the necessary information and tools used to assist in the increased production which leads to more profit; and patient account inquiries and support to assist patients with their billing and insurance questions.

NOTE 2 - BASIS OF PRESENTATION OF INTERIM FINANCIAL STATEMENTS

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America.  The accompanying interim unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

Operating results for the three months ended December 31, 2013 are not necessarily indicative of the results that may be expected for the year ending September 30, 2014. Notes to the unaudited interim financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the year ended September 30, 2013 have been omitted; this report should be read in conjunction with the audited financial statements and the footnotes thereto for the fiscal year ended September 30, 2013 included within the Company’s Form 10-K as filed with the Securities and Exchange Commission.

NOTE 3 - GOING CONCERN

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has recurring losses from operations and an accumulated deficit at December 31, 2013 of $26,748,890 and needs additional cash to maintain its operations.

These factors raise doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company’s continued existence is dependent upon management’s ability to develop profitable operations, continued contributions from the Company’s executive officers to finance its operations and the ability to obtain additional funding sources to explore potential strategic relationships and to provide capital and other resources for the further development and marketing of the Company’s products and business.

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. Significant accounting policies are as follows:

Use of Estimates and Assumptions

Table of Contents 7

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net revenues and expenses recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates. The Company’s most significant estimates relate to the valuation of its proprietary technology and its valuation of its common stock.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.  At December 31, 2013, cash and cash equivalents include cash on hand and cash in the bank and the FDIC insures these deposits up to $250,000.

Impairment of Long-Lived Assets

Long-lived assets are evaluated for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted future cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value. The acquired software technologies are reviewed annually for impairment.

Fair Value of Financial Instruments

The Company's financial instruments consist primarily of cash, accounts payable and accrued expenses, and debt. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.  

Fair value is focused on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Within the measurement of fair value, the use of market-based information is prioritized over entity specific information and a three-level hierarchy for fair value measurements is used based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.  

The three-level hierarchy for fair value measurements is defined as follows:

• Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; liabilities in active markets;

• Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability other than quoted prices, either directly or indirectly, including inputs in markets that are not considered to be active; or directly or indirectly including inputs in markets that are not considered to be active;

• Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following table summarizes fair value measurements by level at December 31, 2013 and September 30, 2012 for assets measured at fair value on a recurring basis:

	Level 1		Level 2		Level 3		Total
At December 31, 2013
Software	$	—	$	—	$	762,766	$	762,766
Total Software	$	—	$	—	$	762,766	$	762,766
At September 30, 2012
Software	$	—	$	—	$	817,921	$	817,921
Total Software	$	—	$	—	$	817,921	$	817,921

Table of Contents 8

Accounts Receivable and Allowance for Uncollectible Accounts

Substantially all of the Company’s accounts receivable balance is related to trade receivables. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company will maintain allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments for services. Accounts with known financial issues are first reviewed and specific estimates are recorded. The remaining accounts receivable balances are then grouped in categories by the number of days the balance is past due, and the estimated loss is calculated as a percentage of the total category based upon past history. Account balances are charged against the allowance when it is probable the receivable will not be recovered. As of December 31, 2013 and 2012, the Company had no valuation allowance for the Company’s accounts receivable.

Income Taxes

The Company utilizes the asset and liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for operating loss and tax credit carry-forwards and for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that the value of such assets will be realized.

The Company uses the two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating the Company's tax positions and tax benefits, which may require periodic adjustments. At December 31, 2013, the Company did not record any liabilities for uncertain tax positions.

Revenue Recognition

License revenue consists principally of revenue earned under software license agreements. The Company sells its software to a medical practitioner for direct payment or through a third party leasing company for direct payment to the Company. The third party lease agreement is a non-recourse debt and the Company is not responsible for the default of the medical practitioner. License revenue is generally recognized when a signed contract or other persuasive evidence of an arrangement exists, the software has been electronically delivered, the license fee is fixed or is measured on a paid user basis; and collection of the resulting receivable is probable. When contracts contain multiple elements wherein Vendor-Specific Objective Evidence (“VSOE”) exists for all undelivered elements, we account for the delivered elements in accordance with the “Residual Method.”

VSOE of fair value for maintenance and support is established by a stated renewal rate, if substantive, included in the license arrangement or rates charged in stand-alone sales of maintenance and support. Revenue from subscription license agreements, which include software, rights to unspecified future products and maintenance, is recognized ratably over the term of the subscription period.

Provided all other revenue criteria are met, the upfront, minimum, non-refundable license fees from customers are generally recognized upon delivery and on-going royalty fees are generally recognized upon reports of new licenses issued. If there is significant uncertainty about the project completion or receipt of payment for professional services, revenue is deferred until the uncertainty is sufficiently resolved. VSOE of fair value of services is based upon stand-alone sales of those services.

Subscription revenue is generated from bandwidth and information storage. In the first year and each year thereafter, the software is purchased and installed the purchaser will pay an annual fee of $1,200, $1,500, $1,800, and $2,400, respectively. Subscription revenue is recognized ratably over the term of the agreement.

Transaction revenue is generated from the following services and recognized when a transaction occurs:

· Electronic Remittance Advise $0.35 Electronic remittance transaction fee;

· Paper Claims $1.00 Paper claim fee;

· Carrier Direct $0.16 Carrier direct fee;

· Fast Forward $0.35 Fast forward transaction fee; and,

· Patient Credit $2.50 Automatic Debit processing per transaction paid by the patient

Table of Contents 9

The Company had not received any transaction revenues in the three months ended December 31, 2013.

Cost of License, and Subscriptions Revenues

Cost of license revenue is primarily comprised of the license-based royalties to third parties and production and distribution costs for initial product licenses. No costs were incurred for license-based royalties during the three months ended December 31, 2013 and 2012.

Cost of subscription revenue is primarily comprised of the costs associated with the customer support personnel that provide maintenance, enhancement and support services to customers. No costs were incurred for customer support during the three months ended December 31, 2013 and 2012.

The amortization of acquired technology for products acquired through business combinations are considered as the cost of revenues. The acquired software technologies are amortized over their useful lives of 5 years

Deferred Revenue

Deferred revenue result from fees billed to customers for which revenue has not yet been recognized or for which the conditions of the arrangement have been modified. The Company recognizes revenue to provide up-front capitalization to Cloud-MD for each provider added to the solution set. The Company also recognizes annual subscription fees for virtual servers and subscription and small usage fees and those revenues are based on a 48-month lease, Cloud-MD would amortize the revenue over the life of the agreement of 48 months. In addition, it features incremental monthly revenue, for the duration of the lease (48 months) based on fees assessed for transactions such as eligibility claims processing, etc.

The Company has deferred revenue of $4,350 as of December 31, 2013.

We have adopted the Securities and Exchange Commission’s Staff Accounting Bulletin (SAB) No. 104, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements.

Sales Commissions

The Company pays commissions, including sales bonuses, to the direct sales force related to revenue transactions under sales compensation plans which are established annually. The commission payments are typically paid in full in the month or quarter following execution of the customer contracts. The Company paid commissions of $37,000 and $20,260 for the three months ended December 31, 2013 and 2012, respectively.

Research and Development and Software Development Costs

Capitalization of certain software development costs subsequent to the establishment of technological feasibility. Based on our product development process, technological feasibility is established upon the completion of a working model. To date, costs incurred by us from the completion of the working model to the point at which the product is ready for general release have been insignificant. Accordingly, we have charged all such costs to research and development expense in the period incurred. The Company recorded research and development costs of $30,000 and $40,000 for the three months ended December 31, 2013 and 2012, respectively.

Share-Based Compensation

The Company measures the cost of services received in exchange for an award of an equity instrument based on the grant-date fair value of the award.  Compensation cost is recognized over the vesting or requisite service period.

Basic and Diluted Net Income (Loss) per Common Share

Basic income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. The weighted average number of shares is calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding.  Diluted earnings per share reflects the potential dilution that could occur if stock options, warrants, and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.

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The Company has 4,000,000 preferred shares that can be converted subject to the limitation of the Company’s authorized shares at 1 preferred share for 150 common shares. The conversion can only take place with the approval of the Board of Directors. At December 31, 2013, the preferred shares could be converted into 600,000,000 of the Company’s common shares subject to being limited by the Company’s available authorized shares for issuance, resulting in dilution of common shareholders. The preferred shares are anti-dilutive since the Company has incurred losses for the periods ended December 31, 2013 and 2012.

Diluted loss per share is the same as basic loss per share during periods where net losses are incurred since the inclusion of the potential common stock equivalents would be anti-dilutive as a result of the net loss.  

Concentration of Credit Risk

All of the Company’s cash and cash equivalents are maintained in regional and national financial institutions. The Company has exposure to credit risk to the extent that its cash and cash equivalents exceed amounts covered by the U.S. federal deposit insurance; however, the Company has not experienced any losses in such accounts. In management’s opinion, the capitalization and operating history of the financial institutions are such that the likelihood of material loss is remote.

Subsequent Events

The Company has evaluated all transactions occurring between the three months ended December 31, 2013, through the date of issuance of the financial statements for subsequent event disclosure.

Recent Accounting Pronouncements

No accounting standards or interpretations issued recently are expected to a have a material impact on the Company’s financial position, operations or cash flows.

NOTE 5 - SOFTWARE

The following is a detail of software at December 31, 2013 and September 30, 2012:

	December 31, 2013			September 30, 2013
Source Code License – Antree Systems Limited	$	6,000		$	—
Encryption Software Code		15,800			15,800
Source Code License – MediSouth, LLC		2,500			2,500
Acquisition of Doctor’s Network of America		10,000			10,000
Software License		1,200,106			1,200,106
EMR Certification		23,000			23,000
Total intangible assets		1,257,406			1,251,406
Accumulated amortization of intangible assets		(484,640	)		(423,485	)
Accumulated impairment of assets		(10,000	)		(10,000	)
Total intangible assets	$	762,766		$	817,921

The Company’s software was placed into service starting in the second quarter of fiscal year ended September 30, 2012. The amortization expense was $61,155 and $60,005 for the three months ended December 31, 2013 and 2012, respectively. The Company recognized a $0 and $6,000 for impairment of software acquired from Doctors Network of America (“DNA”) operating in Flowood, Mississippi during the three months ended December 31, 2013 and the year ended September 30, 2013, respectively. The Company is currently in litigation with the sellers of DNA relating to the collection of certain medical billings owed to the Company. As a result of the litigation, the Company deemed the assets to be impaired.

Source Code License

In October 2013, the Company through a purchase agreement with Antree Systems Limited has purchased a complete source code, intellectual property rights, all computer software, patents, or formulas, algorithm licensed or sold under a project known as Compass Rose and appropriate copyrights, patents, mask works, trademarks, service marks, internet domain names and world wide web uniform resource locators (“URLs”) from Antree Systems Limited. The Company issued 200,000 shares of its common stock as consideration for the purchase. The fair value of the consideration and the assets acquired is based on the fair value of the common stock issued in exchange for the software. The total fair value, based on the market price on the date of grant, was $6,000. The Company evaluated this acquisition and determined that it did not meet the definition of a significant business acquisition.

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Encryption Software Code

On November 21, 2012, the Company purchased from CipherSmith, LLC a complete source code, intellectual property rights, all computer software or algorithm licensed or sold under CipherSmith, and appropriate copy rights, patents, mask works, trademarks, service marks, internet domain names or world wide web URS. The Company issued 500,004 shares of its common stock as payment for the acquisition. The fair value of the consideration and the assets acquired is based on the aggregate fair value of the common stock issued in exchange for the software. The total fair value of the shares of common stock issued on the date of grant was $15,800.

Doctors Network of America

On June 22, 2012, the Company entered into an acquisition agreement that closed on March 16, 2013. The Company agreed to acquire DNA in Flowood, Mississippi from Krooss Medical Management Systems, LLC (“Krooss”) for 500,000 shares of common stock. As of September 30, 2012, 200,000 shares of common stock were issued as a deposit, which was valued at $4,000 based on the market value on the date of grant. At the closing of the transaction on March 16, 2013, the Company issued an additional 300,000 shares of common stock which were valued at $6,000 based on the market value on the date of grant.

Subsequent to the transaction closing on March 16, 2013, the sellers refused to pay for medical billing process transaction fees in accordance with their contracts in the amount of approximately $200,000. The Company and the sellers are currently in litigation over the disputed transaction fees of $200,000. The Company has recorded an impairment of the acquired asset in the amount of $6,000 and $4,000 for the three months ended December 31, 2013 and the year ended September 30, 2012, respectively.

NOTE 6 - DISCONTINUED OPERATIONS

The Company’s former Board of Directors believed that it was in the best interest of the Company to discontinue the former business operation of the GPS operational device business. In 2011, this business was transferred to National Scientific, LLC, a company owned by the Company’s prior CEO, by prior management in which the Company’s former CEO was to pay $100,000 plus 2% of revenues for that technology. The former officer never paid the specific consideration for this transaction.

Accordingly, the Company reclassified the assets, liabilities and operations related to its GPS operational device business as discontinued operations.  Consequently, the accompanying financial statements reflect the assets, liabilities and operations of the GPS operational device business as net assets of discontinued operations, net liabilities of discontinued operations and results from discontinued operations.

On March 16, 2013, the Company closed the acquisition with the final payment for DNA. Subsequent to the transaction closing, the sellers refused to pay the transaction fees for medical billing contracts that were processed. The Company filed a lawsuit against the sellers for Breach of Contract among other things in June of 2013. During that time, the Company believes the sellers began contacting all billing contract holders and interfered with the acquisition of all the assets from the transaction. Consequently, the accompanying consolidated financial statements reflect the assets, liabilities and operations of DNA as net assets of discontinued operations, net liabilities of discontinued operations and results from discontinued operations.

Details of the classifications for net assets, liabilities and operations are shown below.

	December 31, 2013		September 30, 2013
Net liabilities of discontinued operations:
Accounts payable	$	46,071	$	35,356
Net liabilities of discontinued operations	$	46,071	$	35,356

	Three Months Ended December 31,
	2013			2012
Discontinued operations:
Revenues	$	77,284		$	—
Cost of sales		—			—
Operating expenses		87,999			—
Gain from write-off of debt		—			58,984
(Loss) income from discontinued operations		(10,715	)	$	58,984

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NOTE 7 - LINES OF CREDIT

In November 2013, the Company entered into a revolving line of credit with Mutual of Omaha in the amount of $65,000 at a 4.00% interest rate per annum which renews annually. As of December 31, 2013, the Company had borrowed $50,000 against the line of credit.

The Company has a revolving line of credit with Chase Bank with a balance as of December 31, 2013 in the amount of $18,370 and a borrowing limit of $50,000. The line of credit with Chase Bank has an interest rate of 4.25% per annum and renews annually.

NOTE 8 - DEBT MITIGATION PROGRAM

The Company determined that the statute of limitations for certain of the Company’s creditors to enforce collection of any amounts they might be owed has now elapsed. Based on the determinations and findings, during three months ended December 31, 2013 and year ended September 30, 2013, the Company recognized a gain on the write-off of liabilities in the amount of $43,911 and $58,984 from third party liabilities, respectively, which was recorded in income from discontinued operations, and additional paid-in capital of $59,704 and $42,137 for related party liabilities, respectively. The Company will continue to conduct this analysis going forward and write-off obligations when such obligations are no longer enforceable based on applicable law.

The following liabilities, through the opinion of legal counsel, were determined by the Company as unenforceable.

	December 31,		September 30,
	2013		2013
Debt Mitigation Program:
Accounts payable and accrued expenses	$	59,704	$	58,984
Accrued interest				42,137
Total debt mitigation program	$	59,704	$	101,121
Gain on write-off of debt	$	—	$	(58,984	)
Additional paid-in capital (1)	$	59,704	$	(42,137	)

(1) All amounts that were owed to related parties in prior years were recorded to paid-in-capital.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

Rent expense for the three months ended December 31, 2013 and 2012 was $0 for both periods.

The Company entered into an agreement to purchase the assets of DNA in June 2012 and after due diligence by both parties the transaction closed on March 16, 2013. Subsequent to the transaction closing on March 16, 2013, the sellers refused to pay for medical billing process transaction fees in accordance with their contracts of approximately $200,000. In June 2013, the Company sued the sellers in federal court for breach of contract among other causes of action of unpaid medical billing transaction fees of approximately $200,000. The Company believes it will be successful in its litigation. However, if the Company is successful, the collectability of the judgment is highly questionable.

The Company has issued shares to new investors since January 2, 2011, that have an anti-reverse common stock split clause if the Company reverse splits the common stock. The reverse split of common stock is determined by management but must be approved by Financial Industry Regulation Authority (“FINRA”). Presently FINRA has denied the Company the right to reverse split the common stock until all Securities and Exchange Commission filings are current and at that point and time the Company will submit a request to FINRA to execute a reverse split of the common stock of the Company. The current investors holding anti-reverse split stock will have the right to hold the same number of shares of common stock as status quo after the reverse split. The anti-reverse split common stock protection is only for stock subject to reverse split and once the Company declares a reverse split and it is completed, the anti-reverse split protection will be terminate and shareholders that received anti-reverse split stock will be held with regular stockholders as the Company proceeds forward. In accordance with the anti-reverse split provision, no further shares will be issued to the anti-reverse split shareholders once the reverse split is approved and completed.

As discussed in Note 8, the Company has written off $59,704 and $101,121 in accounts payable, accrued liabilities and notes payable based on the opinion of legal counsel for the three months ended December 31, 2013 and the year ended September 30, 2013. However, the related creditors could make a claim in the future in regards to these liabilities.

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NOTE 10 - RELATED PARTY TRANSACTIONS

The Company repaid $0 and $25,591 of the advances from the Company’s CEO in the three months ended December 31, 2013 and 2012, respectively. The advances from the CEO are due on demand and do not accrue interest. As of December 31, 2013 and September 30, 2013, there were no amounts owed to the CEO for advances, respectively.

Employment Agreements

The Company entered into an employment agreement with its Chief Executive Officer on January 1, 2013.  The employment agreement will expire on January 1, 2018 and shall automatically renew for another 5 years unless terminated in accordance with the provisions of the employment agreement. The employment agreement provides for:

i.	A monthly salary of $20,833 subject to an annual increase of 10% and consistent with the Company policy applicable to other senior executives and officers and approval by the Board of Directors.
ii.	A cash bonus of 25% of his annual base salary each year if the Company reaches the following milestones (none of which were attained in 2013):
a.		The Company posts annual gross revenues on a consolidated basis of at least $5,000,000;
b.		The Company's earnings before the deduction of income taxes and amortization expenses (“EBITA”), including cash extraordinary items but before officer's bonuses, on a consolidated basis for any year is at least $1,000,000; or the completion of the delinquent SEC filings for five (5) years through September 30, 2013 or the Company obtains FINRA approval for any reverse stock splits.
iii.	The issuance of shares equal to greater of 3,000,000 restricted common shares, or 1% of the outstanding shares.
iv.	The issuance of common stock on each anniversary date of the employment agreement of 5,000,000 shares and issuance of common stock for every acquisition granting 5,000,000 shares for DNA, 5,000,000 shares for CipherSmith, LLC, and 1,000,000 shares for MediSouth, LLC.
v.	An automobile allowance of $1,500 per month.
vi.	A medical insurance allowance of $1,500 per month.
vii.	In the event the Executive's employment is terminated without cause, he will receive the entire contract remaining on the agreement.

The Company entered into an employment agreement with its Chief Financial Officer on January 1, 2013.  The employment agreement will expire January 1, 2018 and shall automatically renew for another 5 years unless terminated in accordance with the provisions of the employment agreement. The employment agreement provides for:

i.	A monthly salary of $12,500 per month subject to an annual increase of 10% per year and consistent with the Company policy applicable to other senior executives and officers and approval by the Board of Directors.
ii.	A cash bonus of 25% of her annual base salary each year if the Company reaches the following milestones (none of which were attained in 2013):
a.		The Company posts annual gross revenues on a consolidated basis of at least $5,000,000;
b.		The Company's EBITA, including cash extraordinary items but before officer's bonuses, on a consolidated basis for any year is at least $1,000,000; or the completion of the delinquent SEC filings for five (5) years through September 30, 2013 or the Company obtains FINRA approval for any reverse stock splits.
iii.	The issuance of shares equal to greater of 3,000,000 restricted common shares, or 1% of the outstanding shares.
iv.	The issuance of common stock on each anniversary date of the employment agreement of 5,000,000 shares and issuance of common stock for every acquisition granting 3,000,000 shares for DNA, 3,000,000 shares for CipherSmith, LLC, and 750,000 shares for MediSouth, LLC.
v.	An automobile allowance of $1,000 per month.
vi.	A medical insurance allowance of $1,500 per month.
vii.	In the event the Executive's employment is terminated without cause, she will receive the entire contract remaining on the agreement.

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NOTE 11 - EQUITY

As of December 31, 2013, the Company was authorized to issue 650,000,000 common shares and 4,000,000 preferred shares at a par value of $0.01.  

Three Months Ended December 31, 2013

Stock Issued for Cash

During the three months ended December 31, 2013, the Company issued 25,000 shares of common stock for $5,000 in net cash proceeds as follows:

Date		Number of Shares		Proceeds
	October 21, 2013		25,000	$	5,000
	Total		25,000	$	5,000

Stock Issued in Connection with Software Licensing and Subscription Agreements

During the three months ended December 31, 2013, the Company issued 120,000 shares of common stock valued at $3,600 based on the market price on the date of grant, to customers, in regards to the purchase of software from the Company in accordance with the Software Licensing and Subscription Agreements. The fair values of the shares issued were recorded as a reduction of software revenue recognized during the three months ended December 31, 2013.

Date		Number of Shares		Fair Value
	December 4, 2013		120,000	$	3,600
	Total		120,000	$	3,600

Stock Issued for Assets Acquisition

In October 2013, the Company through a purchase agreement with Antree Systems Limited has purchased a complete source code, intellectual property rights, all computer software, patents, or formulas, algorithm licensed or sold under a project known as Compass Rose and appropriate copyrights, patents, mask works, trademarks, service marks, internet domain names and world wide web uniform resource locators (“URLs”) from Antree Systems Limited. The Company issued 200,000 shares of its common stock as consideration for the purchase. The fair value of the consideration and the assets acquired is based on the fair value of the common stock issued in exchange for the software. The total fair value, based on the market price on the date of grant, was $6,000. The Company evaluated this acquisition and determined that it did not meet the definition of a significant business acquisition.

In November 2013, the Company issued 180,000 shares of common stock as replacement shares for the 160,000 shares of common stock issued to Antree Systems Limited and 20,000 shares of common stock to Kimberly Ilicerl. The Company intends to cancel the original shares issued because the shares were lost during delivery to Antree Systems.

Three Months Ended December 31, 2012

Stock Issued for Cash

During the three months ended December 31, 2012, the Company issued 87,500 shares of common stock for $31,000 in net cash proceeds as follows:

Date		Number of Shares		Proceeds
	October 14, 2012		20,000	$	20,000
	October 14, 2012		15,000		3,000
	October 14, 2012		18,750		2,500
	October 14, 2012		18,750		2,500
	December 6, 2012		15,000		3,000
	Total		87,500	$	31,000

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Stock Issued in Connection with Software Licensing and Subscription Agreements

During the three months ended December 31, 2012, the Company issued 150,000 shares of common stock valued at $4,100 based on the market price on the date of grant, to customers, in regards to the purchase of software from the Company in accordance with the Software Licensing and Subscription Agreements. The fair values of the shares issued were recorded against software revenue recognized during the three months ended December 31, 2012.

Date		Number of Shares		Fair Value
	October 14, 2012		50,000	$	1,300
	December 6, 2012		100,000		2,800
	Total		150,000	$	4,100

Stock Issued for Services

During the three months ended December 31, 2012, the Company issued 110,000 shares of common stock as compensation. The fair values of the shares were a total of $3,060 and were recorded at the market price on the date of grant. The issuances of stock were as follows:

Date		Number of Shares		Fair Value		Description of Services
	October 14, 2012		10,000	$	260		Commission
	December 6, 2012		100,000		2,800		Compensation
	Total		110,000		3,060

Stock Issued for Assets Acquisition

During three months ended December 31, 2012, the Company issued 100,000 shares of common stock for the acquisition of CipherSmith software. Those shares were valued at $2,800 based on the market price on the dates of grant.

Preferred Stock

The Company has authorized 4,000,000 shares of preferred stock, at $0.01 par value and 4,000,000 are issued and outstanding as of September 30, 2013. Each share of the Preferred Stock has 150 votes on all matters presented to be voted by the holders of our common stock. All 4,000,000 shares of preferred stock have been granted to our CEO & CFO on November 30, 2010 and issued on April 11, 2012 which was valued at the trading price of the common stock of $0.0095 and recorded as an expense of $38,000.

On December 17, 2013, the Company amended its Articles of Incorporation that gave the right to the holders of Preferred A shares to convert 1 share of Convertible Preferred A shares to 150 Common Shares of the Company. The holders of the Preferred A shares can convert the shares upon proper notice and approval of the Board of Directors. Presently, the holders of the Preferred A shares have not sent notice to the Board of Directors.

NOTE 12 – SUBSEQUENT EVENTS

Stock issuances

Period from January 1, 2014 to March 6, 2014

Stock Issued for Cash

On January 12, 2014, the Company issued 10,000 shares of common stock for $10,000 in net cash proceeds.

Stock Issued in Connection with Software Licensing and Subscription Agreements

On March 5, 2014, the Company issued 100,000 shares of common stock valued at $3,000 based on the market price on the date of grant, to customers, in regards to the purchase of software from the Company in accordance with the Software Licensing and Subscription Agreements. The fair values of the shares issued were recorded as a reduction of software revenue recognized during the three months ended March 31, 2014.

* * * * * * * * * * * *

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In this Quarterly Report on Form 10-Q, “Company,” “our company,” “us,” and “our” refer to Cloud Medical Doctor Software Corporation and its subsidiaries, unless the context requires otherwise.

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

Forward-Looking Statements

Management’s Discussion and Analysis contains various “forward looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding future events or the future financial performance of the Company that involve risks and uncertainties. Certain statements included in this Form 10-Q, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to “anticipates”, “believes”, “plans”, “expects”, “future” and similar statements or expressions, identify forward looking statements. Any forward-looking statements herein are subject to certain risks and uncertainties in the Company’s business, including but not limited to, reliance on key customers and competition in its markets, market demand, delayed payments of accounts receivables, technological developments, maintenance of relationships with key suppliers, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which may be beyond the control of the Company. Management will elect additional changes to revenue recognition to comply with the most conservative SEC recognition on a forward going accrual basis as the model is replicated with other similar markets (i.e. SBDC). The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth therein.

Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended September 30, 2013, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.

In addition, the foregoing factors may affect generally our business, results of operations and financial position. Forward-looking statements speak only as of the date the statement was made. We do not undertake and specifically decline any obligation to update any forward-looking statements.

Our Company

The Company was incorporated in Texas on June 22, 1953 as American Mortgage Company. On May 16, 1996, the Company changed its name to National Scientific Corporation. On April 3, 2012, the Company changed its name to Cloud Medical Doctor Software Corporation. During 1996, the Company acquired the operations of Eden Systems, Inc. (Eden) as a wholly owned subsidiary. Eden was engaged in water treatment and the retailing of cleaning products. Eden’s operations were sold on October 1, 1997. From September 30, 1997 through the year ended September 30, 2001, we aimed our efforts in the research and development of semiconductor proprietary technology and processes and in raising capital to fund its operations and research. Beginning in calendar 2002, we focused our efforts on the development, acquisition, enhancement and marketing of location device technologies. Our revenue was derived from sales of electronic devices, recognized as the product is delivered.

On February 4, 2010, the prior Board members Mr. Michael Grollman and Mr. Greg Szabo, voted to discontinue and wind down the operations of the Company's Mobile DVR and Location Products business and operate these remaining Company assets in a Limited Liability Company named NSC Labs, LLC, a company controlled and owned by Mr. Grollman. Mr. Grollman and NSC Labs, LLC entered into an agreement to pay the Company $100,000 plus 2% of revenues. As of this filing, neither Mr. Grollman nor NSC Labs, LLC have paid the specified consideration for this transaction.

Accordingly, the Company reclassified the assets, liabilities and operations related to its GPS operational device business as discontinued operations.  Consequently, the accompanying financial statements reflect the assets, liabilities and operations of the GPS operational device business as net assets of discontinued operations, net liabilities of discontinued operations and results from discontinued operations.

On November 19, 2010, the prior management was terminated and new management began working on operations related to the Company’s medical billing software. In fiscal 2011, the year of termination of prior management, new management deemed that the above transaction transferring prior operations to NSC Labs, LLC was transacted in full and final settlement of the liabilities to former management including those captioned as “disputed accrued expenses – related party” on the Balance Sheet Since the transaction was related to former management who had the ability to affect the terms and outcomes of the liabilities, the transaction has been subsequently recorded as an increase to additional paid in capital.

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The Future for Cloud-MD™

Our business strategy includes the acquisition of successful billing companies in strategic markets, the acquisition or licensing of useful emerging technologies and the direct sale to physicians of Cloud-MD™ Office software licenses.

On the Medical Software and Billing Services side of the equation, Cloud-MD™ has already begun the sale of software licenses and the acquisition of billing companies with the purchase of Doctors Network of America, LLC and is currently in final negotiations with two others billing companies in Texas and we are currently in talks with another medical software company to acquire their software assets and customer base.

Our model is effective because we offer:

· Software For Life – Buy One Time

· Evergreen Product - Support, Maintenance and Upgrades Included With User License

· Physician Ownership Opportunity – Stock Award With Purchase Of License

· Cloud-MD™ is Publicly Traded NSCT.PK

· Patented Auto Post Feature - To Eliminate Need For Manual Posting of Electronic Remittance Advice (835) By Staff

· Multiple Opportunities to Recover Investment (Meaningful Use Dollars, Stock Award Option, IRS Section 179, Lower Employee and Maintenance Cost)

· State-Of-The-Art Claims Editing and Real-Time Eligibility - Increase Collections and Reduce Days in A/R

· Cloud Based Technology- IPAD, IPHONE, ANDROID, GOOGLE, WINDOWS for Anytime and Anywhere Availability and Eliminates Catastrophic Loss of Data

As we move forward building on our current platforms and strengths and gaining significant momentum in acquisitions, capabilities and revenue streams, it is important for Cloud-MD™ to augment its portfolio of capabilities with solutions that complement those offerings currently available. With the addition of a pending acquisition, we will add another dimension to our Cloud-MD™ Office and Billing Services offering that will offer a secure mechanism for providers to exchange patient PHI without the need to have all of the providers on a common EMR platform, but will integrate with our EMR in a manner that offers prospective large clients such as hospitals, ACO’s, etc. the functionality of an Electronic Health Interchange without the huge costs and overhead. In addition, we have recently developed enhanced capabilities within our Cloud-MD™ Office product offering that will offer superior solutions to hospitalists, nursing home practitioners and providers of home health services.

The Future for CipherLoc™

The digital cipher and encryption market offers seemingly endless opportunity. Our CipherLoc™ Polymorphic Cipher Engine is a ground-breaking; state-of-the-art Polymorphic Key Progression Algorithm (PKPA) based digital encryption solution that has wide-spread applicability throughout the commercial computer, communications and broadcasting industries as well as significant applicability in the government arena.

Results of Operations for the Three Months Ended December 31, 2013 and December 31, 2012

Revenue decreased to $117,557 from $149,357 for the three months ended December 31, 2013 and 2012, respectively. Our revenues decreased as a result of lower sales activity during the three months ended December 31, 2013 compared to the three months ended December 31, 2012. The lower sales activity is due to the Company’s focus on two potential acquisitions in Texas that deterred our focus to these potentially new opportunities.

Cost of revenue increased to $61,155 from $60,005 for the three months ended December 31, 2013 and 2012, respectively. Our cost of revenue increased during the three months period due to the amortization of the software costs placed into service.

Selling, general and administrative expenses increased to $222,076 from $118,871 for the three months ended December 31, 2013 and 2012, respectively. The increase in our selling, general and administrative expenses are related to the salaries of management of $106,399 in the three months ended December 31, 2013 compared to $42,147 in the three months ended December 31, 2012 as well as an increase in the cost of accounting.

Research and development costs decreased to $30,000 from $40,000 for the three months ended December 31, 2013 and 2012, respectively. Our research and development costs decrease is related to decreased salary costs for programmers to update software required to be in compliance with the updates and modifications to the Affordable Care Act.

Interest expense increased to $236 from $127 for the three months ended December 31, 2013 and 2012, respectively. Our interest expense increased as a result of the increase in outstanding borrowings on our lines of credits.

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We recorded loss from discontinued operations of $10,715 compared to income of $58,984 for the three months ended December 31, 2013 and 2012, respectively. The Company is currently engaged in the medical billing operations.  Until October 1, 2009, the Company’s sole sources of revenues were from GPS operational device business.  The Company discontinued its GPS operational device business in February 2010 (See “Note 6 - Discontinued Operations” to the accompanying Financial Statements).   

Liquidity and Capital Resources

We expect to incur substantial expenses and generate significant operating losses as we continue to grow our operations, as well as incur expenses related to operating as a public company and compliance with regulatory requirements.

We have an accumulated deficit at December 31, 2013 of $26,748,890 and need additional cash flows to maintain our operations. We depend on the continued contributions of our executive officers to finance our operations and need to obtain additional funding sources to explore potential strategic relationships and to provide capital and other resources for the further development and marketing of our products and business. We expect our cash needs for the next 12 months to be $850,000 to fund our operations. The ability of the Company to continue its operations is dependent on the successful execution of management’s plans, which include expectations of raiding debt or equity based capital until such time that funds from operations are sufficient to fund working capital requirements. The Company may need to incur additional liabilities with related parties to sustain the Company’s existence. There is no assurance that such funding, if required will be available to us or, if available, will be available upon terms favorable to us.

The Company has a revolving line of credit with Chase Bank with a balance as of December 31, 2013 in the amount of $18,370 and a borrowing limit of $50,000. We have previously received advances from our Chief Executive Officer which we have used to help fund our operations.

In November 2013, the Company entered into a revolving line of credit with Mutual of Omaha for a line of credit in the amount of $65,000 at 4.00% interest rate which renews annually. As of December 31, 2013, the Company had borrowed $50,000.

Cash flows from operations. Our cash (used in) provided by operating activities were ($56,254) and $16,973 for the three months ended December 31, 2013 and 2012, respectively. The increase in cash used in operations was primarily attributable to the increase of general and administrative expenses in 2013 as compared to the 2012 period.

Cash flows from financing activities. Cash provided by (used in) financing activities was $63,574 and ($16,354) for the three months ended December 31, 2013 and 2012, respectively. We received cash from the sale of our common stock of $5,000 and $31,000 for the three months ended December 31, 2013 and 2012, respectively. During the three months ended December 31, 2013, received $8,574 from the Chase line of credit and received $50,000 from our Mutual of Omaha line of credit. During the three months ended December 31, 2012, we repaid the Chase line of credit of $21,763, repaid our advances from our CEO of $25,591.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements including arrangements that would affect the liquidity, capital resources, market risk support and credit risk support or other benefits.

WHERE YOU CAN FIND MORE INFORMATION

You are advised to read this Quarterly Report on Form 10-Q in conjunction with other reports and documents that we file from time to time with the SEC. In particular, please read our Quarterly Reports on Form 10-Q, Annual Report on Form 10-K, and Current Reports on Form 8-K that we file from time to time. You may obtain copies of these reports directly from us or from the SEC at the SEC’s Public Reference Room at 100 F. Street, N.E. Washington, D.C. 20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its website http://www.sec.gov.

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not hold any derivative instruments and do not engage in any hedging activities.

ITEM 4.  CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our Chief Executive Officer and Principal Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures were designed to provide reasonable assurance that the controls and procedures would meet their objectives. As required by SEC Rule 13a-15(b), our Chief Executive Officer and Principal Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective since the Company has been ineffective in filing timely.

Our Chief Executive Officer and Principal Financial Officer are responsible for establishing and maintaining adequate internal control over our financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management has used the framework set forth in the report entitled Internal Control-Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission, known as COSO, to evaluate the effectiveness of our internal control over financial reporting. Based on this assessment, our Chief Executive Officer and Principal Financial Officer have concluded that our internal control over financial reporting were effective as of December 31, 2013. There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. The Company has been ineffective in the timely filing of the company’s quarterly filings.

a. There were no changes in our internal control over financial reporting that occurred during the three months ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

b. It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our company’s or our company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

On July 5, 2013, the Company filed a complaint against Krooss Medical Management Systems, LLC, William F. Krooss and Marie W. Krooss in the United States District Court, District of Nevada Case No. 2013-CV-01187-ABG-VCF for the collection of $200,000 of unpaid medical billing fees that were seriously delinquent. After many attempts by the Company to begin collections, the Defendants refused to pay the outstanding balances, however expected the Company to continue to bill for them. The Complaint includes causes of action Breach of the PTAPA, Breach of Billing and Collections Contracts, Negligence, Breach of the Duty of Good Faith and Fair Dealing, Tortious Interference with Business Relations, Fraud, among other causes of action.

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On August 13, 2013, Krooss Medical Management Systems et al filed a Complaint in Chancery Court of Rankin County, Mississippi Case No. 13-1372 as a strategy to keep the collection matter in Mississippi Chancery Court.

Case No. 13-1372 was remanded to the United States District Court, Southern District of Mississippi Jackson Division Case No. 3:13CV507-HTW-LRA.

This litigation is a collection matter of unpaid fees by the Defendants and the Company vehemently denies the allegations (Breach of the Permanent Transfer Asset Purchase Agreement (“PTAPA”), Rescission of the PTAPA, Breach of Billing and Collections Contracts, Negligence, Quantum Meruit, Restitution, and Estoppel, Breach of the Duty of Good Faith and Fair Dealing, Tortious Interference with Business Relations, among other causes of action) filed in Mississippi Chancery Court related to this collection matter. The Company does not expect the cost to litigate this matter to adversely affect the Company’s operations. However, the Company has reduced operations in DNA-Cloud in Mississippi as the sellers have interfered with the billing contracts purchased which is one of the causes of action in Complaint, among others. Many of the contracts have been terminated due to the interference by the sellers, and DNA-Cloud has not been able to expand the business because of the reputation of the sellers in Jackson, Mississippi and the surrounding area.

ITEM 1A. RISK FACTORS

There were no material changes from the risk factors previously disclosed in Part II, Item 1A, “Risk Factors” in our  Annual Report on Form 10-K for the year ended September 30, 2013 during our three months ended December 31, 2013.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS SECURITIES

Period from December 31, 2013 to March 6, 2014

Stock Issued for Cash

On January 12, 2014, the Company issued 10,000 shares of common stock for $10,000 in net cash proceeds. 

Three Months Ended December 31, 2013

Stock Issued for Cash

During the three months ended December 31, 2013, the Company issued 25,000 shares of common stock for $5,000 in net cash proceeds as follows:

Date		Number of Shares		Proceeds
	October 21, 2013		25,000	$	5,000
	Total		25,000	$	5,000

Stock Issued in Connection with Software Licensing and Subscription Agreements

During the three months ended December 31, 2013, the Company issued 120,000 shares of common stock valued at $3,600 based on the market price on the date of grant, to customers, in regards to the purchase of software from the Company in accordance with the Software Licensing and Subscription Agreements. The fair values of the shares issued were recorded as a reduction of software revenue recognized during the three months ended December 31, 2013.

Date		Number of Shares		Fair Value
	December 4, 2013		120,000	$	3,600
	Total		120,000	$	3,600

Stock Issued for Assets Acquisition

In October 2013, the Company through a purchase agreement with Antree Systems Limited has purchased a complete source code, intellectual property rights, all computer software, patents, or formulas, algorithm licensed or sold under a project known as Compass Rose and appropriate copyrights, patents, mask works, trademarks, service marks, internet domain names and world wide web uniform resource locators (“URLs”) from Antree Systems Limited. The Company issued 200,000 shares of its common stock as consideration for the purchase. The fair value of the consideration and the assets acquired is based on the fair value of the common stock issued in exchange for the software. The total fair value, based on the market price on the date of grant, was $6,000. The Company evaluated this acquisition and determined that it did not meet the definition of a significant business acquisition.

Table of Contents 21

In November 2013, the Company issued 180,000 shares of common stock as replacement shares for the 160,000 shares of common stock issued to Antree Systems Limited and 20,000 shares of common stock to Kimberly Ilicerl. The Company intends to cancel the original shares issued because the shares were lost during delivery to Antree Systems.

Three Months Ended December 31, 2012

Stock Issued for Cash

During the three months ended December 31, 2012, the Company issued 87,500 shares of common stock for $31,000 in net proceeds as follows:

Date		Number of Shares		Proceeds
	October 14, 2012		20,000	$	20,000
	October 14, 2012		15,000		3,000
	October 14, 2012		18,750		2,500
	October 14, 2012		18,750		2,500
	December 6, 2012		15,000		3,000
	Total		87,500	$	31,000

Stock Issued in Connection with Software Licensing and Subscription Agreements

During the three months ended December 31, 2012, the Company issued 150,000 shares of common stock valued at $4,100 based on the market price on the date of grant, to customers, in regards to the purchase of software from the Company in accordance with the Software Licensing and Subscription Agreements. The fair values of the shares issued were recorded against software revenue recognized during the three months ended December 31, 2012.

Date		Number of Shares		Fair Value
	October 14, 2012		50,000	$	1,300
	December 6, 2012		100,000		2,800
	Total		150,000	$	4,100

Stock Issued for Services

During the three months ended December 31, 2012, the Company issued 110,000 shares of common stock as compensation. The fair values of the shares were a total of $3,060 and were recorded at the market price on the date of grant. The issuances of stock were as follows:

Date		Number of Shares		Fair Value		Description of Services
	October 14, 2012		10,000	$	260		Commission
	December 6, 2012		100,000		2,800		Compensation
	Total		110,000		3,060

Stock Issued for Assets Acquisition

During three months ended December 31, 2012, the Company issued 100,000 shares of common stock for the acquisition of CipherSmith software. Those shares were valued at $2,800 based on the market price on the dates of grant.

Table of Contents 22

The offer and sale of such shares of our common stock were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Rule 506 promulgated under the Securities Act of 1933 (the “Securities Act”) and in Section 4(2) of the Securities Act, based on the following: (a) the investors confirmed to us that they were “accredited investors,” as defined in Rule 501 of Regulation D promulgated under the Securities Act and had such background, education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities; (b) there was no public offering or general solicitation with respect to the offering; (c) the investors were provided with certain disclosure materials and all other information requested with respect to our company; (d) the investors acknowledged that all securities being purchased were “restricted securities” for purposes of the Securities Act, and agreed to transfer such securities only in a transaction registered under the Securities Act or exempt from registration under the Securities Act; and (e) a legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequent registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There were no defaults upon senior securities during the three months period ended December 31, 2013.

ITEM 4. MINING SAFETY DISCLOSURES 

N/A

ITEM 5. OTHER INFORMATION

There is no information with respect to which information is not otherwise called for by this form.

Table of Contents 23

ITEM 6. EXHIBITS

Exhibits

3.1	Articles of Incorporation(1)
3.2	Bylaws(2)
10.1	Employment Agreement between National Scientific Corporation and Michael A. Grollman dated January 2001(4)
10.2	Employment Agreement between National Scientific Corporation and Graham L. Clark dated January 2003(6)
10.3	NSC Consulting Agreement dated August 2001, and Amendments dated August 2002 and July 2003, with Dr. El-Badawy El-Sharawy(6)
10.4	Amended and Restated 2000 Stock Option Plan(3)
10.5	Form of 2004 Stock Retainage Plan Agreement(6)
10.6	Agreement Regarding Management Consulting Services with Stanton Walker of New York dated May 2003(6)
10.7	Agreement Regarding Distribution and Marketing of Gotcha!® Child Safety Product and other products dated December 2002 with FutureCom Global, Inc. (6)
10.8	Purchase Order from Verify Systems, Inc, dated March 2003 for IBUS™ School Child Tracking Systems(5)
10.9	Letter of Understanding and Agreement dated April 2004 Regarding Sales and Distribution of Verify School safety products, and an Unlimited Software License with Anthony Grosso and CIS Services, LLC(6)
10.10	Letter of Intent from Positus, Inc. dba Bike & Cycle Trak, dated February 2003 for Design of Power Sports Tracking System(6)
10.11	Purchase Order from Positus, Inc. dba Bike & Cycle Trak, for Design of Power Sports Tracking System dated March 2003(6)
10.12	Employment agreement of Michael De La Garza(8)
10.13	Employment agreement of Pamela Thompson(8)
14	Code of Ethics(7)
31	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
32	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act

____________

	(1)	Incorporated by reference to the Registrant’s Form 10-SB filed on or about January 3, 2000.
	(2)	Incorporated by reference to the Registrant’s Form 10-QSB for the quarter ended March 31, 2001 and filed on or about May 15, 2001.
	(3)	Incorporated by reference to the Registrant’s Form 10-QSB for the quarter ended December 31, 2000 and filed on or about February 14, 2001.
	(4)	Incorporated by reference to the Registrant’s Form 10-KSB for the year ended September 30, 2000 and filed on or about December 19, 2000.
(5)		Incorporated by reference to the Registrant’s Form S-8 filed on or around June 3, 2003.
(6)		Incorporated by reference to the Registrant’s Form SB2 filed on or around June 24, 2004.
(7)		Incorporated by reference to the Registrant’s Form 10-QSB for the quarter ended June 30, 2004 and filed on or about August 16, 2004.
(8)		Incorporated by reference to the Registrant’s Form 10-K for the year ended September 30, 2011 and filed on or about October 10, 2013.

Table of Contents 24

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.

Registrant Date: March 20, 2014	Cloud Medical Doctor Software Corporation By: /s/ Michael De La Garza
	Michael De La Garza
	Chief Executive Officer (Principal Executive Officer)

Registrant Date: March 20, 2014	Cloud Medical Doctor Software Corporation By: /s/ Pamela Thompson
	Pamela Thompson
	Principal Financial Officer

Table of Contents 25

EX-31.1

Exhibit 31.1

Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and pursuant to Rule 13a-14(a) and Rule 15d-14 under the Securities Exchange Act of 1934

I, Michael De La Garza, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Cloud Medical Doctor Software Corporation;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Registrant	Cloud Medical Doctor Software Corporation By: /s/ Michael De La Garza
Date: March 20 2014	Michael De La Garza
	Chief Executive Officer (Principal Executive Officer,)

EX-31.2

Exhibit 31.2

Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and pursuant to Rule 13a-14(a) and Rule 15d-14 under the Securities Exchange Act of 1934

I, Pamela Thompson, certify that: 

1 I have reviewed this Quarterly Report on Form 10-Q of Cloud Medical Doctor Software Corporation;

2 Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Registrant	Cloud Medical Doctor Software Corporation By: /s/ Pamela Thompson
Date: March 20, 2014	Pamela Thompson
	Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of Cloud Medical Doctor Software Corporation (the "Company") on Form 10-Q for the period ending December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael De La Garza, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Registrant	Cloud Medical Doctor Software Corporation By: /s/ Michael De La Garza
Date: March 20, 2014	Michael De La Garza
	Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of Cloud Medical Doctor Software Corporation (the "Company") on Form 10-Q for the period ending December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Pamela Thompson, Principle Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Registrant Date: March 20, 2014	Cloud Medical Doctor Software Corporation By: /s/ Pamela Thompson
	Pamela Thompson
	Chief Financial Officer (Principal Financial Officer)

XML

9 - COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $)	3 Months Ended		12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2013
COMMITMENTS AND CONTINGENCIES
Rent Expense	$ 0	$ 0
Payable Write Offs	$ 59,704		$ 101,121

XML

4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $)	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2013
Accounting Policies [Abstract]
FDIC Insured Cash	$ 250,000
Subscription Revenue, Year One	1,200
Subscription Revenue, Year Two	1,500
Subscription Revenue, Year Three	1,800
Subscription Revenue, Year Four	2,400
Deferred Revenue	4,350
Sales Commissions	37,000	20,260
Research and Development Costs	$ 30,000	$ 40,000
Preferred Stock, Shares Outstanding	4,000,000		4,000,000
Preferred Stock converted into Common Stock, Shares Common Stock	600,000,000

XML

4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. Significant accounting policies are as follows:

Use of Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net revenues and expenses recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates. The Company’s most significant estimates relate to the valuation of its proprietary technology and its valuation of its common stock.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.  At December 31, 2013, cash and cash equivalents include cash on hand and cash in the bank and the FDIC insures these deposits up to $250,000.

Impairment of Long-Lived Assets

Long-lived assets are evaluated for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted future cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value. The acquired software technologies are reviewed annually for impairment.

Fair Value of Financial Instruments

The Company's financial instruments consist primarily of cash, accounts payable and accrued expenses, and debt. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.  

Fair value is focused on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Within the measurement of fair value, the use of market-based information is prioritized over entity specific information and a three-level hierarchy for fair value measurements is used based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.  

The three-level hierarchy for fair value measurements is defined as follows:

• Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; liabilities in active markets;

• Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability other than quoted prices, either directly or indirectly, including inputs in markets that are not considered to be active; or directly or indirectly including inputs in markets that are not considered to be active;

• Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following table summarizes fair value measurements by level at December 31, 2013 and September 30, 2012 for assets measured at fair value on a recurring basis:

	Level 1		Level 2		Level 3		Total
At December 31, 2013
Software	$	—	$	—	$	762,766	$	762,766
Total Software	$	—	$	—	$	762,766	$	762,766
At September 30, 2012
Software	$	—	$	—	$	817,921	$	817,921
Total Software	$	—	$	—	$	817,921	$	817,921

Accounts Receivable and Allowance for Uncollectible Accounts

Substantially all of the Company’s accounts receivable balance is related to trade receivables. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company will maintain allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments for services. Accounts with known financial issues are first reviewed and specific estimates are recorded. The remaining accounts receivable balances are then grouped in categories by the number of days the balance is past due, and the estimated loss is calculated as a percentage of the total category based upon past history. Account balances are charged against the allowance when it is probable the receivable will not be recovered. As of December 31, 2013 and 2012, the Company had no valuation allowance for the Company’s accounts receivable.

Income Taxes

The Company utilizes the asset and liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for operating loss and tax credit carry-forwards and for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that the value of such assets will be realized.

The Company uses the two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating the Company's tax positions and tax benefits, which may require periodic adjustments. At December 31, 2013, the Company did not record any liabilities for uncertain tax positions.

Revenue Recognition

License revenue consists principally of revenue earned under software license agreements. The Company sells its software to a medical practitioner for direct payment or through a third party leasing company for direct payment to the Company. The third party lease agreement is a non-recourse debt and the Company is not responsible for the default of the medical practitioner. License revenue is generally recognized when a signed contract or other persuasive evidence of an arrangement exists, the software has been electronically delivered, the license fee is fixed or is measured on a paid user basis; and collection of the resulting receivable is probable. When contracts contain multiple elements wherein Vendor-Specific Objective Evidence (“VSOE”) exists for all undelivered elements, we account for the delivered elements in accordance with the “Residual Method.”

VSOE of fair value for maintenance and support is established by a stated renewal rate, if substantive, included in the license arrangement or rates charged in stand-alone sales of maintenance and support. Revenue from subscription license agreements, which include software, rights to unspecified future products and maintenance, is recognized ratably over the term of the subscription period.

Provided all other revenue criteria are met, the upfront, minimum, non-refundable license fees from customers are generally recognized upon delivery and on-going royalty fees are generally recognized upon reports of new licenses issued. If there is significant uncertainty about the project completion or receipt of payment for professional services, revenue is deferred until the uncertainty is sufficiently resolved. VSOE of fair value of services is based upon stand-alone sales of those services.

Subscription revenue is generated from bandwidth and information storage. In the first year and each year thereafter, the software is purchased and installed the purchaser will pay an annual fee of $1,200, $1,500, $1,800, and $2,400, respectively. Subscription revenue is recognized ratably over the term of the agreement.

Transaction revenue is generated from the following services and recognized when a transaction occurs:

· Electronic Remittance Advise $0.35 Electronic remittance transaction fee;

· Paper Claims $1.00 Paper claim fee;

· Carrier Direct $0.16 Carrier direct fee;

· Fast Forward $0.35 Fast forward transaction fee; and,

· Patient Credit $2.50 Automatic Debit processing per transaction paid by the patient

The Company had not received any transaction revenues in the three months ended December 31, 2013.

Cost of License, and Subscriptions Revenues

Cost of license revenue is primarily comprised of the license-based royalties to third parties and production and distribution costs for initial product licenses. No costs were incurred for license-based royalties during the three months ended December 31, 2013 and 2012.

Cost of subscription revenue is primarily comprised of the costs associated with the customer support personnel that provide maintenance, enhancement and support services to customers. No costs were incurred for customer support during the three months ended December 31, 2013 and 2012.

The amortization of acquired technology for products acquired through business combinations are considered as the cost of revenues. The acquired software technologies are amortized over their useful lives of 5 years

Deferred Revenue

Deferred revenue result from fees billed to customers for which revenue has not yet been recognized or for which the conditions of the arrangement have been modified. The Company recognizes revenue to provide up-front capitalization to Cloud-MD for each provider added to the solution set. The Company also recognizes annual subscription fees for virtual servers and subscription and small usage fees and those revenues are based on a 48-month lease, Cloud-MD would amortize the revenue over the life of the agreement of 48 months. In addition, it features incremental monthly revenue, for the duration of the lease (48 months) based on fees assessed for transactions such as eligibility claims processing, etc.

The Company has deferred revenue of $4,350 as of December 31, 2013.

We have adopted the Securities and Exchange Commission’s Staff Accounting Bulletin (SAB) No. 104, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements.

Sales Commissions

The Company pays commissions, including sales bonuses, to the direct sales force related to revenue transactions under sales compensation plans which are established annually. The commission payments are typically paid in full in the month or quarter following execution of the customer contracts. The Company paid commissions of $37,000 and $20,260 for the three months ended December 31, 2013 and 2012, respectively.

Research and Development and Software Development Costs

Capitalization of certain software development costs subsequent to the establishment of technological feasibility. Based on our product development process, technological feasibility is established upon the completion of a working model. To date, costs incurred by us from the completion of the working model to the point at which the product is ready for general release have been insignificant. Accordingly, we have charged all such costs to research and development expense in the period incurred. The Company recorded research and development costs of $30,000 and $40,000 for the three months ended December 31, 2013 and 2012, respectively.

Share-Based Compensation

The Company measures the cost of services received in exchange for an award of an equity instrument based on the grant-date fair value of the award.  Compensation cost is recognized over the vesting or requisite service period.

Basic and Diluted Net Income (Loss) per Common Share

Basic income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. The weighted average number of shares is calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding.  Diluted earnings per share reflects the potential dilution that could occur if stock options, warrants, and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.

The Company has 4,000,000 preferred shares that can be converted subject to the limitation of the Company’s authorized shares at 1 preferred share for 150 common shares. The conversion can only take place with the approval of the Board of Directors. At December 31, 2013, the preferred shares could be converted into 600,000,000 of the Company’s common shares subject to being limited by the Company’s available authorized shares for issuance, resulting in dilution of common shareholders. The preferred shares are anti-dilutive since the Company has incurred losses for the periods ended December 31, 2013 and 2012.

Diluted loss per share is the same as basic loss per share during periods where net losses are incurred since the inclusion of the potential common stock equivalents would be anti-dilutive as a result of the net loss.  

Concentration of Credit Risk

All of the Company’s cash and cash equivalents are maintained in regional and national financial institutions. The Company has exposure to credit risk to the extent that its cash and cash equivalents exceed amounts covered by the U.S. federal deposit insurance; however, the Company has not experienced any losses in such accounts. In management’s opinion, the capitalization and operating history of the financial institutions are such that the likelihood of material loss is remote.

Subsequent Events

The Company has evaluated all transactions occurring between the three months ended December 31, 2013, through the date of issuance of the financial statements for subsequent event disclosure.

Recent Accounting Pronouncements

No accounting standards or interpretations issued recently are expected to a have a material impact on the Company’s financial position, operations or cash flows.

XML

6 - DISCONTINUED OPERATIONS (Details Narrative) (USD $)	12 Months Ended
	Sep. 30, 2011
Discontinued Operations and Disposal Groups [Abstract]
Sale of Assets, Purchase Price	$ 100,000

XML

6 - DISCONTINUED OPERATIONS - Discontinued Operations (Details) (USD $)	3 Months Ended		12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2013
Revenues	$ 117,557	$ 149,357
Cost of sales	61,155	60,005
Operating expenses	252,076	158,871
Gain from write-off of debt			(58,984)
Discontinued Operations [Member]
Accounts payable	46,071		35,356
Net liabilities of discontinued operations	46,071		35,356
Revenues	77,284
Cost of sales
Operating expenses	87,999
Gain from write-off of debt		58,984
(Loss) income from discontinued operations	$ (10,715)	$ 58,984

XML

7 - LINES OF CREDIT (Details Narrative) (USD $)	3 Months Ended
	Dec. 31, 2013
Mutualof Omaha [Member]
Revolving Line of Credit, Borrowing Capacity	$ 65,000
Line of Credit Interest Rate	4.00%
Line of Credit, Amount Outstanding	50,000
Chase [Member]
Revolving Line of Credit, Borrowing Capacity	50,000
Line of Credit Interest Rate	4.25%
Line of Credit, Amount Outstanding	$ 18,370

XML

8 - DEBT MITIGATION PROGRAM - Debt Mitigation Program (Details) (USD $)	3 Months Ended			12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012	Sep. 30, 2013
Total debt mitigation program	$ 59,704			$ 101,121
Gain on write-off of debt				(58,984)
Additional paid-in capital	59,704	[1]		42,137	[1]
Accounts Payable and Accrued Expenses
Total debt mitigation program	59,704			58,984
Accrued Interest
Total debt mitigation program				$ 42,137

[1] All amounts that were owed to related parties in prior years were recorded to paid-in-capital.

XML

3 - GOING CONCERN

3 Months Ended

Dec. 31, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

3 - GOING CONCERN

NOTE 3 - GOING CONCERN

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has recurring losses from operations and an accumulated deficit at December 31, 2013 of $26,748,890 and needs additional cash to maintain its operations.

These factors raise doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company’s continued existence is dependent upon management’s ability to develop profitable operations, continued contributions from the Company’s executive officers to finance its operations and the ability to obtain additional funding sources to explore potential strategic relationships and to provide capital and other resources for the further development and marketing of the Company’s products and business.

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8 - DEBT MITIGATION PROGRAM (Details Narrative) (USD $)	3 Months Ended			12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012	Sep. 30, 2013
OTHER INCOME (EXPENSE)
Gain on the Write-Off of Liabilities	$ 43,911			$ 58,984
Additional Paid-In Capital for Related Party Liabilities	$ 59,704	[1]		$ 42,137	[1]

[1] All amounts that were owed to related parties in prior years were recorded to paid-in-capital.

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Balance Sheets (Unaudited) (USD $)	Dec. 31, 2013	Sep. 30, 2013
CURRENT ASSETS:
Cash	$ 15,907	$ 8,587
Accounts receivable	10,493	8,338
Total current assets	26,400	16,925
Software, net	762,766	817,921
TOTAL ASSETS	789,166	834,846
CURRENT LIABILITIES:
Accounts payable and accrued liabilities	374,995	361,994
Liabilities attributable to discontinued operations	46,071	35,356
Lines of credit	68,370	9,796
Total current liabilities	489,436	407,146
Deferred revenue	4,350
TOTAL LIABILITIES	493,786	407,146
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 4,000,000 shares authorized; 4,000,000 shares issued and outstanding	40,000	40,000
Common stock, $0.01 par value, 650,000,000 shares authorized; 214,969,216 and 214,624,216 shares issued and outstanding, respectively	2,149,692	2,146,242
Additional paid-in capital	24,854,578	24,783,723
Accumulated deficit	(26,748,890)	(26,542,265)
Total stockholders' equity	295,380	427,700
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 789,166	$ 834,846

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1- DESCRIPTION OF BUSINESS

3 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

1- DESCRIPTION OF BUSINESS

NOTE 1- DESCRIPTION OF BUSINESS

Cloud Medical Doctor Software Corporation (the “Company”) was incorporated in Texas on June 22, 1953 as American Mortgage Company. On May 16, 1996, the Company changed its name to National Scientific Corporation. On April 3, 2012, the Company changed its name to Cloud Medical Doctor Software Corporation. 

In the year ended September 30, 2011, Cloud-MD introduced the Cloud-MD Office, a “Cloud Based”, 5010 ready and ICD-10 compliant, fully integrated and interoperable suite of medical software and services, designed by experienced healthcare analysts and programmers for healthcare providers, that produces “Actionable Information” to help Independent Physician Practices, New Care Delivery Models (ACO), Healthcare Systems and Billing Services optimize a wide range of business processes resulting in Increased Profits, Higher Quality, Greater Efficiency, Noticeable Cost Reductions and Better Patient Care. Current software product offerings include Practice Management, Electronic Medical Records, Revenue Management, Patient Financial Solutions, Medical and Pharmaceutical Supply Management, Claims Management and PHI Exchange.

In the year ended September 30, 2012, Cloud-MD launched Cloud-MD Billing Services which provides management of medical claims from posting physician charges and payments into our medical billing software. The software uses a continuous insurance claim follow-up system to track and research all rejected or denied medical claims; a Comprehensive Reporting module that includes monthly financial statements sent to our clients so they can see how their practice is performing and a variety of detailed reports giving our clients the necessary information and tools used to assist in the increased production which leads to more profit; and patient account inquiries and support to assist patients with their billing and insurance questions.

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11 - EQUITY (Details Narrative) (USD $)	2 Months Ended	3 Months Ended
	Mar. 06, 2014	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2013
Common Stock, Shares Authorized		650,000,000		650,000,000
Preferred Stock Shares Authorized		4,000,000		4,000,000
Common Stock, Par Value		$ 0.01		$ 0.01
Preferred Stock, Par Value		$ 0.01		$ 0.01
Preferred Stock, Shares Issued		4,000,000		4,000,000
Preferred Stock Shares Outstanding		4,000,000		4,000,000
Preferred Stock, Voting Rights		150
Preferred Stock, Trading Price of the Common Stock				$ 0.0095
Compensation Expense			$ 38,000
Conversion Ratio, Preferred to Common		0.0067
Stock Issued for Cash, Shares	10,000	25,000	87,500
Stock Issued for Cash, Value	10,000	5,000	31,000
Stock Issued for Software Licensing and Subscription Agreements, Shares	100,000	120,000	150,000
Stock Issued for Software Licensing and Subscription Agreements, Value	3,000	3,600	4,100
Stock Issued for Assets Acquisition, Shares		200,000	100,000
Stock Issued for Assets Acquisition, Value		6,000	2,800
Stock Issued for Replacement, Shares		180,000
Stock Issued for Services, Shares			110,000
Stock Issued for Services, Value			$ 3,060
Antree Systems [Member]
Stock Issued for Replacement, Shares		160,000
Kimberly Ilicerl
Stock Issued for Replacement, Shares		20,000

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8 - DEBT MITIGATION PROGRAM (Tables)

3 Months Ended

Dec. 31, 2013

OTHER INCOME (EXPENSE)

Debt Mitigation Program

	December 31,		September 30,
	2013		2013
Debt Mitigation Program:
Accounts payable and accrued expenses	$	59,704	$	58,984
Accrued interest				42,137
Total debt mitigation program	$	59,704	$	101,121
Gain on write-off of debt	$	—	$	(58,984	)
Additional paid-in capital (1)	$	59,704	$	(42,137	)

(1) All amounts that were owed to related parties in prior years were recorded to paid-in-capital.

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12- SUBSEQUENT EVENTS (Details Narrative) (USD $)	2 Months Ended	3 Months Ended
	Mar. 06, 2014	Dec. 31, 2013	Dec. 31, 2012
Subsequent Events [Abstract]
Stock Issued for Cash, Shares	10,000	25,000	87,500
Stock Issued for Cash, Value	$ 10,000	$ 5,000	$ 31,000
Stock Issued for Software Licensing and Subscription Agreements, Shares	100,000	120,000	150,000
Stock Issued for Software Licensing and Subscription Agreements, Value	$ 3,000	$ 3,600	$ 4,100

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4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair Value Measurements by Level (Details) (USD $)	Dec. 31, 2013	Sep. 30, 2013
Software	$ 762,766	$ 817,921
Total Software	762,766	817,921
Level 1
Software
Total Software
Level 2
Software
Total Software
Level 3
Software	762,766	817,921
Total Software	$ 762,766	$ 817,921

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2 - BASIS OF PRESENTATION OF INTERIM FINANCIAL STATEMENTS

3 Months Ended

Dec. 31, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

2 - BASIS OF PRESENTATION OF INTERIM FINANCIAL STATEMENTS

NOTE 2 – BASIS OF PRESENTATION OF INTERIM FINANCIAL STATEMENTS

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America.  The accompanying interim unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

Operating results for the three months ended December 31, 2013 are not necessarily indicative of the results that may be expected for the year ending September 30, 2014. Notes to the unaudited interim financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the year ended September 30, 2013 have been omitted; this report should be read in conjunction with the audited financial statements and the footnotes thereto for the fiscal year ended September 30, 2013 included within the Company’s Form 10-K as filed with the Securities and Exchange Commission.

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Balance Sheets (Parenthetical) (USD $)	Dec. 31, 2013	Sep. 30, 2013
Statement of Financial Position [Abstract]
Preferred Stock, Par Value	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	4,000,000	4,000,000
Preferred Stock, Shares Issued	4,000,000	4,000,000
Preferred Stock, Shares Outstandng	4,000,000	4,000,000
Common Stock, Par Value	$ 0.01	$ 0.01
Common Stock, Shares Authorized	650,000,000	650,000,000
Common Stock, Shares Issued	214,969,216	214,624,216
Common Stock, Shares Outstanding	214,969,216	214,624,216

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12- SUBSEQUENT EVENTS

3 Months Ended

Dec. 31, 2013

Subsequent Events [Abstract]

12- SUBSEQUENT EVENTS

NOTE 12 – SUBSEQUENT EVENTS

Stock issuances

Period from January 1, 2014 to March 6, 2014

Stock Issued for Cash

On January 12, 2014, the Company issued 10,000 shares of common stock for $10,000 in net cash proceeds.

Stock Issued in Connection with Software Licensing and Subscription Agreements

On March 5, 2014, the Company issued 100,000 shares of common stock valued at $3,000 based on the market price on the date of grant, to customers, in regards to the purchase of software from the Company in accordance with the Software Licensing and Subscription Agreements. The fair values of the shares issued were recorded as a reduction of software revenue recognized during the three months ended March 31, 2014.

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Document and Entity Information	3 Months Ended
	Dec. 31, 2013	Mar. 18, 2014
Document And Entity Information
Entity Registrant Name	NATIONAL SCIENTIFIC CORP/AZ
Entity Central Index Key	0001022505
Document Type	10-Q
Document Period End Date	Dec. 31, 2013
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	No
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		215,079,216
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2014

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4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Use of Estimates and Assumptions

Use of Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net revenues and expenses recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates. The Company’s most significant estimates relate to the valuation of its proprietary technology and its valuation of its common stock.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.  At December 31, 2013, cash and cash equivalents include cash on hand and cash in the bank and the FDIC insures these deposits up to $250,000.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Long-lived assets are evaluated for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted future cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value. The acquired software technologies are reviewed annually for impairment.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company's financial instruments consist primarily of cash, accounts payable and accrued expenses, and debt. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.  

Fair value is focused on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Within the measurement of fair value, the use of market-based information is prioritized over entity specific information and a three-level hierarchy for fair value measurements is used based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.  

The three-level hierarchy for fair value measurements is defined as follows:

• Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; liabilities in active markets;

• Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability other than quoted prices, either directly or indirectly, including inputs in markets that are not considered to be active; or directly or indirectly including inputs in markets that are not considered to be active;

• Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following table summarizes fair value measurements by level at December 31, 2013 and September 30, 2012 for assets measured at fair value on a recurring basis:

	Level 1		Level 2		Level 3		Total
At December 31, 2013
Software	$	—	$	—	$	762,766	$	762,766
Total Software	$	—	$	—	$	762,766	$	762,766
At September 30, 2012
Software	$	—	$	—	$	817,921	$	817,921
Total Software	$	—	$	—	$	817,921	$	817,921

Accounts Receivable and Allowance for Uncollectible Accounts

Accounts Receivable and Allowance for Uncollectible Accounts

Substantially all of the Company’s accounts receivable balance is related to trade receivables. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company will maintain allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments for services. Accounts with known financial issues are first reviewed and specific estimates are recorded. The remaining accounts receivable balances are then grouped in categories by the number of days the balance is past due, and the estimated loss is calculated as a percentage of the total category based upon past history. Account balances are charged against the allowance when it is probable the receivable will not be recovered. As of December 31, 2013 and 2012, the Company had no valuation allowance for the Company’s accounts receivable.

Income Taxes

Income Taxes

The Company utilizes the asset and liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for operating loss and tax credit carry-forwards and for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that the value of such assets will be realized.

The Company uses the two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating the Company's tax positions and tax benefits, which may require periodic adjustments. At December 31, 2013, the Company did not record any liabilities for uncertain tax positions.

Revenue Recognition

Revenue Recognition

License revenue consists principally of revenue earned under software license agreements. The Company sells its software to a medical practitioner for direct payment or through a third party leasing company for direct payment to the Company. The third party lease agreement is a non-recourse debt and the Company is not responsible for the default of the medical practitioner. License revenue is generally recognized when a signed contract or other persuasive evidence of an arrangement exists, the software has been electronically delivered, the license fee is fixed or is measured on a paid user basis; and collection of the resulting receivable is probable. When contracts contain multiple elements wherein Vendor-Specific Objective Evidence (“VSOE”) exists for all undelivered elements, we account for the delivered elements in accordance with the “Residual Method.”

VSOE of fair value for maintenance and support is established by a stated renewal rate, if substantive, included in the license arrangement or rates charged in stand-alone sales of maintenance and support. Revenue from subscription license agreements, which include software, rights to unspecified future products and maintenance, is recognized ratably over the term of the subscription period.

Provided all other revenue criteria are met, the upfront, minimum, non-refundable license fees from customers are generally recognized upon delivery and on-going royalty fees are generally recognized upon reports of new licenses issued. If there is significant uncertainty about the project completion or receipt of payment for professional services, revenue is deferred until the uncertainty is sufficiently resolved. VSOE of fair value of services is based upon stand-alone sales of those services.

Subscription revenue is generated from bandwidth and information storage. In the first year and each year thereafter, the software is purchased and installed the purchaser will pay an annual fee of $1,200, $1,500, $1,800, and $2,400, respectively. Subscription revenue is recognized ratably over the term of the agreement.

Transaction revenue is generated from the following services and recognized when a transaction occurs:

· Electronic Remittance Advise $0.35 Electronic remittance transaction fee;

· Paper Claims $1.00 Paper claim fee;

· Carrier Direct $0.16 Carrier direct fee;

· Fast Forward $0.35 Fast forward transaction fee; and,

· Patient Credit $2.50 Automatic Debit processing per transaction paid by the patient

The Company had not received any transaction revenues in the three months ended December 31, 2013.

Cost of License, and Subscriptions Revenues

Cost of License, and Subscriptions Revenues

Cost of license revenue is primarily comprised of the license-based royalties to third parties and production and distribution costs for initial product licenses. No costs were incurred for license-based royalties during the three months ended December 31, 2013 and 2012.

Cost of subscription revenue is primarily comprised of the costs associated with the customer support personnel that provide maintenance, enhancement and support services to customers. No costs were incurred for customer support during the three months ended December 31, 2013 and 2012.

The amortization of acquired technology for products acquired through business combinations are considered as the cost of revenues. The acquired software technologies are amortized over their useful lives of 5 years

Deferred Revenue

Deferred Revenue

Deferred revenue result from fees billed to customers for which revenue has not yet been recognized or for which the conditions of the arrangement have been modified. The Company recognizes revenue to provide up-front capitalization to Cloud-MD for each provider added to the solution set. The Company also recognizes annual subscription fees for virtual servers and subscription and small usage fees and those revenues are based on a 48-month lease, Cloud-MD would amortize the revenue over the life of the agreement of 48 months. In addition, it features incremental monthly revenue, for the duration of the lease (48 months) based on fees assessed for transactions such as eligibility claims processing, etc.

The Company has deferred revenue of $4,350 as of December 31, 2013.

We have adopted the Securities and Exchange Commission’s Staff Accounting Bulletin (SAB) No. 104, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements.

Sales Commissions

Sales Commissions

The Company pays commissions, including sales bonuses, to the direct sales force related to revenue transactions under sales compensation plans which are established annually. The commission payments are typically paid in full in the month or quarter following execution of the customer contracts. The Company paid commissions of $37,000 and $20,260 for the three months ended December 31, 2013 and 2012, respectively.

Research and Development and Software Development Costs

Research and Development and Software Development Costs

Capitalization of certain software development costs subsequent to the establishment of technological feasibility. Based on our product development process, technological feasibility is established upon the completion of a working model. To date, costs incurred by us from the completion of the working model to the point at which the product is ready for general release have been insignificant. Accordingly, we have charged all such costs to research and development expense in the period incurred. The Company recorded research and development costs of $30,000 and $40,000 for the three months ended December 31, 2013 and 2012, respectively.

Share-Based Compensation

Share-Based Compensation

The Company measures the cost of services received in exchange for an award of an equity instrument based on the grant-date fair value of the award.  Compensation cost is recognized over the vesting or requisite service period.

Basic and Diluted Net Income (Loss) per Common Share

Basic and Diluted Net Income (Loss) per Common Share

Basic income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. The weighted average number of shares is calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding.  Diluted earnings per share reflects the potential dilution that could occur if stock options, warrants, and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.

The Company has 4,000,000 preferred shares that can be converted subject to the limitation of the Company’s authorized shares at 1 preferred share for 150 common shares. The conversion can only take place with the approval of the Board of Directors. At December 31, 2013, the preferred shares could be converted into 600,000,000 of the Company’s common shares subject to being limited by the Company’s available authorized shares for issuance, resulting in dilution of common shareholders. The preferred shares are anti-dilutive since the Company has incurred losses for the periods ended December 31, 2013 and 2012.

Diluted loss per share is the same as basic loss per share during periods where net losses are incurred since the inclusion of the potential common stock equivalents would be anti-dilutive as a result of the net loss.  

Concentration of Credit Risk

Concentration of Credit Risk

All of the Company’s cash and cash equivalents are maintained in regional and national financial institutions. The Company has exposure to credit risk to the extent that its cash and cash equivalents exceed amounts covered by the U.S. federal deposit insurance; however, the Company has not experienced any losses in such accounts. In management’s opinion, the capitalization and operating history of the financial institutions are such that the likelihood of material loss is remote.

Subsequent Events

Subsequent Events

The Company has evaluated all transactions occurring between the three months ended December 31, 2013, through the date of issuance of the financial statements for subsequent event disclosure.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

No accounting standards or interpretations issued recently are expected to a have a material impact on the Company’s financial position, operations or cash flows.

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Statements of Operations (Unaudited) (USD $)	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Income Statement [Abstract]
REVENUES	$ 117,557	$ 149,357
COST OF REVENUES	61,155	60,005
GROSS PROFIT	56,402	89,352
OPERATING EXPENSES:
Selling, general and administrative	222,076	118,871
Research and development	30,000	40,000
Total operating expenses	252,076	158,871
OPERATING LOSS	(195,674)	(69,519)
OTHER INCOME (EXPENSE)
Interest expense	(236)	(127)
Total other income (expense)	(236)	(127)
LOSS FROM CONTINUING OPERATIONS	(195,910)	(69,646)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS	(10,715)	58,984
NET LOSS	$ (206,625)	$ (10,662)
Basic and diluted
Continuing operations	$ 0.00	$ 0.00
Discontinued operations	$ 0.00	$ 0.00
Total	$ 0.00	$ 0.00
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic and diluted	214,873,781	212,195,098

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7 - LINES OF CREDIT

3 Months Ended

Dec. 31, 2013

Debt Disclosure [Abstract]

7 - LINES OF CREDIT

NOTE 7 – LINES OF CREDIT

In November 2013, the Company entered into a revolving line of credit with Mutual of Omaha in the amount of $65,000 at a 4.00% interest rate per annum which renews annually. As of December 31, 2013, the Company had borrowed $50,000 against the line of credit.

The Company has a revolving line of credit with Chase Bank with a balance as of December 31, 2013 in the amount of $18,370 and a borrowing limit of $50,000. The line of credit with Chase Bank has an interest rate of 4.25% per annum and renews annually.

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6 - DISCONTINUED OPERATIONS

3 Months Ended

Dec. 31, 2013

Discontinued Operations and Disposal Groups [Abstract]

6 - DISCONTINUED OPERATIONS

NOTE 6- DISCONTINUED OPERATIONS

The Company’s former Board of Directors believed that it was in the best interest of the Company to discontinue the former business operation of the GPS operational device business. In 2011, this business was transferred to National Scientific, LLC, a company owned by the Company’s prior CEO, by prior management in which the Company’s former CEO was to pay $100,000 plus 2% of revenues for that technology. The former officer never paid the specific consideration for this transaction.

Accordingly, the Company reclassified the assets, liabilities and operations related to its GPS operational device business as discontinued operations.  Consequently, the accompanying financial statements reflect the assets, liabilities and operations of the GPS operational device business as net assets of discontinued operations, net liabilities of discontinued operations and results from discontinued operations.

On March 16, 2013, the Company closed the acquisition with the final payment for DNA. Subsequent to the transaction closing, the sellers refused to pay the transaction fees for medical billing contracts that were processed. The Company filed a lawsuit against the sellers for Breach of Contract among other things in June of 2013. During that time, the Company believes the sellers began contacting all billing contract holders and interfered with the acquisition of all the assets from the transaction. Consequently, the accompanying consolidated financial statements reflect the assets, liabilities and operations of DNA as net assets of discontinued operations, net liabilities of discontinued operations and results from discontinued operations.

Details of the classifications for net assets, liabilities and operations are shown below.

	December 31, 2013		September 30, 2013
Net liabilities of discontinued operations:
Accounts payable	$	46,071	$	35,356
Net liabilities of discontinued operations	$	46,071	$	35,356

	Three Months Ended December 31,
	2013			2012
Discontinued operations:
Revenues	$	77,284		$	—
Cost of sales		—			—
Operating expenses		87,999			—
Gain from write-off of debt		—			58,984
(Loss) income from discontinued operations		(10,715	)	$	58,984

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3 - GOING CONCERN (Details Narrative) (USD $)	Dec. 31, 2013	Sep. 30, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accumulated Deficit	$ (26,748,890)	$ (26,542,265)

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4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Fair Value Measurements by Level

	Level 1		Level 2		Level 3		Total
At December 31, 2013
Software	$	—	$	—	$	762,766	$	762,766
Total Software	$	—	$	—	$	762,766	$	762,766
At September 30, 2012
Software	$	—	$	—	$	817,921	$	817,921
Total Software	$	—	$	—	$	817,921	$	817,921

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10 - RELATED PARTY TRANSACTIONS

3 Months Ended

Dec. 31, 2013

Related Party Transactions [Abstract]

10 - RELATED PARTY TRANSACTIONS

NOTE 10– RELATED PARTY TRANSACTIONS

The Company repaid $0 and $25,591 of the advances from the Company’s CEO in the three months ended December 31, 2013 and 2012, respectively. The advances from the CEO are due on demand and do not accrue interest. As of December 31, 2013 and September 30, 2013, there were no amounts owed to the CEO for advances, respectively.

 Employment Agreements

The Company entered into an employment agreement with its Chief Executive Officer on January 1, 2013.  The employment agreement will expire on January 1, 2018 and shall automatically renew for another 5 years unless terminated in accordance with the provisions of the employment agreement. The employment agreement provides for:

i.	A monthly salary of $20,833 subject to an annual increase of 10% and consistent with the Company policy applicable to other senior executives and officers and approval by the Board of Directors.
ii.	A cash bonus of 25% of his annual base salary each year if the Company reaches the following milestones (none of which were attained in 2013):
a.		The Company posts annual gross revenues on a consolidated basis of at least $5,000,000;
b.		The Company's earnings before the deduction of income taxes and amortization expenses (“EBITA”), including cash extraordinary items but before officer's bonuses, on a consolidated basis for any year is at least $1,000,000; or the completion of the delinquent SEC filings for five (5) years through September 30, 2013 or the Company obtains FINRA approval for any reverse stock splits.
iii.	The issuance of shares equal to greater of 3,000,000 restricted common shares, or 1% of the outstanding shares.
iv.	The issuance of common stock on each anniversary date of the employment agreement of 5,000,000 shares and issuance of common stock for every acquisition granting 5,000,000 shares for DNA, 5,000,000 shares for CipherSmith, LLC, and 1,000,000 shares for MediSouth, LLC.
v.	An automobile allowance of $1,500 per month.
vi.	A medical insurance allowance of $1,500 per month.
vii.	In the event the Executive's employment is terminated without cause, he will receive the entire contract remaining on the agreement.

The Company entered into an employment agreement with its Chief Financial Officer on January 1, 2013.  The employment agreement will expire January 1, 2018 and shall automatically renew for another 5 years unless terminated in accordance with the provisions of the employment agreement. The employment agreement provides for:

i.	A monthly salary of $12,500 per month subject to an annual increase of 10% per year and consistent with the Company policy applicable to other senior executives and officers and approval by the Board of Directors.
ii.	A cash bonus of 25% of her annual base salary each year if the Company reaches the following milestones (none of which were attained in 2013):
a.		The Company posts annual gross revenues on a consolidated basis of at least $5,000,000;
b.		The Company's EBITA, including cash extraordinary items but before officer's bonuses, on a consolidated basis for any year is at least $1,000,000; or the completion of the delinquent SEC filings for five (5) years through September 30, 2013 or the Company obtains FINRA approval for any reverse stock splits.
iii.	The issuance of shares equal to greater of 3,000,000 restricted common shares, or 1% of the outstanding shares.
iv.	The issuance of common stock on each anniversary date of the employment agreement of 5,000,000 shares and issuance of common stock for every acquisition granting 3,000,000 shares for DNA, 3,000,000 shares for CipherSmith, LLC, and 750,000 shares for MediSouth, LLC.
v.	An automobile allowance of $1,000 per month.
vi.	A medical insurance allowance of $1,500 per month.
vii.	In the event the Executive's employment is terminated without cause, she will receive the entire contract remaining on the agreement.

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8 - DEBT MITIGATION PROGRAM

3 Months Ended

Dec. 31, 2013

OTHER INCOME (EXPENSE)

8 - DEBT MITIGATION PROGRAM

NOTE 8 – DEBT MITIGATION PROGRAM

The Company determined that the statute of limitations for certain of the Company’s creditors to enforce collection of any amounts they might be owed has now elapsed. Based on the determinations and findings, during three months ended December 31, 2013 and year ended September 30, 2013, the Company recognized a gain on the write-off of liabilities in the amount of $43,911 and $58,984 from third party liabilities, respectively, which was recorded in income from discontinued operations, and additional paid-in capital of $59,704 and $42,137 for related party liabilities, respectively. The Company will continue to conduct this analysis going forward and write-off obligations when such obligations are no longer enforceable based on applicable law.

The following liabilities, through the opinion of legal counsel, were determined by the Company as unenforceable.

	December 31,		September 30,
	2013		2013
Debt Mitigation Program:
Accounts payable and accrued expenses	$	59,704	$	58,984
Accrued interest				42,137
Total debt mitigation program	$	59,704	$	101,121
Gain on write-off of debt	$	—	$	(58,984	)
Additional paid-in capital (1)	$	59,704	$	(42,137	)

(1) All amounts that were owed to related parties in prior years were recorded to paid-in-capital.

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9 - COMMITMENTS AND CONTINGENCIES

3 Months Ended

Dec. 31, 2013

COMMITMENTS AND CONTINGENCIES

9 - COMMITMENTS AND CONTINGENCIES

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Rent expense for the three months ended December 31, 2013 and 2012 was $0 for both periods.

The Company entered into an agreement to purchase the assets of DNA in June 2012 and after due diligence by both parties the transaction closed on March 16, 2013. Subsequent to the transaction closing on March 16, 2013, the sellers refused to pay for medical billing process transaction fees in accordance with their contracts of approximately $200,000. In June 2013, the Company sued the sellers in federal court for breach of contract among other causes of action of unpaid medical billing transaction fees of approximately $200,000. The Company believes it will be successful in its litigation. However, if the Company is successful, the collectability of the judgment is highly questionable.

The Company has issued shares to new investors since January 2, 2011, that have an anti-reverse common stock split clause if the Company reverse splits the common stock. The reverse split of common stock is determined by management but must be approved by Financial Industry Regulation Authority (“FINRA”). Presently FINRA has denied the Company the right to reverse split the common stock until all Securities and Exchange Commission filings are current and at that point and time the Company will submit a request to FINRA to execute a reverse split of the common stock of the Company. The current investors holding anti-reverse split stock will have the right to hold the same number of shares of common stock as status quo after the reverse split. The anti-reverse split common stock protection is only for stock subject to reverse split and once the Company declares a reverse split and it is completed, the anti-reverse split protection will be terminate and shareholders that received anti-reverse split stock will be held with regular stockholders as the Company proceeds forward. In accordance with the anti-reverse split provision, no further shares will be issued to the anti-reverse split shareholders once the reverse split is approved and completed.

As discussed in Note 8, the Company has written off $59,704 and $101,121 in accounts payable, accrued liabilities and notes payable based on the opinion of legal counsel for the three months ended December 31, 2013 and the year ended September 30, 2013. However, the related creditors could make a claim in the future in regards to these liabilities.

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11 - EQUITY

3 Months Ended

Dec. 31, 2013

Equity [Abstract]

11 - EQUITY

NOTE 11 - EQUITY

As of December 31, 2013, the Company was authorized to issue 650,000,000 common shares and 4,000,000 preferred shares at a par value of $0.01.  

Three Months Ended December 31, 2013

Stock Issued for Cash

During the three months ended December 31, 2013, the Company issued 25,000 shares of common stock for $5,000 in net cash proceeds as follows:

Date		Number of Shares		Proceeds
	October 21, 2013		25,000	$	5,000
	Total		25,000	$	5,000

Stock Issued in Connection with Software Licensing and Subscription Agreements

During the three months ended December 31, 2013, the Company issued 120,000 shares of common stock valued at $3,600 based on the market price on the date of grant, to customers, in regards to the purchase of software from the Company in accordance with the Software Licensing and Subscription Agreements. The fair values of the shares issued were recorded as a reduction of software revenue recognized during the three months ended December 31, 2013.

Date		Number of Shares		Fair Value
	December 4, 2013		120,000	$	3,600
	Total		120,000	$	3,600

Stock Issued for Assets Acquisition

In October 2013, the Company through a purchase agreement with Antree Systems Limited has purchased a complete source code, intellectual property rights, all computer software, patents, or formulas, algorithm licensed or sold under a project known as Compass Rose and appropriate copyrights, patents, mask works, trademarks, service marks, internet domain names and world wide web uniform resource locators (“URLs”) from Antree Systems Limited. The Company issued 200,000 shares of its common stock as consideration for the purchase. The fair value of the consideration and the assets acquired is based on the fair value of the common stock issued in exchange for the software. The total fair value, based on the market price on the date of grant, was $6,000. The Company evaluated this acquisition and determined that it did not meet the definition of a significant business acquisition.

In November 2013, the Company issued 180,000 shares of common stock as replacement shares for the 160,000 shares of common stock issued to Antree Systems Limited and 20,000 shares of common stock to Kimberly Ilicerl. The Company intends to cancel the original shares issued because the shares were lost during delivery to Antree Systems.

Three Months Ended December 31, 2012

Stock Issued for Cash

During the three months ended December 31, 2012, the Company issued 87,500 shares of common stock for $31,000 in net cash proceeds as follows:

Date		Number of Shares		Proceeds
	October 14, 2012		20,000	$	20,000
	October 14, 2012		15,000		3,000
	October 14, 2012		18,750		2,500
	October 14, 2012		18,750		2,500
	December 6, 2012		15,000		3,000
	Total		87,500	$	31,000

Stock Issued in Connection with Software Licensing and Subscription Agreements

During the three months ended December 31, 2012, the Company issued 150,000 shares of common stock valued at $4,100 based on the market price on the date of grant, to customers, in regards to the purchase of software from the Company in accordance with the Software Licensing and Subscription Agreements. The fair values of the shares issued were recorded against software revenue recognized during the three months ended December 31, 2012.

Date	Number of Shares		Fair Value
October 14, 2012		50,000	$	1,300
December 6, 2012		100,000		2,800
Total		150,000	$	4,100

Stock Issued for Services

During the three months ended December 31, 2012, the Company issued 110,000 shares of common stock as compensation. The fair values of the shares were a total of $3,060 and were recorded at the market price on the date of grant. The issuances of stock were as follows:

Date		Number of Shares		Fair Value		Description of Services
	October 14, 2012		10,000	$	260		Commission
	December 6, 2012		100,000		2,800		Compensation
	Total		110,000		3,060

Stock Issued for Assets Acquisition

During three months ended December 31, 2012, the Company issued 100,000 shares of common stock for the acquisition of CipherSmith software. Those shares were valued at $2,800 based on the market price on the dates of grant.

Preferred Stock

The Company has authorized 4,000,000 shares of preferred stock, at $0.01 par value and 4,000,000 are issued and outstanding as of September 30, 2013. Each share of the Preferred Stock has 150 votes on all matters presented to be voted by the holders of our common stock. All 4,000,000 shares of preferred stock have been granted to our CEO & CFO on November 30, 2010 and issued on April 11, 2012 which was valued at the trading price of the common stock of $0.0095 and recorded as an expense of $38,000.

On December 17, 2013, the Company amended its Articles of Incorporation that gave the right to the holders of Preferred A shares to convert 1 share of Convertible Preferred A shares to 150 Common Shares of the Company. The holders of the Preferred A shares can convert the shares upon proper notice and approval of the Board of Directors. Presently, the holders of the Preferred A shares have not sent notice to the Board of Directors.

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10 - RELATED PARTY TRANSACTIONS (Details Narrative) (USD $)

3 Months Ended

60 Months Ended

Dec. 31, 2013

Dec. 31, 2012

Dec. 31, 2017

Chief Executive Officer [Member]

Dec. 31, 2017

Chief Financial Officer [Member]

Repayment of Advances from Related Parties

$ (25,591)

Employment Agreement

i.   A monthly salary of $20,833 subject to an annual increase of 10% and consistent with the Company policy applicable to other senior executives and officers and approval by the Board of Directors.

ii.   A cash bonus of 25% of his annual base salary each year if the Company reaches the following milestones (none of which were attained in 2013):

a.   The Company posts annual gross revenues on a consolidated basis of at least $5,000,000;

b.   The Company's earnings before the deduction of income taxes and amortization expenses (“EBITA”), including cash extraordinary items but before officer's bonuses, on a consolidated basis for any year is at least $1,000,000; or the completion of the delinquent SEC filings for five (5) years through September 30, 2013 or the Company obtains FINRA approval for any reverse stock splits.

iii.   The issuance of shares equal to greater of 3,000,000 restricted common shares, or 1% of the outstanding shares.

iv.   The issuance of common stock on each anniversary date of the employment agreement of 5,000,000 shares and issuance of common stock for every acquisition granting 5,000,000 shares for DNA, 5,000,000 shares for CipherSmith, LLC, and 1,000,000 shares for MediSouth, LLC.

v.   An automobile allowance of $1,500 per month.

vi.   A medical insurance allowance of $1,500 per month.

vii.   In the event the Executive's employment is terminated without cause, he will receive the entire contract remaining on the agreement.

i.   A monthly salary of $12,500 per month subject to an annual increase of 10% per year and consistent with the Company policy applicable to other senior executives and officers and approval by the Board of Directors.

ii.   A cash bonus of 25% of her annual base salary each year if the Company reaches the following milestones (none of which were attained in 2013):

a.   The Company posts annual gross revenues on a consolidated basis of at least $5,000,000;

b.   The Company's EBITA, including cash extraordinary items but before officer's bonuses, on a consolidated basis for any year is at least $1,000,000; or the completion of the delinquent SEC filings for five (5) years through September 30, 2013 or the Company obtains FINRA approval for any reverse stock splits.

iii.   The issuance of shares equal to greater of 3,000,000 restricted common shares, or 1% of the outstanding shares.

iv.   The issuance of common stock on each anniversary date of the employment agreement of 5,000,000 shares and issuance of common stock for every acquisition granting 3,000,000 shares for DNA, 3,000,000 shares for CipherSmith, LLC, and 750,000 shares for MediSouth, LLC.

v.   An automobile allowance of $1,000 per month.

vi.   A medical insurance allowance of $1,500 per month.

vii.   In the event the Executive's employment is terminated without cause, she will receive the entire contract remaining on the agreement.

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6 - DISCONTINUED OPERATIONS (Tables)

3 Months Ended

Dec. 31, 2013

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

	December 31, 2013		September 30, 2013
Net liabilities of discontinued operations:
Accounts payable	$	46,071	$	35,356
Net liabilities of discontinued operations	$	46,071	$	35,356

	Three Months Ended December 31,
	2013			2012
Discontinued operations:
Revenues	$	77,284		$	—
Cost of sales		—			—
Operating expenses		87,999			—
Gain from write-off of debt		—			58,984
(Loss) income from discontinued operations		(10,715	)	$	58,984

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5 - SOFTWARE - Research and Development (Details) (USD $)	Dec. 31, 2013	Sep. 30, 2013
Intangible assets	$ 1,257,406	$ 1,251,406
Accumulated amortization of intangible assets	(484,640)	(423,485)
Accumulated impairment of assets	(10,000)	(10,000)
Intangible assets, Net	762,766	817,921
Antree Systems Limited
Intangible assets	6,000
CipherSmith LLC
Intangible assets	15,800	15,800
MediSouth LLC
Intangible assets	2,500	2,500
Doctors Network of America
Intangible assets	10,000	10,000
Software License
Intangible assets	1,200,106	1,200,106
EMR Certification
Intangible assets	$ 23,000	$ 23,000

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Statements of Cash Flows (Unaudited) (USD $)	3 Months Ended
	Dec. 31, 2013		Dec. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (206,625)		$ (10,662)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS	(10,715)		58,984
Loss from continuing operations	(195,910)		(69,646)
Adjustments to reconcile loss from continuing operations to net cash from operating activities:
Depreciation and amortization	61,155		60,005
Stock issued for compensation			3,060
Stock issued for license agreements	3,600		4,100
Changes in operating assets and liabilities:
Accounts receivable	(2,155)		4,454
Accounts payable and accrued liabilities	72,706		15,000
Deferred revenue	4,350
Net cash provided by (used in) provided by operating activities	(56,254)		16,973
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of advances from officer			(25,591)
Proceeds from lines of credit	58,574
Repayment of line of credit			(21,763)
Common stock issued for cash	5,000		31,000
Net cash provided by (used in) financing activities	63,574		(16,354)
INCREASE IN CASH	7,320		619
CASH, BEGINNING OF PERIOD	8,587		51,356
CASH, END OF PERIOD	15,907		51,975
CASH PAID FOR:
Interest
Taxes
NONCASH OPERATING, INVESTING AND FINANCING ACTIVITIES:
Write-off of related party debt to additional paid-in capital	59,704	[1]
Common stock issued for purchase of intangible assets	$ 6,000		$ 2,800

[1] All amounts that were owed to related parties in prior years were recorded to paid-in-capital.

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5 - SOFTWARE

3 Months Ended

Dec. 31, 2013

Research and Development [Abstract]

5 - SOFTWARE

NOTE 5 – SOFTWARE

The following is a detail of software at December 31, 2013 and September 30, 2012:

	December 31, 2013			September 30, 2013
Source Code License – Antree Systems Limited	$	6,000		$	—
Encryption Software Code		15,800			15,800
Source Code License – MediSouth, LLC		2,500			2,500
Acquisition of Doctor’s Network of America		10,000			10,000
Software License		1,200,106			1,200,106
EMR Certification		23,000			23,000
Total intangible assets		1,257,406			1,251,406
Accumulated amortization of intangible assets		(484,640	)		(423,485	)
Accumulated impairment of assets		(10,000	)		(10,000	)
Total intangible assets	$	762,766		$	817,921

The Company’s software was placed into service starting in the second quarter of fiscal year ended September 30, 2012. The amortization expense was $61,155 and $60,005 for the three months ended December 31, 2013 and 2012, respectively. The Company recognized a $0 and $6,000 for impairment of software acquired from Doctors Network of America (“DNA”) operating in Flowood, Mississippi during the three months ended December 31, 2013 and the year ended September 30, 2013, respectively. The Company is currently in litigation with the sellers of DNA relating to the collection of certain medical billings owed to the Company. As a result of the litigation, the Company deemed the assets to be impaired.

Source Code License

In October 2013, the Company through a purchase agreement with Antree Systems Limited has purchased a complete source code, intellectual property rights, all computer software, patents, or formulas, algorithm licensed or sold under a project known as Compass Rose and appropriate copyrights, patents, mask works, trademarks, service marks, internet domain names and world wide web uniform resource locators (“URLs”) from Antree Systems Limited. The Company issued 200,000 shares of its common stock as consideration for the purchase. The fair value of the consideration and the assets acquired is based on the fair value of the common stock issued in exchange for the software. The total fair value, based on the market price on the date of grant, was $6,000. The Company evaluated this acquisition and determined that it did not meet the definition of a significant business acquisition.

Encryption Software Code

On November 21, 2012, the Company purchased from CipherSmith, LLC a complete source code, intellectual property rights, all computer software or algorithm licensed or sold under CipherSmith, and appropriate copy rights, patents, mask works, trademarks, service marks, internet domain names or world wide web URS. The Company issued 500,004 shares of its common stock as payment for the acquisition. The fair value of the consideration and the assets acquired is based on the aggregate fair value of the common stock issued in exchange for the software. The total fair value of the shares of common stock issued on the date of grant was $15,800.

Doctors Network of America

On June 22, 2012, the Company entered into an acquisition agreement that closed on March 16, 2013. The Company agreed to acquire DNA in Flowood, Mississippi from Krooss Medical Management Systems, LLC (“Krooss”) for 500,000 shares of common stock. As of September 30, 2012, 200,000 shares of common stock were issued as a deposit, which was valued at $4,000 based on the market value on the date of grant. At the closing of the transaction on March 16, 2013, the Company issued an additional 300,000 shares of common stock which were valued at $6,000 based on the market value on the date of grant.

Subsequent to the transaction closing on March 16, 2013, the sellers refused to pay for medical billing process transaction fees in accordance with their contracts in the amount of approximately $200,000. The Company and the sellers are currently in litigation over the disputed transaction fees of $200,000. The Company has recorded an impairment of the acquired asset in the amount of $6,000 and $4,000 for the three months ended December 31, 2013 and the year ended September 30, 2012, respectively.

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5 - SOFTWARE (Details Narrative) (USD $)	3 Months Ended					12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 Antree Systems [Member]	Dec. 31, 2012 Cipher Smith [Member]	Dec. 31, 2013 Doctors Networkof America [Member]	Sep. 30, 2012 Doctors Networkof America [Member]	Mar. 16, 2013 Doctors Networkof America [Member]	Mar. 16, 2013 Doctors Networkof America [Member] Pending Litigation [Member]
Amortization Expense	$ 61,155	$ 60,005
Impairment of Software Acquired	0	6,000			6,000	4,000
Stock issued Purchase of Asset, Shares	200,000	100,000	200,000	500,004
Stock Issued Purchase of Asset, Value	6,000	2,800	6,000	15,800
Stock Issued, Acquisition, Shares						500,000
Shares Issued						200,000	300,000
Shares Issued, Value						4,000	6,000
Amount Due from Acquisition								$ 200,000

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5 - SOFTWARE (Tables)

3 Months Ended

Dec. 31, 2013

Research and Development [Abstract]

Research and Development

	December 31, 2013			September 30, 2013
Source Code License – Antree Systems Limited	$	6,000		$	—
Encryption Software Code		15,800			15,800
Source Code License – MediSouth, LLC		2,500			2,500
Acquisition of Doctor’s Network of America		10,000			10,000
Software License		1,200,106			1,200,106
EMR Certification		23,000			23,000
Total intangible assets		1,257,406			1,251,406
Accumulated amortization of intangible assets		(484,640	)		(423,485	)
Accumulated impairment of assets		(10,000	)		(10,000	)
Total intangible assets	$	762,766		$	817,921