UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549 

FORM 10-Q/A

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934  

For the quarterly period ended March 31, 2015

[ ]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

Cipherloc 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)

(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 [X] No [ ]

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 [X] No [ ]

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

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 24, 2016
Common stock, $0.01 par value	4,494,241

 EXPLANATORY NOTE

This Amendment No. 1 on Form 10-Q/A amends the Quarterly Report on Form 10-Q of Cipherloc Corporation (the “Company”) for the quarter ended March 31, 2015 as originally filed with the Securities and Exchange Commission on May 20, 2015 (the “Original Filing”).

This Form 10-Q/A amends the Original Filing to reflect a retrospective restatement of financial information. The Company realized that the criteria for revenue recognition had not been met for revenue previously recognized. The Company is amending the Consolidated Balance Sheet. We also made adjustments to the Notes to Consolidated Financial Statements, specifically, Notes 2 and 4 to support the changes to the Consolidated Balance Sheet.

This amendment also contains changes to Part II – Other information. These changes are as follows:

Item 2.  Management’s Discussion and analysis of financial condition and results of operations has been amended by updating changes in Liquidity and Capital Resources.

 CIPHERLOC CORPORATION

INDEX TO FORM 10-Q/A FILING

FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2015 AND 2014

TABLE OF CONTENTS

		PAGE
PART I - FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (Unaudited)
	Consolidated Balance Sheets (Restated)
	Consolidated Statements of Operations
	Consolidated Statements of Cash Flows
	Notes to Consolidated Financial Statements (Restated)
Item 2.	Management Discussion & Analysis of Financial Condition and Results of Operations
Item 3	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures
PART II - OTHER INFORMATION
Item 6.	Exhibits
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.
32.2	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.

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

The accompanying interim consolidated 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 consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended September 30, 2014.  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 six months ended March 31, 2015 are not necessarily indicative of the results that can be expected for the year ending September 30, 2015.

Table of Contents  1

CIPHERLOC CORPORATION

(Formerly Cloud Medical Doctor Software Corporation)

(Formerly National Scientific Corporation)

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	March 31,			September 30,
	2015 (Restated)			2014 (Restated)
	(Restated)
ASSETS
CURRENT ASSETS:
Cash	$	86,872		$	545,650
Accounts receivable		—			1,006
Assets attributable to discontinued operations		—			6,887
Total current assets		86,872			553,543
Proprietary technology, net		238,530			604,301
TOTAL ASSETS	$	325,402		$	1,157,844
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued liabilities	$	630,720		$	649,452
Liabilities attributable to discontinued operations		—			18
Line of credit		46,098			53,612
Stock payable		—			7,000
Deferred revenue		1,125,000			1,125,000
TOTAL LIABILITIES		1,801,818			1,835,082
COMMITMENTS AND CONTINGENCIES		—			—
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $0.01 par value, 10,000,000 shares authorized;
10,000,000 issued and outstanding as of March 31, 2015 and September 30, 2014		100,000			40,000
Common stock, $0.01 par value, 650,000,000 shares authorized;
2,832,587 and 2,834,737 issued and outstanding as of
March 31, 2015 and September 30, 2014, respectively		28,325			28,347
Additional paid-in capital		38,470,411			28,635,141
Accumulated deficit		(40,075 ,152)			(29,380,726	)
Total stockholders' equity (deficit)		(1,476,416	)		(677,238	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	325,402		$	1,157,844

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents  2

CIPHERLOC CORPORATION

(Formerly Cloud Medical Doctor Software Corporation)

(Formerly National Scientific Corporation)

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2015			2014			2015			2014
REVENUE	$	—		$	105,118		$	431		$	222,675
COST OF REVENUES		64,650			61,155			127,970			122,310
GROSS PROFIT		(64,650	)		43,963			(127,539	)		100,365
OPERATING EXPENSES:
General and administrative		10,107,671			1,106,142			10,283,996			1,328,218
Impairment		238,531			—			238,531			—
Research and development		19,469			30,000			41,650			60,000
Total operating expenses		10,365,671			1,136,142			10,564,177			1,388,218
OPERATING LOSS		(10,430,321	)		(1,092,179	)		(10,691,716	)		(1,287,853	)
OTHER (INCOME) AND EXPENSES
Interest expense		(817	)		(279	)		(1,841	)		(515	)
Total other (income) expenses		(817	)		(279	)		(1,841	)		(515	)
LOSS FROM CONTINUING OPERATIONS		(10,431,138	)		(1,092,458	)		(10,693,557	)		(1,288,368	)
(LOSS) INCOME FROM DISCONTINUED OPERATIONS		(155	)		3,198			(869	)		(7,517	)
NET INCOME (LOSS)	$	(10,431,293	)	$	(1,089,260	)	$	(10,694,426	)	$	(1,295,885	)
NET INCOME (LOSS) PER COMMON SHARE - Basic and diluted:
Continuing operations	$	(3.68	)	$	(0.49	)	$	(3.77	)	$	(0.59	)
Discontinued operations	$	(0.00	)	$	0.00		$	(0.00	)	$	(0.00	)
Total	$	(3.68	)	$	(0.49	)	$	(3.77	)	$	(0.59	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted		2,832,587			2,245,463			2,833,320			2,196,569

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents  3

CIPHERLOC CORPORATION

(Formerly Cloud Medical Doctor Software Corporation)

(Formerly National Scientific Corporation)

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	Six Months Ended
	March 31,
	2015			2014
Net income (loss)	$	(10,694,426	)	$	(1,288,368	)
Loss (Income) from discontinued operations		869			(7,517	)
Net loss from continuing operations		(10,693,557	)		(1,295,885	)
Adjustments to reconcile net loss from continuing operations to net cash
(used in) provided by operating activities:
Impairment of software		238,531			—
Depreciation and amortization		127,240			122,310
Gain on cancellation of stock issued for services		(4,752	)		—
Common stock issued for compensation					666,750
Stock issued with software sales		—			5,700
Stock compensation		9,900,000			—
Changes in operating assets and liabilities:
Accounts receivable		7,006			3,162
Accounts payable and accrued liabilities		(18,732	)		397,270
Net cash (used in) operating activities		(444,264	)		(100,693	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit		—			58,574
Subscribed stock		(7,000	)		—
Repayment of line of credit		(7,514	)		—
Common stock issued for cash		—			5,000
Net cash (used in) provided by financing activities		(14,514	)		63,574
(DECREASE) INCREASE IN CASH		(458,778	)		(37,119	)
CASH, BEGINNING OF YEAR		545,650			8,587
CASH, END OF YEAR	$	86,872		$	(28,532	)
CASH PAID FOR:
Interest paid	$	1,222		$	—
Income taxes paid	$	—		$	—
SUPPLEMENTAL DISCLOSURE OF NONCASH OPERATING AND FINANCING ACTIVITIES:
Write-off of debt - related parties	$	—		$	59,704
Common stock issued for purchase of software	$	—		$	6,000
Cancellation of stock rescinded for purchase of software	$	6,000		$	—
Cancellation of common stock	$	150		$	—

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Table of Contents  4

  CIPHERLOC CORPORATION
(Formerly Cloud Medical Doctor Software Corporation)
(formerly National Scientific Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2015
(Unaudited)

NOTE 1- DESCRIPTION OF BUSINESS

Cipherloc 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 March 15, 2015, the Company changed its name to Cipherloc Corporation. The name change became effective as of March 23, 2015. The name change effected by the Amended Certificate was effective as of March 23, 2015.

The Company has notified the Financial Industry Regulatory Authority (FINRA) of its name change and has received FINRA’s approval for a new trading symbol CLOK reflecting its new name. The name change and the 1-100 reverse split were announced March 20, 2015 in the Daily List and became effective on March 23, 2015. All share references have been retroactively adjusted.

In the year ended September 30, 2011, the Company 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.

During the year ended September 30, 2012, we 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.

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. Since 2012, the Company has tested the software application and created a commercial product for distribution of its encryption technology. The Company is presently developing more applications for consumer usage in the future.

On September 1, 2014, the company purchased Evolve Software for $25,000, which is a front office interface that complements our back office medical billing software. The Company has bridged the software to provide a more user friendly medical billing package for our customers.

NOTE 2 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

The restatement reflects adjustments to correct errors identified by management related to the Company’s revenue recognition of a transaction that occurred during the year ended September 30, 2014. The effect of the restatement was material on the Company’s Balance Sheet. The nature and impact of these adjustments are described below.

Table of Contents  5

Revenue Recognition

During the quarter ended March 31, 2015, the Company has retrospectively restated software revenue related to the sale of a license for its Cipherloc software to a third-party. Management subsequently determined that a lack of delivery of the software to the customer did not allow for revenue recognition during the year ended September 30, 2014. The Company has corrected the classification of this amount ($1,125,000) as a reduction to software revenue and an increase to deferred revenue.

For the quarter ended March 31, 2015

The results of the restatements are summarized as follows:

Consolidated Balance Sheet as of March 31, 2015:

	As reported			Restatement Adjustment			As restated
Deferred revenue	$	—		$	1,125,000		$	1,125,000
Current liabilities		676,818			1,125,000			1,801,818
Accumulated deficit		(38,950,152	)		(1,125,000	)		(40,075,152	)
Stockholders deficit		(351,416	)		(1,125,000	)		(1,476,416	)

Consolidated Balance Sheet as of September 2014:

	As reported			Restatement Adjustment			As restated
Deferred revenue	$	—		$	1,125,000		$	1,125,000
Current liabilities		710,082			1,125,000			1,835,082
Accumulated deficit		(28,255,726	)		(1,125,000	)		(29,380,726	)
Stockholders deficit		447,762			(1,125,000	)		(677,238	)

NOTE 3 - BASIS OF  PRESENTATION OF INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The accompanying interim unaudited consolidated 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 six months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending September 30, 2015. Notes to the unaudited interim consolidated financial statements that would substantially duplicate the disclosures contained in the audited consolidated financial statements for the year ended September 30, 2014 have been omitted; this report should be read in conjunction with the audited consolidated financial statements and the footnotes thereto for the fiscal year ended September 30, 2014 included within the Company’s Form 10-K as filed with the Securities and Exchange Commission.

Segment reporting change

With the placement into service of the Company’s encryption technology, the Company began a segment reporting structure to match the new operating structure and how the Company’s management views the business and allocates resources. Reclassifications of prior period financial information have been made to conform to the current period presentation. This change does not impact previously reported consolidated financial statements of the Company. See Note 12 for additional information on our segment reporting change.

Table of Contents  6

NOTE 4 - GOING CONCERN

The accompanying consolidated 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 incurred losses from operations, has an accumulated deficit at March 31, 2015 of $40,075,152 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 consolidated 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 5 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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. During the six months ended March 31, 2015, the Company impaired $238,531 of its software assets.

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.

Table of Contents  7

The following table summarizes fair value measurements by level at March 31, 2015 and September 30, 2014 for assets measured at fair value on a recurring basis:

	Level 1		Level 2		Level 3		Total
At March 31, 2015
Software	$	—	$	—	$	238,530	$	238,530
Total Software	$	—	$	—	$	238,530	$	238,530
At September 30, 2014
Software	$	—	$	—	$	604,301	$	604,301
Total Software	$	—	$	—	$	604,301	$	604,301

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. 

NOTE 6 - SOFTWARE

The following is a detail of software at March 31, 2015 and September 30, 2014:

	2015			2014
Source Code License	$	2,500		$	2,500
Software License		1,200,106			1,200,106
EMR Certification		23,000			23,000
Encryption Software Code		15,800			15,800
Evolve Software Code		25,000			25,000
Compose Rose Code		—			6,000
Acquisition of Doctor’s Network of America		10,000			10,000
Total intangible assets		1,276,406			1,282,406
Accumulated amortization of intangible assets (charged to cost of sales)		(795,345	)		(668,105	)
Accumulated impairment of assets		(248,531	)		(10,000	)
Total proprietary technology, net	$	238,530		$	604,301

The amortization expense was $127,240 for the six months ended March 31, 2015. During the six months ended March 31, 2015, the Company impaired $238,531 of its software assets, as a result of the decline in revenues.

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 2,000 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  8

During the six months ended March 31, 2014, the Company and Antree agreed to unwind the acquisition of the software by the Company. Accordingly, the Company gave up all its rights for the use of the Compass Rose Code and all associated intellectual property rights, all computer software, patents, or formulas, algorithms licensed or sold under the project known as Compass Rose and the appropriate copyrights, patents, mask works, trademarks, service marks, internet domain names and world wide web uniform resource locators. In exchange for the Company giving up its rights to the Compass Rose Code, Antree agreed to the rescission and cancellation of the shares issued for the purchase. The Company cancelled the 2,000 shares issued to Antree and recorded a reduction to its capitalized intangible assets of $6,000 and a corresponding reduction of equity. The Company recorded a gain on the cancellation for the shares of $4,752.

NOTE 7- 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 Corporation; 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 consolidated 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.

DNA 

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 liabilities and operations are shown below.

	March 31, 2015		September 30, 2014
Net liabilities of discontinued operations:
Accounts payable	$	—	$	18
Net liabilities of discontinued operations	$	—	$	18

	Three Months Ended March 31,
	2015			2014
Discontinued operations:
Revenues	$	12,779		$	53,766
Operating expenses		(12,934	)		(50,568	)
(Loss) income from discontinued operations		(155	)	$	3,198

	Six Months Ended March 31,
	2015			2014
Discontinued operations:
Revenues	$	12,779		$	12,779
Operating expenses		(13,648	)		(13,494	)
(Loss) income from discontinued operations		(869	)		(7,517	)

Table of Contents  9

NOTE 8 - 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 5.00% interest rate per annum which renews annually. As of March 31, 2015, the Company had borrowed $46,097 against the line of credit. During the six months ended March 31, 2015, the Company repaid $7,514 of the outstanding balance and incurred and paid $1,222 in interest expense related to the Mutual of Omaha line of credit.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

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.

NOTE 10 - EQUITY

As of March 31, 2015, the Company was authorized to issue 650,000,000 common shares and 10,000,000 preferred shares at a par value of $0.01.  

Six months ended March 31, 2015

Stock Cancelled

During the six months ended March 31, 2015, the Company cancelled 2,150 shares of common stock. 2,000 of these shares were cancelled in relation to the Company giving back its rights to the Compass Rose Code. See Note 5. As part of the Antree rescission and cancellation, 150 shares were additionally cancelled that were issued in the year ended September 30, 2014, to one of the owners of Antree who provided additional programming services for improvements to the Compass Rose Code. The cancellation of the 150 shares was recorded as an adjustment to the Company’s par value, as no consideration was paid for the cancellation.

The Company received $7,000 for the issuance of 50,000 shares of common stock recorded as stock payable and as of September 30, 2014 the common stock has not been issued by the Company. In the six months ended March 31, 2015, the Company paid back the proceeds and did not issue the stock.

Preferred Stock

On February 5, 2015, the Company issued 6,000,000 shares of its Series A Preferred Stock to its CEO. As the Series A Preferred Stock is convertible into the Company’s common stock at a rate of 1 to 1.5 common shares. The Company recorded $9,900,000 as stock compensation based on the market value of the Company’s common stock on the date of grant. As of February 17, 2015, there are a total of 10,000,000 shares of the Series A Preferred Stock authorized and outstanding which are convertible into a total of 15,000,000 shares of common stock. The holders of the Preferred A shares can only 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 and the Board of Directors does not currently intend to approve such conversion.

Table of Contents  10

NOTE 11 - SEGMENT INFORMATION

Cloud Medical Doctors Software Corporation has two reporting segments and corporate overhead:

• Cloud-MD - the Company sells medical billing software to doctors. Prior to 2014, all of the Company’s business activities were derived from this segment.

• Cipherloc - the Company has a second software program which is an encryption technology that can be used by larger corporation to protect their data through our polymorphic technology.

• Corporate Overhead - the Company’s investment holding including financing current operations and expansion of its current holdings as well as evaluating the feasibility of entering into additional business.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performances based on profit or loss from operations before income taxes, not including nonrecurring gains and losses and foreign exchange gains and losses. The reportable segments are strategic business units that offer different technology and marketing strategies. Most of the businesses were developed internally and management remains the same. To date, the Company’s operations are principally in the United States.

Consolidated revenues from external customers, operating loss, and identifiable assets were as follows:

	Three months ended March 31,
	2015			2014
Revenues:
Cloud-MD	$	—		$	105,118
CipherLoc		—			—
Total revenues	$	—		$	105,118
Operating expenses:
Cloud-MD	$	(10,254,265	)	$	(91,155	)
Cipherloc		(18,520	)		—
Corporate		(157,806	)		(1,106,142	)
Net Loss from Continuing Operations	$	(10,430,321	)	$	(1,092,179	)

	Six months ended March 31,
	2015			2014
Revenues:
Cloud-MD	$	431		$	222,675
Cipherloc		—			—
Total revenues	$	431		$	222,675
Operating expenses:
Cloud-MD	$	(10,516,073	)	$	(182,310	)
Cipherloc		(18,520	)		(18,520	)
Corporate		(604,075	)		(1,309,698	)
Net Loss from Continuing Operations	$	(10,691,716	)	$	(1,287,853	)

	March 31, 2015		September 30, 2014
Identifiable assets:
Cloud-MD	$	216,730	$	583,507
CipherLoc		21,800		21,800
Corporate		86,872		552,537
Total identifiable assets	$	325,402	$	1,157844

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NOTE 12 - SUBSEQUENT EVENTS

On April 21, 2015, the Company entered into  a Licensing Agreement with two entities, Code Robert, LLC and Sunset Angel Productions, LLC that jointly own software for cross-platform, digital use. Cipherloc has the right to perpetually use the software in its CipherLoc PKPA engine. With this licensed software, the Company expects to be able to reduce the initial development time of the delivery mechanism for its PKPA engine to as little as 6-8 months and with fewer engineers.

The licensing fee for the use of the software is Fifty Thousand 50,000 restricted common shares of the Company’s stock divided equally between the Licensors.

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

In this Quarterly Report “Company,” “our company,” “us,” and “our” refer to Cipherloc Corporation and its subsidiaries, unless the context requires otherwise

Forward-Looking Statements

The following information contains certain forward-looking statements. Forward-looking statements are statements that estimate the happening of future events and are not based on historical fact. Forward-looking statements may be identified by the use of forward-looking terminology, such as "may," "could," "expect," "estimate," "anticipate," "plan," "predict," "probable," "possible," "should," "continue," or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking 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. At March 31, 2015, the Company had cash of $86,872.

We have an accumulated deficit at March 31, 2015 of $40,075,152 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 raising 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.

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.

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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 consolidated 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 not effective as of March 31, 2015. 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.

a. There were no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2015 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.

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SIGNATURES

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

Date: March 24, 2016	Cipherloc Corporation By: /s/ Michael De La Garza
	Michael De La Garza
	Chief Executive Officer (Principal Executive Officer)

Registrant Date: March 24, 2016	Cipherloc Corporation By: /s/ Eric Marquez
	Eric Marquez
	Principal Financial Officer

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