THE COMPANY PREVIOUSLY HAD INSUFFICIENT
WORKING CAPITAL TO PAY FOR THE PROFESSIONAL SERVICES REQUIRED TO PREPARE, AUDIT, AND FILE THE QUARTERLY AND ANNUAL REPORTS REQUIRED
BY THE SECURITIES ACT OF 1934. AS A RESULT, THE AUDITORS WHO AUDITED THE SEPTEMBER 30, 2007 FINANCIAL STATEMENTS AND REVIEWED THE
QUARTERLY REPORTS THROUGH JUNE 30, 2008 RESIGNED EFFECTIVE DECEMBER 13, 2011.
IN FEBRUARY 2010 THE BOARD OF DIRECTORS
VOTED TO DISCONTINUE THE MOBILE DVR AND LOCATIONPRODUCTS LINE OF BUSINESS REPORTED IN THESE FINANCIAL STATEMENTS DUE TO THE CUMULATIVE
EFFECTS OF SEVERELY DECLINING REVENUES RESULTING FROM THE 2008 RECESSION. SINCE THIS DECISION WAS MADE SUBSEQUENT TO THE YEARS
ENDED SEPTEMBER 30, 2008 AND 2009, THE QUARTERLY AND YEAR END STATEMENTS FOR THOSE YEARS ARE BEING REPORTED ON A GOING CONCERN
BASIS RATHER THAN AS DISCONTINUED OPERATIONS. THEY WILL, HOWEVER, BE REPORTED AS DISCONTINUED OPERATIONS COMMENCING WITH THE FISCAL
2010 FILINGS.
NEW MANAGEMENT HAS SUBSEQUENTLY
INFUSED SUFFICIENT WORKING CAPITAL TO BRING THE 1934 ACT FILINGS CURRENT. ADDITIONALLY, A NEW LINE OF BUSINESS HAS ALSO COMMENCED
WHICH WILL BE REPORTED ON IN THE FISCAL 2011 AND 2012 FILINGS.
The accompanying reviewed 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, 2010. 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, 2011 are not necessarily
indicative of the results that can be expected for the year ending September 30, 2011.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED
MARCH 31, 2011 AND 2010
NOTE 1- DESCRIPTION OF
BUSINESS
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 is derived from sales of electronic devices, recognized
as the product is delivered.
In February 4, 2010 the prior Board
members Mr. Michael Grollman and Mr. Greg Szabo, decided to discontinue the operations and wind down the operation of the Company
and operate the Company assets in a Limited Liability Company named NSC Labs, LLC controlled and owned by Mr. Grollman. Mr. Grollman
and NSC Labs, LLC was to pay the Company 2% of revenues and $100,000. Mr. Grollman nor NSC Labs, LLC never paid consideration for
this transaction.
In 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 has 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.
NOTE 2 – BASIS OF PRESENTATION
OF INTERIM FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation of Interim
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/A 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, 2011 are not necessarily indicative of the results that may be expected for the year
ending September 30, 2011. Notes to the unaudited interim consolidated financial statements that would substantially duplicate
the disclosures contained in the audited consolidated financial statements for fiscal year 2010 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, 2010 included within its Form 10-K as filed with the Securities and Exchange Commission.
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.
Revenue Recognition
Revenue includes provision of services. The Company recognizes
revenue from provision of services at the time evidence of an arrangement exists, fees are contractually fixed or determinable,
collection is reasonably assured through historical collection results and regular credit evaluations, and there are no uncertainties
regarding customer acceptance.
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 March 31, 2011, 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
Property and equipment are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted
future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows,
an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the estimated fair value of
the asset.
Income Taxes
Deferred income taxes are provided
to reflect the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial
reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected
to be realized.
The Company adopted the provisions
of ASC Topic 740,
Accounting For Uncertainty In Income Taxes-An Interpretation of ASC Topic 740
("ASC Topic 740").
ASC Topic 740 contains a 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 September 30, 2008, the Company did not record any liabilities for uncertain tax positions.
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. The Black-Scholes option-pricing model is used to estimate the
fair value of options or warrants granted.
Basic and Diluted Net Loss Per 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.
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.
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.
The Company adopted ASC Topic
820,
Fair Value Measurements
(“ASC Topic 820”), which defines fair value, establishes a framework for measuring
fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition of
fair value which focuses 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. The standard also prioritizes, within the measurement
of fair value, the use of market-based information over entity specific information and establishes a three-level hierarchy for
fair value measurements 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
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 3 - GOING CONCERN ISSUES
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 a net loss for the six months ended March 31, 2011 of
$193,317, an accumulated deficit of $26,066,658, cash flows used in operating activities of $104,253 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- DISCONTINUED OPERATIONS
The Company’s former Board of
Directors believed that it was in the best interest of the Company to discontinue the business operation of the GPS operational
device business. In 2011, this business was transferred to National Scientific, LLC by prior management in which he was to pay
$100,000 for that technology the former officer never paid the required compensation. The Company discontinued these operations
and began selling Medical Business Software and is the current operation of the Company.
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 operations from discontinued
operations in accordance with ASC Topic 360,
Accounting for the Impairment or Disposal of Long Lived Assets
.
Details of those classifications are shown below.
|
|
|
March
31, 2011
|
|
|
|
September
30, 2010
|
|
Net assets of discontinued operations:
|
|
|
(Unaudited)
|
|
|
|
|
|
Cash
|
|
$
|
—
|
|
|
$
|
2,197
|
|
Deferred offering costs
|
|
|
—
|
|
|
|
400
|
|
Net assets of discontinued operations
|
|
$
|
—
|
|
|
$
|
2,597
|
|
|
|
|
|
|
|
|
|
|
Net liabilities of discontinued operations:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
169,175
|
|
|
$
|
195,072
|
|
Disputed salaries & vacation of former officers
|
|
|
968,645
|
|
|
|
968,645
|
|
Disputed salary – former employee
|
|
|
20,256
|
|
|
|
20,256
|
|
|
|
|
|
|
|
|
|
|
Disputed payroll taxes for back pay of former officers
|
|
|
84,701
|
|
|
|
84,701
|
|
Disputed interest
|
|
|
191,348
|
|
|
|
191,348
|
|
Interest expenses
|
|
|
51,071
|
|
|
|
42,137
|
|
Former officer note payable at 8% interest rate
|
|
|
59,704
|
|
|
|
59,704
|
|
Shareholders demand note payable at 12%
|
|
|
11,625
|
|
|
|
11,625
|
|
Shareholders demand note payable at 12%
|
|
|
20,000
|
|
|
|
20,000
|
|
Unsecured note payable at 8% interest due November 2010, interest payments in default at 6/30/2010
|
|
|
175,000
|
|
|
|
175,000
|
|
Note discount
|
|
|
—
|
|
|
|
(860
|
)
|
Note beneficial conversion feature
|
|
|
—
|
|
|
|
(166
|
)
|
Net liabilities of discontinued operations
|
|
$
|
1,751,525
|
|
|
$
|
1,767,460
|
|
|
|
Three Months ended
March 31,
|
|
|
2011
|
|
2010
|
Discontinued operations:
|
|
(Unaudited)
|
|
(Unaudited)
|
Revenues
|
|
$
|
—
|
|
|
$
|
1,686
|
|
Cost of sales
|
|
|
—
|
|
|
|
1,533
|
|
Operating expenses
|
|
|
—
|
|
|
|
4,833
|
|
Interest expense
|
|
|
4,726
|
|
|
|
7,544
|
|
Loss from Discontinued Operations
|
|
$
|
4,726
|
|
|
$
|
12,224
|
|
|
|
Six Months ended
March 31,
|
|
|
2011
|
|
2010
|
Discontinued operations:
|
|
(Unaudited)
|
|
(Unaudited)
|
Revenues
|
|
$
|
3,400
|
|
|
$
|
58,788
|
|
Cost of sales
|
|
|
—
|
|
|
|
25,463
|
|
Operating expenses
|
|
|
—
|
|
|
|
35,286
|
|
Interest expense
|
|
|
10,477
|
|
|
|
16,357
|
|
Loss from Discontinued Operations
|
|
$
|
7,077
|
|
|
$
|
18,318
|
|
Commitments and contingencies that were discontinued
as a result of the transfer of the assets to National Scientific LLC as follows:
On September 7, 2005, we entered
into a factoring agreement with United Capital Funding (UCF) of Florida. UCF is a specialized financial services firm offering
Accounts Receivable Management and working capital funding via factoring. We expect to improve our cash flow with this arrangement.
Under the arrangement, we sell
to UCF as absolute owner, invoices that we submit to UCF to be factored. Upon purchase, UCF assumes the risk of non-payment on
purchased invoices, so long as the cause of non-payment is solely due to the occurrence of an insolvency event. As collateral securing
the obligations, we grant UCF a continuing first priority security interest in all accounts and related inventory. Notwithstanding
the creation of the above security interest, our relationship with UCF is one of Seller and Purchaser of accounts, and not that
of lender and borrower. However, as there is certain recourse for non-payment, the accounts receivable are recorded at the estimated
realizable value, net of allowances and the net advanced amount from UCF is recorded as an obligation at the end of fiscal
2007 and 2006. The initial and periodic factoring fee is .45% of the face amount of factored invoices. The factoring period is
five days and the purchase price is 80% of the face amount, excluding sales tax.
UCF typically advances to us
80% of the total amount of invoices factored, excluding sales tax. UCF retains 20% of the outstanding factored invoices as a reserve,
which it holds until the customer pays the factored invoice to UCF.
On November 1, 2005, as an important
phase in the current year’s financing plan, we entered into a financing program with Strategic Working Capital Fund, LP.
The terms of this program include a five-year Note payable at maturity in November 2010 for $175,000, at an effective annual interest
rate of 8%. Interest is due and payable semi-annually on May 1st and November 1st for each year in which the note is outstanding
The transaction also included 1,200,000 restricted common shares and a conversion/exchange option to convert the principal amount
and any unpaid interest of the Note into common shares at a per share conversion price of $0.0525. These shares include weighted
average anti-dilution provisions, as well as piggyback registration rights. Additionally, the Note has various put and call rights,
and has a right to early payment under certain conditions after 2 years. The 1,200,000 restricted common shares were recorded at
$0.043, which was the five-day average market closing price of our stock. The note and common stock were issued with a debt discount
of $51,600 and a beneficial conversion feature of $9,933. The discount and beneficial conversion feature are being amortized to
interest expense over the term of the note, which is approximately 60 months. The issuance of the shares resulted in deferred financing
costs of $24,000. The deferred financing costs are being amortized over term of the note, which is approximately 60 months, and
are included in the statement of operations as offering costs.
On February
24, 2005, March 28, 2005, May 2, 2005, and May 27, 2005 our Chairman Michael Grollman made new personal loans to the Company totaling
$159,000 to assist us with working capital needs. The loans are evidenced by a demand note that provides for repayment within five
business days of a demand notice from Mr. Grollman, with interest of 6% compounded annually from June 1, 2005. These loans were
secured by an interest in the copyrights in the Company’s iBus software and designs. During the quarter to September
30, 2007, these loans were paid down by $11,000. As of September 30, 2007, these loans had a balance outstanding of $148,000 and
the interest rate going forward was adjusted to 8% compounded annually from October 1, 2007. On September 30, 2007,
the Company converted unpaid interest of $13,300 on demand notes payable to Michael Grollman into a new demand note of $13,300
that provides for repayment within five business days of a demand notice from Mr. Grollman, with interest of 8% compounded annually
on October 1
st
. The balance of the note at March 31, 2011 is $59,704. On April 27, 2006, we secured a short-term loan
of $16,625 from a shareholder. The loan carries an origination/placement fee of $500 and has a perfectible security interest a)
prior to delivery in any assets purchased for the fulfillment of a customer’s order dated March 16, 2006, and b) in any receivable
resulting from the fulfillment of the customer’s purchase order. The interest rate on the loan is 12%. The transaction also
included 100,000 warrants to purchase our common stock at $0.036 at any time before April 27, 2009. The note had an approximate
maturity date of June 15, 2006. At September 30, 2006 and September 30, 2007 this note was in default. A partial payment towards
principal and interest of $5,258 was made on October 6, 2006. As of March 31, 2011 and September 30, 2010 $11,625 of this loan
was in default.
On May
31, 2006, we secured a short-term loan of $20,000 from a shareholder. The loan carries an origination/placement fee of $500 and
has a perfectible security interest a) prior to delivery in any assets purchased for the fulfillment of Clover Park, WA’s
order and b) in any receivable resulting from the fulfillment of the Clover Park purchase order. The interest rate on the
loan is 12%. The transaction also included 100,000 warrants to purchase our common stock at $0.036 at any time before May 31, 2009.
The note had a maturity date of July 10, 2006. At March 31, 2011 this note was in default.
NOTE 5 – COMMITMENT AND
CONTINGENCIES
On August 27, 2004 the Company signed a twenty-six month non-cancelable
operating lease agreement for an office in Scottsdale, Arizona. The lease for the Scottsdale facility expired October 31,
2006. On October 20, 2006 NSC executed a lease for 1,601 square feet of office/warehouse space at 8361 E. Evans Road, Suite 106 Scottsdale,
Arizona 85260. The lease for this Scottsdale facility commenced on November 1, 2006 and expires October 31, 2008 and is at
a base rental rate of $1,963 per month for the first twelve months and $ 2,028 per month for the final twelve months. In 2010
the Company lease was on a month to month basis.
NOTE 6– RELATED PARTY TRANSACTIONS
The CEO advanced $115,285 for the six
months ended March 31, 2011.
See Note 9 re the asset acquisition
involving entities under common control.
NOTE 7 - EQUITY
As of March 31, 2011 the Company had 180,276,879 common shares
outstanding at a par value of $.01 and no preferred shares outstanding at a par value of $.01.
Common Stock
The holders
of our common stock are entitled to receive such dividends, if any, as may be declared by our board of directors from time to time
out of legally available funds. The dividend rights of our common stock are junior to any preferential dividend rights of any outstanding
shares of preferred stock. The holders of our common stock also are entitled to receive distributions upon our liquidation, dissolution
or winding up of our assets that are legally available for distribution, after payment of all debt and other liabilities and distribution
in full of preferential amounts, if any, to be distributed to holders of our preferred stock.
The holders
of our common stock are not entitled to preemptive, subscription, redemption or conversion rights. The rights, preferences and
privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of any series of preferred
stock that we may designate and issue in the future.
Preferred Stock
The Company has authorized 4,000,000
shares of preferred stock, at $.001 par value and all are issued and outstanding as of March 31, 2011. The Corporation established
and designated the rights and preferences of a Series A Preferred Stock, and reserved 4,000,000 shares of preferred stock against
its issuance, such rights, preferences and designations. 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 that have been issued to our CEO &
CFO on November 30, 2000 and valued at the trading price of the common stock of $0.0095 and recorded as an expense of $38,000.
The
issuance of preferred stock by our board of directors could adversely affect the rights of holders of the common stock by, among
other things, establishing preferential dividends, liquidation rights or voting powers.
Warrants and Options
All warrants and options issued have
expired.
Stock Option Plan
Our board of
directors adopted the 2000 Stock Option Plan effective January 1, 2001. Our stockholders formally approved the 2000 Stock Option
Plan on February 14, 2001. The 2000 Stock Option plan terminates in accordance with the term on December 1, 2010. The Current Board
of Directors has not approved nor extended the Stock Option Plan therefore it is terminated.
NOTE
8 – STOCK-BASED COMPENSATION
Options
The Prior
board of directors adopted the 2000 Stock Option Plan effective January 1, 2001. Our stockholders formally approved the 2000 Stock
Option Plan on February 14, 2001.
The 2000 Stock Option plan terminated in accordance with the plan
provisions on December 1, 2010. The Current Board of Directors did not extend the Stock Option Plan, allowing it to terminate.
Under the 2000 Stock Option Plan, the purchase
price must be at least 100% of the fair market value of our common stock (if the option is an incentive stock option), or at least
25% of the fair market value of our common stock at the time the option was granted (if the option is a nonqualified grant), or
such higher price as may be determined by the Board of Directors at the time of grant. If however, an incentive stock option was
granted to an individual who would, immediately before the grant, directly or indirectly own more than 10% of the total combined
voting power of all our classes of stock, the purchase price of the shares of common stock covered by such incentive stock option
may not be less than 110% of the fair market value of such shares on the day the incentive stock option was granted. As the price
of the Company’s common stock was quoted on the OTC Bulletin Board, the fair market value of the common stock underlying
options granted under the 2000 Stock Option Plan was the last closing sale price of the common stock on the day the options were
granted. If there was no market price for the common stock, then our Board of Directors may, after taking all relevant facts into
consideration, determined the fair market value of our common stock.
According to
Section
10. Of the agreement captioned “Exercise of Options Upon Termination”
“(a)
|
|
Subject to Section 10(c), upon the termination of a Grantee’s relationship with
the Company and its Subsidiaries, the period during which such Grantee may exercise any outstanding exercisable installments of
his Options that were exercisable at the date of termination of his relationship with the Company shall not exceed (i) if such
termination is due to death or permanent and total disability, one year from the date of such termination, and (ii) in all other
cases, three months (six months for Nonemployee Directors) from the date of such termination, provided, however, that in no event
shall the period extend beyond the expiration of the Option term. Notwithstanding the foregoing, all Options shall immediately
terminate upon a termination of a Grantee’s employment if the Committee determines, in its sole discretion, that such termination
is for Cause.
|
(b)
|
|
In no event shall any Option be exercisable for more than the maximum number of shares
that the Grantee was entitled to purchase at the date of termination of the relationship with the Company and its Subsidiaries.
|
(c)
|
|
The Committee may, in its discretion, extend the period of exercisability set forth
in clauses (i) and (ii) in paragraph (a) above; provided, however, that such period may not be extended for Options granted to
Nonemployee Directors or for ISOs.”
|
Accordingly,
upon termination of employment with the Company, whether through dismissal or resignation, the options granted to former management
expired. All remaining options expired three months after the resignation of Mr. Grollman in 2010. Additionally, current management
did not extend the options of any prior management.
A summary of Options activity
for the six months ended March 31, 2011 is presented below:
|
|
Outstanding Options
|
|
|
Shares
Available for
Grant
|
|
Number of
Shares Granted
|
|
Weighted
Average
Exercise Price
|
|
Weighted Average
Remaining
Contractual
Life
(years)
|
|
Aggregate
Intrinsic Value
|
|
October 1, 2009
|
|
|
|
7,000,000
|
|
|
|
5,311,756
|
|
|
$
|
0.43
|
|
|
|
1.75
|
|
|
$
|
—
|
|
|
Grants
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
Forfeitures
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
September 30, 2010
|
|
|
|
—
|
|
|
|
5,311,756
|
|
|
$
|
0.43
|
|
|
|
.75
|
|
|
|
—
|
|
|
Grants
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Forfeitures
|
|
|
|
|
|
|
|
(5,311,756
|
)
|
|
|
.64
|
|
|
|
|
|
|
|
|
|
|
March
31, 2011
|
|
|
|
7,000,000
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
The Company
values all warrants using the Black-Scholes option-pricing model. Critical assumptions for the Black-Scholes option-pricing
model include the market value of the stock price at the time of issuance, the risk-free interest rate corresponding to the term
of the warrant, the volatility of the Company’s stock price, dividend yield on the common stock, as well as the exercise
price and term of the warrant. The warrants are not subject to any form of vesting schedule and, therefore, are exercisable
by the holders anytime at their discretion during the life of the warrant. No discounts were applied to the valuation
determined by the Black-Scholes option-pricing model.
Warrants
During the
six months ended March 31, 2011, no awards were granted, no share purchase warrants were exercised, and no warrants were forfeited.
All remaining warrants shown in the table below expired on April 1, 2011.
Summary of warrant
activity for the six months ended March 31, 2011 is presented below:
|
|
Number of
Shares Granted
|
|
Weighted
Average
Exercise Price
|
|
Weighted Average
Remaining
Contractual
Life
(years)
|
|
Aggregate
Intrinsic Value
|
|
October 1, 2009
|
|
|
|
2,308,497
|
|
|
$
|
.10
|
|
|
$
|
58
|
|
|
$
|
—
|
|
|
Grants
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
|
|
2,308,497
|
|
|
$
|
0.10
|
|
|
|
.38
|
|
|
|
—
|
|
|
Grants
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
|
(500,000
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
March
31, 2011
|
|
|
|
1,808,497
|
|
|
$
|
0.10
|
|
|
$
|
.01
|
|
|
$
|
—
|
|
The Company values all warrants using the Black-Scholes option-pricing
model. Critical assumptions for the Black-Scholes option-pricing model include the market value of the stock price
at the time of issuance, the risk-free interest rate corresponding to the term of the warrant, the volatility of the Company’s
stock price, dividend yield on the common stock, as well as the exercise price and term of the warrant. The warrants
are not subject to any form of vesting schedule and, therefore, are exercisable by the holders anytime at their discretion during
the life of the warrant. No discounts were applied to the valuation determined by the Black-Scholes option-pricing
model.
Stock Option Plan
Our board
of directors adopted the 2000 Stock Option Plan effective January 1, 2001. Our stockholders formally approved the 2000 Stock Option
Plan on February 14, 2001. The 2000 Stock Option plan terminates in accordance with the term on December 1, 2010. The Current Board
of Directors has not approved nor extended the Stock Option Plan therefore it is terminated.
NOTE 9 – SOFTWARE ACQUISITION:
TRANSACTION BETWEEN ENTITIES UNDER COMMON CONTROL
On January 2, 2011 the Company
entered into an asset purchase agreement with certain private companies owned by Michael de la Garza (“MDLG”) whereby
NSC acquired the rights to proprietary medical billing and practice management software developed by the private companies.
The Office of the Chief Accountant
(OCA) of the Securities and Exchange Commission was consulted by Company management to insure that the transaction was recorded
correctly on the books of NSC. The OCA considered the facts and circumstances as described below in their deliberations.
January 1, 2011 Acquisition Of
Software A Business Combination Under Common Control
On August 24, 2010 –National Scientific
Corporation (“NSC”) signed a letter of intent for NSC to acquire the Private Companies’ assets.
On November 19, 2010 – NSC and
MDLG signed a revised letter of intent with the Private Companies.
In accordance with the revised LOI the
following occurred and on December 1, 2010 the NSC reported that change on Form 8-K:
1. On November
19, 2010 - MDLG was appointed CEO, President, and Chairman of the Board. At that time there were now then 3 Board members.
2. On November
29, 2010, 4,000,000 shares of Preferred A were authorized by the Board. These preferred shares are not convertible but entitle
to 150 votes per share.
3. On November
30, 2010 – 3,000,000 Preferred A shares were beneficially issued to The Private Companies and 1,000,000 were issued to another
Board member.
4. On January 2, 2011 the sale
of the software by the Private Companies to NSC was finalized which included the exchange for a $5,000,000 note convertible to
500,000,000 of common stock at $.01 per share. The Company agreed to issue a $5,000,000 promissory note for 8% interest rate the
note matures on April 30, 2021.
5. On January 2, 2011 10,000,000
common shares were beneficially issued to MDLG via an affiliate for compensation.
On January 18, 2011 the prior CEO of
NSC resigned from the Board of Directors and a Form 8-K was filed on February 8, 2011.
On October 5, 2011 the Company issued
Absolute Medical Software Systems, LLC 30,000,000 common shares in full payment of this promissory note.
On January 3, 2013 the Company engaged
a valuation expert to assess the value of the software for impairment purposes at September 30, 2011 and 2012. The Company valued
the software and source code on the development cost of the software provided by Absolute Medical Software Systems, LLC of $4,296,000
for September 30, 2011 and September 30, 2012.
Prior Public Company Transaction
Michael de la Garza (“MDLG”)
is the owner of three related private companies, Absolute, PayMed, and MedPay (“the private companies”) who own and
operate medical billing software. On September 10, 2008 the private company entered into an asset purchase agreement with a prior
public company. On September 10, 2008 prior publically traded companies, purchased all the private companies’ assets, for
10,000,000shares of common stock per the purchase agreements. On the date of that sale, September 10, 2008 the stock was trading
at $.100 which valued the transaction at $1,000.000. This value was based on the software before the update to operate on a Cloud
based platform. Management considers the price to represent the fair value of the software at that point in time.
This transaction was an arms-length
value since MDLG was not a shareholder, officer or director of this prior public company. On June 9, 2009 the transaction was rescinded
and the assets returned to The Private Companies. The private companies impaired the GAAP basis software development cost to the
value of the prior public company transaction value of $1,000,000.
During the period of 2009 through 2010
the software was updated to operate on a Cloud based platform and had additional software development costs of $200,106.
The OCA has determined that due to the
voting rights of the Preferred A shares that the transaction occurred between parties under common control. Accordingly, they have
determined that the GAAP basis software development cost of the private entity sellers should become the cost basis of NSC.
Since these costs ($1,011,223) exceeded
the transaction price ($1,000,000) with the prior public company, the prior costs incurred have been impaired to the September
10, 2008 value of the share received in the prior transaction.
The related convertible note which was
subsequently converted to common shares has been discounted to the cost basis used to value the transaction which is less than
the fair value of the software as determined by independent appraisal.
The cost basis was determined as follows:
Cost Basis for assets acquired under Common Control
|
|
Cost Basis
|
Cost basis of Consideration:
|
|
|
|
|
Absolute Medical Software Systems LLC development costs from inception
|
|
$
|
1,011,222
|
|
Impairment of software on September 10, 2008 to value
|
|
|
(11,222
|
)
|
|
|
|
|
|
Total Value at September 10, 2008
|
|
$
|
1,000,000
|
|
Software Update to Operate on Cloud Based Platform
|
|
|
|
|
Absolute Medical Software Systems LLC development costs
|
|
$
|
200,106
|
|
|
|
|
|
|
Total Cost Basis at January 1, 2011
|
|
$
|
1,200,106
|
|
Purchase Price Allocation
|
|
|
Value of Consideration:
|
|
|
Equity instrument of $5,000,000 promissory
note converted to 30,000,000 common stock on October 4, 2011 value under common control
|
|
$
|
1,200,106
|
|
Total Purchase Price
|
|
$
|
1,200,106
|
|
Cost
Basis
of
Assets
acquired
under
common
control:
|
|
|
|
|
Assets:
|
|
|
|
|
Software source code and development costs of software
|
|
$
|
1,200,106
|
|
Cost Basis of total assets
|
|
$
|
1,200,106
|
|
NOTE 10– SUBSEQUENT EVENTS
In accordance with the Subsequent Events
Topic of the FASB ASC 855, Management has evaluated subsequent events, and have determined that the following events are reasonably
likely to impact the financial statements:
2013
In October, 2012 the Company issued
137,500 common shares for $46,000 and issued 10,000 common stock in conjunction with the sale of medical software.
In December 6, 2012 the Company issued
500,000 common shares for the acquisition of CipherSmith software, issued 200,000 common shares for the sale of medical software.
In January 22, 2013 the Company issued
200,000 common shares for the acquisition of CipherSmith software.
In March 21, 2013 the Company issued
270,000 common shares for software investment in the company in accordance with the Software Investment Agreements.
In March 21, 2013 the Company issued
500,000 to Krooss Family Trust LLP for the acquisition of
Doctors Network of America in Flowood, Mississippi
and all of the assets of that company. Also on April 17, 2013 the Company issued 167,000 for compensation for the salaries for
the entire year of 2013 those shares were issued to Krooss Family Trust LLP in accordance with the Agreement. On April 17, 2013
the Company issued 378,500 to Krooss Family Trust LLP in accordance with the Agreement with total shares issued to William and
Marie Krooss of 1,045,500 common shares.
April 17, 2013 the Company cancelled
the 200,000 common shares issued to for the acquisition and reissued 220,004 common shares for the acquisition of CipherSmith software.
April 17, 2013 the Company issued 95,000 for the software investment
in the Company in accordance with the Software Investment Agreements.
May 10, 2013 the Company issued
20,000 common shares for software investment in the company in accordance with the Software Investment Agreements.
June 26, 2013 the Company issued
25,000 common shares for software investment in the company in accordance with the Software Investment Agreements.
August 26, 2013 the Company issued
120,000 common shares to two Software Sales Personal located in California.
2012
During the ten months ended July 31,
2012, the Company issued the following shares:
The Company issued 30,000,000 common
shares for there the reduction of debt from our CEO and reduced debt of the company by $3,325,949.
The Company issued 19,000 common shares
for services rendered by professionals and recorded the expenses based upon the trading price of the common shares of $0.0102 and
expensed $204 as consulting fees.
The Company issued 1,055,333 common
shares to third parties that have purchased our medical billing software at the trading price of the common stock of $0.0160 and
recorded a revenue contra account of $20,871.
The Company issued 90,000 common shares
for $18,000 in cash.
The Company issued 200,000 common shares
to Krooss Medical Management in accordance with the acquisition agreement and recorded it at the trading price of the common shares
of $0.020 and recorded an investment in Krooss Medical Management of $4,000.
In August of 2012 the Company issued
100,000 shares to MediSouth LLC for the acquisition of its software. The stock was valued at $2,500 (See MediSouth LLC software
acquisition below).
2011
The Company issued 250,000 in
common stock for $25,000 in cash.
Software asset purchases:
On
June 22, 2012
The Company
acquired Doctors Network of America in Flowood, Mississippi for 500,000 common shares and the acquisition was valued at $10,000.
The fair value of the consideration
and the assets acquired is based on the aggregate value of the common stock issued in exchange for the software as shown below:
|
|
June 22, 2012
|
Fair Value of Consideration:
|
|
|
Common Stock (500,000 common shares valued at $.008)
|
|
$
|
10,000
|
|
Total Purchase Price
|
|
$
|
10,000
|
|
Fair Value of Assets acquired:
|
|
|
|
|
Assets:
|
|
|
|
|
Software
|
|
$
|
10,000
|
|
Fair value of total assets
|
|
$
|
10,000
|
|
The acquisitions
terms are as follows:
1.
|
|
Cloud-MDs will provide medical billing services under Cloud-MDs Corporation. No need
for a wholly owned subsidiary to be formed to accommodate medical billing.
|
2.
|
|
DNA will provide personnel, network access, facilities and expertise to deliver contracted
billing service support to Cloud-MDs for clients that Cloud-MDs sends to DNA for billing support. DNA will be compensated on an
agreed upon schedule. All revenue will be reported as Cloud-MDs revenue and tracked separately.
|
3.
|
|
Goal is to grow DNA related gross revenue within Cloud-MDs to 3X, or greater, current
DNA gross revenue over the next 3 years.
|
4.
|
|
Cloud-MDs will acquire the assets of Kroosss Medical management Systems, LLC once
the revenue goals in item #3 are achieved. As consideration to Bill Kroosss and Marie Kroosss (collectively “Ownership”)
of Kroosss Medical Management Systems, LLC for the acquisition of DNA, Cloud-MDs proposes the following:
|
a.
|
|
Current Ownership will remain in their current roles at Kroosss Medical Management
Systems, LLC with current responsibilities and will take on additional responsibilities of sales and marketing in the territory
of the state of Mississippi and surrounding states and will assume new responsibilities within Cloud-MDs corporate.
|
b.
|
|
Current executive management will remain for a period of not less than 1 year after
the acquisition and Ownership salary will be established as $200,000.00.
|
c.
|
|
Current Ownership will be awarded NSCT class 144 stock in the amount of 500,000 common
shares, with anti-dilution clause, that is restricted for 12 months during which time Ownership may not sell the awarded stock.
These shares will be awarded as follows:
|
i.
|
|
Upon acquisition, 200,000 shares of class 144 common stock with a 12 month restriction
with applicable anti-dilution clause. This stock is non-refundable to NSCT in the event of any misrepresentations by NSCT to Kroosss
Medical Management Systems, LLC during the acquisition or the first 90 days following the acquisition;
|
ii.
|
|
After the first 90 days following the acquisition, NSCT will award to the Ownership
300,000 shares of class 144, common stock with a 12 month restriction with applicable anti-dilution clauses.
|
d.
|
|
For one (1) year after the acquisition, current Ownership will have the opportunity
to earn up to 125,000 shares, per calendar quarter, of addition shares of NSCT common stock based on meeting certain performance
criteria. The shares will be issued with applicable anti-dilution clause.
|
5.
|
|
The acquired assets and customer base of Kroosss Medical Management Systems, LLC will
be merged into the current asset and customer base of Cloud-MDs.
|
6.
|
|
Upon the purchase of DNA by Cloud-MDs, all liabilities of DNA as of the date of asset
transfer will be the responsibility of Kroosss Medical management Systems, LLC.
|
7.
|
|
DNA cannot add new clients. New clients will be sent to Cloud-MDs.
|
8.
|
|
DNA ownership may be called upon to act as a reference for Cloud-MDs and/or work with
Cloud-MDs senior management in an advisory capacity.
|
9.
|
|
DNA will become a Cloud-MDs software (PM/EMR/RM) reseller and will acquire an enterprise
license with unlimited use:
|
a.
|
|
Enterprise license is $100,000 and includes all updates, hosting, etc. and DNA receives
100,000 shares of Cloud-MDs 144 class stock if done prior to stock roll-back. If after roll-back, stock award shall equal $100,000/then
current share price. Leasing is available.
|
b.
|
|
DNA can resell licenses to current DNA clients or other clients:
|
i.
|
|
MSRP of software license is $50,000/provider, leasing is available
|
ii.
|
|
A commission of up to 40% of revenue on each software license sold goes to DNA + up
to 3,000 shares of stock per software license sold and support will be provided by DNA staff after training.
|
iii.
|
|
All revenue other than commissions goes to Cloud-MD
|
iv.
|
|
DNA takes 1
st
support call on all software licenses it sells
|
v.
|
|
Primary, non-exclusive, territories are the states of Mississippi, Alabama and Louisiana
with additional non-exclusive territories permissible based on a specific sales opportunity
|
c.
|
|
DNA will become official beta site for Cloud-MDs PM/EMR/RM software releases.
|
10.
|
|
Upon acquisition of DNA by Cloud-MDs, Cloud-MDs will assume employer responsibilities
for all current Kroosss Medical Management Systems, LLC employees. All employees of Kroosss Medical Management Systems, LLC will
remain employed by Cloud-MDs in their current positions for at least 180 days after the acquisition after which time each will
be evaluated for their then current responsibilities or considered for new responsibilities.
|
11.
|
|
Independent Medical Practice Support, LLC (“IMPS”) assets and customer
base are not part of this acquisition discussion or negotiation and any IMPS related expenses or liabilities must be removed from
DNA accounting records and will not be considered in future acquisition discussions or negotiations.
|
On
August 14, 2012
The Company
through a comprehensive agreement with MediSouth, LLC, has purchased a complete source code license and will integrate and enhance
this feature set as part of its ever expanding Cloud-MD Office product suite.
The fair value of the consideration
and the assets acquired is based on the aggregate value of the common stock issued in exchange for the software as shown below:
|
|
August 14, 2012
|
Fair Value of Consideration:
|
|
|
Common Stock (100,000 common shares valued at $.025)
|
|
$
|
2,500
|
|
Total Purchase Price
|
|
$
|
2,500
|
|
Fair Value of Assets acquired:
|
|
|
|
|
Assets:
|
|
|
|
|
Software source code
|
|
$
|
2,500
|
|
Fair value of total assets
|
|
$
|
2,500
|
|
2
.
4.
Principal
C
onditions a
n
d
Consideration
. Subject to all of the terms and conditions
s
et
forth in this Agr
e
em
e
nt
,
and in consideration of the sale
,
assignment,
transfer and delivery of
t
he Purchased As
sets
by L
icensor
t
o Licensee
,
as of the Effective Date of this agreement
L
icensee
and Licensor agree to the following
(
the
"Purchase
Consideration")
:
a)
Me
diS
outh wi
l
l
pro
v
ide
C
loud-MD
with the software source code fo
r
the License
,
expertise to
i
ns
t
all
and integ
r
ate the License into Cloud
-
MD
product offerings and deliver the MediSou
t
h s
o
f
tw
a
r
e
s
ource code to Cloud-MD
.
b)
For as
l
ong as
L
icensee
makes use of the License, Licensor agrees to provide Licensee
w
it
h
a
ll s
o
f
t
w
are
updates for the License within 5 working days of
L
icensor
i
mplementin
g
th
o
se
s
a
me soft
w
are
updates in its own production version of the License
.
c
)
Licen
s
or
ag
r
e
es
that Licensee shall have the right to modify the software
c
ontained
in
t
he
Li
cense
to meet
L
icensee's operat
i
onal
needs.
d
)
C
lou
d
-MD sha
l
l
p
rovide back to MediSouth
,
with the permission of each affected
C
loud-MD
cl
i
e
nt
,
t
he de
-
i
dent
i
fied
purchasing data it collects as a result of Cloud-MD clients utili
z
ing
t
he
embedded Medical Supplies and Pharmaceutical Inventory
M
anagemen
t f
un
ctio
n
a
lit
y
pro
v
ided b
y
the License
.
e
)
MediSouth shall recei
v
e
100
,
000 shares of non-diluteable
,
Class 144
,
Cloud-MD
s
toc
k
with
a on
e (1
)
y
e
a
r
tradin
g
restriction if this agreement is executed pr
i
or
t
o
L
icensee
'
s
plan
ned
s
t
oc
k
roll-b
a
ck
.
If th
i
s agreement is
executed after the Licen
s
ee
'
s
s
tock roll-b
a
ck
,
t
he s
t
ock
awa
r
d shall equal
$300
,
OOO
/
then
current
share pri
c
e of Licen
s
e
e'
s
p
ub
l
icl
y
t
ra
d
ed stock
.
M
ediSouth shall complete the Subscription Agreement
.
f)
MediSo
u
t
h
wi
l
l
g
rant
C
l
o
ud-MD
all nece
s
s
a
r
y
rights to use the License and
r
ela
t
ed
pat
ents an
d
t
ho
s
e
r
igh
t
s
s
hall be transferabl
e
to an
y
Licensee who
ma
y
purchase
C
loud-
M
D
a
nd i
t
s
assets
.
g
)
In
th
e e
ve
n
t
t
hat
C
loud-
M
D
i
s
acqu
i
red
b
y
another entit
y,
the use of the License
s
hall
trans
fer
t
o
th
e
a
c
qu
ir
ing
entit
y
w
ith
th
e
provision that the License ma
y
be used onl
y wi
th
i
n
t
he
Cl
o
u
d
-
M
D
softw
are
app
lica
t
ion
a
s it
w
as
used at
t
he
t
im
e
of the
a
cquis
i
tion
.
h
)
Ot
h
er than 2
.
4.g
above
,
Clo
u
d-
M
D
may not sell the License, transfe
r
the License
,
allow an
y
o
t
he
r
e
n
ti
ty
to
us
e
the
L
i
c
en
s
e
as pa
rt
o
f
that entit
y
'
s
software application o
r t
ransf
er
an
y r
i
ght
s
t
o a
not
h
e
r
p
a
r
t
y
t
o
u
se the
L
icen
s
e
s
e
pa
r
atel
y
from Cloud-MD
p
roducts
in
w
hi
ch
t
h
e
Lic
e
nse i
s
embedded
.
i)
If
fr
o
m the Eff
e
c
ti
v
e
Date
o
f
t
his
a
g
r
e
ement
t
hrough
the end of the
1s
t
y
ea
r
f
ol
lo
wi
ng
the
Pe
r
m
a
ne
nt
T
r
an
s
fe
r,
Licensee
discovers an
y
misrepresentat
i
ons
on
t
he par
t
o
f L
i
cen
s
o
r
to L
i
c
en
s
e
e
or
Lic
ensor
,
Lic
e
nse
e
or
Licensor will have the righ
t
to dissolve
thi
s
agree
me
n
t.
S
ho
ul
d
t
h
i
s
occu
r
, Licensor will be required to forfeit the
stock awarded
t
o it a
s
des
crib
e
d
in
i
te
m
2
.
4
.
e
abo
v
e
wi
th
that stock having an established per share valu
e e
qual
to th
e
v
a
l
ue
of
a
s
hare
o
f L
i
c
ens
e
e
'
s
s
tock
a
s
officiall
y
recorded
on the date of
L
icensee
'
s
s
t
ock
r
ol
lba
ck
and an
y
assets from the original acquisition that
st
i
ll remain under th
e
c
on
t
r
ol
of
L
icensee
w
il
l
be
returned to
L
icensor and in thei
r
then
current
c
ondition o
r
s
t
atus
and
bo
t
h
parti
e
s
wi
l
l
e
x
it
the
r
elat
i
onship
h
oldin
g
e
ach othe
r
harmles
s
in a
l
l
ma
tt
e
r
s
.
j)
L
ic
e
n
sor
ag
r
e
es t
o
pro
vide a softw
a
re
device
i
n the licens
e
d
s
oftware that wil
l
o
ff
e
r
an
a
u
tomat
i
c
lo
g
on fr
om
L
i
cen
s
ee
'
s
soft
wa
r
e
.
k
)
L
i
c
en
s
or
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g
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e
s
to pro
v
ide sof
t
ware
operations
,
communications and
h
osting
s
ervices fo
r t
h
e
lic
e
nse
d
s
oftw
a
r
e
i
n same comput
i
ng facilit
y
as Licensee has its
o
perationa
l
so
f
t
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r
e
u
n
t
il
L
ic
e
ns
e
e
a
n
d L
icenso
r
mutuall
y
agree
t
hat
this serv
i
ce is no
lon
ger
ne
c
ess
a
ry
,
1
)
L
ic
ens
ee
a
n
d
Li
c
ensor
a
g
ree t
o
e
x
ecute
sale
s
agreements for each oth
e
r
's
products
a
n
d
se
rv
ic
e
s
.
m
)
L
icen
s
e
e
a
gree
s th
a
t
i
f
du
e
to
L
i
censee modificat
i
ons
to the licensed software, data from th
e
m
od
ifi
ed
licensed so
f
t
wa
re
cannot be processed b
y L
icensor, Licensee
sha
ll
pro
v
ide d
a
t
a
i
n
or
ig
inal
licensed
s
o
f
t
w
a
re
format and mak
e
that
data av
ai
lable to
Lice
nsor
as i
n
2
.
4
.
d.
n
)
L
ic
e
ns
e
e
sha
ll ha
ve
the
righ
t
t
o c
o
p
y
and u
s
e all forms o
f
documentat
i
on
,
m
a
r
k
e
t
i
n
g
in
fo
r
ma
ti
o
n
a
nd da
t
a r
el
at
ed
t
o
t
he
L
i
cense.
o
)
L
i
censee shal
l
have
the right to brand the License with a product name selected b
y
the
Licensee a
n
d Li
c
ensor.
p
)
Lic
e
nsor shall change
the appearance of the Lice
n
se
'
s
end-user com
p
uter display screens to
m
atch
the appearance of the L
i
censee
'
s
computer application
'
s end
-
user
computer d
is
pl
ays
,
i
nc
l
uding
the branding desc
r
ibed in 2
.
4.0
above
.
q)
In the e
v
e
n
t
that Licensor should cease doing business, Licensee shall have the
r
ight
to co
nt
in
u
e
u
s
a
ge
o
f t
he License and all associated documentation and related
marketin
g m
a
teria
l
wi
thout recourse from Licensor or an
y
entit
y
representing
Licensor
'
s interest
s
.
r)
T
h
e
"
powe
red
b
y
M
ed
iScan
"
t
ext or graphic must alway
s
be
display
e
d on modules
and
ap
pli
c
a
t
i
on
web pages pro
v
ided b
y
L
i
censor
.
2.5
Ho
ld
b
a
c
k
St
ock
.
Pursuant to
the terms and subject to the conditions of this
A
greement,
no pr
o
vis
i
ons
shall be made for the purpose of withholding previousl
y
awarded
s
tock b
y L
icensee
t
o
L
ice
ns
o
r
other t
h
an those
al
read
y
cited in section 2
.
4
of this Agreement
.
Cloud-MD Inventory
Management System is a ground breaking Cloud-based Medical Supply Inventory Management System, specifically designed for small
and medium Medical Practices, DME's, Home Health, Long-term Care, and Surgery Centers that will offer:
1. Centralized management control over
medical supply and drug inventories
2. Real time utilization and financial inventory summary
3. Low price notifications
4. Par level/reorder tracking
5. RX expiration tracking
6. Auto supply re-ordering from a practices established suppliers
Based on a barcode
scanning technology,
Cloud-MD Inventory Management
is designed to reduce workloads
by automating inventory control processes. The Cloud-MD's Inventory Management System requires no installation, on-site software
or special hardware. The new Cloud-MD Office application suite, of which Cloud-MD Inventory Management is a part, is fully delivered
via the Internet and requires no special computing environment at the end-user facility.
Manual inventory
is time consuming, labor intensive and leaves room for error. Benefiting healthcare professionals across the country, Cloud-MD's
Inventory Management System is a low-cost, low-maintenance, easy to use automated system that can provide effective solutions.
On
November 21, 2012
The Company
through a comprehensive agreement with CipherSmith, LLC, has purchased 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. This security software will be part of its ever expanding Cloud-MD
Office product suite.
The fair value of the consideration and the assets acquired is
based on the aggregate value of the common stock issued in exchange for the software as shown below:
|
|
November 21, 2012
|
Fair Value of Consideration:
|
|
|
Common Stock (800,000 common shares valued at $.018)
|
|
$
|
14,400
|
|
Total Purchase Price
|
|
$
|
14,400
|
|
Fair Value of Assets acquired:
|
|
|
|
|
Assets:
|
|
|
|
|
Software source code and security software
|
|
$
|
14,400
|
|
Fair value of total assets
|
|
$
|
14,400
|
|
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.