NATIONAL SCIENTIFIC CORP/AZ - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Edgar Glimpses Via Acquire Media NewsEdge) Forward-Looking Statements
Management's Discussion and Analysis contains various "forward looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, regarding future events or the future financial performance of
the Company that involve risks and uncertainties. Certain statements included in
this Form 10-Q, including, without limitation, statements related to anticipated
cash flow sources and uses, and words including but not limited to
"anticipates", "believes", "plans", "expects", "future" and similar statements
or expressions, identify forward looking statements. Any forward-looking
statements herein are subject to certain risks and uncertainties in the
Company's business, including but not limited to, reliance on key customers and
competition in its markets, market demand, delayed payments of accounts
receivables, technological developments, maintenance of relationships with key
suppliers, difficulties of hiring or retaining key personnel and any changes in
current accounting rules, all of which may be beyond the control of the Company.
Management will elect additional changes to revenue recognition to comply with
the most conservative SEC recognition on a forward going accrual basis as the
model is replicated with other similar markets (i.e. SBDC). The Company's actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth therein.
Forward-looking statements involve risks, uncertainties and other factors, which
may cause our actual results, performance or achievements to be materially
different from those expressed or implied by such forward-looking statements.
Factors and risks that could affect our results and achievements and cause them
to materially differ from those contained in the forward-looking statements
include those identified in the section titled "Risk Factors" in the Company's
Annual Report on Form 10-K for the year ended September 30, 2008, as well as
other factors that we are currently unable to identify or quantify, but that may
exist in the future.
In addition, the foregoing factors may affect generally our business, results of
operations and financial position. Forward-looking statements speak only as of
the date the statement was made. We do not undertake and specifically decline
any obligation to update any forward-looking statements.
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.
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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 changed management
and began working on operations related to the Company's medical billing
Item 1. Description of Business
Our Current Business of the Company - Cloud Doctor Medical Software
Cloud-MD Software Solutions introduces the Cloud-MD Office, a "Cloud Based",
5010 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.
Cloud-MD Billing Services provides: Management of Medical Claims from posting
physician charges into our medical billing software to posting of payments;
Continuous Insurance Claim Follow Up to track and research all rejected or
denied medical claims; Comprehensive Reporting including monthly financial
Statements sent to our clients so they can see how their practice is doing and a
variety of detailed reports give our clients the important information and tools
used to assist in the increased production which leads to more profit; Patient
Account Inquiries & Support to assist patients with their billing and insurance
Cloud-MD Medical and Pharmaceutical Supply Management Software Services
provides: 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 offers:
Centralized management control over your medical supply and drug inventory
Real time utilization and financial inventory summary
Low price notifications
Par level/reorder tracking
RX expiration tracking
Auto supply re-ordering
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Based on a barcode scanning system, designed to reduce workloads by automating
inventory control processes, the Cloud-MD® Inventory Management System requires
no installation, on-site software or special hardware. The Cloud-MD® application
suite is fully delivered via the Internet and requires no special computing
environment at the end-user facility.
Cloud-MD Healthcare Systems Consulting Services specializes in the
implementation of sustainable, comprehensive solutions that increase financial
and operational performance in healthcare businesses. By partnering with
clients, we deliver solutions across the healthcare enterprise that improve
quality, increase revenue, reduce operational expenses and attract physicians,
patients and employees. We bring resources, in-depth knowledge, and
significantly deeper experience than most in the field.
Cloud-MD Acquisition Services provides medical supply acquisition services that
are fully integrated with Cloud-MD Office's Medical and Pharmaceutical Inventory
Management software and offers a full range of medical, surgical, and laboratory
supply products and equipment for medical offices and surgery centers. Cloud-MD
Acquisition Services easy-to-use and seamless process makes supply purchasing
quicker and more cost efficient.
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Discontinued Operations of the Business through February 4, 2010
Mobile DVR and Location Products
Most of our customers require monitoring and or tracking of a person or object,
and reporting this information back to a central location.
Our current MDVR technology has not been awarded any patents as of the date of
this report and has been awarded trademark protection on one other. We use a
combination of confidentiality agreements, copyright and other trade secret
management techniques to protect our trade secrets.
Overview of This Technology
We have developed a group of mobile products with the capability to record high
quality digital video, determine location and identify individuals and
concatenate this information into a homogeneous information stream that can be
easily displayed on a remote computer. We use a technology called Global
Positioning System or GPS to determine location. These products report the
location information as well as other desired information back to the user
through a radio network. The products typically contain a small computer to
provide the overall control and data processing capacity for the device. The
products can be thought of as having three distinct pieces or systems. These are
the data collection system, the data control & processing system, and the data
transport system. This design concept is the basis for our Mobile DVR products.
The diagram below shows in a general way how the system works with our products:
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Data Collection System
This system can be thought of as the "eyes and ears" of the product. It is
comprised of two systems. One determines location of the product, while the
other system records specific events that the customer may be interested in,
such as a door opening on a school bus or the speed of the bus at a certain
location. The location system determines the position of the product using a
technology developed by the U.S. Government called the Global Positioning
System, or GPS, as it is commonly known. The U.S. Government developed the
system which consists of approximately 24 satellites that orbit the earth
rapidly. It is a worldwide navigation support system that allows users of GPS
receivers to determine their precise geographic locations to within a few meters
in most cases. The network of satellites and their ground control and monitoring
stations are maintained and operated by the United States Department of Defense,
which maintains an ongoing satellite replenishment program to ensure continuous
global system coverage. Access to the system for all users is currently provided
free of charge by the U.S. Government.
GPS works by ranging and triangulating the product's position from a group of
satellites. Of the 24 GPS satellites in orbit, a minimum of four is needed to
reliably determine the product's three-dimensional position. A GPS receiver
measures distance by calculating the amount of time it takes a navigation and
time reference radio signal from the satellite to make a one-way trip to the GPS
GPS receivers typically are very compact; and it is not necessary to have a
large dish antenna to receive GPS signals. Typical information that can be
obtained from these GPS signals are latitude, longitude, elevation, speed,
direction, date, and time.
The second part of this Data Collection System is customer specific. Many
customers have additional types of data that they want to know or want collected
relevant to a location. An example of this is, every time a child enters or
leaves a school bus or the time and location that the bus stops. This data input
system can therefore be customized to meet the exact needs of a customer.
Another kind of data collection technology we use in some of our products is
called RFID, which stands for Radio Frequency Identification. RFID devices are
small radios that could be used to track information about people or objects.
RFID provides a low-cost solution for certain kinds of tracking activities,
especially short-range activities, typically less than a hundred feet. RFID
devices are primarily used to determine if the object is close to a given
Another kind of data collection technology we use in some of our products is
called MDVR, which stands for mobile digital video recorder. MDVR devices use a
small digital camera that takes up to 30 pictures per second and then stores
these images electronically. When these individual pictures are 'played back',
you see a movie of the recorded event. Schools are particularly interested in
this type of technology in conjunction with GPS to monitor what is happening on
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Data Control & Processing System
This system can be thought of as the "brains" of the product. A technical term
for this system is an embedded system, meaning one that lives deep inside the
overall product. An embedded system is a small special-purpose computer system
built into a larger device. The reason we use an embedded system in our products
is to keep cost to us low, so our products stay more competitive in price.
Simple embedded systems can cost us as little as a few dollars each and use very
little power compared to the desktop computers that many people are familiar
with, which usually cost much more. On our embedded systems there is typically
no disk drive, operating system, keyboard, or screen. Our embedded systems
instead communicate with other computers by radio. These other computers
typically have a keyboard and screens, and they are used to display our
The programs that we run on these systems are custom designed and built by our
software engineers. These programs are called firmware. The firmware controls
how the data is collected, what data should be collected and what events should
be monitored and reported, what should be ignored, and how, when and what data
should be sent back to the user. As mentioned above, the system is relatively
easy to customize, and the firmware is also easy to customize as it has been
written in a modular fashion that allows changes to one section to be
implemented without the need to completely re-write the program. This also helps
us keep costs down.
Data Transport System
This system can be thought of as the "mouth" of the product. It communicates to
the outside world where it is and what has happened. There are many different
types of technology that can be used to transport this data back to the user,
generally using some kind of wireless technology based on radios. We currently
use cellular radios, satellite radios, Wi-Fi radios, and other special purpose
We use a cellular radio based on GSM cellular technology. GSM, or Global System
for Mobile Communications, is a second-generation digital mobile telephone
standard. GSM was initially developed as pan-European collaboration, intended to
enable mobile roaming between member countries.
The cellular radios typically operate in "real time." When an event occurs, the
data is immediately transported back to a user at a remote location.
While cellular coverage and reception is good in urban areas, it is less
effective in rural areas and is non-existent in most wilderness areas. Sometimes
our products are used in areas where there is poor or no cellular coverage. To
overcome this we sometimes use a special radio that communicates with satellites
orbiting the earth. This form of communication has the advantage that our
products can be used in very remote areas almost anywhere in the world. The
major downside is that these radios are large and expensive and the airtime
usage costs can be high. Another problem associated with this technology is
that, like GPS, these satellite radios work best when there is a clear line of
site to the satellites; as such they may not work well indoors, or under dense
foliage or in deep valleys. The satellite radios typically operate in "real
time." When an event occurs, the data is immediately transported back to the
user. Some of our customers do not want to have the expense of a real time
cellular or satellite connection, nor are they interested in having the data in
real time. For this we use either a special purpose radio or a Wi-Fi radio.
The Wi-Fi radio operates in a very similar manner to cordless phones found in
many households. These phones typically consist of a base station and handset.
Our system is very similar; it consists of a base station unit that receives
data from the mobile unit that would be on the asset or vehicle being tracked.
The base station is typically attached to a personal computer that takes the raw
data from the radio and re-formats it into information that can be displayed by
other computers on the Internet. Wi-Fi stands for "Wireless Fidelity" and is a
technology in very common use to wirelessly connect personal computers to other
computer networks, including the Internet.
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Our special purpose radios work in a very similar manner to the Wi-Fi radio,
except that they can sometimes transmit data over longer distances.
Wi-Fi radios operate in an unlicensed part of the radio spectrum and as such do
not have any special government licensing fees associated with them. Because
they operate in a license-free spectrum, the Federal Communications Commission
(FCC) imposes some restrictions on the use of these radios. One major
restriction is that the radio signal range is limited to about 300 feet.
Since most of the time our product operates well beyond 300 feet from the base
station, all the collected data is stored within the device for later
transmission when the product comes back into that range again. When the vehicle
or asset comes back into base-station range, the mobile units automatically
download their information. We call this mode of operation "near time." These
"near time" products do not incur any special airtime usage charges. As such,
they can be significantly cheaper to operate than the cellular or satellite
Once the data is transmitted back to the user they can either display the
information on our software or on some other computer application.
Results of Operations for the Three and Six Months ended March 31, 2009 and
March 31, 2008
Revenues decreased to $78,344 from $156,216 for the three months ended March 31,
2009 and 2008 respectively. Revenues decreased to $243,259 from $371,755 for the
six months ended March 31, 2009 and 2008, respectively. This decrease is
primarily attributable to decrease in sales for 2009 and less marketing of our
Cost of goods sold decreased to $39,679 from $83,033 for the three months ended
March 31, 2009 and 2008 respectively. Cost of goods sold decreased to $132,736
from $206,473 for the six months ended March 31, 2009 and 2008, respectively.
Our cost of goods sold is directly related to the decrease in revenue.
General and administrative expense decreased to $139,143 from $176,334 for the
three months ended March 31, 2009 and 2008 respectively. General and
administrative expense decreased to $285,503 from $337,481 for the six months
ended March 31, 2009 and 2008, respectively. The decrease in general and
administrative expense was related to the decrease in research and development
costs of the Company.
Interest expense decreased to $11,661 from $21,772 for the three months ended
March 31, 2009 and 2008 respectively. Interest expense decreased to $23,706 from
$44,620 for the six months ended March 31, 2009 and 2008, respectively. Our
interest expense is related to the cost of debt and it has been reduced by
repayment of loans of $1,168 and related party notes payables of $38,269.
Net loss for the three months ended March 31, 2009 net loss decreased to
$112,139 and $124,923 for March 31, 2008 as compared to six months ended March
31, 2009 and 2008 decreased to $198,656 from $216,819 respectively.
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Liquidity and Capital Resources
The Company has material notes, one from our prior Chief Executive Officer for
approximately $59,723 , one convertible note with an investor relationship with
Strategic Working Capital Fund, LP$155,515 net of discount and beneficial
conversion feature of $19,485 with a total balance due of $175,000, and three
notes with shareholders of $34,000. In March 31, 2009 the Company was in
compliance with the note agreement with Strategic Working Capital Fund LP and
all other note requirements are in default.
Our cash provided by (used in) operating activities were $31,957 and ($85,451)
for the six months ended March 31, 2009 and 2008, respectively. The decrease in
cash flows used in operations was primarily attributable to the changes in
operating assets and liabilities, primarily related to increases in amounts
payable, in March 31, 2009 as compared to the 2008 period.
Cash (used in) provided by financing activities was ($39,438) and $1,886 for the
six months ended March 31, 2009and 2008, respectively. We repaid notes payables
of $1,169 and related party notes payables of $38,269 as compared to repayment
of related party notes payables of $17,424 and increase in notes payables of
We are currently investigating opportunities regarding the acquisition or
leasing of companies in the software sector and are actively pursuing
There is a strong possibility that, in attempting to accomplish the above, we
may not be able to satisfy our cash requirements over the next twelve months and
may be required to raise additional cash from outside sources.
In the event that we are required to raise additional cash from outside source,
we may issue equity securities or incur additional debt. 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.
Off-Balance sheet arrangements
We have no off-balance sheet arrangements including arrangements that would
affect the liquidity, capital resources, market risk support and credit risk
support or other benefits.
WHERE YOU CAN FIND MORE INFORMATION
You are advised to read this Quarterly Report on Form 10-Q in conjunction with
other reports and documents that we file from time to time with the SEC. In
particular, please read our Quarterly Reports on Form 10-Q, Annual Report on
Form 10-K, and Current Reports on Form 8-K that we file from time to time. You
may obtain copies of these reports directly from us or from the SEC at the SEC's
Public Reference Room at 100 F. Street, N.E. Washington, D.C. 20549, and you may
obtain information about obtaining access to the Reference Room by calling the
SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic
filers at its website http://www.sec.gov.
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