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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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Form 10-QSB



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(Mark One)

|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------



For the quarterly period ended June 30, 2005



| ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------



For the transition period from  to



Commission file number 0-50435



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MD Technologies Inc.

(Name of small business issuer in its charter)



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|                                                               |  |                                       
|-------------------------------------------------------------- |  | --------------------------------------
|DELAWARE                                                       |  | 72-1491921                            
|(State or other jurisdiction of incorporation or organization) |  | (I. R. S. Employer Identification No.)
|                                                               | 
|620 FLORIDA ST., SUITE 200 BATON ROUGE, LOUISIANA              |  | 70801                                 
|(Address of principal executive offices)                       |  | (Zip Code)                            



Issuers
telephone number (225) 343-7169



---



Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ̈



APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS



Check whether the registrant filed all documents and reports required to be filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a
court.    Yes ̈No ̈Not applicable.



APPLICABLE ONLY TO CORPORATE ISSUERS



State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: Common Stock: 3,949,313 shares outstanding as of August 3, 2005.



Transitional Small Business Disclosure Form (check
one):    Yes  x    No ̈



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##### Table of Contents

MD TECHNOLOGIES INC.



INDEX TO FORM
10-QSB



June 30, 2005



|                                                                                                                   |  |   
|------------------------------------------------------------------------------------------------------------------ |  | --
|PART I  FINANCIAL INFORMATION                                                                                     |  |   
|                                                                                                                   | 
|Item 1  Financial Statements (unaudited)                                                                          |  |   
|                                                                                                                   | 
|Condensed Balance Sheets at June 30, 2005 and December 31, 2004                                                    |  | 3 
|                                                                                                                   | 
|Condensed Statements of Operations For the Three Months Ended and Six Months Ended June 30, 2005 and June 30, 2004 |  | 4 
|                                                                                                                   | 
|Condensed Statements of Cash Flows For the Six Months Ended June 30, 2005 and June 30, 2004                        |  | 5 
|                                                                                                                   | 
|Notes to Condensed Financial Statements                                                                            |  | 6 
|                                                                                                                   | 
|Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations                     |  | 7 
|                                                                                                                   | 
|Item 3  Controls and Procedures                                                                                   |  | 10
|                                                                                                                   | 
|PART II  OTHER INFORMATION                                                                                        |  | 11
|                                                                                                                   | 
|Item 4  Submission of Matters to a Vote of Security Holders                                                       |  | 11
|                                                                                                                   | 
|Item 6  Exhibits and Reports on Form 8-K                                                                          |  | 11
|                                                                                                                   | 
|SIGNATURES                                                                                                         |  | 12
|                                                                                                                   | 
|EXHIBITS                                                                                                           |  |   

|
|







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##### Table of Contents

PART I  FINANCIAL INFORMATION



Item 1. Financial Statements.



MD Technologies Inc.

CONDENSED BALANCE SHEETS

(unaudited)



|                                                                                                                        |  |               |            |   |               |   |            |  
|----------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------- | - | ------------- | - | ---------- | -
|                                                                                                                        |  | June 30, 2005 |            |   | Dec. 31, 2004 |  
|ASSETS                                                                                                                  |  |               |            |   |               |   |            |  
|Current Assets                                                                                                          |  |               |            |   |               |   |            |  
|Cash and cash equivalents                                                                                               |  | $             | 419,571    |   |               | $ | 1,045,780  |  
|Accounts receivable                                                                                                     |  |               | 56,167     |   |               |   | 34,662     |  
|Prepaid expenses                                                                                                        |  |               | 8,693      |   |               |   | 22,196     |  
|                                                                                                                        |  |               |            |   |               |   |            |  
|Total current assets                                                                                                    |  |               | 484,431    |   |               |   | 1,102,638  |  
|                                                                                                                        |  |              
|Property and Equipment                                                                                                  |  |               |            |   |               |   |            |  
|Computer equipment and software                                                                                         |  |               | 222,396    |   |               |   | 201,388    |  
|Assets under capital lease                                                                                              |  |               | 44,109     |   |               |   | 44,109     |  
|Furniture and fixtures                                                                                                  |  |               | 30,370     |   |               |   | 25,820     |  
|                                                                                                                        |  |               |            |   |               |   |            |  
|                                                                                                                        |  |               | 296,875    |   |               |   | 271,317    |  
|Less: Accumulated depreciation                                                                                          |  |               | 94,267     |   |               |   | 54,602     |  
|                                                                                                                        |  |               |            |   |               |   |            |  
|                                                                                                                        |  |               | 202,608    |   |               |   | 216,715    |  
|Other Assets                                                                                                            |  |               |            |   |               |   |            |  
|Deferred bond offering costs                                                                                            |  |               | 60,723     |   |               |   |           |  
|                                                                                                                        |  |              
|Capitalized software costs held for sale, net                                                                           |  |               | 281,413    |   |               |   | 284,711    |  
|                                                                                                                        |  |               |            |   |               |   |            |  
|Total assets                                                                                                            |  | $             | 1,029,175  |   |               | $ | 1,604,064  |  
|                                                                                                                        |  |               |            |   |               |   |            |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                    |  |               |            |   |               |   |            |  
|Current Liabilities                                                                                                     |  |               |            |   |               |   |            |  
|Accounts payable                                                                                                        |  | $             | 30,689     |   |               | $ | 27,286     |  
|Accrued expenses and interest                                                                                           |  |               | 176,843    |   |               |   | 25,627     |  
|Current portion of note payable                                                                                         |  |               | 6,620      |   |               |   | 6,425      |  
|Current portion of obligation under capital lease                                                                       |  |               | 9,870      |   |               |   | 9,351      |  
|Deferred revenue                                                                                                        |  |               | 14,710     |   |               |   | 14,555     |  
|                                                                                                                        |  |               |            |   |               |   |            |  
|Total current liabilities                                                                                               |  |               | 238,732    |   |               |   | 83,244     |  
|                                                                                                                        |  |              
|Long Term Liabilities                                                                                                   |  |               |           |   |               |   |            |  
|Note payable, net of current portion                                                                                    |  |               | 14,440     |   |               |   | 17,791     |  
|Obligation under capital lease, net of current portion                                                                  |  |               | 24,637     |   |               |   | 29,886     |  
|Stockholders Equity                                                                                                    |  |               |            |   |               |   |            |  
|Preferred stock, no par value; 20,000 shares authorized, no shares issued or outstanding                                |  |               |           |   |               |   |           |  
|Common stock, $0.0004 par value; 30,000,000 shares authorized, 4,904,561 shares issued and 3,949,313 shares outstanding |  |               | 1,962      |   |               |   | 1,962      |  
|Additional paid-in capital                                                                                              |  |               | 4,358,957  |   |               |   | 4,338,957  |  
|Treasury stock                                                                                                          |  |               | (383       | ) |               |   | (383       | )
|Retained earnings                                                                                                       |  |               | (3,609,170 | ) |               |   | (2,867,393 | )
|                                                                                                                        |  |               |            |   |               |   |            |  
|                                                                                                                        |  |               | 751,366    |   |               |   | 1,473,143  |  
|                                                                                                                        |  |               |            |   |               |   |            |  
|Total liabilities and stockholders equity                                                                              |  | $             | 1,029,175  |   |               | $ | 1,604,064  |  
|                                                                                                                        |  |               |            |   |               |   |            |  



The accompanying
notes are an integral part of the financial statements.



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MD Technologies Inc.

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)



|                                             |  |                                     |            |   |                                   |   |            |      |  |   |            |   |  |   |            |  
|-------------------------------------------- |  | ----------------------------------- | ---------- | - | --------------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                             |  | For the three Months ended June 30, |            |   | For the six months ended June 30, |  
|                                             |  | 2005                                |            |   | 2004                              |   |            | 2005 |  |   | 2004       |  
|REVENUES                                     |  |                                     |            |   |                                   |   |            |      |  |   |            |   |  |   |            |  
|Sales and service revenue                    |  | $                                   | 245,424    |   |                                   | $ | 144,179    |      |  | $ | 451,054    |   |  | $ | 264,624    |  
|                                             |  |                                     |            |   |                                   |   |            |      |  |   |            |   |  |   |            |  
|Total revenues                               |  |                                     | 245,424    |   |                                   |   | 144,179    |      |  |   | 451,054    |   |  |   | 264,624    |  
|                                             |  |                                     |            |  
|COSTS OF REVENUES                            |  |                                     |            |   |                                   |   |            |      |  |   |            |   |  |   |            |  
|Salaries direct                              |  |                                     | 43,339     |   |                                   |   | 20,855     |      |  |   | 76,461     |   |  |   | 35,300     |  
|Depreciation                                 |  |                                     | 23,754     |   |                                   |   | 16,046     |      |  |   | 54,957     |   |  |   | 29,456     |  
|Other cost of revenue                        |  |                                     | 19,670     |   |                                   |   | 12,796     |      |  |   | 26,551     |   |  |   | 21,521     |  
|                                             |  |                                     |            |   |                                   |   |            |      |  |   |            |   |  |   |            |  
|Total cost of revenues                       |  |                                     | 86,763     |   |                                   |   | 49,697     |      |  |   | 157,969    |   |  |   | 86,277     |  
|                                             |  |                                     |            |   |                                   |   |            |      |  |   |            |   |  |   |            |  
|Gross profit (loss)                          |  |                                     | 158,661    |   |                                   |   | 94,482     |      |  |   | 293,085    |   |  |   | 178,347    |  
|                                             |  |                                     |            |  
|OPERATING EXPENSES                           |  |                                     |            |   |                                   |   |            |      |  |   |            |   |  |   |            |  
|Compensation                                 |  |                                     | 320,982    |   |                                   |   | 257,284    |      |  |   | 654.681    |   |  |   | 406,831    |  
|Depreciation                                 |  |                                     | 14,112     |   |                                   |   | 12,743     |      |  |   | 39,667     |   |  |   | 24,285     |  
|Selling, general and administrative expenses |  |                                     | 178,355    |   |                                   |   | 168,699    |      |  |   | 341,494    |   |  |   | 312,397    |  
|                                             |  |                                     |            |   |                                   |   |            |      |  |   |            |   |  |   |            |  
|Total operating expenses                     |  |                                     | 513,449    |   |                                   |   | 438,726    |      |  |   | 1,035,842  |   |  |   | 743,513    |  
|                                             |  |                                     |            |   |                                   |   |            |      |  |   |            |   |  |   |            |  
|Income from operations                       |  |                                     | (354,787   | ) |                                   |   | (344,244   | )    |  |   | (742,757   | ) |  |   | (565,166   | )
|                                             |  |                                     |            |  
|OTHER INCOME (EXPENSE)                       |  |                                     |            |   |                                   |   |            |      |  |   |            |   |  |   |            |  
|Interest income                              |  |                                     | 1,520      |   |                                   |   | 3,081      |      |  |   | 3,570      |   |  |   | 3,483      |  
|Interest expense                             |  |                                     | (1,236     | ) |                                   |   | (1,002     | )    |  |   | (2,590     | ) |  |   | (8,746     | )
|                                             |  |                                     |            |   |                                   |   |            |      |  |   |            |   |  |   |            |  
|                                             |  |                                     | 285        |   |                                   |   | 2,079      |      |  |   | 980        |   |  |   | (5,263     | )
|                                             |  |                                     |            |   |                                   |   |            |      |  |   |            |   |  |   |            |  
|NET LOSS                                     |  |                                     | (354,503   | ) |                                   |   | (342,165   | )    |  |   | (741,777   | ) |  |   | (570,429   | )
|                                             |  |                                     |            |  
|Retained earnings, beginning of period       |  |                                     | (3,254,667 | ) |                                   |   | (1,808,050 | )    |  |   | (2,867,393 | ) |  |   | (1,579,786 | )
|                                             |  |                                     |            |   |                                   |   |            |      |  |   |            |   |  |   |            |  
|Retained earnings, end of period             |  | $                                   | (3,609,170 | ) |                                   | $ | (2,150,215 | )    |  | $ | (3,609,170 | ) |  | $ | (2,150,215 | )
|                                             |  |                                     |            |   |                                   |   |            |      |  |   |            |   |  |   |            |  
|Income per share: (Basic and diluted)        |  | $                                   | (0.09      | ) |                                   | $ | (0.09      | )    |  | $ | (0.19      | ) |  | $ | (0.14      | )
|                                             |  |                                     |            |   |                                   |   |            |      |  |   |            |   |  |   |            |  
|Wtd. average number of shares outstanding    |  |                                     | 3,949,313  |   |                                   |   | 3,945,811  |      |  |   | 3,949,313  |   |  |   | 3,947,340  |  
|                                             |  |                                     |            |   |                                   |   |            |      |  |   |            |   |  |   |            |  



The accompanying
notes are an integral part of the financial statements.



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MD Technologies Inc.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)



|                                                       |  |                                   |           |   |      |   |           |  
|------------------------------------------------------ |  | --------------------------------- | --------- | - | ---- | - | --------- | -
|                                                       |  | For the six months ended June 30, |          
|                                                       |  | 2005                              |           |   | 2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                   |  | $                                 | (480,480  | ) |      | $ | (741,708  | )
|                                                       |  |                                  
|CASH FLOWS FROM INVESTING ACTIVITIES                   |  |                                   |           |   |      |   |           |  
|Plant and equipment purchases                          |  |                                   | (25,428   | ) |      |   | (127,211  | )
|Capitalization of software development costs           |  |                                   | (51,662   | ) |      |   | (85,597   | )
|                                                       |  |                                   |           |   |      |   |           |  
|Net cash flows used by investing activities            |  |                                   | (77,120   | ) |      |   | (212,808  | )
|                                                       |  |                                  
|CASH FLOWS FROM FINANCING ACTIVITIES                   |  |                                   |           |   |      |   |           |  
|Deferred offering costs                                |  |                                   | (60,723   | ) |      |   | 129,186   |  
|Issuance of stock for cash                             |  |                                   |           |   |      |   | 2,886,312 |  
|Decrease in stock subscriptions receivable             |  |                                   |           |   |      |   | 863       |  
|Repayment of debt                                      |  |                                   | (7,886    | ) |      |   | (213,893  | )
|                                                       |  |                                   |           |   |      |   |           |  
|Net cash flows provided (used) by financing activities |  |                                   | (68,609   | ) |      |   | 2,802,468 |  
|                                                       |  |                                   |           |   |      |   |           |  
|NET INCREASE (DECREASE) IN CASH                        |  |                                   | (626,209  | ) |      |   | 1,847,952 |  
|                                                       |  |                                  
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD         |  |                                   | 1,045,780 |   |      |   | 2,923     |  
|                                                       |  |                                   |           |   |      |   |           |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD               |  | $                                 | 419,571   |   |      | $ | 1,850,875 |  
|                                                       |  |                                   |           |   |      |   |           |  



The accompanying
notes are an integral part of the financial statements.



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MD Technologies Inc.

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2005



|1. | Managements Representation of Interim Financial Information
|-- | ------------------------------------------------------------



The accompanying financial statements have been prepared by MD Technologies Inc. without audit pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as allowed by
such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These financial statements include all of the adjustments which, in the opinion of management, are necessary to a
fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. These financial statements should be read in conjunction with the audited financial statements at December 31, 2004.



|2. | Subsequent Event  Closing of Convertible Debenture Offering
|-- | ------------------------------------------------------------



On July 5, 2005, the Company completed the sale of $5 million of its 7.5% Convertible Debentures.



The debentures will mature on June 30, 2015 and pay 7.5% interest per annum,
payable semi-annually. The debentures are convertible into shares of common stock of MD Technologies at a price of $2.25 per share starting on July 5, 2006. The Company received proceeds of $4,924,135, net of costs related to the offering totaling
$75,685.



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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.



CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION



The discussion in this Quarterly Report on Form 10-QSB regarding MD Technologies Inc., its business and operations includes forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1996. This report and the information incorporated by reference in it contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. Such statements consist of
any statement other than a recitation of historical fact and can be identified by the use of forward-looking terminology such as may, expect, anticipate, estimate or continue or the
negative thereof or other variations thereon or comparable terminology. The reader is cautioned that all forward-looking statements are necessarily speculative and there are certain risks and uncertainties that could cause actual events or results
to differ materially from those referred to in such forward looking statements. We do not have a policy of updating or revising forward-looking statements and thus it should not be assumed that silence by us over time means that actual events are
bearing out as estimated in such forward looking statements.



When used in
this Quarterly Report, the terms  we, our, us, and MD Technologies refers to MD Technologies Inc., a Delaware corporation.



Certain statements contained in this Managements Discussion and Analysis are forward-looking statements. Actual
results could differ materially from those encompassed within such forward-looking statements as a result of various factors.



General



For an understanding of the significant factors that influenced our results during the past three fiscal years, you should read the following discussion
in conjunction with our consolidated financial statements and related notes. In addition, you should read the following discussion in conjunction with the Managements Discussion and Analysis included in our Annual Report on Form 10-KSB for the
year ended December 31, 2004.



The Quarter Ended June 30,
2005 Compared with the Quarter Ended June 30, 2004



| |  |  | Total revenue increased 70% in the quarter ended June 30, 2005 to $245,424 from $144,179 in the quarter ended June 30, 2004.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | Cost of Revenues increased 75% to $86,763.
| | - |  | ------------------------------------------



| |  |  | Operating Expenses increased 17% to $513,449.
| | - |  | ---------------------------------------------



| |  |  | Net Loss increased to $354,503 ($.09/share.)
| | - |  | --------------------------------------------



The Six Months Ended June 30, 2005 Compared with the Six Months Ended June 30, 2004



| |  |  | Total revenue increased 71% in the six months ended June 30, 2005 to $451,054 from $264,624 in the six months ended June 30, 2004.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cost of Revenues increased 83% to $157,969.
| | - |  | -------------------------------------------



| |  |  | Operating Expenses increased 39% to $1,035,842.
| | - |  | -----------------------------------------------



| |  |  | Net Loss increased 30% to $741,777 ($.19/share.)
| | - |  | ------------------------------------------------



During the three months ended June 30, 2005 and the six months ended June 30, 2004, we continued to implement our strategy of acquiring aggressive
customer and revenue growth through the efforts of our sales and marketing strategies. Our cost of revenues for the three month and six month periods ended June 30, 2005, were significantly higher than the three and six month periods ended June 30,
2004 as a result of costs associated with servicing our increase in sales. Our operating expenses for three and six month periods ended June 30, 2005 were higher than the operating expenses incurred in the three and six month periods ended June 30,
2004. The increase in operating expenses is related to the fact that the



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initial build out phase of expanding the Companys operations, utilizing the funds received from our public offering
in 2004, had not been completed at the end of the quarter ended June 30, 2004. Therefore, we did not incur as many expenses in the three month and six month periods ended June 30, 2004, while we were still in a build-out phase, as we incurred during
the three and six month periods ended June 30, 2005, when we were fully staffed. Net Loss for the three and six month periods ended June 30, 2005 exceeded Net Loss for the three and six month periods ended June 30, 2004 as operating expenses grew at
a greater rate than revenue.



Results of Operations



Revenues



Total revenue increased from $144,179 in the quarter ended June 30, 2004 to
$245,424 in the quarter ended June 30, 2005, a 70% increase in total revenue. Total revenue increased from $264,624 in the six months ended June 30, 2004 to $451,054 in the six months ended June 30, 2005, a 71% increased in total revenue.



The increases in total revenue for both the three month period
and the six month period are the result of continued successes in the sale and implementation of our products and services, Medtopia Manager and Medtopia Expert. The Medtopia Manager revenue consists of one-time setup and
training fees and monthly subscription fees, while the Medtopia Expert revenue consists of monthly percentage-based revenue that is earned from customer billing and collection activity. Total revenue for the quarter ended June 30, 2005 for
Medtopia Manager was $145,801 and total revenue for the same quarter for Medtopia Expert was $99,623. Total revenue for the six months ended June 30, 2005 for Medtopia Manager was $274,894 and total revenue for the same period
for Medtopia Expert was $176,160. Revenue from each of these products and services has been growing consistently and is a direct result of our sales and marketing efforts. We expect this trend of revenue growth to continue for the foreseeable
future.



Costs of Revenues



The Cost of Revenues for the three month period ended June
30, 2005 increased 75% from $49,697 in the quarter ended June 30, 2004 to $86,763 in the quarter ended June 30, 2005. This increase is due to the additional expenses incurred to service our increased customer base. New employees have been hired to
service the increased customer base which contributed specifically to an increase in the Cost of Revenues Salaries Direct from $20,855 in the quarter ended June 30, 2004 compared to $43,339 in the quarter ended June 30, 2005, an increase of 108%.
Other cost of revenue increased from $12,796 in the quarter ended June 30, 2004 to $19,670 in the quarter ended June 30, 2005, an increase of 54%. This is a result of other costs, such as courier expense and statement processing, associated with
servicing our increased customer base. The remainder of the increase is a result of an increase in depreciation expense related to our capitalized software. Depreciation expense increased from $16,046 in the quarter ended June 30, 2004 compared to
$23,754 in the quarter ended June 30, 2005, an increase of 48%. The increase in depreciation expense is a result of the increased amount of capitalized costs associated with the development of our new line of products.



The Cost of Revenues for the six month period ended June 30, 2005 increased
83% from $86,277 in the period ended June 30, 2004 to $157,969 in the period ended June 30, 2005. This increase is due to the additional expenses incurred to service our increased customer base. Cost of Revenues Salaries Direct increased from
$35,300 in the six months ended June 30, 2004 to $76,461 in the six months ended June 30, 2005, an increase of 117%. The remainder of the increase is a result of an increase in depreciation expense related to our capitalized software. Depreciation
expense increased from $29,456 in the period ended June 30, 2004 compared to $54,957 in the quarter ended June 30, 2005, an increase of 87%. The increase in depreciation expense is a result of the increased amount of capitalized costs associated
with the development of our new line of products.



Operating Expenses



Our operating
expenses increased from $438,726 in the quarter ended June 30, 2004 to $513,449 in the quarter ended June 30, 2005, an increase of 17%. Loss from operations increased slightly from $344,244 in the quarter ended June 30, 2004 compared to $354,787 in
the quarter ended June 30, 2005, an increase of 3%. The increase in operating expenses is a result of the new sales, marketing, programming, and administration personnel that were hired during and after the quarter ended June 30, 2004. These
additional employees contributed to an increase in Operating Expenses Compensation from $257,284 in the quarter ended June 30, 2004 to $320,982 in the quarter ended June 30, 2005, an increase of 25%. The



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remainder of the increase in operating expenses is a result of increased selling, general, and administrative expense,
which increased slightly from $168,699 in the quarter ended June 30, 2004 to $178,355 in the quarter ended Jun 30, 2005, an increase of 6%.



During the quarter ended June 30, 2005 total revenues increased 70%, cost of revenues increased 75%, and operating expenses increased 17%. The net effect
of the increase in both revenue and expenses resulted in a slight increase in net loss from $342,165 in the quarter ended June 30, 2004 to $354,503 in the quarter ended June 30, 2005, an increase of of 4%. We expect the net loss to continue in the
near future. However, the net loss is also expected to decrease moderately from quarter to quarter as we have completed our initial build-out phase of hiring new administrative and programming employees. New employees in these areas and the
associated administrative expenses are expected to increase only incrementally in the future as we add additional customers and potentially enter into new markets or release new products.



Our operating expenses increased from $743,513 in the six months ended June 30, 2004 to $1,035,842 in the quarter ended June
30, 2005, an increase of 39%. This increase in operating expenses resulted in an increased loss from operations of $742,757 in the period ended June 30, 2005 as compared to $565,166 in the period ended June 30, 2004, an increase of 31%. The increase
in operating expenses is a result of the additional sales, marketing, programming, and administration personnel that were hired in the first six months of 2004 as part of the companys build-out phase. These additional employees contributed to
an increase in Operating Expenses Compensation from $406,831 in the six months ended June 30, 2004 to $654,681 in the six months ended June 30, 2005, an increase of 61%. The remainder of the increase is attributable to selling, general, and
administrative expense and depreciation expense, which increased 9% and 63%, respectively. Selling, general, and administrative expense and depreciation expense increased in this period as a direct result of the additional costs associated with
implementing our growth plan. While total revenues increased 71% in this six month period, the increase in the cost of revenues coupled with the increase in operating expenses contributed to a greater net loss of $741,777 in the six months ended
June 30, 2004 in comparison to $570,429 in the six months ended June 30, 2005, an increase of 30%. Net loss is expected to decrease in the second half of the year as we continue to grow revenue through our sales and marketing efforts and as we
implement our acquisition plan.



Liquidity and Capital Resources



Our cash and cash equivalents decreased by 60% from
$1,045,780 at the beginning of the year to $419,571 at June 30, 2005 for a total cash decrease of $626,209. The decrease in cash is a result of the cash used to fund our operating loss and capital improvements in the first six months of the year.



As of June 30, 2005, the Company had working capital and
stockholders equity surpluses of $245,699 and $751,366 respectively. The $419,571 of cash on hand is being used as working capital in order to fund sales and marketing, operations, and the research and development of our products and services.
In addition, portions of the proceeds have been and will be used to fund capital expenditures. The cash on hand is expected to satisfy our cash and working capital requirements for the next several months. During the first quarter of 2005, the
Company reached an agreement with two of its officers to defer cash payment of a portion of their salaries to a future date to be determined by management. In addition, the Company has reached an agreement to compensate another officer in common
shares, issuable at the end of the fiscal year. During the month of June 2005, two of the three officers began receiving their full salary in cash. The third officer began receiving his full cash salary in July 2005. The unpaid portion of the
officers salaries is recorded in accrued expenses at June 30, 2005. These accrued expenses will be paid at a later date based upon managements discretion. Subsequent to the end of the reporting period, the Company raised $5,000,000
through a public bond offering. The proceeds of this bond offering will be used to acquire medical billing companies in the Southeast United States and to satisfy the working capital needs of the Company.



Critical Accounting Policies



The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires us to make estimates and assumptions. Critical accounting policies are those policies that can have a significant impact on our financial position and results of operations and require
complex judgments and the most significant use of these subjective estimates and assumptions. Because of the uncertainty inherent in such estimates, actual results may differ from these estimates. Specific risks inherent in our application of these
critical policies are described below. For all of these policies, we caution that future events rarely develop exactly as forecasted, and the best estimates routinely require adjustment. These policies also often require difficult judgments on
complex matters that may be subject to multiple sources of authoritative guidance.



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Revenue



The Company recognizes revenue from the sale of third-party hardware and software products upon shipment from the Company.
Title transfers FOB shipping point. Revenue from professional services is recognized upon completion of the work and notification from the customer of their acceptance. Revenue from software licensing is recognized in accordance with Statement of
Position 97-2, Software Revenue Recognition. Revenue from software licensing is recognized when delivery of the software has occurred, a signed non-cancelable license agreement has been received from the customer, and any remaining obligations under
the license agreement are insignificant. Revenue associated with agreements to provide product support services is recognized as related services are provided. Revenue from annual or other renewals of maintenance contracts is deferred and recognized
on a straight-line basis over the term of the contracts.



Property and Equipment



Property and equipment are recorded at cost. Expenditures for renewals and improvements are capitalized while expenditures for repairs and maintenance are charged to operations as incurred. Depreciation and amortization of property and
equipment are computed by the straight-line method at rates adequate to allocate the cost of applicable assets over their estimated useful lives.



Costs of computer software developed for external uses and costs associated with technology under development are capitalized. Amortization is recorded
for each of the Companys products separately, using the greater of a) the amount calculated under the straight-line method over the remaining estimated economic life of each product, or b) the amount calculated using the ratio of current year
revenue to projected total revenue for each product. Capitalization of costs begins when conceptual and design activities have been completed, technological feasibility is assured, and when management has authorized and committed to fund a project.
Costs capitalized include external and internal costs of labor, materials, and services. Costs associated with training and general and administrative activities are expensed as incurred. The Company does not develop nor capitalize software for
internal purposes.



Item 3. Controls and Procedures.



The Companys management, including our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule
13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as of the period ended June 30, 2005, the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective.



There have been no changes in the Companys internal control procedures over financial reporting that have occurred during the fiscal quarter ended June 30, 2005 that have materially affected, or are likely to materially affect, the
Companys internal control over financial reporting.



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PART II  OTHER INFORMATION



Item 4. Submission of Matters to a Vote of Security Holders.



At the Annual Meeting of Shareholders held on June 4, 2005 (the Annual Meeting), the Companys shareholders voted to approve the ratification of Comiskey & Company as the Companys auditors
for the year-ended December 31, 2005. The following is a summary of the vote:



Ratification of Comiskey & Company as Auditors



|        |  |          
|------- |  | ---------
|        |  | Votes    
|For     |  | 2,362,479
|Against |  |          
|Abstain |  |          



Also at the Annual
Meeting, the Companys shareholders voted to elect each of William Ellison and Thomas Frazer, as a director of the Company to serve until the third annual meeting of shareholders after their election or until their successors are elected and
qualified.



The following is a summary of the vote:



|        |  |                 |  |              
|------- |  | --------------- |  | -------------
|Votes   |  | William Ellison |  | Thomas Frazer
|For     |  | 2,362,479       |  | 2,362,479    
|Against |  |                 |  |              
|Abstain |  |                 |  |              



Item 6. Exhibits and Reports on Form 8-K.



(a) Exhibits.



The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated:



|              |  |                                                                                                   
|------------- |  | --------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                       
|31.1          |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|              | 
|31.2          |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|              | 
|32.1          |  | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|              | 
|32.2          |  | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



(b) Reports on Form 8-K.



We did not file any reports on Form 8-K during the second quarter of 2005.



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SIGNATURES



In accordance with the
requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                      |  |                      |  |                                    
|--------------------- |  | -------------------- |  | -----------------------------------
|                      |  | MD Technologies Inc.
|                      |  | (Registrant)        
|                      |  |                     
|Date: August 12, 2005 |  | By:                  |  | /s/ William D. Eglin               
|                      |  |                      |  | William D. Eglin                   
|                      |  |                      |  | President & Chief Executive Officer
|                      |  |                     
|                      |  | By:                  |  | /s/ William D. Eglin               
|                      |  |                      |  | William D. Eglin                   
|                      |  |                      |  | Chief Financial Officer            



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