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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 September 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 jurisdictionof incorporation or organization) |  | (I. R. S. EmployerIdentification No.)



|                                                 |  |           
|------------------------------------------------ |  | ----------
|620 FLORIDA ST., SUITE 200BATON 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 ̈



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



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 November 2, 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



September 30, 2005



|                               |  |                                                                                                                               |  |   
|------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------- |  | --
|PART I  FINANCIAL INFORMATION |  |                                                                                                                              
|                               |  |                                                                                                                              
|                               |  | Item 1  Financial Statements (unaudited)                                                                                     |  |   
|                               |  |                                                                                                                              
|                               |  | Condensed Balance Sheets at September 30, 2005 and December 31, 2004                                                          |  | 3 
|                               |  |                                                                                                                              
|                               |  | Condensed Statements of Operations For the Three Months Ended and Nine Months Ended September 30, 2005 and September 30, 2004 |  | 4 
|                               |  |                                                                                                                              
|                               |  | Condensed Statements of Cash Flows For the Nine Months Ended September 30, 2005 and September 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 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)



|                                                                                                                        |  |                    |            |   |               |   |            |  
|----------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ---------- | - | ------------- | - | ---------- | -
|                                                                                                                        |  | September 30, 2005 |            |   | Dec. 31, 2004 |  
|ASSETS                                                                                                                  |  |                    |            |   |               |   |            |  
|Current Assets                                                                                                          |  |                    |            |   |               |   |            |  
|Cash and cash equivalents                                                                                               |  | $                  | 5,001,072  |   |               | $ | 1,045,780  |  
|Accounts receivable (net of allowance of $65,000 and $0, respectively)                                                  |  |                    | 41,984     |   |               |   | 34,662     |  
|Prepaid expenses                                                                                                        |  |                    | 18,138     |   |               |   | 22,196     |  
|                                                                                                                        |  |                    |            |   |               |   |            |  
|Total current assets                                                                                                    |  |                    | 5,061,194  |   |               |   | 1,102,638  |  
|                                                                                                                        |  |                   
|Property and Equipment                                                                                                  |  |                    |            |   |               |   |            |  
|Computer equipment and software                                                                                         |  |                    | 224,841    |   |               |   | 201,388    |  
|Assets under capital lease                                                                                              |  |                    | 64,255     |   |               |   | 44,109     |  
|Furniture and fixtures                                                                                                  |  |                    | 30,370     |   |               |   | 25,820     |  
|                                                                                                                        |  |                    |            |   |               |   |            |  
|                                                                                                                        |  |                    | 319,466    |   |               |   | 271,317    |  
|Less: Accumulated depreciation                                                                                          |  |                    | 108,381    |   |               |   | 54,602     |  
|                                                                                                                        |  |                    |            |   |               |   |            |  
|                                                                                                                        |  |                    | 211,085    |   |               |   | 216,715    |  
|                                                                                                                        |  |                   
|Other Assets                                                                                                            |  |                    |            |   |               |   |            |  
|Deferred bond offering costs                                                                                            |  |                    | 77,175     |   |               |   |           |  
|Capitalized software costs held for sale, net                                                                           |  |                    | 275,237    |   |               |   | 284,711    |  
|                                                                                                                        |  |                    |            |   |               |   |            |  
|Total assets                                                                                                            |  | $                  | 5,624,691  |   |               | $ | 1,604,064  |  
|                                                                                                                        |  |                    |            |   |               |   |            |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                    |  |                    |            |   |               |   |            |  
|Current Liabilities                                                                                                     |  |                    |            |   |               |   |            |  
|Accounts payable                                                                                                        |  | $                  | 17,442     |   |               | $ | 27,286     |  
|Accrued expenses and interest                                                                                           |  |                    | 198,461    |   |               |   | 25,627     |  
|Current portion of note payable                                                                                         |  |                    | 6,720      |   |               |   | 6,425      |  
|Current portion of obligation under capital lease                                                                       |  |                    | 13,574     |   |               |   | 9,351      |  
|Deferred revenue                                                                                                        |  |                    | 9,790      |   |               |   | 14,555     |  
|                                                                                                                        |  |                    |            |   |               |   |            |  
|Total current liabilities                                                                                               |  |                    | 245,987    |   |               |   | 83,244     |  
|                                                                                                                        |  |                   
|Long Term Liabilities                                                                                                   |  |                    |           |   |               |   |            |  
|Note payable, net of current portion                                                                                    |  |                    | 13,268     |   |               |   | 17,791     |  
|Obligation under capital lease, net of current portion                                                                  |  |                    | 38,892     |   |               |   | 29,886     |  
|Bonds payable                                                                                                           |  |                    | 5,000,000  |   |               |   |           |  
|                                                                                                                        |  |                   
|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, 4,905,561 shares issued and 3,949,313 shares outstanding |  |                    | 1,962      |   |               |   | 1,962      |  
|Additional paid-in capital                                                                                              |  |                    | 4,359,357  |   |               |   | 4,338,957  |  
|Treasury stock                                                                                                          |  |                    | (383       | ) |               |   | (383       | )
|Retained earnings                                                                                                       |  |                    | (4,034,391 | ) |               |   | (2,867,393 | )
|                                                                                                                        |  |                    |            |   |               |   |            |  
|                                                                                                                        |  |                    | 326,545    |   |               |   | 1,473,143  |  
|                                                                                                                        |  |                    |            |   |               |   |            |  
|Total liabilities and stockholders equity                                                                              |  | $                  | 5,624,691  |   |               | $ | 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 September 30, |            |   | For the nine months ended September 30, |  
|                                             |  | 2005                                     |            |   | 2004                                    |   |            | 2005 |  |   | 2004       |  
|REVENUES                                     |  |                                          |            |   |                                         |   |            |      |  |   |            |   |  |   |            |  
|Sales and service revenue                    |  | $                                        | 258,747    |   |                                         | $ | 169,359    |      |  | $ | 709,700    |   |  | $ | 433,983    |  
|                                             |  |                                          |            |   |                                         |   |            |      |  |   |            |   |  |   |            |  
|Total revenues                               |  |                                          | 258,747    |   |                                         |   | 169,359    |      |  |   | 709,700    |   |  |   | 433,983    |  
|                                             |  |                                          |            |  
|COSTS OF REVENUES                            |  |                                          |            |   |                                         |   |            |      |  |   |            |   |  |   |            |  
|Salaries direct                              |  |                                          | 50,763     |   |                                         |   | 25,439     |      |  |   | 127,224    |   |  |   | 60,739     |  
|Depreciation                                 |  |                                          | 23,754     |   |                                         |   | 25,170     |      |  |   | 78,711     |   |  |   | 54,626     |  
|Other cost of revenue                        |  |                                          | 21,686     |   |                                         |   | 15,848     |      |  |   | 48,236     |   |  |   | 37,369     |  
|                                             |  |                                          |            |   |                                         |   |            |      |  |   |            |   |  |   |            |  
|Total cost of revenues                       |  |                                          | 96,203     |   |                                         |   | 66,457     |      |  |   | 254,712    |   |  |   | 152,734    |  
|                                             |  |                                          |            |   |                                         |   |            |      |  |   |            |   |  |   |            |  
|Gross profit (loss)                          |  |                                          | 162,544    |   |                                         |   | 102,902    |      |  |   | 455,528    |   |  |   | 281,249    |  
|                                             |  |                                          |            |  
|OPERATING EXPENSES                           |  |                                          |            |   |                                         |   |            |      |  |   |            |   |  |   |            |  
|Compensation                                 |  |                                          | 289,178    |   |                                         |   | 278,519    |      |  |   | 943,859    |   |  |   | 685,350    |  
|Depreciation                                 |  |                                          | 14,112     |   |                                         |   | 9,960      |      |  |   | 53,779     |   |  |   | 34,245     |  
|Selling, general and administrative expenses |  |                                          | 212,647    |   |                                         |   | 156,433    |      |  |   | 554,140    |   |  |   | 468,830    |  
|                                             |  |                                          |            |   |                                         |   |            |      |  |   |            |   |  |   |            |  
|Total operating expenses                     |  |                                          | 515,937    |   |                                         |   | 444,912    |      |  |   | 1,551,779  |   |  |   | 1,188,425  |  
|                                             |  |                                          |            |   |                                         |   |            |      |  |   |            |   |  |   |            |  
|Income from operations                       |  |                                          | (353,393   | ) |                                         |   | (342,010   | )    |  |   | (1,096,251 | ) |  |   | (907,176   | )
|                                             |  |                                          |            |  
|OTHER INCOME (EXPENSE)                       |  |                                          |            |   |                                         |   |            |      |  |   |            |   |  |   |            |  
|Interest income                              |  |                                          | 22,781     |   |                                         |   | 4,002      |      |  |   | 26,352     |   |  |   | 7,485      |  
|Interest expense                             |  |                                          | (94,609    | ) |                                         |   | (1414      | )    |  |   | (97,200    | ) |  |   | (10,160    | )
|                                             |  |                                          |            |   |                                         |   |            |      |  |   |            |   |  |   |            |  
|                                             |  |                                          | (71,828    | ) |                                         |   | 2,588      |      |  |   | (70,848    | ) |  |   | (2,675     | )
|                                             |  |                                          |            |   |                                         |   |            |      |  |   |            |   |  |   |            |  
|NET LOSS                                     |  |                                          | (425,221   | ) |                                         |   | (339,422   | )    |  |   | (1,167,098 | ) |  |   | (909,851   | )
|Retained earnings, beginning of period       |  |                                          | (3,609,170 | ) |                                         |   | (2,150,215 | )    |  |   | (2,867,393 | ) |  |   | (1,579,786 | )
|                                             |  |                                          |            |   |                                         |   |            |      |  |   |            |   |  |   |            |  
|Retained earnings, end of period             |  | $                                        | (4,034,391 | ) |                                         | $ | (2,489,637 | )    |  | $ | (4,034,491 | ) |  | $ | (2,489,637 | )
|                                             |  |                                          |            |   |                                         |   |            |      |  |   |            |   |  |   |            |  
|Income per share: (Basic and diluted)        |  | $                                        | (0.11      | ) |                                         | $ | (0.09      | )    |  | $ | (0.30      | ) |  | $ | (0.26      | )
|                                             |  |                                          |            |   |                                         |   |            |      |  |   |            |   |  |   |            |  
|Wtd. average number of shares outstanding    |  |                                          | 3,949,313  |   |                                         |   | 3,945,811  |      |  |   | 3,949,313  |   |  |   | 3,526,935  |  
|                                             |  |                                          |            |   |                                         |   |            |      |  |   |            |   |  |   |            |  



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 nine months ended September 30, |          
|                                                       |  |                                        
|                                                       |  | 2005                                    |           |   | 2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                   |  | $                                       | (857,247  | ) |      | $ | (1,045,706 | )
|                                                       |  |                                        
|CASH FLOWS FROM INVESTING ACTIVITIES                   |  |                                         |           |   |      |   |            |  
|Plant and equipment purchases                          |  |                                         | (27,903   | ) |      |   | (149,680   | )
|Capitalization of software development costs           |  |                                         | (69,237   | ) |      |   | (144,070   | )
|                                                       |  |                                         |           |   |      |   |            |  
|Net cash flows used by investing activities            |  |                                         | (97,140   | ) |      |   | (293,750   | )
|                                                       |  |                                        
|CASH FLOWS FROM FINANCING ACTIVITIES                   |  |                                         |           |   |      |   |            |  
|Deferred offering costs                                |  |                                         | (79,175   | ) |      |   | 129,186    |  
|Issuance of stock for cash                             |  |                                         |           |   |      |   | 2,888,712  |  
|Issuance of bonds for cash                             |  |                                         | 5,000,000 |   |      |   |            |  
|Decrease in stock subscriptions receivable             |  |                                         |           |   |      |   | 863        |  
|Repayment of debt                                      |  |                                         | (11,146   | ) |      |   | (217,379   | )
|                                                       |  |                                         |           |   |      |   |            |  
|Net cash flows provided (used) by financing activities |  |                                         | 4,909,679 |   |      |   | 2,801,382  |  
|                                                       |  |                                         |           |   |      |   |            |  
|NET INCREASE IN CASH                                   |  |                                         | 3,955,292 |   |      |   | 1,461,926  |  
|                                                       |  |                                        
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD         |  |                                         | 1,045,780 |   |      |   | 2,923      |  
|                                                       |  |                                         |           |   |      |   |            |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD               |  | $                                       | 5,001,072 |   |      | $ | 1,464,849  |  
|                                                       |  |                                         |           |   |      |   |            |  



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MD Technologies Inc.

NOTES TO CONDENSED FINANCIAL STATEMENTS

September 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  Purchase of Medical Group Services, Inc. Stock
|-- | -----------------------------------------------------------------

On October 31, 2005, the Company acquired 100% of the outstanding shares of common stock of Medical Group Services, Inc. The purchase price was $3 million, consisting of cash and shares of MD Technologies stock.
A portion of the purchase price has not yet been paid and will be paid out over the next twenty four months if the acquired company meets preset financial targets. The allocation of the purchase price has not yet been finalized. Medical Group
Services, Inc. will operate as a wholly owned subsidiary of the Company, whose earnings will be presented as a part of the consolidated whole beginning in the fourth quarter of 2005.



Medical Group Services, Inc., based in Tampa, Florida, offers comprehensive accounts receivable, practice management, and
financial services to physician groups. Medical Group Services, Inc. currently serves more than 300 clients in six states and employs 26 staff members. The acquisition combines Medical Group Services, Inc.s strengths in back office management
with MD Technologies strengths in marketing and internet-based applications to better serve the two entities current and future customers.



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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
September 30, 2005 Compared with the Quarter Ended September 30, 2004



| |  |  | Total revenue increased 53% in the quarter ended September 30, 2005 to $258,747 from $169,359 in the quarter ended September 30, 2004.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Cost of Revenues increased 45% to $96,203.
| | - |  | ------------------------------------------

| |  |  | Operating Expenses increased 16% to $515,937.
| | - |  | ---------------------------------------------

| |  |  | Net Loss increased to $425,221 ($.11/share.)
| | - |  | --------------------------------------------



The Nine Months Ended September 30, 2005 Compared with the Nine Months Ended September 30, 2004



| |  |  | Total revenue increased 64% in the nine months ended September 30, 2005 to $709,700 from $433,983 in the nine months ended September 30, 2004.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Cost of Revenues increased 66% to $254,712.
| | - |  | -------------------------------------------

| |  |  | Operating Expenses increased 31% to $1,551,779.
| | - |  | -----------------------------------------------

| |  |  | Net Loss increased 28% to $1,167,098 ($.30/share.)
| | - |  | --------------------------------------------------



During the three months ended September 30, 2005 and the nine months ended September 30, 2005, we continued to implement our strategy of
acquiring aggressive customer and revenue growth through the efforts of our sales and marketing strategies while continuing to invest in improving our technologies. Our cost of revenues for the three month and nine months periods ended
September 30, 2005 were significantly higher than the three and nine month periods ended September 30, 2004 as a result of costs associated with servicing our increase in sales. Our operating expenses for the three and nine



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month periods ended September 30, 2005 were higher than the operating expenses incurred in the three and nine month periods ended September 30,
2004. The increase in operating expenses for the nine months ended September 30, 2005 is related to the fact that the initial build out phase of expanding the Companys operations, with the funds received from our public offering in 2004,
was not completed until the third quarter of 2004. Therefore, we did not incur as many expenses in the three month and nine month periods ended September 30, 2004, while the Company was in its build-out phase, as we incurred during the three
and nine month periods ended September 30, 2005 when we were fully staffed. Net Loss for the three and nine month periods ended September 30, 2005 exceeded Net Loss for the three and nine month periods ended September 30, 2004 as
operating expenses and other expenses grew at a greater rate than revenue.



Results of Operations



Revenues



Total revenue increased from $169,359 in the quarter
ended September 30, 2004 to $258,747 in the quarter ended September 30, 2005, a 53% increase in total revenue. Total revenue increased from $433,983 in the nine months ended September 30, 2004 to $709,700 in the nine months ended
September 30, 2005, a 64% increased in total revenue.



The
increases in total revenue for both the three month period and the nine month period are the result of continued successes in the sale and implementation of our products and services, Medtopia Manager and Medtopia Expert, as well as
the Company making its first sale of its Medtopia DMS. The Medtopia ManagerandMedtopia DMS revenue consists of one-time setup and training fees and monthly subscription or support 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 September 30, 2005 was $140,663 for Medtopia Manager, $106,684 for Medtopia Expert, and
$11,400 for Medtopia DMS. Total revenue for the nine months ended September 30, 2005 was $416,347 for Medtopia Manager, $281,953 for Medtopia Expert, and $11,400 for Medtopia DMS. Revenue from Medtopia Manager
and Medtopia Expert has been growing consistently and is a direct result of our sales and marketing efforts. The Medtopia DMS product was just brought to market in the third quarter of 2005. We are currently marketing this product
offering aggressively.



Costs of Revenues



The Cost of Revenues for the three-month period ended
September 30, 2005 increased 45% from $66,457 in the quarter ended September 30, 2004 to $96,203 in the quarter ended September 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 $25,439 in the quarter ended September 30, 2004 compared to $50,763 in the quarter
ended September 30, 2005, an increase of 100%. Other cost of revenue increased from $15,848 in the quarter ended September 30, 2004 to $21,686 in the quarter ended September 30, 2005, an increase of 37%. This is a result of other
costs, such as courier expense and statement processing, associated with servicing our increased customer base. Other changes in cost of revenues were minimal.



The Cost of Revenues for the nine-month period ended September 30, 2005 increased 66% from $152,734 in the period ended September 30, 2004 to
$254,712 in the period ended September 30, 2005. This increase is due to the additional expenses incurred to service our increased customer base. Cost of Revenues Salaries Direct increased from $60,739 in the nine months ended
September 30, 2004 to $127,224 in the nine months ended September 30, 2005, an increase of 109%. The remainder of the increase is a result of an increase in depreciation expense related to our capitalized software. Depreciation expense
increased from $54,626 in the nine months ended September 30, 2004 compared to $78,711 in the nine months ended September 30, 2005, an increase of 44%. 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 $444,912 in the quarter ended September 30, 2004 to $515,937 in the quarter ended September 30, 2005, an increase of 16%. Loss from operations increased slightly from $342,010 in the quarter ended September 30,
2004 compared to $353,393 in the quarter ended September 30, 2005, an increase of 3%. The increase in operating expenses is a result of a bad debt accrual of $65,000 that was recorded in September 2005. The allowance for doubtful accounts was
recorded to accrue for potential bad debts as a result of a Hurricane Katrina. Several of the Companys customers were located in areas that were directly affected by Hurricane Katrina and, as such, some



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customers have not paid their outstanding Accounts Receivable under customary terms. Most of the Companys customers that were affected by Hurricane
Katrina are now open for business, and the Company believes that a large portion of the Accounts Receivable that have been reserved will be paid. The $65,000 accrual for allowance for bad debts contributed to an increase in Operating Expenses
Selling, General, and Administrative from $156,433 in the quarter ended September 30, 2004 to $212,647 in the quarter ended September 30, 2005, an increase of 36%. All other changes in operation expenses during the quarter were minimal.



During the quarter ended September 30, 2005 total
revenues increased 53%, cost of revenues increased 45%, and operating expenses increased 16%. The net effect of the increase in both revenue and expenses resulted in an increase in net loss from $339,422 in the quarter ended September 30, 2004
to $425,221 in the quarter ended September 30, 2005, an increase of 25%. 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 $1,188,425 in the nine months ended September 30, 2004 to $1,551,779 in the nine months ended September 30, 2005, an increase of 31%. This increase in operating expenses resulted in an
increased loss from operations of $1,096,251 in the nine months ended September 30, 2005 as compared to $907,176 in the nine months ended September 30, 2004, an increase of 21%. The increase in operating expenses is a result of the
additional sales, marketing, programming, and administration personnel that were hired in the first nine months of 2004 as part of the Companys build-out phase. These additional employees contributed to an increase in Operating Expenses
Compensation from $685,350 in the nine months ended September 30, 2004 to $943,859 in the nine months ended September 30, 2005, an increase of 38%. The remainder of the increase is attributable to selling, general, and administrative
expense and depreciation expense, which increased 18% and 57%, 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 and the allowance for bad debts that was created due to Hurricane Katrina. While total revenues increased 63% in this nine-month period, the increase in the cost of revenues coupled with the increase in operating expenses contributed to
a net loss of $1,167,098 in the nine months ended September 30, 2005 in comparison to $909,851 in the nine months ended September 30, 2004, an increase of 28%.



Liquidity and Capital Resources



Our cash and cash equivalents increased by 378% from $1,045,780 at the beginning of the year to $5,001,072 at September 30, 2005 for a total cash
increase of $3,955,292. The increase in cash is a result of the Company completing the sale of $5,000,000 of its 7.5% Convertible Debentures on July 5, 2005. The influx in cash, resulting from the sale of our bonds, was offset in the first nine
months of 2005 by the cash used to fund our operating loss, product development, and capital expenditures.



As of September 30, 2005, the Company had working capital and stockholders equity surpluses of $4,815,207 and $326,545 respectively. The
$5,001,072 of cash on hand is being used for two main purposes. The first purpose is to acquire medical billing companies in the Southeastern United States. Subsequent to quarter end, on October 31, 2005, the Company used a combination of cash
and stock to purchase all of the outstanding stock of Medical Group Services, Inc. Medical Group Services, Inc., located in Tampa, Florida, offers practice management, accounts receivable management, and financial services to physician groups. The
cash on hand is also being used as working capital in order to fund sales and marketing, operations, and the research and development of our products and services and 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 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. During the third quarter of 2005, the Company reached an agreement with another of its officers to defer cash payment of his salary until a future date to be determined by management. This officers salary is still being accrued. The
unpaid portion of the officers salaries is recorded in accrued expenses at September 30, 2005. These accrued expenses will be paid at a later date based upon managements discretion.



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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.



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 September 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 September 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 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:



| |  |                |  |                                                                                                   
| |  | -------------- |  | --------------------------------------------------------------------------------------------------
| |  | Exhibit Number |  | Description                                                                                       
| |  | 10.9           |  | Employment Agreement of William D. Eglin                                                          
| |  | 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.



A Form 8-K was filed on July 6, 2005 announcing that the Company closed a $5 million public offering of convertible debentures.



A Form 8-K was filed on August 2, 2005 announcing that the Company entered into an employment agreement with William D.
Eglin, its President and CEO.



A Form 8-K was filed on
September 22, 2005 announcing that the Company did not experience any damage or interruption of service as a result of Hurricane Katrina.



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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: November 10, 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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