SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended July 31, 1996 Commission File No. 2-98314-W
MEDICAL ADVISORY SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1233960
(State of other Jurisdiction of (I.R.S. Employer Identification No.)
incorporated or organization)
8050 Southern Maryland Boulevard, Owings, Maryland 20736
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 855-8070
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes (X) No __
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
3,869,938 shares of Common Stock ($0.005 par value per share)
outstanding at January 31, 1996
INDEX
MEDICAL ADVISORY SYSTEMS, INC.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Balance Sheet - July 31, 1996 and October 31, 1995
Statement of Operations - Three and nine months ended July 31, 1996
and 1995
Statement of Cash Flow - Nine months ended July 31, 1996 and 1995
Notes of Condensed Financial Statements: July 31, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults from Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Reports on Form 8-K and Exhibits.
SIGNATURES
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
July 31 October 31
1996 1995
--------------------------
UNAUDITED
(NOTE-A)
ASSETS
CURRENT ASSETS
Cash $ 517,267 $ 402,768
Accounts receivable, net 569,041 430,474
Prepaid expenses and other 14,056 12,698
Inventory - Pharmaceuticals 11,496 23,295
---------- ----------
TOTAL CURRENT ASSETS 1,111,860 869,235
PROPERTY AND EQUIPMENT, NET 401,531 269,873
OTHER ASSETS
Investments 427,468 427,468
Deferred income taxes 333,624 333,625
---------- ----------
TOTAL OTHER ASSETS 761,092 761,093
TOTAL ASSETS $2,274,483 $1,900,201
========== ==========
The accompanying notes are an integral part of these statements.
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET - CONTINUED
July 31 October 31
1996 1995
--------------------------
UNAUDITED
(NOTE-A)
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Current maturities of long term debt $ 34,757 $ 39,660
Accounts payable & accrued expenses 260,565 303,745
Deferred income and other liabilities 237,322 79,689
---------- ----------
TOTAL CURRENT LIABILITIES 532,644 423,094
Long-term debt, less current maturities 119,114 146,756
---------- ----------
TOTAL LIABILITIES 651,758 569,850
---------- ----------
JOINT VENTURER'S INTEREST 119,570 24,507
SHAREHOLDERS' EQUITY
Common stock, $0.005 par value -
Authorized: 6,000,000 shares
Issued: 3,869,938 shares 19,415 19,415
Convertible preferred stock, $1.75 par value
Authorized: 1,000,000 shares
Issued: none 0 0
Additional paid-in capital 3,824,778 3,824,778
Accumulated deficit (2,297,455) (2,494,766)
Treasury stock at cost - 65,940 shares (43,583) (43,583)
---------- ----------
NET SHAREHOLDER EQUITY 1,503,155 1,305,844
---------- ----------
TOTAL LIABILITIES AND EQUITY $2,274,483 $1,900,201
========== ==========
The accompanying notes are an integral part of these statements.
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Nine Months
Ended July 31 Ended July 31
1996 1995 1996 1995
Revenues: ------------------- -------------------
Assistance Services $ 182,219 $ 109,740 $ 568,335 $ 255,246
Maritime Program Services 182,736 200,332 561,277 650,327
Pharmaceutical Sales 101,068 111,737 321,277 331,901
Training Services 27,309 47,220 136,319 136,143
Clinic Program 9,820 11,140 46,679 26,525
Interest income (net) 4,047 910 10,290 2,161
Other revenue 585 120 1,460 2,111
--------- --------- --------- ---------
Total revenue 507,784 481,199 1,645,637 1,404,414
--------- --------- --------- ---------
Costs and expenses:
Pharmaceutical cost of goods $ 50,624 $ 66,211 $ 166,242 $ 190,313
Medical professional services 73,024 79,868 232,508 218,939
Cost of clinic services 5,689 6,632 26,243 16,956
Cost of training services 7,461 8,701 28,112 31,946
Salaries and wages 155,398 138,951 425,787 368,115
Other selling, general and
administrative expenses 148,812 112,019 447,114 357,447
Depreciation and amortization 9,069 8,956 27,257 28,625
--------- --------- --------- ---------
Total costs and expenses 450,077 421,338 1,353,263 1,212,341
--------- --------- --------- ---------
Profit (loss) before joint
venturer's interest 57,707 59,861 292,374 192,073
Joint venturer's interest (16,108) (12,383) (95,062) (6,400)
--------- --------- --------- ---------
Net profit $ 41,599 $ 47,478 $ 197,312 $ 185,673
========= ========= ========= =========
Earnings per share $.01 $.01 $.05 $.05
Outstanding shares used to calculate
earnings per share 3,816,933 3,816,933 3,816,933 3,816,933
--------- --------- --------- ---------
The accompanying notes are an integral part of these statements.
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
July 31
1996 1995
--------------------
Cash flows from operating activities:
Net earnings for the period $ 197,312 $ 185,673
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 27,257 28,625
Equity interest in joint venture income (losses) 95,062 6,400
(Increase) decrease in:
Accounts Receivable (138,567) 117,979
Inventory - Pharmaceuticals 11,799 (23,868)
Prepaid expenses and other (1,358) 4,473
Increase (decrease) in:
Accounts payable and accrued expenses (43,180) 44,604
Deferred income and other liabilities 157,633 (73,660)
---------- ----------
Net cash provided by (used for) operating activities $ 305,958 $ 290,226
Cash flow from investing activities:
Purchase of Investments Securities- (100,000)
Capital expenditures (158,914) (40,865)
---------- ----------
Net cash provided by (used in) investing activities ($158,914) ($140,865)
Cash flows from financing activities
Repayments of loans to banks and related parties (32,545) (40,932)
---------- ----------
Net cash provided by (used in) financing activities ($32,545) ($40,932)
Net increase (decrease) in cash 114,499 108,429
Cash at beginning of the period 402,768 280,668
---------- ----------
Cash at end of the period $ 517,267 $ 389,097
========= =========
The accompanying notes are an integral part of these statements.
MEDICAL ADVISORY SYSTEMS, INC.
NOTES OF CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - Summary of Accounting Policies
General
- -------
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-QSB, and,
therefore, do not include all information necessary for a fair presentation
of financial position, results of operations and cash flows in conformity
with generally accepted accounting principles.
In the opinion of management, all adjustments (consisting of only normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the nine month period ended July 31, 1996
are not necessarily indicative of the results that may be expected for the
year ended October 31, 1996. The unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and footnotes thereto included in the Company's annual report on
Form 10-KSB for the year ended October 31, 1995.
Consolidated Statements
- -----------------------
The consolidated financial statements include the accounts of Medical
Advisory Statements, Inc. (MAS) and its wholly-owned subsidiary, MAS
Laboratories, Inc. (collectively "the Company"). Significant intercompany
transactions have been eliminated in consolidation.
The consolidated financial statements also include 100% of the assets,
liabilities and operating results of Assistance Services of America, Inc.
(ASA). The Company owns 50% of ASA's common stock. The Joint Venture's
Interest reflected on the consolidated balance sheet and the consolidated
statement of earnings represents the other joint venturer's share (50%) of
ASA's equity and results of operations.
The following summarizes ASA's condensed statement of operations for the nine
months ended July 31, 1996:
Revenues, net of direct expenses $ 273,605
Net income 190,124
MAS share (50%) 95,062
Earnings per share .02
MEDICAL ADVISORY SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED JULY 31, 1996 AND 1995
Results of Operations
- ---------------------
Total revenues for the Company were $1,635,347 for the first nine months
of FY 1996 compared to $1,402,253 for the same period in FY 1995, an increase
of 16.6%. Revenues for the quarter ended July 31, 1996 were $507,784 an
increase of 5.5% over revenues of $481,199 for the same period in FY 1995.
Growth of the Company's business has resulted in continuing gains in liquidity
and shareholders' equity. The Company has sufficient cash on hand to meet
current operating requirements. Our discussion and analysis of the Company's
various programs is as follows:
The Company had $568,335 in revenues from sales of assistance services
during the first nine months of FY 1996, a 122.7 % increase compared to
$255,246 reported for the same period in FY 1995. Revenues for the quarter
ended July 31, 1996 were $182,219 an increase of 66% over revenues of $109,740
for the same period in FY 1995. Increases are primarily the result of new
contracts obtained by the Company's subsidiary Assistance Services of America
(ASA), Inc. ASA is a joint venture between the Company and the French
company SACNAS International, S.A. The joint venture was formed in
November, 1993 to market specialized travelers' assistance and insurance claims
handling services to companies in North America. Revenues from the sale of
assistance services are expected to continue to increase during FY 1996.
Revenues from maritime program services were $561,277 for the first nine
months of FY 1996 compared to $650,327 for the same period in FY 1995, a
13.7% decrease for the nine month period. Revenues for the quarter ended
July 31, 1996 were $182,736 a decrease of 8.8% over revenues of $200,332 for
the same period in FY 1995. These declines are due to continuing reductions
in the size of the U.S. merchant marine fleet and increasing competition in
the market place. Additional fleet reductions by U.S. vessel owners are
expected as government subsidies for deep-draft merchant vessels decline.
Management is making efforts to stabilize revenues from this core program by
expanding marketing efforts into other maritime and transportation sectors.
Revenues from pharmaceutical sales were $321,277 for the three quarters
of FY 1996 compared to revenues of $331,901 for the same period of FY 1995,a
3.2% decrease for the nine month period. Revenues for the quarter ended July
31, 1996 were $101,068 a decrease of 9.5% over revenues of $111,737 for the
same period in FY 1995. These decreases are a result of new market
competition for pharmaceutical sales to a major client. Early forth quarter
pharmaceutical order levels indicate that pharmaceutical sales should
stabilize for the remainder of FY 1996.
The Company's training programs provided revenues of $136,319 for the
first nine months of FY 1996, compared to training revenues of $ 136,143 for
the same period of FY 1995. Revenues for the quarter ended July 31, 1996 were
$27,309 a decrease of 42.2% over revenues of $47,220 for the same period in
FY 1995. The decrease in third quarter revenues is primarily due to delays
in the scheduling of several training programs. Revenues from these programs
will be recognized in the forth quarter of 1996. To strengthen service
capabilities, the Company is using more in-house personnel and fewer outside
contractors to function as instructors. This has resulted in some shifting
of instructors' costs from "Cost of Training Services" to "Salaries and Wages"
on the Company's Consolidated Statement of Operations.
Clinic services revenues were $46,679 for the first nine months of
FY 1996, a 76.0% increase compared to $26,525 for the same period of 1995.
Revenues for the quarter ended July 31, 1996 were $9,820, a decrease of 11.8%
over revenues of $11,140 for the same period in FY 1995. Revenues for the
fourth quarter of FY 1996 are expected to remain at the third quarter levels.
Liquidity and Capital Resources
- -------------------------------
As the Company's business has continued to grow, the Company's liquidity
requirements continue to increase. During the first nine months of fiscal
1996, as a result of the Company's 17.2% increase in sales, working capital
increased $133,075 and cash flow generated by operations exceeded cash flows
used by operations by $305,958. Accounts receivable increased $138,567
because of increased sales. Due to the shipment of several large orders at
the end of the quarter, pharmaceutical inventories decreased by $11,799.
In response to increasing sales of assistance services the Company has
begun a 12,000 square foot building expansion at its corporate headquarters.
Building costs of $95,380 are reflected in the Company's capital expenditures
of $158,914 for the nine months ended July 31, 1996. The Company's planned
capital expenditures will be approximately $900,000 during fiscal years 1996
and 1997. The Company believes it will be able to finance these capital
expenditures primarily from cash flows from operations and from borrowings.
The Company's debt to equity ratio of 0.51:1 at July 31, 1996 compares to a
ratio of 0.46:1 reported at October 31, 1995.
MEDICAL ADVISORY SYSTEMS, INC.
PART II - OTHER INFORMATION
Item I. Legal Proceedings
- --------------------------
None.
Item 2. Changes in Securities
- ------------------------------
None.
Item 3. Defaults from Senior Securities
- ----------------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not applicable.
Item 5. Other Information
- --------------------------
None.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits. None
(b) Reports on Form 8-K. None
MEDICAL ADVISORY SYSTEMS, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, and the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MEDICAL ADVISORY SYSTEMS, INC.
------------------------------
(Registrant)
Date: September 13, 1996 __________________________________
Thomas M. Hall, M.D.
Chief Executive Officer
(Duly Authorized Officer
and Principal Accounting
and Financial Officer)
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