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 April 30, 1997 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.
3,882,873 shares of Common Stock ($0.005 par value per share)
outstanding at January 31, 1997
INDEX
MEDICAL ADVISORY SYSTEMS, INC.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Balance Sheet - April 30, 1997 and October 31, 1996
Statement of Operations - Six months ended April 30, 1997 and 1996
Statement of Cash Flow - Six months ended April 30, 1997 and 1996
Notes of Condensed Financial Statements: April 30, 1997
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
April 30 October 31
1997 1996
UNAUDITED
(NOTE-A)
ASSETS
CURRENT ASSETS
Cash $ 624,606 $ 717,678
Receivables, net 754,277 842,439
Inventory - Pharmaceuticals 25,570 20,133
Prepaid expenses and other 17,649 544
Current deferred tax asset 24,861 24,862
TOTAL CURRENT ASSETS 1,446,963 1,605,656
PROPERTY AND EQUIPMENT, NET 949,687 781,829
OTHER ASSETS
Investments 364,969 364,969
Deferred assets 309,041 306,167
TOTAL OTHER ASSETS $ 674,010 $ 671,136
TOTAL ASSETS $ 3,070,660 $ 3,058,621
The accompanying notes are an integral part of these statements.
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET - CONTINUED
April 30 October 31
1997 1996
UNAUDITED
(NOTE-A)
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Current Maturities LT Debt $ 501,840 $ 25,392
Accounts payable & accrued expenses 411,692 607,728
Deferred income 323,699 241,797
TOTAL CURRENT LIABILITIES 1,237,231 874,917
Long-term liabilities to Banks and Others 132,437 616,149
TOTAL LIABILITIES $ 1,369,668 $ 1,491,066
JOINT VENTURER'S INTEREST 71,815 24,508
SHAREHOLDER'S EQUITY
Common Stock, $0.005 pqr value -
Authorized: 10,000,000 shares
Issued: 3,869,938 shares 19,415 19,415
Convertible Preferred Stock, $1.75 par value
Authorized: 1,000,000 shares
Issued: none
Additional capital 3,824,778 3,824,778
Accumulated deficit (2,171,433) (2,257,563)
Treasury Stock at Cost - 65,940 (43,583) (43,583)
NET SHAREHOLDERS EQUITY $ 1,629,177 $ 1,543,047
TOTAL LIABILITIES AND EQUITY $ 3,070,660 $ 3,058,621
The accompanying notes are an integral part of these statements
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Six Months
Ended April 30 Ended April 30
1997 1996 1997 1996
Revenues:
Maritime Program Services $ 177,955 $ 191,609 $ 352,282 $ 378,541
Assistance Services 231,720 95,333 512,366 386,116
Pharmaceutical Sales 115,473 129,239 193,372 220,209
Training Services 34,438 76,592 82,452 109,010
Clinic Program 2,185 3,620 19,735 36,859
Interest Revenue 11,303 875 21,652 16,727
Total Revenue 573,074 597,268 1,181,859 1,147,462
Cost and Expenses:
Pharmaceutical Cost of Goods $ 60,240 $ 66,400 $ 93,013 $ 115,618
Medical Professional Services 86,120 86,284 161,500 159,484
Cost of Clinic Services 55 2,439 13,121 20,554
Cost of Training Services 9,975 14,704 15,823 20,651
Salaries and Wages 179,565 126,031 387,201 270,389
Other selling, general and
Administrative expenses 206,201 161,087 336,600 298,302
Depreciation and Amortization 16,293 9,069 28,046 18,188
Interest expense (income) net 6,399 (11,887) 12,700 9,609
Total costs and expenses 564,848 454,127 1,048,004 912,795
Profit (loss) before joint
venturer's interest 8,226 143,141 133,855 234,667
Joint venturer's interest (7,697) (38,574) (47,307) (78,954)
Net Profit $ 529 $ 104,567 $ 86,548 $ 155,713
Earnings per share $ 0.00 $ 0.03 $ 0.02 $ 0.04
Outstanding shares used to
calculate earnings per share 3,882,873 3,882,873 3,882,873 3,882,873
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Six Months Ended April 30
1997 1996
Cash flows from operating activities:
Net earnings from period $ 86,548 $ 155,713
Adjustment to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 28,046 18,188
Equity interest in joint venture income (losses) 47,307 78,954
(Increase) decrease in :
Accounts Receivable 88,162 (170,497)
Inventory - Pharmaceuticals (5,437) (2,492)
Prepaid expenses and other (17,105) (2,173)
Increase (decrease) in :
Accounts payable and accrued expenses (196,036) 97,102
Deferred income 81,902 (25,862)
Net cash provided by (used for) operating activities $ 113,387 $ 148,933
Cash flows from investing activities:
Purchase of Invesment Securities
Capital Expenditures (199,195) (64,020)
Net cash provided by (used in) investing activities (199,195) (64,020)
Cash Flows from financing activities
Repayment of loans to banks and related parties (7,264) (26,069)
Net cash provided by (used in) financing activities (7,264) (26,069)
Net increase (decrease) in cash (93,072) 58,844
Cash at beginning of period 717,678 402,768
Cash at end of the period $ 624,606 $ 461,612
MEDICAL ADVISORY SYSTEMS, INC.
NOTES OF CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - Summary of Accounting Policies
The accompanying unaudited condensed 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 three month period ended April 30, 1997
are not necessarily indicative of the results that may be expected for the
year ended October 31, 1997. 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, 1996.
MEDICAL ADVISORY SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Total revenues for the Company were $1,181,859 for the first
six months of FY 1997 compared to $1,147,462 for the same period
in FY 1996, an increase of 3.0%. Total General and Administrative
expenses increased from $596,488 for the first six months of FY
1996 to $764,547 for the same period in 1997. The company moved
into its new building at the Corporate headquarters location in
Owings, MD in February of 1997. This move and the related
disruption to the Company's billing process resulted in a billing
backlog and a corresponding adverse effect on revenues recognized
for the second quarter of FY 1997. Increased demand for the
Company's services has required an increase in personnel and related
resources. These increases coupled with extraordinary, non-
recurring moving related costs, an increased local demand for skilled
labor, and the accrual of Joint Venture related expenses previously
accounted for at year-end has resulted in the increase in General and
Administrative costs.
Growth of the Company's business has resulted in continuing
gains 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 $512,366 in revenues from sales of
assistance services during the first six months of FY 1997, a 32.6 %
increase compared to $386,116 reported for the same period in FY
1996. The increase is primarily a result of the growth of existing
contracts held by the Company's subsidiary Assistance Services of
America (ASA), Inc. Revenues from the sale of assistance services
are expected to continue to increase during FY 1997.
Revenues from maritime program services were $352,282 for
the first six months of FY 1997 compared to $378,541 for the same
period in FY 1996, a 6.9% decrease. This decline is due to
increased competition in the market place. Successful marketing
efforts have recently increased the Company's client base. The
resulting growth in sales is expected to provide increased revenues in
the remaining quarters of FY 1997 compared to FY 1996.
Revenues from pharmaceutical sales were $193,372 for the
first half of FY 1997 compared to revenues of $220,209 for the same
period of FY 1996 a decrease of 12.2%. This decrease in revenues is
a direct result of increased competition and deep discount programs
in the market place. However, strategic purchasing and cost controls
have resulted in a decrease in gross profits of only 4.0%.
Management expects that these controls coupled with the addition of
an on-line ordering system will result in pharmaceutical gross profits
exceeding FY 1996 levels by the end of FY 1997.
The Company's training programs provided revenues of
$82,452 for the first half of FY 1997, compared to training revenues
of $109,010 and $88,923 in the first half of FY 1996 and 1995
respectively. The two year fluctuation in revenues is primarily due to
the bi-annual training schedule of a major client.
Clinic services revenues were $19,735 for the first six
months of FY 1997, in comparison to $36,859 and $15,384 for the
same periods of 1996 and 1995. Fiscal year 1996 results included
revenues accrued in the first quarter of FY 1996 from a large short-
term contract. Diversification of this program to include the
coordination and review of employee drug-testing coupled with
continued marketing of these services has resulted in modest growth
of sales to core clients.
At the end of FY 1996 the company took a write-down of
$62,500 on its $100,000 investment in Wastemasters, Inc.. An
additional write down of the investment balance of $37,500 may have
to be taken this fiscal year based on the market performance of
Wastemasters stock. Management does not intend to liquidate the
company's investment in Wastemasters at this time.
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,
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: June 16, 1997 _______________/s/_______________
Thomas M. Hall, M.D.
Chief Executive Officer
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