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 January 31, 1998 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.
3,816,933 shares of Common Stock ($0.005 par value per share)
outstanding at January 31, 1998
INDEX
MEDICAL ADVISORY SYSTEMS, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheet - January 31, 1998 and October 31, 1997
Statement of Operations - Three months ended January 31, 1998 and 1997
Statement of Cash Flow - Three months ended January 31, 1998 and 1997
Notes of Condensed Financial Statements: January 31, 1998
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
January 31 October 31
1998 1997
__________________________
UNAUDITED
(NOTE -A)
ASSETS
CURRENT ASSETS
Cash $ 939,291 $ 729,609
Receivables, net 766,898 1,044,612
Inventory - Pharmaceuticals 20,476 22,205
Prepaid expenses and other 5,706 14,012
Current deferred tax asset 41,830 41,830
__________ __________
TOTAL CURRENT ASSETS 1,774,201 1,852,268
PROPERTY AND EQUIPMENT, NET 984,759 966,537
OTHER ASSETS
Investments 364,969 364,969
Deferred assets 346,860 346,860
__________ __________
TOTAL OTHER ASSETS 711,829 711,829
TOTAL ASSETS $3,470,789 $3,530,634
========== ==========
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET - CONTINUED
January 31 October 31
1998 1997
_________________________
UNAUDITED
(NOTE-A)
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Current Maturities LT Debt $ 1,971 $ 501,903
Accounts payable & accrued expenses 502,143 600,314
Deferred income 356,487 367,172
__________ __________
TOTAL CURRENT LIABILITIES 860,601 1,469,389
Long-term liabilities to Banks and Others 631,178 131,819
__________ __________
TOTAL LIABILITIES $1,491,779 $1,601,208
__________ __________
JOINT VENTURER'S INTEREST 45,407 28,476
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 (1,867,007) (1,899,660)
Treasury Stock at Cost - 65,940 shares (43,583) (43,583)
__________ __________
NET SHAREHOLDERS EQUITY $1,933,603 $1,900,950
__________ __________
TOTAL LIABILITIES AND EQUITY $3,470,789 $3,530,634
========== ==========
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months
Ended January 31
1998 1997
_______________________
Revenues:
Maritime Program Services $ 200,658 $ 174,327
Assistance Services 274,177 280,646
Pharmaceutical Sales 118,026 77,899
Training Services 15,830 48,014
Clinic Services 6,491 17,550
Other Income 403 -
Interest Revenue 10,495 10,349
__________ __________
626,080 608,785
Cost and Expenses:
Pharmaceutical Cost of Goods 55,709 32,773
Medical Professional Services 75,213 75,380
Cost of Clinic Services 2,990 13,066
Cost of Training Services 2,353 5,848
Salaries and Wages 232,782 207,636
Other selling, general and
Administrative expenses 158,418 130,399
Depreciation and Amortization 24,405 11,753
Interest expense (income) net 8,196 6,301
__________ __________
560,066 483,156
Operating Income 66,014 125,629
Income Tax benefit (expense) (16,431) -
__________ __________
Profit (loss) before joint venturer's interest 49,583 125,629
Joint venturer's interest (16,930) (39,610)
__________ __________
NET EARNINGS $ 32,653 $ 86,019
========== ==========
Earnings per share $0.01 $0.02
Outstanding shares used to calculate
earnings per share 3,816,933 3,816,933
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Three Months
Ended January 31
1998 1997
_______________________
Cash flows from operating activities:
Net earnings from period $ 32,653 $ 86,019
Adjustment to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 24,405 11,753
Equity interest in joint venture income (losses) 16,930 39,610
(Increase) decrease in :
Accounts Receivable 277,714 185,555
Inventory - Pharmaceuticals 1,729 4,378
Prepaid expenses and other 8,306 544
Increase (decrease) in :
Accounts payable and accrued expenses (98,171) (205,134)
Deferred income (10,684) 102,736
__________ __________
Net cash provided by (used for) operating activities 252,882 225,461
Cash flows from investing activities:
Purchase of Invesment Securities - -
Capital Expenditures (42,627) (140,976)
__________ __________
Net cash provided by (used in) investing activities (42,627) (140,976)
Cash Flows from financing activities
Repayment of loans to banks and related parties (573) (9,716)
__________ __________
Net cash provided by (used in) financing activities (573) (9,716)
Net increase (decrease) in cash 209,682 74,769
Cash at beginning of period 729,609 717,678
__________ __________
Cash at end of the period $ 939,291 $ 792,447
========== ==========
MEDICAL ADVISORY SYSTEMS, INC.
NOTES OF CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
for Form 10-QSB and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation have been included.
MEDICAL ADVISORY SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Although quarterly revenues increased by 3% for the first quarter of
fiscal year 1998, the Company's consolidated net income from operations was
$32,653 as compared to $86,019 last year, a decrease of 62%. This decrease is
primarily the result of the restructuring for the Company's subsidiary,
Assistance Services of America, (ASA) Inc. (see "Subsidiary Option and
Restructuring Agreement" below). During the first quarter of FY 1998 the
Company recorded $12,528 in licensing expenses and $16,431 in provisions for
income taxes for ASA. These expenses were not recognized in the comparable
quarter last year.
The Company had $274,177 in revenues from sales of assistance services
during the first three months of FY 1998, compared to $280,646 reported for
the same period in FY 1997.
Revenues from maritime response services were $200,658 for the first
three months of FY 1998 compared to $174,327 for the same period in FY 1997
an increase of 15%. This increase is the result of the stabilization in the
size of the U.S. merchant marine fleet along with expanded marketing efforts.
Revenues from pharmaceutical sales were $118,026 for the first quarter
of FY 1998, a 51% increase compared to the same period in FY 1997. The
increase is attributed to the offering of an expanded product line resulting
in an increased client base, as well as a cyclical upturn in purchasing by
existing clients.
The Company's training program provided revenues of $15,830 for the
period, a 67% decrease compared to training revenues of $ 48,014 in the first
quarter of FY 1996. During the first quarter of FY 1998 several of the
Company's clients delayed enrollment in training sessions due to the
introduction of new International Maritime Organization (IMO) training
standards. The Company is in the process of modifying its training program
to incorporate the new standards and is currently awaiting US Coast Guard
approval of its new curriculum.
Subsidiary Option and Restructuring Agreement
During the first quarter of FY 1998, the Company entered into an
agreement with SACNAS International(SACNAS), the 50% shareholder of ASA.
The agreement grants SACNAS an option to purchase 100% of the Company's shares
in ASA for $2,000,000 during the period January 1, 1998 through December 31,
1999. At the time SACNAS exercises its option, SACNAS shall tender to the
Company the 305,378 shares of the Company SACNAS owns. The Company's shares
shall be sold by SACNAS to the Company for $122,151 and the proceeds shall
be used to offset the $2,000,000 purchase of the Company's ASA shares. The
Company has the option to retain 8% of total ASA shares while allowing SACNAS
to retain their 305,378 Company shares. If the Company exercises this option,
the SACNAS option to purchase the remaining ASA shares shall be reduced to
$1,680,000.
Provided SACNAS has not exercised the option agreement, beginning
January 1, 1998, and at the end of each quarter, SACNAS shall forgive 12.5%,
or $62,500, of the $500,000 unsecured loan to the Company along with interest
accrued to that date. Any principal loan amount forgiven shall be
credited to the option price.
If SACNAS does not elect to exercise the option agreement during the term
provided, the remaining principal balance of the $500,000 loan not forgiven
plus any accrued interest, shall be forgiven in its entirety.
The Company is continuing to consolidate ASA financial results during
the option period.
As a result of the agreement, the Company recorded ASA licensing expenses
and a provision for income taxes that were not recognized in the comparable
quarter last year. The Company had not written down any portion of the
outstanding $500,000 loan during the quarter.
MEDICAL ADVISORY SYSTEMS, INC.
PART II - OTHER INFORMATION
Item 1. 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
None.
Item 5. Other Information
In 1986 the Company filed an S-1 registration under the Securities
Act of 1933. The Company files 10-KSB and 10-QSB reports on a
voluntary basis.
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: March 16, 1998
/s/Thomas M. Hall, M.D., M.I.M.
_______________________________
Thomas M. Hall, M.D., M.I.M.
Chief Executive Officer
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