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, 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.
3,885,878 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. Consolidated Financial Statements (Unaudited)
Balance Sheet - April 30, 1998 and October 31, 1997
Statement of Operations - Six months ended April 30, 1998 and 1997
Statement of Cash Flow - Six months ended April 30, 1998 and 1997
Notes of Condensed Financial Statements: April 30, 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
April 30 October 31
1998 1997
__________________________
UNAUDITED
(NOTE-A)
ASSETS
CURRENT ASSETS
Cash $ 1,026,668 $ 729,609
Receivables, net 794,841 1,044,612
Inventory - Pharmaceuticals 13,000 22,205
Prepaid expenses and other 12,935 14,012
Current deferred tax asset 41,830 41,830
___________ ___________
TOTAL CURRENT ASSETS 1,889,274 1,852,268
PROPERTY AND EQUIPMENT, NET 973,410 966,537
OTHER ASSETS
Investments 338,231 364,969
Deferred assets 346,860 346,860
___________ ___________
TOTAL OTHER ASSETS 685,091 711,829
TOTAL ASSETS $ 3,547,775 $ 3,530,634
=========== ===========
The accompanying notes are an integral part of these statements.
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET - CONTINUED
April 30 October 31
1998 1997
___________________________
UNAUDITED
(NOTE-A)
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Current Maturities LT Debt $ 2,009 $ 501,903
Accounts payable & accrued expenses 545,910 600,314
Deferred income 345,178 367,172
___________ ___________
TOTAL CURRENT LIABILITIES 893,097 1,469,389
Long-term liabilities to Banks and Others 568,254 131,819
___________ ___________
TOTAL LIABILITIES $ 1,461,351 $ 1,601,208
___________ ___________
JOINT VENTURER'S INTEREST 29,340 28,476
SHAREHOLDER'S EQUITY
Common Stock, $0.005 par value -
Authorized: 10,000,000 shares
Issued: 3,885,878 shares 19,430 19,415
Convertible Preferred Stock, $1.75 par value
Authorized: 1,000,000 shares
Issued: none - -
Additional capital 3,824,763 3,824,778
Accumulated deficit (1,743,526) (1,899,660)
Treasury Stock at Cost - 65,940 (43,583) (43,583)
___________ ___________
NET SHAREHOLDERS EQUITY $ 2,057,084 $ 1,900,950
___________ ___________
TOTAL LIABILITIES AND EQUITY $ 3,547,775 $ 3,530,634
=========== ===========
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
1998 1997 1998 1997
______________________ _____________________
Revenues:
Maritime Program Services $ 181,706 $ 177,955 $ 382,364 $ 352,282
Assistance Services 268,637 231,720 542,814 512,366
Pharmaceutical Sales 136,876 115,473 254,902 193,372
Training Services 48,994 34,438 64,824 82,452
Clinic Program 4,376 2,185 10,867 19,735
Option Revenue 66,150 - 66,150 -
Other Income 62,129 - 62,532 -
Interest Income 22,085 11,303 32,580 21,652
__________ __________ __________ __________
Total Revenue 790,953 573,074 1,417,033 1,181,859
__________ __________ __________ __________
Cost and Expenses:
Pharmaceutical Cost of Goods $ 81,922 $ 60,240 $ 137,631 $ 93,013
Medical Professional Services 85,298 86,120 160,511 161,500
Cost of Clinic Services 3,331 55 6,321 13,121
Cost of Training Services 10,529 9,975 12,882 15,823
Salaries and Wages 246,911 179,565 479,693 387,201
Other selling, general and
Administrative expenses 228,766 206,201 403,615 336,600
Depreciation and Amortization 24,406 16,293 48,811 28,046
Interest expense (income) net 2,375 6,399 10,571 12,700
__________ __________ __________ __________
Total costs and expenses 683,538 564,848 1,260,035 1,048,004
Profit (loss) before joint
venturer's interest 107,415 8,226 156,998 133,855
Joint venturer's interest 16,065 (7,697) (865) (47,307)
__________ __________ __________ __________
Net Profit $ 123,480 $ 529 $ 156,133 $ 86,548
========== ========== ========== ==========
Earnings per share $0.03 $0.00 $0.04 $0.02
Outstanding shares used to
calculate earnings per share 3,885,878 3,885,878 3,885,878 3,885,878
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Six Months Ended April 30
1998 1997
_________________________
Cash flows from operating activities:
Net earnings from period $ 156,133 $ 86,548
Adjustment to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 48,811 28,046
Equity interest in joint venture income (losses) 865 47,307
(Increase) decrease in :
Accounts Receivable 249,771 88,162
Inventory - Pharmaceuticals 9,205 (5,437)
Prepaid expenses and other 1,077 (17,105)
Increase (decrease) in :
Accounts payable and accrued expenses (54,404) (196,036)
Deferred income (21,994) 81,902
Net cash provided by (used for) operating activities $ 389,464 $ 113,387
Cash flows from investing activities:
Purchase of Invesment Securities 26,738 -
Capital Expenditures (55,684) (199,195)
_________________________
Net cash provided by (used in) investing activities (28,946) (199,195)
Cash Flows from financing activities
Repayment of loans to banks and related parties (63,459) (7,264)
_________________________
Net cash provided by (used in) financing activities (63,459) (7,264)
Net increase (decrease) in cash 297,059 (93,072)
Cash at beginning of period 729,609 717,678
_________________________
Cash at end of the period $ 1,026,668 $ 624,606
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 six month period ended April
30, 1998 are not necessarily indicative of the results that may be expected
for the year ended October 31, 1998. 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, 1997.
MEDICAL ADVISORY SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Total revenues for the Company were $1,416,376 for the first six months of
FY 1998 compared to $1,181,859 for the same period in FY 1997, an increase
of 19.8%. Total General and Administrative expenses increased from $764,547
for the first six months of FY 1997 to $942,690 for the same period in 1998.
The Company's consolidated net income for the first half of FY 1998 was
$156,133 as compared to $86,548 for the same period of FY 1997 an increase of
$69,585 or 80.4%. The increase is primarily due to Option Revenue of $66,150
recognized in FY 1998 (see "Subsidiary Option and Restructuring Agreement"
below) and gains recognized on the sale of the Company's stock in Wastemasters,
Inc., which had previously been written down in F.Y. 1996.
The Company had $542,814 in revenues from sales of assistance services
during the first six months of FY 1998, a 5.9 % increase compared to $512,366
reported for the same period in FY 1997.
Revenues from maritime program services were $382,364 for the first
six months of FY 1998 compared to $352,282 for the same period in FY 1996,
a 8.5% increase. 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 $254,902 for the first half of
FY 1998 compared to revenues of $193,372 for the same period of FY 1997 an
increase of 31.8%. 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 programs provided revenues of $64,824 for the
first half of FY 1998, compared to training revenues of $82,452 in the first
half of FY 1997 a decrease of 21.4%. During the first half 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 has modified 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 shares that
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 provisions for income
taxes that were not recognized in the comparable quarter last year. During
the quarter the Company wrote down 1/8th of the outstanding $500,000 loan
and accumulated interest.
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: June 11, 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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