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, 1999 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.
3,554,560 shares of Common Stock ($0.005 par value per share)
outstanding at April 30, 1999
INDEX
MEDICAL ADVISORY SYSTEMS, INC.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Balance Sheet - April 30, 1999 and October 31, 1998
Statement of Operations - Three and Six months ended April 30, 1999
and 1998
Statement of Cash Flow - Six months ended April 30, 1999 and 1998
Notes of Condensed Financial Statements: April 30, 1999
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
1999 1998
-----------------------------
UNAUDITED
ASSETS
CURRENT ASSETS
Cash $ 1,936,915 $ 579,331
Receivables, net 314,292 907,720
Inventory 34,751 26,745
Prepaid expenses and other 6,455 6,802
Current deferred tax asset 37,015 37,015
----------- -----------
TOTAL CURRENT ASSETS 2,329,428 1,557,613
PROPERTY AND EQUIPMENT, NET 945,829 1,015,055
OTHER ASSETS
Investments 2,297,751 660,000
Deferred assets 387,739 387,739
----------- ----------
TOTAL OTHER ASSETS 2,685,490 1,047,739
TOTAL ASSETS $ 5,960,747 $ 3,620,407
=========== ===========
The accompanying notes are an integral part of these statements.
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET - CONTINUED
April 30 October 31
1999 1998
-----------------------------
UNAUDITED
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Current maturities LT debt $ 3,253 $ 315,617
Accounts payable & accrued expenses 223,502 437,249
Deferred income 100,371 327,565
----------- -----------
TOTAL CURRENT LIABILITIES 327,126 1,080,431
Long-term liabilities to banks and others 132,397 134,069
----------- -----------
TOTAL LIABILITIES $ 459,523 $ 1,214,500
JOINT VENTURER'S INTEREST - (24,706)
SHAREHOLDER'S EQUITY
Convertible preferred stock, $1.75 par value
authorized: 1,000,000 shares, issued and
outstanding at October 31, 1998: 0 and 2,706,661 -
issued and outstanding at April 30, 1999:
500,000;
Common stock, $0.005 par value -
authorized: 10,000,000 shares
issued and outstanding October 31, 1998: 19,662 19,415
3,819,938; issued and outstanding at April
30, 1999: 3,554,560
Convertible preferred stock, dividends paid (48,950)
Additional paid in capital 3,866,531 3,824,778
Accumulated deficit (882,834) (1,369,997)
Treasury stock at cost (159,846) (43,583)
----------- -----------
NET SHAREHOLDERS EQUITY $ 5,501,224 $ 2,430,613
----------- -----------
TOTAL LIABILITIES AND EQUITY $ 5,960,747 $ 3,620,407
=========== ===========
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
1999 1998 1999 1998
Revenues:
Program services $ 244,695 $ 186,082 $ 463,990 $ 393,231
Assistance services 250,838 268,637 348,513 542,814
Pharmaceutical sales 107,719 136,876 228,553 254,902
Chat center revenue 736,161 1,552,137
Training services 13,055 48,994 37,742 64,824
Option revenue 250,000 66,150 330,822 66,150
Other income 926 62,129 8,621 62,532
Interest revenue 16,698 22,085 22,241 32,580
----------------------- -----------------------
Total Revenue 1,620,092 790,953 2,992,619 1,417,033
----------------------- -----------------------
Cost and Expenses:
Program & Assistance
medical services $ 55,657 $ 88,629 $ 119,455 $ 166,832
Pharmaceutical cost of goods 56,580 81,922 109,599 137,631
Chat center medical services 547,738 1,138,272
Other chat center costs 29,491 45,937
Cost of training services 4,637 10,529 10,586 12,882
Salaries and wages 332,006 246,911 619,187 479,693
Other selling, general and
administrative expenses 228,092 228,766 426,595 403,615
Depreciation and amortization 14,117 24,406 35,975 48,811
Interest expense 60,021 2,375 61,825 10,571
----------------------- -----------------------
1,328,340 683,538 2,567,432 1,260,035
Operating Income 291,752 107,415 425,187 156,998
Income tax benefit (expense)
----------------------- -----------------------
Profit (loss) before joint
ventures's interest 291,752 107,415 425,187 156,998
Joint venturer's interest 16,065 (865)
----------------------- -----------------------
Net Profit $ 291,752 $ 123,480 $ 425,187 $ 156,133
======================= =======================
Earnings per share:
Basic $0.08 $0.03 $0.12 $0.04
Diluted $0.06 $0.03 $0.10 $0.04
Weighted average shares outstanding:
Basic 3,556,680 3,885,878 3,538,731 3,885,878
Diluted 4,536,839 3,885,878 4,309,159 3,885,878
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Six Months Ended April 30
1999 1998
-------------------------
Cash flows from operating activities:
Net earnings from period $ 425,187 $ 156,133
Adjustment to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 35,975 48,811
Equity interest in joint venture income (losses) 0 865
(Increase) decrease in :
Accounts receivable 593,428 249,771
Inventory (8,006) 9,205
Prepaid expenses and other 347 1,077
Increase (decrease) in :
Accounts payable and accrued expenses (213,747) (54,404)
Deferred income (227,194) (21,994)
Net cash provided by (used for) operating
activities $ 605,990 $ 389,464
Cash flows from investing activities:
Purchase of Investment (1,587,047) 26,738
(Purchase) disposal of property and equipment,
net 69,226 (55,684)
--------------------------
Net cash provided by (used in) investing
activities (1,517,821) (28,946)
Cash Flows from financing activities
Proceeds from sale of common stock, net of costs 42,003 -
Proceeds from sale of preferred stock, net
of costs 2,706,661 -
Dividends Paid - preferred stock (48,950) -
Purchase of treasury stock (116,263) -
Repayment of loans to banks and related parties (314,036) (63,459)
--------------------------
Net cash provided by (used in) financing
activities 2,269,415 (63,459)
Net increase (decrease) in cash 1,357,584 297,059
Cash at beginning of period 579,331 729,609
--------------------------
Cash at end of the period $ 1,936,915 $ 1,026,668
==========================
Supplemental disclosure of Cash Flow information:
Cash paid during period for interest $ 62,843 $ 5,883
==========================
MEDICAL ADVISORY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - Basis of Presentation
The accompanying unaudited condensed financial statements
have been prepared in accordance with the instructions to SEC
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, 1999 are not necessarily indicative
of the results that may be expected for the year ended October
31, 1999. The unaudited consolidated financial statement should
be read in connection with the consolidated financial statements
and footnotes thereto included in the Company's annual report
on 10-KSB for the year ended October 31, 1998.
NOTE B - Consolidated Statements
The consolidated financial statements include the accounts of
Medical Advisory Systems, Inc. (MAS) and its wholly-owned
subsidiaries MAS Laboratories, Inc., Doc-Talk, LLC and
TLC, Inc. Significant intercompany transactions have been
eliminated in consolidation.
The consolidated financial statements as of October 31, 1998
and for the six months ended April 30, 1998 also include
100% of the assets, liabilities and operating results of
Assistance Services of America, Inc. (ASA). The Joint
Venturer's Interest reflected on the October 31, 1998
consolidated balance sheet and the consolidated statements of
operations for the six months ended April 30, 1998 represent
the other joint venturer's share (50%) of ASA's equity
(deficit) and results of operations.
In March, 1999, the Company sold 100% of its equity
interest in ASA to ASA's remaining shareholder, SACNAS
International. The terms of the sale agreement included
SACNAS International assuming all responsibilities for
operations of ASA effective November 1, 1998. The
accompanying April 30, 1999 financial statements include
certain adjustments to reflect the Company discontinuing
operating ASA. Accordingly, the accompanying consolidated
balance sheet at April 30, 1999 and the statement of
operations for the three months ended April 30, 1999 do not
include the assets, liabilities and operating results of ASA.
NOTE C - Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date (s) of the financial
statements and the reported amounts of revenues and
expenses during the reporting period (s). Actual results could
differ from those estimates.
MEDICAL ADVISORY SYSTEMS, INC.
PART I. FINANCIAL INFORMATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For the first six months of FY 1999 sales were
$2,992,619. For the first six months of last year sales were
$1,417,033. Sales for the first six months of FY 1999 reflect
deleted business from the sale of ASA (see NOTE-B).
Deleting ASA sales from the first six months of FY 1998,
results in sales of $1,205,333 for comparison to the first six
months of FY 1999. Therefore, sales for the first six months
of FY 1999 comparatively increased by 148%. The increase
resulted primarily from chat center revenues, a new business
segment launched in the forth quarter of FY 1998.
Revenues from Program Services were $463,990 for
the first six months of FY 1999 compared to $393,231 for the
same period in FY 1998, an increase of 18.0%. This increase
resulted from the stabilization of the size of the U.S.
merchant marine fleet along with expanded marketing efforts,
plus the addition of outpatient clinical services at the
Company's headquarters building.
The Company had assistance service revenues of
$348,513 during the first six months of FY 1999. First six
month sales for last year were $542,814. Sales for the first
half reflect deleted business from the sale of ASA (see
NOTE-B). Deleting ASA sales from the first six months of
FY 1998, results in sales of $89,829 for comparison to the
first half of FY 1999. Sales for the first half of FY 1999
comparatively increased by 288%, resulting primarily from a
one-time transition fee of $164,500 paid by SACNAS
International related to its purchase of the Company's interest
in Assistance Services of America, Inc. (See Sale of the
Company's Affiliate, Assistance Services of America, Inc.
below). The Company is in negotiations with SACNAS
International with respect to a new service contract, and
continuing revenues from this business line are not assured.
Revenues from pharmaceutical sales were
$228,553 for the first six months of FY 1999 reflecting a
decrease in revenues of $26,349 or 10.3% when compared to
the same period of 1998. The decrease reflects the loss of a
pharmaceutical contract with a major customer. The
Company has recently obtained additional contracts that are
expected to bring pharmaceutical revenues back in line with
the previous fiscal year.
Chat Center revenues totaled $1,552,137
during the first half of 1999. These revenues were derived
from a new business segment launched in the forth quarter of
FY 1998. The Company provides professional medical
information "chats" via the internet to internet service
providers and internet users on behalf of
AmericasDoctor.Com. The Company anticipates continuing
increases in revenues from this business segment.
The Company's training program provided revenues
of $ 37,742 for the period, a 41.8% decrease compared to
training revenues of $ 64,824 in the first six months of FY
1998. The decrease is primarily the result of the off year of
the biannual training schedule of a major customer.
Sale of the Company's affiliate, Assistance Services of America, Inc.
On March 9, 1999 the Company entered into an agreement to sell its
interest in Assistance Services of America, Inc (ASA) to SACNAS
International (SACNAS). Under the terms of the agreement
SACNAS paid the Company a transition fee of $164,500, forgave an
outstanding note payable of $250,000, and sold 295,378 shares of
the Company's common stock back to the Company for $116,248.
The Company paid SACNAS $57,000 representing accrued interest
on the note payable. These items were completed on March 12,
1999 and the 295,378 MAS shares were returned to the Company's
treasury. The final step of the transaction calls for SACNAS to
complete due diligence and enter into a stock purchase agreement
with the Company, at which time SACNAS is to pay the Company
$25,000 for the ASA shares and enter into a service agreement
defining the future relationship between SACNAS and the Company.
This final step has not yet been completed.
MEDICAL ADVISORY SYSTEMS, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
In February, 1999 the Company sold 500,000 shares of a
Series A Redeemable Convertible Preferred Stock in a private
placement. On May 01, 1999 all of the preferred
shareholders elected to convert these shares into MAS
common stock.
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. On file
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 14, 1999 /s/ Thomas M. Hall, M.D. M.I.M.
---------------------------------
Thomas M. Hall, M.D. M.I.M.
Chief Executive Officer
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