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, 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.
4,411,060 shares of Common Stock ($0.005 par value per share)
outstanding at July 31, 1999
INDEX
MEDICAL ADVISORY SYSTEMS, INC.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Balance Sheet - July 31, 1999 and October 31, 1998
Statement of Operations - Three and Nine months ended July 31, 1999
and 1998
Statement of Cash Flow - Nine months ended July 31, 1999 and 1998
Notes of Condensed Financial Statements: July 31, 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
July 31 October 31
1999 1998
--------------------------
UNAUDITED
ASSETS
CURRENT ASSETS
Cash $ 1,239,944 $ 579,331
Receivables, net 424,006 907,720
Inventory 38,204 26,745
Prepaid expenses and other 22,012 6,802
Current deferred tax asset 37,015 37,015
---------- -----------
TOTAL CURRENT ASSETS 1,761,181 1,557,613
PROPERTY AND EQUIPMENT, NET 958,569 1,015,055
OTHER ASSETS
Investments 3,116,731 660,000
Deferred assets 387,739 387,739
---------- -----------
TOTAL OTHER ASSETS 3,504,470 1,047,739
TOTAL ASSETS $ 6,224,220 $ 3,620,407
=========== ===========
The accompanying notes are an integral part of these statements.
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET - CONTINUED
July 31 October 31
1999 1998
--------------------------
UNAUDITED
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Current Maturities LT Debt $ 3,323 $ 315,617
Accounts payable & accrued expenses 283,228 437,249
Deferred income 21,517 327,565
----------- -----------
TOTAL CURRENT LIABILITIES 308,069 1,080,431
Long-term liabilities to Banks and Others 131,534 134,069
----------- -----------
TOTAL LIABILITIES $ 439,603 $ 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
Issued and Outstanding at April 30, 1999: 0
Common Stock, $0.005 par value - Authorized:
10,000,000 shares Issued and Outstanding
October 31, 1998: 3,819,938; 2,722,676 19,415
Issued and Outstanding at July 31, 1999:
4,411,060
Convertible Preferred Stock, Dividends Paid (48,950)
Additional capital 4,066,331 3,824,778
Accumulated deficit (795,593) (1,369,997)
Treasury Stock at Cost (159,846) (43,583)
----------- -----------
NET SHAREHOLDERS EQUITY $ 5,784,617 $ 2,430,613
----------- -----------
TOTAL LIABILITIES AND EQUITY $ 6,224,220 $ 3,620,407
=========== ===========
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
1999 1998 1999 1998
------------------------ ------------------------
Revenues:
Program Services $ 238,196 $ 206,980 $ 702,186 $ 600,211
Assistance Services 79,085 246,993 427,598 789,807
Pharmaceutical Sales 128,589 120,921 357,142 375,823
Chat Center Revenue 1,249,920 2,802,057
Training Services 19,476 18,435 57,218 83,259
Option Revenue 66,149 330,822 132,299
Other Income 2,637 11,258 62,532
Interest Revenue 15,654 13,044 37,895 45,624
----------- ----------- ----------- ----------
Total Revenue 1,733,557 672,522 4,726,176 2,089,555
----------- ----------- ----------- -----------
Cost and Expenses:
Program & Assistance
Medical Services $ 55,440 $ 81,284 $ 174,895 $ 241,795
Pharmaceutical Cost of Goods 69,781 53,196 179,380 190,827
Chat Center Medical Services 913,592 2,051,864
Other Chat Center Costs 19,296 65,233
Cost of Training Services 8,216 6,590 18,802 19,472
Salaries and Wages 295,841 246,359 915,028 726,052
Other selling, general and
Administrative expenses 259,692 256,575 686,287 660,190
Depreciation and Amortization 21,586 25,405 57,561 74,216
Interest expense 2,871 3,232 64,696 13,803
----------- ----------- ----------- -----------
1,646,315 672,641 4,213,746 1,926,355
Operating Income 87,242 (119) 512,430 163,200
Income Tax benefit (expense)
----------- ----------- ----------- -----------
Profit (loss) before joint
ventures's interest 87,242 (119) 512,430 163,200
Joint venturer's interest 34,890 34,025
----------- ----------- ----------- -----------
Net Profit $ 87,242 $ 34,771 $ 512,430 $ 197,225
=========== =========== =========== ===========
Earnings per share:
Basic $0.02 $0.01 $0.13 $0.05
Diluted $0.02 $0.01 $0.12 $0.05
Weighted average shares outstanding:
Basic 4,397,010 3,885,878 4,035,677 3,885,878
Diluted 4,670,820 3,885,878 4,395,544 3,885,878
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Nine Months Ended July 31
1999 1998
Cash flows from operating activities:
Net earnings from period $ 512,430 $ 197,225
Adjustment to reconcile net earning
to net cash provided by operating activities:
Depreciation and amortization 57,561 74,216
Equity interest in joint venture income (losses) 0 (34,025)
(Increase) decrease in :
Accounts Receivable 267,207 521,642
Inventory (11,459) (1,057)
Prepaid expenses and other (16,669) 4,912
Increase (decrease) in :
Accounts payable and accrued expenses 35,415 (286,599)
Deferred income 7,886 (34,372)
Net cash provided by (used for) operating activities $ 852,372 $ 441,942
Cash flows from investing activities:
Purchase of Investment (2,432,019) 8,499
(Purchase) disposal of property and equipment, net (69,108) (126,213)
----------- -----------
Net cash provided by (used in) investing activities (2,501,127) (117,714)
Cash Flows from financing activities
Proceeds from Sale of Common Stock, net of costs 2,703,246 -
Proceeds from Paid in Capital in Excess of Par 241,568 -
Dividends Paid - Preferred Stock (48,950) -
Purchase of Treasury Stock (116,263) -
Repayment of loans to banks and related parties (315,035) (126,824)
----------- -----------
Net cash provided by (used in) financing activities 2,464,565 (126,824)
Net increase (decrease) in cash 815,809 197,404
Cash at beginning of period 424,135 729,609
----------- -----------
Cash at end of the period $ 1,239,944 $ 927,013
=========== ===========
Supplemental disclosure of Cash Flow information
Cash paid during period for interest $ 64,696 $ 14,778
=========== ===========
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 nine
months period ended July 31, 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 nine months ended July 31, 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 nine months ended July 31, 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 July 31, 1999 financial statements include
certain adjustments to reflect the Company discontinuing
operating ASA. Accordingly, the accompanying consolidated
balance sheet at July 31, 1999 and the statement of
operations for the nine months ended July 31, 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 nine months of FY 1999 sales were
$4,726,176. For the first nine months of last year sales were
$2,089,555. Sales for the first nine months of FY 1999
reflect deleted business from the sale of ASA (see NOTE-B).
Deleting ASA sales from the first nine months of FY 1998,
results in sales of $1,794,079 for comparison to the first nine
months of FY 1999. Therefore, sales for the first nine
months of FY 1999 comparatively increased by 263%. For
the three months ended July 31, 1999 sales where $1,733,557
compared to the same period of FY 1998 with sales of
$672,522. Deleting ASA sales from the third quarter of 1998
resulted in sales of $584,529, an increase of 337%. The
increase resulted primarily from chat center revenues, a new
business segment launched in the forth quarter of FY 1998.
Chat Center revenues totaled $1,249,520 during the
third quarter and $2,802,057 during the first nine months 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 has been informed by AmericasDoctor.com
that there is a dispute over the term of the Call Center Service
Agreement between the companies. AmericasDoctor.com
believes it was the intent of the parties that
AmericasDoctor.com could elect not to renew the agreement
for the period July 2, 2001 through July 2, 2003. The
Company believes only the Company has the right to elect
not to renew the contract for that period.
Revenues from Program Services were $702,186 for
the first nine months of FY 1999 compared to $600,211 for
the same period in FY 1998, an increase of 17.0%. Revenues
for the third quarter of FY 1999 were $238,196 compared to
$206,979 for the same period of FY 1998. 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
$427,598 during the first nine months of FY 1999. First nine
months sales for last year were $789,807. Sales for the first
nine months reflect deleted business from the sale of ASA
(see NOTE-B). Deleting ASA sales from the first nine
months of FY 1998, results in sales of $161,013 for
comparison to the first nine months of FY 1999. Sales for
the first nine months of FY 1999 comparatively increased by
266%, 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 third
quarter of FY 1999 had revenues of $79,085 as compared to
$246,993 for FY 1998. Deleting ASA sales from the third
quarter of FY 1998 resulted in revenues of $71,184, an
increase of 11%. SACNAS has now purchased the
Company's shares in ASA and the Company is now providing
leased office space and case handling services under a new
services agreement. Management therefore anticipates
continuing revenues from this business line for the remainder
of fiscal year 1999.
Revenues from pharmaceutical sales were $357,142
for the first nine months of FY 1999 reflecting a decrease in
revenues of $18,681 or 5.2% when compared to the same
period of 1998. This decrease reflects the loss of a
pharmaceutical contract with a major customer. The third
quarter of FY 1999 had sales of $128,589 as compared to the
same period of FY 1998 revenues of $120,921, an increase
for the third quarter of $7,668 or 6.3%. The Company has
recently obtained additional contracts that are expected to
bring pharmaceutical revenues back in line with the previous
fiscal year.
The Company's training program provided revenues
of $ 57,218 for the nine months, a 31.3% decrease compared
to training revenues of $ 83,259 in the first nine months of
FY 1998. The third quarter of FY 1999 had revenues of
$19,476, compared to FY 1998 third quarter sales of
$18,435, an increase of 5.6%.
Sale of the Company's affiliate, Assistance Services of America, Inc. (ASA)
On March 9, 1999 the Company entered into an
agreement to sell all of its interest in Assistance Services of
America, Inc. (ASA) to SACNAS International (SACNAS).
SACNAS paid $189,500 in cash, forgave an outstanding note
payable of $250,000 and sold back to the Company 295,378
shares of the Company's common stock for $116,248. The
Company paid SACNAS $57,000 to settle accrued interest
on the note payable.
Agreement with Assistance Services of America, Inc. (ASA)
In conjunction with the final sale by the Company of
all of its interests in ASA to SACNAS, the Company entered
into a lease and service agreement with ASA and SACNAS.
Under this agreement ASA is renting office space in the
Company's headquarters building in Owings, Maryland and
continuing to use the Company to service its US medical and
travel cases. The lease and service agreement has a 1-year
term with automatic renewals, and may be cancelled by either
party upon 90 days notice. Additionally, the Company and
SACNAS have agreed to pursue the international expansion
of the Company's core medical information programs
through the call centers operated by SACNAS in 19
countries.
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
On June 4,1999 the Company issued a Proxy
Statement to all shareholders that on June 25, 1999
the Company will hold its annual shareholders meeting.
Item 5. Other Information
In 1986 the Company filed an S-1 registration under
the Securities Act of 1933. The Company has
previously filed 10-KSB and 10-QSB reports on a
voluntary basis. On August 13, 1999 the Company
filed with the Securities and Exchange Commission
form 8A/A subjecting the Company to the Exchange Act of 1934.
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: September 10, 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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