FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the quarter ended January 31, 2000 ________________
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________________to____________________
Commission file number 2-98314-W
_____________
MEDICAL ADVISORY SYSTEMS, INC.
________________
(Name of small business issuer in its charter)
Delaware 52-1233960
- -------------------------------- ----------------------------------
(State or other jurisdiction of IRS Employer Identification No.)
incorporation or organization)
8050 Southern Maryland Blvd., Owings, MD 20736
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(Address of principal executive offices) (Zip Code)
(301) 855-8070
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Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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____
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-QSB or any amendment of this Form 10-QSB [x]
Issuer's revenues for its most recent fiscal quarter: $2,718,945
Common Stock, $.005 par value 4,506,240 Shares of Common Stock
Outstanding as of January 31, 2000
Item 1. Financial Statements
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
October 31, January 31,
1999 2000
Assets
Current
Cash and cash equivalents $ 931,949 $ 433,127
Accounts receivable, less allowance for
doubtful accounts of $77,744 and $86,545 444,396 825,264
Inventories 25,108 35,562
Prepaid expenses and other 11,651 2,500
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Total current assets 1,413,104 1,296,453
Property and equipment, at cost, less
accumulated depreciation and amortization 1,042,653 1,039,424
Investment in AmericasDoctor.com (Note 1) 639,171 639,171
Deferred investment advisory costs (Note 4) 757,607 438,418
Intangible assets, net 48,250 46,511
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$3,900,785 $3,459,977
==============================================================================
See accompanying summary of accounting policies and notes to consolidated
financial statements.
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
October 31, January 31,
1999 2000
Liabilities and Stockholders' equity
Current
Current maturities of long-term debt $ 3,395 $ 3,515
Current maturities of capital lease obligations 25,769 27,311
Accounts payable and accrued expenses 483,383 486,727
Deferred income 31,677 27,813
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Total current liabilities 544,224 545,366
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Long-term debt 131,230 129,455
Capital lease obligations 98,793 90,768
Customer advances 57,944 57,944
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Total liabilities 832,191 278,167
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Commitments and contingencies
Stockholders' equity (Notes 3, 4 and 5)
Convertible preferred stock, par value, $1.75 par
share; 1,000,000 shares authorized; none issued or
outstanding - -
Common stock; $.005 par value; 10,000,000 shares
authorized; 4,411,060 and 4,506,240 shares issued
and outstanding 22,054 22,530
Additional paid-in capital 8,164,041 8,163,565
Accumulated deficit (5,073,918) (5,506,068)
Treasury stock, at cost (50,000 shares) (43,583) (43,583)
- ------------------------------------------------------------------------------
Total stockholders' equity 3,068,594 2,636,444
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$3,900,785 $3,459,977
See accompanying summary of accounting policies and notes to
consolidated financial statements.
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended January 31, 1999 2000
Revenue:
Internet chat services $ 815,976 $2,233,972
Maritime response services 219,295 222,186
Travel assistance 97,675 96,705
Pharmaceutical sales 120,834 153,382
Training services 24,687 4,231
Doc Talk revenue - 1,457
Clinic services - 7,012
- ------------------------------------------------------------------------------
Total Revenue 1,278,467 2,718,945
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Operating Expenses:
Internet chat services (Note 2) 641,438 1,733,938
Maritime response & travel assistance
services (Note 2) 119,651 152,228
Pharmaceutical cost of sales 72,257 110,039
Cost of training services 13,334 2,452
Clinic services - 14,776
Start-up cost-Doc-Talk - 289,887
Salaries and wages 170,247 209,645
Other selling, general and administrative (Note 4) 240,228 605,006
Depreciation & amortization 26,744 44,914
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Total Operating Expenses 1,283,899 3,162,885
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Operating loss (5,432) (443,940)
Other Income/(Expense):
Other income 22,368 8,586
Interest income 5,543 7,139
Interest expense (3,026) (3,935)
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Total Other Income/(Expense) 24,885 11,790
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Income (loss) before earnings (loss) of
affiliate and extraordinary item 19,453 (432,150)
Equity in loss of affiliate (Note 1) (164,199) -
- ------------------------------------------------------------------------------
Loss before extraordinary item (144,746) (432,150)
Extraordinary gain 66,149 -
- ------------------------------------------------------------------------------
Net loss $(78,597) $(432,150)
==============================================================================
Basic and diluted loss per share before
extraordinary gain $(0.04) $(0.10)
Extraordinary gain 0.02 -
- ------------------------------------------------------------------------------
Basic and diluted loss per share $(0.02) $(0.10)
Weighted average shares outstanding 3,828,090 4,430,717
==============================================================================
See accompanying summary of accounting policies and notes to
consolidated financial statements.
MEDICAL ADVISORY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASHFLOWS
Three months ended January 31, 1999 2000
Cash flows from operating activities:
Net loss $ (78,597) $ (432,150)
Adjustment to reconcile net loss
to net cash provided by (used in) operating
activities:
Depreciation and amortization 26,744 44,914
Provision for doubtful accounts - 7,500
Equity in loss of affiliate 164,199 -
Compensation expense for options and warrants 44,883 319,189
Changes in assets and liabilities:
Accounts receivable 358,847 (388,368)
Inventory (11,804) (10,454)
Prepaid expenses and other (14,337) 9,151
Accounts payable and accrued expenses (199,881) 3,344
Deferred income (252,143) (3,864)
- ------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 37,911 (450,738)
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Cash flows from investing activities:
Investment in equity affiliate (484,467) -
Purchase of property and equipment 63,002 (39,946)
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Net cash used in investing activities (421,465) (39,946)
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Cash Flows from financing activities
Proceeds from sale of common stock, net of cost 33,750 -
Repayment of loans to banks and related parties (759) (8,138)
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Net cash provided by (used in) financing activities 32,991 (8,138)
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Net decrease in cash (350,563) (498,822)
Cash at beginning of period 579,331 931,949
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Cash at end of the period $ 228,768 $ 433,127
See accompanying summary of accounting policieand notes to
consolidated financial statements.
MEDICAL ADVISORY SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The consolidated financial statements include the accounts of Medical
Advisory Systems, Inc. (MAS or the Company) and its wholly-owned
subsidiaries, MAS Laboratories, Inc., Doc-Talk, LLC, and TLC., Inc.
Significant intercompany transactions have been eliminated in
consolidation.
Effective November 1, 1998, the Company began using the equity
method of accounting for its investment in AmericasDoctor.com. The
Company determined that the equity method was appropriate based on a
combination of its strict ownership percentage, which increased from 8%
in October 1998 to 13.5% in April 1999, coupled with the ability to have
a representative on the board of directors. Under the equity method,
original investments are recorded at cost, increased for subsequent
investments in and advances to the investee, and adjusted for the
Company's share of undistributed earnings and losses of the investee.
The Company's ownership interest was reduced to 5.3% on October 31,
1999 and further reduced to 2.3% on January 6, 2000. Effective
November 1, 1999, the Company discontinued using the equity method
to account for its investment in AmericasDoctor.com and began to use
the cost method.
Business Operations
MAS provides medical advice to personnel on ocean-going vessels and
other individuals or entities located outside the continental United States,
operates an out-patient medical clinic and provides medical information
service via "chats" over the internet and telephone. MAS Laboratories is
currently inactive. The Company provides these various services through
four operating segments as described more fully in Note 7.
Risks and Uncertainties
The Company provides medical information and assistance services and
related products through various methods of distribution. The majority
of the Company's revenues result from providing medical information to
the public via the internet under an exclusive contract with
AmericasDoctor.com. AmericasDoctor.com has an exclusive contract
with America Online (AOL) to provide interactive chats as an anchor
tenant on the AOL Health Page. AOL subscribers can "chat" with the
Company's doctors located in it's call center, which is staffed 24-hours-
a-day. Because of the exclusive nature of its agreement with
AmericasDoctor.com, the Company's ability to continue to generate
significant internet chat revenue and cash flow is directly related to the
continued successful operation of the AOL home page concept by
AmericasDoctor.com.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions particularly regarding valuation of accounts receivable,
recognition of liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. Actual results could
differ from those estimates.
Concentrations of
Credit Risk
Financial instruments and related items which potentially subject the
Company to concentrations of credit risk consist primarily of cash and
cash equivalents and trade receivables. The Company places its cash and
temporary cash investments with high credit quality institutions. At
times, such investments may be in excess of the FDIC insurance limit.
The Company's customers are not concentrated geographically and it
periodically reviews its trade receivables in determining its allowance for
doubtful accounts. Revenues from AmericasDoctor.com, Inc. were
$815,976 and $2,233,972 or 64% and 82% of consolidated revenues for
the three months ended January 31, 1999 and 2000, respectively.
Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity date of three
months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market determined by the
first-in, first-out (FIFO) method. Inventories consist of pharmaceuticals
available for sale.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed over
their estimated useful lives by the straight line method (see Note 1)
Deferred Investment
Advisory Costs
Deferred investment advisory and public relations costs consist of
approximately $1,500,000 representing the estimated fair value of
360,000 warrants issued to certain third parties for public and investor
relations services to be rendered over one and three-year periods,
respectively (see note 4). These amounts are being amortized on a
straight line basis over the lives of the service agreements. Amortization
expense was $44,883 and $319,189 for the three months ended January
31, 1999 and 2000, respectively.
Impairment of Long-Lived
Assets
Long-lived assets and certain identifiable intangibles held and used by
the Company are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. In addition, assets to be disposed of are reported at the
lower of the carrying amount or the fair value less costs to sell.
Revenue Recognition
Revenues from contracts that provide unlimited services are recognized
ratably over the term of the contract. Revenues from contracts based on
usage are recognized when the services are rendered. Other revenues are
recognized at the time services or goods are provided.
Income Taxes
The Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards No. 109. Accounting for Income
Taxes ("SFAS 109"). Under SFAS 109, deferred taxes are determined
using the liability method which requires the recognition of deferred tax
assets and liabilities based on differences between financial statement
and income tax bases using presently enacted tax rates.
Stock Based Compensation
The Company accounts for stock based compensation using the intrinsic
value method prescribed in Accounting Principle Board Opinion No. 25,
"Accounting for Stock Issued to Employees." The Company has adopted
the disclosure-only provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock Based Compensation" with
respect to options and warrants granted to employees.
Earnings Per Share
The Company follows Statement of Financial Accounting Standards No.
128, "Earnings Per Share," specifying the computation, presentation and
disclosure requirements of earnings per share information. Basic
earnings per share has been calculated based upon the weighted average
number of common shares outstanding. Stock options and warrants have
been excluded as common stock equivalents in the diluted earnings per
share because they are antidilutive.
Comprehensive
Income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130"), establishes standards for
reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all
changes in equity except those resulting from investments by owners and
distributions to owners. Among other disclosures, SFAS 130 requires
that all items that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The Company adopted SFAS 130 during the first
quarter of fiscal 1999 and has no items of comprehensive income to
report.
Recent Accounting
Pronouncements
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments" ("SFAS 133"). SFAS 133 establishes accounting
and reporting standards for derivative instruments and for hedging
activities. SFAS 133 requires that an entity recognize all derivatives as
either assets or liabilities and measure those instruments at fair market
value. Under certain circumstances, a portion of the derivative's gain or
loss is initially reported as a component of other comprehensive income
and subsequently reclassified into income when the transaction affects
earnings. For a derivative not designated as a hedging instrument, the
gain or loss is recognized in income in the period of change. SFAS 133
is effective for all fiscal quarters beginning after June 15, 2000 and
requires application prospectively. Presently, the Company does not use
derivative instruments either in hedging activities or as investments.
Accordingly, the Company believes that adoption of SFAS 133 will have
no impact on its financial position or results of operations.
Reclassifications
Certain prior year balances have been reclassified to conform with the
current year presentation.
1. Investment in
AmericasDoctor.com
In October 1998 the Company invested $660,000 which represented an
8% interest in AmericasDoctor.com. During 1999 the Company
increased its investment to $3,159,024 (13.5%), principally in February
and June. AmericasDoctor.com operates an interactive internet
healthcare information site for consumers which offers free, real-time
interaction with healthcare professionals and easy access to relevant and
reliable healthcare information. The site features a free 24-hour doctor
chat service that enables consumers to have live on-line, one-on-one
chats with doctors and other healthcare professionals, a variety of
interactive healthcare content including lectures and live educational
programs, a growing library of information on ailments, illnesses,
nutrition, pharmacology and other topics, and health and medical
publications and news.
The Company's remaining investment represents goodwill which has
been assigned a five-year life. On October 31, 1999, the Company's
ownership interest was reduced to 5.3% and further reduced to 2.3% on
January 6, 2000. Effective November 1, 1999, the Company began to
account for its investment using the cost method. Accordingly, the
Company will discontinue recording additional losses or amortizing the
remaining investment effective November 1, 1999.
2. Related Party
Transactions
Hall & Associates, P.A., Hall & AmDoc, Associates, P.A., and Hall &
DocTalk, Associates, P.A., which are owned by the Company's Chief
Executive Officer, Thomas M. Hall, M.D., provide medical professional
services to MAS. Amounts paid to these companies represent fees for
professional services rendered and premiums on professional liability
insurance. During the three months ended January 31, 1999 and 2000,
the Company paid Hall & Associates, P.A., Hall & AmDoc, Associates,
P.A. and Hall & DocTalk, Associates, P.A., a combined total of
$655,567 and $1,690,971, respectively, in fees and professional liability
insurance premiums. There were no amounts payable to these affiliates
at either January 31, 1999 or 2000.
3. Stockholder's Equity
In January 2000, the Company issued 95,180 shares of common stock in
connection with the exercise of previously recorded warrants issued to
third parties.
4. Stock Warrants
In November 1998, the Company issued 300,000 warrants to purchase
the Company's common stock to a broker dealer as consideration for
certain investment advisory services, including services related to the
issuance of 500,000 shares of Convertible Preferred Stock in a private
placement. The Company determined the estimated aggregate fair value
of these warrants on the date of grant to be approximately $742,250
based on the Black-Scholes valuation model with the following weighted
average assumptions: dividend yield of 0%, expected volatility of 40%,
risk free interest rate of approximately 5.01% and expected life of
approximately 5 years. The Company recorded $124,605 as a reduction
in paid-in-capital in order to raise the effective commission paid to the
broker dealer to 15% to more accurately reflect the commission rate for
similar transactions being completed. The remaining $620,645 was
recorded as deferred investment advisory fees and is being amortized
over 36 months, the term of the service agreement. As of January 31,
2000, the amount included in deferred investment advisory costs related
to these warrants is $379,283. In addition, the Company issued warrants
to purchase the Company's common stock to various marketing and
public relations consultants. The terms of the consulting agreements vary
from one month to one year. All of the warrants issued to third parties
allowed them to purchase common stock for $3.00 to $12.00 per share
for up to five years. There were no vesting requirements associated with
these warrants. The Company determined the estimated aggregate fair
value of these various warrants on the date of grant to be approximately
$895,706 based on the Black-Scholes valuation model described above.
The majority of these warrants have been amortized into expense as of
October 31, 1999. As of January 31, 2000, the amount included in
deferred investment advisory costs related to these warrants is $59,135
and will be fully amortized by March 2000.
5. Stock Options
The Company has a nonqualified stock option plan to provide key
employees and non-employees the opportunity to participate in equity
ownership. Options may be granted at or above the fair market value of
the stock and have a five-year life (increased to ten years in December
1999). Options granted to certain individuals vest ratably over three
years. The Company has reserved 650,000 common shares for exercise
of these stock options.
6. Income Taxes
The Company has estimated its annual effective tax rate at 0% due to the
uncertainty over the level of earnings in 2000. Also, the Company has
net operating loss carryforwards of approximately $1.0 million for
income tax reporting purposes for which no income tax benefit has been
recorded due to the uncertainty over the generation of taxable income in
2000.
7. Operating Segments
The Company has four operating segments: Internet chats, Maritime
response and travel assistance, Pharmaceutical sales, Doc-Talk and
other, which includes the laser clinics training services. All of the
segments are engaged in the dispensing of medical advice and
information, but the method of distribution and customer bases are
different. The Internet chats segment provides medical information
via the AmericasDoctor.com button on America Online. The Maritime
response segment provides medical advice to personnel on ocean-going
vessels. The Travel assistance segment provides medical assistance to
travelers to the United States. The Pharmaceutical sales segment
provides pharmaceuticals to airlines and companies using ocean-going
vessels. The Doc-Talk segment provides medical information via local
and long distance telephone lines. The laser center is an out patient
medical clinic providing laser related medical services. The Company
evaluates performance based on operating results of the respective
segments. The accounting policies of the segments are the same as those
described in the summary of accounting policies. Summarized financial
information concerning the Company's reporting segments for the three
months ended January 31, 1999 and 2000 is presented below.
Three months ended Segment Total
January 31, 1999 Revenues Profit(loss) Assets
- ------------------------------------------------------------------------------
Internet chat services $ 815,976 $ 174,538 $1,309,122
Maritime response & travel
assistance services 316,970 197,319 669,230
Pharmaceutical sales 120,834 48,577 192,237
Doc-Talk - - -
Other 24,687 11,353 -
Unallocated corporate
expenses - (437,219) -
Unallocated assets - - 1,167,942
- ------------------------------------------------------------------------------
$1,278,467 $ (5,432) $3,338,530
==============================================================================
Three months ended Segment Total
January 31, 2000 Revenues Profit(loss) Assets
Internet chat services $2,233,972 $ 500,034 $1,583,749
Maritime response & travel
assistance services 318,891 166,663 498,633
Pharmaceutical sales 153,382 43,343 154,149
Doc-Talk 1,457 (298,570) 47,968
Other 11,243 (5,985) -
Unallocated corporate
expenses - (849,425) -
Unallocated assets - - 1,175,478
- ------------------------------------------------------------------------------
$2,718,945 $ (443,940) $2,163,524
==============================================================================
8. Subsequent
Events
On March 9, 2000, the Company sold 550,000 shares of common stock,
in a private transaction, for total proceeds of $5,775,000 to Premier
Research Worldwide ("PRWW"), an unrelated third party.
Concurrently, the Company and eResearch Technology, a wholly owned
subsidiary of PRWW, executed a sales, service and marketing
agreement. Under the agreement, which has a five-year term, the
Company will assist eResearch Technology in deploying its suite of
integrated proprietary clinical research software to companies in the
pharmaceutical, medical device and biotechnology industries, as well as
clinical research organizations. Also, the Company will expand its
telecommunications and internet infrastructure to become an application
service provider for eResearch Technology's proprietary clinical
research software. Further, the two companies will work to increase the
efficiency and effectiveness of eResearch Technology's electronic
network by utilizing the Company's base of contract physicians to
expedite clinical research reporting. In addition, the companies will
cooperate to facilitate training of physicians to use proprietary software,
developed by eResearch Technology, which provides for the electronic
transmission of a centralized analysis of electrocardiograms used to
monitor the effects on the heart of new therapies.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation.
Forward-Looking Information
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements made by the Company in
its disclosures to the public. There is certain information contained herein
in the Company's press releases and in oral statements made by
authorized officers of the company which are forward-looking statements
as defined by such Act. When used herein in the Company's press
releases and in such oral statements, the words "estimate", "project",
"anticipate", "expect", "intend", "believe", "plan", and similar
expressions are intended to identify forward-looking statements.
The following selected financial data and Management's Discussion and
Analysis of Financial Conditions and Results of Operations should be
read in conjunction with the Company's interim financial statements and
notes thereto, included elsewhere in this Form 10QSB
The Company's net loss for the first three months of FY 2000 was
$432,150 compared to a net loss of $78,597 for the comparable period in
FY 1999. The net loss in the current year is primarily attributable to
losses in the wholly owned subsidiary DocTalk, Inc. of $298,570 and the
non-cash amortization expense of deferred investment advisory costs
related to options and warrants issued to outside consulting and
investment firms of $319,189.
On March 9, 2000, the Company sold 550,000 shares of common stock,
in a private transaction, for total proceeds of $5,775,000 to Premier
Research Worldwide, ("PRWW"), an unrelated third party.
Concurrently, the Company and eResearch Technology, ("eRT") a
wholly owned subsidiary of PRWW, executed a sales, service and
marketing agreement. Under this agreement, which has a five-year term,
the Company will assist eRT in deploying its suite of integrated
proprietary clinical research software to companies in the
pharmaceutical, medical device and biotechnology industries, as well as
clinical research organizations. Also, the Company will expand its
telecommunications and Internet infrastructure to become an application
service provider for eRT's proprietary clinical research software.
Further, the two companies will work to increase the efficiency and
effectiveness of eRT's electronic network by utilizing the Company's
base of contract physicians to expedite clinical research reporting. In
addition, the companies will cooperate to facilitate training of physicians
to use proprietary software, developed by eRT, which provides for the
electronic transmission of a centralized analysis of electrocardiograms
used to monitor the effects on the heart of new therapies. Execution of
these agreements with eRT will require the Company to purchase a
software license for approximately $2,700,000. Also, the Company
expects capital expenditures of approximately $300,000 for upgrading its
computer hardware and telecommunications infrastructure. The sales, service
and marketing agreement guarantees the Company a minimum of approximately
$1,000,000 in revenues during the first year of the contract beginning
April 1, 2000.
INTERNET "CHAT" SERVICES
Revenues increased 174% from $815,976 in the first quarter of 1999 to
$2,233,972 in the first quarter of 2000. Operating expenses increased
170% from $641,438 in the first quarter of 1999 to $1,733,938 in the first
quarter of 2000. Operating income increased 186% from $174,538 in the
first quarter of 1999 to $500,034 in the first quarter of 2000. This
increase is due to an increase in the number of consumers engaging in
medical chats at the
Americasdoctor.com web site, for which the Company has an exclusive
contract to provide medical personnel to provide the chat service.
MARITIME AND TRAVEL ASSISTANCE SERVICES
Revenues increased slightly from $316,970 in the first quarter of 1999 to
$318,891in the first quarter of 2000. Operating expenses increased 27%
from $119,651 in the first quarter of 1999 to $152,228 in the first quarter
of 2000. Operating income decreased from $197,319 in the first quarter
of 1999 to $166,663 in the first quarter of 2000. This 16% decrease in
operating income is due to increased expenses caused by the termination
of the ASA service contract and the costs associated with unlimited
service contracts.
PHARMACEUTICAL KITS AND SERVICES
Revenues increased $32,548 or 27% from 120,834 in the first quarter of
1999 to $153,382 in the first quarter of 2000. This increase is due to an
increase in the volume of kits and services provided sales. Operating
expenses increased $37,782 or 52% from $72,257 in the first quarter of
1999 to $110,039 in the first quarter of 2000. This increase is primarily
due to hiring additional staff.
THE DOCTALK, INC. SERVICE
The launch of the DocTalk, Inc. service occurred in October 1999. Since
then, DocTalk has entered its initial prototype operational phase. The
phasing in of this service has permitted the Company to continuously
fine tune its operational procedures, more precisely identify the
demographics of its customer base and identify additional alliances and
strategic programs to increase its revenue sources. DocTalk generated
revenues of $1,457 and operating expenses of $289,887 in the quarter
ended January 31, 2000. There were no revenues or expenses in the
comparable quarter in fiscal 1999. If business conditions warrant
accelerated expansion of the DocTalk operation, the Company will
explore financing alternatives to provide the necessary funding.
OTHER
Revenues decreased 54% from $24,687 in the first quarter of 1999 to
$11,243 in the first quarter of 2000. Expenses increased 29% from
$13,334 in the first quarter of 1999 to $17,228 in the first quarter of
2000. The net loss of $5,985 in the first quarter of 2000 as compared to a
profit of $11,354 in the first quarter of 1999 was due primarily to start-up
costs associated with the new primary care clinic.
SALARIES AND WAGES
Salaries and wages increased $39,398 or 23% from $170,247 in the first
quarter of 1999 to $209,645 in the first quarter of 2000. This increase is
due to compensation increases and hiring additional personnel
SELLING, GENERAL AND ADMINISTRATIVE
Selling, General and administrative expenses increased 152% from
$240,228 in the first quarter of 1999 to $605,006 in the first quarter of
2000. The increase is primarily due to an increase in the amortization of
deferred investment advisory costs. The amortization was $44,883 in the
first quarter of 1999 compared to $319,189 in the first quarter of 2000.
DEPRECIATION AND AMORTIZATION
Depreciation increased from $26,744 in the first quarter of 1999 to
$44,914 in the first quarter of 2000, an increase of 68%. This increase is
due to the purchase of new computer equipment to support the
AmericasDoctor.com program and furniture and fixtures for the
DocTalk, Inc. program.
EXTRAORDINARY GAIN
In the first quarter of 1999 the Company recorded an extraordinary gain
of $66,149 due to the forgiveness of debt from SACNAS International.
There was no comparable amount in the first quarter of 2000.
INCOME TAX BENEFIT/EXPENSE
The Company did not record an income tax provision or benefit for the
three months ended January 31, 1999 and 2000 due to the net loss for the
period. The Company has provided a valuation allowance related to the
deferred tax asset represented by the net operating losses due to the
uncertainty surrounding the amount of taxable income to be generated in
2000.
LIQUIDITY AND CAPITAL RESOURCES
Cash used by operating activities totaled $450,738 in the first quarter of
2000 compared to cash provided by operations of $37,911 in the first
quarter of 1999. The $450,738 used in operations in the first quarter of
2000 is due to the net loss and an increase in accounts receivable. Capital
expenditures were for computers and equipment related to the new
DocTalk, Inc. service and the Internet chat services. The Company
currently has a $500,000 credit agreement with a bank. At January 31,
2000 there is no outstanding balance. The agreement extends through
October 2000
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 2. Changes in Securities
In January 2000 the Company issued 95,180 shares of common
stock in connection with the exercise of previously recorded
warrants issued to third parties.
Item 3. Defaults from Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders.
NONE
Item 5. Other Information
NONE
Item 6 Exhibits
NONE
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:March 16, 2000 By: /s/ Thomas M. Hall, M.D., M.I.M.
---------------------------------
Thomas M. Hall, M.D., M.I.M.
Chief Executive Officer
Medical Advisory Systems, Inc.
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