SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended
September 30, 1996
Commission File Number
0-14757
MEDMASTER SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State of incorporation)
No. 87-0400472
(I.R.S. Employer Identification Number)
2072 North Main
Logan Utah
(Address of principal executive offices)
84341
(Zip Code)
801-753-4101
Registrant's telephone number, including area code
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
requirementsfor the past 90 days:
Yes X No
As of September 30, 1996, outstanding shares of common stock
were 10,844,117.
MEDMASTER SYSTEMS, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information:
Consolidated Condensed Balance Sheets - September 30,
1996 and March 31, 1996
Consolidated Condensed Statements of Operations - Three
Months and Six Months
Ended September 30, 1996 and 1995
Consolidated Condensed Statements of Cash Flows - Three
Months and Six Months
Ended September 30, 1996 and 1995
Notes to Consolidated Condensed Financial Statements
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 Upon Senior Securities
Item 4. Submission Of Matters To A Vote Of Security
Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8 - K
Signatures
MEDMASTER SYSTEMS, INC. AND SUBSIDIARIES
<TABLE>
Consolidated Condensed Balance Sheets
(Unaudited)
<CAPTION>
Assets
September 30, 1996 March 31,
1996
(Unaudited)
<S> <C> <C>
Current Assets
Cash $210,049 $216,463
Factor Receivables (net of bad debt allowance of
$45,736 and $40,000):
Trade $126,403 $303,121
Other $1,902 $0
Prepaid Expenses $22,383 $20,821
Note Receivable - Related Party $40,387 $46,767
Total Current Assets $401,124 $587,172
Property & Equipment net of
accumulated depreciation of
$217,555 and $207,068 $27,472 $19,597
Other Assets $71,668 $63,867
TOTAL ASSETS $500,264 $670,636
Liabilities & Shareholders' Equity
Current Liabilities
Current Maturities of
Long-Term Debt $0 $0
Accounts Payable $84,199 $54,659
Funds Due To Providers $467,588 $482,761
Accrued Expenses $420,928 $405,010
Total Current Liabilities $972,715
$942,430
Long-Term Debt less
current maturities - -
Shareholders' Equity
Common Stock - $.01 par value;
authorized - 30,000,000 shares;
issued - 10,844,117 shares.
Preferred Stock - $.01 par value;
authorized - 500,000 shares;
none issued and outstanding. $108,441 $108,441
Additional Paid-in Capital $3,140,825 $3,140,825
Retained (deficit) ($3,721,717) ($3,521,060)
Sub-Total ($472,451) ($271,794)
Less: Treasury Stock - -
Stockholders' Equity ($472,451) ($271,794)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $500,264 $670,636
See accompanying notes to consolidated condensed financial
statements.
</TABLE>
MEDMASTER SYSTEMS, INC. AND SUBSIDIARIES
<TABLE>
Consolidated Condensed Statements of Operations
<CAPTION>
(Unaudited)
Three Months Ended Six Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Revenues:
Factoring Commissions
and Fees $31,643 $105,085 $103,634 $212,161
Computer Software $6,541 $2,109 $8,780 $4,490
Printing $4,804 $2,826 $8,926 $5,624
Travel $22,651 $10,861 $52,879 $27,574
$65,639 $120,881 $174,219 $249,849
General and Administrative Expenses:
Related Parties $13,305 $13,305 $26,610 $26,610
Bad Debt $0 $0 $0 $0
Other $164,299 $163,887 $330,523 $351,557
$177,604 $177,192 $357,133 $378,167
Income (Loss)
from Operations ($111,965) ($56,311) ($182,914) ($128,318)
Other Income (Expenses):
Interest Income -
Related Party $0 $0 $0 $0
Interest Income -
Other $2,145 $7,378 $3,890 $12,899
Dividends $0 $0 $0 $0
Interest Expense ($11,418) ($64,935) ($21,624) ($128,732)
($9,273) ($57,557) ($17,734) ($115,833)
Income (Loss) Before Provision
for Income Taxes ($121,238) ($113,868) ($200,648) ($244,151)
Income Tax
Expense (Benefit) - - - -
Net Income (Loss) Before
Extraordinary Item ($121,238) ($113,868) ($200,648) ($244,151)
Extraordinary Item - Gain on
Settlement - $2,924,875 - $2,924,875
Net Income (Loss) ($121,238) $2,811,007 ($200,648) $2,680,724
Per Share
Earnings (Loss) ($0.01) $0.26 ($0.02) $0.25
Weighted Average
Number of Common Shares
Outstanding 10,844,117 10,844,117 10,844,117 10,844,117
See accompanying notes to consolidated condensed financial
statements.
</TABLE>
MEDMASTER SYSTEMS, INC. AND SUBSIDIARIES
<TABLE>
Consolidated Condensed Statements of Cash Flows
<CAPTION>
(Unaudited)
Six Months Ended September 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net Income (Loss) ($200,648) $2,680,724
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization $4,982 $10,249
Provision for losses on
accounts receivable $0 $0
Changes in assets and liabilities:
Decrease(increase) in
marketable securities $0 $0
Decrease in accounts receivable $172,511 $86,721
Decrease(increase) in
prepaid expenses ($1,562) $4,858
Increase(decrease) in current
maturities of long term debt $0 ($1,362,087)
Increase(decrease) in
accounts payable 29,540 ($187,890)
Increase(decrease) in
demand reserve deposits ($15,173) $197,847
Increase(decrease) in
accrued expenses $15,918 ($1,452,921)
Total adjustments $206,216 ($2,703,223)
Net cash (used) provided by
operating activities $5,568 ($22,499)
Cash flows from investing activities:
Capital expenditures ($18,362) ($3,787)
Payments received on
note receivable, related party $6,380 $170,337
Net cash provided by (used in)
investing activities ($11,982) $166,550
Cash flows from financing activities:
Principal payments on long term debt $0 $0
Net cash used in financing activities $0 $0
Net increase(decrease) in cash ($6,414) $144,051
Cash at beginning of period $216,463 $27,026
Cash at end of period $210,049 $171,077
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $21,624 $16,378
See notes to consolidated financial statements.
</TABLE>
MEDMASTER SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1 - In the opinion of the Company, the accompanying
unaudited
consolidated condensed financial statements contain all
adjustments
(consisting of only normal recurring accruals) necessary
to present
fairly the financial position as of September 30, 1996
and the results
of operations for the three months and six months ended
September 30, 1996 and 1995 and changes in cash flows for
the six months ended September 30, 1996
and 1995. The consolidated condensed financial statements
should be read in conjunction with the Company's audited
consolidated financial statements for the year ending March
31, 1996.
Note 2 - The results of operations for the three months and
six months ended September 30, 1996 are not necessarily
indicative of the results to be expected for the full year.
MEDMASTER SYSTEMS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Company management has worked on improving the Company's
financial condition and future by providing more services
for fees; less factoring & financing; and considered areas
of focus other than Health Care given that industry's
uncertain future. Management is reviewing all options and
sources of revenue available to the Company at this time and
believes that a re-direction of the Company focus is
imperative to provide a viable future for the Company. There
is no plan to discontinue all of the services the Company
has provided in the past. However, some services which
require substantial upfront capital, such as factoring, will
be discontinued. Services, such as providing credit reports,
collection letters and collection services will be pursued
on a fee for service basis. In addition, the Company is
considering the opportunities that are available for its'
printing and travel services. There can be no assurance that
the Company will be successful in these efforts. Gross
transactions (the total amount of sales, including billings
submitted by Health Care Providers during the period, as
well as a portion of income from
other operations) decreased $229,550 or 38% and $480,033 or
39% for the three months and six months ended September 30,
1996 as compared to the same period in 1995 from $601,767 to
$372,217 and from $1,242,874 to $762,841, respectively. Net
revenues
decreased $55,242 or 46% and $75,630 or 30% for the three
months and six months ended September 30, 1996 as compared
to the same period in 1995 from $120,881 to $65,639 and from
$249,849 to $174,219, respectively. These decreases are a
result of the Company
discontinuing to provide some of the services that have been
provided in the past and redirecting the efforts of the
company to generate revenues by focusing on "fee for
services". These services do not require the Company to
provide upfront cash to its clients but, instead, will
operate in a fee for service situation. Consequently, the
Company has become a TRW authorized reseller of credit
reports and is providing credit reports, billing services
and pre-collection & collection services to clients.
Although this direction will initially result in a decrease
in revenues, management has determined that it is in the
best interest of the Company.
General and administrative expenses increased $412 or less
than one-half percent and decreased $21,034 or 6% for the
three months and six months ended September 30, 1996 as
compared to the same period in 1995 from $177,192 to
$177,604 and from $378,167 to $357,133, respectively.
Management will continue to focus on controlling expenses
and increasing revenues in an effort to become profitable.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital for the six months ended
September 30, 1996 of a negative $(571,591) decreased
$216,333 from the March 31, 1996 balance of a negative
$(355,258). The change is primarily due to the reduction in
revenues and the operating loss that resulted during the six
month period.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
NONE. There are no pending legal proceedings outside of the
normal
course of business to which the Company is a party or of
which any of
its property is the subject.
Item 2. CHANGES IN SECURITIES
NONE.
Item 3. DEFAULTS UPON SENIOR SECURITIES
NONE.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE.
Item 5. OTHER INFORMATION
NONE.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
NONE.
SIGNATURES
Pursuant to the requirements of Section 13 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.
MEDMASTER SYSTEMS, INC. AND SUBSIDIARIES
Date: November 14, 1996 BY____[ SIGNED]____________
David C. Marx
President and
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> MAR-31-1997 MAR-31-1997
<PERIOD-END> SEP-30-1996 SEP-30-1996
<CASH> 210,049 210,049
<SECURITIES> 0 0
<RECEIVABLES> 214,428 214,428
<ALLOWANCES> 45,736 40,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 401,124 401,124
<PP&E> 245,027 245,027
<DEPRECIATION> 217,555 217,555
<TOTAL-ASSETS> 500,264 500,264
<CURRENT-LIABILITIES> 972,715 972,715
<BONDS> 0 0
<COMMON> 108,441 108,441
0 0
0 0
<OTHER-SE> (580,892) (580,892)
<TOTAL-LIABILITY-AND-EQUITY> 500,264 500,264
<SALES> 306,323 625,407
<TOTAL-REVENUES> 306,323 625,407
<CGS> 240,684 451,188
<TOTAL-COSTS> 240,684 451,188
<OTHER-EXPENSES> 177,604 357,133
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9,273 17,734
<INCOME-PRETAX> (121,238) (200,648)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (121,238) (200,648)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (121,238) (200,648)
<EPS-PRIMARY> (.01) (.02)
<EPS-DILUTED> (.01) (.02)
</TABLE>
