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
December 31, 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 December 31, 1996, outstanding shares of common stock were
10,844,117.
MEDMASTER SYSTEMS, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information:
Consolidated Condensed Balance Sheets - December 31, 1996
and March 31, 1996
Consolidated Condensed Statements of Operations - Three
Months and Nine Months
Ended December 31, 1996 and 1995
Consolidated Condensed Statements of Cash Flows - Three
Months and Nine Months
Ended December 31, 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
December 31, 1996 March 31, 1996
(Unaudited)
<S> <C> <C>
Current Assets
Cash $65,803 $216,463
Accounts Receivable (net of bad debt allowance of $45,829
and $40,000):
Trade $99,014 $303,121
Other $1,892 $0
Prepaid Expenses $21,147
$20,821
Note Receivable - Related Party $36,461
$46,767
Total Current Assets $224,317 $587,172
Property & Equipment net of
accumulated depreciation of
$221,894 and $207,068 $23,132
$19,597
Other Assets $74,268 $63,867
TOTAL ASSETS $321,717 $670,636
Liabilities & Shareholders' Equity
Current Liabilities
Current Maturities of
Long-Term Debt $0 $0
Accounts Payable $95,298
$54,659
Funds Due To Providers $342,239 $482,761
Accrued Expenses $435,942 $405,010
Total Current Liabilities $873,479
$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) ($3,801,028)
($3,521,060)
Sub-Total ($551,762) ($271,794)
Less: Treasury Stock - -
Stockholders' Equity ($551,762)
($271,794)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $321,717 $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 Nine Months Ended
December 31, December 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Factoring Commissions
and Fees $38,650 $94,648 $139,215
$306,809
Software Fees $9,995 $1,708 $20,554
$6,143
Printing Fees $3,659 $3,265 $20,492
$15,176
Travel Fees $247,252 $168,407 $732,714 $512,488
$299,556 $268,028 $912,975 $840,616
Cost and Expenses
Cost of Software Fees $1,575 $55 $3,354
$0
Cost of Printing Fees $1,632 $1,076
$9,539 $7,363
Cost of Travel Fees $225,835 $155,918 $667,256 $472,425
General & administrative $136,048 $171,776 $464,568
$520,680
Rent - related parties $13,305 $13,305
$39,915 $39,915
Net (recoveries) provision
for credit losses ($8,359) $5,465
($18,263) $8,118
$370,036 $347,595 $1,166,369 $1,048,501
Income (Loss)
from Operations ($70,480) ($79,567) ($253,394)
($207,885)
Other Income (Expenses):
Interest Income -
Related Party $0 $0 $0 $0
Interest Income -
Other $1,437 $4,665 $5,327
$17,564
Dividends $0 $0 $0 $0
Interest Expense ($10,276) ($11,678) ($31,900)
($132,754)
Interest Expense - Related Party $0 $0 $0
($7,656)
Gain (Loss) On Sale Of Securities $0 ($70,045) $0
($70,045)
($8,839) ($77,058) ($26,573) ($192,891)
Income (Loss) Before Provision
for Income Taxes ($79,319) ($156,625) ($279,967)
($400,776)
Income Tax
Expense (Benefit) - - - -
Net Income (Loss) Before
Extraordinary Item ($79,319) ($156,625) ($279,967)
($400,776)
Extraordinary Item - Gain on
Settlement - - - $2,924,875
Net Income (Loss) ($79,319) ($156,625) ($279,967)
$2,524,099
Per Share
Earnings (Loss) ($0.01) ($0.01)
($0.03) $0.23
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)
Nine Months Ended December 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net Gain (Loss) ($279,967)
$2,524,099
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization $14,826
$15,858
Provision for losses on
accounts receivable $0 $0
Changes in assets and liabilities:
Decrease(increase) in
marketable securities $0 $70,045
Decrease in accounts receivable $191,813
$171,977
Decrease(increase) in
prepaid expenses ($326) $2,972
Increase(decrease) in current
maturities of long term debt $0
($1,362,087)
Increase(decrease) in
accounts payable 40,639 ($185,404)
Increase(decrease) in
funds due to providers ($140,522)
$168,909
Increase(decrease) in
accrued expenses $30,932
($1,544,103)
Total adjustments $137,362 ($2,661,833)
Net cash (used) provided by
operating activities ($142,605)
($137,734)
Cash flows from investing activities:
Capital expenditures ($18,361) ($3,250)
Payments received on
note receivable, related party $10,306
$175,903
Net cash provided by (used in)
investing activities ($8,055)
$172,653
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 ($150,660)
$34,919
Cash at beginning of period $216,463 $27,026
Cash at end of period $65,803
$61,945
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $31,900
$27,035
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 December 31, 1996 and the
results of operations for the three months and nine months ended
December 31, 1996 and 1995 and changes in cash flows for the
three months and nine months ended December 31, 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 nine
months ended December 31, 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
Management has been reviewing all options and sources of revenue
available to the Company. Services which, in the past, required
substantial upfront capital, such as factoring, have now been
discontinued. Services, such as providing credit reports,
collection letters and collection services have been pursued on a
fee for service basis with a limited amount of success. Under a
dealership agreement with Financial Computer Services, Inc., the
Company has been marketing computer business software and has had
somewhat promising results. However, management foresees
difficulty in meeting financial obligations if revenues and
cashflow do not improve very soon. The Company has had a going
concern opinion from their auditors since 1988 and management
is seriously evaluating whether there is any viable future for
the Company, whether a bankruptcy should be filed, or if the
Company should be shut down. Additionally, the President of the
Company, David C. Marx, has an employment agreement that expires
on March 31, 1997. As of December 31, 1996, the Company owed Mr.
Marx approximately $410,706 in deferred compensation which is
secured by all assets of the Company. There have been no
discussions as to whether or not Mr. Marx is willing to continue
to defer what is owed him or is willing to continue with the
Company. There is no assurance, that if the Company decides not
to shut down, that it will have any viable future.
Gross transactions (the total amount of sales, including factored
billings which was discontinued during the period, as well as a
portion of income from other operations) decreased $258,951 or
43% and $738,984 or 40% for the three months and nine months
ended December 31, 1996 as compared to the same period in 1995
from $607,167 to $348,216 and from $1,850,041 to $1,111,057,
respectively. Revenues increased $31,528 or 12% and $72,359 or 9%
for the three months and nine months ended December 31, 1996 as
compared to the same period in 1995 from $268,028 to $299,556 and
from $840,616 to $912,975, respectively. Costs and expenses
increased $22,441 or 7% and $117,868 or 11% for the three months
and nine months ended December 31, 1996 as compared to the same
period in 1995 from $347,595 to $370,036 and from $1,048,501 to
$1,166,369, respectively. The Company has tried to redirect its
efforts to generate revenues by focusing on "fee for services
and products". Management had to redirect the focus of the
Company because it did not have the capital resources available
to continue its factoring operation. Services that do not require
the Company to provide upfront cash but, instead, will operate in
a fee for service situation. The Company is an authorized
reseller of TRW credit reports and provides credit reports,
billing services and pre-collection & collection services to a
limited number (less than seventy) of clients.
General and administrative expenses decreased $35,728 or 21% and
decreased $56,112 or 11% for the three months and nine months
ended December 31, 1996 as compared to the same period in 1995
from $171,776 to $136,048 and from $520,680 to $464,568,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital for the nine months ended December
31, 1996 of a negative ($649,162) decreased $293,904 from the
March 31, 1996 balance of a negative ($355,258). The change is
primarily due to the reduction in revenues, the reduction in
accounts receivable and the operating loss that resulted during
the nine 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 to
which any of its property is the subject other than the
following: a dispute exists where a former client claims he is
owed approximately $235,000 by the Company. The Company believes
that the former client owes the Company in excess of any amount
he claims he has coming. There can be no assurance as to the
outcome of this dispute.
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: February 12, 1996 BY____[ SIGNED]____________
David C. Marx
President and
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> MAR-31-1997 MAR-31-1997
<PERIOD-END> DEC-31-1996 DEC-31-1996
<CASH> 65,803 65,803
<SECURITIES> 0 0
<RECEIVABLES> 100,906 100,906
<ALLOWANCES> 45,829 45,829
<INVENTORY> 0 0
<CURRENT-ASSETS> 224,317 224,317
<PP&E> 245,027 245,027
<DEPRECIATION> 221,894 221,894
<TOTAL-ASSETS> 321,717 321,717
<CURRENT-LIABILITIES> 873,479 873,479
<BONDS> 0 0
<COMMON> 108,441 108,441
0 0
0 0
<OTHER-SE> (660,203) (660,203)
<TOTAL-LIABILITY-AND-EQUITY> 321,717 321,717
<SALES> 299,556 912,975
<TOTAL-REVENUES> 299,556 912,975
<CGS> 140,994 680,149
<TOTAL-COSTS> 370,036 1,166,369
<OTHER-EXPENSES> 8,839 26,573
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 10,276 31,900
<INCOME-PRETAX> (79,319) (279,967)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (79,319) (279,967)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (79,319) (279,967)
<EPS-PRIMARY> (.01) (.03)
<EPS-DILUTED> (.01) (.03)
</TABLE>
