-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IVdx8YPp+nexdjYd4V0Vu9fPqsx/w7dXTMVbxvxkVGmyNKWbHoVMykDxw/uadzwE 3xEM8k4d1LAJM8j/U8WtTw== 0000771252-99-000014.txt : 19991021 0000771252-99-000014.hdr.sgml : 19991021 ACCESSION NUMBER: 0000771252-99-000014 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990131 FILED AS OF DATE: 19991020 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDICAL ADVISORY SYSTEMS INC CENTRAL INDEX KEY: 0000771252 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOME HEALTH CARE SERVICES [8082] IRS NUMBER: 521233960 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 001-15177 FILM NUMBER: 99731084 BUSINESS ADDRESS: STREET 1: 8050 SOUTHERN MARYLAND BLVD CITY: OWINGS STATE: MD ZIP: 20736 BUSINESS PHONE: 3018558070 MAIL ADDRESS: STREET 1: 8050 SOUTHERN MARYLAND BLVD CITY: OWINGS STATE: MD ZIP: 20736 10QSB/A 1 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 January 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. 3,849,938 shares of Common Stock ($0.005 par value per share) outstanding at January 31, 1999 INDEX MEDICAL ADVISORY SYSTEMS, INC. PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Balance Sheet - January 31, 1999 and October 31, 1998 Statement of Operations - Three months ended January 31, 1999 and 1998 Statement of Cash Flow - Three months ended January 31, 1999 and 1998 Notes of Condensed Financial Statements: January 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 Sheets October 31, January 31, 1998 1999* -------------------------- Assets Current Cash $ 579,331 $ 228,768 Accounts receivable, less allowance for doubtful accounts of $77,744 and $73,045 907,720 548,873 Inventories 26,745 38,549 Prepaid expenses and other 6,802 21,139 Deferred income taxes 37,015 37,015 ___________ ___________ Total current assets 1,557,613 874,344 Property, plant and equipment, at cost, less accumulated depreciation and amortization 1,015,055 1,096,179 Investments 660,000 980,268 Deferred income taxes 387,739 387,739 ___________ ___________ $3,620,407 $3,338,530 =========== ========== See accompanying summary of accounting policies and notes to consolidated financial statements. * Restated. Medical Advisory Systems, Inc. Consolidated Balance Sheets October 31, January 31, 1998 1999* --------------------------- Liabilities and Stockholders' Equity Current Current maturities of long term debt $315,617 $ 3,185 Current maturities of capital lease obligations - 18,160 Accounts payable and accrued expenses 437,249 301,278 Deferred income 327,565 75,422 --------- --------- Total current liabilities 1,080,431 398,045 --------- --------- Long-term debt 134,069 383,242 Capital lease obligations - 126,594 --------- --------- Total liabilities 1,214,500 907,881 --------- --------- Joint venturers's interest (24,706) - Commitments and Contingencies Stockholders' Equity Common stock; $0.005 par value; 10,000,000 shares authorized; 3,885,878 and 3,915,878 shares issued; 3,819,938 and 3,849,938 shares outstanding 19,430 19,580 Warrants to purchase common stock - 44,883 Additional paid-in capital 3,824,763 3,858,363 Accumulated deficit (1,369,997) (1,448,594) Treasury stock, at cost (65,940 shares) (43,583) (43,583) --------- --------- Total stockholders' equity 2,430,613 2,430,649 --------- --------- $3,620,407 $3,338,530 ========= ========= See accompanying summary of accounting policies and notes to consolidated financial statements. * Restated. Medical Advisory Systems, Inc. Consolidated Statements of Operations Three Months Ended January 31, 1998 1999 - ----------------------------------------------------------------------------- Revenue: Program Services $207,149 $219,295 Assistance Services 274,177 97,675 Pharmaceutical Sales 118,026 120,834 Chat Center Revenue - 815,976 Training Services 15,830 24,687 --------- --------- Total Revenue 615,182 1,278,467 --------- --------- Operating Expenses: Program & Assistance Medical Services 75,213 63,798 Pharmaceutical Cost of Goods 55,709 53,019 Chat Center Medical Services - 590,534 Other Chat Center Costs - 16,446 Cost of Training Services 2,353 5,949 Salaries and Wages 232,782 287,181 Other Selling, General and Administrative 161,408 240,228 Depreciation & Amortization 24,405 26,744 --------- --------- Total Operating Expenses 551,870 1,283,899 --------- --------- Operating (Loss) Income 63,312 (5,432) Other Income/(Expense): Option Revenue - 14,673 Other Income 403 7,695 Interest Income 10,495 5,543 Interest Expense (8,196) (3,026) Other expense (16,431) - --------- --------- Total Other Income/(Expense) (13,729) 24,885 --------- --------- Income (loss before earnings (loss) of affiliate and joint venture and extraordinary item 49,583 19,453 Equity in loss of affiliate - (164,199) Joint venture minority interest (16,930) - --------- --------- Income (loss) before extraordinary item 32,653 (144,746) Extraordinary gain - 66,149 --------- --------- Net income (loss) $32,653 $(78,597) ========= ========= Three Months Ended January 31, 1998 1999* - ------------------------------------------------------------------------------ Basic and diluted earnings $.01 $(.02) (loss) per share Weighted average shares outstanding 3,819,938 3,828,090 See accompanying summary of accounting policies and notes to consolidated financial statements. * Restated. Medical Advisory Systems, Inc. Consolidated Statement of Cash Flows Three Months Ended January 31, 1998 1999* - ------------------------------------------------------------------------------ Cash flows from operating activities: Net income (loss) $ 32,653 $(78,597) Adjustment to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 24,405 26,744 Equity in loss of affiliate - 164,199 Compensation expense for options and warrants - 44,883 Joint venture minority interest 16,930 - (Increase) decrease in: Accounts receivable 277,714 358,847 Inventory 1,729 (11,804) Prepaid expenses and other 8,306 (14,337) Increase (decrease): Accounts payable and accrued expenses (98,171) (199,881) Deferred income (10,684) (252,143) --------- --------- Net cash provided by (used for) operating activities 252,882 37,911 --------- --------- Cash flows from investing activities: Purchase of Investment - (484,467) (Purchase) disposal of property and equipment, net (42,627) 63,002 --------- --------- Net cash provided by (used in) investing activities (42,627) (421,465) --------- --------- Cash Flows from financing activities Proceeds from sale of common stock, net of cost 33,750 Repayment of loans to banks and related parties (573) (759) --------- --------- Net cash provided by (used In) financing activities (573) 32,991 --------- --------- Net increase (decrease) in cash 209,682 (350,563) Cash at beginning of period 729,609 579,331 Cash at end of period $ 939,291 $ 228,768 Supplemental disclosure of Cash Flows information: Cash paid during period for interest $ 4,030 $ 3,107 See accompanying summary of accounting policies and notes to consolidated financial statements. * Restated. 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 three month period ended January 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 there to 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 three months ended January 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 three months ended January 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 January 31, 1999 financial statements include certain adjustments to reflect the Company discontinuing operating ASA. Accordingly, the accompanying consolidated balance sheet at January 31, 1999 and the statement of operations for the three months ended January 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. NOTE D - Restatement As a result of a limited review of its financial statements for the nine months ended July 31, 1999 by its newly retained independent auditors, BDO Seidman, LLP, the Company concluded that it should change its method of accounting for the investment in AmericasDoctor.com and for options and warrants issued to non-employees. Effective November 1, 1998, the Company changed to the equity method of accounting for its investment in AmericasDoctor.com. Application of the equity method requires that the Company record in its financial statements its prorata share of the losses of AmericasDoctor.com for each quarterly reporting period. Previously, the Company accounted for its investment in AmericaDoctor.com using the cost method. In addition effective November 1, 1998, the Company changed its method of accounting for options and warrants issued to non-employees. The Company has recorded the fair value of the options and warrants as an additional expense, over the vesting period, if any, as required by Statement of Financial Accounting Standards No. 123. In one instance, the Company deferred a portion of the fair value of warrants issued to an investment banking firm that was committed to provide investment advisory and investor relations services to the Company for three years. The Company is amortizing these deferred investment advisory fees to expense ratably over three years. The following table summarizes the effect of the restatement on net income and income per share: Quarter Ended January 31, 1999 - --------------------------------------------------------------------- Income as originally reported $ 133,435 Effect of accounting changes (212,032) --------- Restated net loss $ (78,597) --------- Income (loss) per share As originally reported $ .03 Restated $(.02) NOTE E - Subsequent Events - Pro Forma Financial Information The following pro forma condensed balance sheet assumes the transactions described below (the closing of the Private Placement in February, 1999, the sale of the Company's equity interest in Assistance Services of America, Inc., the forgiveness of the balance of the SACNAS International note payable and the Company's acquisition of 295,378 shares of the Company's common stock from SACNAS International in March, 1999) had occurred on January 31, 1999: (1) the issuance of 500,000 shares of the Company's Series A Redeemable Convertible Preferred Stock through a private placement yielding net proceeds of $2,675,000 (the "Private Placement"), (2) the sale of the Company's equity interest in Assistance Services of America, Inc. to SACNAS International for $25,000, (3) the forgiveness by SACNAS International of the note payable in the amount of $250,000, (4) the accrual of $57,000 of interest expense related to the SACNAS International note payable and (5) the Company's acquisition of 295,378 shares of Company common stock from SACNAS International for approximately $117,000. The pro forma condensed balance sheet should be read in conjunction with the notes thereto and the financial statements of the Company. The pro forma condensed balance sheet is not necessarily indicative of what the actual financial position would have been had the transactions occurred at January 31, 1999 nor does it purport to represent the financial position of the Company. MEDICAL ADVISORY SYSTEMS, INC. Pro Forma Balance Sheet January 31, 1999 Historical Pro forma Pro forma (UNAUDITED) Adjustments Balance Sheet Current assets: Cash $ 228,768 (1) $ 2,675,000 $ 2,811,768 (4) (117,000) (2) 25,000 Receivables, net 548,873 548,873 Inventory - Pharmaceuticals 38,549 38,549 Prepaid expenses and other 21,139 21,139 Current deferred tax asset 37,015 37,015 --------- --------- Total current assets 874,344 3,457,344 Property and equipment, net 1,096,179 1,096,179 Other assets: Investments 980,268 (2) (24,507) 955,761 Deferred assets 387,739 - 387,739 --------- --------- --------- TOTAL ASSETS $ 3,338,530 $ 2,558,493 $ 5,897,023 ========= ========= ========= MEDICAL ADVISORY SYSTEMS, INC. Pro Forma Balance Sheet January 31, 1999 Historical Pro forma Pro forma (UNAUDITED) Adjustments Balance Sheet Current liabilities: Current maturities (LT Debt) $ 21,345 $ 21,345 Accounts payable & accrued expenses 301,278 (3) 57,000 358,278 Deferred Income 75,422 75,422 --------- --------- Total current liabilities 398,045 455,045 Notes payable 509,836 (3) (250,000) 259,836 --------- --------- Total Liabilities 907,881 714,881 Shareholders' Equity: Redeemable convertible Preferred stock - (1) 2,675,000 2,675,000 Common stock and additional paid in capital 3,922,826 3,922,826 Accumulated deficit (1,448,594) (2) 25,000 (1,255,101) (2) (24,507) (3) 250,000 (3) (57,000) Treasury stock, at cost (43,583) (4) (117,000) (160,583) ----------- --------- ---------- Total Shareholders' Equity 2,430,649 2,751,493 5,182,142 ----------- --------- ---------- TOTAL LIABILITIES AND EQUITY $3,338,530 $2,558,493 $5,897,023 ========== ========== ========== MEDICAL ADVISORY SYSTEMS, INC. Notes to Pro Forma Unaudited Condensed Balance Sheet as of January 31, 1999 (1) Reflects the issuance of 500,000 shares of Series A redeemable convertible preferred stock through a private placement at $6.00 per share yielding net proceeds of $2,675,000 after offering costs and placement agent fees aggregating $325,000. Each share has a par value of $1.75 per share, pays an eight percent (8%) annual cumulative dividend, payable quarterly, and is redeemable at the option of the Company one year after issuance and once the average daily closing price of the Company's common stock is $15.00 per share for ten (10) consecutive trading days. The preferred stock is also redeemable at the option of the Company at any time three (3) years after issuance at the original price, as adjusted for stock splits and similar events. The preferred stock is convertible at the option of the holder of such shares at any time into one share of the Company's common stock. (2) Reflects the sale of the Company's equity interest in Assistance Services of America, Inc. to SACNAS International for $25,000 less $493 ASA accumulated deficit from previous years. (3) Reflects the forgiveness by SACNAS International of the balance of the Company's $500,000 note payable to SACNAS in the amount of $250,000 and the accrual of $57,000 of interest expense related to the note. (4) Reflects the Company's acquisition of 295,678 shares of the Company's common stock from SACNAS International for $117,000. MEDICAL ADVISORY SYSTEMS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS Restatement of results of Quarter Ended January 31, 1999 As a result of a limited review of its financial statements for the nine months ended July 31, 1999, the Company concluded that it should change its method of accounting for the investment in AmericasDoctor.com and for options and warrants issued to non-employees. Effective November 1, 1998, the Company changed to the equity method of accounting for its investment in AmericasDoctor.com. which requires the Company to record in its financial statements its prorata portion of the losses generated by AmericasDoctor.com for the period. In addition effective November 1, 1998, the Company changed its method of accounting for options and warrants issued to non-employees. The Company has recorded the fair value of the options and warrants issued to nonemployees. The Company has recorded the fair value of options and warrants as an additional expense over the vesting period, if any, as required by generally accepted accounting principles. The effect of the restatement on net income is as follows: The following table summarizes the effect of the restatement on net income and income per share: Quarter Ended January 31, 1999 - --------------------------------------------------------------------------- Income as originally reported $ 133,435 Effect of accounting changes (212,032) ----------- Restated net loss $ (78,597) 1999 Compared to 1998 The first quarter of FY 1999 sales were $1,278,467. First quarter sales of last year were $615,182. Sales for the first quarter reflect deleted business from the sale of ASA (see NOTE-B). Deleting ASA sales from the first quarter of FY 1998, results in sales of $461,680 for comparison to the first quarter of FY 1999. Therefore, sales for the first quarter of FY 1999 comparatively increased by 177%. The increase resulted primarily from chat center revenues, a new business segment launched in the forth quarter of FY 1999. Revenues from Program Services were $219,295 for the first three months of FY 1999 compared to $207,149 for the same period in FY 1998, an increase of 6%. This increase resulted from the stabilization of the size of the U.S. merchant marine fleet, along with expanded marketing efforts. The Company had assistance service revenues of $97,675 during the first three months of FY 1999. First quarter sales of last year were $274,177. Sales for the first quarter reflect deleted business from the sale of ASA (see NOTE-B). Deleting ASA sales from the first quarter of FY 1998, results in sales of $23,615 for comparison to first quarter FY 1999. Sales for the first quarter of FY 1999 comparatively increased by 314%, resulting primarily from increased use of the company as a foreign correspondent for assistance to international travelers. Revenues from pharmaceutical sales were $120,834 for the first quarter of FY 1999 resulting in a flat growth period when compared to 1998. Chat Center revenues totaled $815,976 during the first quarter 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's training program provided revenues of $ 24,687 for the period, a 56% increase compared to training revenues of $ 15,830 in the first quarter of FY 1998, resulting primarily from biannual variation in the training schedule of a major customer. Subsidiary Option and Restructuring Agreement During the first quarter of FY 1998, the Company entered into an agreement with SACNAS International (SACNAS), the 50% shareholder of ASA. The agreement grants SACNAS an option to purchase 100% of the Company's shares in ASA for $2,000,000 during the period January 1, 1998 through December 31, 1999. At the time SACNAS exercises its option, SACNAS shall tender to the Company the 305,378 shares of the Company SACNAS owns. The Company's shares shall be sold by SACNAS to the Company for $122,151 and the proceeds shall be used to offset the $2,000,000 purchase of the Company's ASA shares. The Company has the option to retain 8% of total ASA shares while allowing SACNAS to retain their 305,378 Company shares. If the Company exercises this option, the SACNAS option to purchase the remaining ASA shares shall be reduced to $1,680,000. Provided SACNAS has not exercised the option agreement, beginning January 1, 1998, and at the end of each quarter, SACNAS shall forgive 12.5%, or $62,500, of the $500,000 unsecured loan to the Company along with interest accrued to that date. Any principal loan amount forgiven shall be credited to the option price. On March 11, 1999 the Company and SACNAS concluded a transaction whereby SACNAS purchased the Company's shares in ASA. The results of operations for the first quarter are reflected in the Financial Statements, and a Pro-Forma Balance Sheet reflecting the sale is reported in NOTE-E. Terms of the transaction with SACNAS included the sale of the Company's equity interest in Assistance Services of America, Inc. to SACNAS for $25,000, the forgiveness by SACNAS of a note payable in the amount of $250,000, the accrual of $57,000 of interest expense related to the SACNAS note payable and the Company's acquisition of 295,378 shares of the Company's common stock from SACNAS International for approximately $117,000. MEDICAL ADVISORY SYSTEMS, INC. PART II - OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities None. 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, 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: October 20, 1999 /s/ Thomas M. Hall, M.D., M.I.M. ___________________________________ Thomas M. Hall, M.D., M.I.M. Chief Executive Officer EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 1ST QTR 10QSB/A
5 3-MOS Oct-31-1999 Nov-01-1998 Jan-31-1999 228768 980268 548873 0 38549 874344 1732366 636187 3338530 398045 0 19580 0 0 2411069 3338530 1278467 1303352 53019 1283899 0 0 3026 (78597) 0 (78597) 0 0 0 (78597) (.02) (.02)
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