-----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, LX2kZLTBS4w9pKuqL/TkxDtHSwlmrLXoNmuBoQNkqizstPOZ1yIhVcbfSZYe7ouM x05RWUuDGeMsT/GEWFClaw== 0000771252-99-000016.txt : 19991021 0000771252-99-000016.hdr.sgml : 19991021 ACCESSION NUMBER: 0000771252-99-000016 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990731 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: 99731093 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 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 Sheets October 31, July 31, 1998 1999* - ------------------------------------------------------------------------------ Assets Current Cash $ 579,331 $ 1,246,235 Accounts receivable, less allowance for doubtful accounts of $77,744 and $73,045 907,720 388,085 Inventories 26,745 38,204 Prepaid expenses and other 6,802 8,875 Deferred income taxes 37,015 37,015 ----------- ----------- Total current assets 1,557,613 1,718,414 Property, plant and equipment, at cost, less accumulated depreciation and amortization 1,015,055 1,071,819 Investments 660,000 1,266,865 Deferred investment advisory fees - 517,205 Deferred income taxes 387,739 387,739 ----------- ----------- $ 3,620,407 $ 4,962,042 See accompanying summary of accounting policies and notes to consolidated financial statements. * Restated. Medical Advisory Systems, Inc. Consolidated Balance Sheets October 31, July 31, 1998 1999* - ------------------------------------------------------------------------------ Liabilities and Stockholders' Equity Current Current maturities of long term debt $ 315,617 $ 3,323 Current maturities of capital lease obligations - 25,769 Accounts payable and accrued expenses 437,249 286,835 Deferred income 327,565 21,517 ----------- ----------- Total current liabilities 1,080,431 337,444 ----------- ----------- Long-term debt 134,069 131,534 Capital lease obligations - 107,029 ----------- ----------- Total liabilities 1,214,500 576,007 ----------- ----------- Joint venturers's interest (24,706) - Commitments and Contingencies Stockholders' Equity (Notes 5 and 6) Convertible preferred stock, $1.75 par value, 1,000,000 shares authorized, none outstanding - - Common stock; $0.005 par value; 10,000,000 shares authorized; 3,885,878 and 4,772,378 shares issued; 3,819,938 and 4,411,060 shares outstanding 19,430 23,862 Warrants to purchase common stock - 1,089,671 Additional paid-in capital 3,824,763 6,640,539 Accumulated deficit (1,369,997) (3,208,191) Treasury stock,at cost(65,940 and 361,318 shares) (43,583) (159,846) ----------- ----------- Total stockholders' equity 2,430,613 4,386,035 ----------- ----------- $ 3,620,407 $ 4,962,042 =========== =========== See accompanying summary of accounting policies and notes to consolidated financial statements. * Restated. Medical Advisory Systems, Inc. Consolidated Statements of Operations Three Months Ended July 31, 1998 1999* - ------------------------------------------------------------------------------ Revenue: Program Services $ 206,980 $ 238,196 Assistance Services 246,993 79,085 Pharmaceutical Sales 120,921 128,589 Chat Center Revenue - 1,249,920 Training Services 18,435 19,475 ----------- ----------- Total Revenue 593,329 1,715,265 ----------- ----------- Operating Expenses: Program & Assistance Medical Services 81,284 55,440 Pharmaceutical Cost of Goods 53,196 69,781 Chat Center Medical Services - 913,592 Other Chat Center Costs - 19,296 Cost of Training Services 6,590 8,216 Salaries and Wages 246,359 295,841 Other Selling, General and Administrative 256,575 573,297 Depreciation & Amortization 25,405 28,923 ----------- ----------- Total Operating Expenses 669,409 1,964,386 ----------- ----------- Operating (Loss) (76,080) (249,121) Other Income/(Expense): Option Revenue 66,149 - Other Income - 2,638 Interest Income 13,044 15,654 Interest Expense (3,232) (2,872) ----------- ----------- Total Other Income/(Expense) 75,961 15,420 ----------- ----------- Income (loss before earnings (loss) of affiliate and joint venture minority interest (119) (233,701) Equity in loss of affiliate - (1,136,160) Joint venture minority interest 34,890 - ----------- ----------- Net income (loss) before extraordinary item $ 34,771 $(1,369,861) =========== =========== See accompanying summary of accounting policieand notes to consolidated financial statements. *Restated. Medical Advisory Systems, Inc. Consolidated Statements of Operations Three Months Ended July 31, 1998 1999* - ------------------------------------------------------------------------------ Basic and diluted earnings $ .01 $(.31) (loss) per share Weighted average shares outstanding 3,885,878 4,397,010 See accompanying summary of accounting policies and notes to consolidated financial statements. * Restated. Medical Advisory Systems, Inc. Consolidated Statements of Operations Nine Months Ended July 31, 1998 1999* - ------------------------------------------------------------------------------ Revenue: Program Services $ 600,211 $ 702,186 Assistance Services 789,807 427,598 Pharmaceutical Sales 375,823 357,142 Chat Center Revenue - 2,802,057 Training Services 83,259 57,217 ---------- ----------- Total Revenue 1,849,100 4,346,200 ---------- ----------- Operating Expenses: Program & Assistance Medical Services 241,795 174,895 Pharmaceutical Cost of Goods 190,827 179,380 Chat Center Medical Services - 2,051,864 Other Chat Center Costs - 65,233 Cost of Training Services 19,472 18,802 Salaries and Wages 726,052 915,028 Other Selling, General and Administrative 660,190 1,197,298 Depreciation & Amortization 74,216 77,119 ---------- ----------- Total Operating Expenses 1,912,552 4,679,619 ---------- ----------- Operating Loss (63,452) (333,419) Other Income/(Expense): Option Revenue 132,299 - Other Income 62,532 11,258 Gain on sale of joint venture investment - 62,468 Interest Income 45,624 37,895 Interest Expense (13,803) (72,910) ---------- ----------- Total Other Income/(Expense) 226,652 38,711 ---------- ----------- Income (loss) before earnings (loss) of affiliate and joint venture and extraordinary item 163,200 (294,708) Equity in loss of affiliate - (1,825,359) Joint venture minority interest 34,025 - ---------- ----------- Income (loss)before extraordinary item 197,225 (2,120,067) Extraordinary gain - 330,822 ---------- ----------- Net income (loss) $ 197,225 $(1,789,245) ========== =========== See accompanying summary of accounting policies and notes to consolidated financial statements. * Restated. Medical Advisory Systems, Inc. Consolidated Statements of Operations Nine Months Ended July 31, 1998 1999* - ------------------------------------------------------------------------------ Basic and diluted earnings (loss) per share $0.05 $(.41) Weighted average shares outstanding 3,885,878 4,397,010 See accompanying summary of accounting policies and notes to consolidated financial statements. * Restated. Medical Advisory Systems, Inc. Consolidated Statements of Cash Flows Nine Months Ended July 31, 1998 1999* - ------------------------------------------------------------------------------ Cash flows from operating activities: Net income (loss) $ 197,225 $(1,789,245) Adjustment to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 74,119 77,119 Equity in loss of affiliate - 1,825,359 Compensation expense for options and warrants - 447,862 (Increase) decrease in: Accounts receivable 521,642 267,207 Inventory (1,057) (11,459) Prepaid expenses and other 4,912 (16,669) Increase (decrease): Accounts payable and accrued expenses (286,599) 44,312 Deferred income (34,372) 7,886 Other - (22,801) ---------- ----------- Net cash provided by (used for) operating activities 441,942 829,571 ---------- ----------- Cash flows from investing activities: Purchase of Investment 8,499 (2,432,019) (Purchase) disposal of property and equipment, net (126,213) (69,108) ---------- ----------- Net cash provided by (used in) investing activities (117,714) (2,501,127) ---------- ----------- Cash Flows from financing activities Proceeds from sale of preferred stock, net of cost - 2,706,661 Proceeds from sale of common stock, net of cost - 112,047 Dividends Paid - preferred stock - (48,950) Purchase of treasury stock - (116,263) Repayment of loans to banks and related parties (126,824) (315,035) ---------- ----------- Net cash provided by (used In) financing activities (126,824) 2,338,460 ---------- ----------- Net increase in cash 197,404 666,904 Cash at beginning of period 729,609 579,331 Cash at end of the period $ 927,013 $ 1,246,235 Supplemental disclosure of Cash Flows information: Cash paid during period for interest $ 14,778 $ 64,696 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 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. 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 Period Ended July 31, 1999 July 31, 1999 - ------------------------------------------------------------------------------ Income as originally reported $ 87,242 $ 512,430 Effect of accounting changes (1,457,103) (2,301,675) ----------- ----------- Restated net loss $(1,369,861) $(1,789,245) =========== =========== Income (loss) per share As originally reported $ .02 $ .12 Restated $(.31) $(.41) MEDICAL ADVISORY SYSTEMS, INC. PART I. FINANCIAL INFORMATION Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 AmericasDictor.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 Period Ended July 31, 1999 July 31, 1999 - -------------------------------------------------------------------------- Income as originally reported $ 87,242 $ 512,430 Effect of accounting changes (1,457,103) (2,301,675) ----------- ----------- Restated net loss $(1,369,861) $(1,789,245) 1999 Compared to 1998 - --------------------- For the first nine months of FY 1999 sales were $4,346,200. For the first nine months of last year sales were $1,849,100. 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 $1,498,603 for comparison to the first nine months of FY 1999. Therefore, sales for the first nine months of FY 1999 comparatively increased by 190%. For the three months ended July 31, 1999 sales where $1,715,265 compared to the same period of FY 1998 with sales of $593,329. Deleting ASA sales from the third quarter of 1998 resulted in sales of $505,336, an increase of 239%. 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: 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 3RD QTR 10QSB
5 3-MOS Oct-31-1999 May-01-1999 Jul-31-1999 1246235 1266865 388085 0 38204 1718414 1736786 664967 4962042 337444 0 23862 0 0 4362173 4962042 1715265 1733557 69781 1964386 1139032 0 2872 (1369861) 0 (1369861) 0 0 0 (1369861) (.31) (.31)
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