<PAGE>

                                   FORM 10-QSB
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

(Mark One)
[x]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934 [FEE REQUIRED]
         For the Quarter ended January 31, 2002

                                ----------------

                                       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
   incorporation or organization)                          Identification No.)

8050 Southern Maryland Blvd., Owings, MD                         20736
----------------------------------------                       ----------
(Address of principal executive offices)                       (Zip Code)

                                 (301) 855-8070
                                 --------------

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: $908,903

The aggregate market value of the voting stock held by non-affiliates as of
March 8, 2002 was $33,586,995

Common Stock, $.005 par value, 5,167,230 Shares of Common Stock Outstanding as
of January 31, 2002

<PAGE>
PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                                  MEDICAL ADVISORY SYSTEMS, INC.

                                                     CONSOLIDATED BALANCE SHEETS

================================================================================


                                                       October 31,   JANUARY 31,
                                                           2001         2002
--------------------------------------------------------------------------------

                    ASSETS

                    CURRENT

   Cash and cash equivalents                            $1,388,826   $  763,693
   Accounts receivable, less allowance for doubtful
     accounts of $137,620 and $105,000                     429,105      268,961
   Inventories                                              52,778       62,604
   Prepaid expenses and other (Note 5)                     263,118      382,250
--------------------------------------------------------------------------------

              TOTAL CURRENT ASSETS                       2,133,827    1,477,508

PROPERTY AND EQUIPMENT, at cost, less
   accumulated depreciation and amortization             1,573,006    1,483,689

INVESTMENT IN AFFILIATES (Note 2)                          953,750      953,750
--------------------------------------------------------------------------------


                                                        $4,660,583   $3,914,947
================================================================================
                    See accompanying summary of accounting policies and notes to
                                              consolidated financial statements.

                                       2
<PAGE>

<TABLE>
                                                             MEDICAL ADVISORY SYSTEMS, INC.

                                                                CONSOLIDATED BALANCE SHEETS
<CAPTION>
===========================================================================================

                                                              October 31,       JANUARY 31,
                                                                 2001              2002
-------------------------------------------------------------------------------------------
<S>                                                         <C>               <C>

                LIABILITIES AND STOCKHOLDERS' EQUITY

                               CURRENT
   Current maturities of long-term debt                     $      4,103      $    125,350
   Current maturities of capital lease obligations                32,241            33,330
   Accounts payable and accrued expenses                         668,854           238,441
   Deferred income                                                21,051            26,991
-------------------------------------------------------------------------------------------

                      TOTAL CURRENT LIABILITIES                  726,249           424,112

Long-term debt                                                   122,234                --
Capital lease obligations                                         38,748            27,268
-------------------------------------------------------------------------------------------

                          TOTAL LIABILITIES                      887,231           451,380
-------------------------------------------------------------------------------------------

                    COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (Notes 4, 5 and 6)
   Common stock; $.005 par value; 10,000,000 shares
     authorized; 5,161,230 and 5,167,230 shares issued;
     5,111,230 and 5,117,230 shares outstanding                   25,805            25,835
   Additional paid-in capital                                 14,654,032        14,657,002
   Accumulated deficit                                       (10,862,902)      (11,175,687)
   Treasury stock, at cost (50,000 shares)                       (43,583)          (43,583)
-------------------------------------------------------------------------------------------

                     TOTAL STOCKHOLDERS' EQUITY                3,773,352         3,463,567
-------------------------------------------------------------------------------------------

                                                            $  4,660,583      $  3,914,947
===========================================================================================
                               See accompanying summary of accounting policies and notes to
                                                         consolidated financial statements.

                                             3
</TABLE>
<PAGE>

<TABLE>
                                                      MEDICAL ADVISORY SYSTEMS, INC.

                                               CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
====================================================================================

THREE MONTHS ENDED JANUARY 31,                              2001            2002
------------------------------------------------------------------------------------
<S>                                                    <C>              <C>

REVENUE:

24/7 medical response and assistance services          $   990,303      $   668,708
ASP and WEB hosting services                               252,235           14,836
Interactive medical information services                   204,908            7,588
Pharmaceutical kits and equipment                          162,723          169,666
Other services                                              14,374           48,105
------------------------------------------------------------------------------------

                          TOTAL REVENUE                  1,624,543          908,903
------------------------------------------------------------------------------------

OPERATING EXPENSES:

24/7 medical response and assistance services              797,023          519,036
ASP and WEB hosting services                                 7,425           14,467
Interactive medical information services                   185,741            6,194
Pharmaceutical kits and equipment                          102,449          115,555
Other services                                              13,461           31,462
Salaries and wages                                         273,290          254,167
Other selling, general and administrative (Note 4)         362,998          193,706
Depreciation & amortization                                204,098           57,636
Impairment of long-lived assets                                 --           31,681
------------------------------------------------------------------------------------

                    TOTAL OPERATING EXPENSES             1,946,485        1,223,904
------------------------------------------------------------------------------------

                         OPERATING LOSS                   (321,942)        (315,001)

OTHER INCOME/(EXPENSE):

Other income                                                    26               --
Interest income                                             31,774            3,975
Interest expense                                           (15,151)          (1,759)
------------------------------------------------------------------------------------

                  TOTAL OTHER INCOME/(EXPENSE)              16,649            2,216
------------------------------------------------------------------------------------

                            NET LOSS                   $  (305,293)     $  (312,785)
====================================================================================

Basic and diluted loss per share                       $     (0.06)     $     (0.06)

Weighted average shares outstanding                      4,889,129        4,889,329
====================================================================================
                        See accompanying summary of accounting policies and notes to
                                                  consolidated financial statements.

                                         4
</TABLE>
<PAGE>

<TABLE>
                                                                MEDICAL ADVISORY SYSTEMS, INC.

                                                         CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
==============================================================================================

THREE MONTHS ENDED JANUARY 31,                                        2001            2002
----------------------------------------------------------------------------------------------
<S>                                                              <C>              <C>

                CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                      $  (305,293)     $  (312,785)
   Adjustment to reconcile net loss
     to net cash provided by (used in) operating activities:
     Depreciation and amortization                                   204,098           57,636
     Provision for doubtful accounts                                 (33,014)         (32,620)
     Compensation expense for options and warrants                    34,042           16,625
     Impairment of long lived assets                                      --           31,681
CHANGES IN ASSETS AND LIABILITIES:
     Accounts receivable                                              55,491          192,764
     Inventory                                                        (2,192)          (9,826)
     Prepaid expenses and other                                       22,630         (135,757)
     Accounts payable and accrued expenses                           159,325         (430,413)
     Deferred income                                                  (2,416)           5,940
----------------------------------------------------------------------------------------------

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                  132,671         (616,755)
----------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Investment in equity affiliate                                   (159,000)              --
   Purchase of property and equipment                               (313,119)              --
----------------------------------------------------------------------------------------------

                NET CASH USED IN INVESTING ACTIVITIES               (472,119)              --
----------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Repayment of loans to banks and related parties                    (7,984)         (11,378)
   Exercise of stock options                                              --            3,000
----------------------------------------------------------------------------------------------

                NET CASH USED IN FINANCING ACTIVITIES                 (7,984)          (8,378)
----------------------------------------------------------------------------------------------

   Net decrease in cash                                             (347,432)        (625,133)

   Cash at beginning of period                                     2,615,842        1,388,826
----------------------------------------------------------------------------------------------

   Cash at end of the period                                     $ 2,268,410      $   763,693
==============================================================================================
                                  See accompanying summary of accounting policies and notes to
                                                            consolidated financial statements.

                                              5
</TABLE>
<PAGE>

                                                  MEDICAL ADVISORY SYSTEMS, INC.

                                                  SUMMARY OF ACCOUNTING POLICIES

================================================================================

BASIS OF PRESENTATION      The consolidated financial statements include the
                           accounts of Medical Advisory Systems, Inc. (MAS or
                           the Company) and its wholly-owned subsidiaries,
                           Travelers Angel Assistance, Inc., MAS Laboratories,
                           Inc., Doc-Talk, LLC, and TLC., Inc. Significant
                           intercompany accounts and transactions have been
                           eliminated in consolidation.

                           The Company has a 2.3% ownership interest in
                           AmericasDoctor.com. The Company accounts for this
                           investment using the cost method (See Note 2).

                           In May 2000, the Company purchased a 12% ownership
                           interest in CICP, the holding company for CORIS Group
                           International ("CORIS"). The Company accounts for
                           this investment using the cost method (See Note 2).

                           In December 2000, the Company purchased a 15%
                           ownership interest in Jaspin Interactive, Inc. The
                           Company accounts for this investment using the cost
                           method (See Note 2).


BUSINESS OPERATIONS        The Company provides interactive medical information
                           services via "chats" over the internet and telephone,
                           provides telemedicine services, training, and
                           pharmaceuticals to the worldwide maritime industry
                           and other individuals or entities located in remote
                           locations worldwide, operates as an Application
                           Service Provider (ASP), provides WEB hosting
                           services, and operates an out-patient medical clinic.
                           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 and services
                           through various methods of distribution. In 2001, the
                           majority of the Company's revenues resulted from
                           providing 24/7 medical response and assistance
                           services. In October 2001, the Company announced a
                           new travel insurance product directed toward American
                           tourists traveling outside the United States. While
                           the profitability of delivering medical response and
                           assistance services increased in 2001, the Company is
                           unsure what the impact will ultimately be on the
                           future profitability of travel assistance services
                           given the significant decline in travel after the
                           attacks on the United States in September 2001.

                                       6
<PAGE>

                                                  MEDICAL ADVISORY SYSTEMS, INC.

                                                  SUMMARY OF ACCOUNTING POLICIES

================================================================================

                           In September 2001, AmericasDoctor.com cancelled its
                           contract with the Company to provide internet "chats"
                           with doctors located in its call center which is
                           staffed 24 hours-a-day (see Note 2). The Company has
                           the ability to provide the internet "chat" for new
                           customers.

                           As discussed in Note 8, in November 2001 the Board of
                           Directors approved an agreement and plan of merger
                           pursuant to which the Company would acquire the
                           Advanced Wireless Group of Applied Digital Solutions,
                           Inc. ("ADS"). As a result of this transaction, ADS
                           will own 82.1% of the Company's outstanding common
                           stock and will be able to control the board of
                           directors. If the merger is ultimately completed, a
                           new senior management team has been identified by ADS
                           to direct the Company. The Company cannot predict
                           what changes, if any, the new management team will
                           make in the existing business plan.

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          Financial instruments and related items that
CREDIT RISK                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
                           receive les in determining its allowance for doubtful
                           accounts


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. The Company had
                           temporary investments of $162,659 on January 31,
                           2002.


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.

                                       7
<PAGE>

                                                  MEDICAL ADVISORY SYSTEMS, INC.

                                                  SUMMARY OF ACCOUNTING POLICIES

================================================================================

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        Deferred investment advisory and public relations
ADVISORY COSTS             costs consist of the estimated fair value of warrants
                           issued to certain third parties for public and
                           investor relations services to be rendered over one
                           and two year periods. These amounts are being
                           amortized on a straight line basis over the lives of
                           the service agreements.


IMPAIRMENT OF LONG-LIVED   Long-lived assets and certain identifiable
ASSETS                     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.

                                       8
<PAGE>

                                                  MEDICAL ADVISORY SYSTEMS, INC.

                                                  SUMMARY OF ACCOUNTING POLICIES

================================================================================

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 have 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
                           calculation of diluted earnings per share because
                           they are anti-dilutive.


COMPREHENSIVE              Statement of Financial Accounting Standards No. 130,
INCOME                     "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 previously
                           adopted SFAS 130 and has no items of comprehensive
                           income to report.


RECENT ACCOUNTING          In June 2001, the FASB issued Statement of Financial
PRONOUNCEMENTS             Accounting Standards No. 141, "Business Combinations"
                           (SFAS No. 141). SFAS No. 141 changed the accounting
                           for business combinations, requiring that all
                           business combinations be accounted for using the
                           purchase method and that intangible assets be
                           recognized as assets apart from goodwill if they
                           arise from contractual or other legal rights, or if
                           they are separable or capable of being separated from
                           the acquired entity and sold, transferred, licensed,
                           rented or exchanged. SFAS No. 141 is effective for
                           all business combinations initiated after June 30,
                           2001.

                                       9
<PAGE>

                                                  MEDICAL ADVISORY SYSTEMS, INC.

                                                  SUMMARY OF ACCOUNTING POLICIES

================================================================================

                           In June 2001, the FASB issued Statement of Financial
                           Standards No. 142, "Accounting for Goodwill" ("SFAS
                           142"). SFAS 142 establishes accounting standards for
                           existing goodwill related to purchase business
                           combinations. Under the Statement, the Company would
                           discontinue the periodic amortization of goodwill
                           effective with adoption of the new Statement. Also,
                           the Company would have to test any remaining goodwill
                           for possible impairment within six months of adopting
                           the Statement, and periodically thereafter, based on
                           new valuation criteria set forth in the Statement.
                           Further, the Statement has new criteria for purchase
                           price allocation. The Statement becomes effective
                           January 1, 2002. If the proposed merger is completed,
                           the transaction would be subject to the requirements
                           of SFAS 141 and 142.

                           In August 2001, the FASB approved Statement of
                           Financial Accounting Standards No. 144 "Accounting
                           for the Impairment or Disposal of Long-Lived Assets"
                           ("SFAS 144"). SFAS 144 supersedes SFAS 121
                           "Accounting for Impairment of Long-Lived Assets and
                           for Long Lived Assets to be Disposed Of" and the
                           accounting and reporting provisions of the Accounting
                           Principles Board Opinion No. 30, "Reporting the
                           Results of Operations - Reporting the Effects of
                           Disposal of a Segment of a Business, and
                           Extraordinary, Unusual and Infrequently Occurring
                           Events and Transactions." SFAS 144 established a
                           single accounting model, based on the framework
                           established in SFAS 121. SFAS 144 retains the
                           requirements of SFAS 121 to recognize an impairment
                           loss only if the carrying amount of a long-lived
                           asset is not recoverable from its undiscounted cash
                           flows and measure an impairment loss as the
                           difference between the carrying amount and fair value
                           of the asset. SFAS 144 excludes goodwill from its
                           scope, describes a probability weighted cash flow
                           estimation approach, and established a "primary
                           asset" approach to determine the cash flow estimation
                           period for groups of assets and liabilities. SFAS 144
                           is effective for fiscal years beginning after
                           December 15, 2001 and interim periods within those
                           fiscal years, with early application encouraged. The
                           Company believes that adoption of SFAS 144 will not
                           have a material impact on its financial position or
                           results of operations.


RECLASSIFICATIONS          Certain prior year balances have been reclassified to
                           conform with the current year presentation.

                                       10
<PAGE>

                                                  MEDICAL ADVISORY SYSTEMS, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

1.      PROPERTY AND       Property and equipment consists of the following:
        EQUIPMENT

<TABLE>
<CAPTION>
                                                                October 31,     JANUARY 31,      Estimated
                                                                       2001            2002   Useful lives
                           --------------------------------------------------------------------------------
<S>                        <C>                                 <C>             <C>             <C>
                           Land                                $     65,078    $     65,078
                           Buildings and improvement              1,660,703       1,660,703    10-20 years
                           Furniture, fixtures and equipment      1,036,028         989,454      3-5 years
                           --------------------------------------------------------------------------------

                                                                  2,761,809       2,715,235

                           Less: Accumulated depreciation
                                  and amortization                1,188,803       1,231,546
                           --------------------------------------------------------------------------------

                                                                 $1,573,006      $1,483,689
                           ================================================================================
</TABLE>

2.      INVESTMENT IN      Investment in affiliates consists of the following:
        AFFILIATES

<TABLE>
<CAPTION>
                                                                             October 31,      JANUARY 31,
                                                                                    2001             2002
                           -------------------------------------------------------------------------------
<S>                        <C>                                                  <C>              <C>
                           AmericasDoctor.com                                   $131,000         $131,000

                           CORIS                                                 513,750          513,750

                           Jaspin Interactive                                    309,000          309,000
                           -------------------------------------------------------------------------------

                                                                                $953,750         $953,750
                           ===============================================================================
</TABLE>

                           The Company initially recorded its investment in
                           AmericasDoctor.com using the equity method and the
                           excess of the investment over the Company's share of
                           AmericasDoctor.com's net assets was recorded as
                           goodwill, which the Company periodically reviews for
                           impairment, and was assigned a five-year life. The
                           investment balance at January 31, 2002 represented
                           the remaining balance of goodwill. On October 31,
                           1999, the Company's ownership interest was reduced to
                           5.3% and further reduced to 2.3% on January 6, 2000
                           which it remains at January 31, 2002. Effective
                           November 1, 1999, the Company began to account for
                           its investment using the cost method.

                           In the fourth quarter of 2001, Americasdoctor.com
                           notified the Company that it was terminating its
                           contract for services. This notification caused the
                           Company to review the carrying value of this
                           investment. The Company analyzed current financial
                           information, discussed liquidity concerns with senior

                                       11
<PAGE>

                                                  MEDICAL ADVISORY SYSTEMS, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

                           management and ultimately determined that the
                           carrying value of the investment was impaired.
                           Accordingly, the Company recorded a write-down of the
                           investment of $508,171. The Company continues to
                           review the carrying value of this investment as
                           current financial information becomes available.

                           In May 2000, the Company purchased 12% of the
                           outstanding common stock of CORIS of Paris, France
                           for $400,000 in cash and 10,000 shares of its common
                           stock with a fair value of $113,750 for a total
                           investment of $513,750. CORIS provides medical and
                           non-medical travel assistance and insurance claims
                           services to the travel industry and insurance clients
                           through an independent network of 24-hour call
                           centers in 37 countries. The investment agreement
                           with CORIS calls for the development of international
                           internet medical "chat" services and foreign language
                           chat services in the U.S, using CORIS 24-hour call
                           centers to provide infrastructure and personnel. It
                           also calls for CORIS to serve as the international
                           arm of MAS' application service provider ("ASP")
                           operations. This investment has been accounted for
                           using the cost method.

                           In December 2000, the Company purchased a 15%
                           ownership interest in Jaspin Interactive, Inc.,
                           ("Jaspin") a privately held company in Dulles,
                           Virginia. The Company paid $159,000 and issued 40,000
                           shares of the Company's common stock in exchange for
                           shares of Jaspin. Jaspin is an Internet and Online
                           business solutions provider and software development
                           company. Under the investment agreement, the Company
                           will have the right to use Jaspin's proprietary
                           software and will provide ASP and WEB hosting
                           services to Jaspin. This investment has been
                           accounted for using the cost method.


3.      RELATED PARTY      Hall & Associates, P.A., Hall & AmDoc Associates,
        TRANSACTIONS       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 professiona1 liability insurance. During
                           the three months ended January 31, 2001 and 2002, 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 $71,912,
                           respectively, in fees and professional liability
                           insurance premiums. At January 31, 2002, total
                           payments due to these affiliates were $225. There
                           were no amounts payable to these affiliates at
                           January 31, 2001.

                                       12
<PAGE>

                                                  MEDICAL ADVISORY SYSTEMS, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

4.      STOCK WARRANTS     In March 2001, the Company issued 35,000 options to
                           purchase its common stock to an outside consulting
                           firm as consideration for providing marketing
                           services for one year. The holder of the warrants may
                           purchase 35,000 common shares at $3.90 per share.
                           These options vest ratably over a three-year period.
                           The Company determined the estimated aggregate fair
                           value of the options on the date of grant to be
                           $66,500 based on the Black-Scholes valuation model.
                           The Company recorded the $66,500 as prepaid marketing
                           cost and is amortizing this cost to expense over 12
                           months, the term of the agreement.

                           There were 240,000 warrants outstanding at January
                           31, 2001 and 2002.


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 below 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 1,000,000
                           common shares for exercise of these stock options.

                           The following table summarizes the changes in options
                           outstanding and the related prices for the shares of
                           the Company's common stock issued to key employees of
                           the Company for the nine months ended January 31,
                           2002:

<TABLE>
<CAPTION>
                                                                                      Exercise
                                                                Numbers of           Price Per
                                                                    Shares               Share
                           --------------------------------------------------------------------
<S>                        <C>                                   <C>           <C>
                           Options outstanding October 31,
                              2001                               1,527,820     $0.50 to $10.00

                           Options exercised                        (6,000)              $0.50
                           --------------------------------------------------------------------

                           Options outstanding
                              January 31, 2002                   1,521,820     $0.50 to $10.00
                           --------------------------------------------------------------------

                           Weighted average price of
                              options outstanding                                        $4.96
                           ====================================================================
</TABLE>

                                       13
<PAGE>

                                                  MEDICAL ADVISORY SYSTEMS, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

                           If the Company had elected to recognize compensation
                           based on the fair value at the grant dates for
                           options issued under the plan described above,
                           consistent with the method prescribed by SFAS No.
                           123, net income (loss) applicable to common
                           shareholders and earning (loss) per share would have
                           been changed to the pro forma amounts indicated
                           below:

<TABLE>
<CAPTION>
                           THREE MONTHS ENDED JANUARY 31,                    2001           2002
                           -------------------------------------------------------------------------
<S>                        <C>                                            <C>             <C>
                           Net income (loss) applicable to common
                              shareholders:
                              as reported                                 $(305,293)      $(312,785)
                              pro forma                                   $(337,144)      $(451,725)
                           Basic and diluted earnings (loss) per share:
                              as reported                                 $   (0.06)      $   (0.06)
                              as pro forma                                $   (0.07)      $   (0.09)
</TABLE>

6.    INCOME TAXES         The Company has estimated its annual effective tax
                           rate at 0% due to the uncertainty over the level of
                           earnings in 2002. Also, the Company has net operating
                           loss carry-forwards 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 2002.


7.    OPERATING SEGMENTS   The Company has four operating segments: Interactive
                           medical information services, 24/7 medical response
                           and assistance services, Pharmaceutical kits and
                           equipment and ASP and WEB hosting services. The
                           Interactive medical information services segment
                           provides 24 hour a day medical information to the
                           public via the internet as well as via the telephone
                           to individuals, groups and associations. The 24/7
                           medical response and assistance services segment
                           provides medical advice to ocean-going vessels and
                           medical travel assistance services to multi- national
                           corporations, the international travel industry and
                           health maintenance organizations. The Pharmaceutical
                           kits and equipment segment provides customized
                           pharmaceutical and medical supply kits to the
                           maritime and aviation industries. In the ASP and WEB
                           hosting services segment, the Company functions as a
                           provider of software application services and WEB
                           hosting services. The Company evaluates performance
                           based on the operating results of the respective
                           segments. The accounting policies of the segments are
                           the same as those described in the summary of
                           accounting policies.

                                       14
<PAGE>

                                                  MEDICAL ADVISORY SYSTEMS, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

Three months ended                                      Segment          Total
January 31, 2002                        Revenues   Profit (loss)        Assets
-------------------------------------------------------------------------------

24/7 medical response &
   assistance services                  $668,708      $ 132,959     $1,112,071
ASP & WEB                                 14,836            369        322,243
Interactive medical information
   services                                7,588        (54,495)       754,149
Pharmaceutical kits and
   equipment                             169,666         54,111        131,219
Other services                            48,105          2,465         12,881
Unallocated corporate expenses                 -       (450,410)             -
Unallocated assets                             -              -      1,582,384
-------------------------------------------------------------------------------

                                        $908,903      $(315,001)    $3,914,947
===============================================================================

Three months ended                                      Segment          Total
January 31, 2001                        Revenues  Profit (loss)         Assets
-------------------------------------------------------------------------------

24/7 medical response &
   assistance services                $  990,303      $ 193,280     $1,190,992
ASP & WEB                                252,235        244,810      2,888,230
Interactive medical information
   services                              204,908         19,167      1,460,961
Pharmaceutical kits and
   equipment                             162,723         60,274         92,691
Other services                            14,374            913         11,600
Unallocated corporate expenses                 -       (840,386)             -
Unallocated assets                             -              -      2,963,186
-------------------------------------------------------------------------------

                                      $1,624,543      $(321,942)    $8,607,660
===============================================================================

                                       15
<PAGE>

                                                  MEDICAL ADVISORY SYSTEMS, INC.

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

8.      PROPOSED MERGER    In November 2001, the Board of Directors approved an
                           agreement and plan of merger pursuant to which the
                           Company would acquire the Advanced Wireless Group of
                           ADS, an affiliate and beneficial owner of 16.6% of
                           the Company's common stock. As consideration for the
                           merger, the Company will issue 18,750,000 shares of
                           common stock to ADS. As a result, ADS will own 82.1%
                           of the Company's outstanding shares of common stock
                           and will be able to control the Company's board of
                           directors. The merger will be accounted for using the
                           purchase method of accounting. Given ADS's ownership
                           of the Company at the completion of the merger, ADS
                           will be considered to be the acquirer for accounting
                           purposes. Accordingly, this transaction will be
                           accounted for as a reverse acquisition of the Company
                           by ADS. The agreement is subject to the approval of
                           IBM Credit Corporation, a secured lender of ADS and
                           the Company's stockholders and other closing
                           conditions.

                                       16
<PAGE>

                                                   MEDICAL ADVISORY SYSTEMS, INC

MANAGEMENT DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

================================================================================

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATION

FORWARD-LOOKING INFORMATION

This Form 10-QSB contains certain "forward-looking statements" that represent
Medical Advisory Systems, Inc. ("MAS") (AMEX: "DOC"), expectations or beliefs,
including, but not limited to, statements concerning industry performance and
MAS's operations, performance, financial condition, plans, growth and
strategies. Statements contained in this Form 10-QSB that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the generality of the foregoing, words such as "may," "will," "expect,"
"anticipate," "intend," "could," "estimate," "continue" or the negative or other
variations thereof or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, certain of which are beyond MAS's control. Actual
results may also differ materially depending on a variety of important factors,
many of which are beyond the control of MAS.

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 first quarter ended January 31, 2001 and 2002 financial
statement and notes thereto, included elsewhere in this Form 10-QSB.


OVERVIEW

During the quarter ended January 31 ("fiscal quarter") 2002, MAS continued with
its efforts to diversify its sources of revenue in order to reduce its
dependence on any one segment as a primary generator of revenue. MAS continues
to explore strategic alliances and investments in entities that can maximize the
profitability of its 24/7 physician-staffed medical call center and the recently
completed ASP facility.

In May 2000, MAS purchased 12% of the outstanding common stock of CORIS for
$400,000 in cash and 10,000 in shares of its common stock with a fair value of
$113,750 for a total investment of $513,750. CORIS provides medical and
non-medical travel assistance and insurance claims services to the travel
industry and insurance clients through an independent network of 24-hour call
centers in 37 countries. The investment agreement with CORIS calls for the
development of international internet medical chat services and foreign language
chat services in the U.S., using CORIS's 24-hour call centers to provide
infrastructure and personnel. It also calls for CORIS to serve as the
international arm of MAS's ASP operations. This investment has been accounted
for using the cost method.

In December 2000, MAS purchased 15.0% of the issued and outstanding common
shares of Jaspin Interactive, Inc., a software and web development company
headquartered in Dulles, Virginia, for $159,000 in cash and 40,000 restricted
shares of MAS's common stock. The alliance provides MAS with the right to use
Jaspin Interactive's proprietary ChatCentre and RoomCentre software, as well as
benefit from upgrades and technical support. MAS uses this software to support
its medical and informational chat services. This alliance did not generate any
revenue or expense for the quarter ended January 31, 2002.

In February 2001, Digital Angel Corporation, a wholly owned subsidiary of
Applied Digital Solutions, Inc, purchased a 16.6% interest in MAS from Mr.
Ronald Pickett, MAS's chairman, his two minor children and Dr. Thomas Hall,
MAS's Chief Executive Officer. Through this transaction, Digital Angel will have
use of MAS's secure, FDA-compliant ASP computer facility for management of
sensitive data and a 24/7 physician-staffed medical call center. MAS and Digital
Angel are currently developing various business and revenue models for the
on-going development and launch of a joint product offering.

On September 6, 2001, MAS announced a new traveler assistance and insurance
service, "Travelers Angel Protection Plan." The product was offered in limited
release in November 2001. This program is being brought to the public by
Travelers Angel Assistance, Inc., a wholly owned subsidiary of MAS. The
Travelers Angel Protection Plan product has a number of protection and
assistance benefits that are beneficial to both U.S. travelers and travel

                                       17
<PAGE>

                                                   MEDICAL ADVISORY SYSTEMS, INC

MANAGEMENT DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

================================================================================

agents. The benefits of this program include: trip cancellation/interruption
insurance, air flight accident insurance, baggage loss insurance, 24/7 telephone
access to U.S. licensed physicians and medical repatriation benefits. An
unrelated third party insurance company is underwriting the insurance component
of the product. Initially, an existing network of travel agents will market the
product. MAS expects to generate sales of the product during fiscal year 2002.
This product did not produce any revenue or expense in the quarter ended January
31, 2002.

In November 2001, the Board of Directors approved an agreement and plan of
merger pursuant to which MAS would acquire the Advanced Wireless Group of ADS,
an affiliate and beneficial owner of 16.6% of the MAS common stock. As
consideration for the merger, the Company will issue 18,750,000 shares of MAS
common stock to ADS. As a result, ADS will own 82.1% of the outstanding shares
of MAS common stock and will be able to control the MAS board of directors and
decide all matters submitted to MAS stockholders for approval. The merger will
be accounted for using the purchase method of accounting as a reverse
acquisition of MAS by ADS. The agreement is subject to the approval of IBM
Credit Corporation, a secured lender of ADS and the MAS's stockholders and other
closing conditions. The Securities and Exchange Commission approved proxy
materials, concerning the proposed merger with ADS, for mailing on February 14,
2002. MAS will hold a special meeting of stockholders on March 18, 2002 to
ratify the Agreement and Plan of Merger.


RESULTS OF OPERATIONS

NET LOSS

The net loss for the first quarter of 2002 was $312,785 compared to a net loss
of $305,293 for the same period in fiscal year 2001. The loss of the eRT
contract and AmericasDoctor.com program was primarily responsible for the
decline in revenues for the first quarter of fiscal 2002 as compared to the same
period in fiscal 2001. However, this reduction in revenue was nearly offset by a
corresponding reduction in operating expenses that resulted from a decrease in
salaries and wages, non-cash management fees and depreciation and amortization
expenses.

24/7 MEDICAL RESPONSE AND ASSISTANCE SERVICES

Revenues decreased 32.4% from $990,000 for the first quarter of fiscal year 2001
to $669,000 for the same period in fiscal year 2002. Operating expenses
decreased 34.9% from $797,000 for the first quarter of fiscal year 2001 to
$519,000 for the same period in fiscal year 2002. For that same period, gross
profits decreased 31.1% from $193,000 in fiscal year 2001 to $133,000 in fiscal
year 2002. The decrease in revenue is attributable to an overall decrease in
travel assistance cases, resulting from the significant decline in travel since
the attacks on September 11, 2001. The corresponding decrease in operating
expenses is attributable to a decrease in the third party expenses that MAS pays
in connection with the management of travel assistance cases, ultimately billed
back to customers. The decrease in gross profit is due primarily to an increase
in costs of clinic services program and salaries and wages.

ASP AND WEB HOSTING SERVICES

Revenues decreased 94.0% from $252,000 for the first quarter of fiscal year 2001
to $15,000 for the same period in fiscal year 2002. Operating expenses increased
100.0% from $7,000 for the first quarter in fiscal year 2001 to $14,000 for the
same period in fiscal year 2002. Gross profits decreased from $245,000 for the
first quarter fiscal 2001 to a break-even for the same period in fiscal 2002.
Revenues decreased due to a loss of service revenue from eResearch Technologies
(eRT), MAS's primary customer for this service. During the third quarter of
fiscal year 2001, eRT insisted on renegotiating the monthly fee under the
service agreement originally executed in March 2000. Ultimately, the service
contract was cancelled in the fourth quarter, as the parties were unable to
agree on a revised fee structure. As a result, MAS did not recognize any revenue
from eRT in the first quarter of fiscal year 2002. Consequently, MAS, based on a
further review of undiscounted cash flows, including the estimated fair market
value of certain long-lived assets, recorded an impairment charge of
approximately $32,000 in the first quarter of fiscal year 2002.

                                       18
<PAGE>

                                                   MEDICAL ADVISORY SYSTEMS, INC

MANAGEMENT DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

================================================================================

INTERACTIVE MEDICAL INFORMATION SERVICES

Revenues decreased 96.6% from $205,000 in the first quarter of fiscal year 2001
to $7,000 for the same period in fiscal year 2002. Operating expenses decreased
96.8% from $186,000 in the first quarter of fiscal year 2001 to $6,000 for the
same period in fiscal year 2002. Gross profits were decreased 384.2% from
$19,000 for the first quarter in fiscal year 2001 to a loss of $54,000 for the
same period in fiscal year 2002. This segment includes the real-time internet
chat service (DocChat) and the phone-based DocTalk service. Nearly all revenue
and expenses in this segment relate to the DocChat program. MAS introduced its
real time online internet chat service in the fourth quarter of 1998. MAS
provided this product under contract exclusively to AmericasDoctor.com. Upon the
introduction of this service, MAS experienced growth in the volume of its real
time online internet chats. Beginning in the second quarter of fiscal year 2000,
the volume of real time online internet chats began to decline due primarily to
the elimination, by AmericasDoctor.com, of free unlimited consumer access to the
chat feature of the AmericasDoctor.com website. The volume of real time online
internet chats continued to decline from that time until all chats ceased when
AmericasDoctor.com cancelled the call center agreement in late September 2001
after negotiations to continue the agreement failed. As AmericasDoctor.com was
the primary customer under this program, MAS does not expect to generate any
significant revenue or expenses from real time internet chat services in 2002.

MAS recently launched Travelers Angel, its new travel assistance product. This
product includes an Interactive Medical Information service component (DocTalk)
in every policy sold. Therefore, revenue in this segment is expected to grow
based on the success of the Travelers Angel program.

PHARMACEUTICAL KITS AND SERVICES

Revenues increased 4.3% from $163,000 for the first quarter of fiscal year 2001
to $170,000 for the same period in fiscal year 2002. Operating expenses
increased by 12.6% from $103,000 for the first quarter of fiscal year 2001 to
$116,000 for the same period in fiscal year 2002. For that same period gross
profits decreased by 10% from $60,000 in fiscal year 2001 to $54,000 in fiscal
year 2002. The continued growth of the revenue in the pharmaceutical segment is
the result of an expanding customer base. However, the disparity between the
increase in revenues and expenses, in this segment, is primarily the result of
an ordinary increase in salaries and wages.

OTHER

Revenues increased 242.9% from $14,000 for the first quarter of 2001 to $48,000
for the first quarter of 2002. Operating expenses increased 138.5% from $13,000
for the first quarter of 2001 to $31,000 for the first quarter of 2002. Gross
profits increased from $1,000 for the first quarter of 2001 to $2,000 for the
same period in fiscal year 2002. This segment consists of the training program
and the primary laser care clinic. The increase in gross profits is due
primarily to an increase in the number of participants in the training programs.

SALARIES AND WAGES

Salaries and wages decreased 7.0% from $273,000 for the first quarter of fiscal
2001 to $254,000 for the same period in fiscal year 2002. The decrease is due to
reduction in staffing and contract personnel related to the cancellation of the
eRT\ASP contract.

                                       19
<PAGE>

                                                   MEDICAL ADVISORY SYSTEMS, INC

MANAGEMENT DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

================================================================================

SELLING, GENERAL AND ADMINISTRATIVE

Selling, general and administrative expenses decreased 46.6% from $363,000 for
the first quarter of fiscal year 2001 to $194,000 for the same period in fiscal
year 2002. This is due primarily to a reduction of investor relations expenses
and non-cash professional compensation expense related to options and warrants
issued to third parties in exchange for services.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization decreased 71.6% from $204,000 for the first
quarter of fiscal year 2001 to $58,000 for the same period in fiscal year 2002.
This reduction is due to the elimination of recurring depreciation and
amortization caused by an impairment of long-lived assets recorded in the fourth
quarter of fiscal 2001.

OTHER INCOME AND EXPENSE

Interest income decreased 87.5% from $32,000 in the first quarter of fiscal 2001
to $4,000 for that same period in fiscal 2002. This was primarily due to a
reduction in MAS's cash accounts, which are MAS's primary investment vehicle.
Interest expense also decreased from $15,000 for the first quarter of fiscal
year 2001 to $2,000 for the same period in fiscal year 2002.

INCOME TAX PROVISION

MAS did not record an income tax provision or benefit in the first quarter of
fiscal year 2001 nor 2002 due to continuing losses. MAS maintains a valuation
allowance for its entire deferred tax assets due to the uncertainty related to
the generation of taxable income in fiscal year 2002.

LIQUIDITY AND CAPITAL RESOURCES

Cash used in operating activities totaled $617,000 during the first quarter of
fiscal year 2002, and was due primarily to the net loss of $313,000 as well as a
net outflow of $377,000 from the changes in working capital. The significant
changes in working capital were a decrease of $430,000 in accounts payable and
accrued expenses in addition to an increase of $136,000 in prepaid expenses
offset by a decrease of $193,000 in accounts receivable. There was no investment
during this period but cash outflows from financing activities was $8,000, due
primarily to principal debt repayments.

MAS currently has a $500,000 credit facility agreement with a bank. At January
31, 2002 there was no outstanding balance. The agreement extends through March
2002 and an annual renewal is expected. MAS believes that current levels of cash
($763,693 at January 31, 2002) together with cash from operations and its
existing credit facilities will be sufficient to meet its working capital
requirements for the next twelve months.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, the FASB issued Statement of Financial Accounting Standards No.
141, "Business Combinations" (SFAS No. 141). SFAS No. 141 changed the accounting
for business combinations, requiring that all business combinations be accounted
for using the purchase method and that intangible assets be recognized as assets
apart from goodwill if they arise from contractual or other legal rights, or if
they are separable or capable of being separated from the acquired entity and
sold, transferred, licensed, rented or exchanged. SFAS No. 141 is effective for
all business combinations initiated after June 30, 2001.

                                       20
<PAGE>

                                                   MEDICAL ADVISORY SYSTEMS, INC

MANAGEMENT DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

================================================================================

In June 2001, the FASB issued Statement of Financial Standards No. 142,
"Accounting for Goodwill" (SFAS 142). SFAS 142 establishes accounting standards
for existing goodwill related to purchase business combinations. Under SFAS 142,
MAS will discontinue the periodic amortization of goodwill effective with
adoption of the SFAS 142. Also, MAS will have to test any remaining goodwill for
possible impairment within six months of adopting SFAS 142, and periodically
thereafter, based on new valuation criteria set forth in the statement. Further,
SFAS 142 has new criteria for purchase price allocation. SFAS 142 became
effective January 1, 2002. If the proposed merger is completed, the transaction
would be subject to the requirements of SFAS 141 and 142.

In August 2001, the FASB approved Statement on Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS
144). SFAS 144 supersedes SFAS No. 121, "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" and the accounting and
reporting provisions of the Accounting Principles Board Opinion No 30,
"Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." SFAS 144 establishes a single accounting model, based
on the framework established in SFAS 121, for long-lived assets to be disposed
of by sale and resolved significant implementation issues related to SFAS 121.
SFAS 144 retains the requirements of SFAS 121 to recognize an impairment loss
only if the carrying amount of a long-lived asset is not recoverable from its
undiscounted cash flows and measure an impairment loss as the difference between
the carrying amount and fair value of the asset. SFAS 144 excludes goodwill from
its scope, describes a probability-weighted cash flow estimation approach, and
establishes a "primary-asset" approach to determine the cash flow estimation
period for groups of assets and liabilities. SFAS 144 is effective for fiscal
years beginning after December 15, 2001, and interim periods within those fiscal
years, with early application encouraged. MAS believes the adoption of SFAS 144
will not have a material impact on its financial position or results of
operations.


PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Silva, et al. v. Customized Services Administrators, Incorporated, dba CSA
Travel Protection, Inc. et al., No. CV798528 (Santa Clara County Superior Court)

On May 29, 2001, Janet Silva, individually and as Guardian AD LITEM for Jonathan
Silva, a minor, and the Estate of Clarence William Silva, Jr. (collectively,
"Plaintiffs") filed suit against Customized Services Administrators,
Incorporated ("CSA"), Pricesmart, Inc. ("Pricesmart"), Commercial Union
Insurance Company ("Commercial Union"), CGU Insurance Group, and the Company
(collectively the "Defendants") in the Superior Court of the State of California
in and for the County of Santa Clara. The allegations of the complaint arise
from a vacation guarantee insurance policy (the "Insurance Contract") allegedly
purchased by Plaintiffs from Defendants on March 6, 2000. The complaint alleges,
among other things, that Defendants breached the Insurance Contract, defrauded
Plaintiffs, acted in bad faith, engaged in deceptive and unlawful business
practices, resulting in the wrongful death of Clarence William Silva, Jr. (the
"Deceased") and the intentional infliction of emotional distress on Plaintiffs.
The complaint seeks the cost of funeral and burial expenses of the Deceased and
amounts constituting the loss of financial support of the Deceased, general
damages, attorney's fees and costs, and exemplary damages.

CSA has filed a cross-claim against the Company alleging that the Company should
be held liable for any liability that CSA may have to Plaintiffs. The Company
has denied the allegations of the complaint and the CSA cross-claim and is
vigorously contesting all aspects of this action.

                                       21
<PAGE>

                                                   MEDICAL ADVISORY SYSTEMS, INC

MANAGEMENT DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

================================================================================

ITEM 2. CHANGE 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
                         NONE

ITEM 6. EXHIBITS
                         NONE

                                       22