INNOVATIVE MEDICAL SERVICES
1725 GILLESPIE WAY
EL CAJON, CALIFORNIA 92020
(619) 596-8600
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PROXY STATEMENT
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held January 10, 1998
TO THE SHAREHOLDERS OF INNOVATIVE MEDICAL SERVICES
NOTICE HEREBY IS GIVEN that the Annual Meeting of Shareholders of
INNOVATIVE MEDICAL SERVICES, a California corporation (the "Company"), will
be held at the Sheraton San Diego Hotel and Marina, 1380 Harbor Island Dr.,
San Diego, CA, 92101, on January 10, 1998, at 11:00 a.m., Pacific Standard
Time, and at any and all adjournments thereof, for the purpose of
considering and acting upon the following Proposals:
Proposal No. 1. ELECTION OF DIRECTORS
This Annual Meeting is called as provided for by California law and the
Company's by-laws.
Only holders of the outstanding Common Stock of the Company of record at
the close of business on November 14, 1997 will be entitled to notice of
and to vote at the Meeting or at any adjournment or adjournments thereof.
All shareholders, whether or not they expect to attend the Annual Meeting
of Shareholders in person, are urged to sign and date the enclosed Proxy
and return it promptly in the enclosed postage-paid envelope which requires
no additional postage if mailed in the United States. The giving of a
proxy will not affect your right to vote in person if you attend the
Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
DENNIS ATCHLEY
CORPORATE SECRETARY
El Cajon, California
November 24, 1997
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INNOVATIVE MEDICAL SERVICES
1725 GILLESPIE WAY
EL CAJON, CALIFORNIA 92020
(619) 596-8600
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PROXY STATEMENT
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ANNUAL MEETING OF SHAREHOLDERS
To be Held January 10, 1998
GENERAL INFORMATION
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The enclosed Proxy is solicited by and on behalf of the Board of Directors
of INNOVATIVE MEDICAL SERVICES, a California corporation (the "Company"),
for use at the Company's Annual Meeting of Shareholders to be held at the
Sheraton San Diego Hotel and Marina, 1380 Harbor Island Dr., San Diego, CA,
on the 10th day of January, 1998, at 11:00 a.m., Pacific Standard Time, and
at any adjournment thereof. It is anticipated that this Proxy Statement
and the accompanying Proxy will be mailed to the Company's shareholders on
or before December 8, 1997.
Any person signing and returning the enclosed Proxy may revoke it at any
time before it is voted by giving written notice of such revocation to the
Company, or by voting in person at the Meeting. The expense of soliciting
proxies, including the cost of preparing, assembling and mailing this proxy
material to shareholders, will be borne by the Company. It is anticipated
that solicitations of proxies for the Meeting will be made only by use of
the mails; however, the Company may use the services of its Directors,
Officers and employees to solicit proxies personally or by telephone
without additional salary or compensation to them. Brokerage houses,
custodians, nominees and fiduciaries will be requested to forward the proxy
soliciting materials to the beneficial owners of the Company's shares held
of record by such persons, and the Company will reimburse such persons for
their reasonable out-of-pocket expenses incurred by them in that
connection.
All shares represented by valid proxies will be voted in accordance
therewith at the Meeting. Shares not voting as a result of a proxy marked
to abstain will be counted as part of total shares voting in order to
determine whether or not a quorum has been achieved at the Meeting. Shares
registered in the name of a broker-dealer or similar institution for
beneficial owners to whom the broker-dealer distributed notice of the
Annual Meeting and proxy information and which such beneficial owners have
not returned proxies or otherwise instructed the broker-dealer as to voting
of their shares, will be counted as part of the total shares voting in
order to determine whether or not a quorum has been achieved at the
Meeting. Abstaining proxies and broker-dealer non-votes will not be
counted as part of the vote on any business at the Meeting on which the
shareholder has abstained.
The Company's Annual Report to Shareholders for the fiscal year ended July
31, 1997, has been previously mailed or is being mailed simultaneously to
the Company's shareholders, but does not constitute part of these proxy
soliciting materials.
SHARES OUTSTANDING AND VOTING RIGHTS
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All voting rights are vested exclusively in the holders of the Company's
Common Stock with each common share entitled to one vote. Only
shareholders of record at the close of business on November 14, 1997, are
entitled to notice of and to vote at the Meeting or any adjournment
thereof. On November 14, 1997, the Company had 3,532,851 shares of its
Common Stock outstanding, each of which is entitled to one vote on all
matters to be voted upon at the Meeting, including the election of
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Directors. No fractional shares are presently outstanding. A majority of
the Company's outstanding voting stock represented in person or by proxy
shall constitute a quorum at the Meeting. The affirmative vote of a
majority of the votes cast, providing a quorum is present, is necessary to
elect the Directors. Cumulative voting in the election of Directors is
permitted.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND OF MANAGEMENT
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The following table sets forth persons known to the Company as beneficially
owning more than five percent (5%) of the outstanding shares of the
Registrant.
Name and Address of Common Stock Percentage of Shares
Beneficial Owner Ownership Outstanding
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Thomas E. Smith 618,307 17.50%
9408 Lightwood Cove
Austin, TX 78748
The following table sets forth the number of shares of the Company's Common
Stock beneficially owned as of July 31, 1997, by individual directors and
executive officers and by all directors and executive officers of the
Company as a group.
Name and Address of Common Stock Percentage of Shares
Beneficial Owner Ownership Outstanding
--------------------- --------------- --------------------
Norman Anderson 51,334 1.45%
1725 Gillespie Way
El Cajon, CA 92020
Dennis Atchley 22,000 0.62%
1725 Gillespie Way
El Cajon, CA 92020
Gary Brownell 32,334 0.92%
1725 Gillespie Way
El Cajon, CA 92020
Michael L. Krall 618,307 17.50%
1725 Gillespie Way
El Cajon, CA 92020
Eugene Peiser 6,334 0.18%
1725 Gillespie Way
El Cajon, CA 92020
Patrick Galuska 35,334 1.00%
8137 S. Downing St.
Littleton, CO 80122
Dennis Brovarone 13,334 0.38%
11249 W. 103rd Dr.
Westminster, CO 80021
Officers and Directors
as a group (7 Persons) 778,977 22.05%
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PROPOSAL NO. 1. ELECTION AS DIRECTORS
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The Articles presently provide for a Board of Directors of no fewer than
one (1) member. The number of Directors of the Company has been fixed at
six (6) by the Company's Board of Directors. The Company's Board of
Directors recommends the election of Directors of the six (6) nominees
listed below to hold office until the next Annual Meeting of Shareholders
and until their successors are elected and qualified or until their earlier
death, resignation or removal. The persons named as "proxies" in the
enclosed form of Proxy, who have been designated by Management, intend to
vote for the six (6) nominees for election as Directors unless otherwise
instructed in such proxy. If at the time of the Meeting, any of the
nominees named below should be unable to serve, which event is not expected
to occur, the discretionary authority provided in the Proxy will be
exercised to cumulatively vote for the remaining nominees, or for a
substitute nominee or nominees, if any, as shall be designated by the Board
of Directors.
NOMINEES
The following table sets forth the name and age of each nominee for
Director, indicating all positions and offices with the Company presently
held by him, the period during which he has served.
Year First
Name Age Position Director
----------------- ---- ------------------------------ ------------
Norman Andersen 78 Chairman of the Board, Director 1993
Dennis Brovarone 41 Director 1996
Gary Brownell, CPA 49 Chief Financial Officer, Director 1996
Patrick Galuska 38 Director 1996
Michael L. Krall 45 President, CEO, Director 1992
Eugene Peiser, PD 66 Director 1996
BUSINESS EXPERIENCE OF NOMINEES
NORMAN L. ANDERSEN Mr. Andersen, 78, currently retired, was from 1974
until September of 1994, Chairman of the Board of Cord North American
Moving and Storage, Inc., in Earth City, MO, a suburb of St. Louis. Prior
to serving solely as Chairman of the Board from 1987 until this year, he
also served as its Chief Executive Officer. Cord North American is a
holding company for several moving and storage concerns in the St. Louis
area. Mr. Andersen served for many years and in several capacities in the
Al Bahr Shrine. He is widowed and lives in Fairview Heights, IL.
DENNIS BROVARONE Mr. Brovarone, 41 has been practicing corporate and
securities law since 1986 and as a solo practitioner since 1990. He was
elected to the Company's Board of Directors in April 1996. Prior to 1990,
Mr. Brovarone served as in-house counsel to R.B. Marich, Inc., a Denver,
Colorado based brokerage firm. Mr. Brovarone also serves as President
(Chairman) of the Board of Directors of The Community Involved Charter
School, a four year old K-12 public school located in Lakewood, Colorado,
operating under an independent charter and serving approximately 350
students in an individualized, experiential learning environment. Mr.
Brovarone lives and works in Denver, Colorado.
GARY W. BROWNELL Mr. Brownell, 48, is a Certified Public Accountant in a
private partnership practice. He is the partner in charge of taxes and
municipal audits for his firm. Mr. Brownell graduated from San Diego State
University in 1973 with a Bachelor of Science degree in accounting. He
received his Certified Public Accountant designation in 1983. Mr. Brownell
has been a partner in Brownell and Duffy since 1985.
PATRICK GALUSKA Mr. Galuska, 38, is a Petroleum Engineer and has been with
Meridian Oil Inc., since 1982. He is responsible for the financial
viability of numerous properties located in the Rocky Mountains and has
also been involved in many property acquisitions and contract negotiations.
He is
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a Registered Professional Engineer and is a member of the Society of
Petroleum Engineers. Mr. Galuska graduated from the University of Wyoming
in 1982 with a Bachelor of Science degree in Petroleum Engineering. He
received his Masters in Business Administration, specializing in Finance
from the University of Denver in 1992. Mr. Galuska resides in Denver,
Colorado with his wife.
MICHAEL L. KRALL Mr. Krall, 45, is the President and CEO of Innovative
Medical Services, a position he has held since 1993. He is responsible for
the strategic planning, product development, and day-to-day operations of
IMS. Previously, Mr. Krall was the President and CEO of Bettis-Krall
Construction, Inc. a successful building-development company of custom
homes and commercial property in San Diego County, California. He has also
held numerous positions in general management in the hospitality industry.
Mr. Krall attended Pepperdine University (economics, statistics mechanical
engineering). He previously served 4 years in the United States Marine
Corps and was elected, by general election, to a 4-year term on the Valle
de Oro Planning Board. Mr. Krall lives in El Cajon, California with his
wife, Connie and two children.
EUGENE S. PEISER, DOCTOR OF PHARMACY Dr. Peiser, 66, has been an
independent consultant to FDA regulated industries since 1974 and a Member
of the Board of Innovative Medical Services since 1994. He graduated from
the University of Tennessee College of Pharmacy with a Bachelor of Science
in Pharmacy in 1951 and has received his Doctorate of Pharmacy. Dr.
Peiser's consultancy advises on a wide variety of subjects, including
compliance with the Prescription Drug Marketing Act and other government
compliance matters, employee training and drug repackaging. Dr. Peiser
furnishes expert witness services and has provides approved Pharmaceutical
Continuing Education to several thousand attendees at his seminars. Dr.
Peiser is a Founding Director of the Association of Drug Repackagers; is
appointed as a Registered Arbitrator by the American Registry of
Arbitrators; serves as a member of the Surgeon General's Speakers Bureau;
and is President of the Southwest Chapter of the Association of Military
Surgeons. Dr. Peiser lives and works in Palm Harbor, FL.
COMMITTEES: MEETINGS OF THE BOARD
The Company has a Compensation/Administration Committee and an Audit
Committee. The Compensation/Administration Committee and the Audit
Committee were formed in September 1996. Messrs. Andersen, Galuska and
Peiser comprise the Compensation/Administration Committee and Messrs.
Andersen, Galuska and Peiser serve on the Audit Committee. The
Compensation Committee recommends to the Board the compensation of
executive officers and will serve as the Administrative Committee for the
Company's Stock Option Plan. The Audit Committee serves as a liaison
between the Board and the Company's auditor. The Compensation/Administration
Committee met two times during the fiscal year ended July 31, 1997, and the
Audit Committee met one time during the fiscal year ended July 31, 1997.
The Company's Board of Directors held 5 meetings during the fiscal year
ended July 31, 1997, at which time all the then Directors were present or
consented in writing to the action taken at such meetings. No incumbent
Director attended fewer than 100% of said meetings.
COMPLIANCE WITH SECTION 16(A) OF SECURITIES EXCHANGE ACT OF 1934
To the Company's knowledge, during the fiscal year ended July 31, 1997, the
Company's Officers and Directors complied with all applicable Section 16(a)
filing requirements. This statement is based solely on a review of the
copies of such reports furnished to the Company by its Officers and
Directors and their written representations that such reports accurately
reflect all reportable transactions.
FAMILY RELATIONSHIPS
There is no family relationship between any director, executive or person
nominated or chosen by the Company to become a director or executive
officer.
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EXECUTIVE COMPENSATION
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SUMMARY COMPENSATION TABLE
The following table shows for the past three fiscal years ending July 31,
the compensation awarded or paid by the Company to its Chief Executive
Officer and its executive officers during such years:
Restricted
Total Annual Cash Compensation Stock or
Name & Position (Year ended 7/31) ($ Amt.) Options Granted
- --------------- ----------------- -------- ---------------
Michael L. Krall 1995 45,000 0
1996 96,000 (2) 31,250 options (1)
1997 117,000 50,000 options (3)
Dennis Atchley 1995 0 0
1996 0 0
1997 24,000 50,000 options (3)
Gary Brownell 1995 0 14,000
1996 0 0
1997 52,000 50,000 options (3)
(1) Five-year Options exercisable after April 1997 at $3.20 per
share. See EMPLOYMENT AGREEMENTS below.
(2) A bonus awarded in September 1996 by the Board of Directors.
(3) Five-year Options exercisable September 1996 at $4.00 per share
as part of grant to directors and officers made on that date. In
November 1997, each member of the Board of Directors and each
executive officer surrendered these options to the Company.
No other executive officer earned more than $100,000 during the current
fiscal year.
EMPLOYMENT AGREEMENTS
In April 1996, the Board of Directors approved a five-year employment
agreement for Michael Krall, its President. Mr. Krall is to receive a
salary of $108,000 per year, an amount equal to 3% of the Company's net
income before taxes if any plus other benefits. In addition, the Board of
Directors awarded Mr. Krall compensation in the amount of $30,000, $45,000
and $60,000 for the fiscal years ended July 31, 1994, 1995 and the eight
month period ended March 31, 1996. Mr. Krall has contributed these amounts
back to the Company as additional paid in capital for shares previously
issued to Mr. Krall. Mr. Krall was also awarded five-year options to
acquire 31,250 common shares at $3.20 per share, which are first
exercisable in April 1997. In September 1996, the Board of Directors
awarded Mr. Krall a bonus of $257,500 as compensation for his extraordinary
work in the weeks preceding the Initial Public Offering. The Board of
Directors increased Mr. Krall's salary to $144,000 per year, effective May
1997.
INCENTIVE STOCK OPTION PLAN
On April 17, 1996, the Shareholders approved the Company's 1996 Incentive
Stock Option Plan (the Plan). The purpose of the Plan is to advance the
business and development of the Company and its shareholders by affording
to the key employees of the Company the opportunity to acquire a propriety
interest in the Company by the grant of Options to acquire shares of the
Company's common stock. The Options granted are "Incentive Stock Options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, for certain key employees. The Plan is administered by an
Administrative Committee whom shall serve a one-year term. The
Administrative Committee is composed of the Board's Compensation Committee.
The current members of the Compensation Committee are Messrs. Andersen,
Galuska and Peiser.
Subject to anti-dilution provisions, the Plan may issue Options to acquire
up to 1,000,000 shares to Key Employees. The maximum number of shares
subject to Options granted to any one Key Employee shall not exceed 100,000
shares. The exercise price for Options shall be set by the Administrative
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Committee but shall not be for less than the fair market value of the
shares on the date the Option is granted. The period in which Options can
be exercised shall be set by the Administrative Committee not to exceed
five years from the date of Grant. The Plan may be terminated, modified or
amended by the Board of directors upon the recommendation of the
Administrative Committee. The issuance of options pursuant to this Plan is
not expected to be a taxable event for recipient until such time that the
recipient elects to exercise the option whereupon the recipient is expected
to recognize income to the extent the market price of the shares exceeds
the exercise price of the option on the date of exercise. All Key
Employees of the Company and its subsidiaries are eligible to participate
in the Incentive Stock Options. A Key Employee is defined in the Plan as
a Company employee who in the judgement of the Administrative Committee has
the ability to positively affect the profitability and economic well-being
of the Company. Part time employees, independent contractors, consultants
and advisors performing bona fide services to the Company shall be
considered employees for purposes of participation in the Plan.
COMPENSATION OF DIRECTORS
Directors are entitled to receive $300 plus reimbursement for all out-of-
pocket expenses incurred for attendance at Board of Directors meetings.
Mr. Anderson receives a salary of $2,000/month for services as Chairman of
the Board and of the Board's Compensation and Budget Committees. Pursuant
to these directors fees, $31,200 was paid during the past fiscal year. In
September 1996, the Board of Directors and Executive Officers were each
granted a five-year option to purchase 50,000 shares of stock at $4.00 per
share, exercisable September 1996. In September 1997, the Directors and
Executive Officers were each granted an additional five-year option to
purchase 50,000 shares at $2.00 per share, exercisable September 1997. In
November 1997, each member of the Board of Directors and each executive
officer surrendered the option to purchase 50,000 shares of stock at $4.00
per share, as granted in September 1996. No options granted to Directors
or Officers of the Company have been exercised to date.
OTHER ARRANGEMENTS
There are no other arrangements pursuant to which the Company's Directors
receive compensation from the Company for services as Directors.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENT
There is no compensatory plan or arrangement with respect to any individual
named above which results or will result from the resignation, retirement
or any other termination of employment with the Company, or from a change
in the control of the Company.
TRANSACTIONS WITH MANAGEMENT
During the fiscal year ended July 31, 1997, the Company did not enter the
any transactions with entities in which certain of the Company's officers
and directors may have a direct or indirect interest.
DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS
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Any proposal by a shareholder to be presented at the Company's 1999 Annual
Meeting, including nominations for election as directors, must be received
at the offices of Company, 1725 Gillespie Way, El Cajon, California 92020,
by September 30, 1998.
DENNIS ATCHLEY
CORPORATE SECRETARY
El Cajon, California
November 24, 1997
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PROXY SOLICITED BY THE BOARD OF DIRECTORS OF
INNOVATIVE MEDICAL SERVICES
The undersigned appoints Michael L. Krall (and Dennis Brovarone if Mr. Krall
is unable to serve), as the undersigned's lawful attorney and proxy, with
full power of substitution and appointment, to act for and vote all of the
undersigned's shares of the Common Stock of INNOVATIVE MEDICAL SERVICES, a
California corporation, at the Annual Meeting of Shareholders to be held at
the Sheraton San Diego Hotel and Marina, 1380 Harbor Island Dr., San Diego,
CA, 92101, at 11:00 a.m. Pacific Standard Time, on January 10, 1998, and at
any and all adjournments thereof, for the following purposes:
A SHAREHOLDER MAY USE CUMULATIVE VOTING FOR THE NOMINEES OF THAT PROPOSAL
BY VOTING THE NUMBER OF THE SHARES HELD TIMES THE NUMBER OF DIRECTORS BEING
ELECTED ON A SINGLE OR GROUP OF CANDIDATES. SHAREHOLDERS MAY ALSO WITHHOLD
AUTHORITY TO VOTE FOR A NOMINEE(S) BY DRAWING A LINE THROUGH THE NOMINEE'S
NAME(S). FOR EXAMPLE A SHAREHOLDER WITH 1,000 SHARES MAY CAST A TOTAL OF
6,000 VOTES (# OF SHARES X 6 DIRECTORS) FOR ALL, ONE OR A SELECT NUMBER OF
CANDIDATES.
PROPOSAL NO. 1 ELECTION TO THE BOARD OF DIRECTORS
[ ] FOR Management nominees listed below equally among all the
nominees OR VOTED AS FOLLOWS:
Michael L. Krall: ____________________ Shares
AGAINST Management's nominees for the Board of Directors
MANAGEMENT INTENDS TO VOTE SHARES FOR THE SIX (6) NOMINEES UNLESS OTHERWISE
INSTRUCTED IN THIS PROXY. IF AT THE TIME OF THE MEETING, ANY OF THE
NOMINEES SHOULD BE UNABLE TO SERVE, THE DISCRETIONARY AUTHORITY PROVIDED IN
THE PROXY WILL BE EXERCISED TO CUMULATIVELY VOTE FOR THE REMAINING
NOMINEES, OR FOR A SUBSTITUTE NOMINEE OR NOMINEES, IF ANY, AS SHALL BE
DESIGNATED BY THE BOARD OF DIRECTORS.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN ACCORDANCE
WITH THE SHAREHOLDER'S SPECIFICATION ABOVE. THIS PROXY CONFERS
DISCRETIONARY AUTHORITY IN RESPECT TO MATTERS FOR WHICH THE SHAREHOLDER HAS
NOT INDICATED A PREFERENCE OR IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED
AT THE TIME OF THE MAILING OF THE NOTICE OF THE ANNUAL MEETING OF
SHAREHOLDERS TO THE UNDERSIGNED.
The undersigned revokes any proxies heretofore given by the undersigned and
acknowledges receipt of the Notice of Annual Meeting of Shareholders and
Proxy Statement furnished herewith and the Annual Report to Shareholders
previously provided.
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Dated: _______________, 199__
Signature(s) should agree with the name(s) hereon. Executors,
administrators, trustees, guardians and attorneys should indicate when
signing. Attorneys should submit powers of attorney.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF INNOVATIVE
MEDICAL SERVICES PLEASE SIGN AND RETURN THIS PROXY TO INNOVATIVE MEDICAL
SERVICES, NEW ADDRESS. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO
VOTE IN PERSON IF YOU ATTEND THE MEETING.
