U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the period ended April 30, 2000
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required] For the transition period
from to
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Commission File number 0-21019
INNOVATIVE MEDICAL SERVICES
---------------------------
(Name of small business issuer in its charter)
California 33-0530289
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(State or other jurisdiction
of incorporation or organization) (IRS Employer Identification No.)
1725 Gillespie Way, El Cajon, California 92020
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(Address of principal executive offices)
619 596 8600
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Issuer's telephone number
Check whether the issuer (1) filed all reports 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
State the number of shares outstanding of each of the issuer's classes
of common equity as of the latest practicable date: 6,443,814 as of June 8,
2000.
<PAGE>
Text of the Amendment
Explanatory note:
Each of the above listed items is hereby amended by deleting the item in its
entirety and replacing it with the items attached hereto and filed herewith.
The purpose of this amendment is to amend the Company's 10-QSB for the period
ending April 30, 2000 (the "Original Filing").
During the period from January 1999 to January 2000, the Company's Research and
Development Department created an e-commerce web supersite. The costs of
development during this period were expensed as incurred. According to SOP98-1
(Statement of Position issued by the Accounting Standards Executive Committee)
these costs should have been capitalized and included in the Company's assets.
The Company had identified $450,100 of costs associated with the construction of
the website during this period. As the software neared completion,
Nutripure.com, a wholly owned subsidiary of the Company, was formed to acquire
and operate the website. The website was sold to Nutripure.com for $1,000,000.
In order to correct not previously capitalizing the costs of the website
development, the Company accounted for this transaction by capitalizing $115,300
of the identified costs that occurred in the current quarter and by eliminating
from inter-company sales $665,200, and with the remaining $334,800 representing
the costs not capitalized in previous quarters, increased revenues and earnings
for the period.
The accompanying restated consolidated financial statements retroactively
reflect a lowered amount of $207,707 of website cost. These reduced costs, which
represent only those expenses directly related to website development, are
consistent with the newly issued EITF Issue No. 00-2 -Emerging Issues Task Force
Issue Titled: Accounting for Web Site Development Costs dated March 16, 2000. Of
this amount, $79,900 was incurred before the beginning of the fiscal year and is
shown as a cumulative change in accounting principle. At the same time, the
entire $1,000,000 is eliminated from inter-company sales to correctly state
total revenues.
The accompanying financial statements also reflect an increase of $130,000 in
General and Administrative Expenses that represents an addition to bad debt
expense for a receivable that is now considered a doubtful account.
As a result, sales decreased $334,800 from $1,909,600 to $1,574,800 for the nine
months ended April 30, 2000. At the same time, General and Administrative
Expenses decreased by $28,500 of website expense and by $130,000 of bad debt
expense for a total of $101,500. The cumulative change in accounting principle
resulted in a net gain of $79,900. Net loss increased $359,600 from $474,900 to
$834,500 for the nine months ended April 30, 2000. Net loss decreased $13,200
from $662,300 to $649,100 for the quarter ended April 30, 2000 due to less
amortization on the lower capitalized amount of the website.
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<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
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(Unaudited)
April 30 July 31
ASSETS 2000 1999
--------------- ---------------
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 1,413,219 $ 22,056
Restricted cash 200,962 205,574
Accounts receivable, net of allowance for doubtful
accounts of $ 180,000 1,014,104 790,166
Notes receivable 216,647 339,524
Inventories 712,214 719,972
Prepaid expenses 59,153 37,078
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Total current assets 3,616,299 2,114,370
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Property, Plant and Equipment
Property, plant and equipment 1,010,900 805,523
---------- -------
Total property, plant and equipment 1,010,900 805,523
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Noncurrent Assets
Deposits 13,083 6,575
Patents and license 576,016 425,550
Goodwill 252,522 256,422
Other intangible assets 346,500 353,250
Deferred acquisition costs 103,376 53,851
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Total noncurrent assets 1,291,498 1,095,648
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Total assets $ 5,918,696 $ 4,015,541
============ ===========
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts payable $ 321,961 $ 594,948
Accrued liabilities 55,709 43,068
Notes payable 260,411 446,067
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Total current liabilities 638,082 1,084,083
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Minority interest payable 75,082 -
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Stockholders' Equity
Class A common stock, no par value: authorized
20,000,000 shares, issued and outstanding
6,416,939 at April 30, 2000 and
4,392,242 at July 31, 1999 9,771,973 6,663,318
Class A warrants: issued and outstanding 3,687,500
warrants 108,750 108,750
Accumulated deficit (4,675,190) (3,840,610)
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Total stockholders' equity 5,205,533 2,931,458
============ ===========
Total liabilities and stockholders' equity $ 5,918,696 $ 4,015,541
============ ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INCOME (Unaudited)
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For the Nine Months Ended For the Three Months Ended
April 30 April 30
2000 1999 2000 1999
----------- ----------- --------- ------------
<S> <C> <C> <C> <C>
Net sales $ 1,574,840 $ 2,733,401 $ 357,845 $ 1,169,903
Cost of sales 809,301 1,050,880 234,249 496,960
-------- ---------- -------- -------
Gross profit 765,539 1,682,521 123,596 672,943
-------- ---------- -------- -------
Selling expenses 406,377 289,028 147,947 101,256
General and administrative expenses 1,219,428 790,669 612,652 342,964
Research and development 84,496 119,862 40,380 34,923
------- -------- ------- ------
-
Total operating costs 1,710,301 1,199,559 800,979 479,143
---------- ---------- -------- -------
Operating income (loss) (944,762) 482,962 (677,383) 193,800
--------- -------- --------- -------
Other income and (expense):
Interest income 4,218 8,097 1,714 2,716
------ ------ ------ -----
Total other income (expense) 4,218 8,097 1,714 2,716
------ ------ ------ -----
Income (loss) before income taxes, minority
Interest in subsidiary operations and
change in accounting principle (940,544) 491,059 (675,669) 196,516
Federal and state income taxes 600 600 200 200
---- ---- ---- ---
Income (loss) before minority interest in subsidiary
operations and change in
accounting principle (941,144) 490,459 (675,869) 196,316
Minority interest in subsidiary operations 26,718 - 26,718 -
------- -- ------- --
Net income (loss) before cumulative
change in accounting principle (914,427) 490,459 (649,151) 196,316
Cumulative effect (to August 31, 1999) of change
in accounting principle
(see explanatory note) 79,896 - - -
------- -- -- --
Net income (loss) $ (834,531) $ 490,459 $ (649,151) $ 196,316
=========== ========== =========== ==========
Net income (loss) per common share before change
in accounting principal (basic) (0.17) 0.07 (0.12) 0.04
Cumulative effect (to August 31, 1999) of change
in accounting principle
(see explanatory note) 0.01 - - -
----- ------- ------ ------
Net income (loss) per common share (basic) $ (0.16) $ 0.07 (0.12) $ 0.04
======== ======= ====== ======
Net income (loss) per common share before change
in accounting principal (diluted) (0.11) 0.04 (0.08) 0.02
Cumulative effect (to August 31, 1999) of change
in accounting principle
(see explanatory note) 0.01 - - -
----- ------- ------- -------
Net income (loss) per common share (diluted) $ (0.10) $ 0.04 $(0.08) $ 0.02
======== ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
April 30 Ended July 31
CONSOLIDATED STATEMENTS OF ACCUMULATED DEFICITS 2000 1999
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of period $ (3,840,610) $ (4,101,330)
Net income (loss) (834,531) 260,720
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Balance, end of period $ (4,675,191) $ (3,840,610)
============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended
April 30
2000 1999
------------ ------------
Cash flows from operating activities
<S> <C> <C>
Net income (loss) $ (834,531) $ 490,459
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 115,324 116,189
Minority interest in subsidiary operations 75,082
Changes in assets and liabilities:
(Increase) decrease in restricted cash 4,613 101,425
(Increase) decrease in accounts receivable (223,938) (1,021,065)
(Increase) decrease in notes receivable 122,877 (83,399)
(Increase) decrease in prepaid expense 7,758 (1,080)
(Increase) decrease in inventory (22,075) (62,095)
(Increase) decrease in deposits (6,508) (4,450)
(Increase) decrease in patent and licenses (150,465) (367,140)
(Increase) decrease in goodwill 6,750 (258,055)
(Increase) decrease in intangible assets (49,525) (355,500)
(Increase) decrease in deferred acquisition costs - 1,051,422
Increase (decrease) in accounts payable (272,987) (71,054)
Increase (decrease) in accrued liabilities 12,641 (43,928)
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Net cash provided (used) by operating
activities (1,214,985) (508,272)
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Cash flows from investing activities
Purchase of property, plant and equipment (316,851) (120,817)
------------
Net cash (used) in investing activities (316,851) (120,817)
--------------- ------------
Cash flows from financing activities
Increase (decrease) in notes payable (185,656) 361,172
Proceeds from sale of common stock 3,108,655 375,238
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Net cash provided by financing activities 2,923,000 736,410
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Net increase (decrease) in cash and cash
equivalents 1,391,163 107,320
Cash at beginning of period 22,056 48,250
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Cash at end of period $ 1,413,219 $ 155,570
============== =========
Interest paid $ 65,286 $ 39,622
Taxes paid $ 600 $ 600
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INNOVATIVE MEDICAL SERVICES
(Registrant)
By: /s Michael L. Krall
------------------------
Michael L. Krall, President/CEO
Date: October 20, 2000
By: /s/ Gary Brownell
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Gary Brownell, Chief Financial Officer
Date: October 20, 2000
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