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 January 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required] For the transition period
from _______ to _____
Commission File number 0-21019
INNOVATIVE MEDICAL SERVICES
---------------------------
(Name of small business issuer in its charter)
California 33-0530289
---------- ----------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1725 Gillespie Way, El Cajon, California 92020
----------------------------------------------
(Address of principal executive offices)
619 596 8600
------------
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: 5,152,117 as of March 14, 2000.
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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 January 31, 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 $1,551,800 to $1,217,000 for the six
months ended January 31, 2000 and from $646,900 to $312,100 for the quarter
ending January 31, 2000. At the same time, General and Administrative Expenses
decreased by $12,100 of website expense and increased by $130,000 of bad debt
expense for a net increase of $117,800. The cumulative change in accounting
principle resulted in a net gain of $79,900. Net income decreased $372,400 from
a profit of $187,400 to a loss of $185,000 for the six months ended January 31,
2000 and $305,000 from a profit of $41,200 to a loss of $263,800 for the quarter
ended January 31, 2000.
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<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------------------------------------------------------
(Unaudited)
January 31 July 31
ASSETS 2000 1999
--------------- ---------------
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 79,570 $ 22,056
Restricted cash 203,611 205,574
Accounts receivable, net of allowance for doubtful
accounts of $ 147,850 885,408 790,166
Notes receivable 436,677 339,524
Inventories 716,800 719,972
Prepaid expenses 50,324 37,078
------- -------
Total current assets 2,372,389 2,114,370
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Property, Plant and Equipment
Property, plant and equipment 1,025,435 805,523
---------- --------
Total property, plant and equipment 1,025,435 805,523
---------- --------
Noncurrent Assets
Deposits 13,083 6,575
Patents and license 493,950 425,550
Goodwill 253,156 256,422
Other intangible assets 348,750 353,250
Deferred acquisition costs 53,851 53,851
------- -------
Total noncurrent assets 1,162,790 1,095,648
---------- ---------
Total assets $ 4,560,614 $ 4,015,541
============ ===========
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts payable $ 505,822 $ 594,948
Accrued liabilities 9,602 43,068
Notes payable 425,538 446,067
-------- -------
Total current liabilities 940,961 1,084,083
-------- ---------
Minority interest payable 101,490 -
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Stockholders' Equity
Class A common stock, no par value: authorized
20,000,000 shares, issued and outstanding
4,704,117 at January 31, 2000 and
4,392,242 at July 31, 1999 7,435,093 6,663,318
Class A warrants: issued and outstanding 3,687,500
warrants 108,750 108,750
Accumulated deficit (4,025,680) (3,840,610)
----------- -----------
Total stockholders' equity 3,518,163 2,931,458
============ ===========
Total liabilities and stockholders' equity $ 4,560,614 $ 4,015,541
============ ===========
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME (Uuaudited)
------------------------------------------------------------------------------------------------------
For the Six Months Ended For the Three Months Ended
January 31, 2000 January 31, 2000
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales $ 1,216,995 $ 1,563,498 $ 312,107 $ 767,979
Cost of sales 575,053 553,920 164,840 271,631
-------- -------- -------- -------
Gross profit 641,942 1,009,578 147,267 496,348
-------- ---------- -------- -------
Selling expenses 258,430 187,772 145,726 116,466
General and administrative expenses 606,776 447,705 341,296 179,067
Research and development 44,116 84,939 5,513 46,902
------- ------- ------ ------
-
Total operating costs 909,323 720,416 492,536 342,435
-------- -------- -------- -------
Operating income (loss) (267,380) 289,162 (345,268) 153,913
--------- -------- --------- -------
Other income and (expense):
Interest income 2,504 5,381 1,426 2,688
------ ------ ------ -----
-
Total other income (expense) 2,504 5,381 1,426 2,688
------ ------ ------ -----
Income (loss) before income taxes, minority
Interest in subsidiary operations and
change in accounting principle (264,876) 294,543 (343,842) 156,601
Federal and state income taxes 400 400 200 200
---- ---- ---- ---
Income (loss) before minority interest
in subsidiary operations and
change in accounting principle (265,276) 294,143 (344,042) 156,401
Minority interest in subsidiary operations 310 - 310 -
---- -- ---- -
Net income (loss) before cumulative
change in accounting principle (264,966) 294,143 (343,732) 156,401
Cumulative effect (to August 31, 1999) of change
in accounting principle
(see explanatory note) 79,896 - 79,896 -
------- -- ------- -
Net income (loss) $ (185,070) $ 294,143 $ (263,836) $ 156,401
=========== ========== =========== =========
Net income (loss) per common share before change
in accounting principle (basic) $ (0.06) $ 0.07 $ (0.07) $ 0.04
Cumulative effect (to August 31, 1999) of change
in accounting principle
(see explanatory note) 0.02 - 0.02 -
----- ---- ----- -----
Net income (loss) per common share (basic) $ (0.04) $ 0.07 $ (0.05) $ 0.04
======== ======= ======== =======
Net income (loss) per common share before change
in accounting principle (diluted) $ (0.03) $ 0.04 $ (0.04) $ 0.02
Cumulative effect (to August 31, 1999) of change
in accounting principle
(see explanatory note) 0.01 - 0.01 -
----- ----- ----- -
Net income (loss) per common share (diluted) $ (0.02) $ 0.04 $ (0.03) $ 0.02
======== ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
January 31 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) (185,070) 260,720
--------- -------
Balance, end of period $ (4,025,680) $ (3,840,610)
============= =============
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
-----------------------------------------------------------------------------------------------
For the Six Months Ended
January 31
2000 1999
----------- ---------
Cash flows from operating activities
<S> <C> <C>
Net income (loss) $ (185,070) $ 294,143
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 72,324 70,550
Minority interest in subsidiary operations 101,490 -
Changes in assets and liabilities:
(Increase) decrease in restricted cash 1,963 2,641
(Increase) decrease in accounts receivable (95,242) (442,744)
(Increase) decrease in notes receivable (97,153) (18,161)
(Increase) decrease in prepaid expense (13,245) (12,545)
(Increase) decrease in inventory 3,172 (203,716)
(Increase) decrease in deposits (6,508) (4,450)
(Increase) decrease in patent and licenses (68,400) (347,271)
(Increase) decrease in goodwill 3,267 (261,322)
(Increase) decrease in intangible assets 4,500 (360,000)
(Increase) decrease in deferred acquisition costs - 1,051,422
Increase (decrease) in accounts payable (89,127) 49,999
Increase (decrease) in accrued liabilities (33,467) (41,611)
----------- ------------
Net cash provided (used) by operating
activities (401,496) (223,065)
----------- ------------
Cash flows from investing activities
Purchase of property, plant and equipment (292,236) (87,539)
----------- ------------
Net cash (used) in investing activities (292,236) (87,539)
----------- ------------
Cash flows from financing activities
Increase (decrease) in notes payable (20,529) 257,216
Proceeds from sale of common stock 771,775 24,015
----------- ------------
Net cash provided by financing activities 751,246 281,231
----------- ------------
Net increase (decrease) in cash and cash
equivalents 57,514 (29,373)
Cash at beginning of period 22,056 48,250
---------- ------------
Cash at end of period $ 79,570 $ 18,877
========= ========
Interest paid $ 35,514 $ 4,807
Taxes paid $ 400 $ 400
</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
-----------------
Gary Brownell, Chief Financial Officer
Date: October 20, 2000
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