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 October 31, 1999
[ ] 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
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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: 4,552,242 as of December 14,
1999.
<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 October 31, 1999 (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, General and Administrative Expenses were decreased by $64,800 of
website expense and increased by $130,000 of bad debt expense for a net increase
of $65,200 for the three months ended October 31, 1999. The cumulative change in
accounting principle resulted in a net gain of $79,900. Net income increased
$14,600 from $146,200 to $160,800 for the quarter.
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<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
---------------------------------------------------------------------------------------------------
(Unaudited)
October 31 July 31
ASSETS 1999 1999
---------------- ----------------
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 22,248 $ 22,056
Restricted cash 201,462 205,574
Accounts receivable, net of allowance for doubtful
accounts of $ 147,850 1,101,289 790,166
Notes receivable 339,975 339,524
Inventories 776,833 719,972
Prepaid expenses 65,559 37,078
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Total current assets 2,507,366 2,114,370
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Property, Plant and Equipment
Property, plant and equipment 962,298 805,523
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Total property, plant and equipment 962,298 805,523
-------- -------
Noncurrent Assets
Deposits 13,083 6,575
Patents and license 428,550 425,550
Goodwill 254,789 256,422
Other intangible assets 351,000 353,250
Deferred acquisition costs 53,851 53,851
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Total noncurrent assets 1,101,274 1,095,648
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Total assets $ 4,570,937 $ 4,015,541
============ ===========
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts payable $ 683,301 $ 594,948
Accrued liabilities 13,088 43,068
Notes payable 567,367 446,067
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Total current liabilities 1,263,757 1,084,083
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Stockholders' Equity
Class A common stock, no par value: authorized
20,000,000 shares, issued and outstanding
4,552,242 at October 31, 1999 and
4,392,242 at July 31, 1999 6,880,068 6,663,318
Class A warrants: issued and outstanding 3,687,500
warrants 108,750 108,750
Accumulated deficit (3,681,636) (3,840,610)
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Total stockholders' equity 3,307,182 2,931,458
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Total liabilities and stockholders' equity $ 4,570,937 $ 4,015,540
============ ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME (Uuaudited)
----------------------------------------------------------------------------------------
For the Three Months Ended
October 31
1999 1998
----------- ----------
<S> <C> <C>
Net sales $ 904,888 $ 795,519
Cost of sales 410,213 282,289
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Gross profit 494,675 513,230
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Selling expenses 112,704 71,306
General and administrative expenses 263,321 268,638
Research and development 38,603 38,037
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Total operating costs 414,628 377,982
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Operating income (loss) 80,047 135,248
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Other income and (expense):
Interest income 1,078 2,693
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Total other income (expense) 1,078 2,693
------ -----
Income (loss) before income taxes and cumulative
change in accounting principle 81,125 137,941
Federal and state income taxes 200 200
---- ---
Net income (loss) before cumulative
change in accounting principle 80,925 137,741
Cumulative effect (to August 31, 1999) of change
in accounting principle (see explanatory note) 79,896 -
------- -----
Net income (loss) $ 160,821 $ 137,741
========== =========
Net income (loss) per common share before change
in accounting principle (basic) $ 0.02 $ 0.04
Cumulative effect (to August 31, 1999) of change
in accounting principle (see explanatory note) 0.02 -
----- ------
Net income (loss) per common share (basic) $ 0.04 $ 0.04
======= ======
Net income (loss) per common share before change
in accounting principle (diluted) $ 0.01 $ 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) $ 0.02 $ 0.02
======= ======
</TABLE>
<TABLE>
<CAPTION>
Three Months
Ended Year Ended
October 31 Ended July 31
CONSOLIDATED STATEMENTS OF ACCUMULATED DEFICITS 1999 1999
------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of period $ (3,842,457) $ (4,101,330)
Net income (loss) 160,821 258,873
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Balance, end of period $ (3,681,636) $ (3,842,457)
============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
------------------------------------------------------------------------------------------------------
For the Three Months Ended
October 31
1999 1998
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Cash flows from operating activities
<S> <C> <C>
Net income (loss) $ 160,821 $ 137,741
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 42,484 35,786
Changes in assets and liabilities:
(Increase) decrease in restricted cash 4,113 1,507
(Increase) decrease in accounts receivable (311,123) (360,418)
(Increase) decrease in notes receivable (452) (16,510)
(Increase) decrease in prepaid expense (28,481) 1,030
(Increase) decrease in inventory (56,861) (164,775)
(Increase) decrease in deposits (6,508) (3,000)
(Increase) decrease in patent and licenses (3,000) (347,271)
(Increase) decrease in deferred acquisition costs - 1,051,422
(Increase) decrease in goodwill 1,633 (261,322)
(Increase) decrease in intangible assets 2,250 (360,000)
Increase (decrease) in accounts payable 88,353 161,171
Increase (decrease) in accrued liabilities (29,980) (41,413)
------------ ----------
-
Net cash provided (used) by operating -
activities (136,751) (166,052)
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Cash flows from investing activities
Purchase of property, plant and equipment (201,107) (54,266)
------------ ----------
Net cash (used) in investing activities (201,107) (54,266)
------------ ----------
Cash flows from financing activities
Increase (decrease) in notes payable 121,300 213,634
Proceeds from sale of common stock 216,750 -
------------ ----------
-
Net cash provided by financing activities 338,050 213,634
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Net increase (decrease) in cash and cash
equivalents 192 (6,684)
Cash at beginning of period 22,056 48,250
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Cash at end of period $ 22,248 $ 41,566
========= ========
Interest paid $ 16,299 $ 9,797
Taxes paid $ 800 $ 800
</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
