U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
X
- ----- Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required)
- ----- Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the fiscal year ended April 30, 1998
Commission file number 0-9064
APPLIED MEDICAL DEVICES, INC.
--------------------------------------------
(Name of small business issuer in its charter)
Colorado 84-0789885
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1722 Buffehr Creek Road, Vail, CO 81657
- --------------------------------- -----
(Address of principal executive offices) (Zip Code)
(former address)
8100 W. Crestline Avenue, Suite A-15, #330, Denver, CO 80123
Issuer's telephone number (970) 479-2800
Securities registered pursuant to Section 12(b) of the Exchange Act : None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.01 Par Value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months 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 pursuant to Item 405 of
Regulation S-B is not contained herein, and will not 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-KSB or any amendment to
this Form 10-KSB. [ X ]
The issuer had approximately $87,00 in interest revenue in its most recent
fiscal year.
The aggregate market value of the voting stock held by non-affiliates was
approximately $51,720 based upon the bid price of the stock on June 29, 1998 of
$.001. However, trading in the stock is limited and sporadic. See Item 5.
The number of shares of the Registrant's $.01 par value common stock outstanding
as of June 29, 1998 was 65,977,800.
<PAGE>
Disclosure Regarding Forward-Looking Statements
- -----------------------------------------------
This Report includes "forward-looking statements" within the meaning of Section
27A of the Securities Exchange Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). All statements other than statements of historical fact
included in this Report, including without limitation, the statements in Items 1
and 6 regarding the Company's financial position and liquidity, the Company's
plan of operation and other matters, may be deemed forward-looking statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from the Company's expectations are
disclosed in this Report, including without limitation, in conjunction with the
forward-looking statements included in the Report. Should the Company's
underlying assumptions prove incorrect, actual results may vary materially from
those described in this Report as intended, anticipated, believed, estimated or
expected or with respect to other forward-looking statements. The Company does
not undertake to update these forward-looking statements.
Part I
Item 1. Description/Business.
---------------------
(a) Business Development. Applied Medical Devices, Inc., (a development
stage company) the Registrant (the "Company"), was incorporated under the laws
of the State of Colorado on February 5, 1979. Until 1986, the Company engaged in
the development and sale of medical devices and medical technology. The
Company's efforts in the medical products industry were unsuccessful, and the
Company accumulated a substantial deficit since inception. In July 1986, the
Company determined to discontinue its operations in the medical products
industry. The Company reduced its staff and commenced its present activities
which consist of the search for an acquisition, merger or other form of business
combination with an existing business. Although the Company has evaluated
certain entities, and in some instances, engaged in discussions concerning
possible arrangements, there are presently no agreements, arrangements or
understandings with respect to any such acquisition, merger or combination.
(b) Business of Issuer. The Company, which originally operated in the
medical products industry, discontinued operations in that industry in 1986 due
to continued losses. Since that time, the Company has been engaged in the
investigation of business opportunities with the goal of attempting to effect a
business combination with another entity.
Although the Company has engaged in evaluations of certain business
opportunities, the Company has no firm arrangements, commitments or agreements
with respect to any acquisition, merger or other form of business combination.
The nature of the specific business which the Company may acquire cannot be
determined at the present time. Due to the limited capital available to the
Company, there can be no assurance that the Company will be able to locate or
acquire any attractive business on terms favorable to the Company. In addition,
it is anticipated that with the Company's limited capital the Company would be
able to acquire only one business.
A substantial amount of time may elapse and the Company may expend
considerable funds for consulting, legal, accounting and other fees before the
Company is able, if at all, to acquire any business or effect a merger or other
form of business combination. Such expenditures may have an adverse impact on
the ability of the Company to carry out its plan or, on its ability to continue
any business which it acquires. The Company will be an insignificant participant
among the firms which engage in the mergers with and acquisitions of privately-
financed entities. There are many established venture capital and financial
concerns which have significant financial and personnel resources, technical
expertise and greater experience than the Company. In addition, the Company is
competing with numerous small entities similar in size and scope of operations
to the Company. In view of the Company's limited financial resources and limited
management availability, the Company is at a significant competitive
disadvantage vis-a-vis many of the Company's competitors.
<PAGE>
The Company has no trademarks, licenses, franchises, concessions, royalty
agreements or labor contracts. The Company produces no products, has no key
suppliers and has no backlog. The Company has no contracts with the United
States Government. The Company has no dependence upon a single customer, or a
few customers. The Company has not engaged in any research and development
activities during the past two fiscal years. The Company has not incurred
expenditures in connection with compliance with governmental provisions relating
to the environment.
At the present, the Company employs one person, on a part-time basis.
Item 2. Description of Properties.
--------------------------
The Company owns no real property. The Company presently subleases office
facilities from, and is provided administrative services by, an entity that has
certain common shareholders with the Company. The facilities and services are
provided on a month-to-month basis for $250 per month pursuant to an oral
arrangement. See Item 12.
Item 3. Legal Proceedings.
------------------
The Company is not involved in any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
No matter was submitted to a vote of the Company's security holders during
the fourth quarter covered by this Report, and this Item is, therefore,
inapplicable.
PART II
Item 5. Market for Company's Common Equity and Related Stockholder Matters.
-------------------------------------------------------------------
The Company's $.01 par value common stock is traded in the over-the-counter
market. Trading in the Company's stock is believed to be sporadic. Moreover, the
Company's stock is not traded on any exchange or on NASDAQ, but instead trades
on the Electronic Bulletin Board under the symbol AMDI. Accordingly, although
the quotations set forth below have been obtained from sources believed to be
reliable, there can be no assurance that they accurately reflect the trading
markets. The range of high and low bid quotations for each quarterly period
during the two most recent fiscal years is set forth below:
Quarter Ended High Bid Low Bid
------------- -------- -------
April 30, 1998 $.001 $.001
January 31, 1998 $.001 $.001
October 31, 1997 $.001 $.001
July 31, 1997 $.001 $.001
April 30, 1997 $.001 $.001
January 31, 1997 $.001 $.001
October 31, 1996 $.002 $.002
July 31, 1996 $.002 $.002
The quotations for the Company's common stock reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
At June 29, 1998, the approximate number of holders of record of the
Company's common stock was 9,877. The Company has not paid any cash dividends.
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation.
----------------------------------------------------------
Plan of Operation.
- ------------------
During the fiscal year ended April 30, 1998, the Company continued its
efforts to acquire, merge with or enter into another form of business
combination with another entity, and the Company plans to continue these efforts
in the fiscal year ending April 30, 1999. The Company generated approximately
$8,700 in interest income and had expenses of approximately $34,500 in the year
ended April 30, 1998. Total assets, which declined by approximately fourteen
percent from $186,100 to $160,100, consisted of cash or cash equivalents. The
Company expects that its current cash and cash equivalent balances should be
adequate to satisfy its cash requirements for the next twleve months, even if
legal and accounting and other expenses were to increase significantly should
the Company identify a suitable candidate for a business combination. Due to the
nature of the Company's present activities, however, the Company is unable to
predict its likely expenditures for professional fees and other expenses. At
present, the Company has no major capital commitments.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
- --------------------------------------------------------------------------------
Fiscal Years Ended April 30, 1998 and April 30, 1997.
- -----------------------------------------------------
During the fiscal year ended April 30, 1998, the Company had a net loss of
approximately $25,800. Net cash used in operating activities during the fiscal
year 1998 was approximately $26,000. The Company incurred general and
administrative costs of approximately $34,500 in fiscal 1998 of which
approximately $19,300 were incurred in connection with daily operations and
evaluation of business opportunities. Accounting, legal and transfer fees were
approximately $15,200 or 44 percent of the total general and administrative
expenses. The Company earned interest on temporary cash and other money market
instruments of approximately $8,700. Interest income fluctuates based upon
increases and decreases with general interest rates which cannot be predicted.
During the fiscal year ended April 30, 1997, the Company had a net loss of
approximately $29,400. Net cash used in operating activities during the fiscal
year 1997 was approximately $28,800. The Company incurred general and
administrative costs of approximately $39,500 in fiscal 1997 of which
approximately $23,300 were incurred in connection with daily operations and
evaluation of business opportunities. Accounting, legal and transfer fees were
approximately $16,200 or 41 percent of the total general and administrative
expenses. The Company earned interest on temporary cash and other money market
instruments in the amount of approximately $10,100.
As stated above in Plan of Operation, due to the nature of the Company's
activities, the Company's prospects for the future are dependent on a number of
variables which cannot be predicted. Generally, if the Company were to identify
a potential business opportunity, the Company anticipates that it would incur
significant costs in evaluating the desirability of an acquisition or other form
of business combination. Should the Company determine to proceed with the
business combination, the transaction costs could be significant. Thereafter,
results of operations would be expected to be materially affected by the
business acquired by the Company.
Income Taxes And Net Operating Losses
-------------------------------------
As discussed in Note 1 in the accompanying consolidated financial
statement, the Company had net operating loss carryforwards for income tax
purposes of approximately $2,705,000, of which approximately $17,000 are limited
to future taxable income, if any, of the Company's inactive subsidiary. The
deferred tax asset of $1,157,000 arising from the net operating loss
carryforwards has been fully offset by a valuation allowance as it was unable to
be determined if such tax benefits would more likely than not be realized.
<PAGE>
Year 2000
---------
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 issue and is
developing an implementation plan to resolve the issue. The "Year 2000" problem
is the result of computer programs being written using two digits rather than
four to define the applicable year. Any of the Company's programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a major system failure or
miscalculations. The Company presently believes that, with modifications to
existing software and converting to new software, the Year 2000 problem will not
pose significant operational problems for the Company's computer systems as so
modified and converted. However, if such modifications and conversions are not
timely completed, the Year 2000 problem may have a material impact on the
operations of the Company. The Company does not believe that the costs of
modifications or conversion will have a material effect.
Recent Accounting Pronouncements
--------------------------------
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income (SFAS)
130), which 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.
Also, in June 1997, FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information" which supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise." SFAS No. 131
establishes standards for the way that public companies report information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial statements
issued to the public. It is also establishes standards for disclosures regarding
products and services, geographic areas and major customers. SFAS No. 131
defines operating segments as components of a company about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance.
SFAS 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and requires comparative information for
earlier years to be restated. Because of the recent issuance of the standards,
management has been unable to fully evaluate the impact, if any, the standards
may have on future financial statement disclosures. Results of operations and
financial position, however, will be unaffected by implementation of these
standards.
In February 1998, the FASB issued SFAS No. 132, "Employees Disclosures
about Pensions and Other Postretirement Benefits" which standardizes the
disclosure requirements for pensions and other benefits and requires additional
information on changes in the benefit obligations and fair values of plan assets
that will facilitate financial analysis. SFAS No. 132 is effective for years
beginning after December 15, 1997 and requires comparative information for
earlier years to be restated unless such information is not readily available.
Management believes that adoption of this statement will have no material impact
on the Company's financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which establishes accounting and reporting
standards for derivative instruments including certain derivative instruments
embedded in other contracts and for hedging activities. SFAS 133 is effective
for all fiscal quarters of fiscal years beginning after June 15, 1999.
Management believes the adoption of this statement will not have a material
impace on the Company's financial statements.
Item 7. Financial Statements.
---------------------
See pages F-1 through F-10.
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
- --------------------------------------------------------------------------------
There were no changes in accountants during the fiscal year ended April 30,
1998. Not applicable.
PART III
Item 9. Directors and Executive Officers.
---------------------------------
Date First
Elected Principal Occupation
Name Age Director and Employment
- --------------------------------------------------------------------------------
Gary Brunner 53 1988 Mr. Brunner has been self employed
as a medical services consultant
since 1985. From 1981 to 1985, he
was Vice President of Operations of
the Company. Mr. Brunner received a
B.S. degree from the University of
Northern Colorado in 1968. Mr.
Brunner became Secretary and
Director of the Company in October
1988.
Allan K. Lager 55 1989 Mr. Lager has been an automotive
consultant since 1988. From 1978 to
1988, he was President and Director
of Storz, Inc., a firm involved in
the sales and service of Porsche
automobiles. Mr. Lager became
President and Director of the
Company in April 1989.
Kenneth E. Shearer 53 1988 Since 1990, Mr. Shearer has been a
management consultant in the area
of health management and economics.
Mr. Shearer received a Bachelor's
degree in pre-law in 1962 from
Central State University and a
Master's degree in public and
international affairs in 1964 from
the University of Pittsburgh.
The directors of the Company are elected to serve until the next Annual
Meeting of Shareholders or until their successors have been duly elected and
qualified. None of the Company's officers has an employment agreement with the
Company and, therefore, each serves at the pleasure of the Company's Board of
Directors. There are no family relationships among the Company's officers and
directors. During the fiscal year ended April 30, 1998, the Company held one
meeting of Directors. The Company's Board of Directors has no committees. There
are no standard or other arrangements pursuant to which directors are
compensated as such or for committee particpation.
Based solely upon a review of Forms 3, 4 and 5, which have been furnished
to the Company with respect to the past fiscal year of the Company, and certain
representations made by officers and directors of the Company in connection
therewith, the Company has no knowledge that any current officer or director
failed to file on a timely basis any reports required by Section 16(a) of the
Securities Exchange Act of 1934 with respect to the fiscal year of the Company
ended April 30, 1998.
<PAGE>
Item 10. Executive Compensation.
-----------------------
(a) Cash Compensation. The following sets forth cash compensation paid by
the Company during the fiscal year ended April 30, 1998 to executive officers as
a group. No officer received more than $100,000 during the fiscal year.
Mr. Lager receives a salary of $200 per month ($2,400 annually) for serving
as President of the Company. Prior to March 1998, Mr. Lager received a salary of
$400 per month ($4,800 annually). Mr. Lager's salary for the fiscal years ended
April 30, 1998, 1997 and 1996 were $4,400, $4,800 and $4,800, respectively.
Neither Mr. Lager nor any other officer or director of the Company has received
any other compensation, cash or otherwise, from the Company, in any of the past
three years. Accordingly, the Summary Compensation Table has been omitted.
(b) Option SAR Grants Table; Aggregated Option/SAR Exercise and Fiscal Year
End Option/SAR Table; Agregated Option/SAR Exercised in Last Fiscal Year and
Fiscal Year End Option/SAR Values; Term Incentive Plan Awards Table.
None of the Company's officers or directors was granted or exercised any
stock option, stock appreciation right or received any awards under any long
term incentive, stock option or similar plan; accordingly, no tables for these
items are included.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------------------
The following table sets forth the persons known to the Company to own
beneficially more than five percent of the outstanding shares of common stock of
the Company on June 11, 1998, and the number of shares of common stock of the
Company beneficially owned by each director of the Company and all officers and
directors of the Company as a group.
Number of Percent of
Beneficial Owner Shares Class
- --------------------------------------------------------------------------------
Gary Brunner (1)
1071 S. Foothill Drive
Lakewood, Colorado 80228 716,473 1.1%
Allan K. Lager
1040 S. Franklin Street
Denver, Colorado 80209 1,141,667 1.7%
Kenneth E. Shearer
1175 Emerson Street, Suite 208
Denver, Colorado 80218 200,000 .3%
All officers and directors
as a group (3 persons) 2,058,140 3.1%
- ----------
Gary McAdam (2)
14 Red Tail Drive
Highlands Ranch, Colorado 80126 5,975,000 9.1%
Jill J. Pusey (3)
1722 Buffehr Creek Road
Vail, Colorado 81657 4,933,333 7.5%
- --------------------------------
<PAGE>
(1) Includes 560,000 shares owned by Brunner & Associates, P.C., a corporation
owned by Mr. Brunner. Does not include 568,566 shares owned by Mr. Brunner's
father.
(2) Includes shares held by: GJM Trading Partners, Ltd., a partnership of which
Mr. McAdam is the general partner; Creative Investment Services, Inc., a
corporation of which Mr. McAdam is President and a director; and pension and
profit sharing plans of which Mr. McAdam is the trustee and sole beneficiary.
(3) Includes 1,766,666 shares held by Mrs. Pusey as custodian for her minor
children. Does not include 1,293,000 shares owned beneficially by Gregory Pusey,
who is Mrs. Pusey's husband. Mrs. Pusey disclaims any beneficial interest in the
shares owned by Mr. Pusey.
Item 12. Certain Relationships and Related Transactions.
-----------------------------------------------
The Company uses office facilities and administrative services provided by,
Livingston Capital, Ltd. ("Livingston"), a venture capital firm. The Company has
paid Livingston $5,665 and $6,200 for the fiscal years ended April 30, 1998 and
1997, respectively. The Company currently pays Livingston $250 per month.
Gregory Pusey is an officer and director of Livingston and Jill J. Pusey is an
officer and principal shareholder of Livingston. See Item 11. The Company
believes that the terms of its arrangement with Livingston are as favorable as
could be obtained with another firm. The Company's arrangements with Livingston
are on a month-to-month basis.
Item 13. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits.
The exhibits listed on the accompanying index to exhibits are filed as part
of this Annual Report.
(b) Reports on Form 8-K.
No Reports on Form 8-K were filed during the period covered by this report.
<PAGE>
Applied Medical Devices, Inc.
(A Development Stage Company)
Index to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheet as of
April 30, 1998 F-3
Consolidated Statements of Operations for the
Years Ended April 30, 1998 and 1997
and for the Period from May 1, 1987
(Beginning of the Development Stage) to
April 30, 1998 F-4
Consolidated Statements of Stockholders' Equity
for the Years Ended April 30, 1998 and
1997 and for the Period from May 1, 1987
(Beginning of the Development Stage) to
April 30, 1996 F-5
Consolidated Statements of Cash Flows for the Years
Ended April 30, 1998 and 1997 and for the
Period from May 1, 1987 (Beginning of the
Development Stage) to April 30, 1998 F-6
Summary of Accounting Policies F-7 - F-9
Notes to Consolidated Financial Statements F-10
F-1
<PAGE>
Report of Independent Certified Public Accountants
To the Stockholders and Board of Directors
Applied Medical Devices, Inc.
Denver, Colorado
We have audited the accompanying consolidated balance sheet of Applied Medical
Devices, Inc. and subsidiary (a development stage company) as of April 30, 1998
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the two years in the period ended April 30, 1998. We have
also audited the statements of operations, stockholders' equity and cash flows
for the period from the beginning of development stage (May 1, 1987) to April
30, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above, present
fairly, in all material respects, the financial position of Applied Medical
Devices, Inc. and subsidiary at April 30, 1998 and the results of their
operations and their cash flows for each of the two years in the period ended
April 30, 1998 and the period from the beginning of development stage (May 1,
1987) to April 30, 1998, in conformity with generally accepted accounting
principles.
/s/ BDO SEIDMAN, LLP
Denver, Colorado
June 9, 1998
F-2
<PAGE>
Applied Medical Devices, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
- --------------------------------------------------------------------------------
April 30, 1998
- --------------------------------------------------------------------------------
Assets
Current -
Cash and cash equivalents $ 160,103
- --------------------------------------------------------------------------------
$ 160,103
================================================================================
Liabilities and Stockholders' Equity
Current liabilities -
Accrued expenses $ 530
- --------------------------------------------------------------------------------
Commitment (Note 3)
Stockholders' equity (Note 2):
Common stock, $.01 par value; 75,000,000 shares
authorized, issued and outstanding, 65,977,800 659,778
Additional paid-in capital 4,172,128
Accumulated deficit (4,451,999)
Deficit accumulated during the development stage (220,334)
- --------------------------------------------------------------------------------
Total stockholders' equity 159,573
- --------------------------------------------------------------------------------
$ 160,103
================================================================================
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-3
<PAGE>
Applied Medical Devices, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
- --------------------------------------------------------------------------------
Development
Stage
Year Ended April 30, 1998 1997 Cumulative(a)
- --------------------------------------------------------------------------------
Expenses - General and
administrative $ 34,549 $ 39,487 $ 402,421
- --------------------------------------------------------------------------------
Other income:
Interest income 8,713 10,112 118,498
Gain from sale of
marketable securities - - 31,053
Other - - 32,536
- --------------------------------------------------------------------------------
Total other income 8,713 10,112 182,087
- --------------------------------------------------------------------------------
Net loss $ (25,836) $ (29,375) $ (220,334)
- --------------------------------------------------------------------------------
Basic loss per share of
common stock $ Nil $ Nil
- -----------------------------------------------------------
Basic weighted average number of
common shares outstanding 65,977,800 65,977,800
- -----------------------------------------------------------
See accompanying summary of accounting policies and notes to
consolidated financial statements.
(a) Cumulative from May 1, 1987 (beginning of the development stage) to April
30, 1998.
F-4
<PAGE>
<TABLE>
<CAPTION>
Applied Medical Devices, Inc.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
- -------------------------------------------------------------------------------------------------------------------------
Years Ended April 30, 1998 and 1997 and Period from May 1, 1987 (Beginning of the Development Stage) to April 30, 1996
- -------------------------------------------------------------------------------------------------------------------------
Deficit
Accumulated
Common Stock Additional During the Total
----------------- Paid-in Accumulated Development Treasury Stockholders'
Shares Amount Capital Deficit Stage Stock Equity
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, May 1, 1987 43,256,994 $432,570 $4,389,342 $(4,451,999) $ - $ 234,949 $ 604,862
Common stock issued
for services 1,357,473 13,575 (6,000) - - - 7,575
Retirement of treasury
stock (3,136,667) (31,367) (203,582) - - (234,949) (469,898)
Issuance of common
stock and warrants
pursuant to public
offering 14,700,000 147,000 (7,632) - - - 139,368
Exercise of stock
purchase warrant 9,800,000 98,000 - - - - 98,000
Net loss for the periods - - - - (165,123) - (165,123)
- -------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1996 65,977,800 659,778 4,172,128 (4,451,999) (165,123) - 214,784
Net loss for the year - - - - (29,375) - (29,375)
- -------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1997 65,977,800 659,778 4,172,128 (4,451,999) (194,498) - 185,409
Net loss for the year - - - - (25,836) - (25,836)
- -------------------------------------------------------------------------------------------------------------------
Balance, April 30, 1998 65,977,800 $659,778 $4,172,128 $(4,451,999) $ (220,334) $ - $ 159,573
- -------------------------------------------------------------------------------------------------------------------
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Applied Medical Devices, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
- ----------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents
Development
Stage
Year Ended April 30, 1998 1997 Cumulative(a)
- -----------------------------------------------------------------------------------------------------
Operating activities:
<S> <C> <C> <C>
Net loss $ (25,836) $ (29,375) $ (220,334)
Adjustments to reconcile net
loss to cash used in
operating activities:
Gain from sale of marketable securities - - (31,053)
Issuance of common stock for services - - 7,565
Changes in operating assets and liabilities:
Accounts receivable - - 4,903
Accrued expenses (126) 595 (42,580)
Other - - 10
- -----------------------------------------------------------------------------------------------------
Net cash used in operating activities (25,962) (28,780) (281,489)
- -----------------------------------------------------------------------------------------------------
Investing activities -
Proceeds from sale of marketable securities - - 47,040
- -----------------------------------------------------------------------------------------------------
Financing activities:
Proceeds from issuance of
common stock - - 139,368
Proceeds from exercise of
stock warrants - - 98,000
- -----------------------------------------------------------------------------------------------------
Net cash provided by financing activities - - 237,368
- -----------------------------------------------------------------------------------------------------
Increase (decrease) in cash and
cash equivalents (25,962) (28,780) 2,919
Cash and cash equivalents,
beginning of year 186,065 214,845 157,184
- -----------------------------------------------------------------------------------------------------
Cash and cash equivalents,
end of year $ 160,103 $ 186,065 $ 160,103
- -----------------------------------------------------------------------------------------------------
See accompanying summary of accounting policies and notes to
consolidated financial statements.
(a) Cumulative from May 1, 1987 (beginning of the development stage) to April 30, 1998.
F-6
</TABLE>
<PAGE>
Applied Medical Devices, Inc.
(A Development Stage Company)
Summary of Accounting Policies
- --------------------------------------------------------------------------------
Organization Applied Medical Devices, Inc. (the "Company")(a development
and Business stage company) was incorporated on February 5, 1979 under
Organization the laws of the State of Colorado to engage in the
development and sale of medical devices and medical
technology. In July, 1986, the Company decided to
discontinue its business operations and commenced disposing
of its business assets. As of May 1, 1987, the Company had
completed the disposition of its business operations. Since
that time, the Company's operations have consisted of
efforts to pursue other business opportunities and funding
sources. Accordingly, the Company is considered to be in the
development stage.
The financial statements include the accounts of the Company
and its inactive wholly owned subsidiary, Applied Medical,
Inc. ("AMI"). All intercompany accounts and transactions
have been eliminated.
Financial The Company's financial instruments that are exposed to
Instruments and concentrations of credit risk consist primarily of cash
Concentrations equivalents.
of Credit Risk
The Company's cash equivalents are invested in money market
accounts placed with major financial institutions and in
United States government securities. The investment policy
limits the Company's exposure to concentrations of credit
risk. Money market deposit accounts at times may exceed
federally insured limits. The Company has not experienced
any losses in such accounts.
Use of The preparation of financial statements in conformity with
Estimates generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Fair Value of Unless otherwise specified, the Company believes the
Financial carrying value of financial instruments approximates their
Instruments fair value.
F-7
<PAGE>
Applied Medical Devices, Inc.
(A Development Stage Company)
Summary of Accounting Policies
- --------------------------------------------------------------------------------
Cash Equivalents The Company considers all highly liquid investments
purchased with an original maturity of three months or less
to be cash equivalents. At April 30, 1998 cash equivalents
include a United States Treasury bill of approximately
$150,000.
Income Taxes The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109 ("FASB No. 109").
Temporary differences are differences between the tax basis
of assets and liabilities and their reported amounts in the
financial statements that will result in taxable or
deductible amounts in future years. The Company's temporary
differences consist of its net operating loss carryforwards
and capitalized start-up costs.
Net Income (Loss) Through April 30, 1997, the Company followed the provisions
Per Shares of Accounting Principles Board Opinion ("APB") No. 15,
"Earnings Per Share". Effective for the year ended April 30,
1998, the Company implemented Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share".
SFAS No. 128 provides for the calculation of "Basic" and
"Diluted" earnings per share. Basic earnings (loss) per
share includes no dilution and is computed by dividing
income (loss) available to common stockholders by the
weighted average number of common shares outstanding for the
period. Diluted earnings (loss) per share reflects the
potential dilution of securities that could share in the
earnings of an entity, similar to fully diluted earnings
(loss) per share. In loss periods, dilutive common
equivalent shares are excluded as the effect would be
anti-dilutive. Basic and diluted earnings (loss) per share
are the same for all periods presented. The adoption of SFAS
128 had no effect.
Recent In June 1997, the Financial Accounting Standards Board
Accounting ("FASB") issued Statement of Financial Accounting Standards
Pronouncements No. 130, Reporting Comprehensive Income ("SFAS 130"), which
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. Also, in June 1997, FASB issued SFAS
F-8
<PAGE>
Applied Medical Devices, Inc.
(A Development Stage Company)
Summary of Accounting Policies
- --------------------------------------------------------------------------------
No. 131, "Disclosures about Segments of an Enterprise and
Related Information" which supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise."
SFAS No. 131 establishes standards for the way the public
companies report information about operating segments in
annual financial statements and requires reporting of
selected information about operating segments in interim
financial statements issued to the public. It also
establishes standards for disclosures regarding products and
services, geographic areas and major customers. SFAS No. 131
defines operating segments as components of a company about
which separate financial information is available that is
evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing
performance.
SFAS 130 and 131 are effective for financial statements for
periods beginning after December 15, 1997 and requires
comparative information for earlier years to be restated.
Because of the recent issuance of the standards, management
has been unable to fully evaluate the impact, if any, the
standards may have on future financial statement
disclosures. Results of operations and financial position,
however, will be unaffected by implementation of these
standards.
In February 1998, the FASB issued SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement
Benefits" which standardizes the disclosure requirements for
pensions and other postretirement benefits and requires
additional information on changes in the benefit obligations
and fair value of plan assets that will facilitate financial
analysis. SFAS No. 132 is effective for years beginning
after December 15, 1997 and requires comparative information
for earlier years to be restated, unless such information is
not readily available. Management believes the adoption of
this statement will have no material impact on the Company's
financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" which
establishes accounting and reporting standards for
derivative instruments including certain derivative
instruments embedded in other contracts and for hedging
activities. SFAS 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. Management
believes the adoption of this statement will not have a
material impact on the Company's financial statements.
F-9
<PAGE>
Applied Medical Devices, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. Income Taxes As of April 30, 1998 the net deferred tax asset recorded and
its approximate tax effect consists of tax operating loss
carryforwards and capitalized start-up costs of $1,157,000.
As of April 30, 1998, a valuation allowance equal to the net
deferred tax asset recognized has been recorded, as
management has been unable to determine that it is more
likely than not that the deferred tax asset will be
realized.
At April 30, 1998 the Company has net operating loss
carryforwards of approximately $2,705,000 which expire
through 2002. Of this amount, AMI has approximately $17,000
in net operating loss carryforwards which were generated
prior to AMI's acquisition by the Company. These net
operating loss carryforwards may be used only to offset
AMI's future earnings should AMI reactivate its operations
and expire at April 30, 1999.
2. Stockholders' During fiscal 1988 and 1989, the Company issued a total of
Equity 1,356,473 of its common shares to certain employees and
directors for services valued at $7,565.
In fiscal 1989, the Company completed a public offering
whereby it sold 14,700,000 shares of its common stock and
9,800,000 warrants to purchase common shares at $.01 per
share. Total proceeds, net of expenses of $7,632 were
$139,368.
During fiscal 1990, all of the warrants were exercised and
the Company received proceeds of $98,000.
In fiscal 1993, the Company issued 1,000 of its common
shares to a stockholder for consideration received in prior
years valued at $10.
3. Commitment The Company leases office space from an affiliate of a
stockholder for approximately $250 per month on a
month-to-month basis. Rent expense for the years ended April
30, 1998 and 1997 was $5,665 and $6,200.
F-10
<PAGE>
INDEX TO EXHIBITS
-----------------
3 (a) Articles of Incorporation, as amended, of the Company, previously
filed as an exhibit to the Form 10-K Report for the year ended April 30, 1981,
which Exhibit is incorporated herein by reference thereto.
(b) Bylaws of the Company, previously filed as Exhibit 2(b) to the
Company's Registration Statement on Form S-18 (File No. 2-65079), which Exhibit
is incorporated herein by reference.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
APPLIED MEDICAL DEVICES, INC.
Date: July 29, 1998 By: /s/ Allan K. Lager
--------------------------------------
Allan K. Lager, President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Date: July 29, 1998 By: /s/ Allan K. Lager
--------------------------------------
Allan K. Lager, President and Director
Date: July 29, 1998 By: /s/ Gary Brunner
--------------------------------------
Gary Brunner, Secretary and Director
Date: July 29, 1998 By: /s/ Kenneth E. Shearer
--------------------------------------
Kenneth E. Shearer, Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> APR-30-1998
<CASH> 160,103
<SECURITIES> 0
<RECEIVABLES> 0
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0
<COMMON> 4,831,906
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