U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
_____ 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, 1999
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)
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 $7,000 in interest revenue in its most recent
fiscal year.
The aggregate market value of the voting stock held by non-affiliates was
approximately $1,034,400 based upon the bid price of the stock on July 19, 1999
of $.02. However, trading in the stock is limited and sporadic. See Item 5.
<PAGE>
The number of shares of the Registrant's $.01 par value common stock outstanding
as of July 19, 1999 was 65,977,800.
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.
2
<PAGE>
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.
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.
3
<PAGE>
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 the asking price for each
quarterly period during the two most recent fiscal years is set forth below:
Quarter Ended High Bid Low Bid
------------- -------- -------
April 30, 1999 $.001 $.001
January 31, 1999 $.005 $.0001
October 31, 1998 $.001 $.0001
July 31, 1998 $.001 $.001
April 30, 1998 $.001 $.001
January 31, 1998 $.001 $.001
October 31, 1997 $.001 $.001
July 31, 1997 $.001 $.001
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 July 19, 1999, the approximate number of holders of record of the
Company's common stock was 9,900. The Company has not paid any cash dividends.
Item 6. Management's Discussion and Analysis or Plan of Operation.
- ------------------------------------------------------------------
Plan of Operation.
- ------------------
During the fiscal year ended April 30, 1999, 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, 2000. The Company generated approximately
$7,000 in interest income and had expenses of approximately $20,800 in the year
ended April 30, 1999. Total assets, which declined by approximately nine percent
from $160,100 to $146,100, 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 twelve 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.
4
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations.
--------------------------
Fiscal Years Ended April 30, 1999 and April 30, 1998.
- -----------------------------------------------------
During the fiscal year ended April 30, 1999, the Company had a net loss of
approximately $13,800. Net cash used in operating activities during the fiscal
year 1999 was approximately $14,000. The Company incurred general and
administrative costs of approximately $20,800 in fiscal 1999 of which
approximately $9,300 were incurred in connection with daily operations and
evaluation of business opportunities. Accounting, legal and transfer fees were
approximately $11,500 or 55 percent of the total general and administrative
expenses. The Company earned interest on temporary cash and other money market
instruments of approximately $7,000. Interest income fluctuates based upon
increases and decreases with general interest rates which cannot be predicted.
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 in the amount of approximately $8,700.
As stated above in the 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 $2,688,000. The deferred tax asset of $ 1,158,000
arising from the net operating loss carryforwards and capitalized start-up costs
have been fully offset by a valuation allowance as management has been unable to
determine if such tax benefits would more likely than not be realized.
Year 2000
- ---------
The Company has completed a review and risk assessment of all technology items
used in its operations. The Company believes that the year 2000 problem should
not pose significant operational problems. The Company's accounting software
5
<PAGE>
program as well as other office software was upgraded during 1999 to be year
2000 compliant. The Company's financial institution has informed the Company
that it has reviewed its systems and is year 2000 compliant. Should any problems
arise, the Company does not anticipate that changing vendors or financial
institutions will be difficult.
Item 7. Financial Statements.
- -----------------------------
See pages F-1 through F-10.
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,
1999. Not applicable.
PART III
Item 9. Directors and Executive Officers.
- -----------------------------------------
Date First
Elected Principal Occupation
Name Age Director and employment
- --------------------------------------------------------------------------------
Gary Brunner 54 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 56 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 54 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.
6
<PAGE>
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, 1999, the Company held no
meetings 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, 1999.
Item 10. Executive Compensation.
- --------------------------------
(a) Cash Compensation. The following sets forth cash compensation paid by
the Company during the fiscal year ended April 30, 1999 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, 1999, 1998 and 1997 were $2,400, $4,400 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; Aggregated 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.
7
<PAGE>
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 July 19, 1999, 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%
- --------------------------------
(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.
8
<PAGE>
Item 12. Related Party Transactions.
- ------------------------------------
The Company uses office facilities and administrative services provided by,
Livingston Capital, Ltd. ("Livingston"), a venture capital firm. The Company has
paid Livingston $3,000 and $5,665 for the fiscal years ended April 30, 1999 and
1998, 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.
9
<PAGE>
INDEX TO EXHIBITS
-----------------
None.
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, 1999 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, 1999 By: /s/ Allan K. Lager
- ------------------- ----------------------
Allan K. Lager, President and Director
Date: July 29, 1999 By: /s/ Gary Brunner
- ------------------- --------------------
Gary Brunner, Secretary and Director
Date: July 29, 1999 By: /s/ Kenneth E. Shearer
- ------------------- --------------------------
Kenneth E. Shearer, Director
10
<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, 1999 F-3
Consolidated Statements of Operations for the Years Ended April 30,
1999 and 1998 and for the Period from May 1, 1987 (Beginning of
the Development Stage) to April 30, 1999 F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
April 30, 1999 and 1998 and for the Period from May 1, 1987
(Beginning of the Development Stage) to April 30, 1997 F-5
Consolidated Statements of Cash Flows for the Years Ended April 30,
1999 and 1998 and for the Period from May 1, 1987 (Beginning of
the Development Stage) to April 30, 1999 F-6
Summary of Accounting Policies F-7
Notes to Consolidated Financial Statements F-9
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, 1999
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the two years in the period ended April 30, 1999. 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, 1999. 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, and the
cumulative amounts for the period from May 1, 1987 (beginning of development
stage) to April 30, 1999, present fairly, in all material respects, the
financial position of Applied Medical Devices, Inc. and subsidiary at April 30,
1999 and the results of their operations and their cash flows for each of the
two years in the period ended April 30, 1999 and the period from the beginning
of development stage (May 1, 1987) to April 30, 1999, in conformity with
generally accepted accounting principles.
/S/ BDO SEIDMAN, LLP
Denver, Colorado
July 9, 1999
F-2
<PAGE>
Applied Medical Devices, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
April 30, 1999
- --------- ----
Assets
Current -
Cash and cash equivalents $ 146,121
===========
Liabilities and Stockholders' Equity
Current liabilities -
Accrued expenses $ 310
-----------
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 (234,096)
-----------
Total Stockholders' equity 145,811
-----------
$ 146,121
===========
See accompanying independent auditors' report, summary
of accounting policies and notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
Applied Medical Devices, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
Development
Stage
Years Ended April 30, 1999 1998 Cumulative(a)
- --------------------- ---- ---- -------------
Expenses
<S> <C> <C> <C>
General and administrative $ 20,791 $ 34,549 $ 423,212
------------ ------------ ------------
Other income:
Interest income 7,029 8,713 125,527
Gain from sale of marketable securities -- -- 31,053
Other -- -- 32,536
------------ ------------ ------------
Total other income 7,029 8,713 189,116
------------ ------------ ------------
Net Loss $ (13,762) $ (25,836) $ (234,096)
------------ ------------ ------------
Basic and diluted loss per share of
common stock $ -- $ --
============ ============
Basic and diluted weighted average
number of common shares outstanding 65,977,800 65,977,800
============ ============
See accompanying independent auditors' report, summary
of accounting policies and notes to consolidated financial statements.
(a) Cumulative from May 1, 1987 (beginning of the development stage) to April
30, 1999.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Applied Medical Devices, Inc.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
Years Ended April 30, 1999 and 1998 and Period from May 1, 1987
(Beginning of the Development Stage) to April 30, 1997.
- -------------------------------------------------------
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 -- -- -- -- (194,498) -- (194,498)
----------- ----------- ----------- ----------- ----------- ----------- -----------
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
Net loss for the year -- -- -- -- (13,762) -- (13,762)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, April 30, 1999 65,977,800 $ 659,778 $ 4,172,128 $(4,451,999) $ (234,096) $ -- $ 145,811
=========== =========== =========== =========== =========== =========== ===========
See accompanying independent auditors' report, 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
Years Ended April 30, 1999 1998 Cumulative(a)
- --------------------- ---- ---- -------------
Operating activities:
<S> <C> <C> <C>
Net loss $ (13,762) $ (25,836) $(234,096)
Adjustments to reconcile net loss to cash
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 (220) (126) (42,800)
Other -- -- 10
--------- --------- ---------
Net cash used in operating activities (13,982) (25,962) (295,471)
--------- --------- ---------
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
--------- --------- ---------
Decrease in cash and cash equivalents (13,982) (25,962) (11,063)
Cash and cash equivalents, beginning of period 160,103 186,065 157,184
--------- --------- ---------
Cash and cash equivalents, end of period $ 146,121 $ 160,103 $ 146,121
========= ========= =========
See accompanying independent auditors' report, summary
of accounting policies and notes to consolidated financial statements.
(a) Cumulative from May 1, 1987 (beginning of the development stage) to April
30, 1999.
F-6
</TABLE>
<PAGE>
Applied Medical Devices, Inc.
(A Development Stage Company)
Summary of Accounting Policies
Organization and Business
- -------------------------
Applied Medical Devices, Inc. (the "Company")(a development stage company) was
incorporated on February 5, 1979 under 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 Instruments and Concentrations of Credit Risk
- -------------------------------------------------------
The Company's financial instruments that are exposed to concentrations of credit
risk consist primarily of cash equivalents.
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 Estimates
- ----------------
The preparation of financial statements in conformity with 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 Financial Instruments
- -----------------------------------
Unless otherwise specified, the Company believes the carrying value of financial
instruments approximates their 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, 1999 cash
equivalents include a United States Treasury bill of approximately $130,000.
Income Taxes
- ------------
The Company accounts for income taxes under Statement of Financial Accounting
Standards 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 Loss Per Share
- ------------------
The Company follows the provisions of 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.
Comprehensive Income
- --------------------
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income."
Comprehensive income is comprised of net income and all changes to the
statements of shareholders' equity, except those due to investment by
shareholders, changes in additional paid-in capital and distributions to
shareholders. The adoption of SFAS No. 130 does not impact the Company's
financial statements for the periods presented.
F-8
<PAGE>
Applied Medical Devices, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
1. Income Taxes
- ---------------
As of April 30, 1999 the net deferred tax asset recorded and its approximate tax
effect consists of the following:
Tax operating loss carryforwards $1,002,500
Capitalized start-up costs 155,500
----------
$1,158,000
==========
As of April 30, 1999, 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, 1999 the Company has net operating loss carryforwards (NOLs) of
approximately $2,688,000 which expire in the following years:
2000 $ 936,000
2001 1,126,000
2002 626,000
------------
$ 2,688,000
============
A portion of the NOLs is limited on an annual basis as a result of Internal
Revenue Code Section 382 which relates to the change in control that has
occurred as a result of the Company's business acquisitions.
F-9
<PAGE>
Applied Medical Devices, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
2. Stockholders' Equity
- -----------------------
During fiscal 1988 and 1989, the Company issued a total of 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. Related Party
- ----------------
The Company leases office space from an affiliate of a stockholder (Livingston
Capital, Ltd.) for approximately $250 per month on a month-to-month basis. Rent
expense for the years ended April 30, 1999 and 1998 was $3,000 and $5,665.
F-10
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-01-1998
<PERIOD-END> APR-30-1999
<CASH> 146,121
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 146,121
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 146,121
<CURRENT-LIABILITIES> 310
<BONDS> 0
0
0
<COMMON> 659,778
<OTHER-SE> (513,967)
<TOTAL-LIABILITY-AND-EQUITY> 146,121
<SALES> 0
<TOTAL-REVENUES> 7,029
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 20,791
<LOSS-PROVISION> 0
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<INCOME-PRETAX> (13,762)
<INCOME-TAX> 0
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,762)
<EPS-BASIC> 0
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