<PAGE>
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
--- Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended April 30, 2000
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)
PO BOX 2365, EDWARDS, CO 81632
------------------------ -----
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (970) 926-3631
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
Section13 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. [ ]
Form 10KSB
Page 1 of 11
<PAGE>
The issuer had approximately $6,900 in interest revenue in its most recent
fiscal year.
The aggregate market value of the voting stock held by non-affiliates was
approximately $9,896,670 based upon the bid price of the stock on July 18,
2000 of $.15. 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 July 19, 2000 was 65,977,800.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Report includes "forward-looking statements" within the meaning of
Section 27A of the Securities 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. The
Company has evaluated various entities, and in some instances, engaged in
discussions concerning possible arrangements. However, the Company has not
entered into
Form 10KSB
Page 2 of 11
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any definitive agreements. Subsequent to the fiscal year-end, the Company
intensified its evaluation of a privately held company, Nisco Systems, Inc.
which was organized in 1999 to design and install high speed
telecommunications infrastructures for corporations, specializing in
inter-building, intra-building, outside-plant and corporate networks. The
Company has entered into a letter of intent for the merger of Nisco Systems,
Inc., into the Company. Completion of the merger is subject to several
conditions, including completion of due diligence, a definitive agreement to
merge (which will include customary representations and warranties) and
approvals of the Board of Directors and shareholders of both entities. The
Company is currently engaged in its due diligence evaluation of this merger
candidate and no assurance can be given that any agreement, arrangement or
understanding will be concluded regarding a merger with this entity or any
other entity in the future.
(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. 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 that engage in the mergers with and
acquisitions of privately financed entities. There are many established
venture capital and financial concerns that 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.
Form 10KSB
Page 3 of 11
<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
had 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 the market price for each quarterly period during the two most
recent fiscal years is set forth below:
Form 10KSB
Page 4 of 11
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED HIGH BID LOW BID
------------- -------- -------
<S> <C> <C>
April 30, 2000 $.30 $.025
January 31, 2000 $.11 $.01
October 31, 1999 $.02 $.01
July 31, 1999 $.021 $.001
April 30, 1999 $.001 $.001
January 31, 1999 $.005 $.0001
October 31, 1998 $.001 $.0001
July 31, 1998 $.001 $.001
</TABLE>
The quotations for the Company's common stock reflect inter-dealer prices,
without retail mark-up, markdown or commission and may not necessarily
represent actual transactions.
At July 17, 2000, the approximate number of holders of record of the
Company's common stock was 9,710. 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, 2000, 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, 2001. The Company generated
approximately $6,900 in interest income and had expenses of approximately
$27,700 in the year ended April 30, 2000. Total assets, which decreased by
approximately eleven percent from $146,100 to $129,700, 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 determine to attempt to complete
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, 2000 AND APRIL 30, 1999.
During the fiscal year ended April 30, 2000, the Company had a net loss of
approximately $20,800. Net cash used in operating activities during the
fiscal year 2000 was approximately $16,400. The Company incurred general and
administrative costs of approximately $27,700 in fiscal 2000 of which
Form 10KSB
Page 5 of 11
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approximately $8,900 were incurred in connection with daily operations and
evaluation of business opportunities. Accounting, legal and transfer fees
were approximately $18,800 or 68 percent of the total general and
administrative expenses. The Company earned interest on temporary cash and
other money market instruments of approximately $6,900. Interest income
fluctuates based upon increases and decreases with general interest rates
that cannot be predicted.
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 in the amount of approximately $7,000.
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 that cannot be predicted. The Company has recently commenced a
due diligence evaluation of a prospective merger candidate. The Company could
expend substantial sums if it is determined that a business combination is
desirable. Thereafter, results of operations would be expected to be
materially affected by the business acquired by the Company. If the Company
determines to proceed with a business combination, or incurs significant
transaction costs and the business combination is not completed, the Company,
due to its limited capital resources, will have its liquidity adversely
affected and its ability to proceed with other business combinations will be
impaired.
INCOME TAXES AND NET OPERATING LOSSES
As discussed in Note 1 in the accompanying consolidated financial statement,
the Company had net operating loss carry forwards for income tax purposes of
approximately $1,745,000. The deferred tax asset of $817,000 arising from the
net operating loss carry forwards 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.
Item 7. FINANCIAL STATEMENTS.
See pages F-1 through F-10.
Form 10KSB
Page 6 of 11
<PAGE>
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
(a) Previous independent accountants
(i) On February 24, 2000, BDO Seidman, LLP resigned as independent
accountants for the Company.
(ii) The reports of BDO Seidman, LLP on the financial statements
for the past two fiscal years contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principle.
(iii) The Company's Board of Directors participated in and
approved the decision to change independent accountants.
(iv) In connection with its audits for the two most recent fiscal
years and through February 24, 2000, there have been no
disagreements with BDO Seidman, LLP on any matter of
accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of BDO
Seidman, LLP would have caused them to make reference thereto
in their report on the financial statements for such years.
(v) BDO Seidman LLP furnished the Company with a letter
addressed to the Securities and Exchange Commission stating
it agreed with the above statements. A copy of such letter,
dated February 25, 2000, was filed as Exhibit 16 to the
Company's Form 8-K Report regarding the change in
accountants.
(b) New independent accountants
The Company has engaged AJ. Robbins, P.C. as its new independent
accountants as of February 24, 2000. During the two most recent fiscal
years and through February 24, 2000, the Company has not consulted
with AJ. Robbins, P.C. regarding either (i) the application of
accounting principles to a specific transaction, either completed or
proposed; or the type of audit opinion that might be rendered on the
Company's financial statements.
Form 10KSB
Page 7 of 11
<PAGE>
or (ii) any matter that was either the subject of a disagreement, or a
reportable event.
PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS.
<TABLE>
<CAPTION>
Date First
Elected Principal Occupation
Name Age Director and Employment
---- --- -------- --------------
<S> <C> <C> <C>
Gary Brunner 55 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 57 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 55 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
Form 10KSB
Page 8 of 11
<PAGE>
affairs in 1964 from the University of Pittsburgh.
</TABLE>
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, 2000, the
Company held two 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 participation.
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, 2000, except that a Form 4 was filed late by Kenneth
E. Shearer, a director of the Company, and the Company is unsure of whether a
Form 3 has been filed by Luis R. Quinonez, a 10% shareholder of the Company.
Item 10. EXECUTIVE COMPENSATION.
(a) CASH COMPENSATION. The following sets forth cash compensation paid
by the Company during the fiscal year ended April 30, 2000 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, 2000, 1999 and 1998 were $2,400, $2,400 and
$4,400, 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.
Form 10KSB
Page 9 of 11
<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 17, 2000. No director of the Company nor any officers
and directors of the Company as a group beneficially owned shares of common
stock of the Company.
<TABLE>
<CAPTION>
Number of Percent of
Beneficial Owner Shares Class
---------------- ------ -----
<S> <C> <C>
Luis R. Quinonez 10,600,000 16.1%
C/I IQ Management Inc.
2800 Shirlington Road, Suite 620
Arlington, VA 22206
</TABLE>
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 per year for the fiscal years ended April 30, 2000
and 1999. The Company currently pays Livingston $250 per month. Gregory
Pusey, a consultant to, and a former principal shareholder of the Company, is
an officer and director of Livingston and his wife, Jill J. Pusey, is an
officer and principal shareholder of Livingston. 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.
(i) 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 is incorporated herein by this reference.
(ii) Bylaws, previously cited as exhibit 2(b) to the Company's
Registration Statement on Form S-18 (File No. 2-65079) which exhibit is
incorporated herein by this reference.
(b) REPORTS ON FORM 8-K.
A Form 8-K was filed in February 2000 stating the change in certifying
accountants used by the Company. See Item 8.
INDEX TO EXHIBITS
None.
Form 10KSB
Page 10 of 11
<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 27, 2000 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 27, 2000 By: /s/ Allan K. Lager
------------------
Allan K. Lager, President and Director
Date: July 27, 2000 By: /s/ Gary Brunner
----------------
Gary Brunner, Secretary and Director
Date: July 27, 2000 By: /s/ Kenneth E. Shearer
----------------------
Kenneth E. Shearer, Director
Form 10KSB
Page 11 of 11
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report F-2
Independent Auditors' Report F-3
Financial Statements:
Consolidated Balance Sheet F-4
Consolidated Statements of Operations F-5
Consolidated Statements of Changes in Stockholders' Equity F-6
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-8
</TABLE>
F-1
<PAGE>
AJ. ROBBINS, PC
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
3033 EAST 1ST AVENUE
SUITE 201
DENVER, COLORADO 80206
INDEPENDENT AUDITORS' REPORT
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS
APPLIED MEDICAL DEVICES, INC.
VAIL, COLORADO
We have audited the accompanying consolidated balance sheet of Applied Medical
Devices, Inc. and subsidiary (a development stage company) as of April 30, 2000
and the related consolidated statements of operations, stockholders' equity, and
cash flows the year ended April 30, 2000. 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 audit.
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 audit provides 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, 2000 and the results of their
operations and their cash flows for the year ended April 30, 2000, in conformity
with generally accepted accounting principles.
AJ. ROBBINS, PC
CERTIFIED PUBLIC ACCOUNTANTS
AND CONSULTANTS
Denver, Colorado
June 30, 2000
F-2
<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 consoldiated statements of operations,
stockholders' equity and cash flows of Applied Medical Devices, Inc. and
subsidiary (a development stage company) for the year 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 audit.
We conducted our audit 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 audit provides 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
consolidated results of operations and cash flows of Applied Medical Devices,
Inc. and subsidiary for the year 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-3
<PAGE>
APPLIED MEDICAL DEVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
APRIL 30, 2000
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 129,680
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses $ 4,660
-----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 75,000,000 shares
authorized, 65,977,800 issued and outstanding 659,778
Additional paid-in capital 4,172,128
Accumulated deficit (4,451,999)
Deficit accumulated during the development stage (254,887)
-----------
Total Stockholders' Equity 125,020
-----------
$ 129,680
===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-4
<PAGE>
APPLIED MEDICAL DEVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MAY 1,
1987 (INCEPTION
OF THE DEVELOPMENT
FOR THE YEARS ENDED APRIL 30, STAGE) TO
----------------------------- APRIL 30,
2000 1999 2000
------------ ------------ ------------
<S> <C> <C> <C>
EXPENSES:
General and administrative $ 27,667 $ 20,791 $ 450,879
------------ ------------ ------------
OTHER INCOME:
Interest income 6,876 7,029 132,403
Gain from sale of marketable securities -- -- 31,053
Other -- -- 32,536
------------ ------------ ------------
Total Other Income 6,876 7,029 195,992
------------ ------------ ------------
NET LOSS $ (20,791) $ (13,762) $ (254,887)
============ ============ ============
NET LOSS PER COMMON SHARE -
BASIS AND DILUTED $ * $ *
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 65,977,800 65,977,800
============ ============
*Less than $(.01)
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
<PAGE>
APPLIED MEDICAL DEVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED APRIL 30, 2000 AND 1999 AND PERIOD FROM
MAY 1, 1987 (INCEPTION OF THE DEVELOPMENT STAGE) TO APRIL 30, 1998
<TABLE>
<CAPTION>
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 -- -- -- -- (220,334) -- (220,334)
----------- ----------- ----------- ----------- ----------- ----------- -----------
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
Net loss for the year -- -- -- -- (20,791) -- (20,791)
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE, APRIL 30, 2000 65,977,800 $ 659,778 $ 4,172,128 $(4,451,999) $ (254,887) $ -- $ 125,020
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-6
<PAGE>
APPLIED MEDICAL DEVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM MAY 1,
1987 (INCEPTION
OF THE DEVELOPMENT
FOR THE YEARS ENDED APRIL 30, STAGE) TO
----------------------------- APRIL 30,
2000 1999 2000
---------- ---------- -----------------
<S> <C> <C> <C>
CASH FLOWS USED BY OPERATING ACTIVITIES:
Net loss $ (20,791) $ (13,762) $(254,887)
Adjustments to reconcile net loss to net cash used
by operations:
Gain from sale of marketable securities -- -- (31,053)
Issuance of common stock for services -- -- 7,565
Changes in:
Accounts receivable -- -- 4,903
Accrued expenses 4,350 (220) (38,450)
Other -- -- 10
--------- --------- ---------
Cash Flows (Used) by Operating
Activities (16,441) (13,982) (311,912)
--------- --------- ---------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
Proceeds from sale of marketable securities -- -- 47,040
--------- --------- ---------
Cash Flows Provided by Investing
Activities -- -- 47,040
--------- --------- ---------
CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES:
Proceeds from issuance of common stock -- -- 139,368
Proceeds from exercise of stock warrants -- -- 98,000
--------- --------- ---------
Cash Flows Provided by Financing
Activities -- -- 237,368
--------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS (16,441) (13,982) (27,504)
CASH AND CASH EQUIVALENTS, beginning of
period 146,121 160,103 157,184
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of
period $ 129,680 $ 146,121 $ 129,680
========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-7
<PAGE>
APPLIED MEDICAL DEVICES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT 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-8
<PAGE>
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
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, 2000 cash
equivalents include a United States Treasury bill of approximately $130,000.
INCOME TAXES
Deferred income taxes are recorded to reflect the tax consequences in future
years of temporary differences between the tax basis of the assets and
liabilities and their financial statement amounts at the end of each reporting
period. Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized. Income tax expense is the tax
payable for the current period and the change during the period in deferred tax
assets and liabilities. The deferred tax assets and liabilities have been netted
to reflect the tax impact of temporary differences.
NET LOSS PER SHARE
In 1997, the Financial Accounting Standards Board (FASB) issued Statement No.
128, "Earnings Per Share". Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, to conform to Statement 128 requirements.
NOTE 2 - INCOME TAXES
As of April 30, 2000 the net deferred tax asset recorded and its approximate tax
effect consists of the following:
<TABLE>
<S> <C>
Net operating loss carryforwards $ 650,884
Capitalized start-up costs 165,809
---------
816,693
Less: valuation allowance (816,693)
---------
Net deferred tax asset $ --
=========
</TABLE>
As of April 30, 2000, 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.
F-9
<PAGE>
NOTE 2 - INCOME TAXES (CONTINUED)
At April 30, 2000 the Company has net operating loss carryforwards (NOLs) of
approximately $1,745,000 which expire in the following years:
<TABLE>
<S> <C>
2001 $1,119,000
2002 626,000
----------
$1,745,000
==========
</TABLE>
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.
NOTE 3 - 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.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company leases office space from an affiliate (Livingston Capital, Ltd.) for
approximately $250 per month on a month-to-month basis. Rent expense for the
years ended April 30, 2000 and 1999 was $3,000 per year.
NOTE 5 - SUBSEQUENT EVENTS (UNAUDITED)
On July 7, 2000 the Company entered into a letter of intent to merge with NISCO
Systems, Inc. The closing of the merger is subject to, among other items,
finalization of due diligence, execution of a definitive agreement and
stockholder approval.
F-10
