10QSB/A 1 0001.txt AMENDED 10QSB FOR THE PERIOD ENDED 1/31/00 U.S. Securities and Exchange Commission Washington, D.C. 20549 Form 10-QSB/A (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended January 31, 2000 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from _______ to _____ Commission File number 0-21019 INNOVATIVE MEDICAL SERVICES --------------------------- (Name of small business issuer in its charter) California 33-0530289 ---------- ---------- (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) 1725 Gillespie Way, El Cajon, California 92020 ---------------------------------------------- (Address of principal executive offices) 619 596 8600 ------------ Issuer's telephone number Check whether the issuer (1) filed all reports to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date: 5,152,117 as of March 14, 2000. Text of the Amendment Explanatory note: Each of the above listed items is hereby amended by deleting the item in its entirety and replacing it with the items attached hereto and filed herewith. The purpose of this amendment is to amend the Company's 10-QSB for the period ending January 31, 2000 (the "Original Filing"). During the period from January 1999 to January 2000, the Company's Research and Development Department created an e-commerce web supersite. The costs of development during this period were expensed as incurred. According to SOP98-1 (Statement of Position issued by the Accounting Standards Executive Committee) these costs should have been capitalized and included in the Company's assets. The Company had identified $450,100 of costs associated with the construction of the website during this period. As the software neared completion, Nutripure.com, a wholly owned subsidiary of the Company, was formed to acquire and operate the website. The website was sold to Nutripure.com for $1,000,000. In order to correct not previously capitalizing the costs of the website development, the Company accounted for this transaction by capitalizing $115,300 of the identified costs that occurred in the current quarter and by eliminating from inter-company sales $665,200, and with the remaining $334,800 representing the costs not capitalized in previous quarters, increased revenues and earnings for the period. The accompanying restated consolidated financial statements retroactively reflect a lowered amount of $207,707 of website cost. These reduced costs, which represent only those expenses directly related to website development, are consistent with the newly issued EITF Issue No. 00-2 -Emerging Issues Task Force Issue Titled: Accounting for Web Site Development Costs dated March 16, 2000. Of this amount, $79,900 was incurred before the beginning of the fiscal year and is shown as a cumulative change in accounting principle. At the same time, the entire $1,000,000 is eliminated from inter-company sales to correctly state total revenues. The accompanying financial statements also reflect an increase of $130,000 in General and Administrative Expenses that represents an addition to bad debt expense for a receivable that is now considered a doubtful account. As a result, sales decreased $334,800 from $1,551,800 to $1,217,000 for the six months ended January 31, 2000 and from $646,900 to $312,100 for the quarter ending January 31, 2000. At the same time, General and Administrative Expenses decreased by $12,100 of website expense and increased by $130,000 of bad debt expense for a net increase of $117,800. The cumulative change in accounting principle resulted in a net gain of $79,900. Net income decreased $372,400 from a profit of $187,400 to a loss of $185,000 for the six months ended January 31, 2000 and $305,000 from a profit of $41,200 to a loss of $263,800 for the quarter ended January 31, 2000.
CONSOLIDATED BALANCE SHEETS ------------------------------------------------------------------------------------------------------------------------ (Unaudited) January 31 July 31 ASSETS 2000 1999 --------------- --------------- Current Assets Cash and cash equivalents $ 79,570 $ 22,056 Restricted cash 203,611 205,574 Accounts receivable, net of allowance for doubtful accounts of $ 147,850 885,408 790,166 Notes receivable 436,677 339,524 Inventories 716,800 719,972 Prepaid expenses 50,324 37,078 ------- ------- Total current assets 2,372,389 2,114,370 ---------- ---------- Property, Plant and Equipment Property, plant and equipment 1,025,435 805,523 ---------- -------- Total property, plant and equipment 1,025,435 805,523 ---------- -------- Noncurrent Assets Deposits 13,083 6,575 Patents and license 493,950 425,550 Goodwill 253,156 256,422 Other intangible assets 348,750 353,250 Deferred acquisition costs 53,851 53,851 ------- ------- Total noncurrent assets 1,162,790 1,095,648 ---------- --------- Total assets $ 4,560,614 $ 4,015,541 ============ =========== LIABILITIES AND STOCKHOLDERS EQUITY Current Liabilities Accounts payable $ 505,822 $ 594,948 Accrued liabilities 9,602 43,068 Notes payable 425,538 446,067 -------- ------- Total current liabilities 940,961 1,084,083 -------- --------- Minority interest payable 101,490 - ---------- ---- Stockholders' Equity Class A common stock, no par value: authorized 20,000,000 shares, issued and outstanding 4,704,117 at January 31, 2000 and 4,392,242 at July 31, 1999 7,435,093 6,663,318 Class A warrants: issued and outstanding 3,687,500 warrants 108,750 108,750 Accumulated deficit (4,025,680) (3,840,610) ----------- ----------- Total stockholders' equity 3,518,163 2,931,458 ============ =========== Total liabilities and stockholders' equity $ 4,560,614 $ 4,015,541 ============ ===========
CONSOLIDATED STATEMENTS OF INCOME (Uuaudited) ------------------------------------------------------------------------------------------------------ For the Six Months Ended For the Three Months Ended January 31, 2000 January 31, 2000 2000 1999 2000 1999 Net sales $ 1,216,995 $ 1,563,498 $ 312,107 $ 767,979 Cost of sales 575,053 553,920 164,840 271,631 -------- -------- -------- ------- Gross profit 641,942 1,009,578 147,267 496,348 -------- ---------- -------- ------- Selling expenses 258,430 187,772 145,726 116,466 General and administrative expenses 606,776 447,705 341,296 179,067 Research and development 44,116 84,939 5,513 46,902 ------- ------- ------ ------ - Total operating costs 909,323 720,416 492,536 342,435 -------- -------- -------- ------- Operating income (loss) (267,380) 289,162 (345,268) 153,913 --------- -------- --------- ------- Other income and (expense): Interest income 2,504 5,381 1,426 2,688 ------ ------ ------ ----- - Total other income (expense) 2,504 5,381 1,426 2,688 ------ ------ ------ ----- Income (loss) before income taxes, minority Interest in subsidiary operations and change in accounting principle (264,876) 294,543 (343,842) 156,601 Federal and state income taxes 400 400 200 200 ---- ---- ---- --- Income (loss) before minority interest in subsidiary operations and change in accounting principle (265,276) 294,143 (344,042) 156,401 Minority interest in subsidiary operations 310 - 310 - ---- -- ---- - Net income (loss) before cumulative change in accounting principle (264,966) 294,143 (343,732) 156,401 Cumulative effect (to August 31, 1999) of change in accounting principle (see explanatory note) 79,896 - 79,896 - ------- -- ------- - Net income (loss) $ (185,070) $ 294,143 $ (263,836) $ 156,401 =========== ========== =========== ========= Net income (loss) per common share before change in accounting principle (basic) $ (0.06) $ 0.07 $ (0.07) $ 0.04 Cumulative effect (to August 31, 1999) of change in accounting principle (see explanatory note) 0.02 - 0.02 - ----- ---- ----- ----- Net income (loss) per common share (basic) $ (0.04) $ 0.07 $ (0.05) $ 0.04 ======== ======= ======== ======= Net income (loss) per common share before change in accounting principle (diluted) $ (0.03) $ 0.04 $ (0.04) $ 0.02 Cumulative effect (to August 31, 1999) of change in accounting principle (see explanatory note) 0.01 - 0.01 - ----- ----- ----- - Net income (loss) per common share (diluted) $ (0.02) $ 0.04 $ (0.03) $ 0.02 ======== ======= ======== =======
Six Months Ended Year Ended January 31 Ended July 31 CONSOLIDATED STATEMENTS OF ACCUMULATED DEFICITS 2000 1999 ---------------------------------------------------------------------------------------- Balance, beginning of period $ (3,840,610) $ (4,101,330) Net income (loss) (185,070) 260,720 --------- ------- Balance, end of period $ (4,025,680) $ (3,840,610) ============= =============
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) ----------------------------------------------------------------------------------------------- For the Six Months Ended January 31 2000 1999 ----------- --------- Cash flows from operating activities Net income (loss) $ (185,070) $ 294,143 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 72,324 70,550 Minority interest in subsidiary operations 101,490 - Changes in assets and liabilities: (Increase) decrease in restricted cash 1,963 2,641 (Increase) decrease in accounts receivable (95,242) (442,744) (Increase) decrease in notes receivable (97,153) (18,161) (Increase) decrease in prepaid expense (13,245) (12,545) (Increase) decrease in inventory 3,172 (203,716) (Increase) decrease in deposits (6,508) (4,450) (Increase) decrease in patent and licenses (68,400) (347,271) (Increase) decrease in goodwill 3,267 (261,322) (Increase) decrease in intangible assets 4,500 (360,000) (Increase) decrease in deferred acquisition costs - 1,051,422 Increase (decrease) in accounts payable (89,127) 49,999 Increase (decrease) in accrued liabilities (33,467) (41,611) ----------- ------------ Net cash provided (used) by operating activities (401,496) (223,065) ----------- ------------ Cash flows from investing activities Purchase of property, plant and equipment (292,236) (87,539) ----------- ------------ Net cash (used) in investing activities (292,236) (87,539) ----------- ------------ Cash flows from financing activities Increase (decrease) in notes payable (20,529) 257,216 Proceeds from sale of common stock 771,775 24,015 ----------- ------------ Net cash provided by financing activities 751,246 281,231 ----------- ------------ Net increase (decrease) in cash and cash equivalents 57,514 (29,373) Cash at beginning of period 22,056 48,250 ---------- ------------ Cash at end of period $ 79,570 $ 18,877 ========= ======== Interest paid $ 35,514 $ 4,807 Taxes paid $ 400 $ 400
SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INNOVATIVE MEDICAL SERVICES (Registrant) By: /s/ MICHAEL L. KRALL -------------------- Michael L. Krall, President/CEO Date: October 20, 2000 By: /s/ GARY BROWNELL ----------------- Gary Brownell, Chief Financial Officer Date: October 20, 2000