10QSB/A 1 0001.txt AMENDED 10QSB FOR THE PERIOD ENDED 4/30/00 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 April 30, 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 of incorporation or organization) (IRS Employer Identification No.) 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: 6,443,814 as of June 8, 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 April 30, 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 $1,909,600 to $1,574,800 for the nine months ended April 30, 2000. At the same time, General and Administrative Expenses decreased by $28,500 of website expense and by $130,000 of bad debt expense for a total of $101,500. The cumulative change in accounting principle resulted in a net gain of $79,900. Net loss increased $359,600 from $474,900 to $834,500 for the nine months ended April 30, 2000. Net loss decreased $13,200 from $662,300 to $649,100 for the quarter ended April 30, 2000 due to less amortization on the lower capitalized amount of the website.
CONSOLIDATED BALANCE SHEETS ------------------------------------------------------------------------------------------------ (Unaudited) April 30 July 31 ASSETS 2000 1999 --------------- --------------- Current Assets Cash and cash equivalents $ 1,413,219 $ 22,056 Restricted cash 200,962 205,574 Accounts receivable, net of allowance for doubtful accounts of $ 180,000 1,014,104 790,166 Notes receivable 216,647 339,524 Inventories 712,214 719,972 Prepaid expenses 59,153 37,078 ------- ------ Total current assets 3,616,299 2,114,370 ---------- --------- Property, Plant and Equipment Property, plant and equipment 1,010,900 805,523 ---------- ------- Total property, plant and equipment 1,010,900 805,523 ---------- ------- Noncurrent Assets Deposits 13,083 6,575 Patents and license 576,016 425,550 Goodwill 252,522 256,422 Other intangible assets 346,500 353,250 Deferred acquisition costs 103,376 53,851 -------- ------ Total noncurrent assets 1,291,498 1,095,648 ---------- --------- Total assets $ 5,918,696 $ 4,015,541 ============ =========== LIABILITIES AND STOCKHOLDERS EQUITY Current Liabilities Accounts payable $ 321,961 $ 594,948 Accrued liabilities 55,709 43,068 Notes payable 260,411 446,067 -------- ------- Total current liabilities 638,082 1,084,083 -------- --------- Minority interest payable 75,082 - -------- ----- Stockholders' Equity Class A common stock, no par value: authorized 20,000,000 shares, issued and outstanding 6,416,939 at April 30, 2000 and 4,392,242 at July 31, 1999 9,771,973 6,663,318 Class A warrants: issued and outstanding 3,687,500 warrants 108,750 108,750 Accumulated deficit (4,675,190) (3,840,610) ----------- ----------- Total stockholders' equity 5,205,533 2,931,458 ============ =========== Total liabilities and stockholders' equity $ 5,918,696 $ 4,015,541 ============ ===========
STATEMENT OF INCOME (Unaudited) ------------------------------------------------------------------------------------------------ For the Nine Months Ended For the Three Months Ended April 30 April 30 2000 1999 2000 1999 ----------- ----------- --------- ------------ Net sales $ 1,574,840 $ 2,733,401 $ 357,845 $ 1,169,903 Cost of sales 809,301 1,050,880 234,249 496,960 -------- ---------- -------- ------- Gross profit 765,539 1,682,521 123,596 672,943 -------- ---------- -------- ------- Selling expenses 406,377 289,028 147,947 101,256 General and administrative expenses 1,219,428 790,669 612,652 342,964 Research and development 84,496 119,862 40,380 34,923 ------- -------- ------- ------ - Total operating costs 1,710,301 1,199,559 800,979 479,143 ---------- ---------- -------- ------- Operating income (loss) (944,762) 482,962 (677,383) 193,800 --------- -------- --------- ------- Other income and (expense): Interest income 4,218 8,097 1,714 2,716 ------ ------ ------ ----- Total other income (expense) 4,218 8,097 1,714 2,716 ------ ------ ------ ----- Income (loss) before income taxes, minority Interest in subsidiary operations and change in accounting principle (940,544) 491,059 (675,669) 196,516 Federal and state income taxes 600 600 200 200 ---- ---- ---- --- Income (loss) before minority interest in subsidiary operations and change in accounting principle (941,144) 490,459 (675,869) 196,316 Minority interest in subsidiary operations 26,718 - 26,718 - ------- -- ------- -- Net income (loss) before cumulative change in accounting principle (914,427) 490,459 (649,151) 196,316 Cumulative effect (to August 31, 1999) of change in accounting principle (see explanatory note) 79,896 - - - ------- -- -- -- Net income (loss) $ (834,531) $ 490,459 $ (649,151) $ 196,316 =========== ========== =========== ========== Net income (loss) per common share before change in accounting principal (basic) (0.17) 0.07 (0.12) 0.04 Cumulative effect (to August 31, 1999) of change in accounting principle (see explanatory note) 0.01 - - - ----- ------- ------ ------ Net income (loss) per common share (basic) $ (0.16) $ 0.07 (0.12) $ 0.04 ======== ======= ====== ====== Net income (loss) per common share before change in accounting principal (diluted) (0.11) 0.04 (0.08) 0.02 Cumulative effect (to August 31, 1999) of change in accounting principle (see explanatory note) 0.01 - - - ----- ------- ------- ------- Net income (loss) per common share (diluted) $ (0.10) $ 0.04 $(0.08) $ 0.02 ======== ======= ======== =======
Nine Months Ended Year Ended April 30 Ended July 31 CONSOLIDATED STATEMENTS OF ACCUMULATED DEFICITS 2000 1999 ----------------------------------------------------------------------------------------------- Balance, beginning of period $ (3,840,610) $ (4,101,330) Net income (loss) (834,531) 260,720 --------- ------- Balance, end of period $ (4,675,191) $ (3,840,610) ============= =============
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Nine Months Ended April 30 2000 1999 ------------ ------------ Cash flows from operating activities Net income (loss) $ (834,531) $ 490,459 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 115,324 116,189 Minority interest in subsidiary operations 75,082 Changes in assets and liabilities: (Increase) decrease in restricted cash 4,613 101,425 (Increase) decrease in accounts receivable (223,938) (1,021,065) (Increase) decrease in notes receivable 122,877 (83,399) (Increase) decrease in prepaid expense 7,758 (1,080) (Increase) decrease in inventory (22,075) (62,095) (Increase) decrease in deposits (6,508) (4,450) (Increase) decrease in patent and licenses (150,465) (367,140) (Increase) decrease in goodwill 6,750 (258,055) (Increase) decrease in intangible assets (49,525) (355,500) (Increase) decrease in deferred acquisition costs - 1,051,422 Increase (decrease) in accounts payable (272,987) (71,054) Increase (decrease) in accrued liabilities 12,641 (43,928) ------------- ------------ Net cash provided (used) by operating activities (1,214,985) (508,272) ------------- ------------ Cash flows from investing activities Purchase of property, plant and equipment (316,851) (120,817) ------------ Net cash (used) in investing activities (316,851) (120,817) --------------- ------------ Cash flows from financing activities Increase (decrease) in notes payable (185,656) 361,172 Proceeds from sale of common stock 3,108,655 375,238 --------------- ------------ Net cash provided by financing activities 2,923,000 736,410 --------------- ------------ Net increase (decrease) in cash and cash equivalents 1,391,163 107,320 Cash at beginning of period 22,056 48,250 --------------- ------------ Cash at end of period $ 1,413,219 $ 155,570 ============== ========= Interest paid $ 65,286 $ 39,622 Taxes paid $ 600 $ 600
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