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 October 31, 2001
[ ] 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 (IRS Employer
organization) 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: 7,678,099 as of December 14,
2001.
Explanatory note on amendment
The Registrant has filled this amendment to reflect changes made to its
financial statements for the fiscal year ended July 31, 2002 with respect to the
writing off of certain start up costs which had been previously capitalized. The
Amendment revises and replaces the following sections:
Item 1. Financial Statements and Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations;
The interim financial statements include all adjustments, which in the
opinion of management, are necessary in order to make the financial
statements not misleading.
CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------------------------------
(Unaudited)
October 31 July 31
2001 2001
Restated Restated
ASSETS (Note 2) (Note 2)
-------- ---------
Current Assets
Cash and cash equivalents $ 101,917 $ 207,092
Accounts receivable, net of allowance for doubtful
accounts of $ 100,000 at October 2001
and $115,000 at July 31, 2001 534,177 570,733
Due from officers and employees 256,936 240,001
Inventories 621,439 711,018
Prepaid expenses 176,799 182,556
-------- -------
Total current assets 1,691,268 1,911,400
---------- ---------
Property, Plant and Equipment
Property, plant and equipment 842,192 903,072
-------- -------
Total property, plant and equipment 842,192 903,072
-------- -------
Noncurrent Assets
Deposits 8,127 8,127
Patents and licenses 1,071,704 1,014,282
---------- ---------
Total noncurrent assets 1,079,831 1,022,409
---------- ---------
Total assets $ 3,613,291 $ 3,836,881
============ ===========
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts payable $ 351,043 $ 543,992
Accrued liabilities 106,368 96,691
Notes payable 300,000 -
-------- -------
Total current liabilities 757,411 640,683
-------- -------
Stockholders' Equity
Common stock, no par value: authorized
20,000,000 shares, issued and outstanding
6,974,699 at October 31, 2001 and
6,954,699 at July 31, 2001 11,670,446 11,619,665
Accumulated deficit (8,814,566) (8,423,467)
----------- -----------
Total stockholders' equity 2,855,880 3,196,198
---------- ---------
Total liabilities and stockholders' equity $ 3,613,291 $ 3,836,881
============ ===========
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
-------------------------------------------------------------------------------
For The Three Months Ended
October 31
----------
2001 2000
Restated
(Note 2)
------------- -------------
Net sales $ 864,028 $ 366,126
Cost of sales 487,864 164,077
-------- -------
Gross profit 376,164 202,049
-------- -------
Selling expenses 234,409 174,518
General and administrative expenses 459,953 445,473
Research and development 70,823 50,985
------- ------
Total operating costs 765,185 670,976
-------- -------
Operating income (loss) (389,021) (468,927)
--------- ---------
Other income and (expense):
Interest income 212 14,599
Interest Expense (1,690) -
------- -----
Total other income (expense) (1,478) 14,599
------- ------
Income (loss) before income taxes, minority
interest in subsidiary operations (390,499) (454,328)
Federal and state income taxes 600 200
---- ---
Income (loss) before minority interest in
subsidiary operations (391,099) (454,528)
Minority interest in subsidiary operations - 14,972
----------- ------
Net income (loss) $ (391,099) $ (439,556)
=========== ===========
Net income (loss) per common share (basic) $ (0.06) $ (0.07)
======== ========
Net income (loss) per common share (diluted) $ (0.06) $ (0.07)
======== ========
CONSOLIDATED STATEMENTS OF ACCUMULATED DEFICITS
-------------------------------------------------------------------------------
Three Months
Ended Year Ended
October 31 July 31
2001 2001
------------------------------
Balance, beginning of period $ (8,423,467) $ (6,411,971)
Net income (loss) (391,099) (2,011,496)
--------- -----------
Balance, end of period $ (8,814,566) $ (8,423,467)
============= =============
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
--------------------------------------------------------------------------------------------------------
For The Three Months Ended
October 31
2001 2000
Restated
(Note 2)
------------- ---------------
Cash flows from operating activities
Net income (loss) $ (391,099) $ (439,556)
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization 14,165 21,192
Depreciation 67,315 47,500
Minority interest in subsidiary operations - (14,972)
Changes in assets and liabilities:
(Increase) decrease in restricted cash - (3,036)
(Increase) decrease in accounts receivable 36,556 105,665
(Increase) decrease in due from officers and employees (16,935) (6,592)
(Increase) decrease in prepaid expense 5,757 (67,814)
(Increase) decrease in inventory 89,579 (92,644)
(Increase) decrease in deposits - 5,956
Increase (decrease) in accounts payable (192,949) 105,017
Increase (decrease) in accrued liabilities 9,679 19,114
---------------------------
Net cash provided (used) by operating
activities (377,932) (320,170)
--------------------------------
Cash flows from investing activities
Purchase of property, plant and equipment (6,434) (21,903)
Purchase of patents and licenses (71,589) (34,000)
Deferred acquisition costs - (201,152)
--------------------------------
Net cash (used) in investing activities (78,023) (257,055)
--------------------------------
Cash flows from financing activities
Proceeds from debt obligations 300,000 -
Payments on debt obligations - (14,583)
Proceeds from sale of common stock 50,780 84,932
------------------------------
-
Net cash provided by financing activities 350,780 70,349
------------------------------
Net increase (decrease) in cash and cash
equivalents (105,175) (506,876)
Cash at beginning of period 207,092 1,121,316
------------------------------
Cash at end of period $ 101,917 $ 614,440
========== =========
Supplemental disclosures of cash flow information
Cash paid for interest paid $ 1,690 $ 5,462
Cash paid for taxes paid $ 2,400 $ 800
Noncash investing and financing activities:
Value of shares issued in exchange for Nutripure.com minority interest $ - $ 550,011
NOTES TO FINANCIAL STATEMENTS
Note 1. Financial Statements
The financial statements included herein have been prepared by
Innovative Medical Services (the Company) without audit, pursuant
to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted as allowed by such rules and regulations, and Innovative
Medical Services believes that the disclosures are adequate to
make the information presented not misleading. It is suggested
that these financial statements be read in conjunction with the
July 31, 2001 audited financial statements and the accompanying
notes thereto. While management believes the procedures followed
in preparing these financial statements are reasonable, the
accuracy of the amounts are in some respects dependent upon the
facts that will exist and procedures that will be accomplished by
Innovative Medical Services later in the year. The results of
operations for the interim periods are not necessarily indicative
of the results of operations for the full year.
Note 2. Restatement of Financial Statements - Start-up Costs and Warranty
Liability
The accompanying financial statements have been restated to
correct an error in the recording and reporting of Start-up Costs
and the Warranty Liability of the Company.
The Company expended $230,000 during the year ended July 31, 2001
and an additional $47,831 during the July 31, 2002 fiscal year in
an effort to acquire and setup a Korean corporation. The Company
capitalized these costs as Deferred Acquisition costs as incurred.
The Company later determined the venture was not feasible and
decided not to go forward with the project. The total costs of
$277,831 were written-off as Abandoned Projects at July 31, 2002.
We now believe the treatment of these costs was not correct. The
accompanying financial statements now show these costs as expensed
when incurred as Start-up Costs. The income statement effect of
this restatement was to increase the net loss at July 31, 2001 by
$230,000 and to decrease the net loss at July 31, 2002 by
$230,000. The balance sheet effect is to show a decrease in
Deferred Acquisition Costs ay July 31, 2001 of $230,000.
In previous years the Company had not recorded a liability for its
future warranty obligation. Because the Company has now computed
and booked this liability the accompanying financial statements
have been restated to include this obligation. A liability of
$43,817 at October 31, 2001 and $33,791 at July 31, 2001 are now
included in Accrued Liabilities. The income statement effect of
these items was to reduce net loss at July 31, 2001 by $729 and to
increase net loss for the quarter ended October 31, 2001 $10,027.
Note 3. Segment Information
In accordance with the provisions of SFAS No. 131, certain
information is disclosed based on the way management organizes
financial information for making operating decisions and assessing
performance. In determining operating segments, the Company
reviewed the current management structure reporting to the chief
operating decision-maker ('CODM') and analyzed the reporting the
CODM receives to allocate resources and measure performance.
The Company's business activities are divided, managed and
conducted in two basic business segments, the Water Treatment
segment and the Bio Sciences segment. These two segments were
determined by management based upon the inherent differences in
the end use of the products, the inherent differences in the value
added processes made by the Company, the differences in the
regulatory requirements and the inherent differences in the
strategies required to successfully market finished products.
The Company plans to utilize multiple forms of analysis and
control to evaluate the performance of the segments and to
evaluate investment decisions. In general, gross margin and
Earnings Before Interest Depreciation and Amortization (EBITDA)
are deemed to be the most significant measurements of performance,
although collection volumes and certain controllable costs also
provide useful "early warning signs" of future performance.
Because the Company has just recently changed to multiple
segments, historical data on gross profit and income from
operations is not available. However, the following is a summary
of segment revenues at October 31, 2001:
Three months % Three months Ended %
Ended Total October 31, 2001 Total
October 31, 2000 Sales Sales
--------------------- ----------- ------------------ --------
Revenues:
Water Treatment $ 326,200 100% $528,300 61%
Bioscience 0 0% 335,700 39%
---------- --- -------- ---
Total Revenues $326,200 100% $864,000 100%
======== ==== ======== ====
Note 4. Subsequent Events
On November 30, 2001, we settled the dispute with NVID. Under the
terms of the agreement, NVID dismissed its case against us and
assigned the Axenohl patent to us. In return, NVID receives
651,000 shares of our common stock and 5% of our gross Axenohl
sales until March 2018, the end of the life of the patent.
Innovative Medical Services issued an additional 49,000 shares to
settle claims on behalf of NVID. There are minimum royalties of
$1,000,000 for the period of November 2001 to July 31, 2004 and
for each fiscal year thereafter. If the minimum royalty for any
period is not met, we have the right, in our sole and absolute
discretion to pay NVID the deficiency in cash, in our common stock
at prevailing market prices or transfer the patent back to NVID
without further royalty obligation. As the sole owner of the
patent, we control the granting of rights to market and distribute
Axenohl and related products. ETI-H2O, our wholly owned
subsidiary, retains sole manufacturing rights. As part of the
settlement agreement, we have entered into non-exclusive marketing
agreements for Axenohl with Watertronics, Ltd., for the United
Kingdom and Aqua Biotech S.A. de C.V. for the Republic of Mexico.
In addition, Innovative Medical Services reaffirmed the exclusive
right of Sistecam, S.A. to manufacture and market Axenohl for sale
in Costa Rica for the duration of the patent.
Note 5. Warrants
On August 8, 2001 the total 3,687,500 Class A warrants and the
total 785,000 Class Z warrants expired without exercise.
Note 6. Reclassifications
Certain reclassifications have been made to previously reported
statements to conform to the Company's current financial statement
format.
Note 7. Line of Credit
During the quarter, the Company obtained line of credit financing
with a private lender. The term of the agreement is one year
beginning September 15, 2001 with an interest rate of 12% per
annum The Company may borrow up to $500,000, which is fully
secured against the Company's accounts receivables. At October 31,
2001, the Company had drawn $300,000 against the line of credit.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction with the
audited and unaudited financial statements of Innovative Medical Services.
OVERVIEW
Innovative Medical Services began as a provider of pharmaceutical water
purification products. Although the majority of our current revenues are still
from the pharmacy industry, we have expanded from our commercial pharmacy market
into other, broader markets with new products, including residential water
filtration systems , heath and wellness related e-commerce products and
bioscience technologies.
Water Treatment Division
The Fillmaster(R) pharmaceutical water purification, dispensing and measuring
products include the Pharmapure(R) water purification system, the FMD 550
dispenser, the patented Fillmaster 1000e computerized dispenser and the patented
Scanmaster(TM) bar code reader. We also market proprietary National Sanitation
Foundation certified replacement filters for the Fillmaster Systems.
Our Nutripure(R) line of water treatment and filtration systems includes the
Nutripure 3000S-Series whole-house water softening systems, the Nutripure Elite
reverse osmosis point-of-use systems, the Nutripure 2000 countertop water
filtration system and the Nutripure Sport filtered sport bottle. We distribute
our various Nutripure products in several ways, including retail sales,
catalogue placement, business-to-business sales, internet promotion and in-home
sales presentations.
E-Commerce
Through our subsidiary Nutripure.com, we operate Nutripure.com(TM), an
e-commerce health website that distributes Bergen Brunswig products. We provide
consumers a wide variety of vitamins, minerals, nutritional supplements,
homeopathic remedies and natural products. In addition to merchandise, the site
offers comprehensive health and wellness information in an easy-to-access,
intuitive reference format. Although sales from Nutripure.com are non-material,
we have minimized costs related to the operation and promotion of the website.
Bioscience Division
Our bioscience division includes a silver ion technology called Axenohl(TM).
Axenohl is a patented, non-toxic aqueous disinfectant. The use dilution
formulation of Axenohl is called Axen(TM). The EPA registration for use of
Axenohl and Axen as hard surface disinfectants has been issued. The first
Axen-containing product we developed is our CleanKill(TM) hard surface
disinfectant for sale to the pest control industry. We intend not only to sell
our own Axen-based hard surface disinfectant products, but also to sell Axen as
an additive to other manufacture's products
We plan to pursue additional EPA, USDA and FDA regulatory approvals for other
applications. Additional possible uses for this product include wound care,
topical infection care and personal disinfecting retail products, which may
require FDA approvals, as well as municipal water treatment and
point-of-use/point-of-entry water treatment products, which may require
additional EPA approvals. The investment necessary to pursue regulatory approval
for Axenohl will be significant, but as additional US and international
approvals for Axenohl uses are received, we expect revenues to develop quickly.
We currently operate under a five-year contract signed in March 2001 to provide
Axenohl to Dodo & Company, a Korean cosmetics manufacturer and marketer. Dodo &
Company has developed an Axen-containing line of skin care products for the
treatment of acne. The product line, called A-Clinic, launched in South Korea in
September 2001. Under the contract, Dodo & Company will purchase approximately
$1.2 million dollars of product from us over five years. In addition to the
purchase price, we will receive a royalty on sales of the Axen-containing
products. We anticipate that, over the five years, the revenues from Dodo &
Company cosmetics royalties will exceed $5 Million. Regulatory clearances have
not been issued in South Korea.
Originally, we obtained worldwide manufacturing and marketing rights to
Axen/Axenohl from NVID International, Inc., in a License Agreement dated
November 24, 1999 and a Manufacturing, Licensing and Distribution Agreement
dated March 26, 2000 which supersedes the November 1999 Agreement. The latter
agreement became the subject of litigation that has subsequently settled in
November 2001.
Under the terms of the settlement, we acquired the Axenohl patent from NVID in
exchange for 700,000 shares of our common stock and 5% of our gross Axenohl
sales until March 2018, the end of the life of the patent. There are minimum
royalties of $1,000,000 for the period of November 2001 to July 31, 2004 and for
each fiscal year thereafter. If the minimum royalty for any period is not met,
we have the right, in our sole and absolute discretion to pay NVID the
deficiency in cash, in our common stock at prevailing market prices or transfer
the patent back to NVID without further royalty obligation. As the sole owner of
the patent, we control the granting of rights to market and distribute Axenohl
and related products. ETI-H2O, our wholly owned subsidiary, retains sole
manufacturing rights. As part of the settlement agreement, we have entered into
non-exclusive marketing agreements for Axenohl with Watertronics, Ltd., for the
United Kingdom and Aqua Biotech S.A. de C.V. for the Republic of Mexico. In
addition, Innovative Medical Services reaffirmed the exclusive right of
Sistecam, S.A. to manufacture and market Axenohl for sale in Costa Rica for the
duration of the patent.
Our bioscience division also includes a line of pesticide technologies. The
EPA-approved RoachX(TM) was the first product to launch from the line. The
national kickoff took place at the National Pest Management Association meeting
in New Orleans, Louisiana, in October 2001. We have earned the support of and
are selling RoachX through Vopak (formerly Van, Waters & Rogers) and members of
the Speckoz group of nine regional independent wholesalers.
United States Department of Agriculture testing confirms that RoachX is over 96%
effective in three to four days with one application for indoor and outdoor
eradication of cockroaches, and can be used near children and food preparation
areas. Boric acid is a well-known and effective deterrent of cockroaches and
will kill them on contact, but cockroaches do not naturally eat the repellent.
Although many pesticide products contain boric acid as the listed active
ingredient, we believe RoachX to be new because of the combination of boric acid
and glycerin in a colloidal suspension to create three unique results: 1) The
formula protects the boric acid from water and humidity, 2) The cockroaches
perceive formulation as food and will actually eat the glycerin-encapsulated
boric acid, and 3) The formula acts as a time-released pesticide, allowing the
cockroach to return to the nest before it dies and then becomes a "bait station"
for other roaches in the colony. We believe the product line, containing
particular formulas for specific pests, is effective against cockroaches, ants,
palmetto bugs, silverfish, waterbugs, ticks, fleas, lice and garden pests.
At the October trade show, we also launched ProChoice(TM) caulk for pest control
operators. We repackage an NSF, USDA and FDA approved food-grade silicone caulk
as our ProChoice product. ProChoice does not contain any pesticide and is a
convenience tool for pest control operators for "exclusion", or the filling of
cracks and crevices to create a physical barrier insects cannot penetrate.
In January 2002, we will formally launch CleanKill(TM), the Axen-based hard
surface disinfectant for the pest control industry. CleanKill is approved by the
EPA as an additional brand name of Axen. We believe adding sales of these
products to the already climbing RoachX revenues will have a very material
positive effect on revenues in the coming fiscal year.
By February 2002, we plan to launch AntX(TM), our latest development in
pesticide technology. We have submitted for and anticipate receiving EPA
approval for AntX(TM), the next product in the line. We are ready to begin
selling AntX as soon as approval is received.
Although we think that the pesticide technologies will have the most immediate
material impact on revenues in the coming quarters, we believe that the silver
ion technologies will ultimately become the largest revenue generator for
Innovative Medical Services. We intend not only to sell our own Axen-based
products, like CleanKill, but also to sell Axen as an additive to other
manufacturer's products, like Dodo Cosmetics' acne-fighting product line. We
believe that the innumerable applications for a non-toxic, tasteless, odorless,
highly effective antimicrobial agent present an outstanding market opportunity
for our Axenohl products.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 2001 VERSUS THREE
MONTHS ENDED OCTOBER 31, 2001 During the quarter, we continued to realize
revenues from multiple product lines in our different divisions. In order to be
more informative regarding distribution of revenues, discussion of revenues will
be in terms of our water treatment and bioscience divisions.
Revenues of $864,000 in the quarter ended October 31, 2001 were 136% higher than
the $366,100 in revenues reported for the quarter ended October 31, 2000. In the
prior period, revenues were exclusively from sales of commercial and residential
water treatment products. In the current period, revenues were also generated
from our new bioscience division. The increase in revenues was due to an
increase in revenues in our water treatment division and the addition of
revenues from our bioscience division. During the quarter, water treatment
division revenues of $528,400 were 42% higher than the prior quarter and include
$411,400 in Fillmaster commercial water purification product sales and $117,000
in Nutripure residential water treatment product sales. Bioscience division
revenues were $335,600 and include silver ionization product sales of $210,000
and pesticide product sales of $125,600.
Except for products sold through the Nutripure water dealer program, revenues of
all products are recognized on shipment where the sale is made F.O.B. shipping
point. Nutripure water dealer program sales consist mostly of sales of other
manufacturers' products to independent dealers. Revenue is recognized on sales
to dealers as shipped since we currently do not sell to third party customers of
the dealers.
Gross profit for the quarter ended October 31, 2001 was $376,164 versus $202,049
in 2000. Gross profit percentage of 44% in 2001 was lower versus 55% in 2000.
The decrease in gross profit percentage was largely due to lower margins
associated with the Nutripure water dealer program products. Also in the prior
quarter, Fillmaster replacement filter sales, which are associated with higher
margins, comprised 33% of total sales compared to only 14% of total sales in the
recent quarter.
Net loss for the quarter ended October 31, 2001 was $391,100 versus net loss of
$439,600 for the same period in 2000. During the quarter, General and
Administrative expenses remained constant increasing only 3% or $14,500 from
$445,500 in fiscal 2000 to $460,000 in fiscal 2001. Selling expense increased
approximately $59,900, or 34%, from $174,500 in 2000 to $234,400 in 2001 because
of increased costs associated with development of marketing materials, hiring of
additional sales personnel, trade shows and product launches for the bioscience
division. Research and Development costs were higher; increasing $19,800 or 39%
from $51,000 in the quarter ended October 31, 2000 to $70,800 in the current
quarter. The increase was due mainly to costs associated with development of
bioscience division products, including RoachX, AntX and Clean Kill.
LIQUIDITY AND CAPITAL RESOURCES
From inception through October 31, 2001, we have financed our operations
primarily through our initial public offering in August of 1996, by a subsequent
private placement in March of 2000, and by other smaller private placement stock
sales. We have operated without long-term debt and have no plans to obtain
long-term financing in the next twelve months. We believe that sales from our
new product lines will not provide sufficient capital resources to sustain
operations and fund product development through fiscal year 2002. In the short
term, we expect to raise capital through equity sales as necessary to fund
future growth until we operate above the break-even point. We continually
evaluate opportunities to sell additional equity or debt securities, or obtain
credit facilities from lenders to strengthen our financial position. The sale of
additional equity or convertible debt securities could result in additional
dilution to our stockholders.
Our liquidity is unaffected by the financing program offered to participating
dealers in the Nutripure water dealer program. We receive funds from our primary
lender and disperse the funds to the dealer, less a commission charged by us,
upon completion of the contract. The primary lender disperses funds to us. We
record a liability when the funds are received and relief of liability when
funds are dispersed, and we do not retain liability on the credit extended.
During the fiscal quarter ended October 31, 2001, our current assets to
liabilities ratio decreased from 3.15 to 2.37. Current assets decreased $220,100
from $1,911,400 to $1,691,300. Current assets at October 31, 2001 include a
decrease of $105,200 in cash and cash equivalents and a decrease of $89,600 in
inventories, which reflects a changing product mix and more efficient
purchasing. Accounts receivable and other current assets remained relatively
constant.
Current liabilities increased $106,700 from $606,900 to $713,600. The increase
in current liabilities was the net result of a pay down of accounts payable of
$193,000 and an increase in notes payable of $300,000. The note payable was
drawn against a $500,000 credit line we established during the quarter, which is
secured against our accounts receivable.
Noncurrent assets increased by $57,400 during the quarter due to the increase in
Patents and Licenses.
Cash flows used from operations were $377,900 in the quarter ended October 31,
2001 and $320,200 in 2000. For fiscal 2001, cash flows used in investing
activities included $6,400 for the purchase of machinery and equipment and
$71,600 for the purchase of patents and licenses. In fiscal 2000 cash flows used
in investing activities included $21,900 for the purchase of machinery and
equipment and $34,000 for the purchase of patents and licenses. We also incurred
$201,200 in deferred acquisition costs during fiscal 2000. Cash flows from
financing activities were $350,800 in fiscal 2001 and $70,300 in fiscal 2000.
Financing activities for the current quarter included the addition of $300,000
in notes payable from a line of credit established in September 2001. Cash flows
from financing activities also included an increase of common stock of $51,000
from the exercise of options during the quarter. In the prior quarter, cash
flows from financing activities included a pay down of $14,600 in notes payable
and an increase of common stock of $84,900 from the exercise of options during
the quarter. The total decrease in cash and cash equivalents for 2001 was
$105,200 as compared to an increase of $506,900 during the same period in 2000.
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
August 4, 2003
By: Gary Brownell
--------------------------------------
Gary Brownell, Chief Financial Officer
August 4, 2003