<PAGE>


                     U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)
[X]  QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934 For the period ended April 30, 1999


[ ]  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: 4,392,242 as of June 11, 1999.




<PAGE>



INNOVATIVE MEDICAL SERVICES
INDEX

PART 1.       FINANCIAL INFORMATION
              Item 1.   Financial Statements
                        Balance Sheets as of July 31, 1998 and April 30, 1999
                        Statements of  Operations  for the three months and nine
                            months ended April 30, 1998 and 1999
                        Statements of Cash Flows for the three  months and nine
                            months  ended April 30, 1998 and 1999
              Item 2.   Management's Discussion and Analysis of Financial
                        Condition and Results of Operations

PART 2.       OTHER INFORMATION
              Item 1.  Legal Proceedings
              Item 2.  Changes in Securities
              Item 3.  Defaults Upon Senior Securities: None
              Item 4.  Submission of Matters to a Vote of Security Holders: None
              Item 5.  Other information
              Item 6.  Exhibits and Reports on Form 8-K
              Signatures

                                       2
<PAGE>

The interim financial statements include all adjustments which in the opinion of
management  are  necessary  in  order  to  make  the  financial  statements  not
misleading.


INNOVATIVE MEDICAL SERVICES
BALANCE SHEETS
--------------------------------------------------------------------------------

                                        (unaudited)
ASSETS                                  April 30, 1999          July 31, 1998
                                        --------------          -------------
Current Assets
  Cash and cash equivalents              $     155,572           $     48,250
  Restricted cash                              104,805                206,230
  Accounts receivable, net of
     allowance for doubtful
     accounts of $17,850                     1,297,684                276,619
  Notes receivable                             190,317                106,918
  Inventories                                  422,661                360,566
  Prepaid expenses                              12,636                 11,556
                                                ------                 ------

Total current assets                         2,183,675              1,010,139
                                             ---------              ---------

Property, Plant and Equipment
  Property, plant and equipment                796,227                791,599
                                               -------                -------

    Total property, plant and equipment        796,227                791,599
                                               -------                -------
Noncurrent Assets
  Deposits                                      18,525                 14,075
  Patents and licenses                         424,946                 57,806
  Goodwill                                     258,055                      -
  Other intangible assets                      355,500                      -
  Deferred acquisition costs                    45,431              1,096,852
                                                ------              ---------

     Total noncurrent assets                 1,102,457              1,168,733
                                             ---------              ---------

  Total assets                             $ 4,082,359            $ 2,970,471
                                           ===========            ===========

LIABILITIES AND STOCKHOLDERS EQUITY

Current Liabilities
   Accounts payable                          $ 424,233              $ 495,287
   Accrued liabilities                           3,133                 47,060
   Notes payable                               656,159                294,986
                                               -------                -------

      Total current liabilities              1,083,525                837,333
                                             ---------                -------

Long-Term Debt                                       -                      -
                                             ---------                -------

Stockholders' Equity
  Class A common stock, no par value:
    authorized 20,000,000 shares, issued
    and outstanding 4,392,242 at
    April 30, 1999 and 3,916,351 at
    July 31, 1998                            6,500,955              6,125,718
  Class A warrants: issued and
    outstanding 3,687,500 warrants             108,750                108,750
  Accumulated deficit                       (3,610,871)            (4,101,330)
                                            ----------             ----------

       Total stockholders' equity            2,998,834              2,133,138
                                             ---------              ---------

   Total liabilities and stockholders'
     equity                                $ 4,082,359            $ 2,970,471
                                           ===========            ===========

                                       3
<PAGE>

INNOVATIVE MEDICAL SERVICES
STATEMENTS OF INCOME (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>


                                             For the Three Months Ended   For the Nine Months Ended
                                                  April 30                      April 30
                                             1999           1998           1999           1998
                                             -------------------------    ------------------------
<S>                                            <C>           <C>             <C>           <C>
Net sales                                  $ 1,169,903     $ 291,348     $ 2,733,401     $ 1,150,396
Cost of sales                                  496,960       168,778       1,050,880         684,945
                                               --------      --------      ----------        -------

Gross profit                                   672,943       122,570       1,682,521         465,451
                                               --------      --------      ----------        -------

Selling expenses                               101,256       164,658         289,028         538,947
General and administrative expenses            342,964       953,597         790,669       1,653,508
Research and development                        34,923       102,605         119,862         195,191
                                                -------      --------        --------        -------

Total operating costs                          479,143     1,220,860       1,199,559       2,387,646
                                               --------    ----------      ----------      ---------


Operating income (loss)                        193,800    (1,098,290)       482,962       (1,922,195)
                                               --------   -----------       --------      -----------

Other income and (expense):
Interest income                                  2,716             -           8,097               -
Dividend income                                      -         7,211               -          36,814
                                                 ------        ------         ------         -------

Total other income (expense)                     2,716         7,211           8,097          36,814
                                                 ------        ------          ------         ------


Income (loss) before income taxes              196,516    (1,091,079)        491,059      (1,885,381)

Federal and state income taxes                     200           200             600             600
                                                -------      --------         -------       ---------

Net income (loss)                            $ 196,316  $ (1,091,279)      $ 490,459      (1,885,981)
                                             ========== =============      ==========    ============


Net income per common share(primary)            $ 0.05       $ (0.28)         $ 0.12         $ (0.51)
                                                ======       =======          ======         =======
Net income per common share (fully diluted)     $ 0.03       $ (0.18)         $ 0.07         $ (0.32)
                                                =======      ========         =======        ========
</TABLE>



STATEMENTS OF ACCUMULATED DEFICITS
--------------------------------------------------------------------------------

                                            (Unaudited)
                                            Nine Months
                                               Ended             Year Ended
                                              April 30             July 31
                                                1999                1998
                                           -------------------------------------

Balance, beginning of period                $ (4,101,330)       $ (2,198,588)

Net income (loss)                                490,459          (1,902,742)
                                                 --------         -----------

Balance, end of period                      $ (3,610,871)       $ (4,101,330)
                                            =============       =============


                                       4
<PAGE>


INNOVATIVE MEDICAL SERVICES
STATEMENTS OF CASH FLOWS (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                         For the Nine Months Ended
                                                                  April 30
                                                        1999                 1998
                                                    ---------------------------------
<S>                                                  <C>                    <C>
Cash flows from operating activities
 Net income (loss)                               $     490,459         $  (1,885,981)

 Adjustments  to  reconcile  net
 income to net cash provided by operating activities:
   Depreciation                                        116,189                90,087
   Stock issued for services                                 -               450,000
Changes in assets and liabilities:
 (Increase) decrease in restricted cash                101,425                     -
 (Increase) decrease in accounts receivable         (1,021,065)               36,175
 (Increase) decrease in notes receivable               (83,399)             (472,816)
 (Increase) decrease in prepaid expense                 (1,080)              578,331
 (Increase) decrease in inventory                      (62,095)             (101,517)
 (Increase) decrease in deposits                        (4,450)                7,345
 (Increase) decrease in patent costs                  (367,140)              (13,000)
 (Increase) decrease in deferred acquisition costs   1,051,422              (468,124)
 Increase (decrease) in accounts payable               (71,054)              112,506
 Increase (decrease) in notes payable                  361,172               179,648
 Increase (decrease) in accrued liabilities            (43,928)              (10,933)
                                                   ------------        ---------------
    Net cash provided (used) by operating
       activities                                      466,456            (1,498,279)
                                                   ------------        ---------------

Cash flows from investing activities
  Purchase of property, plant and equipment           (120,817)             (179,081)
  Purchase of goodwill                                (258,055)                    -
  Purchase of other intangible assets                 (355,500)                    -
                                                   ------------        ---------------

      Net cash (used) in investing activities         (734,372)             (179,081)
                                                   ------------        ---------------

Cash flows from financing activities
  Increase (decrease) in long-term notes payable             -                (2,378)
  Sale of common stock                                 375,238                     -
                                                   ------------        ---------------

       Net cash provided by financing activities       375,238                (2,378)
                                                   ------------        ---------------

       Net increase (decrease) in cash and cash
           equivalents                                 107,322            (1,679,738)

Cash at beginning of period                             48,250             1,982,660
                                                   ------------        ---------------

Cash at end of period                                $ 155,572             $ 302,922
                                                   ============        ================
</TABLE>


                                       5
<PAGE>


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 the Company.

OVERVIEW
Innovative  Medical Services,  through an aggressive,  growth-oriented  business
strategy,  has built a strong market presence in the manufacturing and marketing
of pharmacy efficiency products, as well as water filtration systems.  Since its
founding in August 1992, and subsequent to its initial public offering in August
1996,  the Company has  invested in its  research  and  development  department,
production facilities and sales and marketing resources. The Company's principal
products  are  the  Pharmapure(R)   pharmacy  water  purification  system,  the
Fillmaster(R)  dispensing units for  reconstituting  oral suspensions,  and the
Nutripure(R)  line of  residential  drinking  water  systems.  The Company also
markets,  for all water filtration  products,  proprietary  filters that require
changing at intervals of nine to twelve months. Filter replacements  represent a
significant continuing source of revenue to the Company.

In addition,  Innovative  Medical  Services markets the  Medifier(TM),  a unique
magnifying device for use with any size prescription  bottle label,  targeted to
the growing elderly  population.  The Medifier  represents a low-cost entry into
the  retail  pharmacy  market and will be sold  through  the  Company's  current
distribution  channels as well as through  catalogues and  promotional  products
distributors.

Innovative Medical Services also owns Export Company of America, Inc. (EXCOA), a
Nevada corporation that holds and operates the Company's Brazilian export/import
operation.  The Company distributes medical, dental and veterinary supplies into
Brazil  and  plans to use this  distribution  conduit  for the  Company's  water
filtration products.

Innovative  Medical  Services'  customer  base  for  its  pharmaceutical   water
purification  systems includes  Wal-Mart,  Walgreens,  American Stores,  Eckerd,
Kroger, Fred Meyer,  Target and CVS, and IMS' expertise in pharmaceutical  water
systems provides a strong foundation for its "pharmacist recommended"  Nutripure
line of residential  water  filtration  systems.  The Company's  Nutripure Elite
reverse  osmosis  residential  water  system  usually  retails for $499,  and is
available as either a convenient,  compact,  unit easily  installed  beneath the
sink, or an attractive,  counter-top  appliance  requiring no installation.  The
Nutripure  2000  countertop  water filter  retails for $79.99 and competes  with
PUR(R), Brita(R) and Culligan(R) products.

In the second quarter,  the Company launched a major internet marketing strategy
beginning  with its new  internet  shopping  sites  and its  links to  Lycos(R),
Excite(R), Netscape(R), Info Seek(R) and Alta Vista(R). The Company's opened its
first online store on Yahoo!(R) Store at stores.yahoo.com/nutripure,  from which
all of the Company's residential and pharmacy water systems may be purchased.


Also in the second  quarter,  the Company placed its Nutripure  2000  countertop
water filtration system in approximately  100 Fred Meyer stores.  After tracking
sale rates  from its  December  opening  order for  stores in the  Portland  and
Seattle  regions,  Fred Meyer has begun  reordering in multi-case lots for those
stores and has expanded  retail  placement  of Nutripure  2000 to all Fred Meyer
Stores.  Innovative Medical Services  continues to negotiate  placement in other
regional and national chains.

                                       6
<PAGE>

During the third quarter,  the Company introduced the ScanMaster(TM).  Developed
as an  enhancement  to  the  Company's  popular  Fillmaster  1000e  computerized
pharmaceutical water dispenser,  the ScanMaster enhances prescription dispensing
by adding the assurance and  efficiency  of bar code reading  technology.  Users
simply  scan a  prescription's  NDC bar code in front of the  dispenser  and the
Fillmaster  1000e  displays the product name and required  water  quantity.  The
prescription  is then  dispensed  with one  touch of  button.  The  ScanMaster's
database  contains  proprietary  and  generic  oral drug  types by  manufactures
including  Bristol-Meyers Squibb Co. (NYSE: BMY), Apothecon,  SmithKline Beecham
(NYSE:  SBH),  Wyeth-Ayerst  Laboratories,  Eli Lilly & Co. (NYSE: LLY) and many
others.

The Company  continued  its  progress on two major  projects  which,  when fully
launched, should create significant quantum growth for the Company: 1) Nutripure
2000CT  countertop  water  filtration  system and 2) expansion of the  Company's
online retailing  intiative  through the addition of vitamins and supplements to
the Company's existing product line. The Nutripure 2000CT residential countertop
water  filtration  system has been very well received by the mass  merchandisers
and is undergoing  final  evaluations in several  chains.  The online  retailing
expansion to include  vitamins  and  supplements  should be completed  within 60
days.  Both retail  programs are  strongly  supported  by IMS'  internet  market
presence, and the Company expects these two projects to dramatically  accelerate
the Company's growth. As mentioned earlier, marketing for the Company's products
is supported by consumer targeted,  e-commerce  advertising  campaigns on AOL(R)
(NYSE: AOL), Yahoo(R) (NASDAQ: YHOO) and Lycos(R) (NASDAQ:  LCOS). The Company's
products   can   be   purchased    online   from   IMS'   Yahoo!(R)   Store   at
stores.yahoo.com/nutripure or from its web site at www.imspure.com.

RESULTS OF  OPERATIONS  FOR THE THREE  MONTHS  ENDED APRIL 30, 1999 VERSUS THREE
MONTHS ENDED APRIL 30, 1998
Revenues  of  $1,169,900  in the third  quarter  ended  April 30, 1999 were 302%
higher than the $291,300 in revenues  reported for the same quarter  ended April
30, 1998. Fillmaster Purification System sales in the 1999 quarter were $922,100
and  replacement  filter sales were  $247,800.  In the 1998 quarter,  Fillmaster
Purification  System  sales were  $138,000  and  replacement  filter  sales were
$111,500. The 568%increase in systems sales was largely due to the popularity of
the new electronic dispenser.  The 122% increase in replacement filter sales was
expected due to the continually  increasing  number of Fillmaster(R)Purification
Systems in use.

Gross  profit in the most recent  quarter was  $672,900  versus  $122,600 in the
year-earlier  quarter.  Gross profit  percentage  of 58% in the 1999 quarter was
higher versus the 42% gross profit  percentage  in the 1998  quarter.  The gross
profit  percentage  increase  reflects the  increased  proportion  of electronic
dispenser and filter sales associated with higher margins during the quarter.

Income for the quarter  ended April 30, 1999 was  $196,300  versus a net loss of
$(1,091,300)  for the same  quarter  in 1998.  The  increased  income was due to
increased sales of Fillmaster pharmacy water purification and dispensing systems
and disposable  filter  replacements,  and to growing revenues from sales of new
products,  including the Nutripure line of residential water filtration systems.
The  increase in income was  accompanied  by a 61%  decrease in total  operating
costs from $1,220,860 in the third quarter of 1998 to $479,142 in 1999.

RESULTS OF  OPERATIONS  FOR THE NINE  MONTHS  ENDED  APRIL 30,  1999 VERSUS NINE
MONTHS ENDED APRIL 30, 1998
Revenues of  $2,733,400 in the nine months ended April 30, 1999 were 138% higher
than the  $1,150,400  in revenues  reported  for the nine months ended April 30,
1998. Fillmaster(R) Purification System sales in the nine months ended April 30,
1999 were  $2,035,500 and replacement  filter sales were $665,400.  In the prior
period,  Fillmaster  Purification  System sales were  $758,000  and  replacement
filter  sales were  $330,500.  Sales of filters  rose 101%  during the period as
expected due to the  continually  increasing  number of Fillmaster  Purification
Systems in use.

Gross  profits for the nine months ended April 30, 1999 were  $1,682,500  versus
$465,500 in 1998.  The gross profit margin in 1999 was 62% compared to 41% gross
profit margin in 1998. The gross profit margin increase reflects increased sales
of  electronic  dispensers  and  replacement  filters in the  recent  nine-month
period. As the number of Fillmaster system installations  increases, so does the
volume of replacement filter sales.

Net income for first nine months ended April 30, 1999 was $490,500  versus a net
loss of  $(1,886,000)  for the same period last year.  This  turnaround  was the
result of  increased  sales and  improved  gross  profit  margins.  Also,  while
increasing  sales,  the Company cut Selling  Expenses by $249,900,  or 46%, from
$538,900 in the prior nine-month  period to $289,000 in the current period.  The
Company also reduced General and  Administrative  expenses by $862,800,  or 52%,
from  $1,653,500  to  $790,700.  The Company  expensed  $119,900 of Research and
Development  costs  associated  with  production and development of new products
during the current nine-month period.

LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended April 30, 1999,  the  Company's  current  assets to
liabilities  ratio rose from 1.21 to 2.02.  Current assets increased  $1,173,500
from  $1,010,100  to  $2,183,700.  Current  assets at April 30, 1999  include an
increase of $1,021,000 of accounts  receivable  due to sharply  increased  sales
during the quarter.  Inventories  increased $62,100 from $360,600 to $422,700 on
anticipation  of  increased  sales  of the  new  electronic  dispenser.  Current
liabilities  increased  $246,200  from $837,300 to  $1,083,500.  The increase in
current  liabilities  was the result of increased  use of the  Company's  credit
facility  associated  with a corresponding  increase in accounts  receivable and
inventories.

Cash flows from operations were $466,500 in the first nine months of fiscal year
1999. Cash flows used from  operations  were a negative  $1,498,300 for the same
period in 1998.  For those  periods,  cash  flows used in  investing  activities
included, respectively,  $120,800 and $179,100 for the purchase of machinery and
equipment  and  for  leasehold  improvements.   Cash  flows  used  in  investing
activities for the recent period also included $258,100 of goodwill and $355,500
of other  intangible  assets  related to the purchase of EXCOA, a privately held
Florida based  distributor,  and AMPROMED a Rio de Janeiro based import company.
The  purchase  did not have a  material  impact on the income  statement  of the
company  for the  period.  The company  has  temporarily  minimized  its current
activity in Brazil due to recent economic  developments in the region.

The Company received  $375,200 from financing  activities  during the period. In
February  1999,  the  Company  issued  242,800  shares  of  common  stock to two
accredited  investors for $360,750 ($1.486 per share) in a private  placement of
the shares  offered to the two accredited  investors.  With respect to the sales
made,  the Company  relied on Section  4(2) of the  Securities  Act of 1933,  as
amended.  No  advertising or general  solicitation  was employed in offering the
securities.  The  securities  were  offered  to  accredited  investors  who were
provided all of the current  public  information  available on the Company.

The total increase in cash and cash  equivalents  for the 1999 nine month period
was $107,300 as compared to decrease of  $(1,679,700)  during the same period in
1998.

                                       7
<PAGE>

PART 2            OTHER INFORMATION

ITEM 1
LEGAL PROCEEDINGS

The  following  is  an  update  of  developments  in  the  previously  disclosed
litigation  involving the Company filed in the Circuit Court of Pinellas County,
Florida by Zedburn  Corporation,  against  the Company for breach of contract in
October,  1997.  The Company has filed  counterclaims  based upon the  Racketeer
Influenced  and  Corrupt  Organization  (RICO) Act against  Mr.  Reitz,  Zedburn
Corporation,  Capital Development Group, Steven Durland and other defendants. It
is the  Company's  position  that Mr. Reitz and others  perpetrated  a scheme to
defraud the Company of cash fees and  securities  in connection  with  purported
services  of  arranging a public  offering of the  Company's  common  stock.  In
October  1997,  Mr.  Reitz and Zedburn  filed for  protection  under the Federal
bankruptcy laws. In August 1998, Mr. Reitz voluntarily  dismissed his bankruptcy
and as a result  thereof the Company has named Mr.  Reitz as a defendant  to its
counterclaims.

The Company believes that the defendants had perpetrated similar schemes against
other  parties.  The  Company  also  believes  it  has  substantially  completed
discovery and complied compelling evidence to prove its claims.

Several of the Defendants filed Motions to Dismiss the Company's  counterclaims.
A hearing on the  Motions  was held on October 1, 1998.  Certain of the  Motions
were granted pending the Company's  amendment of its  Counterclaim.  The Company
amended  its  Counterclaims  in  accordance  with the judge's  rulings.  Certain
Defendants filed second Motions to Dismiss the amended Counterclaims.  A hearing
on these latest  motions was held in March 1999,  before a different  judge than
the judge who ruled on the first motions. On April 20,1999,  Orders were entered
granting the Defendants'  Motions to Dismiss. However these Orders did not state
the basis for the Orders, nor was the Company's legal counsel provided notice of
the  Orders  or a copy of the new  judge's  correspondence  offering  a  "formal
ruling"  upon request. In May 1999 the Company filed an Appeal of the Orders and
Motions  for  Reconsideration  based upon  inconsistency  of the Orders with the
previous  judge's  rulings  and the lack of notice to the  Company.  The Company
believes  that its  Motions  have  merit and will be  granted.  In any event the
Company intends to pursue a trial as soon as possible.

The  Company  has  neither  accrued  a  liability  in its  financial  statements
regarding this litigation nor disclosed the matter in the footnotes thereof. The
Company  has not done so because it does not  believe  there is any merit to Mr.
Reitz's claims and that the likelihood that the Company will realize a loss from
these matters is believed remote. In addition,  the Company believes that in the
unlikely event that the Company settles, the amount of any such settlement would
not be material to the Company's financial statements.

ITEM 2.
CHANGES IN SECURITIES

In February  1999,  the Company  issued  242,766  shares of common  stock to two
accredited  investors for $360,750 ($1.486 per share) in a private  placement of
the shares offered to the two accredited investors.

With  respect to the sales  made,  the  Company  relied on  Section  4(2) of the
Securities Act of 1933, as amended.  No advertising or general  solicitation was
employed in offering the  securities.  The securities were offered to accredited
investors who were provided all of the current public  information  available on
the Company.

                                       8
<PAGE>



ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
Not applicable.

ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.

ITEM 5.
OTHER INFORMATION
Not applicable.

ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
         (A)      EXHIBITS
                  EXHIBITS DESCRIPTION
                           11    Statement re: computation of per share earnings
                           27    Financial data schedule
         (B)      REPORTS ON FORM 8-K
                  None.

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

By:  /s/ Gary Brownell
----------------------
Gary Brownell, Chief Financial Officer

                                       9
<PAGE>