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 January 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      (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:  6,625,752 as of March 16,
2001.


<PAGE>



INNOVATIVE MEDICAL SERVICES

INDEX

PART 1. FINANCIAL INFORMATION

     Item 1. Financial Statements

          Balance Sheets as of July 31, 2000 and January 31, 2001

          Statements of  Operations  for the three months ended January 31, 2000
          and 2001

          Statements  of Cash Flows for the three months ended  January 31, 2000
          and 2001

     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



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


<PAGE>

CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                           (Unaudited)
                                                           January 31          July 31
ASSETS                                                        2001               2000
                                                        --------------    ---------------
Current Assets
<S>                                                       <C>             <C>
     Cash and cash equivalents                            $    348,578    $  1,121,316
     Restricted cash                                           211,004         204,887
     Accounts receivable, net of allowance for doubtful             --
          accounts of $ 225,000                                285,574         411,322
     Notes receivable                                          335,624         226,729
     Inventories                                               891,056         796,136
     Prepaid expenses                                           63,842          33,975
                                                             ---------       ---------
          Total current assets                               2,135,677       2,794,365
                                                             ---------       ---------
Property, Plant and Equipment
     Property, plant and equipment                             968,773       1,056,252
                                                             ---------       ---------
          Total property, plant and equipment                  968,773       1,056,252
                                                             ---------       ---------
Noncurrent Assets
     Deposits                                                    8,127          13,083
     Patents and license                                     1,008,048         498,181
     Goodwill                                                  246,623         250,889
     Other intangible assets                                   339,750         344,250
     Deferred acquisition costs                                     --         202,542
                                                             ---------       ---------
          Total noncurrent assets                            1,602,548       1,308,946
                                                             ---------       ---------
     Total assets                                         $  4,706,998    $  5,159,563
                                                             =========       =========
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
     Accounts payable                                     $    319,321    $    308,812
     Accrued liabilities                                        46,867          36,880
     Notes payable                                             196,009         210,592
                                                             ---------       ---------
          Total current liabilities                            562,196         556,284
                                                             ---------       ---------
Minority interest payable                                           --          61,697
                                                             ---------       ---------
Stockholders' Equity
     Class A common stock, no par value: authorized
          20,000,000 shares, issued and outstanding
           6,504,351 at January 31, 2001 and
           5,942,903 at July 31, 2000                       10,556,543      10,018,873
     Class A warrants: issued and outstanding 3,686,000
          warrants                                             108,750         108,750
     Accumulated deficit                                    (6,520,490)     (5,586,041)
                                                            ----------       ---------
          Total stockholders' equity                         4,144,803       4,541,582
                                                             ---------       ---------
     Total liabilities and stockholders' equity           $  4,706,998    $  5,159,563
                                                             =========       =========
</TABLE>

<PAGE>


CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                For the Six Months Ended   For the Three Months Ended
                                                                       January 31                  January 31
                                                                  2001            2000         2001          2000
                                                              -----------    -----------    ---------   ----------
<S>                                                           <C>            <C>            <C>          <C>
Net sales                                                     $   761,441    $ 1,216,995    $ 395,315    $ 312,107
Cost of sales                                                     424,517        575,053      260,440      164,840
                                                              -----------    -----------    ---------    ---------
Gross profit                                                      336,924        641,942      134,874      147,267
                                                              -----------    -----------    ---------    ---------
Selling expenses                                                  277,166        258,430      102,647      145,726
General and administrative expenses                               949,138        606,776      503,665      341,296
Research and development                                           82,803         44,116       31,818        5,513
                                                              -----------    -----------    ---------    ---------
Total operating costs                                           1,309,106        909,323      638,130      492,536
                                                              -----------    -----------    ---------    ---------
Operating income (loss)                                          (972,182)      (267,380)    (503,256)    (345,268)
                                                              -----------    -----------    ---------    ---------
Other income and (expense):
Interest income                                                    23,161          2,504        8,562        1,426
                                                              -----------    -----------    ---------    ---------
Total other income (expense)                                       23,161          2,504        8,562        1,426
                                                              -----------    -----------    ---------    ---------
Income (loss) before income taxes, minority
     Interest in subsidiary operations and
     change in accounting principle                              (949,021)      (264,876)    (494,693)    (343,842)

Federal and state income taxes                                        400            400          200          200
                                                              -----------    -----------    ---------    ---------
Income (loss) before minority interest in subsidiary
     operations and change in accounting principle               (949,421)      (265,276)    (494,893)    (344,042)

Minority interest in subsidiary operations                         14,972            310            0          310
                                                              -----------    -----------    ---------    ---------
Net income (loss) before cumulative
     change in accounting principle                              (934,449)      (264,966)    (494,893)    (343,732)

Cumulative effect of change
     in accounting principle                                           --         79,896           --       79,896
                                                              -----------    -----------    ---------    ---------
Net income (loss)                                             $  (934,449)   $  (185,070)   $(494,893)   $(263,836)
                                                              ===========    ===========    =========    =========
Net income (loss) per common share before change
     in accounting principle (basic)                          $     (0.15)   $     (0.06)   $   (0.08)   $   (0.07)
Cumulative effect of change
     in accounting principle                                           --           0.02           --         0.02
                                                              -----------    -----------    ---------    ---------
Net income (loss) per common share (basic)                    $     (0.15)   $     (0.04)   $   (0.08)   $   (0.06)
                                                              ===========    ===========    =========    =========
Net income (loss) per common share before change
     in accounting principal (diluted)                        $     (0.15)   $     (0.03)   $   (0.08)   $   (0.04)
Cumulative effect of change
     in accounting principle                                           --           0.01           --         0.01
                                                              -----------    -----------    ---------    ---------
Net income (loss) per common share (diluted)                  $     (0.15)   $     (0.02)   $   (0.08)   $   (0.03)
                                                              ===========    ===========    =========    =========
</TABLE>

<TABLE>
                                                         Six Months
                                                           Ended          Year Ended
                                                         January 31         July 31
CONSOLIDATED STATEMENTS OF ACCUMULATED DEFICITS             2001             2000
-------------------------------------------------------------------------------------
<S>                                                     <C>              <C>
Balance, beginning of period                            $(5,586,041)     $(3,840,610)

Net income (loss)                                          (934,449)      (1,745,431)
                                                        -----------      -----------
Balance, end of period                                  $(6,520,490)     $(5,586,041)
                                                        ===========      ===========
</TABLE>

<PAGE>

<TABLE>

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
--------------------------------------------------------------------------------

                                                                For the Six Months Ended
                                                                       January 31
                                                                2001                2000
                                                             -------------   ------------

Cash flows from operating activities
<S>                                                            <C>            <C>
       Net income (loss)                                       $  (934,449)   $ 160,821

       Adjustments to reconcile net income to net cash
       provided by operating activities:
           Amortization                                             42,385           --
           Depreciation                                             95,370       42,824
           Minority interest in subsidiary operations              (61,697)          --
       Changes in assets and liabilities:
           (Increase) decrease in restricted cash                   (6,117)       4,113
           (Increase) decrease in accounts receivable              125,748     (311,123)
           (Increase) decrease in notes receivable                (108,895)        (452)
           (Increase) decrease in prepaid expense                  (29,867)     (28,481)
           (Increase) decrease in inventory                        (94,920)     (56,861)
           (Increase) decrease in deposits                           4,956       (6,508)
           (Increase) decrease in patent and licenses             (509,867)      (3,000)
           (Increase) decrease in deferred acquisition costs       202,542           --
           (Increase) decrease in goodwill                           4,267        1,633
           (Increase) decrease in intangible assets                  4,500        2,250
           Increase (decrease) in accounts payable                  10,509       88,353
           Increase (decrease) in accrued liabilities                9,987      (29,980)
                                                                ----------    ---------
                Net cash provided (used) by operating
                      activities                                (1,245,548)    (136,751)
                                                                ----------    ---------
Cash flows from investing activities
       Purchase of property, plant and equipment                   (50,276)    (201,107)
                                                                ----------    ---------
                Net cash (used) in investing activities            (50,276)    (201,107)
                                                                ----------    ---------
Cash flows from financing activities
       Increase (decrease) in notes payable                        (14,583)     121,300
       Proceeds from sale of common stock                          537,669      216,750
                                                                ----------    ---------
                Net cash provided by financing activities          523,086      338,050
                                                                ----------    ---------
                Net increase (decrease) in cash and cash
                      equivalents                                 (772,738)         192

Cash at beginning of period                                      1,121,316       22,056
                                                               -----------    ---------
Cash at end of period                                          $   348,578    $  22,248
                                                               ===========    =========
Interest paid                                                  $     9,645    $  16,299
Taxes paid                                                     $       800    $     800
</TABLE>



<PAGE>



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, 2000 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. Stock Dividend

     On October 26, 2000 Innovative Medical Services announced that the Board of
     Directors  voted  to  declare  a  dividend  in kind of  Innovative  Medical
     Services'  common  stock.  This common  stock  dividend  was  declared  and
     distributed in lieu of the previously  announced  dividend of Nutripure.com
     shares.  The Company  distributed one share of Innovative Medical Services'
     common  stock for every  fifty  shares  held of record on November 6, 2000,
     with fractional  shares rounded up to the nearest whole share,  for a total
     of 121,961 shares.

     In  December  1999,  Innovative  Medical  Services  formed a  wholly  owned
     subsidiary, Nutripure.com, to capitalize on internet commerce opportunities
     focusing  on health and  wellness.  In  January  2000,  Innovative  Medical
     Services  declared a dividend in kind of Nutripure.com  common stock as the
     Company began the process to spin off  Nutripure.com  as a separate  public
     company.  The record date and  distribution  date were to be set  following
     completion of the  registration of Nutripure.com as a reporting issuer with
     the Securities  and Exchange  Commission.  During the last several  months,
     however,  adverse market conditions for solely internet-based ventures have
     eroded  Management's  confidence  in the  viability of a public  market for
     Nutripure.com   common  stock.   Therefore,   the  Board  has  amended  its
     declaration of a Nutripure.com dividend to a dividend of Innovative Medical
     Services'  common  stock.  The  Company  will  retain  Nutripure.com  as an
     operating  division of Innovative Medical Services in order to minimize the
     substantial  administrative expense associated with launching and operating
     a public company.

Note 3. Acquisitions

     In November 2000, Innovative Medical Services acquired 100% of the stock of
     ETIH2O, Inc., a Florida corporation,  for 56,381 shares of IMS stock valued
     at $140,953  ($2.50 per share).  The  transaction  was  recorded  using the
     purchase method of accounting.  The assets acquired and liabilities assumed
     are as follows:

              Assets:

              Notes Receivable                  $   33,655
              Inventories                           32,077
              Equipment                             16,932
              Licensing & Distribution Rights      118,324
                                                ----------
                 Total Assets                      200,988
              Liabilities:
                 Notes Payable - IMS                60,035
              Equity                            $  140,953
                                                ==========

     Assets and  liabilities  were valued at historical cost and no goodwill was
     recorded in the  transaction.  Results of  operations  of ETIH2O  Inc.  are
     included in the current quarter. The acquired entity was a startup company,
     if results of operations were included in prior periods and shown as though
     the companies  had been  combined at the beginning of the period,  it would
     not have a material  affect on the  consolidated  financial  statements  of
     Innovative Medical Services.

<PAGE>


     The Company merged ETIH2O with a newly formed Nevada corporation of similar
     name and  dissolved  the Florida  corporation.  ETI-H2O,  a privately  held
     technology  corporation,  developed  Axenohl and  focuses on  research  and
     development of varied water treatment applications, including electronic RF
     scale control, copper/silver ionization and filtration technologies.

Note 4. Common Stock

     In addition to the common  stock  issued,  described  in Notes 2 and 3, the
     Company completed a $250,000 private placement in January 2001 in which the
     Company  issued 83,334 shares of common stock to six investors at $3.00 per
     Unit.  Each  Unit  contained  one share of  common  stock and a warrant  to
     acquire  an  additional  share of  common  stock  for $4.00 per share up to
     January 28, 2003.


<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  (the   Company)  is  the  nation's   leader  in
pharmaceutical  water  purification.  The  Company has  expanded  from its niche
pharmacy  market  into  other,  broader  markets  with new  products,  including
residential and commercial water filtration systems, health and wellness-related
retail merchandise, e-commerce products, and silver ion bioscience technologies.

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.  The  Company  also  markets  proprietary  NSF
certified replacement filters for the Fillmaster Systems.

The Company's "Pharmacist Recommended"  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. The Company distributes its various Nutripure products in
several ways, including retail sales, catalogue placement,  business-to-business
sales, internet promotion and in-home sales presentations.

During the first half of fiscal 2001,  Innovative  Medical  Services created the
most  comprehensive  marketing  program ever  introduced to the water  treatment
industry. The program offers existing independent water treatment dealers a line
of residential water softening and other point-of-use water treatment  equipment
for sale to the public under IMS' reputable "Pharmacist  Recommended"  Nutripure
brand.  In  addition,  the  program  provides   complementary,   industry-unique
financing that extends  credit to consumers for the purchase of water  treatment
equipment.  During the second  quarter,  the Company  partnered  with  Automated
Payment  Services  ("APS"),  and MBNA to strengthen and streamline the financing
program and  administration  of the Nutripure  dealer program.  Under the unique
Nutripure  program,  independent water treatment dealers may now offer credit to
all prospective  customers  because the Nutripure  programs offers  competitive,
risk-based  interest  rates.  In  addition,  through  APS,  dealers  can  obtain
real-time  processing and approval  information online for their customers.  The
dealer base for the program grows  steadily,  and the Company  expects  revenues
from the Nutripure dealer program to accelerate in the second half of the year.

The Company,  through its  subsidiary  Nutripure.com(R),  operates an e-commerce
health supersite, which provides consumers a wide variety of vitamins, minerals,
nutritional supplements,  homeopathic remedies and natural products. In addition
to  merchandise,   the  supersite  offers   comprehensive  health  and  wellness
information in an easy-to-access, intuitive reference format.

Innovative Medical Services has obtained  worldwide  manufacturing and marketing
rights for advanced  silver ion  technologies.  Axenohl(TM)  is a  revolutionary
antimicrobial  technology  that uses the biocidal  properties of ionic silver to
kill bacteria viruses and fungi.  Axenohl's broad effectiveness works to prevent
and treat infection, and, unlike traditional disinfectants, Axenohl is non-toxic
and  environmentally  friendly.  Potential  applications for products containing
Axenohl include municipal and point-of-use/point-of-entry  water treatment, food
processing,  personal  disinfecting  retail products,  and commercial and retail
hard surface disinfecting products. In addition, this technology may prove to be
revolutionary in the healthcare market for treatment of disease, including human
and  animal  infections  and  wounds,  and  for  disinfecting   applications  in
hospitals,  clinics,  surgical  centers,  dental  offices and other  medical and
health related facilities.

The  disinfection  efficacy of Axenohl has been well  documented by  independent
testing laboratories. Axenohl eliminates the following test organism strains all
within  one minute  and with  99.9999%  efficacy  (complete  kill):  Pseudomonas
aeruginosa ATCC 15422,  Staphylococcus aureus ATCC 6538, Salmonella  cholerasuis
ATCC 10708, E. Coli ATCC 0157:H7, Listeria monocytogenes ATCC 11543, Entrococcus
facium ATCC  11543,  Rhino  virus  (common  colds),  and  Rotavirus  (infectious
diarrhea).

In March  2001,  the US Patent  and  Trademark  Office  issued US Patent  Number
6,197,814  for  Axenohl.  Patent  applications  have been  filed in more than 50
countries  and  regions,  and  the  World  Intellectual   Property  Organization
published the Axenohl  International  Patent Application on April 22, 1999 under
publication number WO 99/18790.

<PAGE>

Regulatory approval is a threshold event for the Company's  commercial launch of
Axenohl and related  products in the United States.  EPA approval of Axenohl for
use as a hard surface disinfectant is believed imminent.  Meanwhile, the Company
has applied for  approvals in several  other  countries.  Axenohl is approved in
Costa Rica for use as a water treatment chemical, hard surface disinfectant, and
industrial  disinfectant  for direct  food  contact.  Approval in Costa Rica for
human and veterinary topical use is expected this quarter.

In March 2001,  the Company  signed its first  significant  contract for Axenohl
with a Korean  cosmetics  company.  Dodo & Company is launching a  revolutionary
line  of  acne-fighting  cosmetics  containing  Axen as its  active  ingredient.
(Axen(TM) is the trade name for the use dilution  Axenohl  solution.)  Under the
terms of the contract,  Dodo & Company will purchase  approximately $1.2 million
dollars of product from Innovative Medical Services over five years. In addition
to the purchase  price,  Innovative  Medical  Services will receive a royalty on
sales of the  Axen-containing  products.  The  Company  anticipates  that  total
revenues  from the contract  should  exceed $5 Million  over five years.  Dodo &
Company plans to begin  purchasing  product in May 2001 in  preparation  for the
September launch of its new product line. The company expects to begin realizing
revenues  from sales of Axenohl to  additional  international  customers  in the
third fiscal quarter of 2001.

In  January  2001,  the  Company  acquired  a   revolutionary,   safe  pesticide
technology.  The EPA-approved RoachX(R) will be the first product to launch from
the  line.  RoachX  is over  96%  effective  in  three  to four  days  with  one
application   for  indoor  and   outdoor   eradication   of   cockroaches.   The
patent-pending time-released formulation protects the boric acid from dissolving
in water and maintains the integrity of the pesticide to obtain maximum  killing
effect.  The product line,  containing  particular  formulas for specific pests,
provides excellent results against cockroaches, ants, palmetto bugs, silverfish,
waterbugs, ticks, fleas, lice and garden pests.

RESULTS OF  OPERATIONS  FOR THE THREE MONTHS ENDED JANUARY 31, 2001 VERSUS THREE
MONTHS ENDED JANUARY 31, 2000

Total  revenues of $395,300 in the first quarter ended January 31, 2001 were 27%
higher than the $312,100 in revenues reported for the same quarter ended January
31, 2000. Fillmaster Purification System sales in the 2001 quarter were $298,900
and  replacement  filter sales were  $77,800.  In the 2000  quarter,  Fillmaster
Purification  System  sales were  $234,600  and  replacement  filter  sales were
$74,000.

Gross  profit in the most recent  quarter was  $134,900  versus  $147,300 in the
year-earlier  quarter.  The gross profit of 34% in 2001 was lower versus the 47%
gross profit in 2000.

Net loss for the quarter  ended  January 31, 2001 was $494,900  versus a loss of
$263,800 for the same quarter in 2000.

In November  2000,  Innovative  Medical  Services  acquired 100% of the stock of
ETIH2O,  Inc., a Florida  corporation,  for  approximately  56,400 shares of IMS
stock valued at approximately  $141,000.  The transaction was recorded using the
purchase  method of  accounting.  The Company  merged ETIH2O with a newly formed
Nevada  corporation  of similar  name and  dissolved  the  Florida  corporation.
ETI-H2O,  a  privately  held  technology  corporation,   developed  Axenohl  and
previously  manufactured  the product in  cooperation  with NVID.  ETI-H2O is an
industry   leader  in  research  and   development  of  varied  water  treatment
applications,  including electronic RF scale control,  copper/silver  ionization
and filtration technologies.

During the second quarter, the Company partnered with Automated Payment Services
("APS"),  and MBNA to  strengthen  and  streamline  the  financing  program  and
administration  of the  Nutripure  dealer  program.  Under the unique  Nutripure
program,  independent  water  treatment  dealers  may now  offer  credit  to all
prospective   customers  because  the  Nutripure  programs  offers  competitive,
risk-based  interest  rates.  In  addition,  through  APS,  dealers  can  obtain
real-time  processing  and  approval  information  online  for their  customers.
Revenues from the Nutripure water treatment  dealer program continue to ramp up.
The dealer base grows  steadily,  and Management  believes that the program will
accelerate through the second half of the year.

In addition to the ongoing  expansion of the water dealer program,  distribution
of the Company's  other products in the Water  Treatment  Division  continued to
grow in the second  quarter.  The Nutripure  Sport Bottle was shipped to 900 GNC
stores.  Shaws  Supermarkets  has stocked  the  Nutripure  Sport  Bottle and the
Nutripure  2000 and also will be  installing  Fillmaster  Systems  in the coming
quarter. In March, Kaiser Permanente began purchasing Fillmaster  pharmaceutical
water  filtration  systems for all  California  pharmacies.  Wal-Mart has placed

<PAGE>
Nutripure 2000 countertop  water  filtration  systems in over 350 of its highest
volume  stores.  CVS  currently  purchases  Fillmaster  systems  for its new and
remodeled  stores at a rate of at least 50 units per month and plans to continue
the roll out through  the end of the  calendar  year.  Nutripure  Sport  Bottle,
Nutripure  2000 and  Fillmaster  are also being  tested in Canada,  with initial
placement in some Pharma Plus and Wal-Mart  Canada Stores.  The Company  expects
retail  product  distribution  to continue to increase in the second half of the
fiscal year.

As mentioned in the Company Overview,  regulatory  approval is a threshold event
for the  Company's  commercial  launch of Axenohl  and  related  products in the
United States. EPA approval of Axenohl for use as a hard surface disinfectant is
believed  imminent,  and if approvals are received,  Management expects revenues
from Axenohl to rapidly and substantially  develop.  Meanwhile,  the Company has
applied for international approvals in several countries. Axenohl is approved in
Costa Rica for use as a water treatment chemical, hard surface disinfectant, and
industrial  disinfectant  for direct  food  contact.  Approval in Costa Rica for
human and veterinary topical use is expected this quarter.

In March 2001, Innovative Medical Services signed a five-year contract with Dodo
& Company,  a leading  Korean  cosmetics  manufacturer  and  marketer to provide
Axenohl.  Dodo & Company is  launching  a  revolutionary  line of  acne-fighting
cosmetics containing Axen as its active ingredient.  (Axen is the trade name for
the  use-dilution  Axenohl  solution.)  Under the terms of the contract,  Dodo &
Company  will  purchase  approximately  $1.2  million  dollars of  product  from
Innovative  Medical Services over five years. In addition to the purchase price,
Innovative   Medical   Services   will   receive  a  royalty  on  sales  of  the
Axen-containing products. The Company anticipates that, over the five years, the
revenues  from the  cosmetics  royalties  will exceed the revenues from sales of
Axen.

In January 2001,  the Company  announced  its  acquisition  of a new,  non-toxic
pesticide technology.  RoachX is the first product to launch, and since January,
the Company has been working to increase distribution to commercial  applicators
and retailers.  Major  distribution  projects are underway in the United States,
Canada, Mexico,  Germany, the United Kingdom, Korea, China and South Africa. The
Company  expects  revenues  from  sales of RoachX to  accelerate  in the  coming
quarter and have a very  significant  short and long-term impact on revenues and
earnings.

RESULTS OF  OPERATIONS  FOR THE SIX MONTHS  ENDED  JANUARY  31,  2001 VERSUS SIX
MONTHS ENDED JANUARY 31, 2000

Revenues  of $761,400  in the six months  ended  January 31, 2001 were 37% lower
than the  $1,217,000  in revenues  reported for the six months ended January 31,
2000.  Fillmaster  Purification System sales in the six months ended January 31,
2001 were  $483,100 and  replacement  filter sales were  $199,600.  In the prior
period, Fillmaster Purification System sales were $843,000and replacement filter
sales were $266,000.  Sales of Fillmaster  Purification System decreased 23% and
sales of filter replacements  decreased 36% during the fiscal quarter 2000/2001.
Management  believes  the  decline in  Fillmaster  revenues  is due to  multiple
factors, including the fact that the market for pharmacy products is maturing in
that there is a  decreasing  number of  pharmacy  chains  that do not have water
filtration products, and that the Company has sold systems to most major chains.
The focus for further  Fillmaster sales will be on incremental and upgrade sales
to individual pharmacies within current chain accounts,  although the Company is
still actively pursuing Fillmaster sales to remaining chains. Management expects
to close such volume  sales to new chains in the coming  year,  and, as in prior
years,  those sales will result in spikes in  Fillmaster  revenues.  The Company
works to retain  customers  with its  Customer  Service  Plan 2000, a multi-year
service and warranty contract.

Gross  profits for the six months ended  January 31, 2001 were  $336,900  versus
$641,900 in 2000. The gross profit of 44% in 2001 was lower versus the 53% gross
profit in 2000. The decrease in gross profit percentage was largely due to fixed
production  and labor costs being applied to the  unexpected  lower sales volume
for the year.

Net loss for first  six  months  ended  January  31,  2001 was  $934,400  versus
$185,100  for the  same  period  last  year.  The  decreased  income  was due to
decreased sales and to an increase in General and Administrative expenses as the
Company positions for anticipated rapid growth activity related to new ventures,
including expanded retail  distribution of the Nutripure 2000 home water system,
Nutripure.com.  and the new silver ion technologies.  General and Administrative
expenses  increased  $342,400 from $606,700 in fiscal 2000 to $949,100 in fiscal
2001,  $137,600 of these expenses were related to Nutripure.com,  a wholly owned
subsidiary  incorporated in the state of Nevada in December 1999.  Nutripure.com
is an e-commerce web supersite  providing  consumers a wide variety of vitamins,
minerals, nutritional supplements, homeopathic remedies and natural products. In
addition to  products,  the website  offers  comprehensive  health and  wellness
information in an easy-to-access,  intuitive  reference format. The website also
presents the Nutripure line of water filtration systems.

<PAGE>
Throughout  the  six-month  period,  Innovative  Medical  Services  focused  its
resources  on  expanding  the current and future  scope of business  and related
growth  potential.  The  Company's  increased  selling  expenses and general and
administrative  expenses  reflect the Company's  transition  from a niche market
company  that  provides  water  purification   equipment  to  pharmacies  to  an
international  company  containing  several divisions to manage new products and
programs  in  consumer  and  commercial  water   treatment,   direct-to-consumer
e-commerce and retail distribution of multiple product lines.

LIQUIDITY AND CAPITAL RESOURCES

During the six months ended January 31, 2000,  the Company's  current  assets to
liabilities ratio decreased from 5.02 to 3.80. Current assets decreased $658,700
from  $2,794,400  to  $2,135,700.  The change in current  assets  during the six
months  ended  January 31, 2001 include an decrease of $772,700 in cash on hand,
an increase in inventories of $94,900, while total receivables remained constant
during the period.  Current  liabilities also remained virtually constant during
the six months ended January 31, 2001.

Cash  flows  used from  operations  were  $1,245,500  in the first six months of
fiscal year 2001.  Cash flows used from  operations  were  $136,800 for the same
period in 2000.  For those  periods,  cash  flows used in  investing  activities
included,  respectively,  $50,300 and $201,100 for the purchase of fixed assets.
Cash flows  from  financing  activities  were  $523,700  from the sale of common
stock,  which included a $250,000 private placement in January 2001 in which the
Company issued 83,334 shares of common stock to six investors at $3.00 per Unit.
Each Unit  contained  one share of common  stock  and a warrant  to  acquire  an
additional  share of common  stock  for $4.00 per share up to 5:00 p.m.  Pacific
time,  January 28, 2003.  Also, In November 2000,  Innovative  Medical  Services
acquired  100%  of the  stock  of  ETIH2O,  Inc.,  a  Florida  corporation,  for
approximately 56,400 shares of IMS stock valued at approximately  $141,000.  The
transaction was recorded using the purchase  method of accounting.  In addition,
approximately $132,700 was received from exercise of outstanding stock options.

The total decrease in cash and cash  equivalents  for the 2001 six-month  period
was $772,700 as compared to increase of $200 during the same period in 2000. u

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 compiled 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 Appeal and  Motions  have merit and will be  granted.  In any
event the Company intends to pursue a trial as soon as possible. As of March 16,
2001, no ruling has been received on the Company's Appeal.

<PAGE>
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.

The Company has filed an action  against John Woodard,  former Vice President of
Sales,  in Superior  Court in the State of California in April 2000. The Company
has alleged Mr. Woodard  violated his  non-competition/non-disclosure  agreement
and  provided  proprietary  information,  including  information  regarding  the
Company's  Fillmaster  line of products and  Fillmaster  customer base, to Fresh
Water  Systems,  Inc.  The Company is seeking  monetary  damages and  injunctive
relief.  On November 20, 2000 an "Amendment to Complaint"  was filed adding Lisa
Still as a new Defendant. The Company alleges the same causes of actions to Lisa
Still as previously alleged against Mr. Woodard.

The Company has also filed an action against Fresh Water Systems,  Inc.,  Steven
Norvell,  Brian  Folk  and  Eric  Norvell  in  Superior  Court  in the  State of
California. The action was filed in August 2000 and amended in October 2000. The
Company   alleges   Fresh  Water   Systems  and  it's   officers  and  directors
misappropriated  trade secrets of the Company  obtained from former employees of
the Company, engaged in unfair competition in violation of the California Unfair
Practices  Act,  tortious  interference  with  contractual  relations,  tortious
interference  with  prospective  business  advantage,  fraud,  trade  libel  and
conspiracy  with  regard  to the  Fillmaster  line of  products  and  Fillmaster
customer base. The Company is seeking monetary damages and injunctive relief. On
or about October 20, 2000 a motion for Consolidation was granted by the Superior
Court, thereby merging the Fresh Water Systems lawsuit into the Woodard lawsuit.
A jury  trial  date was set in the above  matters  for  January  2002.  Numerous
discovery issues propounded to defendants are still awaiting responses.

The Company filed an action against Eckerd  Corporation in Superior Court in the
State of California in August 2000. The Company  alleges Eckerd  Corporation has
not paid for Fillmaster  products  ordered by and shipped to Eckerd  pharmacies.
The Company  seeks  monetary  damages not less than  $170,000  plus interest and
attorney's fees. In September 2000, Defendant filed a "Notice of Removal" moving
said case from  California  Superior Court to the Federal Court for the Southern
District of California.  Minimal discovery commenced regarding Eckerd's contacts
with California. Defendants then filed a motion to "Dismiss for Lack of Personal
Jurisdiction." On March 5, 2001 this motion was granted  dismissing said action.
The Company  plans to appeal this motion and/or file this action in the state of
Florida.

ITEM 2.
CHANGES IN SECURITIES

In  January  2001,  the  Company  issued  83,334  shares of common  stock to six
investors in a private  placement  at $3.00 per Unit.  Each unit  contained  one
share of common  stock and a warrant to acquire  an  additional  share of common
stock for $4.00 per share up to 5:00 p.m. Pacific time, January 28, 2003.

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  solely to
accredited  or  sophisticated  investors  who were  provided  all of the current
public information available on the Company.

Also in February  2001,  the Company  issued  20,000 shares of common stock to a
single investor in settlement of a debt of ETI H2O, Inc.

With  respect to these  shares,  the Company  relied on Section  3(a)(10) of the
Securities  Act of 1933,  as  amended as the  shares  were a security  issued in
exchange for a bona fide  outstanding  claim where the terms and  conditions  of
such issuance and exchange have been approved, after a hearing by a court of the
United States.

ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
Not applicable.

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

<PAGE>
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
     (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


<PAGE>