Innovative Medical Services Reports Third Quarter Results; EPA Approval of Axen 30-TM- Expected to Significantly Benefit Revenues in Upcoming Fiscal Year.

Business Editors/Health/Medical Writers

SAN DIEGO--(BUSINESS WIRE)--June 17, 2003

Innovative Medical Services (NASDAQ:PURE), a biosciences company that develops and markets technology-based products involving water purification/treatment, pest control, and anti-microbial applications, today announced its operating results for the third quarter and first nine months of FY2003.

For the three months ended April 30, 2003, revenues totaled $644,600, compared with revenues of $877,400 in the third quarter of FY2002. The company recorded a net loss from operations of ($679,500), or ($0.07) per share, in the most recent quarter, compared with a net loss from operations of ($578,500), or ($0.08) per share, in the prior-year quarter.

For the nine months ended April 30, 2003, the company reported revenues of $2,005,500 and a net loss from operations of ($2,375,400), or ($0.27) per share. These results compare with revenues of $2,575,600 and a net loss from operations of ($1,363,700), or ($0.19) per share, in the corresponding period of the previous fiscal year.

Water Treatment division revenues increased approximately 9% during the quarter to $632,900, versus $582,200 in the prior-year quarter. Revenues from the company's Biosciences division declined to $11,700 in the most recent quarter from $295,200 in the third quarter of FY2002, reflecting the company's earlier decision to terminate shipments to a major overseas customer that did not perform in accordance with its contract.

The company reached a noteworthy milestone during the quarter by obtaining EPA registration for its Axen-30(TM) hard surface disinfectant product. Axen-30 is a 30-parts-per-million (ppm) use-dilution formula of the company's flagship antimicrobial technology, Axenohl(R).

The recent EPA approval allows Innovative Medical Services to expand the existing Axen efficacy claims as a hard surface disinfectant to include a 30-second kill time on standard indicator bacteria, a 24-hour residual kill on standard indicator bacteria, a 2-minute kill time on some resistant strains of bacteria, a 10-minute kill time on fungi, a 30-second kill time on HIV Type I, and a 10-minute kill time on certain other viruses. These claims distinguish the efficacy of Axen-30 from many of the leading commercial and consumer products currently on the market, while maintaining lower toxicity ratings.

"Our financial results for the current quarter do not reflect the operational progress made by the company during the most recent quarter," commented Michael Krall, president and chief executive officer of Innovative Medical Services. "Water treatment division sales continued to increase, as expected, but we are most excited about receipt of the EPA registration of Axen-30. Obtaining the EPA approval was a huge accomplishment and provides crucial validation of the technology's value as we begin to address a broad audience of potential customers.

"Superior in efficacy, yet lower in toxicity, Axen-30 sets a new standard in hard surface disinfecting," he said. "EPA approval opens the door to an enormous market at a time when the public is acutely aware of the dangers of contaminated food supplies and communicable diseases and increasingly concerned about the dangers of traditional household and commercial chemicals.

"We are working with several companies to process federal and state EPA registrations on private-label products," continued Krall. "We expect that our initial Axen-30 sales will involve companies that wish to repackage the product as a private-label hard surface disinfectant. We are also working with a number of companies that are interested in formulating Axen-30 into their existing products.

"During the quarter, Nickel, Ltd. received initial governmental certification of its Bac'Out line of disinfecting products containing Axen-30, and Nickel has represented to us that it expects a full-scale launch of the product line in September 2003. Although we are in the process of introducing Nickel's line of wipes and other auto care products to US mass merchandisers, the current political, business and consumer attitude toward imported French products has slowed our progress in this area."

Krall also stated, "Additional capital will be required to fully exploit the growth opportunities presented by our expanding Water Treatment division and emerging Biosciences division. We continue to rely upon small private placements of common stock until such time that the financing climate improves, and I am optimistic that we will procure the funding necessary to properly fuel product marketing and sales in both divisions. We remain confident in our revenue projections and expect to realize new revenues from sales of Axen-30 as early as July, with shipments accelerating significantly in August and September."

In April 2003, Innovative Medical Services filed a Form 8-K in which the company stated that, assuming it is successful in executing a strategy to further capitalize its operation and accelerate its business plan, approximately $12 million in revenues and $350,000 in net income should be realized in the 12-month period beginning April 1, 2003. In addition, the company stated that it expects to reach operational profitability in November 2003.

The company believes that its Axenohl technology will ultimately become the largest revenue generator for Innovative Medical Services. Axenohl and its use dilution formula, Axen, contain a new molecule, silver di-hydrogen citrate, and have been patented as a liquid disinfectant. Based on the EPA toxicity categorization of antimicrobial products that ranges from Category I (high toxicity) down to Category IV, Axen, with its combination of the biocidal properties of ionic silver and citric acid, is an EPA Category IV antimicrobial, for which precautionary labeling statements are normally not required. This compares with Category II warning statements for most leading brands of antimicrobial products.

The company plans to pursue additional EPA and FDA regulatory approvals for other applications containing the Axenohl technology. Additional possible uses for this product include wound care, topical infection care, personal disinfecting retail products, food processing, and food safety applications 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.

About Innovative Medical Services

Innovative Medical Services (IMS) is a biosciences company that develops and markets technology-based products involving water purification/treatment, pest control and anti-microbial applications. The company is currently America's leader in pharmaceutical water purification products and services using reverse osmosis technology. IMS has expanded beyond its niche pharmacy market by developing and marketing its Innovex line of EPA-approved pest control products utilizing Triglycylboride(TM) technology and its Axenohl(TM) anti-microbial disinfectant based upon its patented ionic silver technology.

Innovative Medical Services has headquarters in El Cajon, Calif. (San Diego metropolitan area) and its common stock is listed on The Nasdaq Stock Market under the symbol "PURE".

This press release includes statements that may constitute "forward-looking" statements, usually containing the words "believe", "estimate", "project", "expect" or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, acceptance of the company's current and future products and services in the marketplace, the ability of the company to develop effective new products and receive regulatory approvals of such products, competitive factors, dependence upon third-party vendors, and other risks detailed in the company's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the company undertakes no obligation to update these statements for revisions or changes after the date of this release.

For additional information on Innovative Medical Services, visit the company's Web site at www.imspure.com or contact Donna Singer, Executive Vice President, at 619/596-8600 or via email at [e-mail] or RJ Falkner & Company, Investor Relations Counsel, at 800/377-9893 or via e-mail at [e-mail].