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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
- --------------------------------------------------------------------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 2003 Commission File No. 2-82655
INTERWEST MEDICAL CORPORATION
-----------------------------
(Exact name of registrant as specified in its charter)
Oklahoma 75-1864474
---------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
Arlington Heights Professional Office Building
3221 Hulen Street, Suite C, Fort Worth, TX 76107-6193
-----------------------------------------------------
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (817)731-2743
Not Applicable
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(Former name, former address, and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
(Not Applicable)
Yes X No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act)
Yes No X
(APPLICABLE TO CORPORATE ISSUERS)
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report. 15,915,211
shares of Common Stock, $0.001 Par Value.
INTERWEST MEDICAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2003 2002
---- ----
(Unaudited)
ASSETS
CURRENT ASSETS
Cash ................................................ $ 442,517 $ 1,004,795
Accounts receivable - trade ......................... 3,569,977 2,783,978
Investments - trading ............................... 334,649 186,606
Prepaid expenses and other receivables .............. 698,846 530,505
----------- -----------
Total current assets ............................ 5,045,989 4,505,884
PROPERTY AND EQUIPMENT, at cost
Land ................................................ 294,354 294,354
Buildings and improvements .......................... 3,962,104 3,960,924
Equipment and furniture ............................. 1,420,938 1,389,927
Oil and gas properties
(successful efforts method of accounting) ......... 170,489 170,489
----------- -----------
5,847,885 5,815,694
Less accumulated depreciation and depletion ......... 2,692,900 2,480,107
----------- -----------
3,154,985 3,335,587
OTHER ASSETS
Cash escrow accounts ................................ 191,700 40,025
Deferred financing costs, net ....................... 53,340 349,320
----------- -----------
245,040 389,345
----------- -----------
TOTAL ASSETS .......................................... $ 8,446,014 $ 8,230,816
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt ................ $ 40,940 $ 50,898
Accounts payable .................................... 2,106,007 2,077,100
Accrued expenses .................................... 583,060 645,766
----------- -----------
Total current liabilities ....................... 2,730,007 2,773,764
LONG-TERM DEBT ........................................ 4,577,160 4,293,990
STOCKHOLDERS' EQUITY
Common stock, par value $0.001, authorized
50,000,000 shares, issued 22,000,000 shares ....... 22,000 22,000
Additional paid-in capital .......................... 5,096,745 5,096,745
Retained earnings (deficit) ......................... (2,927,664) (2,903,474)
----------- -----------
2,191,081 2,215,271
Less cost of shares held in the treasury,
2003 - 6,084,789 shares; 2002 - 6,084,289 shares .. 892,234 892,209
Notes receivable - officer .......................... 160,000 160,000
----------- -----------
1,138,847 1,163,062
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............ $ 8,446,014 $ 8,230,816
=========== ===========
See Accompanying Notes to Condensed
Consolidated Financial Statements
INTERWEST MEDICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2003 2002 2003 2002
---- ---- ---- ----
REVENUES
Patient service revenue ............................. $ 4,249,385 $ 3,427,712 $ 11,672,121 $ 9,877,906
Other revenue ....................................... 13,518 7,922 36,150 45,313
------------ ------------ ------------ ------------
Total revenue ................................... 4,262,903 3,435,634 11,708,271 9,923,219
COSTS AND EXPENSES
Professional care of patients ....................... 2,381,610 2,080,319 6,921,145 5,880,830
General services .................................... 713,921 685,016 2,091,087 1,946,650
Administrative services ............................. 778,935 467,394 2,032,345 1,468,317
Other costs ......................................... 3,702 5,317 12,614 21,425
Depreciation, depletion and amortization ............ 70,931 68,149 212,793 198,758
------------ ------------ ------------ ------------
Income (loss) from operations ................... 313,804 129,439 438,287 407,239
OTHER INCOME (EXPENSES)
Interest income ..................................... 707 4,334 3,101 17,232
Other Financing Costs ............................... (349,320) -- (349,320) --
Expense ............................................. (82,594) (85,466) (243,794) (233,782)
Investment income (loss) ............................ 55,810 (662,347) 127,536 (1,256,183)
------------ ------------ ------------ ------------
Income (loss) before taxes on income (loss) ..... (61,593) (614,040) (24,190) (1,065,494)
Provision for income taxes ............................ -- -- -- --
------------ ------------ ------------ ------------
Net income (loss) ............................... ($ 61,593) ($ 614,040) ($ 24,190) ($ 1,065,494)
============ ============ ============ ============
Weighted averages shares outstanding .................. 15,915,544 15,917,411 15,915,675 15,919,605
============ ============ ============ ============
Earnings (loss) per common share - basic and diluted .. ($ 0.00) ($ 0.04) ($ 0.00) ($ 0.07)
============ ============ ============ ============
See Accompanying Notes to Condensed
Consolidated Financial Statements
INTERWEST MEDICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
-----------------
September 30, September 30,
2003 2002
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES ..................... ($ 652,982) ($ 80,528)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for acquisition of property ................... (32,191) (174,177)
Net changes in escrow accounts ......................... 151,675 (9,603)
Proceeds from sale of property and equipment ........... -- 14,000
----------- -----------
Net cash provided by (used in) investing activities .. 119,484 (169,780)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings ............................... 14,705 --
Purchase of treasury stock ............................. (25) (770)
Payments on borrowings ................................. (43,460) (49,617)
----------- -----------
Net cash provided by (used in) financing activities .. (28,780) (50,387)
----------- -----------
Net increase (decrease) in cash ...................... (562,278) (300,695)
CASH, beginning of period ................................ 1,004,795 1,412,024
----------- -----------
CASH, end of period ...................................... $ 442,517 $ 1,111,329
=========== ===========
See Accompanying Notes to Condensed
Consolidated Financial Statements
INTERWEST MEDICAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly the Company's financial position as of September 30, 2003,
and its results of operations for the three and nine months ended
September 30, 2003 and 2002, and cash flows for the nine months ended
September 30, 2003 and 2002. The results of operations for the period
presented are not necessarily indicative of the results to be expected for
a full year.
2. Income (loss) per share was computed by dividing the net income (loss) by
the weighted average number of shares outstanding.
3. The Company has adopted a Stock Option Plan which provides for the
granting of options to officers and other key employees for the purchase
of common stock of the Company.
The Plan reserves 1,500,000 shares of common stock for the granting of
such options. Options are subjected to adjustment upon any change in the
capital structure of the Company such as a stock dividend, stock split or
other similar events.
Options may be granted at not less than 100% of the fair market value of
the Company stock at the date of grant, and are exercisable during a term
of ten years from the date of grant at any time in whole or in part, and
are subject to continued employment and other conditions as set forth in
the option agreement.
Options are exercisable only by the participants and are not assignable
during their lifetime and must be exercised within one year of the death
of the participant by his legal representative.
A summary of the status of the Company's stock options for 2003 and 2002
is as follows:
2003 2002
---- ----
Weighted Weighted
Average Average
Shares Exercise Shares Exercise
(000) Price (000) Price
----- ----- ----- -----
Outstanding, beginning 1,500 .15 1,500 $ .15
Granted -- -- -- --
Exercised -- -- -- --
Forfeited -- -- -- --
-------- -------- -------- --------
Outstanding, ending 1,500 .15 1,500 $ .15
======== ======== ======== ========
Options exercisable
at year end 1,500 $ .15 1,500 $ .15
======== ======== ======== ========
Weighted average fair
value of options
granted during the year $ -- $ --
======== ========
At September 30, 2003, the 1,500,000 options have an exercise price of
$0.15 per share and a weighted average remaining contractual life of 6.50
years.
4. In August, 2003, the company refinanced its long term debt based upon the
current favorable financing and interest rate environment. All financing
costs capitalized on its previous debt were charged to operations and is
included in the accompanying financial statements as other financing
costs.
REVIEW BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Weaver and Tidwell, L.L.P., Independent Certified Public Accountants, have
performed a review of the condensed consolidated balance sheet as of September
30, 2003 and the condensed consolidated statements of operations for the three
and nine months ended September 30, 2003 and 2002, and cash flows for the nine
months ended September 30, 2003 and 2002, in accordance with established
professional standards and procedures for such a review. All adjustments or
additional disclosures proposed by Weaver and Tidwell, L.L.P. have been
reflected in the data presented.
The report of Weaver and Tidwell, L.L.P. commenting upon their review is
included as Part I - Exhibit I.
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
To the Board of Directors
InterWest Medical Corporation
We have reviewed the condensed consolidated balance sheet of InterWest Medical
Corporation as of September 30, 2003, and the related condensed consolidated
statements of operations for the three and nine month periods ended September
30, 2003 and 2002, and cash flows for the nine months ended September 30, 2003
and 2002. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical review procedures and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit in accordance with generally
accepted auditing standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying interim condensed consolidated financial statements
referred to above, for them to be in conformity with accounting principles
generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
InterWest Medical Corporation as of December 31, 2002, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended (not presented herein); and in our report dated February 24,
2003, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 2002, is fairly stated
in all material respects in relation to the consolidated balance sheet from
which it has been derived.
/s/ WEAVER AND TIDWELL, L.L.P.
WEAVER AND TIDWELL, L.L.P.
Fort Worth, Texas
November 10, 2003
657
PART I - EXHIBIT I
Item 2. Management's Discussion and Analysis of Financial
Position and Results of Operations.
Changes in Balance Sheet Accounts
Current assets were $5,045,989 and total assets were $8,446,014 at September 30,
2003 as compared to $4,505,884 current assets and $8,230,816 total assets at
December 31, 2002. Current liabilities were $2,730,007 at September 30, 2003 as
compared to $2,773,764 at December 31, 2002.
Results of Operations
For the three months ended September 30, 2003, operating revenue was $4,262,903;
costs and expenses were $3,949,099 net loss was ($61,593) and interest income
was $707, as compared to the three months ended September 30, 2002, operating
revenue of $3,435,634, costs and expenses of $3,306,195, net loss was ($614,040)
and interest income of $4,334.
For the nine months ended September 30, 2003, operating revenue was $11,708,271,
costs and expenses were $11,269,984, net loss was ($24,190) and interest income
was $3,101, as compared to the nine months ended September 30, 2002, operating
revenue of $9,923,219, costs and expenses of $9,515,980, net loss of
($1,065,494) and interest income of $17,232.
Cash Flows
For the nine months ended September 30, 2003, cash flows from operating
activities were ($652,982), cash flows from investing activities were $119,484,
cash flows from financing activities were ($28,780) net decrease in cash was
($562,278), cash at the beginning of the period was $1,004,795, and cash at the
end of the period was $442,517 as compared to the nine months ended September
30, 2002, to cash flows from operating activities of ($80,528), cash flows from
investing activities of ($169,780), cash flows from financing activities of
($50,387), net decrease in cash of ($300,695), cash at the beginning of the
period of $1,412,024 and cash at the end of the period of $1,111,329.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company has not entered into any derivative financial instruments,
derivative commodity instruments or other similar instruments during the quarter
ended September 30, 2003.
Item 4. Controls and Procedures
As of September 30, 2003, an evaluation was performed under the supervision and
with the participation of the Company's management, including the CEO, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. Based on that evaluation, the Company's management, including
the CEO, concluded that the Company's disclosure controls and procedures were
effective as of September 30, 2003. There have been no significant changes in
the Company's internal controls or in other factors that could significantly
affect internal controls subsequent to September 30, 2003.
Liquidity
The company has not experienced any substantial changes in liquidity during the
current year. At December 31, 2002 current assets exceeded current liabilities
by $1,732,120. Current assets exceed current liabilities by $2,315,982 at
September 30, 2003.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Securities Holders.
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 31 - Section 302 Certification
Exhibit 32 - Section 906 Certification
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its half by the
undersigned thereunto duly authorized.
INTERWEST MEDICAL CORPORATION
By: /s/ ARCH B. GILBERT
-------------------------------------
Arch B. Gilbert, President,
Chief Executive Officer,
Chief Financial Officer, and
Chief Accounting Officer
Date: November 11, 2003