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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, 2004 Commission File No. 2-82655
INTERWEST MEDICAL CORPORATION
(Exact name of registrant as specified in its charter)
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| Oklahoma
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75-1864474 |
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer Identification No.) |
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
(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 o
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 o
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act)
Yes o 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. 20,000,000 shares of Common Stock, $0.001 Par Value.
TABLE OF CONTENTS
INTERWEST MEDICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
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|
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|
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September 30, |
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December 31, |
| |
|
2004
|
|
2003
|
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|
(unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
Cash, including interest bearing accounts |
|
$ |
2,100,919 |
|
|
$ |
796,434 |
|
Accounts receivable — trade, net of allowance for
doubtful accounts
and December 31,2003 $452,000 |
|
|
2,992,583 |
|
|
|
3,655,364 |
|
Investments — trading |
|
|
93,145 |
|
|
|
355,252 |
|
Prepaid expenses and other receivables |
|
|
157,741 |
|
|
|
75,933 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
5,344,388 |
|
|
|
4,882,983 |
|
PROPERTY AND EQUIPMENT, at cost |
|
|
|
|
|
|
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Land |
|
|
294,354 |
|
|
|
294,354 |
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Buildings and improvements |
|
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4,164,206 |
|
|
|
4,147,464 |
|
Equipment and furniture |
|
|
1,287,917 |
|
|
|
1,240,906 |
|
Oil and gas properties
(successful efforts method of accounting) |
|
|
195,068 |
|
|
|
170,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5,941,545 |
|
|
|
5,853,213 |
|
Less accumulated depreciation and depletion |
|
|
2,920,976 |
|
|
|
2,723,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3,020,569 |
|
|
|
3,129,277 |
|
OTHER ASSETS |
|
|
|
|
|
|
|
|
Cash escrow accounts |
|
|
290,703 |
|
|
|
253,202 |
|
Deferred financing costs, net |
|
|
76,028 |
|
|
|
78,569 |
|
|
|
|
|
|
|
|
|
|
|
|
|
366,731 |
|
|
|
331,771 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
8,731,688 |
|
|
$ |
8,344,031 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
Current maturities of long-term debt |
|
$ |
52,466 |
|
|
$ |
50,539 |
|
Accounts payable |
|
|
2,240,363 |
|
|
|
2,022,066 |
|
Accrued expenses |
|
|
485,556 |
|
|
|
708,786 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
2,778,385 |
|
|
|
2,781,391 |
|
LONG-TERM DEBT |
|
|
4,515,889 |
|
|
|
4,555,316 |
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Common stock, par value $0.001, authorized 50,000,000 shares,
issued 20,000,000 shares |
|
|
20,000 |
|
|
|
22,000 |
|
Additional paid-in capital |
|
|
4,883,587 |
|
|
|
5,096,745 |
|
Retained earnings (deficit) |
|
|
(2,573,660 |
) |
|
|
(3,059,187 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
2,329,927 |
|
|
|
2,059,558 |
|
Less cost of shares held in the treasury, |
|
|
892,513 |
|
|
|
892,234 |
|
Notes receivable — officer |
|
|
|
|
|
|
160,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
1,437,414 |
|
|
|
1,007,324 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
8,731,688 |
|
|
$ |
8,344,031 |
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Condensed
Consolidated Financial Statements
INTERWEST MEDICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
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|
|
|
|
|
|
|
|
|
|
|
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|
|
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Three Months Ended |
|
Nine Months Ended |
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|
September 30,
|
|
September 30,
|
| |
|
2004
|
|
2003
|
|
2004
|
|
2003
|
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient service revenue |
|
$ |
4,451,707 |
|
|
$ |
4,249,385 |
|
|
$ |
13,018,169 |
|
|
$ |
11,672,121 |
|
Other revenue |
|
|
6,933 |
|
|
|
13,518 |
|
|
|
24,250 |
|
|
|
36,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
4,458,640 |
|
|
|
4,262,903 |
|
|
|
13,042,419 |
|
|
|
11,708,271 |
|
COSTS AND EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional care of patients |
|
|
2,438,723 |
|
|
|
2,381,610 |
|
|
|
7,265,499 |
|
|
|
6,921,145 |
|
General services |
|
|
730,049 |
|
|
|
713,921 |
|
|
|
2,016,151 |
|
|
|
2,091,087 |
|
Administrative services |
|
|
801,804 |
|
|
|
778,935 |
|
|
|
2,532,913 |
|
|
|
2,032,345 |
|
Other costs |
|
|
4,251 |
|
|
|
3,702 |
|
|
|
10,126 |
|
|
|
12,614 |
|
Depreciation, depletion and amortization |
|
|
52,967 |
|
|
|
70,931 |
|
|
|
184,327 |
|
|
|
212,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
430,846 |
|
|
|
313,804 |
|
|
|
1,033,403 |
|
|
|
438,287 |
|
OTHER INCOME (EXPENSES) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income (loss) |
|
|
— |
|
|
|
55,810 |
|
|
|
(45,928 |
) |
|
|
127,536 |
|
Interest income |
|
|
1,452 |
|
|
|
707 |
|
|
|
3,091 |
|
|
|
3,101 |
|
Interest expense |
|
|
(85,000 |
) |
|
|
(82,594 |
) |
|
|
(258,889 |
) |
|
|
(243,794 |
) |
Other Financing Costs |
|
|
|
|
|
|
(349,320 |
) |
|
|
— |
|
|
|
(349,320 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes on income |
|
|
347,298 |
|
|
|
(61,593 |
) |
|
|
731,677 |
|
|
|
(24,190 |
) |
Provision for income taxes |
|
|
120,000 |
|
|
|
— |
|
|
|
246,150 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
227,298 |
|
|
$ |
(61,593 |
) |
|
$ |
485,527 |
|
|
$ |
(24,190 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted averages shares outstanding |
|
|
15,247,803 |
|
|
|
1,591,544 |
|
|
|
15,692,408 |
|
|
|
15,915,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share — basic and diluted |
|
$ |
0.01 |
|
|
$ |
(0.00 |
) |
|
$ |
0.03 |
|
|
$ |
(0.00 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Condensed
Consolidated Financial Statements
INTERWEST MEDICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| |
|
|
|
|
|
|
|
|
| |
|
Nine Months Ended
|
| |
|
September 30, |
|
September 30, |
| |
|
2004
|
|
2003
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
$ |
1,476,556 |
|
|
$ |
(652,982 |
) |
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Net Change in escrow accounts |
|
|
(37,501 |
) |
|
|
151,675 |
|
Net change in financing costs |
|
|
|
|
|
|
2,541 |
|
Payments for acquisition of property |
|
|
(99,332 |
) |
|
|
(32,191 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(134,292 |
) |
|
|
119,484 |
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Purchase of treasury stock |
|
|
(279 |
) |
|
|
(25 |
) |
Proceeds on borrowings |
|
|
— |
|
|
|
14,705 |
|
Payments on borrowings |
|
|
(37,500 |
) |
|
|
(43,460 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(37,779 |
) |
|
|
(28,780 |
) |
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
|
1,304,485 |
|
|
|
(562,278 |
) |
CASH, beginning of period |
|
|
796,434 |
|
|
|
1,004,795 |
|
|
|
|
|
|
|
|
|
|
CASH, end of period |
|
$ |
2,100,919 |
|
|
$ |
442,517 |
|
|
|
|
|
|
|
|
|
|
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, 2004,
and its results of operations for the three and nine months ended
September 30, 2004 and 2003, and cash flows for the nine months ended
September 30, 2004 and 2003. The results of operations for the period
presented are not necessarily indicative of the results to be expected for
a full year. |
| |
| 2. |
|
Income per share was computed by dividing the net income 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 2004 and 2003 is
as follows: |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2004
|
|
2003
|
| |
|
|
|
|
|
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, 2004, the 1,500,000 options have an exercise price of $0.15
per share and a weighted average remaining contractual life of 5.75 years. |
| |
| 4. |
|
The treasury shares in the accompanying financial statements are owned by a
subsidiary company, are issued and outstanding for all corporate purposes, but
are treated as treasury shares only for the presentation of the accompanying
financial statements. |
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, 2004 and the condensed consolidated statements of operations for the three
and nine months ended September 30, 2004 and 2003, and cash flows for the nine
months ended September 30, 2004 and 2003, 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.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
InterWest Medical Corporation
We have reviewed the condensed consolidated balance sheet of InterWest Medical
Corporation as of September 30, 2004, and the related condensed consolidated
statements of operations for the three and nine month periods ended September
30, 2004 and 2003, and cash flows for the nine months ended September 30, 2004
and 2003. These interim financial statements are the responsibility of the
Company’s management.
We conducted our review in accordance with standards of the Public Company
Accounting Oversight Board (United States). 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 the
standards of the Public Company Accounting Oversight Board, 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, 2003, 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 March 19,
2004, 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, 2003, is fairly stated
in all material respects in relation to the consolidated balance sheet from
which it has been derived.
WEAVER AND TIDWELL, L.L.P.
Fort Worth, Texas
November 4, 2004
689
|
|
| Item 2. |
Management’s Discussion and Analysis of Financial Position and Results of Operations. |
Changes in Balance Sheet Accounts
Current assets were $5,344,388 and total assets were $8,731,688 at September
30, 2004 as compared to $4,882,983 current assets and $8,344,031 total assets
at December 31, 2003. Current liabilities were $2,778,385 at September 30,
2004 as compared to $2,781,391 at December 31, 2003.
Results of Operations
For the three months ended September 30, 2004, operating revenue was
$4,458,640, costs and expenses were $4,027,794, net income was $227,298 and
interest income was $1,452, as compared to the three months ended September 30,
2003, operating revenue of $4,262,903, costs and expenses of $3,949,099, net
income was $(61,593), and interest income of $707.
For the nine months ended September 30, 2004, operating revenue was
$13,042,419, costs and expenses were $12,009,016, net income was $485,527 and
interest income was $3,091, as compared to the nine months ended September 30,
2003, operating revenue of $11,708,271, costs and expenses of $11,269,984, net
loss of $(24,190), and interest income of $3,101.
Cash Flows
For the nine months ended September 30, 2004, cash flows from operating
activities were $1,476,556, cash flows from investing activities were
$(134,292), cash flows from financing activities were $(37,779), net increase
in cash was $1,304,485, cash at the beginning of the period was $796,434, and
cash at the end of the period was $2,100,919, as compared to the nine months
ended September 30, 2003, to cash flows from operating activities of
$(652,982), cash flows from investing activities of $119,484, cash flows from
financing activities of $(28,780), net decrease in cash of $(562,278), cash at
the beginning of the period of $1,004,795 and cash at the end of the period of
$442,517.
|
|
| 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, 2004.
|
|
| Item 4. |
Controls and Procedures |
As of September 30, 2004, 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, 2004. 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, 2004.
PART II. OTHER INFORMATION
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| Item 1. |
Legal Proceedings. |
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| Item 2. |
Changes in Securities. |
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| Item 3. |
Defaults upon Senior Securities. |
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| Item 4. |
Submission of Matters to a Vote of Securities Holders. |
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| Item 5. |
Other Information |
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| Item 6. |
Exhibits and Reports on Form 8-K. |
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(a) Exhibit 31 – Section 302 Certification |
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(b) 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.
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INTERWEST MEDICAL CORPORATION
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| Date: November 5, 2004 |
By: |
/s/ Arch B. Gilbert
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Arch B. Gilbert, President, |
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Chief Executive Officer,
Chief Financial Officer, and
Chief Accounting Officer |
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