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, 2002 Commission File No. 2-82655
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INTERWEST MEDICAL CORPORATION
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(Exact name of registrant as specified in its charter)
Oklahoma 75-1864474
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Arlington Heights Professional Office Building
3221 Hulen Street, Suite C, Fort Worth, TX 76107-6193
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(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (817)731-2743
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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 [ ]
(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. 15,916,911
shares of Common Stock, $0.001 Par Value.
REVIEW BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Weaver and Tidwell, L.L.P., Independent Certified Public Accountants, has
performed a review of the condensed consolidated balance sheet of InterWest
Medical Corporation as of September 30, 2002 and the condensed consolidated
statements of operations for the three and nine months ended September 30, 2002
and 2001, and cash flows for the nine months ended September 30, 2002 and 2001,
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, 2002, and the related condensed consolidated
statements of operations for the three and nine month periods ended September
30, 2002 and 2001, and cash flows for the nine months ended September 30, 2002
and 2001. 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 of obtaining an understanding of the system for the
preparation of interim financial information, applying analytical review
procedures to financial data 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 condensed consolidated statements referred to above,
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 2001, 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 18, 2002, we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 2001, 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 8, 2002
629
PART I - EXHIBIT I
INTERWEST MEDICAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
September 30, December 31,
2002 2001
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(unaudited)
ASSETS
CURRENT ASSETS
Cash $ 1,111,329 $ 1,412,024
Accounts receivable - trade 2,562,612 2,359,104
Income taxes receivable -- 4,641
Investments - trading 170,859 1,477,949
Prepaid expenses and other receivables 909,223 86,637
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Total current assets 4,754,023 5,340,355
PROPERTY AND EQUIPMENT, at cost
Land 294,354 294,354
Buildings and improvements 3,960,924 3,960,924
Equipment and furniture 1,430,109 1,236,298
Oil and gas properties (successful efforts
method of accounting) 182,635 170,489
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5,868,022 5,662,065
Less accumulated depreciation (2,455,231) 2,272,882
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3,412,791 3,389,183
OTHER ASSETS
Cash escrow accounts 37,491 27,888
Deferred financing costs, net 361,995 361,995
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399,486 389,883
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TOTAL ASSETS $ 8,566,300 $ 9,119,421
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 47,290 $ 47,290
Accounts payable 2,484,556 1,736,400
Accrued expenses 411,231 596,627
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Total current liabilities 2,943,077 2,380,317
DEFERRED TAX LIABILITY -- --
LONG-TERM DEBT 4,291,197 4,340,814
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 (2,735,410) (1,669,916)
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2,383,335 3,448,829
Less
Cost of shares held in the treasury
2002 - 6,083,089 shares; 2001 - 6,075,389 shares 891,309 890,539
Notes receivable - officer 160,000 160,000
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1,332,026 2,398,290
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,566,300 $ 9,119,421
=============== ===============
</Table>
See Accompanying Notes to Condensed
Consolidated Financial Statements
INTERWEST MEDICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<Table>
<Caption>
Three Months Ended Nine Months Ended
September 30, September 30,
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2002 2001 2002 2001
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Net patient service revenue $ 3,427,712 $ 3,499,154 $ 9,877,906 $10,203,836
Other revenue 7,922 10,690 45,313 54,231
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Total revenue 3,435,634 3,509,844 9,923,219 10,258,067
COSTS AND EXPENSES
Professional care of patients 2,080,319 2,029,131 5,880,830 5,751,363
General services 685,016 649,453 1,946,650 1,830,187
Administrative services 467,394 492,494 1,468,317 1,662,939
Other costs 5,317 3,181 21,425 11,981
Depreciation, depletion
and amortization 68,149 65,682 198,758 193,862
----------- ----------- ----------- -----------
Income from operations 129,439 269,903 407,239 807,735
OTHER INCOME (EXPENSES)
Interest income 4,334 19,678 17,232 31,963
Interest expense (85,466) (82,388) (233,782) (267,890)
Investment income (loss) (662,347) (609,459) (1,256,183) (945,232)
----------- ----------- ----------- -----------
Income (loss) before
taxes on income (614,040) (402,266) (1,065,494) (373,424)
Provision (benefit)
for income taxes -- -- -- --
----------- ----------- ----------- -----------
Net income (loss) $ (614,040) $ (402,266) $(1,065,494) $ (373,424)
=========== =========== =========== ===========
Per share of common stock
Weighted average number
of shares outstanding 15,917,411 15,930,111 15,919,605 15,930,111
=========== =========== =========== ===========
Earnings per common share -
basic and diluted $ (0.04) $ (0.03) $ (0.07) $ (0.02)
=========== =========== =========== ===========
</Table>
See Accompanying Notes to Condensed
Consolidated Financial Statements
INTERWEST MEDICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<Table>
<Caption>
Nine Months Ended
September 30,
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2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES $ (80,528) $1,120,219
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment 14,000 --
Payments for acquisition of property (174,177) (131,924)
Net changes in escrow accounts (9,603) (9,603)
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Net cash used in investing activities (169,780) (141,527)
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock (770) --
Payments on borrowings (49,617) (35,301)
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Net cash used in financing activities (50,387) (35,301)
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Net change in cash (300,695) 943,391
CASH, beginning of period 1,412,024 885,513
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CASH, end of period $1,111,329 $1,828,904
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</Table>
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,
2002, and its results of operations for the three and nine months ended
September 30, 2002 and 2001, and cash flows for the nine months ended
September 30, 2002 and 2001. The results of operations for the period
presented are not necessarily indicative of the results to be expected
for a full year.
2. Earnings per share was computed by dividing the net income (loss) by
the weighted average number of shares outstanding.
Item 2. Management's Discussion and Analysis
of Financial Position and Results of Operations.
Changes in Balance Sheet Accounts
Current assets were $4,754,023 and total assets were $8,566,300 at September 30,
2002 as compared to $5,340,355 current assets and $9,119,421 total assets at
December 31, 2001. Current liabilities were $2,943,077 at September 30, 2002 as
compared to $2,380,317 at December 31, 2001.
Results of Operations
For the Three Months Ended September 30, 2002, operating revenue was $3,435,634;
costs and expenses were $3,306,195, net loss was ($614,040) and interest income
was $4,334, as compared to the Three Months Ended September 30, 2001, operating
revenue of $3,509,844, costs and expenses of $3,239,941, net loss of ($402,266)
and interest income of $19,678.
For the Nine Months Ended September 30, 2002, operating revenue was $9,923,219;
costs and expenses were $9,515,980, net loss was ($1,065,494) and interest
income was $17,232, as compared to the Nine Months Ended September 30, 2001,
operating revenue of $10,258,067, costs and expenses of $9,450,332, net loss of
($373,424) and interest income of $31,963.
Cash Flows
For the Nine Months Ended September 30, 2002, cash flows from operating
activities were ($80,528), cash flows from investing activities were ($169,780),
cash flows from financing activities were ($50,387), net change in cash was
($300,695), cash at the beginning of the period was $1,412,024, and cash at the
end of the period was $1,111,329 as compared to the Nine Months Ended September
30, 2001, to cash flows from operating activities of $1,120,219, cash flows from
investing activities of ($141,527), cash flows from financing activities of
($35,301), net change in cash of $943,391, cash at the beginning of the period
of $885,513 and cash at the end of the period of $1,828,904.
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, 2002.
Item 4. Controls and Procedures
As of September 30, 2002, 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, 2002. 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, 2002.
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) None.
(b) None.
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
/s/ ARCH B. GILBERT
By:
Arch B. Gilbert, President,
Chief Executive Officer,
Chief Financial Officer, and
Chief Accounting Officer
Date: November 11, 2002
CERTIFICATION
Pursuant to 18 U.S. C. Section 1350,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Arch B. Gilbert, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
InterWest Medical Corporation;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have:
a. designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to me by others within those entities,
particularly during the period in which this
quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls
and procedures based on my evaluation as of the
Evaluation Date.
5. I have disclosed, based on my most recent evaluation, to the
registrant's auditors and the Audit Committee of the Company's Board of
Directors:
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
I have indicated in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of my most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
/s/ ARCH B. GILBERT November 11, 2002
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Arch B. Gilbert
President, Chief Executive Officer
and Chief Financial Officer