10-Q 1 d01172e10vq.txt FORM 10-Q 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 ------------------ ------- INTERWEST MEDICAL CORPORATION ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Oklahoma 75-1864474 --------------------------------- ------------------- (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 ----------------------------------------------------- (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 [ ] 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
September 30, December 31, 2002 2001 --------------- --------------- (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 --------------- --------------- 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 --------------- --------------- 5,868,022 5,662,065 Less accumulated depreciation (2,455,231) 2,272,882 --------------- --------------- 3,412,791 3,389,183 OTHER ASSETS Cash escrow accounts 37,491 27,888 Deferred financing costs, net 361,995 361,995 --------------- --------------- 399,486 389,883 --------------- --------------- 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 --------------- --------------- 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) --------------- --------------- 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 --------------- --------------- 1,332,026 2,398,290 --------------- --------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,566,300 $ 9,119,421 =============== ===============
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, ------------------------------- -------------------------------- 2002 2001 2002 2001 ----------- ----------- ----------- ----------- 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 ----------- ----------- ----------- ----------- 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) =========== =========== =========== ===========
See Accompanying Notes to Condensed Consolidated Financial Statements INTERWEST MEDICAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, --------------------------------- 2002 2001 ---------- ---------- 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) ---------- ---------- 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) ---------- ---------- Net cash used in financing activities (50,387) (35,301) ---------- ---------- Net change in cash (300,695) 943,391 CASH, beginning of period 1,412,024 885,513 ---------- ---------- CASH, end of period $1,111,329 $1,828,904 ========== ==========
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 --------------------------------------- Arch B. Gilbert President, Chief Executive Officer and Chief Financial Officer