##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-K (Mark One) þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003.
 OR o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM  TO .
 Commission file number            No. 0-11881 INTERWEST MEDICAL CORPORATION   Oklahoma
    
    75-1864474(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)3221 Hulen Street, Suite C
Fort Worth, Texas
    
    76107-6193(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (817)731-2743 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: NONE 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 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    1




---



##### Table of Contents



Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act)
o Yes x No As of June 30, 2003 the aggregate market value of the 9,620,461 shares of
voting Common Stock held by non-affiliates of the Company was approximately
$577,000 based on the average bid and ask prices on that date. APPLICABLE ONLY TO CORPORATE REGISTRANTS Indicate the number of shares outstanding of each of registrants classes
of Common Stock, as of the latest practicable date. Shares OutstandingClass
    
    as of April 10, 2004Common Stock,
$0.001 Par Value
    
    
    15,915,461
 DOCUMENTS INCORPORATED BY REFERENCE  (a)
    
    Prospectus dated June 6, 1983  incorporated by reference in Part I.(b)
    
    Exhibits to the Registration Statement No. 2-82655 on Form S-18  Part
IV.(c)
    
    Form 8-K, dated July 2, 1990. 2




---



TABLE OF CONTENTS  PART IItem 1. Business.Item 2. Properties.Item 3. Legal Proceedings.Item 4. Submission of Matters to a Vote of Security Holders.PART IIItem 5. Market for Registrants Common Equity and Related Stockholders Matters.Item 6. Selected Financial Data.Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.Item 7a. Qualitative and Quantitative Disclosure About Market RiskItem 8. Financial Statements and Supplementary Data.Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.Item 9a. Controls and ProceduresPART IIIItem 10. Directors and Executive Officers of the Registrant.Item 11. Executive Compensation.Item 12. Security Ownership of Certain Beneficial Owners and Management.Item 13. Certain Relationships and Related Transactions.PART IVItem 14. Principle Accounting Fees and ServicesItem 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.INDEX TO EXHIBITSSIGNATURESCode of EthicsCertification of CEO & CFO Pursuant to Section 302Certification Pursuant to Section 906    Table of Contents  FORM 10-K INTERWEST MEDICAL CORPORATION 
 PART I 
 Item 1. Business. InterWest Medical Corporation (the Company) was incorporated under the
laws of the State of Oklahoma on March 3, 1983. The principal office and place
of business of the Company is located at Suite C, 3221 Hulen Street, Fort
Worth, Texas 76107-6193. Its telephone number is (817) 731-2743. The Company was organized to engage in the business of developing,
operating and owning surgery centers itself and in association with others.
The Company did not, however, develop any surgery centers. In April 1984, the Company commenced efforts to develop nursing homes in
an effort to diversify its efforts. The Company built and sold to an unrelated
purchaser a 187-bed skilled nursing home in Vista, California. The Company
presently owns and operates a 156-bed skilled nursing home in Colton,
California. The Company does not at this time have any plans to develop other
nursing homes. The Companys business is extremely competitive in all phases. Many of
its competitors, both public and private, possess and employ financial and
personnel resources substantially greater than those which are currently
available to the Company. 
 Item 2. Properties. The Company owns and operates a 156-bed skilled nursing home located on a
nine-acre parcel of land in Colton, California. At December 31, 2003, the
Company had an undepreciated cost of $3,058,271 in such facility, including
equipment and furniture. 
 Item 3. Legal Proceedings. In the opinion of management, all litigation pertaining to the operations
is considered to be ordinary routine litigation incidental to its business and
that the disposition of all outstanding legal actions will not have a material
adverse effect on the Company. 3




---



##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders. No matters were submitted to a vote of security holders during the fourth
quarter of 2003, except for the election of directors at the annual meeting of
shareholders. The only Director elected at such meeting was Arch B. Gilbert,
who received 13,397,396 number of votes for his election and 15,700 number of
votes against his election. 4




---



##### Table of Contents



PART II 
 Item 5. Market for Registrants Common Equity and Related Stockholders Matters. The Companys Common Stock is traded in the national over-the-counter
market and is listed in the pink sheets. The high and low bid prices quoted
for each quarter in the past two calendar years were as follows: Period
    
    Low Bid
    
    High Bid1st Quarter, 2002
    
    $
    0.09
    
    
    $
    0.122nd Quarter, 2002
    
    $
    0.09
    
    
    $
    0.113rd Quarter, 2002
    
    $
    0.09
    
    
    $
    0.114th Quarter, 2002
    
    $
    0.09
    
    
    $
    0.111st Quarter, 2003
    
    $
    0.04
    
    
    $
    0.062nd Quarter, 2003
    
    $
    0.04
    
    
    $
    0.093rd Quarter, 2003
    
    $
    0.06
    
    
    $
    0.104th Quarter, 2003
    
    $
    0.06
    
    
    $
    0.11
 As of March 26, 2004 the approximate number of holders of Common Stock was
1,770. No cash dividends had been paid as of December 31, 2003, and the
Company does not currently anticipate paying cash dividends in the foreseeable
future. 
 Item 6. Selected Financial Data. The following table sets forth certain summary financial information concerning
the Company. 2003
    
    2002
    
    2001
    
    2000
    
    1999Operating
Revenues
    
    $
    15,849,894
    
    
    $
    13,489,084
    
    
    $
    13,347,836
    
    
    $
    12,349,695
    
    
    $
    11,295,408Net income
(loss)
    
    
    (155,713
    )
    
    
    (1,233,558
    )
    
    
    (822,941
    )
    
    
    (2,512,242
    )
    
    
    1,657,032Total Assets
    
    
    8,344,031
    
    
    
    8,230,816
    
    
    
    9,119,421
    
    
    
    9,966,256
    
    
    
    13,247,657Long-term
Debt
    
    
    4,555,316
    
    
    
    4,293,990
    
    
    
    4,340,814
    
    
    
    4,388,104
    
    
    
    4,435,560Earnings
per common
share
    
    
    (0.01
    )
    
    
    (0.08
    )
    
    
    (0.05
    )
    
    
    (0.16
    )
    
    
    0.11Cash
dividends
declared
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.00
 5




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations. (a) Liquidity and Capital Resources: During the year 2001, the Companys cash increased from $885,513 to
$1,412,024. Accordingly, there was an increase in cash of $526,511.
Additionally, the Companys trading assets increased from $1,379,138 to
$1,477,949, or a increase of $98,811. These increases were the result of
operations and investment trading activities. During the year 2002, the Companys cash decreased from $1,412,024 to
$1,004,795. Accordingly, there was a decrease in cash of $407,229. This
decrease was caused by losses from operations and purchases of property and
equipment. During the year 2003, the Companys cash decreased from $1,004,795 to
$796,434. Accordingly, there was a decrease in cash of $208,361.
Additionally, the Companys trading assets increased from $186,606 to $355,252,
or an increase of $168,646. These changes were the result of gains incurred in
investment trading activities. The Company is not aware of any known trends or any known demands,
commitments, events or uncertainties that will result in or that are reasonably
likely to result in the registrants liquidity increasing or decreasing in any
material way. In the Companys view, its short-term liquidity and short-term capital
resources will be sufficient to cover its cash needs up to 12 months into the
future. The Company does not presently anticipate material capital
expenditures. The Company does not have any significant balloon payments. The
Companys long-term debt consists of a mortgage loan bearing interest at the
rate of 5% and is payable in monthly installments of $23,307. It is
anticipated that these payments will be made from revenues received by the
operation of the Companys nursing home. (b) Results of Operations: Operating profit for 2001 was $230,370, as compared to operating profit of
$564,770 for 2000. The net loss decreased from ($2,512,242) to ($822,941) for
the year 2001. The decrease was the result of a reduction in investment
trading losses. 6




---



##### Table of Contents



Operating profit for 2002 was $284,877, as compared to operating profit of
$230,370 for 2001. The increase in operating income was attributable to an
increase in revenues. Net loss in 2002 was ($1,233,558), as compared to
($822,941) in 2001. The increase in loss was attributable to losses on
securities. Operating profit for 2003 was $260,746, as compared to operating profit of
$284,877 for 2002. Net loss decreased from ($1,233,558) for 2002 to ($155,713)
for the year 2003. The decrease was the result of investment trading results. Effects of Inflation: The Company is of the view that inflation did not affect its operations in
2003 and should not in 2004 
 Item 7a. Qualitative and Quantitative Disclosure About Market Risk The Company did not enter into any derivative financial instruments in
2003 and does not anticipate any in 2004. The Company has no variable rate debt. The Companys mortgage note
carries a 5% fixed rate and would be unaffected by changes in interest rates. 
 Item 8. Financial Statements and Supplementary Data. Page No.Independent Auditors Report
    
    
    F-1Consolidated Balance Sheets
December 31, 2003 and 2002
    
    
    F-2Consolidated Statements of
Operations for the Years Ended
December 31, 2003, 2002 and 2001
    
    
    F-4Consolidated Statements of
Stockholders Equity for Years Ended
December 31, 2003, 2002 and 2001
    
    
    F-5Consolidated Statements of
Cash Flows for the Years
Ended December 2003, 2002 and 2001
    
    
    F-6Notes to Consolidated
Financial Statements
    
    
    F-8Schedule II  Valuation
and Qualifying Accounts
    
    
    F-15
 7




---



##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure. There have been no disagreements with accountants on any matter of
accounting principles or practices or financial statement disclosures during
the twenty-four (24) month period ended December 31, 2003. 
 Item 9a. Controls and Procedures Within 90 days of the filing of this 10-K, 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 (as defined in Rules 13a-14 and
15d-14 under the Securities Act of 1934). Based on that evaluation, the
Companys management, including the CEO, concluded that the Companys
disclosure controls and procedures were effective as of December 31, 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
the date of the evaluation. 8




---



##### Table of Contents



INDEPENDENT AUDITORS REPORT To the Board of Directors and Shareholders
InterWest Medical Corporation We have audited the accompanying consolidated balance sheets of InterWest
Medical Corporation and subsidiaries as of December 31, 2003 and 2002, and the
related consolidated statements of operations, stockholders equity and cash
flows for each of the years in the three year period ended December 31, 2003.
Our audits also included the financial statement schedule II for each of the
years in the three year period ended December 31, 2003. These consolidated
financial statements and the financial statement schedules are the
responsibility of the Companys management. Our responsibility is to express
an opinion on these consolidated financial statements and the financial
statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion. In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of InterWest Medical
Corporation and subsidiaries as of December 31, 2003 and 2002, and the
consolidated results of their operations and their cash flows for each of the
years in the three year period ended December 31, 2003 in conformity with
accounting principles generally accepted in the United States of America.
Also, in our opinion, the financial statement schedule II when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein. /s/ WEAVER AND TIDWELL, L.L.P. WEAVER AND TIDWELL, L.L.P.
Fort Worth, Texas
March 19, 2004 4150 F-1




---



##### Table of Contents



(1 of 2) INTERWEST MEDICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 AND 2002 2003
    
    2002ASSETSCURRENT ASSETSCash, including interest bearing accounts,
2003 $555,443; 2002 $730,748
    
    $
    796,434
    
    
    $
    1,004,795Accounts receivable  trade, net of allowance for
doubtful accounts, 2003 $452,000; 2002 $110,033
    
    
    3,655,364
    
    
    
    2,783,978Investments  trading
    
    
    355,252
    
    
    
    186,606Prepaid expenses and other receivables
    
    
    75,933
    
    
    
    530,505Total current assets
    
    
    4,882,983
    
    
    
    4,505,884PROPERTY AND EQUIPMENT, at costLand
    
    
    294,354
    
    
    
    294,354Buildings and improvements
    
    
    4,147,464
    
    
    
    3,960,924Equipment and furniture
    
    
    1,240,906
    
    
    
    1,389,927Oil and gas properties(successful efforts method of accounting)
    
    
    170,489
    
    
    
    170,4895,853,213
    
    
    
    5,815,694Less accumulated depreciation and depletion
    
    
    2,723,936
    
    
    
    2,480,1073,129,277
    
    
    
    3,335,587OTHER ASSETSCash escrow accounts
    
    
    253,202
    
    
    
    40,025Deferred financing costs, net
    
    
    78,569
    
    
    
    349,320331,771
    
    
    
    389,345TOTAL ASSETS
    
    $
    8,344,031
    
    
    $
    8,230,816
 The Notes to Consolidated Financial Statements
     are an integral part of these statements.
 F-2




---



##### Table of Contents



(2 of 2) INTERWEST MEDICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 AND 2002 2003
    
    2002LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESCurrent maturities of long-term debt
    
    $
    50,539
    
    
    $
    50,898Accounts payable
    
    
    2,022,066
    
    
    
    2,077,100Accrued salaries
    
    
    708,786
    
    
    
    645,766Total current liabilities
    
    
    2,781,391
    
    
    
    2,773,764LONG-TERM DEBT
    
    
    4,555,316
    
    
    
    4,293,990Total liabilities
    
    
    7,336,707
    
    
    
    7,067,754COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    STOCKHOLDERS EQUITYCommon stock, par value $0.001,
authorized 50,000,000 shares;
issued 22,000,000 shares
    
    
    22,000
    
    
    
    22,000Additional paid-in capital
    
    
    5,096,745
    
    
    
    5,096,745Retained earnings (deficit)
    
    
    ( 3,059,187
    )
    
    
    ( 2,903,474
    )2,059,558
    
    
    
    2,215,271Less cost of shares held in the treasury,
2003 - 6,084,539 shares; 2002 - 6,084,289 shares
    
    
    892,234
    
    
    
    892,209Notes receivable  officer
    
    
    160,000
    
    
    
    160,0001,007,324
    
    
    
    1,163,062TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    8,344,031
    
    
    $
    8,230,816
 The Notes to Consolidated Financial Statements
      are an integral part of these statements.
 F-3




---



##### Table of Contents



INTERWEST MEDICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 2003
    
    2002
    
    2001REVENUESPatient service revenue
    
    $
    15,804,213
    
    
    $
    13,435,829
    
    
    $
    13,284,809Other revenue
    
    
    45,681
    
    
    
    53,255
    
    
    
    63,027Total revenue
    
    
    15,849,894
    
    
    
    13,489,084
    
    
    
    13,347,836COSTS AND EXPENSESProfessional care of patients
    
    
    9,402,039
    
    
    
    8,010,399
    
    
    
    7,775,638General services
    
    
    2,988,107
    
    
    
    2,617,876
    
    
    
    2,436,208Administrative services
    
    
    2,906,192
    
    
    
    2,246,550
    
    
    
    2,621,360Other costs
    
    
    15,791
    
    
    
    37,000
    
    
    
    16,782Depreciation, depletion and amortization
    
    
    277,019
    
    
    
    292,382
    
    
    
    267,478260,746
    
    
    
    284,877
    
    
    
    230,370OTHER INCOME (EXPENSES)Gain (loss) on sale of securities
    
    
    164,669
    
    
    
    (1,233,736
    )
    
    
    (690,316
    )Loss on refinancing
    
    
    (349,320
    )
    
    
    
    
    
    
    Interest income
    
    
    13,747
    
    
    
    34,174
    
    
    
    64,407Interest expense
    
    
    (245,555
    )
    
    
    (329,864
    )
    
    
    (352,209
    )Income (loss) before taxes on income
    
    
    (155,713
    )
    
    
    (1,244,549
    )
    
    
    (747,748
    )Provision (benefit) for income taxes
    
    
    
    
    
    
    (10,991
    )
    
    
    75,193Net income (loss)
    
    $
    (155,713
    )
    
    $
    (1,233,558
    )
    
    $
    (822,941
    )Weighted averages shares outstanding
    
    
    15,914,192
    
    
    
    15,918,773
    
    
    
    15,929,353Earnings per common share  basic and diluted
    
    $
    (0.01
    )
    
    $
    (0.08
    )
    
    $
    (0.05
    )
 The Notes to Consolidated Financial Statements
      are an integral part of these statements.
 F-4




---



##### Table of Contents



INTERWEST MEDICAL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 Common StockAdditional
    
    RetainedNumber of
    
    Par
    
    Paid-in
    
    Earnings
    
    Treasury
    
    NoteShares
    
    Value
    
    Capital
    
    (Deficit)
    
    Stock
    
    ReceivableBALANCE,
December 31, 2000
    
    
    22,000,000
    
    
    $
    22,000
    
    
    $
    5,096,745
    
    
    $
    (846,975
    )
    
    $
    (889,989
    )
    
    $
    (160,000
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (822,941
    )
    
    
    Purchase of
5,500 shares
of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (550
    )
    
    
    BALANCE,
December 31, 2001
    
    
    22,000,000
    
    
    
    22,000
    
    
    
    5,096,745
    
    
    
    (1,669,916
    )
    
    
    (890,539
    )
    
    
    (160,000
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,233,558
    )
    
    
    
    
    
    
    Purchase of
8,900 shares
of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,670
    )
    
    
    BALANCE,
December 31, 2002
    
    
    22,000,000
    
    
    
    22,000
    
    
    
    5,096,745
    
    
    
    (2,903,474
    )
    
    
    (892,209
    )
    
    
    (160,000
    )Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (155,713
    )
    
    
    
    
    
    
    Purchase of
250 shares
of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25
    )
    
    
    BALANCE,December 31, 2003
    
    
    22,000,000
    
    
    $
    22,000
    
    
    $
    5,096,745
    
    
    $
    (3,059,187
    )
    
    $
    (892,234
    )
    
    $
    (160,000
    )
 The Notes to Consolidated Financial Statements
      are an integral part of these statements.
 F-5




---



##### Table of Contents



INTERWEST MEDICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 2003
    
    2002
    
    2001CASH FLOWS FROMOPERATING ACTIVITIESCash received from customers/patients
    
    $
    14,978,508
    
    
    $
    13,064,210
    
    
    $
    13,474,485Interest received
    
    
    13,747
    
    
    
    34,174
    
    
    
    62,955Cash paid to suppliers and employees
    
    
    (14,869,775
    )
    
    
    (12,992,557
    )
    
    
    (12,735,386
    )Investments  net
    
    
    (3,977
    )
    
    
    51,252
    
    
    
    (789,127
    )Interest paid
    
    
    (225,351
    )
    
    
    (303,161
    )
    
    
    (352,209
    )Income taxes paid (refunded)
    
    
    
    
    
    
    15,632
    
    
    
    1,028,429Net cash provided by
(used in) operating activities
    
    
    (106,848
    )
    
    
    (130,450
    )
    
    
    689,147CASH FLOWS FROMINVESTING ACTIVITIESPurchase of property and equipment
    
    
    (69,826
    )
    
    
    (240,457
    )
    
    
    (150,925
    )Proceeds from sale of assets
    
    
    
    
    
    
    20,701
    
    
    
    Mortgage escrow deposits, net
    
    
    (21,477
    )
    
    
    (12,137
    )
    
    
    32,777Net cash used in
investing activities
    
    
    (91,303
    )
    
    
    (231,893
    )
    
    
    (118,148
    )CASH FLOWS FROMFINANCING ACTIVITIESLoan proceeds
    
    
    73,665
    
    
    
    
    
    
    
    Payments on debt
    
    
    (83,850
    )
    
    
    (43,216
    )
    
    
    (43,938
    )Purchase of treasury stock
    
    
    (25
    )
    
    
    (1,670
    )
    
    
    (550
    )Net cash used in financing activities
    
    
    (10,210
    )
    
    
    (44,886
    )
    
    
    (44,488
    )Net increase (decrease) in cash
    
    
    (208,361
    )
    
    
    (407,229
    )
    
    
    526,511CASH, beginning of period
    
    
    1,004,795
    
    
    
    1,412,024
    
    
    
    885,513CASH, end of period
    
    $
    796,434
    
    
    $
    1,004,795
    
    
    $
    1,412,024
 The Notes to Consolidated Financial Statements
      are an integral part of these statements.
 F-6




---



##### Table of Contents



INTERWEST MEDICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 2003
    
    2002
    
    2001RECONCILIATION OF NET INCOME(LOSS) TO NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIESNet income (loss)
    
    $
    (155,713
    )
    
    $
    (1,233,558
    )
    
    $
    (822,941
    )Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities(Gain) loss on securities
    
    
    ( 164,669
    )
    
    
    1,233,736
    
    
    
    690,316Depreciation and amortization
    
    
    277,019
    
    
    
    292,382
    
    
    
    267,478Loss on refinancing
    
    
    349,320
    
    
    
    
    
    
    
    Deferred taxes
    
    
    
    
    
    
    
    
    
    
    209,527Changes in assets and liabilitiesAccounts receivable
    
    
    ( 871,386
    )
    
    
    (424,874
    )
    
    
    126,649Prepaid expenses
and other receivables
    
    
    454,572
    
    
    
    (443,868
    )
    
    
    (1,542
    )Trading securities
    
    
    (3,977
    )
    
    
    51,252
    
    
    
    (789,127
    )Accounts payable
    
    
    (55,034
    )
    
    
    340,700
    
    
    
    175,016Accrued liabilities
    
    
    63,020
    
    
    
    49,139
    
    
    
    (58,872
    )Income taxes payable (receivable)
    
    
    
    
    
    
    4,641
    
    
    
    894,095Other
    
    
    
    
    
    
    
    
    
    
    (1,452
    )Net cash provided by
(used in) operating activities
    
    $
    (106,848
    )
    
    $
    (130,450
    )
    
    $
    689,147
 NON-CASH INVESTING AND FINANCING
   ACTIVITIES In 2003, the Company refinanced its mortgage on its healthcare facility, of which $191,700 of
escrow deposits and $79,452 of loan costs were financed as part of the refinancing. The Notes to Consolidated Financial Statements
      are an integral part of these statements.
 F-7




---



##### Table of Contents



INTERWEST MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SIGNIFICANT ACCOUNTING POLICIES The accounting policy relative to property and equipment is shown on the
accompanying balance sheets. Other significant accounting policies are as
follows: Basis of Presentation The consolidated financial statements include the accounts of InterWest
Medical Corporation and its wholly-owned subsidiaries. All significant
intercompany transactions and balances have been eliminated. Depreciation Depreciation of long-term health care property and equipment is provided
principally on the straight-line method over the estimated useful lives of
the depreciable assets. Estimated useful lives of depreciable assets are
as follows: Buildings and improvements
    
    31 yearsEquipment and furniture
    
    7 years
 Investments in Securities The Companys investments in securities are classified as follows: Trading Securities- Investments in debt and equity securities held
principally for resale in the near term are classified as trading
securities and recorded at their fair values. Unrealized gains and
losses on trading securities are included in other income. Securities to be Held to Maturity- Debt securities for which the
Company has the positive intent and ability to hold to maturity are
reported at cost, adjusted for amortization of premiums and accretion
of discounts which are recognized in interest income using the
interest method over the period to maturity. Securities Available for Sale- Securities available for sale consist
of its debt and equity securities not classified as trading securities
nor as securities to be held to maturity. Unrealized holding gains and losses on securities available for sale are
reported as a net amount in accumulated other comprehensive income in
stockholders equity until realized. F-8




---



##### Table of Contents



INTERWEST MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SIGNIFICANT ACCOUNTING POLICIES  continued Investments in Securities  continued Gains and losses on the sale of securities available for sale are
determined using the specific identification method. Oil and Gas Property and Equipment The Company utilizes the successful efforts method of accounting for
costs incurred in the exploration and development of oil and gas
properties. Accordingly, costs incurred in the acquisition and
exploratory drilling of oil and gas properties are accumulated and
subsequently either expensed, if the properties are determined not to
have proved reserves or capitalized as a depletable asset if proved
reserves are discovered. Costs of drilling development wells are
capitalized. Geological, geophysical and carrying costs are charged to
expenses as incurred. Acquisition costs relating to producing oil and
gas properties are amortized on a prospect by prospect basis using the
units-of-production method based on engineers estimates of proven oil
and gas reserves. Depletion and depreciation of producing oil and gas
properties (other than acquisition costs) are amortized by prospect using
the units-of-production method based on estimated proved developed
reserves. Use of Estimates The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates. Financial Instruments Financial instruments of the Company consist of cash, accounts
receivable, investments and debt. Recorded values of cash and accounts
receivable approximate fair values due to the short maturities of the
instruments. For information on the fair value of investments, see Note
2. The fair value of debt is estimated at its carrying value at December
31, 2003 and 2002, based upon current interest rates of similar debt
which approximates the Companys mortgage interest rate. Revenue The Company operates an acute care facility in Colton, California. Patient service revenue is reported at the estimated net realizable
amounts from patients, third-party payers, and others for service
rendered. The Company derives a significant portion of its revenues from
third party payers (health maintenance organizations, Medicare and
Medi-Cal). Approximately 59% of 2003 revenue and 53% of 2002 revenue was
derived from a contract with one health maintenance organization. F-9




---



##### Table of Contents



INTERWEST MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SIGNIFICANT ACCOUNTING POLICIES  continued Revenue  continued Revenue under third-party payer agreements is subject to audit and
retroactive adjustment. Provisions for estimated third-party payer
settlements are provided in the period the related services are rendered.
Differences between the estimated amounts accrued and interim and final
settlements are reported in operations in the year of settlement. Income Taxes The Company provides for deferred taxes resulting from temporary
differences between the basis of assets and liabilities for financial and
tax reporting purposes. Such differences result principally from the use
of the direct write-off method for bad debts for tax reporting purposes
and unrealized losses on investment securities. Earnings Per Common Share Dilutive earnings per share have not been presented since the inclusion
of potential common stock would be antidilutive. Amortization Costs of obtaining financing are amortized over the term of the financing. Credit Risk The Company regularly maintains cash in bank deposit and brokerage accounts
which exceed FDIC/SPIC insured limits. The Company has not experienced any
losses in such accounts and believes it is not exposed to any significant
credit risk on cash and cash equivalents. Stock-based Compensation The Company recognizes compensation costs for stock-based compensation
plans based on the difference, if any, between the quoted market price of
the stock and the amount an employee must pay to acquire the stock. The
dates that quoted market prices are determined may vary depending on
whether the terms of an award are fixed or variable. F-10




---



##### Table of Contents



INTERWEST MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SIGNIFICANT ACCOUNTING POLICIES  continued Stock-based Compensation  continued The Financial Accounting Standards Board has issued Statement No. 123
establishing a fair value based method of accounting for stock-based
compensation plans. As permitted under Statement No. 123, the Company does
not intend to adopt the recognition or accounting requirements of the
statement. NOTE 2. INVESTMENT SECURITIES Investment securities consist entirely of equity securities. Included in gain (loss) on sale of investments for 2003 is $343,839 of
unrealized gain on trading securities held at year end. In 2002 and 2001;
$521,182 and $418,728, respectively, of unrealized loss on trading
securities was held at year end. NOTE 3. CAPITAL STOCK 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 representatives. F-11




---



##### Table of Contents



INTERWEST MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3. CAPITAL STOCK  continued A summary of the status of the Companys stock options for 2003, 2002 and
2001 is as follows: 2003
    
    2002
    
    2001Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    Average
    
    
    
    
    
    AverageShares
    
    Exercise
    
    Shares
    
    Exercise
    
    Shares
    
    Exercise(000)
    
    Price
    
    (000)
    
    Price
    
    (000)
    
    PriceOutstanding, beginning
    
    
    1,500
    
    
    
    .15
    
    
    
    1,500
    
    
    $
    .15
    
    
    
    1,500
    
    
    $
    .15Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding, ending
    
    
    1,500
    
    
    
    .15
    
    
    
    1,500
    
    
    $
    .15
    
    
    
    1,500
    
    
    $
    .15Options exercisable
at year end
    
    
    1,500
    
    
    $
    .15
    
    
    
    1,500
    
    
    $
    .15
    
    
    
    1,500
    
    
    $
    .15Weighted average fair
value of options
granted during the year
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
 At December 31, 2003, the 1,500,000 options have an exercise price of $0.15
per share and a weighted average remaining contractual life of 6.25 years. NOTE 4. RELATED PARTY TRANSACTIONS During the years ended December 31, 2003, 2002 and 2001, Arch B. Gilbert, a
Professional Corporation, whose sole stockholder is president of the Company,
was paid $82,500, $193,163 and $225,326, respectively, for legal services
rendered. During the years ended December 31, 2003, 2002 and 2001, the above
corporation was reimbursed $34,307, $26,547 and $50,273, respectively, for
expenses incurred on behalf of the Company. During 2003, 2002 and 2001, the wife of the Companys president performed
consulting services for the Company for which she received annual
compensation of $36,000. The Company has a note receivable from its president. The note bears
interest at 6% annually and principal is due at maturity, April 1, 2004.
Interest accrued on the note was $9,600 annually in 2003, 2002 and 2001. F-12




---



##### Table of Contents



INTERWEST MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5. FEDERAL INCOME TAXES The Companys tax provision (benefit) for 2003, 2002 and 2001 consists of
the following: 2003
    
    2002
    
    2001Current expense (benefit)
    
    $
    (-
    )
    
    $
    (10,991
    )
    
    $
    (134,334
    )Deferred taxes
    
    
    
    
    
    
    
    
    
    
    Re-evaluation of valuation allowance
on beginning temporary differences
    
    
    
    
    
    
    
    
    
    
    209,527$
    (-
    )
    
    $
    (10,991
    )
    
    $
    75,193
 The 2003, 2002 and 2001 tax provision (benefit) differs from the amount
calculated by applying statutory tax rates to pre-tax income as follows: 2003
    
    2002
    
    2001Tax at statutory rates
    
    $
    (52,942
    )
    
    $
    (423,147
    )
    
    $
    (254,234
    )Re-evaluation of valuation allowance
on beginning temporary differences
    
    
    
    
    
    
    
    
    
    
    209,527Losses not providing benefits
    
    
    52,908
    
    
    
    412,112
    
    
    
    119,855Other
    
    
    34
    
    
    
    44
    
    
    
    45$
    (-
    )
    
    $
    (10,991
    )
    
    $
    75,193
 All income (loss) since inception relates to domestic activity. The tax effects of temporary differences at December 31, 2003 and 2002 that
give rise to significant portions of deferred tax assets and deferred tax
liabilities are as follows: 2003
    
    2002Deferred tax assets
Unrealized loss on marketable securities
    
    $
    60,296
    
    
    $
    177,202Expense deduction in future periods
    
    
    153,680
    
    
    
    37,411Capital loss carryforward
    
    
    875,302
    
    
    
    831,552Other carryforwards
    
    
    31,398
    
    
    
    1,120,676
    
    
    
    1,046,165Deferred tax liabilitiesDepreciation and depletion
    
    
    (79,615
    )
    
    
    (115,476
    )Valuation allowance
    
    
    (1,041,061
    )
    
    
    (930,689
    )Deferred tax asset (liabilities), net
    
    $
    
    
    
    $
    
 During 2003, the valuation allowance increased $110,372. The valuation
allowance increased $399,645 in 2002. The Company has a capital loss carryforward of approximately $2,574,000,
ultimately expiring in 2008, and a net operating loss carryforward of
approximately $85,000 due to expire in 2021. F-13




---



##### Table of Contents



INTERWEST MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 6. LONG-TERM DEBT Long-term debt consisted of the following at December 31: 2003
    
    2002Mortgage loan for financing of a nursing
home constructed in Colton, California.
The mortgage loan bears interest at 5%, is
due in monthly installments of $23,307
(principal and interest), matures in
September, 2038 and is secured by real
estate
    
    $
    4,605,855
    
    
    $
    4,344,888Less current maturities
    
    
    50,539
    
    
    
    50,898$
    4,555,316
    
    
    $
    4,293,990
 Aggregate maturities of long-term debt for each of the succeeding five years
and thereafter is as follows: 2004
    
    $
    50,5392005
    
    
    53,1252006
    
    
    55,8422007
    
    
    58,6992008
    
    
    61,703Thereafter
    
    
    4,325,947$
    4,605,855
 NOTE 7. CONTINGENCIES The Company is involved in litigation pertaining to its long-term health care
operations. It is the Companys opinion that any loss incurred would be
adequately covered by insurance and the ultimate liability, if any, should
not have a material adverse effect on the Companys consolidated financial
position. NOTE 8 EMPLOYEES RETIREMENT PLAN The Company has a retirement plan covering substantially all of its
employees. Contributions to the plan in 2003, 2002 and 2001 totaled $55,301,
$61,144, and $79,518, respectively. F-14




---



##### Table of Contents



INTERWEST MEDICAL CORPORATION
SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS Column A
    
    Column B
    
    Column C
    
    Column E
    
    Column FAdditionsChargedBalance at
    
    to Costs
    
    ChargedBeginning
    
    and
    
    to Other
    
    
    
    
    
    Balance atof Period
    
    Expenses
    
    Accounts
    
    Deductions
    
    End of PeriodAllowance for
doubtful accountsYear endedDecember 31, 2001
    
    $
    52,932
    
    
    $
    129,127
    
    
    $
    
    
    
    $
    7,864
    
    
    $
    174,195Year endedDecember 31, 2002
    
    $
    174,195
    
    
    $
    88,513
    
    
    $
    
    
    
    $
    152,675
    
    
    $
    110,033Year endedDecember 31, 2003
    
    $
    110,033
    
    
    $
    390,360
    
    
    $
    
    
    
    $
    48,393
    
    
    $
    452,000
 F-15




---



##### Table of Contents



PART III 
 Item 10. Directors and Executive Officers of the Registrant. (a) Identification of Directors: The directors of the Company are elected annually to serve until the next
Annual Meeting and until their successors are elected and qualified. Year First Becamea Director ofName
    
    Age
    
    Company
    
    PositionArch B. Gilbert
    
    
    70
    
    
    1983 (1)
    
    President,
Secretary,
Treasurer &
Director
 (1) Date of incorporation (b) Identification of Executive Officers: Name
    
    Position
    
    AgeArch B. Gilbert
    
    President,
Secretary,
Treasurer
    
    
    70
 Officers serve at the discretion of the Board of Directors. Arch B. Gilbert received his B.A. and his LL.B. degrees from the
University of Oklahoma in 1955 and 1957 respectively. He also received his
LL.M. degree from Southern Methodist University in 1963. Since August 1, 1979,
Mr. Gilbert has been a member of the law firm of Arch B. Gilbert, A
Professional Corporation. From February 1, 1962 to August 1, 1979, Mr. Gilbert
was a member of the law firm of Brooks, Tarlton, Gilbert, Douglas & Kressler,
Fort Worth, Texas. There is no family relationship between any director or executive officer
of the Company. No personal meetings of the directors took place in 2003. All resolutions
of the directors were taken by written consent. (c) Compliance with Section 16(a) of The Exchange Act. Section 16(a) of the Securities Exchange Act of 1934 requires the
Companys directors, executive officers and persons who own more than 10% of
the Companys outstanding Common Stock to file with the Securities and Exchange
Commission reports of changes in ownership of 9




---



##### Table of Contents



the Common Stock of the Company
held by such persons. Officers, directors and greater than 10% shareholders are also
required to furnish the Company with copies of all forms they file under this
regulation. To the Companys knowledge, based solely on a review of the copies
of such reports furnished to the Company, during the two fiscal years ended
December 31, 2003, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% shareholders were complied with. 
 Item 11. Executive Compensation. During the fiscal year ended December 31, 2002, Arch B. Gilbert did not
receive any direct remuneration. All executive officers as a group (1 person) received cash remuneration in
fiscal year 2003 of $0. This does not include legal fees paid to the law firm
of the President of reimbursement or expenses paid to it. See Item 13.
Directors do not receive any compensation for their services as directors. The Company has established an Incentive Stock Option Plan (the Plan) which
reserved 1,500,000 shares of Common Stock for the exercise of options which may
be granted to directors, officers, employees and others. Mr. Gilbert was
granted an option to purchase 1,500,000 shares of stock at $.15 per share on
April 1, 1999. The option is for a period of 10 years. 
 Item 12. Security Ownership of Certain Beneficial Owners and Management. (a) The following table sets forth, as of April 1, 2003, certain
information regarding all persons known to the Company to be the beneficial
owners (as determined in accordance with the Rules under the Securities
Exchange Act of 1934) of more than 5% of the Companys Common Stock: Name and Address
    
    Sharesof
    
    BeneficiallyBeneficial Owner
    
    Owned
    
    PercentArch B. Gilbert
3221 Hulen Street
Suite C
Fort Worth, Texas
76107
    
    6,295,000 (1)
    
    
    39.6
    %
 10




---



##### Table of Contents



(1) Includes 100,000 shares owned by Arch B. Gilbert, A Professional
Corporation. Includes 6,000 shares owned by Jo Anne Gilbert, Mr. Gilberts
wife. Does not include shares owned by Shannon Gilbert Moten or Devon Vrana,
Mr. Gilberts adult daughters, which beneficial ownership Mr. Gilbert
disclaims. Does not include options to purchase 1,500,000 shares. (b) The following table sets forth as of December 31, 2003, certain
information concerning shares beneficially owned by all directors and all
directors and officers of the registrant as a group: Amount andName of
    
    Nature ofBeneficial
    
    Beneficial
    
    PercentTitle of Class
    
    Owner
    
    Ownership
    
    of ClassCommon Stock
    
    Arch B. Gilbert
    
    
    6,295,000
    
    
    
    39.6
    %Common Stock $0.001 Par Value
    
    All Officer and Directors as a Group
   (1 person)
    
    
    6,295,000
    
    
    
    39.6
    %
 
 Item 13. Certain Relationships and Related Transactions. The Registrant shares the offices of Arch B. Gilbert, consisting of
approximately 1,400 square feet, for which it paid total rent in the year 2003
of $15,600. The Registrant also reimbursed Mr. Gilbert for 50% of his office
and administrative expenses for the year ending December 31, 2003 and for
direct out-of-pocket expenses incurred on behalf of the Company. The total
amount of such reimbursement was $18,707. For the year 2003, Arch B. Gilbert,
A Professional Corporation, whose sole stockholder is the President of the
Company, was paid $82,500 for legal services rendered. In 2004, Mr. Gilbert may perform legal services on behalf of the
Registrant although there are no present plans, agreement or understandings in
regard to any such legal services. If any such legal services are performed by
Mr. Gilbert on behalf of the Company, he will be compensated at his usual
hourly rate. In 2003, Mr. Gilberts wife performed consulting services for the Company
for which she received total cash compensation of $36,000. The Company is not informed as to whether payments made to Mr. Gilbert and
his wife were on terms as favorable as the Registrant might have obtained from
unaffiliated parties.
On April 1, 1999, the Company sold Arch B. Gilbert 2,000,000 unregistered
shares of Common Stock at a price of $0.08 per share. Mr. Gilbert gave the
Company a five year non-recourse $160,000 note for such shares. The note
provides that 11




---



##### Table of Contents



interest of 6% per annum will be payable annually and the entire balance and any accrued
interest will be payable on April 1, 2004. 
 PART IV 
 Item 14. Principle Accounting Fees and Services The Company has only one director, Arch B. Gilbert. He also serves as the
Companys president and chief executive officer. Mr. Gilbert pre-approves all
services of Weaver and Tidwell, L.L.P., the Companys principal accountant.
Aggregate fees billed by Weaver and Tidwell, L.L.P. for 2002 and 2001 were as
follows: 2003
    
    2002Audit fees
    
    $
    41,050
    
    
    $
    35,900Audit related fees
    
    
    
    
    
    
    Tax fees (compliance)
    
    
    10,030
    
    
    
    9,200All other fees (health care consulting)
    
    
    
    
    
    
    3,700$
    51,080
    
    
    $
    48,800
 
 Item 15. Exhibits, Financial Statement Schedules and Reports
on Form 8-K. (a) 1. Financial Statements. The following financial statements of the Company are included in Part II,
Item 8: Independent Auditors Report Consolidated Balance Sheets December 31,
2003 and 2002 Consolidated Statements of Operations for
the Years Ended December 31, 2003, 2002
and 2001 Consolidated Statements of Stockholders
Equity for the Years Ended December 31,
2003, 2002, and 2001 Consolidated Statements of Cash Flows for
the Years Ended December 31, 2003, 2002,
and 2001 Note to Consolidated Financial Statements Supporting Schedule 12




---



##### Table of Contents



2. Financial Statement Schedules. Financial Statement Schedule II is included in Part II, Item 8. All other
schedules are omitted because they are not applicable, not required or because
the required information is included in the financial statements or the notes
thereto. 3. Exhibits. The exhibits listed in the accompanying index to exhibits are filed as
part of this report. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the last quarter of the period
covered by this report. 13




---



##### Table of Contents



INTERWEST MEDICAL CORPORATION 
 INDEX TO EXHIBITS ITEM 14(a) Exhibit
    
    Description
    
    Page3
    
    Articles of Incorporation, Bylaws
    
    *4
    
    Instruments defining the right of
securities holders, including
debentures
    
    *10
    
    Material contracts
    
    *14.1
    
    Code of Ethics
    
    1631
    
    Certification of Chief Executive
Officer and Chief Financial Officer
pursuant to Exchange Rule 13a-14(a)
as adopted pursuant to section 302
of the Sarbanes-Oxley Act of 2002
    
    1732
    
    Certification pursuant to 18 U.S.C.
Section 1350 pursuant to 906 of the
Sarbanes-Oxley Act of 2002
    
    18
 *Pursuant to Rule 12b-32 under the Securities Exchange Act of 1934,
the Registrant hereby incorporates by reference its Registration
Statement No. 2-82655 on Form S-18 and Exhibits to such Registration
Statement, and which contains these documents which are also required to
be filed as Exhibits to this Form 10-K. 14




---



##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized. INTERWEST MEDICAL CORPORATIONBy:
    /s/ Arch B. GilbertArch B. Gilbert, PresidentChief Executive Officer,Chief Financial Officer andChief Accounting Officer
 Date: April 10, 2004
 Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated. By:
/s/ Arch B. GilbertArch B. Gilbert, DirectorDate: April 10, 2004
 15