To Shareholders of InterWest Medical Corporation
Dear Shareholders:
In last year's report to shareholders, we informed you that the
Company anticipated making physical improvements to its nursing
home. These plans have progressed during the year. An addition
to the parking lot has been completed at a cost of approximately
$60,000. Improvements to drainage on the lot are expected to be
finished shortly.
For several months, the Company has been working with California
regulatory authorities in an attempt to receive approval for
plans for modification of the nursing home building. The
addition will enlarge the administration area and the therapy
area. It will not result in adding any patient rooms, but should
result in improvements to operations. Costs are estimated at
$100,000.
The Company has completed the disposition of its remaining
undeveloped oil and gas acreage. Low oil and gas prices and
declining industry fundamentals have discouraged the Company from
acquiring additional acreage. The focus of the Company is to
improve where possible the operations of the nursing home in an
attempt to maximize operating results.
Very truly yours,
INTERWEST MEDICAL CORPORATION
Arch B. Gilbert, President
October 26, 1998
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
(a) Liquidity and Capital Resources:
During the year 1995, the Company's cash increased from
$1,807,951 at the beginning of the period to $2,096,886 at the
end of the period. Accordingly, there was a net increase in cash
of $288,935. This was attributable to an increase in cash
provided by operating activities.
During the year 1996, the Company's cash decreased from
$2,096,886 at the beginning of the period to $2,094,563 at the
end of the period. Accordingly, there was a net decrease in cash
of ($2,323). This was attributable to a decrease in net cash
provided by operating activities.
During the year 1997, the Company's cash decreased from
$2,094,563 at the beginning of the period to $1,458,281 at the
end of the period. There was a decrease in cash of $636,282 as a
result of $1,741,023 used in investment 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
11% and is payable in monthly installments of $42,890. It is
anticipated that these payments will be made from revenues
received by the operation of the Company's nursing home.
During 1997, the Company purchased as treasury shares a total of
297,075 shares of its stock at an aggregate purchase price of $36,571.
(b) Results of Operations:
Operating profit for 1995 was $353,246, as compared to an
operating profit of $268,766 for 1994. The increase in profit
was attributed to larger revenues from the Company's long-term
health care facility. Net loss was ($47,877) as compared to
($53,452) for 1994.
Operating profit for 1996 was $360,059, as compared to an
operating profit of $353,246 for 1995. The increase in profit
was attributed to larger revenues from the Company's long-term
health care facility. Net loss was ($49,282) in 1996 as compared
to a loss of ($47,877) in 1995.
Operating profit for 1997 was $987,934, as compared to an
operating profit of $360,059 for 1996. The increase in profit
was attributed to an increase of revenues from the Company's
long-term health care facility. Net income was $609,112 in 1997
as compared to a loss of ($49,282) in 1996.
The revenues derived from each segment of the Company's
businesses are as follows: Long-term health care - $9,773,756;
real estate development and construction - $87,606 and oil and
gas - $268,806.
c. Effects of Inflation:
The Company is of the view that inflation did not affect its
operations in 1997 and should not in 1998.
<PAGE>
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,
1997 and 1996, 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, 1997. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards and Government Auditing Standards issued by
the Comptroller General of the United States. 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, 1997 and 1996, and the consolidated results of their
operations and their cash flows for each of the years in the
three year period ended December 31, 1997 in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
consolidated financial statements taken as a whole. The
supplemental statements and schedules on pages 25 through 35 are
presented for purposes of additional analysis and are not a
required part of the consolidated financial statements of
InterWest Medical Corporation. Such information has been
subjected to the auditing procedures applied in the audits of the
consolidated financial statements and, in our opinion, are fairly
stated in all material respects in relation to the consolidated
financial statements taken as a whole.
The supplementary information on pages 21 through 24 are not a
required part of the basic financial statements but is
supplementary information required by the Financial Accounting
Standards Board. We have applied certain limited procedures,
which consisted principally of inquires of management regarding
the methods of measurement and presentation of the supplementary
information. However, we did not audit the information and
express no opinion on it.
In accordance with Government Auditing Standards and the
Consolidated Audit Guide for Audits of HUD Programs issued by the
U. S. Department of Housing and Urban Development, we have also
issued a report dated March 10, 1998, on our consideration of the
Company's internal control and reports dated March 10, 1998, on
its compliance with specific requirements applicable to major HUD
programs and specific requirements applicable to Fair Housing and
Non-Discrimination.
WEAVER AND TIDWELL, L.L.P.
Fort Worth, Texas
March 10, 1998
3039
<PAGE>
INTERWEST MEDICAL CORPORATION (1 of 2)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
1997 1996
ASSETS
CURRENT ASSETS
Cash, including interest bearing accounts,
1997 - $1,090,686 ; 1996 - $1,954,527 $1,458,281 $2,094,563
Accounts receivable - trade, net of
allowance for doubtful accounts,
1997 - $54,844; 1996 - $51,178 2,225,183 1,631,439
Investments available for sale 1,955,961 -
Prepaid expenses and other receivables 60,165 73,335
Total current assets 5,699,590 3,799,337
REAL ESTATE DEVELOPMENT
AND CONSTRUCTION COSTS 33,582 121,582
PROPERTY AND EQUIPMENT, at cost
Land 191,442 176,442
Buildings and improvements 3,789,419 3,786,294
Equipment and furniture 827,302 645,876
Oil and gas properties (successful
efforts method of accounting) 477,276 997,083
5,285,439 5,605,695
Less accumulated depreciation and depletion 1,779,239 1,501,730
3,506,200 4,103,965
OTHER ASSETS
Cash escrow accounts 17,293 34,975
Deferred financing costs, net 265,583 273,755
282,876 308,730
TOTAL ASSETS $9,522,248 $8,333,614
<PAGE>
INTERWEST MEDICAL CORPORATION (2 of 2)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 15,418 $ 13,818
Accounts payable 1,196,289 508,621
Accrued salaries 633,144 543,697
Other accrued liabilities 142,019 142,032
Total current liabilities 1,986,870 1,208,168
LONG-TERM DEBT 4,530,234 4,545,653
STOCKHOLDERS' EQUITY
Common stock, par value $0.001,
authorized 50,000,000 shares;
issued 20,000,000 shares 20,000 20,000
Additional paid-in capital 4,798,745 4,798,745
Retained deficit ( 1,297,316) ( 1,906,428)
Net unrealized depreciation on
securities available for sale ( 147,190) -
3,374,239 2,912,317
Less cost of shares held in the treasury,
1997 - 3,180,039 shares;
1996 - 2,882,964 shares 369,095 332,524
3,005,144 2,579,793
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $9,522,248 $8,333,614
<PAGE>
INTERWEST MEDICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
REVENUES
Net patient service revenue $9,773,756 $8,903,359
$8,758,711
Other revenue 349,412 380,415 343,638
Total revenue 10,123,168 9,283,774 9,102,349
COSTS AND EXPENSES
Professional care of patients 5,413,364 4,796,723 4,497,782
General services 1,822,532 1,783,758 1,578,723
Administrative services 1,352,709 1,320,204 1,550,293
Other costs 220,938 731,981 737,377
Depreciation, depletion
and amortization 325,691 291,049 384,928
Income from operations 987,934 360,059 353,246
OTHER INCOME (EXPENSES)
Equity in joint venture operations - 12,313 28,530
Interest income 122,045 80,638 73,705
Interest expense ( 500,867) ( 502,292) ( 503,358)
Income (loss) before
taxes on income 609,112 ( 49,282) ( 47,877)
Provision for income taxes - - -
Net income (loss) $ 609,112 ($ 49,282) ($ 47,877)
Weighted average shares outstanding 16,954,926 17,385,664
18,462,536
Earnings per common share $ .04 ($ - ) ($ - )
<PAGE>
INTERWEST MEDICAL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Net
Unrealized
Depreciation
on
Common Stock Additional Securities
Number of Par Paid-in Retained Available
Treasury
Shares Value Capital Deficit for Sale Stock
Balance,
December 31, 1994
20,000,000 $20,000 $4,798,745 ($1,809,269)
$ - ($151,574)
Net loss ( 47,877)
Purchase of
217,000 shares
of common stock ( 26,508)
Balance,
December 31, 1995 20,000,000 20,000 4,798,745 ( 1,857,146)
- ( 178,082)
Net loss (49,282)
Purchase of
1,237,000 shares
of common stock - - - - - (154,442)
Balance,
December 31, 1996 20,000,000 20,000 4,798,745 ( 1,906,428)
- (332,524)
Net income 609,112
Purchase of
297,075 shares
of common stock (36,571)
Change in
unrealized
depreciation on
securities
available for sale
(147,190)
Balance,
December 31, 1997 20,000,000 $20,000 $4,798,745
($1,297,316) ($147,190) ($369,095)
<PAGE>
INTERWEST MEDICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
CASH FLOWS FROM
OPERATING ACTIVITIES:
Cash received from
customers/patients $9,450,649 $9,045,079 $9,244,777
Interest received 122,045 80,638 73,705
Cash paid to suppliers
and employees (7,916,683) (8,220,967) (7,975,413)
Interest paid (500,880) (502,292) (503,358)
Net cash provided by
operating activities 1,155,131 402,458 839,711
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of property
and equipment (315,427) (352,675) (586,159)
Proceeds from sale of property 659,873 55,595 -
Purchase of investments (2,103,151) - -
Mortgage escrow deposits, net 17,682 854 (13,808)
Receipts from joint ventures - 58,273 86,799
Net cash used
in investing activities (1,741,023) (237,953) (513,168)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Payments on debt (13,819) (12,386) (11,100)
Purchase of treasury stock (36,571) (154,442) (26,508)
Net cash used
in financing activities (50,390) (166,828) (37,608)
Net (decrease) increase in cash (636,282) (2,323) 288,935
CASH, beginning of period 2,094,563 2,096,886 1,807,951
CASH, end of period $1,458,281 $2,094,563 $2,096,886
<PAGE>
INTERWEST MEDICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
RECONCILIATION OF NET INCOME
(LOSS) TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net income (loss) $609,112 ($49,282) ($47,877)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Gain on sale of property (78,775) (36,034) -
Depreciation and amortization 325,691 291,049 384,928
Abandonments 14,575 332,027 394,319
Equity in joint venture operations - (12,313) (28,530)
Changes in assets and liabilities:
Accounts receivable (593,744) (202,661) 142,428
Prepaid expenses and
other receivables 13,170 5,749 (15,127)
Real estate development costs 88,000 105,077 23,580
Other investments - - 10,000
Accounts payable 687,668 (109,253) (139,631)
Accrued liabilities 89,434 78,099 115,621
Net cash provided by
operating activities $1,155,131 $402,458 $839,711
NONCASH INVESTING
AND FINANCING ACTIVITIES:
Included in prepaid expenses and other receivables at December 31, 1996 is
$28,750 due from the president of the Company on the sale of common stock
investments.
<PAGE>
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. Investments in joint ventures
are accounted for on the equity basis of accounting.
Reclassifications
Certain reclassifications have been made to 1996 and 1995
captions to conform to the 1997 presentation.
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 years
Equipment and furniture 7 years
Investments in Securities
The Company has adopted Statement No. 115, Accounting for
Certain Investments in Debt and Equity Securities, issued by
the Financial Accounting Standards Board. In accordance
with Statement No. 115, 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. The
Company does not, nor does it intend to, trade
investments that it owns.
<PAGE>
INTERWEST MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - continued
Investments in Securities - continued
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 a separate
component of stockholders' equity until realized.
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.
<PAGE>
INTERWEST MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - continued
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles 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 as its carrying value at
December 31, 1997 plus refinancing costs paid in February
1998. See Note 6.
Carrying Fair
Amount Value
Long-term debt - 1997 $4,545,652 $4,689,652
Long-term debt - 1996 $4,559,471 $5,198,252
Revenue
Patient service revenue is reported at the estimated net
realizable amounts from patients, third-party payors, and
others for service rendered.
Revenue under third-party payor agreements is subject to
audit and retroactive adjustment. Provisions for estimated
third-party payor 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.
<PAGE>
INTERWEST MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - continued
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
nondeductible write-downs of real estate development costs to
net realizable value.
Earnings Per Common Share
The Company has adopted Statement No. 128, Earnings Per
Share, issued by the Financial Standards Accounting Board.
Adoption of Statement No. 128 had no effect upon 1997, 1996
or 1995 earnings per share computations.
Basic earnings per common share was computed based on the
weighted average number of common shares outstanding for the
period. Diluted earnings per share have not been presented
since the inclusion of common stock equivalents would be
antidilutive.
Cash Flows Presentation
For purposes of the statement of cash flows, the Company
considers cash to include unrestricted cash and all highly
liquid investments with initial maturities of ninety days or
less from the date of purchase.
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.
<PAGE>
INTERWEST MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - continued
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. Dates that quoted
market prices are determined may vary depending on whether
the terms of an award are fixed or variable.
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. No
awards have been granted in 1997, 1996 or 1995.
Accounting Changes
The Financial Accounting Standards Board has issued the
following Statements of Financial Accounting Standards
effective for fiscal years beginning after December 15, 1997:
No. 130 - Reporting Comprehensive Income
Requires that all items are required to be recognized
under accounting standards as components of comprehensive
income be reported in a financial statement that is
displayed with the same prominence as other financial
statements.
No. 131 - Disclosures About Segments of an Enterprise
and Related Information
Requires disclosure of operating segments based upon
information used internally for evaluating segment
performance and allocating resources.
No. 132 - Employers' Disclosures About Pensions
and Other Post-retirement Benefits
Revises employers' disclosures about pensions and other
post-retirement plans.
The Company will adopt the above standards effective January 1, 1998.
Adoption is not expected to have a significant
effect upon current financial statements.
<PAGE>
INTERWEST MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. INVESTMENT SECURITIES
Investment securities consist entirely of equity securities.
The cost and market values of investment securities available
for sale at December 31, 1997 were:
Market value $1,955,961
Amortized cost 2,103,151
Unrealized loss ($147,190)
Unrealized appreciation (depreciation) in investment
securities available for sale are included in stockholders'
equity, net of income tax effect.
There were no sales of securities in 1997.
The Company had no investment securities at December 31, 1996.
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.
Nine hundred, seventy-five thousand (975,000) shares
exercisable at $0.15 per share were granted under the Plan.
All options expired unexercised in 1997.
<PAGE>
INTERWEST MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1997, 1996 and 1995 Arch B.
Gilbert, a Professional Corporation, whose sole stockholder is
president of the Company, was paid $5,000, $9,000 and $21,500,
respectively, for legal services rendered.
During the years ended December 31, 1997, 1996 and 1995, the
above corporation was reimbursed $37,126, $47,068, and $56,056,
respectively, for expenses incurred on behalf of the Company.
Included in other receivables at December 31, 1996 is $28,750
due from the Company's president from the sale of common stock
investments to the president. No gain or loss was recognized
from the sale. Included in accounts payable at December 31,
1997 is approximately $36,000 of advances from the Company's president.
NOTE 5. FEDERAL INCOME TAXES
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes,"
effective January 1, 1996. Adoption of this standard did not
materially impact the Company's consolidated financial
statements.
The Company had no income tax provision in 1997, 1996 or 1995,
and no significant differences between the tax provisions and
the amounts computed using statutory rates.
At December 31, 1997, the Company had unused operating loss
carryforwards available to offset future income for tax
reporting purposes of approximately $1,235,000 which ultimately
expires in 2012.
All income (loss) since inception relates to domestic activity.
The tax effects of net operating loss carryforwards and
temporary differences at December 31, 1997 and 1996 that give
rise to significant portions of deferred tax assets and
deferred tax liabilities are as follows:
1997 1996
Deferred tax assets
Net operating loss carryforwards $419,399 $610,386
Unrealized loss on marketable securities 50,045 -
<PAGE>
INTERWEST MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. FEDERAL INCOME TAXES - continued
1997 1996
Real estate valuations - 17,480
Other 18,646 17,400
488,090 645,266
Deferred tax liabilities - -
Valuation allowance (488,090) (645,266)
Total deferred taxes, net $ - $ -
During 1997 and 1996, the valuation allowance (decreased)
Increased ($157,176) and $16,401, respectively.
NOTE 6. LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
1997 1996
Mortgage loan for financing of a
nursing home constructed in Colton,
California. The mortgage loan bears
interest at 11%, is due in monthly
installments of $42,890 (principal
and interest), matures in June, 2030
and is secured by real estate $4,545,652 $4,559,471
Less current maturities 15,418 13,818
$4,530,234 $4,545,653
Aggregate maturities of long-term debt for each of the
succeeding five years and thereafter is as follows:
1998 $15,418
1999 17,202
2000 19,192
2001 21,413
2002 23,891
Thereafter 4,448,536
<PAGE>
INTERWEST MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. LONG-TERM DEBT - continued
In February 1998, the above mortgage loan was restructured to
reduce the mortgage interest rate to 7.375% effective February
1, 1998. In connection with the restructuring, the Company
paid approximately $144,000 of debt issue costs in 1998.
NOTE 7. SEGMENTED INFORMATION
The Company's operations are classified into three principal
industry segments:
Long-term Health Care - Operation of convalescent centers involving
skilled nursing care in southern California
Real Estate Development
and Construction - Construction and sale of single family housing
Oil and Gas - Oil and gas exploration and development
Following is a summary of segmented information for 1997, 1996 and 1995:
1997
Real Estate
Long-term Development
Health and Oil and
Care Construction Gas
Consolidated
Sales to unaffiliated customers $9,773,756 $87,606 $261,806
$10,123,168
Operating income (loss) $1,173,269 ($394) $48,571 $1,221,446
Other income 122,045
General corporate expenses (233,512)
Interest expenses (500,867)
Income before income taxes $609,112
Identifiable assets $5,829,421 $49,725 $180,361 $6,059,507
Corporate assets 3,462,741
Total Assets at 12/31/97 $9,522,248
Capital expenditures $199,551 $ - $115,876 $315,427
Depreciation, depletion
and amortization $245,394 $ - $80,297 $325,691
<PAGE>
INTERWEST MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. SEGMENTED INFORMATION - continued
1996
Real Estate
Long-term Development
Health and Oil and
Care Construction Gas
Consolidated
Sales to unaffiliated customers $8,903,359 $104,533 $275,882
$9,283,774
Operating income (loss) $1,003,417 ($40,375) ($387,787) $575,255
Other income 92,951
General corporate expenses (215,196)
Interest expenses (502,292)
Loss before income taxes ($49,282)
Identifiable assets $5,356,666 $121,582 $731,961
$6,210,209
Corporate assets 2,123,405
Total Assets at 12/31/96 $8,333,614
Capital expenditures $85,867 $ - $266,808 $352,675
Depreciation, depletion
and amortization $222,625 $ - $68,424 $291,049
1995
Real Estate
Long-term Development
Health and Oil and
Care Construction Gas Consolidated
Sales to unaffiliated customers $8,758,711 $22,091 $321,547
$9,102,349
Operating income (loss) $1,143,251 ($9,844) ($549,500)$583,907
Other income 102,235
General corporate expenses (230,661)
Interest expenses (503,358)
Loss before income taxes ($47,877)
Identifiable assets $5,318,673 $272,619 $863,795
$6,455,087
Corporate assets 2,125,791
Total Assets at 12/31/95 $8,580,878
Capital expenditures $33,865 $ - $552,294 $586,159
Depreciation, depletion
and amortization $219,323 $ - $165,605 $384,928
<PAGE>
INTERWEST MEDICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. SEGMENTED INFORMATION - continued
The Company did not have any intersegment sales. Operating
loss is total revenues less operating expenses for each segment
and excludes general corporate expenses, interest expense and
other income of a corporate nature. Identifiable assets by
segment are those assets that are used in the Company's
operations within that industry. Corporate assets consist
principally of cash.
NOTE 8. 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 9. EMPLOYEES RETIREMENT PLAN
The Company has a retirement plan, established in 1996,
covering substantially all of its employees. Contributions to
the plan in 1997 and 1996 totaled $35,440 and $21,216,
respectively.
