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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
-----------------
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
FOR THE TRANSITION PERIOD FROM _________ TO ____________
COMMISSION FILE NUMBER: 000-23-661
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ROCKWELL MEDICAL TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
MICHIGAN 38-3317208
------------------------------ ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
30142 WIXOM ROAD
WIXOM, MICHIGAN 48393
----------------------------------------
(Address of principal executive offices)
(248) 960-9009
---------------------------
(Issuer's telephone number)
---------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
State the number of shares outstanding of each of the issuer's classes
of common equity as of the latest practicable date: 8,551,814 Common Shares
outstanding and 3,761,071 Common Share Purchase Warrants outstanding as of
August 6, 2004.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [X]
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ROCKWELL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2004 AND DECEMBER 31, 2003
(Whole Dollars)
(Unaudited)
JUNE 30, DECEMBER 31,
2004 2003
------------ ------------
ASSETS
Cash and Cash Equivalents ............................................................. $ 306,032 $ 106,639
Restricted Cash and Cash Equivalents ................................................... 8,662 8,662
Accounts Receivable, net of a reserve of $34,500 in 2004 and $34,500 in 2003 .......... 2,226,195 2,169,564
Inventory .............................................................................. 1,433,358 1,350,291
Other Current Assets ................................................................... 131,559 103,971
------------ ------------
Total Current Assets ............................................................... 4,105,806 3,739,127
Property and Equipment, net ............................................................ 2,030,739 1,943,376
Intangible Assets ...................................................................... 301,834 314,071
Goodwill ............................................................................... 920,745 920,745
Other Non-current Assets ............................................................... 125,271 127,467
------------ ------------
Total Assets ...................................................................... $ 7,484,395 $ 7,044,786
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Short Term Borrowings .................................................................. $ 498,594 $ 642,018
Notes Payable & Capitalized Lease Obligations .......................................... 343,508 307,959
Accounts Payable ....................................................................... 2,036,907 1,666,952
Accrued Liabilities .................................................................... 351,580 329,519
------------ ------------
Total Current Liabilities ......................................................... 3,230,589 2,946,448
Long Term Notes Payable & Capitalized Lease Obligations ................................ 913,980 926,230
Shareholders' Equity:
Common Share, no par value, 8,551,814 and 8,519,405 shares issued and outstanding ..... 11,865,096 11,832,220
Common Share Purchase Warrants, 3,761,071 and 3,766,071 shares issued and outstanding... 320,150 320,150
Accumulated Deficit .................................................................... (8,845,420) (8,980,262)
------------ ------------
Total Shareholders' Equity ....................................................... 3,339,826 3,172,108
------------ ------------
Total Liabilities and Shareholders' Equity ........................................ $ 7,484,395 $ 7,044,786
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
2
ROCKWELL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED INCOME STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004 AND JUNE 30, 2003
(WHOLE DOLLARS)
(Unaudited)
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 2004 JUNE 30, 2003 JUNE 30, 2004 JUNE 30, 2003
------------- ------------- ------------- -------------
Sales ............................. $ 4,382,924 $ 3,453,554 $ 8,690,768 $ 6,888,291
Cost of Sales ..................... 3,700,686 2,881,154 7,313,570 5,843,091
----------- ----------- ----------- -----------
Gross Profit .................... 682,238 572,400 1,377,198 1,045,200
Selling, General and
Administrative..................... 582,977 608,592 1,153,388 1,128,827
----------- ----------- ----------- -----------
Operating Income (Loss) ......... 99,261 (36,192) 223,810 (83,627)
Interest Expense, net ............. 44,636 57,038 88,968 96,396
----------- ----------- ----------- -----------
Net Income (Loss) ............... $ 54,625 $ (93,230) $ 134,842 $ (180,023)
=========== =========== =========== ===========
Basic Earnings (Loss) Per
Share.............................. $ 0.01 $ (0.01) $ 0.02 $ (0.02)
Diluted Earnings (Loss) Per
Share.............................. $ 0.01 $ (0.01) $ 0.01 $ (0.02)
The accompanying notes are an integral part of the consolidated financial
statements.
3
ROCKWELL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND JUNE 30, 2003
(WHOLE DOLLARS)
(Unaudited)
2004 2003
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) ............................................. $ 134,842 $ (180,023)
Adjustments To Reconcile Net Income (Loss) To Net Cash Used For
Operating Activities:
Depreciation and Amortization .............................. 297,765 211,997
Compensation Recognized for Stock Options & Warrants ....... -0- 52,500
Changes in Assets and Liabilities:
Decrease (Increase) in Accounts Receivable ............... (56,631) 116,165
(Increase) in Inventory .................................. (83,067) (93,458)
(Increase) in Other Assets ............................... (25,392) (7,102)
Increase (Decrease) in Accounts Payable .................. 369,954 (226,452)
Increase (Decrease) in Other Liabilities ................. 22,061 (44,567)
----------- -----------
Changes in Assets and Liabilities ..................... 226,925 (255,414)
----------- -----------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ... 659,532 (170,940)
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) in Restricted Cash Equivalents ................. - (1,140)
Purchase of Equipment ..................................... (187,243) (90,379)
----------- -----------
CASH (USED IN) INVESTING ACTIVITIES ............... (187,243) (91,519)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Borrowing on Line of Credit ................. 8,108,522 7,045,730
Payments on Line of Credit ............................... (8,251,945) (6,660,596)
Payments on Notes Payable and Capital Lease Obligations .. (162,349) (94,871)
Issuance of Common Shares ................................ 32,876 --
----------- -----------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ... (272,896) 290,263
INCREASE IN CASH ................................................ 199,393 27,804
CASH AT BEGINNING OF PERIOD ..................................... 106,639 133
----------- -----------
CASH AT END OF PERIOD ........................................... $ 306,032 $ 27,937
=========== ===========
Supplemental Cash Flow Disclosure:
Interest Paid ....................................... $ 89,052 $ 96,486
=========== ===========
Non-Cash Investing and Financing Activity -
Equipment Acquired Under Capital Lease Obligations .. $ 185,648 $ -0-
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
4
ROCKWELL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
We manufacture, sell and distribute hemodialysis concentrates and other
ancillary medical products and supplies used in the treatment of patients with
kidneys that do not function properly. We supply our products to medical service
providers who treat patients with kidney disease. Our products are used to
cleanse patients' blood and replace nutrients during the kidney dialysis
process. We primarily sell our products in the United States.
We are regulated by the United States Food and Drug Administration (the
"FDA") under the Federal Drug and Cosmetics Act, as well as by other Federal,
state and local agencies. We have received 510(k) approval from the FDA to
market hemodialysis solutions and powders. We also have 510(k) approval to sell
our Dri-Sate Dry Acid Concentrate product line and Dri-Sate Mixer.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Our consolidated financial statements include our accounts and the
accounts of our wholly owned subsidiary, Rockwell Transportation, Inc. All
intercompany balances and transactions have been eliminated.
In the opinion of our management, all adjustments have been included which
are necessary to make the financial statements not misleading. All of these
adjustments that are material are of a normal and recurring nature. Our
operating results for the three and six month periods ended June 30, 2004 are
not necessarily indicative of the results to be expected for the year ending
December 31, 2004. You should read our unaudited interim financial statements
together with the financial statements and related footnotes for the year ended
December 31, 2003 included in our Annual Report on Form 10-KSB for the fiscal
year ended December 31, 2003. Our Annual Report on Form 10-KSB for the fiscal
year ended December 31, 2003 includes a description of our significant
accounting policies.
EARNINGS PER SHARE
We computed our basic earnings (loss) per share using weighted average
shares outstanding for each respective period. Diluted earnings per share also
reflect the weighted average impact from the date of issuance of all potentially
dilutive securities, consisting of stock options and common share purchase
warrants, unless inclusion would have had an antidilutive effect. Actual
weighted average shares outstanding used in calculating basic and diluted
earnings per share were:
Three months ended Six months ended
---------------------- ----------------------
June 30, June 30,
---------------------- ----------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Basic Weighted Average Shares Outstanding 8,544,296 8,488,283 8,539,889 8,488,283
Effect of Dilutive Securities 735,060 - 772,230 -
--------- --------- --------- ---------
Diluted Weighted Average Shares Outstanding 9,279,356 8,488,283 9,312,119 8,488,283
========= ========= ========= =========
5
3. LINE OF CREDIT
As of March 28, 2003, we renewed and expanded our credit facility under a
$2,500,000 revolving line of credit facility with a financial institution. The
two year loan facility is secured by our accounts receivable and other assets.
We are obligated to pay interest at the rate of two percentage points over the
prime rate, plus other fees aggregating .25% of the loan balance. As of June 30,
2004, our outstanding borrowings under this loan facility were $498,594.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Some of the statements in this report are forward-looking statements.
These forward-looking statements include statements relating to our performance
in this Management's Discussion and Analysis of Financial Condition and Results
of Operations. In addition, we may make forward-looking statements in future
filings with the Securities and Exchange Commission and in written material,
press releases and oral statements. Forward-looking statements include
statements regarding the intent, belief or current expectations of us or our
officers, including statements preceded by, followed by or including
forward-looking terminology such as "may," "might," "will," "should," "believe,"
"expect," "anticipate," "estimate," "continue," "predict," "forecast,"
"projected," or similar expressions, with respect to various matters.
Our actual results might differ materially from those projected in the
forward-looking statements depending on various important factors. These
important factors include the cost of obtaining FDA approval to market our new
iron supplemented dialysate product, the challenges associated with developing
new products, the uncertainty of acceptance of our products by the hemodialysis
community, competition in our market, and the other factors discussed under the
caption "Risk Factors" in our Registration Statement on Form SB-2 (file no.
333-31991) effective January 26, 1998 and elsewhere in our public filings and in
this report, all of which constitute cautionary statements identifying important
factors with respect to the forward-looking statements, including risks and
uncertainties, that could cause actual results to differ materially from those
in the forward-looking statements.
All forward-looking statements in this report are based on information
available to us on the date of this report. We do not undertake to update any
forward-looking statements that may be made by us or on our behalf in this
report or otherwise.
OVERVIEW
We operate in a single business segment; the manufacture and distribution
of hemodialysis concentrates, dialysis kits and ancillary products used in the
dialysis process. Our business has gained market share each year since our
inception in 1996. Our sales have grown each year since we started. We incurred
losses each year since we started until 2003 when the volume of our sales
exceeded the cost of operating our business. We increased our sales by over 30%
in 2003, allowing us to more fully utilize our facilities, equipment and staff,
and causing our gross profit margins to increase. Those trends continued in the
first half of 2004. In the last four consecutive quarters combined, we have
earned $320,000.
We believe that our core concentrate and supply business can continue to
be profitable. The dialysis supply market is very competitive and we compete
against companies with substantially greater resources than us. We expect to
continue to grow our business while executing our strategic plan to expand our
product lines, to expand our geographic reach and to develop our proprietary
technology.
We are seeking to gain FDA approval for our iron supplemented dialysate
product which we also refer to as dialysate iron. We believe our iron
supplemented dialysate product has the potential to compete in the iron
maintenance therapy market. If we are successful in introducing our dialysate
iron product, we believe it is possible that we may also increase our market
share for the other products we sell. The cost to obtain regulatory approval for
a drug in the United States is expensive and we expect that the development
costs of our iron supplemented dialysate product will require us to raise
additional funds or collaborate with a strategic partner. We expect to incur
substantial costs to conduct required clinical trials and to obtain marketing
approval which may offset some or all of any profits generated from sales of our
existing products during the approval process, and we may incur losses. We
expect this process to take between one and three years and we might not be
successful.
6
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004
Our sales in the second quarter of 2004 were $4,382,924. Sales in the
second quarter increased $929,370 or 26.9% over our sales in the second quarter
of 2003. Sales of our dialysis concentrates, which make up the majority of our
sales, increased by 36% over the second quarter last year. We also realized
sales increases in our ancillary product lines which increased 4% in total. We
experienced a decrease of $31,000 in backhaul revenue as a result of a
combination of higher fleet utilization and changes to government regulations
that reduced driving time available for backhaul operations.
Our dialysis concentrate sales increase was led by the development of new
business primarily for our Dri-Sate Dry Acid concentrate product line which
utilizes our patented Dri-Sate Dry Acid Mixing System. Dri-Sate Dry Acid unit
volumes increased by 55% over the second quarter of 2003. Similarly, sales of
our bicarbonate product lines grew by over 30% over the second quarter of 2003
due to unit volume growth.
Gross profit increased to $682,238 in the second quarter of 2004 which
represented an improvement of $109,838 or 19.2%. Gross profit margins in the
second quarter of 2004 were 15.6% which was .9 percentage points lower than our
gross profit margins in the second quarter of 2003. Nearly all, or .8 percentage
points of the total .9 percentage point margin reduction was due to a reduction
in the percentage allocation of operating expenses to selling, general and
administrative expense for facility, depreciation and other costs. Selling,
general and administrative expense was reduced by the same amount aggregating
$34,200. In addition, increases in the global cost of oil resulted in higher
delivery costs and increased material costs for our products thereby offsetting
productivity gains made by virtue of higher plant production volumes. We would
expect that additional increases in the price of oil may offset productivity
improvements from higher volumes.
Selling, general and administrative expense as a percent of sales in the
second quarter of 2004 decreased by 4.3 percentage points to 13.3% of sales from
17.6% of sales in the second quarter of 2003. Our selling, general and
administrative expenses decreased $25,615 or 4.2% compared to the second quarter
of 2003. We reduced the allocation of facility, depreciation and other costs
charged to selling, general and administrative expense by $34,200. Without this
allocation change, selling, general and administrative costs increased by 1.5%.
Our expenditures for research and development of our dialysate iron product
increased by approximately $10,000 from the second quarter of 2003. In addition,
we realized increases in personnel costs to handle increased transaction
activity coupled with higher operating expenses including higher legal costs for
securities filings and higher healthcare insurance costs. However, we offset
these increases with reductions in other discretionary expenditures.
We are developing a drug product, dialysate iron, to provide iron
supplements for the treatment of anemic dialysis patients. This drug product
will be delivered to patients via our regular dialysis concentrate products. The
cost of developing this drug product is expected to be substantial. We may fund
the cost of product development ourselves or we may collaborate with a strategic
partner or other third party in the development of this product. Future
expenditures on product development will increase substantially once we commence
Phase III clinical trials for dialysate iron. If we fund and incur the cost of
this product development ourselves, these future expenditures are likely to
offset all of our income and we may incur losses during the product development
phase for dialysate iron which may take one to three years.
Our interest expense was $44,636 in the second quarter of 2004 and
decreased by $12,402 over the second quarter of 2003. The decrease in interest
expense was due to lower average borrowings under the line of credit.
Our second quarter 2004 net income of $54,625 was an improvement of
$147,855 over the second quarter 2003 loss of ($93,230). Our earnings per share
was $.01 in the second quarter of 2004. Our earnings per share improved $.02
over the second quarter of 2003 where we reported a loss of ($.01) per share.
The improvement in earnings per share was due to improved operating results due
to higher sales volumes.
7
Our sales for the first six months of 2004 were $8,690,768 and were
$1,802,477 or 26.2% higher than the first six months of 2003. We have been
successful at developing new business over the last year with our growth
attributable to unit volume increases across the breadth of our product lines.
Our growth has been primarily attributable to new dialysis centers purchasing
products from our core concentrate product lines. Sales of our ancillary
products grew 9%; primarily as a result of increases in sales of specialty kits.
Our sales primarily consist of dialysis concentrate sales and sales of our
concentrates increased by over 33% in the first six months of 2004 compared to
the first six months of 2003. Increased sales of our Dri-Sate Dry Acid
Concentrate product line was the primary catalyst behind increases in our sales
and gross profit margins with Dri-Sate unit volume up over 43%. We also
experienced solid growth in the rest of our product lines including our liquid
acid concentrate sold in drums with first half sales up approximately 50% over a
year ago.
We entered into a significant supply contract with a customer in May,
2004. We did not anticipate nor did we realize much impact from this contract
during the second quarter. However, we expect to realize increases in revenue
from this contract in the second half of 2004.
Gross profit of $1,377,198 in the first half of 2004 increased by $331,998
or 31.8% over the first half of 2003. Increased sales volumes coupled with
increased operating efficiencies resulted in gross profit margins increasing .6
percentage points to 15.8% as compared to 15.2% in the first half of 2003.
However, we changed the allocation of facility, depreciation and other operating
costs to selling, general & administrative expense to reflect a more precise
activity based cost allocation of those costs. Additional costs allocated to
cost of sales aggregated $68,400 in the first six months of 2004 or .8% of
sales. Without this expense allocation change, gross profit margins in the first
half of 2004, increased by 1.4 percentage points to sales.
Our margin improvement in the first half of 2004 has been negatively
impacted by two factors that increased our distribution costs. First, the
increased cost of oil increased our costs to deliver products. Our expectation
that our margins will improve as we increase our volumes, may be negatively
impacted if the cost of oil continues to increase. Second, as a result of
changes to regulations governing work hours for truck drivers coupled with our
substantial increases in sales volumes which has resulted in more efficient
fleet utilization, we have seen a significant reduction in our potential for
freight backhaul revenue. As a result of the regulation changes coupled with the
impact of our growth, our backhaul revenue has decreased by $60,000 in the first
six months of 2004 or approximately 1% of first half 2003 sales.
Selling, general and administrative expense decreased as a percentage of
sales by 3.1% in the first half of 2004 as compared to the first half of 2003
with the first half cost to sales of 13.3% as compared to 16.4% in the first
half of 2003. Overall, selling, general and administrative expense decreased by
$24,561 or 2.2%, but after adjusting for a reduction in allocation of facility,
depreciation and other operating costs, these costs increased by 3.8%. We
incurred increased expenses for sales and administrative costs to handle
increased transaction activity. We also incurred higher costs for healthcare
insurance. In addition, we increased spending on development of our dialysate
iron product by over $20,000 from the first six months of last year.
Interest expense decreased by $7,438 in the first six months of 2004
primarily due to lower average borrowings under the line of credit.
Net income in the first half of 2004 was $134,842, an improvement of
$314,865 over the first half results in 2003. Net income to sales improved by
4.1 percent to sales to 1.5% in the first half of 2004 as compared to a loss of
2.6% in the first half of 2003. Basic earnings per share aggregated $.02 as
compared to a loss of ($.02) in the first half of 2003. The $.04 improvement in
net income per share in the first half of 2004 was due to higher sales volumes
and increased operating efficiencies as compared to the first half of 2003.
8
LIQUIDITY AND CAPITAL RESOURCES
We have utilized cash since we started business, and expect that we will
require additional cash to fund our business development and operating
requirements. We have substantially grown our business and have reduced our
operating cash requirements. Until 2003, we had incurred operating losses each
year since inception. We had a net profit of $4,853 for 2003 as a whole and we
reported a net profit of $320,000 over the last four consecutive quarters. We
reported a net profit of $134,842 and our cash balance increased by $199,000 in
the first half of 2004. In 2003, we required cash to fund our development and
operating activities including capital expenditures and working capital which
was primarily provided by increasing the borrowings under our line of credit and
through capital lease arrangements for equipment. In 2004, we anticipate that we
will increase the borrowings under our line of credit and utilize lease
arrangements to fund certain capital expenditures for manufacturing equipment
and transportation equipment.
Our long term strategy is to expand our product line and operations to
serve dialysis providers. We anticipate that, as a result of our existing supply
agreements and our customer relationships, we have the capability to capture
substantial market share that will lead to sustaining profitable operations. We
expect that we will continue to realize substantial growth during 2004 and that
we will require additional working capital and capital expenditures to fund this
growth.
We renewed our line of credit with GE Healthcare Finance as of March 28,
2003 under a two year agreement. Under the new loan agreement, there is a $2.5
million credit limit. We are permitted to borrow up to 80% of our eligible
accounts receivable, and we are required to maintain a net worth of at least
$750,000. We anticipate that this credit line will be sufficient to fund much of
our working capital requirements for our concentrate business operations in
2004. Borrowings under this line were $498,594 at June 30, 2004.
In order for us to fund our working capital and capital expenditure
requirements and to continue to execute our new product development strategy, we
will require additional financing. We estimate the cost to fund development of
our new iron supplemented dialysate product will be between $3,000,000 -
$4,000,000 over the next one to two years. We believe that we will be able to
raise the capital required to expand our operations and fund our new product
development strategy through either debt or equity financing arrangements. We
have identified possible sources of financing, and we are currently in
negotiations with potential strategic partners, investors and lenders; however,
we might not be successful in raising additional funds. If we are not successful
in raising additional funds, we may be required to alter our growth strategy,
defer spending on product development, curtail production expansion plans or
take other measures to conserve our cash resources.
While we have raised our sales level each year and have customer
commitments for additional business we might not be able to continue to increase
our sales levels and market share and to sustain profitable operations. There
can be no assurance that we will have or be able to raise sufficient funds to
carry out our business plans and continue a profitable level of operations.
These factors, among others, raise doubt about our ability to continue as a
going concern. Our consolidated financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount or classification of liabilities that might be necessary
should we be unable to continue as a going concern.
ITEM 3. CONTROLS AND PROCEDURES
We carried out an evaluation under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of our disclosure controls and
procedures as of June 30, 2004. Based upon that evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures are effective as of June 30, 2004 in ensuring that information
required to be disclosed by us under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified under the Exchange Act
rules and forms. There was no change in our internal control over financial
reporting identified in connection with such evaluation that occurred during our
fiscal quarter ended June 30, 2004 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
9
Disclosure controls and procedures are our controls and other procedures
that are designed to ensure that information required to be disclosed by us in
the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is accumulated and communicated to our
management, including our principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required disclosure.
10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We filed a civil action on September 20, 2000 in the Circuit Court of
Wayne County Michigan against Mr. Gary D. Lewis, individually and Wall Street
Partners, Inc., a Michigan corporation, jointly and severally. We filed a breach
of contract suit against Wall Street Partners, Inc. for breach of contract
pertaining to consulting services provided us by Wall Street Partners, Inc and
breach of duty claim against Mr. Gary D. Lewis. Also named in the suit was Mr.
Gary D. Lewis, the principal of the consulting firm. Mr. Lewis is our former
Chairman, a former director and in 2001 was the beneficial owner of more than 5%
of our common shares. We requested recovery of amounts paid to Wall Street
Partners, Inc. and Mr. Lewis.
On November 21, 2001 a jury found in our favor and awarded us $350,000
plus interest. On December 13, 2001, an official judgment in the amount of
$175,000 with interest was entered for us against Mr. Lewis personally and a
judgment in the amount of $175,000 with interest was entered for us against Wall
Street Partners. A motion by Mr. Lewis for re-trial was denied February 15,
2002. Mr. Lewis subsequently filed an appeal to the judgment.
The Michigan Court of Appeals rendered a decision with respect to
defendant's appeal and remanded for retrial. The Appeals court concluded that
the trial court erred with regard to the breach of duty claim against the
defendant by failing to give the jury any instruction on ratification in
response to a request for such instruction. We expect to retry the suit against
Mr. Lewis. The Appeals court affirmed the breach of contract claim against Wall
Street Partners, Inc. and therefore, the judgment against Wall Street Partners,
Inc. was affirmed. The Defendant has sought a rehearing in the Michigan Court of
Appeals and the motion for rehearing is pending.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's annual meeting of its shareholders held May 27, 2004, the
shareholders re-elected Mr. Ronald D. Boyd to the board of directors for a three
year term expiring in 2007. Votes cast in favor were 8,014,574 while votes cast
against were 6,250. Mr. Kenneth L. Holt continues to serve as a Class II
director with a term expiring in 2005 and Mr. Robert L. Chioini continues to
serve as a Class III director with a term expiring in 2006.
In addition, the shareholders approved a proposal to increase the number
of Common Shares with respect to which stock options may be granted under the
Company's 1997 Stock Option Plan from 2,900,000 Common Shares to 3,900,000
Common Shares in the aggregate, and to increase the maximum number of Common
Shares that may be granted to a participant each year from 200,000 Common Shares
to 500,000 Common Shares. Votes cast in favor were 2,953,047 while votes cast
against were 1,084,986. Total votes abstained were 17,950 and total non-votes
were 3,964,841.
No other matters were submitted to a vote of the shareholders at the
annual meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Certifications of Chief Executive Officer Pursuant to Rule
13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
31.2 Certifications of the Chief Financial Officer Pursuant to Rule
13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
32.1 Certifications of the Chief Executive Officer and Chief Financial
Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
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(b) Reports on Form 8-K.
No reports on Form 8-K were filed by us during the quarter for which
this report is filed. We furnished a Current Report on Form 8-K on
May 10, 2004, reporting under Item 9 and Item 12 the information
required by Item 12 - Results of Operations and Financial Condition
in connection with our press release regarding first quarter 2004
results. No financial statements were filed, although we furnished
the financial information included in the press release furnished
with the Form 8-K Current Report.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ROCKWELL MEDICAL TECHNOLOGIES, INC.
(Registrant)
Date: August 13, 2004 /s/ ROBERT L. CHIOINI
---------------------------------
Robert L. Chioini
President, Chief Executive
Officer and Director (Principal
Executive Officer)
Date: August 13, 2004 /s/ THOMAS E. KLEMA
---------------------------------
Thomas E. Klema
Vice President of Finance, Chief
Financial Officer, Treasurer and
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
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10-QSB EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
EX-31.1 Certification of Chief Executive Officer Pursuant to Rule
13a-14(a), as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
EX-31.2 Certification of the Chief Financial Officer Pursuant to Rule
13a-14(a), as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
EX-32.1 Certifications of the Chief Executive Officer and Chief
Financial Officer, Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
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