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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 SEPTEMBER 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: 8,553,031 Common Shares
outstanding as of November 1, 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 SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
(Whole Dollars)
(Unaudited)
SEPTEMBER 30, DECEMBER 31,
2004 2003
------------- ------------
ASSETS
Cash and Cash Equivalents ................................................................. $ 62,026 $ 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 .............. 2,302,866 2,169,564
Inventory .................................................................................. 1,437,712 1,350,291
Other Current Assets ....................................................................... 145,921 103,971
------------ ------------
Total Current Assets ................................................................... 3,957,187 3,739,127
Property and Equipment, net ................................................................ 1,987,917 1,943,376
Intangible Assets .......................................................................... 369,077 314,071
Goodwill ................................................................................... 920,745 920,745
Other Non-current Assets ................................................................... 123,312 127,467
------------ ------------
Total Assets .......................................................................... $ 7,358,238 $ 7,044,786
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Short Term Borrowings ...................................................................... $ 373,874 $ 642,018
Notes Payable & Capitalized Lease Obligations .............................................. 338,826 307,959
Accounts Payable ........................................................................... 1,935,721 1,666,952
Accrued Liabilities ........................................................................ 446,417 329,519
------------ ------------
Total Current Liabilities ............................................................. 3,094,838 2,946,448
Long Term Notes Payable & Capitalized Lease Obligations .................................... 858,298 926,230
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 ........................................................................ (8,780,144) (8,980,262)
------------ ------------
Total Shareholders' Equity ........................................................... 3,405,102 3,172,108
------------ ------------
Total Liabilities and Shareholders' Equity ............................................ $ 7,358,238 $ 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 NINE MONTHS ENDED SEPTEMBER 30, 2004 AND SEPTEMBER 30, 2003
(WHOLE DOLLARS)
(Unaudited)
THREE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED
SEPT. 30, 2004 SEPT. 30, 2003 SEPT. 30, 2004 SEPT. 30, 2003
------------------ ------------------ ----------------- -----------------
SALES .......................................... $ 4,473,872 $ 3,938,878 $ 13,164,640 $ 10,827,169
Cost of Sales .................................. 3,753,177 3,224,504 11,066,748 9,067,596
------------ ------------ ------------ ------------
GROSS PROFIT ................................. 720,695 714,374 2,097,892 1,759,573
Selling, General and Administrative
606,304 588,454 1,759,692 1,717,280
------------ ------------ ------------ ------------
OPERATING INCOME ............................. 114,391 125,920 338,200 42,293
Interest Expense, net .......................... 49,114 41,070 138,082 137,466
------------ ------------ ------------ ------------
NET INCOME (LOSS) ............................ $ 65,277 $ 84,850 $ 200,118 $ (95,173)
============ ============ ============ ============
BASIC EARNINGS (LOSS) PER SHARE ................ $ .01 $ .01 $ .02 $ (.01)
DILUTED EARNINGS (LOSS) PER SHARE .............. $ .01 $ .01 $ .02 $ (.01)
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 NINE MONTHS ENDED SEPTEMBER 30, 2004 AND SEPTEMBER 30, 2003
(WHOLE DOLLARS)
(Unaudited)
2004 2003
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) .................................................................. $ 200,118 $ (95,172)
Adjustments To Reconcile Net Income (Loss) To Net Cash Used For
Operating Activities:
Depreciation and Amortization ................................................... 462,250 318,064
Compensation Recognized for Stock Options & Warrants ............................ -0- 77,021
Changes in Assets and Liabilities:
(Increase) in Accounts Receivable ............................................. (133,302) (314,932)
Decrease (Increase) in Inventory .............................................. (87,421) 121,860
Decrease (Increase) in Other Assets ........................................... (37,795) 13,717
Increase (Decrease) in Accounts Payable ....................................... 268,769 (212,482)
Increase (Decrease) in Other Liabilities ...................................... 116,898 (10,631)
------------ ------------
Changes in Assets and Liabilities .......................................... 127,149 (402,468)
------------ ------------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ........................... 789,517 (102,555)
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) in Restricted Cash Equivalents ..................................... -- (1,140)
Purchase of Equipment ......................................................... (277,149) (128,905)
Purchase of Intangible Assets and Patent Licensing Fees ....................... (75,000) (2,218)
------------ ------------
CASH (USED IN) INVESTING ACTIVITIES ....................................... (352,149) (132,263)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Borrowing on Line of Credit ..................................... 12,147,230 10,623,963
Payments on Line of Credit .................................................... (12,415,374) (10,039,636)
Payments on Notes Payable and Capital Lease Obligations ....................... (246,713) (143,143)
Issuance of Common Shares ..................................................... 32,876 6,800
------------ ------------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES .......................... (481,981) 447,984
INCREASE (DECREASE) IN CASH .......................................................... (44,613) 213,666
CASH AT BEGINNING OF PERIOD .......................................................... 106,639 133
------------ ------------
CASH AT END OF PERIOD ................................................................ $ 62,026 $ 213,299
============ ============
Supplemental Cash Flow Disclosure:
Interest Paid ............................................................... $ 138,166 $ 137,592
============ ============
Non-Cash Investing and Financing Activity --
Equipment Acquired Under Capital Lease Obligations .......................... $ 209,648 $ -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(R) Dry Acid Mixing
System.
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 nine month periods ended September 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 Nine months ended
September 30, September 30,
2004 2003 2004 2003
--------- --------- --------- ---------
Basic Weighted Average Shares Outstanding 8,551,814 8,492,923 8,543,879 8,489,858
Effect of Dilutive Securities 604,363 525,278 728,428 --
--------- --------- --------- ---------
Diluted Weighted Average Shares Outstanding 9,156,177 9,018,201 9,272,307 8,489,858
========= ========= ========= =========
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, which was 4.75% at September 30, 2004, plus other fees aggregating
.25% of the loan balance. As of September 30, 2004, our outstanding borrowings
under this loan facility were $373,874.
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 and our sales
have grown each year since our inception in 1996. We incurred losses each year
since we started until 2003 when in the second half of 2003, the volume of our
sales exceeded the cost of operating our business. We increased our sales by
over 21% for the first nine months of 2004, allowing us to more fully utilize
our facilities, equipment and staff, which resulted in a 19% increase in our
gross profit. In the first nine months of 2004, we have earned $200,118.
We believe that our core concentrate and supply business can continue to be
profitable. However, the dialysis supply market is very competitive and we
compete against companies with substantially greater resources than us. We
expect to continue growing our business while executing our strategic plan to
expand our product lines and 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 substantial 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. These substantial
costs include those expected to be incurred in order to conduct required
clinical trials and to obtain marketing approval which costs may offset some or
all of any
6
profits generated from sales of our existing products during the approval
process, and we may incur losses. We expect the approval process to take between
two and three years and there is no assurance we will be successful.
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004
Our sales in the third quarter of 2004 were $4,473,872 and increased
$534,994, or 13.6%, over our sales in the third quarter of 2003. Sales of our
dialysis concentrates, which make up the majority of our sales, increased by 30%
over the third quarter last year. However, we experienced an overall decrease in
ancillary product sales which decreased by 54% from the third quarter last year.
This decrease in ancillary product sales was due to a reduction in blood tubing
sales to a single customer.
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 41% over the third quarter of 2003. Similarly, unit volume
growth of our bicarbonate product lines increased by over 30% compared to the
third quarter of 2003. We also experienced substantial growth in our liquid
product lines with our aggregate liquid product sales in all of our product
lines up 28% from the third quarter of 2003.
Our ancillary product sales decreased due to a reduction in blood tubing
sales of $478,000 from the third quarter of 2003, with all of the decline due to
a single customer which reduced purchases by $531,000. Beginning in July 2004, a
kit re-packager engaged by our blood tubing customer began using another
supplier in violation of our supply agreement with our customer. We are seeking
to recover lost profits from the parties involved but have not included any
expected recovery in our results.
Other increases in our sales for the third quarter of 2004 included a 29%
increase in sales of specialty kits and a doubling of freight billed to
customers offset by a $9,000 decrease in backhaul freight revenue as compared to
the third quarter of 2003. The decrease in backhaul revenue resulted from a
combination of higher fleet utilization and changes to government regulations
that reduced driving time available for backhaul operations.
Gross profit increased to $720,695 in the third quarter of 2004 which
represented an increase of $6,300 from the third quarter of 2003. In 2004, we
made a change to the relative allocation of certain costs for facility,
depreciation and other costs that increased the portion of those costs included
in cost of goods sold. As a result, we increased cost of sales by $34,200 from
the third quarter last year or .8% of sales for this change in allocations.
Overall, our comparable gross profit margins decreased by 1.2 percentage points
after adjusting for this change in allocations. Despite higher sales volumes,
our gross profit margins decreased largely due to increased delivery costs for
our products which more than offset productivity improvements from higher
production volumes.
We experienced substantially higher delivery costs in the third quarter of
2004 due to several contributing factors including additional fleet resources
added to support new business growth, higher fuel costs to operate our fleet,
increased frequency of deliveries for certain customers and a higher growth rate
in customers in territories beyond our traditional distribution footprint. As a
result of a combination of these factors, our distribution costs were up
approximately 2 percentage points to sales as compared to the third quarter of
2003. We anticipate that the negative impact from some of these factors may be
mitigated in the future as we gain efficiencies from our fleet additions, reduce
delivery frequency for certain customers and optimize our distribution efforts
in certain markets. We would expect that if the cost of fuel continues to
increase that it may offset any future distribution improvements and other
productivity improvements from higher sales volumes.
Selling, general and administrative expense as a percent of sales in the
third quarter of 2004 decreased by 1.3 percentage points to 13.6% of sales from
14.9% of sales in the third quarter of 2003. Our selling, general and
administrative expenses increased $17,850, or 3.0%, compared to the third
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
$52,000, or 8.8% compared to the third quarter of 2003. The majority of the cost
increase was due to additional resources and expenses, including additional
personnel costs, to handle increased transaction activity associated with our
30% increase in concentrate sales.
7
Operating income in the third quarter of 2004 was $114,400, or 2.6% of
sales, which was $11,500 lower than the third quarter of 2003. While we
experienced a significant sales increase of 13.6%, higher costs for distribution
of our products offset much of the favorable impact from our business growth
resulting in minimal change to operating income.
Interest expense for the three months was $49,100 and increased $8,000 over
the third quarter of last year due to increased interest expense resulting from
additional transportation equipment under capitalized leases.
Earnings after tax for the three months was $65,277, or 1.5% of sales, which
was $19,600 lower than the third quarter of 2003. Earnings per share of $.01 was
the same as the third quarter of 2003. Fully diluted earnings per share was
$.01.
Our sales for the first nine months of 2004 were $13,164,640 and were
$2,337,471 or 21.6% higher than our sales for the first nine months of 2003. We
have been successful at developing new business over the last year, with unit
volume increases across the breadth of our dialysis concentrate product lines.
Our growth has been primarily attributable to new dialysis centers purchasing
products from our core concentrate product lines.
Our sales primarily consist of dialysis concentrate sales. Sales of our
concentrates increased by over 30% in the first nine months of 2004 compared to
the first nine months of 2003. Increased sales of our acid concentrates,
particularly our Dri-Sate Dry Acid Concentrate product line, have been the
primary reason for the increase in our sales. Dri-Sate unit volumes were up 43%
over the first nine months of 2003. We also experienced solid growth in the rest
of our product lines including our liquid acid concentrate sold in drums with
unit volume growth up over 46% compared to the first nine months of last year.
Our bicarbonate products sales have increased over 30% as compared to the first
nine months of last year.
We entered into a significant customer supply contract with a customer in
May, 2004. We realized increased revenues from this contract in the third
quarter and anticipate that we will continue to realize increased revenue from
this contract in both the fourth quarter of 2004 and throughout 2005. We also
expect to realize additional increases in revenue from new customers we recently
obtained.
Our ancillary product sales decreased entirely due to a reduction in blood
tubing sales of $433,000 from the first nine months of 2003, with the decline
due to a $563,000 reduction of purchases from a single customer. Beginning in
July 2004, a kit re-packager engaged by our blood tubing customer began using
another supplier in violation of our supply agreement with our customer. We are
seeking to recover lost profits from the parties involved but have not included
any expected recovery in our results.
Gross profit of $2,097,892 in the first nine months of 2004 increased by
$338,319, or 19.2%, over the first nine months of 2003. 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 $102,600 in the first nine months of 2004, or .8% of sales. Excluding
this expense allocation change, gross profit margins in the first nine months of
2004 improved by .5 percentage points despite higher delivery costs that
increased approximately 1.1 percentage points.
Our half percentage point gross profit margin improvement in the first nine
months of 2004 has been negatively impacted by several factors that increased
our distribution costs. First, increased fuel costs have increased our costs to
deliver products. Second, we added additional fleet resources to handle new
business, and during the new business start-up phase, we have not yet realized
efficiencies from these additions. Third, we temporarily incurred higher costs
to accommodate requests from certain clinics for more frequent deliveries.
Fourth, as a result of changes to regulations governing work hours for truck
drivers coupled with increased fleet utilization, we have seen a significant
reduction in our potential for backhaul freight revenue. Our expectation that
our margins will improve as we increase our volumes, may be negatively impacted
if the cost of fuel continues to increase. We also anticipate that some of these
negative factors may be partially mitigated if we gain distribution efficiencies
from our new business.
8
Selling, general and administrative expense decreased as a percentage of
sales by 2.5% in the first nine months of 2004 as compared to the first nine
months of 2003 with cost to sales of 13.4% in the first nine months of 2004 as
compared to 15.9% in the first nine months of 2003. Overall, reported selling
general and administrative expense increased by $42,412, or 2.5%. However, after
adjusting for a reduction in allocation of facility, depreciation and other
costs from cost of sales, these costs increased by 8.4%. We incurred increased
expenses for sales and administrative costs, primarily personnel, to handle
increased transaction activity. We also incurred higher costs for healthcare
insurance. We recognized $110,000 of costs related to our dialysate iron product
development in the first nine months of 2004.
Interest expense increased by $573 in the first nine months of 2004
primarily due to higher interest expense related to higher interest expense on
capitalized lease obligations and offset by lower average borrowings under our
line of credit.
Net income in the first nine months of 2004 was $200,118, an improvement of
$295,291 over the first nine months results in 2003. Net income to sales
improved by 2.4 percentage points to sales, or 1.5%, in the first nine months of
2004 as compared to a loss of (.9%) in the first nine months of 2003. Basic
earnings per share was $.02 as compared to a loss of ($.01) in the first nine
months of 2003. The $.03 improvement in net income per share in the first nine
months of 2004 was due to higher sales volumes and increased operating
efficiencies as compared to the first nine months of 2003. Similarly, fully
diluted earnings per share improved $.03 with nine month results of $.02 per
share in 2004 as compared to a fully diluted loss of ($.01) per share in the
first nine months of 2003.
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. In the first nine months of 2004, we have earned
$200,000. Our business is profitable and growing steadily and we expect to
require additional capital for business expansion and product development.
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 the year ahead
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 this 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. Our net worth was $3.4 million as of September 30, 2004. Borrowings
under this line were less than $375,000 at September 30, 2004.
We anticipate that this credit line will be sufficient to fund much of our
working capital requirements for our concentrate business operations in 2004;
however, in order for us to fund our future working capital and capital
expenditure requirements and to continue to execute our new product development
strategy, we will require additional financing. We are evaluating options to
fund our business expansion and product development plans. These options include
a combination of debt, equity and internal financing alternatives. We expect to
raise additional capital when and as needed for our development. We have
identified possible sources of financing and potential strategic alliances and
are currently in negotiations with potential strategic partners, investors and
lenders. However, we might not be successful in raising additional funds or
achieving a satisfactory strategic alliance. If we are not successful in
arranging additional financing, 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.
9
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 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, may
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 September 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 September 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 September 30, 2004 that has materially affected,
or is reasonably likely to materially affect, our internal control over
financial reporting.
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. 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
unsuccessfully sought a rehearing in the Michigan Court of Appeals. We are
proceeding to retry the suit against Mr. Lewis which is scheduled to begin in
January 2005.
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.
(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
August 12, 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 second 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: November 12, 2004 /s/ ROBERT L. CHIOINI
--------------------------------
Robert L. Chioini
President, Chief Executive
Officer and Director (Principal
Executive Officer)
Date: November 12, 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.
13