UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES |
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For the quarterly period ended March 31, 2004 |
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or |
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TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE |
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For the transition period from to |
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Commission File Number: 001-14059 |
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IOMED, Inc.
(Exact name of registrant as specified in its charter)
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Utah |
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87-0441272 |
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(State or other jurisdiction of |
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(I.R.S. Employer |
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2441 South 3850 West, Salt Lake City, Utah 84120 |
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(Address of principal executive offices) (Zip Code) |
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(801) 975-1191 |
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(Registrant’s telephone number, including area code) |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes o No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). o Yes ý No.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of April 30, 2004:
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Classes of Common Stock |
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Number of shares outstanding |
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Common Stock, no par value |
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6,575,794 |
IOMED, Inc.
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PART I - FINANCIAL INFORMATION |
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Item 1. |
Financial Statements (unaudited) |
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Condensed
Balance Sheets – |
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Condensed Statements
of Cash Flows — |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
Quantitative and Qualitative Disclosure about Market Risk |
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Not applicable |
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2
IOMED, Inc.
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March 31, |
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June 30, |
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(unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
6,808,000 |
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$ |
5,921,000 |
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Accounts receivable, net |
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1,294,000 |
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1,300,000 |
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Inventories |
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988,000 |
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1,027,000 |
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Prepaid expenses |
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82,000 |
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119,000 |
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Total current assets |
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9,172,000 |
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8,367,000 |
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Equipment and furniture, net |
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1,703,000 |
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2,340,000 |
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Restricted cash |
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1,401,000 |
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1,689,000 |
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Other assets |
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77,000 |
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95,000 |
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Total assets |
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$ |
12,353,000 |
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$ |
12,491,000 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Trade accounts payable |
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$ |
319,000 |
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$ |
504,000 |
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Accrued liabilities |
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845,000 |
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1,002,000 |
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Current portion of long-term obligations |
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618,000 |
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598,000 |
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Total current liabilities |
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1,782,000 |
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2,104,000 |
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Long-term obligations |
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1,492,000 |
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1,971,000 |
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Commitments and contingencies |
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Shareholders’ equity |
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Common shares |
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34,699,000 |
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34,646,000 |
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Convertible preferred shares |
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6,881,000 |
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6,881,000 |
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Accumulated deficit |
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(32,501,000 |
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(33,111,000 |
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Total shareholders’ equity |
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9,079,000 |
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8,416,000 |
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Total liabilities and shareholders’ equity |
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$ |
12,353,000 |
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$ |
12,491,000 |
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See accompanying notes.
3
IOMED, Inc.
CONDENSED STATEMENTS OF OPERATIONS
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Three Months Ended |
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Nine Months Ended |
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2004 |
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2003 |
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2004 |
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2003 |
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(unaudited) |
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(unaudited) |
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Product sales |
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$ |
3,094,000 |
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$ |
2,927,000 |
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$ |
9,026,000 |
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$ |
8,815,000 |
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Cost of products sold |
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1,171,000 |
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1,081,000 |
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3,391,000 |
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3,241,000 |
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Gross profit |
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1,923,000 |
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1,846,000 |
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5,635,000 |
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5,574,000 |
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Operating costs and expenses: |
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Selling, general and administrative |
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1,376,000 |
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1,496,000 |
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4,275,000 |
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4,212,000 |
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Research and product development |
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257,000 |
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321,000 |
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765,000 |
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990,000 |
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Non-recurring items |
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— |
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(76,000 |
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— |
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(76,000 |
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Total operating costs and expenses |
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1,633,000 |
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1,741,000 |
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5,040,000 |
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5,126,000 |
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Operating income |
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290,000 |
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105,000 |
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595,000 |
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448,000 |
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Other income (expense): |
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Other income |
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6,000 |
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37,000 |
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80,000 |
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139,000 |
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Interest expense |
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(42,000 |
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(53,000 |
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(133,000 |
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(168,000 |
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Interest income |
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26,000 |
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29,000 |
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68,000 |
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84,000 |
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Net income |
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$ |
280,000 |
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$ |
118,000 |
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$ |
610,000 |
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$ |
503,000 |
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Basic income per common share |
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$ |
0.04 |
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$ |
0.02 |
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$ |
0.09 |
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$ |
0.08 |
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Diluted income per common share |
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$ |
0.04 |
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$ |
0.02 |
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$ |
0.08 |
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$ |
0.07 |
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See accompanying notes.
4
IOMED, Inc.
CONDENSED STATEMENTS OF CASH FLOWS
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Nine
Months Ended |
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2004 |
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2003 |
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(unaudited) |
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Cash flows from operating activities |
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Net income |
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$ |
610,000 |
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$ |
503,000 |
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Adjustments to reconcile net income to net |
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cash provided by operating activities: |
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Depreciation and amortization |
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728,000 |
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699,000 |
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Other non-cash items |
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— |
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(76,000 |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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6,000 |
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6,000 |
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Inventories |
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39,000 |
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78,000 |
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Prepaid expenses |
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37,000 |
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(19,000 |
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Trade accounts payable |
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(185,000 |
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(66,000 |
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Other accrued liabilities |
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(157,000 |
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52,000 |
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Net cash provided by operating activities |
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1,078,000 |
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1,177,000 |
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Cash flows from investing activities |
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Purchases of equipment and furniture |
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(73,000 |
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(116,000 |
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Cash flows from financing activities |
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Change in restricted cash balance |
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288,000 |
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299,000 |
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Proceeds from exercise of stock options |
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53,000 |
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— |
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Payments on long-term obligations |
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(459,000 |
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(430,000 |
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Net cash used in financing activities |
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(118,000 |
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(131,000 |
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Net increase in cash and cash equivalents |
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887,000 |
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930,000 |
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Cash and cash equivalents at beginning of period |
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5,921,000 |
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4,422,000 |
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Cash and cash equivalents at end of period |
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$ |
6,808,000 |
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$ |
5,352,000 |
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See accompanying notes.
5
IOMED, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Description of Business
IOMED, Inc., a Utah corporation (the “Company”), is a leader in the development, manufacture and sale of active drug delivery systems used primarily to treat acute local inflammation in the physical and occupational therapy and sports medicine markets. The Company is pursuing opportunities to advance its position as a provider of quality, innovative, non-invasive medical products that improve patient healthcare. In addition, the Company is seeking collaborative opportunities to develop its non-invasive drug delivery technology to satisfy substantial unmet medical needs. The Company has proprietary technology in various stages of research and product development primarily for the treatment of acute local inflammation and for the treatment of ophthalmic disease.
Basis of Presentation
In the opinion of management, the accompanying condensed financial statements contain all normal recurring adjustments necessary to present fairly the financial position of the Company as of March 31, 2004, and the results of its operations and cash flows for the interim periods ended March 31, 2004 and 2003. The operating results for the interim periods are not necessarily indicative of the results for a full year. Certain information and footnote disclosures normally included in financial statements in accordance with accounting principles generally accepted in the United States have been condensed or omitted. Therefore, these statements should be read in conjunction with the Company’s audited financial statements for the year ended June 30, 2003, included in the Company’s Annual Report on Form 10-K, dated September 15, 2003.
Earnings Per Share
For all periods presented, basic and diluted income per share are computed in accordance with Statement of Financial Accounting Standards (SFAS) No. 128 - Earnings Per Share.
Net income as presented in the condensed statements of operations represents the numerator used in computing both basic and diluted income per share and the following table sets forth the computation of the weighted average shares representing the denominator used in determining basic and diluted income per share:
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Three
Months ended |
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Nine
Months ended |
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2004 |
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2003 |
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2004 |
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2003 |
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(in thousands) |
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(in thousands) |
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Denominator for basic income per share - weighted average shares outstanding |
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6,568 |
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6,545 |
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6,552 |
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6,545 |
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Dilutive securities: convertible preferred stock and certain stock options |
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1,245 |
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987 |
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1,094 |
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938 |
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Denominator for diluted income per share – adjusted weighted average shares outstanding and assumed conversions |
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7,813 |
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7,532 |
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7,646 |
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7,483 |
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6
At March 31, 2004, anti-dilutive securities not considered in the diluted earnings per share calculation consisted of out-of-the-money options to purchase approximately 335,000 common shares at a weighted average exercise price of $5.12 per share.
Stock-based Compensation
The Company has elected to follow Accounting Principles Board Opinion No. 25 - Accounting for Stock Issued to Employees (APB 25) and related interpretations in accounting for its employee stock options rather than adopting the alternative fair value accounting provided for under Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock Based Compensation - Transition and Disclosure. Because the exercise price of the Company’s employee stock options equals the market price of the underlying shares on the date of grant, under APB 25, the Company does not recognize any compensation expense. The following table illustrates the effect on net income and income per share had compensation cost for the Company’s employee stock options been determined consistent with the fair value methodology prescribed under SFAS 123:
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Three Months Ended |
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Nine Months Ended |
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2004 |
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2003 |
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2004 |
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2003 |
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Net income - as reported |
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$ |
280,000 |
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$ |
118,000 |
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$ |
610,000 |
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$ |
503,000 |
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Less: Total stock compensation expense determined using the fair value method |
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(28,000 |
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(77,000 |
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(255,000 |
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(66,000 |
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Net income - pro forma |
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$ |
252,000 |
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$ |
41,000 |
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$ |
355,000 |
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$ |
437,000 |
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Income per share: |
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Basic - as reported |
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$ |
0.04 |
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$ |
0.02 |
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$ |
0.09 |
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$ |
0.08 |
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Diluted - as reported |
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$ |
0.04 |
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$ |
0.02 |
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$ |
0.08 |
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$ |
0.07 |
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Basic - pro forma |
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$ |
0.04 |
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$ |
0.01 |
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$ |
0.05 |
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$ |
0.07 |
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Diluted - pro forma |
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$ |
0.03 |
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$ |
0.01 |
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$ |
0.05 |
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$ |
0.06 |
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The effects of applying SFAS 123 in the above pro forma disclosures are not necessarily indicative of future amounts. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. In management’s opinion the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options because the Company’s employee stock options have characteristics different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate.
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Revenue Recognition
Revenues on product sales are recognized when there is persuasive evidence that an arms length transfer has occurred, generally upon shipment, when title has passed, the price is fixed or determinable, and collectibility is reasonably assured.
Long-lived Assets
The carrying amounts of long-lived assets, and the related amortization periods, are reviewed for impairment whenever events occur or changes in circumstances indicate that the carrying amount of an asset may not be recoverable within the estimated useful life. When the Company determines the existence of impairment indicators, the impairment loss is measured based on the excess of carrying value over the estimated fair value of the impaired asset. The carrying value of the underlying asset is reduced, with the reduction charged to expense, so that the carrying amount is equal to fair value.
Reclassifications
Certain reclassifications have been made to prior year balances to conform to the financial statement presentation included herein.
2. Inventories
Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. Inventories consisted of the following at March 31, 2003 and June 30, 2003:
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March 31, |
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June 30, |
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Raw materials |
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$ |
536,000 |
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$ |
596,000 |
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Work-in-progress |
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71,000 |
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40,000 |
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Finished goods |
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381,000 |
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391,000 |
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$ |
988,000 |
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$ |
1,027,000 |
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3. Restricted Cash
The Company maintains an interest bearing money market account with a lending bank, $1,401,000 of which is being held as a compensating balance as of March 31, 2004 under a long-term obligation and is restricted as to withdrawal. Included in cash and cash equivalents as of March 31, 2004 is an additional $380,000 restricted to secure the current portion of such long-term obligation. The restricted cash balance requirement decreases over the life of the obligation as payments are made.
4. Commitments
The Company has entered into agreements with various lending institutions to provide financing for the Company’s investments in capital equipment and facilities modifications and consolidation. As of March 31, 2004, the Company had approximately $2,110,000 outstanding under these agreements, $1,492,000 of which was classified as long-term obligations.
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5. Litigation
The Company has filed two civil complaints in Utah State Court against two former executives, among others, alleging misappropriation of the Company’s trade secrets, interference with economic relationships and civil conspiracy. The claims arise out of the Company’s allegations that the defendants engaged in conduct to misappropriate confidential information related to a new product that was being developed by the Company under the supervision of the two former executives. The Company is seeking injunctive relief against all defendants. In response, a counterclaim has been filed against the Company and certain Company employees seeking, among other things, $5 million in monetary damages.
In a related matter, two separate federal court complaints were filed against the Company and certain Company employees and agents, alleging violation of the plaintiffs’ federal civil rights, invasion of privacy, intentional infliction of emotional distress, trespassing, and conspiracy. These complaints are related to one of the state court actions filed by the Company in that they arise out of the court-ordered seizure of computer hard drives, other electronic media, and certain business files of certain of the defendants in one of the state court actions. Such seizure was conducted by the Salt Lake County Sheriff’s Office. The two federal court complaints sought, among other things, combined monetary damages of $60 million. The United States District Court granted, with prejudice, the Company’s motion to dismiss the two federal civil rights complaints filed against the Company. The plaintiffs have appealed these rulings.
A plaintiff in one of the federal civil rights complaints also filed a Utah state court complaint against the Company and certain Company employees alleging discrimination, among other things. This complaint is related to one of the state court actions filed by the Company in that the claims asserted arise from the same series of transactions and occurrences. The Utah State Court has granted the Company’s motion to dismiss the plaintiff’s discrimination claim, and the plaintiff has appealed this ruling.
Management believes that the Company’s state court complaints contain meritorious claims and intends to vigorously protect the Company’s intellectual property. Additionally, management believes that there is no basis for the claims and counterclaims asserted or the penalties sought against the Company and the other defendants in the state court or federal court actions. Furthermore, management does not believe that the outcome will have a material adverse impact on the Company. However, the legal fees and expenses of these actions will likely be material and, in the event of an unfavorable resolution, the outcome could have a material adverse impact on the Company’s business, financial position, or results of operations.
9
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the Condensed Financial Statements and the related Notes thereto included elsewhere in this Report. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that involve risks and uncertainties. The Company’s actual results of operations could differ significantly from those anticipated in such forward-looking statements as a result of numerous factors including those discussed herein. Additional risks and uncertainties are described in the Company’s most recent Annual Report on Form 10-K for its fiscal year ended June 30, 2003. This discussion should be read in conjunction with such report, copies of which are available upon request.
The Company is a leader in the development, manufacture and sale of active drug delivery systems primarily used to treat local inflammation in the physical and occupational therapy and sports medicine markets. The Company’s current product line is based on proprietary iontophoretic drug delivery technology. The majority of the Company’s revenues have been generated through the sale of the Phoresor system, including the reusable dose controller and single use, disposable patch kits. The Company is pursuing opportunities to advance its position as a provider of quality, innovative, non-invasive medical products that improve patient healthcare. In addition, the Company is seeking collaborative opportunities to develop its non-invasive drug delivery technology to satisfy substantial unmet medical needs. The Company has proprietary technology in various stages of research and product development primarily for the treatment of acute local inflammation and for the treatment of ophthalmic disease. From inception through fiscal 2002, the Company had generally incurred operating losses as a result of costs associated with internally funded research and development activities. During fiscal 2003, the Company reported net income. As of March 31, 2004, the Company’s accumulated deficit was approximately $32.5 million. The Company’s ability to sustain profitability will depend on its ability to maintain market acceptance, successfully expand sales of its existing and new products, and successfully complete the development of, receive regulatory approvals for, and successfully manufacture and market its products under development, as to which there can be no assurance.
The Company’s results of operations may vary significantly from quarter to quarter and depend on product sales levels, and costs associated with manufacturing processes, as well as other factors. The amount of revenue in any given period is not necessarily indicative of future revenue.
Results of Operations
Three Months and Nine Months Ended March 31, 2004 and 2003
Product sales. Product sales increased 6% and 2% to $3.1 million and $9.0 million in the three and nine months ended March 31, 2004, respectively, from $2.9 million and $8.8 million in the three and nine months ended March 31, 2003, respectively. The current quarter’s product sales of $3.1 million marked a quarterly record and the second consecutive quarter with product sales greater than $3.0 million. The Company has reported record product sales in 28 of the last 30 quarters.
10
During the current quarter, the Company introduced two new iontophoresis products, giving it the broadest range of iontophoresis products on the market. These new product offerings are designed to complement the Company’s premium iontophoresis electrodes, which include the IOGEL® and TransQ® product lines. The Company is also currently restructuring its sales distribution network due to a changing competitive environment. This restructuring, which will introduce distributor pricing incentives and will be designed to reduce interference among distributors, will result in the termination of some dealer relationships and the reallocation of territories. To mitigate the potential effect on sales, the restructuring will be implemented in stages, but the Company may experience short-term fluctuations in sales. The Company is confident, however, that the restructuring, combined with the breadth of its product line, will strengthen its business relationships with long-term strategic distribution partners.
Costs of Products Sold. Costs of products sold were $1.2 million and $3.4 million in the three and nine months ended March 31, 2004, respectively. Gross margins on product sales were 62% for the current quarter and nine month periods compared to 63% for the prior year quarter and nine month periods.
Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased 8% to $1.4 million and increased 1% to $4.3 million in the three and nine months ended March 31, 2004, respectively, compared to $1.5 million and $4.2 million in prior year periods. The changes are primarily due to the timing of litigation related expenses associated with the Company’s efforts to protect its trade secrets and other proprietary intellectual property.
Research and Product Development Expense. Research and product development expenditures decreased 20% and 23% to $257,000 and $765,000 for the three and nine months ended March 31, 2004, respectively, compared to $321,000 and $990,000 for the prior year periods. The Company’s research and product development expenditures in the current periods reflect its continued investment in product development programs, including a focused effort on new products for its operating business in the physical and occupational therapy and sports medicine markets.
Other Income and Expenses. Other income of $6,000 and $80,000 for the quarter and nine months ended March 31, 2004 is primarily from a royalty and license agreement. During the current three and nine month periods, the Company had interest expense (net of interest income) of $16,000 and $65,000, respectively, compared to interest expense (net of interest income) of $24,000 and $84,000 in the prior year periods. Amounts in both periods reflect interest expense on long-term obligations less interest earnings on the invested cash balances. Net interest expense is due to lower interest income from lower average interest rates on invested cash balances relative to fixed rates on borrowed funds.
Income Taxes. The Company has substantial net operating loss carryforwards, which, under the current “change of ownership” rules of the Internal Revenue Code of 1986, as amended, may be subject to substantial annual limitation. No income tax expense was recognized on the Company’s pre-tax income for the three- and nine-month periods ended March 31, 2004, which reflects management’s estimate of the Company’s fiscal 2004 tax position due to the use of historical net operating losses and the resulting change in the valuation allowance. In addition, no income tax expense was recognized for the three- and nine-month periods ended March 31, 2003.
Net Income. The Company recognized net income of $280,000 and $610,000, or $0.04 and $0.08 per diluted share, during the three and nine-month periods ended March 31, 2004, respectively, compared with net income of $118,000 and $503,000, or $0.02 and $0.07 per diluted share, during the prior year periods. The fluctuations are a result of the changes discussed above.
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Liquidity and Capital Resources
During fiscal 2004, and consistent with the prior period, the Company’s operations, including costs associated with its research and product development programs, will be internally funded with cash flows from its current operating business, term loan and capital lease financing agreements and from cash reserves.
As of March 31, 2004, the Company had total cash of approximately $8.2 million, of which $6.8 million is cash and cash equivalents and $1.4 million is being held as a compensating balance under a long-term obligation and subject to withdrawal restrictions. Included in cash and cash equivalents as of March 31, 2004 is an additional $0.4 million restricted to secure the current portion of the long-term obligation. The restricted cash balance requirement decreases over the life of the obligation as payments are made. Cash in excess of immediate requirements is invested in a manner intended to maximize liquidity and return, while minimizing investment risk and the potential effects of concentration of credit risk.
The Company generated $1.1 million in cash from operating activities during the current period, compared to $1.2 million during the prior year period. Cash generated from operations is primarily a result of net income generated from product sales and the fixed asset depreciation during the respective periods.
Historically, the Company’s operations have not been capital intensive. However, during fiscal 2001 the Company invested approximately $3.3 million for the relocation and consolidation of its research and manufacturing facilities and for new equipment to automate its manufacturing process. The Company used long-term financing agreements to fund these investments.
As of March 31, 2004, the Company had approximately $2.1 million outstanding under long-term financing agreements, including the current portion. The Company may enter into additional financing agreements to fund its capital equipment needs during the next 12 months, but does not anticipate a significant investment in capital equipment during that time. The Company’s expenditures for equipment and furniture in excess of equipment acquired under financing agreements were $73,000 and $116,000 in the current and prior year periods, respectively.
The Company used $459,000 and $430,000 of cash for payments on long-term obligations during the current and prior year periods, respectively. The Company had proceeds from the exercise of stock options for $53,000 during the current period. Restricted cash requirements decreased $288,000 and $299,000 in the current and prior year periods, respectively.
The Company will continue to incur costs associated with its product development activities. During fiscal 2004, these costs will be funded internally from the Company’s established operating business, term loan and capital lease financing agreements and from existing cash balances. The Company anticipates that at its current operating levels, existing cash balances and cash generated from operations will be sufficient to fund its operating needs through fiscal 2005 and beyond. However, the Company may be required to or elect to raise additional capital. The Company’s actual capital requirements will depend on numerous factors, many of which are outside the Company’s control.
Critical Accounting Policies
Financial Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. The following list is not intended to be a comprehensive list of all of our accounting policies. Our significant accounting policies are more fully described in Note 1 of our financial statements for the year ended June 30, 2003. In many cases, the accounting treatment of a particular transaction is dictated by accounting principles generally accepted in the United States, with no need for management’s judgment or estimation in its application. There are also areas in which management’s judgment in selecting an available alternative would not produce a materially different result. The following is a brief discussion of the more significant accounting policies and methods used by us:
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General - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of 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 those estimates.
Revenue Recognition – Revenues on product sales are recognized when there is persuasive evidence that an arms length transfer has occurred, generally upon shipment, when title has passed, the price is fixed or determinable, and the collectibility is reasonably assured.
Long-lived Assets – The carrying amounts of long-lived assets, and the related amortization periods, are reviewed for impairment whenever events occur or changes in circumstances indicate that the carrying amount of an asset may not be recoverable within the estimated useful life. When the Company determines the existence of impairment indicators, the impairment loss is measured based on the excess of carrying value over the estimated fair value of the impaired assets. The carrying value of the underlying assets is reduced, with the reduction charged to expense, so that the carrying value is equal to fair value.
Inventories – Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. The Company evaluates the carrying value of its inventories at least quarterly, taking into account such factors as historical and anticipated future sales compared with quantities on hand, the price the Company expects to obtain for its products in their respective markets compared with historical cost, and the remaining shelf life of goods on hand. In the event that it is determined that excess or obsolete inventory exists, the Company establishes a corresponding reserve or writes-off the value of the excess or obsolete inventory.
Item 4. Control and Procedures
Our Chief Executive Officer and Chief Accounting Officer, after conducting an evaluation, together with other members of the Company’s management, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report, have concluded that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in its reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to that evaluation, and there were no significant deficiencies or material weaknesses in such controls requiring corrective actions.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
The Company’s most recent Annual Report on Form 10-K for its fiscal year ended June 30, 2003, which was filed with the Securities Exchange Commission on September 18, 2003, includes a more complete description of the background of the material pending legal proceedings referenced below.
A United States District Court granted, with prejudice, the Company’s motion to dismiss the §1983 civil rights federal court complaints, “Yanaki v. IOMED, Inc., et al” and “ Moss v. IOMED, Inc., et al,” filed against the Company. In addition, a Utah State Court granted the Company’s motion to dismiss a discrimination claim, “Yanaki v IOMED, Inc., et al,” against the Company. Both of these suits were filed against the Company in response to civil complaints filed by the Company in Utah State Court against two former executives, among others, alleging misappropriation of trade secrets, interference with economic relationships and civil conspiracy. While the Company is pleased with these rulings, the plaintiffs have filed appeals and the Company does not know what, if any, further actions may be undertaken by the plaintiffs.
Management continues to believe that the Company’s state court complaints in the pending action “IOMED, Inc. v. Jamal Yanaki, et al” contain meritorious claims and intends to vigorously protect the Company’s intellectual property. Additionally, management continues to believe that there is no basis for the claims and counterclaims asserted or the penalties sought against the Company and the other defendants in the pending actions “IOMED, Inc. v. Jamal Yanaki, et al,” “Yanaki v. IOMED, Inc., et al,” “Moss v. IOMED, Inc., et al,” and “Yanaki v. IOMED, Inc., et al.” Furthermore, management does not believe that the outcome of pending actions will have a material adverse impact on the Company. However, the legal fees and expenses in these actions will likely be material and, in the event of an unfavorable resolution, the outcome could have a material adverse impact on the Company’s business, financial position, or results of operations.
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
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Exhibit No. |
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Description |
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Exhibit 31.1 |
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CERTIFICATION OF CHIEF EXECUTIVE OFFICER |
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Exhibit 31.2 |
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CERTIFICATION OF CHIEF ACCOUNTING OFFICER |
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Exhibit 32.1 |
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CERTIFICATION OF CHIEF EXECUTIVE OFFICER |
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Exhibit 32.2 |
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CERTIFICATION OF CHIEF ACCOUNTING OFFICER |
(b) Reports on Form 8-K:
On February 3, 2004, a Current Report was submitted on Form 8-K under Items 7 and 12 containing the press release relating to the Company’s fiscal 2004 second quarter earnings results.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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IOMED, Inc. |
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(Registrant) |
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Date: |
May 12, 2004 |
By: |
/s/ Robert J. Lollini |
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Robert J. Lollini |
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President and Chief Executive Officer |
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Date: |
May 12, 2004 |
By: |
/s/ Brian L. Mower, CPA |
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Brian L. Mower, CPA |
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Chief Accounting Officer |
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