U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: March 31, 2000
Commission file no. 0-24921
Surgical Safety Products, Inc.
--------------------------------------------
(Name of small business issuer in its charter)
New York 65-0565144
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2018 Oak Terrace
Sarasota, Florida 34231
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (941) 927-7874
Securities registered under Section 12(b) of the Exchange Act:
Name of each exchange on
Title of each class which registered
None
- ----------------------------- -------------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
-----------------------------------
(Title of class)
Copies of Communications Sent to:
Mercedes Travis, Esq.
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696; Fax: (561) 659-5371
<PAGE>
Indicate by 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
--- ---
As of March 31, 2000, there are 14,515,373 shares of voting stock of
the registrant issued and outstanding [and, in addition, the Company was
obligated to issue 50,000 shares under the Consulting Agreement with Global
Development Advisors, Inc. on March 31, 2000, but had not issued the shares by
that date].
<PAGE>
PART I
Item 1. Financial Statements
Condensed Balance Sheets F-1
Condensed Statements of Operations F-3
Condensed Statements of Cash Flows F-4
Notes to the Financial Statements F-6
-1-
<PAGE>
<TABLE>
<CAPTION>
SURGICAL SAFETY PRODUCTS, INC
CONDENSED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2000 1999
<S> <C> <C>
Assets
Current Assets
Cash $ 566,812 $ 516,799
Trade receivables 146,554 17,086
Prepaid expenses and deposits 159,862 118,569
--------------- ---------------
Total current assets 873,228 652,454
--------------- ---------------
Property and equipment, net 189,306 203,533
--------------- ---------------
Other Assets
Intangible assets, net 553,653 270,487
Software development costs, net 147,152 139,382
Other assets 10,250 10,250
--------------- ---------------
Total other assets 711,055 420,119
--------------- ---------------
Total Assets $ 1,773,589 $ 1,276,106
=============== ===============
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
SURGICAL SAFETY PRODUCTS, INC
CONDENSED BALANCE SHEETS
(cont.)
(Unaudited)
March 31, December 31,
2000 1999
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued $ 247,306 $ 438,057
expenses
Line of Credit 100,000 100,000
Notes payable - related parties 52,500 52,500
Total current liabilities 399,806 590,557
Long-Term Liabilities
Notes payable 1,300,000 650,000
Total Liabilities 1,699,806 1,240,557
Stockholders' Equity
Common stock, $.001 par value,
100,000,000 shares authorized;
14,565,373 and 14,515,373 shares
issued and outstanding in 2000
and 1999 respectively 14,566 14,516
Common stock held in escrow (2,700) (2,700)
Additional paid-in capital 3,279,055 2,804,020
Accumulated deficit (3,217,138) (2,780,287)
Total stockholders' equity 73,783 35,549
Total Liabilities and Stockholders' $ 1,773,589 $ 1,276,106
Equity ----------------- ------------------
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
SURGICAL SAFETY PRODUCTS, INC
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
2000 1999
------------------- ----------------
<S> <C> <C>
Revenue
Revenue $ 135,656 $ 39,577
------------------- ----------------
Costs and expenses
Cost of medical products sold 108 261
Operating expenses 376,633 138,984
Research and development expenses 14,345 6,667
Interest expense 181,421 1,521
------------------- ----------------
Total costs 572,507 147,433
------------------- ----------------
Net loss before income taxes (436,851) (107,856)
Provision for income taxes - -
------------------- ----------------
Net loss $ (436,851) $ (107,856)
=================== ================
Net loss per share $ (0.038) $ (0.010)
=================== ================
</TABLE>
The accompanying notes are an
integral part of these
financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
SURGICAL SAFETY PRODUCTS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
2000 1999
------------------- --------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net loss $ (436,851) $ (107,856)
Adjustments to reconcile net loss to cash
used in operating activities
Depreciation and amortization 43,350 29,905
Common stock and options issued for services 24,284 -
Stock option compensation expense (91,113)
Interest expense - issuance of convertible debt 167,143 -
Decrease (increase) in operating assets
Receivables (129,468) (20,634)
Prepaid expenses and deposits 10,980 -
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses (190,751) 45,570
Total adjustments (74,462) (36,272)
Net cash used in operating activities (511,313) (144,128)
Cash Flows From Investing Activities
Furniture and equipment purchased (3,056) (25,937)
Software development additions (15,618) (41,126)
Net cash used in investing activities (18,674) (67,063)
Cash Flows From Financing Activities
Proceeds from related party loans - 70,000
Repayments on line of credit, net - 100,000
Financing and loan costs (70,000)
Proceeds from long-term debt 650,000 0
Net cash provided by financing activities 580,000 170,000
Net increase (decrease) in cash 50,013 (41,191)
Cash at beginning of year 516,799 41,191
Cash at end of year $ 566,812 $ -
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
2000 1999
------------------- --------------------
<S> <C> <C>
Supplemental Cash Flow Information:
Cash paid for interest $ - $ 1,521
</TABLE>
For purposes of the statement of cash flows, management considers all deposits
and financial instruments with original maturities of less than three months to
be cash and cash equivalents.
Material non-cash transactions not reflected in the statement of cash flows
include:
For the Quarter Ended March 31, 2000
- -------------------------------------
- - Common stock issued for $52,273 of prepaid investment services - Deferred
financing costs of $231,385 related to the issuance of warrants in
conjunction with issuance of notes payable.
For the Quarter Ended March 31, 1999
- -------------------------------------
- The Company received fixed assets in the amount of $58,700 for which it had
recorded deposits of such amount at December 31, 1998
The accompanying notes are an
integral part of these
financial statements.
F-5
<PAGE>
Note 1 - Accounting Policies
Basis of Presentation
The condensed financial statements of Surgical Safety Products, Inc. (Company)
have been prepared without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. These consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1999.
The results of operations for the three month period ended March 31, 2000 are
not necessarily indicative of the results to be expected for any other period or
for the full year.
In the opinion of Company's management, the accompanying unaudited financial
statements contain all adjustments, consisting of only normally recurring
adjustments, necessary to present fairly the financial positions of March 31,
2000, the results of operations and cash flows for the three months ended March
31, 2000 and March 31, 1999, except as noted in Note 2.
Net Loss Per Share
Net loss per share has been computed in accordance with Statement of Financial
Accounting Standards (FASB) No. 128, "Earnings Per Share," by dividing net loss
by the weighted average number of shares outstanding during the period. Common
stock equivalents have not been included in the computation of weighted average
number of shares outstanding since the effect would have been anti-dilutive.
Reclassifications
Certain reclassifications have been made in the prior year's financial
statements to conform to the current period presentation.
Note 2 - Stock Compensation Expense
During fiscal year 1998, the Company issued stock options with an exercise price
that was below market price to certain of its employees. Accordingly, the
Company recorded $91,113 of compensation expense related to the issuance for the
year ended December 31, 1998.
In the first quarter of 1999, the Company canceled these stock options and
issued options with an exercise price above that of market. Accordingly, the
Company decreased its payroll expense by $91,113 for the cancellation of these
options for the quarter ended March 31, 1999.
Note 3 - Subsequent Event
F-6
<PAGE>
On April 28, 2000, the investment banking firm which holds the outstanding notes
payable converted $102,630 of outstanding principal and interest into 182,453
shares of common stock pursuant to the convertible secured line of credit
agreement dated December 20, 1999.
F-7
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations.
General
The Company's (OTC BB: SURG) overall mission is the research,
development, production and distribution of innovative products and services for
healthcare. Consisting of both traditional products and innovative
business-to-business e-solutions, the common goal is a safer and more efficient
environment for healthcare workers, manufacturers and patients. Originally
formed as a medical device company, Surgical shifted focus to being an e-company
when the Company's management recognized an untapped market niche: responding to
the critical need for immediate communication and access to information in
healthcare.
Now, the Company operates two divisions providing products and
services to the medical industry. The Information Systems Division through its
Oasis@work product line provides business-to-business on-demand safety and
efficiency driven e-business and information for healthcare workers. The Medical
Products and Services Division develops, manufactures and distributes medical
devices.
About Oasis@work
The Oasis@work strategy is healthcare e-business content aggregation
and applications integration through a virtual private network. It links the
entire healthcare continuum, which includes healthcare workers, administration,
patients, and healthcare and pharmaceutical manufacturers. Oasis@work is a true
healthcare data center with multiple access points. It is an Internet-based
virtual private network consisting of points-of-access via intranets, the
Internet, internet appliances, and through TouchPorts located throughout
healthcare facilities across the country. TouchPorts(TM) are user-friendly
touch-access internet appliances which allow healthcare professionals access to
high quality clinical reference and agency mandated information services.
Corporate Developments
The Company entered into an agreement with IBM Global Services
effective January 3, 2000 which includes an IBM Customer Agreement and a
Statement of Work (the "IBM Global Agreement"). Under the terms of the IBM
Global Agreement IBM will provide complete implementation and support service
solutions for 1,200 OASiS terminals in an estimated 400 end user locations
during the 12 month period commencing December 1, 1999. On February 3, 2000, IBM
Global Services and the Company finalized the Statement of Work. The services to
be provided under the agreement include project planning, site surveys, product
acquisition, network design, web-site hosting services, premises wiring, OASiS
TouchPort Implementation, help desk support and consulting services. The
estimated cost for performing the work is approximately $10 million. In
addition, IBM Global Services will bill the Company a monthly service charge for
pre and post installation support services, including 24-7 support, and for
labor, travel and out of pocket expenses. The Company will provide technical
resources and oversee the IBM Global's activities. The Company believes that
this agreement will expedite the deployment of its OASiS systems under the terms
of its Long Term Agreement with US Surgical.
-2-
<PAGE>
In February 2000, the Company executed an Investment Banking Services
Agreement with Dunwoody Brokerage Services Inc. d/b/a Swartz Institutional
Finance ("Swartz"). Under the agreement, Swartz has agreed to introduce entities
to the Company for potential strategic partnerships, licensing arrangements,
mergers, acquisitions, investments or funding. For such services, Swartz will
receive a scaled fee based upon the value of any completed transaction. Said fee
is payable in cash or stock at Swartz's option and by the issuance of warrants,
the number of which is based upon the fee divided by the market price of the
Company's Common Stock. There is no obligation on the part of the Company to
accept any transaction offered by the Swartz to the Company.
In February 2000, the Company executed a Consulting Agreement with
Global Development Advisors, Inc. ("GDA")). Under the agreement, GDA will
provide business and marketing consulting services, assist in the implementation
of a strategic plan and assist, coordinate and monitor the Company's investor
relations program. The agreement is for a term of six (6) months and may be
extended by the Company. In lieu of cash payments for services, GDA has agreed
to accept 50,000 shares of the Company's Common Stock under the Company's 2000
Stock Plan approved by its shareholders on February 28, 2000 and options to
purchase an additional 50,000 shares at an exercise price of $1.09. The issuance
was made pursuant to Section 4(2) of the Act and Rule 506.
In December 1999, the Company executed a Loan Agreement with Thomson
Kernaghan & Co., Ltd. ("TK"), as Agent and Lender, whereby TK agreed to make
loans to the Company of up to $5,000,000 in installments for a period commencing
with the date of the agreement and ending on November 30, 2002 (the "TK Loan
Commitment"). Under the terms of the TK Loan Commitment, each installment is
supported by a convertible note and security agreement and the Agent and Lender
are granted warrants to purchase shares of the Company's Common Stock. Further,
2,700,000 shares are held by TK in escrow for the potential conversion under the
notes or exercise of the warrants. Under the terms of the TK Loan Agreement, an
initial loan of $650,000 was made on December 30, 1999. On March 31, 2000 the
Company received a second installment under the TK Commitment in the amount of
$650,000. On April 28, 2000, TK elected to convert $100,000 of outstanding
principal and $2,630 of the accrued interest into shares of Common Stock at a
price of $0.5625 per share which represents 182,453 shares. The Company granted
TK registration rights and was obligated to file a Form S-3 within sixty (60)
days of the agreement. The Company filed a registration statement on Form S-3 on
March 2, 2000 covering initially 20,038,097 shares of its Common Stock. The
issuance of the securities was made pursuant to Regulation S of the Act. The
Form S-3 registration statement was declared effective on April 11, 2000.
-3-
<PAGE>
The TK Loan Commitment, as draw downs are taken and as interest
accrues, will increase the long term debt of the Company. The Company has
entered into consulting agreements with several other potential funding sources;
however, to date, has not concluded terms for any financing which it feels
appropriately meets the requirements of the Company under such agreements. With
the TK Loan Commitment and in the event additional debt is raised, it will incur
future interest expense. The TK Loan Commitment, if fully converted and all
warrants are exercised will dilute the interest of existing shareholders and in
the event additional equity is raised, management may be required to dilute the
interest of existing shareholders further or forgo a substantial interest in
revenues, if any. In the event that the Company is successful in securing
additional debt financing, the amount of such financing, depending upon its
terms, would increase either the short or long term debt of the Company or both.
On February 29, 2000, the Company entered into a contract with Steel
Beach Productions, Inc. ("Steel Beach") to design, develop, implement and test
the OASiS Version 3.0 web based application. The contract is for a total of
$160,100 and is to be paid $80,500 in cash and $80,500 in stock options. The
Company paid a deposit of $20,012.50 and the balance is to be paid upon delivery
of the prototype, preliminary product and final product. The options are due at
the time of delivery of the final product. The common stock option number will
be calculated based on the average closing share price ("ACSP") in the twenty
(20) days of trading prior to deliver of the final product. The exercise price
will be 50% of the twenty (20) day average closing price as quoted on the OTC
BB. The number of options issued will be calculated by multiplying $80,050 times
two (2) and dividing by the ACSP. The options are to have a term of five (5)
years and are to conform to Company's consultant option policy as far as
additional terms and details. This agreement with Steel Beach replaces two
earlier agreements; specifically, one agreement for Version 2.0 dated December
30, 1999 in the amount of $37,800 in cash and $37,800 in stock options, and one
agreement for Version 3.0 dated December 30, 1999 in the amount of $42,250 in
cash and $42,250 in stock options. All efforts expended by Steel Beach
Productions under these two earlier contracts are compensated under the terms of
this agreement. The Company retains all propriety rights in the application.
Steel Beach is responsible for its own costs and expenses. The agreement may be
canceled by either party on thirty (30) days written notice.
Discussion and Analysis
The Company was founded in 1992 to combat the potential spread of
bloodborne pathogenic infections such as HIV and hepatitis. It has broadened its
mission to research, develop, manufacturing, marketing and selling medical
products and services to the healthcare community.
The Company was in the development stage until 1993 when it began
commercial shipments of SutureMate(R), its first product. From inception in
June, 1992 through December 31, 1999, the Company generated revenues of
approximately $1,275,000 from a limited number of customers.
-4-
<PAGE>
Since inception through December 31, 1999, the Company has generated cumulative
losses of approximately $2,780,000. Although the Company has experienced a
significant percentage growth in revenues from fiscal 1992 to fiscal 1999, the
Company does not believe prior growth rates are indicative of future operating
results, especially in light of the contracts with US Surgical and IBM Global to
assist in the exploitation of OASiS@works. Due to the Company's operating
history and limited resources, among other factors, there can be no assurance
that profitability or significant revenues on a quarterly or annual basis will
occur in the future. Moreover, the Company expects to continue to incur
operating losses through at least the first half of 2000, and there can be no
assurance that losses will not continue after such date. As of the date hereof
the Company has completed installations of fifteen (15) units in seven (7)
hospitals.
As discussed in the independent auditors' report, the operating
losses incurred by the Company raise doubt about its ability to continue as a
going concern. In addition, with the implementation of its agreements with US
Surgical and IBM Global and/or with the establishment of one or more strategic
alliances in addition to US Surgical and IBM Global, the Company expects to
experience a period of growth, which requires it to significantly increase the
scale of its operations. This increase will include the hiring of additional
personnel in the areas of (i) customer service to provide technical support for
the hospitals where installations are located and (ii) technical staff to make
changes requested by those hospitals. This will result in significantly higher
operating expenses. The increase in operating expenses is expected to be
partially funded by an increase in revenues. However, the Company's net loss may
continue to increase. Expansion of the Company's operations may cause a
significant strain on the Company's management, financial and other resources.
The Company's ability to manage recent and any possible future growth, should it
occur, will depend upon a significant expansion of its sales and marketing,
research and development, accounting and other internal management systems and
the implementation and subsequent improvement of a variety of systems,
procedures and controls. There can be no assurance that significant problems in
these areas will not occur. Any failure to expand these areas and implement and
improve such systems, procedures and controls in an efficient manner at a pace
consistent with the Company's business could have a material adverse effect on
the Company's business, financial condition and results of operations. As a
result of such expected expansion and the anticipated increase in its operating
expenses, as well as the difficulty in forecasting revenue levels, the Company
expects to continue to experience significant fluctuations in its revenues,
costs and gross margins, and therefore its results of operations.
The Company's plan of operations for the next twelve months is to
focus on building revenue from the installation of the OASiS system in the
hospitals designated by US Surgical and to install additional OASiS systems in
hospitals not under the US Surgical agreement. Additionally, the Company intends
to install the inservice modules from US Surgical and other medical product
manufacturers at both the US Surgical and the other hospitals. The Company also
is aggressively seeking strategic alliances with targeted industry partners such
as manufacturers of devices, manufacturers of pharmaceuticals, professional
organizations such as nursing associations and hospital group purchasing
organizations and integrated health networks.
-5-
<PAGE>
The Company estimates that revenues will be sufficient to fund
ongoing operations at the current level when the number of OASiS installations
reaches approximately 100 to 125 and the total number of inservice modules
reaches approximately 150. The Company already has 40 inservice modules under
the US Surgical agreement and is in discussion with various manufacturers
interested in using OASiS to inservice more than 50 of their products.
In the short term, to fund operations through the first half 2000,
the Company will seek to draw upon the funds available under the TK Commitment,
to seek additional funds from strategic alliances with potential clients, its
shareholders, from additional third party financing or seek third party debt or
equity financing other than those planned by the current anticipated agreements.
Currently, the Company has available its existing lines of credit and has begun
hiring additional personnel. Provided that the TK Commitment and other funding
is available when needed, the Company believes that it can meet its capital
needs through year end. There can be no assurance that the Company will be
successful in these efforts.
As discussed in Note 10 to the Financial Statements, if the financing
referred to above is not secured, the recoverability of the recorded asset
amounts may be impaired.
In 2000, the Company will require between $8 and $9 million in
additional capital in the form of debt or equity to fund the continued expansion
of the OASiS system and its development to meet increased demand and to
implement its plans for increased marketing of its medical device products.
Under the TK Commitment, $3,700,000 remains available under the terms of the
agreement. The Company has met with several venture capital firms, investment
bankers, factoring companies and traditional lending sources, each of whom have
expressed early interest and many of whom are awaiting the conclusion of the
testing period. Other than the TK Commitment, the Company has accepted no
definite offer from any other source. There can be no assurance that such
long-term financing will be available to the Company or that it will be on terms
that the Company may seek.
Results of Operations for the Three Months Ended March 31, 2000 and 1999.
Overview
From its inception, the Company has incurred losses from operations.
As of March 31, 2000, the Company had cumulative net losses totaling
approximately $3,217,000. During fiscal 1999, management shifted its focus to
aggressively marketing its proprietary products, especially those associated
with OASiS@works.
-6-
<PAGE>
Financial Position
Working capital as of March 31, 2000 was $473,422, as compared to
working capital of $61,897 at December 31, 1999. This increase is primarily due
to additional borrowings on the TK Commitment.
Revenues
For the three months ended March 31, 2000 and 1999, the Company had
total revenues of $135,656 and $39,577, respectively. For the three months ended
March 31, 2000, revenues were comprised primarily of the payments received for
Oasis unit rentals and inservice modules. The increase of $96,079 or 242% is due
to revenue from the 1999 launch of Oasis.
Selling, General, and Administrative Expenses
For the three months ended March 31, 2000, operating expenses
increased by $237,649 or 171% from $138,984 for the three months ended March 31,
1999. This increase is primarily related to marketing support expenditures to
sustain the launch of the Company's OASiS system. In accordance with the
Company's marketing plan for fiscal 2000, expenses related to promotion, trade
shows, and conventions were increased to enhance the industry awareness of the
company's products and services.
In the past, the Company has focused on the design and development of
proprietary products. For fiscal 2000, the Company has launched an aggressive
marketing plan that is designed to increase worldwide sales of its products.
Surgical believes that the increased operating expenses incurred during the
three months ended March 31, 2000 will position the Company to generate
increased revenue in the 2000 fiscal year.
Liquidity and Capital Resources
The financial condition, liquidity and capital resources of the
Company should be assessed in context with the ability of the Company to
continue as a going concern as discussed in the independent auditors' report.
The Company's operations have been funded primarily from the
$1,300,000 proceeds of draw downs under the TK Commitment completed in the
fourth quarter 1999 and from cash flow
-7-
<PAGE>
of approximately $150,000 from licensing fees for the OASiS units and
partnership fees during the nine months ended March 31, 2000. This allowed the
Company to purchase OASiS hardware for installation, enhance its OASiS software
and fund current operations. At March 31, 2000, the Company has a $566,812 cash
position.
In addition to the balance of $3,700,000 available under the TK
Commitment, the Company has a line of credit in the amount of $100,000 that
expires in May 2017 and is guaranteed by Dr. Swor. In the past, the line of
credit also has been used to fund operations on a short-term basis and $100,000
is currently outstanding.
Net cash used for investing for the three months ended March 31, 2000
was approximately $19,000, representing primarily enhancements to the current
version of OASiS.
In the short term, to fund operations through the balance of fiscal
2000, the Company will be required to make additional draw downs under the TK
Commitment, seek additional funds from strategic alliances with potential
clients, its shareholders, from additional third party financing or seek third
party debt or equity financing other than those planned by the current
agreements. Additionally, the Company may be required to utilize its existing
lines of credit. Provided that additional funding is secured, the Company
believes that it can meet its capital needs through year end. There can be no
assurance that the Company will be successful in these efforts.
Forward-Looking Statements
This Form 10-QSB includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements, other
than statements of historical facts, included or incorporated by reference in
this Form 10-QSB which address activities, events or developments which the
Company expects or anticipates will or may occur in the future, including such
things as future capital expenditures (including the amount and nature thereof),
demand for the Company's products and services, expansion and growth of the
Company's business and operations, and other such matters are forward-looking
statements. These statements are based on certain assumptions and analyses made
by the Company in light of its experience and its perception of historical
trends, current conditions and expected future developments as well as other
factors it believes are appropriate in the circumstances. However, whether
actual results or developments will conform with the Company's expectations and
predictions is subject to a number of risks and uncertainties, general economic
market and business conditions; the business opportunities (or lack thereof)
that may be presented to and pursued by the Company; changes in laws or
regulation; and other factors, most of which are beyond the control of the
Company. Consequently, all of the forward-looking statements made in this Form
10-QSB are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by the Company
will be realized
-8-
<PAGE>
or, even if substantially realized, that they will have the expected consequence
to or effects on the Company or its business or operations.
PART II
Item 1. Legal Proceedings.
The Company knows of no legal proceedings to which it is a party or
to which any of its property is the subject, which are pending, threatened or
contemplated or any unsatisfied judgments against the Company.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults in Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders.
On February 28, 2000, the Company held its annual shareholder
meeting. Of the 11,815373 shares outstanding which were qualified to vote (of
the 14,515,373 outstanding, 2,700,000 are held in escrow under the TK
arrangement and were not qualified to vote at the meeting), in attendance,
either individually or by proxy were holders representing 5,960,113 shares,
which number was sufficient to form a quorum.
At such meeting the shareholders:
(1) approved an amendment to the Articles of Incorporation increasing
the number of authorized shares of Common Stock from 20,000,000 shares to
100,000,000 by a vote of 5,960,113 to -0-;
(2) re-elected the Board of Directors as follows:
-9-
<PAGE>
Dr. Swor by a vote of 5,960,013 to 100
Mr. Clark by a vote of 5,960,013 to 100
Mr. Lawrence by a vote of 5,960,013 to 100
Mr. Collins by a vote of 5,960,013 to 100
Mr. Stuart by a vote of 5,960,013 to 100
Mr. Norton by a vote of 5,960,013 to 100
Mr. Swor by a vote of 5,959,253 to760, with 100 abstaining
Dr. Saye by a vote of 5,960,013 to 100
Mr. Newman, who previously was listed on the ballot, tendered his resignation
prior to the shareholder meeting and his name was withdrawn from the ballot at
the meeting;
(3) ratified Kerkering, Barbario & Co., P.A. as the Company's auditors
by a vote of 5,959,253 to 100 with 760 abstaining; and
(4) approved the Company's 2000 Stock Plan by a vote of 5,960,013 to
100.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits required to be filed herewith by Item 601 of Regulation
S-B, as described in the following index of exhibits, are incorporated herein by
reference, as follows:
<TABLE>
<S> <C>
Exhibit No. Description
- ----------- --------------------------------------------------------------------
3.(i).1 Articles of Incorporation of Surgical Safety Products, Inc., a Florida corporation
filed May 15, 1992 [1]
3.(ii).1 Bylaws of Sheffeld Acres, Inc., now known as Surgical Safety Products, Inc. [1]
3.(ii).2 Amended Bylaws of Surgical Safety Products, Inc. [2]
10.1 Acquisition of Endex Systems, Inc. d/b/a/ InterActive PIE dated December 8,
1997 [1]
</TABLE>
-10-
<PAGE>
<TABLE>
<S> <C>
10.2 Prepaid Capital Lease Agreement with Community Health Corporation relative to
Sarasota Medical Hospital OASiS Installation dated January 30, 1998 [1]
10.3 Letter of Intent with United States Surgical Corporation dated February 12, 1998
[1]
10.4 Form of Rockford Industries, Inc. Rental Agreement and Equipment Schedule to
Master Lease Agreement [1]
10.5 Ad-Vantagenet Letter of Intent dated June 19, 1998 [1]
10.6 Distribution Agreement with Morrison International Inc. dated September 30,
1996 [1]
10.7 Distribution Agreement with Hospital News dated August 1, 1997 [1]
10.8 Clinical Products Testing Agreement with Sarasota Memorial Hospital dated
January 30, 1998 [1]
10.9 Real Estate Lease for Executive Offices effective June 1, 1998 [1]
10.10 Employment Agreement with Donald K. Lawrence dated April 1, 1997 [1]
10.11 Employment Agreement with G. Michael Swor dated June 15, 1998 [1]
10.12 Employment Agreement with Frank M. Clark dated June 15, 1998 [1]
10.13 Agreement for Consulting Services with Stockstowatch.com Inc. dated March 30,
1988 [1]
10.14 Form of Employee Option Agreement dated July 1994 [1]
10.15 Form of Employee Option Agreement dated 1998 [1]
10.16 Form of Consultants Option Agreement dated July 1994 [1]
10.17 Form of Consultants Option Agreement dated 1998 [1]
10.18 Confidential Private Offering Memorandum dated May 30, 1995 [1]
10.19 Supplement to Private Offering Memorandum dated October 30, 1995 [1]
10.20 Stock Option Agreement with Bay Breeze Enterprises LLC dated April 9, 1998
[1]
10.21 Revolving Loan Agreement, Revolving Note, Security Agreement with
SouthTrust Bank dated May 2, 1997 [1]
10.22 Agreement between the Company and T. T. Communications, Inc. dated October
15, 1998 [2]
10.23 Agreement between the Company and U.S. Surgical Corporation dated October
28, 1998. [2]
10.24 Collaborative Agreement between the Company and Dr. William B. Saye dated
November 16, 1998. [2]
</TABLE>
-11-
<PAGE>
<TABLE>
<S> <C>
10.25 Kiosk Information System, Inc. Purchase Order dated November 3, 1998 [2]
10.26 Surgical Safety Products 1999 Stock Option Plan adopted January 1999 [2]
10.27 Form of the Employee Option Agreement under the Surgical Safety Products
1999 Stock Option Plan dated January 1999 [2]
10.28 Form of the Director, Consultant and Advisor Option Agreement under the
Surgical Safety Products 1999 Stock Option Plan dated January 1999 [2]
10.29 Verio, Inc. Access Service Agreement dated February 16, 1999. [2]
10.30 Form of Investor Subscription Documents and Agreements
relative to the April 1999 Self Directed Private Placement
Offering under Rule 506 of Regulation D.
[3]
10.31 Form of the Warrant issued pursuant to the April 1999 Self Directed Private
Placement Offering under Rule 506 of Regulation D. [3]
10.32 Consulting Agreement dated April 1999 with Koritz Group, LLC. [3]
10.33 Agreement dated April 1999 with KJS Investment Corporation. [4]
10.34 Agreement dated May 1999 with Ten Peaks Capital Corp. [4]
10.35 Private Partner Network Agreement dated July 30, 1999 with US Surgical [5]
10.36 Staff/Client Leasing Agreement dated October 16, 1999, as amended September
15, 1999 [5]
10.37 Agreement dated July 15, 1999 with Triton Capital Inc.[6]
10.38 Effective December 30, 1999, Loan Agreement, Note, Security Agreement,
Lender's Warrant, Agent's Warrant, Registration Rights Agreement and Escrow
Agreement relative to the December 1999 transaction with Thomson Kernaghan
& Co., Inc. and Amendment thereto. [7]
10.39 Effective January 3, 2000 IBM Customer Agreement and Statement of Work. [7]
10.40 Investment Banking Services Agreement dated February 2, 2000 with Dunwoody
Brokerage Services Inc. [8]
10.41 Consulting Agreement dated February 15, 2000 with Global Development
Advisors Inc. [8]
10.42 Surgical Safety Products 2000 Stock Option and Aware Plan [8]
10.43 * Agreement with Steel Beach Productions dated February 29, 2000.
13.1 Definitive Proxy Statement filed February 28, 2000 [8]
27.1 * Financial Data Sheet
</TABLE>
- ------------------------
[1] Previously filed with the Company's Form 10SB
-12-
<PAGE>
[2] Previously filed with the Company's Amendment No. 1 to the Form 10SB
[3] Previously filed with the Company's Form 10QSB for the Quarter ended March
30, 1999
[4] Previously filed with the Company's Form 10QSB for the Quarter ended June
30, 1999
[5] Previously filed with the Company's Amendment No. 2 to the Form 10SB
[6] Previously filed with the Company's Form 10QSB for the Quarter ended
September 30, 1999
[7] Previously filed with the Company's Form S-3 on March 2, 2000.
[8] Previously filed with the Company's Form 10KSB for the fiscal year ended
December 31, 1999.
* Filed herewith
(b) No Reports on Form 8-K were filed during the quarter ended March 31,
2000.
-13-
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Surgical Safety Products, Inc. (Registrant)
Date: May 15, 2000 By:/s/ Dr. G. Michael Swor
---------------------------------------
Dr. G. Michael Swor
Chief Executive Officer and Acting Chief
Financial Officer
By:/s/ Donald K. Lawrence
---------------------------------------
Donald K. Lawrence
President and Chief Operating Officer
[sign page SSP 10QSB 3.31.00]
-14-
EXHIBIT 10.43
STEEL BEACH PRODUCTIONS, INC.
CONTRACT FOR MULTIMEDIA SERVICES
This contract is entered into on the 29th day of February, 2000 (the "Effective
Date"), by and between Surgical Safety Products, Incorporated ("SSP") and Steel
Beach Productions, Incorporated ("STEEL BEACH") for the purpose of design,
development, implementation, and testing of the OASiS Version 3.0 web based
application as more fully described below. This contract replaces two earlier
agreements, specifically, one agreement for Version 2.0 dated December 30, 1999
in the amount of $37,800 in cash and $37,800 in stock options, and one agreement
for Version 3.0 dated December 30, 1999 in the amount of $42,250 in cash and
$42,250 in stock options. All efforts expended by Steel Beach Productions under
these two contracts will be compensated under the terms of this agreement.
Article One: CONTRACT DESCRIPTION/PRODUCT SPECIFICATIONS
2. Project Overview: STEEL BEACH will develop the OASiS Version 3.0 in
accordance with the specifications and architecture formats provided
by SSP. Specifically, the overall application will be written in
Macromedia Authorware and/or Director with a portal for XML to
accommodate non high-speed access users. Database requirements will
be handled by SEQUEL. The product will be loaded and tested from
SSP's server and multiple platforms as required. Project specifics
are listed in Article 1.8 below.
3. The Project Manager and single point of contact for this contract for
SSP will be Eric Hill, 2018 Oak Terrace, Sarasota, FL 34231,
941-927-7874, Fax 941-925-0515, e-mail [email protected].
4. The Project Manager and single point of contact for this contract for
STEEL BEACH will be William Harrell at 8301 Cypress Plaza Drive,
Suite 100, Jacksonville, Florida, 32256, 904-296-2743 (phone),
904-296-8569, [email protected].
5. A project kickoff meeting and several follow up meetings were held by
SSP and STEEL BEACH to finalize content and product specifications.
6. At the project kickoff meeting, SSP provided STEEL BEACH the OASiS
Version 2.0 software for upgrading to Version 3.0. SSP also made
available a test portion on SSP Inservice Server for field-testing
and functionality testing purposes.
<PAGE>
7. SSP user access is via a T-1 or T-2 connection.
8. SSP shall provide a subject matter expert (SME) throughout the term
of this contract to answer any technical questions at no cost to
Steel Beach. The SME shall be available for questions during normal
working hours (8:00am to 5:00pm EST) at the SSP office in Sarasota or
will be available via pager.
9. The V3.0 project to be completed by Steel Beach is detailed in the
"OASiS Clinical Internetwork V3.0 - Functional Outline - Hospital
Network Only" dated 02/01/00, as provided by OASiS to Steel Beach.
Specifically, Steel Beach will:
- Populate V3.0 with content from 30 in-service currently
in V2.0. No changes to content.
- Create one V3.0 in-service module from new material under
the guidance of the OASiS subject matter expert.
- Enhance schematics of V3.0 modules as needed from V2.0 flat files to
2D
- Insert QTVR 10 second videos into eight V3.0 in-service modules
- Add interactive multimedia such as light indicators as needed
- Insert video clips for twelve V3.0 in-service modules
- Design a new interface for V3.0
- Design, create a develop a virtual trade show feature
with a minimum of two trade show booth looks
1. A Prototype product shall be developed by STEEL BEACH and will consist
of:
- one fully functional V3.0 in-service module, and
- an example of the product interface and the twelve categories
OASiS shall review and approve the Prototype, or provide written comments to
STEEL BEACH as described in Article Seven, Product Review and Approval Process.
2. The Preliminary Product shall consist of:
- 24 fully functional V3.0 in-service modules, and
- the full functionality of all twelve categories, and the
population of 75% of these categories with content.
OASiS shall review and approve the Preliminary product, or proved written
comments to STEEL BEACH as described in Article Seven, Product Review and
Approval Process.
<PAGE>
3. STEEL BEACH shall incorporate any changes that are presented, in
writing, by SSP according to the following criteria: STEEL BEACH
shall incorporate changes that are within the scope of this effort at
no additional charge. Any request for changes that are considered
out-of-scope, will not be incorporated until a telephone meeting is
held to (1) review the out- of-scope requests, and (2) resolve the
request for out-of-scope changes. Out-of-scope change requests may
require additional compensation by SSP to STEEL BEACH.
4. STEEL BEACH shall test the Final Product once all the changes have
been incorporated into the OASiS Version 3.0 program and provide the
Final Product to SSP on March 30, 2000.
5. SSP shall review and accept the Final Product or provide written
request for changes to STEEL BEACH. Upon incorporation of all
in-scope changes, the Final Product shall be approved by SSP.
6. Once the Final Product is approved by OASiS, Steel Beach will return
the 31 in-service modules used to develop this product to OASiS. This
will free up storage space in Steel Beach's offices for the next set
of in-service module kits to be received and produced.
Article Two: CONTRACT TERM:
2.1 Contractual services may begin upon the date of full execution of
this contract by SSP and STEEL BEACH.
2.2 The contract will be terminated upon deliver and acceptance of the
final product by STEEL BEACH to SSP and receipt of all payments for
invoices presented by STEEL BEACH to SSP.
Article Three: CONTRACT CONSIDERATION:
3.1 The total consideration for all contractual services shall be
$80,050.00 in cash and $80,050.00 worth of stock options in SSP Stock
Options determined as follows: The common stock option number will be
calculated based on the average closing share price (ACSP) in the 20
days of trading prior to deliver of the final product. The exercise
price will be 50% of the 20 day average closing price as quoted on the
OTCBB listing. The number of options issued will be calculated by this
formula: 2 x $80,050 / ACSP. The options have a term of five years and
conform to the standard SSP consultant option policy as far as
additional terms and details. The Stock Options shall be issued to
STEEL BEACH at the time of acceptance of the Final Product. This is a
firm-fixed fee contract with progress payments for product
deliverables as described herein.
3.2 A 25% deposit ($20,012.50) is due with the signing of the contract.
Deposits in the amount of $20,012.50 have been received and applied
to this requirement.
3.3 Progress payment pursuant to this contract will be made as described
below:
3.3.1 Payment for Prototype - $25,012.50
3.3.2 Payment for Preliminary Product - $27,025.00
3.3.3 Payment for Final Product - $8,000.00
<PAGE>
3.4 Payment will be handled by submission of invoice by STEEL BEACH to G.
Michael Swor at SSP at 2018 Oak Terrace, Sarasota, FL 34231 for each
deliverable described in Articles One and Three. All payments are NET
10-day terms from receipt of deliverable with accompanying invoice
presented by STEEL BEACH to SSP. Interest shall accrue at 1.5% per
month for late invoice payments.
3.5 A proposed Product Development Schedule for deliverables will be
submitted by STEEL BEACH to SSP. The preliminary development effort
is estimated at 90 days fro the project kickoff meeting. Both parties
shall agree, in writing, to the schedule developed by STEEL BEACH ad
presented to SSP.
Article Four: PROPRIETARY INTEREST:
Anything, by whatsoever designation it may be known, that is produced, created,
or developed in connection with this contract shall remain the exclusive
property of the SSP and may not be copyrighted, patented, or otherwise
restricted pursuant to state or federal law or regulation. Neither the STEEL
BEACH nor any other individual employed under this contract shall have any
proprietary interest in any product, system or program produced, created, or
developed, pursuant to this contract. STEEL BEACH will, however, retain the
proprietary rights to anything to which such rights had attached prior to the
execution of this contract.
Article Five: INDEPENDENT CONTRACTOR
STEEL BEACH shall perform and render their services as an independent contractor
and not as an agent, representative, or employee of SSP. All the services
described herein will be performed by STEEL BEACH in a proper and satisfactory
manner as determined by SSP in its reasonable sole discretion.
Article Six: COSTS AND EXPENSES:
All costs and expenses, of any nature an type that are incurred by STEEL BEACH
while fulfilling the terms of this contract are to be borne by STEEL BEACH. Such
costs are to include, but not be limited to: travel, lodging, food, materials,
subcontractors and their costs, shipping, leasing, rentals of any variety,
salary or other benefits. In no case, other than by amendment of this contract,
shall SSP be responsible for any costs beyond those allocated in the section
entitled CONTRACT CONSIDERATION above.
Article Seven: PRODUCT REVIEW AND APPROVAL PROCESS
SSP shall have ten (10) working days to review and provide written comment back
to STEEL BEACH on all deliverables discussed in Articles One and Three. If,
after a deliverable by STEEL BEACH to SSP, the latter fails to provide written
approval or question the deliverable in writing within ten (10) working days
beyond the deliverable date, STEEL BEACH shall consider the
<PAGE>
deliverable approved and move forward with the remaining contract requirements.
Article Eight: CHANGES AND CORRECTIONS:
STEEL BEACH agrees to make corrections, as suggested and warranted by SSP,
within the scope described in Article One, throughout the contract process.
However, substantive changes that are suggested or demanded by SSP after a
deliverable is approved will be considered "out-of-scope." Such out-of-scope
changes that are insisted upon by SSP may extend the deliverable timelines as
set forth herein in a manner that is proportional to the delay caused by the
out-of-scope changes. Similarly, such out-of-scope changes may also require
additional funding.
Article Nine: CANCELLATION:
In the event that both parties cannot come to agreement on the scope of the
project or resolve out-of- scope issues, this contract may be terminated by
either SSP or STEEL BEACH, by giving thirty (30) days written notice to the
other party; said notice shall be sufficient if it is delivered to the party
personally or mailed by certified mail to the mailing address as specified
herein. In case of cancellation, only the costs actually accrued for services
satisfactorily performed prior to the date of cancellation shall be due and
payable, and all work in progress shall remain the property of SSP and shall be
delivered to SSP upon payment of all outstanding invoices to STEEL BEACH.
Article Ten: ENTIRE AGREEMENT:
This contract constitutes the entire agreement of SSP and STEEL BEACH. No other
agreement or modification to this contract, expressed or implied, shall be
binding on either party unless same shall be in writing and signed by both
parties. This contract may not be orally modified. Any modification must be in
writing, expressly titled a modification, amendment, or addendum to this
contract, attached to this contract, and signed by both parties.
Article Eleven: FORCE MAJEURE:
Neither party shall be liable for los or damage suffered as a result of any
delay or failure in performance under this contract or interruption of
performance resulting directly or indirectly from acts of God, civil or miliary
authority, acts of public enemy, war, riots, civil disturbances, insurrections,
accidents, fire, explosions, floods, water, wind, lightning strikes or labor
disputes to the extend such events are beyond the reasonable control of the
party claiming excuse from liability resulting therefrom. If a "force majeure
event" does occur, the parties agree to negotiate an extension of te contract as
appropriate.
Article Twelve: LIABILITY:
In no event shall SSP or STEEL BEACH liable for any suit or claim for damages or
other relief resulting from the acts of the other party.
<PAGE>
Article Thirteen: PRIORITY:
STEEL BEACH represent that all services required pursuant to this contract shall
be given first and immediate priority. Time is of the essence in regards to all
elements of this contract.
Article Fourteen: RENEWAL:
This contract may be renewed by written agreement of all parties.
Article Fifteen: ATTORNEYS' FEES:
Except as provided by law, the parties agree to be responsible for their own
attorneys' fees incurred in connections with any disputes arising under the
terms of this contract.
Article Sixteen: DISPUTES:
This contract shall be governed by and construed in accordance with the laws of
Florida.
Article Seventeen: SEVERABILITY:
The invalidity or unenforceability of any particular provision of this contract
shall not affect the other provisions hereof and this contract shall be
construed in all respects as if such invalid or unenforceable provision(s) was
omitted.
Article Eighteen: NOTICES:
All notice to be provided pursuant to this contract are to be provided to the
parties by directing it to the person and address set forth below:
<PAGE>
WITH THEIR SIGNATURES, the parties agree to all the provisions,
special and general, and all other terms and conditions of this contract.
Florida law governs this contract.
/s/ G. Micheal Swor
- --------------------------------------
Surgical Safety Products, Inc.
2/29/2000
- -------------------------------------
Date
/s/ Robert L. Kenny
- --------------------------------------
Robert L. Kenny
President
Steel Beach Productions, Inc.
2/29/2000
- --------------------------------------
Date
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001063530
<NAME> Surgical Safety Products, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Currency
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-1-2000
<PERIOD-END> Mar-31-2000
<EXCHANGE-RATE> 1
<CASH> 566,812
<SECURITIES> 0
<RECEIVABLES> 146,554
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 873,228
<PP&E> 189,306
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,773,589
<CURRENT-LIABILITIES> 399,806
<BONDS> 0
0
0
<COMMON> 14,566
<OTHER-SE> 73,783
<TOTAL-LIABILITY-AND-EQUITY> 1,773,589
<SALES> 0
<TOTAL-REVENUES> 135,656
<CGS> 376,741
<TOTAL-COSTS> 572,507
<OTHER-EXPENSES> 14,345
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 181,421
<INCOME-PRETAX> (436,851)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (436,851)
<EPS-BASIC> (0.038)
<EPS-DILUTED> 0
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