FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1997
Commission File Number 0-26694
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 93-0945003
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
655 East Medical Drive, Bountiful, Utah 84010
(Address of principal executive offices)
(Zip Code)
(801) 298-3360
(Registrant's telephone number, including area code)
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.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding as of August 10, 1997
----- ---------------------------------
Common Stock, $.02 par value 9,279,842
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARY
(A Company in the Development Stage)
Condensed Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
Assets 1997 1996
- ------ ------------------ ------------------
<S> <C> <C>
Current assets:
Cash $ 1,487,829 $ 252,694
Accounts receivable 53,889 1,159
Inventories 14,938 15,710
Prepaid expenses and other 120,106 96,813
------------------- -------------------
Total current assets 1,676,762 366,376
Property and equipment, net 1,367,437 1,186,977
Other assets, net 262,672 295,486
=================== ===================
Total assets $ 3,306,871 $ 1,848,839
=================== ===================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 321,443 $ 100,686
Accrued liabilities 122,414 161,784
Amounts due to related parties - 73,152
------------------- -------------------
Total current liabilities 443,857 335,622
Long-term liabilities:
Unearned royalty revenues 1,750,000 -
------------------- -------------------
Total liabilities 2,193,857 335,622
------------------- -------------------
Stockholders' equity:
Preferred stock, $.001 par value; 5,000,000 shares authorized, no
shares outstanding - -
Common stock, $.02 par value; 50,000,000 shares authorized,
9,279,842 and 8,656,653 shares outstanding, respectively 185,597 173,133
Additional paid-in capital 10,940,815 9,540,928
Series C warrants to purchase common stock 310,994 -
Common stock subscriptions receivable (209,200) (209,200)
Deferred consulting expense (40,200) (40,200)
Deficit accumulated during the development stage (10,074,992) (7,951,444)
------------------- -------------------
Total stockholders' equity 1,113,014 1,513,217
------------------- -------------------
Total liabilities and stockholders' equity $ 3,306,871 $ 1,848,839
=================== ===================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARY
===================================================================================================================
(A Company in the Development Stage)
Condensed Consolidated Statements of Operations
(Unaudited)
Period from
Three Months Ended Inception to
-----------------------------------------
June 30, June 30, June 30,
1997 1996 1997
------------------ ------------------- -------------------
<S> <C> <C> <C>
Sales $ 123,682 $ 53,746 $ 718,823
Cost of sales 92,471 40,133 513,139
------------------ ------------------- -------------------
Gross margin 31,211 13,613 205,684
------------------ ------------------- -------------------
Operating expenses:
Selling, general and administrative 929,479 645,190 7,236,720
Research and development 293,227 307,295 2,952,286
Write-off of operating assets 2,639 - 330,074
------------------ ------------------- -------------------
------------------ ------------------- -------------------
Total operating expenses 1,225,345 952,485 10,519,080
------------------ ------------------- -------------------
Loss from operations (1,194,134) (938,872) (10,313,396)
Interest income, net 4,506 33,643 227,308
Other income 177 - 39,265
------------------ ------------------- -------------------
Net loss (1,189,451) (905,229) (10,046,823)
Less preference stock dividends - - (28,169)
================== =================== ===================
Net loss applicable to common shares $ (1,189,451) $ (905,229) $ (10,074,992)
================== =================== ===================
Net loss per common share $ (.13) $ (.11)
================== ===================
Weighted average number of common shares
outstanding 9,260,767 8,601,568
================== ===================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARY
(A Company in the Development Stage)
Condensed Consolidated Statements of Operations
(Unaudited)
Period from
Six Months Ended Inception to
-----------------------------------------
June 30, June 30, June 30,
1997 1996 1997
------------------ ------------------- -------------------
<S> <C> <C> <C>
Sales $ 163,160 $ 70,367 $ 718,823
Cost of sales 127,042 59,889 513,139
------------------ ------------------- -------------------
Gross margin 36,118 10,478 205,684
------------------ ------------------- -------------------
Operating expenses:
Selling, general and administrative 1,578,793 1,108,939 7,236,720
Research and development 592,511 627,178 2,952,286
Write-off of operating assets 2,639 - 330,074
------------------ ------------------- -------------------
------------------ ------------------- -------------------
Total operating expenses 2,173,943 1,736,117 10,519,080
------------------ ------------------- -------------------
Loss from operations (2,137,825) (1,725,639) (10,313,396)
Interest income, net 6,600 83,900 227,308
Other income 7,677 25,000 39,265
------------------ ------------------- -------------------
Net loss (2,123,548) (1,616,739) (10,046,823)
Less preference stock dividends - - (28,169)
================== =================== ===================
Net loss applicable to common shares $ (2,123,548) $ (1,616,739) $ (10,074,992)
================== =================== ===================
Net loss per common share $ (.24) $ (.19)
================== ===================
Weighted average number of common shares
outstanding 9,002,390 8,681,568
================== ===================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARY
===================================================================================================================
(A Company in the Development Stage)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
Six Months Ended Period from
---------------------------------------
June 30, June 30, Inception to
1997 1996 June 30, 1997
--------------- --------------- ----------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net loss $ (2,123,548) $ (1,616,739) $ (10,046,823)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 107,593 57,424 414,975
Common stock issued for services - - 18,500
Noncash consulting expense - - 93,800
Loss on disposition of assets 2,639 - 331,365
Changes in operating assets and liabilities:
Accounts receivable (52,730) 333,844 (53,889)
Related party receivable - (6,943) -
Inventories 772 233 (14,938)
Prepaid expenses and other (23,293) (183,060) (119,956)
Accounts payable and accrued liabilities 181,387 (447,258) 443,857
Amounts due to related parties (73,152) - -
Unearned royalty revenues 1,750,000 - 1,750,000
--------------- --------------- ----------------
Net cash used in operating activities (230,182) (1,862,499) (7,183,109)
--------------- --------------- ----------------
Cash flows from investing activities:
Purchase of property and equipment (258,028) (551,241) (1,920,453)
Purchase of patents and technology - (2,644) (356,146)
--------------- --------------- ----------------
Net cash used in investing activities (258,028) (553,885) (2,276,599)
--------------- --------------- ----------------
Cash flows from financing activities:
Proceeds from issuance of common stock and warrants 1,723,345 8,775 9,096,405
Proceeds from stock subscriptions - 50,300 330,300
Net proceeds from preferred stock - - 1,135,832
Net borrowings on stockholder loans - - 385,000
--------------- --------------- ----------------
Net cash provided by financing activities 1,723,345 59,075 10,947,537
--------------- --------------- ----------------
Net increase (decrease) in cash and cash equivalents 1,235,135 (2,357,309) 1,487,829
Cash and cash equivalents at beginning of period 252,694 4,251,584 -
=============== =============== ================
Cash and cash equivalents at end of period $ 1,487,829 $ 1,894,275 $ 1,487,829
=============== =============== ================
Supplemental Disclosures of Noncash Investing and
Financing Activities:
Dividends on redeemable preference stock $ - $ - $ 548,000
Common stock issued for subscription receivable - - 548,000
Conversion of stockholder debt to common stock - - 485,000
Acquisition of technology and patents for
stockholder payable - - 100,000
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
================================================================================
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARY
================================================================================
(A Company in the Development Stage)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Interim Condensed Consolidated Financial Statements
The accompanying condensed consolidated financial statements have been
prepared by the Company without audit. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) necessary to present
fairly the financial position, results of operations and cash flows as of the
dates and for the periods presented herein have been made.
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 the Securities and
Exchange Commission rules and regulations. It is suggested that these condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's December 31,
1996 Annual Report on Form 10-K. The results of operations for the three and six
months ended June 30, 1997, are not necessarily indicative of the operating
results that may result for the year ending December 31, 1997. The accounting
policies followed by the Company are set forth in Note 1 to the Company's
consolidated financial statements in its December 31, 1996 Annual Report on Form
10-K.
(2) Net Loss Per Common Share
Net loss per common share is based on the weighted average number of
common shares outstanding. Stock options, warrants and preferred shares prior to
conversion are not included in the calculation because their inclusion would be
antidilutive, thereby reducing the net loss per common share.
(3) License Agreement
In May 1997, the Company entered into an agreement (the "License
Agreement") with Becton, Dickinson and Company ("BD") relating to a single
application (the "Technology") of the Company's ExtreSafe(R) safety needle
withdrawal technology. Pursuant to the terms of the License Agreement, BD paid a
$1,750,000 to the Company in June 1997, and is required to make additional
payments of $250,000 in October 1997 and $2,000,000 upon the earlier of the date
of the first sales by BD of a product utilizing the Technology or April 5, 1998.
Of these total payments, $3,750,000 represents prepaid royalties. BD is also
required to pay ongoing royalties to the Company based on sales of products
utilizing the Technology. In addition, beginning in BD's fiscal year 2002, BD is
required to pay minimum royalties in order to maintain exclusive rights under
the License Agreement.
(4) Quantum Imaging Corporation
The Company and Zerbec, Inc. ("Zerbec"), as joint venturers,
formed Quantum Imaging Corporation ("Quantum") to develop, manufacture, and
market an improved filmless digitized imaging system. Pursuant to the terms of
the joint venture agreement, until and unless at least $3,000,000 in funding is
raised, Zerbec has the right to acquire two-thirds of SHP's interest in Quantum
for one dollar (the "Zerbec Option"). SHP is trying to negotiate an agreement
with Zerbec whereby SHP can acquire Zerbec's interest in Quantum (the "Zerbec
Acquisition") or an extension of the date on which the Zerbec Option can be
exercised. There can be no assurance that SHP will be able to negotiate, on
terms acceptable or favorable to SHP, an agreement relating to the Zerbec
Acquisition or an extension of the date on which the Zerbec Option can be
exercised. As a result, SHP's ownership interest in Quantum may decrease as a
result of its inability to reach an agreement with Zerbec or from dilution
resulting from new financing. The Company does not view Quantum as an integral
aspect of its business plan.
6
<PAGE>
(5) Registration of Common Stock
The Company filed a Form S-3 registration statement with the Securities
and Exchange Commission ("SEC") to register the resale of 12,489,106 shares of
common stock. The SEC declared the filing effective on May 6, 1997.
(6) Subsequent Events
The offering wherein the Company was seeking to raise funds in a
private placement (the "Private Placement") with the assistance of a broker
dealer expired in July without completion. The Company is presently exploring
alternative sources of funding.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's consolidated results of operations and financial condition. The
discussion should be read in conjunction with the condensed consolidated
financial statements, related notes and Management's Discussion and Analysis of
Financial Condition and Results of Operations for the year ended December 31,
1996. Wherever in this discussion the term "Company" is used, it should be
understood to refer to Specialized Health Products International, Inc. ("SHPI")
and Specialized Health Products, Inc., its subsidiary, ("SHP") on a consolidated
basis, except where the context clearly indicates otherwise. Prior to the July
1995 acquisition wherein SHP became a wholly owned subsidiary of SHPI, SHPI had
no operations.
Overview
The Company is a development stage company and, since inception, has
incurred losses from operations. As of June 30, 1997, the Company had cumulative
net losses totaling $10,074,992. To date, the Company's principal focus has been
the design, development, testing, and evaluation of its Safety Cradle(R) sharps
container, ExtreSafe(TM) Lancet Strip, ExtreSafe(TM) medical needle withdrawal
technology, intravenous flow gauge, blood collection device, filmless digitized
imaging technology, and other products, and the design and development of molds
and production processes.
Financial Position
The Company had $1,487,829 in cash as of June 30, 1997. This
represented an increase of $1,235,135 from December 31, 1996. Working capital as
of June 30, 1997, increased to $1,232,905 as compared to $30,754 at December 31,
1996. These increases were largely due to the receipt of net proceeds of
$1,539,570 from the completion of a private placement of securities by the
Company that closed on March 31, 1997, and the receipt of $1,750,000 in advanced
royalties from BD.
Results of Operations
During the three and six months ended June 30, 1997, the Company had
net sales of $123,682 and $163,160, respectively, compared with $53,746 and
$70,367 for the comparable periods from the prior year. Substantially all of the
sales during these periods related to the Company's sharps containers.
On August 26, 1996, the Company entered into an exclusive distribution
agreement (the "Distribution Agreement") with BD relating to the Company's
Safety Cradle(R) sharps container products. The Distribution Agreement grants BD
an exclusive world-wide right to market and distribute the Company's Safety
Cradle(R) sharps container products for an initial term of three years, which
term may be extended by BD annually thereafter subject to negotiation with
respect to price and other terms. The commencement of sales of Safety Cradle(R)
sharps container products was delayed because the Distribution Agreement
required that the Company receive a new 510(k) Notification relating to its
Safety Cradle(R) sharps container products, make certain modifications to the
containers, and that the Company's manufacturer meet certain BD standards before
sales could begin (collectively, the "BD Modifications"). The BD Modifications
were completed, BD introduced the Company's Safety Cradle(R) sharps container
products to its sales force in December 1996 and product sales began in March
1997. Promotional activities relating to the Company's Safety Cradle(R) sharps
container products were started by BD in late May 1997.
The Distribution Agreement provides that container products may be
sold, at BD's option, either under the Company's name or under BD's label. The
products will, however, be imprinted with the Company's product name in either
case. The selling price of the container products sold to BD under the
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<PAGE>
Distribution Agreement can be adjusted under certain circumstances for changes
in raw material costs during the initial term of the Distribution Agreement.
Except as set forth below, the Company is not required to distribute any future,
unrelated products through BD.
Entering into the Distribution Agreement created certain risks for the
Company. These include, among other things: (i) reliance on BD for sales of the
products, and therefore reliance on BD's marketing ability, marketing plans,
credit-worthiness and selling efforts; (ii) because the products are being
marketed under BD's label, any goodwill associated with the products may inure
to the benefit of BD rather than the Company; (iii) the Company has only limited
protection from changes in manufacturing costs (other than with respect to raw
materials costs) during the initial term of the Distribution Agreement; and (iv)
if the Company is reliant on BD for all or substantially all of its container
sales, the Company's ability to effectively negotiate with BD concerning pricing
or other terms in connection with any possible extension of the Distribution
Agreement may be limited.
The ExtreSafe(TM) Lancet Strip is being assembled manually by the
Company until automated production equipment is put in place in the second half
of 1997. When the automated equipment becomes available, the Company expects to
have it installed at the site of an independent third-party manufacturer that
will manufacture the ExtreSafe(TM) Lancet Strip under contract with the Company.
Due to the costs of manual assembly, the Company does not expect to make a
profit on sales of the ExtreSafe(TM) Lancet Strip until production is
transferred to the automated equipment. The automated production equipment is
expected to reduce the cost to manufacture the ExtreSafe(TM) Lancet Strip and
increase manufacturing capacity.
The Company has entered into one distribution agreement relating to the
ExtreSafe(TM) Lancet Strip and is seeking additional parties to market and
distribute the product. Unless and until the Company is able to enter into
additional distribution arrangements, the Company is attempting to market and
sell the ExtreSafe(TM) Lancet Strips with its own limited resources. The Company
expects sales of the ExtreSafe(TM) Lancet Strip to be small at least until the
automated production equipment is completed. There is no assurance that the
Company will enter into any other arrangements with respect to the marketing and
distribution of ExtreSafe(TM) Lancet Strips or that the Company's own marketing
and sales efforts will be effective.
In May 1997, the Company entered into an agreement (the "License
Agreement") with BD relating to a single application (the "Technology") of the
Company's ExtreSafe(TM) safety needle withdrawal technology. Pursuant to the
terms of the License Agreement, BD made a $1,750,000 million payment to the
Company in June 1997, and is required to make additional payments of $250,000 in
October 1997 and $2,000,000 upon the earlier of the date of the first sales by
BD of a product utilizing the Technology or April 5, 1998. Of these total
payments, $3,750,000 million represents advanced royalties. BD is also required
to pay ongoing royalties to the Company based on sales of products utilizing the
Technology. In addition, beginning in BD's fiscal year 2002, BD is required to
pay minimum royalties in order to maintain exclusive rights under the License
Agreement.
Entering into the License Agreement created certain risks for the
Company. These include, among other things: (i) reliance on BD for sales of the
products, and therefore reliance on BD's marketing ability, marketing plans,
credit-worthiness and selling efforts; and (ii) any goodwill associated with the
products may inure to the benefit of BD rather than the Company.
Research and development ("R&D") expenses were $293,227 and $592,511
for the three and six months ended June 30, 1997, compared with $307,295 and
$627,178 for the comparable periods from the prior year. The Company's R&D
efforts in the six month period ended June 30, 1997, focused on completing final
development of the ExtreSafe(TM) Lancet Strip, development relating to several
products utilizing the ExtreSafe(TM) medical needle withdrawal technology, and
development work on the filmless digitized imaging technology (which was
performed by Quantum Imaging Corporation, but which was funded by the Company).
The Company's efforts in the six months ended June 30, 1996, were focused on
refining the design of production molds for its Safety Cradle(R) sharps
9
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container products, on the design and development of its ExtreSafe(TM) Lancet
Strip, on initial development of its ExtreSafe(TM) medical needle withdrawal
technology and funding development work on the filmless digitized imaging
technology.
If the Company had had adequate funding, R&D expenditures during these
periods would have been greater than they actually were. Funding constraints
also set back the anticipated dates on which the Company's products under
development will be brought to market. In addition, R&D expenditures for the
three months ended June 30, 1997, were less than R&D expenditures for each of
the three month periods ended June 30, 1996, September 30, 1996, December 31,
1996 and March 31, 1997. Further reductions in R&D expenditures are not
anticipated unless funding constraints require the Company to make such
reductions. Reductions in R&D expenditures would comprise primarily reductions
in R&D staff. Such staff reductions could have a material adverse effect on
product development and on the Company. Management does not intend to downsize
unless liquidity concerns force the Company to do so.
Selling, general and administrative expenses were $929,479 and
$1,578,793 for the three and six months ended June 30, 1997, compared with
$645,190 and $1,108,939 for the comparable periods from the prior year. The
$280,165 increase between the first and second quarters of 1997 resulted
primarily from increases in product promotional expenses and patent expenses as
well as increases in costs relating to legal, accounting and financial advisory
services. The increases in expenditures between the 1997 and 1996 periods
resulted primarily from an increased number of employees, amounts paid to
financial advisors and public relations firms, and underwriting, legal and
accounting fees incurred connection with private placement activities.
The Company does not expect that selling, general and administrative
expenses will be reduced below current levels without reducing the number of
employees, teriminating its relationship with its financial advisors or reducing
the number of and scope of patent applications in the United States and abroad.
Such reductions may have a material adverse effect on the sale and
commercialization of the Company's products. Management does not intend to
downsize, terminate its financial advisors or limit the number or scope of the
Company's patent filings unless liquidity concerns force the Company to do so.
Net interest income was $4,506 and $6,600 for the three and six months
ended June 30, 1997, compared with $33,643 and $83,900 for the comparable period
from the prior year. The difference in net interest income between said periods
relates mainly to interest earned on funds on deposit. As funds on deposit have
decreased so has the net interest income. Unless the Company generates
additional cash through product sales or financings, net interest income during
the remainder of 1997 will be substantially less than in 1996.
Liquidity and Capital Resources
To date, the Company has financed its operations principally through
private placements of equity securities and receipt of advanced royalties under
the License Agreement. From inception through June 30, 1997, the Company had
received net proceeds of approximately $10,948,000 through financing activities.
As of June 30, 1997, the Company's liabilities totaled $2,193,857, which
included $1,750,000 in unearned royalty revenue relating to the License
Agreement. The Company had working capital as of June 30, 1997, of $1,232,905
and the Company used net cash in operating activities of approximately $230,182
during the six months ended June 30, 1997.
The Company's working capital and other capital requirements for the
foreseeable future will vary based upon a number of factors, including the costs
to complete development and bring the ExtreSafe(TM) medical needle withdrawal
technology, intravenous flow gauge, blood collection device and other products
to commercial viability, and the level of sales of and marketing for the Safety
Cradle(R) sharps containers and ExtreSafe(TM) Lancet Strip.
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In order to maintain current levels of spending for the next twelve
months the Company will need to raise additional funds through one or more of
the following sources: a private offering, product sales, licensing
arrangements, distribution agreements, or otherwise (the "Funding Sources").
Management believes that it will be successful in raising additional funding
through Funding Sources. The Company may, however, be required to further slow
the commercialization of its products under development if funds are not
available from Funding Sources. There is no assurance that any Funding Sources
will provide funding or that, if funding is received, the terms of such funding
will be favorable to the Company.
If funding from Funding Sources does not materialize, the Company can
and would expect to reduce operating costs and capital expenditures by focusing
primarily on its sharps container, lancet and other products that are or soon
will be ready to sell. The Company's failure, however, to produce or sell
sufficient quantities of its products, raise additional funds from Funding
Sources, or sufficiently reduce its costs of operations and capital expenditures
could materially and adversely affect the Company's cash flows and financial
condition. Notwithstanding the foregoing, management may expend cash at
relatively high rates by maintaining or increasing spending if management
determines that additional funding is likely to be obtained. If the anticipated
funding is not obtained, such continued expenditures may materially and
adversely affect the Company's financial condition.
Trading Market
The Company's common stock is currently traded on the Nasdaq Small-Cap
Market System. In order to continue to qualify its stock for quotation on the
Nasdaq Small-Cap Market, a company must have, among other things, at least
$2,000,000 in total assets, $1,000,000 in capital and surplus and a minimum bid
price for its stock of $1.00 per share. If the Company is not successful in
raising additional funds from Funding Sources or if sales do not increase
substantially, then the Company may fall below the capital or asset requirements
and the Company's common stock will no longer qualify for quotation on the
Nasdaq Small-Cap Market. In addition, the listing criteria may change and there
is no assurance that the Company would meet such new requirements.
In the event of delisting, trading, if any, in the Company's securities
would be expected to be conducted in the over-the-counter market in what is
commonly referred to as the "pink sheets" or the "Electronic Bulletin Board." As
a result, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the price of, the Company's securities. The loss of
continued price quotations as provided by the Nasdaq System could also cause a
decline in the price of the Common Stock, a loss of news coverage of the Company
and difficulty in obtaining subsequent financing.
Forward-Looking Statements
When used in this Form 10-Q, in other filings by the Company with the
SEC, in the Company's press releases or other public or stockholder
communications, or in oral statements made with the approval of an authorized
executive officer of the Company, the words or phrases "would be," "will allow,"
"intends to," "will likely result," "are expected to," "will continue," "is
anticipated," "estimate," "project," or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995.
The Company cautions readers not to place undue reliance on any
forward-looking statements, which speak only as of the date made, are based on
certain assumptions and expectations which may or may not be valid or actually
occur, and which involve various risks and uncertainties, including but not
limited to risk of product demand, market acceptance, economic conditions,
competitive products and pricing, difficulties in product development,
commercialization, and technology, and other risks. Furthermore, manufacturing
delays may result from additional mold redesigns or delays may result from the
failure to timely obtain FDA approval to sell future products. In addition,
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sales through BD or otherwise may not commence as anticipated due to delays by
BD or otherwise. If and when product sales commence, sales may not reach the
levels anticipated. As a result, the Company's actual results for future periods
could differ materially from those anticipated or projected.
Unless otherwise required by applicable law, the Company does not
undertake, and specifically disclaims any obligation, to update any
forward-looking statements to reflect occurrences, developments, unanticipated
events or circumstances after the date of such statement.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
On June 17, 1997, stock options to acquire 22,500 shares of the
Company's common stock were exercised for $8,775.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to Vote of Securityholders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a)
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
3(i).1 Restated Certificate of Incorporation of the Company
(Incorporated by reference to Exhibit 3(i).1 of the
Company's current report on Form 8-K, dated July 28,
1995)
3(i).2 Certificate of Amendment of Certificate of Incorporation
of the Company (Incorporated by reference to Exhibit
3(i).2 of the Company's annual report on Form 10-K, dated
December 31, 1996)
3(i).3 Articles of Incorporation of Specialized Health Products,
Inc. ("SHP") (Incorporated by reference to Exhibit 3(i).2
of the Company's Form 10-K, dated December 31, 1995)
3(i).4 Articles of Amendment of SHP (Incorporated by reference
to Exhibit 3(i).3 of the Company's Form 10-K, dated
December 31, 1995)
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<PAGE>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
3(ii).1 Amended and Restated Bylaws of the Company (Incorporated
by reference to Exhibit 3(ii).1 of the Company's annual
report on Form 10-K, dated December 31, 1996)
3(ii).2 Bylaws of SHP (Incorporated by reference to Exhibit
3(ii).2 of the Company's Form 10-K, dated December 31,
1995)
4.1 Form of Series A Warrant Certificate (Incorporated by
reference to Exhibit 4.1 of the Company's Annual Report
on Form 10-K, dated December 31, 1995).
4.2 Form of Series B Warrant Certificate (Incorporated by
reference to Exhibit 4.2 of the Company's Annual Report
on Form 10-K, dated December 31, 1995).
4.3 Form of Series C Warrant Certificate (Incorporated by
reference to Exhibit 4.3 of the Company's Amendment No. 1
to its Form S-3/A Registration Statement, dated April 18,
1997)
10.1 Placement Agreement between the Company, SHP and U.S.
Sachem Financial Consultants, L.P., dated June 23, 1995
(Incorporated by reference to Exhibit 10.2 of the
Company's Form 10-K, dated December 31, 1995)
10.2 Form of Employment Agreement with Executive Officers
(Incorporated by reference to Exhibit 10.3 of the
Company's Form 10-K, dated December 31, 1995)
10.3 Form of Indemnity Agreement with Executive Officers and
Directors (Incorporated by reference to Exhibit 10.4 of
the Company's Form 10-K, dated December 31, 1995)
10.4 Form of Confidentiality Agreement (Incorporated by
reference to Exhibit 10.5 of the Company's Form 10-K,
dated December 31, 1995)
10.5 Joint Venture Agreement between SHP and Zerbec, Inc.,
dated October 30, 1995 (Incorporated by reference to
Exhibit 10.6 of the Company's Form 10-K, dated December
31, 1995)
10.6 Distribution Agreement between SHP and Becton, Dickinson
and Company (Incorporated by reference to Exhibit 10.1 of
the Company's Current Report on Form 8-K, dated August
26, 1996)
10.7 License Agreement between SHP and Becton, Dickinson and
Company (Incorporated by reference to Exhibit 10.1 of the
Company's Current Report on Form 8-K, dated June 4, 1997)
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
One report, dated June 4, 1997, was filed during the quarter
ended June 30, 1997 reporting the execution of the License Agreement between the
Company and BD.
13
<PAGE>
SIGNATURES
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 hereunto duly authorized.
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.:
Date: 8/13/97 By /s/ David A.Robinson
-----------------------------
David A. Robinson
President, Chief Executive
Officer, Director
Date: 8/13/97 By /s/ J. Clark Robinson
-------------------------------
J. Clark Robinson
Chief Financial Officer, Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,487,829
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<RECEIVABLES> 53,889
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<INVENTORY> 14,938
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<PP&E> 1,602,501
<DEPRECIATION> 235,064
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<CURRENT-LIABILITIES> 443,857
<BONDS> 0
0
0
<COMMON> 185,597
<OTHER-SE> 927,417
<TOTAL-LIABILITY-AND-EQUITY> 3,306,871
<SALES> 163,160
<TOTAL-REVENUES> 163,160
<CGS> 127,042
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<INCOME-PRETAX> (2,123,548)
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<NET-INCOME> (2,123,548)
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