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 March 31, 1999
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)
585 West 500 South, 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.
X Yes ___ 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 May 10, 1999
----- ------------------------------
Common Stock, $.02 par value 12,356,440
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PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS March 31, December 31,
1999 1998
------------------ -------------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 1,637,966 $ 2,480,083
Accounts receivable 719,910 494,484
Unbilled receivables on contracts - 142,414
Inventories 2,520 2,520
Prepaid expenses and other 72,829 44,756
Amounts due from related parties 12,293 24,808
------------------ -------------------
Total current assets 2,445,518 3,189,065
------------------ -------------------
PROPERTY AND EQUIPMENT, at cost:
Manufacturing molds 474,633 474,633
Office furnishings and fixtures 534,145 531,215
Assembly and manufacturing equipment 339,356 339,356
Leasehold improvements 133,132 132,326
Construction-in-progress 152,599 152,599
------------------ -------------------
1,633,865 1,630,129
Less accumulated depreciation and amortization (509,436) (442,331)
------------------ -------------------
Net property and equipment 1,124,429 1,187,798
------------------ -------------------
OTHER ASSETS 38,652 39,680
================== ===================
$ 3,608,599 $ 4,416,543
================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 31,359 $ 17,238
Accrued liabilities 258,514 322,765
------------------ -------------------
Total current liabilities 289,873 340,003
------------------ -------------------
DEFERRED ROYALTY REVENUES 3,750,000 3,750,000
------------------ -------------------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.001 par value; 5,000,000 shares authorized, - -
no shares outstanding
Common stock, $.02 par value; 50,000,000 shares authorized,
12,356,440 and 12,356,440 shares outstanding, respectively 247,129 247,129
Common stock subscriptions receivable (200,200) (200,200)
Additional paid-in capital 14,788,373 14,788,373
Series D warrants to purchase common stock 1,954,452 1,954,452
Deficit accumulated during the development stage (17,180,828) (16,423,014)
Deferred consulting expense (40,200) (40,200)
------------------ -------------------
Total stockholders' equity (431,274) 326,540
------------------ -------------------
$ 3,608,599 $ 4,416,543
================== ===================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<TABLE>
<CAPTION>
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Period from
Three Months Ended Inception to
-----------------------------------------
March 31, March 31, March 31,
1999 1998 1999
------------------ ------------------- -------------------
<S> <C> <C> <C>
NET PRODUCT SALES $ - $ 8,677 $ 748,228
COST OF PRODUCT SALES - 6,985 536,002
------------------ ------------------- -------------------
Gross margin on sales - 1,692 212,226
------------------ ------------------- -------------------
DEVELOPMENT FEES 553,176 237,431 1,832,110
COST OF DEVELOPMENT FEES 445,721 189,945 1,268,867
------------------ ------------------- -------------------
Gross margin on development fees 107,455 47,486 563,243
------------------ ------------------- -------------------
OPERATING EXPENSES:
Selling, general and administrative 639,385 605,339 12,555,256
Research and development 253,942 233,963 4,714,622
Write-off of operating assets - - 1,174,795
------------------ ------------------- -------------------
Total operating expenses 893,327 839,302 18,444,673
------------------ ------------------- -------------------
LOSS FROM OPERATIONS (785,872) (790,124) (17,669,204)
OTHER INCOME (EXPENSE):
Interest income 26,973 44,577 488,862
Interest expense - - (23,658)
Other income, net 1,085 4,055 51,341
------------------ ------------------- -------------------
NET LOSS (757,814) (741,492) (17,152,659)
LESS PREFERENCE STOCK DIVIDENDS - - (28,169)
------------------ ------------------- -------------------
NET LOSS APPLICABLE TO COMMON SHARES $ (757,814) $ (741,492) $ (17,180,828)
================== =================== ===================
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (.06) $ (.06)
================== ===================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 12,356,440 11,635,394
================== ===================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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<TABLE>
<CAPTION>
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
Three Months Ended Period from
-----------------------------------
Inception to
March 31, March 31, March 31, 1999
1999 1998
---------------- --------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (757,814) $ (741,492) $ (17,152,659)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 68,133 59,752 1,026,106
Common stock issued for services - - 231,000
Noncash consulting expense - - 264,500
Loss on disposition of assets - - 1,176,086
Changes in operating assets and liabilities:
Accounts receivable (225,426) (216,748) (719,910)
Unbilled receivables on contracts 142,414 - -
Inventories - (5,153) (2,520)
Prepaid expenses and other (28,073) (1,171) (72,829)
Amounts due from related parties 12,515 (1,795) (12,293)
Other assets - (22,500) (27,000)
Accounts payable 14,121 (314,372) 31,359
Accrued liabilities (64,251) 41,781 258,514
Amounts due to related parties - (127,195) -
Deferred royalty revenue - - 3,750,000
---------------- --------------- ---------------
Net cash used in operating activities (838,381) (1,328,893) (11,249,646)
---------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (3,736) (97,251) (2,886,644)
Purchase of patents and technology - - (356,146)
Proceeds from the sale of assets - - 4,517
---------------- --------------- ---------------
Net cash used in investing activities (3,736) (97,251) (3,238,273)
---------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - 2,555,359 12,487,801
Proceeds from issuance of common stock warrants - 1,078,800 1,777,952
Proceeds from stock subscriptions - - 339,300
Proceeds from issuance of preferred stock - - 1,164,001
Proceeds from issuance of redeemable preference stock
- - 240,000
Payments on redeemable preference stock and dividends
- - (268,169)
Net repayments on stockholder loans - - 385,000
---------------- --------------- ---------------
Net cash provided by financing activities - 3,634,159 16,125,885
---------------- --------------- ---------------
NET INCREASE IN CASH AND CASH EQUIVALENTS
(842,117) 2,208,015 1,637,966
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD
2,480,083 1,441,556 -
================ =============== ===============
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD
$ 1,637,966 $ 3,649,571 $ 1,637,966
================ =============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARIES
(A Company in the Development Stage)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
For the period from inception to March 31, 1999, the Company recorded in-kind
dividends on redeemable preferred stock of $28,169.
For the period from inception to March 31, 1999, the Company issued common stock
for subscriptions receivable of $548,000.
For the period from inception to March 31, 1999, the Company converted certain
stockholder loans and amounts due to stockholders to common stock totaling
$485,000.
See accompanying notes to condensed consolidated financial statements.
5
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SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARIES
(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 only 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. These condensed consolidated
financial statements should be read in conjunction with consolidated financial
statements and notes thereto included in the Company's December 31, 1998 Annual
Report on Form 10-K. The results of operations for the three months ended March
31, 1999, are not necessarily indicative of the operating results that may
result for the year ending December 31, 1999. The accounting policies followed
by the Company are set forth in Note 1 to the Company's consolidated financial
statements in its December 31, 1998 Annual Report on Form 10-K.
(2) Basic and Diluted 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. Therefore, there
is no difference between basic and diluted net loss per common share for the
periods presented. The Company has common stock options and warrants outstanding
at March 31, 1999 that, if exercised, would result in the issuance of an
additional 6,084,287 share of common stock.
(3) Reclassifications
Certain reclassifications have been made in the prior year's
consolidated financial statements to conform to the current period presentation.
(4) Cash and Cash Equivalents
Cash and cash equivalents at March 31, 1999 include investments in
commercial paper having maturity dates ranging from April 1, 1999 to May 6,
1999 with interest rates ranging from 5.10% to 5.13%. The Company intends to
hold these investments until maturity.
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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 and accompanying notes and Management's Discussion and
Analysis of Financial Condition and Results of Operations for the year ended
December 31, 1998. Wherever in this discussion the term "Company" is used, it
should be understood to refer to Specialized Health Products International, Inc.
and its wholly owned subsidiaries, Specialized Health Products, Inc.,
Specialized Cooperative Corporation and Iontophoretics Corporation, on a
consolidated basis, except where the context clearly indicates otherwise.
Overview
From its inception, the Company has incurred losses from operations. As
of March 31, 1999, the Company had cumulative net losses applicable to common
shares totaling $17,180,828. To date, the Company's principal focus has been the
design, development, testing, and evaluation of its Safety Cradle(R) sharps
containers, safety lancets, safety needle technologies, intravenous flow gauge,
blood collection devices, and other safety medical products, and the design and
development of various molds and production processes.
Financial Position
The Company had $1,637,966 in cash and cash equivalents as of March 31,
1999. This represents a decrease of $842,117 from December 31, 1998. Working
capital as of March 31, 1999, decreased to $2,155,645 as compared to $2,849,062
at December 31, 1998. These decreases were largely due to ongoing selling,
general and administrative costs and research and development expenditures with
no product sales and minimal margins on development fees. There were no proceeds
from equity or other financing sources during the quarter ended March 31, 1999.
Three Months Ended March 31, 1999 and 1998
During the three months ended March 31, 1999, the Company had total
revenues of $553,176, comprised totally of development fees under the JJM
Agreement. This is compared to total revenues of $246,108 for the comparable
period from the prior year, comprised of $237,431 in development fees under the
JJM Agreement and $8,677 in product sales. As discussed below, the Company will
look to several other products and devices for future sales revenues.
The JJM Agreement provides that the Company and JJM will seek to
commercialize two products using safety medical needle technology. The JJM
Agreement provides for monthly development payments by JJM, sharing of field
related patent costs, the possibility of payments for initial periods of low
volume manufacturing, an ongoing royalty stream and a JJM investment in molds,
assembly equipment and other capital costs related to commercialization of each
product. The JJM Agreement also provides for an ongoing joint cooperative
program between the Company and JJM which derives future funding directly from
sales of Company created products, the possibility of low volume manufacturing
revenue for the Company and an ongoing royalty stream for additional safety
products which are jointly approved for development. The Company anticipates
that JJM will perform substantially all of the manufacturing under the JJM
Agreement during 1999. The Company and JJM also reached arrangements whereby
they are pursuing development and commercialization of four additional products
under their joint cooperative program. The Company anticipates that sales of two
products under the JJM Agreement will begin in 1999. The Company had previously
believed sales of product under the JJM Agreement would begin in early 1999. The
reason for the delay primarily related to design changes to meet anticipated
market requirements. There is no assurance that the Company will realize
revenues under the JJM Agreement or that any of these products will be launched
as anticipated.
The Company has also entered into a license agreement (the "BDIT
License Agreement") that relates to a single application of the Company's
ExtreSafe(R) safety needle technology (the "Technology"). Pursuant to the terms
of the License Agreement, BDIT made payments of $4,000,000 to the Company. Of
these total payments, $3,750,000 was for advanced royalties for sales occurring
before the year 2002 and $250,000 was for a product development fee. BDIT is
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required to pay ongoing royalties to the Company based on sales of products
utilizing the Technology. The Company will not be manufacturing product in
connection with the License Agreement. In addition, beginning in BDIT's fiscal
year 2002, BDIT is required to pay minimum royalties in order to maintain
exclusive rights under the License Agreement. BDIT previously told the Company
that BDIT expected to begin selling the product that is the subject of the
License Agreement in the second quarter of 1999. It has come to the Company's
attention that there is a significant likelihood that the product will not
release as previously represented. The Company is in the process of trying to
obtain additional information from BDIT regarding any plans relating to
marketing of this product. There is no assurance that the Company will realize
additional revenues under the License Agreement or that the product will be
launched in the second quarter of 1999.
License and distribution arrangements, such as those discussed above,
create certain risks for the Company, including (i) reliance for sales of
products on other parties, and therefore reliance on the other parties'
marketing ability, marketing plans and credit-worthiness; (ii) if the Company's
products are marketed under other parties' labels, goodwill associated with use
of the products may inure to the benefit of the other parties rather than the
Company; (iii) the Company may have only limited protection from changes in
manufacturing costs and raw material costs; and (iv) if the Company is reliant
on other parties for all or substantially all of its sales, the Company may be
limited in its ability to negotiate with such other parties upon any renewals of
their agreements. Further, because such arrangements are generally expected to
provide the Company's marketing partners with certain elements of exclusivity
with respect to the products to be marketed by those partners, the Company's
success will be highly dependent on the results obtained by its partners.
Research and development ("R&D") expenses were $253,942 for the three
months ended March 31, 1999, compared with $233,963 for the comparable period
from the prior year. The Company's R&D efforts during the three month period
ended March 31, 1999, focused on development of several additional products
utilizing the Company's medical safety needle technologies. The Company's R&D
efforts during the three month period ended March 31, 1998, focused on
development of several additional products utilizing the Company's medical
safety needle technologies and continued development work on a filmless
digitized imaging technology (which was performed by Quantum Imaging
Corporation, but was funded by the Company). The increase resulted primarily
from an increase in the number of products being developed and additional
development personnel employed by the Company.
Selling, general and administrative expenses were $639,385 for the
three months ended March 31, 1999, compared with $605,339 for the comparable
period from the prior year. The increase resulted mainly from an increase in the
costs associated with exploring new product arrangements along with an increase
in the cost of facilities leased by the Company.
Interest and other income was $28,058 for the three months ended March
31, 1999, compared with $48,632 for the comparable period from the prior year.
The difference in interest income between the periods resulted from changes in
interest earned on funds on deposit and short-term interest bearing investments.
As funds on deposit and interest bearing short-term investments have decreased
so has the related interest income. Unless the Company generates additional cash
through product sales or financings, interest income during the remainder of
1999 will decrease as funds on deposit and interest bearing short-term
investments are reduced.
Liquidity and Capital Resources
To date, the Company has financed its operations principally through
private placements of equity securities, advanced royalties, development fees
and proceeds from the exercise of common stock options. The Company generated
$16,125,885 in net proceeds through financing activities from inception through
March 31, 1999. The Company used net cash for operating activities of $838,381
for the three months ended March 31, 1999. As of March 31, 1999, the Company's
current liabilities totaled $289,873 and it had $3,750,000 in deferred royalty
revenues relating to the Becton Dickinson License Agreement. The Company had
working capital as of March 31, 1999 of $2,155,645. The Company anticipates
settling its subscriptions receivable through collection or otherwise in the
immediate future.
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 safety medical needle technologies,
intravenous flow gauge, blood collection devices and other products to
commercial viability, and the level of sales of and marketing costs for the
Safety Cradle(R) sharps containers, safety lancets and other products. At March
31, 1999, the Company had not committed any funds for capital expenditures. The
Company believes that existing funds, development fees from JJM under the JJM
Agreement, license revenues and funds generated from sales of products and
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non-core technologies, will be sufficient to support the Company's operations
and planned capital expenditures through at least the end of 1999. The Company
may, however, attempt to raise additional funds through a subsequent public or
private offering if, in the opinion of management, the Company is in need of
additional funding. There is no assurance that any such offering will be
completed or that, if completed, the terms of such offering will be favorable to
the Company.
In June 1998, the Company entered into an Option to Purchase Agreement
(the "Option Agreement") with the University of Texas System to purchase certain
patents and related technology, research and development for a total purchase
price of $2,400,000. In accordance with the Option Agreement, a $240,000
non-refundable payment was made in July 1998 with the balance of $2,160,000 to
be paid within 30 days of the exercise of the purchase option. The Company
retained the exclusive right to exercise the option and acquire the patents and
related technology for a period of one year from the date of the execution of
the Option Agreement, or within 14 days of notification of successful completion
of animal toxicity studies. The Company received notice of successful completion
of the toxicity studies in February 1999 and subsequently entered into two
amendments to the Option Agreement resulting in an extension of the exercise
period to May 1999 in exchange for payments totaling $65,000. The Company
anticipates reimbursement of a portion of these fees from a third party who is
potentially interested in acquiring the technology from the Company upon
exercise of the option.
In connection with this Option Agreement, the Company entered into
consulting agreements with three individuals who were the principal inventors of
the technology. These consulting agreements provide for the individuals to
assist the Company to successfully develop the related technology. The
individuals are to provide a minimum of 50 hours of services annually for which
they will be compensated at a rate of $150 per hour. Each individual also
executed stock option agreements with the subsidiary corporation, Iontophoretics
Corporation ("IPC"), which is the entity entering into the Option Agreement and
the individual consulting agreements. The stock option agreements provide for
the individuals to purchase up to 40,000 shares of IPC common stock at an
exercise price of $.01 per share in 10,000 share increments based on achieving
certain milestone events in the future. The Company has recorded $7,200 of
consulting expense in the 1998 consolidated financial statements related to the
granting of these options.
Nasdaq Small-Cap Market Quotation
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, the Company must have, among other things, $2 million
in net tangible assets, a market capitalization of $35 million or annual net
income of $500,000. The Company is also required to have a minimum bid price of
at least $1 per share.
As of March 31, 1999, the Company had deficit net tangible assets of
$442,926, net losses and market capitalization of $11,973,390 and the Company's
bid price is below the $1 per share minimum bid price. As a result, the Company
does not meet the Nasdaq Small-Cap Market listing requirements. A hearing was
held with Nasdaq on April 1, 1999 to consider delisting or suspension of the
Company's Common Stock from the Nasdaq Small-Cap Market. The panel has not made
a decision regarding this matter. The Company expects that delisting or
suspension will occur unless the Company can bring itself into compliance with
the requirements and demonstrate an ability to maintain compliance with those
requirements. The Company is attempting to bring itself into compliance with all
applicable Nasdaq Small-Cap Market listing requirements. There can be no
assurance that the Company will be in compliance and be able to demonstrate the
ability to maintain compliance in the immediate future or otherwise. In the
event of delisting or suspension, 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 "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.
Inflation
The Company does not expect the impact of inflation on its operations
to be significant for the next twelve months.
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Year 2000
The Company uses computer networks, personal computer based development
and measurement equipment, and personal microprocessors that have the potential
for operational problems if they lack the ability to handle the transition to
the Year 2000. The Company has been aggressively proactive in pursuing solutions
for the Year 2000 problem. The Company has acquired new accounting software that
the vendor has represented is Year 2000 compliant and has initiated
communications with its suppliers, dealers, distributors and other third parties
in order to assess and reduce the risk that the Company's operations could be
adversely affected by the failure of these third parties to adequately address
the Year 2000 issue.
The Company's principal computer systems (including the embedded
microprocessor systems) have been purchased since December 31, 1996 and the
vendors supplying such systems have generally represented that such systems are
Year 2000 compliant. The software utilized by the Company is generally standard
"off the shelf" software, typically available from a number of vendors. The
Company is verifying with its software vendors that the services and products
provided are, or will be, Year 2000 compliant. Subject to such verification, the
Company believes that its computer systems and software is Year 2000 compliant
in all material respects. The Company estimates that the cost to redevelop,
replace or repair its technology that is not Year 2000 compliant will not be
material. The Company is not using any independent verification or validation
procedures. There can be no assurance, however, that its systems or programs are
or will be Year 2000 compliant and that the failure of those systems would not
have a material adverse impact on the Company's business and operations.
In connection with its business activities, the Company interacts with
suppliers, customers, and financial service organizations who use computer
systems. The Company is verifying with those parties their state of Year 2000
readiness. Based on its assessment activity to date, the Company believes that a
majority of the suppliers, customers and financial service organizations with
whom it interacts are making acceptable progress toward Year 2000 readiness. The
Company currently believes that the most reasonable likely worst case scenario
is that there will be some localized disruptions of supplier, customer and/or
financial services that will affect the Company and its suppliers, and
distribution channels for a short time rather than systemic or long-term
problems affecting its business operations as a whole. In view of the foregoing,
the Company does not currently anticipate that it will experience a significant
disruption to its business as a result of the Year 2000 issue. However, there is
still uncertainty about the broader scope of the Year 2000 issue as it may
affect the Company and third parties that are critical to the Company's
operations. For example, lack of readiness by electrical and water utilities,
financial institutions, government agencies or other providers of general
infrastructure could pose significant impediments to the Company's ability to
carry on its normal operations in the area or areas so affected. The Company is
currently evaluating what contingency plans, if any, to make in the event the
Company or parties with whom the Company does business experience Year 2000
problems.
The statements made herein about the costs expected to be associated
with the Year 2000 compliance and the results that the Company expects to
achieve, constitute forward-looking information. As noted above, there are many
uncertainties involved in the Year 2000 issue, including the extent to which the
Company will be able to successfully and adequately provide for contingencies
that may arise, as well as the broader scope of the Year 2000 issue as it may
affect third parties that are not controlled by the Company. Accordingly, the
costs and results of the Company's Year 2000 program and the extent of any
impact on the Company's operations could vary materially from those stated
herein.
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
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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, changes in the regulation of safety health
care products, 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, sales and other
revenues may not commence as anticipated due to delays 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.
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PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
No material change since the date of the Company's Annual Report on
Form 10-K.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a 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 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)
3(ii).1 Second 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,
1997)..
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 D Warrant Certificate (Incorporated by
reference to Exhibit 4.3 of the Company's Annual Report
on Form 10-K, dated December 31, 1997).
4.2 Form of SHPI Warrant Certificate (Incorporated by
reference to Exhibit 4.4 of the Company's Annual Report
on Form 10-K, dated December 31, 1997).
10.1 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)
12
<PAGE>
10.2 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)
10.3 Form of Confidentiality Agreement (Incorporated by
reference to Exhibit 10.5 of the Company's Form 10-K,
dated December 31, 1995)
10.4 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)
10.5 Distribution and License Agreement between SHP and
Johnson and Johnson Medical, Inc. (Incorporated by
reference to Exhibit 10.1 of the Company's Current
Report on Form 8-K/A, dated December 22, 1997)
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
None.
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: 5/10/99 By /s/ David A. Robinson
-----------------------------
David A. Robinson
President, Chief Executive
Officer, Director
Date: 5/10/98 By /s/ Charles D. Roe
-----------------------------
Charles D. Roe
Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,637,966
<SECURITIES> 0
<RECEIVABLES> 719,910
<ALLOWANCES> 0
<INVENTORY> 2,520
<CURRENT-ASSETS> 2,445,518
<PP&E> 1,633,865
<DEPRECIATION> 509,436
<TOTAL-ASSETS> 3,608,599
<CURRENT-LIABILITIES> 289,873
<BONDS> 0
0
0
<COMMON> 247,129
<OTHER-SE> (678,403)
<TOTAL-LIABILITY-AND-EQUITY> 3,608,599
<SALES> 0
<TOTAL-REVENUES> 553,176
<CGS> 0
<TOTAL-COSTS> 445,721
<OTHER-EXPENSES> 225,884
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (757,814)
<INCOME-TAX> 0
<INCOME-CONTINUING> (757,814)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (757,814)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
