SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-KSB/A
(Amendment No. 1)
Annual Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended
December 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)
585 West 500 South, Bountiful, Utah 84010 (801) 298-3360
(Address of principal executive offices) (Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $.02 Par Value None
Check whether the issuer (1) 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 | |
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. | |
The issuer's revenues for its most recent fiscal year were $4,850,947.
The aggregate market value of the voting stock held by non-affiliates
(i.e., does not include directors, executive officers or ten percent
stockholders identified in Item 11 hereof) of the issuer as of April 12, 2000
was approximately $8,029,262.
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Item 6. Management's Discussion and Analysis or Plan of Operation
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 consolidated financial
statements and notes thereto. Wherever in this discussion the term "Company" is
used, it should be understood to refer to SHPI and its wholly owned
subsidiaries, SHP, Safety Syringe Corporation, 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 December 31, 1999, the Company had cumulative net losses applicable to common
shares totaling $16,063,783. To date, the Company's principal focus has been the
design, development, testing and evaluation of its 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 $180,425 in cash and cash equivalents as of December
31, 1999. This represented a decrease of $2,299,658 from December 31, 1998.
Working capital as of December 31, 1999, decreased to $230,138 as compared to
$2,877,205 at December 31, 1998. These decreases were largely due to the fact
that during 1999 the Company received only $74,400 from financing activities
compared to receipt of $3,813,159 from financing activities during 1998.
Years Ended December 31, 1999 and 1998
During the year ended December 31, 1999, the Company had total
operating revenues of $4,850,947, compared with total operating revenues of
$1,039,136 for the year ended December 31, 1998. Prior to 1999, the Company had
$3,750,000 in deferred royalty revenue relating to the BDIT License Agreement.
In June 1999, BDIT and the Company amended the BDIT License Agreement. The
amendment provides that the $3,750,000 previously paid by BDIT to the Company
will not be credited against future earned royalties and the Company will have
no further obligation of any kind to BDIT with respect to these payments.
Accordingly, the $3,750,000 of deferred royalty revenue was recognized as
revenue during 1999. During 1999, the Company also had $1,100,947 in development
fee revenues from JJM under the JJM Agreement. Costs incurred to generate these
development fees totaled $890,222. During 1998, $10,202 of the Company's
revenues were from product sales of the Company's sharps container products and
the remaining $1,028,934 were development fee revenues from JJM under the JJM
Agreement. Costs incurred to generate these development fees totaled $823,146.
As discussed below, the Company will look to several other products and devices
for future sales revenues.
In November 1999, the Company and Kendall Healthcare Products Company,
a division of Tyco Healthcare Group LP ("Kendall") entered into a Development
and License Agreement (the "Kendall Agreement") relating to one application of
the Company's needle technology in the production of a line of safety medical
needle products, including six syringe products and five other safety needle
products. The effective date of the Kendall Agreement was subject to certain
approvals that were obtained on March 29, 2000. On April 12, 2000, the Company
received a $1,500,000 payment less $35,044 representing the Company's share of
certain patent filing costs. The Company will also receive an additional
$1,000,000 upon the sale of commercial quantities of products in exchange for
the Company assigning to Kendall the FlexLoc(R) and ReLoc(TM) trademarks and two
related patents. The assignment of the patent rights to Kendall is subject to a
preexisting license agreement and the retention by the Company of an exclusive,
royalty free worldwide license in a number of strategic product areas. The
Kendall Agreement also provides for the
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Company to receive development fees and ongoing royalties, including a $500,000
advance royalty payment upon the sale of commercial quantities of products. It
is anticipated that Kendall will manufacture all products that are subject to
the Kendall Agreement. There can be no assurance that products will be launched
as anticipated or that the Company will realize revenues under the Kendall
Agreement.
In December 1997, the Company entered into the JJM Agreement under
which the parties are seeking to commercialize two applications of the safety
needle technology. 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 2000. The Company and JJM also entered into arrangements
whereby they are pursuing development and commercialization of four additional
products. The Company anticipates that the sale of one product under the JJM
Agreement will begin in the year 2000 with additional products scheduled for
introduction into the market in 2001. 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. All product introductions are scheduled and
controlled by JJM.
In May 1997, the Company entered into the BDIT License Agreement
relating to a single application of the Company's ExtreSafe(R) safety needle
technology. BDIT previously told the Company that it expected to begin selling
the product that is the subject of the BDIT License Agreement at various times.
BDIT has indicated that it is unsure if or when product will be introduced and
sold in the market under the BDIT License Agreement. BDIT has not provided the
Company with information regarding the market introduction of the product.
The Company has an ongoing program for developing products using its
fourteen medical needle technologies and expects to develop additional safety
medical needle technologies.
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 materials 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 $780,425 for the year
ended December 31, 1999, compared with $909,048 for the year ended December 31,
1998. The Company's efforts during 1999 focused on development of several
additional products utilizing the Company's medical safety needle technologies.
The Company's efforts during 1998 focused on development of several additional
products utilizing the ExtreSafe(R) and FlexLoc(R) safety needle technology, the
safety single lancet technology and continued development work on a filmless
digitized imaging technology (which was performed by QIC, but was funded by the
Company). The 1998 R&D effort was expanded beyond development of ExtreSafe(R)
products to manually actuated safety sheathing devices. The decreases in R&D
expenses resulted primarily from (i) a reduction in the development activities
with respect to the filmless digitized imaging technology,
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(ii) the termination of two development employees, and (iii) a reduction in the
use of outside consultants for development activities.
Selling, general and administrative expenses were $2,776,669 for the
year ended December 31, 1999, compared to $2,946,722 for the year ended December
31, 1998. The decrease resulted mainly from (i) the officers of the Company
taking a combined thirty-three percent reduction in compensation, (ii)
downsizing which resulted in the termination of two administrative employees,
and (iii) reduction in financial advisory fees.
The Company wrote off $105,762 in operating assets in 1999 that were
comprised primarily of the write down of certain automation equipment and the
write off of certain obsolete computer equipment abandoned or sold for nominal
amounts. In 1998, the Company wrote off $754,803 in operating assets that were
comprised primarily of molds, production equipment and other assets relating to
the ExtreSafe(R) Lancet Strip. These assets were written-off in connection with
the Company's decision to abandon the further manufacture and distribution of
the ExtreSafe(R) Lancet Strip.
Net other income was $61,362 for the year ended December 31, 1999
compared with $205,064 for the year ended December 31, 1998. The decrease in net
other income is attributable to interest earned on lower levels of funds on
deposit and short-term interest bearing investments. As funds on deposit and
interest bearing short-term investments have decreased, so has the interest
income.
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
$16,200,285 and $74,400 in net proceeds through private placements of equity and
exercise of common stock options from inception through December 31, 1999 and in
1999, respectively. The Company used net cash for operating activities of
$2,340,118 during the year ended December 31, 1999. As of December 31, 1999, the
Company's liabilities totaled $125,675. The Company had working capital as of
December 31, 1999 of $230,138.
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, blood
collection devices and other products to commercial viability, and the level of
sales of the new phlebotomy product due to launch in the fourth quarter of 2000.
At December 31, 1999, the Company had not committed to spend any funds on
capital expenditures. The Company believes that existing funds, including the
$1,500,000 received from Kendall, development fees from JJM and Kendall under
the respective agreements, license revenues and funds generated from
commencement of product royalties under current agreements, will be sufficient
to maintain operations through December 31, 2000. The Company has no contractual
arrangements that guarantee that the Company will have adequate funding during
2000 and there can be no assurance that additional funding, if needed, will be
available on commercially reasonable terms or at all. Any inability to obtain
additional funding if needed will have a material adverse effect on the Company,
including possibly requiring the Company to significantly curtail or cease its
operations.
From time to time the Company is presented with new opportunities to
design, develop, acquire or manufacture safety medical devices. In the event
such opportunities arise, management and the Board of Directors could determine
that the pursuit of such opportunities is in the best interest of the Company
and its stockholders and may decide to raise additional funding through the sale
of securities. The Company will also continue to pursue new arrangements with
strategic partners which could generate additional development or licensing
fees. There are no contractual arrangements in place that would provide for
additional funding and there can be no assurance that the Company will be able
to obtain additional funding if appropriate on commercially reasonable terms or
at all.
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At April 12, 2000, the Company had 3,609,787 Series D Warrants and
775,000 other warrants (the "SHPI Warrants") outstanding which are exercisable
for the same number of shares of Common Stock of the Company at $2.00 per share.
The Series D Warrants expire on the earlier of (a) two years from the date of
effectiveness of a registration statement under the Act covering the sale of the
shares of Common Stock underlying such warrants, which period shall be extended
day-for-day for any time that a prospectus meeting the requirements of the Act
is not available, or (b) the redemption date if such warrants are redeemed
(subject to the right of the holder to exercise the warrants within 20 days of
notice of such redemption). The SHPI Warrants expire on December 31, 2002. The
exercise of all the Warrants would result in an equity infusion to the Company
of $8,769,574. As of the date hereof, all of the warrants are out of the money
and there can be no assurance that any warrants will ever be exercised.
The Company has granted stock options that are currently exercisable
for 1,964,500 shares of Common Stock at exercise prices ranging between $.39 and
$2.625 per share. The exercise of all of such stock options would result in an
equity infusion to the Company of $4,054,514. All but 18,000 of the stock
options are out of the money and there can be no assurance that any of the stock
options will be exercised.
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 four
amendments to the Option Agreement resulting in extensions of the exercise
period through May 2000. The Company paid a total of $265,000 in extension fees.
The Company was reimbursed for the majority of these fees from a third party who
expressed an interest in acquiring the technology from the Company upon exercise
of the option. Subsequent to December 31, 1999, the third party determined that
it would not complete the acquisition. As the Company was not in a position to
exercise the option, the option was allowed to expire effective January 23,
2000. The Company has no obligation to make additional cash payments to the
University of Texas System.
Inflation
The Company does not expect the impact of inflation on operations to be
significant.
Year 2000
The Company had developed plans to address the possible exposures
related to the impact on its computer systems of the Year 2000. Since entering
the Year 2000, the Company has not experienced any major disruptions to its
business nor is it aware of any significant Year 2000-related disruptions
impacting its customers and suppliers. Furthermore, the Company did not
experience any material impact on business at calendar year end. The Company
will continue to monitor its critical systems over the next several months but
does not anticipate any significant impacts due to Year 2000 exposures from its
internal systems as well as from the activities of its suppliers and customers.
Forward-Looking Statements
When used in this Form 10-KSB, in 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. Forward-looking statements specifically include,
but are not
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limited to, the dates disclosed herein upon which sales of or royalty payments
from the Company's various products are anticipated to commence.
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, changes in the regulation of safety
healthcare products, the level of marketing, development and distribution
efforts of the Company's partners 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.
Risk Factors
In addition to the risks set forth above, the Company is subject to
certain other risk factors due to its development stage status, the industry in
which it competes and the nature of its operations. These risk factors include
the following.
History of Losses/Profitability Uncertain. The Company is in the
development stage and, except for 1999, has reported losses each year since
1993. At December 31, 1999, it had an accumulated deficit of $16,063,783. The
Company's products are in various stages of production, pre-production,
development and research. The Company has made only limited sales of its sharps
container products, the only product it was selling as of December 31, 1999. The
Company does not have marketing or distribution agreements in place for this
product. There is no assurance that the Company's products will be commercially
viable and no assurance can be given that the Company will become profitable. In
addition, prospects for the Company's profitability will be affected by
expenses, operational difficulties and other factors frequently encountered in
the development of a business enterprise in a competitive environment, many of
which factors may be unforeseen and beyond the Company's control.
Need for Additional Funds. Due to the development stage status of the
Company and the uncertainty of future profits, the Report of Independent Public
Accountants relating to the Company's 1999 consolidated financial statements,
attached hereto, contains a "going concern" explanatory paragraph. See
Consolidated Financial Statements and related Notes. The Company believes that
existing funds, including the $1,500,000 received from Kendall, development fees
from JJM and Kendall under the respective agreements, license revenues and funds
generated from commencement of product royalties under current agreements, will
be sufficient to maintain operations through December 31, 2000. The Company has
no contractual arrangements that guarantee that the Company will have adequate
funding during 2000 and there can be no assurance that additional funding, if
needed, will be available on commercially reasonable terms or at all. Any
inability to obtain additional funding when needed will have a material adverse
effect on the Company, including possibly requiring the Company to significantly
curtail or cease its operations.
Negative Pricing Pressures on the Company's Safety Products. Prices for
the Company's safety products may be higher than for competing conventional
products which are not designed to provide the safety protection afforded by the
Company's products. The Company's prices, however, are expected to be
competitive with those of competing safety products. Continuing pressure from
third-party payers to reduce costs in the healthcare industry as well as
increasing competition from safety products made by other companies, could
adversely affect the Company's selling prices. Reductions in selling prices
could adversely affect operating margins if the Company cannot achieve
corresponding reductions in manufacturing costs.
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Rapidly Changing Technology. The Company is in various stages of
production, pre-production, development and research with respect to its sharps
containers, safety lancets, medical safety needle technologies, blood collection
devices and other products. There is no assurance that development of superior
products by competitors or changes in technology will not eliminate the need for
the Company's products. The introduction of competing products using different
technology could adversely affect the Company's attempts to develop and market
its products.
Potential Lack of Market Acceptance. The use of safety medical
products, including the Company's products, is relatively new. The Company's
products may not be accepted by the market and their acceptance will depend in
large part on (i) the Company's ability (directly or through its marketing
partners) to demonstrate the operational advantages, safety, efficacy, and
cost-effectiveness of its products in comparison with competing products and
(ii) its ability to distribute its products through major medical products
companies. There can be no assurance that the Company's products will achieve
market acceptance or that major medical products companies will sell the
Company's products.
Dependence on Continued Research and Development. The safety medical
needle technologies, intravenous flow gauge and safety lancets are still in
various stages of development. The Company is also exploring additional
applications for all of its products. The continued development of its products
and development of additional applications and new products is important to the
long-term success of the Company. There can be no assurance that such
applications or products will be developed or, if developed, that they will be
successful.
Dependence on Patents and Proprietary Rights. The Company's future
success depends in part on its ability to protect its intellectual property and
maintain the proprietary nature of its technology through a combination of
patents and other intellectual property arrangements. There can be no assurance
that the protection provided by patents, if issued, will be broad enough to
prevent competitors from introducing similar products or that such patents, if
challenged, will be upheld by the courts of any jurisdiction. Patent
infringement litigation, either to enforce the Company's patents or defend the
Company from infringement suits, would be expensive and, if it occurs, could
divert Company resources from other planned uses. Any adverse outcome in such
litigation could have a material adverse effect on the Company. Patent
applications filed in foreign countries and patents in such countries are
subject to laws and procedures that differ from those in the United States.
Patent protection in such countries may be different from patent protection
under U.S. laws and may not be as favorable to the Company. Certain portions of
the Company's international patent prosecution efforts are funded by third
parties. The failure of the funding parties to pay for the international patent
prosecution costs would materially effect the Company's ability to prosecute
these patents. The Company also attempts to protect its proprietary information
through the use of confidentiality agreements and by limiting access to its
facilities. There can be no assurance that the Company's program of patents,
confidentiality agreements and restricted access to its facilities will be
sufficient to protect the Company's proprietary technology.
Ability to Manage Expanding Operations. The Company intends to pursue a
strategy of rapid growth although there can be no assurance that any growth will
be achieved. The Company plans to significantly expand its product lines and to
devote substantial resources to support operations, research and development,
marketing and administrative functions. There can be no assurance that the
Company will obtain sufficient manufacturing capacity on favorable terms,
arrange for the marketing and distribution of its products, attract qualified
personnel or effectively manage expanded operations. The failure to properly
manage growth could have a material adverse effect on the Company.
Competition/Potential Inability to Compete. The Company is engaged in a
highly competitive business and will compete directly with firms that have
longer operating histories, more experience, substantially greater financial
resources, greater size, more substantial research and development and marketing
organizations, and established distribution channels that are better situated in
the market than the Company. The Company's competitors and potential competitors
include Baxter International, Inc., Becton Dickinson and Company, Johnson &
Johnson, Sage Products, Inc., Surgicutt, Inc., Miles, Inc., B. Braun, Diagnostic
Corporation, Boehringer Mannheim, Inc., Kendall Healthcare Products Company,
Terumo Medical Corporation, Med-Design Corporation, Bio-Plexus, Inc., Maxon,
Inc., Retractable Technologies, Inc. and Univec, Inc. See "Business -
Competition." Such competitors may use their economic strength to influence the
market to continue to buy their existing products. These competitors may also be
potential
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strategic partners with respect to various products as are, for example, Kendall
and JJM. The Company does not have an established customer base and is likely to
encounter a high degree of competition in developing a customer base. One or
more of these competitors could use their resources to improve their current
products or develop new products that may compete more effectively with the
Company's products. New competitors may emerge and may develop products which
compete with the Company's products. No assurance can be given that the Company
will be successful in competing in this industry.
Product Liability. The sale of medical devices entails an inherent risk
of liability in the event of product failure or claim of harm caused by product
operation. There can be no assurance that the Company will not be subject to
such claims, that any claim will be successfully defended or, if the Company is
found liable, that the claim will not exceed the limits of the Company's
insurance. The Company's current insurance coverage is in the amount of $1
million per occurrence and $2 million in aggregate. The Company also has an
umbrella policy in the amount of $5 million. In certain cases the Company has
indemnification arrangements in place with its strategic partners who will be
selling Company developed products under the partner's label. There is no
assurance that the Company will maintain product liability insurance on
acceptable terms in the future or that such insurance will be available. Product
liability claims could have a material adverse effect on the Company.
Uncertainty in the Healthcare Industry. The healthcare industry is
subject to changing political, economic and regulatory influences that may
affect the procurement practices and operations of healthcare facilities. During
the past several years, the healthcare industry has been subject to increased
government regulation of reimbursement rates and capital expenditures. Among
other things, third-party payers are increasingly attempting to contain
healthcare costs by limiting both coverage and reimbursement levels for
healthcare products and procedures. Because prices of the Company's products may
exceed the price of conventional products, the cost control policies of
third-party payers, including government agencies, may adversely affect use of
the Company's products. The Company believes that the costs associated with
accidental needlesticks, however, exceed the procurement costs of safety
products such as those of the Company.
There are numerous proposals to reform the U.S. healthcare system and
the healthcare systems of various states including the safety initiatives that
have been passed in five states and are under consideration in other states and
on a national level. OSHA also issued a national directive in November 1999
requiring use of safety medical devices. Many of these proposals seek to
increase government involvement in healthcare, lower reimbursement rates,
contain costs and otherwise change the operating environment for the Company's
prospective customers. Healthcare providers may react to these proposals and the
uncertainty surrounding such proposals by curtailing or deferring investments in
new technology and new products, including those of the Company. The Company
cannot predict what impact, if any, such proposals or healthcare reforms might
have on the Company's financial condition and results of operations.
Management/Dependence on Key Personnel/Board. The success of the
Company depends upon the skills, experience and efforts of its management and
other key personnel. Should the services of one or more members of its present
management or other key personnel become unavailable to the Company for any
reason, the business of the Company could be adversely affected. There is no
assurance that the Company will be able to retain existing employees or attract
new employees of the caliber needed to achieve the Company's objectives. The
Board currently consists of five members, two of whom are employed by the
Company.
Market Volatility. Market prices of securities of medical technology
companies are highly volatile from time to time. The trading price of the
Company's securities may be significantly affected by factors such as the
announcement of new product or technical innovations by the Company or its
competitors, proposed changes in the regulatory environment, or by other factors
that may or may not relate directly to the Company. Sales of substantial amounts
of Common Stock (including stock which may be issued upon exercise of warrants
or stock options), or the perception that such sales may occur, could adversely
affect the trading price of the Common Stock.
No Assurance of Dividends. The Company has never paid dividends on its
Common Stock. The payment of dividends, if any, on the Common Stock in the
future is at the discretion of the Board and will depend upon the Company's
earnings, if any, capital requirements, financial condition and other relevant
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factors. The Board does not intend to declare any dividends on the Common Stock
in the foreseeable future.
Limitations on Director Liability. The Company's Certificate of
Incorporation provides, as permitted by Delaware law, that a director of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for any action or failure to take any action, with certain
exceptions. These provisions may discourage stockholders from bringing suit
against a director for breach of duty and may reduce the likelihood of
derivative litigation brought by stockholders on behalf of the Company against a
director. In addition, the Company has agreed and its Certificate of
Incorporation and Bylaws provide, for mandatory indemnification of directors and
officers to the fullest extent permitted by Delaware law and it has entered into
contracts with its directors and officers providing for such indemnification.
Anti-Takeover Provisions of Certificate and Bylaws. The Certificate of
Incorporation of the Company provides for the division of the Board into three
classes substantially equal in number. At each annual meeting of stockholders
one class of directors is to be elected for a three-year term. Amendments to
this provision must be approved by a two-thirds vote of all the outstanding
stock entitled to vote; the number of directors may be changed by a majority of
the entire Board or by a two-thirds vote of the outstanding stock entitled to
vote. Meetings of stockholders may be called only by the Board, the Chief
Executive Officer or the President of the Company, and stockholder action may
not be taken by written consent. These provisions could have the effect of (i)
discouraging attempts at non-negotiated takeovers of the Company which may
provide for stockholders to receive a premium price for their stock or (ii)
delaying or preventing a change of control of the Company which some
stockholders may believe is in their interest.
Effect of the Issuance of Preferred Stock. The Company has an
authorized class of preferred stock, shares of which may be issued with the
approval of its Board on such terms and with such rights, preferences and
designations as the Board may determine. Issuance of additional series of
preferred stock, depending upon the rights, preferences and designations
thereof, may have the effect of delaying, deterring or preventing a change in
control of the Company. In addition, certain "anti-takeover" provisions of the
Delaware General Corporation Law, among other things, may restrict the ability
of stockholders to effect a merger or business combination or obtain control of
the Company and may be considered disadvantageous by some stockholders.
Management of the Company presently does not intend to issue any shares of
preferred stock. Preferred stock may, however, be issued at some future date
which stock might have substantially more than one vote per share or other
provisions designed to deter a change in control of the Company. The issuance of
such stock to a limited group of management stockholders may vest in such
persons absolute voting control of the Company, including, among other things,
the ability to elect all of the directors, control certain matters submitted to
a vote of stockholders and prevent any change in management despite their
performance. Also, preferred stock may have the right to vote upon certain
matters as a separate class.
9
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SPECIALIZED HEALTH PRODUCTS
INTERNATIONAL, INC.
(Registrant)
Date: April 25, 2000 By /s/ David A. Robinson
----------------------
David A. Robinson
President, Chief Executive Officer
and Director
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Signature Title Date
/s/ David A. Robinson President, Chief Executive Officer April 25, 2000
- ------------------------- and Director (Principal
David A. Robinson Executive Officer)
/s/ Charles D. Roe Vice President, Chief Financial April 25, 2000
- ------------------------- Officer, Secretary and Treasurer
Charles D. Roe (Principal Financial and Accounting
Officer)
/s/ Gale H. Thorne Director and Vice President April 25, 2000
- -------------------------
Gale H. Thorne
/s/ David G. Hurley Director April 25, 2000
- -------------------------
David G. Hurley
/s/ David T. Rovee Director April 25, 2000
- -------------------------
David T. Rovee
/s/ Robert R. Walker Director April 25, 2000
- -------------------------
Robert R. Walker
10
