UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 21, 2005
SPO MEDICAL INC.
(Exact name of registrant as specified in its charter)
Delaware 0-11772 25-1411971
---------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
21860 Burbank Blvd., North Building, Suite 380
Woodland Hills, CA 91367
(Address of principal executive offices, including Zip Code)
818-888-4380
(Registrant's telephone number, including area code)
UNITED DIAGNOSTIC, INC.
124 West 60th Street, #33L, New York New York 10023
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
SPO Medical Inc., a Delaware corporation formerly known as United
Diagnostic, Inc. (the "Company" or "SPO Inc."), previously reported under Item
2.01 of its Current Report on Form 8-K filed with the Securities and Exchange
Commission (the "Commission") on April 27, 2005 (the "April 2005 8-K") that the
Company completed its acquisition (the "Acquisition") of SPO Medical Equipment
Ltd., a company incorporated under the laws of the State of Israel ("SPO Ltd.").
The Acquisition was completed pursuant to the Capital Stock Exchange Agreement,
dated as of February 28, 2005, by and among the Company, SPO Ltd. and the
shareholders of SPO Ltd., as subsequently amended and restated as of April 21,
2005 (as so amended and restated the "Restated Exchange Agreement"). Under the
terms of the Restated Exchange Agreement, the Company acquired 100% of the
outstanding capital stock of SPO Ltd. in exchange for the issuance to the former
shareholders of SPO Ltd of shares of the Company's common stock, par value $0.01
per share ("Common Stock"), representing approximately 90% of the Common Stock
issued and outstanding after giving effect to the Acquisition. Following the
Acquisition, SPO Ltd. became a wholly-owned subsidiary of the Company and the
Company changed its name to "SPO Medical Inc."
The description of the Acquisition included in the Company's April 2005
8-K is incorporated by reference herein. This Current Report on Form 8-K/A is
being filed to include additional information about the Company and SPO Ltd. and
to complete the financial statements and exhibits records with respect to the
April 2005 8-K.
All references to "we," "our," or "us" in this filing refer to SPO Medical
Inc., a Delaware corporation, and its subsidiary SPO Ltd.
About SPO Ltd. and the Company
Overview
From the commencements of operations in January 1996, SPO Ltd. has been
engaged in the design, development and marketing of non-invasive pulse oximetry
technologies to monitor blood oxygen saturation and heart rate for a variety of
markets, including medical, homecare, sports and search & rescue. Pulse oximetry
is a non-invasive process used to measure blood oxygen saturation levels and is
an established measurement in medical practice to ensure maintenance of adequate
oxygen and prevention of respiratory difficulty. Following the Acquisition,
certain of the business activities historically engaged in by SPO Ltd. are being
conducted through the Company, including, without limitation, the marketing of
products designed, developed and marketed by SPO Ltd.
The Company utilizes proprietary and patented technologies to deliver
oximetry functionality through innovative, commercial products that address such
applications as emergency care, neonatal resuscitation, home monitoring, sleep
apnea, cardiovascular performance, cardiac rehabilitation and the physiological
monitoring of military personnel and safety care workers. The Company has
developed and patented proprietary technology that enables the use of pulse
oximetry in a reflectance mode of operation (i.e. a sensor that can be affixed
to a single side of a body part). This technique is known as Reflectance Pulse
Oximetry (RPO). Using RPO, a sensor can be positioned on various places of the
body, hence minimizing problems of motion and poor profusion. In addition, its
unique design results in substantially lower power requirements, which enable a
wireless, stand-alone configuration with expanded commercial possibilities.
Background
Pulse oximetry is an important non-invasive process used to both measure
blood oxygen saturation levels (SpO2) by monitoring the percentage of hemoglobin
(Hb) that is saturated with oxygen and measure heart rate. This procedure has
been used regularly in hospitals during the past twenty years and is established
as an essential measurement in medical practice to ensure maintenance of
adequate oxygen and prevention of respiratory difficulty. In many disease
states, oxygen saturation is one of the most important vital signs to monitor.
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There are two methods to measure pulse oximetry: by transmission through a
body part or by reflection. In general, the transmission method can only be used
on limited areas of the body, such as fingers, earlobes, etc. Furthermore, in
some instances when the transmission method is used, physiological conditions
such as stress and temperature can adversely affect the accuracy of pulse
oximetry readings.
Since pulse oximetry measurements taken on-site in an emergency, at local
medical practices, and/or in home care can save lives and curtail intervention
costs, mobile units have been developed. However, mobile oximetry units have not
been widely adopted because their power requirements (and hence limited battery
life) often make them impractical. In addition, existing mobile units require
patients to remain absolutely stationary to produce reliable results, further
reducing their practicality .
The Company's Solution
Responding to the need for life-saving information in the field where
people cannot be absolutely stationary, SPO Ltd. developed patented sensors that
work accurately during mild physical activity. This technique uses a reflectance
method (known as RPO) whereby a very small sensor placed on the body at various
locations has the ability to measure oxygen saturation and heart pulse rate. SPO
Ltd. has incorporated its patented reflectance technology into portable devices
for medical and consumer applications. Moreover, these devices operate at a
power requirement approximately 1/50th of that compared to other commercially
available portable systems. This puts pulse oximetry into the hands medical
practitioners and emergency personnel on-site for the safety and benefit of all
and offers the opportunity to create new commercial and consumer applications.
The Company's intends to leverage its core technologies to develop new,
innovative product applications. For instance, the Company is currently
investigating monitoring of other vital sign information that can be obtained
using other optical, non-invasive techniques including :
o Blood pressure using reflectance oximetry
o Billirubin levels
o Monitoring glucose levels in blood
o Hemoglobin count in blood
Products
The following are the products of the Company utilizing its unique pulse
oximetry technology.
PulseOx 5500TM -- a stand-alone commercial RPO spot check monitor for SpO2
and heart rate. The PulseOx 5500TM uses SPO patented technology to provide a
medical device which is easier to use for many patients and less expensive to
operate than any other device available. Its main advantages include: (i) long
lasting battery with more than 1,000 hours, using only a fraction of the power
used by competitive devices and (ii) resistance to many forms of motion,
reducing its susceptibility to the motion artifacts which are typical of other
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pulse oximetry devices. The PulseOx 5500 was first introduced commercially
during the fourth quarter of 2004. The device was approved and registered by the
Federal Drug Administration (" FDA") in September 2004. The device also carries
the CE (European Directives 93/42/EEC and 90/385/EEC for regulatory and safety
standards of medical equipment) and CSA (Canadian Standards Association) mark
for safety and audited manufacturing processes, all of which were obtained in
February 2005.
Check MateTM--- addresses the sports and aviation markets' demand for a
lightweight, inexpensive monitor for measuring SpO2 and heart rate during
physically active and high-altitude activities. It offers the user a greater
ability to monitor these vital signs under motion and is less expensive than
most other available devices. The Check Mate was first introduced commercially
during third quarter of 2005. The Check Mate does not require FDA approval or
registration. It carries the CE and CSA mark for safety and audited
manufacturing processes.
Products Under Design and Development
The Company currently has in various stages of development other devices
utilizing its oximetry technology. These include the following:
PulseOx 7500TM --a monitor for extended monitoring of SpO2 and heart rate
by means of RPO. It is being designed for maximum user comfort and ease-of-use.
It uniquely places the sensor at the base of the finger so it operates as a ring
sensor. Traditionally, devices for longer term monitoring are located at the
finger tip using clip devices and can be awkward and uncomfortable for the user.
PedOMetrixTM -- a monitor being designed specifically for the use with
infants. This unique monitor is being designed for continual non-invasive
monitoring of a baby's SpO2 and heart rate which are particularly important
while the baby is sleeping.
Business Strategy
The Company's mission is to build a profitable business that develops and
commercializes medical biosensor products that improve people's lives and
increases stockholder value. To achieve this mission, the Company is pursuing
the following business strategies:
o Establish our brand in both the medical and consumer marketplaces.
The initial product launch PulseOx 5500TM was a demonstration of the
Company's strategy to establish itself within the most demanding
part of the market - medical devices requiring FDA approval and
requiring a doctor's prescription. Thereafter, subject to regulatory
approval consumer applications using the technology will be marketed
for direct purchase at appropriate outlets (e.g., retail drug
chains, sports and fitness establishments, distributors of safety
and security products).
o Partner with highly qualified, focused companies, internationally.
The company intends to collaborate with leading medical device
resellers capable of distributing the products to the target market.
For instance, the Company currently sells the PulseOx 5500(TM)
through reputable, established medical device distributors serving
North American markets and the European, Asian and Latin American
markets. Other medical products may be distributed by these and
other distributors. The Company anticipates that its other consumer
products, such as the Check Mate(TM), will be distributed by
companies with access to its target market which includes sports
enthusiasts. Finally, with medical and consumer products developed
jointly with other companies, the most appropriate distribution
channels will be used for each product and application.
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o Research and Development. The Company's research and development
strategy is to continually improve and expand its product offerings
by leveraging existing and newly developed proprietary technologies,
as well as those of its collaborators, into new product offerings.
The Company will be pursuing a multi-disciplinary approach to
product design that includes substantial electrical, mechanical,
software and biomedical engineering efforts. SPO Inc. is currently
focusing research and development programs on expanding its current
product offering and investigations in to other non-invasive optical
techniques for blood analysis of other vital signs in blood. In
addition, SPO Inc. has established relationships with leading
teaching hospitals and academic institutions for the purpose of
clinically evaluating its new products. The Company has consulting
arrangements with physicians and scientists in the areas of
research, product development and clinical evaluation.
Suppliers
The Company's products are made of components which it manufactures or
which are usually available from existing and alternate sources of supply. Some
of its products are manufactured through agreements with unaffiliated companies.
The Company purchases certain components from single or preferred sources of
supply. The use of single or preferred sources of supply increases the Company's
exposure to price increases and production delays.
Marketing and Sales Organization
The Company products are sold primarily through resellers in the United
States and a combination of resellers and independent distributors in
international markets. The Company's primary markets include physicians,
hospitals, other medical institutions and general home-care users.
The Company provides service and maintenance to purchasers of its products
under warranty. After the warranty expires, it provides service and maintenance
on a contract basis. The Company employs service representatives in the United
States and Europe and maintains service facilities in the United States and
through it's resellers in Europe and elsewhere.
Patents and Proprietary Information
The Company holds one patent issued by the United States Patent and
Trademark Office ("USPTO") covering various aspects of the Company's unique
sensors for radiance based diagnostics using pulse oximetry. The Company
currently has three patent applications pending before the USPTO for
applications pending before the USPTO for applications in this area. The
expiration or invalidity of any of the Company's patents is expected to have a
material adverse effect on the Company's business.
Employees
As of September 30, 2005, the Company employed 13 a full-time employees,
of which three worked out of its corporate offices in the United States and ten
out of facilities in Israel. None of these employees are subject to collective
bargaining agreements.
Competition
The Company believes that hospitals and other medical institutions choose
among competing products on the basis of product performance, features, price
and service. In general, the Company believes that price has become an important
factor in hospital purchasing decisions because of pressure to cut costs. These
pressures on hospitals result from federal and state regulations that limit
reimbursement for services provided to Medicare and Medicaid patients. There are
also cost containment pressures on healthcare systems outside the U.S.A.,
particularly in certain European countries.
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Many companies, some of which are substantially larger than SPO Inc. and
with significantly more resources, are engaged in manufacturing competing
products. The Company's competition is primarily in the traditional medical
market. The Company's competitors include Nellcor, a unit of the Tyco Healthcare
division of Tyco International Ltd; Nonin Medical Inc. of Plymouth, Minnesota, a
privately owned company; and Smiths Medical PM Inc. of Waukesha, WI, which is
the designer, manufacturer, and distributor of the BCI(R) brand of patient
monitoring equipment which competes with the SPO PulseOx 5500TM units.
Governmental Regulations
The manufacture and sale of the Company's products are subject to
extensive regulation by numerous governmental authorities, principally by the
FDA and corresponding foreign agencies. The FDA administers the Federal Food,
Drug and Cosmetic Act and the regulations promulgated thereunder. The PulseOx
5500TM is subject to the FDA's standards and procedures for the manufacture of
medical devices and the Company's facilities are subject to inspection by the
FDA for compliance with such standards and procedures.
The FDA classifies each medical device into one of three classes depending
on the degree of risk associated with the device and the extent of control
needed to ensure safety and effectiveness. The Company's PulseOx 5500TM has been
classified by the FDA as Class II device and has secured a 510(k) pre-market
notification clearance before being introduced into the United States market.
For additional products, the process of obtaining 510(k) clearance typically
takes several months and may involve the submission of limited clinical data
supporting assertions that the product is substantially equivalent to an already
approved device or to a device that was on the market before the enactment of
the Medical Device Amendments of 1976.
Every company that manufactures or assembles medical devices is required
to register with the FDA and adhere to certain "good manufacturing practices" in
accordance with the FDA's Quality System Regulation which regulates the
manufacture of medical devices, prescribes record keeping procedures and
provides for the routine inspection of facilities for compliance with such
regulations. The FDA also has broad regulatory powers in the areas of clinical
testing, marketing and advertising of medical devices.
Medical device manufacturers are routinely subject to periodic inspections
by the FDA. If the FDA believes that a company may not be operating in
compliance with applicable laws and regulations, it can:
o place the company under observation and re-inspect the facilities;
o issue a warning letter apprising of violating conduct;
o detain or seize products;
o mandate a recall;
o enjoin future violations; and
o assess civil and criminal penalties against the company, its
officers or its employees.
We are also subject to regulation in each of the foreign countries in
which we sell our products. Many of the regulations applicable to our products
in such countries are similar to those of the FDA. The national health or social
security organizations of certain countries require our products to be qualified
before they can be marketed in those countries.
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Description of Property
The Company maintains its corporate headquarters in the Warner Gateway
campus in Warner Center, Woodland Hills, CA, USA. The offices are leased at a
monthly cost of approximately $2,500 and cover a square area of 60 sq. m. The
rental period for this office terminates in April 2006. The offices provide
accommodation for sales, internal administrative and external customer support
operations.
Research and development continue to be at the premises in Ashkolon,
Israel, which are comprised of laboratory and development facility covering a
square area of 140 sq. m. In addition, the Company sub-leases a smaller facility
of 60 sq. m. for local administrative staff. The facilities in Ashkolon, Israel
are leased pursuant to a lease agreement that runs through July 2006 at an
approximate per month rate of $1,095.
Developments following the Acquisition
Private Placement
-----------------
In order to facilitate the Acquisition and to raise working capital, on
April 21, 2005, the Company commenced a private placement (the "Private
Placement") to certain private and institutional investors of up to $1,150,000
in principal amount of units of its securities, with each unit comprised of (i)
an 18 month 6% Promissory Note (a "Note") and (ii) a three year warrant (a
"Warrant") to purchase up to the number of shares of Common Stock obtained by
dividing the principal amount of the Note purchased by such investor divided by
$ 0.85, at a per share exercise price of $0.85. The Company will seek to amend
the Private Placement to increase the amount offered thereunder to $1,500,000;
however, no assurance can be provided that the current investors will agree to
such increase.
As of the date of this filing, the Company has raised an aggregate gross
amount of $1,150,000 in the Private Placement.
Repayment of Outstanding Debt of SPO Ltd.
-----------------------------------------
In April 2004, prior to the Acquisition, SPO Ltd. issued to each of two
entities one-year promissory notes in the principal amount of $57,500 in
consideration of funds advanced to it to cover certain outstanding debts of SPO
Ltd. incurred prior to the Acquisition. Interest accrued on the loans at a 10%
per annum rate; following the maturity date, the interest rate was adjusted to
18% per annum, retroactive to November 2004. In addition, by their terms, the
note instruments provided that, unless paid earlier, the outstanding amounts on
the Notes are automatically convertible into common shares of the Company at a
per share conversion rate equal to 20% less than the valuation in the first sale
of Common Stock of the Company after the Acquisition. In the event that the
Company does not raise through sale of Common Stock at least $250,000 within 180
days of the close of the Acquisition, the notes are convertible at a rate of
$0.01 per share; provided, that, upon such conversion the Company is required to
unwind the Acquisition at an aggregate price of $115,000.
On November 7, 2005, the Company re-paid in full settlement the
outstanding principal amount and accrued interest under these notes.
Risk Factors
The following risk factors should be considered carefully in addition to
the other information presented in this report. This report contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ significantly from the results discussed in the
forward-looking statements. Factors that might cause such differences include,
but are not limited to, the following:
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WE WILL NEED TO RAISE ADDITIONAL FUNDS TO IMPLEMENT OUR BUSINESS PLAN AND
THERE IS NO ASSURANCE THAT SUCH FUNDS CAN BE RAISED ON TERMS THAT WE WOULD FIND
ACCEPTABLE, OR AT ALL.
The Company will require substantial additional capital to develop its
products, including completing product testing and clinical trials, obtaining
all required regulatory approvals and clearances, beginning and scaling up
manufacturing, and marketing our products. We will be required to raise
additional funds through public or private financing, collaborative
relationships or other arrangements. We believe that our existing capital and
the funding from various sources, including operations, will be sufficient to
satisfy our funding requirements through May 2006 at the current scale of the
Company's operations, but may not be sufficient to fund our planned operations
to the point of the large scale commercial introduction of our new pulse
oximetry monitoring products. Any failure to achieve adequate funding in a
timely fashion would delay our development programs and could lead to
abandonment of one or more of our development initiatives. Any required
additional funding may not be available on terms attractive to us, or at all. To
the extent we cannot obtain additional funding, our ability to continue to
develop and introduce products to market will be limited. Any additional equity
financing may be dilutive to stockholders, and debt and certain types of equity
financing, if available, may involve restrictive covenants or other provisions
that would limit how we conduct our business or finance our operations.
IF WE CANNOT OBTAIN ADDITIONAL FUNDS OR ACHIEVE PROFITABILITY, WE MAY NOT
BE ABLE TO CONTINUE AS A GOING CONCERN.
Because we must execute our plans to launch additional products and grow
our revenues to sufficiently higher levels to generate profits and cash flow
from operations, there exists doubt about our ability to continue as a going
concern. There can be no assurance that we will be able to raise these
additional funds. If we do not secure additional funding when needed, we will be
unable to conduct all of our product development efforts as planned, which may
cause us to alter our business plan in relation to the development of all of our
products. Even if we obtain additional funding, we will need to achieve
profitability thereafter.
WE DO NOT HAVE A LONG OPERATING HISTORY, WHICH MAKES IT DIFFICULT FOR YOU
TO EVALUATE OUR BUSINESS.
Because limited historical information is available on SPO Ltd.'s revenue
trends and operations, it will be difficult for you to evaluate the Company's
business. Our prospects must be considered in light of the substantial risks,
expenses, uncertainties and difficulties encountered by entrants into the
medical device industry, which is characterized by increasing intense
competition and a high failure rate.
WE HAVE A HISTORY OF LOSSES, AND WE EXPECT LOSSES TO CONTINUE.
SPO Ltd. has never been profitable, and has incurred operating losses
since inception. We expect our operating losses to continue as we continue to
expend substantial resources to launch the our product line, to complete
development of our products, obtain regulatory clearances or approvals, build
our marketing, sales, manufacturing and finance organizations, and conduct
further research and development. To date, we have engaged primarily in research
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and development efforts. The further development and commercialization of our
products will require substantial development, regulatory, sales and marketing,
manufacturing and other expenditures. SPO Ltd only generated $164,704 in
revenues from product sales during 2004 and $373,350 for the three months ended
March 31, 2005. SPO Ltd.'s accumulated deficit was approximately $3.9 million as
at December 31, 2004.
THE SALE OF OUR PRODUCTS IN THE UNITED STATES IS SUBJECT TO GOVERNMENT
REGULATIONS AND WE MAY NOT BE ABLE TO OBTAIN CERTAIN NECESSARY CLEARANCES OR
APPROVALS.
The design, manufacturing, labeling, distribution and marketing of medical
device products in the United States is subject to extensive and rigorous
regulation by the Food and Drug Administration (FDA). In order for us to market
our products in the United States, we must obtain clearance or approval from the
FDA. which can be expensive and uncertain and can cause lengthy delays before we
can begin selling our products. We cannot be sure:
o that we, or any collaborative partner, will make timely filings with
the FDA;
o that the FDA will act favorably or quickly on these submissions;
o that we will not be required to submit additional information or
perform additional clinical studies;
o that we would not be required to submit an application for premarket
approval, rather than a 510(k) premarket notification submission as
described below; or
o that other significant difficulties and costs will not be
encountered to obtain FDA clearance or approval.
The FDA may impose strict labeling or other requirements as a condition of
its clearance or approval, any of which could limit our ability to market our
products. Further, if we wish to modify a product after FDA clearance of a
premarket notification or approval of a premarket approval application,
including changes in indications or other modifications that could affect safety
and efficacy, additional clearances or approvals will be required from the FDA.
Any request by the FDA for additional data, or any requirement by the FDA that
we conduct additional clinical studies or submit to the more rigorous and
lengthier premarket approval process, could result in a significant delay in
bringing our products to market and substantial additional research and other
expenditures. Similarly, any labeling or other conditions or restrictions
imposed by the FDA on the marketing of our products could hinder our ability to
effectively market our products. Any of the above actions by the FDA could delay
or prevent altogether our ability to market and distribute our products.
Further, there may be new FDA policies or changes in FDA policies that could be
adverse to us.
IN FOREIGN COUNTRIES, INCLUDING EUROPEAN COUNTRIES, WE ARE ALSO SUBJECT TO
GOVERNMENT REGULATION, WHICH COULD DELAY OR PREVENT OUR ABILITY TO SELL OUR
PRODUCTS IN THOSE JURISDICTIONS.
In order for the Company to market our products in Europe and some other
international jurisdictions, we and our distributors and agents must obtain
required regulatory registrations or approvals. We must also comply with
extensive regulations regarding safety, efficacy and quality in those
jurisdictions. We may not be able to obtain the required regulatory
registrations or approvals, or we may be required to incur significant costs in
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obtaining or maintaining any regulatory registrations or approvals we receive.
Delays in obtaining any registrations or approvals required to market our
products, failure to receive these registrations or approvals, or future loss of
previously obtained registrations or approvals would limit our ability to sell
our products internationally. For example, international regulatory bodies have
adopted various regulations governing product standards, packaging requirements,
labeling requirements, import restrictions, tariff regulations, duties and tax
requirements. These regulations vary from country to country.
EVEN IF WE OBTAIN CLEARANCE OR APPROVAL TO SELL OUR PRODUCTS, WE ARE
SUBJECT TO ONGOING REQUIREMENTS AND INSPECTIONS THAT COULD LEAD TO THE
RESTRICTION, SUSPENSION OR REVOCATION OF OUR CLEARANCE.
The Company will be required to adhere to applicable FDA regulations
regarding good manufacturing practice, which include testing, control, and
documentation requirements. We are subject to similar regulations in foreign
countries. Ongoing compliance with good manufacturing practice and other
applicable regulatory requirements will be strictly enforced in the United
States through periodic inspections by state and federal agencies, including the
FDA, and in international jurisdictions by comparable agencies. Failure to
comply with these regulatory requirements could result in, among other things,
warning letters, fines, injunctions, civil penalties, recall or seizure of
products, total or partial suspension of production, failure to obtain premarket
clearance or premarket approval for devices, withdrawal of approvals previously
obtained, and criminal prosecution. The restriction, suspension or revocation of
regulatory approvals or any other failure to comply with regulatory requirements
would limit our ability to operate and could increase our costs.
OUR SUCCESS LARGELY DEPENDS ON OUR ABILITY TO OBTAIN AND PROTECT THE
PROPRIETARY INFORMATION ON WHICH WE BASE OUR PRODUCTS.
The Company's success depends in large part upon our ability to establish
and maintain the proprietary nature of our technology through the patent
process, as well as our ability to license from others patents and patent
applications necessary to develop our products. If any of our patents are
successfully challenged, invalidated or circumvented, or our right or ability to
manufacture our products was to be limited, our ability to continue to
manufacture and market our products could be adversely affected. In addition to
patents, we rely on trade secrets and proprietary know-how, which we seek to
protect, in part, through confidentiality and proprietary information
agreements. The other parties to these agreements may breach these provisions,
and we may not have adequate remedies for any breach. Additionally, our trade
secrets could otherwise become known to or be independently developed by
competitors.
The Company has been issued one United States patent and has three pending
patent applications. There are additional international patents and pending
applications. One or more of the patents we hold directly or license from third
parties, including those for the disposable components to be used with our
existing or future products, may be successfully challenged, invalidated or
circumvented, or we may otherwise be unable to rely on these patents. These
risks are also present for the process we use or will use for manufacturing our
products. In addition, our competitors, many of whom have substantial resources
and have made substantial investments in competing technologies, may apply for
and obtain patents that prevent, limit or interfere with our ability to make,
use and sell our products, either in the United States or in international
markets.
The medical device industry has been characterized by extensive litigation
regarding patents and other intellectual property rights. In addition, the
United States Patent and Trademark Office may institute interference
proceedings. The defense and prosecution of intellectual property suits, Patent
and Trademark Office proceedings and related legal and administrative
proceedings are both costly and time consuming. Moreover, we may need to
litigate to enforce our patents, to protect our trade secrets or know-how, or to
determine the enforceability, scope and validity of the proprietary rights of
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others. Any litigation or interference proceedings involving us may require us
to incur substantial legal and other fees and expenses and may require some of
our employees to devote all or a substantial portion of their time to the
proceedings. An adverse determination in the proceedings could subject us to
significant liabilities to third parties, require us to seek licenses from third
parties or prevent us from selling our products in some or all markets. We may
not be able to reach a satisfactory settlement of any dispute by licensing
necessary patents or other intellectual property. Even if we reached a
settlement, the settlement process may be expensive and time consuming, and the
terms of the settlement may require us to pay substantial royalties. An adverse
determination in a judicial or administrative proceeding or the failure to
obtain a necessary license could prevent us from manufacturing and selling our
products.
WE ARE DEVELOPING OUR CURRENT PRODUCT LINES INDEPENDENTLY FROM ANY
COLLABORATIVE PARTNERS, WHICH WILL REQUIRE US TO ACCESS ADDITIONAL CAPITAL AND
TO DEVELOP ADDITIONAL SKILLS TO PRODUCE, MARKET AND DISTRIBUTE THESE PRODUCTS.
We are independently finishing development, building up production
capacity, launching, marketing and distributing our oximetry line of products.
These activities require additional resources and skills that we will need to
secure. There is no assurance that we will be able to raise sufficient capital
or attract and retain skilled personnel to enable us to finish development,
launch and market these products. Thus, there can be no assurance that we will
be able to commercialize all, or any, of these products.
BECAUSE OUR PRODUCTS, WHICH USE DIFFERENT TECHNOLOGY OR APPLY TECHNOLOGY
IN MORE INNOVATIVE WAYS THAN OTHER MEDICAL DEVICES, ARE OR WILL BE NEW TO THE
MARKET, WE MAY NOT BE SUCCESSFUL IN LAUNCHING OUR PRODUCTS AND OUR OPERATIONS
AND GROWTH WOULD BE ADVERSELY AFFECTED.
Our products are based on new methods of reflective pulse oximetry. If our
products do not achieve significant market acceptance, our sales will be limited
and our financial condition may suffer. Physicians and individuals may not
recommend or use our products unless they determine that these products are an
attractive alternative to current tests that have a long history of safe and
effective use. To date, our products have been used by only a limited number of
people, and few independent studies regarding our products have been published.
The lack of independent studies limits the ability of doctors or consumers to
compare our products to conventional products.
IF WE ARE UNABLE TO COMPETE EFFECTIVELY IN THE HIGHLY COMPETITIVE MEDICAL
DEVICE INDUSTRY, OUR FUTURE GROWTH AND OPERATING RESULTS WILL SUFFER.
The medical device industry in general, and the markets in which we expect
to offer products in particular, are intensely competitive. Many of our
competitors have substantially greater financial, research, technical,
manufacturing, marketing and distribution resources than we do and have greater
name recognition and lengthier operating histories in the health care industry.
We may not be able to effectively compete against these and other competitors. A
number of competitors offer oximetry products. These products and monitors are
widely accepted in the health care industry and have a long history of accurate
and effective use. Further, if our products are not available at competitive
prices, health care administrators who are subject to increasing pressures to
reduce costs may not elect to purchase them.
11
Furthermore, our competitors may succeed in developing, either before or
after the development and commercialization of our further products, devices and
technologies that permit more efficient, less expensive non-invasive and less
invasive pulse oximetry monitoring.
WE HAVE LITTLE MANUFACTURING EXPERIENCE, WHICH COULD LIMIT OUR GROWTH.
We do not have sufficient internal manufacturing experience that would
enable us to make products in the volumes that would be necessary for us to
achieve significant commercial sales, and we rely upon our suppliers. In
addition, we may not be able to establish and maintain reliable, efficient, full
scale manufacturing at commercially reasonable costs, in a timely fashion.
Difficulties we encounter in manufacturing scale-up, or our failure to implement
and maintain our manufacturing facilities in accordance with good manufacturing
practice regulations, international quality standards or other regulatory
requirements, could result in a delay or termination of production. We may
decide to manufacture these products ourselves in the future or may decide to
manufacture products that are currently under development in this market
segment. Companies often encounter difficulties in scaling up production,
including problems involving production yield, quality control and assurance,
and shortages of qualified personnel.
Since we are relying on third party manufacturing for our initial product
offerings in the pulse oximetry product line, we are dependent upon those
parties for product supply. Any delay in initiating production or scaling
production to higher volumes could result in delays of product introduction, or
create lower availability of product than our expectations. These delays could
lead to lower revenue achievement and additional cash requirements for us.
OUR LIMITED MARKETING AND SALES EXPERIENCE MAKES OUR REVENUE UNCERTAIN.
We are responsible for marketing our oximetry product line. We have
relatively limited experience in marketing or selling medical device products
and only have a two person internal marketing and sales team. In order to
successfully continue to market and sell our products, we must either develop a
marketing and sales force or expand our arrangements with third parties to
market and sell our products. We may not be able to successfully develop an
effective marketing and sales force, and we may not be able to enter into and
maintain marketing and sales agreements with third parties on acceptable terms,
if at all. If we develop our own marketing and sales capabilities, we will
compete with other companies that have experienced and well-funded marketing and
sales operations. If we enter into a marketing arrangement with a third party,
any revenues we would receive will be dependent on this third party, and we will
likely be required to pay a sales commission or similar compensation to this
party. The efforts of these third parties for the marketing and sale of our
products may not be successful.
BECAUSE WE OPERATE IN AN INDUSTRY WITH SIGNIFICANT PRODUCT LIABILITY RISK,
AND WE HAVE NOT SPECIFICALLY INSURED AGAINST THIS RISK, WE MAY BE SUBJECT TO
SUBSTANTIAL CLAIMS AGAINST OUR PRODUCTS.
The development, manufacture and sale of medical products entail
significant risks of product liability claims. We currently have limited product
liability insurance coverage beyond that provided by our general liability
insurance. Accordingly, we may not be adequately protected from any liabilities,
including any adverse judgments or settlements, we might incur in connection
with the development, clinical testing, manufacture and sale of our products. A
successful product liability claim or series of claims brought against us that
result in an adverse judgment against or settlement by us in excess of any
insurance coverage could seriously harm our financial condition or reputation.
In addition, product liability insurance is expensive and may not be available
to us on acceptable terms, if at all.
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THE AVAILABILITY OF THIRD-PARTY REIMBURSEMENT FOR OUR PRODUCTS IS
UNCERTAIN, WHICH MAY LIMIT CONSUMER USE AND THE MARKET FOR OUR PRODUCTS.
In the United States and elsewhere, sales of medical products are
dependent, in part, on the ability of consumers of these products to obtain
reimbursement for all or a portion of their cost from third-party payors, such
as government and private insurance plans. Any inability of patients, hospitals,
physicians and other users of our products to obtain sufficient reimbursement
from third-party payors for our products, or adverse changes in relevant
governmental policies or the policies of private third-party payors regarding
reimbursement for these products, could limit our ability to sell our products
on a competitive basis. We are unable to predict what changes will be made in
the reimbursement methods used by third-party health care payors. Moreover,
third-party payors are increasingly challenging the prices charged for medical
products and services, and some health care providers are gradually adopting a
managed care system in which the providers contract to provide comprehensive
health care services for a fixed cost per person. Patients, hospitals and
physicians may not be able to justify the use of our products by the attendant
cost savings and clinical benefits that we believe will be derived from the use
of our products, and therefore may not be able to obtain third-party
reimbursement.
Reimbursement and health care payment systems in international markets
vary significantly by country and include both government sponsored health care
and private insurance. We may not be able to obtain approvals for reimbursement
from these international third-party payors in a timely manner, if at all. Any
failure to receive international reimbursement approvals could have an adverse
effect on market acceptance of our products in the international markets in
which approvals are sought.
OUR SUCCESS DEPENDS ON OUR ABILITY TO ATTRACT AND RETAIN SCIENTIFIC,
TECHNICAL, MANAGERIAL AND FINANCE PERSONNEL.
Our ability to operate successfully and manage our future growth depends
in significant part upon the continued service of key scientific, technical,
managerial and finance personnel, as well as our ability to attract and retain
additional highly qualified personnel in these fields. We may not be able to
attract and retain key employees when necessary, which would limit our
operations and growth. In addition, if we are able to successfully develop and
commercialize our products, we will need to hire additional scientific,
technical, marketing, managerial and finance personnel. We face intense
competition for qualified personnel in these areas, many of whom are often
subject to competing employment offers.
WE ARE SIGNIFICANTLY INFLUENCED BY OUR DIRECTORS, EXECUTIVE OFFICERS AND
THEIR AFFILIATED ENTITIES.
Our directors, executive officers and entities affiliated with them
beneficially owned an aggregate of approximately 30% of our outstanding Common
Stock as of September 30, 2005. These stockholders, acting together, would be
able to exert significant influence on substantially all matters requiring
approval by our stockholders, including the election of directors and the
approval of mergers and other business combination transactions.
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OUR COMMON STOCK IS CURRENTLY QUOTED ON THE "PINK SHEETS" AND HAS A
LIMITED TRADING MARKET.
Our common stock is currently listed on the "Pink Sheets". Accordingly,
there is little or no active trading in our stock.
RISKS RELATED TO OPERATIONS IN ISRAEL
WE DEPEND ON A SINGLE FACILITY IN ISRAEL AND ARE SUSCEPTIBLE TO ANY EVENT
THAT WOULD ADVERSELYAFFECT ITS CONDITION.
Most of the Company's laboratory capacity and principal research and
development and manufacturing facilities are located in the State of Israel.
Fire, natural disaster or any other cause of material disruption in our
operation in this location could have a material adverse effect on our business,
financial condition and operating results. As discussed above, to remain
competitive in the network communications industry, we must respond quickly to
technological developments. Damage to our facility in Israel could cause serious
delays in the development of new products and services and, therefore, could
adversely affect our business. In addition, the particular risks relating to our
location in Israel are described below.
THE TRANSFER AND USE OF SOME OF OUR TECHNOLOGY AND ITS PRODUCTION IS
LIMITED BECAUSE OF THE RESEARCH AND DEVELOPMENT GRANTS WE RECEIVED FROM THE
ISRAELI GOVERNMENT TO DEVELOP SUCH TECHNOLOGY. SUCH LIMITATIONS MAY RESTRICT OUR
BUSINESS GROWTH AND PROFITABILITY.
Our research and development efforts associated with the development of
oximetry products have been partially financed through grants from the Office of
the Chief Scientist of the State of Israel (the "Chief Scientist"). We are
subject to certain restrictions under the terms of the Chief Scientist grants.
Specifically, the products developed with the funding provided by these grants
may not be manufactured, nor may the technology which is embodied in our
products be transferred outside of Israel without appropriate governmental
approvals and/or fines. These restrictions do not apply to the sale or export
from Israel of our products developed with this technology. These restrictions
could limit or prevent our growth and profitability.
POLITICAL AND ECONOMIC CONDITIONS IN ISRAEL MAY LIMIT OUR ABILITY TO
PRODUCE AND SELL OUR PRODUCTS.THIS COULD RESULT IN A MATERIAL ADVERSE EFFECT ON
OUR OPERATIONS AND BUSINESS.
Our research and development and manufacturing facilities are located
Israel,. Political, economic and security conditions in Israel directly
influence us. Since the establishment of the State of Israel in 1948, Israel and
its Arab neighbors have engaged in a number of armed conflicts. A state of
hostility, varying in degree and intensity, has led to security and economic
problems for Israel. Major hostilities between Israel and its neighbors may
hinder Israel's international trade and lead to economic downturn. This, in
turn, could have a material adverse effect on our operations and business.
Since October 2000, there has been substantial deterioration in the
relationship between Israel and the Palestinian Authority that has resulted in
increased violence. The future effect of this deterioration and violence on the
Israeli economy and our operations is unclear. Ongoing violence between Israel
and the Palestinians as well as tension between Israel and the neighboring Syria
and Lebanon may have a material adverse effect on our business, financial
conditions or results of operations.
Generally, male adult citizens and permanent residents of Israel under the
age of 51 are obligated to perform up to 36 days of military reserve duty
annually. Additionally, these residents may be called to active duty at any time
under emergency circumstances. The full impact on our workforce or business if
some of our officers and employees are called upon to perform military reserve
service is difficult to predict.
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In addition, in recent years Israel has been going through a period of
recession in economic activity, resulting in low growth rates and growing
unemployment. Our operations could be adversely affected if the economic
conditions in Israel continue to deteriorate. In addition, due to significant
economic measures proposed by the Israeli Government, there have been several
general strikes and work stoppages in 2003 and 2004, affecting all banks,
airports and ports. These strikes have had an adverse effect on the Israeli
economy and on business, including our ability to deliver products to our
customers. Following the passage by the Israeli Parliament of laws to implement
the economic measures, the Israeli trade unions have threatened further strikes
or work-stoppages, and these may have a material adverse effect on the Israeli
economy and on us.
DIRECTORS AND EXECUTIVE OFFICERS
The following are the names and certain information regarding The
Company's Directors and Executive Officers following the acquisition of SPO Ltd.
and as of September 30, 2005:
NAME AGE POSITION
Michael Braunold 46 President, Chief Executive Officer and
Director
Richard H. Ryan 53 Chief Operating Officer
Jeffrey Feuer 41 Chief Financial Officer
Israel Sarussi 54 Chief Technology Officer
Pauline Dorfman 40 Director
Sidney Braun 44 Director
Pursuant to the Company's bylaws, directors are elected at the annual
meeting of stockholders and each director holds office until his successor is
elected and qualified. Officers are elected by the Board of Directors and hold
office until an officer's successor has been duly appointed and qualified unless
an officer sooner dies, resigns or is removed by the Board. There are no family
relationships among any of the Company's directors and executive officers.
BACKGROUND OF EXECUTIVE OFFICERS AND DIRECTORS
Michael Braunold has been Chief Executive Officer of SPO Ltd. since March
1998 and the President and Chief Executive Officer of the Company since May 18,
2005. Prior to March 1998, Mr. Braunold was Senior Director of Business
Development at Scitex Corporation Ltd., a multinational corporation specializing
in visual information communication. In such capacity, Mr. Braunold played a
strategic role in managing a team of professionals assigned to M&A activities.
During his 12-year tenure at Scitex, he held various positions within the
worldwide organization, including a period in the United States as Vice
President of an American subsidiary of Scitex specializing in medical imaging.
From March 2000 through September 2000, Mr. Braunold was also the Chief
Executive Officer and Chairman of Ambient Corporation, a Delaware company, that
15
specializes in the implementation of a proposed comprehensive high-speed
communication infrastructure that is designed to utilize existing electrical
power distribution lines as a high-speed communication medium. Mr. Braunold
served as a director of Amedia Networks, Inc. (formerly TTR Technologies, Inc.)
from February 2000 through August 2002. Mr. Braunold obtained a Bachelor of
Science degree with honors in Engineering and Management Sciences from Imperial
College Business School, London.
Richard H. Ryan has been Chief Operating Officer since May 2005. Prior to
joining Philips Medical Systems in 2001, Mr. Ryan was contracted by Agilent
Technologies, where he assisted in the successful divestiture of its Healthcare
Solutions Group to Philips Medical Systems; he also oversaw the transfer of
three production lines from Xing Dao, in Mainland China, to a local subsidiary
in California. Following the acquisition by Philips, he was asked to join the
corporate management team to help set up their new Global Materials Organization
(the GMO) and was a founding member of its Executive Board. During his tenure at
Philips Medical Systems, Mr. Ryan was instrumental in driving a cultural change
in supplier management, creating new supply chain opportunities in Asia while
reducing costs at most of the company's manufacturing sites worldwide.
Jeffery Feuer was appointed Chief Financial Officer on July 14, 2005.
Prior to joining the Company, Mr. Feuer served in similar capacities at
Transpharma Medical Ltd., a biomedical device start-up company (January 2004
through May 2005), and Finjan Software Inc., a security software company
(September 1999 through September 2003). From July 1996 to September 1999, he
served as corporate controller of Aladdin Knowledge Systems, Ltd., an Israeli
based NASDAQ company. Prior to this he was a senior auditor in public accounting
both in Israel and the UK.
Israel Sarussi has been the Chief Technology Officer of SPO Ltd. since its
inception in 1996. Prior to this venture, he established a private company
specializing in computer systems for agricultural applications. Israel has held
various technical positions at several hi-tech Israeli companies including Elta
Electronics, a company specializing in military communications, where he was
assigned to advanced development projects for the Israeli Air Force. He holds a
degree in Electronic Engineering from Ben Gurion University, Be'ersheba.
Pauline Dorfman was appointed a Director of the Company on April 21, 2005.
Since January 2001, Mrs. Dorfman, a qualified chartered accountant, has been a
consultant with Berenblut Consulting, an Ontario firm that assists commercial
business, law firms and governments across North America and Europe in several
areas covering economics, finance, accounting, valuation and strategy. Mrs.
Dorfman specializes in conducting analysis and financial investigations in
connection with international development disputes and economic damage
quantification for breach of contract and personal medical malpractice cases.
Prior to this assignment, Mrs. Dorfman worked for 10 years with the Toronto
Dominion Bank in the finance and commercial lending areas analyzing the
financial risk of various bank investments and strategies, assisting in the
development of new bank products and meeting the external and internal financial
reporting requirements of the bank.
Sidney Braun was appointed a Director on April 21, 2005. Since June 2004
Mr. Braun has served as the President and Chief Operating Officer for Med-Emerg
International Inc. (MEII), a company incorporated in the Province of Ontario.
MEII is a publicly listed healthcare services company specializing in the
coordination and delivery of emergency and primary health care related services
in Canada such as physician and nurse staffing and recruitment, clinical
management services, a national drug infusion service and a comprehensive
physician practice management program. Mr. Braun has extensive experience in
commerce both in North America and Europe, including manufacturing, distribution
and trading. Prior to his current position at MEII, Mr. Braun worked for 7 years
as an independent consultant to several large state-owned corporations from the
former Eastern European block on developing business strategies and adapting to
new working conditions in western markets. In addition, Mr. Braun developed
expertise in emerging financial markets in Europe and introduced several
companies to the UK and German capital markets.
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EMPLOYMENT COMPENSATION AGREEMENTS
On May 18, 2005, the Company entered into an employment agreement with
Michael Braunold, pursuant to which he serve as the Company's Chief Executive
Officer and President. On such date, Mr. Braunold and SPO Ltd., entered into an
employment agreement pursuant to which Mr. Braunold serves as SPO Ltd.'s Chief
Executive Officer. Each of the agreements with the Company and SPO Ltd. has an
initial term of three years commencing on the date of the agreement and is
automatically renewable for successive two year terms unless the Company or Mr.
Braunold indicates in writing, upon 90 days prior to the scheduled termination
of the initial term or any renewal term, that it does not intend to renew the
agreement. Mr. Braunold will be paid a monthly salary of $13,250 under the
agreement with SPO Ltd. Mr. Braunold is not entitled to a salary under the
agreement with the Company but will be granted options under the Company's 2005
Equity Incentive Plan to purchase a number of shares of the Company's common
stock to be agreed upon by the Company and Mr. Braunold. The agreements may be
terminated by Mr. Braunold for any reason on 60 days written notice to the
Company or for Good Reason (as defined in the employment agreement) or by the
Company for Just Cause (as defined in the employment agreement) or for any other
reason. In the event of a termination by Mr. Braunold for Good Reason or by the
Company for any reason other than Just Cause, the Company shall pay Mr. Braunold
an amount equal to (i) if such termination occurs during the initial term of the
agreement, the base salary then payable, if any, for the longer of (a) the
period from the date of such termination to the end of the Initial Term as if
the agreement had not been so terminated and (b) twelve months and (ii) if such
termination occurs after the initial term, the base salary then payable, if any,
for a period of twelve months as if the agreement had not been so terminated.
On May 18, 2005, the Company entered into an employment agreement with
Richard H. Ryan pursuant to which Mr. Ryan serves as the Company's Chief
Operating Officer for a period beginning on May 18, 2005 and ending on the
earlier of: (i) Mr. Ryan's death or disability, (ii) termination by the Company
without cause upon 90 days written notice during the first year of the agreement
and thereafter upon six months (or payment in lieu thereof); (iii) termination
by Mr. Ryan without cause upon 60 days written notice; (iv) termination of Mr.
Ryan with cause or (v) two (2) years from the date of the agreement. In
consideration of his service under the agreement, Mr. Ryan is (i) paid a monthly
salary of $8,334, (ii) was granted an option to purchase 200,000 shares of the
Company's common stock, vesting over two years from the date of grant and (iii)
be entitled to a bonus based on the amount of the Company's net sales during the
first year of the agreement.
On July 14, 2005 the Company entered into an employment agreement with
Jeffrey Feuer, pursuant to which Mr. Feuer serves as the Company's Chief
Financial Officer. Previously, on May 15, 2005, Mr. Feuer and SPO Ltd. entered
into an employment agreement pursuant to which Mr. Feuer continues to serves as
SPO Ltd.'s Chief Financial Officer. Each of the agreements with the Company and
SPO Ltd. terminates on the earlier of: (i) Mr. Feuer's death or disability, (ii)
termination by the Company or Mr. Feuer without cause upon 60 days written
notice; or (iii) termination of Mr. Feuer with cause. Mr. Feuer will be paid a
monthly salary of $7,500 under the agreement with SPO Ltd. Mr. Feuer is not
entitled to a salary under the agreement with the Company but will be granted
options under the Company's 2005 Equity Incentive Plan to purchase 120,000
shares of the Company's common stock, vesting over a one year period from the
date of grant.
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Director Compensation
Each non-employee Director will receive cash compensation at the rate of
$15,000 for the first year of service. Each non-employee Director was granted in
April 2005 50,000 options with an exercise price of $0.055 per share, with
25,000 of such options being vested upon issuance and the remaining 25,000
vesting over 12 months following grant.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has not entered into any transaction during the last two years
and the Company has not proposed any transaction to which it was or is to be a
party, in which any of the following persons had or is to have a direct or
indirect material interest:
o Any director or executive officer of the Company;
o Any nominee for election as a director;
o Any security holder named in the "Security Ownership of Certain
Beneficial Owners and Management" section below; and
o Any member of the immediate family (including spouse, parents,
children, siblings, and in-laws) of any such person.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of September 30, 2005
with respect to the beneficial ownership of the outstanding common stock by (i)
any holder of more than five (5%) percent; (ii) each of the Company's executive
officers and directors; and (iii) the Company's directors and executive officers
as a group. Except as otherwise indicated, each of the stockholders listed below
has sole voting and investment power over the shares beneficially owned.
Common Stock Percentage of
Name of Beneficial Owner (1) Beneficially Owned (2) Common Stock (3)
Michael Braunold 743,922 (4) 4.37%
Richard H. Ryan 50,000 (5) *
Jeffrey Feuer 30,000-- (6) *
Israel Sarussi 4,165,776 (7) 23.84%
Pauline Dorfman 25,000-- (8) *
Sidney Braun 25,000-- (8) *
All officers and directors as a group 5,039,698 29.13%
(6 persons)
* Less than 1%
(1) Except as otherwise indicated, the address of each beneficial owner is c/o
SPO Medical Inc., 21860 Burbank Blvd., North Building, Suite 380, Woodland
Hills, CA 91367.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to the shares shown. Except where indicated by footnote and
subject to community property laws where applicable, the persons named in the
table have sole voting and investment power with respect to all shares of voting
securities shown as beneficially owned by them.
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(3) Based on 17,029,407 shares outstanding. The number of shares outstanding
reflects the forward subdivision of the Company's Common Stock on a 2.65285:1
basis after giving effect to the transactions contemplated by Restated Exchange
Agreement.
(4) Comprised of 743,922 shares of the Company's Common Stock.
(5) Represents shares issuable upon exercise of vested options issued in May
2005 under the Company's 2005 Equity Incentive Plan (the "2005 Plan"). Does not
include an additional 150,000 shares issuable upon exercise of options issued in
May 2005 under the 2005 Plan that are scheduled to vest, on a quarterly basis,
over the two years following issuance.
(6) Represents shares issuable upon exercise of vested options issued in July
2005 under the Company's 2005 Plan. Does not include an additional 90,000 shares
issuable upon exercise of options issued in July 2005 under the Company's 2005
Plan that are scheduled to vest, on a quarterly basis, over the one year period
following issuance.
(7) Comprised of 3,719,393 shares of the Company's Common Stock and 446,383
shares of Common Stock issuable upon exercise of currently exercisable warrants.
(8) Represents shares issuable upon exercise of vested options issued in April
2005 under the Company's 2005 Non-Employee Directors Stock Option Plan (the
"2005 Directors Plan"). Does not include an additional 25,000 shares issuable
upon exercise of options issued in April 2005 under the Company's 2005
Non-Employee Directors Stock Option Plan (the "2005 Directors Plan") that are
scheduled to vest, on a quarterly basis, over twelve months following issuance.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
(c) Exhibits.
Exhibit Number Description
-------------- -----------
99.1 Financial statements of business acquired
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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.
Dated: November 9, 2005 SPO MEDICAL INC.
By: /s/ Michael Braunold
----------------------------
Michael Braunold
Chief Executive Officer
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