-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hu5B5L+hYGboZ8HT0jSWpzrz+cU3QdtqijkKFQW2cc4yw9Q1UlzShzzqGRuera3Z LlIFP4nh2wi1rSNcGi6zdg== 0001077357-00-000164.txt : 20000516 0001077357-00-000164.hdr.sgml : 20000516 ACCESSION NUMBER: 0001077357-00-000164 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SURGICAL SAFETY PRODUCTS INC CENTRAL INDEX KEY: 0001063530 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISC HEALTH & ALLIED SERVICES, NEC [8090] IRS NUMBER: 650565144 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-24921 FILM NUMBER: 635865 BUSINESS ADDRESS: STREET 1: 2018 OAK TERRACE CITY: SARASOTA STATE: FL ZIP: 34231 BUSINESS PHONE: 9419277874 MAIL ADDRESS: STREET 1: 2018 OAK TERRACE CITY: SARASOTA STATE: FL ZIP: 34231 10QSB 1 QUARTERLY REPORT U.S. Securities and Exchange Commission Washington, D.C. 20549 Form 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended: March 31, 2000 Commission file no. 0-24921 Surgical Safety Products, Inc. -------------------------------------------- (Name of small business issuer in its charter) New York 65-0565144 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2018 Oak Terrace Sarasota, Florida 34231 - --------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Issuer's telephone number (941) 927-7874 Securities registered under Section 12(b) of the Exchange Act: Name of each exchange on Title of each class which registered None - ----------------------------- ------------------------- Securities registered under Section 12(g) of the Exchange Act: Common Stock, $.001 par value ----------------------------------- (Title of class) Copies of Communications Sent to: Mercedes Travis, Esq. Mintmire & Associates 265 Sunrise Avenue, Suite 204 Palm Beach, FL 33480 Tel: (561) 832-5696; Fax: (561) 659-5371 Indicate by Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of March 31, 2000, there are 14,515,373 shares of voting stock of the registrant issued and outstanding [and, in addition, the Company was obligated to issue 50,000 shares under the Consulting Agreement with Global Development Advisors, Inc. on March 31, 2000, but had not issued the shares by that date]. PART I Item 1. Financial Statements Condensed Balance Sheets F-1 Condensed Statements of Operations F-3 Condensed Statements of Cash Flows F-4 Notes to the Financial Statements F-6 -1-
SURGICAL SAFETY PRODUCTS, INC CONDENSED BALANCE SHEETS (Unaudited) March 31, December 31, 2000 1999 Assets Current Assets Cash $ 566,812 $ 516,799 Trade receivables 146,554 17,086 Prepaid expenses and deposits 159,862 118,569 --------------- --------------- Total current assets 873,228 652,454 --------------- --------------- Property and equipment, net 189,306 203,533 --------------- --------------- Other Assets Intangible assets, net 553,653 270,487 Software development costs, net 147,152 139,382 Other assets 10,250 10,250 --------------- --------------- Total other assets 711,055 420,119 --------------- --------------- Total Assets $ 1,773,589 $ 1,276,106 =============== ===============
F-1
SURGICAL SAFETY PRODUCTS, INC CONDENSED BALANCE SHEETS (cont.) (Unaudited) March 31, December 31, 2000 1999 Liabilities and Stockholders' Equity Current Liabilities Accounts payable and accrued $ 247,306 $ 438,057 expenses Line of Credit 100,000 100,000 Notes payable - related parties 52,500 52,500 Total current liabilities 399,806 590,557 Long-Term Liabilities Notes payable 1,300,000 650,000 Total Liabilities 1,699,806 1,240,557 Stockholders' Equity Common stock, $.001 par value, 100,000,000 shares authorized; 14,565,373 and 14,515,373 shares issued and outstanding in 2000 and 1999 respectively 14,566 14,516 Common stock held in escrow (2,700) (2,700) Additional paid-in capital 3,279,055 2,804,020 Accumulated deficit (3,217,138) (2,780,287) Total stockholders' equity 73,783 35,549 Total Liabilities and Stockholders' $ 1,773,589 $ 1,276,106 Equity ----------------- ------------------
The accompanying notes are an integral part of these financial statements. F-2
SURGICAL SAFETY PRODUCTS, INC CONDENSED STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED) 2000 1999 ------------------- ---------------- Revenue Revenue $ 135,656 $ 39,577 ------------------- ---------------- Costs and expenses Cost of medical products sold 108 261 Operating expenses 376,633 138,984 Research and development expenses 14,345 6,667 Interest expense 181,421 1,521 ------------------- ---------------- Total costs 572,507 147,433 ------------------- ---------------- Net loss before income taxes (436,851) (107,856) Provision for income taxes - - ------------------- ---------------- Net loss $ (436,851) $ (107,856) =================== ================ Net loss per share $ (0.038) $ (0.010) =================== ================
The accompanying notes are an integral part of these financial statements. F-3
SURGICAL SAFETY PRODUCTS, INC. CONDENSED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED) 2000 1999 ------------------- -------------------- Cash Flows From Operating Activities Net loss $ (436,851) $ (107,856) Adjustments to reconcile net loss to cash used in operating activities Depreciation and amortization 43,350 29,905 Common stock and options issued for services 24,284 - Stock option compensation expense (91,113) Interest expense - issuance of convertible debt 167,143 - Decrease (increase) in operating assets Receivables (129,468) (20,634) Prepaid expenses and deposits 10,980 - Increase (decrease) in operating liabilities Accounts payable and accrued expenses (190,751) 45,570 Total adjustments (74,462) (36,272) Net cash used in operating activities (511,313) (144,128) Cash Flows From Investing Activities Furniture and equipment purchased (3,056) (25,937) Software development additions (15,618) (41,126) Net cash used in investing activities (18,674) (67,063) Cash Flows From Financing Activities Proceeds from related party loans - 70,000 Repayments on line of credit, net - 100,000 Financing and loan costs (70,000) Proceeds from long-term debt 650,000 0 Net cash provided by financing activities 580,000 170,000 Net increase (decrease) in cash 50,013 (41,191) Cash at beginning of year 516,799 41,191 Cash at end of year $ 566,812 $ -
F-4
2000 1999 ------------------- -------------------- Supplemental Cash Flow Information: Cash paid for interest $ - $ 1,521
For purposes of the statement of cash flows, management considers all deposits and financial instruments with original maturities of less than three months to be cash and cash equivalents. Material non-cash transactions not reflected in the statement of cash flows include: For the Quarter Ended March 31, 2000 - ------------------------------------- - - Common stock issued for $52,273 of prepaid investment services - Deferred financing costs of $231,385 related to the issuance of warrants in conjunction with issuance of notes payable. For the Quarter Ended March 31, 1999 - ------------------------------------- - The Company received fixed assets in the amount of $58,700 for which it had recorded deposits of such amount at December 31, 1998 The accompanying notes are an integral part of these financial statements. F-5 Note 1 - Accounting Policies Basis of Presentation The condensed financial statements of Surgical Safety Products, Inc. (Company) have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 1999. The results of operations for the three month period ended March 31, 2000 are not necessarily indicative of the results to be expected for any other period or for the full year. In the opinion of Company's management, the accompanying unaudited financial statements contain all adjustments, consisting of only normally recurring adjustments, necessary to present fairly the financial positions of March 31, 2000, the results of operations and cash flows for the three months ended March 31, 2000 and March 31, 1999, except as noted in Note 2. Net Loss Per Share Net loss per share has been computed in accordance with Statement of Financial Accounting Standards (FASB) No. 128, "Earnings Per Share," by dividing net loss by the weighted average number of shares outstanding during the period. Common stock equivalents have not been included in the computation of weighted average number of shares outstanding since the effect would have been anti-dilutive. Reclassifications Certain reclassifications have been made in the prior year's financial statements to conform to the current period presentation. Note 2 - Stock Compensation Expense During fiscal year 1998, the Company issued stock options with an exercise price that was below market price to certain of its employees. Accordingly, the Company recorded $91,113 of compensation expense related to the issuance for the year ended December 31, 1998. In the first quarter of 1999, the Company canceled these stock options and issued options with an exercise price above that of market. Accordingly, the Company decreased its payroll expense by $91,113 for the cancellation of these options for the quarter ended March 31, 1999. Note 3 - Subsequent Event F-6 On April 28, 2000, the investment banking firm which holds the outstanding notes payable converted $102,630 of outstanding principal and interest into 182,453 shares of common stock pursuant to the convertible secured line of credit agreement dated December 20, 1999. F-7 Item 2. Management's Discussion and Analysis of Results of Operations. General The Company's (OTC BB: SURG) overall mission is the research, development, production and distribution of innovative products and services for healthcare. Consisting of both traditional products and innovative business-to-business e-solutions, the common goal is a safer and more efficient environment for healthcare workers, manufacturers and patients. Originally formed as a medical device company, Surgical shifted focus to being an e-company when the Company's management recognized an untapped market niche: responding to the critical need for immediate communication and access to information in healthcare. Now, the Company operates two divisions providing products and services to the medical industry. The Information Systems Division through its Oasis@work product line provides business-to-business on-demand safety and efficiency driven e-business and information for healthcare workers. The Medical Products and Services Division develops, manufactures and distributes medical devices. About Oasis@work The Oasis@work strategy is healthcare e-business content aggregation and applications integration through a virtual private network. It links the entire healthcare continuum, which includes healthcare workers, administration, patients, and healthcare and pharmaceutical manufacturers. Oasis@work is a true healthcare data center with multiple access points. It is an Internet-based virtual private network consisting of points-of-access via intranets, the Internet, internet appliances, and through TouchPorts located throughout healthcare facilities across the country. TouchPorts(TM) are user-friendly touch-access internet appliances which allow healthcare professionals access to high quality clinical reference and agency mandated information services. Corporate Developments The Company entered into an agreement with IBM Global Services effective January 3, 2000 which includes an IBM Customer Agreement and a Statement of Work (the "IBM Global Agreement"). Under the terms of the IBM Global Agreement IBM will provide complete implementation and support service solutions for 1,200 OASiS terminals in an estimated 400 end user locations during the 12 month period commencing December 1, 1999. On February 3, 2000, IBM Global Services and the Company finalized the Statement of Work. The services to be provided under the agreement include project planning, site surveys, product acquisition, network design, web-site hosting services, premises wiring, OASiS TouchPort Implementation, help desk support and consulting services. The estimated cost for performing the work is approximately $10 million. In addition, IBM Global Services will bill the Company a monthly service charge for pre and post installation support services, including 24-7 support, and for labor, travel and out of pocket expenses. The Company will provide technical resources and oversee the IBM Global's activities. The Company believes that this agreement will expedite the deployment of its OASiS systems under the terms of its Long Term Agreement with US Surgical. -2- In February 2000, the Company executed an Investment Banking Services Agreement with Dunwoody Brokerage Services Inc. d/b/a Swartz Institutional Finance ("Swartz"). Under the agreement, Swartz has agreed to introduce entities to the Company for potential strategic partnerships, licensing arrangements, mergers, acquisitions, investments or funding. For such services, Swartz will receive a scaled fee based upon the value of any completed transaction. Said fee is payable in cash or stock at Swartz's option and by the issuance of warrants, the number of which is based upon the fee divided by the market price of the Company's Common Stock. There is no obligation on the part of the Company to accept any transaction offered by the Swartz to the Company. In February 2000, the Company executed a Consulting Agreement with Global Development Advisors, Inc. ("GDA")). Under the agreement, GDA will provide business and marketing consulting services, assist in the implementation of a strategic plan and assist, coordinate and monitor the Company's investor relations program. The agreement is for a term of six (6) months and may be extended by the Company. In lieu of cash payments for services, GDA has agreed to accept 50,000 shares of the Company's Common Stock under the Company's 2000 Stock Plan approved by its shareholders on February 28, 2000 and options to purchase an additional 50,000 shares at an exercise price of $1.09. The issuance was made pursuant to Section 4(2) of the Act and Rule 506. In December 1999, the Company executed a Loan Agreement with Thomson Kernaghan & Co., Ltd. ("TK"), as Agent and Lender, whereby TK agreed to make loans to the Company of up to $5,000,000 in installments for a period commencing with the date of the agreement and ending on November 30, 2002 (the "TK Loan Commitment"). Under the terms of the TK Loan Commitment, each installment is supported by a convertible note and security agreement and the Agent and Lender are granted warrants to purchase shares of the Company's Common Stock. Further, 2,700,000 shares are held by TK in escrow for the potential conversion under the notes or exercise of the warrants. Under the terms of the TK Loan Agreement, an initial loan of $650,000 was made on December 30, 1999. On March 31, 2000 the Company received a second installment under the TK Commitment in the amount of $650,000. On April 28, 2000, TK elected to convert $100,000 of outstanding principal and $2,630 of the accrued interest into shares of Common Stock at a price of $0.5625 per share which represents 182,453 shares. The Company granted TK registration rights and was obligated to file a Form S-3 within sixty (60) days of the agreement. The Company filed a registration statement on Form S-3 on March 2, 2000 covering initially 20,038,097 shares of its Common Stock. The issuance of the securities was made pursuant to Regulation S of the Act. The Form S-3 registration statement was declared effective on April 11, 2000. -3- The TK Loan Commitment, as draw downs are taken and as interest accrues, will increase the long term debt of the Company. The Company has entered into consulting agreements with several other potential funding sources; however, to date, has not concluded terms for any financing which it feels appropriately meets the requirements of the Company under such agreements. With the TK Loan Commitment and in the event additional debt is raised, it will incur future interest expense. The TK Loan Commitment, if fully converted and all warrants are exercised will dilute the interest of existing shareholders and in the event additional equity is raised, management may be required to dilute the interest of existing shareholders further or forgo a substantial interest in revenues, if any. In the event that the Company is successful in securing additional debt financing, the amount of such financing, depending upon its terms, would increase either the short or long term debt of the Company or both. On February 29, 2000, the Company entered into a contract with Steel Beach Productions, Inc. ("Steel Beach") to design, develop, implement and test the OASiS Version 3.0 web based application. The contract is for a total of $160,100 and is to be paid $80,500 in cash and $80,500 in stock options. The Company paid a deposit of $20,012.50 and the balance is to be paid upon delivery of the prototype, preliminary product and final product. The options are due at the time of delivery of the final product. The common stock option number will be calculated based on the average closing share price ("ACSP") in the twenty (20) days of trading prior to deliver of the final product. The exercise price will be 50% of the twenty (20) day average closing price as quoted on the OTC BB. The number of options issued will be calculated by multiplying $80,050 times two (2) and dividing by the ACSP. The options are to have a term of five (5) years and are to conform to Company's consultant option policy as far as additional terms and details. This agreement with Steel Beach replaces two earlier agreements; specifically, one agreement for Version 2.0 dated December 30, 1999 in the amount of $37,800 in cash and $37,800 in stock options, and one agreement for Version 3.0 dated December 30, 1999 in the amount of $42,250 in cash and $42,250 in stock options. All efforts expended by Steel Beach Productions under these two earlier contracts are compensated under the terms of this agreement. The Company retains all propriety rights in the application. Steel Beach is responsible for its own costs and expenses. The agreement may be canceled by either party on thirty (30) days written notice. Discussion and Analysis The Company was founded in 1992 to combat the potential spread of bloodborne pathogenic infections such as HIV and hepatitis. It has broadened its mission to research, develop, manufacturing, marketing and selling medical products and services to the healthcare community. The Company was in the development stage until 1993 when it began commercial shipments of SutureMate(R), its first product. From inception in June, 1992 through December 31, 1999, the Company generated revenues of approximately $1,275,000 from a limited number of customers. -4- Since inception through December 31, 1999, the Company has generated cumulative losses of approximately $2,780,000. Although the Company has experienced a significant percentage growth in revenues from fiscal 1992 to fiscal 1999, the Company does not believe prior growth rates are indicative of future operating results, especially in light of the contracts with US Surgical and IBM Global to assist in the exploitation of OASiS@works. Due to the Company's operating history and limited resources, among other factors, there can be no assurance that profitability or significant revenues on a quarterly or annual basis will occur in the future. Moreover, the Company expects to continue to incur operating losses through at least the first half of 2000, and there can be no assurance that losses will not continue after such date. As of the date hereof the Company has completed installations of fifteen (15) units in seven (7) hospitals. As discussed in the independent auditors' report, the operating losses incurred by the Company raise doubt about its ability to continue as a going concern. In addition, with the implementation of its agreements with US Surgical and IBM Global and/or with the establishment of one or more strategic alliances in addition to US Surgical and IBM Global, the Company expects to experience a period of growth, which requires it to significantly increase the scale of its operations. This increase will include the hiring of additional personnel in the areas of (i) customer service to provide technical support for the hospitals where installations are located and (ii) technical staff to make changes requested by those hospitals. This will result in significantly higher operating expenses. The increase in operating expenses is expected to be partially funded by an increase in revenues. However, the Company's net loss may continue to increase. Expansion of the Company's operations may cause a significant strain on the Company's management, financial and other resources. The Company's ability to manage recent and any possible future growth, should it occur, will depend upon a significant expansion of its sales and marketing, research and development, accounting and other internal management systems and the implementation and subsequent improvement of a variety of systems, procedures and controls. There can be no assurance that significant problems in these areas will not occur. Any failure to expand these areas and implement and improve such systems, procedures and controls in an efficient manner at a pace consistent with the Company's business could have a material adverse effect on the Company's business, financial condition and results of operations. As a result of such expected expansion and the anticipated increase in its operating expenses, as well as the difficulty in forecasting revenue levels, the Company expects to continue to experience significant fluctuations in its revenues, costs and gross margins, and therefore its results of operations. The Company's plan of operations for the next twelve months is to focus on building revenue from the installation of the OASiS system in the hospitals designated by US Surgical and to install additional OASiS systems in hospitals not under the US Surgical agreement. Additionally, the Company intends to install the inservice modules from US Surgical and other medical product manufacturers at both the US Surgical and the other hospitals. The Company also is aggressively seeking strategic alliances with targeted industry partners such as manufacturers of devices, manufacturers of pharmaceuticals, professional organizations such as nursing associations and hospital group purchasing organizations and integrated health networks. -5- The Company estimates that revenues will be sufficient to fund ongoing operations at the current level when the number of OASiS installations reaches approximately 100 to 125 and the total number of inservice modules reaches approximately 150. The Company already has 40 inservice modules under the US Surgical agreement and is in discussion with various manufacturers interested in using OASiS to inservice more than 50 of their products. In the short term, to fund operations through the first half 2000, the Company will seek to draw upon the funds available under the TK Commitment, to seek additional funds from strategic alliances with potential clients, its shareholders, from additional third party financing or seek third party debt or equity financing other than those planned by the current anticipated agreements. Currently, the Company has available its existing lines of credit and has begun hiring additional personnel. Provided that the TK Commitment and other funding is available when needed, the Company believes that it can meet its capital needs through year end. There can be no assurance that the Company will be successful in these efforts. As discussed in Note 10 to the Financial Statements, if the financing referred to above is not secured, the recoverability of the recorded asset amounts may be impaired. In 2000, the Company will require between $8 and $9 million in additional capital in the form of debt or equity to fund the continued expansion of the OASiS system and its development to meet increased demand and to implement its plans for increased marketing of its medical device products. Under the TK Commitment, $3,700,000 remains available under the terms of the agreement. The Company has met with several venture capital firms, investment bankers, factoring companies and traditional lending sources, each of whom have expressed early interest and many of whom are awaiting the conclusion of the testing period. Other than the TK Commitment, the Company has accepted no definite offer from any other source. There can be no assurance that such long-term financing will be available to the Company or that it will be on terms that the Company may seek. Results of Operations for the Three Months Ended March 31, 2000 and 1999. Overview From its inception, the Company has incurred losses from operations. As of March 31, 2000, the Company had cumulative net losses totaling approximately $3,217,000. During fiscal 1999, management shifted its focus to aggressively marketing its proprietary products, especially those associated with OASiS@works. -6- Financial Position Working capital as of March 31, 2000 was $473,422, as compared to working capital of $61,897 at December 31, 1999. This increase is primarily due to additional borrowings on the TK Commitment. Revenues For the three months ended March 31, 2000 and 1999, the Company had total revenues of $135,656 and $39,577, respectively. For the three months ended March 31, 2000, revenues were comprised primarily of the payments received for Oasis unit rentals and inservice modules. The increase of $96,079 or 242% is due to revenue from the 1999 launch of Oasis. Selling, General, and Administrative Expenses For the three months ended March 31, 2000, operating expenses increased by $237,649 or 171% from $138,984 for the three months ended March 31, 1999. This increase is primarily related to marketing support expenditures to sustain the launch of the Company's OASiS system. In accordance with the Company's marketing plan for fiscal 2000, expenses related to promotion, trade shows, and conventions were increased to enhance the industry awareness of the company's products and services. In the past, the Company has focused on the design and development of proprietary products. For fiscal 2000, the Company has launched an aggressive marketing plan that is designed to increase worldwide sales of its products. Surgical believes that the increased operating expenses incurred during the three months ended March 31, 2000 will position the Company to generate increased revenue in the 2000 fiscal year. Liquidity and Capital Resources The financial condition, liquidity and capital resources of the Company should be assessed in context with the ability of the Company to continue as a going concern as discussed in the independent auditors' report. The Company's operations have been funded primarily from the $1,300,000 proceeds of draw downs under the TK Commitment completed in the fourth quarter 1999 and from cash flow -7- of approximately $150,000 from licensing fees for the OASiS units and partnership fees during the nine months ended March 31, 2000. This allowed the Company to purchase OASiS hardware for installation, enhance its OASiS software and fund current operations. At March 31, 2000, the Company has a $566,812 cash position. In addition to the balance of $3,700,000 available under the TK Commitment, the Company has a line of credit in the amount of $100,000 that expires in May 2017 and is guaranteed by Dr. Swor. In the past, the line of credit also has been used to fund operations on a short-term basis and $100,000 is currently outstanding. Net cash used for investing for the three months ended March 31, 2000 was approximately $19,000, representing primarily enhancements to the current version of OASiS. In the short term, to fund operations through the balance of fiscal 2000, the Company will be required to make additional draw downs under the TK Commitment, seek additional funds from strategic alliances with potential clients, its shareholders, from additional third party financing or seek third party debt or equity financing other than those planned by the current agreements. Additionally, the Company may be required to utilize its existing lines of credit. Provided that additional funding is secured, the Company believes that it can meet its capital needs through year end. There can be no assurance that the Company will be successful in these efforts. Forward-Looking Statements This Form 10-QSB includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included or incorporated by reference in this Form 10-QSB which address activities, events or developments which the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), demand for the Company's products and services, expansion and growth of the Company's business and operations, and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. However, whether actual results or developments will conform with the Company's expectations and predictions is subject to a number of risks and uncertainties, general economic market and business conditions; the business opportunities (or lack thereof) that may be presented to and pursued by the Company; changes in laws or regulation; and other factors, most of which are beyond the control of the Company. Consequently, all of the forward-looking statements made in this Form 10-QSB are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized -8- or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. PART II Item 1. Legal Proceedings. The Company knows of no legal proceedings to which it is a party or to which any of its property is the subject, which are pending, threatened or contemplated or any unsatisfied judgments against the Company. Item 2. Changes in Securities and Use of Proceeds None Item 3. Defaults in Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders. On February 28, 2000, the Company held its annual shareholder meeting. Of the 11,815373 shares outstanding which were qualified to vote (of the 14,515,373 outstanding, 2,700,000 are held in escrow under the TK arrangement and were not qualified to vote at the meeting), in attendance, either individually or by proxy were holders representing 5,960,113 shares, which number was sufficient to form a quorum. At such meeting the shareholders: (1) approved an amendment to the Articles of Incorporation increasing the number of authorized shares of Common Stock from 20,000,000 shares to 100,000,000 by a vote of 5,960,113 to -0-; (2) re-elected the Board of Directors as follows: -9- Dr. Swor by a vote of 5,960,013 to 100 Mr. Clark by a vote of 5,960,013 to 100 Mr. Lawrence by a vote of 5,960,013 to 100 Mr. Collins by a vote of 5,960,013 to 100 Mr. Stuart by a vote of 5,960,013 to 100 Mr. Norton by a vote of 5,960,013 to 100 Mr. Swor by a vote of 5,959,253 to760, with 100 abstaining Dr. Saye by a vote of 5,960,013 to 100 Mr. Newman, who previously was listed on the ballot, tendered his resignation prior to the shareholder meeting and his name was withdrawn from the ballot at the meeting; (3) ratified Kerkering, Barbario & Co., P.A. as the Company's auditors by a vote of 5,959,253 to 100 with 760 abstaining; and (4) approved the Company's 2000 Stock Plan by a vote of 5,960,013 to 100. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) The exhibits required to be filed herewith by Item 601 of Regulation S-B, as described in the following index of exhibits, are incorporated herein by reference, as follows: Exhibit No. Description - ----------- -------------------------------------------------------------------- 3.(i).1 Articles of Incorporation of Surgical Safety Products, Inc., a Florida corporation filed May 15, 1992 [1] 3.(ii).1 Bylaws of Sheffeld Acres, Inc., now known as Surgical Safety Products, Inc. [1] 3.(ii).2 Amended Bylaws of Surgical Safety Products, Inc. [2] 10.1 Acquisition of Endex Systems, Inc. d/b/a/ InterActive PIE dated December 8, 1997 [1]
-10- 10.2 Prepaid Capital Lease Agreement with Community Health Corporation relative to Sarasota Medical Hospital OASiS Installation dated January 30, 1998 [1] 10.3 Letter of Intent with United States Surgical Corporation dated February 12, 1998 [1] 10.4 Form of Rockford Industries, Inc. Rental Agreement and Equipment Schedule to Master Lease Agreement [1] 10.5 Ad-Vantagenet Letter of Intent dated June 19, 1998 [1] 10.6 Distribution Agreement with Morrison International Inc. dated September 30, 1996 [1] 10.7 Distribution Agreement with Hospital News dated August 1, 1997 [1] 10.8 Clinical Products Testing Agreement with Sarasota Memorial Hospital dated January 30, 1998 [1] 10.9 Real Estate Lease for Executive Offices effective June 1, 1998 [1] 10.10 Employment Agreement with Donald K. Lawrence dated April 1, 1997 [1] 10.11 Employment Agreement with G. Michael Swor dated June 15, 1998 [1] 10.12 Employment Agreement with Frank M. Clark dated June 15, 1998 [1] 10.13 Agreement for Consulting Services with Stockstowatch.com Inc. dated March 30, 1988 [1] 10.14 Form of Employee Option Agreement dated July 1994 [1] 10.15 Form of Employee Option Agreement dated 1998 [1] 10.16 Form of Consultants Option Agreement dated July 1994 [1] 10.17 Form of Consultants Option Agreement dated 1998 [1] 10.18 Confidential Private Offering Memorandum dated May 30, 1995 [1] 10.19 Supplement to Private Offering Memorandum dated October 30, 1995 [1] 10.20 Stock Option Agreement with Bay Breeze Enterprises LLC dated April 9, 1998 [1] 10.21 Revolving Loan Agreement, Revolving Note, Security Agreement with SouthTrust Bank dated May 2, 1997 [1] 10.22 Agreement between the Company and T. T. Communications, Inc. dated October 15, 1998 [2] 10.23 Agreement between the Company and U.S. Surgical Corporation dated October 28, 1998. [2] 10.24 Collaborative Agreement between the Company and Dr. William B. Saye dated November 16, 1998. [2]
-11- 10.25 Kiosk Information System, Inc. Purchase Order dated November 3, 1998 [2] 10.26 Surgical Safety Products 1999 Stock Option Plan adopted January 1999 [2] 10.27 Form of the Employee Option Agreement under the Surgical Safety Products 1999 Stock Option Plan dated January 1999 [2] 10.28 Form of the Director, Consultant and Advisor Option Agreement under the Surgical Safety Products 1999 Stock Option Plan dated January 1999 [2] 10.29 Verio, Inc. Access Service Agreement dated February 16, 1999. [2] 10.30 Form of Investor Subscription Documents and Agreements relative to the April 1999 Self Directed Private Placement Offering under Rule 506 of Regulation D. [3] 10.31 Form of the Warrant issued pursuant to the April 1999 Self Directed Private Placement Offering under Rule 506 of Regulation D. [3] 10.32 Consulting Agreement dated April 1999 with Koritz Group, LLC. [3] 10.33 Agreement dated April 1999 with KJS Investment Corporation. [4] 10.34 Agreement dated May 1999 with Ten Peaks Capital Corp. [4] 10.35 Private Partner Network Agreement dated July 30, 1999 with US Surgical [5] 10.36 Staff/Client Leasing Agreement dated October 16, 1999, as amended September 15, 1999 [5] 10.37 Agreement dated July 15, 1999 with Triton Capital Inc.[6] 10.38 Effective December 30, 1999, Loan Agreement, Note, Security Agreement, Lender's Warrant, Agent's Warrant, Registration Rights Agreement and Escrow Agreement relative to the December 1999 transaction with Thomson Kernaghan & Co., Inc. and Amendment thereto. [7] 10.39 Effective January 3, 2000 IBM Customer Agreement and Statement of Work. [7] 10.40 Investment Banking Services Agreement dated February 2, 2000 with Dunwoody Brokerage Services Inc. [8] 10.41 Consulting Agreement dated February 15, 2000 with Global Development Advisors Inc. [8] 10.42 Surgical Safety Products 2000 Stock Option and Aware Plan [8] 10.43 * Agreement with Steel Beach Productions dated February 29, 2000. 13.1 Definitive Proxy Statement filed February 28, 2000 [8] 27.1 * Financial Data Sheet
- ------------------------ [1] Previously filed with the Company's Form 10SB -12- [2] Previously filed with the Company's Amendment No. 1 to the Form 10SB [3] Previously filed with the Company's Form 10QSB for the Quarter ended March 30, 1999 [4] Previously filed with the Company's Form 10QSB for the Quarter ended June 30, 1999 [5] Previously filed with the Company's Amendment No. 2 to the Form 10SB [6] Previously filed with the Company's Form 10QSB for the Quarter ended September 30, 1999 [7] Previously filed with the Company's Form S-3 on March 2, 2000. [8] Previously filed with the Company's Form 10KSB for the fiscal year ended December 31, 1999. * Filed herewith (b) No Reports on Form 8-K were filed during the quarter ended March 31, 2000. -13- SIGNATURES In accordance with Section 12 of the Securities Exchange Act of 1934, the registrant caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized. Surgical Safety Products, Inc. (Registrant) Date: May 15, 2000 By:/s/ Dr. G. Michael Swor --------------------------------------- Dr. G. Michael Swor Chief Executive Officer and Acting Chief Financial Officer By:/s/ Donald K. Lawrence --------------------------------------- Donald K. Lawrence President and Chief Operating Officer [sign page SSP 10QSB 3.31.00] -14- EX-10.43 2 MATERIAL CONTRACT EXHIBIT 10.43 STEEL BEACH PRODUCTIONS, INC. CONTRACT FOR MULTIMEDIA SERVICES This contract is entered into on the 29th day of February, 2000 (the "Effective Date"), by and between Surgical Safety Products, Incorporated ("SSP") and Steel Beach Productions, Incorporated ("STEEL BEACH") for the purpose of design, development, implementation, and testing of the OASiS Version 3.0 web based application as more fully described below. This contract replaces two earlier agreements, specifically, one agreement for Version 2.0 dated December 30, 1999 in the amount of $37,800 in cash and $37,800 in stock options, and one agreement for Version 3.0 dated December 30, 1999 in the amount of $42,250 in cash and $42,250 in stock options. All efforts expended by Steel Beach Productions under these two contracts will be compensated under the terms of this agreement. Article One: CONTRACT DESCRIPTION/PRODUCT SPECIFICATIONS 2. Project Overview: STEEL BEACH will develop the OASiS Version 3.0 in accordance with the specifications and architecture formats provided by SSP. Specifically, the overall application will be written in Macromedia Authorware and/or Director with a portal for XML to accommodate non high-speed access users. Database requirements will be handled by SEQUEL. The product will be loaded and tested from SSP's server and multiple platforms as required. Project specifics are listed in Article 1.8 below. 3. The Project Manager and single point of contact for this contract for SSP will be Eric Hill, 2018 Oak Terrace, Sarasota, FL 34231, 941-927-7874, Fax 941-925-0515, e-mail ehill@touchoasis.com. 4. The Project Manager and single point of contact for this contract for STEEL BEACH will be William Harrell at 8301 Cypress Plaza Drive, Suite 100, Jacksonville, Florida, 32256, 904-296-2743 (phone), 904-296-8569, wharrel@steelbeach.com. 5. A project kickoff meeting and several follow up meetings were held by SSP and STEEL BEACH to finalize content and product specifications. 6. At the project kickoff meeting, SSP provided STEEL BEACH the OASiS Version 2.0 software for upgrading to Version 3.0. SSP also made available a test portion on SSP Inservice Server for field-testing and functionality testing purposes. 7. SSP user access is via a T-1 or T-2 connection. 8. SSP shall provide a subject matter expert (SME) throughout the term of this contract to answer any technical questions at no cost to Steel Beach. The SME shall be available for questions during normal working hours (8:00am to 5:00pm EST) at the SSP office in Sarasota or will be available via pager. 9. The V3.0 project to be completed by Steel Beach is detailed in the "OASiS Clinical Internetwork V3.0 - Functional Outline - Hospital Network Only" dated 02/01/00, as provided by OASiS to Steel Beach. Specifically, Steel Beach will: - Populate V3.0 with content from 30 in-service currently in V2.0. No changes to content. - Create one V3.0 in-service module from new material under the guidance of the OASiS subject matter expert. - Enhance schematics of V3.0 modules as needed from V2.0 flat files to 2D - Insert QTVR 10 second videos into eight V3.0 in-service modules - Add interactive multimedia such as light indicators as needed - Insert video clips for twelve V3.0 in-service modules - Design a new interface for V3.0 - Design, create a develop a virtual trade show feature with a minimum of two trade show booth looks 1. A Prototype product shall be developed by STEEL BEACH and will consist of: - one fully functional V3.0 in-service module, and - an example of the product interface and the twelve categories OASiS shall review and approve the Prototype, or provide written comments to STEEL BEACH as described in Article Seven, Product Review and Approval Process. 2. The Preliminary Product shall consist of: - 24 fully functional V3.0 in-service modules, and - the full functionality of all twelve categories, and the population of 75% of these categories with content. OASiS shall review and approve the Preliminary product, or proved written comments to STEEL BEACH as described in Article Seven, Product Review and Approval Process. 3. STEEL BEACH shall incorporate any changes that are presented, in writing, by SSP according to the following criteria: STEEL BEACH shall incorporate changes that are within the scope of this effort at no additional charge. Any request for changes that are considered out-of-scope, will not be incorporated until a telephone meeting is held to (1) review the out- of-scope requests, and (2) resolve the request for out-of-scope changes. Out-of-scope change requests may require additional compensation by SSP to STEEL BEACH. 4. STEEL BEACH shall test the Final Product once all the changes have been incorporated into the OASiS Version 3.0 program and provide the Final Product to SSP on March 30, 2000. 5. SSP shall review and accept the Final Product or provide written request for changes to STEEL BEACH. Upon incorporation of all in-scope changes, the Final Product shall be approved by SSP. 6. Once the Final Product is approved by OASiS, Steel Beach will return the 31 in-service modules used to develop this product to OASiS. This will free up storage space in Steel Beach's offices for the next set of in-service module kits to be received and produced. Article Two: CONTRACT TERM: 2.1 Contractual services may begin upon the date of full execution of this contract by SSP and STEEL BEACH. 2.2 The contract will be terminated upon deliver and acceptance of the final product by STEEL BEACH to SSP and receipt of all payments for invoices presented by STEEL BEACH to SSP. Article Three: CONTRACT CONSIDERATION: 3.1 The total consideration for all contractual services shall be $80,050.00 in cash and $80,050.00 worth of stock options in SSP Stock Options determined as follows: The common stock option number will be calculated based on the average closing share price (ACSP) in the 20 days of trading prior to deliver of the final product. The exercise price will be 50% of the 20 day average closing price as quoted on the OTCBB listing. The number of options issued will be calculated by this formula: 2 x $80,050 / ACSP. The options have a term of five years and conform to the standard SSP consultant option policy as far as additional terms and details. The Stock Options shall be issued to STEEL BEACH at the time of acceptance of the Final Product. This is a firm-fixed fee contract with progress payments for product deliverables as described herein. 3.2 A 25% deposit ($20,012.50) is due with the signing of the contract. Deposits in the amount of $20,012.50 have been received and applied to this requirement. 3.3 Progress payment pursuant to this contract will be made as described below: 3.3.1 Payment for Prototype - $25,012.50 3.3.2 Payment for Preliminary Product - $27,025.00 3.3.3 Payment for Final Product - $8,000.00 3.4 Payment will be handled by submission of invoice by STEEL BEACH to G. Michael Swor at SSP at 2018 Oak Terrace, Sarasota, FL 34231 for each deliverable described in Articles One and Three. All payments are NET 10-day terms from receipt of deliverable with accompanying invoice presented by STEEL BEACH to SSP. Interest shall accrue at 1.5% per month for late invoice payments. 3.5 A proposed Product Development Schedule for deliverables will be submitted by STEEL BEACH to SSP. The preliminary development effort is estimated at 90 days fro the project kickoff meeting. Both parties shall agree, in writing, to the schedule developed by STEEL BEACH ad presented to SSP. Article Four: PROPRIETARY INTEREST: Anything, by whatsoever designation it may be known, that is produced, created, or developed in connection with this contract shall remain the exclusive property of the SSP and may not be copyrighted, patented, or otherwise restricted pursuant to state or federal law or regulation. Neither the STEEL BEACH nor any other individual employed under this contract shall have any proprietary interest in any product, system or program produced, created, or developed, pursuant to this contract. STEEL BEACH will, however, retain the proprietary rights to anything to which such rights had attached prior to the execution of this contract. Article Five: INDEPENDENT CONTRACTOR STEEL BEACH shall perform and render their services as an independent contractor and not as an agent, representative, or employee of SSP. All the services described herein will be performed by STEEL BEACH in a proper and satisfactory manner as determined by SSP in its reasonable sole discretion. Article Six: COSTS AND EXPENSES: All costs and expenses, of any nature an type that are incurred by STEEL BEACH while fulfilling the terms of this contract are to be borne by STEEL BEACH. Such costs are to include, but not be limited to: travel, lodging, food, materials, subcontractors and their costs, shipping, leasing, rentals of any variety, salary or other benefits. In no case, other than by amendment of this contract, shall SSP be responsible for any costs beyond those allocated in the section entitled CONTRACT CONSIDERATION above. Article Seven: PRODUCT REVIEW AND APPROVAL PROCESS SSP shall have ten (10) working days to review and provide written comment back to STEEL BEACH on all deliverables discussed in Articles One and Three. If, after a deliverable by STEEL BEACH to SSP, the latter fails to provide written approval or question the deliverable in writing within ten (10) working days beyond the deliverable date, STEEL BEACH shall consider the deliverable approved and move forward with the remaining contract requirements. Article Eight: CHANGES AND CORRECTIONS: STEEL BEACH agrees to make corrections, as suggested and warranted by SSP, within the scope described in Article One, throughout the contract process. However, substantive changes that are suggested or demanded by SSP after a deliverable is approved will be considered "out-of-scope." Such out-of-scope changes that are insisted upon by SSP may extend the deliverable timelines as set forth herein in a manner that is proportional to the delay caused by the out-of-scope changes. Similarly, such out-of-scope changes may also require additional funding. Article Nine: CANCELLATION: In the event that both parties cannot come to agreement on the scope of the project or resolve out-of- scope issues, this contract may be terminated by either SSP or STEEL BEACH, by giving thirty (30) days written notice to the other party; said notice shall be sufficient if it is delivered to the party personally or mailed by certified mail to the mailing address as specified herein. In case of cancellation, only the costs actually accrued for services satisfactorily performed prior to the date of cancellation shall be due and payable, and all work in progress shall remain the property of SSP and shall be delivered to SSP upon payment of all outstanding invoices to STEEL BEACH. Article Ten: ENTIRE AGREEMENT: This contract constitutes the entire agreement of SSP and STEEL BEACH. No other agreement or modification to this contract, expressed or implied, shall be binding on either party unless same shall be in writing and signed by both parties. This contract may not be orally modified. Any modification must be in writing, expressly titled a modification, amendment, or addendum to this contract, attached to this contract, and signed by both parties. Article Eleven: FORCE MAJEURE: Neither party shall be liable for los or damage suffered as a result of any delay or failure in performance under this contract or interruption of performance resulting directly or indirectly from acts of God, civil or miliary authority, acts of public enemy, war, riots, civil disturbances, insurrections, accidents, fire, explosions, floods, water, wind, lightning strikes or labor disputes to the extend such events are beyond the reasonable control of the party claiming excuse from liability resulting therefrom. If a "force majeure event" does occur, the parties agree to negotiate an extension of te contract as appropriate. Article Twelve: LIABILITY: In no event shall SSP or STEEL BEACH liable for any suit or claim for damages or other relief resulting from the acts of the other party. Article Thirteen: PRIORITY: STEEL BEACH represent that all services required pursuant to this contract shall be given first and immediate priority. Time is of the essence in regards to all elements of this contract. Article Fourteen: RENEWAL: This contract may be renewed by written agreement of all parties. Article Fifteen: ATTORNEYS' FEES: Except as provided by law, the parties agree to be responsible for their own attorneys' fees incurred in connections with any disputes arising under the terms of this contract. Article Sixteen: DISPUTES: This contract shall be governed by and construed in accordance with the laws of Florida. Article Seventeen: SEVERABILITY: The invalidity or unenforceability of any particular provision of this contract shall not affect the other provisions hereof and this contract shall be construed in all respects as if such invalid or unenforceable provision(s) was omitted. Article Eighteen: NOTICES: All notice to be provided pursuant to this contract are to be provided to the parties by directing it to the person and address set forth below: WITH THEIR SIGNATURES, the parties agree to all the provisions, special and general, and all other terms and conditions of this contract. Florida law governs this contract. /s/ G. Micheal Swor - -------------------------------------- Surgical Safety Products, Inc. 2/29/2000 - ------------------------------------- Date /s/ Robert L. Kenny - -------------------------------------- Robert L. Kenny President Steel Beach Productions, Inc. 2/29/2000 - -------------------------------------- Date EX-27 3 FDS --
5 0001063530 Surgical Safety Products, Inc. 1 U.S. Currency 3-mos Dec-31-1999 Jan-1-2000 Mar-31-2000 1 566,812 0 146,554 0 0 873,228 189,306 0 1,773,589 399,806 0 0 0 14,566 73,783 1,773,589 0 135,656 376,741 572,507 14,345 0 181,421 (436,851) 0 0 0 0 0 (436,851) (0.038) 0
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