UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
MARK
ONE
x Quarterly Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
Quarterly Period ended June 30, 2009; or
o Transition Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
transition period from ________ to ________
COMMISSION
FILE NUMBER: 0-11772
SPO
MEDICAL INC.
(Exact
name of registrant specified in its charter)
|
Delaware
|
25-1411971
|
|
(State or other jurisdiction of incorporation or
organization)
|
(I.R.S. Employer Identification
No.)
|
Beit
Hapa’amon, Suite 209, 20 Hata’as Street, Kfar Saba, Israel
(Address
of principal executive offices, including zip code)
972
9 764-3570
(Registrant's
telephone number, including area code)
Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes
o No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a Smaller reporting company. See
the definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer o
Accelerated filer o
Non-accelerated filer o (Do not check if a
smaller reporting company) smaller reporting company x
Indicate
by a check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No x .
As of
August 14, 2009, SPO Medical Inc. had outstanding 25,033,077 shares of common
stock, par value $0.01 per share.
INDEX
PAGE
|
|
|
PAGE
|
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|
|
PART
I — FINANCIAL INFORMATION
|
|
|
|
|
|
|
|
Forward
Looking Statements
|
|
3
|
|
|
|
|
|
Item
1 - Financial Statements
|
|
|
|
|
|
|
|
Unaudited
Condensed Interim Consolidated Balance Sheet June 30, 2009 and audited
Consolidated balance sheet December 31, 2008
|
|
4
|
|
|
|
|
|
Unaudited
Condensed Interim Consolidated Statements of Operations for the six and
three months ended June 30, 2009 and 2008
|
|
5
|
|
|
|
|
|
Unaudited
Condensed Interim Statements of Changes in Stockholders'
Deficiency
|
|
6
|
|
|
|
|
|
Unaudited
Condensed Interim Consolidated Statements of Cash Flows for the six and
three months ended June 30, 2009 and 2008
|
|
7
|
|
|
|
|
|
Notes
to Condensed Interim Consolidated Financial Statements
|
|
8
|
|
|
|
|
|
Item
4(T) - Controls and Procedures
|
|
14
|
|
|
|
|
|
PART
II — OTHER INFORMATION
|
|
|
|
|
|
|
|
Item
3 - Defaults upon Senior Securities
|
|
14
|
|
|
|
|
|
Item
6 - Exhibits
|
|
15
|
|
|
|
|
|
SIGNATURES
|
|
16
|
FORWARD
LOOKING STATEMENTS
THE
FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS
AND RELATED NOTES CONTAINED ELSEWHERE IN THIS FORM 10-Q. CERTAIN STATEMENTS MADE
IN THIS DISCUSSION ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS CAN
BE IDENTIFIED BY TERMINOLOGY SUCH AS "MAY," "WILL," "SHOULD," "EXPECTS,"
"INTENDS," "ANTICIPATES," "BELIEVES," "ESTIMATES," "PREDICTS," OR "CONTINUE" OR
THE NEGATIVE OF THESE TERMS OR OTHER COMPARABLE TERMINOLOGY AND INCLUDE, WITHOUT
LIMITATION, STATEMENTS BELOW REGARDING: THE COMPANY'S INTENDED BUSINESS PLANS;
EXPECTATIONS AS TO PRODUCT PERFORMANCE; EXPECTATIONS AS TO MARKET ACCEPTANCE OF
THE COMPANY'S TECHNOLOGY; AND BELIEF AS TO THE SUFFICIENCY OF CASH RESERVES.
BECAUSE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, THERE ARE
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS. THESE FACTORS
INCLUDE, BUT ARE NOT LIMITED TO, THE COMPANY'S INABILITY TO OBTAIN NECESSARY
FINANCING; GOING CONCERN QUALIFICATIONS; THE COMPETITIVE ENVIRONMENT GENERALLY
AND IN THE COMPANY'S SPECIFIC MARKET AREAS; CHANGES IN TECHNOLOGY; THE
AVAILABILITY OF AND THE TERMS OF FINANCING; INFLATION; CHANGES IN COSTS AND
AVAILABILITY OF GOODS AND SERVICES; ECONOMIC CONDITIONS IN GENERAL AND IN THE
COMPANY'S SPECIFIC MARKET AREAS; DEMOGRAPHIC CHANGES; CHANGES IN FEDERAL, STATE
AND /OR LOCAL GOVERNMENT LAW AND REGULATIONS AFFECTING THE TECHNOLOGY; CHANGES
IN OPERATING STRATEGY OR DEVELOPMENT PLANS; AND THE ABILITY TO ATTRACT AND
RETAIN QUALIFIED PERSONNEL. ALTHOUGH THE COMPANY BELIEVES THAT EXPECTATIONS
REFLECTED IN THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CANNOT GUARANTEE
FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS. MOREOVER, NEITHER THE COMPANY NOR
ANY OTHER PERSON ASSUMES RESPONSIBILITY FOR THE ACCURACY AND COMPLETENESS OF
THESE FORWARD-LOOKING STATEMENTS. THE COMPANY IS UNDER NO DUTY TO UPDATE ANY
FORWARD-LOOKING STATEMENTS AFTER THE DATE OF THIS REPORT TO CONFORM SUCH
STATEMENTS TO ACTUAL RESULTS.
SPO
MEDICAL INC.
CONSOLIDATED
BALANCE SHEETS
U.S.
dollars in thousands (except share data)
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2009
Unaudited
|
|
|
2008
Audited
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
382 |
|
|
$ |
263 |
|
|
Trade
receivables, net
|
|
|
144 |
|
|
|
224 |
|
|
Prepaid
expenses and other accounts receivable
|
|
|
30 |
|
|
|
32 |
|
|
Inventories
|
|
|
471 |
|
|
|
850 |
|
|
|
|
|
1,027 |
|
|
|
1,369 |
|
|
|
|
|
|
|
|
|
|
|
|
LONG
TERM INVESTMENTS
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
12 |
|
|
|
12 |
|
|
Severance
pay fund
|
|
|
262 |
|
|
|
270 |
|
|
|
|
|
274 |
|
|
|
282 |
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, NET
|
|
|
169 |
|
|
|
189 |
|
|
Total
net assets
|
|
$ |
1,470 |
|
|
$ |
1,840 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
Short-term
loans, net
|
|
$ |
1,114 |
|
|
$ |
1,138 |
|
|
Trade
payables
|
|
|
132 |
|
|
|
298 |
|
|
Employees
and payroll accruals
|
|
|
807 |
|
|
|
492 |
|
|
Accrued
expenses and other liabilities
|
|
|
902 |
|
|
|
785 |
|
|
|
|
|
2,955 |
|
|
|
2,713 |
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
severance pay
|
|
|
512 |
|
|
|
492 |
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIENCY
|
|
|
|
|
|
|
|
|
|
Stock
capital
|
|
|
248 |
|
|
|
248 |
|
|
Additional
paid-in capital
|
|
|
14,283 |
|
|
|
14,241 |
|
|
Accumulated
deficit
|
|
|
(16,528 |
) |
|
|
(15,854 |
) |
|
|
|
|
(1,997 |
) |
|
|
(1,365 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ deficiency
|
|
$ |
1,470 |
|
|
$ |
1,840 |
|
SPO
MEDICAL INC. AND ITS SUBSIDIARY
CONDENSED
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
U.S.
dollars in thousands (except share data)
|
|
|
Six months ended
June 30,
|
|
|
Three months ended
June 30,
|
|
|
|
|
Unaudited
|
|
|
Unaudited
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
705 |
|
|
$ |
2,168 |
|
|
$ |
325 |
|
|
$ |
1,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenues
|
|
|
440 |
|
|
|
1,187 |
|
|
|
255 |
|
|
|
595 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
265 |
|
|
|
981 |
|
|
|
70 |
|
|
|
494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development, net
|
|
|
265 |
|
|
|
723 |
|
|
|
195 |
|
|
|
293 |
|
|
Selling
and marketing
|
|
|
87 |
|
|
|
324 |
|
|
|
39 |
|
|
|
181 |
|
|
General
and administrative
|
|
|
457 |
|
|
|
756 |
|
|
|
289 |
|
|
|
454 |
|
|
Total
operating expenses
|
|
|
809 |
|
|
|
1,803 |
|
|
|
523 |
|
|
|
928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
544 |
|
|
|
822 |
|
|
|
453 |
|
|
|
434 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
expenses, net
|
|
|
130 |
|
|
|
251 |
|
|
|
78 |
|
|
|
138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
for the period
|
|
$ |
674 |
|
|
$ |
1,073 |
|
|
$ |
531 |
|
|
$ |
572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per ordinary share
|
|
$ |
(0.03 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding
used in computation of basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
diluted loss per share
|
|
|
26,045,496 |
|
|
|
23,085,616 |
|
|
|
26,067,315 |
|
|
|
23,790,236 |
|
The
accompanying notes to these financial statements are an integral part
thereof.
SPO MEDICAL INC. AND ITS
SUBSIDIARY
CONDENSED INTERIM STATEMENTS
OF CHANGES IN STOCKHOLDERS DEFICIENCY
U.S.
dollars in thousands
|
|
|
Stock capital
|
|
|
Additional
paid-in
capital
|
|
|
Accumulated
deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2007
|
|
$ |
193 |
|
|
$ |
9,954 |
|
|
$ |
(11,049 |
) |
|
$ |
(902 |
) |
|
Issuance
of stock capital, net
|
|
|
14 |
|
|
|
1,169 |
|
|
|
|
|
|
|
1,183 |
|
|
Exercise
of stock options
|
|
|
2 |
|
|
|
8 |
|
|
|
|
|
|
|
10 |
|
|
Benefit
on warrants issued in connection with credit line
|
|
|
|
|
|
|
19 |
|
|
|
|
|
|
|
19 |
|
|
Benefit
resulting from changes to warrant terms
|
|
|
|
|
|
|
41 |
|
|
|
|
|
|
|
41 |
|
|
Issuance
of ordinary stock upon exercise of warrants and conversion of
loans
|
|
|
6 |
|
|
|
510 |
|
|
|
|
|
|
|
516 |
|
|
Amortization
of deferred stock-based compensation related to options granted to
employees
|
|
|
|
|
|
|
110 |
|
|
|
|
|
|
|
110 |
|
|
Amortization
of deferred stock-based compensation related to options granted to
directors
|
|
|
|
|
|
|
58 |
|
|
|
|
|
|
|
58 |
|
|
Amortization
of deferred stock-based compensation related to options granted to
consultants
|
|
|
|
|
|
|
35 |
|
|
|
|
|
|
|
35 |
|
|
Net
Loss
|
|
|
|
|
|
|
|
|
|
|
(1,604 |
) |
|
|
(1,604 |
) |
|
Balance
as of December 31, 2007
|
|
$ |
215 |
|
|
$ |
11,904 |
|
|
$ |
(12,653 |
) |
|
$ |
(534 |
) |
|
Issuance
of ordinary stock upon conversion of loans and accrued
interest
|
|
|
10 |
|
|
|
512 |
|
|
|
|
|
|
|
522 |
|
|
Issuance
of stock capital, net
|
|
|
8 |
|
|
|
549 |
|
|
|
|
|
|
|
557 |
|
|
Issuance
of ordinary stock to service providers
|
|
|
9 |
|
|
|
356 |
|
|
|
|
|
|
|
365 |
|
|
Issuance
of ordinary stock on cancellation of distribution
agreement
|
|
|
4 |
|
|
|
481 |
|
|
|
|
|
|
|
485 |
|
|
Benefit
on issuance of warrants in connection with conversion of loans and accrued
interest
|
|
|
|
|
|
|
105 |
|
|
|
|
|
|
|
105 |
|
|
Amortization
of deferred stock-based compensation related to options granted to
employees
|
|
|
|
|
|
|
249 |
|
|
|
|
|
|
|
249 |
|
|
Issuance
of ordinary stock in consideration of unpaid legal fees
|
|
|
2 |
|
|
|
28 |
|
|
|
|
|
|
|
30 |
|
|
Benefit
on issuance of options and re-pricing of options granted to
directors
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
10 |
|
|
Benefit
on issuance of penny warrants to service providers
|
|
|
|
|
|
|
47 |
|
|
|
|
|
|
|
47 |
|
|
Net
Loss
|
|
|
|
|
|
|
|
|
|
|
(3,201 |
) |
|
|
(3,201 |
) |
|
Balance
as of December 31, 2008
|
|
$ |
248 |
|
|
$ |
14,241 |
|
|
$ |
(15,854 |
) |
|
$ |
(1,365 |
) |
|
Issuance
of ordinary stock to service provider
|
|
|
*- |
|
|
|
5 |
|
|
|
|
|
|
|
5 |
|
|
Issuance
of ordinary stock in consideration of unpaid accrued
interest
|
|
|
*- |
|
|
|
6 |
|
|
|
|
|
|
|
6 |
|
|
Amortization
of deferred stock-based compensation related to options granted to
employees
|
|
|
|
|
|
|
31 |
|
|
|
|
|
|
|
31 |
|
|
Net
Loss
|
|
|
|
|
|
|
|
|
|
|
(674 |
) |
|
|
(674 |
) |
|
Balance
as of June 30, 2009, Unaudited
|
|
$ |
248 |
|
|
$ |
14,283 |
|
|
$ |
(16,528 |
) |
|
$ |
(1,997 |
) |
* Less
than $1
The
accompanying notes to these financial statements are an integral part
thereof.
SPO MEDICAL INC. AND ITS
SUBSIDIARY
CONDENSED
INTERIM STATEMENTS OF CASH FLOWS
U.S.
dollars in thousands
|
|
|
Six months
ended
June 30,
Unaudited
|
|
|
Three months
ended
June 30,
Unaudited
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
for the period
|
|
$ |
(674 |
) |
|
$ |
(1,073 |
) |
|
$ |
(531 |
) |
|
$ |
(572 |
) |
|
Adjustments
to reconcile loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
20 |
|
|
|
21 |
|
|
|
9 |
|
|
|
10 |
|
|
Stock-based
compensation expenses
|
|
|
31 |
|
|
|
114 |
|
|
|
14 |
|
|
|
93 |
|
|
Amortization
of loan discounts, net
|
|
|
— |
|
|
|
49 |
|
|
|
— |
|
|
|
— |
|
|
Grant
of ordinary stock to service providers
|
|
|
5 |
|
|
|
80 |
|
|
|
— |
|
|
|
80 |
|
|
Benefit
resulting from conversion of loans
|
|
|
— |
|
|
|
105 |
|
|
|
— |
|
|
|
105 |
|
|
Increase
in accrued interest payable on loans
|
|
|
52 |
|
|
|
54 |
|
|
|
22 |
|
|
|
22 |
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease
(increase) in trade receivables
|
|
|
80 |
|
|
|
(89 |
) |
|
|
150 |
|
|
|
(90 |
) |
|
Decrease
in other receivables
|
|
|
2 |
|
|
|
10 |
|
|
|
1 |
|
|
|
261 |
|
|
Decrease
in inventories
|
|
|
379 |
|
|
|
24 |
|
|
|
191 |
|
|
|
74 |
|
|
Increase
(decrease) in trade payable
|
|
|
(166 |
) |
|
|
1 |
|
|
|
(68 |
) |
|
|
11 |
|
|
Increase(decrease)
in employees and payroll accruals
|
|
|
315 |
|
|
|
39 |
|
|
|
204 |
|
|
|
(2 |
) |
|
Increase
(decrease) in accrued severance pay, net
|
|
|
28 |
|
|
|
(30 |
) |
|
|
32 |
|
|
|
(14 |
) |
|
Increase
(decrease) in accrued expenses and other liabilities
|
|
|
117 |
|
|
|
9 |
|
|
|
43 |
|
|
|
(13 |
) |
|
Net
cash provided by (used in) operating activities
|
|
|
189 |
|
|
|
(686 |
) |
|
|
67 |
|
|
|
(35 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
— |
|
|
|
(18 |
) |
|
|
— |
|
|
|
(5 |
) |
|
Net
cash used in investing activities
|
|
|
— |
|
|
|
(18 |
) |
|
|
— |
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of stock capital
|
|
|
— |
|
|
|
557 |
|
|
|
— |
|
|
|
334 |
|
|
Repayment
of short-term loans
|
|
|
(70 |
) |
|
|
(322 |
) |
|
|
(39 |
) |
|
|
(322 |
) |
|
Net
cash provided by (used in) financing activities
|
|
|
(70 |
) |
|
|
235 |
|
|
|
(39 |
) |
|
|
12 |
|
|
Increase
(decrease) in cash and cash equivalents
|
|
|
119 |
|
|
|
(469 |
) |
|
|
28 |
|
|
|
(28 |
) |
|
Cash
and cash equivalents at the beginning of the period
|
|
|
263 |
|
|
|
1,242 |
|
|
|
354 |
|
|
|
801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at the end of the period
|
|
$ |
382 |
|
|
$ |
773 |
|
|
$ |
382 |
|
|
$ |
773 |
|
|
Non
cash transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of ordinary stock to Service providers
|
|
|
— |
|
|
$ |
80 |
|
|
|
— |
|
|
$ |
80 |
|
|
Issuance
of ordinary stock upon conversion of loans and accrued
interest
|
|
$ |
— |
|
|
$ |
461 |
|
|
$ |
— |
|
|
$ |
461 |
|
|
Issuance
of ordinary stock on settlement of distribution agreement
|
|
$ |
— |
|
|
$ |
485 |
|
|
$ |
— |
|
|
$ |
485 |
|
The
accompanying notes to these financial statements are an integral part
thereof.
SPO MEDICAL INC. AND ITS
SUBSIDIARY
Notes to interim financial
statements
SPO
Medical Inc. (hereinafter referred to as "SPO" or the "Company") was originally
incorporated under the laws of the State of Delaware in September 1981 under the
name "Applied DNA Systems, Inc." On November 16, 1994, the Company changed its
name to "Nu-Tech Bio-Med, Inc." On December 23, 1998, the Company changed its
name to "United Diagnostic, Inc." Effective April 21, 2005, the Company acquired
(the "Acquisition Transaction") 100% of the outstanding capital stock of SPO
Medical Equipment Ltd., a company incorporated under the laws of the State of
Israel ("SPO Ltd."), pursuant to a Capital Stock Exchange Agreement dated as of
February 28, 2005 between the Company, SPO Ltd. and the shareholders of SPO
Ltd., as amended and restated on April 21, 2005 (the "Exchange Agreement"). In
exchange for the outstanding capital stock of SPO Ltd., the Company issued to
the former shareholders of SPO Ltd. a total of 5,769,106 shares of the Company's
common stock, par value $0.01 per share ("Common Stock"), representing
approximately 90% of the Common Stock then issued and outstanding after giving
effect to the Acquisition Transaction. As a result of the Acquisition
Transaction, SPO Ltd. became a wholly owned subsidiary of the Company as of
April 21, 2005 and, subsequent to the Acquisition Transaction, the Company
changed its name to "SPO Medical Inc." Upon consummation of the Acquisition
Transaction, the Company effectuated a forward subdivision of the Company's
Common Stock issued and outstanding on a 2.65285:1 basis.
The
merger between UNDI and the SPO Ltd was accounted for as a reverse merger. As
the shareholders of SPO Ltd received the largest ownership interest in the
Company, SPO Ltd was determined to be the "accounting acquirer" in the reverse
acquisition. As a result, the historical financial statements of the Company
were replaced with the historical financial statements of the SPO
Ltd.
The
Company and its subsidiary, SPO Ltd., are collectively referred to as the
"Company".
|
Note
2
|
-
Basis of
Presentation
|
The
accompanying unaudited condensed consolidated interim financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with Rule 10-01
of Regulation S-X. These financial statements reflect all adjustments,
consisting of normal recurring adjustments and accruals, which are, in the
opinion of management, necessary for a fair presentation of the financial
position of the Company as of June 30, 2009 and the results of operations and
cash flows for the interim periods indicated in conformity with generally
accepted accounting principles applicable to interim periods. Accordingly,
certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. Operating results for the six and
three months ended June 30, 2009, are not necessarily indicative of the results
that may be expected for the year ended December 31, 2009
SPO MEDICAL INC. AND ITS
SUBSIDIARY
Notes to interim financial
statements
Note
3 Recently Issued Accounting
Standards
In April
2009 the Financial Accounting Standards Board (FASB) issued FASB staff position
157-4, "Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly". This FSP applies to all assets and liabilities within the
scope of accounting pronouncements that require or permit fair value
measurements, except as discussed in paragraphs 2 and 3 of statement 157. The FSP is
Effective for interim and annual reporting periods ending after June 15, 2009,
and shall be applied prospectively.
FSP FAS
157-4 relates to determining fair values when there is no active market or where
the price inputs being used represent distressed sales. It reaffirms what
Statement 157 states is the objective of fair value measurement—to reflect how
much an asset would be sold for in an orderly transaction (as opposed to a
distressed or forced transaction) at the date of the financial statements under
current market conditions. Specifically, it reaffirms the need to use judgment
to ascertain if a formerly active market has become inactive and in determining
fair values when markets have become inactive.
FSP FAS
157-4 provides guidance on (1) estimating the fair value of an asset or
liability (financial and nonfinancial) when the volume and level of activity for
the asset or liability have significantly decreased and (2) identifying
transactions that are not orderly. The adoption of this standard did not
have any impact on the consolidated results of operations or financial position
of the Company.
In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS No. 165”). SFAS
No. 165 establishes general standards of accounting for, and disclosure of,
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. In particular, this
statement sets forth: (1) the period after the balance sheet date during which
management of a reporting entity should evaluate events or transactions that may
occur for potential recognition or disclosure in the financial statements, (2)
the circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements and (3) the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. SFAS No. 165 is effective for
the interim or annual financial periods ending after June 15, 2009.
The adoption of this standard did not have any impact on the consolidated
results of operations or financial position of the Company.
As
reflected in the accompanying financial statements, the Company’s operations for
the six and three months ended June 30, 2009, resulted in a net loss of $674 and
$531 respectively and the Company’s balance sheet reflects a net stockholders’
deficit of $1,997. The Company’s ability to continue operating as a “going
concern” is dependent on its ability to raise sufficient additional working
capital. Management’s plans in this regard include seeking additional cash from
current and potential stockholders and increasing the marketing of its current
and new products. As disclosed in previous filings with the Securities and
Exchange Commission, management has been attempting to raise capital from
current and potential stockholders and plans to continue these efforts. Failure
to raise additional cash may require the Company to carry out further cost
cutting measures, including the laying off of additional
employees.
SPO MEDICAL INC. AND ITS
SUBSIDIARY
Notes to interim financial
statements
|
Note
5
|
- Financial
Expenses
|
Financial
expenses, net, for the six and three months ended June 30, 2009 were $130 and
$78, respectively. The principal components of the financial expenses for the
six and three months ended June 30, 2009 were: (i) interest in respect of debt
instruments issued by the Company between April 2005 and October 2006, in the
amount of $52 and $22, respectively, (ii) non-cash amortization
expenses in the amount of $5 and $0, respectively, and
(iii) exchange rate differences and others finance expenses, in the
amount of $73 and $56, respectively
|
Note
6
|
-
Employees and
Payroll Accruals
|
Included
in the balance for employees and payroll accruals as at June 30, 2009 is a
provision for liabilities to our employees in respect of unpaid salaries and
social benefits due thereon in the amount of $543.(December 31, 2008 -
$265)
|
Note
7
|
Accrued Expenses and
Other Liabilities
|
Included
in the balance of accrued expenses and other liabilities as at June 30, 2009 is
a provision for liabilities in respect of unpaid royalties owed to the Israeli
Government for grants received from the Office of the Chief Scientist is in the
amount of $337.(December 31, 2008 - $310)
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
THE
FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS
AND THE NOTES RELATED TO THOSE STATEMENTS. SOME OF OUR DISCUSSION IS
FORWARD-LOOKING AND INVOLVES RISKS AND UNCERTAINTIES. FOR INFORMATION REGARDING
RISK FACTORS THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, REFER TO
THE RISK FACTORS SECTION OF THE ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2008.
OVERVIEW
SPO
Medical Inc. (“we” or the “Company”) is engaged in the design, development and
marketing of non-invasive pulse oximetry technologies to measure blood oxygen
saturation and heart rate. We have developed and patented proprietary technology
that enables the measurement of heart rate and oxygen saturation levels in the
blood which is known as Reflectance Pulse Oximetry (RPO). Using RPO, a sensor
can be positioned on various body parts, hence minimizing problems from motion
artifacts and poor perfusion. The unique design features contribute to
substantially lower power requirements and enhances wireless, stand-alone
configurations facilitating expanded commercial possibilities.
We hold
four patents issued by the United States Patent and Trademark Office ("USPTO")
covering various aspects of our unique RPO based technology. As further
discussed below, our technologies are currently applied to products that are
designed for use by the, homecare, professional medical care, sports, safety and
search and rescue.
We were
originally organized under the laws of the State of Delaware in September 1981
under the name "Applied DNA Systems, Inc." On November 16, 1994, we changed our
name to "Nu-Tech Bio-Med, Inc." On December 23, 1998, we changed our name to
"United Diagnostic, Inc." Effective April 21, 2005, we acquired 100% of the
outstanding capital stock of SPO Ltd. pursuant to a Capital Stock Exchange
Agreement dated as of February 28, 2005 among the Company, SPO Ltd. and the
shareholders of SPO Ltd., as amended and restated on April 21, 2005 pursuant to
which we issued to the former shareholders of SPO Ltd. a total of 5,769,106
shares of the Company's Common Stock representing approximately 90% of the
Common Stock then issued and outstanding.
We
currently have five commercial products utilizing our unique oximtery
technology. These are the (i) PulseOx 5500TM, a stand-alone commercial RPO spot
check monitor for SpO2 and heart rate, (ii) Check MateTM,addresses the sports
and aviation market’s demand for a lightweight, inexpensive monitor for
measuring SpO2 and heart rate during high-altitude activities, the PulseOx
7500TM, a monitor for extended monitoring of SpO2 and heart rate by means of RPO
(the monitor is being initially marketed for pre screening of sleep apnea
sufferers), (iv) PulseOX 6000 TM, a professional stand-alone commercial RPO spot
check monitor for SpO2 and heart rate and (v) the PulseOX 6100 TM, a
professional stand-alone hand held commercial RPO spot check monitor for SpO2
and heart rate. We currently have in various stages of development other non
medical products utilizing our pulse oximetry technology, including a Baby
Movement Monitor and a Sports Watch.
We need
to raise additional funds on an immediate basis in order to meet our on-going
operating requirements, pay outstanding loans in the aggregate approximate
amount of $1.1million and to realize our business plan. In response to the
deteriorating global economic conditions that began in 2008, we have, since July
2008, reduced operating expenses in an attempt to conserve our cash resources.
In July 2008 we significantly curtailed our non-essential product design and
development, marketing activities and reorganized our product manufacturing and
delivery system to “just-in-time” arrangements. We have terminated certain
product development plans. During 2008, we began to defer part of management and
employee salaries and benefits and such deferral continues to the present. As of
August 14, 2009, we had 15 employees working on a full-time basis. If we are
unable to raise capital on an immediate basis, it may be necessary for us to
take further measures to reduce our cash burn including laying-off additional
personnel. No assurance
can be given that we will be able to raise the needed capital. These conditions
raise substantial doubt about our ability to continue as a going
concern.
CRITICAL
ACCOUNTING POLICIES
The
discussion and analysis of our financial condition and results of operations are
based upon our unaudited consolidated financial statements, which have been
prepared in accordance with generally accepted accounting principles in the
United States. The preparation of these financial statements requires management
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates, including
those related to revenue recognition, bad debts, investments, intangible assets
and income taxes. Our estimates are based on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates.
We have
identified the accounting policies below as critical to our business operations
and the understanding of our results of operations.
REVENUE
RECOGNITION
We
generate revenues principally from sales of our products. Revenues from the sale
of products are recognized when delivery has occurred, persuasive evidence of an
arrangement exists, the vendor's fee is fixed or determinable, no further
obligation exists and collection is probable and there are no remaining
significant obligations. Delivery is deemed to have occurred upon shipment of
products from any of our distribution centers.
INVENTORY
VALUATION
Inventories
are stated at the lower of cost or market. Cost is determined as follows: raw
materials, components and finished products - on the first in first out (FIFO)
basis. Work-in-process - on the basis of direct manufacturing costs. Our
write-off represents the excess of the carrying value, typically cost, over the
amount we expect to realize from the ultimate sale or other disposal of
inventory based upon our assumptions regarding forecasted consumer demand,
inventory aging and technological obsolescence. If our estimates regarding
consumer demand are inaccurate or changes in technology affect demand for
certain products in an unforeseen manner, we may be exposed to losses or gains
in excess of our established write-off that could be material.
USE
OF ESTIMATES
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
RESULTS
OF OPERATIONS
COMPARISON
OF THE SIX AND THREE MONTHS ENDED JUNE 30, 2009 AND THE SIX AND THREE MONTHS
ENDED JUNE 30, 2008
REVENUES. Revenues for each of
the six and three months ended June 30, 2009 and 2008 were derived from our
commercialized pulse oximetry product line, primarily the PulseOx 5500 and Check
Mate. Revenues for the six and three months ended June 30, 2009 were $705,000
and $325,000, respectively. Revenues for the corresponding periods in 2008 were
$2,168,000 and $1,089,000, respectively. The decrease in revenues for each
of the six and three month periods ended June 30, 2009 compared to the
corresponding periods in 2008 is attributable to the combined effect of
a decrease in the volume of unit sales together with a reduction of
the per unit price, both of which are attributable to the economic difficulties
currently prevailing in our principal market, the United States, and the entry
into the United States market of a significant number of relatively low cost
products, primarily form China. Of the revenues earned in the six and three
months ended June 30, 2009, 43.9% and 45.5%, respectively, were
attributable to a single customer.
COSTS OF REVENUES. Costs of
revenues include all costs related to manufacturing products and services and
consist primarily of direct material costs, shipping and salaries and related
expenses for personnel. Costs of revenues for the six and three months ended
June 30, 2009 were $440,000 and $255,000, respectively. Costs of Revenues for
the corresponding periods in 2008 were $1,187,000 and $595,000, respectively.
The decrease in cost of revenues is consistent with the decrease in revenues and
includes, an inventory write off in the amount of $80,000 during the three
months ended June 30, 2009.
RESEARCH AND DEVELOPMENT EXPENSES,
NET. Research and development expenses, net, consist primarily of
expenses incurred in the design, development and testing of our products. These
expenses consist primarily of salaries and related expenses for employees,
contract design and testing services, supplies used and consulting and license
fees paid to third parties. Research and development expenses, net, for the six
and three months ended June 30, 2009 were $265,000 and $195,000, respectively.
Research and development expenses net, for the corresponding periods in 2008
were $723,000 and $293,000, respectively. The decrease in research and
development expenses during six and three months ended June 30, 2009 as compared
to the corresponding periods in 2008 is primarily attributable to the decrease
in the number of employees and the receipt in February and March 2009 of a grant
in the amount of $125,000 received from the Office of the Chief Scientist of the
Government of Israel (“OCS”), which we recognized in the period ended March 31,
2009.
SELLING AND MARKETING
EXPENSES. Selling and marketing expenses consist primarily of costs
relating to compensation attributable to employees engaged in sales and
marketing activities, promotion, sales support, travel and related expenses.
Selling and marketing expenses for the six and three months ended June 30, 2009
were $87,000 and $39,000, respectively. Selling and marketing expenses for the
corresponding periods in 2008 were $324,000 and $181,000, respectively. The
decrease in selling and marketing expenses during 2009 is attributable to the
decrease in the number of employees, and the decrease in the investment by us in
marketing consultants and reseller support programs.
GENERAL AND ADMINISTRATIVE
EXPENSES. General and administrative expenses primarily consist of
salaries and other related costs for personnel in executive and other
administrative functions. Other significant costs include professional fees for
legal and accounting services. General and administrative expenses for the six
and three months ended June 30, 2009 were $457,000 and $289,000, respectively.
General and administrative expenses for the corresponding periods in 2008 were
$756,000 and $454,000, respectively. The decrease in general and administrative
expenses during 2009 is primarily attributable to the recovery of a bad debt
provision in the amount of $58,000 net, which we recorded during the fourth
quarter of 2008, a reduction in the expenses recognized in respect of investor
relations in the amount of $106,000 and a reduction in respect
of amortization of stock based compensation in the amount of
$73,000.
FINANCIAL EXPENSES, NET.
Financial expenses, net, for the six and three months ended June 30, 2009 were
$130,000 and $78,000, respectively. Financial expenses, net, for the
corresponding periods in 2008 were $251,000 and $138,000, respectively. The decrease in
financial expenses, net, during the six months ended June 30, 2009 compared to
the corresponding period in 2008 is primarily attributable to the recognition in
2008 of non cash amortization of loan discounts in the amount of $49,000 and one
time non cash expenses relating to the issue of warrants for the conversion to
equity of certain loan notes and accrued interest thereon in the amount of
$105,000.
NET LOSS. For the six and
three months ended June 30, 2009, we had a net loss of $674,000 and $531,000,
respectively. Net loss for the corresponding periods in 2008 were $1,073,000 and
$572,000, respectively. The decrease in net loss during 2009 period is primarily
attributable to our reorganization process which was initiated in July 2008 in
an attempt to cut the Company’s operating costs significantly and better align
our operations with our revenues.
LIQUIDITY
AND CAPITAL RESOURCES
As at
June 30, 2009, we had cash and cash equivalents of approximately $382,000
compared to $263,000 at December 31, 2008.
We
generated net positive cash flows from operating activities of approximately
$189,000 during the six months ended June 30, 2009 compared to $686,000 negative
cash flows during the six months ended June 30 31, 2008. The primary source of
the increased cash flows resulted from the receipts in February 2009 and March
2009 of the grant from the OCS in the amount of $125,000 as well as the
contribution from cost savings in the period.
In
December 2005 we completed the private placement to certain accredited investors
that we commenced in April 2005 for the issuance of up to $1,544,000 of units of
our securities, with each unit comprised of (i) our 18 month 6% promissory note
(collectively, the "April 2005 Notes") and (ii) three year warrants to purchase
up to such number of shares of our Common Stock as are determined by the
principal amount of the Note purchased by such investor divided by $ 0.85
(collectively the "April 2005 Warrants"). We and the holders of $1,464,000 in
principal amount of the April 2005 Notes subsequently agreed to (a) extend the
maturity term of the April 2005 Notes through March 26, 2008,
(b)extend the exercise period of the April 2005 Warrants from three
to five years with an expiration date of September 26, 2010 and adjust the per
share exercise price to $0.60 and (c) increase the interest rate on
the amounts outstanding under the April 2005 Notes to 8% per annum, effective
July 12, 2006. Holders of notes in the principal amount of $125,000 that agreed
to the extension of the maturity date on the notes , have since exercised their
warrants and converted the interest accrued there on into common stock; and a
holder of an April 2005 Note in the principal amount of $50,000 was
repaid. The Amendment also provided that if we subsequently issue
shares of our Common Stock at an effective per share exercise price less than
that of the adjusted per share exercise price of the April 2005 Warrants during
the adjusted exercise period, then the exercise price thereof is to be reduced
to such lower exercise price, except for certain specified issuances. All of the
extended notes, matured on March 26, 2008
In March
2008, we offered to the holders of the April 2005 Notes to apply the amounts
payable to them on the April 2005 Notes, to the exercise price of the April 2005
Warrants, thereby exercising these warrants, and to convert into Common Stock
the accrued interest on the 2005 Notes at a per share conversion price of $0.60.
Note holders who accepted this offer were issued new warrants for such number of
shares of Common Stock equal to 25% of the number shares issued to them upon
exercise of their existing warrants and conversion of the interest accrued on
the note. The new warrants will be exercisable over three years at an exercise
price of $0.60. As of December 31, 2008, the holders of approximately $439,000
in principal amount have agreed to apply the principal amount owed to them to
the exercise price of the April 2005 Warrants. Accordingly, approximately
$520,000 in amounts owed under the 2005 Notes have been converted into equity
and, accordingly, an aggregate of 866,528 shares of our Common Stock have been
issued upon exercise of the April 2005 Warrants and conversion of the interest
owing on the April 2005 Notes. Under the terms of the offer, new warrants for
216,636 shares of our Common stock have been issued to these April 2005 Note
holders, exercisable over three years from the date of issuance. Three note
holders of the principal amount of $200,000 have agreed to extend their loan for
a further 24 months and we agreed to pay to them the interest accrued through
the original maturity date of March 26, 2008 in the aggregate amount of $40,000.
Under the terms of the agreement with the extending note holders, we will issue
to the extending holders new warrants for an aggregate of 50,000 shares of our
Common stock, which warrants are exercisable for three years from issuance and
contain the same operative terms, including exercise price, as the warrants that
were originally issued in connection with the issuance of the April 2005 Notes.
We have been informed by the holders of $300,000 in principal amount of their
election to not accept our offer, of which $250,000 of principal and the accrued
interest thereon has been repaid as of the date of the filing of this quarterly
report. In February, 2009, we agreed with one of the note holders to repay
$25,000 in principal over a number of payments during the current financial year
and to convert accrued interest to 26,500 shares of common stock. We have also
made payments in the amount of $21,000 during the three months ended June 30,
2009 to other holders in respect of principal and accrued interest. As of August
14, 2009, approximately $872,000 in respect of the principal and accrued
interest on the April 2005 Notes remains outstanding and, accordingly, under the
terms of such notes, we are in default in respect of this amount. We continue to
seek resolution to this matter; but no assurance can be provided that we will be
successful in our efforts.
In July
2006, we commenced a private placement of units of our securities, with each
unit comprised of (i) our 8% month promissory note due 12 months from the date
of issuance and (ii) warrants as described below, pursuant to which we raised
$550,000 (the maximum amount that could be raised from this offering). Under the
terms of the offering, the principal and accrued interest is due in one balloon
payment at the end of the twelve month period. Each purchaser of the notes
received warrants, exercisable over a period of two years from the date of
issuance, to purchase 16,250 shares of Common Stock for each $25,000 of
principal loaned, at a per share exercise price equal to the lower of $1.50 or
35% less than any the offering price at an initial public offering of the
Company's Common Stock during the warrant exercise period. During 2007, we
offered to the holders of the notes to convert the principal and accrued
interest into shares of the Company’s Common Stock at a per share conversion
price of $0.90. As of June 30, 2009, the holders of $238,000 of the principal
amount agreed to convert the principal and accrued interest thereon into shares
of our Common Stock. We repaid to a note holder the principal amount of $75,000
and the accrued interest thereon. We have made payments to certain holders in
respect of principal and accrued interest in the amount of $18,000 during the
three months ended June 30, 2009. As of August 14, 2009, approximately
$250,000 in respect of the principal and accrued interest on these notes
remains outstanding and, accordingly, under the terms of such notes, we are in
default in respect of this amount. We continue to seek resolution to this
matter; but no assurance can be provided that we will be successful in our
efforts.
We have
previously received development grants from the Israeli Government, specifically
from the OCS. Under the terms of these grants, we are required to make payments
of royalties based on sales of products that have been developed using the funds
received under these grants. Through June 30, 2009, we have accrued $337,000 of
royalties due to the OCS from past sales of our Pulse Oximetry products. In
light of our current liquidity challenges, we have not made payments
to the OCS in respect of these accrued royalties. We are currently negotiating
with the OCS a resolution to this matter, though no assurance can be given that
we will be successful in reaching any satisfactory arrangement.
As we
previously disclosed in our annual report for the year ended December 31, 2008
on Form 10K, in order to conserve our cash resources, we have not be paying the
full remuneration liabilities in respect of employees since July 2008. The
deferral of salary payments and social benefits is being effected with the
consent of the employees. As at June 30, 2009 we have recorded an accumulated
liability to our employees in respect of unpaid salaries and social benefits due
thereon in the aggregate amount of $543,000.
As noted
above, we need to raise additional funds on an immediate basis in order to be
able to satisfy our cash requirements and fulfill our business plan over the
next twelve months, pay outstanding loans in the approximate amount of $1.1
million and deferred royalties in the approximate amount of $337,000, which are
currently due and payable. Without raising additional funds on an immediate
basis, whether through the issuance of our securities, licensing fees for our
technology or otherwise, we will also not be able to maintain operations as
presently conducted or to commercially launch any new products that are
currently under design and development. As previously disclosed in our periodic
reports, we have been actively seeking additional capital. In response to the
general deterioration in the general economic environment which began in 2008,
we have taken several cost-cutting measures. We have laid-off a number of our
employees and as of August 14, 2009, we have 15 full time remaining employees on
staff. Additionally, we have been forced to delay payments to most of our
vendors and defer salaries for management and employees. If we are unable to
raise additional capital on an immediate basis and/or our employees demand the
immediate payment of amounts due them that have been deferred, we may be forced
lay-off additional employees and either restructure or cease operations
entirely. At the present time, we have no commitments for financing and no
assurance can be given that we will be able to raise capital on commercially
acceptable terms or at all. We may not be successful in our efforts to raise
additional funds. Even if we raise cash to meet our immediate working capital
needs, our cash needs could be heavier than anticipated in which case we could
be forced to raise additional capital. Our auditors included a "going concern"
qualification in their auditors' report for the year ended December 31, 2008.
Such "going concern" qualification may make it more difficult for us to raise
funds when needed. In addition, the current economic situation may further
complicate our capital raising efforts.
Additional
equity financings is likely to be dilutive to holders of our Common Stock and
debt financing, if available, may require us to be bound by significant
repayment obligations and covenants that restrict our
operations.
ITEM
4(T). CONTROLS AND PROCEDURES
EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES. We maintain disclosure controls and
procedures that are designed to ensure that information required to be disclosed
in our Exchange Act reports is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms, and that such
information is accumulated and communicated to management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure based closely on the definition of
"disclosure controls and procedures" in Rule 13a-14(c).
As of the
end of the period covered by this report, we carried out an evaluation, under
the supervision and with participation of management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on the
foregoing, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were effective.
CHANGES
IN INTERNAL CONTROLS OVER FINANCIAL REPORTING. During the quarter ended June 30,
2009, there have been no changes in our internal controls over financial
reporting that have materially affected, or are reasonably likely to materially
affect, these controls.
PART II - OTHER INFORMATION
ITEM
3. DEFAULTS UPON SENIOR SECURITIES.
We first
disclosed in the quarterly report on Form 10-Q for the three months ended March
31, 2008, that we had not repaid principal and accrued interest that became
due during the quarterly period covered by such report. We disclosed in
subsequent quarterly reports on Form 10-Q additional amounts that became due in
ensuing quarterly periods and the results of our efforts to resolve these
matters. As of June 30, 2009, there continues to remain outstanding, in the
aggregate, approximately $1.1 Million of such principal and accrued interest. We
continue to hold discussions with certain of the holders of the outstanding debt
in an attempt to resolve this matter; no assurance can be provided that we will
be successful in concluding any mutually acceptable resolution of this
matter.
ITEM 6. EXHIBITS.
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31.1
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Rule
13a - 14(a) Certification of Principal Executive
Officer
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31.2
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Rule
13a - 14(a) Certification of Principal Financial
Officer
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32.1
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Section
1350 Certification of Principal Executive Officer
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32.2
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Section
1350 Certification of Principal Financial
Officer
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SIGNATURES
Pursuant to
the requirements of the Exchange Act of 1934, the registrant has caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
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DATE:
August 14, 2009
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SPO
MEDICAL INC.
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/s/ MICHAEL BRAUNOLD
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MICHAEL
BRAUNOLD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
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PRINCIPAL
FINANCIAL AND ACCOUNTING OFFICER
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DATE:
August 14, 2009
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BY
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/s/
JEFF FEUER
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JEFF
FEUER,
CHIEF
FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
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