Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
SPOM > SEC Filings for SPOM > Form 10-K on 11-Apr-2013All Recent SEC Filings

Show all filings for SPO MEDICAL INC | Request a Trial to NEW EDGAR Online Pro

Form 10-K for SPO MEDICAL INC


11-Apr-2013

Annual Report


ITEM 7. 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 THIS ANNUAL REPORT.

OVERVIEW

SPO Medical Inc. ("we" or the "Company" or "SPO") is engaged in the design and development 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). RPO functions using an ASIC (application specific integrated circuit), which is equivalent to a "customized" semi-conductor. Using this technology, a sensor can be positioned on various body parts, minimizing problems from motion artifacts and poor perfusion. The unique design features contribute to substantially lower power requirements and enhance wireless, stand-alone configurations facilitating expanded commercial possibilities. As of April 2013, we held 12 patents issued by the United States Patent and Trademark Office ("USPTO") and European Patent Authorities covering various aspects of our technologies.

We are currently focused on exploiting the sports, baby monitoring and wellness markets by developing cutting edge products based on our proprietary technology. Our current wellness products under development include an innovative bracelet, a baby monitoring unit and a sports watch.

Current Operational Highlights

We recorded revenues of $278,000 for the three months ended September 30, 2012, representing our first quarter revenues from operations since the fourth quarter of 2011. Revenues resulted from the initial shipments of a new consumer wellness product to mass-market retailers based in the United States.

Since August 2012, we have partnered with HoMedics LLC, a distributor and manufacturer of leading brands in an array of consumer health, wellness and electronic lifestyle categories throughout the Americas, Europe, the Asia-Pacific region, Africa and the Middle-East, for the distribution of a private labeled, over the counter pulse oximeter for non-medial consumer wellness applications.

We recorded revenues of $316,000 for the twelve months ended December 31, 2012. Revenues resulted primarily from the initial shipments of a new consumer wellness product to mass-market retailers based in the United States. As of December 31, 2012, we had a backlog of approximately $500,000, consisting of orders for additional units of our wellness product that we expect to deliver into 2013. We have generated significant operating losses since inception and we have a limited operating history upon which an evaluation of our prospects can be made. Our prospects must therefore be evaluated in light of the problems, expenses, delays and complications associated with a development stage company.

However, we need to raise additional funds on an immediate basis in order to realize our business plan as well as pay outstanding loans in the approximate amount of $1,456,000, of which $1,081,000 mature during the year ended December 31, 2013. In January 2010, we restructured our operations in an attempt to focus primarily on our core technology for non-medical market operations. As of April 11, 2013, we had two employees working on a full-time basis. In addition, all research and development activities are performed on a sub-contracted basis. If we are unable to raise capital on an immediate basis, it may be necessary for us to take further cost cutting measures to reduce our cash burn including laying-off additional personnel and/or cease operations entirely. 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 audited 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 product manufacturing and the provision of subcontracted research and development services. Revenues generated from product manufacturing are recognized when such products are shipped; subcontracted research and development services are recognized when such services are performed.

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.

COMPARISON OF THE YEAR ENDED DECEMBER 31, 2012 (the "2012 Period") AND THE YEAR
ENDED DECEMBER 31, 2011 (the "2011 Period")

REVENUES. Revenues for the 2012 Period were $316,000 compared to $20,000 in the 2011 Period. The increase in revenues during the 2012 Period as compared to the 2011 Period is attributable to initial shipments of our new consumer wellness product to mass-market retailers. The revenues in 2011 were derived from the provision of research and development services.

COSTS OF REVENUES. Costs of revenues include all costs related to products sold. Costs of revenues for the 2012 Period were $266,000 compared to $10,000 for the 2011 Period. The increase in cost of revenues is primarily attributable to increase in revenues.

RESEARCH AND DEVELOPMENT EXPENSES, NET. Research and development expenses, net consist primarily of expenses incurred in the design, development and testing of our products net of government grants and participation by others. These expenses consist primarily of salaries and related expenses for personnel, contract design and testing services, supplies used and consulting and license fees paid to third parties. Research and development expenses, net, for the 2012 Period were $10,000 compared to $57,000 for the 2011 Period. The decrease in research and development expenses, net in the 2012 Period as compared to the 2011 Period is primarily attributable to the decrease in the number of employees and other personnel resulting from the cessation by us in February 2011 of all internal research and development activities.

.

SELLING AND MARKETING EXPENSES. Selling and marketing expenses consist primarily of costs relating to compensation attributable to consultants for the provision of public relations, promotion and marketing services geared to the recreational sports and wellness markets. Selling and marketing expenses for 2012 Period were $510,000, of which $499,800 were stock based non-cash expenses, compared to $1,142,000, of which $1,055,000 were stock based non cash expenses, for the 2011 Period. The decrease in selling and marketing expenses in the 2012 Period as compared to the 2011 Period is primarily attributable to the reduction in our utilization of consultancy related services.

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 2012 Period were $216,000 compared to $522,000 for the 2011 Period. The decrease in general and administrative expenses is primarily attributable to reductions in employee salaries and investor relation activities.

IMPAIRMENT OF PROPERTY AND EQUIPMENT, NET. In February 2011, we transferred research and development activity to subcontractors and therefore ceased all internal research and development activities which resulted in a impairment to property and equipment in the amount of $96,000. There was no impairment recorded in 2012.

FINANCIAL INCOME (EXPENSE), NET. Financial expense net for the 2012 Period was $202,000. Financial income net, for the 2011 Period was $200,000. The principal items comprising the financial income (expense), net, were non-cash adjustments to warrants liabilities and convertible note discounts, interest on debt, and foreign exchange rate differences. The change from financial income in the 2011 Period to financial expense in the 2012 Period was primarily attributable to non-cash financial income recorded during the 2011 Period in the amount of $200,000 related to evaluation of warrants to issue shares and Exchange rate differences caused by fluctuations in the exchange rate with the New Israeli Shekel ("NIS") on liabilities denominated in NIS held by the subsidiary.

NET LOSS. For the 2012 Period and 2011 Period, we had a net loss of $888,000 and $1,607,000, respectively. The decrease in net loss for the 2012 Period compared to the 2011 Period is primarily attributable to a reduction in our selling and marketing expenses in the approximate amount of $632,000, and in our reduced general and administrative expenses in the approximate amount of $306,000.

LIQUIDITY AND CAPITAL RESOURCES

We need to raise additional funds in order to meet our on-going operating requirements, pay outstanding loans in the aggregate approximate amount of $1,456,000 and to realize our restructured business plan. Our currently existing cash resources are sufficient to satisfy our operating requirements through June 30, 2013. If we are unable to raise capital on an immediate basis through a financial raise or revenues sis, it may be necessary for us to take further measures to reduce our cash burn including laying-off additional personnel, or ceasing operations entirely. 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. Any 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.

As at December 31, 2012, we had approximately $24,000 cash and cash equivalents available to us, compared to $37,000 cash and cash equivalents as at December 31, 2011.

We generated negative cash flow from operating activities of approximately $336,000 during the 2012 Period compared to negative cash flow of $362,000 for the 2011 Period. The decrease in negative cash flows is primarily attributable to a reduction in share based compensation to service providers.

To date, we have financed our operations primarily from debt financing and the sale of our securities. See Notes 5, 9 and 16 in our consolidated financial statements accompanying this Annual Report on Form 10-K.

During 2012, we raised $356,000 from the private placement of our convertible promissory notes and other promissory notes. These notes are scheduled to mature between February 2013 and September 2013.

During the year ended December 31, 2012, we issued 18,078,234 shares of its common stock upon conversion of $94,000 in principal and accrued interest of convertible promissory notes.

Recently Issued Accounting Pronouncements

During 2012, there were no recently issued accounting pronouncements which were issued and which have relevancy to our business.

  Add SPOM to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for SPOM - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.