Unassociated Document
SECURITIES
AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): January 26, 2010
SPO
MEDICAL INC.
(Exact
name of registrant as specified in its charter)
Delaware
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0-11772
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25-1411971
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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3, Gavish
Street, POB 2454, Kfar Saba, Israel
(Address
of principal executive offices, including Zip Code)
+972-9-764-3570
(Registrant's
telephone number, including area code)
(Former
name or former address, if changed since last report.)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
o Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
1.01. Entry into a Material Definitive
Agreement
On
January 26, 2010 SPO Medical Equipment Ltd. (“SPO LTD”), the wholly owned
subsidiary of SPO Medical Inc. (the “Company”) entered into an Alliance and
License Agreement, dated as of December 1, 2009 (the “Agreement”), with SPO
Medical Systems Ltd. (the “Licensee”) pursuant to which SPO LTD granted to the
Licensee certain rights with respect to SPO LTD’s PulseOx™ product line
utilizing SPO LTD’s unique pulse oximetry technology. Under the Agreement, the
Licensee was granted a non-transferable, royalty bearing worldwide license,
solely with the Field of Use (as defined below) to (i) manufacture and
distribute the PulseOx™ product line, including the Check Mate™ (collectively
the “Special Products”), and derivates, (ii) to use and improve SPO LTD
technology (whether or not related specifically to the Special Products) for
purpose of creating derivative products based on the Special Products, (iii)
bundle Special Products with Licensee technology (the “Bundled Technology”). The
term “Field of Use” has been defined to mean medical technologies and products
designed to measure any vital sign(s) which utilize reflective oximetry
methodology, where “medical” has been limited to refer solely to any technology
or product being targeted for sale solely for use by persons with a potential or
existing illness and technology to determine whether a person is
alive.
The
license described above is exclusive with respect to Special Products and the
Bundled Technology which measure pulse (by any means) and one other vital sign
and non-exclusive with Special Products or the Bundled Technology which measure
only pulse (with no other vital sign being measured).
In
addition to the license rights described above, Licensee was also granted an
exclusive non-transferable, royalty bearing, world wide license to manufacture
and distribute the Check Mate™ device, SPO LTD’s specially designed monitor for
measuring SpO2 and heart rate during physically active and high latitude
activities.
Under the
Agreement, the Licensee (and its affiliates) have undertaken to pay to SPO LTD
royalties derived from Special Products as follows (collectively, the
“Royalties”):
(i)
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all
revenues deriving from purchase orders received during December 2009 in
excess of $100,000;
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(ii)
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with
respect to 2010, 50% of net revenues in excess of $390,000 per calendar
quarter;
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(iii)
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with
respect to 2011, 50% of net revenues in excess of $600,000 per calendar
quarter; and
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(iv)
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From
2012 through the end of the lease term, 6% of gross
revenues.
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With
respect to Bundled Technology, from 2010 through the end of the term, under the
Agreement the Licensee (and its affiliates) are to pay 3% of gross revenues,
payable on a quarterly basis, so long as Special Products do not comprise more
than 50% of Bundled Technology. If the Special Products constitute more than 50%
of the Bundled Technology, the per annum royalty rate shall be at the rate of
6%. Royalties are payable within the later to occur of (i) the 30th day
following receipt of revenues proceeds or (ii) 30th day
following the end of the period for which royalties are payable.
In order to maintain the exclusive
license rights described above, the Company must receive, beginning 2013 and
continuing through the end of the license period, per annum minimum royalties in
the aggregate amount of at least $60,000 (the “Minimum Royalty Payment”). The
Minimum Royalty Payment is due by the 30th day
following the end of the year. If for whatever reason the Minimum Royalty
Payment is not paid when due, then the license shall automatically and without
any further action become non-exclusive. SPO LTD has the right to audit to
review or audit the Licensee records to verify compliance with the terms of the
Agreement.
Unless terminated earlier as provided
therein, the license terms under the Agreement extends through November 30,
2016. Notwithstanding the foregoing, either party is entitled to terminate the
Agreement (i) upon a material breach by the other party and its failure to cure
such breach within 30 days following receipt of written notice thereof, (ii)
upon the other party’s insolvency or liquidation event or (iii) if the results
of three audits performed by the Company shall reveal that Licensee (or its
affiliates) underreported by 10% the amount of payments due to the
Company.
Following the Agreement, the Company
will primarily be engaged in developing and commercializing non-medical
applications for its technology. In connection with the Agreement, the Licensee
has purchased from
SPO LTD certain equipment specified in the agreement for total cash proceeds to
SPO LTD of $200,000.
In consideration of the license, during
the term of this Agreement and for one year thereafter, the Licensee has
undertaken to not engage, directly or indirectly, in the design, development,
production, sale or distribution of any product or component that directly or
indirectly competes with a product or component then being designed produced or
sold by the Company or its affiliates or to which the Company or any of its
affiliates shall then have proprietary rights.
The principal shareholder and control
person of the Licensee is Israel Sarussi, a stockholder of the Company and a
Director and employee of SPO LTD. Sarussi will continue with his technical
support duties at SPO LTD, albeit on a reduced basis.
Item
2.01. Completion of Acquisition or Disposition of
Assets
The
disclosures set forth under Item 1.01 are hereby incorporated by reference into
this Item 2.01.
The
Company intends to reflect in its upcoming annual report on Form 10-K for the
year ended December 31, 2009 the license of the assets (and related
revenues).
In
determining that Royalties are to consist of 50% of the net revenues above the
amounts specified above for each of 2010 and 2011, reference was made to the
historical revenues and profit margins generated by these products. With
respect to 2012 through the end of the term, reference was made to typical
industry rates for royalty agreements of this type.
ITEM
9.01 FINANCIAL STATEMENTS AND EXHIBITS
(a)
Financial Statements.
None.
(b) Pro
Forma Financial Information.
None.
(c)
Exhibits.
None.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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Dated:
February 1, 2010
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SPO
MEDICAL INC.
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By:
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/s/ Michael
Braunold
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Michael
Braunold
Chief
Executive Officer
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