UNITED STATES
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) August 27, 2004
ALLIED HEALTHCARE PRODUCTS, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 0-19266 25-1370721
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(State or Other Jurisdiction of Incorporation) (Commission File Number) (I.R.S. Employer
Identification Number)
1720 Sublette Avenue, St. Louis, Missouri 63110
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(Address, Including Zip Code, of Principal Executive Offices)
314-771-2400
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14a-2(b) under
the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act (17 CFR 240.13e-4(c))
Section 1 - Registrant's Business and Operations
Item 1.01 - Entry into a Material Definitive Agreement.
On August 27, 2004, Allied Healthcare Products, Inc. ("Allied") entered into an
agreement with Abbott Laboratories ("Abbott") pursuant to which Allied will
cease production of its product Baralyme(R), will, within sixty days, effect the
withdrawal of Baralyme(R) product held by distributors and will pursue the
development of a new carbon dioxide absorbent product. Baralyme(R), a carbon
dioxide absorbent product, has been used safely and effectively in connection
with inhalation anesthetics since its introduction in the 1920s. In recent
years, the number of inhalation anesthetics has increased, giving rise to
concerns regarding the use of Baralyme(R) in conjunction with these newer
inhalation anesthetics when Baralyme(R) has been allowed, contrary to
recommended practice, to become desiccated. The agreement also provides that,
for a period of eight years, Allied will not manufacture, distribute, promote,
market, sell, commercialize or donate any Baralyme(R) product or similar product
based upon potassium hydroxide and will not develop or license any new carbon
dioxide absorbent product containing potassium hydroxide.
In consideration of the foregoing, Abbott has agreed to pay Allied an aggregate
of $5,250,000 of which $1,530,000 is currently due and the remainder payable in
4 equal annual installments of $930,000 due on July 1, 2005 through July 1,
2008. Allied has agreed with Abbott that in the event that it receives approval
from the U.S. Food & Drug Administration for the commercial sale of a new carbon
dioxide absorbent product not based upon potassium hydroxide prior to January 1,
2008, that Abbott will be relieved of any obligation to fund the $930,000
installment due July 1, 2008. Allied expects to suspend manufacturing operations
at its Stuyvesant Falls, New York, facility and anticipates that costs
associated with the withdrawal and suspension of operations at that location,
including severance and benefit payments due union employees, will be
approximately $600,000.
In addition to the provisions of the agreement relating to the withdrawal of the
Baralyme(R) product, Abbott has agreed to pay to Allied up to $2,150,000 in
product development costs to pursue development of a new carbon dioxide
absorption product for use in connection with inhalation anesthetics that does
not contain potassium hydroxide and does not produce a significant exothermic
reaction with currently available inhalation agents.
In 2004, Allied's sales of Baralyme(R) were approximately $1.9 million and
contributed approximately $670,000 in pre-tax earnings and cash flow from
operations. The majority of the $5,250,000 Allied is to receive from Abbott will
be recognized into income over the eight-year term of the agreement. The effect
of such amortization is projected to adversely impact Allied's annual pre-tax
operating income by approximately $500,000 in each of the first four years of
the period and $400,000 in the fifth annual period while having a slightly
positive effect in the final three years. The net cash flow expected to be
realized by Allied under the agreement with Abbott is projected be substantially
equivalent to the net cash flow Allied would have expected to realize from
continued manufacture and sales of Baralyme(R) during the initial five years of
the period.
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Section 9 - Financial Statements and Exhibits
(a) Not Applicable
(b) Not Applicable
(c) Exhibits
Exhibit 10: Agreement dated August 27, 2004 between Allied
Healthcare Products and Abbott Laboratories,
including Confidentiality Agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Allied Healthcare Products, Inc.
By: /s/ Daniel C. Dunn
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Name: Daniel C. Dunn
Its: Chief Financial Officer
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