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 quarterly period ended: September 30, 2000
Commission file number: 0-28154
SMLX TECHNOLOGIES, INC.
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(Exact name of small business issuer as specified in its Charter)
Colorado 84-1337509
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
376 Ansin Boulevard, Hallandale, Florida 33009
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(Address of principal executive offices including zip code)
(954) 455-0110
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(Issuer's telephone number)
Indicate by check mark whether the Issuer (1) has 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 [ ]
There were [____________________] shares of the Registrant's Common Stock
outstanding as of [____________________], 2000.
SMLX TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
9/30/2000 12/31/1999
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ASSETS
CURRENT ASSETS
Cash $ 78,854 $ 215,026
Accounts Receivable (Net of allowance for
uncollectible accounts of $2,786 for 9/30/00 and
12/31/99) 131 6,071
Inventory 176,541 129,398
Prepaid Expenses 49,152 23,299
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Total Current Assets 304,678 373,794
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Property, Plant and Equipment, at cost (Net of
accumulated depreciation and amortization of
$265,295 and $197,336 on 09/30/00 and 12/31/99,
respectively) 365,309 418,547
OTHER ASSETS
Deposits 8,092 8,192
Other Intangible Assets (Net of accumulated
amortization of $1,590 and $1,076 on 9/30/00 and
12/31/99, respectively) - 814
Patents and Trademarks
(Net of accumulated amortization of $1,621 and $969 on
9/30/00 and 12/31/99, respectively) 131,649 88,309
Investment in Common Stock 200,000 200,000
Employee Advances 100 -
Other Assets 300 -
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Total Assets $ 1,010,128 $ 1,089,656
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The accompanying notes are an integral part
of these consolidated financial statements.
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SMLX TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
9/30/2000 12/31/1999
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Liabilities $ 207,412 $ 190,164
Current Portion of Notes Payable 16,913 16,913
Customer Deposits 28,816 180,841
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Total Current Liabilities 253,141 387,918
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LONG-TERM DEBT
Notes Payables, Net of Current Portion 309,205 310,636
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock (Par Value $.0001, Authorized
100,000,000 Shares, Issued and Outstanding
12,004,648 Shares on 9/30/00 and 11,544,648 on
12/31/99) 1,200 1,154
Preferred Stock (Par Value $.0001, Authorized
10,000,000 Shares, No Shares Issued and
Outstanding) - -
Additional Paid-In Capital 2,450,477 2,450,516
Deficit Accumulated (2,003,895) (2,060,568)
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Total Stockholders' Equity 447,782 391,102
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Total Liabilities and Stockholders' Equity $ 1,010,128 $ 1,089,656
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The accompanying notes are an integral part
of these consolidated financial statements.
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SMLX TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED
9/30/2000 9/30/1999 9/30/2000 9/30/1999
--------------- -------------- ------------- ---------------
REVENUES - NET $ 1,311,666 $ 810,874 $ 349,071 $ 404,502
COST OF GOODS SOLD 195,500 27,742 52,073 2,236
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GROSS PROFIT 1,116,166 783,132 296,998 402,266
OPERATING EXPENSES
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 966,648 832,769 404,983 317,441
DEPRECIATION AND AMORTIZATION EXPENSE 69,654 44,661 22,866 14,697
TOTAL OPERATING EXPENSES 1,036,302 877,430 427,849 332,138
OPERATING PROFIT (LOSS) 79,864 (94,298) (130,851) 70,128
INTEREST EXPENSE (23,221) (27,393) (7,800) (7,440)
--------------- -------------- ------------- ---------------
NET PROFIT (LOSS) 56,643 (121,691) (138,651) 62,688
NET (LOSS) PER SHARE 0.005 (0.010) (0.011) 0.005
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 12,004,648 11,544,648 12,004,648 11,544,648
The accompanying notes are an integral part
of these consolidated financial statements.
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SMLX TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
9/30/2000 9/30/1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Profit (Loss) $ 56,643 $ (121,691)
Adjustment to Reconcile Net (Loss) to Net Cash
Provided By (Used in) Operating Activities:
Depreciation and Amortization 69,654 44,661
Changes in Operating Assets and Liabilities:
Accounts Receivable 5,940 (7,479)
Inventory (47,143) (2,986)
Deposits 100 -
Accounts Payable and Accrued Liabilities 17,248 (38,304)
Customer Deposits (152,025) 72,018
Prepaid Expenses and Organization Expenses (25,853) (23,777)
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Net Cash (Used In) Provided By Operating Activities (75,436) (77,558)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Fixed Assets (20,724) (58,898)
Patent Costs (38,581) (8,186)
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Net Cash Provided by (Used In) Investing Activities (59,305) (67,084)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Private Placement - 619,903
Proceeds from Notes Payable (1,431) (128,912)
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Net Cash Provided By (Used In) Financing Activities (1,431) 490,991
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Net Increase (Decrease) in Cash (136,172) 346,349
Cash - Beginning of Period 215,026 47,594
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Cash - End of Period $ 78,854 $ 393,943
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The accompanying notes are an integral part
of these consolidated financial statements.
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SMLX TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of SMLX
Technologies, Inc. (the "Company") and its wholly-owned subsidiaries, Simplex
Medical Systems, Inc. (a Florida corporation) and Analyte Diagnostics, Inc.,
have been prepared in accordance with the instructions and requirements of Form
10-QSB and, therefore, do not include all information and footnotes necessary
for a fair presentation of financial position, results of operations, and cash
flows in conformity with generally accepted accounting principles. In the
opinion of management, such financial statements reflect all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
of the results of operations and financial position for the interim periods
presented. Operating results for the interim periods are not necessarily
indicative of the results that may be expected for the full year. These
financial statements should be read in conjunction with the Company's annual
report of Form 10-KSB.
These financial statements give effect to the March 5, 1997 reverse acquisition
whereby Music Tones Ltd. (name subsequently changed to Simplex Medical Systems,
Inc.) acquired all of the outstanding common stock of Simplex Medical Systems,
Inc. as if the transaction occurred on September 15, 1995.
NOTE 2 - BASIS OF PRESENTATION AND CONTINUED EXISTENCE
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. Since inception, the Company has
experienced losses aggregating $2,003,895 and has been dependent upon loans from
stockholders and other third parties in order to satisfy operations to date.
Management believes that funds generated from operations will provide the
Company with sufficient cash flow resources to fund the operations of the
Company. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.
NOTE 3 - INVENTORY
Inventory consists of $176,541 of finished goods as of September 30, 2000.
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at September 30, 2000:
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Leasehold Improvements $ 188,806
Office Furniture and Equipment 66,995
Lab Equipment 374,803
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Total Equipment 630,604
Less: Accumulated Depreciation 265,295
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Total Property, Plant and Equipment $ 365,309
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NOTE 5 - NOTES PAYABLE
Interest Expense for the period ended
September 30, 2000, amounted to: $ 23,221
Interest Expense for the period ended
September 30, 1999, amounted to: $ 27,393
NOTE 6 - INCOME TAXES
To date the Company has incurred tax operating losses and therefore has
generated no income tax liabilities. As of September 30, 2000, the Company has
generated net operating loss carry forwards totaling $(2,003,895) which are
available to offset future taxable income, if any, through the year 2011. As
utilization of such an operating loss for tax purposes is not assured, the
deferred tax asset has been fully reserved through the recording of 100%
valuation allowance.
The components of the net deferred tax asset are as follows at September 30,
2000:
Deferred Tax Assets:
Net Operating Loss Carry forward 681,324
Valuation Allowance (681,324)
NOTE 7 - CONCENTRATIONS
During the nine months ended September 30, 2000, revenue of approximately
$976,000 was earned from a single customer, Vector Medical Technologies, Inc.
This represents approximately 74% of the Company's year to date revenue.
NOTE 8 - CHANGES IN SECURITIES
During the quarter ended, March 31, 2000, the Company issued 460,000 shares of
its Common Stock which were not registered under the Securities and Exchange Act
of 1933, as amended. The shares were issued pursuant to a writ of mandamus
issued by the Circuit Court of Miami-
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Dade County in connection with a lawsuit filed against the Company by John Faro.
The shares are being held in escrow pending a resolution of various claims
against Mr. Faro.
NOTE 9 - SUBSEQUENT EVENTS
On October 7, 2000, the Company announced the resignation of their president and
director James Whidden and cancellation of his option agreement. Mr. Whidden has
returned to Vector Medical Technologies, Inc., his previous employer and a major
customer of SMLX. The Company also announced that Colin Jones, former president
of the Company who retired this year, has resigned from the Board. Kenneth H.
Robertson, a Board member, was elected president, as was Gerald M. Wochna, a
Board member, to vice president and general counsel. Mr. Robertson and Mr.
Wochna joined the Company from Robertson & Partners LLC, a private equity firm
that through two of its funds invested $1,200,000 in SMLX in the summer and fall
of 1998.
The Company is in the middle of a government investigation concerning a former
product of the Company, a Rapid HIV Test Kit, and whether the Kits were
manufactured in accordance with good manufacturing practices and received FDA
approvals and clearances. The new officers felt that because of the pending
litigation and the size of their investment that it was time to take an active
role in the Company and they and the Company plan to fully cooperate with the
government and work toward a settlement of this investigation as well as
settling other pending company litigation.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS.
This Report contains forward-looking statements that involve a number of
risks and uncertainties. While these statements represent the Company's current
judgement in the future direction of the business, such risks and uncertainties
could cause actual results to differ materially from any future performance
suggested herein. Certain factors that could cause results to differ materially
from those projected in the forward-looking statements include timing of orders
and shipments, market acceptance of products, ability to increase level of
production, impact of government requisitions, availability of capital to
finance growth and general economic conditions.
The following should be read in conjunction with the attached Financial
Statements and Notes thereto of the Company.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 VERSUS THREE MONTHS ENDED SEPTEMBER
30, 1999
During the three months ended September 30, 2000, the Company had $349,071
in revenue compared to $404,502 in revenue during the corresponding prior year
period. The decrease in revenue was the result of reduced revenues from sales of
approximately $55,431 during 2000.
Expenses for the three months ended September 30, 2000, were increased
approximately $17,542 over the corresponding prior year period due to an
increase in legal expenses.
NINE MONTHS ENDED SEPTEMBER 30, 2000 VERSUS NINE MONTHS ENDED SEPTEMBER 30,
1999
During the nine months ended September 30, 2000, the Company had $1,311,666
in revenue compared to $810,874 in revenue during the corresponding prior year
period. The increase in revenue was the result of sales of airbrators of
$284,000 (all of which occurred during the quarter ended March 31, 2000) and
increased revenues from Vector Medical of approximately $216,792 during 2000.
Expenses for the nine months ended September 30, 2000, were increased by
approximately $133,279 over the same period for the corresponding prior year
period due to an increase in legal expenses.
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LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, the Company had working capital of approximately
$51,537 compared to approximately $(14,241) at December 31, 1999. The increase
is due to the net income for the nine months.
As of September 30, 2000, the Company had no material commitments for
capital expenditures.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings:
The Company is in the middle of a government investigation concerning a
former product of the Company, a Rapid HIV Test Kit, and whether the Kits were
manufactured in accordance with good manufacturing practices and received FDA
approvals and clearances. The government has threatened enforcement action,
which can range from a cease-and-desist order to civil or criminal penalties.
The new officers felt that because of this investigation and the size of their
investment that it was time to take an active role in the Company and they and
the Company plan to fully cooperate with the government and work toward a
settlement of this investigation as well as settling other pending company
litigation.
Item 2. Changes in Securities:
None
Item 3. Defaults Upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Security Holders:
None
Item 5. Other Information:
On October 7, 2000, the Company announced the resignation of their
president and director James Whidden and cancellation of his option agreement.
Mr. Whidden has returned to Vector Medical Technologies, Inc., his previous
employer and a major customer of SMLX. The Company also announced that Colin
Jones, former president of the Company who retired this year, has resigned from
the Board. Kenneth H. Robertson, a Board member, was elected president, as was
Gerald M. Wochna, a Board member, to vice president and general counsel. Mr.
Robertson and Mr. Wochna joined the Company from Robertson & Partners LLC, a
private equity firm that through two of its funds invested $1,200,000 in SMLX in
the summer and fall of 1998.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibit 27 Financial Data Schedule Filed herewith electronically
(b) Reports on Form 8-K: None
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly cause this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
SMLX TECHNOLOGIES, INC.
Date: November 20, 2000 /s/ Ken Robertson
Ken Robertson, President
Date: November 20, 2000 /s/ Joel Marcus
Joel Marcus, Chief Financial Officer
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