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: June 30, 1998
Commission file number: 0-28154
SIMPLEX MEDICAL SYSTEMS, 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.)
430 Ansin Boulevard, Suite G, 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 10,600,000 shares of the Registrant's Common Stock outstanding as
of July 31, 1998.
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
6/30/98 12/31/97
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ASSETS
CURRENT ASSETS
Cash $ 742,797 $ 41,743
Accounts Receivable (Net Of Allowance
For Uncollectible Accounts Of $2,321
For 1998) 36 3,882
Inventory 147,536 141,565
Prepaid Expenses 19,561 -
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Total Current Assets 909,930 187,190
Property, Plant and Equipment, at cost
(Net of accumulated depreciation) 155,540 87,451
Patents 93,624 66,861
Deposits 300 6,692
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Total Assets $1,159,394 $ 348,194
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CURRENT LIABILITIES
Accounts Payable and Accrued Liabilities $ 76,428 $ 75,074
Current Portion of Notes Payable 61,044 61,044
Customer Deposits 59,682 70,093
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Total Current Liabilities 197,154 206,211
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LONG-TERM DEBT
Notes Payable, Net of Current Portion 378,778 288,932
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STOCKHOLDERS' EQUITY
Common Stock (Par Value $.0001,
Authorized 100,000,000 Shares, Issued
and Outstanding 10,600,000 Shares on
6/30/98 and 7,500,000 on 12/31/97 1,060 750
Additional Paid-In Capital In Excess
of Par 1,657,888 658,197
Deficit Accumulated During the Development
Stage (1,075,486) (805,896)
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Total Stockholders' (Deficit) Equity 583,462 (146,949)
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Total Liabilities and Stockholders' Equity $1,159,394 $ 348,194
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The accompanying notes are an integral part of these consolidated financial
statements.
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SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
SIX MONTHS ENDED THREE MONTHS ENDED
6/30/98 6/30/97 6/30/98 6/30/97
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REVENUES - NET $ 202,891 $ 37,459 $ 160,593 $ 23,385
COST OF GOODS SOLD 78,638 13,937 59,281 6,343
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GROSS PROFIT 124,253 23,522 101,312 17,042
OPERATING EXPENSES
SELLING, GENERAL AND ADMINISTRA-
TIVE EXPENSES 359,591 241,412 230,497 133,413
DEPRECIATION AND AMORTIZATION
EXPENSE 13,102 6,648 6,551 3,324
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TOTAL OPERATING EXPENSES 372,693 248,060 237,048 136,737
OPERATING LOSS (248,440) (224,538) (135,736) (119,695)
INTEREST EXPENSE (21,147) (4,679) (10,673) (4,344)
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NET (LOSS) (269,587) (229,217) (146,409) (124,039)
NET (LOSS) PER SHARE (0.03) (0.03) (0.02) (0.02)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 8,000,000 7,500,000 8,500,000 7,500,000
The accompanying notes are an integral part of these consolidated financial
statements.
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SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
A DEVELOPMENT STAGE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1998 AND JUNE 30, 1997
(UNAUDITED)
6/30/98 6/30/97
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (269,587) $ (229,217)
Adjustment to Reconcile Net Loss to Net Cash
Used in Operating Activities:
Depreciation and Amortization 13,102 6,648
Changes in Operating Assets and Liabilities:
(Increase) in Accounts Receivable 3,846 (7,601)
(Increase) Decrease in Inventory (5,971) 1,786
(Increase) in Prepaid Expense (19,561) (155)
Increase (Decrease) in Accounts Payable 1,354 30,285
Increase (Decrease) in Other Current
Liabilities (10,411) 8,853
Increase in Customer Deposits (6,392) 30,939
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Net Cash (Used In) Provided By Operating
Activities (293,620) (158,462)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Fixed Assets (68,409) (448)
Patent Costs (26,763) (18,390)
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Net Cash Provided By (Used In) Investing
Activities (95,172) (18,838)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Private Placement of Stock 1,000,000 -
Notes Payable 89,846 133,733
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Net Cash Provided by Financing Activities 1,089,846 133,733
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Net (Decrease) Increase in Cash 701,054 (43,567)
Cash - Beginning of Period 41,743 54,086
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Cash - End of Period $ 742,797 $ 10,519
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The accompanying notes are an integral part of these consolidated financial
statements.
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SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
A DEVELOPMENT STAGE ENTERPRISE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Simplex
Medical Systems, 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 on 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 $1,075,486 and has been dependent upon loans
from stockholders and other third parties and proceeds from the sale of stock
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 - INCOME TAXES
To date the Company has incurred tax operating losses and therefore has
generated no income tax liabilities. As of June 30, 1998, the Company has
generated net operating loss carryforwards totalling $(1,075,486) which are
available to offset future taxable income, if any, through the year 2010. 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 June 30, 1998:
Deferred Tax Assets:
Net Operating Loss Carryforward (1,075,486)
Valuation Allowance (1,075,486)
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 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 judgment 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 regulations,
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 JUNE 30, 1998, VERSUS THREE MONTHS ENDED JUNE 30, 1997
During the three months ended June 30, 1998, the Company had $160,393 in
revenue compared to $23,385 in revenue during the corresponding prior year
period. The increase in revenue was the result of international sales of the
Company's Rapid Saliva Tests.
Operating expenses for the three months ended June 30, 1998, increased to
$237,048 as compared to $136,737 in the corresponding prior year period. The
increase was due to the increased level of overall activity in the Company's
business. Payroll costs increased due to the addition of a President, a lab
technician, and a marketing director.
June 1998 was the first month the Company started generating a material
amount of sales revenue. Its sales for the month of June were $103,000 with
an additional $20,000 licensing fee being received, making the gross income
for the month $123,000, which was equal to 76.6% of the revenues received for
the entire quarter. Sales for the third quarter are expected to be
substantially greater than second quarter sales.
SIX MONTHS ENDED JUNE 30, 1998 VERSUS SIX MONTHS ENDED JUNE 30, 1997
During the six months ended June 30, 1998, the Company had $202,891 in
revenue compared to $37,459 in revenue during the corresponding prior year
period. The increase in revenue was the result of international sales of
saliva tests.
Expenses for the six months ended June 30, 1998, increased to $372,693 as
compared to $248,060 in the corresponding prior year period due to the
increased level of activity in the Company's business.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1998, the Company had working capital of approximately
$712,776 compared to approximately $(19,021) at December 31, 1997. The
increase in working capital was primarily due to the sale of stock during the
six months ended June 30, 1998.
As of June 30, 1998, the Company had material commitments for capital
expenditures in the amount of approximately $50,000 to complete build out of
the new premises.
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YEAR 2000 COMPLIANCE
The Company is aware of the issues associated with the programming code
in existing computer systems as the year 2000 approaches. The Company has
assessed these issues as they relate to the Company, and the Company believes
that the year 2000 problem will not be material to the Company.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. None.
ITEM 2. CHANGES IN SECURITIES.
SALES OF RESTRICTED SECURITIES. During the quarter ended June 30, 1998,
the Company issued restricted securities as follows:
During May and June 1998, the Company sold 2,100,000 shares of Common
Stock to two accredited investors for $800,000 in cash.
With respect to these sales, the Company relied on Section 4(2) of the
Act. The investors signed subscription agreements in which they represented
that they were purchasing the shares for investment only and not for the
purpose of resale or distribution. The appropriate restrictive legends were
placed on the certificates and stop transfer orders were issued to the
transfer agent.
During May 1998, the Company issued 500,000 shares to Automated Health
Technologies ("AHT") in exchange for a 19% interest in AHT. The shares were
issued on the Closing of the Share Exchange Agreement which was negotiated
between the two companies. The Company relied on the exemption provided by
Section 4(2)of the Act. The appropriate restrictive legend was placed on the
certificate and stop transfer orders were issued to the transfer agent.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None.
ITEM 5. OTHER INFORMATION. None.
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 caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
SIMPLEX MEDICAL SYSTEMS, INC.
Date: August 4, 1998 By: /s/ Colin Jones
Colin Jones, President
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING
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27. Financial Data Schedule Filed herewith electronically