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, 1998
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)
SIMPLEX MEDICAL SYSTEMS, INC.
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(Former name, if changed since last report)
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 September 30, 1998.
SMLX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
9/30/98 12/31/97
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ASSETS
CURRENT ASSETS
CASH $ 336,700 $ 41,743
ACCOUNTS RECEIVABLE (NET OF ALLOWANCE FOR
UNCOLLECTIBLE ACCOUNTS OF $2,321 FOR 1998) 1,979 3,882
INVENTORY 174,074 141,565
PREPAID EXPENSES 27,945 -
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TOTAL CURRENT ASSETS 540,698 187,190
PROPERTY, PLANT AND EQUIPMENT, AT COST
(NET OF ACCUMULATED DEPRECIATION) 287,924 87,451
PATENTS 108,253 66,861
DEPOSITS 840 6,692
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TOTAL ASSETS $ 937,715 $ 348,194
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES $ 105,157 $ 75,074
CURRENT PORTION OF NOTES PAYABLE 58,992 61,044
CUSTOMER DEPOSITS 50,368 70,093
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TOTAL CURRENT LIABILITIES 214,517 206,211
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LONG-TERM DEBT
NOTES PAYABLE, NET OF CURRENT PORTION 363,932 288,932
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STOCKHOLDERS' EQUITY
COMMON STOCK (PAR VALUE $.0001, AUTHORIZED
100,000,000 SHARES, ISSUED AND OUTSTAND-
ING 10,600,000 SHARES ON 9/30/98 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 (1,299,682) (805,896)
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TOTAL STOCKHOLDERS' (DEFICIT) EQUITY 359,266 (146,949)
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 937,715 $ 348,194
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
2
SMLX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED
9/30/98 9/30/97 9/30/98 9/30/97
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REVENUES - NET $ 369,426 $ 87,925 $ 166,535 $ 50,466
COST OF GOODS SOLD 132,045 24,165 53,407 10,228
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GROSS PROFIT 237,381 63,760 113,128 40,238
OPERATING EXPENSES
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES 679,632 361,756 320,041 131,671
DEPRECIATION AND
AMORTIZATION EXPENSE 19,653 9,972 6,551 3,324
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TOTAL OPERATING
EXPENSES 699,285 371,728 326,592 134,995
OPERATING LOSS (461,904) (307,968) (213,464) (99,757)
INTEREST EXPENSE (31,881) (11,287) (10,734) (4,848)
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NET (LOSS) (493,785) (319,255) (224,198) (99,605)
NET (LOSS) PER SHARE (0.05) (0.04) (0.02) (0.01)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 10,500,000 7,500,000 10,600,000 7,500,000
========== ========= ========== =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
3
SMLX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
AND SEPTEMBER 30, 1997 (UNAUDITED)
9/30/98 9/30/97
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CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $(493,785) $(319,255)
ADJUSTMENT TO RECONCILE NET (LOSS) TO NET
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES:
DEPRECIATION AND AMORTIZATION 19,653 9,972
CHANGES IN OPERATING ASSETS AND LIABILITIES:
DECREASE IN ACCOUNTS RECEIVABLE 1,903 (6,027)
(INCREASE) IN INVENTORY (32,509) (8,341)
(INCREASE) IN PREPAID EXPENSE (27,945) (6,692)
INCREASE IN ACCOUNTS PAYABLE 30,083 27,331
DECREASE IN CUSTOMER DEPOSITS (19,725) 28,561
DECREASE IN SECURITY DEPOSITS 5,852 5,580
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NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (516,473) (268,872)
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CASH FLOWS FROM INVESTING ACTIVITIES:
ACQUISITION OF FIXED ASSETS (220,126) (603)
NOTES PAYABLE 72,948 283,045
PATENT COSTS (41,392) (37,777)
SALE OF STOCK 1,000,000 -
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NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 811,430 244,665
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NET (DECREASE) INCREASE IN CASH 294,957 (24,206)
CASH - BEGINNING OF PERIOD 41,743 53,849
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CASH - END OF PERIOD $ 336,700 $ 29,643
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
4
SMLX TECHNOLOGIES, INC. AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of SMLX
Technologies, Inc. (the "Company") and its wholly-owned subsidiaries, SMLX
Technologies of Florida, 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 $1,299,682 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.
5
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 SEPTEMBER 30, 1998, VERSUS THREE MONTHS ENDED
SEPTEMBER 30, 1997
During the three months ended September 30, 1998, the Company had
$166,535 in revenue compared to $50,466 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 September 30, 1998,
increased to $326,592 as compared to $134,995 in the corresponding prior year
period. The increase was due to the increased level of overall activity in
the Company's business and the cost of holding the annual shareholders
meeting. Payroll costs increased due to the addition of a President, a lab
technician, and a marketing director.
NINE MONTHS ENDED SEPTEMBER 30, 1998 VERSUS NINE MONTHS ENDED SEPTEMBER 30,
1997
During the nine months ended September 30, 1998, the Company had $369,426
in revenue compared to $87,925 in revenue during the corresponding prior year
period. The increase in revenue was the result of international sales of
saliva tests. There revenues were lower than expected because the Company was
out of production for approximately a month because the Company moved into its
new facilities during the quarter and the Certificate of Occupancy was issued
later than expected.
Expenses for the nine months ended September 30, 1998, increased to
$699,285 as compared to $371,728 in the corresponding prior year period due to
the increased level of activity in the Company's business. Payroll costs
increased due to the addition of a President, a lab technician and a marketing
director.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the Company had working capital of
approximately $326,181 compared to approximately $(19,021) at December 31,
1997. The increase in working capital was primarily due to the sale of stock
during the nine months ended September 30, 1998.
As of September 30, 1998, the Company had no material commitments for
capital expenditures.
6
YEAR 2000 COMPLIANCE
The Company is in the process of completing a review of the effect that
the year 2000 will have on its stand alone computer system related to its
ongoing operations, its internal control systems and preparation of financial
information. It has not yet been able to determine the extent, if any, of the
year 2000 problem. However, as the Company keeps both an electronic and paper
backup of all contracts, financial data and important correspondence, it does
not believe there will be any serious problem.
The Company is currently in the process of querying all vendors and
suppliers of services that might have an effect on our business to see if they
are year 2000 compliant, and if not, will they be compliant before the year
2000.
If vendors state that they will not be compliant by the year 2000, we
will make arrangements to switch vendors by July 1, 1999.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. None.
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. 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.
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.
SMLX TECHNOLOGIES, INC.
Date: November 12, 1998 By:/s/ Colin N. Jones
Colin N. Jones, President
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING
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27. Financial Data Schedule Filed herewith electronically