<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K/A
CURRENT REPORT
Amendment No. 1
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
March 5, 1997
------------------------------------------------
Date of Report (date of earliest event reported)
SIMPLEX MEDICAL SYSTEMS, INC.
----------------------------------------------------
Exact name of Registrant as Specified in its Charter
Colorado 0-28154 84-1337504
- --------------------------- --------------- ---------------------------
State or Other Jurisdiction Commission File IRS Employer Identification
of Incorporation Number Number
430 Ansin Boulevard, Suite G, Hallandale, Florida 33009
----------------------------------------------------------
Address of Principal Executive Offices, Including Zip Code
(954) 455-0110
--------------------------------------------------
Registrant's Telephone Number, Including Area Code
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. The following
financial statements for Simplex Medical Systems, Inc. and Subsidiary for the
year ended December 31, 1996 and for the period from June 6, 1995 (date of
inception) to December 31, 1995 are filed herewith:
Page
Report of Independent Auditors ................................. F-1
Financial Statements:
Consolidated Balance Sheets .................................. F-2
Consolidated Statements of Operations ........................ F-3
Consolidated Statements of Changes in Stockholders' Equity ... F-4
Consolidated Statements of Cash Flows ........................ F-5
Notes to the Consolidated Financial Statements ................. F-6 to F-12
(b) PROFORMA FINANCIAL INFORMATION. The pro forma financial information
is filed herewith:
Pro Forma Consolidated Balance Sheet S-1
Pro Forma Condensed Consolidated Statement of Earnings S-2
Notes to Pro forma condensed Financial Statements S-3
(c) EXHIBITS.
Exhibit 10 Share Exchange Agreement between Music Tones
Ltd. and Simplex Medical Systems, Inc.*
_______________
*Previously filed
<PAGE>
MILLWARD & CO., CPAs
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Simplex Medical Systems, Inc. and Subsidiary
Hallandale, Florida
We have audited the accompanying consolidated balance sheets of Simplex
Medical Systems, Inc. and Subsidiary as of December 31, 1996 and 1995, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the year ended December 31, 1996 and for the period June 6,
1995 (date of inception) to December 31, 1995. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Simplex
Medical Systems, Inc. and Subsidiary as of December 31, 1996 and 1995 and the
results of its operations and its cash flows for the year ended December 31,
1996 and for the period June 6, 1995 (date of inception) to December 31, 1995,
in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that Simplex Medical Systems, Inc. and Subsidiary will continue as a going
concern. As more fully described in Note 3, the Company has incurred
operating losses and the accompanying consolidated balance sheet reflects an
accumulated deficit of $495,952. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 3. 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 outcome of this
uncertainty.
/s/ Millward & Co.
Millward & Co. CPAs
Fort Lauderdale, Florida
May 16, 1997
F-1
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31,
1996 1995
---------- ----------
ASSETS
CURRENT ASSETS
Cash $ 53,849 $ 79,441
Accounts Receivable (net of allowance
for uncollectible accounts of $2,321
for 1996 and 1995) 3,416 808
Inventory 140,827 9,086
--------- ---------
Total Current Assets 198,092 89,335
Property, Plant and Equipment, at cost
(Net of accumulated depreciation and
amortization of $25,804 and $50 in 1996
and 1995, respectively) 111,316 925
Patents (Net of accumulated amortization of
$504 and $29 in 1996 and 1995, respectively) 18,508 825
Deposits 5,580 3,392
--------- ---------
Total Assets $ 333,496 $ 94,477
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts Payable and Accrued Liabilities $ 24,062 $ 39,768
Current Portion of Note Payable 2,654 5,500
Customer Deposits 138,799 110,434
--------- ---------
Total Current Liabilities 165,515 155,702
LONG-TERM DEBT
Notes Payable, Net of Current Portion 4,986 -
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Common Stock (Par Value $.0001, Authorized
10,000,000 Shares, Issued and Outstanding
3,453,000 Shares in 1996 and 876,125 Shares
in 1995) 345 87
Preferred Stock (Par Value $.0001, Authorized
1,000,000 Shares, None Issued and Outstanding) - -
Additional Paid-in Capital 658,602 -
Accumulated Deficit (495,952) (61,312)
--------- ---------
Total Stockholders' Equity (Deficit) 162,995 (61,225)
--------- ---------
Total Liabilities and Stockholders' Equity $ 333,496 $ 94,477
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996, and for the Period
June 6, 1995 (Date of Inception) to December 31, 1995
1996 1995
---------- ----------
REVENUES - Net $ 25,840 $ 22,130
COST OF GOOD SOLD 25,269 9,908
--------- ---------
GROSS PROFIT 571 12,222
--------- ---------
OPERATING EXPENSES
Selling, General and Administrative Expenses 403,049 72,949
Depreciation and Amortization Expense 26,229 79
--------- ---------
Total Operating Expenses 429,278 73,028
OPERATING LOSS (428,707) (60,806)
--------- ---------
OTHER INCOME (EXPENSE)
Other Income 536 -
Interest Expense (6,469) (506)
--------- ---------
Total Other Income (Expense) (5,933) (506)
--------- ---------
NET LOSS $(434,640) $ (61,312)
--------- ---------
Weighted Average Number of Common Shares
Outstanding 2,866,651 876,125
--------- ---------
NET LOSS PER COMMON SHARE $ (0.15) $ (0.07)
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Year Ended December 31, 1996 and for the Period
June 6, 1996 (Date of Inception) to December 31, 1995
<TABLE>
<CAPTION>
TOTAL
STOCK-
COMMON STOCK ACCUMU- HOLDERS'
------------------ PAID-IN LATED EQUITY
ANALYTE DIAGNOSTICS, INC. ISSUED AMOUNT CAPITAL DEFICIT (DEFICIT)
- ------------------------- --------- ------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Common Stock Issued on
July 29, 1995 24,750,000 $2,475 $ - $ - $ 2,475
1 for 200 Reverse Stock
Split October 31, 1995 (24,626,250) (2,462) - - (2,462)
Merger on October 31,
1995 of Analyte Diagnos-
tics, Inc. into Simplex
Medical Systems, Inc. (123,750) (13) - - (13)
SIMPLEX MEDICAL SYSTEMS,
INC. AND SUBSIDIARY
- ------------------------
Issuance of One Share
Simplex Medical Systems,
Inc. $.0001 Common Stock
for Each Two Shares of
Analyte Diagnostics, Inc.
Common Stock on October
31, 1995 61,875 6 - - 6
Shares Issued for Cash 1,053,625 105 - - 105
Cancellation of Stock (239,375) (24) - - (24)
Net Loss - - - (61,312) (61,312)
----------- ------ -------- --------- --------
Balance, December 31, 1995 876,125 87 - (61,312) (61,225)
Shares Issued for Cash
at Par 16,475 2 - - 2
Shares Issued for Equipment 214,375 21 53,198 - 53,219
Issuance of Shares for
Private Placement 619,525 62 605,577 - 605,639
Shares Issued for 2 for 1
Stock Split 1,726,500 173 (173) - -
Net Loss - - - (434,640) (434,640)
----------- ------ -------- --------- --------
Balance, December 31, 1996 3,453,000 $ 345 $658,602 $(495,952) $162,995
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 1996, and for the Period
June 6, 1995 (Date of Inception) to December 31, 1995
1996 1995
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(434,640) $(61,312)
Adjustments to Reconcile Net Loss to Net
Cash Used in Operating Activities:
Depreciation and Amortization 26,229 79
Changes in Operating Assets and
Liabilities
Accounts Receivable (2,608) (808)
Inventory (131,741) (9,086)
Deposits (2,188) (3,392)
Accounts Payable and Accrued Liabilities (15,706) 39,768
Other Current Liabilities - 5,500
Customer Deposits 28,365 110,434
--------- --------
Net Cash (Used in) Provided by Operating
Activities (532,289) 81,183
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Private Placement 605,641 87
Acquisition of Fixed Assets and Patents (101,084) (1,829)
Payment of Notes Payable to Stockholders (5,500) -
--------- --------
Net Cash Provided by (Used in) Investing
Activities 499,057 1,742
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of Notes Payable 7,640 -
--------- --------
Net Cash Provided by Financial Activities 7,640 -
--------- --------
Net (Decrease) Increase in Cash (25,592) 79,441
Cash - Beginning of Period 79,441 -
--------- --------
Cash - End of Period $ 53,849 $ 79,441
SUPPLEMENTAL DISCLOSURES:
Interest Paid - Cash Basis $ 6,469 $ 506
Taxes $ - $ -
SUPPLEMENTAL DISCLOSURES OF NON CASH
INVESTING ACTIVITIES
Issuance of Common Stock for Equipment $ 53,219 $ -
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 1 - ORGANIZATION
The Company, Simplex Medical Systems, Inc., was formed on September 15, 1995
and is engaged in the development, acquisition, marketing and manufacture of
medical diagnostic products, biologic products for blood banking, bulk
pharmaceuticals and specialty chemicals. The financial statements include the
accounts of the Company's subsidiary, Analyte Diagnostics, Inc., from the date
of its inception, June 6, 1995.
Analyte Diagnostics, Inc., a predecessor corporation, was acquired by Simplex
Medical Systems, Inc. on October 31, 1995 with all account balances recorded
at cost. At the time, the Company had a 1 to 200 reverse stock split.
Subsequently, the Company had a 2 for 1 stock split. All share references
give effect to the post split plans.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Simplex Medical
Systems, Inc. and its wholly owned subsidiary, Analyte Diagnostics, Inc. All
intercompany accounts and transactions have been eliminated in consolidation.
Inventory
Inventory for sale is recorded at cost. Inventory is valued at the lower of
cost (first-in, first-out) or market.
Property, Plant and Equipment
Property, Plant and Equipment, are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets,
which range from 3 to 7 years. Expenditures for maintenance and repairs are
charged against operations as incurred.
Income Taxes
The Company accounts for income taxes under the liability method in accordance
with Statement of Financial Accounting Standards No. 109 Accounting for Income
Taxes. Deferred income taxes are determined based upon the difference between
the financial statement carrying amount and the tax basis of assets and
liabilities using tax rates expected to be in effect in the years in which the
differences are expected to reverse.
Revenue Recognition
Revenue from sales is recognized upon shipment to the customer.
F-6
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Impairment of Long-Lived Assets:
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and For Long-Lived
Assets to be Disposed Of ("SFAS 121") in 1996. SFAS 121 establishes
accounting standards for recording the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles
to be disposed of. The adoption of SFAS 121 did not have a material impact on
the Company s financial position or results of it operations.
Stock Based Compensation:
The Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation" in
1996. SFAS 123 allows either the adoption of a fair value method of
accounting for stock-based compensation plans or continuation of accounting
under Accounting Principles Board ("APB") Opinion No. 25 Accounting For Stock
Issued To Employees, and related interpretations with supplemental
disclosures. The Company has chosen to account for all stock based
arrangements under which employees receive shares of the Company s stock under
APB 25 and make the related disclosures under SFAS 123. Since the method of
accounting prescribed under SFAS 123 is not to be applied to options granted
prior to January 1, 1995 there is no resulting pro forma compensation cost to
be disclosed.
Recently Issued Accounting Standards:
In June 1996, the FASB issued Statement of Financial Accounting Standards No.
125 ("SFAS 125"), Accounting for Transfer of Servicing of Financial Assets and
Extinguishing of Liabilities". SFAS 125 provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishments
of liabilities occurring after December 31, 1996 and is to be prospectively
applied. The Company believes that the adoption of SFAS 125 will not have a
material impact on its financial statements.
Financial Instruments and Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentrations
of credit risk are primarily cash and accounts receivable. The Company
invests its excess cash in high quality short-term liquid money market
instruments with major financial institutions and the carrying value
approximates market value. The Company does not have significant trade
receivables.
The Company believes it is not exposed to any significant credit risk on cash
and/or accounts receivable.
F-7
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 3 - 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 $495,952 and has been dependent upon loans form
stockholders and other third parties in order to satisfy operations to date.
Management believes that funds from a private placement and 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 classifications
of liabilities that may result from the possible inability of the Company to
continue as a going concern.
NOTE 4 - INVENTORY
Inventory consists of $140,827 and $9,086 of raw materials as of December 31,
1996 and 1995, respectively.
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31, 1996
and 1995:
1996 1995
--------- --------
Computer Equipment $ 11,215 $ 975
Office Furniture and Equipment 4,512 -
Shop Equipment 80,579 -
Computer Software 1,140 -
Molds 39,674 -
--------- --------
Total Equipment 137,120 975
Less: Accumulated Depreciation (25,804) (50)
Total Property, Plant and Equipment $ 111,316 $ 925
Depreciation expense amounted to $25,754 and $50 for the year ended December
31, 1996 and for the period June 6, 1995 (date of inception) to December 31,
1995, respectively.
F-8
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 6 - NOTES PAYABLE EQUIPMENT
December 31,
-----------------------
1996 1995
--------- --------
Notes payable to stockholders consists of
the following:
Note payable equipment with interest at 18%
and monthly payments of $318 maturing July
1999, secured by equipment. $ 7,640 $ 5,500
Less: Current Portion (2,654) (5,500)
-------- --------
$ 4,986 $ -
Interest expense for the year ended December 31, 1996 and for the period June
6, 1995 (date of inception) to December 31, 1995, amounted to $6,469 and $506,
respectively.
NOTE 7 - INCOME TAXES
To date the Company has incurred tax operating loses and therefore has
generated no income tax liabilities. As of December 31, 1996 the Company has
generated net operating loss carryforwards totaling $495,952 which are
available to offset future taxable income, if any, through 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 a 100%
valuation allowance.
The components of the net deferred tax asset are as follows:
December 31,
-----------------------
1996 1995
--------- --------
Deferred Tax Assets:
Net Operating Loss Carryforward $ 147,778 $ 20,846
Valuation Allowance (147,778) (20,846)
--------- --------
Net Deferred Tax $ - $ -
F-9
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 7 - INCOME TAXES (Continued)
Based on the acquisition described in Note 11 the utilization of the net
operating loss carryforwards and credits after the merger will be limited by
the separate return limitation year and change of ownership provisions of the
Internal Revenue Code. As of December 31, 1996, the losses of the Company are
not subject to any limitation pursuant to the Internal Revenue Code.
NOTE 8 - COMMITMENTS
Leases
The Company is currently renting office space in Hialeah, Florida. Pursuant to
a lease which expires August 1997. Rent Expense for the years ended December
31, 1996 and for the period June 6, 1995 (date of inception) to December 31,
1995 amounted to $27,418 and $8,480, respectively.
NOTE 9 - STOCKHOLDERS' EQUITY
Stock Issuances
Shares Sold
In December 1995, the Company sold 839,725 shares at par value or $.0001 per
share pursuant to an subscription agreement of which 16,475 shares were issued
in 1996.
Private Placement
During 1996 the Company completed a private placement of 619,525 shares of
common stock at $1 per shares and received net proceeds of $605,639.
Shares Used for Equipment
In February 1996, Simplex-Florida issued 214,375 shares of its common stock to
a director of the company in exchange for his 100% interest in a private
company which was not active which manufactured specialty chemicals for the
pharmaceutical and agricultural industries. The Company received primarily
laboratory equipment as a result of this acquisition. The Corporation has
been recorded at the fair value of assets acquired.
F-10
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 9 - STOCKHOLDERS' EQUITY (Continued)
Stock Option Plans
The Company maintains two stock option plans, the 1995 Stock Incentive Plan
and the Simplex Medical, Inc. Directors Stock Option Plan. Both plans provide
for the granting of both incentive stock options as defined in Section 422 of
the Internal Revenue Code of 1986 and options that do not qualify under
Section 422 of the Internal Revenue Code of 1986. 250,000 shares of common
stock are reserved for issuance pursuant to these two plans. The maximum
option term is 10 years at an option price not less than the market value of
the common stock on the date the option is granted or 110% of the market value
of the common stock on the date the option is granted to persons owning more
than 10% of the voting stock of the Company. No shares have been granted
pursuant to the Plan.
NOTE 10 - LEGAL PROCEEDINGS
The Company has signed an agreement with Technical Chemical and Products, Inc.
("TCPI") where TCPI has agreed to purchase a twenty- percent equity interest
in the Company. In consideration for this agreement, the Company and TCPI
entered into a Joint Development Agreement through which the Company has
acquired licenses to certain patented and proprietary membrane technologies of
TCPI. The Company and TCPI are to share equally in the profits of the jointly
developed products. Also, TCPI agreed to pay the Company a non-recurring fee
of $600,000 to support the Company's R&D efforts which contribution is payable
out of 50% of the net profits realized by TCPI on orders from the Company.
The Company has reserved 25,000 shares for issuance to TCPI in accordance with
the joint development agreement. On July 3, 1996 TCPI filed action against
Simplex and four others alleging us of TCPI trade secrets relating to HIV test
Kits. Such allegations have been settled for $3,050. The Company is currently
awaiting a formal settlement agreement.
The Company's subsidiary, Analyte Diagnostics, Inc., has been named as one of
six co-defendants in a lawsuit filed by the Company's principle scientist's
previous employer, Americare Transtech, Inc. The litigation involves the
rights to the patent of the Company's saliva sample collection system. The
Company feels the litigation is without merit.
A distributor for the Company has instituted suit against the Company alleging
improprieties on connection with a distribution agreement. The Company
maintains that the suit was frivolous and that the distributor breached the
agreement. The case was subsequently dismissed, however the agreement provides
for arbitration and the distributor may pursue such a forum in the future.
F-11
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 11 SUBSEQUENT EVENTS
On March 5, 1997, the shareholders of the Company received 3,453,000 shares of
the outstanding common stock of Music Tones, Ltd., a publicly traded inactive
company in exchange for 3,453,000 shares of the Company s Common Stock. In
connection with the closing of this transaction, several current shareholders
of Music Tones, Ltd., submitted for cancellation a total of 31,953,000 shares
of common stock. As a result, after the acquisition of the Company, there are
a total of 7,500,000 Music Tones, Ltd. shares outstanding of which the
shareholders of the Company will own 46.04% of the outstanding shares.
The transaction is expected to be treated as a reverse acquisition whereby the
Company (Simplex) is deemed to be the acquirer.
F-12
<PAGE>
PRO FORMA FINANCIAL INFORMATION
MUSIC TONES, LTD.
PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 1996
(Unaudited)
Music
ASSETS Tones, Ltd. Simplex Pro Forma
---------- --------- ---------
CURRENT ASSETS
Cash and Cash Equivalents $ 175 $ 53,849 $ 54,024
Accounts Receivable - 3,416 3,416
Inventories - 140,827 140,827
----- --------- ---------
Total Current Assets 175 198,092 198,267
Property, Plant and Equipment, Net - 111,316 111,316
Patents, Net - 18,508 18,508
Other Assets - 5,580 5,580
----- --------- ---------
Total Assets $ 175 $ 333,496 $ 333,671
----- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $ 375 $ 2,654 $ 3,029
Accounts Payable - Trade - 24,062 24,062
Customer Deposits - 138,799 138,799
----- --------- ---------
Total Current Liabilities 375 165,515 165,890
LONG-TERM DEBT - 4,986 4,986
----- --------- ---------
Total Liabilities 375 170,501 170,876
Total Stockholders' Equity (Deficit) (200) 162,995 162,795
----- --------- ---------
Total Liabilities and Stockholders' Equity $ 175 $ 333,496 $ 333,671
----- --------- ---------
On March 5, 1997, Music Tones, Ltd. (Music Tones) completed the Simplex
Medical acquisition of 100% of the outstanding common stock of Simplex Medical
Systems, Inc. ("Simplex") in exchange for 3,453,000 shares of the Company's
Common Stock (46.04% of the shares not outstanding). In connection with the
closing of this transaction, several current shareholders of Music Tones
submitted for cancellation a total of 31,953,000 shares of common stock. As a
result, after the acquisition of Simplex, there are a total of 7,500,000
shares outstanding.
No monetary proforma adjustments are recorded. The net effect of the
transaction adjusts only the shares outstanding.
As a result of this transaction, the Simplex shareholders will have control of
the Company, accordingly, the transaction is to be accounted for as a reverse
acquisition and recapitalization whereby Simplex is deemed the acquirer. The
shares previously owned by Music Tones shareholders (4,047,000 shares) are
considered a recapitalization on March 5, 1997 and issued by the Company in
exchange for the net account balances on the books of Music Tones. Subsequent
to the transactions, the Company changed its name to Simplex Medical Systems,
Inc.
S-1
<PAGE>
PRO FORMA FINANCIAL INFORMATION
MUSIC TONES, LTD.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
For the Year Ended December 31, 1996
(Unaudited)
Music
Tones, Ltd. Simplex Pro Forma
---------- --------- ----------
SALES $ - $ 25,840 $ 25,840
--------- --------- ----------
OPERATING COSTS AND EXPENSES
Cost of Sales - 25,269 25,269
General and Administrative 15,125 403,049 418,174
Depreciation and Amortization - 26,229 26,229
--------- --------- ----------
Total Operating Costs and Expenses 15,125 454,547 469,672
OPERATING EARNINGS
Interest Expense, Net - (5,933) (5,933)
--------- --------- ----------
NET LOSS $ (15,125) $(434,640) $(449,765)
--------- --------- ----------
Average Shares Outstanding Including
Common Stock Equivalents 4,047,000 2,866,651 6,913,651
--------- --------- ----------
Net Loss Per Share $ 0.00 $ (0.15) $ (0.07)
--------- --------- ----------
Represents weighted shares of Simplex assuming all of the Music Tones shares
issued to Simplex shareholders were issued in the same pro rata amounts on the
dates Simplex had their issuances. The weighted shares include the Music
Tones shares deemed to be issued in connection with the reverse acquisition
and recapitalization (4,047,000 shares).
S-2
<PAGE>
MUSIC TONES, LTD.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
The preceding unaudited pro forma condensed statement of operations for the
year ended December 31, 1996 gives effect to such transaction described in the
Notes to the Pro Forma Balance Sheet as if it had occurred on January 1, 1995
and combines the operations of the Company and Simplex for the year ended
December 31, 1996. The balance sheet at December 31, 1996 gives effect to the
March 7, 1997 pro forma transaction as if it occurred on December 31, 1996.
The pro forma condensed financial statements may not be indicative of the
results that actually would have occurred if the combination had been in
effect on the dates indicated or which may be obtained in the future.
S-3
<PAGE>
SIGNATURES
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.
MUSIC TONES LTD.
Dated: June 20, 1997 By/s/ Nicholas G. Levandoski
Nicholas G. Levandoski, PhD
Director
