<PAGE> 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, 1997
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 7,500,000 shares of the Registrant's Common Stock outstanding as of
September 30, 1997.
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SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
A DEVELOPMENT STAGE ENTERPRISE
CONSOLIDATED BALANCE SHEET
ASSETS
9/30/97 12/31/96
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(UNAUDITED) (AUDITED)
CURRENT ASSETS
CASH $ 29,643 $ 53,849
ACCOUNTS RECEIVABLE (Net of allowance for
uncollectible accounts of $2,321 for 1997) 9,443 3,416
INVENTORY 149,168 140,827
PREPAID EXPENSE 6,692 -
-------- --------
TOTAL CURRENT ASSETS 194,946 198,092
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PROPERTY, PLANT AND EQUIPMENT, AT COST
(NET OF ACCUMULATED DEPRECIATION) 104,452 111,316
PATENTS (NET OF ACCUMULATED AMORTIZATION
OF $2,505 IN 1997) 53,780 18,508
DEPOSITS - 5,580
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TOTAL ASSETS $353,178 $333,496
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
CUSTOMER DEPOSITS 167,360 138,799
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 51,393 24,062
CURRENT PORTION OF NOTES PAYABLE 290,685 2,654
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TOTAL CURRENT LIABILITIES 509,438 165,515
LONG-TERM DEBT
NOTES PAYABLE, NET OF CURRNT PORTION - 4,986
STOCKHOLDERS EQUITY
COMMON STOCK (PAR VALUE $.0001,
AUTHORIZED 100,000,000 SHARES,
ISSUED AND OUTSTANDING
7,500,000 SHARES) 750 345
PAID IN CAPITAL IN EXCESS OF PAR 658,197 658,602
DEFICIT ACCUMULATED DURING
THE DEVELOPMENT STAGE (815,207) (495,952)
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TOTAL STOCKHOLDERS (DEFICIT) EQUITY (156,260) 162,995
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TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $353,178 $333,496
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
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED
9/30/97 9/30/96 9/30/97 9/30/96
-------- -------- -------- --------
REVENUES - NET $ 87,925 $ 19,463 $ 50,466 $ 11,670
COST OF GOOODS SOLD 24,165 79,075 10,228 65,834
GROSS PROFIT 63,760 (59,612) 40,238 (54,164)
OPERATING EXPENSES
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 361,756 305,228 131,671 212,562
DEPRECIATION AND
AMORTIZATION EXPENSE 9,972 1,119 3,324 729
TOTAL OPERATING EXPENSES 371,728 306,347 134,995 213,291
OPERATING LOSS (307,968) (365,959) (94,757) (267,455)
INTEREST EXPENSE NET (11,287) (5,975) (4,849) (4,165)
NET (LOSS) (319,255) (371,934) (99,606) (271,620)
NET (LOSS) PER SHARE (.04) (.05) (.01) (.04)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 7,500,000 7,500,000 7,500,000 7,500,000
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
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<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
A DEVELOPMENT STAGE ENTERPRISE
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
(UNAUDITED)
9/30/97 9/30/96
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CASH FLOWS FROM OPERATING ACTIVITIES:
NET (LOSS) $(319,255) $(271,620)
ADJUSTMENTS TO RECONCILE NET (LOSS) TO
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 9,972 1,119
CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) IN ACCOUNTS RECEIVABLE (6,027) (2,410)
(INCREASE) DECREASE IN INVENTORY (8,341) (130,999)
(INCREASE) IN PREPAID EXPENSE (6,692) (1,793)
INCREASE (DECREASE) IN ACCOUNTS PAYABLE 27,331 54,312
INCREASE IN CUSTOMER DEPOSITS 28,561 27,635
DECREASE IN SECURITY DEPOSITS 5,580 -
NET CASH (USED IN) OPERATING ACTIVITIES (268,871) (323,756)
CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES:
ACQUISITION OF FIXED ASSETS (603) (121,754)
NOTES PAYABLE 283,045 (5,500)
PATENT COSTS (37,777) (66,130)
SALE OF STOCK - 619,624
NET CASH PROVIDED BY INVESTING ACTIVITIES 244,665 426,240
NET INCREASE (DECREASE) IN CASH (24,206) 102,484
CASH - BEGINNING OF PERIOD 53,849 79,486
CASH - END OF PERIOD $29,643 $181,970
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
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<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
A DEVELOPMENT STAGE ENTERPRISE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 (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 $815,207 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 - INCOME TAXES
To date the Company has incurred tax operating losses and therefore has
generated no income tax liabilities. As of September 30, 1997, the Company
has generated net operating loss carryforwards totalling $(815,207) 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 September 30,
1997:
Deferred Tax Assets:
Net Operating Loss Carryforward (815,207)
Valuation Allowance (815,207)
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<PAGE>
ITEM 2. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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, 1997 VERSUS THREE MONTHS ENDED
SEPTEMBER 30, 1996
During the three months ended September 30, 1997, the Company had
$50,466 in revenue compared to $11,670 in revenue during the corresponding
prior year period. The increase in revenue was the result of international
sales of samples of the Company s Rapid HIV Saliva Test for testing and
evaluation purposes.
Sales contracts for the Saliva Test have been executed with vendors in
Brazil, Venezuela, Saudi Arabia, Thailand, the Philippines, Honduras, Costa
Rica and other third world countries. However, the Company is waiting on
final approvals from the appropriate regulatory authority in each country
before sales can be made.
The Company has received permission from the State of Florida
Department of Health to commence human testing of its HIV Saliva Test Kit in
Broward County, Florida. This testing will be used to gather the data for
submission to the U.S. Food & Drug Administration. Phase One of the testing
has been completed and Phase Two has commenced.
Expenses for the three months ended September 30, 1997 decreased to
$134,995 as compared to $213,291 in the corresponding prior year period. The
decrease was due to the fact that most of the expenses related to launching
the Company's Saliva test product and the Dental airbrator have already been
received.
The Company has signed a long term exclusive distribution contract with
Sybron Dental Specialties, Inc. which will distribute the Company's Dental
Airbrator. Sales under this contract are expected to commence in early 1998.
NINE MONTHS ENDED SEPTEMBER 30, 1997 VERSUS NINE MONTHS ENDED SEPTEMBER
30, 1996
During the nine months ended September 30, 1997, the Company had
$87,923 in revenue compared to $19,463 in revenue during the corresponding
prior year period. The increase in revenue was the result of international
sales of samples for testing and evaluation purposes.
Expenses for the nine months ended September 30, 1997, increased to
$371,728 as compared to $306,347 in the corresponding prior year period due to
the increased level of activity in the Company's business.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997, the Company has negative working capital of
approximately $(314,492) compared to approximately $32,577 at December 31,
1996. The reduction in working capital was primarily due to the $(319,255)
capital loss during the nine months ended September 30, 1997.
As of September 30, 1997, the Company had no material commitments for
capital expenditures.
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<PAGE>
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.
SIMPLEX MEDICAL SYSTEMS, INC.
Date: November 13, 1997 By /s/ Nicholas G. Levandoski
Nicholas G. Levandoski
Acting President, Treasurer and
Director
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING
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27. Financial Data Schedule Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheets and statements of operations found on pages 2 and 3 of the Company's Form
10-QSB for the year to date, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> 29,643
<SECURITIES> 0
<RECEIVABLES> 9,443
<ALLOWANCES> 0
<INVENTORY> 149,168
<CURRENT-ASSETS> 194,946
<PP&E> 6,692
<DEPRECIATION> 0
<TOTAL-ASSETS> 353,178
<CURRENT-LIABILITIES> 509,438
<BONDS> 0
<COMMON> 750
0
0
<OTHER-SE> (155,510)
<TOTAL-LIABILITY-AND-EQUITY> 353,178
<SALES> 87,925
<TOTAL-REVENUES> 87,925
<CGS> 24,165
<TOTAL-COSTS> 24,165
<OTHER-EXPENSES> 371,728
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (11,287)
<INCOME-PRETAX> (319,255)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (319,255)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> 0
</TABLE>
