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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, 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
June 30, 1997.
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SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
A DEVELOPMENT STAGE ENTERPRISE
CONSOLIDATED BALANCE SHEETS
ASSETS
6/30/97 12/31/96
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CURRENT ASSETS (Unaudited) (Audited)
CASH $ 10,519 $ 53,849
ACCOUNTS RECEIVABLE (Net of allowance for
uncollectable accounts of $2,321 for 1996) 16,750 3,416
INVENTORY 87,784 140,827
PREPAID EXPENSE 6,692 -
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TOTAL CURRENT ASSETS 121,745 198,092
PROPERTY, PLANT AND EQUIPMENT, AT COST
(NET OF ACCUMULATED DEPRECIATION) 77,820 111,316
PATENTS (NET OF ACCUMULATED
AMORTIZATION OF $504 IN 1996) 37,402 18,508
DEPOSITS - 5,580
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TOTAL ASSETS $ 236,967 $ 333,496
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
CUSTOMER DEPOSITS 169,738 138,799
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 61,460 24,062
CURRENT PORTION OF NOTES PAYABLE 141,373 2,654
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TOTAL CURRENT LIABILITIES 372,571 165,515
LONG-TERM DEBT
NOTES PAYABLE, NET OF CURRENT 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 619,742 658,602
DEFICIT ACCUMULATED DURING THE DEVELOPMENT
STAGE (756,096) (495,952)
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TOTAL STOCKHOLDERS' (DEFICIT) EQUITY (135,604) 162,995
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 236,967 $ 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)
Six Months Ended Three Months Ended
6/30/97 6/30/96 6/30/97 6/30/96
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REVENUES - NET $ 37,459 $ 15,293 $ 23,385 $ 7,793
COST OF GOODS SOLD 13,937 18,056 6,343 13,241
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GROSS PROFIT 23,522 (2,763) 17,042 (5,448)
OPERATING EXPENSES
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 241,412 203,812 133,413 92,666
DEPRECIATION AND
AMORTIZATION EXPENSE 6,648 747 3,324 390
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TOTAL OPERATING EXPENSES 248,060 203,812 136,737 93,056
OPERATING LOSS (224,538) (206,575) (119,695) (98,504)
INTEREST EXPENSE (4,679) (5,555) (4,344) (1,810)
NET (LOSS) (229,217) (212,130) (124,039) (100,314)
NET (LOSS) PER SHARE (.03) (.003) (.03) (.013)
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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SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
A DEVELOPMENT STAGE ENTERPRISE
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
(UNAUDITED)
6/30/97 6/30/96
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CASH FLOWS FROM OPERATING ACTIVITIES:
NET (LOSS) $(229,217) $(212,130)
ADJUSTMENTS TO RECONCILE NET (LOSS) TO
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 6,648 747
CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) IN ACCOUNTS RECEIVABLE (7,601) (2,642)
(INCREASE) DECREASE IN INVENTORY 1,786 (100,481)
(INCREASE) IN PREPAID EXPENSE (155) (280)
INCREASE (DECREASE) IN ACCOUNTS PAYABLE 30,285 12,895
INCREASE (DECREASE) IN OTHER CURRENT LIABILITIES 8,853 494
INCREASE IN CUSTOMER DEPOSITS 30,939 27,635
(DECREASE) IN SECURITY DEPOSITS - (2,546)
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NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (158,462) (276,308)
CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES:
ACQUISITION OF FIXED ASSETS (448) (28,511)
NOTES PAYABLE 133,733 (5,500)
PATENT COSTS (18,390) (66,130)
SALE OF STOCK - 619,624
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NET CASH PROVIDED BY INVESTING ACTIVITIES 114,895 519,483
NET INCREASE (DECREASE) IN CASH (43,567) 243,175
CASH - BEGINNING OF PERIOD 54,086 79,849
CASH - END OF PERIOD $ 10,519 $ 323,024
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, 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 $756,096 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 classifications 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, 1997, the Company has
generated net operating loss carryforwards totaling $(756,096) 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, 1997:
Deferred Tax Assets:
Net Operating Loss Carryforward $(756,096)
Valuation Allowance (756,096)
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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 JUNE 30, 1997 VERSUS THREE MONTHS ENDED JUNE 30, 1996
During the three months ended June 30, 1997, the Company had $23,385 in
revenue compared to $7,793 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 Phillippines 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 Federal Drug Administration
to commence human testing of its Saliva Test products in Broward County,
Florida, for eventual approval within the United States, and phase one of
testing has been completed and phase two has commenced.
Expenses for the three months ended June 30, 1997 increased to $136,737
as compared to $93,056 in the corresponding prior year period. The increase
was due to the increased level of overall activity in the Company's business.
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.
SIX MONTHS ENDED JUNE 30, 1997 VERSUS SIX MONTHS ENDED JUNE 30, 1996
During the six months ended June 30, 1997, the Company had $37,459 in
revenue compared to $15,293 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 six months ended June 30, 1997 increased to $248,060 as
compared to $203,812 in the corresponding prior year period due to the
increased level of overall activity in the Company's business.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company had negative working capital of
approximately ($250,826) compared to approximately $32,577 at December 31,
1996. The reduction in working capital was primarily due to the $229,217 loss
during the six months ended June 30, 1997.
As of June 30, 1997, the Company had no material commitments for capital
expenditures.
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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: September 8, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 10,519
<SECURITIES> 0
<RECEIVABLES> 16,750
<ALLOWANCES> 0
<INVENTORY> 87,784
<CURRENT-ASSETS> 121,745
<PP&E> 77,820
<DEPRECIATION> 0
<TOTAL-ASSETS> 236,967
<CURRENT-LIABILITIES> 372,571
<BONDS> 0
<COMMON> 750
0
0
<OTHER-SE> (134,854)
<TOTAL-LIABILITY-AND-EQUITY> 236,967
<SALES> 37,459
<TOTAL-REVENUES> 37,459
<CGS> 13,937
<TOTAL-COSTS> 13,937
<OTHER-EXPENSES> 248,060
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4,679)
<INCOME-PRETAX> (229,217)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (229,217)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
</TABLE>
