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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: March 31, 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 8,000,000 shares of the Registrant's Common Stock outstanding as of
March 31, 1998.
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SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
A DEVELOPMENT STAGE ENTERPRISE
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
3/31/98 12/31/97
ASSETS ----------- ---------
CURRENT ASSETS
Cash $144,666 $ 41,743
Accounts Receivable (Net of allowance for
uncollectible accounts of $2,321 for
12/31/97 and 3/31/98) 3,547 3,882
Inventory 130,463 141,565
-------- --------
Total Current Assets 278,676 187,190
-------- --------
Property, Plant and Equipment, at cost
(Net of accumulated depreciation and
amortization of $6,551 and $51,897 on
3/31/98 and 12/31/97, respectively) 96,683 87,451
OTHER ASSETS
Deposits 10,892 6,692
Organization Expenses 300 -
Patents and Trademarks (net of accumulated
amortization of $504 and $$504 on
3/31/98 and 12/31/97, respectively) 76,146 66,861
-------- --------
TOTAL ASSETS $462,697 $348,194
======== ========
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 BALANCE SHEETS
(UNAUDITED)
(Continued)
3/31/98 12/31/97
LIABILITIES AND STOCKHOLDER'S EQUITY ----------- --------
LIABILITIES
CURRENT LIABILITIES
Accounts Payable and Accrued Liabilities 65,891 75,074
Current Portion of Notes Payable 61,044 61,044
Customer Deposits 43,225 70,093
-------- --------
Total Current Liabilities 170,160 206,211
LONG-TERM DEBT
Notes Payables, Net of Current Portion 363,442 288,932
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock (Par Value $.0001, Authorized
100,000,000 Shares, Issued and Outstanding
8,000,000 Shares on 3/31/98 and 7,500,000
on 12/31/97) 800 750
Preferred Stock (Par Value $.0001, Authorized
10,000,000 Shares, No Shares Issued and
Outstanding) - -
Additional Paid-In Capital 858,147 658,197
Deficit Accumulated During the
Development Stage (929,852) (805,896)
-------- --------
Total Stockholders' (Deficit) Equity (70,905) (146,949)
-------- --------
Total Liabilities and Stockholders' Equity $462,697 $348,194
======== ========
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)
Three Months Ended
3/31/98 3/31/97
-------- --------
REVENUES - NET $ 42,298 $ 14,074
COST OF GOODS SOLD 19,601 7,594
GROSS PROFIT 22,697 (6,480)
OPERATING EXPENSES
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 129,685 107,999
DEPRECIATION AND
AMORTIZATION EXPENSE 6,551 3,324
TOTAL OPERATING EXPENSES 136,236 111,323
OPERATING LOSS (113,539) (104,843)
INTEREST EXPENSE (10,417) (335)
NET (LOSS) (123,956) (105,178)
NET (LOSS) PER SHARE (0.016) (0.014)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 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 STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
3/31/98 3/31/97
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(123,956) $(105,178)
Adjustment to Reconcile Net Loss to Net Cash
Used in Operating Activities:
Depreciation and Amortization 6,551 3,324
Changes in Operating Assets and Liabilities
Accounts Receivable 335 (4,400)
Inventory 11,102 6,040
Deposits (4,500) 0
Accounts Payable and Accrued Liabilities (9,183) 1,038
Customer Deposits (26,868) (4,011)
-------- --------
Net Cash (Used in) Provided by
Operating Activities (146,519) (103,971)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Fixed Assets and Patents (25,068) 0
Notes Payable to Stockholders 0 99,381
Patent Costs 0 (2,880)
-------- --------
Net Cash Provided by (Used In)
Investing Activities (25,068) 96,501
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Private Placement 200,000 -
Payments on Notes Payable - -
Proceeds from Notes Payable 74,510 -
-------- --------
Net Cash Provided by Financing Activities 274,510 -
-------- --------
Net Increase (Decrease) in Cash 102,923 (7,470)
Cash - Beginning of Period 41,743 54,086
-------- --------
Cash - End of Period $144,666 $ 46,616
======== ========
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
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 $(929,852) 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 - INVENTORY
Inventory consists of $130,463 of finished goods as of March 31, 1998.
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at March 31, 1998:
Office Furniture and Equipment $ 19,692
Lab Equipment 135,439
---------
Total Equipment 155,131
Less: Accumulated Deprecation 58,448
---------
Total Property, Plant and Equipment $ 96,683
=========
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NOTE 5 - NOTES PAYABLE
Interest Expense for the period ended
March 31, 1998, amounted to: $ 10,417
Interest Expense for the period ended
March 31, 1997, amounted to: $ 335
NOTE 6 - INCOME TAXES
To date, the Company has incurred tax operating losses and therefore has
generated no income tax liabilities. As of March 31, 1998, the Company has
generated net operating loss carryforwards totalling $(929,852) which are
available to offset future taxable income, if any, through the year 2012. 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 March 31, 1998:
Deferred Tax Assets:
Net Operating Loss Carryforward $(929,852)
Valuation Allowance (929,852)
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 MARCH 31, 1998 VERSUS THREE MONTHS ENDED MARCH 31, 1997
During the three months ended March 31, 1998, the Company had $42,298 in
revenue compared to $14,074 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.
The Company expects sales to increase significantly in the second quarter
due to the orders that were received during the first quarter. Sales
contracts have been executed with vendors in Brazil, Saudi Arabia, Thailand,
the Philippines and other third world countries.
Expenses for the three months ended March 31, 1998, were approximately
$25,000 more that the corresponding prior year period. General selling and
other administrative expenses increased due to additional personnel hired.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company had negative working capital of
approximately $(108,516) compared to approximately $19,021 at December 31,
1997. Due to existing in-house orders and the anticipated private sale of the
Company's common stock, working capital is expected to increase during the
second quarter of 1998.
As of March 31, 1998, 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.
SALES OF RESTRICTED SECURITIES. During the quarter ended March 31,
1998, the Company issued restricted securities as follows:
In March 1998, the Company sold 500,000 shares of Common Stock to
one accredited investor for $200,000.
With respect to this sale, the Company relied on Section 4(2) of the
Act. The investor signed a subscription agreement in which he represented
that he was purchasing the shares for investment only and not for the purpose
of resale or distribution. The appropriate restrictive legends were 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.
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: May 19, 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
<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, 3 and 4 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 144,666
<SECURITIES> 0
<RECEIVABLES> 3,547
<ALLOWANCES> 0
<INVENTORY> 130,463
<CURRENT-ASSETS> 278,676
<PP&E> 96,683
<DEPRECIATION> 0
<TOTAL-ASSETS> 462,697
<CURRENT-LIABILITIES> 170,160
<BONDS> 0
<COMMON> 800
0
0
<OTHER-SE> (70,112)
<TOTAL-LIABILITY-AND-EQUITY> 462,697
<SALES> 42,298
<TOTAL-REVENUES> 42,298
<CGS> 19,601
<TOTAL-COSTS> 19,601
<OTHER-EXPENSES> 136,236
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (10,417)
<INCOME-PRETAX> (123,956)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (123,956)
<EPS-PRIMARY> (.016)
<EPS-DILUTED> 0
</TABLE>
