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As filed with the Securities and Exchange Commission on January 15, 1999.
SEC Registration No. 333-67087
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
AMENDMENT NO. 1 TO
FORM SB-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
SMLX TECHNOLOGIES, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Colorado 5047 84-1337509
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(State or Other Jurisdic- (Primary Standard Industrial (IRS Employer Iden-
tion of Incorporation) Classification Code Number) tification Number)
376 Ansin Boulevard, Hallandale, FL 33009
(954) 455-0110
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(Address and Telephone Number of Principal
Executive Offices and Principal Place of Business)
Colin N. Jones, President
376 Ansin Boulevard, Hallandale, FL 33009
(954) 455-0110
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(Name, Address and Telephone Number of Agent for Service)
Copies to:
Jon D. Sawyer, Esq.
Krys Boyle Freedman & Sawyer, P.C.
600 Seventeenth Street, Suite 2700 South Tower, Denver, Colorado 80202
(303) 893-2300
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH AMOUNT MAXIMUM MAXIMUM
CLASS OF SECUR- TO BE OFFERING AGGREGATE AMOUNT OF
ITIES TO BE REGIS- PRICE OFFERING REGISTRATION
REGISTERED TERED PER UNIT(1) PRICE FEE
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Common Stock 3,100,000 $1.0156 $3,148,360 $875.24 (3)
$.0001 Par Value Shares
(2)
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 by reference to the average of the closing bid and ask
prices of the Registrant's Common Stock on November 9, 1998, as reported on
the OTC Bulletin Board.
(2) To be offered by Selling Shareholders.
(3) Paid with the initial filing of this Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
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PROSPECTUS SUBJECT TO COMPLETION DATED JANUARY 15, 1999
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The information in this Prospectus is not complete and may be
changed. The securities may not be sold until the registration
statement filed with the Securities and Exchange Commission is
effective. This Prospectus is not an offer to sell these securi-
ties and the Selling Shareholders are not soliciting an offer to
buy these securities in any state where the offer or sale is not
permitted.
SMLX TECHNOLOGIES, INC.
3,100,000 Shares of Common Stock
The Shares of Common Stock are being offered by certain
Selling Shareholders. We will not receive any of the proceeds
from the sale of the Shares by the Selling Shareholders.
The Common Stock is traded in the over-the-counter market
and is quoted on the OTC Bulletin Board (Symbol: SMLX). On
January 15, 1999, the closing bid and ask prices of the Common
Stock were $1.0625 and $1.21875, respectively.
This investment involves a high degree of risk. You should
purchase shares only if you can afford a complete loss. See
"Risk Factors" starting on page 5.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this Prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
January 15, 1999
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TABLE OF CONTENTS
PAGE
Prospectus Summary .......................................... 3
Risk Factors ................................................ 5
Market Prices and Dividends ................................. 9
Management's Discussion and Analysis ........................ 10
Business .................................................... 12
Management .................................................. 22
Security Ownership of Management, Principal Shareholders
and Selling Shareholders .................................. 27
Transactions With Management and Others ..................... 30
Description of Securities ................................... 32
Plan of Distribution ........................................ 33
Legal Matters ............................................... 34
Experts ..................................................... 34
Additional Information ...................................... 34
Index to Financial Statements ............................... F-1
2
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PROSPECTUS SUMMARY
THE COMPANY
SMLX is engaged in the business of developing technological solutions for
the medical, dental and other industries and then bringing the technologies to
the marketplace. The first product which we have developed is a test for HIV,
the AIDS virus, which screens saliva instead of blood or urine.
Another product which we have developed is a disposable dental air
abrasion unit (named the Airbrator(R)) which can be attached to the standard
dental equipment found in most dentist's offices, and which we expect will be
priced for less than $10.00. The FDA has cleared the Airbrator(R) for
marketing for abrading, etching and polishing teeth, and the FDA has verbally
indicated that the product was technically cleared for use in cavity
preparation, and management expects it to be cleared for marketing once the
FDA has inspected the manufacturing site, and determined that it meets the
FDA's regulations. We have also been informed that the patent applied for on
the Airbrator(R) is being issued.
We have several other technologies which we have developed and these are
discussed in the Business section of this Prospectus.
Our offices are located at 376 Ansin Boulevard, Hallandale, Florida
33009. Our telephone number is (954) 455-0110.
OFFERING SUMMARY
Securities Offered: 3,100,000 Shares of Common Stock offered by
Selling Shareholders
Common Stock Presently
Outstanding: 10,600,000 Shares
FINANCIAL SUMMARY
This financial summary does not include all of the information in the
financial statements. You should read the financial summary along with the
financial statements and the notes to the financial statements which are
included in this Prospectus.
Balance Sheet Data: At September 30, 1998 At December 31, 1997
- ------------------ --------------------- --------------------
Total Assets $937,715 $ 348,194
Current Assets 540,698 187,190
Current Liabilities 214,517 206,211
Long-Term Debt 363,932 288,932
Working Capital (Deficit) 176,766 (19,021)
Stockholders' Equity (Deficit) 359,266 (146,949)
Cash Dividends Per Common Share 0 0
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For the None Months For the Years Ended
Statement of Ended September 30, December 31,
Operations Data: 1998 1997 1997 1996
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Net Sales $ 369,426 $ 87,925 $ 71,461 $ 25,840
Net Income (Loss) (493,785) (319,255) (309,944) (434,640)
Net Income (Loss)
Per Share (0.05) (0.04) (0.05) (0.15)
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RISK FACTORS
Some of the statements contained in this Prospectus discuss future
expectations, contain projections of results of operations or financial
condition or state other "forward-looking" information. Those statements are
subject to known and unknown risks, uncertainties and other factors that could
cause the actual results to differ materially from those contemplated by the
statements. Factors that could cause the results to differ include the risk
factors discussed below.
Investing in the Shares is very risky. You should be able to bear a
complete loss of your investment. You should carefully consider the following
factors, among others:
Recently Organized Although SMLX was organized in 1987, it was generally
Business; Losses inactive until March 1997 when it acquired a medical
During Start-up diagnostics products company named Simplex Medical
Operations. Systems, Inc. From June 6, 1995, the date the acquired
business began, to December 31, 1997, we incurred a
We have incurred net loss of $805,896 on revenues of $119,431. During
losses since we the first nine months of 1998, we incurred a net loss
began doing of $493,785 or $.05 per share on revenues of $369,426.
business. Our ability to operate profitably depends on increas-
ing our sales, achieving sufficient gross profit
margins, and bringing new products to the market.
SMLX is also subject to business risks associated with
new business enterprises. We cannot assure you that
SMLX will operate profitably.
We had a working At December 31, 1997, SMLX had a working capital
capital deficit and deficit of $19,021 and a stockholders' equity deficit
a negative stock- of $146,949. During 1998, we received $1,000,000
holders' equity at from the sale of stock in private transactions. We
December 31, 1997. cannot assure you that we will not need additional
We have met capital funds or that any needed funds will be available,
needs with private if at all, on acceptable terms. If we need additional
sales of securities. funds, our inability to raise them will have a very
adverse effect on our operations. If we raise funds
by selling equity securities, sales may dilute your
share ownership.
Our Auditors have The report issued by the independent certified public
raised a concern accountants who audited the financial statements of
about our ability SMLX at December 31, 1997, includes a paragraph which
to continue in raises doubts as to our ability to continue in busi-
business ness. The financial statements as of that date do
not include any adjustments that would be needed if
we went out of business.
No Product Liability We currently only have property and general liability
Insurance. insurance which excludes products liability coverage.
We intend to obtain products liability coverage before
we begin to sell any of our products in larger
quantities, but there is no assurance that we will be
able to obtain such liability insurance on acceptable
terms. If we are unable to obtain this insurance,
we would be exposed to significant losses in the event
someone is injured due to one of our products.
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Competition. Our market is very competitive. We are aware of
other companies, universities and research insti-
Currently, we tutions which have patented, developed or are
have several com- developing products which are or may be competitive
petitors, and with our products. These potential competitors are
may have more in better established and have greater resources than
the future. we do.
Dependence on Our business is largely dependent on our ability to
Management. hire and retain quality managers. Although we have
written employment agreements with each of our
We have a few Officers, the loss of any Executive Officer
key officers and could have an adverse effect on our business and
directors. prospects.
Key-man insurance. We do not currently maintain key-man life insurance
on any of our employees.
Control by As of the date of this Prospectus, our Officers and
Management. Directors beneficially own approximately 39% of our
outstanding shares. Upon completion of the offering
and the sale of all of the shares by the Selling
Shareholders, our Officers and Directors will bene-
ficially own approximately 16% of the then issued
and outstanding shares.
Risks Relating to We own one patent and we have filed federal patent
Patents. applications for six devices related to our
products. We are not certain whether any of these
patents will be granted. Even if we receive one or
more patents, they may not provide us with protection
from competitors.
Patent protection We cannot assure you that any pending patent appli-
is uncertain. cation will result in a patent being issued, or that
any patent obtained will be effective in thwarting
competition. Our failure to obtain patent protection,
or illegal use by others of any patents we may obtain,
may have an adverse effect on our business, financial
condition and operating results. In addition, the
laws of certain foreign countries do not protect
proprietary rights to the same extent as the laws
of the United States.
Costs of prose- We cannot assure you that claims for patent infringe-
cuting and ment or claims for damages resulting from any such
defending patent infringement will not be asserted or prosecuted
infringement against us. Even if we obtain patent protection for
claims are sig- our products, the validity of any patents may be
nificant. challenged. Any such claims, with or without merit,
could be time consuming and costly to defend, divert-
ing management's attention and our resources.
Social, Political Currently, nearly all of our revenues come from the
and Economic Risks sales of our Rapid Saliva Tests to customers in
Associated with foreign countries. Social, political and economic
Foreign Operations conditions inherent in foreign operations and inter-
and International national trade may change, including changes in the
Trade. laws and policies that govern foreign investment and
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international trade. To a lesser extent social,
political and economic conditions may cause changes
in U.S. laws and regulations relating to foreign
investment and trade. Social, political or economic
changes could, among other things, make it more
difficult or more expensive for us to sell our test
kits in foreign countries. Accordingly, we cannot
assure you that changes in social, political or
economic conditions will not have a substantial
adverse effect on our business.
Potential Our Shares are not listed on Nasdaq or any exchange.
liquidity Trading is conducted in the over-the-counter market
problems. on the OTC Bulletin Board, which was established for
securities that do not meet the Nasdaq or exchange
listing requirements. Consequently, selling SMLX
Shares is more difficult because smaller quantities
of shares are bought and sold and security analysts'
and news media's coverage of SMLX is limited. These
factors could result in lower prices and larger
spreads in the bid and ask prices for our shares.
Risks of low- Because our Shares are not currently listed on Nasdaq
priced Shares. or an exchange, they are subject to Rule 15g-9 under
the Exchange Act. That rule imposes additional sales
practice requirements on broker-dealers that sell
low-priced securities to persons other than estab-
lished customers and institutional accredited in-
vestors. For transactions covered by this rule, a
broker-dealer must make a special suitability
determination for the purchaser and have received
the purchaser's written consent to the transaction
prior to sale. Consequently, the rule affects the
ability of broker-dealers to sell our Shares and may
affect the ability of shareholders to sell SMLX Shares
in the secondary market.
No Dividends We intend to retain any future earnings to fund the
Anticipated. operation and expansion of our business. We do not
anticipate paying cash dividends on our Shares in
the foreseeable future.
Shares Eligible We currently have 10,600,000 shares outstanding and
for Future Sale. the following is a breakdown of these shares:
We cannot predict * Free Trading 4,405,800 Shares
the depressive * Restricted:
effect of resales. Currently eligible for
sale under Rule 144 3,094,200 Shares
Being offered in this
Prospectus 3,100,000 Shares
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* Total Restricted Shares 6,194,200 Shares
We are unable to predict the effect that sales made
in this offering or under Rule 144 may have on the
then prevailing market price of our Shares. It is
likely that market sales of large amounts of these
or other SMLX shares (or the potential for those
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sales even if they do not actually occur) will have
the effect of depressing the market price of our
shares.
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MARKET PRICES AND DIVIDENDS
The Company's Common Stock trades in the over-the-counter market, under
the symbol "SMLX". Other than a few sporadic trades during November 1996, the
trading commenced during February 1997. The following table shows the high
and low bid prices for the Company's Common Stock for the periods indicated as
reported by the OTC Bulletin Board. These prices are believed to be
inter-dealer quotations and do not include retail mark-ups, mark-downs, or
other fees or commissions, and may not represent actual transactions.
Quarter Ended High Bid Low Bid
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March 31, 1997 $3.3125 $.03125
June 30, 1997 $3.0625 $1.75
September 30, 1997 $2.875 $1.4375
December 31, 1997 $2.3125 $1.1875
March 31, 1998 $1.78125 $ .75
June 30, 1998 $4.3125 $ .625
September 30, 1998 $3.375 $1.03125
December 31, 1998 $1.875 $ .875
As of January 11, 1999, the Company had approximately 102 shareholders of
record. This does not include shareholders who hold stock in their accounts
at broker/dealers.
Holders of Common Stock are entitled to receive dividends declared by the
Company's Board of Directors. No dividends have been paid on the Company's
Common Stock and no dividends are anticipated to be paid in the foreseeable
future.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
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.
YEAR ENDED DECEMBER 31, 1997 VERSUS YEAR ENDED DECEMBER 31, 1996
The Company's revenues during the year ended December 31, 1997 were
$71,461 as compared to $25,840 during the year ended December 31, 1996. The
increased revenues were due to increased sales of the Company's saliva test
kits to distributors in foreign countries for the purpose of testing the
products and obtaining approvals to sell the products in these countries.
Costs of goods sold increased from $25,269 in the year ended December 31,
1996 to $48,121 in the year ended December 31, 1997 due to the increased
sales. Cost of goods sold as a percentage of sales dropped from 98% in 1996
to 67% in 1997. The margin on the Company's saliva test kits will increase
significantly once the Company starts manufacturing the kits in commercial
quantities.
Selling, general and administrative expenses increased from $403,049 in
the year ended December 31, 1996 to $485,086 in the year ended December 31,
1997 due to the increased level of activity in the Company's business, and the
fact that the Company completed a reverse acquisition with a public company
during March 1997 which caused the Company's legal and accounting expenses to
increase.
During the year ended December 31, 1997 the Company received other income
of $167,360 from the forfeiture of customer deposits for marketing rights to
the Company's HIV test kits, and the Company received $30,000 from Sybron
Dental Specialities, Inc. pursuant to the distribution agreement relating to
the Airbrator(R).
Interest expense increased from $6,469 in the year ended December 31,
1996 to $19,505 in the year ended December 31, 1997 due to the increased
amount of debt outstanding during 1997.
The net loss for the year ended December 31, 1997 declined to $309,944
from $434,640 for the year ended December 31, 1996 due primarily to the other
income received during 1997 related to the forfeiture of customer deposits and
the license fees.
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CAPITAL RESOURCES AND LIQUIDITY
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
2,600,000 shares of stock for $1,000,000 in gross proceeds during the nine
months ended September 30, 1998.
The Company's working capital was a negative $19,021 at December 31, 1997
as compared to a positive $32,577 at December 31, 1996. The decrease in
working capital was primarily due to the net loss for 1997 of $309,944.
During the year ended December 31, 1997, cash used in operating
activities was $303,861 as compared to $532,289 of cash used in operating
activities for the year ended December 31, 1996. The principal contributing
factor was the 1997 loss of $309,944.
During the year ended December 31, 1997 net cash used in investing
activities was $50,581 as compared to $101,084 in the prior year.
During the year ended December 31, 1997 the net cash provided by
financing activities was $342,336 as compared to $607,781 in the prior year.
In 1997 the Company received $294,990 in loans from a shareholder and an
additional $50,000 loan from an investor.
As of September 30, 1998, the Company had no commitments for capital
expenditures.
Management believes that the Company's current working capital will be
sufficient to meet its anticipated needs for the rest of 1998.
The Company has recently signed a letter of intent with an investor
whereby the investor will purchase 1,000,000 shares of the Company's Common
Stock for $950,000. There is no assurance that this transaction will close.
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.
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BUSINESS
BACKGROUND
SMLX Technologies, Inc. (the "Company") was incorporated under Colorado
law on October 26, 1987, under the name The Trader's Edge Ltd. On March 28,
1996, the name was changed to Music Tones Ltd. The Company was generally
inactive through December 31, 1996. On March 28, 1997, the Company's
shareholders approved changing the Company's name to Simplex Medical Systems,
Inc., and on August 20, 1998, the Company's shareholders approved changing the
Company's name to SMLX Technologies, Inc.
In April 1996, the Company filed a registration statement with the
Securities and Exchange Commission on Form 10-SB, which registered its Common
Stock under Section 12(g) of the Securities Exchange Act of 1934, as amended.
On March 5, 1997, the Company completed a reverse acquisition of 100% of
the outstanding common stock of Simplex Medical Systems, Inc., a Florida
corporation ("Simplex-Florida") in exchange for 3,453,000 shares of the
Company's Common Stock which resulted in the shareholders of Simplex-Florida
acquiring approximately 46.04% of the shares outstanding after the
transaction. In connection with the closing of this transaction, several
shareholders agreed to cancel a total of 31,953,000 shares of Common Stock.
As a result, after the acquisition of Simplex-Florida there were a total of
7,500,000 shares outstanding.
Unless the context otherwise requires, the term "Company" herein refers
to the Company and its wholly-owned subsidiaries, Simplex-Florida, Analyte
Diagnostics, Inc. ("ADI"), and IRT Management Corp. ("IRT"). Simplex-Florida
was incorporated in Florida in September 1995, ADI was incorporated in Florida
on June 6, 1995, and IRT was incorporated in Florida on January 14, 1997.
Simplex-Florida changed its name to SMLX Technologies of Florida, Inc. during
November 1998.
DESCRIPTION OF BUSINESS
GENERAL
SMLX is engaged in the business of developing technological solutions for
the medical, dental and other industries and then bringing the technologies to
the marketplace.
THE COMPANY'S PRODUCTS
Our products can be organized as follows:
1. Medical diagnostic tests - Development completed.
Cleared for (a) Rapid saliva tests for HIV, hepatitis, chagas disease,
use in certain prostrate cancer, H pylorea (ulcers), and drugs of
foreign abuse.
countries;
not in the
U.S.
2. Medical diagnostic tests - In development.
(a) Rapid saliva tests for mumps, measles and rubella.
(b) Blood or saliva test or periodontal disease.
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3. Dental products.
Cleared for (a) Airbrator(R) for polishing, cleaning and abrading teeth.
marketing by
FDA.
(b) Saliva Collector.
510(k) sub- (c) Airbrator(R) for use in cavity preparation.
mitted to
FDA.
4. Equine products in testing.
(a) Bioven - anti-inflammatory drug.
(b) Equine infectious anemia rapid test.
5. Other miscellaneous products.
(a) Flea and tick shampoo for small animals.
(b) Organic garden spray (in final testing).
(c) Flavor enhancement.
(d) Tissue fixatives.
A. THE SALIVA COLLECTION DEVICE. The Company's saliva collector is
designed to replace the more traditional methods of specimen collection for
clinical testing. Blood collection has the obvious disadvantage of being an
invasive procedure with associated fear and pain; but most importantly
requires trained personnel to collect the specimen. Urine and fecal matter
have unsavory characteristics as well as the troublesome handling and disposal
problems associated with these biological specimens. All of these specimens
have the disadvantage of being potentially infectious and are treated as bio-
hazardous materials. Saliva collected by the Company's collector can be used
in all routine laboratory equipment and analyzers; can be used by unskilled
personnel; requires little training in its use; and is well tolerated by
patients. Literature references and data obtained by the Company indicates
that saliva collected by its collection system provides a biological specimen
which compares to blood in many of the routinely tested components, such as
HIV, hepatitis, therapeutic drugs, and drugs of abuse, to name only a few.
The saliva collector, when married to the Company's rapid testing
devices, provides the user with a rapid point-of-care test system which
requires little training, is stored at room temperature, needs no complicated
lab equipment, and provides results in ten to 15 minutes. This combination
provides users such as public health officials, prisons and the military with
an effective, rapid testing system. In relatively undeveloped countries, the
on-site saliva testing system provides a means of population screening and
effective disease management through rapid definitive identification of
affected individuals.
In clinical tests, it has proven both safe and effective for the
collection of a clinically acceptable sample of saliva from a donor's mouth,
and the recovery thereof for constituent analysis. Because of the metabolic
constituents of saliva, the sample collector can be used with a number of
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diagnostic tests, including analysis for antibodies which indicate certain
diseases (such as HIV, hepatitis, measles and mumps).
During April 1998 the Company received a letter from the FDA stating that
the FDA had reviewed the Company's 510(k) notification regarding the saliva
collector and had approved marketing of the product in the United States for
use as a saliva absorber during dental procedures.
The fluid collection device to be manufactured and distributed by the
Company may also be used with a variety of screening tests for on-site
determination of the presence of pollutants in drinking water, waste streams
and environmentally sensitive habitats.
The countries which have approved or permitted the sale of these test
kits include Hong Kong, Spain, Peru, Costa Rica, Italy, Kuwait, New Zealand,
and Dominican Republic.
B. DENTAL AIRBRATOR(R). The Company has developed and applied for
patents and FDA approval on a disposable handpiece which attaches to standard
air abrasive etching devices used by dentists for tooth bonding procedures.
The product effectively abrades the surface of teeth, but has no effect at all
on soft tissue. Because it is disposable and there is no need for extensive
sterilization procedures, the product expedites the handling of patients.
During April 1997 the Company received a letter from the FDA stating that
the FDA had completed the scientific review portion of the Company's 510(k)
premarket notification regarding the Airbrator(R), and the Airbrator(R) was
cleared for marketing in the United States for the use of abrading the surface
of teeth. Subsequently, in response to the Company's second 510(k) premarket
notification regarding the Airbrator(R), the Company was informed verbally
that the Airbrator(R) was technically cleared for use in cavity preparation
and management expects it to be cleared for marketing once the FDA has
inspected the manufacturing site and determined that it complies with the
FDA's requirements. The Company has notified the FDA who the manufacturer
will be, and the FDA has indicated it will conduct the inspection during the
fourth quarter of 1998.
During July 1997, the Company entered into a Distribution Agreement with
Sybron Dental Specialties, Inc. ("Sybron") which appointed Sybron as the
exclusive worldwide distributor for the Airbrator(R). Several of the terms of
this agreement were amended during December 1997. The agreement, as amended,
provides that, subject to the Company satisfying its obligations under the
agreement, Sybron will purchase at least three million Airbrators(R) per year
commencing on December 1, 1998, and continuing for the five year term of the
agreement. Sybron paid a $30,000 one-time license fee to the Company during
1997 for the grant of this distributorship. Pursuant to the agreement, the
Company is responsible for using commercially reasonable efforts to produce,
supply and ship the Airbrators(R) in accordance with Sybron's orders. The
Company is currently holding discussions regarding the termination of this
agreement.
C. BIOVEN is an injectable, anti-inflammatory drug which is currently
being tested as a treatment for joint inflammation in horses. These tests are
being conducted at three sites in Florida. One of the Company's officers
developed BIOVEN after fifteen years of extensive research in the field of
immunology. BIOVEN is a result of years of experimentation, evaluation and
historical study in the field of peptide use. The BIOVEN mode of action is
believed to function by reversing the chemical/immunological imbalances that
are present in inflamatory processes.
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D. FLAVOR ENHANCEMENT. The Company has developed a proprietary process
which allows the incorporation of flavor essences into an edible support
material using food grade materials and approved printable inks. This process
would allow a new form of advertising sampler which would let a consumer
sample new food and beverages through newspaper ads, point of sale displays or
direct mailings. The encapsulation process and method of manufacturing are
proprietary and the Company has applied for patent protection for this
technology.
E. FLEA AND TICK SHAMPOO. The Company has developed a proprietary flea
and tick shampoo for small animals, which is being marketed by the Company
under the name Neemodex(R). The active ingredient, Neem Oil, is an extract of
the Neem tree, a tropical evergreen that grows in Asia. This product is all
natural, non-insecticidal, non-toxic and environmentally safe. The Company is
the manufacturer of this product and expects to expand on its formulation line
by adding new pet grooming products in the future.
F. ORGANIC GARDEN SPRAY. The Company has recently acquired the rights
to an organic garden spray which is in the final stages of research and
development and field testing. This product is an all natural insecticide and
fungicide containing Neem Oil. It will be sold ready to use on ornamental and
vegetable plants. It controls aphids, spider mites, whitefly, thrips and
scale insects. It is environmentally safe and can be used on indoor or
outdoor plants.
G. EQUINE INFECTIOUS ANEMIA RAPID TEST. This is a rapid serum test for
equine infectious anemia. It utilizes a procedure that is simpler to run than
the other two available tests (the Coggin's test or the ELISA test), and it
does not require a trained technician to perform. It can be easily performed
at the stables. The Company has completed development of this test and is
currently working with a distributor in Brazil which is seeking approval from
Brazilian regulatory authorities to market the product in Brazil. The Company
plans to submit this test product to the U.S. Department of Agriculture for
their approval in the future.
RESEARCH AND DEVELOPMENT
The Company spent $103,324 on research and development of new products
during the year ended December 31, 1997, and it expects to spend approximately
three times this in the current fiscal year on development of the products
described above in addition to others.
THE MARKET
The Company believes that the saliva diagnostic market is in its infancy
and could become an extremely large industry. However, no market or
feasibility study has been undertaken by the Company. Commercial development
of immunoassays in diagnostic medicine commenced in the 1960's and has
increased significantly since then, due to the high degree of sensitivity and
specificity of such techniques.
Tests for hepatitis, HIV, mumps, measles, cancer tumor markers, EBV, CMV,
and many other diseases currently use blood as the source of the specimen.
These tests, while effectively performed in the clinical setting, are
expensive, time consuming and, at the least, painful for the patient. The
skill and expertise of the physician or other highly trained individual needed
to obtain the sample of blood for these tests also adds to the high cost of
the testing.
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The saliva collection and test system not only tends to solve these
problems but is easy to use and lends itself to home or "point of care"
testing. These advantages reduce the overall cost of immunological testing
and provide immediate results. The Company believes that testing with saliva
specimens has many potential advantages compared to testing with blood and
urine specimens. Unlike blood specimens, saliva specimens can be collected at
any time in any location. The sampling procedure is easy to administer and
monitor, and may be conducted on a group basis. The Company believes that,
unlike blood collection, the use of its products will not require special
training. Blood specimen testing requires the use of needles, which may
accidentally injure or infect the technician collecting the specimen or the
person giving the specimen. Saliva specimen collection does not require the
use of sharp objects. Additionally, after collection, blood specimens remain
potentially infectious (for example they can contain live HIV virus) whereas
saliva specimens are believed not to be infectious. The use of saliva
specimens also has advantages compared to the use of urine specimens since the
integrity of the saliva specimen can be maintained, chain of custody concerns
can be addressed and saliva collection can be used without significant
invasion of privacy.
Disadvantages of saliva collection include the stability of saliva as a
specimen and the impact of the subject's diet and enzymes on saliva.
Provisions must be made to assure that a sufficient amount of saliva is
collected, the specimen is adequately stabilized and bacterial growth does not
cause test interference.
Saliva based testing has been recognized by the World Health Organization
("WHO") and the FDA as efficacious and practical. Several tests have been
approved to be used in the clinical market based on saliva samples. Countries
such as Thailand, Brazil, Mexico, Russia and many others have already made
policy changes which allow for the use, and even encourage the use, of saliva
tests for HIV in their health programs.
The market currently is divided into three major components: the
"government" sector; the "captive audience" sector (military, criminal,
institutional, etc.); and the "private" sector or individual patient.
International markets for the Company's products include both government
and private business sectors. Subject to government approvals, the Company's
introduction of its saliva collector will be with an HIV diagnostic screening
test. The HIV test kit is initially planned for distribution and use by
governmental public health agencies and by foreign military establishment. In
certain foreign markets, the Company's HIV test kits are expected to be
advertised for sale directly to private physicians and the consuming public.
The Company already has products under evaluation in a number of
countries. Several countries have begun testing the HIV saliva test with the
goal of introducing the product to their military to replace the currently
used blood test. Public health institutions in several foreign countries have
reviewed and tested the Company's HIV saliva collectors. Their goal is to use
the test to screen "at risk" populations in major cities and tourist areas.
These include legal prostitutes, drug addicts, the homosexual population and
the prison population. Results of this testing will be used to develop policy
for the education programs which must be implemented along with testing to
halt the rapid spread of this infection. Additionally, many of these countries
will use the results of this testing and mass screening to plan for the future
health needs of their countries.
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The tremendous publicity of the HIV/AIDS epidemic has created a very
large demand by individuals who would like to have a test. However,
individuals are reluctant to submit to organized testing because of a fear of
being "reported" and the social consequences even if the test is negative. The
testing of partners is a common concern of the socially active. The simple and
confidential nature of saliva testing allows an individual to perform the
Company's test in the privacy of his own home at his convenience. As a
screening test this will reduce the unnecessary burden on clinical labs as
only persons with positive test results must be retested. Doctors' office
visits will be reduced and a substantial savings in time will be realized.
All of this will lead to lower overall health costs for the individual.
GOVERNMENT REGULATION
The development, manufacture, testing and marketing of the Company's
diagnostic products and the Airbrator(R) are subject to regulation by the FDA
and other federal, state and foreign agencies. Under the FDC Act, the FDA
regulates almost all aspects of development, marketing and sale, including the
introduction, clinical trials, advertising, manufacturing, labeling,
distribution of and record keeping for the products in the United States.
Diagnostic products marketed for testing for drug abuse are regulated as
medical devices under the FDC Act for which FDA approval is required. The
Company may attempt to obtain marketing clearance through 510(k) Premarket
Notification for certain of its products used in connection with testing for
drug abuse. Following submission of a 510(k) Premarket Notification, the
manufacturer or distributor may not place the device into commercial
distribution until an order is issued by the FDA. The FDA has no specific time
limit by which it must respond to a 510(k) Premarket Notification. The FDA may
declare that the device is "substantially equivalent" to another legally-
marketed device, and allow the device to be marketed in the United States. The
FDA may, however, determine that the proposed device is not substantially
equivalent, or may require further information, such as additional test data,
before it is able to make a determination. There is no assurance that
marketing clearance will be obtained for any of the Company's products.
Other than the dental products, no FDA approval has yet been received for
any of the Company's products and there can be no assurance that such approval
will ultimately be obtained. Although the saliva collection device received
FDA approval in April 1998 for dental use only (see "The Company's Products"
above), the test kit which incorporates the collection device has not been
approved by the FDA for sale within the United States. It is however, the
Company's proposal to export the test kit in compliance with applicable laws
and regulations administered by the FDA. Initially, because the test device
has not been approved for use in the United States, the Company would have to
comply with the FDC Act if it wishes to export the device in its finished
form. To export the completed saliva test kit from the United States, the
Company does not only need to receive permission to export the product into
the foreign country, it also had to submit to the FDA, basic data regarding
the safety of the finished device in order for the agency to determine that
export is not contrary to public health and safety. The FDA cleared the
export of both the saliva collection device and the test kit for hepatitis B,
provided that the appropriate regulatory agency of the country to which the
product is exported has approved the importation and use of the product.
During April 1997 the Company received a letter from the FDA stating that
the FDA had completed the scientific review portion of the Company's first
510(k) Premarket Notification regarding the Airbrator(R), and that the
Airbrator(R) was released for marketing in the United States for the use of
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abrading, polishing and cleaning the surface of teeth. Subsequently, in
response to the Company's second 510(k) Premarket Notification regarding the
Airbrator(R), the Company was informed verbally that the Airbrator(R) was
technically cleared for use in cavity preparation, and management expects it
to be cleared for marketing once the FDA has inspected the manufacturing site
and determined that it complies with the FDA's requirements.
FOREIGN REGULATION
Agencies similar to the FDA regulate medical devices in some foreign
countries, whereas other countries allow unregulated marketing of such
devices. The Company's products will be required to meet the regulations, if
any, of the foreign countries in which they are marketed. Once a product has
been registered in a foreign country, the Company is required to obtain a
certificate of exportability from the FDA before the product can be shipped.
MANUFACTURING
The Company will manufacture the key components of its rapid saliva test
products because of the need to maintain quality control standards coupled
with the need to closely guard the technology. The saliva collector is being
manufactured by a contract manufacturer for the Company.
The two sub-assemblies of the Airbrator(R) are manufactured by East Coast
Plastics, a contract molding company and these components will then be filled,
assembled and packaged by National HealthCare, Inc., a contract manufacturer.
The other products described above will generally be manufactured by the
Company.
The Company believes that most components used in the manufacture of its
current and proposed products are currently available from numerous suppliers
located in the United States, Europe and Asia. However, certain components are
available only from a limited number of suppliers. Although the Company
believes that it will not encounter difficulties in obtaining these
components, there can be no assurance that the Company will be able to enter
into satisfactory agreements or arrangements for the purchase of commercial
quantities of such components.
The Company anticipates that it will not be required to maintain
significant inventory levels of products until the Company's products are
deemed acceptable for sale. The Company does not currently have any material
backlog. Until the Company is able to market its products on a broad basis, it
does not anticipate that its backlog or inventory level will be material. At
that time, the Company intends to cause these products to be manufactured for
it shortly before they are required for shipment. The Company does not
foresee that an extensive period of time will be required from the time of its
manufacturing order to the time of final delivery of its products.
COMPETITION
The markets in which the Company participates are highly competitive. The
Company is aware of specialized biotechnology firms, universities and other
research institutions which have patented, developed, or are developing
technologies and products which are competitive with the Company's products
and technologies. These entities, most of which are established, have
substantially greater research, marketing and financial resources than the
Company. The Company expects that the number of products competing with its
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saliva-based test products will increase as the potential benefits of saliva-
based testing become more widely recognized.
The Company is attempting to develop strategic alliances with companies
to jointly develop diagnostic tests which use saliva and/or blood as the
testing specimen.
PATENTS, TRADEMARKS AND PROPRIETARY INFORMATION
The Company owns the rights to U.S. Patent Number 5424219 dated June 13,
1995, which relates to the "Method of Performing Assays for Biomolecules and
Solid Supports for Use in Such Methods." The Company has licensed its rights
under this Patent to Polyfiltronics, Inc. (See "License Agreement with
Polyfiltronics, Inc." below.)
The Company presently has pending, two (2) patent applications in the
United States, on certain aspects of its saliva collection testing device.
Since the Company plans to sell its products in foreign markets it intends to
seek foreign patent protection on such products and technologies. The patent
laws of other countries may differ from those of the United States as to the
patentability of the Company's products and technologies and the degree of
protection afforded.
The Company also has one pending patent application in the United States
relating to the dental air abrasion device (Airbrator(R)), and three other
applications for other technologies which the Company is developing. The FTC
has informed the Company's patent counsel of the allowance of the Airbrator(R)
patent, and it should be issued within 90 days.
Much of the technology developed or owned by the Company is subject to
trade secret protection. To reduce the risk of loss of trade secret protection
through disclosure, the Company generally enters into confidentiality
agreements with its employees. There can be no assurance that the Company will
be successful in maintaining such trade secret protection or that others will
not capitalize on certain of the Company's technology.
The Company has also registered four trademarks with the U.S. Patent and
Trademark Office. These include the trademarks "Simplex," "Neemodex,"
"Airbrator(R)," and "Cytech."
LICENSE AGREEMENT WITH POLYFILTRONICS, INC.
In June 1998, the Company entered into an agreement with Polyfiltronics,
Inc. which grants Polyfiltronics an exclusive license of the Company's rights
under a patent owned by the Company relating to a micro titer filter plate
technology and an opaque wall micro strip system. Polyfiltronics paid the
Company $40,000 for the license and certain related tools and molds, and will
pay a royalty to the Company based on a percentage of sales of products using
the technology. The term of the license is for twenty years or the life of
the patent, whichever is shorter.
Polyfiltronics is a U.S. subsidiary of Whatman PLC, an English company,
with a worldwide presence in research laboratories, academic and teaching
facilities and industrial laboratories. Polyfiltronics is a technical leader
in filter plate technology. Filter plates are commonly used in medical
diagnostics, forensic medicine, DNA research, drug discovery and other
scientific fields for the analysis of small quantities of chemical or
biological components.
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ACQUISITION OF MINORITY INTEREST IN AUTOMATED HEALTH TECHNOLOGIES, INC.
During May 1998, the Company acquired a 19% interest in Automated Health
Technologies, Inc. ("AHT") in exchange for 500,000 shares of the Company's
Common Stock. The shares were exchanged pursuant to the terms of a Share
Exchange Agreement dated May 20, 1998, between the Company and AHT. The Share
Exchange Agreement provides that AHT has the right to require the Company to
exchange an additional 1,000,000 shares of Common Stock for all of the
remaining outstanding shares of AHT under certain conditions. AHT may
exercise this right prior to May 20, 2003, if, at the time of exercise, AHT
has a net worth of at least $200,000, no debt other than up to $25,000 in
trade payables, and year-to-date positive cash flow. In addition, AHT may
exercise this right if it sells the business of its subsidiary - Rx Automation
Incorporated, and escrows $1,000,000 from the proceeds of such a sale. In the
event that AHT exercises its right, the Company and AHT will in good faith
negotiate a merger or other exchange agreement necessary to effect the
additional exchange, and file a registration statement on Form S-4 to register
the transaction.
AHT is a medical services company that processes pharmacy and retail drug
store expired drug returns.
EMPLOYEES
The Company currently has eight employees. The Company is not subject to
any collective bargaining agreement and believes that its relationships with
its employees are good.
FACILITIES
The Company presently maintains its corporate offices and warehouse
facilities at 376 Ansin Boulevard, Hallandale, Florida 33009. The five year
lease on these facilities commenced April 1, 1998, and requires monthly rental
payments of $4,000 plus tax. The Company has the option to renew the lease
for five additional years.
LEGAL PROCEEDINGS
Other than the law suits described below, there are no pending legal
proceedings in which the Company is a party, and the Company is not aware of
any threatened legal proceedings involving the Company.
In August 1995, Americare Transtech, Inc. ("Americare"), Americare
Biologicals, Inc. and International Medical Associates, Inc., through their
principal, Joseph D'Angelo ("D'Angelo"), filed a lawsuit against six parties
in the Broward County circuit court under case no. 95-011256 (21). The
Complaint was dismissed and subsequently amended on or about May 17, 1996, and
included Simplex-Florida as a defendant in one count of the amended Complaint.
The Complaint alleges that ADI misappropriated Americare's proprietary and
trade secret technology relating to the saliva sample collection system and
non-invasive glucose detection technology. No specified amount of damages was
alleged other than to claim that the amount exceeded $15,000. Nine
affirmative defenses were filed in response to the allegations. A trial on
this matter was held in December 1998, and no damages were awarded against the
Company or its subsidiaries.
On or about September 3, 1998, Americare, D'Angelo et al amended a
previous complaint which had been filed in the United States District Court
for the Southern District of Florida under Case No. 97-3654-CIV, and added
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Simplex-Florida and ADI as defendants. The Complaint alleges patent
infringement, misappropriation of trade secrets, breach of contract, breach of
fiduciary duty as agent, breach of confidential relations, breach of trust,
unfair competition, and conversion. The Company intends to aggressively
defend the suit and has filed a motion to dismiss because it does not pertain
to anything the Company has ever been involved in.
On or about September 1, 1998, John Faro filed a Complaint against
Simplex Medical Systems, Inc., f/k/a Music Tones Ltd., a Colorado corporation;
Simplex Medical Systems, Inc., a Florida corporation; Nicholas Levandoski;
Henry B. Schur; John Trafton; D.L. Ross a/k/a Debra Ross; and Corporate Stock
Transfer, Inc., a Colorado corporation. The Complaint was filed in Miami-Dade
County Circuit Court under Case Number 98-19091 CA-4.
The Complaint contains eight counts alleging various causes of action
which all seek 460,000 shares of the Company. On January 6, 1999, the Court
dismissed the Complaint with leave to amend it. The Company believes that
the Complaint will be amended and refiled.
REPORTS TO SECURITY HOLDERS
The Company is subject to the reporting requirements of Section 13(a) and
to the proxy requirements of Section 14 of the Securities Exchange Act of
1934, as amended, and in accordance therewith files periodic reports, proxy
statements and other information with the Commission. Such reports, proxy
statements and other information concerning the Company may be inspected or
copied at the public reference facilities at the Commission located at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
Regional Offices in New York, 7 World Trade Center, New York, New York 10048,
and in Chicago, Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such documents can be obtained at
the public reference section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web
site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants that file
electronically.
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MANAGEMENT
DIRECTORS AND OFFICERS
The Directors and Executive Officers of the Company are as follows:
NAME AGE POSITIONS HELD
---- --- --------------
Colin N. Jones 77 President and Chairman of the Board
Nicholas G. Levandoski 61 Vice President - Research and
Development, Secretary, Treasurer
and Director of the Company, and
Director of Research and Development
for Simplex-Florida
Henry B. Schur 53 Vice President - Operations and
Director of the Company, Vice
President and a Director of
Simplex-Florida
Thomas E. Glickman 43 Vice President of Sales and
Marketing
Joel Marcus 58 Director
Kenneth H. Robertson 63 Director
Gerald M. Wochna 55 Director
There is no family relationship between any Director or Executive Officer
of the Company.
The Company has audit, compensation and executive committees, which were
set up on August 20, 1998. The audit committee consists of Joel Marcus and
Gerald Wochna. The compensation committee consists of Joel Marcus, Gerald
Wochna and Kenneth Robertson. The executive committee consists of Colin
Jones, Henry Schur and Kenneth Robertson.
Set forth below are the names of all directors and executive officers of
the Company, all positions and offices with the Company held by each such
person, the period during which he has served as such, and the principal
occupations and employment of such persons during at least the last five
years:
COLIN N. JONES has served as the President and Chairman of the Board of
the Company since April 10, 1998. Mr. Jones served as CEO and Chairman of
Automated Health Technologies from November 1996 to April 1998 and was a
consultant to that firm from February 1996 to November 1996. From July 1994
until January 1996, he served as Chairman, International of INTEC, an
international consulting firm specializing in reengineering. From February
1983 until March 1988, he served as Chairman of Proximity Technologies and
continued as Vice President, International until July 1994 for Franklin
Electronics, which had purchased Proximity Technologies. From June 1974 until
February 1983, he owned and operated his own merger and acquisition firm.
From January 1970 until June 1974, he was President and CEO of Sensormatic
Electronics and remained a consultant until June 1984. From September 1950
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until January 1970, he was employed by IBM in various positions with his final
position being Manager of Sales Programs for the Office Products Division.
Mr. Jones received a BSME Degree from the University of Texas in 1949.
NICHOLAS LEVANDOSKI has served as the Vice President of Research and
Development, Secretary, Treasurer and a director of the Company since March 5,
1997. He also served as acting President from March 5, 1997 until April 10,
1998. He has served as Director of Research and Development for Simplex-
Florida since June 1995. Mr. Levandoski has extensive research and clinical
experience, including military, industry and hospital environments. Mr.
Levandoski received a B.S. degree in Chemistry/Biology from the University of
Notre Dame in 1958. After a brief period in private industry (Abbott
Laboratories, N. Chicago, Illinois), Mr. Levandoski enlisted and served in the
Medical Service Corps. of the U.S. Army from 1959 to 1962. While on active
duty in Medical Service Corps., Mr. Levandoski enrolled and attended the
graduate school of the University of Denver where he continued his studies in
organic chemistry. Upon release from active duty in 1962, Mr. Levandoski was
hired as the Director of Laboratory of Metabolic Division of the U.S. Army
Research and Nutrition Laboratory, Denver, Colorado, from 1962 to 1964, and he
completed his graduate studies in 1964. He thereafter held responsible
positions in industry, including Cordis Corporation, Miami, Florida, from 1965
to 1971, in the Diagnostic Products Division; Benasil Corporation, Miami,
Florida from 1977 to 1979; and Director of Corporate Compliance (FDA) for
North American Biologicals, Miami, Florida. In 1979, Mr. Levandoski returned
to active duty in the U.S. Army as Executive Officer and Hospital
Administrator for a 1,000-bed general hospital in Miami, Florida. In 1982,
Mr. Levandoski was selected to attend the National War College, Ft. McNair,
Washington, D.C.; and was thereafter assigned to the Pentagon in Washington,
D.C., Division of Reserve Affairs, where he remained until his retirement as a
full Colonel in 1984.
HENRY SCHUR has served as the Company's Vice President of Marketing and a
Director since March 5, 1997. He has served as President of Analyte
Diagnostics, Inc., a wholly owned subsidiary of Simplex-Florida since June
1995. He is the Company's principal scientist and one of the principal
inventors of the Company's products. Mr. Schur has an undergraduate degree in
Health Sciences from Florida International University and post graduate
studies in Business Management at the University of Oklahoma. In the course
of Mr. Schur's professional career, he has occupied responsible positions with
companies engaged in the manufacture of diagnostics products and biochemicals,
including specifically, Arcade, Inc., Chattanooga, Tennessee (1986 to 1987),
and Cordis Corporation, Miami, Florida (1966 to 1968). Mr. Schur, in 1991,
was formerly employed by Americare, with whom Mr. Schur is now in litigation.
Mr. Schur is a principal inventor of a number of the Company's products and
has a number of issued U.S. and foreign patents to his credit.
THOMAS E. GLICKMAN has served as the Vice President of Sales and
Marketing since January 1998, and he has been employed by the Company since
October 1997. From 1993 until December 1997 he owned and operated KenStar
Corporation, a company which marketed diagnostic test kits and equipment to
clinical laboratories worldwide. Mr. Glickman sold KenStar to join the
Company. From 1986 until 1987 he served as the Director of Marketing for DVM,
the veterinary division of Ivax Corporation, which manufactured and sold skin
care products for dogs and cats to veterinarians. From 1987 until 1993 he
served as Vice President of Worldwide Sales and Marketing for the Diamedix
Division of Ivax. Diamedix manufactures enzyme immunoassay test kits for
infectious diseases and autoimmune diseases for use in clinical laboratories.
Prior to his employment with Ivax, Mr. Glickman spent 9 years with the Dade
Division of Baxter Travenol beginning as a Technical Sales Representative in
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the Maryland, Delaware and Washington D.C. areas. Later he held positions as
Product Manager for Hematology and National Accounts Manager. The Dade
Division manufactured and sold a wide range of diagnostic reagents and
controls for clinical laboratories worldwide.
JOEL MARCUS has served as a Director of the Company since December 1997.
He has been self-employed as a certified public accountant in Florida since
1974 when he became a licensed CPA. Mr. Marcus received a Bachelor of Science
Degree in Business Administration from Hofstra University in New York in 1960
and completed graduate studies at CW Post Tax Institute in 1963.
KENNETH H. ROBERTSON has been a Director of the Company since August
1998. Mr Robertson is President and CEO of Conference-Call USA, Inc., a
successful teleconferencing company which he co-founded in 1987 and sold in
December 1996 to Citizens Utilities, Inc. Following the sale, he has
continued as CEO of that entity, and it has continued to grow under his
leadership. Mr. Robertson has extensive experience in a diverse range of
business activities with special emphasis on sales and financial management.
In 1981 he moved to Florida as President and CEO of Alo-Scherer Healthcare
(now Scherer Healthcare, Inc.) and held that position until 1983 at which time
he resigned and has remained a director of this NASDAQ-listed company. Mr.
Robertson received a Bachelor's Degree in Economics from Wabash College in
1956.
GERALD M. WOCHNA has been a Director of the Company since August 1998.
Since 1984, he has been involved in the formation, financing and development
of several small businesses, both individually and as a member/manager of
Robertson & Partners, L.L.C. He is currently a director of Automated Health
Technology. Since 1984, Mr. Wochna has been involved in land development and
the development, construction, leasing and financing of retail, warehouse and
office properties. From 1973 to 1984, he practiced law with a law firm he
established in Boca Raton, Florida. Mr. Wochna continued to practice law on
an "of counsel" basis from 1984 to 1989, when he retired from that profession.
Mr. Wochna received his Bachelor's Degree from John Carroll University,
Cleveland, Ohio in 1964, and he graduated from Cleveland State University Law
School in 1968.
The Company's executive officers hold office until the next annual
meeting of the Directors of the Company. Except as described below, there are
no known arrangements or understandings between any director or executive
officer and any other person pursuant to which any of the above-named
executive officers or directors or nominees was selected as an officer or
director or nominee for director of the Company.
Colin N. Jones, Gerald M. Wochna and Kenneth R. Robertson were nominated
for election as directors of the Company pursuant to the terms of a
Stockholders' Agreement dated May 15, 1998, among the Company and certain
shareholders of the Company. (See "TRANSACTIONS WITH MANAGEMENT AND OTHERS --
STOCK SALES IN MAY AND JUNE 1998 AND STOCKHOLDERS' AGREEMENT.")
EXECUTIVE COMPENSATION
The following tables set forth information regarding executive
compensation for the Company's President and Chief Executive Officer and each
other executive officer who received total annual salary and bonus in excess
of $100,000 for any of the years ended December 31, 1997, 1996 or 1995.
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<TABLE>
<CAPTION>
Summary Compensation Table
Long-term Compensation
Awards Payouts
------------------------
Securi-
Annual Compensation ties
--------------------- Re- Underly- All
Other strict- ing Other
Name and Annual ed Options/ LTIP Com-
Principal Compen- Stock SARs Pay- pensa-
Position Year Salary Bonus sation Award(s) (Number) outs tion
- ---------- ---- -------- ----- ------- -------- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nicholas G. 1997 $43,500 -- $19,400 -- 250,000 -- --
Levandoski, 1996 $ -- -- $21,956 -- -- -- --
President
</TABLE>
Aggregated Option Exercises in Year Ended
December 31, 1997 and December 31, 1997 Option Values
Securities Under- Value of Unexer-
Shares lying Unexercised cised in-the
Acquired Options Money Options/
On at 12/31/97 at 12/31/97
Exercise Value Exercisable/ Exercisable/
Name (Number) Realized Unexercisable Unexercisable
---- -------- -------- ---------------- ----------------
Nicholas Levandoski -0- $ -0- 0 / 250,000 $ 0 / 0
Options / Grants in Last Fiscal Year
Individual Grants
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted(#) Fiscal Year ($/sh) Date
---- ------------ ------------ ----------- ----------
Nicholas Levandoski 250,000 51.0% $1.58 8/27/02
Effective July 1, 1998, the Company entered into two-year employment
agreements with Colin Jones, Nicholas Levandoski and Henry Schur, Executive
Officers of the Company. Under these agreements, each of these persons will
receive a base salary of $80,000 per year (which amount is to be reviewed
annually) plus one-third of a bonus pool. The bonus pool will be equal to a
percentage of the audited pre-tax profit of the Company, or a minimum of
$40,000, if the corporate achievements set forth below are met. The
determination of the bonus pool is summarized below:
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Achievement
Year Profit (Loss)(1) Percentage Estimated Pool
---- ---------------- ---------- --------------
1998 $ (300,000) 12% $ 40,000 (minimum)
1999 $1,200,000 10% $120,000
2000 $2,900,000 8% $232,000 (2)
______________
(1) No bonus pool will be created unless the audited pre-tax profit (loss)
is equal to or better than the achievement level for that year.
(2) Since the employment agreements will end on June 30, 2000, any bonuses
paid for 2000 will be one-half of the amount determined and will not
be paid until completion of the year-end audit.
Each of the employment agreements provide that in the event of a
termination of employment by the Company without cause (as defined in the
agreements), the Company will be required to pay the terminated officer a lump
sum equal to the base salary remaining under the agreement, up to one year,
plus an amount equal to one years' base salary. If such a termination occurs
within six months of a change in control of the Company, the terminated
officer will receive a lump sum equal to the base salary remaining under the
agreement (without a one year limitation) plus one years' base salary.
STOCK OPTION PLAN
During August 1997, the Board of Directors adopted a Stock Option Plan
(the "Plan"), and on August 20, 1998, the Corporation's shareholders approved
the Plan. The Plan authorizes the issuance of options to purchase up to
2,000,000 shares of the Company's Common Stock.
The Plan allows the Board to grant stock options from time to time to
employees, officers, directors and consultants of the Company. The Board has
the power to determine at the time that the option is granted whether the
option will be an Incentive Stock Option (an option which qualifies under
Section 422 of the Internal Revenue Code of 1986) or an option which is not an
Incentive Stock Option. Vesting provisions are determined by the Board at the
time options are granted. The option price for any option will be no less
than the fair market value of the Common Stock on the date the option is
granted.
Since all options granted under the Plan must have an exercise price no
less than the fair market value on the date of grant, the Company will not
record any expense upon the grant of options, regardless of whether or not
they are incentive stock options. Generally, there will be no federal income
tax consequences to the Company in connection with Incentive Stock Options
granted under the Plan. With regard to options that are not Incentive Stock
Options, the Company will ordinarily be entitled to deductions for income tax
purposes of the amount that option holders report as ordinary income upon the
exercise of such options, in the year such income is reported.
The Company has granted options to purchase a total of 880,000 shares of
Common Stock at prices ranging from $1.58 to $3.26 per share under the Plan.
26
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<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT,
PRINCIPAL SHAREHOLDERS AND SELLING SHAREHOLDERS
The following table sets forth, as of the date of this Prospectus, and as
adjusted for the sale of the shares offered by the Selling Shareholders, the
stock ownership of each person known by the Company to be the beneficial owner
of five percent or more of the Company's Common Stock, all Directors
individually and all Directors and Executive Officers of the Company as a
group, and the Selling Shareholders. Except as noted, each person has sole
voting and investment power with respect to the shares shown.
Per- Per-
centage Number centage
Amount of of Class of of Class
Name and Address of Beneficial Prior Shares After
Beneficial owner Ownership to Sales Offered Sales
- ------------------- ---------- -------- --------- --------
Henry B. Schur 1,142,500 (1) 10.7% -0- 10.7%
376 Ansin Boulevard
Hallandale, FL 33009
Debra L. Ross 1,142,500 (2) 10.7% -0- 10.7%
376 Ansin Boulevard
Hallandale, FL 33009
Colin N. Jones 230,000 (3) 2.0% -0- 2.1%
193 Cove Road
West Palm Beach, FL 33413
Nicholas G. Levandoski 250,000 (4) 2.3% -0- 2.3%
376 Ansin Boulevard
Hallandale, Florida 33009
Joel Marcus 190,000 (5) 1.8% -0- 1.8%
676 West Prospect Road
Fort Lauderdale, FL 33309
Kenneth H. Robertson 2,600,000 (6) 24.5% 2,600,000 0.0%
No. 206 (6)
855 S. Federal Highway
Boca Raton, FL 33432
Gerald M. Wochna 2,600,000 (7) 24.5% 2,600,000 0.0%
No. 206 (7)
855 S. Federal Highway
Boca Raton, FL 33432
John E. Trafton 708,000 6.7% -0- 6.7%
Apartment 16
285 Sunrise Drive
Key Biscayne, FL 33149
Software & Healthcare 1,000,000 9.4% 1,000,000 0.0%
Technology Fund, LLC
No. 206
855 S. Federal Highway
Boca Raton, FL 33432
27
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<PAGE>
Robertson & Partners, L.L.C. 1,600,000 17.0% 1,600,000 0.0%
No. 206
855 S. Federal Highway,
Boca Raton, FL 33432
International Technologies 900,000 8.5% -0- 8.5%
Ltd.
c/o William Smith
P.O. Box F-40729
Freeport, Bahamas
Automated Health 500,000 4.7% 500,000 0.0%
Technologies, Inc.
1025 Park of Commerce Blvd.
Delray Beach, FL 33445
All Directors and Executive 4,412,500 39.1% 2,600,000 16.0%
Officers as a Group
(6 Persons)
_______________________
(1) Includes 862,500 shares held of record by Mr. Schur's wife, Debra Ross,
80,000 shares held by Mr. Schur's daughter, 100,000 shares held in trust
for Mr. Schur's daughter, and 100,000 shares underlying options held by
Mr. Schur.
(2) Includes 862,500 shares held directly by Mrs. Ross, 80,000 shares held
by Mrs. Ross' daughter, 100,000 shares held in trust for Mrs. Ross'
daughter, and 100,000 shares underlying options held by Mrs. Ross'
husband.
(3) Includes 30,000 shares held directly and 200,000 underlying options held
by Mr. Jones.
(4) Represents 250,000 shares underlying stock options held by Mr.
Levandoski.
(5) Includes 90,000 shares held directly and 100,000 shares underlying stock
options held by Mr Marcus.
(6) Represents 1,600,000 shares held by Robertson & Partners, L.L.C. ("R&P")
and 1,000,000 shares held by Software & Healthcare Technology Fund,
L.L.C. ("SHTF"). Mr. Robertson is a majority owner and a manager of R&P
and R&P is the manager of SHTF. Mr. Robertson is also an investor in
SHTF. Mr. Robertson therefore has shared voting and shared investment
control over the 2,600,000 shares.
(7) Represents 1,600,000 shares held by Robertson & Partners, L.L.C. ("R&P")
and 1,000,000 shares held by Software & Healthcare Technology Fund,
L.L.C. ("SHTF"). Mr. Wochna is a 20% owner and a manager of R&P and R&P
is the manager of SHTF. Mr. Wochna, therefore, has shared voting and
shared investment control over the 2,600,000 shares.
Robertson & Partners L.L.C. ("R&P"), a Selling Shareholder, is affiliated
with the Company in that Kenneth H. Robertson, who is a manager and a majority
owner of R&P, is a Director of the Company. Gerald M. Wochna, who is a
manager and 20% owner of R&P, is also a Director of the Company. Software &
28
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<PAGE>
Healthcare Technology Fund, LLC ("SHTF"), a Selling Shareholder, is managed by
R&P and Kenneth H. Robertson is an investor in SHTF.
SHTF, R&P, Automated Health Technologies, Inc., Jennifer J. Schur Trust,
Joel Marcus, Debra L. Ross, Jennifer J. Schur, and the Joel Marcus Irrevocable
Trust have agreed to vote the shares which they hold on the conditions and
subject to the terms of a Stockholders' Agreement dated May 15, 1998. (See
"TRANSACTIONS WITH MANAGEMENT AND OTHERS -- STOCK SALES IN MAY AND JUNE 1998
AND STOCKHOLDERS' AGREEMENT.")
There are no known agreements, the operation of which may at a subsequent
date result in a change in control of the Company.
29
<PAGE>
<PAGE>
TRANSACTIONS WITH MANAGEMENT AND OTHERS
ACQUISITION OF SIMPLEX-FLORIDA
On March 5, 1997, the Company completed the acquisition of 100% of the
outstanding Common Stock of Simplex Medical Systems, Inc. ("Simplex-Florida")
in exchange for 3,453,000 shares of the Company's Common Stock. The shares
were exchanged on the basis of one share of the Company's Common Stock for one
share of Simplex-Florida common stock. In connection with the closing of this
transaction, several shareholders submitted for cancellation a total of
31,953,000 shares of common stock. As a result, after the acquisition of
Simplex-Florida, there were a total of 7,500,000 shares outstanding.
The stock issuances were made pursuant to an Agreement ("Agreement")
between the Company and Simplex-Florida. The terms of the Agreement were the
result of negotiations between the managements of the Company and Simplex-
Florida. However, the Board of Directors did not obtain any independent
"fairness" opinion or other evaluation regarding the terms of the Agreement,
due to the cost of obtaining such opinions or evaluations.
TRANSACTIONS INVOLVING THE COMPANY
On March 20, 1996, the Company issued to each of Mesdames Colleen E.
Schmidt, a Director of the Company, and a Company Director, and Sandra S.
Steinberg, a Director of the Company, 15,000,000 shares of the Company's
Common Stock, $.0001 par value per share (a total of 30,000,000 shares of
Common Stock), in consideration, in each case, for the sum of $5,000 in cash
(a total of $10,000 in cash). These shares collateralized two non-interest
bearing promissory notes in the principal amount of $2,500 each (an aggregate
face amount of $5,000), due and payable on May 31, 1996, of which each of
Mesdames Schmidt and Steinberg are the makers and the Company is the holder.
During the year ended December 31, 1997, the Company entered into several
short term notes payable with Joel Marcus, a director of the Company, totaling
$294,990, bearing interest at 10% per annum. Joel Marcus subsequently
assigned these notes to International Technologies Ltd., a principal
shareholder. As a of December 31, 1997, $284,990 of these notes payable had
expired terms. On April 2, 1998, the Company entered into an agreement with
International Technologies Ltd. to extend the terms of the notes for a three
year period with interest at 10% per annum. These notes will be amortized
over the three year period with payments on principal to be made only if the
Company records pre-tax earnings in excess of the principal amount due. If an
additional extension of time is necessary, this agreement grants an extension
until such time as pre-tax profits are sufficient to amortize the loans over
the three year period.
STOCK SALES IN MAY AND JUNE 1998 AND STOCKHOLDERS' AGREEMENT
On May 15, 1998, the Company sold 1,000,000 shares of Common Stock to
Software & Healthcare Technology Fund, L.L.C. ("SHTF") for $400,000 in cash
and on June 30, 1998, the Company sold 1,600,000 shares of Common Stock to
Robertson & Partners, L.L.C. ("R&P") for $600,000 in cash. These sales were
made pursuant to subscription agreements dated May 15, 1998. R&P is the
managing member of SHTF. The Company also granted SHTF a 120-day right of
first refusal with regard to any offerings of the Company's securities.
In connection with these stock sales, SHTF, R&P, Automated Health
Technologies, Inc. ("AHT"), Jennifer Shur, the Jennifer Shur Trust, Joel
Marcus, The Joel Marcus Irrevocable Trust and Debra L. Ross, shareholders of
30
<PAGE>
<PAGE>
the Company, entered into a Stockholders' Agreement dated May 15, 1998, which
provides, among other things, that the shareholders who are parties to the
Shareholders' Agreement will vote their shares for certain director nominees
selected by SHTF, R&P and AHT, and in such a manner as is necessary to carry
out the intent of the Stockholders' Agreement. For the Annual Meeting of
Shareholders held on August 20, 1998, the nominees selected were Gerald M.
Wochna, Kenneth H. Robertson and Colin N. Jones. (Colin Jones was added to
the Board on April 10, 1998.) The Stockholders' Agreement also provides that
during the term of that agreement none of the shareholders who are parties
thereto will transfer their shares except in accordance with the terms of the
agreement.
The Company is also a party to the Stockholders' Agreement and has agreed
that it will not sell any of its securities in any transactions unless it
provides the shareholders who are parties to the Stockholders' Agreement a
preemptive right to purchase a pro rata portion of such securities on the same
terms and conditions. This preemptive right will not apply to securities
issued to any officer, director or employee of the Company under a benefit or
compensation plan, or for services or assets (other than cash or notes).
The Company also granted "piggy-back" registration rights to SHTF and R&P
with respect to their shares of Common Stock under certain conditions.
Certain provisions of the Stockholders' Agreement, including those
related to the preemptive rights and piggyback registration rights will
terminate on the later of May 15, 2000, or on the 90th consecutive day on
which the bid price of the Company's Common Stock exceeds $4.00 per share.
The remaining provisions will terminate on May 15, 2005.
31
<PAGE>
<PAGE>
DESCRIPTION OF SECURITIES
COMMON STOCK
The authorized capital stock of the Company includes 100,000,000 shares
of Common Stock, $.0001 par value. All shares have equal voting rights and
are not assessable. Voting rights are not cumulative, and so the holders of
more than 50% of the Common Stock of the Company could, if they chose to do
so, elect all the Directors.
Upon liquidation, dissolution or winding up of the Company, the assets of
the Company, after the payment of liabilities and any liquidation preferences
on outstanding preferred stock, will be distributed pro rata to the holders of
the Common Stock. The holders of the Common Stock do not have preemptive
rights to subscribe for any securities of the Company and have no right to
require the Company to redeem or purchase their shares. The shares of Common
Stock presently outstanding are, and the shares of Common Stock to be sold
pursuant to this offering will be, upon issuance, fully paid and
nonassessable.
Holders of Common Stock are entitled to share equally in dividends when,
as and if declared by the Board of Directors of the Company, out of funds
legally available therefor. The Company has not paid any cash dividends on
its Common Stock, and it is unlikely that any such dividends will be declared
in the foreseeable future.
TRANSFER AGENT
Corporate Stock Transfer, Inc., 370 - 17th Street, Suite 2350, Denver,
Colorado 80202, serves as the transfer agent for the Company.
REPORTS TO STOCKHOLDERS
The Company plans to furnish its stockholders for each fiscal year with
an annual report containing financial statements audited by its independent
certified public accountants. Additionally, the Company may, in its sole
discretion, issue unaudited quarterly or other interim reports to its
stockholders when it deems appropriate.
OUTSTANDING RIGHTS TO ACQUIRE COMMON STOCK
In addition to the options outstanding under the Company's 1997 Stock
Option Plan described under "MANAGEMENT -- STOCK OPTION PLAN", the Company has
outstanding other rights to acquire shares of the Company's Common Stock.
The Company has outstanding $125,000 in unsecured convertible 10% Notes
held by three investors. The Notes are convertible into shares of the
Company's Common Stock at the rate of $1.00 per share.
In May 1998, the Company entered into an agreement with Automated Health
Technologies, Inc. ("AHT") which, under certain circumstances, would require
the Company to issue 1,000,000 shares of its Common Stock to acquire the
remaining shares of AHT. {See "BUSINESS -- ACQUISITION OF MINORITY INTEREST
IN AUTOMATED HEALTH TECHNOLOGIES, INC.")
In October 1998, the Company granted an option to purchase 1,000 shares
to Credential Leasing Corporation of Florida. The option is exercisable at
$1.50 per share through October 2, 2003.
32
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<PAGE>
PREFERRED STOCK
The Company is authorized to issue 10,000,000 shares of Preferred Stock,
$.01 par value. The Preferred Stock may be issued in series from time to time
with such designation, rights, preferences and limitations as the Board of
Directors of the Company may determine by resolution. The rights, preferences
and limitations of separate series of Preferred Stock may differ with respect
to such matters as may be determined by the Board of Directors, including,
without limitation, the rate of dividends, method and nature of payment of
dividends, terms of redemption, amounts payable on liquidation, sinking fund
provisions (if any), conversion rights (if any), and voting rights. The
potential exists, therefore, that preferred stock might be issued which would
grant dividend preferences and liquidation preferences to preferred
shareholders over common shareholders. Unless the nature of a particular
transaction and applicable statutes require such approval, the Board of
Directors has the authority to issue these shares without shareholder
approval. The issuance of Preferred Stock may have the affect of delaying or
preventing a change in control of the Company without any further action by
shareholders. There are presently no shares of Preferred Stock outstanding.
PLAN OF DISTRIBUTION
The 3,100,00 Shares offered hereby may be offered and sold from time to
time by the Selling Shareholders, or by pledgees, donees, transferees or other
successors in interest. Such offers and sales may be made from time to time
in the over-the-counter market, or otherwise, at prices and on terms then
prevailing or at prices related to the then-current market price, or in
negotiated transactions. The Shares may be sold by one or more of the
following: (a) a block trade in which the broker or dealer so engaged will
attempt to sell the Shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction; (b) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account; (c) an exchange distribution in accordance with the rules of such
exchanges; (d) ordinary brokerage transactions and transactions in which the
broker solicits purchasers; (e) privately negotiated transactions; and (f) a
combination of any such methods of sale. In effecting sales, brokers or
dealers engaged by the Selling Shareholders may arrange for other brokers or
dealers to participate. Brokers or dealers may receive commissions or
discounts from Selling Shareholders or from the purchasers in amounts to be
negotiated immediately prior to the sale. The Selling Shareholders may also
sell such shares in accordance with Rule 144 under the 1933 Act.
The Selling Shareholders and any brokers participating in such sales may
be deemed to be underwriters within the meaning of the 1933 Act. There can be
no assurance that the Selling Shareholders will sell any or all of the shares
of Common Stock offered hereunder.
All proceeds from such sales will be the property of the Selling
Shareholders who will bear the expense of underwriting discounts and selling
commissions, if any, and their own legal fees. The Selling Shareholders are
also sharing the costs of the registration of the Shares.
33
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<PAGE>
LEGAL MATTERS
The legality of the securities of the Company offered will be passed on
for the Company by Krys Boyle Freedman & Sawyer, P.C., 600 17th Street, Suite
2700 South Tower, Denver, Colorado 80202.
EXPERTS
The financial statements of the Company included in this Prospectus, to
the extent and for the periods indicated in their report, have been audited by
Schmidt, Raines, Trieste, Dickenson & Adams, P.L., Certified Public
Accountants, and are included herein in reliance on the authority of such firm
as experts in accounting and auditing in giving such reports.
The financial statements of the Company included in this Prospectus, to
the extent and for the periods indicated in their report, have been audited by
Millward & Co., CPA's, and are included herein in reliance on the authority of
such firm as experts in accounting and auditing in giving such reports.
ADDITIONAL INFORMATION
A Registration Statement on Form SB-2, including amendments thereto,
relating to the securities offered hereby has been filed by the Company with
the Securities and Exchange Commission, Washington, D.C. This Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto. For further information with respect to
the Company and the securities offered hereby, reference is made to such
Registration Statement, exhibits and schedules. Statements contained in this
Prospectus as to the contents of any contract or other document referred to
are not necessarily complete, and in each instance reference is made to the
copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. A copy of the Registration Statement may be inspected without
charge at the Commission's principal offices in Washington, D.C., and copies
of all or any part thereof may be obtained from the Commission upon the
payment of certain fees prescribed by the Commission. The Registration
Statement has been filed electronically through the Commission's Electronic
Data Gathering, Analysis and Retrieval System and may be obtained through the
Commission's Web site (http://www.sec.gov).
No person is authorized to give any information or to make any
representation other than those contained in this Prospectus, and if given or
made such information or representation must not be relied upon as having
been authorized. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the securities
offered by this Prospectus or an offer to sell or a solicitation of an offer
to buy the securities in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction.
34
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<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
Consolidated Balance Sheet as of September 30, 1998 (unaudited)
and December 31, 1997. . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Operations for the nine months
ended September 30, 1998 and 1997 (unaudited). . . . . . . . . . F-3
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1998 and 1997 (unaudited). . . . . . . . . . F-4
Notes to Financial Statements (unaudited). . . . . . . . . . . . F-5
Independent Auditors' Reports. . . . . . . . . . . . . . . . . . F-6 - F-7
Consolidated Balance Sheets as of March 31, 1997 . . . . . . . . F-8
Consolidated Statements of Operations for the period from
June 6, 1995 (date of inception) through December 31, 1997
and for the years ended December 31, 1997 and 1996 . . . . . . . F-9
Consolidated Statements of Stockholders' Equity for the
period from June 6, 1995 (date of inception) through
December 31, 1997 and for the years ended December 31,
1997 and 1996. . . . . . . . . . . . . . . . . . . . . . . . . . F-10
Consolidated Statements of Cash Flows for the period from
June 6, 1995 (date of inception) through December 31, 1997
and for the years ended December 31, 1997 and 1996 . . . . . . . F-11
Notes to Financial Statements. . . . . . . . . . . . . . . . . . F-12
F-1
<PAGE>
<PAGE>
SMLX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
9/30/98 12/31/97
--------- ---------
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 -
---------- ---------
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
---------- ---------
TOTAL ASSETS $ 937,715 $ 348,194
========== =========
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
---------- ---------
TOTAL CURRENT LIABILITIES 214,517 206,211
---------- ---------
LONG-TERM DEBT
NOTES PAYABLE, NET OF CURRENT PORTION 363,932 288,932
---------- ---------
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)
---------- ---------
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY 359,266 (146,949)
---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 937,715 $ 348,194
========== =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-2
<PAGE>
<PAGE>
SMLX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED
9/30/98 9/30/97
--------- ---------
REVENUES - NET $ 369,426 $ 87,925
COST OF GOODS SOLD 132,045 24,165
--------- ---------
GROSS PROFIT 237,381 63,760
OPERATING EXPENSES
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES 679,632 361,756
DEPRECIATION AND
AMORTIZATION EXPENSE 19,653 9,972
--------- ---------
TOTAL OPERATING
EXPENSES 699,285 371,728
OPERATING LOSS (461,904) (307,968)
INTEREST EXPENSE (31,881) (11,287)
--------- ---------
NET (LOSS) (493,785) (319,255)
NET (LOSS) PER SHARE (0.05) (0.04)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 10,500,000 7,500,000
========== =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-3
<PAGE>
<PAGE>
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
---------- ---------
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
---------- ---------
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (516,473) (268,872)
---------- ---------
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 -
---------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 811,430 244,665
---------- ---------
NET (DECREASE) INCREASE IN CASH 294,957 (24,206)
CASH - BEGINNING OF PERIOD 41,743 53,849
---------- ---------
CASH - END OF PERIOD $ 336,700 $ 29,643
========== =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-4
<PAGE>
<PAGE>
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
financial statements for the year ended December 31, 1997.
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.
F-5
<PAGE>
<PAGE>
SCHMIDT, RAINES, TRIESTE, DICKENSON & ADAMS, P.L.
Certified Public Accountants and Consultants to Business
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
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 (a development stage company) as of
December 31, 1997, and the related statements of operations, changes in
stockholders' equity (deficit) and cash flows for the year then ended. 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. The consolidated financial
statements of Simplex Medical Systems, Inc. and Subsidiary as of December 31,
1996 were audited by other auditors whose report dated May 16, 1997 included
an explanatory paragraph describing conditions that raised substantial doubt
about the Company's ability to continue as a going concern.
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 December 31, 1997 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,
1997 and the results of their operations and their cash flows for the year
then ended in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the
consolidated financial statements, the Company incurred a net loss of $309,944
during the year ended December 31, 1997, and, as of that date, had a negative
net worth of $146,949. Those conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans
regarding these matters are described in Note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
/s/ Schmidt & Co.
SCHMIDT, RAINES, TRIESTE,
DICKENSON & ADAMS, P. L.
Boca Raton, Florida
March 26, 1998
F-6
<PAGE>
<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 the related
consolidated statements of operations, changes in stockholders' equity and
cash flows for the year ended December 31, 1996. 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 the results
of its operations and its cash flows for the year ended December 31, 1996, 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 2, 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 2. 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-7
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
1997 1996
--------- ---------
ASSETS
Current assets:
Cash $ 41,743 $ 53,849
Accounts receivable, net of allowance for
uncollectible accounts of $2,321 for
1997 and 1996 3,882 3,416
Inventory 141,565 140,827
--------- ---------
Total current assets 187,190 198,092
--------- ---------
Equipment, less accumulated depreciation
1997 $51,897; 1996 $25,804 87,451 111,316
--------- ---------
Other assets:
Patents and trademarks, less accumulated
amortization 1997 and 1996 $504 66,861 18,508
Deposits 6,692 5,580
--------- ---------
73,553 24,088
--------- ---------
$ 348,194 $ 333,496
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 75,074 $ 24,062
Current portion of notes payable 61,044 2,654
Customer and other deposits 70,093 138,799
--------- ---------
Total current liabilities 206,211 165,515
--------- ---------
Notes payable, net of current portion 288,932 4,986
--------- ---------
Commitments and contingencies
Stockholders' equity (deficit):
Common stock, $.0001 par value, 100,000,000
shares authorized, 7,500,000 and 3,453,000
shares issued and outstanding at December 31,
1997 and 1996, respectively 750 345
Preferred stock, $.0001 par value, 10,000,000
shares authorized, no shares issued or
outstanding -0- -0-
Additional paid-in capital 658,197 658,602
Deficit accumulated during the development stage (805,896) (495,952)
--------- ---------
(146,949) 162,995
--------- ---------
$ 348,194 $ 333,496
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD JUNE 6, 1995 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1997
AND FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
June 6, 1995
(date of inception)
through
December 31, 1997 1997 1996
----------------- --------- ---------
Revenues, net $ 119,431 $ 71,461 $ 25,840
Cost of goods sold 83,298 48,121 25,269
---------- --------- ---------
Gross profit 36,133 23,340 571
Operating expenses:
Selling, general and
administrative expenses 961,084 485,086 403,049
Depreciation and amortization
expense 52,401 26,093 26,229
---------- --------- ---------
Total operating expenses 1,013,485 511,179 429,278
---------- --------- ---------
Net loss from operations (977,352) (487,839) (428,707)
Other income (expense):
Forfeiture of customer deposits 167,360 167,360 -0-
License fees 30,000 30,000 -0-
Other income 576 40 536
Interest expense (26,480) (19,505) (6,469)
---------- --------- ---------
Total other income (expense) 171,456 177,895 (5,933)
---------- --------- ---------
Net loss before income taxes (805,896) (309,944) (434,640)
Income taxes -0- -0- -0-
---------- --------- ---------
Net loss $ (805,896) $(309,944) $(434,640)
=========== ========= =========
Loss per common share $ (0.05) $ (0.15)
========= =========
Weighted average number of shares 6,790,389 2,866,651
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD JUNE 6, 1995 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1997
AND FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Total
Stock-
holders'
Common Stock Paid-in Accumulated Equity
Issued Amount Capital Deficit (Deficit)
----------- ------ ------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Analyte Diagnostics, Inc.
Common stock issued on
July 29, 1995 24,750,000 $2,475 $ -0- $ -0- $ 2,475
1 for 200 reverse stock
split October 31, 1995 (24,626,250) (2,462) -0- -0- (2,462)
Merger on October 31, 1995
of Analyte Diagnostics,
Inc. into Simplex Medical
Systems, Inc. (123,750) (13) -0- -0- (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 -0- -0- 6
Shares issued for cash at
par on October 31, 1995 1,053,625 105 -0- -0- 105
Cancellation of stock on
October 31, 1995 (239,375) (24) -0- -0- (24)
Net loss -0- -0- -0- (61,312) (61,312)
----------- ----- ------- --------- ---------
Balance, December 31, 1995 876,125 87 -0- (61,312) (61,225)
Shares issued for cash at
par in February 1996 16,475 2 -0- -0- 2
Shares issued for equipment
in February 1996 214,375 21 53,198 -0- 53,219
Issuance of shares for
private placement on
June 7, 1996 619,525 62 605,577 -0- 605,639
Shares issued for 2 for 1
stock split on September
25, 1996 1,726,500 173 (173) -0- -0-
Net loss -0- -0- -0- (434,640) (434,640)
----------- ----- -------- --------- ---------
Balance, December 31, 1996 3,453,000 345 658,602 (495,952) 162,995
Issue of shares in merger
with Music Tones on
March 5, 1997 4,047,000 405 (405) -0- -0-
Net loss -0- -0- -0- (309,944) (309,944)
----------- ------ -------- --------- ---------
Balance, December 31, 1997 7,500,000 $ 750 $658,197 $(805,896) $(146,949)
=========== ====== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD JUNE 6, 1995 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1997
AND FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
June 6, 1995
(date of inception)
through
December 31, 1997 1997 1996
OPERATING ACTIVITIES ------------------ --------- ---------
Net loss $ (805,896) $(309,944) $(434,640)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 52,401 26,093 26,229
(Increase) decrease in:
Accounts receivable (3,882) (466) (2,608)
Inventory (141,565) (738) (131,741)
Deposits (6,692) (1,112) (2,188)
Increase (decrease) in:
Accounts payable and accrued
expenses 75,074 51,012 (15,706)
Customer and other deposits 70,093 (68,706) 28,365
---------- --------- ---------
Net cash used in operating activities (760,467) (303,861) (532,289)
---------- --------- ---------
INVESTING ACTIVITIES
Proceeds from the sale of equipment 290 290 -0-
Acquisition of fixed assets and patents (207,003) (50,871)(101,084)
---------- --------- ---------
Net cash provided by (used in)
Investing activities (206,713) (50,581)(101,084)
---------- --------- ---------
FINANCING ACTIVITIES
Proceeds from private placement 658,947 -0- 605,641
Payments on notes payble (8,154) (2,654) (5,500)
Proceeds from notes payable 358,130 344,990 7,640
---------- --------- --------
Net cash provided by financing
activities 1,008,923 342,336 607,781
---------- --------- -------
Net increase (decrease) in cash 41,743 (12,106) (25,592)
Cash - beginning of period -0- 53,849 79,441
---------- --------- -------
Cash - end of period $ 41,743 $ 41,743 $53,849
========== ========= =======
The accompanying notes are an integral part of these consolidated financial
statements.
F-11
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Simplex Medical Systems, Inc. has been in the development stage since its
inception on June 6, 1995. Since inception, the Company has been engaged in
the development, acquisition, marketing and manufacture of medical diagnostic
products, biological products for blood banking, bulk pharmaceuticals, and
specialty chemicals, as well as seeking regulatory clearance, patent
protection, and raising capital to fund operations.
The Company has patented and proprietary technology in the fields of: point
of use medical and veterinary diagnostics; dental therapeutic devices;
pharmaceutical products; and consumer products. The Company utilizes its own
manufacturing facilities for the production of proprietary or quality
sensitive materials and contracts out the other products and final packaging
to third parties. The Company currently has products approved in several
foreign countries and is actively marketing its products in those areas.
Within the United States, the Company has received FDA registration on one of
its major products and anticipates approval on its second major product during
1998.
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. was a predecessor corporation to Simplex Medical
Systems, Inc. which was formed on September 15, 1995. The two companies were
merged into 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.
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 consists of finished goods as of December 31, 1997 and 1996 and is
stated at the lower of cost (first-in, first-out method) or market.
EQUIPMENT
Equipment is stated at cost and is depreciated using the straight-line method
over the estimated useful lives of the respective assets. Expenditures for
maintenance and repairs are charged against operations as incurred.
F-12
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles require management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
PATENTS AND TRADEMARKS
The cost of patents and trademarks acquired are being amortized on a straight-
line basis over their estimated useful lives, ranging from 17 to 40 years,
beginning when the trademarks and patents are approved.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to operations when incurred and are
included in operating expenses. The amounts charged to operations for the
year ended December 31, 1997 totaled $103,324.
REVENUE RECOGNITION
Revenue from sales is recognized upon shipment of goods to the customer.
License fee revenue is recognized upon receipt.
Revenue is recognized from the forfeiture of customer deposits based upon the
individual terms contained in the International Distribution agreements with
each customer. These deposits are non-refundable and are considered forfeited
when the customer fails to perform certain requirements as described in their
contract.
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 its operations.
F-13
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
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.
EARNINGS PER SHARE
The Company adopted SFAS No. 128, "Earnings Per Share", in 1997. SFAS 128
establishes accounting standards for the computation, presentation, and
disclosure of earnings per share information for entities with publicly held
common stock or potential common stock.
CAPITAL STRUCTURE
The Company adopted SFAS No. 129, "Disclosure of Information about Capital
Structure", in 1997. SFAS 129 establishes disclosure requirements within the
financial statements of the pertinent rights and privileges of the various
securities outstanding.
RECENTLY ISSUED ACCOUNTING STANDARDS
COMPREHENSIVE INCOME
The Financial Accounting Standards Board recently issued SFAS No. 130,
"Comprehensive Income: Financial Statement Presentation". SFAS 130
establishes accounting standards for reporting and presenting comprehensive
income and its components in a set of financial statements. For the purpose
of this standard, comprehensive income is defined as the change in equity of a
company arising from transactions and other events and circumstances from
nonowner sources. It includes all changes in equity during a period except
those resulting from investments by and distributions to owners. This
standard is applicable to financial statements with fiscal years beginning
after December 15, 1997. The adoption of SFAS 130 is not expected to have a
material impact on the Company's financial position or results of its
operations.
F-14
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
SEGMENT REPORTING
The Financial Accounting Standards Board recently issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information". This
standard requires that public companies report certain information about
operating segments, products and services, the geographic areas in which they
operate, and their major customers. This standard is applicable to financial
statements with fiscal years beginning after December 15, 1997. The adoption
of SFAS 131 is not expected to have a material impact on the Company's
financial position or results of its operations.
NET LOSS PER SHARE
Net loss per share is computed on the basis of the weighted average number of
shares actually outstanding during the years ended December 31, 1997 and 1996.
Options to purchase 490,000 shares of Common Stock and bonds convertible into
50,000 shares of Common Stock were not included in computing net loss per
share because the effect of such inclusion would be to decrease the reported
net loss per share.
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.
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 $805,896 and has been dependent upon loans from
stockholders and other third parties in order to satisfy operations to date.
As described in Note 15, "Subsequent Events", the Company has signed a letter
of intent with Robertson & Partners, LLC ("Robertson") and Automated Health
Technologies, Inc. ("AHT") in which the Company will purchase 19% of AHT
common stock and issue a five year put option on the purchase of the remaining
81% of AHT's common stock. Furthermore, the chairman of AHT will become the
Chairman and Chief Executive Officer of the Company. In addition, the letter
of intent calls for the sale of 20% of the Company's stock to investors being
sought by Robertson for $1,000,000.
F-15
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 2 - BASIS OF PRESENTATION AND CONTINUED EXISTENCE (CONTINUED)
Management believes that the funds raised through the sale of stock and income
generated from the sale of several recently developed products will provide
the Company with sufficient cash flow resources to fund the operations of the
Company. Furthermore, management believes that the expertise gained through
the employment of AHT's chairman will provide the Company with the non-
financial resources necessary to efficiently and effectively operate 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 - BUSINESS ACQUISITION AND MERGER
On March 5, 1997, the shareholders of the Company received 3,453,000 shares of
the outstanding common stock of Music Tones, Ltd. ("MTL"), a publicly traded
inactive company, in exchange for the same number of the Company's Common
Stock in a reverse acquisition whereby the Company was deemed to be the
acquirer. As of the date of the transaction, MTL had 36,000,000 shares of
common stock issued and outstanding. Pursuant to the terms of the merger, MTL
canceled 31,953,000 shares of its common stock which reduced its issued and
outstanding shares to 4,047,000. After the closing, the Company's
shareholders owned approximately 46.04% of the then issued and outstanding
shares of MTL. This transaction has been accounted for as a pooling of
interests. The combined and separate results of MTL and the Company as of the
date of the merger have not been presented and the consolidated financial
statements for the periods presented have not been restated to include the
accounts of MTL because management believes they are immaterial.
NOTE 4 - EQUIPMENT
Useful Life
(in Years) 1997 1996
----------- -------- --------
Computer equipment 5 $ 11,215 $ 11,215
Office furniture and equipment 5-7 6,922 4,512
Shop equipment 5-7 80,291 80,579
Computer software 3 1,246 1,140
Molds 5 39,674 39,674
-------- --------
139,348 137,120
Less: accumulated depreciation (51,897) (25,804)
-------- --------
$ 87,451 $111,316
======== ========
Depreciation expense totaled $26,093 and $25,704 for the years ended December
31, 1997, and 1996, respectively.
F-16
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 5 - NOTES PAYABLE
During the year ended December 31, 1997, the Company entered into several
short term notes payable with a shareholder totaling $294,990, bearing
interest at 10% per annum. These notes were subsequently assigned to another
shareholder. As of December 31, 1997, $284,990 of these notes payable had
expired terms. On April 2, 1998, the Company entered into an agreement with
the shareholder to extend the terms of the notes for a three year period with
interest at 10% per annum. These notes shall be amortized over the three year
period with payments on principal to be made only if the Company records
pre-tax earnings in excess of the principal amount due. If an additional
extension of time is necessary, this agreement grants an extension until such
a time as pre-tax profits are sufficient to amortize the loans over the three
year period. Accordingly, a portion of these notes payable has been
classified as long-term debt as of December 31, 1997.
Notes payable as of December 31, 1997 and 1996 consisted of the following:
1997 1996
Note payable, vendor, due in monthly payments -------- --------
of $318, including interest which is calcu-
ated at 18% per annum, final payment due July,
1999; collateralized by equipment with a net
book value of $7,714 as of December 31, 1997. $ 4,986 $ 7,640
Note payable, shareholder, interest payable
at 10% per annum; payable as described above. 294,990 -0-
Convertible note payable, individual,
interest payable at 10% per annum on
December 18, 1998 and upon maturity on
June 18, 1999; convertible into common
stock at $1.00 per share (See Note 13). 50,000 -0-
-------- -------
349,976 7,640
Less: current maturities 61,044 2,654
-------- -------
$288,932 $ 4,986
======== =======
Aggregate annual maturities of the notes payable at December 31, 1997 are as
follows:
During the year ending December 31, 1998 $ 61,044
- ---------------------------------- 1999 146,905
2000 104,733
2001 37,294
--------
$349,976
========
F-17
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 5 - NOTES PAYABLE (CONTINUED)
Interest expense totaled $19,505 and $6,469 during the years ended December
31, 1997 and 1996, respectively.
NOTE 6 - CUSTOMER AND OTHER DEPOSITS
Included in customer and other deposits at December 31, 1997 is $16,100
received from an individual as a deposit on stock to be issued.
NOTE 7 - LEASES
The Company is currently renting office and warehouse space in Hallandale,
Florida pursuant to two lease agreements which expire in August and September
1998. See Note 15, "Subsequent Events", for disclosure of new lease
arrangement.
Rent expense for the years ended December 31, 1997 and December 31, 1996
amounted to $27,791 and $27,418, respectively.
NOTE 8 - RELATED PARTY TRANSACTIONS
A director and shareholder loaned the Company a total of $294,990 at various
times during the year ended December 31, 1997 that were subsequently assigned
to another shareholder of the Company. These notes were outstanding as of
December 31, 1997 and are discussed in Note 5. Interest expense incurred in
connection with these loans totaled $17,057 during 1997.
NOTE 9 - SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
During the years ended December 31, 1997 and 1996 cash paid by the Company for
interest totaled $1,163 and $749, respectively.
In addition, equipment increased by $8,800 during the year ended December 31,
1996 due to the recording of a related note payable.
NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
NOTES PAYABLE
The carrying amount approximates fair value because the same terms and
interest rates could be obtained for similar maturities.
F-18
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS
STOCK OPTIONS
It is not practicable to estimate the fair value of the Company's stock
options because they are subject to trading restrictions and lack quoted
market prices.
NOTE 11 - STOCK OPTIONS
In August 1997, the Board of Directors granted certain employees, directors
and consultants of the Company stock options pursuant to the Company s 1997
Stock Option Plan. A total of 2,000,000 shares of the Company s stock have
been reserved for the options to be granted under this plan. Eligible
participants include any employee, officer, director or consultant that the
Board of Directors, in its sole discretion, designates is eligible to
participate in this Plan. The option exercise price is stated on the option
grant and shall not be less than 100% of the fair market value of the shares
on the date of the grant or the par value, whichever is greater. Unless
otherwise stated on the option, each option is exercisable for ten years. As
of December 31, 1997, the options granted under this plan totaled 490,000
shares exercisable within ten years at a price of $1.58 per share.
The following summarizes the status of the Company s stock options for the
year ended December 31, 1997:
Weighted-Average
Shares Exercise Price
------- ----------------
Outstanding at January 1, 1997 - 0 -
Granted and exercisable 490,000 $1.58
Exercised - 0 -
Forfeited - 0 -
Outstanding at December 31, 1997 490,000 $1.58
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations in accounting for its stock options.
Accordingly, no compensation cost has been recognized in the accompanying
financial statements related to stock options. The weighted average fair
value of options granted during the year ended December 31, 1997 was $0.97,
which was computed using the Black-Scholes option pricing model with the
following assumptions: expected life of 3 years; expected volatility of 75%;
and a risk free interest rate of 6%. Had compensation cost for the Company's
stock options been determined based on the fair value at the grant dates
consistent with the method of FASB No. 123, "Accounting for Stock-Based
Compensation", the Company's net loss and net loss per share for the year
ended December 31, 1997 would have been $785,244 and $0.12, respectively.
F-19
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<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 11 - STOCK OPTIONS (CONTINUED)
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the use of
highly subjective assumptions. Because the Company s stock options have
characteristics that are significantly different from traded options and
because changes in the valuation assumptions can materially affect the fair
value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its
employee stock options.
NOTE 12 - INCOME TAXES
The Company has incurred tax operating losses and therefore has generated no
income tax liabilities. As of December 31, 1997, the Company has generated
net tax operating loss carryforwards totaling $805,896 which are available to
offset future taxable income, if any. These loss carryforwards expire
beginning in 2010. Due to limitations on the utilization of loss
carryforwards resulting from ownership changes and separate return limitations
and the uncertainty that the Company and its subsidiaries will be able to
utilize the net operating losses, a 100% valuation allowance has been recorded
against the deferred tax assets.
The following summarizes the components of the net deferred tax asset at
December 31, 1997 and 1996:
1997 1996
Deferred tax assets: -------- --------
Net operating loss carryforward $274,005 $147,778
Valuation allowance (274,005) (147,778)
-------- --------
Net deferred tax asset $ - 0 - $ - 0 -
======== ========
NOTE 13 - STOCKHOLDERS' EQUITY (DEFICIT)
PRIVATE PLACEMENT
During 1996, the Company completed a private placement of 619,525 shares of
Common Stock for $1 per share and received net proceeds of $605,639.
SHARES USED FOR EQUIPMENT
In February 1996, the Company 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. This company manufactured specialty chemicals for the
pharmaceutical and agricultural industries. The Company received primarily
laboratory equipment as a result of this acquisition. The transaction has
been recorded at the fair value of assets acquired.
F-20
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<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 13 - STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
CONVERTIBLE NOTES PAYABLE
On December 18, 1997 the Company issued an unsecured convertible note payable
to an individual. This note bears interest at 10% per annum and matures on
June 18, 1999. Upon issuance and at any time on or prior to the maturity
date, any unpaid principal and accrued interest is convertible into fully paid
and nonassessable shares of $0.0001 par value Common Stock at $1.00 per share.
NOTE 14 - LEGAL PROCEEDINGS
The Company has been named as one of six co-defendants in a lawsuit filed by
the Company's principal scientist's previous employer, Americare Transtech,
Inc. Americare Transtech, Inc. alleges damages for violation of Florida's
Trade Secret Act with regard to the rights to the patent of the Company's
saliva sample collection system. The Company has aggressively defended its
position in the case and believes that the litigation lacks merit.
NOTE 15 - SUBSEQUENT EVENTS
LETTER OF INTENT
On February 20, 1998, the Company signed a letter of intent with Robertson &
Partners, LLC ("Robertson") and Automated Health Technologies, Inc. ("AHT").
According to this letter of intent, the Company has agreed to buy 19% of AHT
Common Stock for 500,000 shares of the Company's Common Stock and give AHT
shareholders a 5 year put option on an additional 1,000,000 shares of the
Company's Common Stock for the remaining 81% of AHT's common stock. In
addition, the Company has agreed to issue 20% of its stock to investors being
sought by Robertson in exchange for $1,000,000 to be raised during 1998. The
Company received $200,000 of this additional capital in March and April 1998.
Robertson's fee for raising this additional capital is 100,000 shares of the
Company's Common Stock.
LETTER OF INTENT FOR JOINT VENTURE
On February 5, 1998, the Company signed a letter of intent for joint venture
with S.S. White Technologies, Inc. in which the two companies will work
together to introduce and market one of the Company's major products for
industrial application.
F-21
<PAGE>
<PAGE>
SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 15 - SUBSEQUENT EVENTS (CONTINUED)
NOTES PAYABLE
On January 21, 1998, the Company executed two unsecured convertible 10% note
agreements totaling $75,000. These notes mature on July 21, 1999 with
interest payable on January 21 and July 21, 1999. These notes are convertible
into shares of the Company s Common Stock at a price of $1.00 per share.
LEASE
On February 11, 1998, the Company entered into a lease agreement for office
and warehouse space at a new location. This five year lease begins on April
1, 1998 and requires monthly rental payments of $4,000 plus tax. The Company
has the option at the end of the lease term to renew the lease for an
additional five years. This lease replaces and cancels the Company's existing
lease agreements which expire in August and September, 1998.
F-22
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The only statute, charter provision, bylaw, contract, or other
arrangement under which any controlling person, Director or Officer of the
Company is insured or indemnified in any manner against any liability which he
may incur in his capacity as such, is as follows:
(a) The Company has the power under the Colorado Business Corporation
Act to indemnify any person who was or is a party or is threatened to be made
a party to any action, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a Director,
Officer, employee, fiduciary, or agent of the Company or was serving at its
request in a similar capacity for another entity, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection therewith if he acted in good faith
and in a manner he reasonably believed to be in the best interest of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In case of an action
brought by or in the right of the Company such persons are similarly entitled
to indemnification if they acted in good faith and in a manner reasonably
believed to be in the best interests of the Company but no indemnification
shall be made if such person was adjudged to be liable to the Company for
negligence or misconduct in the performance of his duty to the Company unless
and to the extent the court in which such action or suit was brought
determines upon application that despite the adjudication of liability, in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnification. In such event, indemnification is limited to
reasonable expenses. Such indemnification is not deemed exclusive of any
other rights to which those indemnified may be entitled under the Articles of
Incorporation, Bylaws, agreement, vote of shareholders or disinterested
directors, or otherwise.
(b) The Articles of Incorporation and Bylaws of the Company generally
require indemnification of Officers and Directors to the fullest extent
allowed by law.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the offering, all of which are to be borne by
the Selling Shareholders, are as follows:
SEC Filing Fee ................................ $ 875.24
Printing Expenses ............................. 1,000.00
Accounting Fees and Expenses .................. 2,500.00
Legal Fees and Expenses ....................... 25,000.00
Blue Sky Fees and Expenses .................... 1,000.00
Miscellaneous ................................. 624.76
----------
Total .................................... $31,000.00
II-1
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<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During its past three years, the Registrant issued securities which were
not registered under the Securities Act of 1933, as amended (the "Act"), as
follows.
Effective March 20, 1996, the Company effected a 2,000 for 1 forward
split of the outstanding Common Stock. All numbers of shares stated below
give retroactive effect to this stock split.
On March 20, 1996, the Company issued to each of Mesdames Colleen E.
Schmidt, the daughter-in-law of Mr. Paul J. Schmidt and who was then a
director of the Company, and Sandra S. Steinberg, the mother of Daniel C.
Steinberg, who was then President and a director of the Company, 15,000,000
shares of the Company's Common Stock (a total of 30,000,000 shares of Common
Stock), in consideration, in each case, for the sum of $5,000 in cash (a total
of $10,000 in cash). These shares collateralized two non-interest bearing
promissory notes in the principal amount of $2,500 each (an aggregate face
amount of $5,000), due and payable on May 31, 1996, of which each of Messrs.
Schmidt and Steinberg were the makers and the Company was the holder. These
promissory notes were paid during 1996.
On March 5, 1997, the Company completed the acquisition of 100% of the
outstanding common stock of Simplex Medical Systems, Inc. ("Simplex-Florida")
in exchange for 3,453,000 shares of the Company's Common Stock. The shares
were exchanged on the basis of one share of the Company's Common Stock for one
share of Simplex-Florida common stock. The stock issuances were made to the
29 shareholders of Simplex-Florida pursuant to an Agreement ("Agreement")
between the Company and Simplex-Florida.
During the period from March 1998 through June 1998, the Company sold
1,600,000 shares of its Common Stock to Robertson & Partners L.L.L. for
$600,000 in cash, and 1,000,000 shares of Common Stock to Software &
Healthcare Technology Fund LLC for $400,000 in cash. Both of these investors
are accredited investors.
During May 1998, the Company issued 500,000 shares to Automated Health
Technologies ("AHT") in exchange for a 19% interest in AHT. The shares were
issued on the closing of a Share Exchange Agreement which was negotiated
between the two companies.
The sales described above were made in reliance on the exemption from
registration offered by Section 4(2) of the Securities Act of 1933. The
Company had reasonable grounds to believe that these persons (1) were
acquiring the shares for investment and not with a view to distribution, and
(2) had such knowledge and experience in financial and business matters that
they were capable of evaluating the merits and risks of their investment and
were able to bear those risks. Such persons had access to pertinent
information enabling them to ask informed questions. An appropriate
restrictive legend is noted on the certificates representing such shares, and
stop-transfer instructions have been noted in the Company's transfer records.
II-2
<PAGE>
<PAGE>
ITEM 27. EXHIBITS.
The following Exhibits are filed as part of this Registration Statement
pursuant to Item 601 of Regulation S-B:
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------- ----------- --------
3.1 Articles of Incorporation, Incorporated by reference to Exhibits
as amended 2.1, 2.2 and 2.3 to the Registrant's
Form 10-SB Registration Statement
filed on April 4, 1996
3.2 Bylaws Incorporated by reference to Exhibit
2.4 to Registrant's Form 10-SB Regis-
tration Statement filed on April 4,
1997
3.3 Articles of Amendment to Previously filed
Articles of Incorporation
dated March 28, 1997
3.4 Articles of Amendment to Previously filed
Articles of Incorporation
dated August 20, 1998
5 Opinion of Krys Boyle Previously filed
Freedman & Sawyer, P.C.
regarding the legality
of the securities being
registered
10.1 1997 Stock Option Plan Previously filed
10.2 Share Exchange Agreement Previously filed
with Automated Health
Technologies, Inc.
10.3 Employment Agreement with Previously filed
Colin N. Jones
10.4 Employment Agreement with Previously filed
Nicholas Levandoski
10.5 Employment Agreement with Previously filed
Henry Schur
10.6 Stockholder Agreement with Previously filed
Software & Healthcare
Technology Fund, L.L.C.,
et al.
10.7 Business Lease with Previously filed
Wedgewood Properties FL,
Inc.
10.8 Distribution Agreement with Previously filed
Sybron Dental Specialties,
Inc., as amended
II-3
<PAGE>
<PAGE>
21 Subsidiaries of the Previously filed
Registrant
23.1 Consent of Krys Boyle Contained in Exhibit 5
Freedman & Sawyer, P.C.
23.2 Consent of Schmidt, Raines, Filed herewith electronically
Trieste, Dickenson & Adams,
P.L.
23.3 Consent of Millward & Co. Filed herewith electronically
ITEM 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the small business issuer will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned small business issuer will:
(1) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
II-4
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2, and authorized this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of Hallandale, State of
Florida, on the 15th day of January 1999.
SMLX TECHNOLOGIES, INC.
By:/s/ Colin N. Jones
Colin N. Jones, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Colin N. Jones President (Chief Executive January 15, 1999
Colin N. Jones Officer) and Director
/s/ Henry B. Schur Vice President - Operations January 15, 1999
Henry B. Schur and Director
/s/ Nicholas G. Levandoski Vice President - Research January 15, 1999
Nicholas G. Levandoski and Develpment, Secretary,
Treasurer (Chief Finan-
cial and Accounting Officer)
and Director
/s/ Joel Marcus Director January 15, 1999
Joel Marcus
________________________ Director
Kenneth H. Robertson
_________________________ Director
Gerald M. Wochna
CONSENT OF INDEPENDENT AUDITORS
As independent auditors of SMLX Technologies, Inc. (formerly Simplex Medical
Systems, Inc. and Subsidiary), we hereby consent to the use of our report as
of December 31, 1997 and for the year then ended, dated March 26, 1998, and to
all references to our Firm included in or made a part of this Amendment No. 1
to the Registration Statement.
/s/ Schmidt, Raines, Trieste,
Dickenson & Adams, P.L.
SCHMIDT, RAINES, TRIESTE,
DICKENSON & ADAMS, P.L.
Boca Raton, Florida
January 15, 1999
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this Amendment No. 1 to the Registration Statement of
SMLX Technologies, Inc. on Form SB-2 of our report dated May 16, 1997,
appearing in the Prospectus, which is a part of this Registration Statement
and to the reference to our firm under the heading "Experts" in the
Prospectus.
/s/ Millward & Co., CPAs
MILLWARD & CO., CPAs
Fort Lauderdale, Florida
January 15, 1999
