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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1999
Commission file number: 0-28154
SMLX TECHNOLOGIES, INC.
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(Exact name of small business issuer as specified in its Charter)
Colorado 84-1337509
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
376 Ansin Boulevard, Hallandale, Florida 33009
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(Address of principal executive offices, including zip code)
(954) 455-0110
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(Issuer's telephone number)
Indicate by check mark whether the Issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes [ X ] No [ ]
There were 11,544,648 shares of the Registrant's Common Stock outstanding as
of November 1, 1999.
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INDEX
Part I: Financial Information Page No.
Item 1. Financial Statements:
Unaudited Consolidated Balance Sheets - as of
September 30, 1999........................................... 3-4
Unaudited Consolidated Statements of Operations, Nine
Months Ended September 30, 1999 and 1998 .................... 5
Unaudited Consolidated Statement of Cash Flows, Nine
Months Ended September 30, 1999 and 1998 .................... 6
Notes to Consolidated Financial Statements................... 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ............ 9
Part II: Other Information........................................ 10
Item 1. Legal Proceedings................................... 10
Item 2. Change in Securities................................ 10
Item 3. Defaults Upon Senior Securities..................... 10
Item 4. Submission of Matters to a Vote
of Security Holders................................. 10
Item 5. Other Information................................... 10
Item 6. Exhibits and Reports on Form 8-K.................... 10
Signatures ....................................................... 10
2
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SMLX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
9/30/99 12/31/98
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ASSETS
CURRENT ASSETS
Cash $ 393,943 $ 47,594
Accounts Receivable (Net of allowance
for uncollectible accounts of $16,733
for 9/30/99 and 12/31/98 9,821 2,342
Inventory 144,558 141,572
Prepaid Expenses 43,188 19,411
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Total Current Assets 591,510 210,919
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Property, Plant and Equipment, at cost
(Net of accumulated depreciation and
amortization of $44,661 and $96,600
on 9/30/99 and 12/31/98, respectively) 392,175 385,935
OTHER ASSETS
Deposits 8,192 8,192
Organization Expenses 300 1,352
Patents and Trademarks
(Net of accumulated amortization of $1,307
and $504 on 9/30/99 and 12/31/98,
respectively) 66,453 58,267
Investment in Common Stock 200,000 200,000
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Total Assets $1,258,630 $ 864,665
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
3
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SMLX TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
9/30/1999 12/31/98
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LIABILITIES
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Liabilities $ 122,451 $ 160,755
Current Portion of Notes Payable 56,058 184,970
Customer Deposits 180,716 108,698
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Total Current Liabilities 359,225 454,423
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LONG-TERM DEBT
Notes Payables, Net of Current Portion 238,932 237,119
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock (Par Value $.0001, Authorized
100,000,000 Shares, Issued and Outstanding
11,544,648 Shares on 9/30/99 and 10,600,000
on 12/31/98) 1,154 1,060
Preferred Stock (Par Value $.0001, Authorized
10,000,000 Shares, No Shares Issued and
Outstanding) - -
Additional Paid-In Capital 2,465,893 1,846,084
Deficit Accumulated (1,806,574) (1,674,021)
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Total Stockholders' Equity 660,473 173,123
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Total Liabilities and Stockholders'
Equity $ 1,258,630 $ 864,665
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
4
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SMLX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED
9/30/99 9/30/98 9/30/99 9/30/98
--------- --------- --------- ---------
REVENUES - NET $ 810,874 $ 369,426 $ 404,502 $ 166,535
COST OF GOODS SOLD 27,742 132,045 2,236 53,407
---------- ---------- --------- ---------
GROSS PROFIT 783,132 237,381 402,266 113,128
OPERATING EXPENSES
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 832,769 679,632 317,441 320,041
DEPRECIATION AND
AMORTIZATION EXPENSE 44,661 19,653 14,697 6,551
---------- ---------- ---------- ----------
TOTAL OPERATING
EXPENSES 877,430 699,285 332,138 326,592
OPERATING INCOME (LOSS) (94,298) (461,904) 70,128 (213,464)
INTEREST EXPENSE (27,393) (31,881) (7,440) (10,734)
---------- ---------- ---------- ----------
NET (LOSS) (121,691) (493,785) 62,688 (224,198)
NET (LOSS) PER SHARE (0.010) (0.050) 0.005 (0.020)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 11,544,648 10,500,000 11,544,648 10,600,000
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
5
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SMLX TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
9/30/99 9/30/98
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $(121,691) $ (493,785)
Adjustment to Reconcile Net (Loss)
to Net Cash Provided By (Used in)
Operating Activities:
Depreciation and Amortization 44,661 19,653
Changes in Operating Assets and Liabilities:
Increase in Accounts Receivable (7,479) 1,903
(Increase) in Inventory (2,986) (32,509)
(Increase) in Prepaid Expense (23,777) (27,945)
Decrease in Accounts Payable (38,304) 30,083
Increase in Customer Deposits 72,018 (19,725)
Decrease in Security Deposits - 5,852
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Net Cash (Used In) Provided By Operating
Activities (77,558) (516,473)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Fixed Assets and Patents (58,898) (220,126)
Notes Payable Payoff (128,912) 72,948
Patent Costs (8,186) (41,392)
Sale of Stock 619,903 1,000,000
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Net Cash Provided by (Used In) Investing
Activities 423,907 811,430
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Net Increase (Decrease) in Cash 346,349 294,957
Cash - Beginning of Period 47,594 41,743
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Cash - End of Period $ 393,943 $ 336,700
========= ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
6
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SMLX TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of SMLX
Technologies, Inc. (the "Company") and its wholly-owned subsidiaries, Simplex
Medical Systems, Inc.(a Florida corporation) and Analyte Diagnostics, Inc.,
have been prepared in accordance with the instructions and requirements of
Form 10-QSB and, therefore, do not include all information and footnotes
necessary for a fair presentation of financial position, results of
operations, and cash flows in conformity with generally accepted accounting
principles. In the opinion of management, such financial statements reflect
all adjustments (consisting only of normal recurring accruals) necessary for a
fair presentation of the results of operations and financial position for the
interim periods presented. Operating results for the interim periods are not
necessarily indicative of the results that may be expected for the full year.
These financial statements should be read in conjunction with the Company's
annual report on Form 10-KSB.
These financial statements give effect to the March 5, 1997 reverse
acquisition whereby Music Tones Ltd. (name subsequently changed to Simplex
Medical Systems, Inc.) acquired all of the outstanding common stock of Simplex
Medical Systems, Inc. as if the transaction occurred on September 15, 1995.
NOTE 2 - BASIS OF PRESENTATION AND CONTINUED EXISTENCE
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. Since inception, the Company has
experienced losses aggregating $1,806,574 and has been dependent upon loans
from stockholders and other third parties in order to satisfy operations to
date. Management believes that funds generated from operations will provide
the Company with sufficient cash flow resources to fund the operations of the
Company. The financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the
possible inability of the Company to continue as a going concern.
NOTE 3 - INVENTORY
Inventory consists of $144,558 of finished goods as of September 30, 1999.
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at September 30, 1999:
Leasehold Improvements $ 188,806
Office Furniture and Equipment 50,502
Lab Equipment 293,730
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Total Equipment 532,038
Less: Accumulated Depreciation 140,863
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Total Property, Plant and Equipment $ 392,175
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7
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NOTE 5 - NOTES PAYABLE
Interest Expense for the period ended
September 30, 1999, amounted to: $ 27,393
Interest Expense for the period ended
September 30, 1998, amounted to: $ 31,881
NOTE 6 - INCOME TAXES
To date the Company has incurred tax operating losses and therefore has
generated no income tax liabilities. As of September 30, 1999, the Company
has generated net operating loss carry forwards totaling $(1,806,574) which
are available to offset future taxable income, if any, through the year 2010.
As utilization of such an operating loss for tax purposes is not assured, the
deferred tax asset has been fully reserved through the recording of 100%
valuation allowance.
The components of the net deferred tax asset are as follows at September
30,1999:
Deferred Tax Assets:
Net Operating Loss Carry forward (1,806,574)
Valuation Allowance (1,806,574)
NOTE 7 - YEAR 2000 COMPLIANCE
During the third quarter of this year, the company purchased new computers for
all stations that would be subject to any Y2K problems. Additionally, the
Company keeps both an electronic and paper backup of all contracts, financial
data and important correspondence. It does not anticipate any internal Y2K
problems. The company has been querying all vendors and suppliers of services
that might have an effect on the Company's business and there does not appear
to be any problem.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS.
This Report contains forward-looking statements that involve a number of
risks and uncertainties. While these statements represent the Company's
current judgement in the future direction of the business, such risks and
uncertainties could cause actual results to differ materially from any future
performance suggested herein. Certain factors that could cause results to
differ materially from those projected in the forward-looking statements
include timing of orders and shipments, market acceptance of products, ability
to increase level of production, impact of government requisitions,
availability of capital to finance growth and general economic conditions.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 VERSUS THREE MONTHS ENDED SEPTEMBER
30, 1998
During the three months ended September 30, 1999, the Company had
$404,502 in revenue compared to $166,535 in revenue during the corresponding
prior year period. The increase in revenue was the result of Advanced Royalty
Income and the sale of Technology.
Expenses for the three months ended September 30, 1999, were
approximately $1600 less than the corresponding prior year period.
The third quarter marks the second consecutive time that the Company has
shown a profit since it became operational. The Company expects that the
fourth quarter of 1999 will also be profitable.
NINE MONTHS ENDED SEPTEMBER 30, 1999 VERSUS NINE MONTHS ENDED SEPTEMBER
30, 1998
During the nine months ended September 30, 1999, the Company had $810,874
in revenue compared to $369,426 during the nine months ended September 30,
1998. The increase in revenue was due to the signing of two contracts during
April and May 1999. Pursuant to a contract signed with Vector Medical
Technologies, Inc., the Company sold certain technologies and is to receive an
advance on royalties of $75,000 per month for four years. Pursuant to a
contract signed with HelveStar, S.A., the Company and HelveStar formed a joint
venture named BioStar Life Sciences. BioStar has agreed to purchase certain
non-core products from the Company for $2.4 million payable $100,000 per month
for 24 months.
Total operating expenses for the nine months ended September 30, 1999,
were $877,430 compared to $699,285 for the nine months ended September 30,
1998. The increased expenses were primarily due to additional personnel hired
during 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, the Company had working capital of
approximately $232,285 compared to approximately $(243,504) at December 31,
1998. The primary reason for the increase in the working capital was the
receipt of $619,903 from the sale of stock during the first six months of
1999.
As of September 30, 1999, the Company had no material commitments for
capital expenditures.
9
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings:
None
Item 2. Changes in Securities:
None
Item 3. Defaults Upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Security Holders:
None
Item 5. Other Information:
SMLX has entered into a partnership with Florida International University
(FIU) whereby FIU will provide research services to SMLX. Additionally, SMLX
and BioStar Life Science, its partner, have agreed to fund a five year,$15,000
per year graduate fellowship in biomedical engineering at FIU.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibit 27 Financial Data Schedule Filed herewith
electronically
(b) Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
SMLX TECHNOLOGIES, INC.
Date: November 9, 1999 By: /s/ Colin Jones
Colin Jones, President
10
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING
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27. Financial Data Schedule Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheets and statements of operations found on pages 2 and 3 of the Company's Form
10-QSB for the year to date, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1999
<CASH> 393,943
<SECURITIES> 0
<RECEIVABLES> 9,821
<ALLOWANCES> 0
<INVENTORY> 144,558
<CURRENT-ASSETS> 591,510
<PP&E> 392,175
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,258,630
<CURRENT-LIABILITIES> 359,225
<BONDS> 0
<COMMON> 1,154
0
0
<OTHER-SE> 659,319
<TOTAL-LIABILITY-AND-EQUITY> 1,258,630
<SALES> 810,874
<TOTAL-REVENUES> 810,874
<CGS> 27,742
<TOTAL-COSTS> 27,742
<OTHER-EXPENSES> 877,430
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (27,393)
<INCOME-PRETAX> (121,691)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (121,691)
<EPS-BASIC> (.01)
<EPS-DILUTED> 0
</TABLE>
