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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 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 10,930,000 shares of the Registrant's Common Stock outstanding as
of March 31, 1999.
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INDEX
PAGE
NUMBER
Part I. Financial Information
Item I. Financial Statements 3
Unaudited Consolidated Balance Sheets as of
March 31, 1999 and December 31, 1998 3-4
Unaudited Consolidated Statement of Operations
for Three Months ended March 31, 1999 and 1998 5
Unaudited Consolidated Statement of Cash Flows
for Three Months ended March 31, 1999 and 1998 6
Unaudited Notes to Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of
Operations 9
Part II. Other Information 10
Item 1. Legal Proceedings 10
Item 2. Changes 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 11
2
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SMLX TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
3/31/99 12/31/98
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ASSETS
CURRENT ASSETS
Cash $ 45,207 $ 47,594
Accounts Receivable (Net of allowance for
uncollectible accounts of $16,733 for
12/31/98 and 3/31/99 27,265 2,342
Inventory 143,420 141,572
Prepaid Expenses 20,010 19,411
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Total Current Assets 235,902 210,919
Property, Plant and Equipment, at cost
(Net of accumulated depreciation and
amortization of $24,150 and $96,600
on 3/31/99 and 12/31/98, respectively) 372,226 385,935
OTHER ASSETS
Deposits 8,192 8,192
Organization Expenses 300 1,352
Patents and Trademarks (net of accumulated
amortization of $126 and $504 on 3/31/99
and 12/31/98, respectively) 59,166 58,267
Investment in Common Stock 200,000 200,000
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Total Assets $875,786 $864,665
======== ========
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)
3/31/99 12/31/98
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Liabilities $ 254,236 $ 160,755
Current Portion of Notes Payable 182,284 184,970
Customer Deposits 73,373 108,698
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Total Current Liabilities 509,893 454,423
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LONG-TERM DEBT
Notes Payables, Net of Current Portion 238,932 237,119
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock (Par Value $.0001, Authorized
100,000,000 Shares, Issued and Outstanding
10,930,000 Shares on 3/31/99 and 10,600,000
on 12/31/98) 1,093 1,060
Preferred Stock (Par Value $.0001, Authorized
10,000,000 Shares, No Shares Issued and
Outstanding) - -
Additional Paid-In Capital 2,007,854 1,846,084
Deficit Accumulated (1,881,986) (1,674,021)
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Total Stockholders' Equity 126,961 173,123
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Total Liabilities and Stockholders' Equity $ 875,786 $ 864,665
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
4
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SMLX TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
3/31/99 3/31/98
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REVENUES - NET $ 61,771 $ 42,298
COST OF GOODS SOLD 22,004 19,601
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GROSS PROFIT 39,767 22,697
OPERATING EXPENSES
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 212,707 129,685
DEPRECIATION AND AMORTIZATION EXPENSE 24,150 6,551
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TOTAL OPERATING EXPENSES 236,857 136,236
OPERATING LOSS (197,090) (113,539)
INTEREST EXPENSE (10,875) (10,417)
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NET (LOSS) (207,965) (123,956)
NET (LOSS) PER SHARE (0.019) (0.016)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 10,930,000 7,500,000
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
5
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SMLX TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
3/31/99 3/31/98
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $ (207,965) $ (123,956)
Adjustment to Reconcile Net (Loss)
to Net Cash Provided By (Used in)
Operating Activities:
Depreciation and Amortization 24,276 6,551
Changes in Operating Assets and Liabilities:
Accounts Receivable (24,923) 335
Inventory (1,848) 11,102
Deposits - (4,500)
Accounts Payable and Accrued Liabilities 93,481 (9,183)
Customer Deposits (35,325) (26,868)
Prepaid Expenses and Organization Expenses 453 -
---------- ----------
Net Cash (Used In) Provided By Operating
Activities (151,851) (146,519)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Fixed Assets and Patents (10,441) (25,068)
Notes Payable to Stockholders - -
Patent Costs (1,025) -
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Net Cash Provided by (Used In) Investing
Activities (11,466) (25,068)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Private Placement 161,803 200,000
Payments on Notes Payable - -
Proceeds from Notes Payable (873) 74,510
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Net Cash Provided By (Used In) Financing
Activities 160,930 274,510
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Net Increase (Decrease) in Cash (2,387) 102,923
Cash - Beginning of Period 47,594 41,743
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Cash - End of Period $ 45,207 $ 144,666
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
6
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SMLX TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 $1,881,986 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 $143,420 of finished goods as of March 31, 1999.
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at March 31, 1999:
Leasehold Improvements $ 188,806
Office Furniture and Equipment 37,973
Lab Equipment 266,197
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Total Equipment 492,976
Less: Accumulated Depreciation 120,750
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Total Property, Plant and Equipment $ 372,226
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7
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NOTE 5 - NOTES PAYABLE
Interest Expense for the period ended
March 31, 1999, amounted to: $ 10,875
Interest Expense for the period ended
March 31, 1998, amounted to: $ 10,417
NOTE 6 - INCOME TAXES
To date the Company has incurred tax operating losses and therefore has
generated no income tax liabilities. As of March 31, 1999, the Company has
generated net operating loss carryforwards totalling $(1,881,986) 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 March 31, 1999:
Deferred Tax Assets:
Net Operating Loss Carryforward (1,881,986)
Valuation Allowance (1,881,986)
NOTE 7 - 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 year 2000, we will make
arrangements to switch vendors by July 1, 1999.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 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 judgment 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 regulations,
availability of capital to finance growth, and general economic conditions.
The following should be read in conjunction with the attached Financial
Statements and Notes thereto of the Company.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 VERSUS THREE MONTHS ENDED MARCH 31,
1998
During the three months ended March 31, 1999, the Company had $61,771 in
revenue compared to $42,298 in revenue during the corresponding prior year
period. The increase in revenue was the result of international sales of
samples for testing and evaluation purposes.
The Company expects to sign contracts during the second quarter that will
lead to significant sales in the future.
Expenses for the three months ended March 31, 1999, were approximately
$100,621 more than the corresponding prior year period. General selling and
other administrative expenses increased due to additional personnel hired and
legal costs.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999, the Company had negative working capital of
approximately $(273,991) compared to approximately $(243,504) at December 31,
1998. Due to existing in-house orders and the anticipated private sale of the
Company's common stock, working capital is expected to increase during the
second quarter of 1999.
As of March 31, 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.
During the three months ended March 31, 1999, the Company sold 330,000
shares of Common Stock to one accredited investor for approximately $162,000
in cash.
With respect to this sale, the Company relied on Section 4(2) of the Act.
The investor signed a subscription agreement in which it represented that it
was purchasing the shares for investment only and not for the purpose of
resale or distribution. The appropriate restrictive legends were placed on
the certificates and stop transfer orders were issued to the transfer agent.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 27 Financial Data Schedule Filed herewith
electronically
(b) Reports on Form 8-K. None.
10
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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: June 29, 1999 By:/s/ Colin Jones
Colin Jones, President
11
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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 3, 4 and 5 of the
Company's Form 10-QSB for the year to date, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<CASH> 45,207
<SECURITIES> 0
<RECEIVABLES> 27,265
<ALLOWANCES> 0
<INVENTORY> 143,420
<CURRENT-ASSETS> 235,902
<PP&E> 372,226
<DEPRECIATION> 0
<TOTAL-ASSETS> 875,786
<CURRENT-LIABILITIES> 509,893
<BONDS> 0
<COMMON> 1,093
0
0
<OTHER-SE> 125,868
<TOTAL-LIABILITY-AND-EQUITY> 875,786
<SALES> 61,771
<TOTAL-REVENUES> 61,771
<CGS> 22,004
<TOTAL-COSTS> 22,004
<OTHER-EXPENSES> 236,857
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (10,875)
<INCOME-PRETAX> (207,965)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (207,965)
<EPS-BASIC> (.019)
<EPS-DILUTED> 0
</TABLE>
