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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 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 11,544,444 shares of the Registrant's Common Stock outstanding as
of June 30, 1999.
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INDEX
Part I: Financial Information Page No.
Item 1. Financial Statements:
Unaudited Consolidated Balance Sheets - as of
June 30, 1999................................................ 3-4
Unaudited Consolidated Statements of Operations, Six
Months Ended June 30, 1999 and 1998 ......................... 5
Unaudited Consolidated Statement of Cash Flows, Six
Months Ended June 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)
6/30/99 12/31/98
--------- ---------
ASSETS
CURRENT ASSETS
Cash $ 315,665 $ 47,594
Accounts Receivable (Net of allowance
for uncollectible accounts of $16,733
for 12/31/98 and 6/31/99 5,518 2,342
Inventory 143,680 141,572
Prepaid Expenses 17,831 19,411
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Total Current Assets 482,694 210,919
Property, Plant and Equipment, at cost
(Net of accumulated depreciation and
amortization of $28,392 and $96,600
on 6/30/99 and 12/31/98, respectively) 360,638 385,935
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 6/30/99 and 12/31/98,
respectively) 65,357 58,267
Investment in Common Stock 200,000 200,000
---------- ---------
Total Assets $1,117,181 $ 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)
6/30/1999 12/31/98
---------- ---------
LIABILITIES
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Liabilities $ 37,144 $ 160,755
Current Portion of Notes Payable 56,372 184,970
Customer Deposits 165,418 108,698
----------- -----------
Total Current Liabilities 258,934 454,423
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
11,544,444 Shares on 6/30/99 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 2,481,993 1,846,084
Deficit Accumulated (1,863,832) (1,674,021)
----------- -----------
Total Stockholders' Equity 619,315 173,123
----------- -----------
Total Liabilities and Stockholders'
Equity $ 1,117,181 $ 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)
SIX MONTHS ENDED THREE MONTHS ENDED
6/30/99 6/30/98 6/30/99 6/30/98
--------- --------- --------- ---------
REVENUES - NET $ 406,372 $ 202,891 $ 356,221 $ 160,593
COST OF GOODS SOLD 25,506 78,638 3,502 59,281
GROSS PROFIT 380,866 124,253 352,719 101,312
OPERATING EXPENSES
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 514,328 359,591 303,838 230,497
DEPRECIATION AND
AMORTIZATION EXPENSE 29,964 13,102 29,964 6,551
--------- --------- --------- ---------
TOTAL OPERATING
EXPENSES 544,292 372,693 333,802 237,048
OPERATING INCOME (LOSS) (163,426) (248,440) 18,917 (135,736)
INTEREST EXPENSE (19,953) (21,147) (9,076) (10,673)
--------- --------- --------- ---------
NET PROFIT/(LOSS) (183,379) (269,587) 9,841 (146,409)
NET (LOSS) PER SHARE (0.020) (0.030) 0.000 (0.020)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 11,540,000 8,000,000 11,540,000 8,500,000
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
FOR THE SIX MONTHS ENDED JUNE 30, 1999
AND JUNE 30, 1998 (UNAUDITED)
6/30/99 6/30/98
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $(183,379) $ (269,587)
Adjustment to Reconcile Net (Loss)
to Net Cash Provided By (Used in)
Operating Activities:
Depreciation and Amortization 29,964 13,102
Changes in Operating Assets and Liabilities:
Accounts Receivable (3,176) 3,846
Inventory (2,108) (5,971)
Accounts Payable and Accrued Liabilities (123,611) (9,057)
Customer Deposits 56,720 (6,392)
Prepaid Expenses and Organization Expenses 2,367 (19,561)
--------- ----------
Net Cash (Used In) Provided By Operating
Activities (223,223) (293,620)
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Fixed Assets (3,095) (68,409)
Notes Payable to Stockholders - -
Patent Costs (8,397) (26,763)
--------- ----------
Net Cash Provided by (Used In) Investing
Activities (11,492) (95,172)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Private Placement 636,003 1,000,000
Notes Payable (133,217) 89,846
--------- ----------
Net Cash Provided By (Used In) Financing
Activities 502,786 1,089,846
--------- ----------
Net Increase (Decrease) in Cash 268,071 701,054
Cash - Beginning of Period 47,594 41,743
--------- ----------
Cash - End of Period $ 315,665 $ 742,797
========= ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
6
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SMLX TECHNOLOGIES, INC. AND SUBSIDIARIES
A DEVELOPMENT STAGE ENTERPRISE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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 $1,863,.832 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 $143,680 of finished goods as of June 30, 1999.
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at June 30, 1999:
Leasehold Improvements $ 188,806
Office Furniture and Equipment 37,973
Lab Equipment 260,157
---------
Total Equipment 486,936
Less: Accumulated Depreciation 126,299
---------
Total Property, Plant and Equipment $ 360,637
=========
7
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NOTE 5 - NOTES PAYABLE
Interest Expense for the period ended
June 30, 1999, amounted to: $ 19,953
Interest Expense for the period ended
June 30, 1998, amounted to: $ 21,147
NOTE 6 - INCOME TAXES
To date the Company has incurred tax operating losses and therefore has
generated no income tax liabilities. As of June 30, 1999, the Company has
generated net operating loss carry forwards totaling $(1,863,832) which are
available to offset future taxable income, if any, through the year 2010. As
utilization of such an operating loss for tax purposes is not assured, the
deferred tax asset has been fully reserved through the recording of 100%
valuation allowance.
The components of the net deferred tax asset are as follows at June 30, 1999:
Deferred Tax Assets:
Net Operating Loss Carry forward (1,863,832)
Valuation Allowance (1,863,832)
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. 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. Additionally, the Company plans to purchase
new computers for all stations that would be subject to any Y2K problems
during the third quarter of this year.
The Company has queried all vendors and suppliers of services that might have
an effect on its business and there does not appear to be any problem.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANAYLSIS 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 regulations,
availability of capital to finance growth and general economic conditions.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 VERSUS THREE MONTHS ENDED JUNE 30, 1998
During the three months ended June 30, 1999, the Company had $356,221 in
revenue compared to $160,593 in revenue during the corresponding prior year
period. 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.
Expenses for the three months ended June 30, 1999, were approximately
$73,341 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 June 30, 1999, the Company had working capital of approximately
$223,760 compared to a deficit of approximately $(243,504) at December 31,
1998.
The second quarter marks the first time that the Company has shown a
profit since it became operational last June. The Company expects that the
remaining quarters of 1999 will also be profitable.
As of June 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.
Sales of Restricted Securities. During the quarter ended June 30, 1999,
the Company issued restricted securities as follows:
In April 1999, the Company sold 444,444 shares of Common Stock to R&P
Venture II, an accredited investor, which is controlled by Kenneth H.
Robertson, a Director of the Company, for $200,000.
In May 1999, the Company issued an aggregate of 125,000 shares of Common
Stock to three investors upon the conversion of convertible notes aggregating
$125,000 in principal.
In May 1999, the Company also issued an aggregate of 375,204 shares of
Common Stock to six investors upon the exercise of options at an exercise
price of $1.58 per share, or an aggregate purchase price of $592,822.
With respect to these sales, the Company relied on Section 4(2) of the
Act. The investors represented that they were 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. The Company filed one Report on Form 8-K
dated May 10, 1999, reporting information under Items 5 and 7 of that form
concerning the execution of a Joint Venture Agreement with HelveStar S.A.
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: July 16, 1999 By:/s/ Colin N. Jones
Colin N. Jones, President
10
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EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- ------- ------------------------------
27. Financial Data Schedule Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheets and statements of operations found on pages 2 and 3 of the Company's Form
10-QSB for the year to date, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1999
<CASH> 315,665
<SECURITIES> 0
<RECEIVABLES> 5,518
<ALLOWANCES> 0
<INVENTORY> 143,680
<CURRENT-ASSETS> 482,694
<PP&E> 360,638
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,117,181
<CURRENT-LIABILITIES> 258,934
<BONDS> 0
<COMMON> 1,154
0
0
<OTHER-SE> 618,161
<TOTAL-LIABILITY-AND-EQUITY> 1,117,181
<SALES> 406,372
<TOTAL-REVENUES> 406,372
<CGS> 25,506
<TOTAL-COSTS> 25,506
<OTHER-EXPENSES> 544,292
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (19,953)
<INCOME-PRETAX> (183,379)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (183,379)
<EPS-BASIC> (.02)
<EPS-DILUTED> 0
</TABLE>
