SMLX Technologies Inc – ‘10KSB’ for 12/31/97

As of:  Tuesday, 4/28/98   ·   For:  12/31/97   ·   Accession #:  948830-98-97   ·   File #:  0-28154

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Annual Report — Small Business   —   Form 10-KSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10KSB       Annual Report -- Small Business                       35    174K 
 2: EX-27       Financial Data Schedule (Pre-XBRL)                     1      7K 

10KSB   —   Annual Report — Small Business
Document Table of Contents

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U.S. SECURITIES AND EXCHANGE COMMISSION     
Washington, D.C.  20549     

FORM 10-KSB       

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE    
SECURITIES EXCHANGE ACT OF 1934     

For the fiscal year ended: December 31, 1997      

Commission file number: 0-28154     

SIMPLEX MEDICAL SYSTEMS, INC.   
(Formerly "Music Tones Ltd.")   
----------------------------------------------        
(Name of small business issuer in its Charter)        

Colorado                                        84-1337509
-------------------------------                        -----------------        
(State or other jurisdiction of                        (I.R.S. Employer         
incorporation or organization)                         Identification No.)      

   430 Ansin Boulevard, Suite G, Hallandale, Florida 33009
   -----------------------------------------------------------
    (Address of principal executive offices, including zip code)

(954) 455-0110  
--------------------------- 
(Issuer's telephone number) 

Securities Registered Pursuant to Section 12(b) of the Act:  None.              

Securities Registered Pursuant to Section 12(g) of the Act:  Common Stock,      
                                                      No Par Value

Check whether the issuer (1) 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 [ ]                                                                          

Check if disclosure of delinquent filers pursuant to Item 405 of Regulation     
S-B is not contained in this form, and no disclosure will be contained, to the  
best of registrant's knowledge, in definitive proxy or information statements   
incorporated by reference in Part III of this Form 10-KSB or any amendment to   
this Form 10-KSB. [ ]                                                           

The Issuer's revenues for its most recent fiscal year were $71,461.             

As of April 21, 1998, 7,500,000 shares of the Registrant's common stock were    
outstanding, and the aggregate market value of the shares held by               
non-affiliates was approximately $3,665,000.                                    

DOCUMENTS INCORPORATED BY REFERENCE: None.                                      

Transitional Small Business Disclosure Format (check one): Yes __   No X        

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PART I

ITEM 1.  DESCRIPTION OF BUSINESS.                                               

BACKGROUND                                                                      

  Simplex Medical Systems, Inc. (the "Company") was incorporated under the
laws of the State of Colorado 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 a proposal to change the Company's name to  
Simplex Medical Systems, Inc.                                                   

In April 1996, the Company filed a registration statement with the    
Securities and Exchange Commission on Form 10-SB, wherein it registered its     
common stock under Section 12(g) of the Securities Exchange Act of 1934, as     
amended (the "34 Act").  As a result, the Company became a fully reporting      
company under the 34 Act.                                                       

  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 in the Company.  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.                                                   

  Unless the context otherwise requires, the term "Company" as used herein
refers to the Company and its wholly-owned subsidiary, Simplex-Florida, and     
its wholly-owned subsidiary Analyte Diagnostics, Inc. ("ADI").                  
Simplex-Florida was incorporated in Florida in September 1995, and ADI was      
incorporated in Florida on June 6, 1995.                                        

DESCRIPTION OF BUSINESS                                                         

GENERAL                                                               

The Company is engaged in the development, acquisition, manufacturing 
and marketing of medical diagnostic products for point-of-care testing.  The    
Company  offers a diagnostic test for HIV which screens saliva instead of       
blood or urine.  The countries which have approved or permitted the sale of     
these test kits include Hong Kong, Venezuela, Spain, Costa Rica, Italy,         
Bahamas, New Zealand and Argentina.  The Company was also issued an approval    
in Brazil, but due to a change in their government and a consequent change in   
the certifying hospital, the Company had to resubmit the documents and redo     
the clinical trials.  This has been completed and the Company expects           
re-approval during May 1998.                                                    

The Company has acquired, through internal development, assignment,   
acquisition, and a series of joint development agreements, certain rights to    
technology for non-invasive diagnostic products, specifically products for      
detection of HIV antibodies in saliva, and for the testing of diabetics to      
monitor their daily dietary and insulin requirements. The non-invasive          
collection and analysis of biological fluids, specifically, the devices for     
collection of saliva and biological fluids extracted through the skin of a      
sample donor, are expected to replace many of the present test regimes for      
diagnostics products that are currently in use.                                 
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THE COMPANY'S PRODUCTS                                                

Public Health officials, including specifically the agencies that are 
responsible for testing defined populations in prisons, military and            
registered prostitutes, have become increasingly concerned with the need for a  
rapid and accurate diagnostic test for detection of infectious disease,         
including specifically HIV, hepatitis and the like. The prospective customers   
of the Company's saliva collector and diagnostic products require that such     
diagnostic products be relatively simple to use, and capable of use outside     
the laboratory (on-site diagnostic testing). In relatively undeveloped          
countries the on-site testing is of paramount importance to acceptance of such  
tests.                                                                          

Because the Company's initial marketing and sales efforts are directed
outside the United States, FDA approval of certain of the Company's products    
may not be as restrictive compared to domestic requirements.  The customers of  
the Company's products generally favor products that are manufactured in        
facilities which are subject to FDA regulation (FDA registered establishment)   
and thus the Company has had its facilities registered.                         

A.   THE SALIVA COLLECTION DEVICE, was designed for the collection,   
recovery, dispensing and on the spot testing of a fluid  sample, including      
vital biological fluids such as saliva. Other aspects of the technology         
include an optical window integrated with the device to provide analysis of     
the sample within the device.                                                   

The device consists of a recovery container in the shape of a small   
plastic test tube which embodies a tubular member having an open end and        
closed end and includes an absorbent element comprised of a polymer foam to     
absorb a fluid sample in sufficient quantity to permit analysis and testing     
without elaborate sample preparation or laboratory equipment. In certain        
designs, by applying a pressure to the flexible tube the fluid can be squeezed  
into a reservoir which can then be collected for analysis. The volume of        
saliva collected by the absorbent element is a function of both the size of     
the element and the time the element is in contact with the donor. The test     
kit for this technology includes an analyte sensitive element and one sample    
collection device along with instructions for performance of an analysis of     
the collected fluid sample.                                                     

  The Company's saliva sample collector is to be used in place of the more
traditional, and intrusive, sample collection methodologies (e.g. drawing       
blood by venous puncture or finger stick) to obtain a biological fluid sample,  
which, in most instances, is comparable, or preferable, to biological fluids    
such as blood, urine or fecal matter, for constituent analysis. The market for  
the Company's fluid sample collector is not restricted by international         
boundaries and, depending upon the diagnostic test used in conjunction          
therewith, will be made available to any business or individual having a need   
to collect a fluid sample by untrained personnel and without the need or        
assistance of elaborate and intrusive equipment.                                

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       
diagnostic tests, including analysis for antibodies indicative of disease       
states (HIV, hepatitis, measles and mumps) and, for drugs of abuse.             

During April 1998 the Company received a letter from the FDA 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.  The  
Company next                                                                    
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intends to submit a 510(k) premarket notification for one of the Company's      
test kits which incorporate the saliva collector.                               

The fluid collection device to be manufactured and distributed by the 
Company is also suitable for use with any one of a variety of screening tests   
for on-site determination of the presence of pollutants in drinking water,      
waste streams and in environmentally sensitive habitats.                        

The countries which have approved or permitted the sale of these test 
kits include Hong Kong, Venezuela, Spain, Costa Rica, Italy, Bahamas, New       
Zealand and Argentina.  The Company was also issued an approval in Brazil, but  
due to a change in their government and a consequent change in the certifying   
hospital, the Company had to resubmit the documents and redo the clinical       
trials.  This has been completed and the Company expects re-approval during     
May 1998.                                                                       

  During March 1997, the Company signed a Memorandum of Understanding with
Sun Biomedical Laboratories, Inc. ("Sun") to collaborate on the development of  
a new saliva-based diagnostic test for mumps, rubella and pertussis (whooping   
cough). Sun is a bio-tech product development and manufacturing company         
located in Cherry Hill, New Jersey.                                             

B.   DENTAL AIRBRATOR.  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 increases patient through-put.            

During April 1997 the Company received a letter from the FDA that the 
FDA had completed the scientific review portion of the Company's 510(k)         
premarket notification regarding the airbrator, and the airbrator is approved   
for marketing in the United States for the use of abrading the surface of       
teeth.                                                                          

  During July 1997, the Company entered into a Distribution Agreement with
Sybron Dental Specialties, Inc. ("Sybron") pursuant to which the Company        
appointed Sybron as the exclusive worldwide distributor for the airbrator.      
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 from the Company at       
least three million airbrators 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 in accordance with Sybron's orders.                                  

C.   THE NON-INVASIVE GLUCOSE TEST is a formulation and method for the
analysis of interstitial fluids to determine the presence and/or concentration  
of an analyte of interest such as glucose.   The test kit comprises one or      
more reagents for the extraction and collection of the fluid, a collection      
device and an analyte sensitive element integrated with the collection device   
that is responsive to and capable of identifying the analyte contained in the   
extracted fluid.  This product configuration is clearly in the research and     
development stage as no final commercial embodiment has been created. Nor can   
the Company determine with certainty if it infringes upon patents and other     
claims inasmuch as this is an area of active development by a number of         
competing companies. Neither the Company nor ADI have a patent pending for      
this technology.                                                                
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D.   BIOVEN ANTI-INFLAMMATORY/ANTI-ARTHRITIC TREATMENT is a powerful  
and safe treatment for the symptomatic treatment of Rheumatoid Arthritis        
("RA"). The Company's principal scientist developed BIOVEN after fifteen years  
of extensive research in the field of immunology.  BIOVEN has undergone         
significant clinical trials in several foreign countries and has gained         
approval for administration in Hong Kong and Nicaragua, but not in the United   
States.                                                                         

BIOVEN is a result of years of experimentation, evaluation and        
historical study in the field of peptide use. The product is currently          
administered as an injectable solution made under the strict guidelines of the  
FDA, however, the FDA has not approved BIOVEN for use in the United States.     
The BIOVEN mode of action is believed to function by reversing the body's       
chemical/immunological imbalances that are present in RA. Hospital studies and  
laboratory data have confirmed that in the typical case where the RA test is    
positive, the treatment with BIOVEN returns test results to normal. The         
immunoglobulin fractions of patients' blood with RA that are abnormal are       
returned to baseline normal levels after treatment with BIOVEN. The biological  
results are quantifiable. After treatment with BIOVEN, the joint inflammation   
is reduced, the joint pain is removed and a general feeling of well-being is    
reported by most patients. Patients who have previously required high doses of  
pain medication, such as aspirin, can reduce the amount of medication needed    
and, in many instances, stop taking all secondary pain medications.             

BIOVEN has been shown not to have any adverse side effects. In over   
2,000 case histories, to the Company's knowledge, there has not been one        
adverse reaction reported in clinical use. The LD50 studies that have been      
done along with the other safety tests confirmed BIOVEN's safety and efficacy.  

BIOVEN has been used to treat Early Onset Rheumatoid Arthritis and to 
the Company's knowledge in all cases has resulted in a marked and to date,      
permanent, beneficial result. There are many children today who are leading a   
normal life due to BIOVEN treatment. The mode of action of BIOVEN has led       
other scientific groups to use it to develop a clearer understanding of how     
the RA process works and how it affects the body.                               

Research into the uses of BIOVEN has been an on-going project that has
not ended with the anti-inflammatory properties of the drug. New research over  
the past several years has led to a modified version of BIOVEN with very        
potent and effective antiviral properties. The modified BIOVEN (BIOVEN-H) has   
been used to treat Herpes zoster (Shingles), Herpes keratitis (Herpes of the    
eye) and Herpes varicella (cold sores). All three conditions responded with a   
100% cure rate in all cases. Over 100 cases to date have been treated and all   
report the disappearance of the virus and its effects. BIOVEN-H works in three  
to five days and has no side effects.                                           

 BIOVEN-H has been used by the Director of Medicine at the Eye Institute
of Nicaragua on dozens of patients with Herpes infections of the eye and found  
it to be effective in preventing blindness in the patients. The Institute used  
BIOVEN-H for many years prior to the political changes that restricted trade    
with the United States and thus made the drug unavailable there. This           
situation has reversed itself and the Company is planning to reestablish a      
manufacturing plant in the country as soon as adequate funding becomes          
available.                                                                      

 BIOVEN can be made available for clinical trials worldwide and for sale
in countries where approval is currently in force. The Company believes the     
market for both BIOVENs in the countries where it is currently licensed is      
very significant. Major steps have been undertaken to gain approval in the      
European Economic Community and the Company has recently received approval of   
BIOVEN for                                                                      
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veterinary use in France.  The Company has not applied for FDA approval for     
Bioven for use in the United States due to the significant expenditure which    
would be required for the product since it must be injected.  If approval was   
applied for, there be no assurance that such approval would be forthcoming.     
It should be emphasized that no market test studies have been undertaken by     
the Company and no patents have been acquired nor are any pending for this      
product.                                                                        

E.   FLAVOR ENHANCEMENT. The Company has developed a proprietary      
process which allows for the incorporation of flavor essences into an edible    
support material using food grade materials and approved printable inks.  This  
process has given rise to a new form of advertising sampler which will enable   
a consumer to 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.                                                 

RESEARCH AND DEVELOPMENT                                              

The Company spent $103,324 on research and development of new products
during the year ended December 31, 1997.                                        

THE MARKET                                                            

The Company believes that the general state of the saliva diagnostic  
market with regard to the products available, the size of the market and the    
number of competitive manufacturers can be described as in the infancy of an    
extremely large industry. It must be emphasized that 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 principally to the high degree of sensitivity     
and specificity of such techniques.                                             

Tests for hepatitis, HIV, mumps, measles, cancer tumor markers, EBV,  
CMV, and many others are currently using 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 recipient of the   
blood collection needle. The skill and expertise of the physician or other      
highly trained individual needed to obtain the sample of blood for these tests  
is also adding to the high cost of the testing.                                 

The saliva collection and test system not only tends to solve the     
aforementioned problems but is easy to use and lends itself to home or "point   
of care" style testing. These advantages effectively reduce the overall cost    
of immunological testing and allow for the immediate results to be made         
available to the practitioner or individual. The Company believes that testing  
with saliva specimens has many potential advantages compared to testing with    
blood and urine specimens. Unlike obtaining blood specimens, saliva specimens   
can be collected at any time in any location and the sampling procedure is      
easy to administer and monitor, and may be conducted on a group basis. The      
Company believes, that unlike self-administered 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 subject giving the specimen. Saliva   
specimen collection does not require the use of sharp objects. Additionally,    
after collection, blood specimens remain potentially infectious (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 inasmuch as 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.                                        
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 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 overall health programs. The immunoassay  
diagnostic testing market began in 1960, and, in 1990 was approximately a $2.8  
billion market. The immunoassay diagnostic test market in the United States     
was estimated at $900 million in 1990, with annual growth estimated between 7%  
and 8%.                                                                         

The overall market currently is divided into three major components;  
first, the "government" sector, second, the "captive audience" sector           
(military, criminal, institutional, etc.) and lastly, the "private" sector or   
individual patient.                                                             

The international markets for the Company's products include both the 
government and the private business sectors. More specifically, 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  
the foreign military establishment. In certain foreign markets, the Company's   
HIV test kits are expected to be advertised for sale directly to the private    
physicians and to the consuming public.                                         

 The Company already has products under evaluation in several countries,
including Russia, Thailand, Paraguay, Mexico and Venezuela. Several countries   
have begun testing the ADI HIV saliva test with the goal of introducing the     
product to the 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 the    
"at risk" populations present in the major cities and tourist areas. These      
include the legal prostitutes, the 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 country.                                                  

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 negative. The testing of   
partners is a common concern in the socially active. The simple and             
confidential nature of saliva testing allows for the 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 the clinical labs as  
only the positives 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.                                  
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GOVERNMENT REGULATION                                                 

The development, manufacture, testing and marketing of the Company's  
diagnostic products 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 drugs of 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    
drugs of 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 future information, such as            
additional test data, before the FDA is able to make a determination regarding  
substantial equivalence. There can be no assurance that the Company will        
receive approval for any of its products under 510(k) Premarket Notification.   
There can be no assurance that marketing clearance will be obtained for any of  
its products.                                                                   

  Other than as described below, 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. In this regard, special attention should be given  
to the Company's primary product, the saliva collection device.  Although the   
saliva collection device received FDA approval in April 1998 (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    
the 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     
has approved 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 that the 
FDA had completed the scientific review portion of the Company's 510(k)         
premarket notification regarding the airbrator, and the airbrator is approved   
for marketing in the United States for the use of abrading the surface of       
teeth.                                                                          

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.                       
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MANUFACTURING                                                         

  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 market in which the Company participates, saliva-based collection 
and diagnostic testing, is highly competitive. The Company is aware of certain  
other entities, specialized biotechnology firms, as well as 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    
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 AND PROPRIETARY INFORMATION                                   

The Company presently has pending, two (2) patent applications in the 
United  States, on certain aspects of its saliva collection testing device.     
Inasmuch as the Company intends to sell its products in foreign markets it      
intends to seek foreign patent protection on such products and technologies,    
although it has not yet obtained such protection. 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), and three other         
applications for other technologies which the Company is developing.            

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 is technology.                         
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EMPLOYEES                                                             

  The Company currently has five employees.  The Company is not subject to
any collective bargaining agreement and believes that its relationships with    
its employees are good.                                                         

ITEM 2.  DESCRIPTION OF PROPERTY.                                               

The Company maintains its corporate offices at 430 Ansin Boulevard,   
Suite G, Hallandale, Florida 33009.  Until February 1998, the Company rented    
approximately 3,700 square feet at this location and paid approximately $1,675  
per month for rent pursuant to a lease which was scheduled to  expire August    
31, 1998.  The Company also rented approximately 1,900 square feet of lab       
space in the same building pursuant to a lease which required monthly payments  
of approximately $900 and which was scheduled to expire September 30, 1998.     

  On February 11, 1998, the Company entered into a new lease with the same
landlord for office and warehouse space at a new nearby location.  The five     
year lease 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.  This new lease replaces and cancels the two lease            
agreements described above.                                                     

 The Company expects to move to its new offices during May or June 1998.

ITEM 3.  LEGAL PROCEEDINGS.                                                     

Other than the law suit 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.                         

On or about August 11, 1995, Americare Transtech, Inc. ("Americare"), 
Americare Biologicals, Inc. and International Medical Associates, Inc.,         
through their principal, Joseph D'Angelo ("D'Angelo"), instituted suit 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 have been filed in response to the          
allegations.  Simplex intends on aggressively defending the case and believes   
that the action lacks merit and has been filed as a retaliatory measure by      
D'Angelo as a result of an earlier action filed against D'Angelo and Americare  
by one of Simplex's principals.  The suit is currently in the discovery stage   
and it is expected to go to trial late in 1998.                                 

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                   

No matters were submitted to a vote of security holders during the    
fourth quarter of the fiscal year ended December 31, 1997.                      
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PART II 

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.              

(a)  MARKET INFORMATION.  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 sets forth 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          
necessarily represent actual transactions.                                      

QUARTER ENDED                 HIGH BID     LOW BID    
--------------                --------     -------    
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      

(b)  HOLDERS.  As of March 31, 1998, the Company had approximately 85 
shareholders of record.  This does not include shareholders who hold stock in   
their accounts at broker/dealers.                                               

(c)  DIVIDENDS.  The Company has never paid a cash dividend on its    
common stock and does not expect to pay a cash dividend in the foreseeable      
future.                                                                         

(d)  RECENT SALES OF UNREGISTERED SECURITIES.  None.                  

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.             

RESULTS OF OPERATIONS                                                 

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.                                                      
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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.                                                               

 The Company has reviewed the effect that the year 2000 will have on its
essential computer systems, especially those related to its ongoing operations  
and its internal control systems, including the preparation of financial        
information.  The Company has plans underway to ensure that there will be no    
significant adverse effect on its operations or accounting records related to   
the year 2000.                                                                  

CAPITAL RESOURCES AND LIQUIDITY                                                 

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.  The Company has prepared the         
financial statements on a going concern basis with the assumption that the      
Company will secure additional financing from the sale of the Company's common  
stock for up to $1,000,000 in proceeds.  The Company also expects to generate   
revenues from the sale of its test kits in countries where the products have    
been approved for sale.                                                         

During March 1998 the Company signed a letter of intent with Automated
Health Technologies, Inc. ("AHT") and an investment partnership pursuant to     
which the Company will acquire a 19% interest in AHT.  The Company will also    
grant a put option for the remaining 81% of AHT whereby the Company would be    
required to issue its common stock for the remaining 81%.  Pursuant to this     
letter of intent Mr. Colin Jones, the CEO of AHT has become the President and   
Chairman of the Company.  The letter of intent also provides that the           
investment partnership will raise $1 million for a number of shares which       
approximates 20% of the Company on a fully diluted basis.  The definitive       
agreement has not been executed as of the filing of this Report, however, the   
partnership has loaned the Company $200,000 during March and April 1998.        

 The Company has no material commitments for capital expenditures at the
time of the filing of this Report.                                              

ITEM 7.  FINANCIAL STATEMENTS.                                                  

 The financial statements are set forth on pages F-1 through F-6 hereto.
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ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND        
FINANCIAL DISCLOSURE.                                                           

No response required.                                                 
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  PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;          
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.                              

  The directors and executive officers of the Company and its wholly-owned
subsidiary, their ages and positions held in the Company are as follows:        

NAME                 AGE   POSITIONS HELD AND TENURE    
-----------------------------    ---   ----------------------------------       
Colin N. Jones                   77    President and Chairman of the Board      

Nicholas G. Levandoski, Ph.D.    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 - Business Development    
                               and Director of the Company; Vice
                         President and a Director of
             Simplex-Florida

Joel Marcus                      58    Director                                 

 There are no family relationships between any officers and directors of
the Company.  The Company presently has no audit, compensation or nominating    
committees.                                                                     

BUSINESS EXPERIENCE                                                             

The following is a brief account of the education and business        
experience during at least the past five years of the Company's directors,      
executive officers, and key employees, indicating the principal occupation and  
employment during that period, and the name and principal business of the       
organization in which such occupation and employment were carried out.          

 COLIN N. JONES has served as the President and Chairman of the Board of
the Company since April 10, 1998.  Mr. Jones has served as CEO and Chairman of  
Automated Health Technologies since November 1996 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 1974.  From September 1950 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.                                    

  DR. 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.  Dr. Levandoski has extensive research and     
clinical experience,                                                            
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including military, industry and hospital environments. Dr. 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), Dr. 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., Dr. 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, Dr. 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 Corps., 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, Dr. 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, Dr. 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.                                                                           

 MR. 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.                  

  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.                

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT                               

Based solely on a review of Forms 3 and 4 and amendments thereto      
furnished to the Company during its most recent fiscal year, and Forms 5 and    
amendments thereto furnished to the Company with respect to its most recent     
fiscal year and certain written representations, no persons who were either a   
Director, Officer or beneficial owner of more than 10% of the Company's Common  
Stock, failed to file on a timely basis reports required by Section  16(a) of   
the Exchange Act during the most recent fiscal year except as follows:          
International Technologies Ltd., a principal shareholder, failed to file a      
Form 3 and one Form 4 reporting its initial ownership position and one          
transfer during 1997.  The shareholder has also not filed a Form 5 for 1997.    
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ITEM 10.  EXECUTIVE COMPENSATION.                                               

The following table sets forth information regarding the executive    
compensation for the Company's President and each other executive officer       
whose total annual salary and bonus exceeded $100,000 for the year ended        
December 31, 1996 and December 31, 1997:                                        

                                                                [Download Table]

                                  SUMMARY COMPENSATION TABLE                 

                                                           LONG-TERM         
COMPENSATION                                                                 

-----------------------------------                                          
                           ANNUAL COMPENSATION               AWARDS          
PAYOUTS                                                                      
                          -----------------------  --------------------------
-------                                                                      
                                                            SECURI-          
                                                             TIES            
                                                            UNDERLY-         
                                           OTHER     RE-      ING            
ALL                                                                          
                                           ANNUAL  STRICTED OPTIONS/         
OTHER                                                                        
NAME AND PRINCIPAL                         COMPEN-  STOCK     SARs     LTIP  
COMPEN-                                                                      
     POSITION       YEAR  SALARY   BONUS   SATION  AWARD(S) (NUMBER)  PAYOUTS
SATION                                                                       
------------------  ----  -------  -----   ------  -------- --------  -------
------                                                                       
                                                                             
                                                                             
Nicholas G.         1997  $43,500    --    $19,400    --     250,000     --  
 --                                                                          
 Levandoski, Ph.D., 1996  $    --    --    $21,956    --        --       --  
 --                                                                          
 President                                                                   

 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-    250,000/250,000          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          54.3%          $1.58        8/27/02      

STOCK OPTION PLAN                                                               

During March 1997, the Board of Directors adopted a Stock Option Plan 
(the "Plan"), and on March 28, 1997, 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.                                 
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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.                  

During 1997 the Company granted options to seven persons to purchase a
total of 490,000 shares of common stock at a price of $1.58 per share.          

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.       

The following table sets forth, as of March 31, 1998, 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, each officer and director   
individually, and all officers and directors as a group.  Each person has sole  
voting and investment power over the shares except as noted.                    

                                                                [Download Table]

                                     AMOUNT AND                               
  NAME AND ADDRESS                 NATURE OF BENE-          PERCENT           
OF BENEFICIAL OWNERS               FICIAL OWNERSHIP         OF CLASS          
-------------------------          ----------------         --------          
                                                                              
Henry B. Schur                     1,042,500<FN1>            13.9%            
430 Ansin Boulevard, Suite G                                                  
Hallandale, Florida 33009                                                     

Debra L. Ross                      1,042,500<FN2>            13.9%            
430 Ansin Boulevard, Suite G                                                  
Hallandale, Florida 33009                                                     

John E. Trafton                      878,000                 11.7%            
285 Sunrise Drive, Apt. 16                                                    
Key Biscayne, Florida 33149                                                   

Colin N. Jones                          --                    --              
1025 N.W. 17th Avenue                                                         
Delray Beach, Florida  33445                                                  

Nicholas G. Levandoski                     0<FN3>             -0-             
430 Ansin Boulevard, Suite G                                                  
Hallandale, Florida 33009                                                     

Joel Marcus                           90,000<FN4>             1.2%            
676 West Prospect Road                                                        
Fort Lauderdale, Florida  33309                                               
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International Technologies Ltd.    1,300,000                 17.3%            
c/o William Smith                                                             
P.O. Box F-40729                                                              
Freeport, Bahamas                                                             

All Directors and Officers         1,312,500<FN1>            17.5%            
as a Group (4 Persons)                                                        
_______________________                                                       
<FN>                                                                          
<FN1>                                                                         
Includes 862,500 shares held of record by Mr. Schur's wife, Debra Ross, 80,000
shares held by Mr. Schur's daughter, and 100,000 shares held in trust for Mr. 
Schur's daughter.  Does not include options to purchase 100,000 shares since  
the Company's stock option plan is awaiting shareholder approval.             
<FN2>                                                                         
Includes 862,500 shares held directly by Ms. Ross, 80,000 shares held by Ms.  
Ross' daughter, and 100,000 shares held in trust for Ms. Ross' daughter.      
<FN3>                                                                         
Does not include options to purchase 250,000 shares since the Company's stock 
option plan is awaiting shareholder approval.                                 
<FN4>                                                                         
Does not include options to purchase 100,000 shares since the Company's stock 
option plan is awaiting shareholder approval.                                 
</FN>                                                                         

The Company knows of no arrangement or understanding, the operation of
which may at a subsequent date result in a change of control of the Company.    

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.                       

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 (approximately   
46.04% of the shares now outstanding).  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      
current shareholders submitted for cancellation a total of 31,953,000 shares    
of common stock.  As a result, after the acquisition of Simplex-Florida, there  
are 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.    
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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         
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.                                                          
PART IV   

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.                                     
(a)  3.  EXHIBITS.                                                    

EXHIBIT                                                                         
NUMBER      DESCRIPTION                   LOCATION                              
3.1        Articles of Incorporation,    Incorporated by reference to         
  as Amended                    Exhibits 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 the Registrant's
                                  Form 10-SB Registration State-
                               ment filed on April 4, 1996

10.1        Promissory Note dated         Incorporated by reference to          
      March 20, 1996 of             Exhibit 10.1 to the Registrant's
    Sandra S. Steinberg           Form 10-SB Registration State-
                               ment filed on April 4, 1996

10.2        Promissory Note dated         Incorporated by reference to          
      March 20, 1996 of             Exhibit 10.2 to the Registrant's
    Colleen E. Schmidt            Form 10-SB Registration State-
                               ment filed on April 4, 1996

 (b)  REPORTS ON FORM 8-K.  No Reports on Form 8-K were filed during the
fourth quarter of the Company's fiscal year ended December 31, 1997.            

INDEX TO FINANCIAL STATEMENTS 

Independent Auditor's Report                                   F-1              

Financial Statements:                                                           

Balance Sheets                                            F-2         

Statements of Operations                                  F-3         
Statements of Stockholders' Equity (Deficit)              F-4         
Statements of Cash Flows                                  F-5         
Notes to Financial Statements                             F-6         
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SCHMIDT, RAINES, TRIEST, 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/ Schnmidt & Co.  
     SCHMIDT, RAINES, TRIESTE,
    DICKENSON & ADAMS, P. L.
Boca Raton, Florida                                                             
March 26, 1998                                                                  
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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.                                                                     
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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.                                                                     
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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              
                                                               Total
                                                                Stock-
                                                                holders'
                        Common stock   Paid-in Accumulated      Equity
                             Issued   Amount  Capital   Deficit  (Deficit)
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)
                          =========== ====== ======== =========  =========
The accompanying notes are an integral part of these consolidated financial     
statements.                                                                     
F-4               

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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.                                                                     
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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.             

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.                                      
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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)                                                   

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.                  

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.                                                                   
F-7               

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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)                                                   

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.                                                                     

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.                                                             
F-8               

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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)                                                     

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.                                             

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                              
F-9               

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SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY              
(A Development Stage Company)               
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS              
DECEMBER 31, 1997 AND 1996              

NOTE 3 - BUSINESS ACQUISITION AND MERGER (CONTINUED)                            

restated to include the accounts of MTL because management believes they are    
immaterial.                                                                     

NOTE 4 - EQUIPMENT                                                              

Equipment consists of the following at December 31, 1997 and 1996               

               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.                                               

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.                           
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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)                                              

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
                                                ========

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.                                  

F-11              

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SIMPLEX MEDICAL SYSTEMS, INC. AND SUBSIDIARY              
(A Development Stage Company)               
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS              
DECEMBER 31, 1997 AND 1996              

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.                        

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:                                                   
F-12              

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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)                                             
                                            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.       

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 -        
                                  ========    ========
F-13              

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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)                                        

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.                             

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-14              

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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-15              

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SIGNATURES  

Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the Registrant has duly caused this Report to be signed   
on its behalf by the undersigned, thereunto duly authorized.                    

Date: April 28, 1998                 SIMPLEX MEDICAL SYSTEMS, INC.              

               By:/s/ Colin J. Jones
                       Colin N. Jones, President

Pursuant to the requirements of the Securities Exchange Act of 1934,  
this report has been signed below by the following persons on behalf of the     
Registrant and in the capacities and on the dates indicated.                    

SIGNATURE                       TITLE                   DATE    

/s/ Colin N. Jones             President (Chief Executive    April 28, 1998     
Colin N. Jones                 Officer) and Director                            

/s/ Henry B. Schur             Vice President of Marketing   April 28, 1998     
Henry B. Schur                 and Director                                     

/s/ Nicholas G. Levandoski     President, Vice President     April 28, 1998     
Nicholas G. Levandoski,        of Research and Development,                     
Ph.D.                        Secretary, Treasurer and                       
            Chief Financial and Accounting
   Officer) and Director

/s/ Joel Marcus                Director                      April 28, 1998     
Joel Marcus                                                                     

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10KSB’ Filing		Date		First		Last			Other Filings
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		9/30/98		10					10QSB
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Filed on:		4/28/98		35
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		4/1/98		10		34			8-K/A
		3/31/98		11		17			10QSB,  NT 10-K,  NT 10-Q
		3/26/98		20
		2/20/98		33
		2/11/98		10		34
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For Period End:		12/31/97		1		34			NT 10-K
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		12/15/97		27
		9/30/97		11					10QSB
		6/30/97		11					10QSB,  NT 10-Q
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		3/31/97		11					10QSB,  NT 10-Q
		3/28/97		2		16			DEF 14C,  PRES14C
		3/5/97		2		28			8-K,  8-K/A
		1/1/97		32
		12/31/96		2		34			10KSB,  NT 10-K
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		3/20/96		18		19
		10/31/95		23		25
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