SMLX Technologies Inc – ‘10KSB’ for 12/31/96

As of:  Tuesday, 4/15/97   ·   For:  12/31/96   ·   Accession #:  948830-97-104   ·   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                       26    114K 
 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, 1996          

Commission file number: 0-28154     

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

Colorado                                        84-1337504
(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 $ -0-.               

As of April 11, 1997, 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 $14,995,000.                                       

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 are 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                                                               

Simplex-Florida, through ADI, is engaged in the development,          
acquisition, manufacturing and marketing of medical diagnostic products for     
point-of-care testing.  Simplex-Florida offers a diagnostic test for HIV which  
screens saliva instead of blood or urine, and has been approved for             
professional use as a point-of-care screening test in Brazil.                   

 The Company has, 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. Each of these technologies for the non-invasive sample        
collection devices were being jointly developed through a formal contractual    
relationship between the Company's subsidiary, ADI and Technical Chemical &     
Products, Inc. ("TCPI"), of Pompano Beach, Florida. The Company and TCPI were   
to share equally in the profits resulting from their joint development          
efforts, however, this relationship terminated in December 1995.  The           
agreement with TCPI                                                             
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provides that the Company has the right to independently exploit the two joint  
inventions with TCPI and the patent rights, and the right to license under the  
background patents of TCPI, on reasonable terms, to the extent necessary to     
exploit the jointly developed products.                                         

THE COMPANY'S PRODUCTS                                                

The Company, by virtue of its employment, assignment and license      
agreements with key personnel, through ADI, its wholly-owned subsidiary, and    
through agreements with otherwise unaffiliated companies, presently owns        
and/or has rights to technology (pending patent applications ) in the products  
and markets of principal interest to the Company. Two of the listed products -  
the saliva collection and glucose test - are assets of the Company's            
subsidiary, ADI.  The balance of the products are either proprietary to the     
Company or result from joint development and marketing relationships.           

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                                                              
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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.             

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 Brazilian Ministry of Health has recently approved the importation
and professional use of the Company's saliva test in Brazil.                    

  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.   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.                                                                

The technology of the invention consists of a formulation comprising a
multi-phasic fluid composition. The device initially obtains a biological       
fluid sample by extraction of intercellular, i.e. interstitial fluid through    
the skin and thereafter channels such fluid along a pathway within the device   
so as to make it available for analysis by contact with an analyte sensitive    
medium. The analyte sensitive element will typically contain a test strip that  
is sensitive to the presence of the analyte sought to be identified. Upon       
interaction of the fluid and the chemical within the test strip a physical and  
demonstrative change occurs in the test strip, which is indicative of the       
presence or absence of the chemical sought to be identified.                    

C.   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. 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                                                        
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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 is currently arranging for          
clinical trials in Italy to accomplish this. Bioven has not been approved for   
use in the United States, nor can there be any assurance that such approval     
will be forthcoming. Should FDA approval for use in this country be obtained,   
the Company estimates the BIOVEN market could be very substantial. 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.         

D.   BLOOD GROUP MODIFYING SUBSTANCE. Blood group substances are the  
glycoproteins that surround the surface or coat the surface of the red cells    
(erythrocytes) and determine the "type" of the blood, i.e. A, AB, O. The        
Company is currently investigating using its proprietary technology to alter    
these active substances so as to render the blood "universal donor" type. If    
successful it will have a major significance in the medical community by        
allowing for the                                                                
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transfusion of any blood type from a donor to any blood type recipient. The     
preliminary laboratory studies carried out by the Company have indicated that   
this universal blood type treatment process is feasible and practical. The      
market to be targeted initially for this conversion process will be the         
military for field use as well as to relieve the current shortage in            
transfusable blood. The Company has no patent nor is one pending for this       
technology.                                                                     

E.   SOLID PHASE MATRIX TECHNOLOGY AND PROCESS. The Company has       
developed a proprietary method of preparing a support system for diagnostic     
tests which will increase the sensitivity of the tests and make the             
manufacture of these tests much more cost effective. This technology will have  
application in the rapid diagnostic field, the clinical laboratory testing      
field and in the area of forensic testing. Test systems are currently being     
adapted to the Simplex Solid Phase Matrix System for the rapid detection of     
the HIV virus, TB, Hepatitis virus and many tumor marker proteins used in       
cancer detection. No patent has been acquired nor is any pending for this       
technology.                                                                     

 F.   DENTAL AIR ABRASIVE DEVICE.  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 issue.  Because it is disposable and there is no need     
for extensive sterilization procedures, the product increases patient through-  
put.                                                                            

G.   BIOREMEDIATION. The problem of "refined" oil marine and          
environmental pollution is a global crises. The Company has developed and       
tested a naturally derived strain of bacterial organisms which when placed in   
an oil polluted area will naturally consume the oil and thus reduce the level   
of pollution from the oil to accepted levels. This technology is primarily      
intended for confined areas such as boat and ship bilges to prevent overboard   
discharge contamination or in oil sumps in garages to prevent runoff            
contamination. This product is currently being prepared for patent              
application.                                                                    

H.   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 is seeking patent protection for  
this technology.                                                                

I.   MOLECULAR SIEVING AIR/GAS FILTERS. This product and technology is
utilized in the storage and preservation of food for storage and shipment by    
selectively absorbing the gasses responsible for the ripening of the food,      
specifically fruits and vegetables. Variations in this product are used in the  
control of odors in air conditioning systems as well as to prevent the growth   
and spread of organisms in the systems. This product is currently being         
introduced to the commercial sector and plans are underway to introduce this    
product in the consumer markets by 1997. The Company has no patent nor are any  
pending for this technology.                                                    

J.   PET PRODUCTS.  The Company has filed trademark protection on the 
name Neemodex, for its proprietary flea and tick shampoo. This product is all   
natural, non-insecticidal, non-toxic and environmentally safe and has met with  
acceptance in its recent introduction in the marketplace. The Company is the    
manufacturer of this product and expects to expand on its formulation line by   
adding new pet grooming products in the near future.                            
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K.   TUMOR MARKERS. The Company also has an agreement with Goodwin    
Biotechnology Inc. ("GBI") to collaborate in the development of                 
immunodiagnostic products for the early detection of tumor markers. GBI,        
located in Plantation, Florida, is a contract manufacturer of clinical          
biologics (e.g. monoclonal antibodies, recombinant proteins) for the            
pharmaceutical and medical research industry. The diagnostic test to be         
developed by the Company is to be co-marketed with a immunotherapeutic agent    
presently under development by GBI.                                             

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.                                        

 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                                                        
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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.                                  

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                                                                 
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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. This product    
test kit 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 the saliva collection device provided that the       
appropriate regulatory agency of the country to which it is exported has        
approved the importation and use of the product.                                

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.                       

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.              
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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, three (3) 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.                                                                       

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.                         

EMPLOYEES AND DISTRIBUTORS                                            

The Company currently has three employees and three consultants. 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.  The Company rents approximately 3,700      
square feet at this location and pays approximately $1,675 per month for rent   
pursuant to a lease which expires on August 31, 1997, but the Company has an    
option to renew the lease for an additional two years.  The Company also rents  
approximately 1,300 square feet of lab space in the same building pursuant to   
a lease which requires monthly payments of approximately $900 and which         
expires September 30, 1997.                                                     

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                                                                         
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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.  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.                                                                     

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, 1996.                      
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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    

(b)  HOLDERS.  As of March 31, 1997, the Company had approximately 36 
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.  On March 20, 1996, the 
Company sold a total of 30,000,000 shares of its common stock to two then       
directors, Colleen E. Schmidt and Sandra S. Steinberg (15,000,000 shares        
each), for a total consideration of $5,000.  The Company relied on the          
exemption provided by Section 4(2) of the Securities Act of 1933, as amended,   
since both investors were directors of the Company.                             

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

RESULTS OF OPERATIONS                                                 

  During the fiscal year ended December 31, 1996, and since its formation,
the Company has engaged in no significant operations other than the search      
for, and identification and evaluation of, possible acquisition candidates.     
No revenues were received by the Company during the fiscal year and no          
expenses were incurred.                                                         

With the reverse acquisition of Simplex-Florida, the Company's results
of operations will change significantly to reflect the activities of this       
subsidiary.                                                                     

PLAN OF OPERATION                                                     

As of April 15, 1997, the Company had approximately $50,000 in cash   
available to pay operating expenses and the Company's current level of          
overhead is approximately $15,000 to $20,000 per month.  The Company has just   
started receiving orders for its HIV test kits and the purchasers are being     
required to provide letters of credit before the Company has the test kits      
manufactured.  Therefore, even with limited capital available the Company       
expects to be able to fill the orders.                                          

Management believes that its existing cash and projected cash from    
operations will be sufficient to fund its continuing operations through the     
end of the current fiscal year.  In the event additional cash is necessary,     
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management believes that it will be able to raise the financing needed either   
through the private placement of equity securities or through debt financing    
or a combination of both.  There is no assurance that the necessary financing   
can be secured.                                                                 

The Company is continually engaged in a limited amount of research and
development related to new and existing products, and the Company has no plans  
to significantly increase the level of research and development during the      
current year.  In addition, the Company has no plans to purchase any            
significant equipment or materially increase the number of employees or         
consultants during the current year.                                            

ITEM 7.  FINANCIAL STATEMENTS.                                                  

 The financial statements are set forth on pages F-1 through F-6 hereto.

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    

Nicholas G. Levandoski, Ph.D.    60      Acting President; Vice President -     
                                  Research and Development, Secre-
                              tary, Treasurer and Director
                                 of the Company; and Director of
                              Research and Development for
                 Simplex-Florida

John E. Trafton, Ph.D.           54      Vice President of the Company;         
                             President and a Director of
                 Simplex-Florida

Henry B. Schur                   52      Vice President - Marketing and         
                               Director of the Company; Vice
                              President of Marketing and a
                             Director of Simplex-Florida

Sheldon Nassberg, M.D.           55      Director of Simplex-Florida            

 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.          

DR. NICHOLAS LEVANDOSKI has served as the Acting President, Vice      
President of Development, Secretary, Treasurer and a director of the Company    
since March 5, 1997.  He has  served as Director of Research and Development    
for Simplex-Florida since June 1995.  Dr. Levandoski has extensive research     
and clinical experience, 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                                     
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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.               

DR. JOHN E. TRAFTON has served as Vice President of the Company since 
March 5, 1997.  From January 1996 until February 1997, he served as President   
of Simplex-Florida.  Dr. Trafton has a Ph.D. in Physical Organic Chemistry      
from the University of Miami, and extensive experience in the manufacture of    
biologics and diagnostic products as Director, Technical Operations for Baxter  
Diagnostics, Inc., a wholly owned subsidiary of Baxter International (1989 to   
1992).  Dr. Trafton has also been involved as a co-founder and principal of     
Chiral Design, Inc., a manufacturer of specialty chemicals for the              
agricultural and pharmaceutical industries (1992 to 1995).  On December 28,     
1995, the Company acquired 100% interest in Trafton Laboratories, Inc., the     
company in which Dr. Trafton was the sole shareholder.                          

 MR. HENRY SCHUR has served as the Company's Vice President of Marketing
and a Director since March 5, 1995.  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.                  

  SHELDON NASSBERG, M.D. has served as a Director of Simplex-Florida since
June 1995.  He is responsible for coordination of the Company's relations       
within the medical and scientific community and liaison with regulatory         
compliance agencies of government.  Dr. Nassberg is a graduate of George        
Washington School of Medicine (1967); a specialist in Endocrinology &           
Metabolism; and Board Certified in 1974 in internal medicine.  Dr. Nassberg     
presently serves as Chief of the Department of Endocrinology & Metabolic        
Disease and as the Medical Director for the Diabetes Treatment Center at North  
Ridge Medical Center in Fort Lauderdale, Florida.  Dr. Nassberg also serves on  
a number of State and National Advisory Committees for the treatment of         
Diabetes and the secondary disorders associated with Diabetes.                  

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:          

Daniel C. Steinberg, Fred A. Bruecher, and Colleen E. Schmidt, three  
former officers and directors of the Company, and Sandra S. Steinberg, a        
former principal shareholder of the Company, failed to file Form 3's when the   
Company became a reporting company during 1996.                                 
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ITEM 10.  EXECUTIVE COMPENSATION.                                               

No executive officer received any compensation for the fiscal years   
ended December 31, 1996, 1995 and 1994.                                         

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        
1,000,000 shares of the Company's Common Stock.                                 

The Plan allows the Board to grant stock options from time to time to 
employees, officers, directors and consultants of the Company.  The Board has   
the power to determine at the time that the option is granted whether the       
option will  be an Incentive Stock Option (an option which qualifies under      
Section 422 of the Internal Revenue Code of 1986) or an option which is not an  
Incentive Stock Option.  Vesting provisions are determined by the Board at the  
time options are granted.  The option price for any option will be no less      
than the fair market value of the Common Stock on the date the option is        
granted.                                                                        

 Since all options granted under the Plan must have an exercise price no
less than the fair market value on the date of grant, the Company will not      
record any expense upon the grant of options, regardless of whether or not      
they are incentive stock options.  Generally, there will be no federal income   
tax consequences to the Company in connection with Incentive Stock Options      
granted under the Plan.  With regard to options that are not Incentive Stock    
Options, the Company will ordinarily be entitled to deductions for income tax   
purposes of the amount that option holders report as ordinary income upon the   
exercise of such options, in the year such income is reported.                  

No options had been granted under this Plan as of March 31, 1997.     

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

The following table sets forth, as of March 28, 1997, 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%             
2160 Poinciana Drive                                                          
Hallandale, Florida 33009                                                     

Debra L. Ross                      1,042,500<FN2>           13.9%             
2160 Poinciana Drive                                                          
Hallandale, Florida 33009                                                     

John E. Trafton                      878,000                11.7%             
285 Sunrise Drive, Apt. 16                                                    
Key Biscayne, Florida 33149                                                   
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Nicholas G. Levandoski                     0                 -0-              
430 Ansin Boulevard, Suite G                                                  
Hallandale, Florida 33009                                                     

All Directors and Officers         1,920,500<FN1>           25.6%             
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.                                                             
<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.      
</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 SIMPLEX-FLORIDA                                          

In October 1995, Simplex-Florida entered into an agreement whereby it 
issued an aggregate of 61,875 shares of its common stock to Debra Ross (Mr.     
Schur's wife), Nicholas Levandoski, Linda Kirsch-Topper and John  H. Faro in    
exchange for their respective ownership interests in Analyte Diagnostics, Inc.  
("ADI") which constituted all the outstanding capital stock of ADI.  As a       
result ADI became a wholly-owned subsidiary of the Company.                     

On December 28, 1995, Simplex-Florida issued 214,375 shares of its    
common stock to Dr. John E. Trafton in exchange for his 100% interest in        
Trafton Industries, Inc., a Florida corporation which manufactured specialty    
chemicals for the pharmaceutical and agricultural industries.                   
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TRANSACTIONS INVOLVING THE COMPANY                                              

On March 20, 1996, the Company issued to each of Mesdames Colleen E.  
Schmidt, a Director of the Company, and 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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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, 1996.  However,  
a Current Report on Form 8-K dated March 5, 1997 was filed by the Company on    
March 17, 1997, reporting the acquisition of Simplex Medical Systems, Inc.      

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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Janet Loss, C.P.A., P.C.  
Certified Public Accountant 
9101 East Kenyon Avenue, Suite 2000 
Denver, Colorado 80237

Board of Directors                                                              
Music Tones, Ltd.                                                               
(A Development Stage Company)                                                   

I have audited the accompanying balance sheets of Music Tones, Ltd. (a          
development stage company) as of December 31, 1996 and 1995, and the related    
statements of operations, shareholders' equity (deficit) and cash flows for     
the years ended December 31, 1996 and 1995. These financial statements are the  
responsibility of the Company's management. My responsibility is to express an  
opinion on these financial statements based on my audits.                       

I conducted my audits in accordance with generally accepted auditing            
standards. Those standards require that I 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. I believe that my audits provide a reasonable basis     
for my opinion.                                                                 

In my opinion, the financial statements referred to above present fairly, in    
all material respects, the financial position of Music Tones, Ltd. (a           
development stage company) as of December 31, 1996 and 1995, and the results    
of its operations and its cash flows for the years ended December 31, 1996 and  
1995.                                                                           

/s/  Janet Loss, C.P.A., P.C.                                                   
Janet Loss, C.P.A., P.C.                                                        

FEBRUARY 28, 1997                                                               
F-1     

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MUSIC TONES, LTD.         
(A DEVELOPMENT STAGE COMPANY)           
BALANCE SHEETS          

December 31, 1996 and 1995            

                                    1996          1995
ASSETS        
CURRENT ASSETS:                                                                 
Cash in checking                         $    175       $      0      

TOTAL ASSETS                             $    175       $      0      

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)      

CURRENT  LIABILITIES:                                                           
Accounts payable                         $    375       $      0      

TOTAL LIABILITIES                             375              0      

STOCKHOLDERS' EQUITY (DEFICIT):                                                 
Preferred Stock, $.01 par value,                                      
10,000,000 shares authorized, no                                      
shares issued and outstanding                   -              -      

Common Stock, $.0001 par value,                                       
100,000,000 shares authorized,                                        
36,000,000 and 3,000 shares                                           
issued and outstanding                      3,600             75      

Additional paid-in-capital                 12,000              -      

(Deficit) accumulated during                                          
development stage                         (15,800)           (75)     

TOTAL STOCKHOLDERS' EQUITY (DEFICIT)         (200)             0      

TOTAL LIABILITIES AND                                                           
STOCKHOLDERS' EQUITY (DEFICIT)               $    175       $      0          

The accompanying notes are an integral part of the financial statements.        
F-2     

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MUSIC TONES, LTD.   
(A DEVELOPMENT STAGE COMPANY)   
STATEMENTS OF OPERATIONS  

For the Years Ended December 31, 1996 and 1995
and       
From October 26, 1987 (Inception) to December 31, 1996  

                                                   October 26,1987
                 Year Ended        Year Ended     (Inception) to
                 December 31,      December 31,     December 31,
                1996              1995              1996
Revenues                 $      0            $  0            $      0           

OPERATING EXPENSES:                                                             
Audit and accounting                                                          
fees                       975               0                 975        
Filing and transfer                                                           
fees                       820               0               1,495        
Legal fees                12,400               0              12,400          
Office expense               930               0                 930          

TOTAL OPERATING                                                             
EXPENSES               15,125               0              15,800       

NET INCOME (LOSS)        $(15,125)            $ 0            $(15,800)          

NET (LOSS) PER COMMON                                                           
SHARE                   $      *             $ *            $      *          

* less than $.01 net loss per share                                             

The accompanying notes are an integral part of the financial statements.        
F-3     

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MUSIC TONES, LTD.     
(A DEVELOPMENT STAGE COMPANY)         
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)    

For the Years Ended December 31, 1996 and 1995  

                                                                [Download Table]

                                                    DEFICIT                   
                   COMMON               ADDI-     ACCUMULATED       TOTAL     
                   STOCK      COMMON    TIONAL      DURING       STOCKHOLDERS'
                   NUMBER     STOCK     PAID-IN   DEVELOPMENT      EQUITY     
                  OF SHARES   AMOUNT    CAPITAL      STAGE        (DEFICIT)   
                                                                              
Balance,              3,000   $    75   $     -    $    (75)      $      0    
January 1,                                                                    
1995                                                                          

Net (loss)                -         -         -           8              0    
for the year                                                                  
ended Decem-                                                                  
ber 31, 1995     ----------   -------   -------    --------       --------    

Balance,              3,000   $    75   $     -    $    (75)      $      0    
December 31,                                                                  
1995                                                                          

Decrease in               -       (75)        -           -            (75)   
organization                                                                  
costs                                                                         

March 20,            15,000    15,000         -           -         15,000    
1996, 15,000                                                                  
shares issued                                                                 
for cash and                                                                  
notes, no par                                                                 
value                                                                         

March 20,        35,982,000   (11,400)  12,000         (600)            -     
1996, stock                                                                   
split, 2,000-                                                                 
to-1 for common                                                               
stock, $.0001                                                                 
par value                                                                     

Net (loss) for            -         -        -      (15,125)       (15,125)   
the year ended                                                                
December 31,                                                                  
1996             ----------   -------   -------    --------       --------    

Balance,         36,000,000   $ 3,600   $12,000    $(15,800)      $   (200)   
December 31,                                                                  
1996                                                                          

The accompanying notes are an integral part of the financial statements.        
F-4     

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MUSIC TONES, LTD.     
(A DEVELOPMENT STAGE COMPANY)     
STATEMENTS OF CASH FLOWS      

For the Years Ended December 31, 1996 and 1995  

                                                      October 26, 1987
                         Year Ended     Year Ended    (Inception) to
                        December 31,   December 31,   December 31,
                       1996           1995            1996
CASH FLOWS FROM OPERATING                                                       
ACTIVITIES:                                                                   

Net (Loss)                   $(15,125)          $ -            $(15,800)    
Adjustments to reconcile                                                    
net (loss) to net cash                                                    
used by operating                                                         
activities:                                                               

Decrease in organization                                                
costs                          (75)            -                   -  

Changes in operating assets                                             
and liabilities:                                                      

Increase (decrease) in                                              
accounts payable             375             -                 375

NET CASH (USED) BY                                                      
OPERATING ACTIVITIES        (14,825)            -             (15,425)  

CASH FLOWS FROM FINANCING                                                       
ACTIVITIES:                                                                   

Proceeds from issuance                                                      
of common stock               15,000           $ -              15,600    

NET CASH PROVIDED BY                                                    
FINANCING ACTIVITIES         15,000             -              15,600   

NET INCREASE (DECREASE) IN                                                      
CASH                          $    175           $ -            $    175      

CASH, BEGINNING OF PERIOD      $     0            $ 0            $      0       

CASH, END OF PERIOD            $   175            $ 0            $    175       

The accompanying notes are an integral part of the financial statements.        
F-5     

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MUSIC TONES, LTD.   
(A DEVELOPMENT STAGE COMPANY)     
NOTES TO FINANCIAL STATEMENTS     

NOTE 1 - HISTORY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                 

Music Tones Ltd., a Colorado Corporation, was incorporated October 26, 1987,    
and the Company was generally inactive through December 31, 1996. The original  
name of the corporation was The Trader's Edge Ltd.; the name change occurred    
March 20, 1996.                                                                 

Year End                                                              

The Company has elected a calendar year-end.                          

Accounting Method                                                     

The company records income and expenses on the accrual method.        

Organization Costs                                                    

Costs incurred in organizing the Company are being amortized over a   
sixty-month period.                                                             

NOTE 2 - CAPITAL STOCK                                                          

On March 20, 1996, the corporation issued a 2,000-to-1 forward stock split for  
common stock. Thus, the total common stock authorized changed from 50,000 to    
100,000,000; and from no par value to $.0001 par value.                         

NOTE 3 - RELATED PARTIES                                                        

The Company has issued 3,000 shares of stock for services rendered from March   
18, 1990, to March 21, 1993.                                                    

The Company maintains its office in space provided by the Company's president   
pursuant to an oral agreement on a rent-free basis with reimbursement for       
out-of-pocket expenses, such as telephone.                                      

NOTE 4 - SUBSEQUENT EVENTS                                                      

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 are a total of           
7,500,000 shares outstanding.                                                   

NOTE 5 - NAME CHANGE                                                            

The corporate name has been changed from Music Tones, Ltd. to Simplex Medical   
Systems, Inc. effective March 28, 1997.                                         
F-6     

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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 15, 1997                SIMPLEX MEDICAL SYSTEMS, INC.               

                      By: /s/ Nicholas G. Levandoski
                            Nicholas G. Levandoski, Ph.D.,
              Acting 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/ Henry B. Schur             Vice President of Marketing   April 15, 1997     
Henry B. Schur                 and Director                                     

/s/ Nicholas G. Levandoski     Acting President, Vice        April 15, 1997     
Nicholas G. Levandoski,        President of Research and                        
Ph.D.                        Development, Secretary,                        
        Treasurer (Chief Executive
         Officer and Chief Financial
     and Accounting Officer)
and Director      

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10KSB’ Filing		Date		First		Last			Other Filings
		9/30/97		10					10QSB
		8/31/97		10
Filed on:		4/15/97		12		26
		4/11/97		1
		3/31/97		12		16			10QSB,  NT 10-Q
		3/28/97		2		25			DEF 14C,  PRES14C
		3/17/97		19					8-K,  DEF 14C
		3/5/97		2		25			8-K,  8-K/A
		2/28/97		20
For Period End:		12/31/96		1		25			NT 10-K
		5/31/96		18
		5/17/96		11
		4/4/96		19
		3/28/96		2
		3/20/96		12		25
		12/31/95		16		24
		12/28/95		15		17
		8/11/95		10
		6/6/95		2
		3/5/95		15
		1/1/95		23
		12/31/94		16
		3/21/93		25
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