================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark one)
[X] Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act
of 1934 for the quarterly period ended September 30, 1997.
or
[ ] Transition Report Under Section 13 or 15 (d) of the Exchange Act for the
transition period from __________ to __________
Commission File No. 000-21627
SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
(Exact name of small business issuer as specified in its charter)
Florida 06-1413994
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
27 Governor Street, Ridgefield, Connecticut 06877
(Address of principal executive offices) (Zip code)
Issuer's telephone number, including area code (203) 438-8144
- --------------------------------------------------------------------------------
(Former name , former address and former fiscal year, if
changed since last report)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ ] No [x]
As of April 30, 1998, there were issued and outstanding 12,472,120 shares of the
issuer's Common Stock.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE>
SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
FORM 10-QSB
for the quarterly period ended September 30, 1997
INDEX
Page
----
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Balance Sheet, September 30, 1997 (Unaudited) 3
Statement of Operations (Unaudited):
Three Months Ended September 30, 1997 and
September 30, 1996 4
Statement of Operations (Unaudited):
Nine Months Ended September 30, 1997
and September 30, 1996 5
Statement of Cash Flow (Unaudited):
Nine Months Ended September 30, 1997
and September 30, 1996 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis or
Plan of Operation 8
Part II. Other Information 10
Item 2. Changes in Securities and Use of Proceeds 10
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27. Financial Data Schedule 10
<PAGE>
SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
BALANCE SHEET
September 30, 1997 (Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 175,803
Accounts receivable 46,392
Advances to employees 25,122
Inventory 188,442
------------
TOTAL CURRENT ASSETS 435,759
FIXED ASSETS
Equipment 157,773
Leasehold improvements 66,162
Furniture and fixtures 118,614
------------
342,549
Less accumulated depreciation 202,544
------------
140,005
OTHER ASSETS
Deposits and other noncurrent assets 13,114
------------
$ 588,878
============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 153,138
Accrued Expense 211,123
------------
TOTAL CURRENT LIABILITIES 364,261
SHAREHOLDER LOANS 1,021,765
SHAREHOLDERS' EQUITY
Common stock $.0001 par value, 200,000,000 shares authorized,
12,472,120 shares issued and outstanding 1,247
Additional paid-in capital 14,076,916
Accumulated deficit (14,382,878)
Subscriptions issuable 2,160
Deferred compensation (494,593)
------------
Total stockholders' deficit (797,148)
------------
$ 588,878
============
<PAGE>
SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
STATEMENT OF OPERATIONS (UNAUDITED)
Three months ended
Sept. 30
1997 1996
-------------------------------
Sales $ 32,804 $ 15,955
Costs and expenses:
Cost of goods sold 16,612 9,905
Selling, general and administrative 515,235 1,505,870
Research and development 79,690 58,413
Depreciation and amortization 10,441 11,454
-------------------------------
621,978 1,585,642
-------------------------------
Net loss $ (589,174) $ (1,569,687)
==============================
Net loss per common share $ (0.05) $ (0.18)
==============================
Average number of shares outstanding 12,472,120 8,723,374
See accompanying notes.
<PAGE>
SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
STATEMENT OF OPERATIONS (UNAUDITED)
Nine months ended
Sept. 30
1997 1996
-------------------------------
Sales $ 77,958 $ 53,616
Costs and expenses:
Cost of goods sold 41,418 33,773
Selling, general and administrative 2,435,842 2,680,225
Research and development 262,763 171,697
Depreciation and amortization 36,569 34,364
------------------------------
2,776,592 2,920,059
------------------------------
Net loss $ (2,698,634) $ (2,866,443)
==============================
Net loss per common share $ (.22) $ (.33)
==============================
Average number of shares outstanding 12,472,120 8,723,374
See accompanying notes.
<PAGE>
SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
September 30
1997 1996
--------------------------
<S> <C> <C>
Cash flows from operating activities
Net loss $(2,698,634) $(2,866,443)
Adjustments to reconcile net loss used in
operating activities:
Depreciation and amortization 36,569 34,364
Non-cash compensation and commissions 1,253,774 1,810,530
Changes in operating assets and liabilities:
Accounts receivable (34,230) (1,704)
Advances to employees (5,200) (19,992)
Inventories (175,255) (9,962)
Deposits and advances (550) (1,700)
Accounts payable and accrued expenses (103,289) 8,993
--------------------------
Net cash (used in) operating activities (1,520,237) (1,070,844)
Cash flows from investing activities
Additions to fixed assets (36,247) (26,074)
--------------------------
Net cash (used in) investing activities (36,247) (26,074)
Cash flows from financing activities
Net proceeds from stockholders' loans 600,700 0
Repayment of stockholders' loans (46,000) (221,350)
Proceeds from issuances of common stock and subscriptions 1,173,593 1,580,472
Expenses for sale of common stock 0 (128,728)
--------------------------
Net cash provided by financing activities 1,728,293 1,230,394
Net increases in cash 171,809 133,476
Cash at beginning of period 3,994 12,331
--------------------------
Cash at end of period 175,803 145,807
==========================
</TABLE>
See accompanying notes
<PAGE>
SAFE ALTERNATIVES CORPORATION OF AMERICA, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine month period ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997.
2. STOCKHOLDERS' EQUITY
During the third quarter the Company issued 1,058,000 shares of its common stock
as compensation for services valued at $1,192,500 based upon the value of the
common stock. This amount has been recorded in selling, general, and
administrative expenses in the statement of operations.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
General
During the nine month period ended September 30, 1997, management of the Company
has continued to concentrate a significant portion of its efforts on the
marketing and sale of the Company's paint stripping product. Additionally,
subject to the Company's successful completion of its research with regard to
evaluating the appropriate mechanism for delivery of the foam product onto its
intended surface, and subject to the Company's ability to obtain additional
financing, management believes that the Company's foam products could be ready
for marketing during the second quarter of 1998, although no assurances thereof
can be given. Based upon the Company's current financial status, the need to
continue research and development and the Company's emphasis on its paint
stripping and foam products, management does not believe that it will market any
of its sealants, coatings or solvents in 1997 or 1998.
The report of the Company's independent auditors included in the Company's
Annual Report for the year ended December 31, 1996 contains a paragraph as to
the Company's ability to continue as a going concern. Among the factors cited by
the auditors as raising substantial doubt as to the Company's ability to
continue as a going concern are (i) the Company has incurred recurring operating
losses and (ii) the Company has a working capital deficiency.
Comparison of the Nine Month Periods
Ended September 30, 1997 and September 30, 1996
Sales and Net Losses. For the nine month period ended September 30, 1997, sales
increased to $77,958 from $53,616 in the same period of the prior year, an
increase of 45%. The Company's marketing and sales efforts are still in the
formative stages and therefore comparisons to the prior period are not
meaningful. For the nine month period ended September 30, 1997, the Company
reported net losses of $2,698,634 compared to $2,866,443 in the prior period, a
decrease of 6%, due primarily to a decrease in selling, general, and
administrative expenses as discussed below.
Selling, General and Administrative. For the nine month period ended September
30, 1997, the Company incurred selling, general and administrative expenses of
$2,435,842 compared to $2,680,225 in the same period of the prior year, a
decrease of 9%. Calculations with respect to the percentage of selling, general
and administrative expenses relative to sales are not meaningful.
Research and Development. For the nine month period ended September 30, 1997,
research and development expenses increased to $262,763 from $171,697 in the
same period of the prior year, an increase of 53%. The increase relates to
activities associated with the Company's foam product. Calculations with respect
to the percentage of research and development expenses relative to sales are not
meaningful.
<PAGE>
Liquidity
The Company has never generated sufficient revenues to finance its operations
and has been able to remain in business solely as a result of raising capital.
The Company's ability to continue as a going concern in the near term is
dependent upon obtaining additional financing. The Company does not have the
financial resources to operate its business, continue research and development
or market its products. The Company has financed its operations through loans
from shareholders which aggregated approximately $1,022,000 as of this date and
the private placement of equity securities amounting to $6,031,470 since
inception. The Company continues to seek additional capital from an array of
potential sources. The Company has provided information regarding its
technologies to venture capital firms and is currently in discussions with some
of them, although there can be no assurances that any such discussions will
result in the Company obtaining additional capital. Even if the Company is able
to obtain additional capital there can be no assurances that the structure or
terms of such proposed financing will be on acceptable terms.
The Company estimates that it will require approximately $750,000 in additional
financing in order to continue current operations for the next twelve months,
and an additional $1,500,000 in order to complete research with respect to all
of the technologies, commercially exploit the products derived therefrom, market
each such product and finance initial production thereof.
<PAGE>
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds
During the quarter ended September 30, 1997, the Registrant issued an
aggregate of 1,058,000 shares of common stock in exchange for services valued at
an aggregate of $1,192,500. The Registrant has relied upon the private offering
exemption under Section 4(2) of the Securities Act of 1933 with respect to these
issuances.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27. Financial Data Schedule
(b) Reports on Form 8-K: The Registrant did not file any reports on
Form 8-K during the third quarter.
<PAGE>
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements 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.
SAFE ALTERNATIVES CORPORATION
OF AMERICA, INC.
By: /s/ Richard J. Fricke
-------------------------------
Richard J. Fricke
President
By: /s/ Sean McNamara
-------------------------------
Sean McNamara
Chief Financial Officer
Dated: May 11, 1998
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27. FINANCIAL DATA SCHEDULE
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Sep-30-1997
<CASH> 175,803
<SECURITIES> 0
<RECEIVABLES> 46,392
<ALLOWANCES> 0
<INVENTORY> 188,442
<CURRENT-ASSETS> 435,759
<PP&E> 342,549
<DEPRECIATION> 202,544
<TOTAL-ASSETS> 588,878
<CURRENT-LIABILITIES> 364,261
<BONDS> 0
0
0
<COMMON> 1,247
<OTHER-SE> (798,395)
<TOTAL-LIABILITY-AND-EQUITY> 588,878
<SALES> 77,958
<TOTAL-REVENUES> 77,958
<CGS> 41,418
<TOTAL-COSTS> 41,418
<OTHER-EXPENSES> 2,735,174
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,698,634)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,698,634)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,698,634)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> 0
</TABLE>
