================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER: 000-17746
SAFE TECHNOLOGIES INTERNATIONAL INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 22-2824492
------------------------------ -----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
249 Peruvian Avenue
Suite F2
Palm Beach, Florida 33480
(Address of principal executive offices, including zip code)
(561) 832-2700
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
requirements for the past 90 days.
YES [X] NO [ ]
The number of issued and outstanding shares of the Registrant's Common Stock,
$0.00001 par value, as of August 9, 2000 was 794,754,420.
<PAGE>
INDEX
-----
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 2000 (Unaudited) and December 31, 1999.............4
Consolidated Statements of Operations (Unaudited) -
Six Months Ended June 30, 2000 and June 30, 1999............6
Consolidated Statements of Changes in
Stockholders Equity (Unaudited) -
Six Months Ended June 30, 2000..............................7
Consolidated Statements of Cash Flows (Unaudited) -
Six Months Ended June 30, 2000 and June 30, 1999............11
Notes to Unaudited Consolidated Financial Statements........13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................21
PART II OTHER INFORMATION
Item 1. Legal Proceedings...........................................26
Item 2. Changes in Securities.......................................26
Item 3. Defaults Upon Senior Securities.............................26
Item 4. Submission of Matters to a Vote of Security Holders.........26
Item 5. Other Information...........................................26
Item 6. Exhibits and Reports on Form 8-K............................26
Signature............................................................26
</TABLE>
2
<PAGE>
PART 1 - FINANCIAL STATEMENT PRESENTATION
SAFE TECHNOLOGIES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED
JUNE 30, 2000
3
<PAGE>
<TABLE>
<CAPTION>
SAFE TECHNOLOGIES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 (Unaudited) AND DECEMBER 31, 1999 (Audited)
June 30, December 31,
2000 1999
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
Current assets
Cash $ 3,454 $ 16,372
Accounts receivable (net of allowance for
doubtful accounts $ 14,210 and $ 2,755) 131,533 126,331
Other current assets 1,349 1,327
------------ ------------
Total current assets 136,336 144,030
Fixed assets (net of accumulated depreciation
of $ 34,098 and $ 21,294) 165,217 174,705
Other assets
Deposits 12,890 15,974
Goodwill and trademarks (net of accumulated
amortization $ 69,667 and $ 48,483) 565,842 587,026
Other assets 18,750 25,000
------------ ------------
597,482 628,000
------------ ------------
$ 899,035 $ 946,735
============ ============
</TABLE>
See notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
SAFE TECHNOLOGIES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 (Unaudited) AND DECEMBER 31, 1999 (Audited)
June 30, December 31,
2000 1999
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
Current liabilities
Accounts payable $ 65,366 $ 65,214
Accrued expenses 207,467 158,846
Notes payable 292,515 267,571
Deferred income - 33,388
Lease payable, current portion 1,393 1,393
---------- ----------
Total current liabilities 566,741 526,412
Long term liabilities
Lease payable 244 1,014
Shareholders' equity
Common stock $.00001 par value, authorized
999,999,000 shares; issued and outstanding:
764,174,417 and 746,200,414 shares respectively 7,642 7,462
Capital subscribed 40,000 40,000
Additional paid in capital 5,148,824 3,714,589
Retained deficit (4,864,416) (3,342,742)
---------- ----------
332,050 419,309
---------- ----------
$ 899,035 $ 946,735
========== ==========
</TABLE>
See notes to financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
SAFE TECHNOLOGIES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (Unaudited)
For the period ended June 30,
Three months Six months
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Income
Sales net of returns $ 122,788 $ 115,407 $ 289,123 $ 341,744
Cost of sales 34,929 10,100 47,152 19,990
------------------------------- -----------------------------
Gross profit 87,859 105,307 241,971 321,754
------------------------------- -----------------------------
Expenses
General and administrative expenses 392,296 82,428 446,624 171,168
Salaries 74,853 105,434 189,965 214,002
Consulting fees 978,156 987,969
Proxy and brokers services 950 2,265
Accounting and legal 70,027 14,800 87,096 59,926
Depreciation and amortization 16,993 33,987
Advertising & promotions 933 3,331 1,268 13,996
Management expenses 3,125 6,250
------------------------------- -----------------------------
1,537,333 205,993 1,755,424 459,092
Other income/expenses
Interest expense 3,769 8,221
Interest income 56 166
------------------------------- -----------------------------
Net loss $(1,453,243) $ (100,630) $(1,521,674) $ (137,172)
=============================== =============================
Earning per share
-----------------
Net loss per share $ (0.001946) $(0.0001426) $ (0.002038) $ (0.000194)
------------------------------- -----------------------------
</TABLE>
See notes to financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
SAFE TECHNOLOGIES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (Unaudited)
Common Stock Capital Paid in
Shares Amount Subscribed Capital
-----------------------------------------------------
<S> <C> <C> <C> <C>
Balance December 31, 1998 712,489,700 $ 7,125 $ 39,000 $2,591,531
Less adjustments in 1999 1,000 (19,995)
Internet Associates International acquisition (January 29,
1999) 25,000,000 250 - 24,750
Issuance of shares of common stock to unrelated party in
exchange for accounting services valued at $6,890 on
March 2, 1999. 125,000 1 6,889
Issuance of shares of common stock to unrelated party in
exchange for accounting services valued at $ 15,000 on
March 10, 1999. 300,000 3 14,997
Issuance of shares of common stock on March 22, 1999 to
a member of Board of Directors for consulting services
valued at $ 0.045 per share 200,000 2 7,998
Issuance of shares of common stock on May 3, 1999 to
Ruth Deutsch (Franklin L. Frank) in exchange for cash. 600,000 6 14,994
Issuance of shares of common stock to an unrelated party
in compensation for accounting services valued at $ 0.04
per share on June 1, 1999. 100,000 1 3,999
-----------------------------------------------------
Sub-total 738,814,700 $ 7,388 $ 40,000 $2,645,163
(RESTUBBED TABLE)
Retained
Deficit TOTAL
-------------------------------
<C> <C>
Balance December 31, 1998 $ (2,422,800) $ 214,856
Less adjustments in 1999 (18,995)
Internet Associates International acquisition (January 29,
1999) 25,000
.
Issuance of shares of common stock to unrelated party in
exchange for accounting services valued at $6,890 on
March 2, 1999. 6,890
Issuance of shares of common stock to unrelated party in
exchange for accounting services valued at $ 15,000 on
March 10, 1999. 15,000
Issuance of shares of common stock on March 22, 1999 to
a member of Board of Directors for consulting services
valued at $ 0.045 per share 8,000
Issuance of shares of common stock on May 3, 1999 to
Ruth Deutsch (Franklin L. Frank) in exchange for cash. 15,000
Issuance of shares of common stock to an unrelated party
in compensation for accounting services valued at $ 0.04
per share on June 1, 1999. 4,000
---------------------------------
Sub-total $ (2,422,800) $ 269,751
</TABLE>
See notes to financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
SAFE TECHNOLOGIES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (Unaudited)
Common Stock Capital Paid in
Shares Amount Subscribed Capital
---------------------------------------------------------
<S> <C> <C> <C> <C>
Sub-total 738,814,700 $ 7,388 $ 40,000 $2,645,163
Connect.ad, Inc., Connect.ad Services, Inc. and Connect.ad
of South Florida, Inc - acquisition (September 28, 1999) 4,285,714 43 299,957
Issuance of shares of common stock to the members of
Board of Directors valued at $ 0.045 per share on
December 8, 1999. 600,000 6 26,994
Issuance of shares of common stock to an unrelated party
in compensation for accounting services valued at $ 0.045
per share on December 30, 1999. 50,000 1 2,249
Issuance of common stock for consulting services for the year
ending December 31, 1999 550,000 5 24,745
Issuance of common stock for Public Relations services for
the year ending December 31, 1999. 4,900,000 49 220,451
Issuance of common stock for employee compensation in lieu
of cash payment 11,000,000 110 494,890
Cancelation of shares of common stock of GMG acquisition;
---------------------------------------------------------
Sub-total 760,200,414 $ 7,602 $ 40,000 $3,714,449
(RESTUBBED TABLE)
Retained
Deficit TOTAL
----------------------------
<C> <C>
Sub-total $ (2,422,800) $ 269,751
Connect.ad, Inc., Connect.ad Services, Inc. and Connect.ad
of South Florida, Inc - acquisition (September 28, 1999) 300,000
Issuance of shares of common stock to the members of
Board of Directors valued at $ 0.045 per share on
December 8, 1999. 27,000
Issuance of shares of common stock to an unrelated party
in compensation for accounting services valued at $ 0.045
per share on December 30, 1999. 2,250
Issuance of common stock for consulting services for the year
ending December 31, 1999 24,750
Issuance of common stock for Public Relations services for
the year ending December 31, 1999. 220,500
Issuance of common stock for employee compensation in lieu
of cash payment 495,000
Cancelation of shares of common stock of GMG acquisition;
---------------------------
Sub-total $ (2,422,800) $1,339,251
</TABLE>
See notes to financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
SAFE TECHNOLOGIES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (Unaudited)
Common Stock Capital Paid in
Shares Amount Subscribed Capital
----------------------------------------------------------
<S> <C> <C> <C> <C>
Sub-total 760,200,414 $ 7,602 $ 40,000 $3,714,449
GMG returned these shares after the cancelation of the
acquisition agreement (14,000,000) (140) 140
Net loss December 31, 1999
----------------------------------------------------------
Balance December 31, 1999 (Audited) 746,200,414 7,462 40,000 3,714,589
Issuance of shares of common stock for technology services
valued at $ 20,000 for 5 month ending May 31,2000 324,003 3 19,997
Issuance of shares of common stock for legal services valued at
$ 0.0781 per share on June 9, 2000 500,000 5 39,045
Issuance of shares of common stock on June 9, 2000 in
exchange for cash to Ruth Deutsch (Franklin L. Frank) 500,000 5 74,995
Issuance of shares of common stock in compensation for
secretarial/administrative services valued at $ 0.0781
per share on June 14, 2000. 4,500,000 45 351,405
----------------------------------------------------------
Sub-total 752,024,417 $ 7,520 $ 40,000 $4,200,031
(RESTUBBED TABLE)
Retained
Deficit TOTAL
-------------------------------
Sub-total $ (2,422,800) $1,339,251
GMG returned these shares after the cancelation of the
acquisition agreement -
Net loss December 31, 1999 (919,942) (919,942)
-------------------------------
Balance December 31, 1999 (Audited) (3,342,742) 419,309
Issuance of shares of common stock for technology services
valued at $ 20,000 for 5 month ending May 31,2000 20,000
Issuance of shares of common stock for legal services valued at
$ 0.0781 per share on June 9, 2000 39,050
Issuance of shares of common stock on June 9, 2000 in
exchange for cash to Ruth Deutsch (Franklin L. Frank) 75,000
Issuance of shares of common stock in compensation for
secretarial/administrative services valued at $ 0.0781
per share on June 14, 2000. 351,450
-------------------------------
Sub-total $ (3,342,742) $ 904,809
</TABLE>
See notes to financial statements.
9
<PAGE>
SAFE TECHNOLOGIES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Common Stock Capital Paid in
Shares Amount Subscribed Capital
-----------------------------------------------------
<S> <C> <C> <C> <C>
Sub-total 752,024,417 $ 7,520 $ 40,000 $4,200,031
Issuance of shares of common stock to unrelated party for
service bonus valued at $ 0.0781 per share on
June 14, 2000. 150,000 2 11,713
Issuance of shares of common stock to an officer as
compensation for services provided from February 9,
1998 through June 30, 2000 ($0.0781 per share) 12,000,000 120 937,080
Net loss June 30, 2000
-----------------------------------------------------
Balance June 30, 2000 (Unaudited) 764,174,417 $ 7,642 $ 40,000 $5,148,824
=====================================================
(RESTUBBED TABLE)
Retained
Deficit TOTAL
----------------------------
Sub-total $ (3,342,742) $ 904,809
Issuance of shares of common stock to unrelated party for
service bonus valued at $ 0.0781 per share on
June 14, 2000. 11,715
Issuance of shares of common stock to an officer as
compensation for services provided from February 9,
1998 through June 30, 2000 ($0.0781 per share) 937,200
Net loss June 30, 2000 (1,521,674) (1,521,674)
----------------------------
Balance June 30, 2000 (Unaudited) $ (4,864,416) $ 332,050
============================
</TABLE>
See notes to financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
SAFE TECHNOLOGIES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (Unaudited)
For the six months ended June 30,
2000 1999
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,521,674) $ (100,630)
----------- ----------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 33,987
(Increase) decrease in accounts receivable (5,202) (5,426)
(Increase) decrease in notes receivables (5,500)
(Increase) decrease in other assets 9,312
Increase (decrease) in accounts payable 152 6,973
Increase (decrease) in accrued liabilities 48,621 64,000
Increase (decrease) in other payables 24,175 (257)
Increase (decrease) in deferred income (33,388)
----------- ----------
Total adjustments 77,657 59,790
----------- ----------
Net cash used by operating activities (1,444,017) (40,840)
----------- ----------
Cash flows from investing activities:
Cash payment for purchase of intangibles -
Cash payments for the purchase of property (3,316) -
----------- ----------
Net cash used by investing activities (3,316) -
----------- ----------
</TABLE>
See notes to financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
SAFE TECHNOLOGIES INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (Unaudited)
For the six months ended June 30,
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of common stock $ 1,434,415 $ 38,382
----------- -----------
Net cash provided by financing activities 1,434,415 38,382
----------- -----------
Net increase (decrease) in cash and cash equivalents (12,918) (2,458)
Cash and cash equivalents, beginning of period 16,372 31,476
----------- -----------
Cash and cash equivalents, end of period $ 3,454 $ 29,018
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest expense $ -- $ --
----------- -----------
</TABLE>
Shareholders' equity note:
Approximately 17,474,003 shares of the Company's common stock were awarded to
various service providers in lieu of cash consideration.
See notes to financial statements.
12
<PAGE>
SAFE TECHNOLOGIES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JUNE 30, 2000
NOTE 1 UNAUDITED FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Rule 310(b) of Regulation SB.
Accordingly, they do not include all of the information and
footnote disclosures normally included in complete financial
statements prepared in accordance with generally accepted
accounting principles. For further information, such as
significant accounting policies followed by the Company, refer to
the notes to the Company's audited financial statements.
In the opinion of management, the unaudited financial statements
include all necessary adjustments (consisting of normal,
recurring accruals) for a fair presentation of the financial
position, results of operations and cash flow for the interim
periods presented. Preparing financial statements requires
management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue and expenses.
Actual results may differ from these estimates. Interim results
are not necessarily indicative of results for a full year.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Description
--------------------
Safe Technologies International, Inc. ("Safe Tech") and its
subsidiaries is a multi-faceted company specializing in Internet
services and products.
Organization
------------
The Company was incorporated under the laws of the state of
Delaware on May 21, 1987 as Safe Aid Products, Incorporated. On
February 9, 1998, the Company changed its name to Safe
Technologies International, Inc.
Basis of Consolidation
----------------------
The consolidated financial statements include the accounts of
Safe Technologies International, Inc. and its subsidiaries,
Internet Commerce, Inc., Total Microcomputers, Inc. (inactive),
Connect.Ad, Inc., Connect.Ad Services, Inc., Connect.Ad of South
Florida, Inc. and Internet Associates International, Inc. All
material intercompany transactions and balances have been
eliminated in the consolidated financial statements.
- 13 -
<PAGE>
SAFE TECHNOLOGIES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JUNE 30, 2000
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
-------------------------
For purposes of the consolidated statements of cash flows, the
Company treats all short-term investments with maturities of
three months or less at acquisition to be cash equivalents.
Use of Estimates
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Advertising
-----------
Advertising costs are charged to operations when incurred.
Advertising costs of $1,268 were incurred during the six months
ended June 30, 2000.
Revenue Recognition
-------------------
Revenues of Safe Tech, Internet Commerce, Inc., Connect.Ad, Inc.,
Connect.Ad Services, Inc., Connect.Ad of South Florida, Inc. and
Internet Associates International, Inc. are recognized at the
time the services are rendered to customers. Services are
rendered when the Company's representatives receive the
customer's requests and complete the customer's orders.
Financial Instruments
---------------------
Cash and cash equivalents, accounts receivable and accounts
payable are short-term in nature and the net values at which they
are recorded are considered to be reasonable estimates at their
fair values. The carrying values of notes payable are deemed to
be reasonable estimates of their fair values.
Accounts Receivable
-------------------
It is the policy of management to review the outstanding accounts
at year-end, as well as review bad debts, and establish an
allowance for doubtful accounts and uncollectible amounts.
- 14 -
<PAGE>
SAFE TECHNOLOGIES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JUNE 30, 2000
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Intangible Assets
-----------------
The Company continually evaluates the carrying value of goodwill
and other intangible assets to determine whether there are any
impairment losses. If indicators of impairment are present in
intangible assets used in operations, and future cash flows are
not expected to be sufficient to recover the assets' carrying
amount, an impairment loss would be charged to expense in the
period identified.
No reduction for impairment of intangible assets was necessary at
June 30, 2000 or 1999.
Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation of
depreciable assets is computed using the straight-line method of
depreciation over the estimated useful lives of the assets. The
estimated useful life is between 5 to 7 years.
Credit Risk
-----------
Financial instruments that potentially subject the Company to
credit risk include cash on deposit with five financial
institutions amounting to $3,454 at June 30, 2000, and $16,372 at
December 31, 1999, which was insured for up to $500,000 by the
U.S. Federal Deposit Insurance Corporation (FDIC).
Amortization
------------
Amortization of trademarks and copyrights, and goodwill is
determined utilizing the straight-line method based generally on
the estimated useful lives of the intangibles as follows:
Trademarks and copyrights 15 years
Goodwill 15 years
Accounting Pronouncements
-------------------------
In June 1997, the Financial Accounting Standards Board issued
Statement of Accounting Standards No. 131, Disclosures About
Segments of an Enterprise and Related Information (SFAS No. 131)
which established presentation of financial date based on the
"management approach". SFAS No. 131 is applicable for fiscal
years beginning after December 15, 1997. For the current fiscal
year we are not going to present segment reporting because it is
immaterial.
- 15-
<PAGE>
SAFE TECHNOLOGIES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JUNE 30, 2000
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basic Loss per Share and Diluted Loss per Share
-----------------------------------------------
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per
Share (SFAS No. 128), which specifies the computation,
presentation and disclosure requirements for earnings per share.
SFAS No. 128 supercedes Accounting Principle Board Opinion No. 15
entitled Earnings Per Share. Basic earnings per share are
computed by dividing income available to common stockholders (the
numerator) by the weighted-average number of common shares (the
denominator) for the period. The computation of diluted earnings
per share is similar to basic earnings per share, except that the
denominator is increased to include the number of additional
common shares that would have been outstanding if the potentially
dilutive common shares had been issued.
The numerator in calculating basic earnings per share is reported
net loss. The denominator is based on the following
weighted-average number of common shares:
Basic 746,781,188
Basic Loss per Share and Diluted Loss per Share
-----------------------------------------------
The 14,727,280 shares of common stock, reserved in connection
with warrants are not included in the diluted earnings per share
calculation since the exercise price is greater than the average
market price.
NOTE 3 CAPITAL STOCK TRANSACTIONS
The Articles of Incorporation provide for the authorization of
950,000,000 shares of common stock at $.00001 par value. On
January 30, 1999, the stockholders approved increasing the
authorized number of shares to 999,999,000.
- 16 -
<PAGE>
SAFE TECHNOLOGIES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JUNE 30, 2000
NOTE 3 CAPITAL STOCK TRANSACTIONS (CONTINUED)
In June of 1988, the Company completed a sale of 150,000 units to
the public at a price of $10 per unit. The Company received
proceeds in the amount of $1,213,841, net of commissions and
expenses to the underwriter, legal, accounting and other expenses
related to the public offering in the amount of $286,159. Each
unit consisted of 1,000 shares of common stock, $.00001 par
value, and 500 redeemable common stock warrants designated
redeemable Warrant "A". Each redeemable Warrant "A" would, upon
exercise, entitle the holder to purchase one share of common
stock for $.20 per share and to receive one redeemable Class "B"
Common stock purchase warrant. Each redeemable Class "B" Common
Stock purchase warrant would, upon exercise, entitle the holder
to purchase one share of common stock for $.50 per share. These
exercise periods of both Class "A" and Class "B" warrants have
been extended by the Board of Directors through January 9, 2000,
after giving effect to the ten for one reverse split on February
9, 1998. At June 30, 2000, 14,727,280 shares of common stock,
reserved in connection with such warrants remain outstanding.
There was no market activity for these warrants through June 30,
2000.
On May 31, 2000, 324,003 shares of common stock were issued for
technology services valued at $20,000, which were performed
during the five months ended May 31, 2000.
On June 9, 2000, 500,000 shares of common stock were issued for
legal services valued at $0.0781 per share.
On June 9, 2000, 500,000 shares of common stock were issued in
exchange for cash.
On June 14, 2000, 4,500,000 shares of common stock were issued as
compensation for secretarial/administrative services valued at
$0.0781 per share.
On June 14, 2000, 150,000 shares of common stock were issued to
an unrelated party as services bonus valued at $0.0781 per share.
On June 30, 2000, 12,000,000 shares of common stock were issued
to an officer as compensation for services valued at $0.0781 per
share.
- 17 -
<PAGE>
SAFE TECHNOLOGIES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JUNE 30, 2000
NOTE 4 SUBSCRIPTIONS
The Company entered into a subscription agreement for the
purchase of 4,405,882 shares of common stock for $40,000 on
November 4, 1998. At March 31, 2000, the Company had received
payments amounting to $40,000. No stock has been issued relating
to this subscription.
NOTE 5 LEASES
The Company rents office space in Palm Beach and Boca Raton,
Florida on a month to month basis. There is no lease in force.
The monthly total rent is currently $3,514. The Company also
rents office furniture and equipment on a month to month basis
for $1,000 per month from the president. The Company leases
telephone equipment through a capital lease. The term of the
lease is for 36 months, commencing July 22, 1998, in the amount
of $119.48 plus sales tax per month. There is a $1.00 purchase
option at the end of the lease.
NOTE 6 INCOME TAXES
The Company and its subsidiaries file consolidated income tax
returns. No provision has been made in the accompanying financial
statements for income taxes payable because of the Company's
operating loss from operations. At December 31, 1999, the Company
had $3,342,743 of operating loss carry-forwards for financial
reporting and income tax purposes available to offset future
income taxes expiring through the year 2019. Net operating losses
of $584,474 for the six months ended June 30, 2000 will expire in
2020. Additionally, the Company has approximately $44,000 of
research and development credits available to offset future
income taxes through the year 2005. There can, however, be no
assurance that the Company will have future operating profits.
- 18 -
<PAGE>
SAFE TECHNOLOGIES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JUNE 30, 2000
NOTE 7 NOTES PAYABLE
At June 30, 2000, short-term debt consisted of the following:
<TABLE>
<CAPTION>
<S> <C>
8% note payable to an officer, unsecured, due
on demand. Upon any default, the note
becomes due immediately at an interest rate
of 18% per annum. $188,436
Note payable to a shareholder, unsecured, due
on demand, no interest rate specified. 142,586
Note payable to an individual, unsecured, due
on demand, with an interest rate of 5.5%. 35,143
Note payable to an officer, unsecured, due on
demand, no interest rate specified. 1,350
-----------
Total short-term debt $367,515
===========
</TABLE>
Interest expense for the six months ended June 30, 2000 was
$8,221.
NOTE 8 STOCK AWARDS
The Company has a Stock Incentive Plan that was established on
April 1, 1998 and was registered in August, 1998. The Plan
contained 30,000,000 Option Shares, 15,000,000 Stock Awards, and
15,000,000 shares of 144 Restricted Stock. In 1998, 7,325,000
shares were granted under the plan.
- 19 -
<PAGE>
SAFE TECHNOLOGIES INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JUNE 30, 2000
NOTE 8 STOCK AWARDS
During the fourth quarter of 1999, the Company established the
Safe-Technologies International, Inc. - Year 2000 Stock Award
Plan (the "Year 2000 Plan"). Pursuant to the Year 2000 Plan, the
Company registered 30,000,000 shares of its common stock, to be
awarded to eligible persons thereunder. During fiscal 1999, the
Company granted 18,770,764 shares of common stock to eligible
persons under both the Plan and the Year 2000 Plan. At June 30,
2000 5,474,003 shares were granted under the Plan
NOTE 9 EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement dated January
30, 1997 with Barbara Tolley, its president and CEO. The term of
the agreement is for a period of two (2) years, commencing on
February 9, 1998 and ending on February 9, 2000.
On February 9, 2000, the contract was renewed for one (1) year
with the same terms.
In consideration of the services performed, the Company will pay
a monthly salary of $10,000, payable in all cash, or half
cash/half stock, all stock, or partial accrual, at the option of
the employee.
In addition, the agreement calls for the Company to provide
additional employment benefits, which include automobile,
insurance, telephone, dues and vacation.
In March, 2000, the Company entered into an employment agreement
with Randy Swatt, President, and a member of the Board of
Directors of Internet Associates International, Inc. The term is
for a period of one (1) year with a monthly salary of $5,000,
payable semi-monthly.
- 20 -
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview
Safe Technologies International, Inc., formerly known as Safe Aid Products,
Inc. (the "Company," "we" or "us"), has concluded a positive second quarter.
Unless the context otherwise requires, the term "Company" as used herein refers
to the Company and its subsidiaries.
Pursuant to our intent to control expenses, management is beginning to see
results from efforts to control discretionary expenses while at the same time
maintaining focus on our long-term objectives through prudent investment of
corporate funds in activities congruent with our business model. Having made
significant progress toward the total consolidation of the prior multiple
locations of the Company's various subsidiaries' operations, we are nearing
completion of our plan to have centralized facilities to house our Internet
services-related functions. We expect to continue to realize significant cost
efficiencies as a result of our decision to centralize overlapping functions
into a single geographic location. Examples of such consolidations are Internet
Commerce, Inc.'s and the affiliated connec.ad groups' relocation of their
separate respective facilities to our 123 NW 13th Street location in Boca Raton,
Florida and the resulting reduction of redundant systems. Further potential
savings are intended to be realized through our plan to consolidate the units
into a single corporate subsidiary of all Internet Service Provider functions.
We have continued our meetings and negotiations with the two different
significant potential business combination candidates identified in our report
for the first quarter of 2000, and have entered into a binding letter of intent
with them as of June 27, 2000. Our intent is to acquire an 80% interest in both
companies. One of the targets is a four year old company involved in the
automobile industry, which has significant annual revenues. The other target
company is one with patented proprietary technology which has applications in
the construction and underground infrastructure contexts. For example, one of
the products is for use in the rehabilitation of water and sewerage systems and
storm water drainage systems. This product has related applications in airports,
bridges, highways, tunnels, roofs and other structures. We are currently
conducting due diligence in connection with these potential acquisitions. Our
pursuit of these identified business targets and our continuing evaluation of
other potential business opportunities, remain consistent with our stated
business objective of growing the Company through strategic alliances which
complement our core competencies and through other value-added acquisitions the
completion of which would serve to enhance shareholder value.
Our wholly owned subsidiary, IAI, concluded another productive quarter with
additional notable web site development engagements, with the majority of such
customers being involved in the Internet platform in the B2B sector, and at the
same time still serving some players in the B2C arena.
- 21 -
<PAGE>
Results of Operations
Revenues were $122,788 for the second quarter of 2000 as compared to $115,407
for the corresponding quarter of 1999, representing a 6.4% increase. We believe
that the increase in revenues can be sustained through our continued focus on
value-added services to our customers.
Cost of revenues were $34,929 during the second quarter of 2000 and were $10,100
for the second quarter of 1999, representing an increase $24,829. This
difference is attributable to small classification variances and is immaterial
to the financial statements taken as a whole.
Expenses were $1,537,333 for the second quarter of 2000 as compared to $205,993
for the second quarter of 1999. The significant increase represents a timing
difference in the comparative periods of our recognition of expenses
attributable to items paid by stock in lieu of cash as our accounting systems
mature which in prior years have been recognized near the end of the fiscal
year.
As a result of the foregoing, the Company's operating loss for the second
quarter of 2000 was $1,453,243 compared to a net loss for the second quarter of
1999 in the amount of $100,630.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, the Company had a cash balance of $3,454 as compared to a
balance of $16,372 as of the fiscal year ended December 31, 1999. For the period
ended June 30, 2000, the Company had a working capital deficit of $430,405
compared with a working capital deficit of $382,382 on December 31, 1999.
Net cash used in operating activities was $1,444,017 during the second quarter
of 2000 compared to ($40,840) for the second quarter of 1999. The Company used
$3,316 in investing activities in the second quarter of 2000 and none in the
second quarter of 1999. Net cash provided by financing activities was $1,434,415
during the second quarter of 2000 as compared with $38,382 used in the second
quarter of 1999. Again, these comparative variances of cash used in operating
and financing activities result from our current recognition of expenses
resulting from the issuance of shares of common stock in lieu of cash during the
interim period.
We continue to secure additional small lots of capital. We believe that we have
adequate resources for the next six months of operations.
CAUTIONARY STATEMENTS
Forward-looking statements in this Form 10-QSB including, without limitation,
statements relating to our plans, strategies, objectives, expectations,
intentions, and adequacy of resources, are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. These
forward looking statements involve known and unknown risks, uncertainties and
- 22 -
<PAGE>
other factors that may cause actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. The following factors,
among others, could cause actual results to differ materially from those set
forth in the forward-looking statements: our ability to successfully (i) develop
and profitable grow its InCyberMall web site, including entering into agreements
with merchants to sell upmarket products in the CyberMall Caste Store, (ii) to
develop IAI's Internet web design, hosting and marketing business, (iii) to
develop the Connect.Ad Companies' Internet marketing business, (iv) identify and
finalize acquisition agreements with select Internet companies and/or enter into
partnership agreements with established companies in high technology deals, and
(v) raise additional capital to finance its operations in the next fiscal year.
Additional factors, include, but are not limited to the following: the size and
growth of the market for the Company's products, competition, pricing pressures,
market acceptance of the Company's products and services, the effect of economic
conditions, the availability of management, risks in product development and
other risks identified in the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1999 and the Company's other SEC filings.
RISK FACTORS
The Company is engaged in the pursuit of commerce on the Internet
platform. This form of commerce involves many opportunities, as well as
significant threats, many of which are out of our control. Some of the risks
which we face are as follows:
Consumers, suppliers and advertisers may not accept our web site as a
valuable commercial tool, which would impair the growth of our business.
For us to achieve the level of growth that we have projected,
consumers, suppliers, merchants and advertisers must accept our web site model
as a valuable commercial tool. Consumers who have historically purchased the
various product offering found on our web sites using traditional commercial
channels must change that paradigm and purchase instead through our site.
Consumers frequently "surf" sites like our sites in search of the various
products offered therein and then ultimately revert to the traditional purchase
channel. If this paradigm is not shifted, we may never achieve our anticipated
growth.
Similarly, suppliers, advertisers and merchants will also need to
accept and use our web site. In order for this to occur, suppliers, advertisers
and merchants will need to perceive our site as efficient and profitable
channels of distribution for their products, for expenditure of their
advertising budgets and for their merchandise.
In order to achieve the acceptance of consumers, suppliers, advertisers
and merchants contemplated by our business plan, we will need to make
substantial investments in technology and brand. We can not, however, assure you
that these investments will be successful. Our failure to make succeed in these
areas will hamper the opportunities to achieve our business plan.
We expect there to be operating losses and negative cash flows.
We expect to continue to incur net losses and negative cash flows for
the foreseeable future and there can be no assurance that we will ever achieve
profitability or generate positive cash flows. As we
- 23 -
<PAGE>
enhance our existing sites on continue to launch new sites and deploy our
business plan, we expect to incur significant operating expenses particularly in
the sales, marketing and operations areas. These types of expenses will grow as
we expand the scope and reach of our operations. If our revenues do not grow as
expected, or if our actual expenses exceed our budgeted expenses, there could be
a material adverse effect on our business, operating results and financial
condition. We will need to raise additional funds through the issuance of
equity, equity-related or debt securities. If we are unable to obtain additional
financing on reasonable terms to enable the development of our business plan, we
may never be able to completely implement our on-line strategy.
The success of our business will depend on continued growth of online
commerce and the Internet.
Because we do not intend to provide our services through any commercial
medium other than the Internet, our future revenues and profits depend upon the
widespread acceptance and use of the Internet and online services as a medium
for commerce. Rapid growth in the use of the Internet and online services is a
recent phenomenon. This growth may not continue. A sufficiently broad base of
consumers may not accept, or continue to use, the Internet as a medium of
commerce. Demand for and market acceptance of recently introduced products and
services over the Internet involve a high level of uncertainty.
The Internet has experienced, and is expected to continue to
experience, significant growth in the number of users and amount of traffic. Our
success will depend upon the development and maintenance of the Internet's
infrastructure to cope with this increased traffic. This will require a reliable
network backbone with the necessary speed, data capacity and security and the
timely development of complementary products for providing reliable Internet
access and services . Major online service providers and the Internet itself
have experienced outages and other delays as a result of software and hardware
failures and could face such outages and delays in the future. Outages and
delays are likely to affect the level of Internet usage and the processing of
transactions on our web sites. In addition, the Internet could lose its
viability because of delays in the development or adoption of new standards to
handle increased levels of activity or of increased government regulation. The
adoption of new standards or government regulation may require us to incur
substantial compliance costs.
Interruptions in service from third parties could impair the quality of
our service.
We will rely upon third-party computer systems and third party service
providers, including Internet Bandwidth Supplier. Any interruption in these
third-party services or a deterioration in their performance could impair the
quality of our service. If our arrangement with any of these third party were to
be terminated, we may not be able to find an alternative source of systems
support on a timely basis or on commercially reasonable terms.
Our success depends upon the development and maintenance of superior
technology systems and infrastructure.
In order to be successful, we must provide reliable, real-time access
to our systems for our customers and suppliers. As our operations grow in both
size and scope, domestically and internationally, we will
- 24 -
<PAGE>
need to continually upgrade our systems and infrastructure to offer our
customers and suppliers enhanced products, services, features, and
functionality. The expansion of our systems will require additional financial,
operational and technical resource expenditures before business volume may reach
levels sufficient to yield profitability, with no assurance that the volume of
business will increase or that profitability will be achieved. Consumers and
suppliers will not tolerate a service hampered by slow delivery times,
unreliable service levels or insufficient capacity, any of which could have a
material adverse effect on our business, operating results and financial
condition.
Our business is exposed to risks associated with online commerce
security and credit card fraud.
Consumer concerns over the security of transactions conducted on the
Internet or the privacy of users may inhibit the growth of the Internet and
online commerce. To transmit confidential information such as customer credit
card numbers securely, we will rely upon encryption and authentication
technology. Unanticipated events or developments could result in a compromise or
breach of integrity of our consumer transaction data. Our servers could also be
vulnerable to viruses transmitted over the Internet, which if not detected,
could create a service interruption.
Our success depends in large part upon the efforts of a few individuals
and our ability to attract, retain and motivate highly skilled employees.
We depend substantially on the services and performance of our senior
management, particularly Barbara L. Tolley our Chief Executive Officer, Michael
Bhethana, our Chief Information Officer and Bradford L. Tolley our Secretary,
Treasurer and Vice President of Investor Relations. These individuals may not be
able to fulfill their responsibilities adequately and may not remain with us.
The loss of the services any executive officer or other key employees could hurt
our business.
- 25 -
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27.1
Financial Data Schedule (filed herewith electronically)
(b) Reports on Form 8-K
The Company filed three reports on Form 8-K during the three
months ended June 30, 2000.
(i) The Company filed a report on Form 8-K dated
April 18, 2000 which reported information
under Item 5 - Other
Information.
(ii) The Company filed a report on Form 8-K dated
April 19,2000 which reported information
under Item 5 - Other Information.
(iii) The Company filed a report on Form 8-K dated
June 28, 2000 which reported information
under Item 5 - Other
Information.
- 26 -
<PAGE>
Safe Technologies International, Inc.
In accordance with the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Safe Technologies International, Inc., Registrant
Date: August 14, 2000 By: /s/Barbara Tolley
------------------ ---------------------
Date President
- 27 -
