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 Quarter Ended March 31, 1997
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 0-24778
NATIONAL HEALTH & SAFETY CORPORATION
(Exact name of small business issuer as specified in its charter)
Utah 87-0505222
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
730 Louis Drive, Warminster, Pennsylvania 18974
(Address of principal executive offices)
Registrant's telephone no., including area code: (215) 442-0926
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
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
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Class Outstanding as of March 31, 1997
Common Stock, $.001 par value 24,449,438
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TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . 1
Balance Sheets -- March 31, 1997 and
December 31, 1996. . . . . . . . . . . . . . . 2
Statements of Operations -- three months ended
March 31, 1997 . . . . . . . . . . . . . . . . 4
Statements of Stockholders' Deficiencies . . . 5
Statements of Cash Flows -- three months ended
May 13, 1997 . . . . . . . . . . . . . . . . . 6
Notes to Financial Statements . . . . . . . . 7
Item 2. Management's Discussion and Analysis and
Results of Operations. . . . . . . . . . . . . 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . 16
Item 2. Changes In Securities. . . . . . . . . . . . . 16
Item 3. Defaults Upon Senior Securities. . . . . . . . 17
Item 4. Submission of Matters to a Vote of
Securities Holders . . . . . . . . . . . . . . 17
Item 5. Other Information. . . . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K . . . . . . . 17
SIGNATURES . . . . . . . . . . . . . . . . . . 18
-i-
<PAGE>
PART I
Item 1. Financial Statements
The following unaudited Financial Statements for the period
ended March 31, 1997, have been prepared by the Company.
NATIONAL HEALTH & SAFETY CORPORATION
FINANCIAL STATEMENTS
March 31, 1997 and December 31, 1996
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Balance Sheets
ASSETS
March 31, December 31,
1997 1996
(Unaudited)
CURRENT ASSETS
Cash $ 21,969 $ 161,503
Accounts receivable, net of allowance
for doubtful accounts of $48,212
(Note 1) 38,416 39,908
Total Current Assets 60,385 201,411
PROPERTY AND EQUIPMENT (Note 1)
Furniture and fixtures 7,088 7,088
Computer equipment 129,649 129,649
Office equipment 29,062 29,062
Total Property and Equipment 165,799 165,799
Less accumulated depreciation (136,617) (129,343)
Net Property and Equipment 29,182 36,456
OTHER ASSETS
Prepaid expenses (Note 1) 500,000 500,000
Deferred loan costs (Note 1) 25,627 34,378
Deposits 9,298 9,298
Total Other Assets 534,925 543,676
TOTAL ASSETS $ 624,492 $ 781,543
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
March 31, December 31,
1997 1996
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 391,398 $ 416,710
Loans payable, stockholder (Note 3) 672,025 672,025
Loans payable, individuals (Note 2) 602,082 602,082
Accrued expenses (Note 5 and 8) 1,033,299 1,119,598
Total Current Liabilities 2,698,804 2,810,415
LONG-TERM DEBT
Convertible debentures (Note 6) 316,887 316,887
COMMITMENTS AND CONTINGENCIES (Note 5) - -
STOCKHOLDERS' DEFICIENCY
Preferred stock, $.001 par value;
25,000,000 shares authorized; 14,363
shares issued and outstanding 14 14
Common stock; $.001 par value,
50,000,000 shares authorized;
24,449,438 and 21,146,105 shares issued
and outstanding, respectively 24,450 21,146
Additional paid-in capital 6,419,435 6,227,239
Stock subscriptions receivable (755,000) (766,000)
Accumulated deficit (8,080,098) (7,828,158)
Total Stockholders' Deficiency (2,391,199) (2,345,759)
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY $ 624,492 $ 781,543
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Statements of Operations
(Unaudited)
For the Three Months Ended
March 31,
1997 1996
SALES $ 26,320 $ 50,782
OPERATING COSTS AND EXPENSES
Cost of sales 7,356 9,865
Operating expenses 258,805 333,943
Total Operating Costs and Expenses 266,161 343,808
LOSS FROM OPERATIONS (239,841) (293,026)
OTHER EXPENSE
Interest 12,099 11,189
NET LOSS $ (251,940) $ (304,215)
LOSS PER SHARE $ (0.01) $ (0.03)
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Statements of Stockholders' Deficiency
Additional Stock
Preferred Common Paid-in Subscriptions Accumulated
Stock Stock Capital Receivable Deficit
Balance, December 31, 1995 14 $ 22,526 $83,823,970 $(80,500,000) $(5,853,195)
Cancellation of stock
subscriptions - (13,300)(79,986,700) 80,000,000 -
Contribution of capital by
investor - - 114,439 - -
Issuance of common stock
in payment of debt - 3,105 521,894 - -
Issuance of common stock
for prepaid advertising - 378 329,030 (266,000) -
Issuance of common stock
for services rendered - 619 1,067,048 - -
Issuance of common stock
for cash - 7,818 357,558 - -
Net loss for the year
ended December 31, 1996 - - - - (1,974,963)
Balance, December 31, 1996 14 21,146 6,227,239 (766,000) (7,828,158)
Issuance of common
stock for cash - 3,304 192,196 - -
Net loss for the three
months ended December 31,
1997 (Unaudited) - - - - (251,940)
Balance, March 31, 1997 $ 14 $ 24,450 $6,419,435 $(766,000) $(8,080,098)
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Statements of Cash Flows
(Unaudited)
For the Three Months Ended
March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (251,940) $(304,215)
Adjustments to reconcile net loss to net cash
used by operating activities:
Common stock issued for services - 765,000
Depreciation and amortization 27,025 7,275
(Increase) decrease in:
Accounts receivable 1,492 1,993
Notes receivable - (18,000)
Increase (decrease) in:
Accounts payable (25,312) (669,235)
Accrued expenses (86,299) (9,363)
Net Cash Used by Operating Activities (335,034) (226,545)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment - -
Net Cash Used by Investing Activities - -
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued for cash 195,500 220
Proceeds from convertible debentures - 350,000
Repayment of loans, individuals - (102)
Proceeds from loans, individuals - 20,000
Payment of deferred loan costs - (19,264)
Proceeds from stockholders' loan - 35,000
Net Cash Provided by Financing Activities 195,500 385,854
INCREASE (DECREASE) IN CASH (139,534) 159,309
CASH, BEGINNING OF PERIOD 161,503 55,276
CASH, END OF PERIOD $ 21,969 $ 214,585
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest during the period $ 12,099 $ 11,189
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
March 31, 1997 and 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
a. Nature of Organization
The Company was incorporated on March 23, 1989. The Company's
principal business activities consist of providing medical cost
containment services to both institutional and consumer markets.
The Company performs on-going credit evaluations of its customers'
financial condition and generally requires no collateral.
On March 22, 1993 the Company entered into a merger with State
Policeman Annual Magazine, Inc. (State), whereby each share of the
Company's common and preferred stock was exchanged for one share
of State's common and preferred stock. State is a Company which
was organized under the laws of the State of Utah on May 14,
1983. Pursuant to the merger agreement, State amended its
Articles of Incorporation to change its name to National Health &
Safety Corporation.
b. Accounts Receivable
Accounts receivable are shown net of an allowance for doubtful
accounts of $48,212. Bad debts are written off in the period in
which they are deemed uncollectible. Any bad debts subsequently
recovered are recorded as income in the financial statements in
the period during which they are recovered.
c. Property and Equipment
Property and equipment are stated at cost. Depreciation is
provided using accelerated and straight-line methods, over the
estimated useful life of each class of asset as follows:
Furniture and fixtures 7 years
Office equipment 7 years
Computers 5 years
Expenditures for repairs, maintenance and minor renewals are
charged against income as incurred and expenditures for major
renewals and betterment are capitalized. The cost and accumulated
depreciation of assets sold or retired are removed from the
respective accounts with any gain or loss on disposal reflected in
income. Depreciation expense was $7,274 and $7,275 for the three
months ended March 31, 1997 and 1996, respectively.
d. Loss per Share
The Company has computed the loss per share based upon the
weighted average number of shares outstanding during the period.
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
March 31, 1997 and 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less to be cash equivalents.
f. Deferred Loan Costs
During 1995, the Company issued convertible debentures with a face
value of $250,000. The Company incurred issuance costs of $70,000
relating to the debentures. The costs have been capitalized and
will be amortized over the life of the debentures which mature on
November 30, 1997.
g. Provision for Taxes
At March 31, 1997, the Company had net operating loss
carryforwards of approximately $8,000,000 that may be offset
against future taxable income through 2011. No tax benefit has
been reported in the financial statements, because the Company
believes the carryforwards may expire unused. Accordingly, the
potential tax benefits of the loss carryforwards are offset by a
valuation allowance of the same amount.
h. Prepaid Expenses
The Company has purchased $500,000 in radio airtime, to be used
over the next year to promote its products. $11,000 was expensed
in the three months ended March 31, 1997.
i. Unaudited Financial Statements
The accompanying unaudited financial statements include all of the
adjustments which in the opinion of management are necessary for
a fair presentation. Such adjustments are of a normal, recurring
nature.
j. 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.
k. Uninsured Corporate Cash Balances
The Company maintains its corporate cash balances at various banks
and financial institutions. Corporate cash accounts at banks are
insured by the FDIC for up to $100,000. Amounts in excess of
insured limits were approximately $126,672 at December 31, 1996.
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
March 31, 1997 and 1996
NOTE 2 - LOANS PAYABLE, INDIVIDUALS
March 31, December 31,
Private Placement Advances 1997 1996
(Unaudited)
The Company received advances from certain
individuals under various private placements.
The Company has agreed to issue common stock
to these individuals upon securing additional
financing. Some of the individuals who had
advanced funds were partially repaid. $ 55,540 $ 55,540
Loans, Individuals
During the last four years, the Company was
advanced money from various individuals for
working capital purposes which bear interest
at 8% to 10%. If the Company is successful in
obtaining additional capital, it intends to
exchange a majority of these loans for common
stock and the remainder of the loans will
be repaid. 546,542 546,542
$ 602,082 $ 602,082
NOTE 3 - LOAN PAYABLE, STOCKHOLDER
Prior to the Company's incorporation, one of the stockholders
incurred certain costs and expenses related to the start- up of
the Company. These costs have been capitalized and will be
amortized over a five-year period. Over the years the stockholder
advanced to the Company additional funds. The Company expects to
repay this loan in full when financing occurs. The amount due the
stockholder was $672,025 at March 31, 1997.
NOTE 4 - GOING CONCERN
These statements are presented on the basis that the Company is a
going concern. Going concern contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business over a reasonable length of time. The continuation of
the Company as a going concern is dependent upon the success of
the future operations and obtaining additional financing.
Management is presently pursuing plans to increase sales volume,
reduce administrative costs, and improve cash flows as well as
obtain additional financing. The ability of the Company to
achieve its operating goals and to obtain such additional
financing, however, is uncertain.
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
March 31, 1997 and 1996
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Company is in various stages of negotiations with several
securities and financial service companies in order for the
Company to obtain additional capital. The Company has promised to
repay certain debts, guarantee fees and loan incentives with
common stock, subsequent to the Company securing additional
capital.
In 1991, the Company entered into an agreement to sell all of its
stock to another Company, P.R. Stocks, Inc. (PRS), if PRS
successfully raised $375,000 in a private placement of the common
stock of PRS. PRS was able to raise approximately $163,000, and
advanced approximately $132,000 net of expenses to the Company in
1992. However, PRS has been unable to raise a minimum of $375,000
in order for the two companies to merge. In November 1992, PRS
merged with MedGain International, Inc. (MedGain). MedGain has
demanded repayment of the proceeds from the private placement
advanced to the Company. In January 1994, MedGain brought suit
against the Company and its president seeking repayment of the
advances plus punitive damages. In March 1996, MedGain obtained
a judgement for $132,000.
The Company leases its office facility and certain automotive and
office equipment under noncancelable operating leases. Future
minimum annual rental commitments are as follows:
1997 $ 112,536
1998 117,746
1999 50,146
Total $ 280,428
Rent expense amounted to $28,134 and $18,243 for the three months
ended March 31, 1997 and 1996, respectively.
The Company has entered into a five year employment agreement with
its president and chief executive officer, and five year
employment agreements with its vice-president and chief financial
officer and its vice-president of marketing. Under the terms of
the agreements, the Company will pay minimum annual compensation
of $314,500 and $352,000 for the year ended December 31, 1997.
At March 31, 1997, total deferred income for these three
individuals was $618,096. This amount is included in accrued
expenses.
The Company has settled certain litigation involving alleged
improper use of a medical card benefit program. Under terms of
the proposed settlement, both parties agree to dismiss the claims
against each other, and agree to enter into a commission agreement
hereby the Company pays a commission of 3.5% of sales, such
commission to aggregate $400,000 over the life of the agreement;
the Company will pay at a minimum, an annual commission of
$30,000. The Company is current with the terms of the settlement
agreement. $335,000 is accrued at March 31, 1997 which covers the
total remaining obligation.
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
March 31, 1997 and 1996
NOTE 5 - COMMITMENTS AND CONTINGENCIES (Continued)
The Company was named in a formal order of investigation captioned
"In the Matter of Trading in the Securities of National Health &
Safety Corp." (NY-6155) issued by the Securities and Exchange
Commission and related to the trading of the Company's securities
in the public market. The NASD has also made inquires regarding
trading in the shares of the Company's securities. As of the date
hereof, no determination has been made as to the extent of the
investigation or to the possible material effect that it may have
on the Company.
The Company issued shares to certain individuals in connection
with a private placement. The Company has agreed to not dilute
these shareholders below 5.3% of the outstanding shares of the
Company by allowing them to purchase the shares for the par value
amount, until the Company raises $2,000,000 through a public
offering of its common stock.
The Company has agreed to repurchase stock issued to an individual
in a private placement. The individual purchased 5,000 shares of
the Company's common stock for $25,000. The Company has committed
to repurchasing the stock for the same amount, contingent upon the
success of future stock placements.
During 1995, several stock subscription agreements were cancelled.
Of the shares cancelled, certificates representing 4,000,000
shares have not been returned to the Company, however, these
certificates are legended so that they cannot be traded.
NOTE 6 - CONVERTIBLE DEBENTURES
During 1996, the Company issued convertible debentures with a face
value of $650,000. $400,000 of these debentures were converted
during 1996, and the remaining $250,000 have a maturity date of
May 20, 1998 and bear interest at 9%. The debentures may be
converted into the Company's common stock at the option of the
holder at a conversion price equal to 50% of the lowest closing
bid price on any day after December 19, 1996 until the date of
conversion.
NOTE 7 - PREFERRED STOCK
In 1992, the Company entered into a stock exchange agreement with
certain shareholders, whereby such stockholders agreed to exchange
certain of their shares of the pre-split common stock of the
Company and certain other rights for 14,363 authorized shares of
a new class of redeemable preferred stock. The stock is
redeemable at $41.78 per share (aggregate - $600,086), payable as
follows:
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
March 31, 1997 and 1996
NOTE 7 - PREFERRED STOCK (Continued)
Upon closing of a private placement issue $ 50,011
Upon closing of secondary public offering 50,011
One year after closing of a secondary public offering 150,074
Two years after closing of a secondary public offering 174,975
Three years after closing of a secondary public offering 175,015
$ 600,086
NOTE 8 - RELATED PARTY TRANSACTIONS
Included in accounts payable at March 31, 1997 is an amount due to
a corporation affiliated with the Company through common
management and stock ownership, representing fees for
administrative services rendered to the Company in 1991 and prior
years. The amount was $26,279 at March 31, 1997.
NOTE 9 - ECONOMIC DEPENDENCE
The Company has one customer which accounted for 47% of the
Company's total sales.
NOTE 10 - OPTIONS AND WARRANTS
The Company has the following outstanding warrants:
Number Expiration
Issued Purchase Price Date
487,500 Lessor of $1.50 or 75% of current price 12/31/00
131,665 Lessor of $2.13 or 75% of current price 12/31/00
250,000 $0.25 per share 04/01/01
200,000 $0.25 per share 04/01/01
30,202 $1.00 per share 06/25/98
The Company has issued 6,000,000 options to officers of the
Company at an exercise price of $0.17 per share. 3,000,000
options expire on June 6, 2010, and 3,000,000 expire on April 30,
2011.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following table sets forth the percentage relationship to
sales of principal items contained in the Company's Statements of
Operations for the three month period ended March 31, 1997 and
1996. It should be noted that percentages discussed throughout
this analysis are stated on an approximate basis.
Three Months Ended
March 31,
1997 1996
(Unaudited)
Sales . . . . . . . . . . . . . . . 100% 100%
Cost of sales . . . . . . . . . . . 28 19
Operating expenses. . . . . . . . . . 983 658
(Loss) from operations. . . . . . . . (911) (577)
Other expenses - interest . . . . . . 46 22
Net (loss). . . . . . . . . . . . . . (957) (599)
Results of Operations for the Three Months Ended March 31, 1997 and
1996
Total sales of $26,320 for the three months ended March 31,
1997 ("first quarter of 1997") represent a decrease of 48% from
total revenue of $50,782 for the three months ended March 31, 1996
("first quarter of 1996"). This decrease is primarily attributed
to the decline in POWERX sales of 52% due to one major client
reducing the number of members, resulting in a $23,653 reduction in
sales dollars for the period. Revenues from the sale of medical
equipment decreased $652, or 18% for the first quarter of 1997 from
the comparable 1996 period. Cost of sales (as a percentage of
total revenues) increased to 28% for the first quarter of 1997,
from 19% for the comparable 1996 period because the one major
client with reduced activity pays on a payroll deduction option,
but the cost of goods is realized in the first month.
Operating expenses for the first quarter of 1997 decreased 23%
when compared to the same period for 1996, primarily due to the 73%
decrease in commissions paid and the 79% decrease in consulting
fees due to a concerted effort to minimize consulting activities.
This decrease was partially offset by the 223% increase in rent
expense due to the entering into a new lease with expanded
facilities, and related the related increase in building
maintenance expense from $859 for the first quarter of 1996 to
$9,595 for the corresponding 1997 period. Travel and entertainment
expense also increase 610% during the first quarter of 1997
compared to the corresponding 1996 period due to increased
marketing activity.
As a percentage of total revenues, operating expenses
increased from 658% for the first quarter of 1996 to 983% for the
first quarter of 1997 reflecting decreased sales and the increase
in related operating expenses. The net loss for the first quarter
of 1997 decreased to $251,940 from $304,215 for the comparable 1996
period, due to the decreased in operating expenses.
Liquidity and Capital Resources
Historically, the Company's working capital needs have been
satisfied primarily through its financing activities including
private loans and raising capital through the sale of securities.
Working capital at March 31, 1997 was a negative $2,638,419
compared to a negative $2,609,004 at December 31, 1996, primarily
due to the $139,534 decrease in cash during the period and
partially offset by the $86,299 decrease in accrued expenses.
Net cash used by operating activities for the first quarter of
1997 was $335,034 compared to net cash used of $226,545 for the
comparable 1996 period, attributed to the net loss form operations
and decrease in accrued expenses, and also due to $765,000 in
common stock issued in the first quarter of 1996 for services.
Also, net cash provided by financing activities during the first
quarter of 1997 was $195,500 from the issuance of common stock for
cash compared to net cash provided of $385,854 for the comparable
1996 period, primarily from the proceeds from the issuance of
convertible debentures. The 1996 period also reflects $20,000
from loans from individuals and $35,000 from loans from
stockholders.
The Company anticipates meeting its working capital needs
during the 1997 fiscal year partially with revenues from
operations, and by investigating the possibility of interim
financing to provide working capital and to increase marketing
activities related to the Company's products. Management has not
entered into any new arrangements or definitive agreements for
additional private placement of securities and/or a public
offering. If the Company's operations are not adequate to fund its
operations and it is unable to secure financing from the sale of
its securities or from private lenders, the Company could
experience additional losses which could curtail the Company's
operations and services which could result in the loss of current
customers. The continuation of the Company as a going concern is
directly dependent upon the success of its future operations and
ability to obtain additional financing.
As of March 31, 1997, the Company had total assets of $624,492
and total stockholders' deficiency of $2,391,199. In comparison,
as of December 31, 1996, the Company had total assets of $781,543
and total stockholders' deficiency of $2,345,759. This 20%
decrease in total assets for the three month period ended March 31,
1997 is primarily due to the decreases in cash.
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
During the next 12 months, the Company will stress the
marketing of its POWERX contracts and increasing the number of
POWERX members nationwide. The Company will also concentrate on
the development of the corporate infrastructure necessary to
service POWERX members, including the expansion of a customer
service staff. Among the priorities of the Company will be the
completion of an electronic data processing center to provide for
the processing of POWERX orders.
Management believes that the Company has sufficient capital
resources to fund its anticipated operations until some time in the
third quarter of 1997. Management estimates that its current level
of operations requires approximately $70,000 per month in cash
based upon average monthly cash flows in 1996. Although management
believes that sales of the POWERX Card will improve appreciably
during the next several quarters, unless the Company is able to
raise additional revenue from operating activities or from
additional sales of corporate debt or equity securities, the
Company may encounter a cash flow shortage in the second quarter
of 1997. To overcome this potential cash flow shortage, management
intends to seek additional equity or debt capital through private
sources, although there can be no assurance such fund will be
available. As of the date hereof, the Company has not entered into
any firm agreements or understanding for the raising of capital
from private sources.
<PAGE>
PART II
Item 1. Legal Proceedings
Except as set forth below, there are presently no other
material pending legal proceedings to which the Company or any of
its subsidiaries is a party or to which any of its property is
subject and, to the best of its knowledge, no such actions against
the Company are contemplated or threatened.
In 1993, the National Association of Securities Dealers, Inc.
("NASD") and the Securities and Exchange Commission ("SEC") made
preliminary inquiries regarding trading in the shares of the
Company's securities. A formal order of investigation was issued
by the SEC on October 19, 1994 ("In the Matter of Trading in the
Securities of National Health & Safety Corp. / NY-6155). In April
1995, the Company delivered to the SEC certain requested documents
pursuant to a subpoena duces tecum.
The Company has been advised by the NASD that its inquiries
should not be construed as indicating that any violation of NASD
rules had occurred, or as a reflection on the merits of the
Company's securities or on any person who effected a transaction in
such securities. The Company was similarly advised by the SEC that
the existence of the SEC's inquiry was not to be construed as an
indication by the SEC that any violation of law had occurred, nor
was it to be considered an adverse reflection on any person, entity
or security. The Company is unaware of the circumstances
concerning the investigation by the NASD and SEC and is not able to
speculate as to the outcome or possible effect of the investigation
on the Company. The Company does not believe that it, its officers
or directors violated any securities laws, rules or regulation in
offering, selling or trading in the securities of the Company. To
date, to the best knowledge of the Company, no action has been
taken by or on behalf of either the NASD or the SEC against the
Company or its officers or directors.
Item 2. Changes In Securities
In February and March 1997 the Company made sales of
3,303,333 shares of its authorized but previously unissued common
stock to a total of eight private investors at the purchase price
of $.05 and $.15 per share. The issuance of the shares was made in
private transactions with individual investors executing a
subscription agreement, and was made in reliance on the exemption
from registration provided by Section 4(2) of the Securities Act of
1933, as amended. The aggregate proceeds from the sale were
$195,500 and were applied to the general operating and
administrative expenses of the Company.
Item 3. Defaults Upon Senior Securities
This Item is not applicable to the Company.
Item 4. Submission of Matters to a Vote of Security Holders
This Item is not applicable to the Company.
Item 5. Other Information
This Item is not applicable to the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedules
(b) Reports on Form 8-K
No report on Form 8-K was filed by the Company during the
three month period ended March 31, 1997.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NATIONAL HEALTH & SAFETY CORPORATION
Date: May 14, 1997 By /S/ R. Dennis Bowers
(Signature)
R. DENNIS BOWERS, President
Date: May 14, 1997 By /S/ Roger H. Folts
(Signature)
ROGER H. FOLTS, Vice
President, Treasurer and
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE NATIONAL HEALTH & SAFETY
CORPORATION FINANCIAL STATEMENTS FOR THE PERIOD
ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1997
<CASH> 21,969
<SECURITIES> 0
<RECEIVABLES> 86,628
<ALLOWANCES> 48,212
<INVENTORY> 0
<CURRENT-ASSETS> 60,385
<PP&E> 165,799
<DEPRECIATION> 136,617
<TOTAL-ASSETS> 624,492
<CURRENT-LIABILITIES> 2,698,804
<BONDS> 316,887<F1>
14
0
<COMMON> 24,450
<OTHER-SE> 6,419,435
<TOTAL-LIABILITY-AND-EQUITY> 624,492
<SALES> 26,320
<TOTAL-REVENUES> 26,320
<CGS> 7,356
<TOTAL-COSTS> 266,161
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,099
<INCOME-PRETAX> (251,940)
<INCOME-TAX> 0
<INCOME-CONTINUING> (251,940)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (251,940)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
<FN>
<F1> DURING 1996, THE COMPANY ISSUED CONVERTIBLE
DEBENTURES WITH A FACE VALUE OF $650,000. $400,000
OF THESE DEBENTURES WERE CONVERTED DURING 1996, AND
THE REMAINING $250,000 HAVE A MATURITY DATE OF MAY
20, 1998 AND BEAR INTEREST AT 9%. THE DEBENTURES
MAY BE CONVERTED INTO THE COMPANY'S COMMON STOCK AT
THE OPTION OF THE HOLDER AT A CONVERSION PRICE EQUAL
TO 50% OF THE LOWEST CLOSING BID PRICE ON ANY DAY
AFTER DECEMBER 19, 1996 UNTIL THE DATE OF
CONVERSION.
</TABLE>
