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 September 30, 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 September 30, 1996
Common Stock, $.001 par value 32,241,168
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TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . 1
Balance Sheets -- September 30, 1997 and
December 31, 1996. . . . . . . . . . . . . . . 2
Statements of Operations -- three months and
nine months ended September 30, 1997 and 1996. 4
Statements of Stockholders' Equity (Deficit) . 5
Statements of Cash Flows -- three months and
nine months ended September 30, 1997 and 1996. 6
Notes to Financial Statements . . . . . . . . 8
Item 2. Management's Discussion and Analysis and
Results of Operations. . . . . . . . . . . . . 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . 16
Item 2. Changes In Securities. . . . . . . . . . . . . 17
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 September 30, 1997, have been prepared by the Company.
NATIONAL HEALTH & SAFETY CORPORATION
FINANCIAL STATEMENTS
September 30, 1997 and December 31, 1996
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Balance Sheets
ASSETS
September 30, December 31,
1997 1996
(Unaudited)
CURRENT ASSETS
Cash $ 392,764 $ 161,503
Accounts receivable, net of allowance
for doubtful accounts of $44,122 36,422 39,908
Total Current Assets 429,186 201,411
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 (142,968) (129,343)
Net Property and Equipment 22,831 36,456
OTHER ASSETS
Prepaid expenses (Note 1) 500,000 500,000
Deferred loan costs (Note 1) 8,125 34,378
Deposits 9,298 9,298
Total Other Assets 517,423 543,676
TOTAL ASSETS $ 969,440 $ 781,543
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
September 30, December 31,
1997 1996
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 357,429 $ 416,710
Loans payable, stockholder (Note 3) 672,025 672,025
Loans payable, individuals (Note 2) 746,542 602,082
Accrued expenses (Note 5, 8) 1,299,612 1,119,598
Total Current Liabilities 3,075,608 2,810,415
LONG-TERM DEBT
Convertible debentures (Note 6) 141,887 316,887
COMMITMENT 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; 32,241,168 and 21,146,105 shares
issued and outstanding, respectively 32,241 21,146
Additional paid-in capital 7,193,004 6,227,239
Stock subscriptions receivable (716,500) (766,000)
Accumulated deficit (8,756,814) (7,828,158)
Total Stockholders' Deficiency (2,248,055) (2,345,759)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 969,440 $ 781,543
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Statements of Operations
(Unaudited)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
SALES $ 27,909 $ 57,137 $ 77,845 $172,231
OPERATING COSTS AND EXPENSES
Cost of sales 7,089 12,023 20,405 46,310
Operating expenses 425,697 422,459 952,293 1,432,739
432,786 434,482 972,698 1,479,049
LOSS FROM OPERATIONS (404,877) (377,345) (894,853)(1,306,818)
OTHER EXPENSE
Interest 11,178 7,691 33,803 32,616
NET LOSS $(416,055) $(385,036) $(928,656) $(1,339,434)
LOSS PER SHARE $ (0.01) $ (0.03) $ (0.05) $ (0.11)
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Statements of Stockholders' Equity (Deficit) (Continued)
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 and debt
(Unaudited) - 11,095 965,765 49,500 -
Net loss for the nine months
ended September 30, 1997
(Unaudited) - - - - (928,656)
Balance, September 30, 1997
(Unaudited) $ 14 $ 32,241 $7,193,004 $(716,500)$(8,756,814)
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Statements of Cash Flows
(Unaudited)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $ (416,055) $ (385,036) $ (928,656) $ (1,339,434)
Adjustments to reconcile net
income to net cash provided
(used) by operating activities:
Common stock issued for services - 6,000 - 1,295,929
Depreciation and amortization 13,293 24,777 39,878 48,076
(Increase) decrease in:
Prepaid expenses - 13,500 - (279,500)
Accounts receivable (2,880) 7,265 3,486 (9,727)
Notes receivable - 18,750 - (20,512)
Deposits - 9,999 - 839
Increase (decrease) in:
Accounts payable 12,673 95,533 (59,281) (577,224)
Accrued expenses 234,474 24,432 180,014 68,890
Net Cash Used by Operating
Activities (158,495) (184,780) (764,559) (812,663)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment - (2,876) - (8,952)
Net Cash Used by Investing Activities- (2,876) - (8,952)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from convertible
debentures - - - 700,000
Payment of deferred loan costs - 10,334 - (66,930)
Repayment of loans, individuals (34,199) - (34,199) (102)
Proceeds from loans, individuals - 59,999 178,659 79,999
Proceeds from stockholders' loan - 65,056 10,000 100,056
Repayment of loans,
stockholders' (10,000) - (10,000) (32,000)
Issuance of common stock 525,360 - 851,360 220
Net Cash Provided by Financing '
Activities 481,161 135,389 995,820 781,243
INCREASE (DECREASE) IN CASH 322,666 (52,267) 231,261 (40,372)
CASH, BEGINNING OF PERIOD 70,098 67,171 161,503 55,276
NET CASH, END OF PERIOD $ 392,764 $ 14,904 $ 392,764 $ 14,904
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Statements of Cash Flows (Continued)
(Unaudited)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
SUPPLEMENTAL DISCLOSURE
Cash paid for interest
during the period $ 11,178 $ 7,691 $ 33,803 $ 32,616
NON-CASH FINANCING ACTIVITIES
Issuance of common stock
for services rendered and
prepaid expenses $ - $ 6,000 $ - $1,295,929
Issuance of common stock
for debt $ 50,000 $ 250,000 $ 175,000 $568,085
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
September 30, 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 $8,200. 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 $13,625 for the
nine months ended September 30, 1997.
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
September 30, 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 September 30, 1997, the Company had net operating loss
carryforwards of approximately $8,650,000 that may be offset
against future taxable income through 2012. 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.
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
September 30, 1997 and 1996
NOTE 2 - LOANS PAYABLE, INDIVIDUALS
September 30, December 31,
1997 1996
(Unaudited)
Private Placement Advances
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. 691,002 546,542
$ 746,542 $ 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
September 30, 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
September 30, 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 $107,826 for the nine months ended
September 30, 1997.
Effective February 1996, 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 September 30, 1997, total
deferred income for these three individuals was $709,602. 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. $315,000 is accrued at September
30, 1997 which covers the total remaining obligation.
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
September 30, 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. $575,000 of these debentures were
converted during 1996 and 1997, and the remaining $75,000 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
September 30, 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 September 30, 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 $16,948 at September 30, 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 and nine month periods ended September
30, 1997 and 1996. It should be noted that percentages discussed
throughout this analysis are stated on an approximate basis.
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
(Unaudited) (Unaudited)
Sales. . . . . . . . . . . 100 % 100 % 100 % 100 %
Cost of sales. . . . . . . 26 21 26 27
Operating expenses . . . . 1525 739 1223 832
(Loss) from operations . . (1451) (660) (1149) (759)
Other expenses - interest 40 14 44 19
Net (loss) . . . . . . . . (1491) (674) (1193) (778)
Results of Operations
Total sales for the third quarter of 1997 decreased 51% from the
third quarter of 1996 attributed to the 54% decrease in POWERX Card sales
due to the reduction in the number of members covered by a major
customer. Sales for the first nine months of 1997 decreased 55% from
the comparable 1996 period attributed to the 57% decrease in POWERX sales
and 37% decrease in medical equipment sales due to reduced promotional
efforts in this lower profitability sector. Cost of sales decreased 41%
and 56% for the third quarter and first nine months of 1997,
respectively, due to lower sales activities. Cost of sales (as a
percentage of total sales) increased to 26% for the third quarter of
1997, from 21% for the third quarter of 1996, a result of lower sales,
and decreased from 27% for the first nine months of 1996 to 26% for the
first nine months of 1997 reflecting a better product mix.
Operating expenses for the third quarter of 1997 remained
relatively stable (less than 1% increase) and decreased 34% for the
first nine months of 1997. This 34% decrease was attributed to the 22%
decrease in salaries paid due to staff reductions; the 52% decrease in
commissions paid due to the elimination of one direct mail item
promoting medical equipment sales; the 57% decrease in consulting
expenses due to the elimination of two consultants; the 50% reduction in
promotion expenses due to decreased marketing; and the 93% decrease in
organizational expenses due to a one time due diligence expense for a
potential acquisition in 1996. These decrease were partially offset by
the 99% increase in travel and entertainment expenses related to fund
raising activities and the 44% increase in rental and leases expense due
to a new lease entered into in June 1996. As a percentage of total
revenues, operating expenses increased from 739% for the third quarter
of 1996 to 1529% for the third quarter of 1997, and from 832% for the
first nine months of 1996 to 1223% for the first nine months of 1997.
The net loss for the third quarter of 1997 increased 8% to
$416,055, primarily attributed to the decrease in sales. For the first
nine months of 1997, net loss decreased 31% to $928,656 due to
significant decreases in operating expenses resulting from lower sales
and closer control over 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 September 30, 1997 was a negative $2,646,422, a decrease from
the negative $2,609,004 at December 31, 1996, due to the $180,014 (16%)
increase in accrued expenses during the period and the $144,460
(24%)increase in loans payable to individual. The decrease in working
capital was partially offset by the $231,281 (143%) increase in cash and
$59,281 (14%) decrease in accounts payable during the period.
Net cash used by operating activities for the third quarter and
first nine months of 1997 was $158,495 and $764,559, respectively,
compared to net cash used of $184,780 and $812,663 for the comparable
1996 periods. These decreases are primarily attributed to the increases
in accrued expenses during 1997 and, for the first nine months of 1997,
the decrease in net loss. Net cash provided by financing activities for
the third quarter and first nine months of 1997 was $481,161 and
$995,820, respectively, compared to net $135,389 and $781,243 for the
1996 periods. These results are due to the issuance of common stock
during 1997.
The Company anticipates meeting its near-term working capital needs
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 September 30, 1997, the Company had total assets of $969,440
and total stockholders' deficiency of $2,248,055. In comparison, as of
December 31, 1996, the Company had total assets of $781,543 and total
stockholders' deficiency of $2,345,759. This 24% increase in total
assets for the nine month period ended September 30, 1997 is primarily
due to the increase 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 improved processing of POWERX orders.
Management believes that the Company has sufficient capital
resources to fund its anticipated operations until some time in the
first quarter of 1998. 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
fourth 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 funds 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.
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). The Company has 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
During the third quarter of 1997, the Company issued 769,230
shares of its authorized but previously unissued common to one person
upon the conversion of certain convertible debentures and an additional
4,308,115 shares of authorized but previously unissued common stock to
a total of 38 persons, at the purchase price of $.10 and $.12 per share
and for services. The issuance of the shares for cash and services 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 "Act"). The aggregate proceeds from the sale were $358,860
and were applied to the general operating and administrative expenses of
the Company. The issuance of shares pursuant to the conversion of the
debentures was made in reliance on the exemption from registration
provided by Section 3(a)(9) and Regulation S of the Act.
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 September 30, 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: November 12, 1997 By /S/ R. Dennis Bowers
(Signature)
R. DENNIS BOWERS, President
Date: November 12, 1997 By /S/ Roger H. Folts
(Signature)
ROGER H. FOLTS, Vice
President, Treasurer and
Chief Financial Officer
<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 SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> SEP-30-1997
<CASH> 392,764
<SECURITIES> 0
<RECEIVABLES> 80,544
<ALLOWANCES> 44,122
<INVENTORY> 0
<CURRENT-ASSETS> 429,186
<PP&E> 165,799
<DEPRECIATION> 142,968
<TOTAL-ASSETS> 969,440
<CURRENT-LIABILITIES> 3,075,608
<BONDS> 141,887
14
0
<COMMON> 32,241
<OTHER-SE> (2,280,310)
<TOTAL-LIABILITY-AND-EQUITY> 969,440
<SALES> 77,845
<TOTAL-REVENUES> 77,845
<CGS> 20,405
<TOTAL-COSTS> 972,698
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,803
<INCOME-PRETAX> (928,656)
<INCOME-TAX> 0
<INCOME-CONTINUING> (928,656)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (928,656)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
