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, 1998
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, 1998
Common Stock, $.001 par value 37,124,961
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TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . 1
Balance Sheets -- March 31, 1998 and
December 31, 1997. . . . . . . . . . . . . . . 2
Statements of Operations -- three months ended
March 31, 1998 . . . . . . . . . . . . . . . . 4
Statements of Stockholders' Deficiencies . . . 5
Statements of Cash Flows -- three months ended
March 31, 1998 . . . . . . . . . . . . . . . . 7
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. . . . . . . . . . . . . . . 17
Item 2. Changes In Securities. . . . . . . . . . . . . 17
Item 3. Defaults Upon Senior Securities. . . . . . . . 18
Item 4. Submission of Matters to a Vote of
Securities Holders . . . . . . . . . . . . . . 18
Item 5. Other Information. . . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K . . . . . . . 18
SIGNATURES . . . . . . . . . . . . . . . . . . 19
-i-
<PAGE>
PART I
Item 1. Financial Statements
The following unaudited Financial Statements for the period
ended March 31, 1998, have been prepared by the Company.
NATIONAL HEALTH & SAFETY CORPORATION
FINANCIAL STATEMENTS
March 31, 1998 and 1997
December 31, 1997
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Balance Sheets
ASSETS
March 31, December 31,
1998 1997
(Unaudited)
CURRENT ASSETS
Cash $ 4,115 $ 7,516
Accounts receivable, net of allowance
for doubtful accounts of $8,200
(Note 1) 34,697 31,918
Total Current Assets 38,812 39,434
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 152,051 147,510
Net Property and Equipment 13,748 18,289
OTHER ASSETS
Prepaid expenses (Note 1) 221,015 500,000
Deposits 9,298 9,298
Total Other Assets 230,313 509,298
TOTAL ASSETS $ 282,873 $ 567,021
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Balance Sheets
LIABILITIES AND STOCKHOLDERS DEFICIENCY
March 31, December 31,
1998 1997
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 335,894 $ 344,280
Loans payable, stockholder (Note 3) 656,025 652,025
Loans payable, individuals (Note 2) 873,082 759,582
Accrued expenses (Notes 5 and 8) 1,111,632 1,041,924
Convertible debentures (Note 6) 167,500 175,000
Total Current Liabilities 3,144,133 2,972,811
LONG-TERM DEBT
Legal settlement (Note 5) 275,000 275,000
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;
37,124,961 and 34,241,074 shares
issued and outstanding, respectively 37,125 34,241
Additional paid-in capital 7,562,010 7,392,394
Stock subscription receivable (800,000) (700,000)
Accumulated deficit (9,935,409) (9,407,439)
Total Stockholders Deficiency (3,136,260) (2,680,790)
TOTAL LIABILITIES AND STOCKHOLDERS
DEFICIENCY $ 282,873 $ 567,021
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Statements of Operations
(Unaudited)
For the Three Months Ended
March 31,
1998 1997
SALES $ 40,199 $ 26,320
OPERATING COSTS AND EXPENSES
Cost of sales 3,632 7,356
Operating expenses 553,360 258,805
Total Operating Costs and Expenses 556,992 266,161
LOSS FROM OPERATIONS (516,793) (239,841)
OTHER EXPENSE
Interest 11,177 12,099
NET LOSS $ (527,970) $ (251,940)
LOSS PER SHARE $ (0.02) $ (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 for cash - 3,105 521,894 - -
Issuance of common stock
in payment of debt - 378 329,030 (266,000) -
Issuance of common
stock for services rendered - 619 1,067,048 - -
Stock subscriptions
receivable - 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
in payment of debt - 2,918 197,082 - -
Issuance of common stock
for services rendered - 1,204 205,196 - -
Issuance of common stock
for cash - 8,973 732,877 - -
Contribution of capital by
investor - - 30,000 - -
Receipt of stock subscription
receivable - - - 66,000 -
Net (loss) for the year
ended December 31, 1997 - - - - (1,579,281)
Balance, December 31, 1997 $14 $ 34,241 $7,392,394 $ (700,000) $(9,407,439)
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Statements of Stockholders' Deficiency (Continued)
Additional Stock
Preferred Common Paid-in Subscriptions Accumulated
Stock Stock Capital Receivable Deficit
Balance, December 31, 1997 $14 $ 34,241 $7,392,394 $ (700,000) $(9,407,439)
Issuance of common stock in
payment of debt (unaudited) - 556 24,444 - -
Issuance of common stock for
services rendered (unaudited)- 245 22,255 - -
Issuance of common stock for
cash (unaudited) - 2,083 122,917 (100,000) -
Net loss for the three months
ended March 31, 1998
(unaudited) - - - - (527,970)
Balance, March 31, 1998 $14 $ 37,125 $7,562,010 $ (800,000) $(9,935,409)
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Statements of Cash Flows
(Unaudited)
For the Three Months Ended
March 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(527,970) $ (251,940)
Adjustments to reconcile net loss to net cash
used by operating activities:
Common stock issued for services 25,000 -
Depreciation and amortization 4,541 27,025
(Increase) decrease in:
Accounts receivable 2,779 1,492
Prepaid expenses 278,985 -
Increase (decrease) in:
Accounts payable (8,386) (25,312)
Accrued expenses 79,150 (86,299)
Net Cash Used by Operating Activities (145,901) (335,034)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment - -
Net Cash Used by Investing Activities - -
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued for cash 25,000 195,500
Proceeds from loans, individuals 113,500 -
Proceeds from stockholders loan 4,000 -
Net Cash Provided by Financing Activities 142,500 195,500
INCREASE (DECREASE) IN CASH (3,401) (139,534)
CASH, BEGINNING OF PERIOD 7,516 161,503
CASH, END OF PERIOD $ 4,115 $ 21,969
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest during the period $ 11,144 $ 12,099
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
March 31, 1998 and 1997
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
$4,541 and $7,274 for the three months ended March 31, 1998
and 1997, 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.
e. Cash Equivalents
The Company considers all highly liquid investments with
a maturity of three months or less to be cash equivalents.
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
March 31, 1998 and 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 have been amortized over the life
of the debentures which matured on November 30, 1997, the
amount of deferred loan costs is $0.00. In 1997, the
Company determined that due to the low trading price of its
stock, that the conversion of the debentures would result
in excessive dilution. Accordingly, it has offered the
holders of the debentures the full cash face value of the
debentures and a 10% cash bonus. The additional
compensation has been accrued as interest expense in the
1997 financial statements.
g. Provision for Taxes
At March 31, 1998, the Company had net operating loss
carryforwards of approximately $9,900,000 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. $278,985
was expensed in the three months ended March 31, 1998.
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.
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
March 31, 1998 and 1997
NOTE 2 - LOANS PAYABLE, INDIVIDUALS
March 31, December 31,
1997 1998
(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. These
loans are unsecured and due upon demand. $ 48,040 $ 48,040
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. These loans are unsecured and due
upon demand. 825,042 711,542
$ 873,082 $ 759,582
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. Over the years the
stockholder has advanced to the Company additional
funds. The Company expects to repay this loan in full
when financing occurs. The amount due the stockholder
was $656,025 at March 31, 1998. The loan is unsecured
and accrues interest at 10% per annum.
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, 1998 and 1997
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.
The Company leases its office facility under a non-
cancelable operating lease. Future minimum annual rental
commitments are as follows:
1998 117,746
1999 50,146
Total $ 167,892
Rent expense amounted to $33,166 and $28,134 for the three
months ended March 31, 1998 and 1997, 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 $352,000 for the
year ended December 31, 1998. At March 31, 1998, total
deferred income for these three individuals was $802,393.
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. $305,000 is accrued at March 31, 1998 of which
$275,000 is long-term debt which covers the total remaining
obligation.
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. Additionally, the Company
received $25,000 from an individual. A judgment has been
issued against the Company to repay the $25,000. The
balance due at March 31, 1998 was $17,500.
During 1995, several stock subscription agreements were
canceled. Of the shares canceled, certificates
representing 4,000,000 shares have not been returned to the
Company, however, these certificates are legended so that
they cannot be traded.
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
March 31, 1998 and 1997
NOTE 6 - CONVERTIBLE DEBENTURES
During 1995 and 1996, the Company issued convertible
debentures with a face value of $900,000. $400,000 of
these debentures were converted during 1996, and $320,000
were converted in 1997. 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. The balance due at December 31, 1997 was
$175,000. In 1997, the Company determined that due to the
low trading price of its stock, the conversion of the
debentures would result in excessive dilution.
Accordingly, it was offering the holders of the debentures
the full cash face value of the debentures and a 10% cash
bonus. The additional compensation has been accrued as
interest expense in the 1997 financial statements.
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 - $600,086), payable as
follows:
Upon closing of a private placement issue$ 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, 1998 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 $28,780 at March 31, 1998.
NOTE 9 - 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
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
March 31, 1998 and 1997
NOTE 9 - OPTIONS AND WARRANTS (Continued)
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.
The Company has issued 6,000,000 options to officers of the
Company at an exercise price of $0.07 per share. These
options expire in February 2013.
<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, 1998 and
1997. It should be noted that percentages discussed throughout
this analysis are stated on an approximate basis.
Three Months Ended
March 31,
1998 1997
(Unaudited)
Sales . . . . . . . . . . . . . . . 100% 100%
Cost of sales . . . . . . . . . . . 9 28
Operating expenses. . . . . . . . . . 1376 983
(Loss) from operations. . . . . . . . (1285) (911)
Other expenses - interest . . . . . . 28 46
Net (loss). . . . . . . . . . . . . . (1313) (957)
Results of Operations for the Three Months Ended March 31, 1998 and 1997
Total sales of $40,199 for the three months ended March 31,
1998 ("first quarter of 1998") represent a increase of 53% from
total revenue of $26,320 for the three months ended March 31, 1997
("first quarter of 1997"). This increase is primarily attributed
to the increase in POWERX sales of 39% due to increased marketing
resulting in increased customer awareness and acceptance. Revenues
from the sale of medical equipment decreased $235, or 8% for the
first quarter of 1997 from the comparable 1996 period. Other sales
increased 575% to $6,237 for the first quarter of 1998 from 924 for
the first quarter of 1997 due to the Company's renting of excess
space.
Cost of sales (as a percentage of total revenues) decreased to
9% for the first quarter of 1998, from 28% for the comparable 1997
period due to improved product mix with POWERX sales. Operating
expenses for the first quarter of 1998 increased 114% when compared
to the same period for 1997, primarily due to advertising expenses
of $282,689 compared to $0 for the 1997 period, and marketing
expenses of $20,826 compared to $102 for the 1997 period. These
increases are due to the use of prepaid expenses of $278,985 for
radio advertising and a general increase in marketing. Also for
the first quarter of 1998, salaries increased 8% when compared to
1997 due to increased customer service level and general salary
increases, and rents and leases increased 10% due to an increase in
rent, additional office equipment and an additional car lease which
reduce the car allowance expense.
As a percentage of total revenues, operating expenses
increased from 983% for the first quarter of 1997 to 1376% for the
first quarter of 1998 reflecting the increase in advertising and
marketing expenses. The net loss for the first quarter of 1998
increased to $527,835 from $251,941 for the comparable 1997 period,
also due to the increase in advertising and marketing 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 $3,105,321
compared to a negative $2,933,377 at December 31, 1997, a 6%
increase primarily attributed to an increase in loans of $117,500
and an increase in accrued expenses of $69,708 due mainly to unpaid
salaries.
Net cash used by operating activities for the first quarter of
1998 was $145,901 compared to net cash used of $335,034 for the
first quarter of 1997, attributed to the net loss form operations
and partially offset by the $278,985 decrease in prepaid expenses
and the $79,150 increase in accrued expenses. Also, net cash
provided by financing activities during the first quarter of 1998
was $142,500 primarily from proceeds form loans, compared to net
cash provided of $195,500 for the comparable 1997 period, primarily
from the proceeds from the issuance of common stock for cash.
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 March 31, 1998, the Company had total assets of $282,873
and total stockholders' deficiency of $3,136,260. In comparison,
as of December 31, 1997, the Company had total assets of $567,021
and total stockholders' deficiency of $2,680,790. This 50%
decrease in total assets for the three month period ended March 31,
1998 is primarily due to the decrease in prepaid expenses of
$278,985 which was expensed during the first quarter of 1998.
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
During the remainder of fiscal 1998, 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
second 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 1997. 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 1998. 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.
Risk Factors and Cautionary Statements
Forward-looking statements in this report are made pursuant to
the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. The Company wishes to advise readers that
actual results may differ substantially from such forward-looking
statements. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially
from those expressed in or implied by the statements, including,
but not limited to, the following: the ability of the Company to
secure additional financing, acceptance of the Company's products
and services in the marketplace, competitive factors, and other
risks detailed in the Company's periodic report filings with the
Securities and Exchange Commission.
<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). 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 first quarter of 1998, the Company issued 555,555
shares of its authorized but previously unissued common to one
person upon the conversion of certain convertible debentures, an
additional 245,000 shares to one persons for services based on a
price of $.09 per share, and an additional 2,683,332 shares were
sold to a one person at a price of $.06 per share. The issuance of
the shares for services and for cash were made in private
transactions with individual investors executing subscription
agreements, 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 cash
sale were $125,500 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 March 31, 1998.
<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, 1998 By /S/ R. Dennis Bowers
(Signature)
R. DENNIS BOWERS, President
Date: May 14, 1998 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 MARCH 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,115
<SECURITIES> 0
<RECEIVABLES> 42,897
<ALLOWANCES> 8,200
<INVENTORY> 0
<CURRENT-ASSETS> 38,812
<PP&E> 165,799
<DEPRECIATION> 152,051
<TOTAL-ASSETS> 292,873
<CURRENT-LIABILITIES> 3,144,133
<BONDS> 275,000
14
0
<COMMON> 37,125
<OTHER-SE> 7,562,010
<TOTAL-LIABILITY-AND-EQUITY> 282,973
<SALES> 40,199
<TOTAL-REVENUES> 40,199
<CGS> 3,632
<TOTAL-COSTS> 556,992
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,177
<INCOME-PRETAX> (527,970)
<INCOME-TAX> 0
<INCOME-CONTINUING> (527,970)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (527,970)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
