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, 1999
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, 1999
Common Stock, $.001 par value 56,340,716
<PAGE>
TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . 3
Balance Sheets -- March 31, 1999 and
December 31, 1998. . . . . . . . . . . . . . . . . . . . 4
Statements of Operations -- three months ended
March 31, 1999 . . . . . . . . . . . . . . . . . . . . . 6
Statements of Stockholders' Deficiencies . . . . . . . . 7
Statements of Cash Flows -- three months ended
March 31, 1999 . . . . . . . . . . . . . . . . . . . . . 8
Notes to Financial Statements . . . . . . . . . . . . . 9
Item 2. Management's Discussion and Analysis and
Results of Operations. . . . . . . . . . . . . . . . . . 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 18
Item 2. Changes In Securities and Use of Proceeds. . . . . . . . 18
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . 19
Item 4. Submission of Matters to a Vote of
Securities Holders . . . . . . . . . . . . . . . . . . . 19
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . 19
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 20
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 21
<PAGE>
PART I
Item 1. Financial Statements
The following unaudited Financial Statements for the period
ended March 31, 1999, have been prepared by the Company.
NATIONAL HEALTH & SAFETY CORPORATION
FINANCIAL STATEMENTS
March 31, 1999 and 1998
(Unaudited)
December 31, 1998
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Balance Sheets
ASSETS
March 31, December 31,
1999 1998
(Unaudited)
CURRENT ASSETS
Cash $ 50,624 $ 3,336
Accounts receivable, net of allowance
for doubtful accounts of $8,200 (Note 1) 26,137 30,857
Royalty receivable (Note 1) - 41,000
Total Current Assets 76,761 75,193
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 157,111 156,418
Net Property and Equipment 8,688 9,381
OTHER ASSETS
Deposits 9,298 9,298
Total Other Assets 9,298 9,298
TOTAL ASSETS $ 94,747 $ 93,872
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
March 31, December 31,
1999 1998
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 356,965 $ 302,522
Loan payable, stockholder (Note 3) 686,025 646,025
Loans payable, individuals (Note 2) 532,670 689,375
Accrued expenses (Note 5) 1,658,627 1,476,567
Convertible debentures (Note 6) - 125,000
Total Current Liabilities 3,234,287 3,239,489
LONG-TERM DEBT
Legal settlement (Note 5) 265,000 265,000
Total Liabilities 3,499,287 3,504,489
STOCKHOLDERS' DEFICIENCY
Preferred stock: $0.001 par value; 5,000,000 shares
authorized; 14,363 shares issued and outstanding 14 14
Common stock: $0.001 par value, 100,000,000 shares
authorized; 56,340,716 and 52,454,994 shares
issued and outstanding, respectively 56,341 52,455
Additional paid-in capital 8,868,805 8,512,687
Accumulated deficit (12,329,700) (11,975,773)
Total Stockholders' Deficiency (3,404,540) (3,410,617)
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY $ 94,747 $ 93,872
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Statements of Operations
(Unaudited)
For the Three Months Ended
March 31,
1999 1998
SALES $ 24,275 $ 40,199
OPERATING COSTS AND EXPENSES
Costs of sales 7,430 3,632
Operating expenses 351,265 553,360
Total Operating Costs and Expenses 358,695 556,992
LOSS FROM OPERATIONS (334,420) (516,793)
OTHER EXPENSE
Interest 19,507 11,177
NET LOSS $ (353,927) $ (527,970)
BASIC LOSS PER SHARE $ (0.01) $ (0.02)
FULLY DILUTED LOSS PER SHARE $ (0.01) $ (0.02)
<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, 1997 $ 14 $ 34,241 $7,392,394 $(700,000) $ (9,407,439)
Issuance of common stock in
payment of debt - 4,960 440,040 - -
Issuance of common stock for
services rendered - 1,195 202,305 - -
Issuance of common stock
for cash - 12,059 952,448 - -
Cancellation of stock
subscription receivable - - (474,500) 700,000 -
Net (loss) for the year
ended December 31, 1998 - - - - (2,568,334)
Balance, December 31, 1998 14 52,455 8,512,687 - (11,975,773)
Contribution of capital
(unaudited) - - 50,000 - -
Issuance of common stock for
cash (unaudited) - 1,614 129,136 - -
Issuance of common stock for
services (unaudited) - 610 53,644 - -
Issuance of common stock for
conversion of debentures
(unaudited) - 1,662 123,338 - -
Net loss for the three months
ended March 31, 1999
(unaudited) - - - - (353,927)
Balance, March 31, 1999
(unaudited) $ 14 $ 56,341 $8,868,805 $ - $(12,329,700)
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Statements of Cash Flows
(Unaudited)
For the Three Months Ended
March 31,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (353,927) $ (527,970)
Adjustments to reconcile net loss to
net cash used by operating activities:
Common stock issued for services 54,254 25,000
Depreciation and amortization 693 4,541
(Increase) decrease in:
Accounts receivable 4,720 2,779
Prepaid expenses - 278,985
Royalty receivable 41,000 -
Increase (decrease) in:
Accounts payable 54,443 (8,386)
Accrued expenses 182,060 79,150
Net Cash Used by Operating Activities (16,757) (145,901)
CASH FLOWS FROM INVESTING ACTIVITIES - -
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on loans, individuals (106,705) -
Common stock issued for cash 130,750 25,000
Proceeds from loans, individuals - 113,500
Proceeds from stockholders' loan 40,000 4,000
Net Cash Provided by Financing Activities 64,045 142,500
INCREASE (DECREASE) IN CASH 47,288 (3,401)
CASH, BEGINNING OF PERIOD 3,336 7,516
CASH, END OF PERIOD $ 50,624 $ 4,115
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest during the period $ 4,285 $ 11,144
SCHEDULE OF NON-CASH FINANCING ACTIVITIES
Common stock issued for debt conversion $ 125,000 $ -
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
March 31, 1999 and 1998
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
$693 and $4,541 for the three months ended March 31, 1999
and 1998, respectively.
d. Basic Loss per Common Share
Basic loss per common share has been calculated based on
the weighted average number of shares of common stock
outstanding during the period. Fully diluted loss per
share does not include any dilutive instruments.
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
March 31, 1999 and 1998
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
were capitalized and have been amortized over the life of
the debentures. The debentures matured on November 30,
1997. $125,000 of debentures are still outstanding as of
December 31, 1998. The debentures were converted into
1,667,013 shares of stock as of March 31, 1999. 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 offered the holders
of the debentures the full cash face value of the
debentures and a 10% cash bonus. The additional
compensation has been recorded as interest expense in the
1997 financial statements.
g. Provision for Taxes
At March 31, 1999, the Company had net operating loss
carryforwards of approximately $9,000,000 that may be
offset against future taxable income through 2013. 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
In 1994, the Company purchased $500,000 in radio air time
by issuing 50,000 shares of common stock to be used over
the next year to promote its products. The radio air time
was fully amortized in 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.
<PAGE>
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
March 31, 1999 and 1998
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
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. Corporate cash balances occasionally exceed
insured limits.
NOTE 2 - LOANS PAYABLE, INDIVIDUALS
March 31, December 31,
1999 1998
(Unaudited)
Private Placement Advances
The Company received advances from certain
individuals under various private placements. The
Company agreed to issue common stock to these
individuals upon securing additional financing, which
it has not been able to obtain. Some of the individuals
who had advanced funds were partially repaid. These
loans are unsecured and due upon demand. $ 30,540 $ 37,540
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. These loans are unsecured and due upon
emand. 502,130 651,835
$532,670 $689,375
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
$686,025 and $646,025 at March 31, 1999 and December 31,
1998, respectively. 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, 1999 and 1998
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
noncancelable operating lease. Future minimum annual
rental commitments are as follows:
1999 $ 50,146
Total $ 50,146
Rent expense amounted to$35,930 and $33,166 for the three
months ended March 31, 1999 and 1998, 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, 1999 and
December 31, 1998, total deferred income for these three
individuals was $970,027 and $896,923, respectively. 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. $285,000 is accrued at March 31, 1999 and
December 31, 1998 of which $265,000 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 December 31, 1998 was $7,000.
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, 1999 and 1998
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, $320,000 in
1997 and $55,000 in 1998. 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, 1998 was
$125,000, which was converted into 1,662,013 shares of
common stock in the first quarter of 1999. 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 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.
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 - 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
300,000 50% of market price average for preceding 30 days 09/01/00
The Company has the following outstanding stock options:
Stock Options Issued:
Bowers Folts Bathurst Total
6/6/95 @ $0.17 6/6/2010 2,000,000 500,000 500,000 3,000,000
4/30/96 @ $0.17 4/30/2011 2,000,000 500,000 500,000 3,000,000
2/20/98 @ $0.07 2/20/2013 4,000,000 1,000,000 1,000,000 6,000,000
12,000,000
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
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, 1999 and
1998. It should be noted that percentages discussed throughout
this analysis are stated on an approximate basis.
Three Months Ended
March 31,
1999 1998
(Unaudited)
Sales . . . . . . . . . . . . . . . . . . . . . 100% 100%
Cost of sales . . . . . . . . . . . . . . . . . 31 9
Operating expenses. . . . . . . . . . . . . . . 1447 1376
(Loss) from operations. . . . . . . . . . . . . (1378) (1285)
Other expenses - interest . . . . . . . . . . . 80 28
Net (loss). . . . . . . . . . . . . . . . . . . (1458) (1313)
Results of Operations for the Three Months Ended March 31, 1999 and 1998
Total sales of $24,275 for the three months ended March 31,
1999 ("first quarter of 1999") represent a decrease of 40% from
total revenue of $40,199 for the three months ended March 31, 1998
("first quarter of 1998"). This decrease is primarily attributed
to the 40% decrease in POWERX sales due to a lower level of broker
activity. Revenues from the sale of medical equipment nominally
increased by 5% for the first quarter of 1998. Other sales
decreased 84% to $1,017 for the first quarter of 1999 from $6,237
for the first quarter of 1998 due to the completion of consulting
contracts in 1998.
Cost of sales (as a percentage of total revenues) increased to
31% for the first quarter of 1999, from 9% for the comparable 1998
period due to an increase in the cost from the dental network
covering the last quarter of 1998 and the first quarter of 1999.
Actual cost of sales increased 105% in the first quarter of 1999.
Operating expenses for the first quarter of 1999 decreased 37% when
compared to the same period for 1998, primarily due to a one time
charge of $279,985 in 1998 for radio advertising. During the first
quarter of 1998, the Company expended $287 for advertising expenses
compared to $279,985 for the 1998 period. This reduction in
advertising expense is attributed to the use of prepaid expenses of
$278,985 for radio advertising in the 1998 period and a general
decrease in marketing. Salaries decreased 11.6% for the first
quarter of 1999 when compared to 1998 due to lower commission
payments, reduction of a part-time employee and an open full-time
position for a portion of the first quarter of 1999. Rents and
leases increased 8% primarily due to a rent increase.
As a percentage of total revenues, operating expenses
increased from 1376% for the first quarter of 1998 to 1447% for the
first quarter of 1999 attributed to the 40% decrease in total
sales. However, for the same period actual operating expenses
decreased 37% primarily attributed to the decrease in advertising
expenses. Consulting fees increased 181% the first quarter of 1999
compared to the 1998 period due mainly to the payment of a finder's
fee for the generation of additional paid in capital for the past
nine months.
The net loss for the first quarter of 1999 decreased to
$353,927 from $527,970 for the comparable 1998 period, primarily due
to the decrease 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, 1999 was a negative $3,157,526
compared to a negative $3,164,296 at December 31, 1998. During the
first quarter of 1999, accounts payable increased 18% due to the
slow payment of bills due, loans payable to stockholders increased
6% due to additional funds loaned to the Company by its President,
and accrued expenses increased 12% due to additional accrued
interest, additional deferred income and accrual of legal
judgments. For this same period, cash increased from $3,336 to
$50,624.
Net cash used by operating activities for the first quarter of
1999 was $16,757 compared to net cash used of $145,901 for the
first quarter of 1998. This decrease in net cash used is
attributed to the decreased net loss form operations and the
$182,060 increase in accrued expenses. Net cash provided by
financing activities during the first quarter of 1999 was $64,045,
primarily from proceeds from loans and sale of common stock,
compared to net cash provided of $142,500 for the comparable 1998
period, primarily from the proceeds from loans.
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, 1999, the Company had total assets of $94,747
and total stockholders' deficiency of $3,404,540. In comparison,
as of December 31, 1998, the Company had total assets of $93,872
and total stockholders' deficiency of $3,419,617.
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
During the remainder of fiscal 1999, 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 1999. Management estimates that its current
level of operations requires approximately $80,000 per month in
cash based upon average monthly cash flows in 1998. 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 1999. 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.
Year 2000
Year 2000 issues may arise if computer programs have been
written using two digits (rather than four) to define the
applicable year. In such case, programs that have time-sensitive
logic may recognize a date using "00" as the year 1900 rather than
the year 2000, which could result in miscalculations or system
failures.
The Company has completed its assessment of the Year 2000
issue and believes that any costs of addressing the issue will not
have a material adverse impact on the Company's financial position.
The Company believes that its existing accounting computer systems
and software will not need to be upgraded to mitigate the Year 2000
issues. The Company has not incurred any costs associated with its
assessment of the Year 2000 problem. In the event that Year 2000
issues impact the Company's accounting operations and other
operations aided by its computer system, the Company believes, as
part of a contingency plan, that it has adequate personnel to
perform those functions manually until such time that any Year 2000
issues are resolved.
The Company believes that third parties with whom it has
material relationships will not materially be affected by the Year
2000 issues as those third parties are relatively small entities
which do not rely heavily on information technology ("IT") systems
and non-IT systems for their operations. However, if the Company
and third parties upon which it relies are unable to address any
Year 2000 issues in a timely manner, it could result in a material
financial risk to the Company, including loss of revenue and
substantial unanticipated costs. Accordingly, the Company plans to
devote all resources required to resolve any significant Year 2000
issues in a timely manner.
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.
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 January 1999, a writ of execution for money judgment in the
amount of $361,034 was entered against the Company in Bucks County,
Pennsylvania. This judgment was initiated by the Supreme Court of
the State of New York, County of Nassau, in the case titled
Schwartz, Berger and Berger vs. National Health and Safety
Corporation (# 99000212). The action is related to certain
transactions between the Company and Barrett Day Securities which
took place starting in 1993. The Company includes the debt as a
liability in its financial statements.
Item 2. Changes In Securities and Use of Proceeds
During the first quarter of 1999, the Company sold 1,614,167
shares of its authorized but previously unissued common stock to
seventeen persons for the average price of $.08 per share. The
Company also issued 609,542 shares to four persons for services
based on an average of $.10 per share. Further, debentures with a
total value of $125,000 were converted into 1,662,013 shares of
common stock.
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 Sections 4(2) and 4(6) of the
Securities Act of 1933, as amended (the "Act"). The issuance of
shares upon the conversion of debentures was made pursuant to
Section 3(9) 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
On May 1, 1999, the Company entered into a Letter of Intent
with HealthLink International, Inc., a Nevada corporation
("HealthLink"). Pursuant to the Letter of Intent, the two entities
contemplate entering into a share exchange or merger agreement
whereby the two entities would be consolidated with the Company
being the surviving entity. It is anticipated that such a
transaction would allow the Company to restructure, recapitalize
and refinance its business activities. The parties have continued
their negotiations, however no final terms and conditions have been
agreed upon and no definitive agreement has been executed. There
can be no assurance that this proposed transaction will be
finalized in a timely manner, or at all. Shareholders will be
updated on the progress of the negotiations.
In connection with the transactions contemplated under the
Letter of Intent, on May 11, 1999 HealthLink caused a certain
letter to be mailed to the Company's creditors. In the letter
HealthLink stated that in the process of reviewing information for
a possible merger with the Company, HealthLink indicated that the
Company's outstanding debt must be eliminated. This is to be
accomplished either through a lump sum payment or an agreement by
the Company's creditors to trade the value of their debt for shares
of the Company's stock following the merger. The letter further
states that in order to complete the merger, HealthLink requires
that all of the Company's creditors settle their claims against the
Company either by exchanging their debt for stock, or by accepting
an immediate payment equal to ten percent of the amount of their
debt.
This letter to creditors sent by HealthLink was not authorized
by the Company or its Board of Directors. It must me emphasized
that the letter and offer to settle the Company's debt comes from
HealthLink and not the Company. The Company has not made or
distributed a plan to offer a settlement to its creditors as set
forth in the letter or otherwise.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedules
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during
the three month period ended March 31, 1999
<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 21, 1999 By /S/ R. Dennis Bowers
R. DENNIS BOWERS, President
C.E.O. and Director
Date: May 21, 1999 By /S/ Roger H. Folts
ROGER H. FOLTS,
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, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> MAR-31-1999
<CASH> 50,6254
<SECURITIES> 0
<RECEIVABLES> 34,337
<ALLOWANCES> 8,200
<INVENTORY> 0
<CURRENT-ASSETS> 76,761
<PP&E> 165,799
<DEPRECIATION> 157,111
<TOTAL-ASSETS> 94,747
<CURRENT-LIABILITIES> 3,234,287
<BONDS> 265,000
14
0
<COMMON> 56,341
<OTHER-SE> 8,868,805
<TOTAL-LIABILITY-AND-EQUITY> 94,747
<SALES> 24,275
<TOTAL-REVENUES> 24,275
<CGS> 7,430
<TOTAL-COSTS> 358,695
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,507
<INCOME-PRETAX> (353,927)
<INCOME-TAX> 0
<INCOME-CONTINUING> (353,927)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (353,927)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
