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 June 30, 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 June 30, 1999
Common Stock, $.001 par value 58,803,716
TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . 3
Balance Sheets -- June 30, 1999 and
December 31, 1998. . . . . . . . . . . . . . . . . . . . 4
Statements of Operations -- Six months ended
June 30, 1999. . . . . . . . . . . . . . . . . . . . . . 6
Statements of Stockholders' Deficiencies . . . . . . . . 7
Statements of Cash Flows -- six months ended
June 30, 1999. . . . . . . . . . . . . . . . . . . . . . 8
Notes to Financial Statements . . . . . . . . . . . . . 9
Item 2. Management's Discussion and Analysis and
Results of Operations. . . . . . . . . . . . . . . . . . 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 18
Item 2. Changes In Securities and Use of Proceeds. . . . . . . . 19
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
PART I
Item 1. Financial Statements
The following unaudited Financial Statements for the period
ended June 30, 1999, have been prepared by the Company.
NATIONAL HEALTH & SAFETY CORPORATION
FINANCIAL STATEMENTS
June 30, 1999 and 1998
(Unaudited)
December 31, 1998
NATIONAL HEALTH & SAFETY CORPORATION
Balance Sheets
ASSETS
June 30, December 31,
1999 1998
(Unaudited)
CURRENT ASSETS
Cash $ 24,392 $ 3,336
Accounts receivable, net of allowance for doubtful
accounts of $8,200 (Note 1) 24,575 30,857
Royalty receivable (Note 1) - 41,000
Total Current Assets 48,967 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 157,804 156,418
Net Property and Equipment 7,995 9,381
OTHER ASSETS
Deposits 9,298 9,298
Total Other Assets 9,298 9,298
TOTAL ASSETS $ 66,260 $ 93,872
NATIONAL HEALTH & SAFETY CORPORATION
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
June 30, December 31,
1999 1998
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 358,881 $ 302,522
Loan payable, stockholder (Note 3) 694,025 646,025
Loans payable, individuals (Note 2) 655,801 689,375
Accrued expenses (Note 5) 1,648,599 1,476,567
Convertible debentures (Note 6) - 125,000
Total Current Liabilities 3,357,306 3,239,489
LONG-TERM DEBT
Legal settlement (Note 5) 265,000 265,000
Total Liabilities 3,622,306 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; 58,803,716 and 52,454,994 shares
issued and outstanding, respectively 58,804 52,455
Additional paid-in capital 9,037,792 8,512,687
Accumulated deficit (12,652,656) (11,975,773)
Total Stockholders' Deficiency (3,556,046) (3,410,617)
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY $ 66,260 $ 93,872
NATIONAL HEALTH & SAFETY CORPORATION
Statements of Operations
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
1999 1998 1999 1998
SALES $ 24,687 $ 31,215 $ 48,962 $ 71,414
OPERATING COSTS AND EXPENSES
Cost of sales 7,173 10,848 14,603 14,480
Operating expenses 333,839 478,412 685,104 1,031,772
Total Operating Costs
and Expenses 341,012 489,260 699,707 1,046,252
LOSS FROM OPERATIONS (316,325) (458,045) (650,745) 974,838)
OTHER EXPENSE
Interest expense 6,631 12,769 26,138 23,946
NET LOSS $ (322,956) $ (470,814) $ (676,883) $ (998,784)
BASIC LOSS PER SHARE $ (0.01) $ (0.06) $ (0.02) $ (0.08)
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) - 3,240 268,990 - -
Issuance of common stock for
services (unaudited) - 1,447 82,777 - -
Issuance of common stock for
conversion of debentures
(unaudited) - 1,662 123,338 - -
Net loss for the six months
ended June 30, 1999
(unaudited) - - - - (676,883)
Balance, June 30, 1999
(unaudited) $ 14 $ 58,804 $9,037,792 $ - $(12,652,656)
NATIONAL HEALTH & SAFETY CORPORATION
Statements of Cash Flows
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
1999 1998 1999 1998
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $ (322,956) $ (470,814) $ (676,883) $(998,784)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Common stock issued for
services 30,000 14,500 84,254 35,000
Depreciation and amortization 693 4,622 1,386 7,523
(Increase) decrease in:
Prepaid expenses - - - 278,985
Accounts receivable 1,562 1,299 6,282 (1,480)
Other receivables - (33,515) 41,000 (33,515)
Increase (decrease) in:
Accounts payable 1,916 (62,982) 56,359 (71,368)
Accrued expenses (10,058) 44,064 172,002 134,912
Net Cash Used by Operating
Activities (298,843) (502,826) (315,600) (648,727)
CASH FLOWS FROM INVESTING
ACTIVITIES - - - -
CASH FLOWS FROM FINANCING
ACTIVITIES
Payments on loans, individuals - - (106,705) -
Repayment of long-term debt - (10,000) - (10,000)
Proceeds from loans,
individuals 123,131 659,785 123,131 773,285
Proceeds from stockholders' loan 8,000 - 48,000 4,000
Issuance of common stock 141,480 111,000 272,230 136,000
Net Cash Provided by Financing
Activities 272,611 760,785 336,656 903,285
INCREASE (DECREASE) IN CASH (26,232) 257,959 21,056 254,558
CASH, BEGINNING OF PERIOD 50,624 4,115 3,336 7,516
CASH, END OF PERIOD $ 24,392 $ 262,074 $ 24,392 $ 262,074
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest
during the period $ 6,631 $ 12,769 $ 26,138 $ 23,946
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
June 30, 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
$1,386 and $4,622 for the six months ended June 30, 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.
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
June 30, 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 June 30, 1999, the Company had net operating loss
carryforwards of approximately $9,300,000 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.
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
June 30, 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
June 30, 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 demand. 625,261 651,835
$ 655,801 $ 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
$694,025 and $646,025 at June 30, 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.
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
June 30, 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$60,176 and $68,034 for the six
months ended June 30, 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 June 30, 1999 and
December 31, 1998, total deferred income for these three
individuals was $980,665 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 June 30, 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 of $7,000, due at December 31, 1998 was paid in
full as of June 30, 1999.
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.
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
June 30, 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 2,800,000 1,000,000 1,000,000 4,800,000
10,800,000
NATIONAL HEALTH & SAFETY CORPORATION
Notes to Financial Statements
June 30, 1999 and 1998
NOTE 9 - SUBSEQUENT EVENT
On July 1, 1999, National Health and Safety Corporation
voluntarily filed for Chapter 11 Bankruptcy in the Eastern
District of Pennsylvania United States Bankruptcy Court
Case #99-18339 DWS. It is anticipated that a plan for
reorganization will be filed the latter part of August. In
addition, there is a motion before the court to sell a
portion of the assets relating to the Powerx card. This
sale is targeted to be completed by the end of August.
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 and six month periods ended June 30,
1999 and 1998. It should be noted that percentages discussed
throughout this analysis are stated on an approximate basis.
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
(Unaudited) (Unaudited)
Revenues . . . . . . . . . . . . . 100% 100% 100% 100%
Cost of sales. . . . . . . . . . 29 35 30 20
Operating expenses . . . . . . . . 1352 1532 1399 1445
(Loss) from operations . . . . . . (1281) (1467) (1329) (1365)
Other expenses - interest. . . . . 26 41 53 34
Net (loss) . . . . . . . . . . . . (1307) (1508) (1382) (1399)
Results of Operations for the Three and Six Months Ended June 30,
1999 and 1998
Total revenue for the three months ended June 30, 1999
("second quarter of 1999") decreased 21% to $24,686 compared to the
three months ended June 30, 1998 ("second quarter of 1998"),
primarily attributed to the 11% decrease in POWERX Card sales due
primarily to a lower level of broker activity, and the 85% decrease
in other sales due to completion of consulting contracts in 1998.
For the first six months of 1999, total revenues decreased 31% to
$48,962 from the comparable 1998 period primarily attributed to the
27% decrease in POWERX sales, 27% decrease in medical equipment
sales due to a reduced marketing effort, and the 83% decrease in
other sales.
Cost of sales (as a percentage of total revenues) decreased to
29% for the second quarter of 1999, from 35% for the second quarter
of 1998 period, and increased to 30% for the first six months of
1999 from 20% for the comparable 1998 period. The percentage
changes for the second quarter and first six months of 1999 were
primarily the result of a different sales mix. Actual cost of
sales decreased 34% for the second quarter of 1999 and only
fractionally for the first six months of 1999 from the comparable
1998 periods.
Operating expenses for the second quarter and first six months
of 1999 decreased by $155,610 (31%) and $385,637 (36%)
respectively, when compared to the corresponding 1998 results. The
decrease for the second quarter of 1999 was primarily attributed to
the $129,571 decrease (102%) in marketing expenses reflecting the
Company's reduced marketing activities, and the $32,501 decrease
(18%) in payroll expenses due to personnel reductions and
replacement of one person at a lower rate. The decrease for the
first half of 1999 was primarily attributed to the $108,927
decrease (73%) in marketing expenses, and the $283,096 decrease
(nearly 100%) in advertising expenses due to a one time prepaid
expense for radio advertising of $279,985 during the first quarter
of 1998. Also, payroll expenses decreased $49,466 (15%) for the
first six months of 1999.
As a percentage of total revenues, operating expenses
decreased from 1532% for the second quarter of 1998 to 1352% for
the second quarter of 1999, and from 1445% for the first six months
of 1998 to 1399% for the first six months of 1999.
The net loss for the second quarter and first six months of
1999 decreased to $322,956 (32%) for the second quarter, and to
$676,883 (32%) for the first six months, as compared with the
corresponding 1998 periods. These results are primarily attributed
to the significant decreases in advertising and marketing expenses
for the 1999 periods.
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 June 30, 1999 was a negative $3,308,399 compared
to a negative $3,164,296 at December 31, 1998. During the second
half of 1999, accounts payable increased 19% due to the slow
payment of bills due, loans payable to stockholders increased 7%
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 $24,392.
Net cash used by operating activities for the second quarter
and first half of 1999 was $298,843 and $315,600, respectively,
compared to net cash used of $502,826 and $648,727 for the
comparable 1998 periods. This decrease in net cash used is
attributed to the decrease in net loss of $321,901, the increase in
common stock issued for services of $49,254, and the increase in
accounts payable of $127,727. Net cash provided by financing
activities during the second quarter and first half of 1999 was
$272,611 and $336,656 respectively, compared to $760,785 and
$903,285 for the corresponding 1998 periods. These results are
primarily due to the decrease in individuals purchasing stock
from the Company.
As of June 30, 1999, the Company had total assets of $66,260
and total stockholders' deficiency of $3,556,046. In comparison,
as of December 31, 1998, the Company had total assets of $93,872
and total stockholders' deficiency of $3,410,617.
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
On July 1, 1999, the Company voluntarily filed for
reorganization under Chapter 11 of the United States Bankruptcy
Code. See Part II Item 1 below. The Company's operations for the
remainder of fiscal 1999 will depend on the outcome of the
bankruptcy filing and any proposed plan of reorganization, which
will be subject to approval by the Bankruptcy Court.
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.
On July 1, 1999, the Company voluntarily filed for
reorganization under Chapter 11 of the United States Bankruptcy
Code in the Untied States Bankruptcy Court of the Eastern District
of Pennsylvania (file no. 99-18339). Management anticipates filing
a Plan of Reorganization for consideration by its creditors and
shareholders and for ultimate approval by the Bankruptcy Court. It
is anticipated that a plan for reorganization will be filed the
latter part of August. In addition, there is a motion before the
court to sell a portion of the assets relating to the Powerx card.
This sale is targeted to be completed by the end of August.
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 second quarter of 1999, the Company sold 396,333
shares of its authorized but previously unissued common stock to
nine persons for the average price of $.15 per share. The Company
also issued 866,667 shares to two persons for services based on an
average of $.04 per share. Further, options for 1,200,000 shares
of common stock were exercised by the Company's President at $.07
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 Sections 4(2) and 4(6) of the
Securities Act of 1933, as amended (the "Act"). Proceeds realized
by the sale of shares for cash were used for general operating
expenses of the Company.
Item 3. Defaults Upon Senior Securities
This Item is not applicable to the Company.
Item 4. Submission of Matters to a Vote of Security Holders
This Item is not applicable to the Company.
Item 5. Other Information
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. The Letter of Intent was terminated on
May 27, 1999 and the proposed transactions were abandoned.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedules
(b) Reports on Form 8-K
On July 16, 1999, the Company filed a report on Form 8-K
reporting under Item 3 that the Company had voluntarily filed
for reorganization under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court of the
Eastern District of Pennsylvania.
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: August 23, 1999 By /S/ R. Dennis Bowers
R. DENNIS BOWERS, President
Date: August 23, 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 JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
<CASH> 24,392
<SECURITIES> 0
<RECEIVABLES> 32,775
<ALLOWANCES> 8,200
<INVENTORY> 0
<CURRENT-ASSETS> 48,967
<PP&E> 165,799
<DEPRECIATION> 157,804
<TOTAL-ASSETS> 66,260
<CURRENT-LIABILITIES> 3,357,306
<BONDS> 265,000
0
14
<COMMON> 58,804
<OTHER-SE> 9,037,792
<TOTAL-LIABILITY-AND-EQUITY> 66,260
<SALES> 48,962
<TOTAL-REVENUES> 48,962
<CGS> 14,603
<TOTAL-COSTS> 699,707
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,138
<INCOME-PRETAX> (676,883)
<INCOME-TAX> 0
<INCOME-CONTINUING> (676,883)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (676,883)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
