UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1999
COMMISSION FILE NUMBER: 0-24378
FIRST SCIENTIFIC, INC.
EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER).
DELAWARE 33-0611745
------------------------------- -------------------------------
(STATE OR OTHER JURISDICTION (IRS EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
1877 WEST 2800 SOUTH, SUITE 200, OGDEN, UTAH 84401
---------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (801) 393-5781
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for 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
These were 20,169,770 shares of common stock, $.001 par value,
outstanding as of May 11, 1999.
FIRST SCIENTIFIC, INC.
FORM 10-QSB
QUARTER ENDED MARCH 31, 1999
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited) -
March 31, 1999 and December 31, 1998. . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations (Unaudited)
for the Three Months Ended March 31, 1999 and 1998
and for the Cumulative Period from April 30,
1990 (Date of Inception) through March 31, 1999 . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Three Months Ended March 31, 1999 and 1998. . . . . . . . . . 5
Notes to the Condensed Consolidated Financial Statements
(Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis and Plan of Operation. . 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
FIRST SCIENTIFIC, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1999 1998
----------- -----------
ASSETS
CURRENT ASSETS
Cash $ 964,607 $ 1,286,299
Investment in securities available-for-sale 194,286 194,784
Trade receivables 75 614
Inventory 51,909 26,619
Prepaid expenses 21,087 29,356
---------- -----------
TOTAL CURRENT ASSETS 1,231,964 1,537,672
PROPERTY AND EQUIPMENT 124,686 95,378
Less: accumulated depreciation (7,826) (2,982)
---------- ---------
NET PROPERTY AND EQUIPMENT 116,860 92,396
PURCHASED TECHNOLOGY, NET 86,250 108,750
INVESTMENT IN EQUITY SECURITIES, AT COST - 50,000
---------- ----------
TOTAL ASSETS $1,435,074 $1,788,818
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 59,350 $ 54,334
Customer deposits 33,750 33,750
Accrued liabilities 29,357 75,979
Capital lease obligation - current portion 3,323 2,070
Related party notes payable 22,694 22,693
---------- ---------
TOTAL CURRENT LIABILITIES 148,474 188,826
---------- ---------
LONG-TERM CAPITAL LEASE OBLIGATION 6,981 4,784
---------- ---------
STOCKHOLDERS' EQUITY
Preferred stock 1,000,000 shares authorized,
no shares outstanding - -
Common stock $.001 par value, 50,000,000
shares authorized; issued and outstanding:
20,169,770 shares at March 31, 1999 and
December 31,1998 20,170 20,170
Additional paid-in capital 6,429,114 6,429,114
Unearned compensation (68,572) (84,056)
Accumulated other comprehensive loss (57,775) (7,275)
Deficit accumulated during the
development stage (5,043,318) (4,762,745)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 1,279,619 1,595,208
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,435,074 $1,788,818
========== ==========
The accompanying notes are an integral part of these financial statements.
FIRST SCIENTIFIC, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative From
April 30, 1990
For the Three Months (Date of Inception)
Ended March 31, Through
------------------------- March 31,
1999 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
SALES $ 370 $ 271 $ 236,366
COST OF SALES 247 108 154,900
----------- ----------- -----------
GROSS PROFIT 123 163 81,466
----------- ----------- -----------
OPERATING EXPENSES
General and administrative expense 285,415 14,797 1,122,747
Research and development expense 6,262 4,570 3,995,812
----------- ----------- -----------
TOTAL OPERATING EXPENSES 291,677 19,367 5,118,559
LOSS FROM OPERATIONS (291,554) (19,204) (5,037,093)
OTHER INCOME AND (EXPENSE)
Interest income 12,146 - 26,828
Interest expense (1,165) (8,022) (94,934)
----------- ----------- -----------
LOSS BEFORE INCOME TAXES (280,573) (27,226) (5,105,199)
BENEFIT FROM INCOME TAXES - - 61,881
----------- ----------- -----------
NET LOSS $ (280,573) $ (27,226) $(5,043,318)
=========== =========== ===========
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.01) $ (0.00) $ (0.48)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES USED
IN PER-SHARE CALCULATION 20,169,770 10,467,581 10,584,687
=========== =========== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
FIRST SCIENTIFIC, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative From
April 30, 1990
For the Three Months (Date of Inception)
Ended March 31, Through
------------------------- March 31,
1999 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (280,573) $ (27,226) $(5,043,318)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 27,344 - 56,576
Common stock issued for services - - 74,355
Common stock issued for purchased
research and development - - 3,766,440
Compensation from stock options
granted 15,484 - 105,622
Deferred tax benefit - - (61,881)
Changes in operating assets and
liabilities:
Accounts receivable 539 8,425 (75)
Inventory (25,290) - (51,909)
Prepaid expenses 8,269 - (21,087)
Customer deposits - - 33,750
Accounts payable 5,016 1,005 59,350
Accrued liabilities (46,622) 5,480 161,789
Deferred compensation - 1,225 -
----------- ----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (295,833) (11,091) (920,388)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for equipment (29,309) - (116,970)
Cash received from sale of securities
available-for-sale - - 302,847
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (29,309) - 185,877
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowing 4,336 - 260,311
Principal payments on notes payable - (2,382) (155,975)
Proceeds from loans from stockholders - 6,197 158,934
Principal payments on loans from
stockholder - - (63,807)
Principal payment under capital lease
obligation (886) - (1,748)
Proceeds from issuance of common stock - - 1,501,403
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 3,450 3,815 1,699,118
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (321,692) (7,276) 964,607
Cash and Cash Equivalents at Beginning
of Period 1,286,299 7,938 -
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 964,607 $ 662 $ 964,607
=========== =========== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
FIRST SCIENTIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1-- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTERIM CONDENSED FINANCIAL STATEMENTS The accompanying condensed
consolidated financial statements are unaudited. In the opinion of
management, all necessary adjustments (which include only normal
recurring adjustments) have been made to present fairly the
financial position, results of operations and cash flows for the
periods presented. Certain information and note disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed
or omitted. It is suggested that these condensed consolidated
financial statements be read in conjunction with the First
Scientific financial statements and notes thereto included in the
Form 10-KSB dated December 31, 1998. The results of operations for
the three month period ended March 31, 1999 are not necessarily
indicative of the operating results to be expected for the full year.
PRINCIPLES OF CONSOLIDATION - The accompanying condensed
consolidated financial statements include the accounts and
transactions of First Scientific, Inc. and its wholly-owned
subsidiary, First Scientific Corporation, since the date of its
acquisition. Intercompany accounts and transactions have been
eliminated in consolidation. The consolidated entities are
collectively referred to herein as "First Scientific."
NOTE 2--COMPREHENSIVE LOSS
Other comprehensive income of First Scientific consists of
unrealized losses on investment in securities available-for-sale
and is as follows:
<TABLE>
<CAPTION>
Cumulative From
April 30, 1990
For the Three Months (Date of Inception)
Ended March 31, Through
------------------------- March 31,
1999 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
NET LOSS $ (280,573) $ (27,226) $(5,043,318)
OTHER COMPREHENSIVE LOSS
Unrealized loss on investment
in securities available-
for-sale (50,500) - (57,775)
---------- ------------ -----------
COMPREHENSIVE LOSS $ (331,073) $ (27,226) $(5,101,093)
========== ============ ===========
NOTE 3--SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid during the three months ended March 31, 1999 and
1998, was $598 and $2,542, respectively, and $93,639 for the
period from April 30, 1990 (date of inception) through March 31,
1999.
NOTE 4--COMMITMENTS AND CONTINGENCIES
CAPITAL LEASE - During the first quarter of 1999 First Scientific
entered into a capital lease agreement for computer equipment.
The lease agreement is for a 3-year term requiring monthly
payments of $177 and a present value of $4,336 at inception of the
lease.
UNASSERTED CLAIM - On January 5, 1999 First Scientific was advised
of a claim against it allegedly arising out of an Agreement in
Principle made in 1991 (the "1991 Agreement") by Linco Industries,
Inc. (a predecessor to First Scientific Inc.'s wholly-owned
subsidiary). The 1991 Agreement purported to promise shares of
Linco common stock to an individual if certain conditions were met
in representing Linco to potential customers. No legal proceeding
has been filed with respect to this claim, nor has First
Scientific made any settlement offer in an attempt to resolve the
matter. First Scientific's management maintains that the 1991
Agreement is no longer valid because the conditions in the 1991
Agreement were not met in a reasonable time and because of the
failure of other material terms. Additionally, an indemnification
agreement in favor of First Scientific by the former founding
Linco shareholders requires the latter to satisfy any obligations
Linco incurred prior to the reorganization. Consequently, First
Scientific would require that any eventual settlement or award
resulting from the 1991 Agreement be satisfied entirely by the
founding shareholders of Linco. The Linco founders have made a
settlement offer to the Claimant and have assured First Scientific
that they will defend this matter in the event any legal
proceedings should be filed against First Scientific.
ITEM 2. MANAGEMENTS'S DISCUSSION AND ANALYSIS AND PLAN OF
OPERATIONS.
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding
of First Scientific's consolidated results of operations and
financial condition. The discussion should be read in conjunction
with the unaudited condensed consolidated financial statements, as
of March 31, 1999, together with the annual financial statements
as of December 31,1998. Whenever in this discussion the term
"First Scientific" is used, it should be understood to refer to
First Scientific, Inc. ("First Scientific") and its wholly owned
subsidiary on a consolidated basis, except where the context
clearly indicates otherwise.
Plan of Operations
------------------
First Scientific is a development stage company which, since
inception, has incurred losses from operations. As of March 31,
1999, the cumulative net losses of First Scientific since
inception total $5,043,318 of which $3,766,440 is attributable to
acquired research and development, as described in First
Scientific's annual report on Form 10-KSB dated December 31, 1998.
First Scientific is engaged primarily in the development of
chemical formulations that appear to have worldwide sales
application. First Scientific has chosen to market its products
initially through private label relationships with companies that
are major distributors in the over-the-counter, medical,
healthcare and multi-level arenas. Development of the First
Scientific's own brands, which will be sold through regional
distributors, especially in medical markets, will be pursued on a
case-by-case basis as profitable opportunities are identified.
First Scientific has developed two unique formulations; the first
is a moisturizing antibacterial sanitizing formulation that
removes 99.99% of bacteria from the skin without the harsh effects
of alcohol or iodine (this product can be delivered in wipes,
spray, gel-lotion and lotion-soap form) and the second, a topical
rash prevention and treatment formulation that cleanses and
moisturizes the skin for treatment against skin rashes caused by
incontinence and other skin rashes (in wipe form).
The worldwide market for products similar to those being
developed by First Scientific has grown significantly in recent
years and is projected to continue growing at a substantial rate.
Regarding First Scientific's antibacterial formulation, the growth
in demand of this product line is due to the increase in bacteria
related disease, sickness and death from methicillin-resistant and
other bacteria, the demands of government and healthcare
agencies/providers to create healthier treatment environments and
the insistence of the public in general for healthier living and
working conditions. Increasing market growth for diaper and other
rash formulations is primarily a function of the tremendous growth
rate of the incontinent geriatric population, as baby boomers
grow older, and the product's application for the infant market.
Management believes the markets for products First Scientific is
developing will continue to expand and that the potential of
First Scientific to become a significant participant in such
markets is a reasonable expectation, however the realization of
revenues from these efforts is not assured
First Scientific currently outsources manufacturing of its
products. First Scientific has developed relationships with
manufacturers who have U.S. Food and Drug Administration
("F.D.A.") compliant facilities and years of experience
manufacturing according to F.D.A. standards. These companies are
in the business of manufacturing for various customers who require
F.D.A. compliant facilities for their products. First Scientific
is able to produce a concentrate of its antibacterial formulation
at its own facility, or at nearby contract facilities, under
F.D.A. protocols. The concentrate can then be shipped to its
contract manufacturers for production runs according to customer
specifications. This procedure helps protect the trade secret
status of this proprietary formulation. However, First Scientific
does not use this procedure in the production of its Dimethicone
based rash prevention and treatment formulation, because currently
the Company cannot economically mix concentrate for this product.
Strict confidentiality agreements are in place with the
manufacturer to protect the trade secret status of this product
formulation. Future dealings with major private labelers may lead
to deviation from these procedures. Such deviations, that may
include the preparation of concentrate at a contract manufacturer
who are privy to First Scientific's formulations, may be justified
based on the economic value of such relationships.
The cash requirements of First Scientific for the foreseeable
future will vary based upon a number of factors including, but not
limited to, continuing research and development levels, market
development, facilities enhancement, additional personnel, travel
and other expenses related to projected growth. With the new
business First Scientific is now negotiating, management believes
that existing funds and funds generated from anticipated sales
will be sufficient to meet the obligations of First Scientific
over the next nine to twelve months. However, in light of
management's cash consumption projections for the remaining nine
months of its fiscal year, if anticipated sales do not materialize
in a timely manner at projected volumes, First Scientific would
likely need a bank line of credit and/or additional equity funding
to meet its working capital needs by the first quarter of 2000.
There is no assurance that any funding would be available or
that, if available, the terms of such funding will be favorable to
First Scientific.
A new source of revenue has developed for First Scientific. A
large multinational drug company recently engaged First
Scientific, on a fee for service basis, to perform testing
procedures that fulfill FDA regulatory compliance requirements
relating to potential product sales to this customer. Initial
responses from this customer are favorable regarding First
Scientific's testing procedures and operating protocols. The
prospects for ongoing testing work with this customer appear
likely. This experience has allowed First Scientific to develop
standard operating procedures that satisfy not only this
customer's needs, but that should withstand the most critical
evaluations and requirements of future customers, therefore,
providing new revenue.
Product research and development is an ongoing process at First
Scientific. Existing products are continually being refined to
meet the needs of markets being developed. Potential customers
also present product specifications from time to time which are
different from those of First Scientific's existing products.
These circumstances cause additional research and development to
be performed in order to meet the specifications required. First
Scientific likewise researches new products that fall within the
scope of its currently defined market place and new market places
that appear to have future economic potential.
Given First Scientific's current mode of operations of
outsourcing its manufacturing, existing plant and equipment are
projected to be sufficient to meet most of its growth needs.
However, should First Scientific decide, or be required, to
perform expanded testing for its clients and/or should it move to
in-house manufacturing, additional capital would be required to
fund the establishment of such activities.
First Scientific now employs seven individuals in management,
administrative, and technical positions. As First Scientific
continues to grow, additional personnel will need to be added to
enable it to meet projections. Specifically, a Vice President of
Sales and Marketing will be added to the Company's management team
during the second quarter. Projections also call for adding a lab
testing/quality control manager, another lab assistant and an
executive secretary before years end. These projected hires will
represent a fifty-seven percent increase in First Scientific's
workforce.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Position
------------------
First Scientific had $964,607 in cash as of March 31, 1999. This
represents a decrease of $321,692 from December 31, 1998. Working
capital, as of March 31,1999, decreased to $1,083,490 compared to
working capital of $1,398,846 at December 31, 1998.
Results of Operations
---------------------
Sales were nominal during the three months ended March 31, 1999
and 1998 which reflects that the Company has yet to obtain any
significant customers for its products.
Prior to December 1998 Company revenues were generated from
sporadic sales of a Linseed oil based soap product and a rash
prevention product created for a distributor who sells this
product under private labels to an over-the-counter customer.
First Scientific has decided to discontinue the sale of these
products, but does expect minimal revenue as existing inventory is
liquidated. In June 1998, First Scientific entered into a private
label supply agreement with a multinational distributer of medical
and healthcare products. This agreement is for individual
antibacterial wipes that the customer plans to export. As of
March 31,1999; however, the manufacturing of this product has not
been completed because of delays caused by internal business
restructuring at the private labeler and production scheduling by
First Scientific's contract manufacturer. It is contemplated that
this production will be done in the second quarter of 1999.
Serious negotiations continue to progress with other potential
domestic private label customers and an international customer.
First Scientific is disappointed that negotiations with a major
division of a Fortune 100 company has not formally concluded;
nevertheless, substantive progress has been made with them.
Management believes a significant contract will be signed with
this company in the second quarter of 1999. Should this or other
potential opportunities not materialize, First Scientific's
ability to sustain operations beyond the end of 1999, without
additional debt or equity financing, would be questionable.
Private label agreements, such as those discussed above, create
certain risks for First Scientific, including (i) reliance for
sales of products on other parties, and therefore reliance on the
other parties' marketing ability, marketing plans and
credit-worthiness; (ii) if First Scientific's products are
marketed under other parties' labels, goodwill associated with use
of the products may inure to the benefit of the other parties
rather than First Scientific; (iii) First Scientific may have only
limited protection from changes in manufacturing costs and raw
materials costs; and (iv) if First Scientific is reliant on other
parties for all or substantially all of its sales, First
Scientific may be limited in its ability to negotiate with such
other parties upon any renewals of their agreements. It is the
belief of management that these risks are mitigated by initial
market demands, the apparent uniqueness of its formulations,
large existing and expanding markets for its products and the
caliber of customers with which it is currently negotiating.
However, First Scientific recognizes that, in the short run, it
will be dependent on a few large customers where the bulk of its
sales will be generated. Until a broader base of customers is
established, the loss of one such customer could have a serious
negative impact on the operating viability of First Scientific.
First Scientific uses as many as twenty specific chemical and
botanical ingredients to formulate its products. Supplies of
ingredients for First Scientific's formulations continues to
remain readily available from multiple sources, in most cases.
First Scientific continues to maintain very good relationships
with its suppliers and does not anticipate problems that would
cause significant interruption, delay or availability of such
ingredients.
General and administrative expenses were $ 285,415 for the three
months ended March 31, 1999, compared with $ 14,797 from the prior
year's period. The increase in expenditures between the 1999 and
1998 periods was due to the continued transition of First
Scientific from a one-man product development entity, with
minimal sales during the first quarter of 1998, to an adequately
staffed operation capable of administrating anticipated growth.
Executive office space that First Scientific moved into during
1998 should meet growth needs for the foreseeable future.
Remodeling of the space it had previously occupied was completed
during the current quarter. This space will be used for research,
testing, mixing and warehousing.
Research and development expenses were $6,262 for the three
months ended March 31, 1999 compared with $4,570 for the
comparable periods from the prior year. The increase in
expenditures between the 1999 and 1998 periods resulted from the
continued refinement of First Scientific's formulations and the
development of new product variations to meet customer request
Management expects an increase in research and development
expenses for future periods, as First Scientific expands its
product offerings.
Liquidity and Capital Resources
-------------------------------
Historically, First Scientific has financed its operations
principally through loans, private placements of equity
securities and sporadic product sales; however, minimal capital
was generated during the three months ended March 31, 1999 from
these sources. First Scientific used net cash in operating
activities of $ 295,833 during the three months ended March 31,
1999. As of March 31, 1999, First Scientific's liabilities
totaled $ 155,455. First Scientific had working capital as of the
end of the current quarter, March 31,1999, of $ 1,083,490.
Year 2000
---------
First Scientific uses computers principally for scientific
modeling and calculation, product/market research and
administrative functions such as communications, word processing,
accounting and management and financial reporting. First
Scientific's computer system was purchased September, 1998. The
software utilized by First Scientific is generally standard "off
the shelf" software, typically available from a number of vendors.
While First Scientific believes it has taken all appropriate steps
to assure year 2000 compliance, it is dependent substantially on
vendor compliance. Should vendor assurances that First
Scientific's systems are 2000 compliant be incorrect, management
believes systems failures would not have a material adverse impact
on its operations.
In addition to its own computer systems, in connection with its
business activities, First Scientific interacts with suppliers,
customers, creditors and financial service organizations
domestically and globally who use computer systems. It is
impossible for First Scientific to monitor all such systems, and
there can be no assurance that the failure of such systems would
not have a material adverse impact on First Scientific's business
and operations. First Scientific is currently evaluating what
contingency plans it may adopt in the event First Scientific or
parties with whom First Scientific does business experience year
2000 problems.
Forward-Looking Statements
--------------------------
When used in this Form 10-Q and in other filings by First
Scientific with the SEC, in First Scientific's press releases or
other public or stockholder communications, or in oral statements
made with the approval of an authorized executive officer of First
Scientific, the words or phrases "would be," "will allow,"
"intends to," "will likely result," "are expected to," "will
continue," "is anticipated," "estimate," "project," or similar
expressions are intended to identify "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
of 1995.
First Scientific cautions readers not to place undue reliance on
any forward-looking statements, which speak only as of the date
made, are based on certain assumptions and expectations which may
or may not be valid or actually occur, and which involve various
risks and uncertainties, including but not limited to risk of
product demand, market acceptance, economic conditions,
competitive products and pricing, difficulties in product
development, commercialization, and technology, and other risks.
In addition, sales and other revenues may not commence and/or
continue as anticipated due to delays or otherwise. As a result,
First Scientific's actual results for future periods could differ
materially from those anticipated or projected.
Unless otherwise required by applicable law, First Scientific
does not undertake, and specifically disclaims any obligation, to
update any forward-looking statements to reflect occurrences,
developments, unanticipated events or circumstances after the date
of such statement.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
First Scientific is not involved in, nor has it been involved
in, any legal proceedings. On January 5, 1999 First Scientific
was advised of a claim against it allegedly arising out of an
Agreement in Principle made in 1991 (the "1991 Agreement") by
Linco Industries, Inc. (a predecessor to First Scientific Inc.'s
wholly-owned subsidiary). The 1991 Agreement purported to promise
shares of Linco (now First Scientific) common stock to an
individual if certain conditions were met in representing Linco to
potential customers. No legal proceeding has been filed with
respect to this claim, nor has First Scientific made any
settlement offer in an attempt to resolve the matter. First
Scientific's management maintains that the 1991 Agreement is no
longer valid because the conditions in the 1991 Agreement were not
met in a reasonable time and because of the failure of other
material terms. Additionally, an indemnification agreement in
favor of First Scientific by the former founding Linco
shareholders requires the latter to satisfy any obligations Linco
incurred prior to the reorganization. Consequently, First
Scientific would require that any eventual settlement or award
resulting from the 1991 Agreement be satisfied entirely by the
founding shareholders of Linco. The Linco founders have made a
settlement offer to the Claimant and have assured First Scientific
that they will defend this matter in the event any legal
proceedings should be filed against First Scientific.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
REGISTRANT
FIRST SCIENTIFIC, INC.
Registrant
DATED: May 11, 1999 By: /s/ Douglas R. Warren
------------------------------
Douglas R. Warren, President
DATED: May 11, 1999 By: /s/ Gordon M. Davis
-------------------------------
Gordon M. Davis, Vice President
Administration/CFO (Principal
Financial and Accounting Officer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet as of March 31, 1999, and statements of operations for the three months
ended March 31, 1998, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 964,607
<SECURITIES> 194,286
<RECEIVABLES> 75
<ALLOWANCES> 0
<INVENTORY> 51,909
<CURRENT-ASSETS> 1,231,964
<PP&E> 124,686
<DEPRECIATION> (7,826)
<TOTAL-ASSETS> 1,435,074
<CURRENT-LIABILITIES> 148,474
<BONDS> 6,981
0
0
<COMMON> 20,170
<OTHER-SE> 1,259,449
<TOTAL-LIABILITY-AND-EQUITY> 1,435,074
<SALES> 370
<TOTAL-REVENUES> 370
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<TOTAL-COSTS> 247
<OTHER-EXPENSES> 291,677
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<INTEREST-EXPENSE> 1,165
<INCOME-PRETAX> (280,573)
<INCOME-TAX> 0
<INCOME-CONTINUING> (280,573)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (280,573)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
