-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O4ZYW8eOLZ9+JYNMD+9m7nwkznmrNFKbNxSm/wSkwFqGQhloBNetMrzQ8bPA2IXH KT76YEr8HgfuHyGu18Tnog== 0000950147-00-000205.txt : 20000215 0000950147-00-000205.hdr.sgml : 20000215 ACCESSION NUMBER: 0000950147-00-000205 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL SCIENTIFIC CORP/AZ CENTRAL INDEX KEY: 0001022505 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 860837077 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-28745 FILM NUMBER: 540309 BUSINESS ADDRESS: STREET 1: 210 S. FOURTH AVE CITY: PHOENIX STATE: AZ ZIP: 85003 MAIL ADDRESS: STREET 1: 210 S. FOURTH AVE CITY: PHOENIX STATE: AZ ZIP: 85003 10QSB 1 QUARTERLY REPORT FOR THE QTR ENDED 12/31/99 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 quarterly period ended December 31, 1999 [ ] 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 0-28745 NATIONAL SCIENTIFIC CORPORATION (Exact name of small business issuer as specified in its Charter) Texas 86-0837077 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4455 East Camelback Road, E160, Phoenix, AZ 85018 (Address of Principal Executive Offices, including Zip Code) Issuer's telephone number: 602-954-1492 Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 [ ] 42,930,889 shares of Common Stock, par value $.01 per share, were outstanding at February 15, 2000. Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X] NATIONAL SCIENTIFIC CORPORATION FORM 10-QSB INDEX Part I - Financial Information Item 1 - Financial statements (unaudited) Balance Sheet - December 31, 1999 3 Statements of Operations - Three Months ended December 31, 1999 and 1998 and Cumulative from October 1, 1997 (Inception) through December 31, 1999 4 Statements of Cash Flows - Three Months ended December 31, 1999 and 1998 and Cumulative from October 1, 1997 (Inception) through December 31, 1999 5 Statements of Changes in Shareholders' Equity - Fiscal Years ended September 30, 1999 and 1998 and Quarter ended December 31, 1999 6 Notes to Financial Statements 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II - Other Information Item 2 - Changes in Securities and Use of Proceeds 11 Item 5 - Other Information 11 Item 6 - Exhibits and reports on Form 8-K 11 Signatures 12 PART I - FINANCIAL INFORMATION NATIONAL SCIENTIFIC CORPORATION (A Development Stage Company) Unaudited Condensed Balance Sheet December 31, 1999 ASSETS 1999 ----------- Current assets: Cash and cash equivalents $ 702,521 ----------- Total current assets 702,521 ----------- Property and equipment, net 3,006 ----------- $ 705,527 =========== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable and accrued expenses $ 15,546 Accrued interest 11,280 Note payable 110,000 ----------- Total current liabilities 136,826 ----------- ----------- Shareholders' equity, (deficit): Preferred stock, $.10 par value; 4,000,000 shares authorized, No shares issued and outstanding -- Common stock, par value $.01; 80,000,000 shares authorized, 42,930,889 shares issued and outstanding 429,309 Additional paid-in-capital 4,605,049 Deficit accumulated during the development stage (2,065,977) Accumulated deficit (2,394,680) Receivable for return of stock (5,000) ----------- 568,701 ----------- $ 705,527 =========== See Accompanying notes to financial statements 3 NATIONAL SCIENTIFIC CORPORATION (A Development Stage Company) Unaudited Condensed Statements of Operations For the Quarters Ended December 31, 1999 and 1998, and For the Period from October 1, 1997 (Inception of Development Stage) Through December 31, 1999
Cumulative Development 1999 1998 Stage ----------- ----------- ----------- Revenues $ -- $ -- $ -- ----------- ----------- ----------- Costs and expenses Consulting fees, related party 405,000 44,450 935,775 Salaries and benefits -- -- 73,706 Research and development 78,027 17,877 529,557 Stock compensation 50,320 -- 155,276 Other 62,324 16,833 334,585 ----------- ----------- ----------- 595,671 79,160 2,028,899 ----------- ----------- ----------- Net loss from operations (595,671) (79,160) (2,028,899) ----------- ----------- ----------- Other income (expense) Interest and other income 4,074 -- 5,354 Interest expense (2,750) -- (13,877) Loss on disposal of assets -- -- (28,555) ----------- ----------- ----------- 1,324 -- (37,078) ----------- ----------- ----------- Net loss before income tax benefit (594,347) (79,160) (2,065,977) Provision for income taxes (benefit) -- -- -- ----------- ----------- ----------- Net loss $ (594,347) $ (79,160) $(2,065,977) =========== =========== =========== Net loss per common share, basic and diluted $ (0.01) $ -- =========== ===========
See Accompanying notes to financial statements 4 NATIONAL SCIENTIFIC CORPORATION (A Development Stage Company) Unaudited Condensed Statements of Cash Flows For the Quarters Ended December 31, 1999 and 1998, and For the Period from October 1, 1997 (Inception of Development Stage) Through December 31, 1999
Cumulative Development 1999 1998 Stage ----------- ----------- ----------- Cash flows from operating activities: Net loss $ (594,347) $ (79,160) $(2,065,977) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 334 334 8,561 Loss on disposal of assets -- -- 28,555 Stock issued for services 474,820 20,413 1,192,797 Decrease in receivables -- 12,500 30,000 Decrease in prepaid expenses and deposits -- -- 10,571 Decrease in accounts payable and accrued expenses (4,371) (5,606) (7,033) Increase in accrued interest 2,750 -- 11,280 ----------- ----------- ----------- Net cash used in operating activities (120,814) (51,519) (791,246) ----------- ----------- ----------- Cash flows from investing activities: Proceeds from the sale of furniture and equipment -- -- 4,660 ----------- ----------- ----------- Cash flows from financing activities: Repayment of shareholder loans -- -- (10,000) Proceeds from the issuance of common stock 750,000 -- 748,181 Proceeds from the issuance of preferred stock -- 55,000 482,500 Proceeds from exercise of common stock options 11,150 -- 264,808 ----------- ----------- ----------- Net cash provided by financing activities 761,150 55,000 1,485,489 ----------- ----------- ----------- Net increase in cash and cash equivalents 640,336 3,481 698,903 Cash and cash equivalents, beginning of year 62,185 21,735 3,618 ----------- ----------- ----------- Cash and cash equivalents, end of year $ 702,521 25,216 702,521 =========== =========== =========== SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for interest $ -- $ -- $ 2,597 =========== =========== =========== Cash paid during the year for income taxes $ -- $ -- $ -- =========== =========== ===========
SUMMARY OF NON-CASH INVESTING AND FINANCING ACTIVITIES During 1998, the Company sold equipment for $4660 in cash, with the purchaser assuming $9,252 in lease obligations. During the year-ended September 30, 1999, the Company issued 451,440 shares of restricted common stock to a Director in exchange for 320,000 shares of unrestricted common stock. During the quarter-ended December 31, 1999, the Company issued 1,128,600 shares of restricted common stock to a Director in exchange for 580,000 shares of unrestricted common stock. See Accompanying notes to financial statements 5 NATIONAL SCIENTIFIC CORPORATION (A Development Stage Company) Unaudited Statements of Changes in Shareholders' Equity (Deficit) For the Years Ended September 30, 1999 and 1998, and For the Quarter Ended December 31, 1999
Common Stock Preferred Stock -------------------- ----------------- Additional Development Number of Number of Paid-In Accumulated Stage Shares Amount Shares Amount Capital Deficit Deficit Total ------ ------ ------ ------ ------- ------- ------- ----- Balance September 30, 1997 17,847,292 $178,473 -- -- 2,160,780 (2,394,680) -- (55,427) Stock issued for services 3,487,557 34,875 -- -- 335,473 -- -- 370,348 Private placement of preferred stock -- -- 49,500 4,950 242,550 -- -- 247,500 Exercise of warrants and options 547,000 5,470 -- -- 100,888 -- -- 106,358 Conversion of preferred to common stock 3,450,000 34,500 (34,500) (3,450) (31,050) -- -- -- Contributed capital -- -- -- -- 14,850 -- -- 14,850 Net loss -- -- -- -- -- -- (772,545) (772,545) ---------- -------- ------- ------ ---------- ---------- ---------- -------- Balance, September 30, 1998 25,331,849 253,318 15,000 1,500 2,823,491 (2,394,680) (772,545) (88,916) ---------- -------- ------- ------ ---------- ---------- ---------- -------- Stock issued for services 3,165,000 31,650 -- -- 315,979 -- -- 347,629 Preferred stock offering -- -- 47,000 4,700 230,300 -- -- 235,000 Exercise of warrants and options 496,000 4,960 -- -- 27,490 -- -- 32,450 Private placement of common stock 400,000 4,000 -- -- 96,000 -- -- 100,000 Conversion of preferred to common stock 6,200,000 62,000 (62,000) (6,200) (55,800) -- -- -- Common stock issued to collateralize loan 500,000 5,000 -- -- -- -- -- 5,000 Stock converted by director's family member 451,440 4,515 -- -- (4,515) -- -- -- Net loss -- -- -- -- -- -- (699,085) (699,085) ---------- -------- ------- ------ ---------- ---------- ---------- -------- Balance, September 30, 1999 36,544,289 365,443 -- -- 3,432,945 (2,394,680) (1,471,630) (67,922) ---------- -------- ------- ------ ---------- ---------- ---------- -------- Stock issued for services 1,375,000 13,750 -- -- 461,070 -- -- 474,820 Preferred stock offering -- -- -- -- -- -- -- -- Exercise of warrants and options 118,000 1,180 -- -- 9,970 -- -- 11,150 Private placement of common stock 3,765,000 37,650 -- -- 712,350 -- -- 750,000 Stock converted by director's family member 1,128,600 11,286 -- -- (11,286) -- -- -- Net loss -- -- -- -- -- -- (594,347) (594,347) ---------- -------- ------- ------ ---------- ---------- ---------- -------- Balance, December 31, 1999 42,930,889 429,309 -- -- 4,605,049 (2,394,680) (2,065,977) 573,701 ========== ======== ======= ====== ========== ========== ========== ======== Receivable for return of stock (5,000) -------- 568,701 ========
See Accompanying notes to financial statements 6 NATIONAL SCIENTIFIC CORPORATION (A Development Stage Company) Notes to Financial Statements December 31, 1999 and 1998 1. BASIS OF PRESENTATION The accompanying financial statements have been prepared by the Company, without audit, and reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods. The statements have been prepared in accordance with generally accepted accounting principles for interim financial reporting and Securities and Exchange Commission regulations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the financial statements reflect all adjustments (of a normal and recurring nature) which are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The results of operations for the three months ended December 31, 1999 are not necessarily indicative of the results to be expected for the entire fiscal year. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's registration statement on Form 10-SB, as amended, for the fiscal year ended September 30, 1999. 2. ISSUANCE OF COMMON STOCK During the quarter ended December 31, 1999, the Company received $750,000 from a private placement of common stock. In conjunction with the offering, the Company issued 600,000 shares of restricted stock valued at $72,000 to a principal and a consultant of the Company. The Company also issued 500,000 shares of restricted common stock to consultants as compensation for services. The stock was valued at 50% of the market price of the stock on the dates granted and earned. 3. STOCK OPTIONS The Company from time to time issues stock options for the purchase of restricted stock to directors, officers, employees and consultants. The Company does not have a qualified stock option plan for its executives and employees. The Company adopted Statement of Financial Accounting Standards No. 123 (FAS 123), "Accounting for Stock-Based Compensation," which permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Under the terms of the Company's stock options granted to certain directors, officers and consultants, the Board of Directors, at its sole discretion, will determine when certain options granted shall be fully vested and exercisable. At December 31, 1999, all outstanding stock options had been deemed vested, and were fully exercisable at fiscal year end. 7 3. STOCK OPTIONS, CONTINUED In accordance with FAS 123, the fair value of option grants is estimated on the date of grant using the Black-Scholes option-pricing model for proforma footnote purposes with the following assumptions used for grants in all years; dividend yield of 0%, risk-free interest rate of 6%, and expected option life of 2.5 years. Expected volatility was assumed to be 50% in 1999. Weighted Number Average of Exercise Shares Price ------ ----- Options Outstanding, September 30, 1999 92,000 $ .10 Granted 256,000 .09 Exercised (118,000) .09 --------- Options Outstanding, December 31, 1999 230,000 .10 ========= 4. NET LOSS PER SHARE Net loss per share is computed by dividing the loss attributable to common shareholders by the weighted average number of shares outstanding during the period, which was assumed to be 40,532,808 and 27,321,904 for the quarters ended December 31, 1999 and 1998, respectively. Stock options and warrants are considered anti-dilutive and were not considered in the calculation. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SAFE HARBOR STATEMENT Certain statements in this Form 10-QSB, including information stated under Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations, constitute "forward-looking statements' within the meaning of the Private Securities Litigation Reform Act of 1995 (the Act). We desire to make available to ourselves certain "safe harbor" provisions of the Act and we are including this special note to enable us to do so. Forward-looking statements in the Form 10-QSB or those included in other publicly available documents filed with the Securities and Exchange Commission, reports to our stockholders and other publicly available statements issued or released by us involve known and unknown risks, uncertainties and other factors which could cause our actual results, performance (financial or operating) or achievements to differ from the future results, performance (financial or operating) or achievements expressed or implied by such forward-looking statements. Such future results are based upon management's best estimates based upon current conditions and the most recent results of operations. THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THREE MONTHS ENDED DECEMBER 31, 1998 We are a development stage company and, therefore, have no revenues to report for the periods indicated above. During the quarter ended December 31, 1999, we completed our private offering of August 1, 1999. We raised a total of $830,000 for the entire offering, with $750,000 of this coming in the quarter ended December 31, 1999. We believe that our cash position of $702,521 as of December 31, 1999, to be sufficient to continue operations for the next twelve months without the need to raise additional funds. Such future requirements are based upon management's best estimates based upon current conditions and the most recent results of operations. In the next twelve months, we expect to increase research and development expenditures with additional staffing under our chief technical consultant, Dr. El-Sharawy. The purpose of these additional expenditures is to bring our existing products closer to the point of market readiness by producing working prototypes along with design and process specifications. There can be no assurance that we will be successful in completing these tasks in the time period estimated. Operating expenses for the three months ended December 31, 1999 of $595,671 are up from the similar period ended December 31, 1998, which were $79,160. This increase, over the similar period last year, was primarily due to the increase in stock compensation to consultants and a principal for the completion of specific patent related projects and completion of the August 1, 1999 private offering. 9 LIQUIDITY AND CAPITAL RESOURCES On December 31, 1999, we completed our private offering of August 1, 1999. The gross proceeds of the offering were $830,000. We believe we presently have sufficient capital to fund our operations. Additional capital may be received as a result of the exercise of warrants to acquire 9,650,000 shares of restricted common stock. The warrants expire on December 31, 2000 and were issued in conjunction with our private offering of March 15, 1998, at an exercise price of $1.00 per share. There can be no assurance, however, that any of these warrants will be exercised. Cash used in operations was $120,814 for the three months ended December 31, 1999 compared with $51,519 for the three month period ended December 31, 1998. A substantial portion of this increase can be attributed to the costs associated with the work done to bring about the filing of our Form 10-SB on December 30, 1999. YEAR 2000 We have conducted a review to identify which systems, both internal and external, may be affected by the "Year 2000" problem. The majority of our business processing applications operate on individual personal computer systems. We believe that the hardware and operating systems are now Year 2000 compliant as of December 31, 1999. If the current systems are not fully Year 2000 compliant, we estimate that the cost associated with becoming Year 2000 compliant will not materially affect our future operating results or financial condition. 10 PART II - OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On December 31, 1999, we completed our private offering of August 1, 1999. A total of $830,000 was raised during the offering. We sold 4,165,000 shares of restricted common stock at an average price of $.20 per share for the entire offering. Of these totals, $750,000 was raised and 3,765,000 shares were sold for the quarter ended December 31, 1999. As part of this offering, we also issued 4,250,000 warrants to purchase a restricted share of common stock at a price of $1.50 for each warrant. These warrants are immediately exercisable and they all expire on December 31, 2001. No warrants have been exercised as of the date of this filing. The shares were sold in reliance on the exemption provided by Sections 4 (2) and 4 (6) of the Securities Act of 1933 and Rule 506 of Regulation D. In addition, during the quarter ending December 31, 1999, 1,375,000 restricted shares of common stock were issued to consultants and a principal for services, including 600,000 restricted shares issued to a consultant and a principal for their completion of the private offering of August 1, 1999; 118,000 restricted shares of common stock were issued due to the exercising of options granted to consultants; and 1,128,600 restricted shares of common stock were issued to a principal as final payment for use of his family's unrestricted common stock for the private offering of August 1, 1999. ITEM 5. OTHER INFORMATION Since the filing of Form 10-SB on December 30, 1999, our Form 10-SB amendment on January 19, 2000 and prior to the filing of this Form 10-QSB, we have learned that the U.S. Patent and Trademark Office has issued two additional patents on the company's behalf; patent 6,008,694 for our Distributed Amplifier And Method Therefor was issued on December 28, 1999 and patent 6,013,939 for our Monolithic Inductor With Magnetic Flux Lines Guided Away From Substrate was issued on January 11, 2000. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27 -- Financial Data Schedule (b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NATIONAL SCIENTIFIC CORPORATION Date: February 15, 2000 /s/ L.L. Ross ---------------------------------------- L.L Ross Chairman of the Board, President & Chief Executive Officer /s/ Vernon M. Traylor ---------------------------------------- Vernon M. Traylor Corporate Secretary 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 1 U.S. DOLLARS 3-MOS SEP-30-2000 OCT-01-1999 DEC-31-1999 1 702,521 0 0 0 0 702,521 6,680 3,674 705,527 26,826 110,000 0 0 429,309 139,392 705,527 0 0 0 0 595,671 0 2,750 (594,347) 0 (594,347) 0 0 0 (594,347) (.01) (.01)
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