Texas |
|
86-0837077 |
(State
of Incorporation) |
|
(I.R.S.
Employer Identification
No.) |
|
|
|
14505
North Hayden Road, Suite 305 |
||
Scottsdale,
AZ |
85260-6951 | |
(Address of Principal Executive
Offices) |
(Zip Code) |
Page | ||
Part I | Financial Information |
3 |
Item 1. | Financial Statements (unaudited) |
3 |
3 | ||
4 | ||
5 | ||
6 | ||
|
7 | |
Item 2. |
12 | |
Item 3. | Controls and Procedures |
16 |
Part II | Other Information |
18 |
Item 1. | Legal Proceedings |
18 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
18 |
Item 3. | Defaults Upon Senior Securities |
18 |
Item 4. | Submission of Matters to a Vote of Security Holders |
18 |
Item 5. | Other Information |
18 |
Item 6. | Exhibits |
18 |
Signatures |
19 | |
Exhibit 31 - Certification Pursuant to Section 302 of the Sarbanes-Oxley Act | ||
Exhibit 32 - Certification Pursuant to Section 906 of the Sarbanes-Oxley Act |
Item 1. |
Financial
Statements |
ASSETS | ||||
Current
Assets: |
||||
Cash
and cash equivalents |
$ |
25,410 |
||
Trade
receivables, net |
26,819
|
|||
Other
receivables, net |
30,093
|
|||
Inventory
(includes goods on consignment, in Canada, on March 31, 2005 of
$27,444) |
66,072
|
|||
Other
assets |
6,873
|
|||
Total
current assets |
155,267 |
|||
|
||||
Property
and equipment, net |
14,350 |
|||
Deposits |
2,000 |
|||
Acquired
investment |
289,100 |
|||
|
||||
|
$ |
460,717 |
||
|
||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY (DEFICIT) | ||||
Current
Liabilities: |
||||
Accounts
payable |
$ |
157,319 |
||
Accrued
expenses |
379,626 |
|||
Note
payable, related party |
100,000 |
|||
Total
current liabilities |
636,945 |
|||
|
||||
Note
payable |
43,250 |
|||
Total
liabilities |
680,195 |
|||
|
||||
Commitments
and contingencies |
— |
|||
|
||||
Shareholders’
equity (deficit): |
||||
Preferred
stock, par value $0.10; 4,000,000 shares authorized, and no shares issued
and outstanding |
— |
|||
Common
stock, par value $0.01; 120,000,000 shares authorized, and 91,500,657
shares issued and outstanding |
915,007 |
|||
Additional
paid-in capital |
22,064,491 |
|||
Accumulated
deficit |
(23,198,976 |
) | ||
Total
shareholders’ equity (deficit) |
(219,478 |
) | ||
|
||||
|
$ |
460,717 |
||
|
Three
Months
Ended
March
31, 2005 |
Three
Months
Ended
March
31, 2004 |
Six
Months
Ended
March
31, 2005 |
Six
Months
Ended
March
31, 2004 |
Development
Stage |
||||||||||||
|
|
|
|
|
|
|||||||||||
Revenues
|
$ |
3,609 |
$ |
36,308 |
$ |
5,472 |
$ |
74,538 |
$ |
1,032,674 |
||||||
|
||||||||||||||||
Cost
of Sales |
2,118 |
24,856 |
3,231 |
55,998 |
956,315 |
|||||||||||
|
||||||||||||||||
Gross
profit |
1,491 |
11452 |
2,241 |
18,540 |
76,359 |
|||||||||||
|
||||||||||||||||
Costs
and expenses |
||||||||||||||||
Salaries
and benefits |
61,113 |
112,346 |
164,914 |
257,395 |
2,735,018 |
|||||||||||
Research
and development |
124,051 |
4,440 |
197,534 |
9,398 |
4,163,926 |
|||||||||||
Stock
compensation |
— |
22,290 |
4,437 |
28,293 |
3,130,552 |
|||||||||||
Consulting
fees, related party |
— |
— |
— |
— |
8,175,973 |
|||||||||||
Other
|
60,694 |
72,446 |
116,682 |
131,170 |
2,784,634 |
|||||||||||
Total
costs and expenses |
245,858 |
211,522 |
483,567 |
426,256 |
20,990,103 |
|||||||||||
Loss
from operations |
(244,367 |
) |
(200,070 |
) |
(481,326 |
) |
(407,716 |
) |
(20,913,
744 |
) | ||||||
|
||||||||||||||||
Other
income (expense) |
||||||||||||||||
Interest
and other income |
— |
— |
— |
— |
178,972 |
|||||||||||
Gain
on settlement |
— |
— |
— |
— |
89,403 |
|||||||||||
Interest
expense |
(4,253 |
) |
(7,342 |
) |
(7,970 |
) |
(10,474 |
) |
(63,780 |
) | ||||||
Loss
on disposal of assets |
— |
— |
— |
— |
(30,960 |
) | ||||||||||
Loss
on impairment of equipment |
— |
— |
— |
— |
(64,187 |
) | ||||||||||
|
(4,253 |
) |
(7,342 |
) |
(7,970 |
) |
(10,474 |
) |
109,448 |
|||||||
Loss
before income taxes |
(248,620 |
) |
(207,412 |
) |
(489,296 |
) |
(418,190 |
) |
(20,804,296 |
) | ||||||
Income
tax expense |
— |
— |
— |
— |
— |
|||||||||||
|
||||||||||||||||
Net
loss |
$ |
(248,620 |
) |
$ |
(207,412 |
) |
$ |
(489,296 |
) |
$ |
(418,190 |
) |
$ |
(20,804,296 |
) | |
|
||||||||||||||||
Net
loss per common share, basic and diluted |
$ |
(0.00 |
) |
$ |
(0.00 |
) |
$ |
(0.01 |
) |
$ |
(0.01 |
) |
||||
|
||||||||||||||||
Weighted
average number of shares outstanding |
89,037,879 |
73,581,446 |
86,665,878 |
72,263,939 |
||||||||||||
|
|
2005
|
2004 |
Development Stage |
|||||||
Cash
flows from operating activities: |
||||||||||
Net
loss |
$ |
(489,296 |
) |
$ |
(418,190 |
) |
$ |
(20,804,296 |
) | |
Adjustments
to reconcile net loss to net cash used in operating
activities: |
||||||||||
Non
cash transactions |
||||||||||
Depreciation
|
6,671 |
6,463 |
85,001 |
|||||||
Loss
on disposal of assets |
— |
— |
30,960 |
|||||||
Impairment
loss on equipment |
— |
— |
64,187 |
|||||||
Stock
and options issued for services, net |
4,437 |
28,293 |
11,632,570 |
|||||||
Other
adjustments for non-cash items |
(25,000 |
) |
— |
(25,000 |
) | |||||
Decrease
(increase) in inventory |
78 |
(50,674 |
) |
(66,072 |
) | |||||
(Increase)
decrease in deferred offering costs |
— |
— |
(85,171 |
) | ||||||
Decrease
(increase) in trade and other receivables |
(31,115 |
) |
(1,800 |
) |
104,812 |
|||||
Decrease
(increase) in other assets |
11,647 |
(20,499 |
) |
(30,026 |
) | |||||
Increase
(decrease) in accounts payable and accrued expenses |
47,774 |
172,252 |
786,401 |
|||||||
Net
cash (used in) operating activities |
(474,804 |
) |
(284,155 |
) |
(8,306,634 |
) | ||||
|
||||||||||
Cash
flows from investing activities: |
||||||||||
Acquisition
of property and equipment |
— |
— |
(155,766 |
) | ||||||
Repayment
of loans |
— |
— |
200,000 |
|||||||
Proceeds
from the sale of furniture and equipment |
— |
— |
6,050 |
|||||||
Loans
issued |
— |
— |
(400,000 |
) | ||||||
Net
cash (used in) provided by investing activities |
— |
— |
(349,716 |
) | ||||||
|
||||||||||
Cash
flows from financing activities: |
||||||||||
Increase
in notes payable |
— |
196,000 |
— |
|||||||
Draws
on the line of credit |
— |
— |
430,000 |
|||||||
Loan
from (to) officer, related party, net |
100,000 |
— |
165,079 |
|||||||
Repayment
of notes payable |
—
|
(5,000 |
) |
(120,000 |
) | |||||
Repayment
of line of credit |
— |
— |
(430,000 |
) | ||||||
Repayment
of capital lease obligations |
— |
— |
(1,819 |
) | ||||||
Proceeds
from the exercise of options |
— |
— |
208,265 |
|||||||
Proceeds
from the exercise of warrants |
— |
— |
92,460 |
|||||||
Proceeds
from equity line of credit |
— |
— |
414,824 |
|||||||
Proceeds
from the issuance of preferred stock |
— |
— |
482,500 |
|||||||
Deposits
from private placement |
—
|
(20,000 |
) |
— |
||||||
Proceeds
from securities exchange agreement |
240,000 |
— |
240,000 |
|||||||
Proceeds
from issuance of common stock |
— |
644,691 |
7,196,833 |
|||||||
Net
cash provided by financing activities |
340,000 |
815,691 |
8,678,142 |
|||||||
|
||||||||||
Net
(decrease) increase in cash and cash equivalents |
(134,804 |
) |
531,536 |
21,792 |
||||||
Cash
and cash equivalents, beginning of period |
160,214 |
17,903 |
3,618 |
|||||||
Cash
and cash equivalents, end of period |
$ |
25,410 |
$ |
549,439 |
$ |
25,410 |
||||
|
||||||||||
Supplementary
Disclosure of Cash Flow Information: |
||||||||||
Cash
paid for interest |
$ |
11 |
$ |
5,211 |
$ |
35,978 |
||||
Cash
paid for income taxes |
$ |
— |
$ |
— |
$ |
50 |
||||
|
|
Common
Stock |
Preferred
Stock |
|
|
|
|||||||||||||||||
|
Number |
|
Number |
|
Additional |
|
|
|||||||||||||||
|
of |
Par |
of |
Par |
Paid-In |
Accumulated |
|
|||||||||||||||
|
Shares |
Value |
Shares |
Value |
Capital |
Deficit |
Total |
|||||||||||||||
|
||||||||||||||||||||||
Balance,
September 30, 2004 |
84,330,669 |
$ |
843,307 |
— |
$ |
— |
$ |
21,627,654 |
$ |
(22,709,680 |
) |
$ |
(238,719 |
) | ||||||||
Stock
Issued for services |
||||||||||||||||||||||
Price
per share ranged |
||||||||||||||||||||||
$0.1608 |
6,218 |
62 |
— |
— |
838 |
— |
900 |
|||||||||||||||
$0.145 |
13,770 |
138 |
— |
— |
1,659 |
— |
1,797 |
|||||||||||||||
Common
stock options granted, net |
— |
— |
— |
— |
1,740 |
— |
1,740 |
|||||||||||||||
|
||||||||||||||||||||||
Securities
Exchange Agreement of common
stock shares for $0.074 |
7,150,000 |
71,500 |
— |
— |
432,600 |
— |
504,100 |
|||||||||||||||
Net
loss |
— |
— |
— |
— |
— |
(489,296 |
) |
(489,296 |
) | |||||||||||||
Balance,
March 31, 2005 |
91,500,657 |
$ |
915,007 |
— |
$ |
— |
$ |
22,064,491 |
$ |
(23,198,976 |
) |
$ |
(219,478 |
) | ||||||||
|
1. |
Basis
of Presentation |
2. |
Issuance
of Common Stock |
3. |
Development
Stage Operations |
4. |
Stock
Options and Warrants |
|
|
Weighted |
Weighted |
|||||||
|
Number
|
Average |
Average |
|||||||
|
of
|
Exercise |
Fair |
|||||||
|
Shares |
Price |
Value |
|||||||
Options
Outstanding, September 30, 2004 |
3,709,257 |
$ |
0.82 |
$ |
0.02 |
|||||
Granted |
40,000 |
0.12 |
0.03 |
|||||||
Exercised
|
— |
— |
— |
|||||||
Canceled
|
— |
— |
— |
|||||||
Expired |
— |
— |
— |
|||||||
Options
Outstanding, March 31, 2005 |
3,749,257 |
$ |
0.82 |
$ |
0.01 |
|||||
Stock
Options Outstanding |
Stock
Options Exercisable |
|||||||||||||||
|
Weighted |
|
|
|
||||||||||||
|
|
Average |
|
|
|
|||||||||||
|
|
Remaining |
Weighted |
|
Weighted |
|||||||||||
|
|
Contractual
|
Average |
|
Average |
|||||||||||
|
|
Number |
Life |
Exercise |
Number |
Exercise |
||||||||||
Range
of Exercise Prices |
Outstanding |
(In
Years) |
Price |
Outstanding |
Price |
|||||||||||
$0.05
to $0.46 |
2,439,257
|
7.9 |
$ |
0.18 |
2,439,257
|
$ |
0.18 |
|||||||||
$0.47
to $1.84 |
1,000,000
|
5.7 |
$ |
1.84 |
1,000,000
|
$ |
1.84 |
|||||||||
$1.85
to $3.00 |
310,000
|
5.8 |
$ |
2.49 |
310,000
|
$ |
2.49 |
|||||||||
Total |
3,749,257
|
6.6 |
$ |
1.43 |
3,749,257
|
$ |
1.43 |
|||||||||
Weighted |
|||||||
Number |
Average |
||||||
of |
Exercise |
Grant
Date |
|||||
Shares |
Price |
Fair
Value |
|||||
1,000,000
|
$ |
0.35 |
$ |
24,000 |
|||
1,000,000
|
0.50
|
13,100
|
|||||
275,000
|
0.50
|
5,590
|
|||||
275,000
|
0.75
|
2,690
|
|||||
640,000
|
0.13
|
41,600
|
|||||
500,000
|
0.10
|
50,650
|
|||||
4,414,739
|
0.11
|
463,106
|
|||||
3,335,961
|
0.11
|
349,942
|
|||||
1,808,497
|
0.10
|
215,573
|
|||||
800,000
|
0.10
|
46,080
|
|||||
14,049,197
|
$ |
1,212,331 |
|||||
5. |
Net
Loss Per Share |
2005 |
2004 |
||||||
Net
(loss) |
$ |
(489,296 |
) |
$ |
(418,190 |
) | |
Weighted
average shares: |
|||||||
Average
shares outstanding |
86,665,878 |
72,263,939 |
|||||
Effect
of diluted shares |
— |
— |
|||||
|
|||||||
Average
Shares outstanding, adjusted for dilutive effect |
86,665,878 |
72,263,939 |
|||||
|
|||||||
(Loss)
per share - basic |
$ |
(0.01 |
) |
$ |
(0.01 |
) | |
|
|||||||
(Loss)
per share - diluted |
$ |
(0.01 |
) |
$ |
(0.01 |
) | |
|
|
2005 |
2004 |
|||||
Employee
options |
3,749,257 |
3,249,757 |
|||||
Warrants |
14,049,197 |
13,516,940 |
|||||
|
|||||||
Potential
common equivalents |
17,798,454 |
16,766,697 |
|||||
|
6. |
Borrowings |
7. |
Subsequent
Events |
Item 2. |
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations |
Item 3. |
Controls
and Procedures |
Item 1. |
Legal
Proceedings. |
Item 2. |
Unregistered
Sales of Equity Securities and Use of
Proceeds. |
Item 3. |
Defaults
Upon Senior Securities. |
Item 4. |
Submission
of Matters to a Vote of Security
Holders. |
Item 5. |
Other
Information. |
Item 6. |
Exhibits. |
Exhibit
Number |
Description | |
10.1 |
Share Exchange Agreement between NSC and TurboWorx * | |
31 |
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act | |
32 |
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act | |
__________ | ||
* Incorporated by reference from the Company’s Form 8-K filing of February 2, 2005. |
NATIONAL SCIENTIFIC CORPORATION | ||
|
|
|
Date: May 14, 2005 | By: | /s/ Michael A. Grollman |
| ||
Michael
A. Grollman
Director,
Chairman, Chief Executive Officer, and
Acting
Chief Financial Officer |
|
|
|
Date: May 14, 2005 | By: | /s/ Graham L. Clark |
| ||
Graham
L. Clark
Director,
President, and
Secretary |
|
|
|
Date: May 14, 2005 | By: | /s/ Gregory Szabo |
| ||
Gregory
Szabo
Director |