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. |
13
|
|
Item 3. | Controls and Procedures |
18
|
Part II | Other Information |
20
|
Item 1. | Legal Proceedings |
20
|
Item 2. |
20
|
|
Item 3. | Defaults Upon Senior Securities |
20
|
Item 4. |
20
|
|
Item 5. | Other Information |
20
|
Item 6. | Exhibits |
20
|
Signatures |
21
|
|
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
|
$
|
15,384
|
||
Trade
receivables, net
|
21,328
|
|||
Inventory,
net of obsolescence reserve of $32,282
|
32,282
|
|||
Other
assets
|
2,790
|
|||
Total
current assets
|
71,784
|
|||
|
||||
Property
and equipment, net
|
10,860
|
|||
Deposits
|
2,000
|
|||
Investment
in common stock
|
289,100
|
|||
|
$
|
373,744
|
||
|
||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY (DEFICIT)
|
||||
Current
Liabilities:
|
||||
Accounts
payable
|
$
|
194,920
|
||
Accrued
expenses
|
476,216
|
|||
Note
payable, related party
|
159,000
|
|||
Other
notes payable and advance
|
73,750
|
|||
Total
current liabilities
|
903,886
|
|||
|
||||
Note
payable
|
—
|
|||
Total
liabilities
|
903,886
|
|||
|
||||
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; 187,000,000 shares authorized, and 91,536,459
shares issued and outstanding
|
915,365
|
|||
Additional
paid-in capital
|
22,068,801
|
|||
Accumulated
deficit
|
(23,514,308
|
)
|
||
Total
shareholders’ equity (deficit)
|
(530,142
|
)
|
||
|
||||
|
$
|
373,744
|
||
|
Three
Months
Ended
June
30, 2005
|
Three
Months
Ended
June
30, 2004
|
Nine
Months
Ended
June
30, 2005
|
Nine
Months
Ended
June
30, 2004
|
Development
Stage
|
||||||||||||
Revenues
|
$
|
24,157
|
$
|
4,031
|
$
|
29,629
|
$
|
78,569
|
$
|
1,056,831
|
||||||
Cost
of Sales
|
14,680
|
2,719
|
17,911
|
58,717
|
970,995
|
|||||||||||
Gross
profit
|
9,477
|
1,312
|
11,718
|
19,852
|
85,836
|
|||||||||||
|
|
|
||||||||||||||
Costs
and expenses
|
|
|
||||||||||||||
Salaries
and benefits
|
86,847
|
183,290
|
251,761
|
440,685
|
2,821,865
|
|||||||||||
Research
and development
|
96,795
|
8,652
|
294,329
|
18,050
|
4,260,721
|
|||||||||||
Stock
compensation
|
4,668
|
22,178
|
9,105
|
50,471
|
3,135,220
|
|||||||||||
Consulting
fees, related party
|
—
|
—
|
—
|
—
|
8,175,973
|
|||||||||||
Other
|
97,497
|
78,774
|
214,179
|
209,944
|
2,882,131
|
|||||||||||
Inventory
obsolescence charge
|
32,282
|
—
|
32,282
|
—
|
32,282
|
|||||||||||
Total
costs and expenses
|
318,089
|
292,894
|
801,656
|
719,150
|
21,308,192
|
|||||||||||
|
|
|
|
|
|
|||||||||||
Loss
from operations
|
(308,612
|
)
|
(291,582
|
)
|
(789,938
|
)
|
(699,298
|
)
|
(21,222,356
|
)
|
||||||
|
|
|
||||||||||||||
Other
income (expense)
|
|
|
||||||||||||||
Interest
and other income
|
—
|
—
|
—
|
—
|
178,972
|
|||||||||||
Gain
on settlement
|
—
|
—
|
—
|
—
|
89,403
|
|||||||||||
Interest
expense
|
(6,720
|
)
|
(8,178
|
)
|
(14,690
|
)
|
(18,652
|
)
|
(70,500
|
)
|
||||||
Loss
on disposal of assets
|
—
|
—
|
—
|
—
|
(30,960
|
)
|
||||||||||
Loss
on impairment of equipment
|
—
|
—
|
—
|
—
|
(64,187
|
)
|
||||||||||
|
(6,720
|
)
|
(8,178
|
)
|
(14,690
|
)
|
(18,652
|
)
|
102,728
|
|||||||
|
|
|
|
|
|
|||||||||||
Loss
before income taxes
|
(315,332
|
)
|
(299,760
|
)
|
(804,628
|
)
|
(717,950
|
)
|
(21,119,628
|
)
|
||||||
Income
tax expense
|
—
|
—
|
—
|
—
|
—
|
|||||||||||
|
|
|
||||||||||||||
Net
loss
|
$
|
(315,332
|
)
|
$
|
(299,760
|
)
|
$
|
(804,628
|
)
|
$
|
(717,950
|
)
|
$
|
(21,119,628
|
)
|
|
|
|
|
|
|
|
|||||||||||
Net
loss per common share, basic and diluted
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
||||
|
|
|
|
|
||||||||||||
Weighted
average number of shares outstanding
|
91,518,361
|
83,921,036
|
88,283,373
|
76,149,638
|
||||||||||||
|
2005
|
|
2004
|
Development Stage
|
||||||
Cash
flows from operating activities:
|
|
|
|
|||||||
Net
loss
|
$
|
(804,628
|
)
|
$
|
(717,950
|
)
|
$
|
(21,119,628
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|||||||||
Non
cash transactions
|
|
|||||||||
Depreciation
|
10,161
|
9,789
|
88,491
|
|||||||
Loss
on disposal of assets
|
—
|
—
|
30,960
|
|||||||
Impairment
loss on equipment
|
—
|
—
|
64,187
|
|||||||
Stock
and options issued for services, net
|
9,105
|
50,471
|
11,637,238
|
|||||||
Other
adjustments for non-cash items
|
(25,000
|
)
|
—
|
(25,000
|
)
|
|||||
Decrease
(increase) in inventory
|
33,868
|
(55,524
|
)
|
(32,282
|
)
|
|||||
(Increase)
decrease in deferred offering costs
|
—
|
—
|
(85,171
|
)
|
||||||
Decrease
(increase) in trade and other receivables
|
4,469
|
13,200
|
110,303
|
|||||||
Decrease
(increase) in other assets
|
15,730
|
14,029
|
4,150
|
|||||||
Increase
(decrease) in accounts payable and accrued expenses
|
181,965
|
67,050
|
920,592
|
|||||||
Net
cash (used in) operating activities
|
(574,330
|
)
|
(618,935
|
)
|
(8,406,160
|
)
|
||||
|
||||||||||
Cash
flows from investing activities:
|
|
|
|
|||||||
Acquisition
of property and equipment
|
—
|
(2,074
|
)
|
(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
|
—
|
(2,074
|
)
|
(349,716
|
)
|
|||||
|
||||||||||
Cash
flows from financing activities:
|
|
|
|
|||||||
Increase
in notes payable
|
30,500
|
—
|
30,500
|
|||||||
Draws
on the line of credit
|
—
|
—
|
430,000
|
|||||||
Loan
from (to) officer, related party, net
|
159,000
|
—
|
224,079
|
|||||||
Repayment
of notes payable
|
—
|
(7,500
|
)
|
(120,000
|
)
|
|||||
Repayment
of line of credit
|
—
|
—
|
(430,000
|
)
|
||||||
Repayment
of capital lease obligations
|
—
|
—
|
(1,819
|
)
|
||||||
Proceeds
from the exercise of options
|
—
|
9,675
|
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
|
—
|
1,045,044
|
7,196,833
|
|||||||
Net
cash provided by financing activities
|
429,500
|
1,027,219
|
8,767,642
|
|||||||
|
||||||||||
Net
(decrease) increase in cash and cash equivalents
|
(144,830
|
)
|
406,210
|
11,766
|
||||||
Cash
and cash equivalents, beginning of period
|
160,214
|
17,903
|
3,618
|
|||||||
|
||||||||||
Cash
and cash equivalents, end of period
|
$
|
15,384
|
$
|
424,113
|
$
|
15,384
|
||||
|
||||||||||
Supplementary
Disclosure of Cash Flow Information:
|
|
|
|
|||||||
Cash
paid for interest
|
$
|
145
|
$
|
10,493
|
$
|
36,112
|
||||
|
||||||||||
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
|
|||||||||||||||
$0.0711
|
10,373
|
104
|
560
|
664
|
||||||||||||||||||
$0.088
|
25,429
|
254
|
1,760
|
2,014
|
||||||||||||||||||
Common
stock options granted, net
|
—
|
—
|
—
|
—
|
3,730
|
—
|
3,730
|
|||||||||||||||
Securities
exchange agreement of common stock shares for
$0.074
|
7,150,000
|
71,500
|
—
|
—
|
432,600
|
—
|
504,100
|
|||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
(804,628
|
)
|
(804,628
|
)
|
|||||||||||||
Balance,
June 30, 2005
|
91,536,459
|
$
|
915,365
|
—
|
$
|
—
|
$
|
22,068,801
|
$
|
(23,514,308
|
)
|
$
|
(530,142
|
)
|
||||||||
|
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
|
80,000
|
0.10
|
0.03
|
|||||||
Exercised
|
—
|
—
|
—
|
|||||||
Canceled
|
—
|
—
|
—
|
|||||||
Expired
|
—
|
—
|
—
|
|||||||
Options
Outstanding, June 30, 2005
|
3,789,257
|
$
|
0.81
|
$
|
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
|
2,479,257
|
7.8
|
$
|
0.18
|
2,479,257
|
$
|
0.18
|
|||||||||
$0.47
to $1.84
|
1,000,000
|
5.4
|
$
|
1.84
|
1,000,000
|
$
|
1.84
|
|||||||||
$1.85
to $3.00
|
310,000
|
5.6
|
$
|
2.49
|
310,000
|
$
|
2.49
|
|||||||||
Total
|
3,789,257
|
6.6
|
$
|
0.81
|
3,789,257
|
$
|
0.81
|
|||||||||
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
|
||||
135,000
|
0.062
|
3,051
|
||||
14,184,197
|
$
|
1,215,382
|
||||
5. |
Net
Loss Per Share
|
2005
|
2004
|
||||||
|
|||||||
Net
(loss)
|
$
|
(804,628
|
)
|
$
|
(717,950
|
)
|
|
Weighted
average shares:
|
|||||||
Average
shares outstanding
|
88,283,373
|
76,149,638
|
|||||
Effect
of diluted shares
|
—
|
—
|
|||||
|
|||||||
Average
Shares outstanding, adjusted for dilutive effect
|
88,283,373
|
76,149,638
|
|||||
|
|||||||
(Loss)
per share - basic
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
|
|
|||||||
(Loss)
per share - diluted
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
|
|
|
2005
|
2004
|
|||||
|
|||||||
Stock
options
|
3,789,257
|
3,312,257
|
|||||
Warrants
|
14,049,197
|
18,249,197
|
|||||
|
|||||||
Potential
common equivalents
|
17,838,454
|
21,561,454
|
|||||
|
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
|
|
31
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act | |
32
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Certification Pursuant to Section 906 of the Sarbanes-Oxley Act |
NATIONAL SCIENTIFIC CORPORATION | ||
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Date: August 12, 2005 | By: | /s/ Michael A. Grollman |
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Michael
A. Grollman
Director,
Chairman, Chief Executive Officer, and
Acting
Chief Financial Officer
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Date: August 12, 2005 | By: | /s/ Graham L. Clark |
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Graham
L. Clark
Director,
President, and
Secretary
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Date: August 12, 2005 | By: | /s/ Gregory Szabo |
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Gregory
Szabo
Director
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