SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2002
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: 2-99080
NATIONAL DIVERSIFIED SERVICES, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 11-2820379
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
c/o Lester Morse P.C.
111 Great Neck Road, Suite #420
Great Neck, New York 11021
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (516) 487-1419
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Not Applicable
(Former name, former address and former fiscal year if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 ___.
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6,548,870 Common Shares, $.001 par value were issued and outstanding at November
12, 2002.
NATIONAL DIVERSIFIED SERVICES, INC.
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
September 30, 2002 (Unaudited) and
December 31, 2001
Consolidated Statements of Operations 4
Three Months and Nine months ended September 30,
2002 and September 30, 2001 (Unaudited)
Consolidated Statements of Cash Flows 5
Six Months Ended September 30, 2002 and
September 30, 2001 (Unaudited)
Notes to Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
PART II. OTHER INFORMATION 9
SIGNATURES 10
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
SEPTEMBER 30, DECEMBER 31,
2002 2001
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(Unaudited) (Audited)
CURRENT ASSETS
Cash and cash equivalents $ 126,265 $ 242,603
Securities available-for-sale 100,799
Interest receivable - 1,863
Other current assets 1,656 1,656
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Total assets $ 228,720 $ 246,122
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 72,922 $ 74,962
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Total liabilities 72,922 74,962
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COMMITMENT
STOCKHOLDERS' EQUITY
Common stock, $.001 par value;
Authorized - 30,000,000 shares; issued and
outstanding - 6,553,870 shares 6,554 6,554
Additional paid-in capital 705,755 705,755
Accumulated deficit (556,993) (541,144)
Accumulated other comprehensive
income - unrealized gain 487 -
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155,803 171,165
Less: 5,000 shares of treasury stock, at cost 5 5
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Total stockholders' equity 155,798 171,160
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 228,720 $ 246,122
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See accompanying notes to consolidated financial statements (unaudited).
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
NINE THREE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2002 2001 2002 2001
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INVESTMENT INCOME $ 2,185 $ 9,975 $ 1,362 $ 3,769
GENERAL AND ADMINISTRATIVE
EXPENSES 18,034 15,389 2,128 3,964
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NET LOSS $ (15,849) $ (5,414) $ (766) $ (195)
========== ========= ========= ========
NET LOSS PER SHARE, BASED
ON THE WEIGHTED AVERAGE
SHARES OUTSTANDING $ - * $ - * $ - * $ - *
========= ======== ======== =======
NUMBER OF SHARES USED TO
COMPUTE LOSS PER SHARE 6,548,870 6,548,870 6,548,870 6,548,870
========= ========= ========= =========
*Less than $.01 per share
See accompanying notes to consolidated financial statements (unaudited).
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE
MONTHS ENDED
SEPTEMBER 30,
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (15,849) $ (5,414)
Adjustments to reconcile net loss to net cash
used in operating activities:
Changes in assets and liabilities:
Interest receivable 1,863 (645)
Accounts payable and accrued expenses (2,040) 1,001
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NET CASH USED IN OPERATING ACTIVITIES (16,026) (5,058)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities available-for-sale (100,312) -
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NET CASH USED IN INVESTING ACTIVITIES (100,312) -
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NET CHANGE IN CASH AND CASH EQUIVALENTS (116,338) (5,058)
CASH AND CASH EQUIVALENTS - beginning 242,603 250,618
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CASH AND CASH EQUIVALENTS - ending $ 126,265 $ 245,560
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SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
Unrealized gain on securities available-for-sale 487 -
See accompanying notes to consolidated financial statements (unaudited).
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements do
not include all disclosures required to be included in a complete set of
financial statements prepared in conformity with U.S. generally accepted
accounting principles. In the opinion of management, all adjustments
(consisting of normal recurring accruals) that are considered necessary for
a fair presentation have been included. The results for the nine month
period ended September 30, 2002 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2002. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K
filed on March 28, 2002 for the year ended December 31, 2001.
NOTE 2 - NATURE OF BUSINESS
The Company was organized under the laws of the State of Delaware on May
30, 1985 and was in the development stage until 1989. During November 1989,
the Company began setting up operations to import to the United States
products for sale principally to the hardware and construction markets. Two
wholly-owned subsidiaries were formed to conduct these operations. The
Company commenced operations during the first three months of 1990 and
began billing its customers in April 1990. Billings to customers ended in
June 1990 and the Company terminated its import business. Currently, the
Company is exploring various business opportunities that may be available
to it.
NOTE 3 - PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, which are all wholly-owned and totally inactive. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(UNAUDITED)
NOTE 4 - SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale consist of an investment in Vanguard GNMA
Fund at fair value. The temporary unrealized gain of $487 is reported as a
separate component of stockholders' equity in accumulated other
comprehensive income.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
During the three months and nine months ended September 30, 2002, the
Company had no revenues other than investment income since the Company
terminated its import and sale business operations in 1990. The Company is
presently exploring various business opportunities that may be available to it.
No assurances can be given that the Company will be successful in completing a
transaction to acquire an operating business.
During the three months ended September 30, 2002, there were no
material changes in the financial condition of the Company other than a net loss
of $766 as compared to a net loss of $195 for the comparable period of the prior
year. During the nine months ended September 30, 2002, there were no material
changes in the financial condition of the Company other than a net loss of
$15,849 as compared to a net loss of $5,414 for the comparable period of the
prior year. Further, due to the Company lacking any current business activities
or operations, other than searching for a new business opportunity or merger
candidate, there are no trends or uncertainties that have had or reasonably
expect to have a material favorable or unfavorable impact on revenues or income
(loss) from continuing operations. Further, there are no unusual or infrequent
events or transactions or any significant economic changes that materially
effected the amount of reported income (loss) from continuing operations.
Liquidity and Capital Resources
Financing of the Company's activities has been provided from the
December 1986 initial public offering of its securities for cash amounting to a
net of approximately $600,000. At September 30, 2002, the Company's working
capital amounted to $155,798 with cash and cash equivalents and securities
available for sale aggregating $227,064. Management believes that its cash
assets are adequate to meet the Company's short term and long term liquidity and
cash requirements until such time, if ever, as the Company completes a
transaction to establish an operating business.
The Company has been unable to find a suitable business opportunity or
merger candidate over the last ten years, considering the limited cash resources
available to the Company and that the Company's Common Stock has no active and
established trading market. Nevertheless, Management is continuing to explore
various business opportunities that may be available to it. As of the filing
date of this Form 10-Q, there are no known trends or any known demands,
commitments, events or uncertainties that will result in or that are reasonably
likely to result in the Registrant's liquidity increasing or decreasing in any
material way. Further, at the present time, the Company has no commitments for
capital expenditures and does not anticipate same until it establishes a
business or acquires an operating business, of which there can be no assurances
given.
Item.3 Quantitative and Qualitative Disclosures about Market Risk
The Company's securities available for sale consist of an investment in a mutual
fund whose value is subject to change with market conditions. The mutual fund
invests in U.S. Government obligations whose terms may be more than one year.
In addition, the Company's cash equivalents are invested in a brokerage account
subject to changes in interest rates. The Company manages its market risk by
periodically changing its investments. The Company has no assets and
liabilities which are denominated in a currency other than U.S. dollars or
involve commodity price risks.
Item 4. Controls and Procedures
The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Company's
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms, and that such information
is accumulated and communicated to the Company's management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure based closely on the definition of
"disclosure controls and procedures" in Rule 13a-14(c). In designing and
evaluating the disclosure controls and procedures, management recognized that
any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Within 90 days
prior to the date of this report, the Company carried out an evaluation, under
the supervision and with the participation of the Company's management,
including the Company's Chief Executive Officer and the Company's Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on the foregoing, the
Company's Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective. There have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect the internal controls subsequent to the date the
Company completed its evaluation. Therefore, no corrective actions were taken.
NATIONAL DIVERSIFIED SERVICES, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings: None
Item 2. Changes in Securities: None
Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders:
None
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits -
3 Certificate of Incorporation and Amendments thereto (1)
3 (A) By-Laws (1)
11. Statement Re: Computation of Earnings per share (see "Financial
Statements").
21 Subsidiaries of Registrant (2)
99 Form of Warrants granted to Morry Rubin and George Rubin (4)
99.1 Form of Warrant granted to Stacy Goldberg (3)
99.2 Form of Warrant granted to Lester Morse and Steven Morse (4)
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(1) Exhibits 3 and 3(A) are incorporated by reference from Registration No.
99080 which were filed in a Registration Statement on Form S-18.
(2) The Company had no active subsidiaries during the year ended December
31, 2001.
(b) No reports on Form 8-K were filed during the quarter ended September
30, 2002.
NATIONAL DIVERSIFIED SERVICES, INC.
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 DIVERSIFIED SERVICES, INC.
(Registrant)
Dated: November 13, 2002 /s/Morry Rubin
Morry Rubin, President, Chief Executive,
Financial and Accounting Officer
CERTIFICATION
I, Morry F. Rubin, Chief Executive Officer and Chief Financial Officer of
the Registrant, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of National
Diversified Services, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I am responsible for
establishing and maintaining disclosure control and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entitles, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: November 13, 2002 /s/ Morry F. Rubin
Morry F. Rubin,
Chief Executive Officer and
Chief Financial Officer
Correspondence Filing
Certification Pursuant to 18 U.S.C.ss.1350
In connection with the filing with the United States Securities and
Exchange Commission of National Diversified Services, Inc.'s (the "Company")
Quarterly Report on Form 10-Q for the period ended September 30, 2002 (the
"Report"), the undersigned, the Chief Executive Officer and the Chief Financial
Officer of the Company, hereby certify that (i) in our capacities as officers of
the Company, (ii) to each of our own respective actual knowledge, and (iii)
solely for the purpose of compliance with 18 U.S.C.ss.1350, that:
(1) the Report fully complies with the requirements of ss.13(a)
or 15(d) of the Securities Exchange Act of 1934, as
amended; and
(2) the information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
The above certification is given as of the date of the Report
and is limited to the periods covered by the Report.
IN WITNESS WHEREOF, the undersigned have executed this
Certificate on November 13, 2002.
By: /s/Morry F. Rubin
Chief Executive Officer
By: /s/ Morry F. Rubin
Chief Financial Officer