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 June 30, 2003
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.
(Exact name of Registrant as specified in its charter)
Delaware 11-2820379
(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
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (516) 487-1419
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 ___.
6,548,870 Common Shares, $.001 par value were issued and outstanding at August
4, 2003.
NATIONAL DIVERSIFIED SERVICES, INC.
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
June 30, 2003 (Unaudited) and
December 31, 2002
Consolidated Statements of Operations 4
Three Months and Six Months ended June 30, 2003,
and June 30, 2002 (Unaudited)
Consolidated Statements of Cash Flows 5
Three Months and Six Months Ended June 30, 2003 and
June 30, 2002 (Unaudited)
Notes to Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of
Operations
PART II. OTHER INFORMATION 9
SIGNATURES 10
2
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
JUNE 30, DECEMBER 31,
2003 2002
----------- -----------
(Unaudited) (Audited)
CURRENT ASSETS:
Cash and cash equivalents $ 109,058 $ 123,337
Securities available-for-sale 104,725 101,993
----------- -----------
Total assets $ 213,783 $ 225,330
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 70,414 $ 74,232
----------- -----------
Total liabilities 70,414 74,232
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value:
Authorized - 30,000,000 shares; issued and
outstanding - 6,548,870 shares 6,549 6,549
Additional paid-in capital 705,755 705,755
Accumulated deficit (568,849) (560,968)
Accumulated other comprehensive loss (86) (238)
----------- -----------
Total stockholders' equity 143,369 151,098
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 213,783 $ 225,330
=========== ===========
See accompanying notes to consolidated financial statements (unaudited).
3
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
SIX THREE
MONTHS ENDED MONTHS ENDED
JUNE 30, JUNE 30,
2003 2002 2003 2002
REVENUES $ 3,163 $ 823 $ 1,498 $ 777
GENERAL AND ADMINISTRATIVE
EXPENSES 11,044 15,906 4,732 13,215
------------ ------------ ------------ ------------
NET LOSS (7,881) (15,083) (3,234) (12,438)
OTHER COMPREHENSIVE LOSS, NET OF TAX:
Unrealized gains/(losses) on securities:
Unrealized holding gain/(loss)
arising during period 152 - (194) -
------------ ------------ ------------ ------------
COMPREHENSIVE LOSS $ (7,729) $ (15,083) $ (3,428) $ (12,438)
------------ ------------ ------------ ------------
BASIC AND DILUTED NET LOSS PER SHARE $ - * $ - * $ - * $ - *
------------ ------------ ------------ ------------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 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).
4
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY
ACCUMULATED
ADDITIONAL OTHER
COMMON STOCK PAID-IN ACCUMULATED COMPREHENSIVE
SHARES AMOUNT CAPITAL DEFICIT GAIN (LOSS ) TOTAL
BALANCE AT DECEMBER 31, 2002
(Audited) 6,548,870 $6,549 $ 705,755 $ (560,968) $ (238) $ 151,098
COMPREHENSIVE LOSS (Unaudited):
Net loss - - - (7,881) - (7,881)
Other comprehensive gain (loss),
net of tax:
Unrealized gains on securities:
Unrealized holding gains arising
during the period - - - - 152 152
----------- ----------- ----------- ----------- ----------- ----------
Total comprehensive loss (7,729)
BALANCE AT JUNE 30, 2003
(Unaudited) 6,548,870 $6,549 $ 705,755 $ (568,849) $ (86) $(143,369)
=========== =========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements (unaudited).
5
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX
MONTHS ENDED
JUNE 30,
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (7,881) $ (15,083)
Adjustments to reconcile net loss to net cash
used in operating activities:
Changes in assets and liabilities:
Interest receivable - 1,213
Accounts payable and accrued expenses (3,818) (143)
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (11,699) (14,013)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available-for-sale (2,580) -
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (2,580) -
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (14,279) (14,013)
CASH AND CASH EQUIVALENTS - beginning 123,337 242,603
------------ ------------
CASH AND CASH EQUIVALENTS - ending $ 109,058 $ 228,590
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 380 $ 300
============ ============
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Unrealized gain on securities available-for-sale $ 152 $ -
============ ============
See accompanying notes to consolidated financial statements (unaudited).
6
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(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 six month
period ended June 30, 2003 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2003. 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
20, 2003 for the year ended December 31, 2002.
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.
8
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(UNAUDITED)
NOTE 4 - REVENUE RECOGNITION
The Company's only revenues are derived from investments. Investment income
is recognized when earned.
NOTE 5 - USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The amounts at which current assets and current liabilities are presented
in the balance sheet approximate their fair value due to their short-term
nature.
9
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
During the three months and six months ended June 30, 2003 and 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 June 30, 2003, there were no material changes
in the financial condition of the Company other than a net loss of $3,234 as
compared to a net loss of $12,438 for the comparable period of the prior year.
During the six months ended June 30, 2003, there were no material changes in the
financial condition of the Company other than a net loss of $7,881 as compared
to a net loss of $15,083 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 June 30, 2003, the Company's working capital amounted
to $143,369 with cash and cash equivalents and securities available for sale
aggregating $213,783.
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.
11
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)
99.1 Certification of Chief Executive Officer and Chief
Financial Officer (3)
________________
(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 quarter ended June 30,
2003.
(3) Filed herewith.
(b) No reports on Form 8-K were filed or required to be filed during
the quarter ended June 30, 2003.
12
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: August 4, 2003 /s/Morry Rubin
-------------------------------------------
Morry F. Rubin, President, Chief Executive,
Financial and Accounting Officer
13
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: August 4, 2003 /s/ Morry F. Rubin
___________________________
Morry F. Rubin,
Chief Executive Officer and
Chief Financial Officer
14
Exhibit 99.1
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 June 30, 2003 (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
August 4, 2003.
By: /s/Morry F. Rubin
___________________________
Chief Executive Officer
By: /s/ Morry F. Rubin
___________________________
Chief Financial Officer
15