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, 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.
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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 ___.
6,548,870 Common Shares, $.001 par value were issued and outstanding at November
6, 2003.
NATIONAL DIVERSIFIED SERVICES, INC.
INDEX
Page Number
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 2003 (Unaudited) and 3
December 31, 2002
Consolidated Statements of Operations
Three Months and Nine months ended September 30,
2003 and September 30, 2002 (Unaudited) 4
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2003 and
September 30, 2002 (Unaudited) 5
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
ASSETS
SEPTEMBER 30, DECEMBER 31,
2003 2002
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(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents ............................. $ 103,919 $ 123,337
Securities available-for-sale ......................... 104,565 101,993
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Total assets ........................... $ 208,484 $ 225,330
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses ................. $ 71,145 $ 74,232
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Total liabilities ...................... 71,145 74,232
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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 ................................... (573,524) (560,968)
Accumulated other comprehensive loss .................. (1,441) (238)
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Total stockholders' equity ............. 137,339 151,098
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............... $ 208,484 $ 225,330
============ ===========
See accompanying notes to consolidated financial statements.
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
NINE THREE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
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2003 2002 2003 2002
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REVENUES .................................. $ 4,572 $ 2,185 $ 1,409 $ 1,362
GENERAL AND ADMINISTRATIVE
EXPENSES ............................... 17,128 18,034 6,083 2,128
----------- ----------- ----------- -----------
NET LOSS .................................. (12,556) (15,849) (4,674) (766)
OTHER COMPREHENSIVE LOSS, NET OF TAX:
Unrealized gains/(losses) on securities:
Unrealized holding gain/(loss)
arising during period ............. (1,441) - (1,355) -
----------- ----------- ----------- -----------
COMPREHENSIVE LOSS ........................ $ (13,997) $ (15,849) $ (6,029) $ (766)
=========== =========== =========== ===========
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.
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
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COMPREHENSIVE LOSS (Unaudited):
Net loss ..................................... - - - (12,556) - (12,556)
Other comprehensive gain (loss),
net of tax:
Unrealized gains on securities:
Unrealized holding gains arising
during the period ...................... - - - - (1,203) (1,203)
------------ ------------ ------------ ------------ ------------ ------------
Total comprehensive loss ............... (13,759)
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BALANCE AT SEPTEMBER 30, 2003
(Unaudited) ................................ 6,548,870 $ 6,549 $ 705,755 $ (573,524) $ (1,441) $ (137,339)
============ ============ ============ ============ ============ ============
See accompanying notes to consolidated financial statements.
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE
MONTHS ENDED
SEPTEMBER 30,
--------------
2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ....................................... $ (12,556) $ (15,849)
Adjustments to reconcile net loss to net cash
used in operating activities:
Changes in assets and liabilities:
Interest receivable ...................... - 1,863
Accounts payable and accrued expenses .... (3,087) (2,040)
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NET CASH USED IN OPERATING ACTIVITIES ............. (15,643) (16,026)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available-for-sale ..... (3,775) (100,312)
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NET CASH USED IN INVESTING ACTIVITIES ............. (3,775) (100,312)
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NET CHANGE IN CASH AND CASH EQUIVALENTS ........... (19,418) (116,338)
CASH AND CASH EQUIVALENTS - beginning ............. 123,337 242,603
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CASH AND CASH EQUIVALENTS - ending ................ $ 103,919 $ 126,265
============ ============
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Unrealized gain on securities available-for-sale $ 1,203 $ 487
============ ============
See accompanying notes to consolidated financial statements.
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 nine month
period ended September 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.
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NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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. Significant estimates made by management include the fair value
of securities.
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.
NOTE 7 - SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale consist of an investment in Vanguard GNMA
Fund at fair value. Temporary unrealized gains and losses are reported as a
separate component of stockholders' equity in accumulated other
comprehensive income.
8
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, 2003, 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, 20023 there were no material
changes in the financial condition of the Company other than a net loss of
$4,674 as compared to a net loss of $766 for the comparable period of the prior
year. During the nine months ended September 30, 2003, there were no material
changes in the financial condition of the Company other than a net loss of
$12,556 as compared to a net loss of $15,849 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, 2003, the Company's working capital
amounted to $137,339 with cash and cash equivalents and securities available for
sale aggregating $208,484. 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.
9
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.
10
NATIONAL DIVERSIFIED SERVICES, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings: None
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Item 2. Changes in Securities: None
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Item 3. Defaults Upon Senior Securities: None
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Item 4. Submission of Matters to a Vote of Security Holders: None
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Item 5. Other Information: None
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Item 6. Exhibits and Reports on Form 8-K:
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(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)
(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, 2003.
11
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.
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(Registrant)
Dated: November 11, 2003 /s/Morry Rubin
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Morry Rubin, President, Chief Executive,
Financial and Accounting Officer
12