SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE
REQUIRED)
For the fiscal year ended December 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ________ to ________
Commission File Number: 2-99080-NY
National Diversified Services, Inc.
----------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 11-2820379
- ----------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
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
---------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
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 .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in part III of this
Form 10-K or any amendment to this Form 10-K [x].
As of March 1, 2004, the aggregate number of shares of the voting stock
held by non-affiliates was 1,762,870 shares of Common Stock, $.001 par value.
See "Item 5" regarding a sporadic market for the Company's Common Stock.
The number of shares outstanding of the Issuer's Common Stock, as of March
1, 2004 was 6,548,870.
PART I
Item 1. Business
General
National Diversified Services, Inc. ("National" or the "Company") was
incorporated under the laws of the State of Delaware on May 30, 1985.
National's business purpose is to seek and review acquisition
possibilities, and to make one or more acquisitions or enter into business
endeavors and provide opportunities for strong organic growth.
Business Strategy
The Company is seeking one or more potential business opportunities through
the acquisition of existing businesses, assets to establish subsidiary
businesses for the Company, a statutory merger or consolidation or the
establishment of a new business or industry. However, due to the limited working
capital of the Company, it is likely that the Company will enter into only one
business transaction.
The Company may also seek to acquire one or more majority and/or wholly
owned equity positions in other companies through the direct purchase of stock.
Such equity positions will be limited by Section 3(a)(3) of the Investment
Company Act of 1940 (the "1940 Act"), in that the Company will not be permitted
to own or propose to acquire investment securities having a value exceeding 40%
of the Company's total assets (exclusive of government securities and cash
items) on an unconsolidated basis.
The Company may provide debt financing to companies in which it has taken
(or intends to take) an equity position. Such financing would generally be made
on an unsecured basis. In no event will the Company provide financing for or
take equity positions in companies where the aggregate of such investments would
cause the Company to be required to register under the 1940 Act.
Present Management of the Company may or may not become involved as
management in the aforementioned business or subsidiary or may hire qualified
but as yet unidentified management personnel. There can, however, be no
assurance whatsoever that the Company will be able to acquire a business.
A potential acquisition of a business may involve the acquisition of, or
merger with, a company which does not need additional capital but which desires
to establish a public trading market for its shares. A company that seeks the
Company's participation in attempting to consolidate its operations through a
merger, reorganization, asset acquisition, or some other form of combination may
desire to do so to avoid what it may deem to be adverse consequences of itself
undertaking a public offering including the inability or unwillingness to comply
with various federal and state laws enacted for the protection of investors.
Factors considered may include time delays, significant
2
expense, loss of voting control. In connection with such acquisition, it is
possible that an amount of stock constituting control of the Company would be
purchased from the Company or its current officers, directors and stockholders
resulting in substantial profits to such persons without similar profits being
realized by other stockholder. Moreover, no assurance can be given with respect
to the experience or qualifications of as yet unknown persons who may, in the
future, engage in the operations of the Company or any business or subsidiary
acquired by the Company. In the event of a change in control of the Company and
its Board of Directors, the payment of dividends would be wholly dependent upon
such persons. Furthermore, it is impossible as yet to determine what, if any,
consequences applicable state law may provide to the Company's shareholders in
any merger or reorganization.
General Policy
The Company may establish or acquire a business and/or invest in one or
more new and developing corporations, whether directly or by way of statutory
merger, which the Management of the Company determines will offer significant
long-term growth potential. In the case of an equity position, the Company will
seek to acquire primarily a majority owned and wholly owned capital stock
position in such corporation. The Company is not restricted to any particular
industry and may engage in any line of business. Accordingly, Management's
discretion as to the type of businesses and equity investments is unlimited.
Management assumes that any business to be acquired and/or equity
investment made by the Company, whether directly or by way of statutory merger,
will involve a business that is new and unseasoned, or a business that has been
operating for a limited period of time and has a limited or unsuccessful record
of revenues or earnings. Investments in start-up enterprises result in a higher
risk of total loss of investment by the Company. Except in cases of a merger or
other instances where stockholders' approval may be required by applicable law,
the Company's stockholders will not have the opportunity to review the relative
merits or weaknesses of any proposed business to be acquired or equity
investment to be made and, accordingly, will have to rely upon the discretion of
Management in selecting a business or investment.
The Company has identified certain general policies which will be
considered by the Company in evaluating business acquisition candidates and
investment possibilities. These policies are listed below. In no event will the
Company provide financing or take equity positions in companies where the
aggregate of such investments would cause the Company to be required to register
under the 1940 Act.
1. The Company will examine the products or services of a business being
considered to determine whether a market exists for the products or services and
whether the business can manufacture and/or market the products or produce the
services at a competitive cost.
2. The Company will invest in a corporation that it believes has a strong
potential for growth. The Company will evaluate the corporation's business and
determine the quality and experience of its management.
3
3. The Company may invest in an operating corporation that has experienced
increases in gross revenues which exceed industry averages. The market for the
corporation's products will be evaluated by determining the relationship of
size, growth potential and competitive factors in that corporation's industry.
This may include the purchase of businesses which offer opportunities for
consolidation.
4. The Company will also consider the following factors: (1) special risks
associated with the business and the industry, (2) equity available to the
business, (3) capital requirements of the business, (4) potential for
profitability and (5) the effect of market and economic conditions and
governmental policies on the business and its products.
It is unlikely that any one prospective corporation with which the Company
may seek to enter a relationship will conform in all respects to the policies
described above. Accordingly, this description is intended to serve only as a
general guide for the Company's projected investment activities. These policies
are not fundamental policies of the Company and may be changed at any time by
the Company's Board of Directors.
The Company intends to actively participate (through present Management or
presently unidentified individuals who may be hired by the Company) in the
management of the operations of any business or subsidiary in which it acquires
an interest. In order to accomplish this objective in the case of a subsidiary,
the Company will be represented on the board of directors of such target
corporation through a nominee of its choice. In addition, where the Company
deems it beneficial, the Company may also have a nominee of its choice elected
as an officer. Such nominee is expected to be an officer or director of the
Company. The objective of such acquisition(s) will be to enhance that
corporation's capabilities through active management as well as financial
support.
The Company anticipates that it will be brought into contact with a
prospective business acquisition or equity investment primarily through the
efforts of its officers, directors and principal stockholders who in the course
of their professional activities frequently come into contact with corporations
whose products, services or concepts may be subject to successful development
and marketing. In such connection, the Company may pay a finder's fee to such
officers, directors, principal stockholders or their affiliates. Any such
payment would not be higher than that which would ordinarily be paid to a
non-affiliated person. The Company proposes to make a business acquisition or
equity investment and to provide interim financing which will assist such
organization in the development of these products, services and concepts. To
date, the Company does not have any contracts or commitments with anyone or any
firm with regard to these business activities. The Company also does not have
any arrangements or understandings with respect to the acquisition of any
business entity or the acquisition of any interest therein.
The Company may use independent consultants (who may agree to receive stock
of the Company in payment for their services in lieu of cash) to explore areas
of, and to seek out, acquisition prospects. Such independent consultants would
be expected to have such expertise or knowledge which would be of use to
Management in any investment decision. The Company has not engaged any
independent consultants as of March 1, 2004
4
At this time, Management believes the Company's equity investments will be
made in private transactions with privately owned corporations. Securities
acquired in this manner are restricted from public sale unless they are
registered under the Securities Act of 1933, or unless an exemption from
registration is available.
Government Regulation
The Company may be subject to government regulations promulgated by various
local, state and Federal government agencies with regard to its proposed
business. Additionally, the Company, in the purchase of equity positions, will
be subject to various rules and regulations promulgated by the Securities and
Exchange Commission and the various state securities commissions. Company does
not intend to engage in the business of investing, reinvesting, owning, holding
or trading in securities or otherwise engaging in activities which would render
the Company an "investment company" as defined in the Investment Company Act of
1940, as amended.
The Company's financing activities will be limited by Section 3(a)(3) of
the Investment Company Act of 1940 in that the Company will not be permitted to
own or propose to acquire investment securities having a total value exceeding
40% of the value of the Company's total assets (excluding government securities
and cash items) on an unconsolidated basis. The Company is permitted under
Section 3(a)(3) of the 1940 Act to own or propose to own securities of a
majority owned subsidiary which is defined under Section 2(a)(24) of the 1940
Act to mean 50% or more of the outstanding securities of which are owned by the
Company or a majority owned subsidiary of the Company. Notwithstanding Section
3(a)(3) of the 1940 Act, the Company would not be considered an investment
company where it is engaged directly or indirectly through a wholly-owned
subsidiary (which is defined to mean at least 95% ownership of the outstanding
voting stock), in a business or businesses, other than that of investing,
owning, holding or trading in securities.
In addition to the limitations by the Investment Company Act of 1940 as
mentioned above, there are a number of other provisions of the Federal
securities laws which will affect the Company's proposed investments.
Most, if not all, of the securities which the Company acquires as equity
investments will be "Restricted securities" within the meaning of the Securities
Act of 1933 ("Securities Act") and will not be permitted to be resold without
compliance with the Securities Act. The registration of securities owned by the
Company is likely to be a time consuming and expensive process, and the Company
always bears the risk, because of these delays, that it will be unable to resell
such securities, or that it will not be able to obtain an attractive price for
the securities. In the event the Company does not register securities it
acquires for sale, it will seek to rely upon an exemption from registration.
Among other exemptions, Rule 144 of the Securities Act of 1933, as amended,
imposes a one year holding period prior to the sale of restricted securities and
established volume limitations on the amount of any restricted securities that
can be sold within certain defined time periods.
Competition
There are numerous similar companies which are larger, have more
experience, and are better financed than the Company. The Company may encounter
intense competition from numerous other
5
firms engaged in its field. In view of the Company's lack of operating history,
it may be anticipated that the Company will encounter competition seeking
relatively more desirable equity investments. Accordingly, the Company's
proposed equity investments, if any, will entail a high degree of business and
financial risk that may result in substantial losses to the Company.
Personnel
The Company presently has no full-time employees. The day-to-day operations
of the Company are managed by George Rubin, the Company's Chairman, and Morry F.
Rubin, its President, each of whom devotes such time to the affairs of the
Company which is necessary for the performance of his duties.
Item 2. Properties
Currently the Company is utilizing the office space of its counsel,
Morse & Morse, PLLC, at no cost to the Company until an acquisition is
consummated or a business is established. The amount of office space utilized by
the Company is currently insignificant.
Item 3. Legal Proceedings
There are no material legal proceedings pending against the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable.
6
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
From the completion of the Company's public offering in December 1986 until
the present time, the Company's securities have been traded in the
over-the-counter market. The Company believes that there is not an active
trading market for the Company's Common Stock and quotations for, and
transactions in the securities are limited. Price quotations for prior periods
are not being supplied herein because in view of the infrequent trading in the
securities, they would not be meaningful.
Management has been advised by its transfer agent (American Stock Transfer
& Trust Company) that the approximate number of holders of the Company's Common
Stock as of March 1, 2004 was approximately 325.
No cash dividends have been paid by the Company on its Common Stock and no
such payment is anticipated in the foreseeable future.
Of the Company's issued and outstanding 6,548,870 shares of Common Stock as
of March 1, 2004, 5,790,300 shares of the Company's restricted Common Stock may
be eligible for sale in compliance with Rule 144. Rule 144 provides among other
things and subject to certain limitations that a person holding restricted
securities for a period of one year may sell those securities in brokerage
transactions, in an amount equal to at least 1% of the Company's outstanding
Common Stock every three months. Possible or actual sales of the Company's
Common Stock under Rule 144 may have a depressive effect upon the price of the
Company's Common Stock if any meaningful market were to develop for the
Company's Common Stock. Notwithstanding anything contained herein to the
contrary, the Securities and Exchange Commission may take the position that the
restricted Common Stock of the Company is not eligible for sale under Rule 144
and must be registered for sale under the Securities Act of 1933, as amended.
Broker-Dealer Sales of Company's Registered Securities.
Except where the Company's Common Stock has a market price of at least
$5.00 per share, the Company's Registered Securities are covered by a Securities
and Exchange Commission ("SEC") rule that imposes additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and institutional accredited investors. For transactions
covered by the rule, the broker-dealer must make a special suitability
determination for the purchaser and receive the purchaser's written agreement to
the transaction prior to the sale. Consequently, the rule affects the ability of
broker-dealers to sell the Company's securities and also may affect the ability
of purchasers in this offering to sell their securities in the secondary market.
The SEC has adopted seven rules ("Rules") under the Securities Exchange Act
of 1934 requiring broker/dealers engaging in certain recommended transactions
with their customers in specified equity securities falling within the
definition of "penny stock" (generally non-NASDAQ
7
securities priced below $5 per share) to provide to those customers certain
specified information. Unless the transaction is exempt under the Rules,
broker/dealers effecting customer transactions in such defined penny stocks are
required to provide their customers with: (1) a risk disclosure document; (2)
disclosure of current bid and ask quotations, if any; (3) disclosure of the
compensation of the broker/dealers and its salesperson in the transaction; and
(4) monthly account statements showing the market value of each penny stock held
in the customer's account. These SEC Rules were adopted in April, 1992 pursuant
to the requirements of the Securities Enforcement Remedies and Penny Stock
Reform Act of 1990 ("Penny Stock Act").
As a result of the aforesaid rules regulating penny stocks, the market
liquidity for the Company's securities, if any, may be severely adversely
affected by limiting the ability of broker-dealers to sell the Company's
securities and the ability of purchasers of the Company's securities in the
secondary market.
Recent Sales of Unregistered Securities
During 2003, the Company did not issue any unregistered securities.
Recent Repurchases of Equity Securities
During 2003, the Company did not repurchase any securities of the Company.
Item 6. Selected Financial Data.
Consolidated Statements of Operations Summary:
======================== =================== ===================== ==================== ==================== =====================
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
2003 2002 2001 2000 1999
- ------------------------ ------------------- --------------------- -------------------- -------------------- ---------------------
Net Sales** $ 5,979 $ 4,531 $11,645 $15,851 $ 13,384
- ------------------------ ------------------- --------------------- -------------------- -------------------- ---------------------
Comprehensive Loss
$(17,591) $(20,062) $(8,808) (13,323) (4,514)
- ------------------------ ------------------- --------------------- -------------------- -------------------- ---------------------
Loss
Per Common Share
* * * * *
======================== =================== ===================== ==================== ==================== =====================
* Less than $.01 per share. ** Represents interest and dividend income.
8
Consolidated Balance Sheets Summary:
========================== =================== ==================== ==================== ==================== ====================
December 31, December 31, December 31, December 31, December 31,
2003 2002 2001 2000 1999
- -------------------------- ------------------- -------------------- -------------------- -------------------- --------------------
Working Capital $ 133,507 $151,098 $ 171,160 $179,968 $ 252,041
- -------------------------- ------------------- -------------------- -------------------- -------------------- --------------------
Total Share-
holders'Equity $ 133,507 179,968 193,291
$151,098 $ 171,160
- -------------------------- ------------------- -------------------- -------------------- -------------------- --------------------
Total
Assets $ 202,867 $225,330 $ 246,122 253,905 256,885
========================== =================== ==================== ==================== ==================== ====================
------------
The foregoing is selected financial information only, and is qualified by the
consolidated Financial Statements and the Notes thereto, in their entirety,
which are set forth elsewhere herein.
Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
During the past three years, except for interest income, no revenues were
received by the Company. The Company is presently exploring various business
opportunities that may be available to it. See "Item 1." No assurances can be
given that the Company will be successful in completing a transaction to acquire
an operating business.
During 2003, there were no material changes in the financial condition of
the Company. During 2003, 2002 and 2001, the Company incurred a comprehensive
loss of $17,591, $20,062 and $8,808, respectively. 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 affected 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 December 31, 2003, the Company's working capital
amounted to $133,507 with cash and cash equivalents and securities available for
sale aggregating $202,867. Management believes that its cash assets are adequate
to meet the Company's short term and long term liquidity and cash
9
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 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-K, 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 7(a).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 8. Financial Statements and Supplementary Data.
The information required by Item 8, appears at pages F-1 through F-13
(inclusive) of this Report, which pages follow this page.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
10
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
INDEPENDENT AUDITORS' REPORT F-1
CONSOLIDATED BALANCE SHEETS F-2
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS F-3
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-6 - F-10
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
National Diversified Services, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of National
Diversified Services, Inc. and Subsidiaries as at December 31, 2003 and 2002,
and the related consolidated statements of operations and comprehensive loss,
stockholders' equity and cash flows, for each of the three years ended December
31, 2003. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of National Diversified
Services, Inc. and Subsidiaries as at December 31, 2003 and 2002, and the
results of their operations and their cash flows for each of the three years
ended December 31, 2003, in conformity with accounting principles generally
accepted in the United States of America.
MILLER, ELLIN & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York
March 12, 2004
F-1
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31,
-------------------------
2003 2002
---------- ----------
CURRENT ASSETS:
Cash $ 97,682 $ 123,337
Securities available-for-sale 105,185 101,993
----------- -----------
Total assets $ 202,867 $ 225,330
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 69,360 $ 74,232
----------- -----------
Total liabilities 69,360 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 (576,764) (560,968)
Accumulated other comprehensive loss (2,033) (238)
----------- -----------
Total stockholders' equity 133,507 151,098
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 202,867 $ 225,330
=========== ===========
See accompanying notes to consolidated financial statements.
F-2
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
YEARS ENDED DECEMBER 31,
2003 2002 2001
-------------- -------------- --------------
Interest and dividend income $ 5,979 $ 4,531 $ 11,645
General and administrative expenses (21,775) (24,355) (20,453)
-------------- -------------- --------------
NET LOSS (15,796) (19,824) (8,808)
Other comprehensive loss, net of tax:
Unrealized losses on securities:
Unrealized holding loss arising during the period (1,795) (238) -
-------------- -------------- --------------
COMPREHENSIVE LOSS $ (17,591) $ (20,062) $ (8,808)
============== ============== ==============
Loss per common share $ (0.00) $ (0.00) $ (0.00)
============== ============= =============
Weighted average number of common
shares outstanding 6,548,870 6,548,870 6,548,870
============== ============= =============
See accompanying notes to consolidated financial statements.
F-3
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
ACCUMULATED
ADDITIONAL OTHER
COMMON STOCK PAID-IN ACCUMULATED COMPREHENSIVE
--------------------------
SHARES AMOUNT CAPITAL DEFICIT LOSS
----------- ------------- ---------------- -------------------- ------------------
BALANCE AT JANUARY 1, 2001 6,553,870 $ 6,554 $ 705,755 $ (532,336) $ -
Net loss - - - (8,808) -
----------- ------------- ---------------- -------------------- ------------------
BALANCE AT DECEMBER 31, 2001 6,553,870 6,554 705,755 (541,144) -
Retirement of treasury stock (5,000) (5) - - -
COMPREHENSIVE LOSS:
Net loss - - - (19,824) -
Other comprehensive loss, net of tax:
Unrealized losses on securities:
Unrealized holding losses arising
during the period - - - - (238)
----------- ------------- ---------------- -------------------- ------------------
Total comprehensive loss
BALANCE AT DECEMBER 31, 2002 6,548,870 6,549 705,755 (560,968) (238)
COMPREHENSIVE LOSS:
Net loss - - - (15,796) -
Other comprehensive loss, net of tax:
Unrealized losses on securities:
Unrealized holding losses arising
during the period - - - - (1,795)
----------- ------------- ---------------- -------------------- ------------------
Total comprehensive loss
BALANCE AT DECEMBER 31, 2003 6,548,870 $ 6,549 $ 705,755 $ (576,764) $ (2,033)
=========== ============= ================ ==================== ==================
See accompanying notes to consolidated financial statements.
F-4
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
TREASURY STOCK
--------------------------
SHARES AMOUNT TOTAL
----------- ------------- ----------------
BALANCE AT JANUARY 1, 2001 (5,000) $ (5) $ 179,968
Net loss - - (8,808)
----------- ------------- ----------------
BALANCE AT DECEMBER 31, 2001 (5,000) (5) 171,160
----------------
Retirement of treasury stock 5,000 5 -
COMPREHENSIVE LOSS:
Net loss - - (19,824)
Other comprehensive loss, net of tax:
Unrealized losses on securities:
Unrealized holding losses arising
during the period - - (238)
----------- ------------- ----------------
Total comprehensive loss (20,062)
----------------
BALANCE AT DECEMBER 31, 2002 - - 151,098
----------------
COMPREHENSIVE LOSS:
Net loss - - (15,796)
Other comprehensive loss, net of tax:
Unrealized losses on securities:
Unrealized holding losses arising
during the period - - (1,795)
----------- ------------- ----------------
Total comprehensive loss (17,591)
----------------
BALANCE AT DECEMBER 31, 2003 - $ - $ 133,507
=========== ============= ================
See accompanying notes to consolidated financial statements.
F-5
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
2003 2002 2001
------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (15,796) $ (19,824) $ (8,808)
Adjustments to reconcile net loss to net
cash used in operating activities:
Bad debt expense - 1,656 -
Changes in assets and liabilities:
Interest receivable - 1,863 (232)
Accounts payable and accrued expenses (4,872) (730) 1,025
------------- ------------- -------------
NET CASH USED IN OPERATING ACTIVITIES (20,668) (17,035) (8,015)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available-for-sale (4,987) (102,231) -
------------- ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (4,987) (102,231) -
------------- ------------- -------------
NET CHANGE IN CASH (25,655) (119,266) (8,015)
CASH - beginning 123,337 242,603 250,618
------------- ------------- -------------
CASH - ending $ 97,682 $ 123,337 $ 242,603
============= ============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash investing and financing activities:
Unrealized loss on securities available-for-sale $ (1,795) $ (238) $ -
============= ============= =============
Retirement of treasury stock $ - $ 5 $ -
============= ============= =============
See accompanying notes to consolidated financial statements.
F-6
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 AND 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Operations
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.
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.
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 valuation
of securities and the deferred tax asset allowance.
Fair Value of Financial Instruments
The amounts at which current assets and current liabilities are presented
approximate their fair value due to their short-term nature.
Valuation of Securities
Quoted market prices are used to value securities. Purchases and sales of
securities are recorded on a trade date basis. Gains and losses on
securities sold are based on the average cost method. Unrealized gains and
losses are reported in accumulated other comprehensive income or loss as a
separate component of stockholders' equity.
Concentrations of Credit Risk
The Company maintains its cash and securities with a high credit quality
financial institution. These balances are not insured.
F-7
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 AND 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment
The Company's property and equipment is carried at cost. Equipment totaling
$1,534 has been fully depreciated using the straight-line method over the
estimated useful lives of the individual classes of assets. No depreciation
expense has been recorded during the years ended December 31, 2003, 2002
and 2001.
Revenue Recognition
The Company's only revenue is investment income, which is recognized as
earned.
Comprehensive Income
The Company accounts for comprehensive income in accordance with Statement
of Financial Accounting Standards No. 130 "Reporting Comprehensive Income
(SFAS No. 130)," which requires comprehensive income and its components to
be reported when a company has items of other comprehensive income.
Comprehensive income includes net income plus other comprehensive income
(i.e., certain revenues, expenses, gains and losses reported as separate
components of stockholders' equity rather than in net income). The
Company's other comprehensive losses represent unrealized holding losses on
securities available-for-sale.
Income Taxes
The Company utilized SFAS No. 109, "Accounting for Income Taxes," which
requires the use of the liability method of accounting for income taxes.
The liability method measures deferred income taxes by applying enacted
statutory rates in effect at the balance sheet date to the differences
between the tax basis of assets and liabilities and their reported amounts
of the financial statements. The resulting deferred tax assets or
liabilities are adjusted to reflect changes in tax laws as they occur.
Equity-Based Awards
The Company applied Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for its equity-based compensation plans prior to January 1,
2003. Accordingly, no compensation expense has been recorded for stock
warrants granted. Effective January 1, 2003, the Company adopted the fair
value recognition provisions, prospectively to all employee awards granted,
modified or settled after January 1, 2003.
F-8
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 AND 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Equity-Based Awards (Continued)
There were no equity-based awards granted, modified or settled during 2003,
2002 and 2001. If the fair- value based method had been applied to all
awards granted, modified, or settled in years beginning after December 15,
1994, there would be no effect on net loss as reported in the accompanying
financial statements for 2003, 2002 and 2001.
Loss Per Share
Basic loss per share is calculated by dividing net loss by the weighted
average number of shares of common stock outstanding. Stock warrants have
not been included in the calculation of diluted loss per share, as the
exercise price of the stock warrants was greater than market price of the
common stock and, therefore, the effect would have been antidilutive.
Accordingly, basic and dilutive loss per share are the same for the
Company.
New Accounting Pronouncements
During 2003, the Financial Accounting Standards Board (FASB) issued SFAS
No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities;" SFAS No. 150, "Accounting for Certain Financial Instruments
With Characteristics of Both Liabilities and Equities;" SFAS No. 132
(revised 2003), "Employers' Disclosures About Pensions and Other
Postretirement Benefits;" FASB Interpretation 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees;" and FASB Interpretation 46,
"Consolidation of Variable Interest Entities." The adoption of these new
standards did not materially affect the Company's operating results or
financial condition.
NOTE B - SECURITIES AVAILABLE-FOR-SALE
The following table presents the fair values of securities
available-for-sale at December 31, 2003 and 2002:
2003 2002
---------- ----------
Vanguard GNMA Mutual Fund $ 105,185 $ 101,993
---------- ----------
$ 105,185 $ 101,993
========== ==========
F-9
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 AND 2001
NOTE C - INCOME TAXES
Deferred tax assets at December 31, is summarized below.
2003 2002
------------ ------------
Net operating loss carryforwards $ 211,997 $ 204,960
Valuation allowance (211,997) (204,960)
------------ ------------
$ - $ -
============ ============
At December 31, 2003 and 2002, a valuation allowance of 100% is provided as
it is uncertain if the deferred tax asset will be utilized in the future.
The Company's valuation allowance increased by $7,037, $8,329, and $3,523
during 2003, 2002 and 2001, respectively.
Reconciliation of the statutory rate to the effective income tax rate is as
follows:
2003 2002 2001
------------- ------------- -------------
Net loss $ (17,591) $ (19,824) $ (8,808)
------------- ------------- -------------
Tax at federal statutory rate (5,981) (7,080) (2,995)
State income tax (1,056) (1,249) (528)
Valuation allowance 7,037 8,329 3,523
------------- ------------- -------------
$ - $ - $ -
============= ============= =============
At December 31, 2003, the Company had unused net operating loss
carryforwards of approximately $486,000 expiring at various dates through
2017.
NOTE D - CAPITAL TRANSACTIONS
Effective December 31, 2002, the Company passed a resolution to retire its
5,000 shares of treasury stock.
F-10
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2002 AND 2001
NOTE E - EQUITY-BASED AWARDS
During 1997, the Company entered into an arrangement with certain officers
and stockholders pursuant to which they received warrants to purchase
2,000,000 shares of the Company's common stock at an exercise price of
$0.03 per share at any time until November 21, 2007. In November 1997, the
Company granted to an officer warrants to purchase 100,000 shares of the
Company's common stock identical to those granted to the officers and
stockholders referred to above in consideration of continuing to serve as
an officer and a director of the Company.
During 1997, the Company also granted warrants to purchase an aggregate of
200,000 shares of the Company's common stock at an exercise price of $0.03
per share to certain non-affiliated persons in connection with legal
services rendered to the Company. These warrants expire on November 21,
2007.
Officers & Officer &
Directors Non-Affiliates Director
----------------- ----------------- -----------------
Date of grant November 21, 1997 November 24, 1997 November 25, 1997
Expiration date November 21, 2007 November 21, 2007 November 21, 2007
Warrants outstanding and
exercisable 2,000,000 200,000 100,000
Exercise price $0.03 $0.03 $0.03
Quoted market price at date of grant $0.00 $0.00 $0.00
NOTE F - RELATED PARTY TRANSACTIONS
Accrued salaries payable to an officer and stockholder of the Company
aggregated $58,750 at December 31, 2003 and 2002, and are included in
accounts payable and accrued expenses.
During 2003, 2002 and 2001, the Company utilized the office space of its
general counsel at no cost to the Company. The amount of office space
utilized by the Company is considered insignificant.
F-11
PART III
Item 10. Directors and Executive Officers of the Registrant.
(a) Identification of Directors
The names, ages and principal occupations of the Company's
present directors, and the date on which their term of office commenced and
expires, are as follows:
First
Term of Became Principal
Name Age Office Director Occupation
George Rubin 76 (1) 1989 Private Investor
Morry Rubin 44 (1) 1998 Private Investor
Stacy Goldberg 41 (1) 1995 Private Investor
- ------------------
(1) Directors are elected at the annual meeting of stockholders and hold office
to the following annual meeting.
(b) Identification of Executive Officers.
George Rubin is Chairman of the Board of Directors. Morry F. Rubin is
President, Chief Executive Officer, Principal Financial Officer and Treasurer of
the Company. Stacy Goldberg is Secretary of the Company. George Rubin is the
father of Stacy Goldberg and Morry F. Rubin. The Company's By-Laws provide that
the terms of all officers expire at the annual meeting of directors following
the annual stockholders meeting.
(c) Business Experience
George Rubin has been Chairman of the Board of Directors of the Company
since December 1989 and served as its and President, Chief Executive Officer and
Chief Financial and Accounting Officer and Treasurer of the Company from August
1995 until February, 1998. George Rubin has been Executive Vice President of
Preferred People Staffing LLC since September 1998 and is a Member-Manager of
Venturesforth LLC. Preferred People Staffing is a provider of temporary workers
for light industrial and unskilled manual labor jobs. Venturesforth is a holding
company and is currently the owner of the governance units of Preferred People
Staffing. George Rubin served as Chairman of the Board of ATC Group Services
Inc. (formerly ATC Environmental Inc.) from June 1988 until February 1998. Mr.
Rubin devotes such time to the Company as is necessary for the performance of
his duties.
11
Morry F. Rubin has served as President, Chief Executive Officer, Treasurer
and Chief Financial Officer of the Company since February 1998. From June 1985
to August 1995, Mr. Rubin served as an executive officer and director of the
Company. Morry Rubin has been Chairman of Preferred People Staffing LLC since
September 1998 and a Member-Manager of Venturesforth LLC. Preferred People
Staffing is a provider of temporary workers for light industrial and unskilled
manual labor jobs. Venturesforth is a holding company and is currently the owner
of the governance units of Preferred People Staffing. Mr. Rubin was President,
Chief Executive Officer and Treasurer of ATC Group Services Inc. (formerly ATC
Environmental Inc.) from January 1988 to February 1998 and a director of ATC
from January 1988 to January 1998. Mr. Rubin devotes such time to the Company as
is necessary for the performance of his duties.
Stacy Goldberg has served as a director and Secretary of the Company since
August 1995. From 1987 to January 1998, she was an Office Manager of ATC Group
Services Inc. Ms. Goldberg devotes such time to the Company as is necessary for
the performance of her duties.
Committees
The Company has no standing audit, nominating and compensation committees
of the Board of Directors or committees performing similar functions. Under the
Sarbanes-Oxley Act of 2002, each public company is required to have an audit
committee consisting solely of independent directors. In the event the public
company does not have an audit committee, the Board of Directors becomes charged
with the duties of the audit committee. Since the enactment of the
Sarbanes-Oxley Act of 2002 which was signed into law by President Bush in July
2002, the Company's directors have, without success, attempted to obtain
independent directors to serve on the Board of Directors and on a newly formed
audit committee. In the event the Company is successful in the future in
obtaining independent directors to serve on the Board of Directors and on a
newly formed audit committee, of which there can be no assurances given, the
Board of Directors would first adopt a written charter. Such charter would be
expected to include, among other things:
. annually reviewing and reassessing the adequacy of the committee's
formal charter;
. reviewing the annual audited financial statements with the Company's
management and its independent auditors and the adequacy of its
internal accounting controls;
. reviewing analyses prepared by the Company's management and
independent auditors concerning significant financial reporting issues
and judgments made in connection with the preparation of its financial
statements;
. being directly responsible for the appointment, compensation and
oversight of the independent auditor, which shall report directly to
the Audit Committee, including resolution of disagreements between
management and the auditors regarding financial reporting for the
purpose of preparing or issuing an audit report or related work;
. reviewing the independence of the independent auditors;
12
. reviewing the Company's auditing and accounting principles and
practices with the independent auditors and reviewing major changes to
its auditing and accounting principles and practices as suggested by
the independent auditor or its management;
. reviewing all related party transactions on an ongoing basis for
potential conflict of interest situations; and
. all responsibilities given to the Audit Committee by virtue of the
Sarbanes-Oxley Act of 2002, which was signed into law by President
George W. Bush on July 30, 2002.
Code of Ethics
Effective March 3, 2003, the Securities & Exchange Commission requires
registrants like the Company to either adopt a code of ethics that applies to
the Company's Chief Executive Officer and Chief Financial Officer or explain why
the Company has not adopted such a code of ethics. For purposes of item 406 of
Regulation S-K, the term "code of ethics" means written standards that are
reasonably designed to deter wrong doing and to promote:
o Honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
o Full, fair, accurate, timely and understandable disclosure in reports
and documents that the Company files with, or submits to, the
Securities & Exchange Commission and in other public communications
made by the Company;
o Compliance with applicable governmental law, rules and regulations;
o The prompt internal reporting of violations of the code to an
appropriate person or persons identified in the code; and
o Accountability for adherence to the code.
In this respect, the Company has adopted a code of ethics which has been
filed as Exhibit 14.1 to this Form 10-K. Changes to the Code of Ethics will be
filed under a Form 8-K or quarterly or annual report under the Exchange Act.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our officers and directors, and persons who own more than ten percent of a
registered class of our equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the
"Commission"). The Company is not subject to the reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934.
13
Item 11. Executive Compensation.
During the past three years, no executive officer or director has any
employment contract with the Company or received any cash or other compensation
issued in 1997. Directors do not presently receive compensation (other than
Warrants described herein) for serving on the board, although the Company will
reimburse its directors for out-of-pocket travel expenditures. Depending upon
the number of meetings and the time required for the Company's operations, the
Company may decide to compensate its directors in the future. See Item 13.
George Rubin served as Chief Executive Officer of the Company during 1997
before his son, Morry F. Rubin, was elected Chief Executive Officer of the
Company on February 1, 1998. The following is the summary compensation table for
the Company's two officers for 2003, 2002 and 2001.
14
SUMMARY COMPENSATION TABLE
======================================================================================================================
Long Term Compensation
- ----------------------------------------------------------------------------------------------------------------------
Annual Compensation Awards Payouts
- ------------ ------ ------------- ------------- ------------- ------------- -------------- ----------- ---------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Name Annual Restricted Other Compen-
and Compen- Stock Number of LTIP sation
Principal sation Award(s) Options/ Payouts ($)
Position Year Salary ($) Bonus ($) ($) ($) Warrants ($)
- ------------ ------ ------------- ------------- ------------- ------------- -------------- ----------- ---------------
2003 -0- -0- -0- -0- -0- -0- -0-
George
Rubin, ------ ------------- ------------- ------------- ------------- -------------- ----------- ---------------
Chairman
of 2002 -0- -0- -0- -0- -0- -0- -0-
the ------ ------------- ------------- ------------- ------------- -------------- ----------- ---------------
Board
2001 -0- -0- -0- -0- -0- -0- -0-
- ------------ ------ --------------- ----------- ------------ ------------- -------------- ----------- ---------------
Morry F. 2003 -0- -0- -0- -0- -0- -0- -0-
Rubin, ------ --------------- ----------- ------------ ------------- -------------- ----------- ---------------
Chief 2002 -0- -0- -0- -0- -0- -0- -0-
Executive ------ ------------- ------------- ------------- ------------- -------------- ----------- ---------------
Officer 2001 -0- -0- -0- -0- -0- -0- -0-
============ ====== ============= ============= ============= ============= ============== =========== ===============
15
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTIONS/WARRANTS VALUES
The information provided in the table below provides information with
respect to each exercise of the Company's stock options/warrants during fiscal
2003 by each of the executive officers named in the summary compensation table
and the fiscal year end value of unexercised options/warrants.
========================== ============== =============== ========================== ============================
(a) (b) (c) (d) (e)
Value
of
Number of Unexercised
Unexercised In-the-Money
Shares Options/Warrants Options/Warrants
Acquired on Value at FY-End (#) at Fy-End($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($)(1) Unexercisable Unexercisable(1)
- -------------------------- -------------- --------------- -------------------------- ----------------------------
George Rubin -0- -0- 1,000,000 / -0- N/A
- -------------------------- -------------- --------------- -------------------------- ----------------------------
Morry F. Rubin -0- -0- 1,000,000 / -0- N/A
========================== ============== =============== ========================== ============================
- ----------
(1) The aggregate dollar values in column (c) and (e) are required to be
calculated by determining the difference between the fair market value
of the Common Stock underlying the options/warrants and the exercise
price of the options/warrants at exercise or fiscal year end,
respectively. In calculating the dollar value realized upon exercise,
the value of any payment of the exercise price is not included.
However, since there is a limited public market for the Company's
Common Stock, no calculation is included in column (e) and N/A (not
applicable) is placed in the table above.
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.
As of March 1, 2004, the only persons of record who held or were known to
own (or believed by the Company to own) beneficially more than 5% of the
outstanding 6,548,870 shares of Common Stock of the Company (the only voting
security) were as indicated in the table below. Such table also sets forth the
beneficial ownership of executive officers, directors, both individually and as
a group.
Approximate
Number of Percent
Name Shares of Class
- ----------------- --------- -------------
Morry F. Rubin
(1)(2)(3)(4) 3,403,000 45.1
George Rubin (1)(2)(3)(4) 3,383,000 44.8
Stacy Goldberg (3)(5) 100,000 *
All officers and
directors as a
group (three persons)(4) 6,786,000 79.4
- ---------------
17
* Represents less than one percent of the Company's outstanding shares of Common
Stock.
(1) May be deemed to be a founder, control person or affiliate of the
Company under the Securities Act of 1933, as amended.
(2) George Rubin is the father of Morry F. Rubin and Stacy Goldberg.
Shares owned by George Rubin do not include shares owned by Morry F.
Rubin and shares owned by Morry F. Rubin do not include shares owned
by George Rubin.
(3) All addresses are c/o Lester Morse P.C., 111 Great Neck Road, Great
Neck, New York 11021.
(4) Includes Warrants to purchase 1,000,000 shares at an exercise price of
$.03 per share and exercisable at any time until November 21, 2007.
(5) Includes Warrants to purchase 100,000 shares at an exercise price of
$.03 per share and exercisable at any time until November 21, 2007.
The Company does not know of any arrangement or pledge of its
securities by persons now considered in control of the Company that might result
in a change of control of the Company.
Item 13. Certain Relationships and Related Transactions.
Between December 1986 to November 22, 1989, accrued salaries payable
to Morry Rubin amounted to $58,750. These monies are payable on demand and are
reflected in accounts payable and accrued expenses.
The Company had an arrangement with George Rubin and Morry Rubin
pursuant to which each received Warrants to purchase 1,000,000 shares of the
Company's Common Stock at an exercise price of $.03 per share at any time until
November 21, 2007 in exchange for them making available to the Company an
aggregate line of credit of up to $500,000. As of December 31, 2003, this line
of credit was terminated without ever having been drawn down upon. In November
1997, the Company granted Stacy Goldberg Warrants to purchase 100,000 shares of
the Company's Common Stock identical to those granted to George Rubin and Morry
Rubin in consideration of her continuing to serve as a director of the Company.
In November 1997, the Company also granted Warrants to purchase an
aggregate of 200,000 shares of the Company's Common Stock at an exercise price
of $.03 per share to certain non-affiliates persons in connection with legal
services rendered to the Company. These Warrants expire on November 21, 2007.
On December 31, 2002, the Company's Board of Directors adopted a
resolution to retire its 5,000 shares of treasury stock to the status of
authorized but unissued shares of Common Stock.
Item 14. Controls and Procedures.
- ------- ------------------------
18
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, 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 recognizes 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.
Item 15. Principal Accountant Fees and Services.
Audit Fees
For the fiscal year ended December 31, 2003, the aggregate fees billed for
professional services rendered by Miller, Ellin & Co. ("independent auditors")
for the audit of the Company's annual financial statements and the reviews of
its financial statements included in the Company's quarterly reports totaled
approximately $13,283.
Financial Information Systems Design and Implementation Fees
For the fiscal year ended December 31, 2003, there were $-0- in fees billed
for professional services by the Company's independent auditors rendered in
connection with, directly or indirectly, operating or supervising the operation
of its information system or managing its local area network.
All Other Fees
For the fiscal year ended December 31, 2003, there was $1,028 in fees and
computer processing billed for preparation of corporate tax returns rendered by
the Company's independent auditors.
Item 16. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)(1)(2) Financial Statements and Financial Statement
Schedules.
19
A list of the Financial Statements and Financial Statement Schedules
filed as a part of this Report is set forth in Item 8, and appears at Page F-1
of this Report; which list is incorporated herein by reference.
(a)(3) 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").
14 Code of Ethics (4)
21 Subsidiaries of Registrant (2)
31 Chief Executive Officer and Chief Financial Officer
Rule 13a-14(a)/15d-14(a) Certification (4)
32 Chief Executive Officer and Chief Financial Officer
Section 1350 Certification (4)
99 Form of Warrants granted to Morry Rubin and George Rubin (3)
99.1 Form of Warrant granted to Stacy Goldberg (3)
99.2 Form of Warrant granted to Lester Morse and Steven Morse (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 year ended December
31, 2002.
(3) Incorporated by reference to the Company's Form 10-K for its fiscal
year ended December 31, 1997.
(4) Filed herewith.
(b) Reports on Form 8-K.
No Form 8-K was filed or required to be filed during the
fourth quarter of 2003.
SIGNATURES
Pursuant to the requirements Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
NATIONAL DIVERSIFIED SERVICES, INC.
BY: /s/ George Rubin
------------------------------------
George Rubin, Chairman of the Board
Dated: March 23, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature Title Date
- --------- ------ ----
President, Chief
Executive Officer,
Treasurer, Principal
Financial and
/s/ Morry Rubin Accounting Officer March 23, 2004
- ------------------------- and Director
MORRY RUBIN
/s/ Stacy Goldberg Director and Secretary March 23, 2004
- -------------------------
STACY GOLDBERG
/s/ George Rubin Chairman of the Board March 23, 2004
- -------------------------
GEORGE RUBIN
20