SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2004
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
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NATIONAL DIVERSIFIED SERVICES, INC.
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(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
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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
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(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
September 30, 2004.
NATIONAL DIVERSIFIED SERVICES, INC.
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
September 30, 2004 (Unaudited) and
December 31, 2003
Consolidated Statements of Operations 4
Three Months and Nine Months ended September 30,
2004 and September 30, 2003 (Unaudited)
Consolidated Statements of Cash Flows 6
Three Months and Nine Months Ended September 30,
2004 and September 30, 2003 (Unaudited)
Notes to Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
PART II. OTHER INFORMATION 10
SIGNATURES 11
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
SEPTEMBER 30, DECEMBER 31,
2004 2003
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(Unaudited) (Audited)
CURRENT ASSETS
Cash and cash equivalents $ 82,671 $ 97,682
Securities available-for-sale 108,189 105,185
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Total assets $ 190,860 $ 202,867
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 69,647 $ 69,360
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Total liabilities 69,647 69,360
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COMMITMENT
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 (588,364) (576,764)
Accumulated other comprehensive loss (2,727) (2,033)
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Total stockholders' equity 121,213 133,507
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 190,860 $ 202,867
========== ==========
See accompanying notes to consolidated financial statements (unaudited).
3
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
NINE THREE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
2004 2003 2004 2003
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REVENUES $ 4,286 $ 4,572 $ 1,451 $ 1,409
GENERAL AND ADMINISTRATIVE
EXPENSES 15,886 17,128 4,545 6,083
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NET LOSS (11,600) (12,556) (3,094) (4,674)
OTHER COMPREHENSIVE LOSS, NET OF TAX:
Unrealized gains/(losses) on securities:
Unrealized holding gain/(loss)
arising during period (694) (1,441) 1,438 (1,355)
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COMPREHENSIVE LOSS $ (12,294) $ (13,997) $ (1,656) $ (6,029)
========== ========== ========== =========
BASIC AND DILUTED NET LOSS PER SHARE NIL NIL NIL NIL
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,548,870 6,548,870 6,548,870 6,548,870
========= ========= ========= =========
See accompanying notes to consolidated financial statements (unaudited).
4
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
--------------------- PAID-IN ACCUMULATED COMPREHENSIVE
SHARES AMOUNT CAPITAL DEFICIT LOSS TOTAL
--------- ---------- ---------- ---------- ---------- ----------
BALANCE AT DECEMBER 31, 2003
(Audited) 6,548,870 $ 6,549 $ 705,755 $ (576,764) $ (2,033) $ 133,507
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COMPREHENSIVE LOSS (Unaudited):
Net loss - - - (11,600) - (11,600)
Other comprehensive loss,
net of tax:
Unrealized loss on securities:
Unrealized holding loss arising
during the period - - - - (694) (694)
---------- ---------- ---------- ---------- ---------- ----------
Total comprehensive loss (12,294)
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BALANCE AT SEPTEMBER 30, 2004
(Unaudited) 6,548,870 $ 6,549 $ 705,755 $ (588,364) $ (2,727) $ 121,213
========== ========== ========== ========== ========== ==========
See accompanying notes to consolidated financial statements (unaudited).
5
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE
MONTHS ENDED
SEPTEMBER 30,
--------------------
2004 2003
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (11,600) $ (12,556)
Adjustments to reconcile net loss to net cash
used in operating activities:
Changes in assets and liabilities:
Accounts payable and accrued expenses 287 (3,087)
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NET CASH USED IN OPERATING ACTIVITIES (11,313) (15,643)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities available-for-sale (3,698) (3,775)
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NET CASH USED IN INVESTING ACTIVITIES (3,698) (3,775)
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NET CHANGE IN CASH AND CASH EQUIVALENTS (15,011) (19,418)
CASH AND CASH EQUIVALENTS - beginning 97,682 123,337
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CASH AND CASH EQUIVALENTS - ending $ 82,671 $ 103,919
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 342 $ 380
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NON-CASH INVESTING AND FINANCING ACTIVITIES:
Unrealized gain on securities available-for-sale $ 694 $ 1,203
========== ==========
6
See accompanying notes to consolidated financial statements (unaudited).
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
(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 September 30, 2004 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2004. 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 24, 2004 for the year ended December 31, 2003.
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.
NOTE 4 - REVENUE RECOGNITION
The Company's only revenues are derived from investments. Investment income
is recognized when earned.
7
Management's Discussion and Analysis of Financial Condition
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and Results of Operations
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Results of Operations
During the three and nine months ended September 30, 2004, 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, 2004, there were no material
changes in the financial condition of the Company other than a net loss of
$3,094 as compared to a net loss of $4,674 for the comparable period of the
prior year. During the nine months ended September 30, 2004, there were no
material changes in the financial condition of the Company other than a net loss
of $11,600 as compared to a net loss of $12,556 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 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 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, 2004, the Company's working capital
amounted to $121,213 with cash and cash equivalents and securities available for
sale aggregating $190,860. 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-QSB, 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.
8
Item 3. 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.
9
NATIONAL DIVERSIFIED SERVICES, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings: None
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Item 2. Unregistered Sale of Equity Securities and Use of Proceeds: 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:
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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)
31.1 Certification of Chief Executive and Chief Financial Officer
Pursuant to Rule 13a-14(a) under the Securities Exchange Act of
1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (4)
32.1 Certification of Chief Executive and Chief Financial Officer
pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 (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)
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(1) Exhibits 3 and 3(A) are incorporated by reference from Registration No.
99080 which were filed in a Registration Statement on Form S-18.
(2) The Company has no active subsidiaries.
(3) Incorporated by reference to the Company's Form 10-K for its fiscal year
ended December 31, 1997.
(4) Filed herewith.
10
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 12, 2004 /s/ Morry Rubin
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Morry Rubin, President, Chief Executive,
Financial and Accounting Officer
11