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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1995
Commission File Number 2-31080
NATIONAL INDUSTRIAL SECURITY CORPORATION
------------------------------------------------------
(Exact Name of Registrant As Specified In Its Charter)
DELAWARE 860214815
---------------- -------------------
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation
or organization)
2025 South Brentwood, St. Louis, Missouri 63144
--------------------------------------------------
(Address of Principal Executive Offices, Zip Code)
(314) 962-1414
--------------------------------------------------
(Telephone Number)
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 twelve
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
--------- ----------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of Common Stock, as of the latest practicable
date:
6,983,000 shares of Common Stock
were issued and outstanding as of
September 30, 1995
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<TABLE>
PART I
FINANCIAL INFORMATION
---------------------
Item 1 - Financial Statements
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
------
<CAPTION>
9/30/95 12/31/94
------- --------
<S> <C> <C>
CURRENT ASSETS
Cash $ 29,433 $ 20,390
Accounts Receivable: (Note B & E)
Trade 100,843 128,931
Other 577 227
Prepaid Expenses 7,705 14,866
------- -------
TOTAL CURRENT ASSETS 138,558 164,414
PROPERTY & EQUIPMENT, at cost (Note D)
Furniture and Equipment 127,288 127,288
Leasehold Improvements 8,880 8,880
------- -------
136,168 136,168
Less Accumulated Depreciation
and Amortization (121,238) (110,365)
------- -------
Property, plant and equipment - Net 14,930 25,803
DEFERRED CHARGES, Net of accumulated
amortization 12,369 13,497
DUE FROM OFFICER 14,394 20,710
------- -------
TOTAL ASSETS $180,251 $224,424
======= =======
The accompanying notes to financial statements are an integral
part of these statements.
</TABLE>
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<TABLE>
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
LIABILITIES & STOCKHOLDERS EQUITY
---------------------------------
<CAPTION>
9/30/95 12/31/94
------- --------
<S> <C> <C>
CURRENT LIABILITIES
Line-of-credit with bank (Note B) $ $ 37,741
Note payable to officer (Note B) 100,000 60,000
Accounts payable and accrued expenses 12,150 11,097
Accrued salaries and related taxes 62,531 71,478
Accrued legal fees 46,334 65,935
Current portion of capital lease
obligation (Note D) 3,349 10,736
Deferred revenue 2,334 1,796
--------- ---------
TOTAL CURRENT LIABILITIES 226,698 258,783
Capital Lease Obligation (Note D) 569
STOCKHOLDERS' EQUITY (Deficiency in Assets)
Common Stock - authorized
12,000,000 shares; par value
$.1667 per share; issued
and outstanding 6,983,000
shares 1,163,830 1,163,830
Additional Paid in Capital 38,785 38,785
Deficit (1,249,062) (1,237,543)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY (46,447) (34,928)
(Deficiency in Assets)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $180,251 $224,424
(Deficiency in Assets) ======== ========
The accompanying notes to financial statements are an integral
part of these statements.
</TABLE>
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<TABLE>
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30
(UNAUDITED)
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
SERVICE REVENUES (Note E) $337,651 $382,234
COST AND EXPENSES:
Labor 247,655 279,196
General and Administrative 85,610 85,178
------- -------
333,265 364,374
------- -------
PROFIT FROM OPERATIONS 4,386 17,860
OTHER INCOME (EXPENSE):
Interest expense (4,462) (2,038)
Investment income 48 207
Miscellaneous (1,092) 699
------- -------
NET (LOSS) PROFIT $( 1,120) $ 16,723
======= =======
NET (LOSS) PROFIT PER COMMON SHARE $( .00) $ .00
======= =======
The accompanying notes to financial statements are an integral
part of these statements.
</TABLE>
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<TABLE>
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
SERVICE REVENUES (Note E) $1,041,513 $1,102,666
COST AND EXPENSES:
Labor 793,042 814,000
General and administrative 247,013 295,035
--------- ---------
1,040,055 1,109,035
--------- ---------
PROFIT (LOSS) FROM OPERATIONS 1,458 ( 6,369)
OTHER INCOME (EXPENSE):
Interest expense (11,187) ( 9,271)
Investment income 159 368
Miscellaneous (1,948) 694
--------- ---------
NET LOSS $ ( 11,518) $ (14,578)
========= =========
NET LOSS PER COMMON SHARE $(.00) $(.00)
========= =========
The accompanying notes to financial statements are an integral part
of these statements.
</TABLE>
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<TABLE>
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30
(UNAUDITED)
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
CHANGE IN CASH AND SHORT-TERM INVESTMENTS:
Cash flows from operating activities:
Net (LOSS) $(11,518) $(14,578)
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 10,873 10,873
Amortization 1,128 1,360
Changes in assets and liabilities:
Accounts receivable 27,738 ( 2,664)
Prepaid expenses 7,161 14,888
Due from officer 6,316 ( 1,187)
Accounts payable and accrued expenses 1,053 (17,685)
Accrued salaries and related taxes ( 8,947) (27,872)
Accrued legal fees (19,601)
Deferred revenue 538 675
------- -------
Net cash provided by (used in)
operating activities 14,203 (36,190)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line-of-credit with bank 238,000 10,033
Payments under line-of-credit with bank (275,742)
Borrowings on note payable to officer 40,000
Payments under note payable to officer
Payments of capital lease obligations (7,418) ( 7,238)
------- -------
Net cash provided by financing activities (5,160) 2,795
------- -------
NET INCREASE (DECREASE) IN CASH 9,043 (33,395)
CASH, beginning of period 20,390 51,616
------- -------
CASH, end of period $ 29,433 $ 18,221
======= =======
The accompanying notes to financial statements are an integral part
of these statements.
</TABLE>
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NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED SEPTEMBER 30, 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of consolidation:
----------------------------
The consolidated financial statements include the accounts
of National Industrial Security Corporation ("the Company") and
its wholly-owned subsidiaries, none of which operated in the three
years ended December 31, 1994 or during fiscal 1995. All material
intercompany balances have been eliminated.
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments (which
include only normal recurring accruals) necessary to fairly present
the financial position of the Company and its subsidiaries at
September 30, 1995, and the results of the operations and changes
in their cash flows for the three month and nine month period
ending September 30, 1995.
Depreciation and amortization:
------------------------------
Property and equipment is depreciated on straight-line
and accelerated methods over the useful lives of the related assets
which approximate five years. Leasehold improvements and equip-
ment under capital leases are amortized over the asset life or the
lease term, if shorter.
Deferred charges at September 30, 1995 consist
principally of goodwill and patent costs which are being amortized
over 5 to 20 years. Accumulated amortization of deferred charges
was $17,134 at December 31, 1994 and $18,262 at September 30, 1995.
Income/Loss per share:
----------------------
Income or loss per share computations are based on the
weighted average number of common shares outstanding each year.
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NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED SEPTEMBER 30, 1995
(Continued)
NOTE B - DEBT
At December 31, 1994, the Company had a $50,000 commercial
bank line of credit, of which $37,741 was outstanding. The line is
collateralized by the Company's accounts receivable and a personal
guarantee of the Company's president. The Company also at December
31, 1994 had a $90,000 loan from the President of the Company, of
which $60,000 was outstanding. At September 30, 1995 the Company
had increased it loan from the President of the Company to $100,000
to meet its temporary working capital requirements. The note is
collateralized by accounts receivable. The note requires monthly
interest payments at prime plus 5 1/4% and is due May 31, 1996.
Interest expense relating to this note was $9,040 for the nine
months ended September 30, 1995. The $50,000 line of credit was
renewed August 9, 1995 on similar terms. The line of credit had
a zero balance at September 30, 1995.
NOTE C - INCOME TAXES
At September 30, 1995 the Company had net operating loss
carryforwards aggregating approximately $800,000 expiring through
2010 and new jobs tax credit carryforwards of $8,450 expiring
principally in 1998.
NOTE D - COMMITMENTS AND CONTINGENCIES:
Leases:
-------
The Company leases its office space under an operating
lease expiring in July 1996. In addition, the Company entered into
capital leases during 1992 for two automobiles. Future minimum
lease commitments under all non-cancellable operating and capital
leases in effect at September 30, 1995 are as follows:
<TABLE>
<CAPTION>
Operating Capital
Leases Lease
--------- --------
<S> <C> <C>
1995 $ 4,791 $ 2,838
1996 12,194 576
------- -------
Total payments 16,985 3,414
Less amount representing interest 65
------- -------
$16,985 $ 3,349
======= =======
</TABLE>
Rent expense was $14,373 and $23,855 for the nine months ending
September 30, 1995 and 1994, respectively.
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NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED SEPTEMBER 30, 1995
(Continued)
NOTE E - SIGNIFICANT CUSTOMERS:
Revenues with 4 major customers accounted for approximately 52%
of total service revenues at September 30, 1995. Accounts receivable
from these 4 customers represent approximately 47% of total trade
accounts receivable at September 30, 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company is a Missouri-based corporation providing
security guard and related security services to commercial,
industrial, governmental, healthcare and other institutional
clients. In addition to guard services, the Company continues to
provide monitoring services for alarm systems already in service.
(the Company no longer sells the alarm systems) Approximately 90
alarm systems located in several states are currently being
monitored. This activity accounts for less than 1% of the
Company's revenues. The Company primarily operates in the St.
Louis, Missouri metropolitan area, and presently employs
approximately 110 security guards and an office staff of 5 all in
St. Louis, Missouri.
RESULTS OF OPERATIONS
Revenues for the nine months ending September 30,
1995, decreased $61,153 (5%) compared with the same period in
1994. The decrease in revenues is due to the termination of a
contract with a major client that filed for bankruptcy, in the
second quarter of 1994. Another major client was lost in the
fourth quarter of 1994 due to competitive bidding. The Company
hopes to establish revenue growth through the recruitment of
additional new clients during the remainder of 1995. Six smaller
clients have been added over the past nine months to partially
offset the previous loss of customers. The six new clients are
smaller in size and revenues then the clients that were lost. Start
up costs for new customers vary depending on the size of that client.
Such costs are expensed as incurred.
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NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED SEPTEMBER 30, 1995
(Continued)
The percentage of labor expense to service revenues
increased from 74% at September 30, 1994 to 76% at September 30,
1995 due to competitive pricing pressures which has reduced margins
on security guard contracts. At September 30, 1995 general and
administrative expenses decreased by $48,022 due to lower
administrative salaries and reduced rent expense.
Net loss for the nine months ended September 30, 1995 was
$11,518 compared with a net loss of $14,578 during the same period
last year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position at September 30, 1995 was
$29,433. The cash position varies day-to-day depending on
collections and the timing of payroll obligations. At September
30, 1995 the Company had a $100,000 loan from the President of the
Company of which $100,000 remained outstanding. The Company
renewed its $50,000 line of credit with a commercial bank on August
9, 1995 on similar terms as before. See Note B to the Company's
Financial Statement. The $100,000 loan from the Company president
is sufficient to meet its working capital requirements. If the
Company needs additional working capital, the Company would
request additional funds from the Company president on the same
terms. See Note B to the Company Financial Statements.
RECENT DEVELOPMENTS
On August 8, 1995 the Company by press release announced
the signing of letters of intent with three St. Louis based
communications companies subject to closing conditions, including
due diligence and financing. The Company will report future
developments when a definitive acquisition agreement is completed.
The combined revenues from acquired companies would be
approximately $5 million. The acquired companies are engaged in
production of animation, cable television and corporate video
programming. At present, funding is being sought through
investment banking companies.
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SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly caused
this report to be signed on its behalf by the undersigned thereunto
duly authorized.
NATIONAL INDUSTRIAL SECURITY
CORPORATION
By: /s/ Max T. Jackson
Date: November 14, 1995 ---------------------------------
Max T. Jackson, President,
Treasurer and Chairman of the
Board of Directors
(Principal Executive, Financial
and Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 29,433
<SECURITIES> 0
<RECEIVABLES> 101,420
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 138,558
<PP&E> 136,168
<DEPRECIATION> (121,238)
<TOTAL-ASSETS> 180,251
<CURRENT-LIABILITIES> 226,698
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 180,251
<SALES> 0
<TOTAL-REVENUES> 1,041,513
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,789
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,187
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,518)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
