<PAGE> 1
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 March 31, 1996
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
March 31, 1996
1
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PART I
FINANCIAL INFORMATION
---------------------
Item 1 - Financial Statements
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
------
<CAPTION>
3/31/96 12/31/95
------- --------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 17,387 $ 32,482
Accounts Receivable: (Note B & E)
Trade 87,678 101,772
Other 444 2,412
Prepaid Expenses 11,771 9,923
-------- --------
TOTAL CURRENT ASSETS 117,280 146,589
PROPERTY & EQUIPMENT, at cost (Note D)
Furniture and Equipment 85,034 127,288
Leasehold Improvements 8,880 8,880
-------- --------
93,914 136,168
Less Accumulated Depreciation
and Amortization (91,097) (132,297)
-------- --------
2,817 3,871
DEFERRED CHARGES, Net of accumulated
amortization 12,928 13,230
DUE FROM OFFICER 15,184 14,789
-------- --------
TOTAL ASSETS $148,209 $178,479
======== ========
The accompanying notes to financial statements are an integral
part of these statements.
</TABLE>
2
<PAGE> 3
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
LIABILITIES & STOCKHOLDERS EQUITY
---------------------------------
<CAPTION>
3/31/96 12/31/95
------- --------
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 12,463 $ 19,365
Accrued salaries and related taxes 52,729 72,983
Accrued legal fees 43,108 45,606
Current portion of capital lease
obligation (Note D) 0 569
Deferred revenue 2,388 1,913
-------- --------
TOTAL CURRENT LIABILITES 110,688 140,436
Note payable to officer (Note B) 100,000 100,000
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 (1,265,094) (1,264,572)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY (62,479) (61,957)
(Deficiency in Assets)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $148,209 $178,479
(Deficiency in Assets) ======== ========
The accompanying notes to financial statements are an integral
part of these statements.
</TABLE>
3
<PAGE> 4
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31
(UNAUDITED)
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
SERVICE REVENUES (Note E) $275,923 $358,570
COST AND EXPENSES:
Labor 204,335 278,686
General and Administrative 70,139 82,701
-------- --------
274,474 361,387
-------- --------
PROFIT (LOSS) FROM OPERATIONS 1,449 ( 2,817)
OTHER INCOME (EXPENSE):
Interest expense (3,637) (2,626)
Investment income 60 66
Miscellaneous 1,607 (302)
-------- --------
NET (LOSS) PROFIT $ (521) $ (5,679)
-------- --------
NET (LOSS) PROFIT PER COMMON SHARE $ (.00) $ (.00)
======== ========
The accompanying notes to financial statements are an integral
part of these statements.
</TABLE>
4
<PAGE> 5
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31
(UNAUDITED)
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CHANGE IN CASH AND SHORT-TERM INVESTMENTS:
Cash flows from operating activities:
Net (LOSS) $ (521) $ (5,679)
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation (41,200) 3,625
Amortization 302 423
Changes in assets and liabilities:
Accounts receivable 16,062 (15,184)
Prepaid expenses (1,849) 884
Due from officer (395) (394)
Accounts payable and accrued expenses (6,902) 593
Accrued salaries and related taxes (20,254) (2,829)
Accrued legal fees (2,498) (7,004)
Furniture & Equipment 42,254
Deferred revenue 475 648
-------- ---------
Net cash provided by (used in) operating
activities (14,526) (2,497)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line-of-credit with bank 336,500
Payments under line-of-credit with bank (349,343)
Borrowings on note payable to officer 40,000
Payments under note payable to officer
Payments of capital lease obligations (569) (2,590)
-------- ---------
Net cash provided by financing activities (569) 24,567
-------- ---------
NET INCREASE (DECREASE) IN CASH (15,095) (350)
CASH, beginning of period 32,482 20,390
-------- ---------
CASH, end of period $ 17,387 $ 20,040
======== =========
The accompanying notes to financial statements are an integral part
of these statements.
</TABLE>
5
<PAGE> 6
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED MARCH 31, 1996
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, 1995 or during fiscal 1996. 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
March 31, 1996 and the results of the operations and changes
in their cash flows for the three month period ending March 31,
1996.
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 March 31, 1996 consist principally of
goodwill and patent costs which are being amortized over 5 to 20
years. Accumulated amortization of deferred charges was $17,403 at
December 31, 1995 and $17,705 at March 31, 1996.
Income/Loss per share:
----------------------
Income or loss per share computations are based on the
weighted average number of common shares outstanding each year.
6
<PAGE> 7
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED MARCH 31, 1996
(Continued)
NOTE B - DEBT
At March 31, 1996, the Company had an unused $50,000 bank
line of credit. Advances under the line of credit are collateralized
by eligible accounts receivable and a personal guarantee of the
Company's President and require monthly interest payments at prime
(8.5% at March 31, 1996) plus 2%. The line of credit expires in June
1996.
The Company has a $100,000 loan from the President of the
Company to meet its working capital requirements. As of March 31,
1996, the loan amount was $100,000 and is due May 31, 1998. The
note is collateralized by accounts receivable and property and
equipment of the Company and is subordinated to the bank line of
credit. The note requires monthly interest payments at prime (8.5%
at March 31, 1996) plus 5.25%. Interest expense relating to this
note was $3,637 for the 3 months ending March 31, 1996.
NOTE C - INCOME TAXES
At March 31, 1996 the Company had net operating loss
carryforwards aggregating approximately $810,000 expiring through
2010 and new jobs tax credit carryforwards of $8,450 expiring
principally in 1998.
7
<PAGE> 8
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED MARCH 31, 1996
NOTE D - COMMITMENTS AND CONTINGENCIES:
Leases:
-------
The Company leases its office space under an operating
lease expiring in July 1996. The Company has signed a new lease
effective August 1996 to increase its square feet from 1,369 to
1,500 with a 45% reduction in cost. The office will be relocated
to the new nearby location in May 1996. The new lease expires in
August 1998.
<TABLE>
<CAPTION>
Operating
Leases
---------
<S> <C>
1996 $11,388
1997 12,000
1998 8,000
-------
Total payments 31,388
$31,388
=======
</TABLE>
Rent expense was $4,791 and $4,791 for the three months
ending March 31, 1996 and 1995, respectively.
NOTE E - SIGNIFICANT CUSTOMERS:
Revenues with 3 major customers accounted for
approximately 52% of total service revenues at March 31, 1996.
Accounts receivable from these 3 customers represent approximately
40% of total trade accounts receivable at March 31, 1996.
8
<PAGE> 9
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED MARCH 31, 1996
(Continued)
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 100 security guards and an office staff of 5 all in
St. Louis, Missouri.
RESULTS OF OPERATIONS
Revenues for the three months ending March 31, 1996,
decreased $82,647 (23%) compared with the same period in 1995.
The decrease in revenues is due to the loss of several major
clients. The Company hopes to reestablish revenue growth through
the recruitment of additional new clients during the remainder of
1996. Start up costs for new customers vary depending on the size
of that client. Such costs are expensed as incurred.
9
<PAGE> 10
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED MARCH 31, 1996
(Continued)
The percentage of labor expense to service revenues
decreased from 78% at March 31, 1995 to 74% at March 31, 1996.
At March 31, 1996 general and administrative expenses decreased by
$12,562 due to lower administrative salaries and reduced rent
expense.
Net loss for the three months ended March 31, 1996 was
$521 compared with a net loss of $5,679 during the same period last
year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position at March 31, 1996 was $17,387.
The cash position varies day-to-day depending on collections and
the timing of payroll obligations.
10
<PAGE> 11
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
Date: May 15, 1996
By: /s/ Max T. Jackson
---------------------------------
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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 17,387
<SECURITIES> 0
<RECEIVABLES> 88,122
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 117,280
<PP&E> 93,914
<DEPRECIATION> (91,097)
<TOTAL-ASSETS> 148,209
<CURRENT-LIABILITIES> 110,688
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 148,209
<SALES> 0
<TOTAL-REVENUES> 275,923
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (1,667)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,637
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (521)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
