<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 June 30, 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)
225 East Kirkham Ave St. Louis, Missouri 63119
------------------------------------------------------
(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
June 30, 1996
1
<PAGE> 2
PART I
FINANCIAL INFORMATION
---------------------
Item 1 - Financial Statements
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
------
<CAPTION>
6/30/96 12/31/95
------- --------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 9,241 $ 32,482
Accounts Receivable: (Note B & E)
Trade 110,777 101,772
Other 495 2,412
Prepaid Expenses 11,832 9,923
-------- ---------
TOTAL CURRENT ASSETS 132,345 146,589
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 (91,571) (132,297)
-------- ---------
2,343 3,871
DEFERRED CHARGES, Net of accumulated
amortization 12,625 13,230
DUE FROM OFFICER 15,578 14,789
-------- ---------
TOTAL ASSETS $162,891 $ 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 AND STOCKHOLDERS EQUITY
-----------------------------------
<CAPTION>
6/30/96 12/31/95
------- --------
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 5,790 $ 19,365
Accrued salaries and related taxes 74,925 72,983
Accrued legal fees 44,008 45,606
Current portion of capital lease
obligation (Note D) 0 569
Note payable to officer (Note B) 7,000 0
Deferred revenue 2,248 1,913
----------- -----------
TOTAL CURRENT LIABILITIES 133,972 140,436
Long Term Note (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 (1,273,696) (1,264,572)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (71,081) (61,957)
(Deficiency in Assets)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 162,891 $ 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 JUNE 30
(UNAUDITED)
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
SERVICE REVENUES (Note E) $277,942 $345,292
COST AND EXPENSES:
Labor 209,607 261,730
General and Administrative 73,227 83,673
-------- --------
282,834 345,403
-------- --------
LOSS FROM OPERATIONS (4,892) ( 111)
OTHER INCOME (EXPENSE):
Interest expense (3,654) (4,099)
Investment income 49 46
Miscellaneous (104) (555)
-------- --------
NET (LOSS) PROFIT $ (8,601) $ (4,719)
======== ========
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 OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
SERVICE REVENUES (Note E) $553,865 $703,862
COST AND EXPENSES:
Labor 413,942 545,387
General and administrative 143,366 161,403
-------- --------
557,308 706,790
-------- --------
PROFIT (LOSS) FROM OPERATIONS (3,443) (2,928)
OTHER INCOME (EXPENSE):
Interest expense (7,291) (6,725)
Investment income 109 112
Miscellaneous (1,503) (857)
-------- --------
NET LOSS $ (9,122) $(10,398)
======== ========
NET LOSS PER COMMON SHARE $ (.00) $ (.00)
======== ========
The accompanying notes to financial statements are an integral
part of these statements.
</TABLE>
5
<PAGE> 6
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30
(UNAUDITED)
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CHANGE IN CASH AND SHORT-TERM INVESTMENTS:
Cash flows from operating activities:
Net (LOSS) $ (9,122) $ (5,679)
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 948 3,625
Amortization 605 423
Changes in assets and liabilities:
Accounts receivable (7,103) (15,184)
Prepaid expenses 1,909 884
Due from officer (789) (394)
Accounts payable and accrued expenses (13,495) 593
Accrued salaries and related taxes (1,942) (2,829)
Accrued legal fees (1,598) (7,004)
Furniture & Equipment 520
Deferred revenue 335 648
-------- ---------
Net cash provided by (used in) operating
activities (29,672) (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 7,000 40,000
Payments under note payable to officer
Payments of capital lease obligations (569) (2,590)
-------- ---------
Net cash provided by financing activities 6,431 24,567
-------- ---------
NET INCREASE (DECREASE) IN CASH (23,241) (350)
CASH, beginning of period 32,482 20,390
-------- ---------
CASH, end of period $ 9,241 $ 20,040
======== =========
The accompanying notes to financial statements are an integral
part of these statements.
</TABLE>
6
<PAGE> 7
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JUNE 30, 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 June 30, 1996 and the results of the
operations and changes in their cash flows for the six month period ending
June 30, 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 equipment under capital leases are amortized
over the asset life or the lease term, if shorter.
Deferred charges at June 30, 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 $18,008
at June 30, 1996.
Income/Loss per share:
----------------------
Income or loss per share computations are based on the weighted
average number of common shares outstanding each year.
7
<PAGE> 8
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JUNE 30, 1996
(Continued)
NOTE B - DEBT
At June 30, 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 (8.25% at June 30, 1996) plus 2%.
The line of credit expires in June 1997.
The Company has a $100,000 loan from the President of the Company
to meet its working capital requirements. As of June 30, 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 8.25% at June 30, 1996) plus 5.25%. Interest expense relating to this
note was $7,290 for the 6 months ending June 30, 1996.
A lawsuit against the Company was settled by arbitration in March 1996.
Funds used in the settlement were provided by the Company president and are
reflected in the current liability section of the balance sheet as a note
payable.
NOTE C - INCOME TAXES
At June 30, 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.
8
<PAGE> 9
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JUNE 30, 1996
NOTE D - COMMITMENTS AND CONTINGENCIES:
Leases:
-------
The Company leased its office space under an operating lease expired
on July 31, 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 relocated to the new nearby location in May 1996. The new lease
expires in August 1998.
<TABLE>
<CAPTION>
Operating
Leases
---------
<S> <C>
1996 $ 6,000
1997 12,000
1998 8,000
-------
Total payments 26,000
$26,000
=======
</TABLE>
Rent expense was $10,582 and $9,592 for the three months ending June 30, 1996
and 1995, respectively.
NOTE E - SIGNIFICANT CUSTOMERS:
Revenues with 3 major customers accounted for approximately 39%
of total service revenues at June 30, 1996. Accounts receivable from these
3 customers represent approximately 43% of total trade accounts receivable at
June 30, 1996.
9
<PAGE> 10
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JUNE 30, 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 six months ending June 30, 1996, decreased $149,997
(21%) 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. Start up costs for
new customers vary depending on the size of that client. Such costs are
expensed as incurred.
The Company is seeking suitable merger or acquisition candidates.
Preliminary discussions have been made with two such companies, but no
definitive agreements have been made to date. All prior acquisition attempts
with other companies have been terminated.
10
<PAGE> 11
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JUNE 30, 1996
(Continued)
The percentage of labor expense to service revenues decreased from
77% at June 30, 1995 to 74% at June 30, 1996. At June 30, 1996 general and
administrative expenses decreased by $18,037 due to lower administrative
salaries and reduced rent expense.
Net loss for the six months ended June 30, 1996 was $9,122 compared
with a net loss of $10,398 during the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position at June 30, 1996 was $9,241. The cash
position varies day-to-day depending on collections and the timing of
payroll obligations.
11
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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
Date: August 15, 1996
By:
------------------------------------
Max T. Jackson, President,
Treasurer and Chairman of the
Board of Directors
(Principal Executive, Financial
and Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 9,241
<SECURITIES> 0
<RECEIVABLES> 111,272
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 132,345
<PP&E> 93,914
<DEPRECIATION> (91,571)
<TOTAL-ASSETS> (162,891)
<CURRENT-LIABILITIES> (133,972)
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 162,891
<SALES> 0
<TOTAL-REVENUES> 553,865
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,394
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,291
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,122)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
