<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 September 30, 1997
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
September 30, 1997
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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>
9/30/97 12/31/96
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 17,989 $ 9,103
Accounts Receivable: (Note B & E)
Trade 37,088 79,431
Other 1,312 891
Prepaid Expenses 3,117 19,820
TOTAL CURRENT ASSETS 59,506 109,245
PROPERTY & EQUIPMENT, at cost (Note D)
Furniture and Equipment 85,034 85,034
Less Accumulated Depreciation
and Amortization (84,615) (83,715)
419 1,319
DEFERRED CHARGES, Net of accumulated
amortization 10,361 11,720
DUE FROM OFFICER 16,235 16,235
TOTAL ASSETS $ 86,521 $138,520
------- -------
The accompanying notes to financial statements are an integral part of
these statements.
</TABLE>
2
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NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
LIABILITIES & STOCKHOLDERS EQUITY
<CAPTION>
9/30/97 12/31/96
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 11,355 $ 15,759
Accrued salaries and related taxes 32,946 25,587
Accrued legal fees 43,422 40,722
Line of Credit 24,000 15,000
Deferred revenue 1,677 2,406
TOTAL CURRENT LIABILITIES 113,400 99,474
Long Term Note (Note B) 72,500 100,000
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 (1,301,994) (1,263,569)
TOTAL STOCKHOLDERS' EQUITY (99,379) (60,954)
(Deficiency in Assets)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 86,521 $138,520
(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 SEPTEMBER 30
(UNAUDITED)
<CAPTION>
1997 1996
<S> <C> <C>
SERVICE REVENUES (Note E) $162,000 $282,648
COST AND EXPENSES:
Labor 123,023 213,822
General and Administrative 47,619 63,329
170,642 277,151
PROFIT (LOSS) FROM OPERATIONS (8,642) 5,497
OTHER INCOME (EXPENSE):
Interest expense (3,265) (4,235)
Investment income 0 61
Miscellaneous 150 242
NET (LOSS) PROFIT $(11,757) $ 1,081
--------- --------
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 NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<CAPTION>
1997 1996
<S> <C> <C>
SERVICE REVENUES (Note E) $ 504,283 $ 836,513
COST AND EXPENSES:
Labor 384,540 627,764
General and administrative 148,450 206,695
532,990 834,459
PROFIT (LOSS) FROM OPERATIONS (28,707) 2,054
OTHER INCOME (EXPENSE):
Interest expense ( 9,786) (11,526)
Investment income 42 170
Miscellaneous 26 1,261
NET LOSS $( 38,425) $( 8,041)
---------- ----------
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
NINE MONTHS ENDED SEPTEMBER 30
(UNAUDITED)
<CAPTION>
1997 1996
<S> <C> <C>
CHANGE IN CASH AND SHORT-TERM INVESTMENTS:
Cash flows from operating activities:
Net (LOSS) $(38,425) $( 521)
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 900 (41,200)
Amortization 1,359 302
Changes in assets and liabilities:
Accounts receivable 41,922 16,062
Prepaid expenses 16,702 ( 1,849)
Due from officer ( 395)
Accounts payable and accrued expenses ( 4,404) ( 6,902)
Accrued salaries and related taxes 7,359 (20,254)
Accrued legal fees 2,700 ( 2,498)
Deferred revenue (729) 475
Net cash provided by (used in) operating
activities 27,386 (14,526)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line-of-credit with bank 9,000
Payments under line-of-credit with bank
Borrowings on note payable to officer
Payments under note payable to officer (27,500)
Net cash provided by financing activities (18,500) (569)
NET INCREASE (DECREASE) IN CASH 8,886 (15,095)
CASH, beginning of period 9,103 32,482
CASH, end of period $ 17,989 $ 17,387
-------- --------
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, 1997
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,
1996 or during fiscal 1997. 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, 1997 and the results of the
operations and changes in their cash flows for the nine month period ending
September 30, 1997.
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 September 30, 1997 consist principally of goodwill
and patent costs which are being amortized over 5 to 20 years. Accumulated
amortization of deferred charges was $18,912 at December 31, 1996 and
$19,812 at September 30, 1997.
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 SEPTEMBER 30, 1997
(Continued)
NOTE B - DEBT
At September 30, 1997, the Company had a $50,000 bank line of credit,
of which $24,000 was outstanding. 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 Sept. 30, 1997) plus 2%. The line of credit expires in June 1998.
The Company has a $100,000 loan from the President of the Company to
meet its working capital requirements. As of Sept. 30, 1997, the loan amount
was $72,500 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 Sept. 30, 1997) plus 5.25%. Interest expense relating to this note
was $8,558 for the 9 months ending September 30, 1997.
NOTE C - INCOME TAXES
At September 30, 1997 the Company had net operating loss carryforwards
aggregating approximately $792,000 expiring through 2010 and new jobs tax
credit carryforwards of $8,450 expiring principally in 1998.
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<PAGE> 9
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED SEPTEMBER 30, 1997
NOTE D - COMMITMENTS AND CONTINGENCIES:
Leases:
The Company leases its office space under an operating lease expiring
in August 1998. Future minimum lease commitments under all non cancelable
operating and capital leases in effect at September 30, 1997 are as follows:
<TABLE>
<CAPTION>
Operating
Leases
<S> <C>
1997 $ 3,000
1998 8,000
Total payments $11,000
$11,000
-------
</TABLE>
Rent expense was $9,000 and $15,179 for the nine months ending
September 30, 1997 and 1996, respectively.
NOTE E - SIGNIFICANT CUSTOMERS:
Revenues with 2 major customers accounted for approximately 55% of
total service revenues at Sept. 30, 1997. Accounts receivable from these
2 customers represent approximately 45% of total trade accounts receivable
at September 30, 1997.
9
<PAGE> 10
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED SEPTEMBER 30, 1997
(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 60 security guards and an office staff
of 4 all in St. Louis, Missouri.
RESULTS OF OPERATIONS
Revenues for the nine months ending September 30, 1997, decreased
$332,230 (40%) compared with the same period in 1996. 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 continuing to reduce its administrative and operating
expenses to a level to provide profitable operations.
10
<PAGE> 11
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED SEPTEMBER 30, 1997
(Continued)
The percentage of labor expense to service revenues decreased from
75% at September 30, 1996 to 76% at September 30, 1997. At Sept. 30, 1997
general and administrative expenses decreased by $58,245 due to lower
administrative salaries and reduced rent expense.
Net loss for the nine months ended Sept. 30, 1997 was $38,425 compared
with a net loss of $8,041 during the same period last year.
11
<PAGE> 12
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: November 15, 1997
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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 17,989
<SECURITIES> 0
<RECEIVABLES> 38,400
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 86,521
<PP&E> 85,034
<DEPRECIATION> 84,615
<TOTAL-ASSETS> 86,521
<CURRENT-LIABILITIES> 113,400
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 86,521
<SALES> 0
<TOTAL-REVENUES> 504,283
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 68
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,786
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (38,425)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
