<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, 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 require-
ments 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, 1997
1
<PAGE> 2
<TABLE>
PART I
FINANCIAL INFORMATION
---------------------
Item 1 - Financial Statements
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
------
<CAPTION>
6/30/97 12/31/96
------- --------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ (6,047) $ 9,103
Accounts Receivable: (Note B & E)
Trade 37,321 79,431
Other (75) 891
Prepaid Expenses 10,218 19,820
-------- --------
TOTAL CURRENT ASSETS 41,417 109,245
PROPERTY & EQUIPMENT, at cost (Note D)
Furniture and Equipment 85,034 85,034
Less Accumulated Depreciation
and Amortization (84,315) (83,715)
-------- --------
719 1,319
DEFERRED CHARGES, Net of accumulated
amortization 10,814 11,720
DUE FROM OFFICER 16,235 16,235
-------- --------
TOTAL ASSETS $ 69,185 $138,520
======== ========
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
2
<PAGE> 3
<TABLE>
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES & STOCKHOLDERS EQUITY
---------------------------------
<CAPTION>
6/30/97 12/31/96
------- --------
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 11,336 $ 15,759
Accrued salaries and related taxes 19,884 25,587
Accrued legal fees 42,522 40,722
Line of Credit 4,000 15,000
Deferred revenue 2,066 2,406
----------- -----------
TOTAL CURRENT LIABILITIES 79,808 99,474
Long Term Note (Note B) 77,000 100,000
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 (1,290,238) (1,263,569)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (87,623) (60,954)
(Deficiency in Assets)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 69,185 $ 138,520
(Deficiency in Assets) =========== ===========
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
3
<PAGE> 4
<TABLE>
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30
(UNAUDITED)
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
SERVICE REVENUES (Note E) $158,550 $277,942
COST AND EXPENSES:
Labor 121,712 209,607
-------- --------
General and Administrative 46,783 73,227
168,495 282,834
-------- --------
PROFIT (LOSS) FROM OPERATIONS (9,945) (4,892)
OTHER INCOME (EXPENSE):
Interest expense (2,927) (3,654)
Investment income 0 49
Miscellaneous (160) (104)
-------- --------
NET (LOSS) PROFIT $(13,032) $ (8,601)
======== ========
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
<TABLE>
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
SERVICE REVENUES (Note E) $342,283 $553,865
COST AND EXPENSES:
Labor 261,517 413,942
General and administrative 100,831 143,366
-------- --------
362,348 557,308
-------- --------
PROFIT FROM OPERATIONS (20,065) (3,443)
OTHER INCOME (EXPENSE):
Interest expense (6,521) (7,291)
Investment income 42 109
Miscellaneous (124) (1,503)
-------- --------
NET LOSS $(26,668) $ (8,122)
======== ========
NET LOSS PER COMMON SHARE $ (.00) $ (.00)
======== ========
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
5
<PAGE> 6
<TABLE>
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30
(UNAUDITED)
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CHANGE IN CASH AND SHORT-TERM INVESTMENTS:
Cash flows from operating activities:
Net (LOSS) $(26,668) $( 521)
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 600 (41,200)
Amortization 906 302
Changes in assets and liabilities:
Accounts receivable 43,076 16,062
Prepaid expenses 9,602 ( 1,849)
Due from officer ( 395)
Accounts payable and accrued expenses ( 4,423) ( 6,902)
Accrued salaries and related taxes ( 5,703) (20,254)
Accrued legal fees 1,800 ( 2,498)
Deferred revenue ( 340) 475
-------- --------
Net cash provided by (used in) operating
activities 18,850 (14,526)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line-of-credit with bank
Payments under line-of-credit with bank (11,000)
Borrowings on note payable to officer
Payments under note payable to officer (23,000)
Net cash provided by financing activities (34,000) ( 569)
-------- --------
NET INCREASE (DECREASE) IN CASH (15,150) (15,095)
CASH, beginning of period 9,103 32,482
-------- --------
CASH, end of period $( 6,047) $ 17,387
======== ========
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, 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 subsid-
iaries, 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 June 30, 1997 and the results of the
operations and changes in their cash flows for the six month period ending
June 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 June 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 $19,512
at June 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 JUNE 30, 1997
(Continued)
NOTE B - DEBT
At June 30, 1997, the Company had a $50,000 bank line of credit, of which
$4,000 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 June 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 June 30, 1997, the loan amount was
$77,000 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, 1997) plus 5.25%. Interest expense relating to this note was
$6,075 for the 6 months ending June 30, 1997.
NOTE C - INCOME TAXES
At June 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.
8
<PAGE> 9
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JUNE 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 June 30, 1997 as follows:
<TABLE>
<CAPTION>
Operating
Leases
---------
<S> <C>
1997 $ 6,000
1998 8,000
Total payments $14,000
$14,000
=======
</TABLE>
Rent expense was $6,000 and $10,582 for the six months ending June 30,
1997 and 1996, respectively.
NOTE E - SIGNIFICANT CUSTOMERS:
Revenues with 2 major customers accounted for approximately 54% of total
service revenues at June 30, 1997. Accounts receivable from these 2 customers
represent approximately 64% of total trade accounts receivable at June 30, 1997.
9
<PAGE> 10
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED JUNE 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 70 security guards and an office staff of 4 all in St.
Louis, Missouri.
RESULTS OF OPERATIONS
Revenues for the six months ending June 30, 1997, decreased $211,582 (38%)
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 JUNE 30, 1997
(Continued)
The percentage of labor expense to service revenues decreased from 74% at
June 30, 1996 to 76% at June 30, 1997. At June 30, 1997 general and
administrative expenses decreased by $42,535 due to lower administrative
salaries and reduced rent expense.
Net loss for the six months ended June 30, 1997 was $26,668 compared with
a net loss of $9122 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 August 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> (6,047)
<SECURITIES> 0
<RECEIVABLES> 37,246
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 69,185
<PP&E> 85,034
<DEPRECIATION> 84,315
<TOTAL-ASSETS> 69,185
<CURRENT-LIABILITIES> 79,808
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 69,185
<SALES> 0
<TOTAL-REVENUES> 342,283
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (82)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,521
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (26,668)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
