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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ________ to ________
Commission File Number: 2-99080-NY
NATIONAL DIVERSIFIED SERVICES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 11-2820379
- --------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization (Identification No.)
104 East 25th Street
Tenth Floor
New York, New York 10010
- --------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (212) 353-8280
---------------
Securities registered pursuant to Section 12(b) of the Act:
None
- -----------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
None
- -----------------------------------------------------------------
(Title of Class)
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 12 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 .
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements incorporated
by reference in part III of this Form 10-K or any amendment to this
Form 10-K [x].
As of March 25, 1997, the aggregate number of shares of the voting
stock held by non-affiliates was 1,762,870 shares of Common Stock,
$.001 par value. See "Item 5" regarding a sporadic market for the
Company's Common Stock.
The number of shares outstanding of the Issuer's Common Stock, as
of March 25, 1997 was 6,548,870.
PAGE
<PAGE>
PART I
Item 1. Business
General
National Diversified Services, Inc. ("National" or the "Company") was
incorporated under the laws of the State of Delaware on May 30, 1985.
National completed a public offering of 758,570 Units in December 1986
as more fully discussed under "Item 5" and raised net proceeds of approximately
$600,000. National was a blind pool offering which at the time did not
specifically allocate the proceeds raised thereby to any business or operations.
National's business purpose is to seek and review acquisition
possibilities, and to make one or more acquisitions or enter into business
endeavors as best as its limited assets will allow.
Business Strategy
The Company is seeking one or more potential business opportunities
that in the opinion of Management may provide an ultimate profit to the Company.
Such involvement may be by way of the acquisition of existing businesses, the
acquisition of assets to establish subsidiary businesses for the Company, a
statutory merger or consolidation or the establishment of a new business.
However, due to the limited working capital of the Company, it is likely that
the Company will enter into only one business transaction.
The Company may also seek to acquire one or more majority and/or wholly
owned equity positions in other companies through the direct purchase of stock.
Such equity positions will be limited by Section 3(a)(3) of the Investment
Company Act of 1940 (the "1940 Act"), in that the Company will not be permitted
to own or propose to acquire investment securities having a value exceeding 40%
of the Company's total assets (exclusive of government securities and cash
items) on an unconsolidated basis.
The Company may provide debt financing to companies in which it has
taken (or intends to take) an equity position. Such financing would generally be
made on an unsecured basis. In no event will the Company provide financing for
or take equity positions in companies where the aggregate of such investments
would cause the Company to be required to register under the 1940 Act.
Present Management of the Company may or may not become involved as
management in the aforementioned business or subsidiary or may hire qualified
but as yet unidentified management personnel. There can, however, be no
assurance whatsoever that the Company will be able to acquire a business.
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A potential acquisition of a business may involve the acquisition of,
or merger with, a company which does not need additional capital but which
desires to establish a public trading market for its shares. A company that
seeks the Company's participation in attempting to consolidate its operations
through a merger, reorganization, asset acquisition, or some other form of
combination may desire to do so to avoid what it may deem to be adverse
consequences of itself undertaking a public offering including the inability or
unwillingness to comply with various federal and state laws enacted for the
protection of investors. Factors considered may include time delays, significant
expense, loss of voting control. In connection with such acquisition, it is
possible that an amount of stock constituting control of the Company would be
purchased from the Company or its current officers, directors and stockholders
resulting in substantial profits to such persons without similar profits being
realized by other stockholder. Moreover, no assurance can be given with respect
to the experience or qualifications of as yet unknown persons who may, in the
future, engage in the operations of the Company or any business or subsidiary
acquired by the Company. In the event of a change in control of the Company and
its Board of Directors, the payment of dividends would be wholly dependent upon
such persons. Furthermore, it is impossible as yet to determine what, if any,
consequences applicable state law may provide to the Company's shareholders in
any merger or reorganization.
General Policy
The Company may establish or acquire a business and/or invest in one or
more new and developing corporations, whether directly or by way of statutory
merger, which the Management of the Company determines will offer significant
long-term growth potential. In the case of an equity position, the Company will
seek to acquire primarily a majority owned and wholly owned capital stock
position in such corporation. The Company is not restricted to any particular
industry and may engage in any line of business. Accordingly, Management's
discretion as to the type of businesses and equity investments is unlimited.
Management assumes that any business to be acquired and/or equity
investment made by the Company, whether directly or by way of statutory merger,
will involve a business that is new and unseasoned, or a business that has been
operating for a limited period of time and has a limited or unsuccessful record
of revenues or earnings. Investments in start-up enterprises result in a higher
risk of total loss of investment by the Company. Except in cases of a merger or
other instances where stockholders' approval may be required by applicable law,
the Company's stockholders will not have the opportunity to review the relative
merits or weaknesses of any proposed business to be acquired or equity
investment to be made and, accordingly, will have to rely upon the discretion of
Management in selecting a business or investment.
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The Company has identified certain general policies which will be
considered by the Company in evaluating business acquisition candidates and
investment possibilities. These policies are listed below. In no event will the
Company provide financing or take equity positions in companies where the
aggregate of such investments would cause the Company to be required to register
under the 1940 Act.
1. The Company will examine the products or services of a business
being considered to determine whether a market exists for the products or
services and whether the business can manufacture and/or market the products or
produce the services at a competitive cost.
2. The Company will invest in a corporation that it believes has a
strong potential for growth. The Company will evaluate the corporation's
business and determine the quality and experience of its management.
3. The Company may invest in an operating corporation that has
experienced increases in gross revenues which exceed industry averages. The
market for the corporation's products will be evaluated by determining the
relationship of size, growth potential and competitive factors in that
corporation's industry.
4. The Company will also consider the following factors: (1) special
risks associated with the business and the industry, (2) equity available to the
business, (3) capital requirements of the business, (4) potential for
profitability and (5) the effect of market and economic conditions and
governmental policies on the business and its products.
It is unlikely that any one prospective corporation with which the
Company may seek to enter a relationship will conform in all respects to the
policies described above. Accordingly, this description is intended to serve
only as a general guide for the Company's projected investment activities. These
policies are not fundamental policies of the Company and may be changed at any
time by the Company's Board of Directors.
The Company intends to actively participate (through present Management
or presently unidentified individuals who may be hired by the Company) in the
management of the operations of any business or subsidiary in which it acquires
an interest. In order to accomplish this objective in the case of a subsidiary,
the Company will be represented on the board of directors of such target
corporation through a nominee of its choice. In addition, where the Company
deems it beneficial, the Company may also have a nominee of its choice elected
as an officer. Such nominee is expected to be an officer or director of the
Company. The objective of such acquisition(s) will be to enhance that
corporation's capabilities through active management as well as financial
support. The Company does not plan to enhance the value of such subsidiaries
with the primary objective of resale
4
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of the subsidiary's stock, but rather to further the Company's
long-term investment and management objectives.
The Company anticipates that it will be brought into contact with a
prospective business acquisition or equity investment primarily through the
efforts of its officers, directors and principal stockholders who in the course
of their professional activities and employment outside the Company, frequently
come into contact with corporations whose products, services or concepts may be
subject to successful development and marketing. In such connection, the Company
may pay a finder's fee to such officers, directors, principal stockholders or
their affiliates. Any such payment would not be higher than that which would
ordinarily be paid to a non-affiliated person. The Company proposes to make a
business acquisition or equity investment and to provide interim financing which
will assist such organization in the development of these products, services and
concepts. To date, the Company does not have any contracts or commitments with
anyone or any firm with regard to these business activities. The Company also
does not have any arrangements or understandings with respect to the acquisition
of any business entity or the acquisition of any interest therein.
The Company may use independent consultants (who may agree to receive
stock of the Company in payment for their services in lieu of cash) to explore
areas of, and to seek out, acquisition prospects. Such independent consultants
would be expected to have such expertise or knowledge which would be of use to
Management in any investment decision. The Company has not engaged any
independent consultants as of March 25, 1997.
At this time, Management believes the Company's equity investments will
be made in private transactions with privately owned corporations. Securities
acquired in this manner are restricted from public sale unless they are
registered under the Securities Act of 1933, or unless an exemption from
registration is available.
Government Regulation
The Company may be subject to government regulations promulgated by
various local, state and Federal government agencies with regard to its proposed
business. Additionally, the Company, in the purchase of equity positions, will
be subject to various rules and regulations promulgated by the Securities and
Exchange Commission and the various state securities commissions. Company does
not intend to engage in the business of investing, reinvesting, owning, holding
or trading in securities or otherwise engaging in activities which would render
the Company an "investment company" as defined in the Investment Company Act of
1940, as amended.
The Company's financing activities will be limited by Section 3(a)(3)
of the Investment Company Act of 1940 in that the Company will not be permitted
to own or propose to acquire
5
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investment securities having a total value exceeding 40% of the value of the
Company's total assets (excluding government securities and cash items) on an
unconsolidated basis. The Company is permitted under Section 3(a)(3) of the 1940
Act to own or propose to own securities of a majority owned subsidiary which is
defined under Section 2(a)(24) of the 1940 Act to mean 50% or more of the
outstanding securities of which are owned by the Company or a majority owned
subsidiary of the Company. Notwithstanding Section 3(a)(3) of the 1940 Act, the
Company would not be considered an investment company where it is engaged
directly or indirectly through a wholly-owned subsidiary (which is defined to
mean at least 95% ownership of the outstanding voting stock), in a business or
businesses, other than that of investing, owning, holding or trading in
securities.
In addition to the limitations by the Investment Company Act of 1940 as
mentioned above, there are a number of other provisions of the Federal
securities laws which will affect the Company's proposed investments.
Most, if not all, of the securities which the Company acquires as
equity investments will be "restricted securities" within the meaning of the
Securities Act of 1933 ("Securities Act") and will not be permitted to be resold
without compliance with the Securities Act. The registration of securities owned
by the Company is likely to be a time consuming and expensive process, and the
Company always bears the risk, because of these delays, that it will be unable
to resell such securities, or that it will not be able to obtain an attractive
price for the securities. In the event the Company does not register securities
it acquires for sale, it will seek to rely upon an exemption from registration.
Among other exemptions, Rule 144 of the Securities Act of 1933, as amended,
imposes a two year holding period prior to the sale of restricted securities and
established volume limitations on the amount of any restricted securities that
can be sold within certain defined time periods.
Competition
There are numerous similar companies which are larger, have more
experience, and are better financed than the Company. The Company will thus
assuredly encounter intense competition from numerous other firms engaged in its
field. In view of the Company's lack of operating history, it may be anticipated
that the Company will encounter intense competition seeking relatively more
desirable equity investments. Accordingly, the Company's proposed equity
investments, if any, will entail an unusually high degree of business and
financial risk that may result in substantial losses to the Company.
Personnel
The Company presently has no full-time employees. The day-to-day
operations of the Company are managed by George Rubin, the
6
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Company's President, who devotes such time to the affairs of the Company which
is necessary for the performance of his duties.
Item 2. Properties
Currently the Company is utilizing the office space of Mr. George Rubin
at no cost to the Company until an acquisition is consummated or a business is
established. The amount of office space utilized by the Company is currently
insignificant.
Item 3. Legal Proceedings
There are no material legal proceedings pending against the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable.
PART II
Item 5. Market for Registrant's Securities and Related
Stockholder Matters.
The Company completed its public offering of 758,570 Units in December
1986, each Unit consisting of one share of Common Stock and six Redeemable
Common Stock Purchase Warrants. The Redeemable Warrants expired in July 1990.
The Company received net proceeds of approximately $600,000 from the offering.
From the completion of the Company's public offering until the present time, the
Company's securities have been available to be traded in the over-the-counter
market. The Company believes that there is not an active trading market for the
Company's Common Stock and quotations for, and transactions in the securities
are sporadic. Price quotations for prior periods are not being supplied herein
because in view of the infrequent trading in the securities, they would not be
meaningful.
Management has been advised by its transfer agent (American Stock
Transfer Company) that the approximate number of holders of the Company's Common
Stock as of March 25, 1997 was 334.
No cash dividends have been paid by the Company on its Common Stock and
no such payment is anticipated in the foreseeable future.
Of the Company's issued and outstanding 6,548,870 shares of Common
Stock as of March 25, 1997, 5,790,300 shares of the Company's restricted Common
Stock may be sold in compliance with Rule 144. Rule 144 provides among other
things and subject to certain limitations that a person holding restricted
securities for a period of two years may sell those securities in brokerage
transactions, in an amount equal to at least 1% of the Company's outstanding
Common Stock every three months. Possible or actual sales of the Company's
Common Stock under Rule 144 may have a depressive effect upon the price of the
Company's Common Stock.
7
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Broker-Dealer Sales of Company's Registered Securities.
Except where the Company's Common Stock has a market price of at least
$5.00 per share, the Company's Registered Securities are covered by a Securities
and Exchange Commission ("SEC") rule that imposes additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and institutional accredited investors. For transactions
covered by the rule, the broker-dealer must make a special suitability
determination for the purchaser and receive the purchaser's written agreement to
the transaction prior to the sale. Consequently, the rule affects the ability of
broker-dealers to sell the Company's securities and also may affect the ability
of purchasers in this offering to sell their securities in the secondary market.
The SEC recently adopted seven rules ("Rules") under the Securities
Exchange Act of 1934 requiring broker/dealers engaging in certain recommended
transactions with their customers in specified equity securities falling within
the definition of "penny stock" (generally non-NASDAQ securities priced below $5
per share) to provide to those customers certain specified information. Unless
the transaction is exempt under the Rules, broker/dealers effecting customer
transactions in such defined penny stocks are required to provide their
customers with: (1) a risk disclosure document; (2) disclosure of current bid
and ask quotations, if any; (3) disclosure of the compensation of the
broker/dealers and its salesperson in the transaction; and (4) monthly account
statements showing the market value of each penny stock held in the customer's
account. These SEC Rules were adopted in April, 1992 pursuant to the
requirements of the Securities Enforcement Remedies and Penny Stock Reform Act
of 1990 ("Penny Stock Act").
As a result of the aforesaid rules regulating penny stocks, the market
liquidity for the Company's securities may be severely adversely affected by
limiting the ability of broker-dealers to sell the Company's securities and the
ability of purchasers of the Company's securities in the secondary market.
8
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Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
Consolidated Statements of Operations Summary:
<S> <C> <C> <C> <C> <C>
==========================================================================================================================
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------
Net Sales $ -0- $ -0- $ -0- $ -0- $ -0-
- --------------------------------------------------------------------------------------------------------------------------
Net Income
(Loss) $ 2,435 $ 3,204 $ (2,438) $ (12,369) $ (2,870)
- --------------------------------------------------------------------------------------------------------------------------
Net Income
(Loss) Per
Common Share * * * * *
==========================================================================================================================
* Less than $.01 per share.
Consolidated Balance Sheets Summary:
==========================================================================================================================
December 31, December 31, December 31, December 31, December 31,
1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------
Working
Capital $270,870(1) $268,345(1) $264,962 (1) $267,208 (1) $220,635
- --------------------------------------------------------------------------------------------------------------------------
Total
Share-
holders'
Equity $212,030 $209,595 $206,391 $208,829 $221,198
- --------------------------------------------------------------------------------------------------------------------------
Total
Assets $278,924 $274,734 $269,281 $271,300 $282,159
==========================================================================================================================
</TABLE>
--------------------
(1) If accrued salary which is not included in current liabilities
were paid, working capital would have been reduced by $58,750
to $212,120 at December 31, 1996, $209,595 at December 31,
1995, $210,352 at December 31, 1994 and $208,458 at December
31, 1993.
The foregoing is selected financial information only, and is qualified
by the consolidated Financial Statements and the Notes thereto, in their
entirety, which are set forth elsewhere herein.
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Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
During the past three years, except for interest income, no
revenues were received by the Company. The Company is presently
exploring various business opportunities that may be available to
it. See "Item 1."
Liquidity and Capital Resources
Financing of the Company's activities has been provided from the public
sale of its securities for cash amounting to a net of approximately $600,000. At
December 31, 1996, the Company's working capital amounted to $270,780 with cash
and cash equivalent assets of $276,977. The Company believes that its presently
available cash and cash equivalents are sufficient to fund the Company's search
for a business opportunity. If successful in entering into such a business
opportunity, the Company may require additional financing. No assurances can be
given that the Company will be successful in entering into a business
opportunity and if successful in securing additional financing for the Company
on terms satisfactory to it, if at all.
There are no material commitments for capital expenditures or other
long term credit arrangements.
Item 8. Financial Statements and Supplementary Data.
The information required by Item 8, appears at pages F-1 through F-9
(inclusive) of this Report, which pages follow this page.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable.
10
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INDEX TO FINANCIAL STATEMENTS
PAGE
INDEPENDENT AUDITORS REPORT F-1
CONSOLIDATED BALANCES SHEETS F-2
CONSOLIDATED STATEMENTS OF OPERATIONS F-3
CONSOLIDATED STATEMENTS OF CASH FLOWS F-4
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-6 - F-7
PAGE
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
National Diversified Services, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of National
Diversified Services, Inc. and Subsidiaries as at December 31, 1996 and 1995,
and the related consolidated statements of operations, cash flows, and changes
in stockholders' equity for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of National Diversified
Services, Inc. and Subsidiaries as at December 31, 1996 and 1995, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
MILLER, ELLIN & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York
March 19, 1997
F-1
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<TABLE>
<CAPTION>
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
ASSETS
DECEMBER 31,
1996 1995
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents $ 276,977 $ 272,574
Interest receivable 1,947 2,160
---------- ----------
Total assets $ 278,924 $ 274,734
========== ==========
LIABILITIES
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 8,144 $ 6,389
---------- ----------
Total current liabilities 8,144 6,389
ACCRUED SALARIES - officer (Note B) 58,750 58,750
---------- ----------
Total liabilities 66,894 65,139
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value
authorized 30,000,000 shares, issued
6,553,870 shares in 1996 and 1995 6,554 6,554
Additional paid-in capital 705,755 705,755
---------- ----------
Total 712,309 712,309
Deficit (500,274) (502,709)
---------- ----------
212,035 209,600
Less 5,000 shares of treasury stock, at cost 5 5
---------- ----------
Total stockholders' equity 212,030 209,595
---------- ----------
TOTAL $ 278,924 $ 274,734
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-2
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<TABLE>
<CAPTION>
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
Interest income $ 14,754 $ 16,513 $ 12,375
------------ ------------ ------------
Total income 14,754 16,513 12,375
General and administrative expenses 12,319 13,309 14,813
------------ ------------ ------------
NET INCOME (LOSS) $ 2,435 $ 3,204 $ (2,438)
============ ============ ============
Income (loss) per share, based on
the weighted average shares
outstanding $ - * $ - * $ - *
Number of shares used to compute
income (loss) per share (Note D) 6,548,870 6,548,870 6,548,870
============ ============ ============
* Less than $.01 per share
</TABLE>
See accompanying notes to consolidated financial statements
F-3
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<PAGE>
<TABLE>
<CAPTION>
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1996 1995 1994
---------- ---------- ----------
Cash flows from operating activities:
Net income (loss) $ 2,435 $ 3,204 $ (2,438)
---------- ---------- ----------
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization - 179 192
Changes in assets and liabilities:
Interest receivable 213 (2,160) -
Accounts payable and accrued expenses 1,755 2,249 419
---------- ---------- ----------
Total adjustments 1,968 268 611
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 4,403 3,472 (1,827)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 4,403 3,472 (1,827)
CASH AND CASH EQUIVALENTS - beginning of year 272,574 269,102 270,929
---------- ---------- ----------
CASH AND CASH EQUIVALENTS - end of year $ 276,977 $ 272,574 $ 269,102
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
PAGE
<PAGE>
<TABLE>
<CAPTION>
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
COMMON STOCK ADDITIONAL TREASURY
$.001 PAR VALUE PAID-IN STOCK
------------------------ ---------------
SHARES AMOUNT CAPITAL DEFICIT SHARES COST
<S> <C> <C> <C> <C> <C> <C>
---------- ------- -------- --------- ----- ----
BALANCE AT
January 1, 1994 6,553,870 $ 6,554 $705,755 $(503,475) 5,000 $5
Net loss for year - - - (2,438) - -
---------- ------- -------- --------- ----- ----
BALANCE AT
December 31, 1994 6,553,870 6,554 705,755 (505,913) 5,000 5
Net income for year - - - 3,204 - -
---------- ------- -------- --------- ----- ----
BALANCE AT
December 31, 1995 6,553,870 6,554 705,755 (502,709) 5,000 5
Net income for year - - - 2,435 - -
---------- ------- -------- --------- ----- ----
BALANCE AT
December 31, 1996 6,553,870 $ 6,554 $705,755 $(500,274) 5,000 $ 5
========== ======= ======== ========= ===== ====
</TABLE>
See accompanying notes to consolidated financial statements
F-5
PAGE
<PAGE>
NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and History
The Company was organized under the laws of the State of Delaware on May
30, 1985 and was in the development stage until 1989. During November 1989,
the Company began setting up operations to import to the United States
products for sale principally to the hardware and construction markets. Two
wholly-owned subsidiaries were formed to conduct these operations. The
Company commenced operations during the first three months of 1990 and
began billing its customers in April 1990. Billings to customers ended in
June 1990 and the Company terminated its import business. Currently, the
Company is exploring various business opportunities that may be available
to it.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, which are all wholly-owned and totally inactive. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Concentrations of Credit Risk
The Company places its cash balances with high credit quality financial
institutions. At times, such balances may be in excess of the FDIC
insurance limit.
Property, Plant and Equipment and Depreciation
Property, plant and equipment have been fully depreciated primarily by
accelerated methods over the estimated useful lives of the individual
classes of assets.
Cash Equivalents
Cash equivalents comprised an investment in short-term commercial paper
with a maturity of less than ninety days.
Income Taxes
Effective January 1, 1993, the Company changed its method of accounting for
income taxes to comply with SFAS No. 109, "Accounting for Income Taxes." A
requirement of SFAS No. 109 is that deferred tax assets and liabilities are
recorded for temporary differences between the financial statement and tax
bases of assets and liabilities using the currently enacted tax rate
expected to be in effect when the taxes are actually paid or recovered.
F-6
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NATIONAL DIVERSIFIED SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE B - ACCRUED SALARIES - OFFICER
Accrued salaries, officer represents $58,750 for the period December 1986
to November, 22, 1989.
NOTE C - INCOME TAXES
At December 31, 1996, the Company had net operating loss carryforwards of
approximately $455,000 which expire from 2001 through 2010. In accordance
with SFAS No. 109 (Note A), these operating loss carryforwards result in
deferred tax assets to the Company. Management is uncertain as to the
utilization of these loss carryforwards and has provided for a 100%
valuation allowance for such deferred tax assets as follows:
Federal net operating loss carryforwards $ 135,000
State net operating loss carryforwards 55,000
----------
Total 190,000
Less valuation allowance 190,000
----------
Net deferred tax assets $ -0-
==========
NOTE D - INCOME (LOSS) PER SHARE
Income (loss) per share is based on the weighted average number of shares
of common stock outstanding.
F-7
PAGE
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
(a) Identification of Directors
The names, ages and principal occupations of the Company's
present directors, and the date on which their term of office commenced and
expires, are as follows:
First
Term of Became Principal
Name Age Office Director Occupation
- -------------- --- ------ -------- ---------------
George Rubin 69 (1) 1989 Chairman of the
Board of ATC
Environmental
Inc.
Stacy Goldberg 34 (1) 1995 Office Manager
of ATC Environ-
mental Inc.
- ------------------
(1) Directors are elected at the annual meeting of stockholders
and hold office to the following annual meeting.
(b) Identification of Executive Officers.
George Rubin is Chairman of the Board of Directors, President, Chief
Executive Officer, Principal Financial Officer and Treasurer of the Company.
Stacy Goldberg is Secretary of the Company. George Rubin is the father of Stacy
Goldberg and Morry F. Rubin, a principal stockholder. The Company's By-Laws
provide that the terms of all officers expire at the annual meeting of directors
following the annual stockholders meeting.
(c) Business Experience
George Rubin has been Chairman of the Board of Directors of the Company
since December 1989 and President, Chief Executive Officer and Chief Financial
and Accounting Officer and Treasurer of the Company since August 1995. George
Rubin is Chairman of the Board of ATC Group Services Inc. (formerly ATC
Environmental Inc.) since June 1988. Mr. Rubin is responsible for assisting in
long and short term financial planning including reviewing budgets, liaison with
financial institutions and in charge of merger and acquisition activities. Mr.
Rubin devotes such time to the Company as is necessary for the performance of
his duties.
Stacy Goldberg, a director and Secretary of the Company since August
1995, has been an Office Manager of ATC Group Services Inc. (formerly ATC
Environmental Inc.) for more than the past five years.
11
PAGE
<PAGE>
Principal Stockholder and Founder
Morry F. Rubin has been President, Chief Executive Officer, Treasurer
and a director of ATC Group Services Inc. (formerly ATC Environmental Inc.)
since January 1988. Mr. Rubin also served as President, Chief Executive Officer
and Treasurer of Aurora from May 1985 through June 1995, and as a director of
Aurora from September 1983 through June 1995. From June 1985 to August 1995, Mr.
Rubin served as an executive officer and director of the Company.
Item 11. Executive Compensation.
During the past three years, no executive officer has any employment
contract with the Company or received any cash or other compensation. Directors
do not presently receive compensation for serving on the board, although the
Company will reimburse its directors for out-of-pocket travel expenditures.
Depending upon the number of meetings and the time required for the Company's
operations, the Company may decide to compensate its directors in the future.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
As of March 25, 1997, the only persons of record who held or were known
to own (or believed by the Company to own) beneficially more than 5% of the
outstanding 6,548,870 shares of Common Stock of the Company (the only voting
security) were as indicated in the table below. Such table also sets forth the
beneficial ownership of executive officers, directors, both individually and as
a group.
Approximately
Number of Percent
Name Shares of Class
---------------------- --------- ----------
Morry F. Rubin
(1)(2)(3) 2,403,000 36.7
George Rubin (1)(2)(3) 2,383,000 36.4
Stacy Goldberg (3) -0- -0-
All officers and
directors as a
group (two persons) 2,383,000 36.4
(1) May be deemed to be a founder, control person or affiliate of the
Company under the Securities Act of 1933, as amended.
(2) George Rubin is the father of Morry F. Rubin and Stacy
Goldberg. Shares owned by George Rubin do not include
shares owned by Morry F. Rubin and shares owned by Morry F.
Rubin do not include shares owned by George Rubin.
12
PAGE
<PAGE>
(3) All addresses are 104 East 25th Street, Tenth Floor, New
York, New York 10010.
The Company does not know of any arrangement or pledge of its
securities by persons now considered in control of the Company that might result
in a change of control of the Company.
Item 13. Certain Relationships and Related Transactions.
None.
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a)(1)(2) Financial Statements and Financial Statement
Schedules.
A list of the Financial Statements and Financial
Statement Schedules filed as a part of this Report is set forth in Item 8, and
appears at Page F-1 of this Report; which list is incorporated herein by
reference.
(a)(3) Exhibits
3 Certificate of Incorporation and Amendments
thereto (1)
3(A) By-Laws (1)
21 Subsidiaries of Registrant (2)
27 Financial Data Schedule (3)
- ------------------------
(1) Exhibits 3 and 3(A) are incorporated by reference from Registration No.
99080 which were filed in a Registration Statement on Form S-18.
(2) The Company had no active subsidiaries during the year ended
December 31, 1996.
(3) Filed herewith.
(b) Reports on Form 8-K.
No Form 8-K was filed or required to be filed during
the fourth quarter of 1996.
13
PAGE
<PAGE>
SIGNATURES
Pursuant to the requirements Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NATIONAL DIVERSIFIED SERVICES, INC.
BY: /s/ George Rubin
------------------------------------
George Rubin, Chairman of the Board,
President, Chief Executive Officer,
Chief Financial and Accounting Officer
Dated: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
Chairman of the Board
President, Chief
Executive Officer,
Treasurer, Principal
Financial and Accounting Officer March 26 1997
/s/ George Rubin
- ---------------------------
GEORGE RUBIN
/s/ Stacy Goldberg Director and Secretary March 26 1997
- ---------------------------
STACY GOLDBERG
14
PAGE
<PAGE>
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0
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