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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities and Exchange Act of 1934
For Quarter Ended March 31, 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
March 31, 1997
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PART I
FINANCIAL INFORMATION
Item 1 - Financial Statements
NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
3/31/97 12/31/96
(unaudited)
CURRENT ASSETS
Cash $ 14,294 $ 9,103
Accounts Receivable: (Note B & E)
Trade 42,254 79,431
Other 143 891
Prepaid Expenses 15,029 19,820
TOTAL CURRENT ASSETS 74,720 109,245
PROPERTY & EQUIPMENT, at cost (Note D)
Furniture and Equipment 85,034 85,034
Less Accumulated Depreciation and Amortization (84,015) (83,715)
1,019 1,319
DEFERRED CHARGES, Net of accumulated amortization 11,268 11,720
DUE FROM OFFICER 16,235 16,235
TOTAL ASSETS $103,242 $138,520
-------- --------
The accompanying notes to financial statements are an integral part of these statements.
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NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES & STOCKHOLDERS EQUITY
3/31/97 12/31/96
(unaudited)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 11,839 $ 15,759
Accrued salaries and related taxes 27,138 25,587
Accrued legal fees 41,622 40,722
Line of Credit 5,000 15,000
Deferred revenue 2,233 2,406
TOTAL CURRENT LIABILITIES 87,832 99,474
Long Term Note (Note B) 90,000 100,000
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 (1,277,205) (1,263,569)
TOTAL STOCKHOLDERS' EQUITY (74,590) (60,954)
(Deficiency in Assets)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $103,242 $138,520
(Deficiency in Assets) -------- --------
The accompanying notes to financial statements are an integral part of these statements.
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NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31
(UNAUDITED)
1997 1996
SERVICE REVENUES (Note E) $183,733 $275,923
COST AND EXPENSES:
Labor 139,805 204,335
General and Administrative 54,048 70,139
193,853 274,474
PROFIT (LOSS) FROM OPERATIONS (10,120) 1,449
OTHER INCOME (EXPENSE):
Interest expense (3,594) (3,637)
Investment income 42 60
Miscellaneous 36 1,607
NET (LOSS) PROFIT $(13,636) $ (521)
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NET (LOSS) PROFIT PER COMMON SHARE $ (.00) $ (.00)
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The accompanying notes to financial statements are an integral part of these statements.
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NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31
(UNAUDITED)
1997 1996
CHANGE IN CASH AND SHORT-TERM INVESTMENTS:
Cash flows from operating activities:
Net (LOSS) $(13,636) $ (521)
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 300 (41,200)
Amortization 451 302
Changes in assets and liabilities:
Accounts receivable 34,926 16,062
Prepaid expenses 4,792 (1,849)
Due from officer (395)
Accounts payable and accrued expenses (3,920) (6,902)
Accrued salaries and related taxes 1,551 (20,254)
Accrued legal fees 900 (2,498)
Deferred revenue 173 475
Net cash provided by (used in) operating activities 25,191 (14,526)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line-of-credit with bank
Payments under line-of-credit with bank (10,000)
Borrowings on note payable to officer
Payments under note payable to officer (10,000)
Net cash provided by financing activities (20,000) (569)
NET INCREASE (DECREASE) IN CASH 5,191 (15,095)
CASH, beginning of period 9,103 32,482
CASH, end of period $ 14,294 $ 17,387
-------- --------
The accompanying notes to financial statements are an integral part of these statements.
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NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED MARCH 31, 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 March 31, 1997 and the results of the
operations and changes in their cash flows for the three month period ending
March 31, 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 March 31, 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 $19,363
at March 31, 1997.
Income/Loss per share:
Income or loss per share computations are based on the weighted average
number of common shares outstanding each year.
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NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED MARCH 31, 1997
(Continued)
NOTE B - DEBT
At March 31, 1997, the Company had a $50,000 bank line of credit, of
which $5,000 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 March 31, 1997) 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 March 31, 1997, the loan amount
was $90,000 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 March 31, 1997) plus 5.25%. Interest expense relating to this note
was $3,240 for the 3 months ending March 31, 1997.
NOTE C - INCOME TAXES
At March 31, 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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NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED MARCH 31, 1997
(Continued)
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 March 31, 1997 as follows:
Operating
Leases
1997 $ 9,000
1998 8,000
Total payments $17,000
$17,000
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Rent expense was $3,000 and $4,791 for the three months ending March
31, 1997 and 1996, respectively.
NOTE E - SIGNIFICANT CUSTOMERS:
Revenues with 2 major customers accounted for approximately 52% of total
service revenues at March 31, 1997. Accounts receivable from these 2 customers
represent approximately 36% of total trade accounts receivable at March 31,
1997.
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NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED MARCH 31, 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
80 security guards and an office staff of 4 all in St. Louis, Missouri.
RESULTS OF OPERATIONS
Revenues for the three months ending March 31, 1997, decreased $92,190
(33%) 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.
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NATIONAL INDUSTRIAL SECURITY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
QUARTER ENDED MARCH 31, 1997
(Continued)
The percentage of labor expense to service revenues decreased from
74% at March 31, 1996 to 76% at March 31, 1997. At March 31, 1997 general
and administrative expenses decreased by $16,091 due to lower administrative
salaries and reduced rent expense.
Net loss for the three months ended March 31, 1997 was $13,636 compared
with a net loss of $521 during the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position at March 31, 1997 was $14,294. The cash
position varies day-to-day depending on collections and the timing of payroll
obligations.
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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: May 15, 1997
By:
Max T. Jackson, President,
Treasurer and Chairman of the
Board of Directors
(Principal Executive, Financial
and Accounting Officer)
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