UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002
Commission file number 033-19992-LA
NATIONAL EQUITIES HOLDINGS, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 76-0539342
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
21800 I-45 North,
Spring, Texas 77373
(Address of principal executive offices) (Zip Code)
Telephone: (281) 414-8172
(Registrant's telephone no., including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, $0.001
PAR VALUE
Indicate by check mark whether the Issuer (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 [ ] No [ X ]
Number of shares of the registrant's common stock outstanding as of April 8,
2003 was 39,785,426.
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
[ x ] Yes [ ] No
Transactional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
Page 1
NATIONAL EQUITIES HOLDINGS, INC.
FORM 10-QSB
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1 - Financial Information
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3 - Item 307 of Regulation S-B
SIGNATURES
Page 2
NATIONAL EQUITIES HOLDINGS, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
__________
UNAUDITED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
F-1
NATIONAL EQUITIES HOLDINGS, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
TABLE OF CONTENTS
__________
PAGE
----
Unaudited Condensed Financial Statements:
Condensed Balance Sheet as of March 31,2002
(unaudited) and December 31, 2001 3
Unaudited Condensed Statement of Operations for the
three months ended March 31, 2002 and 2001 4
Unaudited Condensed Statement of Stockholders' Deficit
for the three months ended March 31, 2002 5
Unaudited Condensed Statement of Cash Flows for the
three months ended March 31, 2002 and 2001 6
Notes to Unaudited Condensed Financial Statements 7
F-2
NATIONAL EQUITIES HOLDINGS, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
MARCH 31, 2002 AND DECEMBER 31, 2001
__________
MARCH 31, DECEMBER 31,
2002 2001
(UNAUDITED) (NOTE)
------------- --------------
ASSETS
------
Current assets:
Cash $ - $ -
------------- --------------
Total current assets - -
------------- --------------
Total assets $ - $ -
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
- ----------------------------------------------
Current liabilities:
Accounts payable $ 570,935 $ 570,935
Accrued liabilities 116,485 116,485
Convertible debentures 11,145 11,145
------------- --------------
Total current liabilities 698,565 698,565
------------- --------------
Commitments and contingencies
Stockholders' deficit:
Preferred stock: $.001 par value; 1,000,000 shares
authorized - -
Common stock: $.001 par value; 49,000,000 shares
authorized; 39,788,676 shares issued and outstanding
at March 31, 2002 and December 31, 2001 39,789 39,789
Additional paid-in capital 9,596,622 9,596,622
Accumulated deficit (10,334,976) (10,334,976)
------------- --------------
Total stockholders' deficit (698,565) (698,565)
------------- --------------
Total liabilities and stockholders' deficit $ - $ -
============= ==============
Note: The balance sheet at December 31, 2001 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
The accompanying notes are an integral part of these
unaudited condensed financial statements.
F-3
NATIONAL EQUITIES HOLDINGS, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
UNAUDITED CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
__________
THREE MONTHS ENDED
MARCH 31,
------------------------
2002 2001
----------- -----------
Revenues $ - $ -
Costs and expenses - -
----------- -----------
Net income $ - $ -
=========== ===========
Basic and diluted income per common share $ - $ -
----------- -----------
Net income per common share $ - $ -
=========== ===========
Weighted average common shares 39,788,676 39,788,676
=========== ===========
The accompanying notes are an integral part of these
unaudited condensed financial statements.
F-4
NATIONAL EQUITIES HOLDINGS, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
UNAUDITED CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2002
__________
TOTAL
ADDITIONAL STOCKHOLDERS'
COMMON STOCK PAID-IN ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL DEFICIT (DEFICIT)
---------- ------- ---------- ------------- ----------
Balance at
December 31, 2001 39,788,676 $39,789 $9,596,622 $(10,334,976) $(698,565)
Net income - - - - -
---------- ------- ---------- ------------- ----------
Balance at
March 31, 2002 39,788,676 $39,789 $9,596,622 $(10,334,976) $(698,565)
========== ======= ========== ============= ==========
The accompanying notes are an integral part of these
unaudited condensed financial statements.
F-5
NATIONAL EQUITIES HOLDINGS, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
__________
THREE MONTHS ENDED
MARCH 31,
------------
2002 2001
----- -----
Cash flows from operating activities:
Net income $ - $ -
Adjustments to reconcile net income to net cash
used in operating activities - -
----- -----
Net cash from operating activities - -
----- -----
Net increase (decrease) in cash and cash equivalents - -
Cash and cash equivalents at beginning of year - -
----- -----
Cash and cash equivalents at end of year $ - $ -
===== =====
The accompanying notes are an integral part of these
unaudited condensed financial statements.
F-6
NATIONAL EQUITIES HOLDINGS, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
__________
1. ORGANIZATION
------------
National Equities Holdings, Inc.(the "Company") is a Delaware corporation
that currently has no significant business activities but is engaged in an
effort to emerge from bankruptcy proceedings that were filed in August
1999. On December 20, 2001, the Company obtained an order dismissing the
bankruptcy and the Company now plans to resume oil and gas exploration and
production activities. The Company is a development stage enterprise
because it currently has no significant operations or assets and is
devoting substantially all its efforts to a search for capital resources
and business development activities. December 20, 2001 is considered the
inception of the development stage for financial reporting purpose because
that date was the date on which bankruptcy proceedings were dismissed by
the bankruptcy courts and the Company began to focus on future activities.
2. ACCOUNTING ESTIMATES
---------------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates. These estimates
mainly involve the useful lives of property and equipment, the impairment
of unproved oil and gas properties, the valuation of deferred tax assets
and the realizability of accounts receivable.
3. INTERIM FINANCIAL STATEMENTS
------------------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three month periods ended March 31, 2002 and 2001 are not necessarily
indicative of the results that may be expected for the respective full
years.
A summary of the Company's significant accounting policies and other
information necessary to understand these consolidated interim financial
statements is presented in the Company's audited financial statements for
the years ended December 31, 2001 and 2000. Accordingly, the Company's
audited financial statements should be read in connection with these
financial statements.
4. GOING CONCERN CONSIDERATIONS
------------------------------
Since its inception, the Company has suffered recurring losses from
operations and has been dependent on existing stockholders and new
investors to provide the cash resources to sustain its operations. During
the years ended December 31, 2001 and 2000, the Company did not have
significant operations, but remained in a negative financial position based
on negative prior year operations.
F-7
NATIONAL EQUITIES HOLDINGS, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
__________
4. GOING CONCERN CONSIDERATIONS, CONTINUED
------------------------------------------
The Company's negative operating results from prior years have produced a
working capital deficit of $(698,565) and a stockholders' deficit of
$(698,565) at December 31, 2001. Additionally, the Company is severely
delinquent on various accounts payable. Management is working with vendors
to resolve old outstanding balances, however, the results of these actions
cannot be predicted. These factors raise substantial doubt about the
Company's ability to continue as a going concern.
The Company's future strategic plans are currently being developed, but may
include private placements of the Company's common stock and the exchange
of common stock for settlement of vendor accounts. There can be no
assurance that any of the plans developed by the Company will produce cash
flows sufficient to overcome current liquidity problems.
The Company's long-term viability as a going concern is dependent on
certain key factors, as follows:
- The Company's ability to obtain adequate sources of outside financing
to support its emergence from bankruptcy proceedings and its efforts
to move forward with oil and gas exploration and production
activities.
- The Company's ability to locate, prove and produce from economically
viable oil and gas reserves.
- The Company's ability to ultimately achieve adequate profitability and
cash flows to sustain continuing operations.
5. INCOME TAXES
-------------
The Company has incurred losses since its inception and, therefore, has not
been subject to federal income taxes. As of March 31, 2002, the Company had
net operating loss ("NOL") carryforwards for income tax purposes of
approximately $10,000,000 which expire in various tax years through 2021.
Under the provisions of Section 382 of the Internal Revenue Code, ownership
changes in the Company in 1997 and again in 2001 will severely limit the
Company's ability to utilize its NOL carryforward to reduce future taxable
income and related tax liabilities. Additionally, because United States tax
laws limit the time during which NOL carryforwards may be applied against
future taxable income, the Company may be unable to take full advantage of
its NOL for federal income tax purposes should the Company generate taxable
income.
F-8
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
The financial statements of the company are set forth beginning on page F-1.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with our unaudited
consolidated interim financial statements and related notes thereto included in
this quarterly report and in our audited consolidated financial statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") contained in our Form 10-KSB for the year ended December 31,
2001. Certain statements in the following MD&A are forward looking statements.
Words such as "expects", "anticipates", "estimates" and similar expressions are
intended to identify forward looking statements. Such statements are subject to
risks and uncertainties that could cause actual results to differ materially
from those projected.
GENERAL
The company experienced dramatic changes during the fiscal year ended 2001. The
Company was restructured after settlement of legal disputes and the dismissal of
Chapter 7 Bankruptcy proceedings. The restructuring plan involved a change in
company control, a change in management, divestiture of uneconomical oil and
natural gas properties, a significant write off of impaired assets and a change
in company focus. The Company has completed all of these steps, but has not
initiated new continuing operating activities . The Company is a development
stage enterprise because it currently has no significant operations or assets
and is devoting substantially all its efforts to a search for capital resources
and business development activities. The Company reported no revenue in 2001 or
2000.
RESULTS OF OPERATIONS
There were no operations and we incurred no debt in the quarter ended March 31,
2002. Additionally, there were no changes to the balance sheet and other
financial statements compared to the previous year including the quarter ended
March 31, 2001 compared to the quarter ended March 31, 2002.
The Company is currently a development stage corporation. Our business plan
includes focusing on oil and natural gas investments for 2002 and the
foreseeable future. The Company is in a start-up phase and has no material
amount of funds from which we can satisfy any cash requirements to commence
operations. There has been no revenue for the past two years. Our year-end
financial statements and the report of our independent auditor contain a going
concern qualification. This means that because we have had little or no
operations to date, and because we have little or no tangible assets or
financial resources, and have incurred losses since inception, there is
substantial doubt about our ability to continue as a going concern.
LIQUIDITY AND CAPITAL RESOURCES
During the year ended December 31, 2001 based on limited operations we are in a
negative financial position with both negative working capital and a
stockholders' deficit of $698,565 at March 31, 2002.
Page 3
The Company has no assets or liabilities owed incurred subsequent to the
restructuring. The Company needs approximately $30,000 to sustain its operations
through the year. We anticipate the need to raise these funds, either by
borrowing the funds or through equity financing, in order to commence principal
operations.
GOING CONCERN
The Company's negative operating results from prior years have produced a
working capital deficit of $(698,565) and a stockholders' deficit of $(698,565)
at December 31, 2001. Additionally, the Company is severely delinquent on
various accounts payable. Management is working with vendors to resolve old
outstanding balances, however, the results of these actions cannot be predicted.
These factors raise substantial doubt about the Company's ability to continue as
a going concern.
The Company's future strategic plans are currently being developed, but may
include private placements of the Company's common stock and the exchange of
common stock for settlement of vendor accounts. There can be no assurance that
any of the plans developed by the Company will produce cash flows sufficient to
overcome current liquidity problems.
The Company's long-term viability as a going concern is dependent on certain key
factors, as follows:
- The Company's ability to obtain adequate sources of outside financing
to support its efforts to move forward with oil and gas exploration
and production activities.
- The Company's ability to locate, prove and produce from economically
viable oil and gas reserves.
- The Company's ability to ultimately achieve adequate profitability and
cash flows to sustain continuing operations.
FORWARD-LOOKING INFORMATION-GENERAL
The statements contained herein and other information contained in this report
may be based, in part, on management's estimates, projections, plans and
judgments. These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical results or those anticipated. In this report, the words
"anticipates", "believes", "expects", "intends", "future", "plans", "targets"
and similar expressions identify forward-looking statements. Readers are
cautioned not to place undue reliance on the forward-looking statements
contained herein. The Company undertakes no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that may arise
after the date hereof. Additionally, these statements are based on certain
assumptions that may prove to be erroneous and are subject to certain risks
including, but not limited to, the Company's dependence on limited cash
resources, its dependence on certain key personnel within the Company, and its
ability to raise additional capital. The Company's ability to generate long-term
value for the common stockholder is dependent upon the acquisition of profitable
energy prospects. There are many companies participating in the oil and gas
industry, many with resources greater than the Company. Greater competition for
profitable operations can increase prices and make it more difficult to acquire
assets at reasonable multiples of cash flow. The Company believes that it will
be able to compete in this environment and will be able to find attractive
investments; however, it is not possible to predict competition or the effect
this will have on the Company's operations. The Company's operations are also
significantly affected by factors, which are outside the
Page 4
control of the Company, including the prices of oil and natural gas,
environmental and governmental regulations. Accordingly, actual results may
differ, possibly materially, from the predictions contained herein.
ITEM 3. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
Bill Knollenberg, our President, Chairman of the Board, Chief Financial Officer
and Director, has concluded that our disclosure controls and procedures are
appropriate and effective. He has evaluated these controls and procedures as of
a date within 90 days of the filing date of this report on Form 10-QSB. There
were no significant changes in our internal controls or in other factors that
could significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
PART II
Pursuant to the Instructions on Part II of the Form 10-QSB, Items 1, 3, and 5
are omitted.
ITEM 2. CHANGES IN SECURITIES
The following information sets forth certain information for all securities the
Company issued from January 1, 2002 through March 31, 2002, in transactions
without registration under the Act. There were no underwriters in any of these
transactions, nor were any sales commissions paid thereon. The securities were
issued pursuant to Section 4(2) of the Act. None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
Page 5
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange
Act of 1934, the undersigned has duly caused this Form 10-QSB to be signed on
its behalf by the undersigned, there unto duly authorized, in the City of
Houston, Texas, on April 8, 2003.
NATIONAL EQUITIES HOLDINGS, INC.
By: /s/ Bill Knollenberg Date: April 8, 2003
------------------------------------
Bill Knollenberg,
President, Chairman of the Board and
Chief Financial Officer
Page 6
CERTIFICATIONS
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Bill Knollenberg, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of National Equities
Holdings, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: April 8, 2003
/s/ Bill Knollenberg
- --------------------
Bill Knollenberg
President
Page 7
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Bill Knollenberg, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of National Equities
Holdings, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: April 8, 2003
/s/ Bill Knollenberg
- --------------------
Bill Knollenberg
Chief Financial Officer
Page 8
Certification of President and Principal Financial Officer of National Equities
- -------------------------------------------------------------------------------
Holdings, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 1992 and
- ----------------------------------------------------------------------------
Section 1350 of 18 U.S.C. 63.
- -----------------------------
I, Bill Knollenberg, the President and Chief Financial Officer of National
Equities Holdings, Inc. hereby certify that to my knowledge, National Equities
Corporation's periodic report on Form 10-QSB for the period ended March 31,
2002, fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that information contained in the periodic
report on Form 10-QSB and the financial statements contained therein fairly
presents, in all material respects, the financial condition and results of the
operations of National Equities Corporation.
Date: April 8, 2003 /s/ Bill Knollenberg
----------------
Bill Knollenberg,
President of
National Equities Corporation
Certification of President and Principal Financial Officer of National Equities
- -------------------------------------------------------------------------------
Holdings, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 1992 and
- ----------------------------------------------------------------------------
Section 1350 of 18 U.S.C. 63.
- -----------------------------
I, Bill Knollenberg the President and Chief Financial Officer of National
Equities Holdings, Inc. hereby certify that to my knowledge, National Equities
Corporation's periodic report on Form 10-QSB for the period ended March 31,
2002, fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that information contained in the periodic
report on Form 10-QSB and the financial statements contained therein fairly
presents, in all material respects, the financial condition and results of the
operations of National Equities Corporation.
Date: April 8, 2003 /s/ Bill Knollenberg
----------------
Bill Knollenberg,
Chief Financial Officer of
National Equities Corporation
Page 9