**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**____________________**

**FORM 10-Q**

**____________________**

**[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the quarterly period ended March 31, 2011**

**[  ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT**

**For the transition period from ____________ to____________**

**Commission File No. 000-53984**

**NETWORK DEALER SERVICES HOLDING CORP.**

(Exact name of Registrant as specified in its charter) 
| Utah

77-0616375

(State or Other Jurisdiction of 

(I.R.S. Employer Identification No.) 

incorporation or organization) 

  

1725 East 1450 South, Suite 340

Clearfield, Utah 84015

 (Address of Principal Executive Offices) 

(801) 927-4000

(Registrant’s telephone number, including area code) 

N/A 

(Former name, former address and former fiscal year, 

if changed since last report) 

Indicate by check mark whether the Registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) 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 whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).  Yes [  ]   No [  ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer [  ]      Accelerated filer [  ]       Non-accelerated filer [  ]      Smaller reporting company [X]

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X] 

1

**APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY**

**PROCEEDINGS DURING THE PRECEDING FIVE YEARS**

Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act subsequent to the distribution of securities under a plan confirmed by a court. 

Not applicable. 

**APPLICABLE ONLY TO CORPORATE ISSUERS**

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date:  May 13, 2011 – 47,460,901 shares of common stock.
2

**PART I**

**Item 1. Financial Statements.**

March 31, 2011

**C O N T E N T S**

Condensed Consolidated Balance Sheets

4

Condensed Consolidated Statements of Operations

5

Condensed Consolidated Statements of Cash Flows

6

Notes to Condensed Consolidated Financial Statements

7

3

**Network Dealer Services Holding Corp.**

**Condensed Consolidated Balance Sheets**

**March 31, 2011 and December 31, 2010**

 

 

**March 31,**

 

**December 31,**

 

 

**2011**

 

**2010**

 

 

**(Unaudited)**

 

**(Audited)**

**Assets**

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

Cash

$

—    

$

5,937  

Accounts receivable, net

 

25,261  

 

39,576  

Accounts receivable - related party

 

17,162  

 

—    

Inventory

 

5,294  

 

5,294  

Prepaid asset

 

186  

 

186  

 

 

 

 

 

Total current assets

 

47,903  

 

50,993  

 

 

 

 

 

Property and equipment, net

 

28,673  

 

31,776  

 

 

 

 

 

Total assets

$

76,576  

$

82,769  

 

 

 

 

 

**Liabilities and Shareholders' Equity (Deficit)**

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

Bank Overdraft

$

13,863  

$

—    

Accounts payable

 

143,244  

 

80,877  

Accounts payable - related party

 

67,304  

 

38,855  

Other current liabilities

 

80,009  

 

74,399  

Unearned revenue - related party

 

—    

 

23,299  

Notes payable related party

 

415,453  

 

351,748  

Current Portion Capital Leases

 

26,728  

 

25,276  

 

 

 

 

 

Total current liabilities

 

746,601  

 

594,454  

 

 

 

 

 

Long term liabilities:

 

 

 

 

Capital Leases

 

7,374  

 

14,754  

 

 

 

 

 

Total long term liabilities

 

7,374  

 

14,754  

 

 

 

 

 

Total liabilities

 

753,975  

 

609,208  

 

 

 

 

 

Shareholders'  Equity (Deficit):

 

 

 

 

 

 

 

 

 

Preferred Stock, $0.001 par value, 5,000,000 shares authorized,

 

 

 

 

none issued and outstanding

 

—    

 

—    

Common stock, $0.001 par value; 100,000,000 shares authorized,

 

 

 

 

46,660,901 and 46,485,901 shares issued and outstanding

 

46,661  

 

46,486  

Additional paid in capital

 

1,784,974  

 

1,767,893  

Accumulated deficit

 

(2,509,034) 

 

(2,340,818) 

Total Stockholders'  equity (deficit)

 

(677,399) 

 

(526,439) 

 

 

 

 

 

Total liabilities and Stockholders'  equity (deficit)

$

76,576  

$

82,769  

 

 

 

 

 

See accompanying notes to financial statements.

4

**Network Dealer Services Holding Corp.**

**Condensed Consolidated Statements of Operations**

**For the Three Month Periods ended March 31, 2011 and 2010**

**(Unaudited)**

 

 

**For the Three Months Ended**

 

 

**March 31,**

 

 

**2011**

 

**2010**

 

 

 

 

 

Revenue

$

82,908  

$

51,400  

Revenues - related party

 

247,435  

 

86,845  

Total revenues

 

330,343  

 

138,245  

 

 

 

 

 

Cost of Goods Sold

 

266,210  

 

131,431  

 

 

 

 

 

Gross Profit

 

64,133  

 

6,814  

 

 

 

 

 

Operating expenses:

 

 

 

 

Rent

 

53,574  

 

34,368  

Professional fees

 

58,087  

 

661  

General and administrative

 

105,405  

 

39,614  

 

 

 

 

 

Total operating expenses

 

217,066  

 

74,643  

 

 

 

 

 

Loss from operations

 

(152,933) 

 

(67,829) 

 

 

 

 

 

Other Income (Expense)

 

 

 

 

Other income

 

50  

 

25  

Interest expense

 

(15,333) 

 

(3,069) 

 

 

 

 

 

Total other expense

 

(15,283) 

 

(3,044) 

 

 

 

 

 

Income (loss) before taxes

 

(168,216) 

 

(70,873) 

 

 

 

 

 

Provision for income taxes

 

—    

 

—    

 

 

 

 

 

Net loss

$

(168,216) 

$

(70,873) 

 

 

 

 

 

Other Comprehensive Income

 

 

 

 

Unrealized gains (losses) on available for sale 

 

 

 

 

securities

 

—    

 

8  

Total Comprehensive Income (Loss)

$

(168,216) 

$

(70,865) 

 

 

 

 

 

Net loss per share - Basic and diluted

$

(0.01)

$

             (0.01)

 

 

 

 

 

Weighted average shares outstanding - Basic 

 

 

 

 

and diluted

 

46,530,623  

 

46,019,233  

 

 

 

 

 

See accompanying notes to financial statements.

5

**Network Dealer Services Holding Corp.**

**Condensed Consolidated Statements of Cash Flows**

**For the Three Months Ended March 31, 2011 and 2010**

(Unaudited)

 

 

**For The Three Months Ended**

 

 

**March 31,**

 

 

**2011**

 

**2010**

Cash flows from operating activities:

 

 

 

 

Net loss

$

(168,216) 

$

(70,873) 

Adjustments to reconcile net loss to net cash

 

 

 

 

from operating activities:

 

 

 

 

Depreciation expense

  

4,522  

 

11,990  

Inputed interest on related party loan

  

12,915  

 

—    

Shares issued for services

  

2,591  

 

—    

Changes in operating assets and liabilities:

 

 

 

 

(Increase) decrease in accounts receivable

  

14,315  

 

(14,561) 

(Increase) decrease in accounts receivable related party

  

(17,162) 

 

41,161  

(Increase) decrease in prepaid assets

  

—    

 

848  

Increase (decrease) in bank overdraft

  

13,863  

 

—    

Increase (decrease) in accounts payable

  

62,367  

 

(5,441) 

Increase (decrease) in accounts payable - related party

  

28,449  

 

45,389  

Increase (decrease) in accrued liabilities

  

7,360  

 

5,952  

Increase (decrease) in unearned revenue

  

(23,299) 

 

—    

 

 

 

 

 

Net cash from operating activities

  

(62,295) 

 

14,465  

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchase of property and equipment

  

(1,419) 

 

(366) 

 

  

 

 

 

Net cash from investing activities

  

(1,419) 

 

(366) 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Payments on notes payable and capital leases

  

(5,928) 

 

(12,981) 

Proceeds from shareholder loan

  

63,705  

 

—    

 

  

 

 

 

Net cash from financing activities

  

57,777  

 

(12,981) 

 

  

 

 

 

Net change in cash

  

(5,937) 

 

1,118  

 

  

 

 

 

Cash, beginning of period

  

5,937  

 

8,398  

 

 

 

 

 

Cash, end of period

$

—    

$

9,516  

Supplemental disclosure of cash flow information:

 

 

 

 

Cash paid during the period for:

 

 

 

 

Income taxes

$

—    

$

—    

Interest

$

481  

$

3,069  

 

 

 

 

 

Supplemental disclosure of non-cash items:

 

 

 

 

Stock issued to settle accrued liabilities

$

1,750  

$

—    

See accompanying notes to financial statements.

6

**Network Dealer Services Holding Corp.**

**Notes to Condensed Consolidated Financial Statements**

**March 31, 2011**

**(Unaudited)**

**NOTE 1 BASIS OF PRESENTATION**

The accompanying financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The interim financial statements reflect all adjustments, consisting of normal recurring adjustments which, in the opinion of management, are necessary to present a fair statement of the results for the period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. The results of operations for the period ended March 31, 2011, are not necessarily indicative of the operating results for the full year. 

**NOTE 2 LIQUIDITY/GOING CONCERN**

The Company has accumulated losses since inception and has not yet been able to generate profits from operations. Operating capital has been raised through the sale of common stock or through loans from stockholders.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  

Management plans are to further development new and innovative products and services that target the auto industry. If management is unsuccessful in these efforts, discontinuance of operations is possible. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

**NOTE 3 RELATED PARTY TRANSACTIONS**

Related party transactions consist of sales and receivables to Great Western Holding Co., Inc. (Great Western) or to J and P Holding, LLC (J&P). Great Western and J&P have common ownership with Network Dealer Services.  Network Dealer Services contracts for and provides services to Great Western for advertising, printing, marketing and some internet solutions.  These services constitute sales revenues which are subsequently paid by Great Western.  As of March 31, 2011 the Company was owed $17,162 by related parties.

During the quarter, payables to related party shareholders (“Shareholders” or “Shareholder”) increased by $29,449, and the Company repaid $1,000.  These amounts are commissions due to the Shareholders under contractual agreements for products sold by the Shareholders at their  automobile dealerships   As of March 31, 2011, the Company owed $67,304 to the Shareholders.

During the quarter, Shareholders loaned the Company $40,000.  As of March 31, 2011, the Company owed $40,000 to the Shareholders on a note in that amount.  For the quarter ended March 31, 2011, the Company imputed $457 of interest on this note.

During the prior year, a related party (JS Investments, a company owned by Shareholders Joshua A. Griffin and R. Shane Griffin), loaned $20,000 to the Company to support operations and executed a note in that amount.  The note is due on demand and has no stated interest.  For the quarter ended March 31, 2011, the Company imputed $685 of interest on this note.

Also during the quarter, Great Western loaned $23,705 to the Company to support operations for which the Company executed a note.  As of March 31, 2011, the total note balances due on advances by Great Western was $355,453.  The note is due on demand and has no stated interest.  For the quarter ended March 31, 2011, the Company imputed $13,710 of interest on this note.

**NOTE 4 COMMON STOCK**

During the quarter ended March 31, 2011, the Company issued 175,000 shares of restricted stock, valued at $0.01 per share, to a former employee and a non employee to settle claims.

7

**NOTE 5 SUBSEQUENT EVENTS**

Subsequent to the balance sheet date the Company issued 800,000 shares of common stock to an officer/director of the Company for $200,000 cash.

8

 **Item 2.**** Management’s Discussions and Analysis of Financial Condition and Results of Operations.**

**Forward-looking Statements**

Statements made in this Quarterly Report which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and our business, including, without limitation, (i) our ability to raise capital, and (ii) statements preceded by, followed by or that include the words “may,” “would,” “could,” “should,” “expects,” “projects,” “anticipates,” “believes,” “estimates,” “plans,” “intends,” “targets” or similar expressions.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: general economic or industry conditions, nationally and/or in the communities in which we may conduct business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our current or potential business and related matters.

Accordingly, results actually achieved may differ materially from expected results in these statements.  Forward-looking statements speak only as of the date they are made.  We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

**Plan of Operations**

The Company continues to seek sources of funding to begin to roll out its plan to acquire franchised, new automobile dealership in small-to-medium markets.  We are also engaged in the business of providing aftermarket sales, marketing, printing, servicing and underwriting channels for various extended service contracts and added value insurance products to the new and used automobile segments of the automobile industry.  Using a prudent mix of cash, stock and debt, management believes that significant value exists in the acquisition of under-valued and under-performing franchised, new automobile small-to-mid-market dealerships.  We believe that significant unrealized value is obtainable through the integration of demonstrated Company sales and marketing strategies, dealership management policies and the consolidation of operations. We have selected a segment of the market that is well established, profitable and growing and that has a low barrier to entry for consolidation. The low barrier to entry is largely due to the fact that we have selected markets and dealerships that are generally not targeted for acquisition markets or dealership size by the established competition. Instead, the small-to-medium sized dealer remains a largely fragmented segment of the larger retail sales industry.  In many such markets, the price to purchase a dealer may be depressed due a relatively few amount of bidders.

Consolidating branded and franchised automobile dealerships has the demonstrated and quantifiable result of providing for greater operational efficiency, management controls, increased sales revenue and higher profit margins, with greater customer retention and satisfaction. Consolidation produces increased capacity through integrating centralized management and systems, while providing a consistent platform for growth through planned and controlled acquisitions.  Our dealership acquisition model will allow us to expand the offering of our current products to all newly acquired dealerships.

We believe that consolidating branded and franchised automobile dealerships will have the result of providing for greater operational efficiency, management controls, increased sales revenue and higher profit margins, and when combined with our in-house marketing, printing and retention programs, greater customer retention and satisfaction. Consolidation has the potential to produce increased capacity through integrating centralized management and systems while providing a consistent platform for growth through planned and controlled acquisitions.  We are engaged in researching this market landscape with the intention of identifying three operating and profitable automobile dealerships in our target market to purchase as part of our initial dealership acquisitions.  

Our acquisition target is a franchised automobile dealership in a rural or small-to-medium, non-metropolitan market, with an initial focus on acquiring under-performing, small-business dealerships from a single owner/operator or a small dealer group. As we acquire dealerships, we will use our current offering of aftermarket sales, marketing, printing, servicing and underwriting channels for various extended service contracts and added value insurance and vehicle maintenance products. This integration will add revenues to all our current business lines and allow us to capture profits that are usually paid out to third-party providers.

9

Our current product offerings are marketed and offered by us to consumers through new and used retail automobile dealership Finance and Insurance (“F&I”) representatives employed by the dealerships to sell F&I products at the point of sale or delivery of the automobile, on a fee and/or commission basis, and are sold by us through automobile dealerships we contract with to facilitate their F&I business services.  It is anticipated in the future that our product offerings will be serviced and primarily underwritten by us through wholly-owned or controlled entities; however, F&I representatives will continue to be employees of the respective dealerships with whom we contract.  Currently, all of our products offered for sale through dealership F&I sales representatives are third-party products administered and underwritten through the third-party providers.  Our future product development plans include the creation of our own underwriting and administration companies and the offering of our own products directly to the end user.  We believe the F&I portion of an automobile dealership’s business is, by far, the most profitable sector.  Our business model consolidates a very stable and profitable segment of the automobile purchase process.  Our products are tied specifically to the purchase of new or used vehicles. As a result, we believe that we are able to plan and create stable revenue and very predictable mid and long term costs and expenses to our business platform because there is substantially and readily publicly available industry data and trends analysis specific to the purchasing, selling and maintaining of new and used automobiles.  Such a strategy should allow us to accurately forecast and adjust our business model with full scalability for maximum return on investment and efficient use of our capital, while increasing shareholder value and, most importantly, managing sustained controlled growth with a real benefit to the customer.  

To fully implement our planned future business operations, we estimate that we will need approximately $10,000,000 in additional funding.  These funds would be primarily utilized to purchase existing franchised, new automobile dealerships, which are anticipated to include the purchase of related party automobile dealerships.  As we acquire automobile dealerships, we will introduce and integrate our full array of aftermarket sales, marketing, and printing products and services into the new dealership, providing greater efficiencies at the new dealership and generating new revenues for all divisions of the Company.  We do not currently have any firm commitments from which to raise these funds.  We cannot assure that we will be successful in raising these funds.  We believe that even without the planned funding, our current and planned business operations will continue to grow, but at a much slower pace.  If we are successful in raising our proposed funds, the following is a present estimate of the use of these proceeds, net of cost of raising these funds: 

Working Capital:

 

 

 

 

Working Capital  for initial acquisitions

$2,600,000 

 

 

NDS Loan - Retirement

$400,000 

 

 

Reserve

$100,000 

 

 

 

 

 

 

Total proceeds for working capital:

 

$3,100,000 

 

 

 

 

Capital Expenditures:

 

 

 

Initial Dealer Acquisition (3 dealerships)

$3,100,000 

 

 

Dealer Acquisition Reserve

$3,300,000 

 

 

Office Equipment

$60,000 

 

 

Acquisition fees, costs, setup, IT

$100,000 

 

 

Continued Product Development, Software

$240,000 

 

 

Reserve

$100,000 

 

 

 

 

 

 

Total proceeds for Capital Expenditures:

 

$6,900,000 

 

 

 

 

Total Use of Proceeds:

 

$10,000,000 

 

10

Presently, there are five automobile dealerships that have customary contractual arrangements with us, which are owned by related parties (four such dealerships are owned by the Griffins [Great Western Holding Company, Inc. and its subsidiaries or “Great Western”]; one dealership is owned by Joshua A. Griffin and Paul D. Stevens, both of whom are officers and directors of the Company), and we provide our products and services to 12 other dealerships, four to five marketing agencies and 10 to 12 other companies.  Most of the products and services that we currently provide are marketing/media, data mining/management, print services, web-site development/support and the insurance products and services that we now offer.  

While we had projected significant increases in revenues during the quarter ended March 31, 2011, through the addition of newly contracted dealership customers and increased revenues resulting form the increase in automobile sales at contracted dealerships, a change in our business plan resulted in a change in focus away from adding new dealership relationships and towards the plan of the Company’s acquiring automobile dealerships, into which we will integrate all other Company products and services.  However, we were able to see the increase in our own products sales due to an increase in automobile sales at our contracted dealerships.  We expect our own revenues to be sustained at current levels or to increase during the following quarter.  However, the more significant increases will come when the Company is able to begin acquiring automobile dealerships.

We have also identified and are in discussions with an investor to secure the capital commitment that we are seeking to implement our planned future operations, though we have not entered into any firm commitment or other arrangements or understandings.  

During the quarter ended March 31, 2011, the Company was successful in having its common stock listed on the OTCBB of the Financial Industry Regulatory Authority, Inc. (“FINRA”). 

**Results of Operations**

**For the three month periods ended March 31, 2011 and 2010**

We had total revenue during the quarter ended March 31, 2011, of $330,343, compared to the quarter ended March 31, 2010, of $138,245.  Revenues increased during this reporting period due to new products and services offered at contracted dealerships and the general recovery of the automobile sales industry.  Cost of goods sold during the quarter ended March 31, 2011, was $266,210, for a gross profit of $64,133, compared to the cost of goods sold during the quarter ended March 31, 2010, of $131,431, for a gross profit of $6,814.  Gross profit percentage increased from 5% to 19%.  The main driver of the increased gross profit percentage was the slower rise in cost of goods sold as compared to revenues.  We would expect this trend to continue as revenues increase due to the relatively high fixed component of our cost of goods sold.  Operating expenses during the quarter ended March 31, 2011, were $217,066, which resulted in a loss from operations for the quarter ended March 31, 2011, of $152,933.  In comparison, during the quarter ended March 31, 2010, operating expenses were comprised $74,643, which resulted in a loss from operations of $67,829.  Both Professional fees and General and Administrative expenses increased sharply during this period due primarily to the increased salaries of employees and outside professional fees related to the continuing compliance and reporting requirement of the Securities and Exchange Commission.  We had a net loss of $168,216 for the quarter ended March 31, 2011, compared to a net loss of $70,873 for the quarter ended March 31, 2010.

Revenues for the three month periods ended March 31, 2011, and 2010, attributable to related parties, were, respectively, $247,435 or approximately 75% of total revenues; and $86,845 or approximately 63% of total revenues.

**Liquidity**

We had cash of $0 as of March 31, 2011.

Our operating losses continued through the first quarter of 2011, despite an increase in revenues from the same quarter of the previous year.  The increased losses are generally the result of increased salaries and professional fees resulting from Securities and Exchange Commission reporting and compliance requirements.  We have also identified and are in discussions with an investor to secure the capital commitment that we are seeking to implement our planned future operations, though we have not entered into any firm commitment or other arrangements or understandings. 

11

During the quarter, related party shareholders (“Shareholder” or “Shareholders”) loaned the Company $40,000.  As of March 31, 2011, the Company owed $40,000 to the Shareholders.  Also during the quarter, Great Western loaned $23,705 to the Company to support operations.  As of March 31, 2011, the total note payable balance to Great Western was $355,453 and $60,000 to other related parties and Shareholders.  The notes are due on demand and have no stated interest.  For the quarter ended March 31, 2011, the Company imputed $14,852 of interest on these loans.

These advanced expenses and loans were used for our working capital.

**Item 3.  Quantitative and Qualitative Disclosures About Market Risk.**

Not required.

**Item 4.  Controls and Procedures.**

**Evaluation of disclosure controls and procedures**

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q.  In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.  In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.  The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. 

Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of March 31, 2011, our disclosure controls and procedures were, subject to the limitations noted above, effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules, regulations and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. 

**Changes in internal control over financial reporting**

Our management, with the participation of the chief executive officer and chief financial officer, has concluded there were no significant changes in our internal controls over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 

12

**PART II - OTHER INFORMATION**

**Item 1. Legal Proceedings.**

None; not applicable. 

**Item 1A.  Risk Factors.**

Not required.

**Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.**

On February 2, 2011, our Board of Directors authorized the issuance of 175,000 shares of our common stock, comprised of “restricted securities” as defined in Rule 144 of the Securities and Exchange Commission, valued at the $0.01 per share. 25,000 shares were issued to James Kolsen for settlement of any claims he had or may have had against the Company arising out of promised employment or otherwise; and 150,000 shares were issued to William Stawski in forgiveness of debt owed by him to the Company in the amount of $21,358.78, and in settlement of any claims he had or may have had against the Company related to his introduction of the Company to Smith Consulting Services, Inc. or otherwise.

On April 13, 2011, our Board of Directors also resolved to issue 800,000 shares of our common stock that were “restricted securities” to R. Lynn McCoy, an officer of the Company, in consideration of the sum of $200,000.

We issued these securities to persons who were either “accredited investors,” or “sophisticated investors,” as those terms are respectively defined in Rules 501 and 506 of the SEC; and each person had prior access to all material information about us. We believe that the offer and sale of these securities was exempt from the registration requirements of the Securities Act pursuant to Sections 4(2) and 4(6) thereof, and Rule 506 of Regulation D of the Securities Exchange Commission. Section 18 of the Securities Act preempts state registration requirements for sales to these classes of persons, save for compliance with state notice and fee requirements, as may be applicable.

**Item 3. Defaults Upon Senior Securities.**

None; not applicable. 

**Item 4. (Removed and Reserved).**

**Item 5. Other Information.**

None; not applicable.

**Item 6. Exhibits.**

**Exhibit No. **                       **Identification of Exhibit**

31.1 

  

31.2

  

32 

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act provided by Joshua A. Griffin, President and Director.

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act provided by Paul D. Stevens, Chief Financial Officer, Vice President, Treasurer and Director

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 provided by Joshua A. Griffin, President and Paul D. Stevens,  Chief Financial Officer, and Director. 

13

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized 

  

**NETWORK DEALER SERVICES HOLDING CORP.**

*Date:*

*May 18, 2011*

 

*By:*

*/s/Joshua A. Griffin*

 

 

 

 

*Joshua A. Griffin*

 

 

 

 

*President and Director*

 

 

 

 

 

*Date:*

*May 18, 2011*

 

*By:*

*/s/Paul D. Stevens*

 

 

 

 

*Paul D. Stevens*

 

 

 

 

*Chief Financial Officer, Vice President, Treasurer and Director*

 

 

 

 

 

*Date:*

*May 18, 2011*

 

*By:*

*/s/R. Lynn McCoy*

 

 

 

 

*R. Lynn McCoy*

 

 

 

 

*Chief Operating Officer, Secretary and Director*

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