**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 September 30, 2010**

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

**For the transition period from ____________ to____________**

**Commission File No. 000-52036**

**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:  November 15, 2010 - 46,019,233 shares of common stock.
2

**PART I**

**Item 1.  Financial Statements**

The Financial Statements of the Registrant required to be filed with this 10-Q Quarterly Report were prepared by management and commence below, together with related notes. In the opinion of management, the Financial Statements fairly present the financial condition of the Registrant. 

September 30, 2010

**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 Consolidated Condensed Financial Statements

7

3

**Network Dealer Services Holding Corp.**

**Condensed Consolidated Balance Sheets**

**September 30, 2010 and December 31, 2009**

 

 

September 30,

 

December 31,

 

 

2010

 

2009

Assets

 

(unaudited)

 

(Audited)

Current Assets:

 

 

 

 

  Cash

$

29,914

$

8,398

   Accounts receivable, net

 

69,691

 

37,100

   Accounts receivable, - related party

 

2,236

 

61,892

   Prepaid asset

 

186

 

1,695

   Inventory 

 

3,953

 

-

   Investments

 

1,059

 

2,074

     Total current assets

 

107,039

 

111,159

Property and equipment, net

 

28,933

 

60,507

     Total assets

$

135,972

$

171,666

 

 

 

 

 

Liabilities and Shareholders' Equity (Deficit)

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

   Accounts payable

$

106,966

$

65,959

   Accounts payable - related party

 

162,422

 

93,128

   Other current liabilities

 

49,935

 

13,044

   Notes payable - related party

 

140,831

 

-

   Current portion capital leases

 

22,170

 

35,710

   Current portion notes payable

 

-

 

2,720

 

 

 

 

 

     Total current liabilities

 

482,324

 

210,561

Ling term liabilities:

 

 

 

 

   Capital leases, net of current portion

 

23,545

 

42,099

     Total long term liabilities

 

23,545

 

42,099

     Total liabilities

 

505,869

 

252,660

 

 

 

 

 

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; 46,019,233 shares issued 

 

 

 

 

  and outstanding

 

46,019

 

46,019

   Additional paid in capital

 

1,749,698

 

1,749,698

   Accumulated other comprehensive loss

 

(3,374)

 

(2,359)

   Accumulated deficit

 

(2,162,240)

 

(1,874,352)

 

 

 

 

 

     Total Stockholders' equity (deficit)

 

(369,897)

 

(80,994)

 

 

 

 

 

     Total liabilities and stockholders' equity (deficit)

$

135,972

$

171,666

See accompanying notes to financial statements.

4

**Network Dealer Services Holding Corp.**

**Condensed Consolidated Statements of Operations**

**For the Three and Nine Months Ended September 30, 2010 and 2009**

**(Unaudited)**

 

**For the Three Months Ended**

**September 30,**

 

**For the Nine Months Ended**

**September 30,**

 

**2010**

 

**2009**

 

**2010**

 

**2009**

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

113,135

 

$

241,852

 

$

260,240

 

$

426,924

Revenue - related party

 

174,232

 

 

146,262

 

 

430,127

 

 

410,236

Total Revenues

 

287,367

 

 

388,114

 

 

690,367

 

 

837,160

 

 

 

 

 

 

 

 

 

 

 

 

Cost of good sold

 

267,889

 

 

293,267

 

 

635,811

 

 

661,429

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

19,478

 

 

94,847

 

 

54,556

 

 

175,731

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

   Professional fees

 

13,804

 

 

34,596

 

 

31,945

 

 

270,934

   General and administrative

 

110,835

 

 

272,224

 

 

305,286

 

 

391,972

          Total operating expenses

 

124,639

 

 

306,820

 

 

337,231

 

 

662,906

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

(105,161)

 

 

(211,973)

 

 

(282,675)

 

 

(487,175)

 

 

 

 

 

 

 

 

 

 

 

 

Other Income (Expense)

 

 

 

 

 

 

 

 

 

 

 

   Other income

 

-

 

 

-

 

 

3,051

 

 

-

   Interest expense

 

(2,559)

 

 

(23,780)

 

 

(8,264)

 

 

(70,209)

         Total other expenses

 

(2,559)

 

 

(23,780)

 

 

(5,213)

 

 

(70,209)

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before taxes

 

(107,720)

 

 

(235,753)

 

 

(287,888)

 

 

(557,384)

   Provision for income taxes

 

-

 

 

-

 

 

-

 

 

-

Net loss

$

(107,720)

 

$

(235,753)

 

$

(287,888)

 

$

(557,384)

 

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

   Unrealized gains (losses) on available

      for sale securities

 

(615)

 

 

(95)

 

 

(1,015)

 

 

739

Total Comprehensive Income (Loss)

 

(108,336)

 

 

(235,848)

 

 

(288,903)

 

 

(556,645)

Net loss per share - Basic and diluted

$

(0.01)

 

$

(0.01)

 

$

(0.01)

 

$

(0.01)

Weighted average shares outstanding -

   Basic and diluted

 

46,019,233

 

 

40,000,000

 

 

46,019,233

 

 

40,000,000

See accompanying notes to financial statements.

5

**Network Dealer Services Holding Corp.**

**Condensed Consolidated Statements of Cash Flows**

**For the Nine Months Ended September 30, 2010 and 2009**

(Unaudited)

 

**September 30,**

 

**2010**

 

**2009**

Cash flows from operating activities:

 

 

 

 

 

   Net loss

$

(287,888)

 

$

(557,384)

   Adjustments to reconcile net loss to net cash used by operating activities:

 

 

 

 

 

       Depreciation expense

 

35,969

 

 

35,970

       Imputed interest on related party loan

 

-

 

 

57,457

       Changes in operating assets and liabilities:

 

 

 

 

 

          (Increase) decrease in accounts receivable

 

(32,591)

 

 

92,807

          (Increase) decrease in accounts receivable related party

 

59,656

 

 

38,164

          (Increase) decrease in inventory

 

(3,953)

 

 

-

          (Increase) decrease in prepaid assets

 

1,509

 

 

1,844

          Increase (decrease) in accounts payable

 

41,007

 

 

(11,535)

          Increase (decrease) in accounts payable related party

 

69,294

 

 

38,219

          Increase (decrease) in accrued liabilities

 

36,891

 

 

(3,503)

               Net cash used in operating activities

 

(80,106)

 

 

(384,399)

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

   Purchase of property and equipment

 

(4,395)

 

 

-

               Net cash used in investing activities

 

(4,395)

 

 

-

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

   Payments on notes payable and capital lease

 

(34,814)

 

 

(34,923)

   Proceeds from notes payable - related party

 

140,831

 

 

-

   Proceeds on shareholder loans

 

-

 

 

400,000

               Net cash provided by financing activities

 

106,017

 

 

365,077

 

 

 

 

 

 

Net change in cash

 

21,516

 

 

(19,322)

Cash, beginning of period

 

8,398

 

 

39,948

Cash, end of period

$

29,914

 

$

20,626

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

   Cash paid during the period for:

 

 

 

 

 

      Income taxes

$

-

 

$

-

       Interest

$

2,679

 

$

13,487

Related Party Debt Forgiveness

$

-

 

$

1,156,234

See accompanying notes to financial statements.

6

**Network Dealer Services Holding Corp.**

**Notes to Condensed Consolidated Financial Statements**

**September 30, 2010**

**(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 for the year ended December 31, 2009. The results of operations for the period ended September 30, 2010, 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. Capital has been raised through loans from shareholders and financing support from other related entities.  For the current nine-month period, the Company has continued to receive financing support from the related entity as described in Note 3 below. The Company expects such support to continue until the Company receives the additional investment funding it is seeking, or until the Company is no longer in need of such support.  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. (GWHC).  GWHC has common ownership with the Company.  The Company contracts for and provides services to GWHC for advertising, printing, marketing and some internet solutions.  These services constitute sales revenues which are subsequently paid by GWHC. 

In addition, GWHC has paid expenses on behalf of the Company. The Company expenses these amounts and records a liability for the amount owed. During the nine months ended September 30, 2010, GWHC paid $69,294 in expenses on behalf of the Company. The Company repaid $0 for the nine months ended September 30, 2010. As of September 30, 2010, the Company owed GWHC $162,422.  

GWHC also loaned an additional $102,340 in cash during the quarter.  This is non-interest bearing and due on demand. During the quarter, the Company and GWHC agreed to reduce the debt by the balance due to the Company for services provided to GWHC in the amount of $28,598.  As of September 30, 2010, the Company owed $140,831.

7

**Network Dealer Services Holding Corp.**

**Notes to Condensed Financial Statements**

**September30, 2010**

**(Unaudited)**

**NOTE 3 RELATED PARTY TRANSACTIONS  (continued)**

Revenues for the nine months ended September 30, 2010, and 2009, attributable to GWHC, were $430,127 or approximately 64% of total revenues; and $410,236 or approximately 53% of total revenues, respectively.

During 2009, shareholders had advanced funds in the form of non-interest bearing demand loans. Interest expense was imputed on these loans of $57,457 for the nine months ended September 30, 2009.  No interest was imputed during the nine month period ended September 30, 2010.

**NOTE 4 SUBSEQUENT EVENTS**

The Company has evaluated subsequent events from the balance sheet date through the date these financials statements were issued, and has determined that there are no events that would require disclose herein.

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**

We are engaged in the business of providing aftermarket sales, marketing, printing, servicing and underwriting channels for various extended service contracts and added value insurance and other products to the new and used automobile segments of the automobile industry; however, we believe our business operations comprise one accounting segment of the automobile industry.  See our web site at: www.networkdealerservices.com.  Our products 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.  In the current economy, the consumer is justifiably concerned about an unexpected and un-budgeted expense.  Our products provide insured peace of mind with the cost budgeted into the purchase agreement and monthly financing payment at the point of purchase.  These 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 $5,000,000 in additional funding.  These funds would be primarily utilized to purchase existing insurance agencies that service automobile dealerships.  Those serviced dealerships will become part of our distribution network, and in addition to the current insurance products offered at those dealerships by such insurance agencies, we will offer our other services and products to them through the purchased agencies.  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 planned funding, the following is a present estimate of the use of these proceeds, net of cost of raising these funds: 

9

**Working Capital:**

 

 

 

 

 

 

 

 

Agency Acquisition Reserve

 

 

 

$3,450,000

 

 

NDS Loan - Retirement

 

 

 

$300,000

 

 

Insurance Company Reserve

 

 

 

$300,000

 

 

Insurance Company Startup Fees and consulting

 

$75,000

 

 

General and Admin

 

 

 

 

$250,000

 

 

Reserve

 

 

 

 

 

$200,000

 

 

 

 

 

 

 

 

 

 

 

 

Total proceeds for working capital:

 

 

$4,575,000

 

 

 

 

 

 

 

 

 

**Capital Expenditures:**

 

 

 

 

 

 

 

 

Office Equipment

 

 

 

 

$10,000

 

 

New Agency Equipment and Setup

 

 

 

$60,000

 

 

Continued R&D Software and Marketing, Equipment

 

$350,000

 

 

Reserve

 

 

 

 

 

$100,000

 

 

 

 

 

 

 

 

 

 

 

 

Total proceeds for Capital Expenditures:

 

 

$520,000

 

 

 

 

 

 

 

 

 

**Total Use of Proceeds:**

 

 

 

 

 

 

$5,095,000

Presently, there are four automobile dealerships that have customary contractual arrangements with us, which are owned by related parties (the Griffins [Great Western Holding Co., Inc. or “Great Western”]), 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.  

During the quarter ended September 30, 2010, we entered into new agency agreements with auto dealerships and installed our offering of products into those dealerships, including extended services contracts, GAP insurance and Theft and Ultra Care Vehicle Maintenance.  These products were installed in five dealerships during the quarter and by the last month of the quarter, were producing revenues at our previously anticipated levels.  Four of the five dealerships are owned by related parties.  During the upcoming quarter, we project installing some or all of our product offerings in between five and 10 new dealerships that are unrelated to us, which may substantially increase our monthly revenues by the end of our fourth quarter and will move the Company away from reliance on the related dealerships and customers.  We anticipate an increase in commissions from the sale of these products of at least 20% in the next quarter.  However, we recognize that the fourth quarter is typically sluggish for automobile sales and since our products are dependent upon automobile sales, the more substantial increase in revenues may be delayed until the first quarter of 2011, even though we project to double the numbers of dealerships we have installed our products in during the fourth quarter of this year.

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.  

We have engaged a securities broker/dealer that has filed a Form 211 with FINRA to seek quotations of our common stock on the OTCBB, a public trading medium, for our shares of common stock to be traded, and we anticipate that such quotations may begin prior to the end of the year.  We anticipate that with the quotations of our common stock on the OTCBB, we will move closer to securing the financial commitment we are seeking.

10

**Results of Operations**

**For the three month periods ended September 30, 2010, and 2009**

We had total revenue during the quarter ended September 30, 2010, of $287,367, compared to the quarter ended September 30, 2009, of $388,114.  Revenues declined during this reporting period due to the industry’s decline in automotive related advertising and marketing.  Cost of goods sold during the quarter ended September 30, 2010, was $267,889, for a gross profit of $19,478, compared to the cost of goods sold during the quarter ended September 30, 2009, of $293,267, for a gross profit of $94,847.  Gross profit percentage decreased from 24% to 7%.  The main driver of the decreased gross profit percentage was the increase in cost of goods sold due largely to a reduction in the client base and those clients that were retained are requiring a smaller amount of our services and products due to overall economic conditions.  Operating expenses during the quarter ended September 30, 2010, were comprised of professional fees of $13,804 and general and administrative expenses of $110,835, for total operating expenses of $124,639, which resulted in a loss from operations for the quarter ended September 30, 2010, of $105,161.  In comparison, during the quarter ended September 30, 2009, operating expenses were comprised of professional fees of $34,596 and general and administrative of $272,224, for total operating expenses of $306,820, which resulted in a loss from operations of $211,973.  Professional fees substantially declined during this period due primarily to the non-recurrence of certain Securities and Exchange Commission filings (our Form 10 Registration Statement legal and accounting expenses).  General and administrative expenses decreased due to a drop in overall employee counts as well as the elimination of certain operating lease costs.   We had interest expense of $2,559 for the quarter ended September 30, 2010, compared to interest expense of $23,780 for the quarter ended September 30, 2009.  The decline in interest expense resulted from a substantial reduction in interest on shareholder loans, which were subsequently satisfied in 2010.  We had a net loss of $107,720 for the quarter ended September 30, 2010, compared to a net loss of $235,753 for the quarter ended September 30, 2009.  We had unrealized losses on available for sale securities of $615 in the quarter ended September 30, 2010, compared to $95 in the quarter ended September 30, 2009, with a total comprehensive loss of $108,336 for the quarter ended September 30, 2010, and $235,848 for the quarter ended September 30, 2009.

**For the nine month periods ended September 30, 2010, and 2009**

We had total revenue during the nine months ended September 30, 2010, of $690,367, compared to the nine months ended September 30, 2009, of $837,160.  Revenues declined during this reporting period due to the industry’s decline in automotive related advertising and marketing.  Cost of goods sold during the nine months ended September 30, 2010, was $635,811, for a gross profit of $54,556, compared to the cost of goods sold during the nine months ended September 30, 2009, of $661,429, for a gross profit of $175,731.  Gross profits decreased during this period due to a decrease in operating revenues.  In addition to the decreased revenues, we also saw an increase in our cost of goods sold, driving a decrease in the gross profit percentage from 21% to 8% for the nine month periods ended September 30, 2009, and 2010.  The decrease in the gross profits is due largely to a change in costs associated with our product mix for the period.  Operating expenses during the nine months ended September 30, 2010, were comprised of professional fees of $31,945 and general and administrative expenses of $305,286, for total operating expenses of $337,231, which resulted in a loss from operations for the nine months ended September 30, 2010, of $282,675.  In comparison, during the nine months ended September 30, 2009, operating expenses were comprised of professional fees of $270,934 and general and administrative of $391,972, for total operating expenses of $662,906, which resulted in a loss from operations of $487,175.  Professional fees substantially declined during this period due primarily to the expiration of the consulting agreement with Smith Consulting Services, Inc. This contract fully expired in 2009, resulting in no charges against income in 2010.  Also, additional costs were incurred by us in the previous quarter for legal and accounting fees related to the expense of becoming a publicly-held company. General and administrative expenses decreased due to decreases in personnel and salaries. We had interest expense of $8,264 and other income of $3,051, resulting in a net other expense of $5,213 for the nine months ended September 30, 2010, compared to interest expense of $70,209 for the nine months ended September 30, 2009.  The decline in interest expense resulted from a substantial reduction in interest on shareholder loans, which were subsequently satisfied in 2010.  We had a net loss of $287,888 for the nine months ended September 30, 2010, compared to a net loss of $557,384 for the nine months ended September 30, 2009.  We had unrealized losses on available for sale securities of $1,015 in the nine months ended September 30, 2010, compared to unrealized gains of $739 in the nine months ended 2009, with a total comprehensive loss of $288,903 for the nine months ended September 30, 2010 and $556,645 for the nine months ended September 30, 2009.

**Liquidity**

We had cash of $29,914 as of September 30, 2010.

Our operating losses continued through the third quarter of 2010.  However, due to changes in our operations resulting in increased operational efficiency, the amount of loss was reduced by half compared to the third quarter of 2009.  We have also identified and are in discussions with an investor to secure the capital commitment that we are seeking to implement 

11

our planned future operations, though we have not entered into any firm commitment or other arrangements or understandings. 

During the nine month period ended September 30, 2010, our net cash from operating activities improved over the nine month period ended September 30, 2009.  The primary driver of this change is the one-time payment of professional fees to Smith Consulting Services, Inc paid by us in the first quarter of 2009 and expensed during 2008 and 2009.  There were no further payment or charges to net income in 2010, and there are no expected future payments.

In addition, Great Western has paid expenses on behalf our behalf.  We expense these amounts and record a liability for the amount owed. During the nine months ended September 30, 2010, Great Western paid $69,294 in expenses on our behalf. We repaid $0 for the nine months ended September 30, 2010. As of September 30, 2010, we owed GWHC $162,422.  

GWHC also loaned an additional $102,340 in cash during the quarter.  This is non-interest bearing and due on demand. During the quarter, We and Great Western agreed to reduce the debt by the balance due to us for services provided by us to Great Western in the amount of $28,598.  As of September 30, 2010, We owed Great Western $140,831.

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

Revenues for the nine month periods ended September 30, 2010, and 2009, attributable to Great Western, were, respectively, $430,127 or approximately 62% of total revenues; and $410,236 or approximately 49% of total revenues.

**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 September 30, 2010, 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.**

None; not 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:*

*November 15, 2010*

 

*By:*

*/s/Joshua A. Griffin*

 

 

 

 

*Joshua A. Griffin*

 

 

 

 

*President and Director*

 

 

 

 

 

*Date:*

*November 15, 2010*

 

*By:*

*/s/Paul D. Stevens*

 

 

 

 

*Paul D. Stevens*

 

 

 

 

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

 

 

 

 

 

*Date:*

*November 15, 2010*

 

*By:*

*/s/R. Lynn McCoy*

 

 

 

 

*R. Lynn McCoy*

 

 

 

 

*Chief Operating Officer, Secretary and Director*

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