U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
------------------------------
FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ________ to ________
Commission File Number 0-3743
-------------------------------
CONTINENTAL INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)
Georgia 58-0705228
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10254 Miller Road, Dallas, Texas 75238
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (214) 691-1100
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
As of April 30, 1996, the registrant had outstanding 9,933,660 shares of
Common Stock.
<PAGE>
Continental Investment Corporation and Subsidiaries
FORM 10-QSB REPORT INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1996
and September 30, 1995 3
Consolidated Statement of Operations
For the periods ended March 31, 1996 and 1995 5
Consolidated Statements of Stockholders' Equity
Six months ended March 31, 1996 6
Consolidated Statements of Cash Flows
For the periods ended March 31, 1996 and 1995 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Continental Investment Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, September 30,
1996 1995
----------- -----------
(Unaudited)
ASSETS
<S> <C> <C>
CASH $ 88 $ 18,165
PROPERTY, at cost 6,628,311 3,220,712
OTHER ASSETS
Intangibles, net of accumulated
amortization of $7,194 and $6,028 27,806 28,972
Other 59,940 8,204
---------- ----------
Total assets $6,716,145 $3,276,053
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, trade $ 196,107 $ 200,449
Accrued expenses 130,771 90,912
Amounts due to related parties 396,513 342,105
---------- ----------
Total current liabilities 723,391 633,466
LONG-TERM LIABILITIES
Note payable 350,000 -
Deferred income taxes 747,000 747,000
--------- ----------
Total liabilities 1,820,391 1,380,466
<FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Continental Investment Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS (Cont'd.)
<CAPTION>
March 31, September 30,
1996 1995
---------- ----------
(Unaudited)
<S> <C> <C>
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value;
1,000,000 shares authorized; no
shares issued or outstanding
Common stock, $0.50 par value;
25,000,000 shares authorized;
9,933,660 and 8,883,527 shares
issued at March 31, 1996 and
September 30, 1995 $2,092,831 $1,567,764
Treasury stock, 7,209 common shares (26,771) (26,771)
Additional contributed capital 4,169,062 1,396,929
Accumulated deficit (1,339,368) (1,042,335)
---------- ----------
Total stockholders' equity 4,895,754 1,895,587
---------- ----------
Total liabilities and
stockholders' equity $6,716,145 $3,276,053
<FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Continental Investment Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues $ 15,000 $ 78,000 $ 30,000 $126,000
Costs and expenses
Cost of revenues 3,000 3,000 6,000 6,000
Selling, general and
administrative expenses 176,278 186,926 319,774 451,293
-------- -------- -------- --------
Operating loss (164,278) (111,926) (295,774) (331,293)
Interest expense 706 13,923 1,259 33,226
-------- -------- -------- --------
Net loss before taxes (164,984) (125,849) (297,033) (364,519)
Income tax expense - - - -
-------- -------- -------- --------
Net Loss per common and common
equivalent share $(.02) $(.02) $(.04) $(.05)
Weighted average number of
common and common equivalent
shares outstanding 8,278,740 7,434,838 8,280,675 7,248,624
<FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Continental Investment Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Six months ended March 31, 1996
(Unaudited)
<CAPTION>
Common stock Common Additional Treasury stock
--------------------- stock contributed ----------------- Accumulated
Shares Par value subscribed capital Shares Amount deficit Total
--------- ---------- ---------- ----------- ------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
September 30, 1995 $8,883,527 $1,567,764 - $1,396,929 7,209 $(26,771) $(1,042,335) $1,895,587
Sale of stock in
private placement 105,000 52,500 - 397,500 - - - 450,000
Issuance of stock
for services 11,800 5,900 - 41,300 - - - 47,200
Issuance of stock
for land 933,333 466,667 - 2,333,333 - - - 2,800,000
Net loss - - - - - - (297,033) (297,033)
-------- ---------- --------- ---------- ------- --------- ----------- ----------
Balance,
March 31, 1996 9,933,660 $2,092,831 - $4,169,062 7,209 $(26,771) $(1,339,368) $4,895,754
<FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Continental Investment Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six months ended
March 31,
---------------------
1996 1995
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(297,033) $(364,519)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization expense 1,166 1,167
Common stocks issued for services 47,200 30,289
Change in operating assets and
liabilities,net of effects of
recapitalization:
Accounts payable, trade (4,342) 76,776
Accrued expenses 39,859 94,777
Accrued expenses to related parties - (69,253)
Franchising (51,736)
---------- --------
Net cash provided by (used in)
operating activities (264,886) (230,763)
Cash flows from investing activities:
Capital expenditures (3,407,599) (37,589)
---------- --------
Net cash provided by (used in)
investing activities (3,407,599) (37,589)
Cash flows from financing activities:
Advances from (repayments to) related
parties, net 54,408 20,300
Note payable 350,000 -
Proceeds from issuance of stock 3,250,000 250,100
Principal payments on debt - (2,500)
---------- --------
Net cash provided by financing
activities 3,654,408 267,900
Net increase (decrease) in cash (18,077) (452)
Cash, beginning of period 18,165 2,215
Cash, end of period $ 88 $ 1,763
<FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
Continental Investment Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996 and 1995
(Unaudited)
NOTE A BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by
the Company pursuant to the rules and regulations of the U. S.
Securities and Exchange Commission. Certain information and disclosures
normally included in annual financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. In the opinion of
management, all adjustments and disclosures necessary to a fair
presentation of these financial statements have been included. Such
adjustments consist of normal recurring adjustments. These financial
statements should be read in conjunction with the financial statements
and notes thereto included in the Form 10-KSB Report of Continental
Investment Corporation (the "Company" or "CICG") for the year ended
September 30, 1995, as filed with the U. S. Securities and Exchange
Commission.
The results of operations for the periods ended March 31,1996 are not
necessarily indicative of the results that may be expected for the full
year.
NOTE B NET INCOME (LOSS) PER SHARE
Net income (or loss) per share has been computed using the weighted
average number of common and common equivalent shares outstanding for
each period. The exercise of stock options would be antidilutive and
has not been reflected in the calculation of loss per common share.
NOTE C ACQUISITION OF REAL ESTATE
In February 1995, the Company entered into a contract to acquire 74
acres adjacent to its Atlanta, Georgia property. On March 29, 1996, the
Company acquired the 74 acres for a purchase price of $3,400,000. The
purchase price consisted of 933,333 shares of Continental Investment
Corporation common stock ($2,800,000), $250,000 cash at closing and a
Promissory Note for $350,000, which is convertible at the sole option of
the seller into 116,667 shares of restricted common stock of the
Company. This option is for a period of two years from closing date.
In addition, the seller has been granted a 5-year option to purchase
500,000 shares of the Company's common stock at a price of $5.00 per
share.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
The primary source of capital during the six months ended March 31,
1996 was provided by the sale of shares of common stock of the Company in
private sales. Capital resources continue to be utilized primarily to fund
the operating losses of the Company, which have been created primarily by
costs associated with planning for the development of the Company's granite
quarry site in Atlanta, Georgia as a waste disposal landfill. The Company
also invested $3,400,000 during the six months ended March 31, 1996 in
additional land at the quarry site in Atlanta, Georgia (see Note C above).
In order to satisfy the liquidity needs of the Company for the
following twelve months, the Company will be primarily dependent upon
proceeds from the sale of the Company's stock and, to a lesser extent,
revenues generated from the operation of its fabric care business.
Historically, revenues from the fabric care operation have not been
adequate to fund the operations of the Company overall. The Company raised
$450,000 through private sales of newly issued shares of its common stock
during the first six months of fiscal 1996 and another $500,000 subsequent
to the close of the first half of fiscal 1996. If the Company is unable to
obtain adequate funds from the sale of its stock in public offerings,
private placements or alternative financing arrangements, it may be
necessary to delay the timetable for the development and permitting of its
Atlanta real estate as a municipal solid waste landfill. Should this delay
occur, the Company may pursue one or more of its potential alternative
plans to produce revenues from the Atlanta site, which include possibly re-
opening the site as a granite quarry, and/or using the site for the
disposal of inert debris and/or the storage of recyclable materials.
Implementation of one or more of these alternatives could possibly occur in
less than one year utilizing present zoning for the property, while the
time frame for obtaining permits to use the site for municipal solid waste
disposal would be a more lengthy process.
The Company has issued shares of its Common Stock from time to time in
the past to satisfy certain obligations, and expects in the future to also
acquire certain services, satisfy indebtedness and/or make acquisitions
utilizing authorized shares of stock of the Company.
Results of Operations
Six Months Ended March 31, 1996 Compared to
Six Months Ended March 31, 1995
Revenues of the Company are currently derived solely from the
licensing and franchising of its fabric care and treatment business through
FIBER-SEAL Holdings, Inc. The revenue of the fabric care business is
composed solely of royalties received from FIBER-SEAL Services
International, Inc., which is the greater of 5% of sales or $5,000 per
month.
<PAGE>
Operating revenues decreased by $96,000 in the first half of fiscal
1996 as compared with the same period in 1995. Such decrease was due
primarily to a $30,000 non-recurring sale of mined rock from the quarry
site in Atlanta during the first half of fiscal year 1995. Revenues from
the fabric care segment were $126,000 in the first half of fiscal 1995 and
$30,000 for the first half of fiscal 1996. The decline in fabric care
revenues is expected to be a temporary situation. Such decline resulted
from the Company's strategic decision to convert its fabric care business
from a licensing mode to a potentially far more lucrative franchising
operation.
The cost of revenues remained constant during the six-month period
ended March 31, 1996 as compared to the same period in fiscal 1995, and is
expected to maintain this level in the near-term future.
Selling, general and administrative (SG&A) costs decreased $131,519
during the six-month period ended March 31, 1996 as compared to the same
period in the prior year. The costs are lower primarily because of lower
expenses pertaining to the study of alternative revenue-generating
activities for the Atlanta real estate. Lower costs were also experienced
for the analysis and planning for the Atlanta quarry site as a municipal
solid waste disposal site.
Interest expense decreased $31,967 in the six-month period ended March
31, 1996 as compared to the same period in 1995 primarily because of the
February 1995 conversion of an $800,000 note into common stock of the
Company.
The net loss for the six-month period ended March 31, 1996 was $67,486
lower than the loss for the previous year's first half. Such decline was
due primarily to the lower expenses discussed in the preceding paragraphs
offset in part by the lower revenues in the fiscal 1996 period.
Three Months Ended March 31, 1996 Compared to
Three Months Ended March 31, 1995
Revenues of the Company are currently derived solely from the
licensing and franchising of its fabric care and treatment business through
FIBER-SEAL Holdings, Inc. The revenue of the fabric care business is
composed solely of royalties received from FIBER-SEAL Services
International, Inc., which is the greater of 5% of sales or $5,000 per
month.
<PAGE>
Operating revenues decreased by $63,000 in the second quarter of
fiscal 1996 as compared with the same period in fiscal 1995. Such decrease
was due primarily to a $30,000 non-recurring sale of mined rock from the
quarry site in Atlanta during fiscal year 1995. Revenues from the fabric
care segment were $78,000 in the second quarterly period in 1995 and
$15,000 for the second quarterly period in 1996. The decline in fabric care
revenues is expected to be a temporary situation. Such decline resulted
from the Company's strategic decision to convert its fabric care business
from a licensing mode to a potentially far more lucrative franchising
operation.
The cost of revenues remained constant during the three-month period
ended March 31, 1996 as compared to the same period in fiscal 1995, and is
expected to maintain this level in the near-term future.
Selling general and administrative expenses decreased by $10,648 in
the second quarter of Fiscal 1996 as compared to the same period of 1995.
The costs are lower primarily because of lower expenses pertaining to the
study of alternative revenue-generating activities for the Atlanta real
estate. Lower costs were also experienced for the analysis and planning for
the Atlanta quarry site as a municipal solid waste disposal site.
Interest expense decreased $13,217 in the three-month period ended
March 31, 1996 as compared to the same period in 1995 primarily because of
the February 1995 conversion of an $800,000 note into common stock of the
Company.
The net loss for the three-month period ended March 31, 1996 was
$$39,135 higher than the loss for the previous year's second quarter. Such
increase was due primarily to the lower revenues in the fiscal 1996 period
offset in part by decreased expenses.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Furnish the exhibits required by Item 601 of Regulation S-B.
None
(b) Reports on Form 8-K.
The following reports were filed during the quarter for which this
Form 10-QSB is filed:
1. Report dated April 22, 1996. This Report contained an Item 5
event "Other Events," pertaining to the purchase of land adjacent
to the Atlanta, Georgia property for $3,400,000.
<PAGE>
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.
CONTINENTAL INVESTMENT CORPORATION
(Registrant)
By:______________________________
Thomas F. Snodgrass
President and Treasurer
(Principal Financial Officer
and Duly Authorized Officer)
DATED: May 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1996
<CASH> 88
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 88
<PP&E> 6,628,311
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,716,145
<CURRENT-LIABILITIES> 723,391
<BONDS> 0
0
0
<COMMON> 2,092,831
<OTHER-SE> 2,802,923
<TOTAL-LIABILITY-AND-EQUITY> 6,716,145
<SALES> 0
<TOTAL-REVENUES> 30,000
<CGS> 0
<TOTAL-COSTS> 6,000
<OTHER-EXPENSES> 319,774
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,259
<INCOME-PRETAX> (297,033)
<INCOME-TAX> 0
<INCOME-CONTINUING> (297,033)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (297,033)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
