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 June 30, 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 June 30, 1996, the registrant had outstanding 10,907,058 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
June 30, 1996 and September 30, 1995 3
Consolidated Statements of Operations
For the periods ended June 30, 1996 and 1995 5
Consolidated Statement of Stockholders' Equity
Nine months ended June 30, 1996 6
Consolidated Statements of Cash Flows
For the periods ended June 30, 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>
June 30, September 30,
1996 1995
(Unaudited)
ASSETS
<S> <C> <C>
CASH $1,151,193 $ 18,165
PROPERTY, at cost 8,439,582 3,220,712
OTHER ASSETS
Intangibles, net of accumulated
amortization of $7,777 and $6,028 27,223 28,972
Other 8,444 8,204
---------- ----------
Total assets $9,626,442 $3,276,053
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, trade $ 103,378 $ 200,449
Accrued expenses 29,889 90,912
Amounts due to related parties 112,954 342,105
---------- ----------
Total current liabilities 246,221 633,466
LONG-TERM LIABILITIES
Deferred income taxes 747,000 747,000
---------- ----------
Total liabilities 993,221 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>
June 30, 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;
10,882,159 and 8,883,527 shares
issued at June 30, 1996 and
September 30, 1995 $2,579,529 $1,567,764
Treasury stock, no shares at
June 30, 1996 and 7,209 common
shares at September 30, 1995 - (26,771)
Additional contributed capital 7,756,294 1,396,929
Accumulated deficit (1,702,602) (1,042,335)
---------- ----------
Total stockholders' equity 8,633,221 1,895,587
---------- ----------
Total liabilities and
stockholders' equity $9,626,442 $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 Nine Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues $ 15,000 $ 48,000 $ 45,000 $ 174,000
Cost and expenses
Cost of revenues 3,000 6,000 9,000 12,000
Selling, general
and administrative
expenses 372,089 67,391 691,843 518,683
--------- --------- --------- ---------
Operating loss (360,089) (25,391) (655,843) (356,683)
Interest expense
(net of interest
income) 3,145 1,208 4,424 34,434
--------- --------- --------- ---------
Net loss before
taxes (363,234) (26,599) (660,267) (391,117)
Income tax expense - - - -
--------- --------- --------- ---------
NET LOSS $ (363,234) $ (26,599) $(660,267) $(391,117)
Net loss per
common and common
equivalent share $ (0.04) $ (0.00) $ (0.07) $ (0.05)
Weighted average number
of common and common
equivalent shares
outstanding 9,800,700 8,695,994 9,074,427 7,882,446
<FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Continental Investment Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Nine months ended June 30, 1996
(Unaudited)
<CAPTION>
Common Additional
Common stock stock contributed Treasury stock 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 555,000 277,500 - 2,222,500 - - - 2,500,000
Issuance of stock
for services 47,800 23,900 - 215,180 - - - 239,080
Issuance of
stock for land 1,427,940 713,970 - 3,944,851 - - - 4,658,821
Retire treasury
stock (7,209) (3,605) - (23,166) 7,209 26,771 - -
Net loss - - - - - - (660,267) (660,267)
---------- ---------- --------- ---------- ------- ------- ----------- ----------
Balance,
June 30, 1996 10,907,058 $2,579,529 - $7,756,294 - - $(1,702,602) $8,633,221
<FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Continental Investment Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine months ended
June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (660,267) $ (391,117)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Amortization expense 1,749 1,167
Common stock issued for
services/expenses 247,901 46,307
Change in operating assets
and liabilities, net of effects
of recapitalization:
Other current assets (240) (336,267)
Accounts payable, trade (97,071) 51,077
Accrued expenses (61,023) 124,159
Accrued expenses to related
parties - 87,512
Deferred rent - 7,132
---------- ----------
Net cash provided by
(used in) operating
activities (568,951) (410,030)
Cash flows from investing activities:
Capital expenditures (purchase of land) (568,870) (37,589)
---------- ----------
Net cash provided by (used in)
investing activities (568,870) (37,589)
Cash flows from financing activities:
Advances from (repayments to) related
parties, net (229,151) 20,300
Capital contribution by majority
stockholder - 14,400
Proceeds from sale of stock 2,500,000 425,100
Proceeds from exercise of stock options - (12,500)
---------- ----------
Net cash provided by financing
activities 2,270,849 447,300
Net increase (decrease) in cash 1,133,028 (319)
Cash, beginning of period 18,165 2,215
---------- ----------
Cash, end of period $1,151,193 $ 1,896
Supplemental schedule of non-cash and
financing activities:
Common stock issued for land $4,650,000 -
<FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
Continental Investment Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 June 30, 1996 are
not necessarily indicative of the results to 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.
NOTE C - ACQUISITION OF REAL ESTATE
In February 1995, the Company entered into a contract to acquire 75
acres of land adjacent to its Atlanta, Georgia property. In March
1996, the Company acquired the 75 acres for a purchase price of
$3,400,000. The purchase price consisted of 933,333 restricted
shares of Continental Investment Corporation common stock
($2,800,000), $250,000 cash at closing and a Promissory Note for
$350,000, which was convertible at the sole option of the seller
into 116,667 restricted shares of common stock of the Company. On
June 30, 1996, the note was converted into such 116,667 restricted
shares of common stock. In addition, the seller was granted an
option to purchase 500,000 restricted shares of the Company's
common stock at a price of $5.00 per share.
In April 1996, the Company entered into a contract to acquire 20
acres of land adjacent to its Atlanta, Georgia property. In June
1996, the Company acquired the 20 acres for a purchase price of
$1,800,000. The purchase price consisted of 375,000 restricted
shares of Continental Investment Corporation common stock
($1,500,000) and $300,000 cash at closing. In addition, the seller
was granted an option to purchase 600,000 restricted 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 nine months ended
June 30, 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 $5,218,870 (including
$18,870 of closing costs) during the nine months ended June 30, 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 $2,500,000 through private sales of newly issued restricted
shares of its common stock during the first nine months 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
Nine Months Ended June 30, 1996
Compared to Nine Months Ended June 30, 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 $129,000 in the nine months 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 in fiscal year 1995 and to a decline in
fabric care revenues. Revenues from the fabric care segment were
$144,000 in fiscal 1995 and $45,000 in 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 decreased by $3,000 for the period ended
June 30, 1996 as compared to the same period in fiscal 1995 as a
result of a renegotiated trademark license fee agreement.
Selling, general and administrative (SG&A) expenses increased
$173,160 during the nine-month period ended June 30, 1996 as compared
to the same period in the prior year. The increase was caused by a
variety of factors including consulting fees related to the potential
use of the Atlanta property as a waste disposal site, consulting fees
related to franchising of the fabric care business, increased legal
fees, increased property taxes, increased investor relations expenses,
and auditing fees related to the Company's application to list its
shares on the Nasdaq automated stock quotation system.
Interest expense decreased $30,010 in the nine-month period ended
June 30, 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 nine-month period ended June 30, 1996 was
$269,150 higher than the loss for the previous year's first nine
months. Such increase was due primarily to the aforementioned lower
revenues and higher SG&A expenses in fiscal 1996 as compared with
fiscal 1995.
Three Months Ended June 30, 1996
Compared to Three Months Ended June 30, 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.
Operating revenues decreased by $33,000 in the third quarter of
fiscal 1996 as compared with the same period in fiscal 1995. Revenues
from the fabric care segment were $48,000 in the third quarterly
period in 1995 and $15,000 for the third 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.
<PAGE>
The cost of revenues decreased by $3,000 during the three-month
period ended June 30, 1996 as compared to the same period in fiscal
1995, as a result of a renegotiated trademark license fee agreement
Selling general and administrative expenses increased by $304,698
in the third quarter of Fiscal 1996 as compared to the same period of
1995. The increase was caused by a variety of factors including
consulting fees related to the potential use of the Atlanta property
as a waste disposal site, consulting fees related to franchising of
the fabric care business, increased legal fees, increased property
taxes, increased investor relations expenses, and auditing fees
related to the Company's application to list its shares on the Nasdaq
automated stock quotation system.
Interest expense increased $1,937 in the three-month period ended
June 30, 1996 as compared to the same period in 1995, primarily
because of interest on the $350,000 note issued as part of the purchase
price of the 75 acres of land as described in Note C on page 7.
The net loss for the three-month period ended June 30, 1996 was
$336,635 higher than the loss for the previous year's third quarter.
Such increase was due primarily to the aforementioned lower revenues
and higher SG & A expenses in fiscal 1996 as compared with fiscal
1995.
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.
Registrant filed Form 8-K dated March 29, 1996. This Report
contained an Item 5 event ("Other Events") pertaining to the
purchase of 75 acres 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
Thomas F. Snodgrass,
President and Treasurer
(Principal Financial officer
and Duly Authorized officer)
DATED: August 5, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1996
<CASH> 1,151,193
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,151,193
<PP&E> 8,439,582
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,626,442
<CURRENT-LIABILITIES> 246,221
<BONDS> 0
0
0
<COMMON> 2,579,529
<OTHER-SE> 6,053,692
<TOTAL-LIABILITY-AND-EQUITY> 9,626,442
<SALES> 15,000
<TOTAL-REVENUES> 15,000
<CGS> 3,000
<TOTAL-COSTS> 375,089
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,145
<INCOME-PRETAX> (363,234)
<INCOME-TAX> 0
<INCOME-CONTINUING> (363,234)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (363,234)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
