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 December 31, 1995
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 Securities Exchange Act of 1934 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 January 31, 1995, the registrant had outstanding 8,913,527
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 December 31, 1995
and September 30, 1995 3
Consolidated Statement of Operations
Three months ended December 31, 1995 and 1994 5
Consolidated Statement of Stockholders' Equity
Three months ended December 31, 1995 6
Consolidated Statement of Cash Flows
Three months ended December 31, 1995 and 1994 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 11
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Continental Investment Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31, September 30,
1995 1995
ASSETS (Unaudited)
<S> <C> <C>
CASH $ (2,361) $ 18,165
PROPERTY, at cost 3,220,874 3,220,712
OTHER ASSETS
Intangibles, net of
accumulated amortization
of $6,611 and $6,028 28,389 28,972
Other 61,870 8,204
__________ __________
Total assets $3,308,772 $3,276,053
LIABILITIES
CURRENT LIABILITIES
Accounts payable, trade $176,307 $200,449
Accrued expenses 87,485 90,912
Amounts due to related parties 364,667 342,105
__________ __________
Total current liabilities 628,559 633,466
__________ __________
LONG-TERM LIABILITIES
Deferred rent 19,775 -
Deferred income taxes 747,000 747,000
__________ __________
Total long-term liabilities 766,775 747,000
__________ __________
Total liabilities $1,395,234 $1,380,466
<FN> See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Continental Investment Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS (Cont'd.)
<CAPTION>
December 31, September 30,
1995 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;
8,913,527 and 8,883,527 shares
issued at December 31, 1995 $1,582,764 $1,567,764
Treasury stock, 7,209 common shares (26,771) (26,771)
Additional contributed capital 1,531,929 1,396,929
Accumulated deficit (1,174,384) 1,042,335
__________ __________
Total stockholders' equity 1,913,538 1,895,587
__________ __________
Total liabilities
and stockholders' equity $ 3,308,772 $ 3,276,053
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Continental Investment Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended December 31,
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Revenues $ 15,000 $ 48,000
Costs and expenses
Cost of revenues 3,000 3,000
Selling, general and
administrative expenses 143,496 264,367
__________ __________
Operating income (loss) (131,496) (219,367)
Interest expense 553 19,303
__________ __________
Income (loss) before
income taxes (132,049) (238,670)
Income tax expense - -
__________ __________
NET INCOME (LOSS) $(132,049) $(238,670)
Net income (loss) per common and
common equivalent share $(.02) $(.03)
Weighted average number of common
and common equivalent shares
outstanding 8,213,537 7,052,727
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Continental Investment Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Three months ended December 31, 1995
(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 30,000 15,000 - 135,000 - - - 150,000
Net loss - - - - - - (132,049) (231,049)
_________ __________ ________ __________ _____ _________ ____________ ___________
Balance,
December 31,
1995 8,913,527 $1,582,764 - $1,531,929 7,209 $(26,771) $(1,174,384) $1,913,538
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Continental Investment Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended December 31,
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(132,049) $(238,670)
Adjustments to reconcile net income
(loss) to net cash used in
operating activities:
Amortization expense 583 583
Change in operating assets
and liabilities:
Other current assets (53,666) (450)
Accounts payable, trade (24,142) 24,365
Accrued expenses (3,427) 91,569
Accrued expenses to related
parties - (27,773)
Deferred rent 19,775 -
_________ _________
Net cash provided by
(used in) operating
activities (192,926) (150,376)
Cash flows from investing activities:
Capital expenditures 162 (30,203)
_________ _________
Net cash used in
investing activities 162 (30,203)
Cash flows from financing activities:
Repayments to related parties,
net of advances 22,562 (66,981)
Proceeds from sale of stock 150,000 250,000
Principal payments on debt - (2,500)
Other - 100
_________ _________
Net cash provided by
(used in) financing
activities 172,562 180,619
_________ _________
Net increase (decrease) in cash (20,526) 40
Cash, beginning of year 18,165 2,215
_________ _________
Cash, end of year $ (2,361) $ 2,255
<FN> See accompanying notes.
</TABLE>
<PAGE>
Continental Investment Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
(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, consisting of normal recurring
adjustments, and disclosures necessary to a fair presentation of these
financial statements have been included. These financial statements
should be read in conjunction with the financial statements and notes
thereto included in the Form 10-K 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 three months ended December 31, 1995
are not necessarily indicative of the results expected for the full
year.
Loss per common share is based on the restated number of shares of
common stock outstanding giving retroactive effect to the
recapitalization of the Company at January 5, 1994.
NOTE B - MERGER AND RECAPITALIZATION
CICG was incorporated on October 3, 1958, in the State of Georgia, as
a real estate investment and development company. In 1965, the
Company purchased 133 acres of land (the Property) located
approximately 15 miles southwest of downtown Atlanta, Georgia. From
1966 to 1993, 65 acres of the land with mineral rights were leased to
a mining quarrying company unrelated to CICG. These acres were mined
until the lease and rights to extract minerals from the Property
expired in 1993. Subsequently, CICG participated in reclamation
activities in preparation for an alternative use of the land.
Effective January 5, 1994, CICG acquired all of the capital stock of
FIBER-SEAL Holdings, Inc. (FSH). The acquisition was accomplished by
the merger of a wholly-owned subsidiary of CICG with and into FSH (the
Merger). As a result of the transaction (i) FSH became a wholly-
owned subsidiary of CICG, (ii) CICG issued 5,750,000 shares of its
Common Stock $0.50 par value per share to Sterritt Properties, Inc.
(SPI), a Texas corporation that owned all of the issued and
outstanding capital stock of FSH, and (iii) CICG issued a note to SPI
in the face amount of $800,000.
<PAGE>
Upon consummation of the Merger, SPI owned approximately 90.3% of the
outstanding common stock of the Company. For accounting purposes, the
Merger was treated as a purchase of CICG by FSH (a reverse
acquisition), resulting in a recapitalization of FSH. Accordingly,
the results of the operations and financial position for periods prior
to January 5, 1994 are those of FSH. The Company's consolidated
financial statements include the accounts of CICG from January 5,
1994. The amounts credited to stockholders' equity for the shares
issued in the Merger were based on the estimated fair value of the net
assets acquired, less the $800,000 note issued to SPI.
NOTE C - 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 D - ACQUISITION OF REAL ESTATE
In February of 1995, the Company entered into a contract to acquire
78 acres adjacent to its Atlanta property in exchange for (as amended
in February 1996) 933,333 shares of CICG common stock plus a $600,000
note payable, which can be converted to an option for 200,000 shares
of CICG common stock within the first two years. In addition, the
seller shall have a 5-year option to purchase 500,000 additional
shares of CICG common stock at $5.00 per share.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Capital Resources
The Company had a working capital deficit of $630,920 at December
31, 1995 as compared to a deficit of $615,301 at the end of the most
recent fiscal year. The primary source of capital during the three
months ended December 31, 1995 was provided by the sale of shares of
common stock of the Company in a private sale. Capital resources
continue to be utilized primarily to fund the operating losses of the
Company, which have been created primarily by costs associated with the
development of the Company's quarry site in Atlanta, Georgia as a waste
disposal landfill.
<PAGE>
For the liquidity needs of the Company in the following twelve
months, the Company is dependent upon revenues generated from the
operation of the fabric care segment and from proceeds from the sale of
the Company's stock. Historically, revenues from the fabric care
operation have not been adequate to fund the operations of the Company
overall. Also, the Company does not presently have available lines of
credit to provide the necessary working capital and expansion and
development cost expected to be incurred during the coming year. The
Company completed a private sale for newly issued shares of its stock
during the first quarter. If the Company is unable to obtain an adequate
amount of funds from the sale of its stock in a private placement, or
seek and obtain an alternative financing arrangement, it will be
necessary to delay or curtail 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 either of its
alternative plans to commence producing revenues from the Atlanta site,
which could include obtaining marketing contracts for re-opening the
site as a granite quarry, disposal of inert debris material, and storage
of re-cyclable materials. Implementation of either of these
alternatives could be expected in less than one year utilizing present
zoning for the property, while the time frame for obtaining permits as a
municipal solid waste disposal site could 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 or make acquisitions utilizing
authorized shares of stock of the Company.
Results of Operations
Revenues of the Company are derived predominately from the
licensing and franchising of its fabric care and treatment business
through FIBER-SEAL Holdings, Inc. (FSH) The revenue of the fabric care
business is composed solely of royalties received from FSSI, which is
the greater of 5% of sales or $5,000.00 per month.
Selling, general and administrative (S,G&A) costs were
significantly lower for the three month period ended December 31, 1995
as compared to the same period in 1994. Significantly lower costs were
incurred to explore alternative revenue-generating activities for the
Atlanta real estate.
Interest expense decreased significantly in the three month period
ended December 31, 1995 as compared to the same period in 1994 and was
primarily due to conversion of the $800,000 note issued in connection
with the Merger. The net loss for the three month period ended September
30, 1995 was significantly lower than the loss for the previous year and
was due primarily to the expenses discussed in the preceding paragraph.
As a result of the operating losses for the three months ended
December 31, 1995, the Company used $192,926 of its resources to fund
its operating activities, as compared to $150,376 used in its operating
activities in the same period in fiscal 1994.
<PAGE>
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.
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused the 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: February 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1995
<CASH> (2361)
<SECURITIES> 0
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<ALLOWANCES> 0
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<PP&E> 3220874
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 3308772
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<CGS> 3000
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</TABLE>
