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, 1998
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 May 20, 1998, the registrant had outstanding 12,442,938 shares of
its Common Stock, $0.50 par value.
<PAGE>
Continental Investment Corporation and Subsidiaries
FORM 10-QSB REPORT INDEX
Page No.
PART I. FINANCIAL INFORMATION
- -----------------------------
Item 1. Financial Statements
----------------------------
Condensed Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997 ..................................... 3
Condensed Consolidated Statements of Operations
Three months ended March 31, 1998 and 1997 ................ 5
Condensed Consolidated Statement of Stockholders' Equity
Three months ended March 31, 1998 ......................... 6
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 1998 and 1997 ................ 7
Notes to Condensed Consolidated
Financial Statements ..................................... 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................ 17
Signatures ........................................................ 17
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<PAGE>
PART I. FINANCIAL INFORMATION.
- --------------------------------
Item 1. Financial Statements.
- ------------------------------
Continental Investment Corporation and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1998 1997
------------ ------------
ASSETS (Unaudited) (Audited)
CURRENT ASSETS
Cash $ 94,032 $ 217,383
Note receivable 1,484,097 1,484,097
Receivables - WasteMasters, Inc. 302,203 433,734
Accounts receivable, net of allowance
for doubtful accounts $18,844
and $17,011 580,140 268,793
Inventories 48,963 59,423
Accrued interest receivable 119,730 82,628
Prepaid expenses and deposits 129,455 156,595
------------ -----------
Total current assets 2,758,620 2,702,653
PROPERTY AND EQUIPMENT
Landfill sites under development,
at cost 14,710,622 14,682,572
Landfills, net of accumulated
amortization of $475,025 and
$307,203 3,185,426 2,572,500
Fixtures and equipment, net of
accumulated depreciation of
$136,607 and $81,114 738,348 764,903
------------ ------------
Total property and equipment 18,634,396 18,019,975
INVESTMENT IN WASTEMASTERS, INC. 6,080,000 6,080,000
INTANGIBLES -0- -0-
------------ ------------
Total assets $27,473,015 $26,802,628
=========== ============
See accompanying notes to unaudited consolidated financial statements.
-3-
<PAGE>
Continental Investment Corporation and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS - Continued
March 31, December 31,
1998 1997
------------ ------------
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, trade $ 598,908 $ 561,090
Note payable, related party 95,687 98,707
Accrued payables 160,000 283,350
Accrued interest payable 57,696 -0-
Current portion of long-term
notes payable 530,081 219,032
------------ ------------
Total current liabilities 1,442,372 1,162,179
LONG-TERM LIABILITIES
Notes payable 1,437,292 1,143,772
Accrued landfill closure costs 164,098 10,770
Deferred income taxes 747,000 747,000
------------ ------------
Total long-term liabilities 2,348,389 1,901,542
------------ ------------
Total liabilities 3,790,762 3,063,721
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value;
1,000,000 shares authorized;
no shares issued or outstanding -0- -0-
Common stock, $0.50 par value;
25,000,000 shares authorized;
12,382,751 shares issued and
outstanding at March 31, 1998;
12,367,055 shares issued and
outstanding at December 31, 1997 $ 3,317,377 $ 3,309,528
Additional contributed capital 24,952,128 24,881,497
Accumulated deficit (4,587,251) (4,452,118)
------------ ------------
Total stockholders' equity 23,682,254 23,738,907
Total liabilities and
stockholders' equity $27,473,015 $26,802,628
============ ============
See accompanying notes to unaudited consolidated financial statements.
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<PAGE>
Continental Investment Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31
(Unaudited)
1998 1997
---------- ----------
Revenues $1,101,369 $ 204,052
Costs and Expenses
Cost of revenues 620,689 78,729
Selling, general and
administrative expenses 629,885 484,462
------------ -----------
Operating loss (149,205) (359,139)
Other Income (Expense)
Interest income 44,784 57,765
Interest expense (30,713) (18,353)
----------- -----------
14,071 39,412
------------ -----------
NET LOSS $ (135,133) $ (319,727)
============ ===========
Per Share Data
Loss per common share - basic $(0. 01) $(0.03)
Weighted average number of
common shares outstanding 12,375,160 11,313,008
See accompanying notes to unaudited consolidated financial statements.
-5-
<PAGE>
Continental Investment Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Three months ended March 31, 1998
(Unaudited)
Common stock Additional
----------------------- contributed Accumulated
Shares Par Value capital deficit Total
---------- ---------- ----------- ----------- ------------
Balance,
December 31,
1997 12,367,055 $3,309,528 $24,881,497 $(4,452,118) $23,738,907
Exercise of
warrants 15,696 7,848 70,632 -0- 78,480
Net Loss -0- -0- -0- (135,133) (135,133)
---------- ---------- ----------- ------------ -----------
Balance,
March 31,
1998 12,382,751 $3,317,376 $24,952,129 $(4,587,251) $23,682,254
========== ========== =========== ============ ===========
See accompanying notes to unaudited consolidated financial statements.
-6-
<PAGE>
Continental Investment Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31
(Unaudited)
1998 1997
----------- -----------
Cash flows from operating activities:
Net income (loss) $(135,133) $ (319,727)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Amortization/depreciation expense 223,315 20,925
Accrual for post-closure expense 28,328 -0-
Change in operating assets and liabilities
Accounts receivable - trade (188,180) -0-
Accrued interest receivable (37,102) -0-
Other current assets and liabilities (35,745) 19,576
Accounts payable trade (83,278) (76,713)
Accrued interest payable 57,696 -0-
Accrued expenses (155,350) (47,021)
---------- -----------
Net cash provided by (used in)
operating activities $(325,449) $ (402,960)
Cash flows from investing activities:
Purchases of property and equipment (16,887) -0-
Partial repayment of note receivable -0- 1,048,563
Cash from acquisition of landfill 2,531 -0-
---------- -----------
Net cash provided by (used in)
investing activities $ (14,356) $1,048,563
Cash flows from financing activities:
Paydown of liabilities $ (59,339) $ (438,481)
Proceeds from debt 275,793 -0-
---------- -----------
Net cash provided by (used in)
financing activities $ 216,454 $ (438,481)
Net increase (decrease) in cash $(123,351) $ 207,121
Cash, beginning of period $ 217,383 $ 841,586
Cash, end of period $ 94,032 $1,048,707
=========== ==========
See accompanying notes to unaudited consolidated financial statements.
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<PAGE>
Continental Investment Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - Continued
NON-CASH TRANSACTIONS:
During the three months ended March 31, 1998, $78,480 of Common Stock
purchase warrants were exercised in exchange for consideration consisting of
the cancellation of $78,840 of Company indebtedness.
As part of the acquisition of Trantex, Inc., effective on
February 18, 1998, accounted for as a purchase, the Company assumed various
assets (subject to certain liabilities) by exchanging shares of Common Stock.
The fair value of assets received and the liabilities assumed are summarized
below:
Cash $ 2,531
Accounts receivable 123,157
Landfill site under development, at cost 28,050
Landfill, net of accumulated amortization 779,798
Equipment, net of accumulated depreciation 13,000
--------
Total assets 946,547
Accounts payable and accrued expenses 539,419
Notes payable 175,128
Obligations to seller 232,000
--------
Total liabilities 946,547
--------
Net of assets acquired over
liabilities assumed $ -0-
========
Of the obligations due to the seller, $32,000 is to be retired upon
issuance of shares of the Company's Common Stock, subsequent to March 31,
1998, and $200,000 represents contingent consideration due to seller upon
achievement of certain performance goals for the landfill. In September 1997,
an initial cost of $275,000 was recorded for the acquisition of Trantex, Inc.
(which owns the Rye Creek landfill in Kirksville, Missouri) upon the issuance
of shares of the Company's Common Stock and warrants.
-8-
<PAGE>
Continental Investment Corporation and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited financial statements have been prepared by
Continental Investment Corporation (the "Company" or "Continental")
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. This Form 10-QSB Report should be read in
conjunction with the Form 10-KSB Report of Continental Investment
Corporation for the fiscal year ended December 31, 1997, as filed with
the U. S. Securities and Exchange Commission.
The results of operations for the period ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the full
year.
NOTE B - DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
- --------------------------------------------------------
This Quarterly Report on Form 10-QSB includes forward looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended ("Forward Looking Statements"). All statements other than
statements of historical fact included in this report are Forward Looking
Statements. In the normal course of its business, the Company, in an
effort to help keep its shareholders and the public informed about the
Company's operations, may from time to time issue certain statements,
either in writing or orally, that contain or may contain Forward Looking
Statements. Although the Company believes that the expectations reflected
in such Forward Looking Statements are reasonable, it can give no
assurance that such expectations will prove to have been correct.
Generally, these statements relate to business plans or strategies,
projected or anticipated benefits or other consequences of such plans or
strategies (past and possible future), acquisitions and projected or
anticipated benefits from acquisitions made by or to be made by the
Company, or projections involving anticipated revenues, earnings, level
of capital expenditures or other aspects of operating results. All phases
of the Company's operations are subject to a number of uncertainties,
risks and other influences, many of which are outside the control of the
Company and any one of which, or a combination of which, could materially
affect the results of the Company's proposed operations and whether
Forward Looking Statements made by the Company ultimately prove to be
accurate. Such important factors ("Important Factors") and other factors
could cause actual results to differ materially from the Company's
expectations. All prior and subsequent written and oral Forward Looking
Statements attributable to the Company or persons acting on its behalf
-9-
<PAGE>
Continental Investment Corporation and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE B - DISCLOSURE REGARDING FOREWARD LOOKING STATEMENTS - Continued
- ---------------------------------------------------------------------
are expressly qualified in their entirety by the Important Factors
described below that could cause actual results to differ materially
from the Company's expectations as set forth in any Forward Looking
Statement made by or on behalf of the Company.
(1) Competition: The waste collection/disposal business and the fabric
care and treatment business are both highly competitive and require
substantial amounts of capital. The Company's existing and potential
facilities do, may or would compete with numerous enterprises, many of
which have significantly larger operations and greater resources than the
Company. The Company does, may or would also compete with those counties
and municipalities that maintain their own waste collection and disposal
operations. Forward Looking Statements assume that the Company will be
able to effectively compete with these other entities.
(2) Availability of Acquisition Targets: The Company's planned
acquisition program is a key element of its expansion strategy. In
addition, obtaining landfill permits has become increasingly difficult,
time consuming and expensive. There can be no assurance, however, that
the Company will succeed in obtaining landfill permits or locating
appropriate acquisition candidates that can be acquired at price levels
that the Company considers appropriate.
(3) Ongoing Capital Requirements: 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,
cash flow from the construction and demolition landfill described in
Note C on page 12 of this report and cash flow generated from the
operation of its fabric care business. If the Company is unable to obtain
adequate funds from the sale of its stock in public offerings, private
placements, the exercise of warrants, or alternative financing
arrangements, it may be necessary to delay the potential permitting and
development of its landfill properties and potential landfill properties.
Because of potential political, legal, bureaucratic, and other factors,
there can be no assurance that the Company will be able to accomplish any
of its goals within a reasonable period of time.
(4) Economic Conditions: The Company's existing and potential waste
disposal businesses may or would be affected by general economic
conditions. There can be no assurance that an economic downturn would not
result in a reduction in the potential volume of waste that might be
disposed of at the Company's facilities and/or the price that the Company
would charge for its services. Additionally, the demand for FIBER-SEAL's
services may be adversely affected by an economic downturn.
-10-
<PAGE>
Continental Investment Corporaton and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE B - DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS - Continued
- --------------------------------------------------------------------
(5) Weather Conditions: Protracted periods of inclement weather may
adversely affect the Company's existing and potential operations by
interfering with collection and landfill operations, delaying the
development of landfill capacity and/or reducing the volume of waste
generated by the Company's existing and potential customers. In addition,
particularly harsh weather conditions may result in the temporary
suspension of certain of the Company's existing and potential operations.
The Forward Looking Statements do not assume that such weather conditions
will occur.
(6) Dependence on Senior Management: The Company is highly dependent
upon its senior management team. In addition, as the Company continues to
grow, its requirements for management personnel with franchising and
waste industry experience will also increase. The future availability of
such experienced management personnel cannot be predicted. The Forward
Looking Statements assume that experienced management personnel will be
available when needed by the Company at compensation levels that are
within industry norms. The loss of the services of any member of senior
management or the inability to hire additional management personnel could
have a material adverse effect on the Company.
(7) Influence of Government Regulation: The Company's existing and
potential operations are and would be subject to and substantially
affected by extensive federal, state and local laws, regulations, orders
and permits, which govern environmental protection, health and safety,
zoning and other matters. These regulations may impose restrictions on
operations that could adversely affect the Company's results, such as
limitations on the expansion of disposal facilities, limitations on or
the banning of disposal of out-of-state waste or certain categories of
waste or mandates regarding the disposal of solid waste. Because of
heightened public concern, companies in the waste management business may
become subject to judicial and administrative proceedings involving
federal, state or local agencies. These governmental agencies may seek to
impose fines or to revoke or deny renewal of operating permits or
licenses for violations of environmental laws or regulations or to
require remediation of environmental problems at sites or nearby
properties, or resulting from transportation or predecessors'
transportation and collection operations, all of which could have a
material adverse effect on the Company. Liability may also arise from
actions brought by individuals or community groups in connection with
the permitting or licensing of operations, any alleged violations of
such permits and licenses or other matters. The Forward Looking
Statements assume that there will be no materially negative impact on its
operations due to governmental regulation.
-11-
<PAGE>
Continental Investment Corporation and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE B - DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS - Continued
- --------------------------------------------------------------------
(8) Potential Environmental Liability: The Company may incur liabilities
for the deterioration of the environment as a result of its existing and
potential operations. Any substantial liability for environmental damage
could materially adversely affect the operating results and financial
condition of the Company. Due to the limited nature of insurance coverage
of environmental liability, if the Company were to incur liability for
environmental damage, its business and financial condition could be
materially adversely affected.
NOTE C - ACQUISITIONS OF OPERATING LANDFILLS
- --------------------------------------------
During the third quarter of 1997, the Company acquired an operating
construction and demolition ("C&D") landfill in metropolitan Atlanta,
Georgia in exchange for consideration totaling $2.74 million. The
purchase price consisted of immediate cash consideration of $2.5 million
and an obligation to make future cash payments totaling $240,000. A
construction and demolition landfill may accept building materials and
rubble resulting from construction, remodeling, repair, and demolition
operations on commercial buildings, pavements, houses, and other
structures. Such wastes include, but are not necessarily limited to,
wood, bricks, metal, concrete, wallboard, paper, and cardboard. The
acquisition was accounted for as a purchase and the operating results of
the acquired landfill have been included in the financial statements of
the Company since the acquisition.
During February 1998, the Company completed the acquisition of an
operating municipal solid waste (MSW) landfill in Kirksville, Missouri.
Municipal solid waste ("MSW") landfills are the primary depository for
solid waste in North America. A municipal solid waste landfill can accept
any waste derived from households, including garbage, trash and sanitary
waste in septic tanks. Household waste includes solid waste from
single-family and multi-family residences, hotels and motels, bunkhouses,
campgrounds, picnic grounds, and day-use recreation areas. The term also
includes commercial solid waste, but does not include solid waste from
mining, agricultural or forestry operations or industrial processes or
operations. Total consideration paid for such landfill comprised
approximately $1,220,190, consisting of $307,000 of restricted Company
common stock and the assumption of approximately $913,190 of liabilities.
-12-
<PAGE>
Continental Investment Corporation and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE C - ACQUISITIONS OF OPERATING LANDFILLS - Continued
- --------------------------------------------------------
The following pro forma information compares the results of operations as
if the acquisitions had been consummated as of the beginning of each of
the three month periods ended March 31, 1998 and March 31, 1997.
Three months ended
March 31,
--------------------------
1998 1997
---------- ----------
Revenue $1,136063 $ 509,397
Net Loss $(150,580) $(311,541)
Loss per common share - basic $(0.01) $(0.03)
The pro forma financial information is presented for informational
purposes only and is not necessarily indicative of operating results
that would have occurred had the acquisition been consummated as of the
beginning of the above periods, nor is it necessarily indicative of
future operating results.
NOTE D - NEW ACCOUNTING PRONOUNCEMENT
- -------------------------------------
In the fourth quarter of 1997, the Company adopted the provisions of
Statement of Financial Accounting Standard No. 128, "Earnings Per Share"
(SFAS 128). In accordance with SFAS 128, the Company computes basic
earnings per share based on the weighted-average number of common shares
outstanding during each period presented. Diluted earnings per share is
computed based on the weighted average number of common shares plus the
dilutive effect of all potential dilutive securities, principally stock
options and warrants, outstanding during each period presented. In all
periods presented, all potential common shares were anti-dilutive.
Accordingly, the adoption of SFAS 128 had no effect on loss per share
amounts.
-13-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
- -----------------------------------------------------------------------
Results of Operations
Three Months Ended March 31, 1998
Compared to Three Months Ended March 31, 1997
Revenues
- --------
During the three months ended March 31, 1998, revenues of the Company
were derived primarily from the C&D landfill, described in Note C on
Page 12 of this report, which was acquired during the third quarter of 1997
($578,494) the FIBER-SEAL fabric care and treatment business ($239,076), the
management contract with WasteMasters, Inc. ($150,000), and the municipal
solid waste landfill in Kirksville, Missouri described in Note C on Page 12
of this report. Revenues for the quarter ended March 31, 1998 increased
$897,317 (439.75%) to $1,101,369 from $204,052 for the quarter ended
March 31, 1997. The increase in revenues was primarily a result of the
acquisitions of the C&D and MSW landfills, the WasteMasters, Inc. management
agreement and, to a lesser degree, increased FIBER-SEAL revenues. FIBER-SEAL
revenues increased $35,024 (17.16%) to $239,076 for the quarter ended
March 31, 1998 from $204,052 for the quarter ended March 31, 1997. There were
no landfill or WasteMasters, Inc. management revenues in the quarter ended
March 31, 1997. The Company has made a strategic decision to convert its
FIBER-SEAL business from a licensing mode to a franchising operation by
December 31, 1998. Further, the Company intends to institute a program for
the expansion of FIBER-SEAL operations in all unexploited geographic areas in
the U. S. during fiscal year 1998.
Cost of Revenues
- ----------------
Cost of revenues for the quarter ended March 31, 1998 increased $541,960
(688.39%) to $620,689 (representing 56.36% of revenues) from $78,729
(representing 38.58% of revenues) for the quarter ended March 31, 1997. The
increase in the cost of revenues was primarily a result of the acquisition of
the C&D and MSW landfills.
Selling, General and Administrative (SG&A) Expenses
- ---------------------------------------------------
Selling, general and administrative (SG&A) expenses for the quarter ended
March 31, 1998 increased $145,422 (30.02%) to $629,884 from $484,462 for the
quarter ended March 31, 1997. The increase was due to a variety of factors
including those related to the development and potential use of the Company's
primary Atlanta, Georgia property as a waste disposal site (e.g., consulting
fees, increased legal fees, increased personnel costs, the rental of office
space in Atlanta, increased travel expenses, etc.), the expenses incurred as
a result of the acquisitions described in Note C on Page 12 of this report,
and additional expenses for FIBER-SEAL related to the development of a plan
to convert from the current licensing method to a franchise operation.
-14-
<PAGE>
Operating Loss
- --------------
Operating loss for the quarter ended March 31, 1998 decreased $209,935
(58.46%) to $149,204 from $359,139 for the quarter ended March 31, 1997. This
was due to an increase in revenues for the quarter ended March 31, 1998 of
$897,317 (a 439.75% increase) to $1,101,369 from $204,052 for the quarter
ended March 31, 1997, an increase in cost of revenues for the quarter ended
March 31, 1998 of $541,960 (a 688.39% increase) to $620,689 from $78,729 for
the quarter ended March 31, 1997, and an increase in selling, general and
administrative (SG&A) expenses for the quarter ended March 31, 1998 of
$145,422 (a 30.02% increase) to $629,884 from $484,462 for the quarter ended
March 31, 1997.
Interest Income
- ---------------
Interest income of $44,784 for the quarter ended March 31, 1998 decreased
by $12,981 (22.47%) as compared with the quarter ended March 31, 1997 during
which quarter there was $57,765 of interest income. Such decrease was due to
the Company's decreased holdings of cash and short-term investments during
the fiscal 1998 period as compared with the fiscal 1997 period.
Interest Expense
- ----------------
Interest expense was $30,713 for the quarter ended March 31, 1998, an
increase of $12,360 (67.35%) as compared with the quarter ended March 31,
1997 during which quarter there was $18,353 of interest expense. Such
increase resulted from certain indebtedness incurred as a result of the
acquisition of the C&D landfill described in Note C on Page 12 of this
report.
Net Loss
- --------
The net loss for the quarter ended March 31, 1998 decreased $184,594
(57.73%) to $135,133 from $319,727 for the quarter ended March 31, 1997. Such
decrease was primarily due to the significantly increased revenues and
decreased operating loss offset in part by increased interest expense and
decreased interest income.
Liquidity and Capital Resources
Cash and Short-Term Investments
- -------------------------------
Cash and short-term investments as of March 31, 1998 were $1,578,129 a
decrease of $123,351 as compared with the cash and short-term investments
position of $1,701,480 at December 31, 1997. Such decrease was primarily due
to the $135,133 net loss experienced by the Company during the three months
ended March 31, 1998.
Investment in WasteMasters, Inc.
- --------------------------------
As of May 19, 1998, the Company owned various restricted, unregistered
securities of WasteMasters, Inc., a publicly-traded corporation whose
registered common stock is traded on the Nasdaq SmallCap Market under the
trading symbol WAST.
-15-
<PAGE>
Such securities consist of 4,500,000 shares of restricted WasteMasters Common
Stock, 5,000,000 shares of WasteMasters Series A Preferred Stock (which are
convertible at the Company's option into 25,500,000 shares of restricted
WasteMasters Common Stock) and an option to exchange up to 1,000,000 shares
of restricted Continental Investment Corporation Common Stock for up to
100,000,000 shares of restricted WasteMasters Common Stock (as per a fixed
exchange ratio of 1 share of Continental for 100 shares of WasteMasters).
Such securities are currently valued on the Company's balance sheet at their
cost basis of $6,080,000. As per a management contract between the Company
and WasteMasters, Inc., the Company is paid a monthly fee of $50,000 to
manage the affairs and operations of WasteMasters, Inc.
Capital Expenditures
- --------------------
The Company currently has no material commitments for capital
expenditures. The Company expects to continue to explore opportunities to
acquire landfills and related waste disposal industry assets in the future.
Capital Resources
- -----------------
Heretofore, the primary source of capital has been provided by the sale
of shares of common stock of the Company in private sales. 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, cash flow from the construction and demolition landfill
described in Note C on Page 12 of this report, cash flow generated from the
operation of its FIBER-SEAL fabric care and tretment business and cash flow
from the municipal solid waste landfill described in Note C on Page 12 of
this report. If the Company is unable to obtain adequate funds from the sale
of its stock in public offerings, private placements, the exercise of
warrants, or alternative financing arrangements, it may be necessary to delay
the potential permitting and development of its landfill properties and
potential landfill properties. Because of potential political, legal,
bureaucratic, and other factors, there can be no assurance that the Company
will be able to accomplish any of its goals within a reasonable period of
time. 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. $2,720,000 of common
stock purchase warrants were exercised during the fiscal year ended
December 31, 1997. $78,480 of common stock purchase warrants were exercised
during the three months ended March 31, 1998.
As of March 31, 1998, the Company had working capital of $1,316,248 and
a current ratio of 1.91 to 1.
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
-16-
<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: /S/ R. Dale Sterritt, Jr.
-------------------------------------
R. Dale Sterritt, Jr., Chairman,
President and Chief Executive Officer
(Principal Executive Officer)
By: /S/ G. Michael Lawshe
-------------------------------------
G. Michael Lawshe
(Principal Accounting Officer)
DATE: May 20, 1998
-17-
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