UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
__________________________________
FORM 10-KSB/A NO. 2
(Mark One)
[ ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
or
[X] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the three months ended December 31, 1996 (short fiscal year)
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
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.50 par value
(Title of each class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, as of March 31, 1997, is approximately $114,045,881 based upon
the closing bid price of $21.25 per share as reported for such date by Trading
and Market Services of The Nasdaq Stock Market, Inc.
As of March 31, 1997, the registrant had outstanding 11,313,008 shares
of Common Stock.
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PART I
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ITEM 1. DESCRIPTION OF BUSINESS.
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Background
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Continental Investment Corporation ("CICG" or the "Company") 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 10 miles southwest of downtown
Atlanta, Georgia. From 1966 to 1993, 65 acres of the land along with mineral
rights were leased to a mining and quarrying company unrelated to CICG. 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. During fiscal 1996, the Company purchased an
additional 96 acres adjacent to the 133-acre Property.
In a series of transactions in fiscal 1994, 1995 and 1996, the Company
acquired all of the operating assets of FIBER-SEAL Holdings, Inc., FIBER-SEAL
Services International, Inc. and FIBER-SEAL of Dallas, including all
trademarks, servicemarks, logos, and tradenames of or related to FIBER-SEAL.
CICG is now engaged in developing the operations of FIBER-SEAL and in
analyzing waste disposal opportunities, initially at the Property located in
Atlanta, Georgia.
FIBER-SEAL Operations
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FIBER-SEAL brand services and products provide customers with cleaning,
stain removal and lasting protection for carpets and other fine interior
fabric coverings and surfaces and cleaner, newer looking interiors. These
products and services have been provided since 1971 under the FIBER-SEAL brand
trademark and servicemark. The products and services are currently being
provided in the United States and other countries through licensing agreements
with approximately 60 service centers now in operation through FSSI. With over
25 years of continuous operations, the FIBER-SEAL business has established
long-term relationships, credibility and brand awareness with architects,
interior designers and manufacturers. Customers' premises include individual
residences, real estate developments, restaurants, offices, and commercial
aircraft.
The Company has made a strategic decision to convert its FIBER-SEAL
Fabric Care System(R) business from a licensing mode to a franchising
operation during fiscal years 1998 and 1999. It is the Company's opinion that
the conversion will not result in the creation of any material risks that
could have an adverse impact upon the Company's financial position and results
of operations. 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 years 1998 and 1999. It is the Company's opinion that the
revenues derived from the FIBER-SEAL business can be significantly enhanced.
However, as the business areas in which FIBER-SEAL competes are highly
competitive, there can be no assurance that the Company will be able to
accomplish its goals regarding FIBER-SEAL.
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Proposed Atlanta Region Waste Management Facility
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A study of the Property has indicated its viability as a potential multi-
use waste disposal, waste transfer, and recycling facility. The Company is
presently evaluating the various categories of potential operations,
consisting principally of the different types of waste and activities
discussed below. Because of ongoing potential political, legal, bureaucratic
and other factors, there can be no assurance that the Company will be able to
accomplish any of its goals for the Property within a reasonable period of
time.
An inert waste landfill is a disposal facility that may accept only
wastes that will not or are not likely to generate contamination to
surrounding soils or groundwater. Such wastes are limited to earth and
earth-like products, concrete, cured asphalt, rock, bricks, yard trimmings,
stumps, limbs, and leaves. A landfill permitted for construction and
demolition debris may accept building materials and rubble resulting from
construction, remodeling, repair, and demolition operations on pavements,
houses, commercial buildings and other structures. Such wastes include, but
are not necessarily limited to, asbestos containing wastes, wood, bricks,
metal, concrete, wallboard, paper, cardboard, all inert waste landfill
material, and other "non-putrescible" wastes, as these wastes have a low
potential for groundwater contamination upon decomposition.
A municipal solid waste landfill ("MSWL") 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 silvicultural
operations or industrial processes or operations.
A transfer station is a waste management facility where solid waste is
received from collection vehicles and then transferred to and compacted in
large, specially designed and constructed trailers for transportation to
distant disposal facilities. Transportation can be by road or rail. A transfer
station operation can effectively reduce costs by positively impacting the
utilization of personnel and equipment and by reducing fuel costs. The
greatest benefit of transfer stations is the quick turnaround obtained for
route collection vehicles.
Industry Background
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According to the National Solid Waste Management Association ("NSWMA"),
the North American solid waste industry was estimated to have had revenues of
more than $32 billion in 1995. The industry is highly fragmented, with the
four largest companies accounting, in 1995, for approximately 30% of revenues,
seven mid-sized public companies, accounting for approximately 4% of revenues,
and several thousand municipalities and independent collection firms
accounting for approximately 66% of revenues. The industry has been
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consolidating in recent years as a result of increased capital requirements
arising primarily from stringent environmental and other governmental
regulations. The Company expects the trend toward consolidation to continue as
many independent landfill and collection operators, including municipalities,
lack the capital resources, management skills and technical expertise
necessary to operate in compliance with such regulations.
The Company believes that approximately 80% of solid waste landfills are
owned by municipalities, 15% by private companies and 5% by the federal and
state governments. These landfills vary greatly in size and capacity. The
Company believes that the estimated 800 privately-owned landfills represent
approximately 50% of the remaining disposal capacity in the United States.
Subtitle D regulations ("Subtitle D") of the Resource Conservation and
Recovery Act ("RCRA") require landfill operators to upgrade existing disposal
facilities by imposing requirements in the areas of facility design and
operating criteria, closure and post-closure requirements, financial assurance
standards and groundwater monitoring as well as corrective action standards.
Trade group data indicate that the number of municipal solid waste landfills
decreased by 62% from 1988 to 1995 and that the remaining number of such
landfills in 1995 was under 3,000.
As a result of these regulatory changes, a number of independent landfill
operators and municipalities are discontinuing or privatizing landfill and
collection operations. In some instances, industrial companies that had
previously operated landfills have decided to close such landfills rather than
bring them into compliance with the new, more demanding regulations. The
increasing requirements for capital, skilled management and technical
expertise are, for small operators who cannot achieve economics of scale and
integration, reducing margins and causing them to sell or close existing
landfills. As a result, the Company expects continued availability of
opportunities to acquire solid waste collection and disposal businesses.
However, there can be no assurance of such continued availability or of the
Company's ability to consummate any such potential acquisitions.
Pricing in the waste management industry has become increasingly complex
as wastes have been sub-divided/categorized by regulation changes, and charges
or "tipping fees" are being calculated as to specific transport and disposal
requirements. Revenues are generated through charges or tipping fees to the
collection and hauling companies and are calculated by volume or weight.
Transfer stations consolidate and compact the waste for transport to distant
sites where tipping fees may be lower, while collecting a fee per ton for
consolidation, compaction, transportation, and disposal. The prices that are
charged for disposal or transfer of waste are determined by the volume or
weight, the type of waste disposed of and prices charged for similar disposal
services by competitors. Long term disposal and collection contracts typically
contain a formula, generally based on published price indices, for automatic
adjustment of fees to cover increases in some, but not all, operating costs.
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The Atlanta Property
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The Company owns 229 acres of land in Fulton County, Georgia. The land is
located within the Atlanta city limits approximately 10 miles southwest of
downtown Atlanta. Fulton County is one of the nine individual counties that
comprise the "Atlanta Region" which includes Fulton (City of Atlanta),
Gwinnett, DeKalb, Rockdale, Henry, Clayton, Fayette, Douglas, and Cobb. The
Property is effectively at the epicenter of the 9-county region.
A section of the westerly portion of the Property underwent granite
surface mining from 1966 to 1993. Approximately 20 acres have been excavated
to depths in excess of 500 feet (maximum depth of 641 feet). A smaller
excavation on the Property has been mined to a depth of approximately 150
feet. Soil borings evidence significant amounts of overburden that can be used
for cover material in landfill operations, as well as large amounts of
granite. Granite mining activities are presently being evaluated as an income
source from the Property. The potential resumption of granite mining
activities represents a possible double benefit to the Company that may also
increase potential landfill capacity in the future.
The Property is potentially well suited to serve as a waste transfer
station for transfer of waste outside the nine county region because a
railroad line is located just outside of the Property's boundary. The Company
will seek to acquire a rail spur to the Property. Although the Property's
proximity to a major rail line provides for a viable transfer station,
complications exist with regard to interstate transport (e.g., states trying
to collect per ton confiscatory fees on incoming waste, etc.). There is also
an effort by some state legislators to restrict the disposal of out-of-state
wastes in their state's landfills. Although most legislative efforts to date
have been rejected by the courts, there is a possibility that these laws may
eventually pass.
Competition
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The solid waste industry is highly competitive and requires substantial
amounts of capital. The waste industry is currently dominated by several
large, national waste management companies -- WMX Technologies, Inc. (formerly
Waste Management, Inc.), Browning-Ferris Industries, Inc. ("BFI"), U.S.A.
Waste Services, Inc., Allied Waste Industries, Inc. and Republic Industries,
Inc. Additionally, there are a number of regional companies and numerous local
companies. All of these companies have significantly larger operations and
greater financial resources than CICG. The Company may also compete with those
counties and municipalities that maintain their own waste collection and/or
disposal operations.
CICG would compete for landfill and transfer business on the basis of
tipping fees, geographical location and quality of operations. The Company's
ability to obtain landfill business may be limited by the fact that some major
collection companies also own or operate landfills to which they send waste
that they collect.
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Municipal Solid Waste Disposal Business Risks
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There are potential, often unforeseen, business risks and certain cost
exposures associated with the establishment, ownership and operation of solid
waste landfill sites. Such risk factors include, but are not limited to: a
reduction in the volume of solid waste available for landfill disposal
resulting from legislative or regulatory action focused on the reduction of
waste volume; public concern regarding the potential for adverse effects on
public health, the environment, and land property values attributable to
wastes disposed of at landfills; the difficulty of obtaining permits to expand
or establish disposal sites and public and private opposition to the location,
expansion and operation of landfills; expanding governmental actions
attempting to restrict the interstate movement of waste for disposal; costs
associated with liner requirements, groundwater monitoring, leachate and
landfill gas control, surface water control, post-closure monitoring, site
clean-up, site remedial work, maintenance and long-term care obligations; the
obligation to manage any adverse affects on the environment that may
materialize at the Property; possible judicial and administrative proceedings
regarding alleged adverse environmental and health effects occasioned by
landfill operations; and potential regulations requiring a landfill operator
to demonstrate financial strength that would enable compliance with prescribed
or changing standards and methods of operation, as well as closure and
post-closure care requirements.
The Company currently intends to purchase and maintain an environmental
impairment liability insurance policy on its potential landfill that provides
coverage against clean-up costs and bodily injury to non-employees and
property damage caused by off-site pollution emanating from the landfill.
However, if the Company should be unable to obtain adequate insurance, or
decides to operate without insurance, a partially or completely uninsured
claim against the Company, if successfully prosecuted and of sufficient
magnitude, could have a material adverse effect upon the Company's business
or financial condition. Difficulty in obtaining insurance could also impair
the Company's ability to secure future contracts, which may be conditioned
upon the availability of adequate coverage.
Municipal and governmental waste management contracts typically require
performance bonds or bank letters of credit to secure performance. In addition,
the Company would be required to demonstrate satisfactory financial assurances
to secure its closure and post-closure care obligations with respect to each
landfill cell, some of which may be in the form of a surety bond or letter of
credit. If the Company is unable to obtain surety bonds or letters or credit in
sufficient amounts or at acceptable rates, it may be precluded from entering
into disposal contracts or obtaining or retaining landfill operating permits.
Environmental and Other Regulations
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Authority to issue Georgia permits for construction and operation of
municipal solid waste landfills, provided they are issued subject to facility
compliance with Subtitle D of The Federal Resource Conservation and Recovery
Act of 1976 (the "RCRA"), rests with the Environmental Protection Division of
the State of Georgia Department of Natural Resources ("EPD"). The Company will
prepare an application that meets the requirements of the EPD and that
demonstrates facility compliance with RCRA, Subtitle D requirements. Locally,
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the City of Atlanta will be requested to issue a Special Use Permit granting
the Company authority to operate a landfill on the Property.
In the event that the Company's applications are granted, construction of
the landfill will be required to comply with RCRA, Subtitle D standards.
Further, in granting a Special Use Permit, the city of Atlanta may require
other operating protocols with which the Company will be required to comply.
Once in operation, both the city and the state may inspect the landfill on an
unannounced basis to investigate for regulatory and permit compliance. Once
the landfill is full, post-closure care operations and maintenance will be
required for 30 years.
The Company will be subject to comprehensive federal, state and local
environmental, health and safety laws and regulations. These regulations are
administered by various federal, state and local environmental, zoning, health
and safety agencies. All of these agencies are empowered to monitor Company
compliance with such laws and regulations via periodic and unannounced
inspections.
Operation of the potential landfill will require that costs be incurred,
some significant, related to liner requirements, groundwater monitoring,
leachate and landfill gas control, surface water control, post-closure
monitoring, site clean-up, site remedial work, maintenance and post-closure
care obligations. These costs may adversely impact the profit potential of the
Company's potential landfill operations by increasing the cost to construct
and operate the landfill over the short and long term. The Company will
require substantial additional financing to develop the Property. There can be
no assurance that such financing will be available.
Resource Conservation and Recovery Act ("RCRA"), Subtitle D regulations
require landfill operators to demonstrate financial responsibility enabling
the operator to comply with landfill construction and operation standards, as
well as closure and post-closure care requirements. The Company will be
required to obtain insurance and performance bonds at potentially high cost to
meet this requirement.
Governmental agencies have the power to enforce compliance with landfill
regulations and permit conditions and to obtain injunctions or impose fines in
the event violations are evidenced. During the ordinary course of its
operation, the Company may from time to time receive citations or notices from
such governmental agencies that its facility is not in full compliance with
applicable environmental or health and safety regulations. Upon receipt of
such citations or notices, the Company will work with agency representatives
to attempt resolution of the matters cited. Failure to correct the problems to
the satisfaction of the agencies could lead to monetary penalties, curtailed
operations, criminal prosecution, facility closure, or the inability to obtain
further permits.
The Company would also be subject to liability for any nuisance or
trespass resulting from the operation of its potential landfill. A person
bringing a nuisance or trespass action against the Company may seek an
injunction to curtail or limit the Company's operations at the Property.
Further, any person pursuing a nuisance or trespass cause of action may
petition for actual and punitive damages. The awarding of such damages could
negatively impact the Company's financial condition and business operations.
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Recycling and other waste minimization efforts can be expected to reduce
waste generation rates not only as more recyclables are regulated, but as
manufacturers take more responsibility for the recyclability of the packaging
that they use. Recycling regulations and procurement requirements for recycled
goods will continue to create business opportunities in the recycling field
while simultaneously serving to diminish the volume of waste available for
disposal in landfills.
The waste disposal industry is subject to extensive and evolving
environmental laws and regulations that have been enacted in response to
technical advances and the public's increased concern over environmental
issues. These regulations are administered by the United States Environmental
Protection Agency and various other federal, state and local environmental,
health and safety agencies. The Company believes that there will be increased
regulation and legislation related to the solid waste collection and disposal
industry. In light of these developments, the Company will attempt to
anticipate future regulatory requirements that might be imposed and plan
accordingly to remain in compliance with the regulatory framework.
In order to operate a landfill or transfer station, the Company typically
will have to go through several governmental review processes and obtain one or
more operating permits and often zoning and other land use approvals. These
permits and zoning or land use approvals are difficult and time consuming to
obtain and are usually opposed by various local elected officials and citizens'
groups. Once obtained, in some states (but not in Georgia), operating permits
generally must be periodically renewed and are subject to modification and
revocation by the issuing agency.
The Company's potential landfill business would subject it to certain
operational, monitoring, site maintenance, closure and post-closure and
financial assurance obligations which change from time to time and could give
rise to increased costs for monitoring and corrective measures. In connection
with the Company's possible acquisition of existing landfills, it will often
be necessary to expend considerable time, effort and money in complying with
the governmental review and permitting process necessary to maintain or
increase the capacity of these landfills. Governmental authorities have the
power to enforce compliance with these laws and regulations and to obtain
injunctions or impose civil or criminal penalties in case of violations. The
Company's proposed operations will be subject to regulation, principally under
the following federal statutes:
The Solid Waste Disposal Act ("SWDA"), as amended by th Resource
Conservation and Recovery Act of 1976, as amended ("RCRA")
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The SWDA and its implementing regulations establish a framework for
regulating the handling, transportation, treatment, and disposal of hazardous
and non-hazardous wastes. They also require states to develop programs to
ensure the safe disposal of solid wastes in landfills.
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Subtitle D of RCRA establishes a framework for federal, state, and local
government cooperation in controlling the management of non-hazardous solid
wastes. While the role of the EPA is to provide overall regulatory direction,
the actual planning and implementation of solid waste programs under Subtitle D
are largely state and local functions. In October 1993, the EPA adopted
regulations under Subtitle D with respect to solid waste disposal facility
criteria, which include location standards, hydrogeological investigations,
facility design requirements (including liners and leachate collection
systems), enhanced operating and control criteria, groundwater and methane gas
monitoring, corrective action standards, closure and extended post-closure
requirements, and financial assurance standards, many of which have not
commonly been in place or enforced at landfills. All Subtitle D regulations
are in effect, except for financial responsibility requirements, which were to
take effect in April 1997 although many states have already implemented
financial assurance programs. These federal regulations must be implemented by
the states, although states may impose requirements for landfill sites that
are more stringent than the federal Subtitle D standards. Once a state has an
approved program, it will review all existing landfill permits to ensure that
they comply with the new regulations. Although the states were required to
submit proposed permitting programs designed to implement the Subtitle D
regulations to the EPA by April 1993, some states have not submitted their
programs to the EPA and others have not fully completed their implementation.
Because the new regulations did not take effect until late 1993 and have not
been fully implemented by the states, their full impact may not be apparent
for several years. The Company could incur significant costs in complying with
such regulations; however, the Company does not believe that such enhanced
standards will have a material adverse effect on its potential operations
because all of the Company's potential landfills would be engineered to meet
or exceed these requirements.
The Federal Water Pollution Control Act of 1972 ("The Clean Water Act")
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This Act establishes rules regulating the discharge of pollutants from a
variety of sources, including solid waste disposal sites, into streams,
groundwater or other surface or subsurface waters. If runoff from the
Company's potential landfill or transfer station is discharged into surface
waters, the Act would require the Company to apply for and obtain a discharge
permit, conduct sampling and monitoring and, under certain circumstances,
reduce the quantity of pollutants in such discharge. Also, virtually all
landfills are required to comply with the new federal storm water regulations,
which are designed to prevent possibly contaminated storm water from flowing
into surface waters. The Company will work with the appropriate regulatory
agencies to ensure that its facilities are in compliance with Clean Water Act
requirements, particularly as they apply to treatment and discharge of
leachate and storm water. In addition, where development may alter or affect
"wetlands," a permit must be obtained before such development may be
commenced. This requirement is likely to affect the construction or expansion
of many solid waste disposal sites. The Act provides for civil, criminal and
administrative penalties for violations of specified sections of the Act.
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The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("Superfund" or "CERCLA")
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CERCLA established a regulatory and remedial program intended to provide
for the investigation and cleanup of facilities from which there has been, or is
threatened, a release of any hazardous substance into the environment.
CERCLA's primary mechanism for remedying such programs is to impose strict
joint and several liability for cleanup of facilities on current owners and
operators of the land, former owners and operators of the land at the time of
the disposal of the hazardous substances, as well as the generators of the
hazardous substances and the transporters who arranged for disposal or
transportation of the hazardous substances. The costs of CERCLA investigation
and cleanup can be very substantial. Liability under CERCLA does not depend
upon the existence or disposal of "hazardous waste" but can also be founded
upon the existence of even very small amounts of the more than 700 "hazardous
substances" listed by the EPA, many of which can be found in household waste.
If the Company were found to be a responsible party for a CERCLA cleanup, the
enforcing agency could hold the Company completely responsible for all
investigative and remedial costs even if others may also be liable. CERCLA
also authorized the imposition of a lien in favor of the United States upon
all real property subject to or affected by a remedial action for all costs
for which a party is liable. The Company's ability to obtain reimbursement
from others for their allocable share of such costs would be limited by the
Company's ability to find other responsible parties and prove the extent of
their responsibility and by the financial resources of such other parties.
In the past, legislation has been introduced in Congress to limit the
liability of municipalities and others under CERCLA as generators and
transporters of municipal solid waste. Although such legislation has not been
enacted, if it were to pass it would limit the Company's ability to seek full
contribution from municipalities for CERCLA cleanup costs even if hazardous
substances that were released and caused the need for cleanup at the Company's
potential landfill were generated by or transported to the landfill by a
municipality. Depending upon whether and how Congress acts, it is possible
that each of these laws may be changed in ways that may significantly affect
the Company's potential waste disposal business.
The Occupational Safety and Health Act of 1970 (the "OSHA Act")
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The OSHA Act authorizes the Occupational Safety and Health Administration
to promulgate occupational safety and health standards. Various of these
standards, including standards for notices of hazards, safety in excavation
and demolition work, and the handling of asbestos, may apply to the Company's
operations.
The Clean Air Act
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The Clean Air Act provides for regulation, through state implementation
of federal requirements, of the emission of air pollutants from certain
landfills based upon the date of the landfill construction and volume per year
of emissions of regulated pollutants. The EPA proposed a New Source
Performance Standard and Emission Guidelines for municipal solid waste
landfills. Current regulations impose limits on air emissions from municipal
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solid waste landfills. The New Source Performance Standard will apply to all
municipal solid waste landfills that commence construction after the date of
the proposal. The Emission Guidelines are a set of standards that must be
adopted by the states and will apply to all municipal solid waste landfills
that received waste after November 8, 1987. The EPA may also issue regulations
controlling the emissions of particular regulated air pollutants from
municipal solid waste landfills. Landfills located in areas with air pollution
problems may be subject to even more extensive air pollution controls and
emission limitations.
Proposed Federal Legislation
----------------------------
In the future, the Company's potential collection, transfer and landfill
operations may also be affected by legislation currently pending before
Congress that would authorize the states to enact discriminatory legislation
governing waste shipments. The Company believes that if any such federal
legislation is enacted, it may have a material adverse effect on the Company's
potential operations.
State and Local Regulation
--------------------------
Each state in which the Company may operate in the future has laws and
regulations governing the generation, storage, treatment, handling,
transportation and disposal of solid waste, water and air pollution and, in
most cases, siting, design, operation, maintenance, closure and post-closure
of landfills and transfer stations. There has also been an increasing trend in
various states seeking to regulate the disposal of out-of-state waste in their
landfills. Legislative and regulatory measures to mandate or encourage waste
reduction at the source and waste recycling have been adopted by many states
and are also under consideration by Congress and the EPA.
The Company's potential collection and landfill operations may be
affected by the trend toward laws requiring the development of waste
reduction and recycling programs. For example, California, Georgia, Florida,
Illinois, Indiana, Kentucky, Pennsylvania, Ohio, South Carolina and West
Virginia have enacted laws that will require counties to adopt comprehensive
plans to reduce the volume of solid waste deposited in landfills, through
waste planning, composting and recycling or other programs, within the next
few years. A number of states have taken, or are considering, steps to ban the
landfilling of certain wastes, such as yard wastes, beverage containers,
newspapers, unshredded tires, lead-acid batteries and "white goods," such as
refrigerators. The enactment of regulations reducing the volume and types of
wastes available for transport to and disposal in landfills could affect
adversely the Company's ability to operate its potential facilities at their
full capacity.
Many municipalities also have ordinances, local laws and regulations
affecting the waste disposal industry. These include zoning and health
measures that limit solid waste management activities to specified sites or
activities, flow control provisions that direct the delivery of solid wastes
to specified facilities, and bans or other restrictions on the movement of
solid wastes into a municipality.
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The permits or other land use approvals with respect to a landfill, as
well as state or local regulations, may (i) limit a landfill to accepting
waste that originates from a specified geographic area and/or (ii) specify the
quantity of waste that may be accepted at a landfill during a given time
period and/or (iii) specify the types of waste that may be accepted at the
landfill.
Proposed Atlanta MSWLs must file for a Special Use Permit ("SUP") with
the City of Atlanta, and a Permit to Construct and Operate a Landfill ("PCO")
with the Environmental Protection Division of The State of Georgia Department
of Natural Resources ("EPD"). Notice of such applications must be filed with
counties lying contiguous to the county within which the Property is located.
These permits, if granted, would give the Company authority to accept
municipal solid waste as well as inert waste, and construction and demolition
debris. Although there are presently no known insurmountable impediments to
the approval of these permit applications, opposition may arise from city of
Atlanta and surrounding county residents regarding environmental and quality
of life issues. It is anticipated that the city of Atlanta may impose
operating protocols on which the SUP permits are contingent. Once in
operation, both the city and state are at liberty to inspect the Property,
without notification to the operator, to investigate regulatory and permit
compliance. Compliance issues covered in the required permits include liner
installation, leachate collection system installation, periodic cover
requirements and groundwater monitoring systems. Landfill operators may also
petition the various permitting authorities, provided that there is sufficient
justification, for regulatory variances that eliminate or reduce some
requirements outlined in the petitions. In the case of the Property, this
would include petitioning to diminish/lessen the liner requirement, as based
on water levels, there will be little or no groundwater seepage/contamination.
A variance would significantly reduce costs associated with the construction
of the landfill.
Disclosure Regarding Forward Looking Statements
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This Annual Report on Form 10-KSB 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, of acquisitions and projected or anticipated
benefits from acquisitions made by or to be made by the Company, or
projections involving anticipated revenues, earnings, levels of capital
expenditures or other aspects of operating results. All phases of the Company
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
-12-
<PAGE>
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 are disclosed in this report. All
prior and subsequent written and oral Forward Looking Statements attributable
to the Company or persons acting on its behalf 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.
Competition: The waste collection/disposal business and the fabric care
business are both highly competitive and require substantial amounts of
capital. If permitted and operational, the Company's facilities would compete
with numerous enterprises, many of which have significantly larger operations
and greater resources than the Company. The Company 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.
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.
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 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. The Company raised $5,500,000 through
private sales of newly issued restricted shares of its common stock during
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 potential permitting and
development of its Atlanta Property 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 Property, which include
possibly re-opening the Property as a granite quarry, and/or using the
Property for the disposal of inert debris and/or the storage of recyclable
materials. 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 for the Property within a reasonable period of time.
Economic Conditions: The Company's potential waste collection/disposal
business 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 potential
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.
-13-
<PAGE>
Weather Conditions: Protracted periods of inclement weather may adversely
affect the Company's 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 potential customers.
In addition, particularly harsh weather conditions may result in the temporary
suspension of certain of the Company's potential operations. The Forward
Looking Statements do not assume that such weather conditions will occur.
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 operations management with franchising and waste industry
experience will also increase. The future availability of such experienced
management cannot be predicted. The Forward Looking Statements assume that
experienced management 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 experienced
operations management could have a material adverse effect on the Company.
Influence of Government Regulation: The Company's potential operations
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.
Potential Environmental Liability: The Company may incur liabilities for
the deterioration of the environment as a result of its 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.
-14-
<PAGE>
Inflation and Prevailing Economic Conditions
- --------------------------------------------
To date, inflation has not had a significant impact on the Company's
operations. Consistent with industry practice, most of the Company's contracts
will provide for a pass through of certain costs, including increases in
landfill tipping fees and, in some cases, fuel costs. The Company therefore
believes it should be able to implement price increases sufficient to offset
most cost increases resulting from inflation. However, competitive factors may
require the Company to absorb cost increases, resulting from inflation. The
Company is unable to determine the future impact of a sustained economic
slowdown.
Employees
As of March 31, 1997, the Company employed a total of 16 persons, none of
whom are subject to a collective bargaining agreement. The Company considers
its relations with its employees to be satisfactory.
ITEM 2. DESCRIPTION OF PROPERTY.
- --------------------------------
The principal fixed asset of the Company is the Atlanta Property
described in Item 1. that the Company proposes to develop into a landfill.
The Company also owns 283.5 acres of real estate located approximately 50
miles from Dallas in Ellis County, Texas. This property is held for future
development or resale. The Company has no timetable for such development or
resale.
The Company leases approximately 8,481 square feet of office and
warehouse space in Dallas, Texas.
ITEM 3. LEGAL PROCEEDINGS.
- --------------------------
Sterritt Properties, Inc. v. Raymond Donner, et al, District Court of
Dallas County Texas: On September 19, 1996 Sterritt Properties, Inc., the
majority shareholder of the Company, filed an original Petition and
Application For Temporary Restraining Order and Temporary Injunction (the
"Petition") against Raymond Donner, Ronnie Davidson, Richard Jepson Egglishaw,
Business Ventures, Inc. ("BVI"), Hilvick Investments Limited and Strachens
Management Services, Ltd. The Petition, as amended, alleges that the
defendants breached a contract with the plaintiff and committed fraud in
connection with a transaction whereby the plaintiff transferred to BVI an
$800,000 promissory note from the Company which was convertible into
1,600,000 shares of the Company's Common Stock. The Note subsequently was
converted by BVI and 1,600,000 shares (the "Disputed Shares") of the Common
Stock were issued to BVI. The Petition, as amended, seeks recision, monetary
and injunctive relief against the defendants other than the Company, and that
the Company be enjoined from transferring the Disputed Shares and ordered to
cancel the Disputed Shares. On October 14, 1996 the District Court of Dallas
entered an Agreed Temporary Injunction enjoining the sale transfer or
assignment of any of the Company's Common Stock held directly or indirectly by
any of the defendants. On November 22, 1996 the Company was named as a
-15-
<PAGE>
defendant to this action in order that it would be bound by any order of the
District Court concerning the ultimate disposition of the Disputed Shares. The
Company is not alleged to have breached any contract with, or to have
participated in any fraud against, the plaintiff. Thus far, based upon the
nature of the allegations of the Petition, the Company has not taken an active
role in this matter. As and if necessitated by the development of the facts
underlying this dispute, the Company will take any action against any party it
deems necessary and appropriate to protect its interests and those of its
shareholders. The Company will comply with any final orders of the District
Court (or any appropriate appellate court) concerning the Disputed Shares.
The Company also is currently a party to routine litigation incidental to
its business. Based upon the scope and magnitude of these actions, the Company
does not believe these claims, if determined adversely to the Company, would
have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------------------------------------------------------------
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of fiscal year 1996 or the short year ended
December 31, 1996.
PART II
-------
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
- -----------------------------------------------------------------
The Company's Common Stock is registered with the United States
Securities and Exchange Commission under Section 12(g) of the Securities
Exchange Act of 1934 but is not quoted on a national or regional securities
exchange or on the National Association of Securities Dealers, Inc. Automated
Quotation System. The Common Stock is traded on the Over-the-Counter Bulletin
Board.
The following table sets forth the quarterly high and low closing bid
prices per share for the Company's Common Stock for the periods indicated.
These prices represent prices between dealers, do not include retail mark-up,
mark-down or commissions and may not necessarily represent actual transactions.
Short Year Ended Year Ended Year Ended
December 31, 1996 September 30, 1996 September 30, 1995
----------------- ------------------ ------------------
Quarters High Low High Low High Low
- ------------ ------- ------- ------- ------- ------- -------
JUL - SEP - - $30.50 $16.50 $6.00 $4.00
APR - JUN - - $26.00 $ 3.50 $6.25 $2.88
JAN - MAR - - $ 5.00 $ 4.13 $5.63 $2.88
OCT - DEC $27.13 $20.50 $ 5.13 $ 4.00 $6.00 $4.00
-16-
<PAGE>
There were 1,241 holders of record of the Common Stock as of March 31,
1997. This number does not include an indeterminate number of shareholders
whose shares are held by brokers in "street name." The Company has not
declared any cash dividends on its Common Stock during its short year ended
December 31, 1996 or during its fiscal years ended September 30, 1996 and
1995. The Board of Directors of the Company has made no determination to date
to declare cash dividends during the foreseeable future. There are no
restrictions on the Company's present or future ability to pay cash dividends
other than those restrictions imposed by law on all Georgia corporations.
ITEM 6. MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
- ------------------------------------------------------
Results of Operations
---------------------
Revenues of the Company are currently derived solely from the FIBER-SEAL
fabric care and treatment business. Revenues consist of: (1) licensee fees
based upon monthly sales, (2) product sales to licensees, and (3) direct
product and service sales from the Dallas, Texas territory (which is owned by
CICG).
Operating revenues decreased by $84,050 in fiscal 1996 as compared with
the fiscal 1995. Such decrease was due to a $30,002 non-recurring sale of
mined rock from the Atlanta quarry site in fiscal year 1995, and to a decline
in revenue from FIBER-SEAL of Dallas as a result of management changes. The
decline in fabric care revenues is expected to be a temporary situation as a
result of expected improvements in performance at FIBER-SEAL of Dallas as well
as the Company's strategic decision to convert its fabric care business from a
licensing mode to a potentially far more lucrative franchising operation.
Operating revenues decreased by $20,581 in the short period ended
December 31, 1996 as compared with the quarter ended December 31, 1995.
Selling, general and administrative (SG&A) expenses increased $307,599
during fiscal 1996 as compared to fiscal 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, other consulting fees,
increased legal fees, increased public relations expenses, and increased
management expenses.
The net loss for fiscal 1996 was $382,110 higher than the loss for fiscal
1995. Such increase was due primarily to the aforementioned lower revenues and
higher SG&A expenses in fiscal 1996 as compared with fiscal 1995.
The net loss for the short period ended December 31, 1996 was $184,586
higher than the loss for the quarter ended December 31, 1995. Such increase
was due primarily to the higher SG&A expenses in the short period ended
December 31, 1996.
-17-
<PAGE>
Liquidity and Capital Resources
-------------------------------
The Company had working capital of $3,224,268 at the end of fiscal year
1996 and a current ratio of 7.8 to 1.
The Company had working capital of $2,993,135 at the end of the short
period ended December 31, 1996 and a current ratio of 8.6 to 1.
The primary source of capital during the 15-month period ended
December 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 (1) fund the operating losses of the Company, which have been created
primarily by costs associated with planning for the development of the
Company's Property in Atlanta, Georgia as a waste disposal landfill and (2) to
acquire additional land adjacent to the Property. The Company invested
$5,352,691 during fiscal 1996 in additional land adjacent to the Property in
Atlanta. None of the Company's real estate holdings are encumbered by any
debt.
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. The Company raised $5,500,000 through private sales of newly issued
restricted shares of its common stock during 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 potential permitting and development of its Atlanta
Property 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 Property, which include possibly re-opening the
Property as a granite quarry, and/or using the Property for the disposal of
inert debris and/or the storage of recyclable materials. 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 for the Property
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.
-18-
<PAGE>
ITEM 7. FINANCIAL STATEMENTS.
- -----------------------------
INDEX TO FINANCIAL STATEMENTS
-----------------------------
Page
Report of Independent Certified Public Accountants ................. F-1
Consolidated Balance Sheet as of
December 31, 1996 ............................................... F-2
Consolidated Statements of Operations for the three months
ended December 31, 1996 and for the fiscal years ended
September 30, 1996 and 1995 ..................................... F-4
Consolidated Statement of Stockholders' Equity
for the three months ended December 31, 1996 and for
the fiscal years ended September 30, 1996 and 1995 .............. F-5
Consolidated Statements of Cash Flows for the three
months ended December 31, 1996 and for the fiscal
years ended September 30, 1996 and 1995 ......................... F-6
Notes to Financial Statements ...................................... F-8
-19-
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors and Stockholders
Continental Investment Corporation
We have audited the accompanying consolidated balance sheet of Continental
Investment Corporation (a Georgia corporation) and Subsidiaries as of December
31, 1996, and the related consolidated statements of operations, stockholders'
equity and cash flows for the three months ended December 31, 1996 and each of
the two years in the period ended September 30, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Continental
Investment Corporation and Subsidiaries as of December 31, 1996, and the
consolidated results of their operations and their consolidated cash flows for
the three months ended December 31, 1996 and each of the two years in the period
ended September 30, 1996, in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
Dallas, Texas
February 7, 1997
F-1
<PAGE>
Continental Investment Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEET
December 31, 1996
ASSETS
CURRENT ASSETS
Cash $ 841,586
Note receivable 2,380,000
Accounts receivable 23,679
Inventories 48,613
Accrued interest receivable 61,142
Prepaid expenses 33,967
-----------
Total current assets 3,388,987
PROPERTY AND EQUIPMENT
Land, at cost 9,497,582
Fixtures and equipment, net of accumulated
depreciation of $29,960 41,813
-----------
9,539,395
INTANGIBLES, net of accumulated amortization
of $17,361 17,639
-----------
Total assets $12,946,021
===========
The accompanying notes are an integral part of this statement.
F-2
<PAGE>
Continental Investment Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEET - CONTINUED
December 31, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 119,496
Accrued expenses 46,356
Current portion of long-term note payable 230,000
-----------
Total current liabilities 395,852
LONG-TERM LIABILITIES
Note payable 920,000
Deferred income taxes 747,000
-----------
1,667,000
Total liabilities 2,062,852
COMMITMENTS -
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value;
1,000,000 shares authorized; no shares
issued or outstanding -
Common stock, $.50 par value; 25,000,000
shares authorized; 11,313,008 issued and
outstanding 2,782,504
Additional contributed capital 11,540,444
Accumulated deficit (3,439,779)
----------
Total stockholders' equity 10,883,169
----------
Total liabilities and stockholders'
equity $12,946,021
===========
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
Continental Investment Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months
ended Year ended September 30,
December 31, ------------------------
1996 1996 1995
------------ ----------- -----------
Revenues $ 221,884 $ 818,978 $ 903,028
Costs and expenses
Cost of revenues 88,900 369,435 411,415
Selling, general and
administrative expenses 453,686 1,358,719 1,051,120
---------- ---------- ----------
542,586 1,728,154 1,462,535
---------- ---------- ----------
Operating loss (320,702) (909,176) (559,507)
Other income (expense)
Interest income 74,824 8,946 -
Interest expense (24,991) (8,472) (12,068)
---------- ---------- ----------
49,833 474 (12,068)
---------- ---------- ----------
Loss before income taxes (270,869) (908,702) (571,575)
Deferred income tax expense - - 1,321
---------- ---------- ----------
Loss before extraordinary
credit (270,869) (908,702) (572,896)
Extraordinary credit - gain on
debt forgiveness - - 39,246
---------- ---------- ----------
NET LOSS $ (270,869) $ (908,702) $ (533,650)
========== ========== ==========
Per share data
Loss before extraordinary
credit per common share $(.02) $(.09) $(.07)
===== ===== =====
Loss per common share $(.02) $(.09) $(.07)
===== ===== =====
Weighted average number of
common and common equivalent
shares outstanding 11,311,288 9,746,092 8,181,482
========== ========== ==========
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
Continental Investment Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common stock Additional Treasury stock
------------------------- contributed ---------------- Accumulated
Shares Par value capital Shares Amount deficit Total
----------- ------------ ------------ ------ -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at October 1, 1994 7,027,327 $ 639,664 $ 1,388,930 7,209 $(26,771) $(1,726,558) $ 275,265
Conversion of debt to stock 1,600,000 800,000 100 - - - 800,100
Sale of stock in private
placement 80,000 40,000 360,000 - - - 400,000
Purchase of land for stock 150,000 75,000 675,000 - - - 750,000
Issuance of stock for services 16,200 8,100 77,899 - - - 85,999
Stock issued for debt
forgiveness 10,000 5,000 45,000 - - - 50,000
Net loss - - - - - (533,650) (533,650)
---------- ---------- ----------- ------ --------- ----------- -----------
Balances at September 30, 1995 8,883,527 1,567,764 2,546,929 7,209 (26,771) (2,260,208) 1,827,714
Retirement of treasury stock (7,209) (3,604) (23,167) (7,209) 26,771 - -
Sale of stock in private
placement 955,000 477,500 5,022,500 - - -
Issuance of stock for services 50,800 25,400 228,680 - - -
Issuance of stock for land 1,427,940 713,969 4,877,852 - - -
Distribution to Shareholder - - (1,150,000) - - -
Net loss - - - - - (908,702) (908,702)
---------- ---------- ----------- ------ -------- ----------- -----------
Balances at September 30, 1996 11,310,058 $2,781,029 $11,502,794 - - (3,168,910) 11,114,913
Issuance of stock 2,950 1,475 37,650 - - - 39,125
Net loss - - - - - (270,869) (270,869)
---------- ---------- ----------- ------ --------- ----------- -----------
Balances at December 31, 1996 11,313,008 $2,782,504 $11,540,444 - $ - $(3,439,779) $10,883,169
========== ========== =========== ====== ========= =========== ===========
<FN>
The accompanying notes are an integral part of this statement.
</FN>
</TABLE>
F-5
<PAGE>
Continental Investment Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months Year ended
ended September 30,
December 31, -------------------------
1996 1996 1995
---------- ----------- -----------
Cash flows from operating activities:
Net loss $(270,869) $ (908,702) $ (533,650)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Amortization and depreciation
expense 12,265 2,333 2,334
Common stock issued as
consideration for services - 254,080 85,999
Deferred income taxes - - 1,321
Change in operating assets and
liabilities:
Accounts receivable - trade (10,847) (12,832) -
Accrued interest receivable (61,142) - -
Other current assets (34,988) (67,711) (24,792)
Accounts payable - trade (7,564) (39,264) 58,760
Accrued expenses 31,356 (67,091) 48,705
Income taxes payable - - (23,921)
Accrued expenses to related
parties (67,999) (274,106) 165,908
Deferred rent - - (8,807)
Other - (67,873) (120,678)
---------- ---------- ----------
Net cash used in
operating activities (409,788) (1,181,166) (349,001)
Cash flows from investing activities:
Issuance of note receivable (1,500,000) (880,000) -
Purchases of property (16,755) (693,870) (9,473)
---------- ---------- ----------
Net cash used in
investing activities (1,516,755) (1,573,870) (9,473)
Cash flows from financing activities:
Proceeds from sale of stock 5,000 5,500,000 400,000
Debt repayments - - (25,676)
Other - - 100
---------- ---------- ----------
Net cash provided by
financing activities 5,000 5,500,000 374,424
Increase (decrease) in cash (1,921,453) 2,744,964 15,950
Cash at beginning of period 2,763,129 18,165 2,215
---------- ---------- ----------
Cash at end of period $ 841,586 $2,763,129 $ 18,165
========== ========== ==========
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
Continental Investment Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Three months ended December 31, 1996 and the years ended
September 30, 1996 and 1995
NON-CASH INVESTING AND FINANCING ACTIVITIES:
- --------------------------------------------
During fiscal year ending September 30, 1995, liabilities were settled and
land was purchased in exchange for stock as follows:
. $800,000 debt retired in exchange for 1,600,000 shares of common stock.
. $75,675 note payable retired for cash of $25,675 and 10,000 shares of
common stock.
. Land was acquired for 150,000 shares of common stock valued at $750,000.
During fiscal year ending September 30, 1996, liabilities were settled and
land was purchased in exchange for stock as follows:
. Land was acquired by issuing 1,427,940 shares of common stock valued at
$5,591,821 and cash of $693,870, for a total purchase price of
$6,285,691.
The accompanying notes are an integral part of this statement.
F-7
<PAGE>
Continental Investment Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------------------------------------------
Basis of Presentation and Principles of Consolidation
-----------------------------------------------------
The accompanying consolidated financial statements include the accounts of
Continental Investment Corporation and its subsidiaries. All significant
intercompany transactions and balances have been eliminated.
Nature of Operations
--------------------
The Company operates in two principal segments: property development,
primarily its potential landfill site in Atlanta, Georgia, and its Fiber-
Seal fabric care and surface protection business.
Property
--------
Property is recorded at cost. Expenditures for major additions and
improvements are capitalized, while minor replacements, maintenance and
repairs are charged to expense as incurred. When property is retired or
otherwise disposed of, the cost and accumulated depreciation and depletion
are removed from the accounts and any resulting gain or loss is reflected in
current operations.
Landfill and certain treatment facility costs will be depleted using the
units of production method, which is calculated using the total units of
airspace filled during the year in relation to total estimated permitted
airspace capacity. Depreciation on the remaining assets will be provided
over the estimated useful lives of such assets using the straight-line
method.
Landfill improvements include direct costs incurred to obtain a landfill
permit and direct costs incurred to construct and improve the site, and
these costs will be depleted based on consumed airspace. No general and
administrative costs are capitalized as landfill and landfill improvements.
Income Taxes
------------
Deferred income taxes are provided under the liability method in which
deferred assets and liabilities are determined based on the differences
between the tax basis of assets and liabilities and the amounts reported in
the financial statements. Deferred tax assets and liabilities at the end of
each period are determined using the currently enacted tax rates.
F-8
<PAGE>
Continental Investment Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
Continued
- -----------------------------------------------------------------------------
Intangibles
-----------
Intangibles are amortized over fifteen years, on a straight-line basis.
Intangibles represent licensing and marketing rights to the intellectual
property of a system for fabric care treatment and protection. The Company
periodically reviews intangibles to assess recoverability, and impairment is
recognized in results of operations when recoverability is not probable.
Loss Per Share
--------------
Loss per common share is based on the weighted average number of outstanding
common shares during the period and, if their effect is dilutive, common
stock equivalents consisting of stock options.
Use of Estimates
----------------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE B - ACQUISITION
- --------------------
On September 30, 1996, the Company acquired all of the operating assets and
liabilities of Fiber-Seal of Dallas (FSD) and Fiber-Seal Services
International, Inc. (FSSI) from the majority stockholder of the Company in
exchange for a $1,150,000 note payable. Due to the common ownership of the
Company, FSD and FSSI, the transaction has been accounted for in a manner
similar to a pooling of interests and, accordingly, the consolidated
financial statements for all periods presented have been restated to include
the accounts of FSD and FSSI. The note payable exchanged in the acquisition
has been discounted and interest imputed at the stated rate of 8-1/2% per
annum as if the transaction had occurred on October 1, 1994. The excess of
the carrying value of the note payable over the historical cost basis of the
net assets acquired has been reflected as a distribution to stockholders.
F-9
<PAGE>
Continental Investment Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - ACQUISITION - Continued
- --------------------------------
Net sales and net earnings of the separate companies for the periods
preceding the acquisition were as follows:
<TABLE>
<CAPTION>
Elimin- Imputed
CICG FSD FSSI ations interest Combined
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Year ended
September 30, 1996
Revenues $ $ 60,000 $247,606 $539,381 $(28,009) $ - $818,978
Net earnings (loss) (1,040,199) (311) 137,187 (5,379) (90,092) (998,794)
Year ended
September 30, 1995
Revenues $ 134,002 $326,683 $491,262 $(48,919) $ - $903,028
Net earnings (loss) (654,508) 23,112 97,746 - (83,034) (616,684)
</TABLE>
NOTE C -CHANGE IN FISCAL YEAR
- -----------------------------
In February 1997, the Company changed its fiscal year end from September 30
to December 31, effective January 1, 1997. A three-month fiscal transition
period from October 1, 1996 to December 31, 1996 will precede the start of
the new fiscal year. Condensed financial information (unaudited) of the
Company for the three months ended December 31, 1995 is as follows:
Revenues $242,465
Operating loss (63,207)
Net loss (86,283)
Loss per common share $(.01)
NOTE D - NOTE RECEIVABLE
- ------------------------
Note receivable consists of amounts due under a revolving loan agreement.
Amounts outstanding under the agreement are collateralized by 100,000 shares
of the Company's common stock, bear interest at 10% per annum, payable
quarterly, with principal due in five installments through December 31,
1997.
F-10
<PAGE>
Continental Investment Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE E - PROPERTY AND EQUIPMENT
- -------------------------------
The Company's property and equipment consists of the following at
December 31, 1996:
LAND
229 acres in Atlanta, Georgia
Former Granite Quarry $ 564,222
Unimproved land 8,068,360
----------
8,632,582
253.5 acres, Ellis County, Texas
Unimproved land 750,000
30 acres, Ferris, Texas
Unimproved land 115,000
----------
$9,497,582
==========
FIXTURES AND EQUIPMENT
Fixtures and equipment $ 71,773
Accumulated depreciation (29,960)
----------
$ 41,813
==========
NOTE F - INCOME TAXES
- ---------------------
The Company and its subsidiaries file a consolidated tax return. At
December 31, 1996, the Company has, for Federal income tax purposes,
operating loss carryforwards of approximately $3,900,000, expiring through
2012 and capital loss carryforwards of approximately $310,000 expiring
through 1999. Tax laws limit the utilization of the net operating loss
carryforwards and capital loss carryforwards to approximately $250,000 per
year. Therefore, the Company may be required to pay income taxes in future
years even though significant loss carryforwards exist.
F-11
<PAGE>
Continental Investment Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE F - INCOME TAXES - Continued
- ---------------------------------
Reconciliation of income taxes computed at the Federal statutory rate and
income tax expense is as follows:
Three months
ended Year ended September 30,
December 31, -------------------------
1996 1996 1995
----------- ----------- ----------
Tax benefit at statutory rate $(92,000) $(340,000) $(223,000)
Change in valuation allowance 89,000 307,000 223,000
Other 3,000 33,000 1,321
--------- --------- ---------
$ - $ - $ 1,321
========= ========= =========
Consolidated deferred tax assets and liabilities consist of the following
at December 31, 1996:
Deferred tax assets
Net operating loss and capital loss carryforwards $ 1,389,000
Valuation allowance (1,389,000)
------------
-
Deferred tax liabilities
Property 747,000
------------
Net deferred tax liability $ 747,000
============
F-12
<PAGE>
Continental Investment Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE F - INCOME TAXES - Continued
- ---------------------------------
At December 31, 1996, the Company had capital and net operating loss
carryforwards for Federal tax purposes expiring as follows:
Year of
expiration Amount
---------- ----------
Capital losses 1999 $ 313,568
Net operating loss carryforwards 2005 $ 245,018
2006 286,359
2007 682,391
2008 152,727
2009 710,373
2010 644,163
2011 902,484
2012 262,408
----------
$3,885,923
==========
NOTE G - NOTE PAYABLE
- ---------------------
The note payable bears interest at 8.5% and is due in annual installments of
$230,000 commencing on January 15, 1997, with interest due quarterly. The
future minimum payments under this long-term note at December 31, 1996 are
as follows:
1997 $ 230,000
1998 230,000
1999 230,000
2000 230,000
2001 230,000
----------
1,150,000
Less current
maturities 230,000
----------
$ 920,000
==========
F-13
<PAGE>
Continental Investment Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE H - LEASES
- ---------------
The Company leases office and warehouse space under an agreement expiring in
1999. This lease, which has been classified for accounting purposes as an
operating lease, is subject to customary escalation clauses for executory
costs and operating expenses. The future minimum lease payments under the
noncancellable lease at December 31, 1996, are as follows:
Year ending
December 31,
------------
1997 $ 36,044
1998 36,044
1999 36,044
---------
$ 108,132
=========
NOTE I - STOCKHOLDER'S EQUITY
- -----------------------------
Common stock is stated at the lower of par value or consideration received,
as permitted by state law.
The following information relates to warrants outstanding:
Number
of shares Option price
---------- ---------------
Warrants outstanding - October 1, 1994 144,000 $5.00 - $18.00
Issued during the year (1) 210,000 $4.25 - $ 5.00
---------
Warrants outstanding - September 30, 1995 354,000 $4.25 - $18.00
Issued during the year (1) 3,622,500 $4.00 - $35.00
Exercised during the year (462,500) $4.00 - $10.00
---------
Warrants outstanding - September 30, 1996 3,404,000 $4.00 - $35.00
=========
Warrants exercisable - September 30, 1996 3,404,000 $4.00 - $35.00
=========
(1) During 1996 and 1995, the Company received $5,500,000 and $400,000
respectively for the sale of its restricted common stock and warrants
to purchase restricted stock which expire in varying terms (one to
five years).
F-14
<PAGE>
Continental Investment Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE I - COMMON STOCK AND STOCK OPTIONS - Continued
- ---------------------------------------------------
Year ended
September 30, 1995
---------------------
Weighted
average
exercise
Shares price
------- ---------
Outstanding at beginning of year 144,000 $10.17
Granted 210,000 4.64
Outstanding at end of year 354,000 $ 6.89
======= ======
Options exercisable at September 30, 1995 354,000 $ 6.89
======= ======
Information about stock options outstanding at December 31, 1996 is
summarized as follows:
Options outstanding and exercisable
-----------------------------------
Weighted average
Number remaining Weighted average
Range of exercise prices outstanding contractual life exercise price
------------------------ ----------- ---------------- ----------------
$ 4.00 to $ 5.00 2,483,000 3.3 years $ 4.84
$ 5.01 to $10.00 122,000 .9 years $ 8.03
$10.01 to $35.00 798,000 1.0 years $26.15
---------
3,403,000
=========
F-15
<PAGE>
Continental Investment Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE J - SEGMENTS
- -----------------
The Company operates in two principal segments: property development,
primarily its potential landfill site in Atlanta, Georgia, and its Fiber-
Seal fabric care and surface protection business.
Property Fabric
December 31, 1996 Development Care Corporate Consolidated
----------------------- ------------ ---------- --------- ------------
Revenues $ - $ 221,884 $ - $ 221,884
Operating profit (loss) (306,603) 35,734 - (311,143)
Identifiable assets 12,640,749 305,272 - 12,022,580
Depreciation and
amortization - 3,266 - 3,266
Capital expenditures - - - -
September 30, 1996
-----------------------
Revenues $ - $ 818,978 $ - $ 818,978
Operating profit (loss) (1,014,144) 105,852 (410) (908,702)
Identifiable assets 13,162,202 93,895 - 13,256,097
Depreciation and
amortization - 13,284 - 13,284
Capital expenditures 693,870 - - 693,870
September 30, 1995
------------------------
Revenues $ 30,002 $ 873,026 $ - $ 903,028
Operating profit (loss) (379,255) 186,134 (378,454) (571,575)
Identifiable assets 3,282,321 25,814 - 3,308,135
Depreciation and
amortization - 2,334 - 2,334
Capital expenditures 9,473 - - 9,473
F-16
<PAGE>
Continental Investment Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE K - FAIR VALUE OF FINANCIAL INSTRUMENTS
- --------------------------------------------
The Company's financial instruments include cash and debt. The fair value of
all instruments approximates the carrying value as they reprice within one
year.
NOTE L - CONTINGENCIES
- ----------------------
The Company is defendant in various matters in litigation which have arisen
in the normal course of business. In the opinion of management, such
litigation will not have a material effect on the Company's financial
position or results of operations.
F-17
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
- -------------------------------------------------------------------
NONE
PART III
--------
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH 16(a) OF THE EXCHANGE ACT.
- ---------------------------------------------------------------------
Executive Officers of the Registrant
- ------------------------------------
Set forth below is certain information concerning the Directors and
Executive Officers of the Company as of March 31, 1997.
Name Age Current Position with Company
---------------------- --- ---------------------------------
R. Dale Sterritt, Jr. 40 Director, Chairman and CEO
Thomas F. Snodgrass 66 Director, President and Treasurer
Robert D. Luna 43 Director, Secretary
Martin G. Blahitka 59 Director
J. B. Morris 57 Director
Mr. R. Dale Sterritt, Jr. has served as Chairman, Chief Executive Officer
and as a Director since July 1991.
Mr. Thomas F. Snodgrass has served as a Director, President and Treasurer
since July 1991.
Mr. Martin G. Blahitka has served as a director of the Company since
September 1993. He has been a private investor for more than five years.
Mr. Robert D. Luna has served as a Director since September 1993 and
currently serves as Secretary of the Company. Mr. Luna has been a private
investor (in securities, real estate and oil and gas) for more than the past
five years.
Mr. J. B. Morris has served as a Director since April 1990. He has been a
private investor for more than five years.
Key Subsidiary Executive
- ------------------------
Steven A. Lytle, in October 1996, was named Executive Vice President and
Chief Operating Officer of a wholly-owned subsidiary, Continental Technologies
Corporation, a Georgia corporation based in Atlanta. He is directing the
development of Continental's proposed solid waste operations. Mr. Lytle, 43,
has had 11 years experience in the solid waste industry, including extensive
involvement in developing and managing solid waste facilities. Among other
accomplishments, he designed and obtained the permit for a 50 million cubic
yard disposal facility in Georgia and continued on to manage this facility as
the District Manager for his former employer. Prior to joining Continental in
October, 1996, Mr. Lytle was a regional executive with Sanifill, Inc. for
Arkansas, Florida, Georgia, Kentucky, Ohio, Pennsylvania, and Puerto Rico,
with responsibilities ranging from landfill design, engineering, permitting
-20-
<PAGE>
operations, and compliance to economic evaluation of potential acquisitions.
He was with Browning-Ferris Industries ("BFI") from 1985 to 1994 in positions
of ever-increasing responsibility. Mr. Lytle holds a degree in Civil
Engineering from the University of Cincinnati.
ITEM 10. EXECUTIVE COMPENSATION.
- --------------------------------
The following table sets forth the compensation earned by the Company's
Chief Executive Officer during fiscal years ended September 30, 1994, 1995 and
1996, and during the short-year ended December 31, 1996. No other executive
officer received compensation in excess of $100,000 during any of those
periods.
<TABLE>
<CAPTION>
Summary Compensation Table
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Annual Compensation Long-Term Compensation
------------------------- ------------------------------
Awards Payouts
Other --------------------- ------- Payouts
Annual Restricted Options/ All Other
Compen- Stock SARs LTIP Compen-
Name and Principal Position Year Salary Bonus sation Awards (Shares) Payouts sation
- ---------------------------- ------- ------ ----- -------- ---------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. Dale Sterritt, Jr. 1996 (1) - - $ 54,750 - - - -
Chairman of the Board 1996 (2) - - $234,750 - - - -
and Chief Executive
Officer 1995 - - $161,575 - - - -
1994 - - $142,125 - - - -
<FN>
(1) Short year October 1 through December 31, 1996
(2) Fiscal year October 1, 1995 through September 30, 1996.
</FN>
</TABLE>
The Company does not have any employment agreements with any of the
executive officers of the parent company. Beginning January 1, 1997, Mr. R.
Dale Sterritt, Jr., Chairman and CEO, began employment with the Company at an
annual salary of $240,000.
Prior to 1997, the compensation paid to executive officers and directors
of the parent company was for services rendered to the Company on a per-diem
basis at rates prescribed by the Board: $750 per day for the Chairman, Chief
Executive Officer and President; and $400 per day for all other executive
officers. By resolution of the Board of Directors, directors are entitled to a
fee of $200 per meeting; however, all such fees were waived during fiscal year
ended September 30, 1996 and the short year ended December 31, 1996.
-21-
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- ------------------------------------------------------------------------
The following table sets forth, to the best knowledge of the Company as
of March 31, 1997, certain information with respect to (i) beneficial owners
of more than five percent (5%) of the outstanding Common Stock, (ii)
beneficial ownership of shares of the Company's Common Stock by each director,
and (iii) beneficial ownership of shares of the Company's Common Stock by all
officers and directors as a group.
Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownership Class
- ---------------------------------- -------------------------- ----------
Martin G. Blahitka 10,000 (4)
c/o Continental Investment Corp.
10254 Miller Road
Dallas, TX 75238
Robert D. Luna - -
c/o Continental Investment Corp.
10254 Miller Road
Dallas, TX 75238
J. B. Morris 170,699 1.5%
c/o Continental Investment Corp.
10254 Miller Road
Dallas, TX 75238
Stewart Rahr 883,475 (3) 7.8%
152-35 10th Avenue
Whitestone, NY 11357
Thomas F. Snodgrass 15,000 (4)
c/o Continental Investment Corp.
10254 Miller Road
Dallas, TX 75238
R. Dale Sterritt, Jr. - -
c/o Continental Investment Corp.
10254 Miller Road
Dallas, TX 75238
Sterritt Properties, Inc. (1) 5,750,444 50.8%
P. O. Box 452648
Garland, TX 75045
Business Ventures, Inc. (2) 1,600,000 14.1%
50 Lincolns Inn Fields, 3rd Floor
London, WC 2A 3PF
England
__________________________
All Officers and Directors 195,699 1.7%
as a Group (5 persons)
(Continued)
-22-
<PAGE>
(Footnotes to preceding table)
(1) Sterritt Properties, Inc. is owned 100% by a Family Limited Partnership.
Richard D. Sterritt, Sr., the President of Sterritt Properties, Inc., is
the father of the Chairman and CEO, R. Dale Sterritt, Jr.
(2) The beneficial ownership of these shares is contested. The Company does
not take a position as to the true beneficial ownership of such shares,
but has indicated the name at the time of issue for the purpose of this
disclosure item.
(3 Does not include options to acquire 1,037,000 shares of CICG common stock.
Also does not include 200,000 shares owned by members of his immediate
family, to which Mr. Rahr disclaims beneficial ownership.
(4) Less than 1%.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- ---------------------------------------------------------
On September 20, 1996 the Company entered into an agreement with the
20th Century Group, an entity owned by the Sterritt Family and comprised of
Sterritt Properties, Inc. ("SPI"), FIBER-SEAL Services International, Inc.
("FSSI"), 20th Century Partners, Inc. and 20th Century Holdings, Inc. This
agreement called for the transfer of certain rights and assets owned by 20th
Century Group. The consideration for the transfer was a $1,150,000 note
payable. The property transferred consisted of assets related to the FIBER-
SEAL business. This included all operations formerly carried out by FSSI, all
operations of the Dallas, Texas licensee of FIBER-SEAL and all trademarks,
servicemarks, logos, and tradenames of or related to FIBER-SEAL. As a result
of this transaction, the Sterritt Family has transferred all of their
FIBER-SEAL-related holdings to CICG. The effective date of the agreement was
September 30, 1996.
PART IV
-------
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
- ------------------------------------------
(a) Following are documents filed as part of this report:
1. Consolidated Financial Statements of Continental Investment
Corporation and Subsidiaries.
See Item 8 of this report - "Financial Statements and Supplementary
Data."
2. Financial statement schedules.
There are no financial statement schedules required to be filed.
-23-
<PAGE>
3. Exhibits.
Exhibit Number Exhibit Index
-------------- -----------------------------------------------------
3.1 - Certified copy of the Company's Articles of
Incorporation and amendments thereto. 1/
3.2 - Amended and Restated Bylaws of the Company, as of
August 8, 1989. 1/
3.3 - Amendment to the Company's Articles of
Incorporation dated March 24, 1994. 2/
21 * - List of the Company's Subsidiaries.
______________________________
* Filed herewith.
1/ - Incorporated by reference to the exhibit with the
same description to the Company's Current Report on
Form 8-K filed on August 11, 1989.
2/ - Incorporated by reference to the exhibit with the
same description to the Company's Current Report on
Form 8-K dated as of January 5, 1994.
(b) Reports on Form 8-K.
There were no reports filed on Form 8-K during the short fiscal period
ended December 31, 1996.
Exhibit 21
As of March 31, 1997, the Company had the following subsidiaries:
(a) Continental Technologies, Inc., a Delaware Corporation
(b) Continental Technologies Corporation of Georgia, a Georgia Corporation
(c) FIBER-SEAL Franchise Corporation, a Delaware Corporation
(d) FIBER-SEAL Holdings, Inc., a Texas Corporation
-24-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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
By: /S/ R. Dale Sterritt, Jr.
----------------------------
R. Dale Sterritt, Jr.
Chairman, President and Chief
Executive Officer
(Principal Executive Officer)
Dated: December 24, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Name Date
/S/ R. Dale Sterritt, Jr. December 24, 1997
--------------------------------
R. Dale Sterritt, Jr., Director
Chairman, President and Chief
Executive Officer
(Principal Executive Officer)
/S/Robert D. Luna December 24, 1997
--------------------------------
Robert D. Luna, Director
and Secretary
/S/Martin G. Blahitka December 24, 1997
--------------------------------
Martin G. Blahitka, Director
/S/ J. B. Morris December 24, 1997
--------------------------------
J. B. Morris, Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 841,586
<SECURITIES> 0
<RECEIVABLES> 2,403,679
<ALLOWANCES> 0
<INVENTORY> 48,613
<CURRENT-ASSETS> 3,388,987
<PP&E> 9,539,395
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,946,021
<CURRENT-LIABILITIES> 395,852
<BONDS> 0
0
0
<COMMON> 2,782,504
<OTHER-SE> 8,100,665
<TOTAL-LIABILITY-AND-EQUITY> 12,946,021
<SALES> 221,884
<TOTAL-REVENUES> 221,884
<CGS> 88,900
<TOTAL-COSTS> 542,586
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,991
<INCOME-PRETAX> (270,869)
<INCOME-TAX> 0
<INCOME-CONTINUING> (270,869)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (270,869)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
