SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTER REPORT UNDER SECTION 13 0R 15(d)
Quarter Ended 9-30-97 Commission File Number
--------------------- ----------------
World Services, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
South Dakota 46-0355586
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
404 South Lincoln Aberdeen, South Dakota 57401
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(Address if principal executive offices) (Zip Code)
Registrant's telephone number, including area code (605) 225-4131
--------------
Not Applicable
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(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check 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 Yes X
during the preceding 12 months (or for such shorter -------
period that the registrant was required to file such No
reports), and (2) has been subject to such filing -------
requirements for the past 90 days.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the close of the period covered by this report.
As of September 30, 1997, Registrant had 2,600,400 shares of its $.001 par value
common stock outstanding.
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. ACCOUNTANTS' REPORT ................................... 1
Balance Sheets as of September 30, 1997, and
December 21, 1996 ............................ 2
Statements of Income for the Quarters Ended
September 30, 1997 and 1996 .................. 3
Statements of Income for the Nine Months Ended
September 30, 1997 and 1996 .................. 4
Statements of Cash Flows for the Nine Months
Ended September 30, 1997 and 1996 ............ 5
Notes to Financial Statements ................ 6
Item 2. Managements's discussion and Analysis of
Financial Condition and Results of Operations:
Liquidity and Capital Resources .............. 7
Results of Operations ........................ 8
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings ..................................... 10
Item 2. Changes in Securities ................................. 10
Item 3. Default Upon Senior Securities ........................ 10
Item 4. Submission of matters to a Vote of Security
Holders ...................................... 10
Item 5. Other Inf11mation ..................................... 11
Item 6. Exhibits and Reports on Form 10-Q ..................... 11
<PAGE>
MEIDINGER & ASSOCIATES
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Certified Public Accountants 311 South 2nd Street
Aberdeen, SD 57401
(605) 229-4404
October 20, 1997
The Board of Directors
World Services, Inc.
Aberdeen, South Dakota 57401
We have compiled the accompanying Balance Sheets of World Services, Inc. as of
September 30, 1997, and December 31, 1996, and the related Statements of Income
and Cash Flows for the periods ended September 30, 1997, and September 30, 1996,
in accordance with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements,
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
The corporation previously recorded the First Savings & Loan Association, Inc.
(FSL) investment, for interim reporting purposes, only at the audited value at
year end. The investment in FSL is now accounted for under the equity method of
accounting. Accordingly, the accompanying financial statements have been
restated.
Meidinger & Associates
Certified Public Accountants
1
<PAGE>
<TABLE>
<CAPTION>
WORLD SERVICES, INC.
BALANCE SHEETS
September 30, 1997 and December 31, 1996
September 30, December 31,
1997 1996
---- ----
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 15,994.60 $ 27,652.56
Certificate of Deposit 490,000.00 290,000.00
Interest Receivable 15,508.77 16,998.90
---------------- ----------------
TOTAL CURRENT ASSETS 521,503.37 334,651.46
PROPERTY AND EQUIPMENT
Office Equipment 2,882.14 2,882.14
Accum Depr-Office Equipment (2,882.14) (2,882.14)
---------------- ----------------
TOTAL PROPERTY AND EQUIPMENT 0.00 0.00
INVESTMENTS AND OTHER ASSETS
Investment-First Savings & Loan 380,100.00 335,000.00
Investment-Super 8 Developers 568,000.00 568,000.00
Other 4,000.00 4,000.00
---------------- ----------------
TOTAL OTHER ASSETS 952,100.00 907,000.00
---------------- ----------------
TOTAL ASSETS $ 1,473,603.37 $ 1,241,651.46
================ ================
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Stock Redemption $ 202,306.75 $ 0.00
---------------- ----------------
STOCKHOLDERS EQUITY
Common stock, par value $.001 per
share; (50,000,000 shares
authorized)
3,152,400 shares issued at
September 30, 1997, and
5,357,000 shares issued at
December 31, 1996 5,359.00 5,359.00
Additional paid in capital 6,544,641.00 6,544,641.00
Treasury Stock at cost, 552,000
shares at September 30, 1997,
and 129,093 at December 31, 1996 (205,306.75) (3,000.00)
Accumulated Deficit (5,073,396.63) (5,305,348.54)
---------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 1,261,296.62 1,241,651.46
---------------- ----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,473,603.37 $ 1,241,651.46
================ ================
2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WORLD SERVICES, INC.
STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
For the Quarters Ended September 30, 1997 and 1996
1997 1996
---- ----
REVENUE
<S> <C> <C>
Interest Income $ 6,541.84 $ 2,094.25
Stock Transfer Fees 0.00 40.25
---------------- -------------
TOTAL REVENUE 6,541.84 2,134.50
---------------- -------------
EXPENSES
Accounting Fees 3,120.80 0.00
Contract Wages & Consulting 13,907.20 780.00
Faxes 141.75 0.07
Legal Fees 7,591.77 4,908.94
Director Fees 3,150.00 600.00
Office Supplies 13.80 88.50
Printing 6,786.94 0.00
Postage 2,252.05 17.78
Supplies 133.30 0.00
Telephone 77.77 2.21
Annual Meeting 462.06 0.00
Miscellaneous Expense 0.00 17.10
---------------- -------------
TOTAL EXPENSES 37,637.44 6,414.53
---------------- -------------
LOSS BEFORE EQUITY IN EARNINGS
OF AFFILIATED COMPANIES (31,095.60) (4,280.03)
EQUITY IN EARNINGS OF AFFILIATED
COMPANIES 8,100.00 0.00
---------------- -------------
LOSS BEFORE INCOME TAXES (22,995.60) (4,280.03)
INCOME TAXES (NOL CARRYOVER) 0.00 0.00
---------------- -------------
NET INCOME (LOSS) $ (22,995.60) $ (4,280.03)
================ =============
INCOME (LOSS) PER SHARE * *
================ =============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 4,000,898 5,229,907
================ =============
* Less than $0.01 per share.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
WORLD SERVICES, INC.
STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
For the Nine Months Ended September 30, 1997 and 1996
1997 1996
REVENUE
<S> <C> <C>
Dividend Income $ 239,085.60 $ 79,700.95
Interest Income 31,399.35 15,247.38
Stock Transfer Fees 39.75 0.00
Miscellaneous Income 0.00 272.24
---------------- ----------------
TOTAL REVENUE 270,524.70 95,220.57
---------------- ----------------
EXPENSES
Accounting Fees 11,736.60 14,647.80
Contract Wages & Consulting 16,547.20 4,973.68
Faxes 281.25 0.00
Interest 0.00 49.76
Legal Fees 35,054.97 11,473.77
Donations 0.00 100.00
Director Fees 6,300.00 1,950.00
Dues, Fees, Subscriptions 0.00 58.00
Office Supplies 133.15 352.80
Printing 7,769.29 0.00
Postage 2,663.55 354.45
Rent 1,820.00 260.00
Repairs & Maintenance 0.00 580.30
Supplies 335.03 4,171.46
Telephone 121.89 70.92
Travel 447.80 0.00
Annual Meeting 462.06 0.00
Administrative Expenses 0.00 2,298.68
Miscellaneous Expense 0.00 470.01
---------------- ----------------
TOTAL EXPENSES 83,672.79 41,811.63
---------------- ----------------
INCOME BEFORE EQUITY IN EARNINGS
OF AFFILIATED COMPANIES 186,851.91 53,408.94
EQUITY IN EARNINGS OF AFFILIATED
COMPANIES 45,100.00 0.00
---------------- ----------------
INCOME BEFORE INCOME TAXES 231,951.91 53,408.94
INCOME TAXES (NOL CARRYOVER) 0.00 0.00
---------------- ----------------
NET INCOME $ 231,951.91 $ 53,408.94
================ ================
INCOME (LOSS) PER SHARE 0.05 0.01
================ ================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 4,815,735 5,229,907
================ ================
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
WORLD SERVICES, INC
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1996
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 231,951.91 $ 53,408.94
Adjustment to reconcile net income to
net cash provided by operating
activities:
Equity in Earning of Affiliates (45,100.00) 0.00
(Increase) Decrease in:
Other Assets 1,490.13 0.00
Increase (Decrease) in:
Accounts Payable 0.00 (6,813.56)
-------------- --------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 188,342.04 46,595.38
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets 0.00 (2,882.14)
Purchase of Certificates of Deposit (200,000.00) (140,000.00)
Sale of certificate of deposit 0.00 100,000.00
-------------- --------------
NET CASH (USED)BY INVESTING ACTIVITIES (200,000.00) (42,882.14)
-------------- --------------
NET INCREASE IN CASH (11,657.96) 3,713.24
CASH AT BEGINNING OF PERIOD 27,652.56 9,000.00
-------------- --------------
CASH AT END OF PERIOD $ 15,994.60 $ 12,713.24
============== ==============
SUPPLEMENTAL DISCLOSURES Cash payments for:
Income taxes $ 0.00 $ 0.00
============== ==============
Interest paid $ 0.00 $ 49.76
============== ===========
5
</TABLE>
<PAGE>
WORLD SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED SEPTEMBER 30, 1997 AND 1996
In the opinion of management of World Services, Inc., (the Company), the
accompanying unaudited financial statements reflect all adjustments necessary to
present fairly the financial position of the company as of September 30, 1997
and 1996, and the results of operations and changes in financial position for
the nine months ended September 30, 1997 and 1996.
These unaudited financial statements should be read in conjunction with the
Company's annual report on Form 10-KSB for the year ended December 31, 1996.
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
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A summary of significant accounting policies is currently on file with the
Securities and Exchange Commission on Form 10-KSB.
NOTE 2 - INCOME TAXES
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As of December 31, 1996, the Company had net operating loss carry forwards for
income tax purposes totaling approximately $3,100,000 which expire in the years
1997 to 2011. The net operating loss carry forwards may be limited with respect
to their availability due to prior ownership changes and the consolidated return
regulations. In addition, there are investment tax credit carry forwards of
$28,000.
6
<PAGE>
WORLD SERVICES, INC.
MANAGEMENTS'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Financial Statements and Notes thereto appearing elsewhere in this report.
LIQUIDITY AND CAPITAL RESOURCES - SEPTEMBER 30, 1997, COMPARED TO
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
During the nine months ended September 30, 1997, Certificates of Deposit
increased $200,000.00, from $290,000.00 at December 31, 1996, to $490,000.00 at
September 30, 1997. The increase reflects the purchase of two certificates of
$100,000.00 each. In addition, cash decreased by $11,657.96 as noted below.
Interest receivable decreased $1,490.13, from $16,998.90 at December 31, 1996,
to $15,508.77 at September 30, 1997.
As a result of the foregoing, current assets increased by $186,851.91, from
$334,651.46 at December 31, 1996, to $521,503.37 at September 30, 1997.
Current liabilities increased $202,306.75, from $0.00 at December 31, 1996, to
$202,306.75 at September 30, 1997. The increase is the result of a stock
redemption induced by a stockholder approved stock split. - Discussed later in
"Other Information".
As a result of the Company's net income for the nine months of $231,951.91, the
accumulated deficit decreased from $5,305,348.54 at December 31, 1996, to
$5,073,396.63 at September 30, 1997. In addition, treasury stock increased
$202,306.75, from $3,000.00 at December 31, 1996, to $205,306.75 at September
30, 1997. As a result, the total stockholders equity increased from
$1,241,651.46 at December 31, 1996, to $1,261,296.62 at September 30, 1996.
7
<PAGE>
WORLD SERVICES, INC.
MANAGEMENTS'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997
COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
Total revenue for the three months ended September 30, 1997, were $6,541.84 as
compared to $2,134.50 for the comparable period ended September 30, 1996, an
increase of $4,407.34. The increase is due to interest payments on several CDs.
Operating expenses were $37,637.44 for the three months ended September 30,
1997, compared to $6,414.53 for the comparable period ended September 30, 1996,
an increase of $31,222.91. The majority of this increase was in legal fees,
wages, directors fees, printing and postage.
Equity in earnings of affiliates relates to holdings of common stock in First
Savings and Loan, Inc.
Based on the foregoing, the net loss available to stockholders for the three
months ended September 30, 1997, was $22,995.60, which translates to a net loss
per share of less than $0.01 based on 4,000,898 weighted average shares
outstanding. This compares to the net loss available to stockholders for the
three months ended September 30, 1996, of $4,280.03, which translates to a net
loss per share of less than $0.01 based on 5,229,907 weighted average shares
outstanding at that time.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1997
COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1996
- --------------------------------------------------------------------------------
Total revenue for the nine months ended September 30, 1997, were $270,524.70 as
compared to $95,220.57 for the comparable period ended September 30, 1996, an
increase of $175,304.13. Dividend income from Super 8 Motel Developers, Inc. of
over $239,000.00 is the major contributing factor in this increase.
Operating expenses were $83,672.79 for the nine months ended September 30, 1997,
compared to $41,811.63 for the comparable period ended September 30, 1996, an
increase of $41,861.16. The majority of this increase was in legal fees due to
the pending OTS inquiry (see other information). There were also substantial
increases in directors fees, printing and postage mainly due to the stockholders
meeting held in August of 1997.
8
<PAGE>
WORLD SERVICES, INC.
MANAGEMENTS'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Equity in earnings of affiliates relates to holdings of common stock in First
Savings and Loan, Inc.
Based on the foregoing, the net income available to stockholders for the nine
months ended September 30, 1997, was $231,951.91, which translates to a net
income per share of $0.05 based on 4,815,735 weighted average shares
outstanding. This compares to the net income available to stockholders for the
nine months ended September 30, 1996, of $53,408.94, which translates to a net
income per share of $0.01 based on 5,229,907 weighted average shares outstanding
at that time.
9
<PAGE>
WORLD SERVICES, INC.
PART II. OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
The company is not a party to any legal proceedings and no such proceedings are
known to be contemplated except for the Office of Thrift Supervision (OTS)
inquiry.
OTS Inquiry - In September of 1996, the Company was contacted by the federal OTS
concerning certain changes in the alleged control of First Savings and Loan
stock, the ownership of First Savings stock by certain affiliates of the
Company, and a threatened action against the Company as a result thereof. OTS
notified the Company and some of its directors that they may be in violation of
OTS Reg. No. 574.4(b), relating to a requirement of submitting either a change
of control notice or rebuttals of concerted action or control. The Company has
complied with the OTS request by voting to sell all shares of First Savings and
Loan stock at the August 18th shareholder meeting (see below). As of September
30, 1997, this offer was pending regulatory review. Subsequent to September 30,
1997, this sale was approved and the sale was consummated at a total price of
$426,672.39.
ITEM 2. - CHANGES IN SECURITIES
- --------------------------------------------------------------------------------
None.
ITEM 3. - DEFAULT UPON SENIOR SECURITIES
- --------------------------------------------------------------------------------
None.
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- --------------------------------------------------------------------------------
On August 18, 1997, a shareholder meeting was held and several major decisions
voted upon and approved. Items of business included the re-election of the five
directors and approval of a plan to recapitalize the corporation through a
510-for-one reverse stock split and purchase of all fractional shares for $.25
per pre-split share. The shareholders further voted to approve a one-for- 300
forward stock split for all remaining shares. Also, at the insistence of the
Office of Thrift Supervision (OTS), it was decided at the August 18th meeting to
accept an offer to sell all shares of First Savings and Loan held by World
Services, Inc. for $2.51 per share.
10
<PAGE>
WORLD SERVICES, INC.
PART II. OTHER INFORMATION
(continued)
ITEM 5. - OTHER INFORMATION
- --------------------------------------------------------------------------------
None.
ITEM 6. - EXHIBITS
- --------------------------------------------------------------------------------
Exhibit 27 - Financial Data Schedule.
11
<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.
OCTOBER 20, 1997
WORLD SERVICES, INC.
By /s/ RONNE TARRELL
-------------------------------------
Ronne Tarrell, President
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.
OCTOBER 20, 1997
Ronne Tarrell, President,
Principal Executive
Officer, and Director
OCTOBER 20, 1997
David Jorgenson,
Secretary, Treasurer,
Principal Accounting
Officer, Principal
Financial Officer, and
Director
OCTOBER 20, 1997
Delores Bower, Director
OCTOBER 20, 1997
Delbert Harty, Director
OCTOBER 20, 1997
Terry Heinz, Director
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1997 of World Services, Inc. and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 505,995
<SECURITIES> 0
<RECEIVABLES> 15,509
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 521,504
<PP&E> 2,882
<DEPRECIATION> (2,882)
<TOTAL-ASSETS> 1,473,603
<CURRENT-LIABILITIES> 202,307
<BONDS> 0
0
0
<COMMON> 5,359
<OTHER-SE> 1,265,937
<TOTAL-LIABILITY-AND-EQUITY> 1,473,603
<SALES> 0
<TOTAL-REVENUES> 270,525
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 83,673
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 231,952
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 231,952
<EPS-PRIMARY> .044
<EPS-DILUTED> .044
</TABLE>
