SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTER REPORT UNDER SECTION 13 0R 15(d)
Quarter Ended 6-30-98 Commission File Number____________
World Services, Inc.
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(Exact name of registrant as specified in its charter)
South Dakota 46-0355586
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
PO Box 786 Aberdeen, South Dakota 57402
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(Address if principal executive offices) (Zip Code)
(605) 225-4131
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Registrant's telephone number, including area code
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 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 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 June 30, 1998, Registrant had 2,639,679 shares of its $.001 par value
common stock outstanding.
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Balance Sheet as of June 30, 1998 .................. 1
Statements of Operations for Quarters Ended
June 30, 1998 and 1997 ............................. 2
Statements of Operations for the Six Months
Ended June 30, 1998 and 1997 ....................... 3
Statements of Cash Flows for the Six Months
Ended June 30, 1998 and 1997 ....................... 4
Notes to Financial Statements ...................... 5
Item 2. Management's discussion and Analysis of
Financial Condition and Results of
Operations:
Liquidity and Capital Resources .................... 6
Results of Operations .............................. 7
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings .................................. 8
Item 2. Changes in Securities .............................. 8
Item 3. Default Upon Senior Securities ..................... 8
Item 4. Submission of matters to a Vote of Security
Holders ............................................ 8
Item 5. Other Information .................................. 9
Item 6. Exhibits and Reports on Form 10-Q .................. 9
<PAGE>
WORLD SERVICES, INC.
BALANCE SHEET
June 30, 1998
ASSETS
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CURRENT ASSETS
Cash $ 108,955.74
Certificates of Deposit 430,000.00
Interest Receivable 11,386.00
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TOTAL CURRENT ASSETS 550,341.74
INVESTMENTS AND OTHER ASSETS
United States Treasury Note 413,846.28
Investment-Super 8 Developers 568,000.00
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TOTAL OTHER ASSETS 981,846.28
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TOTAL ASSETS $ 1,532,188.02
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LIABILITIES AND STOCKHOLDERS EQUITY
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CURRENT LIABILITIES
Accounts Payable $ 22,376.28
Stock Redemption payable 67,806.50
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TOTAL CURRENT LIABILITIES 90,182.78
STOCKHOLDERS EQUITY
Common stock, par value $.001 per
share; (50,000,000 shares
authorized)with
2,640,000 shares issued 2,715.00
Additional paid in capital 6,364,354.75
Accumulated Deficit (4,925,064.51)
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TOTAL STOCKHOLDERS' EQUITY 1,442,005.24
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,532,188.02
================
1
<PAGE>
WORLD SERVICES, INC.
STATEMENTS OF OPERATIONS
For the Quarters Ended June 30, 1998 and 1997
1998 1997
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REVENUE
Dividend Income $ 159,390.40 $ 239,085.60
Interest Income 13,296.28 24,857.51
Stock Transfer Fees 0.00 19.50
Undistributed Income/Loss 0.00 37,000.00
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TOTAL REVENUE 172,686.68 300,962.61
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EXPENSES
Accounting Fees 5,486.38 8,615.80
Contract Wages & Consulting 22,584.10 1,720.00
Faxes 51.00 139.50
Legal Fees 10,179.22 16,176.60
Director Fees 750.00 1,950.00
Office Supplies 264.80 0.00
Printing 545.00 982.35
Postage 1,501.08 333.45
Supplies 18.32 182.66
Telephone 47.51 39.75
Rent 500.00 1,820.00
Travel 0.00 447.80
Loss on Uncollectible Note 4,000.00 0.00
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TOTAL EXPENSES 45,927.41 32,407.91
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INCOME BEFORE INCOME TAXES 126,759.27 268,554.70
INCOME TAXES 0.00 0.00
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NET INCOME $ 126,759.27 $ 268,554.70
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INCOME PER SHARE (Basic & Diluted) .04 *
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WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 2,640,000 5,229,907
================ ================
* Less than $0.01 per share
2
<PAGE>
WORLD SERVICES, INC.
STATEMENTS OF OPERATIONS
For the Six Months ended June 30, 1998 and 1997
1998 1997
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REVENUE
Dividend Income $ 159,390.40 $ 239,085.60
Interest Income 16,459.04 24,857.51
Stock Transfer Fees 0.00 39.75
Undistributed Income/Loss 0.00 37,000.00
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TOTAL REVENUE 175,849.44 300,982.86
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EXPENSES
Accounting Fees 9,149.94 8,615.80
Contract Wages & Consulting 25,803.10 2,640.00
Faxes 123.00 139.50
Legal Fees 11,596.97 27,463.20
Director Fees 2,100.00 3,150.00
Office Supplies 401.28 119.35
Printing 545.00 982.35
Postage 1,760.45 411.50
Supplies 238.32 201.73
Telephone 156.47 44.12
Rent 1,250.00 1,820.00
Travel 0.00 447.80
Miscellaneous Expense 308.00 0.00
Loss on Uncollectible Note 4,000.00 0.00
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TOTAL EXPENSES 57,432.53 46,035.35
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INCOME BEFORE INCOME TAXES 118,416.91 254,947.51
INCOME TAXES 0.00 0.00
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NET INCOME/COMPREHENSIVE INCOME $ 118,416.91 $ 254,947.51
================ ================
INCOME PER SHARE (Basic & Diluted) .04 *
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WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 2,640,000 5,229,907
================ ================
* Less than $0.01 per share
3
<PAGE>
WORLD SERVICES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1998 and 1997
1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Income/Comprehensive Income $ 118,416.91 $ 254,947.51
Adjustment to reconcile net income to
net cash used in operating
activities:
Equity in Earning of Affiliates 0.00 (37,000.00)
(Increase) Decrease in:
Interest Receivable 8,658.46 0.00
Other Assets (10,357.85) 1,832.50
Increase (Decrease) in:
Accounts Payable 22,376.28 7,639.70
Stock Redemption Payable (5,589.50) 0.00
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NET CASH PROVIDED BY OPERATING
ACTIVITIES 133,504.30 227,419.71
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Certificates of Deposit (90,000.00) (200,000.00)
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NET CASH USED BY INVESTING
ACTIVITIES (90,000.00) (200,000.00)
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NET INCREASE IN CASH 43,504.30 27,419.71
CASH AT BEGINNING OF PERIOD 65,451.44 27,652.56
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CASH AT END OF PERIOD $ 108,955.74 $ 55,072.27
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SUPPLEMENTAL DISCLOSURES
Cash payments for:
Income taxes $ 0.00 $ 0.00
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Interest paid $ 0.00 $ 0.00
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4
<PAGE>
WORLD SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 1998
In the opinion of management of World Services, Inc., (the Company), the
accompanying unaudited financial statements reflect all adjustments (consisting
of only normal recurring accruals) necessary to present fairly the financial
position of the company as of June 30, 1998, and the results of operations and
Statements of Cash Flows for the six months ended June 30, 1998 and 1997.
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, 1997.
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, 1997, the Company had net operating loss carry forwards for
income tax purposes totaling approximately $3,100,000 which expire in the years
1998 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.
5
<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 - JUNE 30, 1998, COMPARED TO DECEMBER 31, 1997
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During the six months ended June 30, 1998, cash increased approximately $43,500
as a result of the receipt of a dividend of approximately $160,000 received from
Super 8 Motels less the purchase of a $90,000 certificate of deposit which is
now held by the Company.
Interest receivable decreased from $20,044 at December 31, 1997, to $11,386 at
June 30, 1998.
Primarily as a result of the receipt of the Super 8 Motel Dividend, current
assets increased by $124,846, from $425,496 at December 31, 1997, to $550,342 at
June 30, 1998.
Current liabilities increased $16,787, from $73,396 at December 31, 1997, to
$90,183 at June 30, 1998. The increase is the result of payables accrued near
the end of the quarter including $8,099 owed to Murray Woulfe as a result of the
outcome of prior pending litigation and $11,000 due Ronne Tarrell for contract
services.
As a result of the Company's net income for the six months of $118,417, the
accumulated deficit decreased from $5,043,481 at December 31, 1997, to
$4,925,065 at June 30, 1998. As a result, total stockholders equity increased
from 1,323,588 at December 31, 1997, to $1,442,005 at June 30, 1998.
In August of 1997, the Company completed a reverse stock split followed by a
forward stock split. Following the reverse stock split, there were a number of
fractional shares which were redeemed. Not all of the fractional shares had been
submitted for payment by December 31, 1997 or June 30, 1998. As a result, the
'current liabilities' portion of the balance sheet reflects a "stock redemption
payable." During the six months ended June 30, 1998, the Company redeemed
6
<PAGE>
WORLD SERVICES, INC.
MANAGEMENTS'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
outstanding fractional shares with a value of approximately $5,600. The total
number of outstanding shares of common stock reflected on the balance sheet does
not give any effect to the fractional shares outstanding.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX
MONTHS ENDED JUNE 30, 1997
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Total revenue for the six months ended June 30, 1998, were $175,849 as compared
to $300,983 for the comparable period ended June 30, 1997, a decrease of
$125,133. The decrease is due to the sale in October 1997 of the First Savings &
Loan investment. This decreased dividend income and also decreased their
undistributed income by $37,000.
Operating expenses were $57,433 for the six months ended June 30, 1998, compared
to $46,035 for the comparable period ended June 30 1997, an increase of $11,397.
The majority of this increase was in contract wages and consulting including the
cost of payment to Murray Woulfe as a result of the negative consequences of
litigation.
Based on the foregoing, the net income available to stockholders for the six
months ended June 30, 1998, was $118,416.91, which translates to a net income
per share of less than $0.01 based on 2,640,000 weighted average shares
outstanding. This compares to the net income after taxes for the six months
ended June 30, 1997, of $254,948, which translates to a net income per share of
less than $0.01 based on 5,229,907 weighted average shares outstanding at that
time.
The weighted average number of shares has been adjusted for the reverse and
forward stock splits completed in August of 1997 and for the repurchase of the
fractional shares resulting from the reverse stock split, all as described in
the Company's proxy statement for the shareholders' meeting August 1997.
7
<PAGE>
WORLD SERVICES, INC.
PART II. OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS
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The Company is not a party to any legal proceedings except as follows, and no
such proceedings are known to be contemplated.
The Company was a plaintiff in a civil action in the Circuit Court of the Fifth
Judicial Circuit of the State of South Dakota (Civ97-187, entitled "World
Services, Inc. vs. Murray Woulfe") against Murray Woulfe, a former president of
World Services, on a promissory note. The actions sought recovery of $19,000
plus interest and costs. Mr. Woulfe denied liability and claimed that he owed
World Services no obligation under the promissory note. The matter was scheduled
for trial in May of 1998 and was held before one of the Circuit Judges of the
Fifth Judicial Circuit in and for the County of Brown, State of South Dakota. As
to the ultimate result, Plaintiff expected to prevail; however, the defendant
had the right of appeal to the appellate court of the State of South Dakota. Mr.
Woulfe made material counterclaims against Would Services. The defendant
prevailed and therefore World Services did not recover the $19,000 plus interest
and costs. The counterclaim resulted in the plaintiff owing the defendant
$8,009.10 and writing off $4,000 in receivables. The financial statements
reflect these results.
ITEM 2. - CHANGES IN SECURITIES
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None.
ITEM 3. - DEFAULT UPON SENIOR SECURITIES
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None.
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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There were no shareholder meetings and no matters were submitted to a vote of
shareholders during the second quarter of the fiscal year.
8
<PAGE>
WORLD SERVICES, INC.
PART II. OTHER INFORMATION
(Continued)
ITEM 5. - OTHER INFORMATION
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None.
ITEM 6. - EXHIBITS
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Exhibit 27 - Financial Data Schedule.
9
<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.
August 10, 1998
WORLD SERVICES, INC.
By: /s/ Ronne Tarrell
---------------------------------
Ronne Tarrell, President, Chief
Executive Officer and Principal
Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30,
1998 FINANCIAL STATEMENTS OF WORLD SERVICES, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 538,956
<SECURITIES> 0
<RECEIVABLES> 11,386
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 550,342
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,532,188
<CURRENT-LIABILITIES> 90,183
<BONDS> 0
0
0
<COMMON> 2,715
<OTHER-SE> 1,439,290
<TOTAL-LIABILITY-AND-EQUITY> 1,532,188
<SALES> 0
<TOTAL-REVENUES> 175,849
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 57,433
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 118,417
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 118,417
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
