UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACTION OF 1934
For the quarterly period ended September 30, 2002
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NO. 000-13499
WORLD SERVICES, INC.
(Exact name of small business issuer as specified in its charter)
SOUTH DAKOTA |
| 46-0355586 |
|
|
|
523 Camelot Drive, P.O. Box 786 Aberdeen, South Dakota 57402 |
(605) 229-8899
(Issuer’s telephone number)
(Not Applicable)
(Former name, former address and former fiscal year,
if changed since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes o No o
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:
As of November 11, 2002, there were 2,649,113 shares of common stock, $.001 par value outstanding.
Transitional Small Business Disclosure Format (Check one): Yes o No ý
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 ý No o
2
INDEX |
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
| |
|
|
| |
|
|
|
|
|
|
| |
|
|
| |
|
|
|
|
|
|
| |
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
| ||
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
| ||
|
|
|
|
|
| ||
|
|
|
|
|
| ||
|
|
|
|
|
| ||
|
|
|
|
|
| ||
|
|
|
|
|
| ||
|
|
| |
|
|
|
|
|
| ||
|
|
|
|
|
|
3
PART I — FINANCIAL INFORMATION
WORLD SERVICES, INC.
September 30, 2002
(Unaudited)
|
|
|
| |
ASSETS |
|
|
| |
|
|
|
| |
CURRENT ASSETS |
|
|
| |
Cash & Cash Equivalents |
| $ | 1,239,705.09 |
|
Certificates of Deposit |
| 295,000.00 |
| |
Interest Receivable |
| 8,373.26 |
| |
|
|
|
| |
TOTAL CURRENT ASSETS |
| 1,543,078.35 |
| |
|
|
|
| |
INVESTMENTS AND OTHER ASSETS |
|
|
| |
Investment-Super 8 Developers |
| 568,000.00 |
| |
|
|
|
| |
TOTAL OTHER ASSETS |
| 568,000.00 |
| |
|
|
|
| |
TOTAL ASSETS |
| $ | 2,111,078.35 |
|
|
|
|
| |
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
| |
|
|
|
| |
CURRENT LIABILITIES |
|
|
| |
Stock Redemption Payable |
| $ | 39,937.75 |
|
Accounts Payable |
| 5,022.82 |
| |
|
|
|
| |
TOTAL CURRENT LIABILITIES |
| 44,960.57 |
| |
|
|
|
| |
STOCKHOLDERS EQUITY |
|
|
| |
Common Stock, par value of $.001 per |
| 2,715.00 |
| |
Additional paid in capital |
| 6,364,354.75 |
| |
Accumulated Deficit |
| (4,300,951.97 | ) | |
|
|
|
| |
TOTAL STOCKHOLDERS EQUITY |
| 2,066,117.78 |
| |
|
|
|
| |
TOTAL LIABILITIES AND |
| $ | 2,111,078.35 |
|
4
WORLD SERVICES, INC.
FOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001
(Unaudited)
|
| 2002 |
| 2001 |
| ||
REVENUE |
|
|
|
|
| ||
Interest Income |
| $ | 9,108.12 |
| $ | 21,503.24 |
|
Dividend Income |
| 0.00 |
| 0.00 |
| ||
|
|
|
|
|
| ||
TOTAL REVENUE |
| 9,108.12 |
| 21,503.24 |
| ||
|
|
|
|
|
| ||
EXPENSES |
|
|
|
|
| ||
Accounting Fees |
| 7,878.50 |
| 3,038.93 |
| ||
Administrative Services |
| 0.00 |
| 0.00 |
| ||
Contract Wages & Consulting |
| 0.00 |
| 6,365.00 |
| ||
Faxes |
| 0.00 |
| 288.00 |
| ||
Legal Fees |
| 10,338.18 |
| 14,880.40 |
| ||
Director Fees |
| 0.00 |
| 5,100.00 |
| ||
Printing |
| 5,132.47 |
| 105.20 |
| ||
Postage |
| 29.29 |
| 61.50 |
| ||
Supplies |
| 0.00 |
| 148.43 |
| ||
Telephone |
| 0.00 |
| 20.40 |
| ||
Rent |
| 0.00 |
| 750.00 |
| ||
Meeting Expense |
| 0.00 |
| 0.00 |
| ||
Office Expense |
| 0.00 |
| 0.00 |
| ||
Miscellaneous |
| 0.00 |
| 47.70 |
| ||
|
|
|
|
|
| ||
TOTAL EXPENSES |
| 23,378.44 |
| 30,805.56 |
| ||
|
|
|
|
|
| ||
INCOME (LOSS) BEFORE INCOME TAXES |
| (14,270.32 | ) | (9,302.32 | ) | ||
|
|
|
|
|
| ||
INCOME TAXES |
| 0.00 |
| 0.00 |
| ||
|
|
|
|
|
| ||
NET INCOME (LOSS) |
| $ | (14,270.32 | ) | $ | (9,302.32 | ) |
|
|
|
|
|
| ||
INCOME PER SHARE (Basic & Diluted) |
| $ | 0.04 |
| $ | 0.00 |
|
|
|
|
|
|
| ||
WEIGHTED AVERAGE COMMON |
| 2,649,000 |
| 2,649,000 |
|
5
WORLD SERVICES, INC.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(Unaudited)
|
| 2002 |
| 2001 |
| ||
REVENUE |
|
|
|
|
| ||
Interest Income |
| $ | 32,193.79 |
| $ | 71,463.59 |
|
Dividend Income |
| 119,542.80 |
| 0.00 |
| ||
|
|
|
|
|
| ||
TOTAL REVENUE |
| 151,736.59 |
| 71,463.59 |
| ||
|
|
|
|
|
| ||
EXPENSES |
|
|
|
|
| ||
Accounting Fees |
| 18,550.60 |
| 13,011.18 |
| ||
Administrative Services |
| 17,503.67 |
| 18,385.00 |
| ||
Contract Wages & Consulting |
| 0.00 |
| 0.00 |
| ||
Faxes |
| 0.00 |
| 576.75 |
| ||
Legal Fees |
| 37,618.91 |
| 18,713.06 |
| ||
Director Fees |
| 600.00 |
| 7,200.00 |
| ||
Printing |
| 0.00 |
| 3,696.20 |
| ||
Postage |
| 0.00 |
| 3,127.49 |
| ||
Supplies |
| 0.00 |
| 260.53 |
| ||
Telephone |
| 750.51 |
| 50.23 |
| ||
Rent |
| 750.00 |
| 2,250.00 |
| ||
Meeting Expense |
| 1,177.05 |
| 169.65 |
| ||
Office Expense |
| 16,999.02 |
| 0.00 |
| ||
Miscellaneous |
| 1,204.08 |
| 47.70 |
| ||
|
|
|
|
|
| ||
TOTAL EXPENSES |
| 95,153.84 |
| 67,487.79 |
| ||
|
|
|
|
|
| ||
INCOME (LOSS) BEFORE INCOME TAXES |
| 56,582.75 |
| 3,975.80 |
| ||
|
|
|
|
|
| ||
INCOME TAXES |
| 0.00 |
| 0.00 |
| ||
|
|
|
|
|
| ||
NET INCOME (LOSS) |
| $ | 56,582.75 |
| $ | 3,975.80 |
|
|
|
|
|
|
| ||
INCOME PER SHARE (Basic & Diluted) |
| $ | 0.03 |
| $ | 0.01 |
|
|
|
|
|
|
| ||
WEIGHTED AVERAGE COMMON |
| 2,649,000 |
| 2,649,000 |
|
6
WORLD SERVICES, INC.
FOR THE NINE MONTHS ENDED SEPTMEBER 30, 2002 AND 2001
(Unaudited)
|
| 2002 |
| 2001 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
| ||
Net Income (loss) |
| $ | 56,582.75 |
| $ | 3,975.80 |
|
|
|
|
|
|
| ||
Adjustment to reconcile net income (loss) to |
|
|
|
|
| ||
net cash provided in operating |
|
|
|
|
| ||
activities: |
|
|
|
|
| ||
(Increase) Decrease in: |
|
|
|
|
| ||
Interest Receivable |
| 6,421.84 |
| 674.51 |
| ||
Increase (Decrease) in: |
|
|
|
|
| ||
Stock Redemption Payable |
| (1,021.00 | ) | (125.00 | ) | ||
Accounts Payable |
| (5,977.18 | ) | (5,500.00 | ) | ||
|
|
|
|
|
| ||
NET CASH PROVIDED BY OPERATING ACTIVITIES |
| 56,006.41 |
| (974.69 | ) | ||
|
|
|
|
|
| ||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
| ||
Redemption of Certificates of Deposit |
| 786,068.26 |
| 355,956.78 |
| ||
|
|
|
|
|
| ||
NET CASH PROVIDED BY INVESTING ACTIVITIES |
| 786,068.26 |
| 355,956.78 |
| ||
|
|
|
|
|
| ||
NET INCREASE (DECREASE) IN CASH |
| 842,074.67 |
| 354,982.09 |
| ||
|
|
|
|
|
| ||
CASH AT BEGINNING OF PERIOD |
| 397,630.42 |
| 42,225.10 |
| ||
|
|
|
|
|
| ||
CASH AT END OF PERIOD |
| $ | 1,239,705.09 |
| $ | 397,207.19 |
|
|
|
|
|
|
| ||
SUPPLEMENTAL DISCLOSURES |
|
|
|
|
| ||
Cash payments for: |
|
|
|
|
| ||
Income taxes |
| $ | 0.00 |
| $ | 0.00 |
|
|
|
|
|
|
| ||
Interest paid |
| $ | 0.00 |
| $ | 0.00 |
|
7
WORLD SERVICES, INC.
FOR THE PERIOD ENDED SEPTEMBER 30, 2002
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 September 30, 2002, and the results of operations and cash flows for the periods ended September 30, 2002 and 2001.
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, 2001.
NOTE 1 — NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies is currently on file with the Securities and Exchange Commission on Form 10-KSB.
NOTE 2 — INCOME TAXES
As of December 31, 2001, the Company had net operating loss carry forwards for income tax purposes totaling approximately $657,000 which expire in the years 2003 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.
8
Item 2. Management’s Discussion and Analysis or Plan of Operation
The following discussion and analysis should be read in conjunction with the Financial Statements and Notes thereto appearing elsewhere in this report.
World Services, Inc. (“we” or “World Services”) has had no significant operations since 1989. Since 1995, our activities have consisted of maintaining our investment in Super 8 Motel Developers, Inc., a South Dakota Corporation (“Developers”) and complying with applicable administrative and regulatory requirements. Our only earnings since 1995 have been from dividends received from our investment in Developers and interest earned on deposits.
On February 22, 2002, Developers acquired control of World Services pursuant to the terms of a public tender offer commenced on October 3, 2001. Subsequent to the completion of the tender offer, all previous members of the Board of Directors resigned, and designees of Developers were appointed to fill the vacant positions.
As of the date of this filing, our new Board of Directors has not decided upon an appropriate course for World Services to follow, but our Board of Directors may decide upon one of the following alternatives:
1. Dissolution and liquidation. Pursuant to this alternative, we would seek shareholder approval for the liquidation of the company and the distribution of net assets to shareholders on a pro rata basis.
2. Continuation of World Services as a going concern. Pursuant to this alternative, we would seek business opportunities and consider various possibilities of reorganization for World Services with the intention of allowing us to engage in active business operations.
3. Sale or distribution of World Services’ minority interest in Developers. Pursuant to this alternative, we would seek a sale or distribution of World Services’ minority interest in Developers to Developers, an affiliate of Developers, or an unrelated third party. This may require shareholder approval.
4. Declare and pay a dividend of World Services’ cash and cash equivalents on a pro rata basis to all shareholders.
5. Other alternatives not contemplated herein.
Our available working capital and anticipated dividends from Developers should allow us to continue our current business of maintaining our public reporting status and investigating
9
possible business combinations indefinitely. If World Services acquires a business, however, it is likely that expenses would increase significantly before we would realize any significant revenues from any new business. Nevertheless, we believe that we will have sufficient funds available to meet all our capital obligations in the foreseeable future.
Except for dividends that Developers may pay to us (which cannot be assured), and interest from any funds on deposit, we do not currently anticipate any other income. We anticipate continuing expenditures during the 2002 fiscal year as we continue to comply with our obligations as a reporting company pursuant to the Securities Exchange Act of 1934 and the South Dakota corporations law. During the quarter ended September 30, 2002, our outstanding shareholder base dropped below 500 shareholders and we became eligible to de-register our shares (providing our total assets do not exceed $10,000,000 on the last day of our most recent three fiscal years prior to the de-registration), thus eliminating our obligation to continue reporting under the 1934 Act, but we must comply with certain requirements of the federal securities laws to do so. The Board has not decided yet whether to de-register our shares.
Liquidity and Capital Resources — September 30, 2002, Compared to December 31, 2001
During the nine months ended September 30, 2002, cash increased approximately $842,000, as a result of redeeming certificates of deposits and current period operations. Interest receivable decreased from $14,795 at December 31, 2001, to $8,373 at September 30, 2002.
Primarily as a result of current period income in excess of expenses, current assets increased by $49,584 from $1,493,494 at December 31, 2001 to $1,543,078 at September 30, 2002.
Current liabilities decreased $6,999 from $51,959 at December 31, 2001, to $44,960 at September 30, 2002. The decrease is the result of the decrease in accounts payable and stock redemption payable.
As a result of the Company’s net income for the nine months of $56,583, the accumulated deficit decreased from $4,357,535 at December 31, 2001 to $4,300,952 at September 30, 2002. As a result, total stockholders equity increased from $2,009,535 at December 31, 2001, to $2,066,118 at September 30, 2002.
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, 2001 or September 30, 2002. As a result, the “current liabilities” portion of the balance sheet reflects a “stock redemption payable.” During the nine months ended September 30, 2002, the Company redeemed outstanding fractional shares with a value of approximately $1,021. The total number of outstanding shares of common stock reflected on the balance sheet does not give any effect to the fractional shares outstanding.
World Services’ most significant asset is its investment in Developers, which is carried at cost on its books. World Services believes that the fair market value of this investment is in
10
excess of its book value. However, as a result of Developers’ controlling interest in World Services, World Services’ minority ownership in Developers, and World Services’ inability to significantly influence Developers, the ultimate realization of this investment may be subject to conditions outside of World Services’ control.
|
| Nine-Month Period Ended |
| ||||
|
|
|
| ||||
|
| September 30, 2002 |
| September 30, 2001 |
| ||
|
|
|
|
|
| ||
Net income (loss) |
| $ | 56,853 |
| $ | 3,976 |
|
|
|
|
|
|
| ||
Operating Expenses |
| 95,154 |
| 67,488 |
| ||
|
|
|
|
|
| ||
Weighted Average Number of Shares |
| 2,649,000 | * | 2,649,000 | * | ||
|
|
|
|
|
| ||
Net income per share |
|
|
|
|
| ||
Less than |
| $ | 0.03 |
| $ | 0.01 |
|
* 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 in August of 1997.
Operating expenses (primarily legal, accounting, and administrative costs) increased during the nine months ended September 30, 2002, due to matters associated with the tender offer and related party transactions discussed herein.
Related Party Transactions
The Company pays a monthly administrative fee to Super 8 Motel Developers, Inc. and bookkeeping expenses to a company beneficially owned by Ron Rivett, the Chairman and a significant shareholder of Super 8 Motel Developers, Inc., to cover such costs as office rent, phone, administrative services, accounting services and general office expenses. Payments for these services totaled $5,553 for the nine months ended September 30, 2002
Item 3. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. World Services’ President and Secretary/Treasurer, after evaluating the effectiveness of its “disclosure controls and procedures”
11
(as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934, as amended) as of a date (the “Evaluation Date”) within 90 days before the filing date of this quarterly report, have concluded that its disclosure controls and procedures are effective in ensuring that material information required to be disclosed is included in the reports that it files with the Securities and Exchange Commission.
Changes in Internal Controls. There were no significant changes in World Services’ internal controls or, to the knowledge of our management, in other factors that could significantly affect these controls subsequent to the Evaluation Date.
We are not a party to any legal proceedings, and to the best of our knowledge, no such proceedings have been threatened or are contemplated.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Since Developers’ acquired control of World Services upon the completion of its public tender offer on February 22, 2002, additional World Services shareholders have approached Developers with offers to sell their shares. Developers considered each of these offers on an individual basis, and as of October 29, 2002, Developers had purchased an aggregate of 144,999 additional shares from such shareholders in private sales. As a result of such purchases, Developers owns over 84% of the currently outstanding shares of World Services common stock.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. See Exhibit Index.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended September 30, 2002.
12
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
WORLD SERVICES, INC.
Dated: November 8, 2002 |
|
|
By |
| /s/ Joel W. Albrecht |
|
| Joel W. Albrecht |
|
| Secretary/Treasurer |
EXHIBIT INDEX
Exhibit No. |
| Description | |
99.1 |
| Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
13
CERTIFICATIONS
I, Harvey D. Aman, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of World Services, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
November 8, 2002 |
|
|
By |
| /s/ Harvey D. Aman |
|
| Harvey D. Aman, President |
14
CERTIFICATIONS
I, Joel W. Albrecht, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of World Services, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a. Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c. Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
November 8, 2002 |
|
|
By |
| /s/ Joel W. Albrecht |
|
| Joel W. Albrecht, Secretary/Treasure |
15