UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended 9-30-01
OR
[ ] Transition Report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
Commission File No. 0-
World Services, Inc.
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(Exact name of small business issuer as specified in its charter)
A corporation
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I.R.S. Employer Identification No. 46-0355586
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PO Box 786 Aberdeen, SD 57402
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(Address of Principal Executive Offices)
(605) 225-4131
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(Registrant's telephone number, including area code)
Not Applicable
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(former address, if changed from 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.
X Yes No
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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 September 30, 2001, there were
2,639,679 shares of common stock outstanding.
Transitional Small Business Disclosure Format (Check one):Yes[ ] No[x]
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Balance Sheet as of September 30, 2001 ........ 1
Statements of Operations for Quarters Ended
September 30, 2001 and 2000 ................... 2
Statements of Operations for the Nine Months
Ended September 30, 2001 and 2000 ............. 3
Statements of Cash Flows for the Nine Months
Ended September 30, 2001 and 2000 ............. 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
Subsequent Events ............................. 8
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings ............................. 12
Item 2. Changes in Securities ......................... 12
Item 3. Default Upon Senior Securities ................ 12
Item 4. Submission of matters to a Vote of Security
Holders ....................................... 12
Item 5. Other Information ............................. 12
Item 6. Exhibits and Reports on Form 10-Q ............. 12
WORLD SERVICES, INC.
BALANCE SHEET
September 30, 2001
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 136,133.73
Money Market Fund 261,073.46
Certificates of Deposit 1,090,608.26
Interest Receivable 27,560.29
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TOTAL CURRENT ASSETS 1,515,375.74
INVESTMENTS AND OTHER ASSETS
Investment-Super 8 Developers 568,000.00
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TOTAL OTHER ASSETS 568,000.00
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TOTAL ASSETS $2,083,375.74
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LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Stock Redemption payable $ 41,833.75
Accounts Payable 5,500.00
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TOTAL CURRENT LIABILITIES 47,333.75
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 (4,331,027.76)
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TOTAL STOCKHOLDERS' EQUITY 2,036,041.99
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,083,375.74
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1
WORLD SERVICES, INC.
STATEMENTS OF OPERATIONS
For the Quarters Ended September 30, 2001 and 2000
(Unaudited)
2001 2000
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REVENUE
Interest Income $ 21,503.24 $ 20,219.24
Dividend Income 0.00 199,238.00
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TOTAL REVENUE 21,503.24 219,457.24
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EXPENSES
Accounting Fees 3,038.93 1,576.05
Contract Wages & Consulting 6,365.00 5,850.00
Faxes 288.00 35.25
Legal Fees 14,880.40 726.00
Director Fees 5,100.00 600.00
Printing 105.20 0.00
Postage 61.50 64.00
Supplies 148.43 4.90
Telephone 20.40 3.00
Rent 750.00 750.00
Miscellaneous 47.70 0.00
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TOTAL EXPENSES 30,805.56 9,609.20
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INCOME(LOSS)BEFORE INCOME TAXES (9,302.32) 209,848.04
INCOME TAXES 0.00 0.00
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NET INCOME (LOSS) $ (9,302.32) $ 209,848.04
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INCOME PER SHARE (Basic & Diluted) $ .01 $ .08
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WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 2,640,000 2,640,000
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2
WORLD SERVICES, INC.
STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 2001 and 2000
(Unaudited)
2001 2000
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REVENUE
Interest Income $ 71,463.59 $ 56,944.51
Dividend Income 0.00 199,238.00
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TOTAL REVENUE 71,463.59 256,182.51
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EXPENSES
Accounting Fees 13,011.18 10,812.31
Contract Wages & Consulting 18,385.00 18,020.00
Faxes 576.75 138.00
Legal Fees 18,713.06 2,143.40
Director Fees 7,200.00 1,950.00
Printing 3,696.20 747.40
Postage 3,127.49 136.84
Supplies 260.53 42.90
Telephone 50.23 53.29
Rent 2,250.00 2,250.00
Annual Meeting 169.65 0.00
Miscellaneous 47.70 0.00
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TOTAL EXPENSES 67,487.79 36,294.14
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INCOME BEFORE INCOME TAXES 3,975.80 219,888.37
INCOME TAXES 0.00 0.00
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NET INCOME $ 3,975.80 $ 219,888.37
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INCOME PER SHARE (Basic & Diluted) .01 .08
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WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 2,640,000 2,640,000
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3
WORLD SERVICES, INC.
STATEMENTS OF CASH FLOWS For the
Nine Months Ended September 30, 2001 and 2000
(Unaudited)
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 3,975.80 $219,888.37
Adjustment to reconcile net income to
net cash used in operating
activities:
(Increase) Decrease in:
Interest Receivable 674.51 (31,131.84)
Increase (Decrease) in:
Stock Redemption Payable ( 125.00) ( 246.00)
Accounts Payable (5,500.00) (5,500.00)
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NET CASH PROVIDED(USED) BY
OPERATING ACTIVITIES ( 974.69) 183,010.53
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Certificates
of Deposit 0.00 (196,401.00)
Redemption of Certificates
of Deposit 355,956.78 0.00
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NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES 355,956.78 (196,401.00)
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NET INCREASE(DECREASE)IN CASH 354,982.09 (13,390.47)
CASH AT BEGINNING OF PERIOD 42,225.10 50,173.74
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CASH AT END OF PERIOD $397,207.19 $ 36,783.27
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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
WORLD SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED SEPTEMBER 30, 2001
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, 2001, and the results of operations
and cash flows for the nine months ended September 30, 2001 and 2000.
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, 2000.
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, 2000, the Company had net operating loss carry forwards for
income tax purposes totaling approximately $823,000 which expire in the years
2001 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.
5
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, 2001, COMPARED TO
DECEMBER 31, 2000
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During the nine months ended September 30, 2001, cash increased approximately
$355,000, as a result of redeeming certificates of deposits. Interest receivable
decreased from $28,235 at December 31, 2000, to $27,560 at September 30, 2001.
Primarily as a result of redeeming certificates of deposit, current assets
decreased by $1,649, from $1,517,025 at December 31, 2000, to $1,515,376 at
September 30, 2001.
Current liabilities decreased $5,625 from $52,959 at December 31, 2000, to
$47,334 at September 30, 2001. The decrease is the result of accounts payable
being paid before the end of the quarter.
As a result of the Company's net income for the nine months of $3,976, the
accumulated deficit decreased from $4,335,004 at December 31, 2000, to
$4,331,028 at September 30, 2001. As a result, total stockholders equity
increased from 2,032,066 at December 31, 2000, to $2,036,042 at September 30,
2001.
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, 2000 or September 30, 2001. As a result,
the 'current liabilities' portion of the balance sheet reflects a "stock
redemption payable." During the nine months ended September 30, 2001, the
Company redeemed outstanding fractional shares with a value of approximately
$125. The total number of outstanding shares of common stock reflected on the
balance sheet does not give any effect to the fractional shares outstanding.
6
WORLD SERVICES, INC.
MANAGEMENTS'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
The company has sufficient funds available to meet its capital obligations in
the foreseeable future. As noted, elsewhere in this report and in the Company's
annual report on Form 10-KSB for the year ended December 31, 2000, the future
conduct of World Services' business is dependent upon a number of factors, and
there can be no assurance that World Services will be able to conduct its
operations as contemplated herein. Certain statements contained in this report,
such as the possibility that World Services may acquire an operating business
or, if any such business is acquired that it can be successfully operated, are
forward-looking statements. The accuracy of these statements cannot be
guaranteed as they are subject to a variety of risks including, but not limited
to: the possibility that World Services will not be able to complete any such
acquisition on economic terms, if at all; and if such an acquisition does occur,
the possibility that World Services will not be able to operate the business
successfully. Furthermore, if any acquisition does occur, it will likely be
accompanied by a change of control, and there can be no assurance that such
change of control will be beneficial to World Services or its existing
shareholders.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2001
COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000
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Nine months ended
September 30, 2001 September 30, 2000
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Net income $ 3,976 $219,888
Operating Expenses 67,488 36,294
Weighted Average
Number of Shares 2,640,000* 2,640,000*
Net income per share
Less than $0.01 $0.08
7
WORLD SERVICES, INC.
MANAGEMENTS'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
* 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.
SUBSEQUENT EVENTS
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During the quarter that ended September 30, 2001, World Services was approached
by and commenced negotiations with Super 8 Motel Developers, Inc. ("Developers")
for a tender offer by which Developers offered to purchase all of the
outstanding shares of World Services common stock for $0.85 per share. As a
result of these negotiations and subsequent regulatory compliance requirements,
World Services has been required to involve its legal counsel and incur greater
expenses than customary. During the quarter ended September 30, 2001, World
Services has allocated approximately $18,000 to the costs related to the
negotiations and the tender offer; World Services expects to incur an additional
$50,000 in fees relating to legal fees, and expenses relating to mailing tender
offer materials to all shareholders, responding to other regulatory
requirements, and calling and holding a shareholders' meeting (currently
scheduled for December 11, 2001).
Consequently, World Services expects that its liquidity and working capital will
decrease as a result of the tender offer commenced by Developers, even though
World Services does not have any obligation to purchase any shares tendered by
shareholders. In order to protect World Services' liquidity and capital assets,
during the negotiations, World Services obtained the following covenants from
Developers should Developers complete the tender offer and acquire shares
representing a controlling majority interest in World Services. World Services
believes that these covenants will benefit shareholders who choose to remain
minority shareholders in World Services should Developers complete the tender
offer.
o Developers will not cause World Services to divest or sell any
material assets through a distribution, dividend, payment of any sort
or to conduct any merger, consolidation, exchange or other
8
WORLD SERVICES, INC.
MANAGEMENTS'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
transaction, in a manner which is inconsistent with the fiduciary
duties or other legal obligations that a majority shareholder owes to
any minority shareholders under all applicable state or federal laws;
o Developers will not cause World Services to make any payment to
Developers in exchange for any property or services other than at fair
market value as determined in good faith by the Board of Directors of
World Services at the time of such transaction;
o For so long as World Services is subject to Exchange Act, Developers
will cause World Services to comply with financial reporting and other
obligations pursuant to such Act, and if Developers determines to take
World Services private through filing a Form 15, engaging in a 13e-3
Transaction, or other means, Developers will (and will cause World
Services to) comply with all relevant rules and statutes; and
o For a period of twenty-four (24) months following the completion of
the Tender Offer,
o Developers will not cause World Services to make any
dividend or distribution of cash, stock or other assets or
consideration to its shareholders, or conduct any sale,
merger, consolidation, exchange or other transaction,
pursuant to which Developers would receive a
disproportionate amount of cash, stock or other assets or
consideration on a per share basis in comparison to World
Services' other shareholders;
o Developers will not cause World Services to enter into any
sale of all or substantially all of its assets, merger,
consolidation, exchange, voluntary dissolution or other
transaction that would have the effect of eliminating the
interests of the non-tendering shareholders and give rise to
9
WORLD SERVICES, INC.
MANAGEMENTS'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
dissenters' rights under Section 47-6-23 of the South Dakota
business corporations statutes, unless either (i) the per
share price to be paid to the non-tendering shareholders is
not less than the Tender Offer Price plus interest
calculated from the date the Tender Offer is completed,
minus dividends, as provided in Section 47-33-18(l)(a) of
the business combinations provisions under the Takeover Act,
or (ii) the World Services board has received a fairness
opinion from an independent appraiser indicating that the
per share price to be paid to the minority shareholders is
fair (without applying a minority interest or lack of
marketability discounts); and
o Developers will not cause World Services to enter into
any transaction with Developers or its affiliates not
giving rise to dissenters' rights as provided above,
other than at fair market value (as provided above),
and if World Services were to enter into any such
transaction Developers would cause the World Services
board to give all World services shareholders notice of
the transaction with an explanation of how the board
reached its determination as to the value of the
consideration that is detailed enough for the
shareholders to reasonably evaluate the board's
decision. Any shareholder(s) objecting to the amount or
nature of the consideration will have the right to
require World Services to have an independent appraisal
completed, and
o if the appraised value is within 10% of the price
set by the board, then the price will stand and
World Services will pay for the appraisal;
o if the appraised value is more than 10% higher
than the price set by the board, Developers will
be required to pay such additional consideration
to World Services and reimburse World Services for
the reasonable cost of the appraisal; and
10
WORLD SERVICES, INC.
MANAGEMENTS'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
o if the appraised value is more than 10% lower
than the price set by the board, the price will
stand and the shareholder(s) requesting the
appraisal will reimburse World Services for the
reasonable cost of the appraisal.
To the extent that circumstances change (such as if Developers should extend the
expiration of the tender offer beyond December 11, 2001, the current expiration
date), World Services' costs in the tender offer/shareholder meeting process
will likely increase, and the increased costs would adversely impact World
Services' liquidity and working capital.
11
WORLD SERVICES, INC.
PART II. OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS
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None.
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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On June 28, 2001, the Company held a special meeting of its shareholders in lieu
of an annual meeting. At that meeting, the following nominees were reelected to
the Board of Directors: Ronne Tarrell, Delores Bower, David Jorgenson, Delbert
Harty, and Terry Heinz. No other matters were considered at the special meeting.
ITEM 5. - OTHER INFORMATION
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None.
ITEM 6. - EXHIBITS
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None.
12
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.
November 7, 2001
WORLD SERVICES, INC.
By: /s/ Ronne Tarrell
--------------------------------
Ronne Tarrell, President,
Chief Executive Officer
and Principal Financial
Officer
13