SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTER REPORT UNDER SECTION 13 0R 15(d)
Quarter Ended 9-30-98 Commission File Number
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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)
Registrant's telephone number, including area code (605) 225-4131
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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 X 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months Yes X
(or for such shorter period that the registrant was required to -----
file such reports), and (2) has been subject to such filing No
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, 1998, Registrant had 2,639,679 shares of its $.001 par value
common stock outstanding.
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Balance Sheet as of September 30, 1998 .................1
Statements of Operations for Quarters Ended
September 30, 1998 and 1997 ............................2
Statements of Operations for the Nine Months
Ended September 30, 1998 and 1997 ......................3
Statements of Cash Flows for the Nine Months
Ended September 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
WORLD SERVICES, INC.
BALANCE SHEET
September 30, 1998
ASSET
CURRENT ASSETS
Cash $ 89,220.49
Certificates of Deposit 580,000.00
Interest Receivable 14,408.00
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TOTAL CURRENT ASSETS 683,628.49
INVESTMENTS AND OTHER ASSETS
United States Treasury Note 419,387.58
Investment-Super 8 Developers 568,000.00
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TOTAL OTHER ASSETS 987,387.58
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TOTAL ASSETS $1,671,016.07
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LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Stock Redemption payable $ 66,656.50
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TOTAL CURRENT LIABILITIES 66,656.50
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 (4,762,710.18)
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TOTAL STOCKHOLDERS' EQUITY 1,604,359.57
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,671,016.07
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1
WORLD SERVICES, INC.
STATEMENTS OF OPERATIONS
For the Quarters Ended September 30, 1998 and 1997
1998 1997
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REVENUE
Dividend Income $ 159,390.40 $ 0.00
Interest Income 13,502.33 6,541.84
Undistributed Income/Loss 0.00 8,100.00
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TOTAL REVENUE 172,892.73 14,641.84
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EXPENSES
Accounting Fees 2,399.00 3,120.80
Contract Wages & Consulting 4,249.61 13,907.20
Faxes 30.00 141.75
Legal Fees 773.87 7,591.77
Director Fees 1,350.00 3,150.00
Office Supplies 366.71 13.80
Printing 119.00 6,786.94
Postage 416.00 2,252.05
Supplies 36.20 133.30
Telephone 48.01 77.77
Rent 750.00 0.00
Annual Meeting 0.00 462.06
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TOTAL EXPENSES 10,538.40 37,637.44
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INCOME(LOSS)BEFORE INCOME TAXES 162,354.33 (22,995.60)
INCOME TAXES 0.00 0.00
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NET INCOME (LOSS) $ 162,354.33 $ (22,995.60)
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INCOME PER SHARE (Basic & Diluted) .06 *
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WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 2,640,000 2,640,000
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* Less than $0.01 per share.
2
WORLD SERVICES, INC.
STATEMENTS OF OPERATIONS
For the Nine Months ended September 30, 1998 and 1997
1998 1997
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REVENUE
Dividend Income $ 318,780.80 $ 239,085.60
Interest Income 29,961.37 31,399.35
Stock Transfer Fees 0.00 39.75
Undistributed Income/Loss 0.00 45,100.00
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TOTAL REVENUE 348,742.17 315,624.70
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EXPENSES
Accounting Fees 11,548.94 11,736.60
Contract Wages & Consulting 30,052.71 16,547.20
Faxes 153.00 281.25
Legal Fees 12,370.84 35,054.97
Director Fees 3,450.00 6,300.00
Office Supplies 767.99 133.15
Printing 664.00 7,769.29
Postage 2,176.45 2,663.55
Supplies 274.52 335.03
Telephone 204.48 121.89
Rent 2,000.00 1,820.00
Travel 0.00 447.80
Miscellaneous Expense 308.00 0.00
Annual Meeting 0.00 462.06
Loss on Uncollectible Note 4,000.00 0.00
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TOTAL EXPENSES 67,970.93 83,672.79
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INCOME BEFORE INCOME TAXES 280,771.24 231,951.91
INCOME TAXES 0.00 0.00
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NET INCOME $ 280,771.24 $ 231,951.91
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INCOME PER SHARE (Basic & Diluted) .10 .08
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WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 2,640,000 2,640,000
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* Less than $0.01 per share.
3
WORLD SERVICES, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1998 and 1997
1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $280,771.24 $231,951.91
Adjustment to reconcile net income to
net cash used in operating
activities:
Equity in Earning of Affiliates 0.00 (45,100.00)
(Increase) Decrease in:
Interest Receivable 5,636.46 0.00
Other Assets (15,899.15) 1,490.13
Increase (Decrease) in:
Stock Redemption Payable (6,739.50) 0.00
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NET CASH PROVIDED BY OPERATING
ACTIVITIES 263,769.05 188,342.04
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Certificates of Deposit (240,000.00) (200,000.00)
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NET CASH USED BY INVESTING
ACTIVITIES (240,000.00) (200,000.00)
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NET INCREASE IN CASH 23,769.05 (11,657.96)
CASH AT BEGINNING OF PERIOD 65,451.44 27,652.56
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CASH AT END OF PERIOD $ 89,220.49 $ 15,994.60
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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, 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 September 30, 1998, and the results of operations
and Statements of Cash Flows for the nine months ended September 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
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, 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.
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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, 1998, COMPARED TO DECEMBER 31,
1997
During the nine months ended September 30, 1998, cash increased approximately
$23,800 as a result of the receipt of a dividend of approximately $318,800
received from Super 8 Motel Developers less the purchase of $240,000
certificates of deposits which are now held by the Company.
Interest receivable decreased from $20,044 at December 31, 1997, to $14,408 at
September 30, 1998.
Primarily as a result of the receipt of the Super 8 Motel Developers Dividend,
current assets increased by $258,132, from $425,496 at December 31, 1997, to
$683,628 at September 30, 1998.
Current liabilities decreased $6,739, from $73,396 at December 31, 1997, to
$66,657 at September 30, 1998. The decrease is the result of payments made on
stock redemption payable.
As a result of the Company's net income for the nine months of $280,771, the
accumulated deficit decreased from $5,043,481 at December 31, 1997, to
$4,762,710 at September 30, 1998. As a result, total stockholders equity
increased from 1,323,588 at December 31, 1997, to $1,604,360 at September 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 September 30, 1998. As a result,
the 'current liabilities' portion of the balance sheet reflects a "stock
redemption payable." During the nine months ended September 30, 1998, the
Company redeemed outstanding fractional shares with a value of approximately
$6,700. The total number of outstanding shares of common stock reflected on the
balance sheet does not give any effect to the fractional shares outstanding.
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WORLD SERVICES, INC.
MANAGEMENTS'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THE
NINE MONTHS ENDED SEPTEMBER 30, 1997
Total revenue for the nine months ended September 30, 1998, was $348,742 as
compared to $315,625 for the comparable period ended September 30, 1997, an
increase of $33,117. The increase is due to an exceptionally good dividend paid
by Super 8 Motel Developers because of the profitable sale of one of their
motels.
Operating expenses were $67,971 for the nine months ended September 30, 1998,
compared to $83,673 for the comparable period ended September 30 1997, a
decrease of $15,702. The majority of this decrease was in legal fees.
Based on the foregoing, the net income available to stockholders for the nine
months ended September 30, 1998, was $280,771.24, which translates to a net
income per share of $.10 based on 2,640,000 weighted average shares outstanding.
This compares to the net income after taxes for the nine months ended September
30, 1997, of $231,951, which translates to a net income per share of $.08 based
on 2,640,000 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.
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WORLD SERVICES, INC.
PART II. OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS
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 World 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
$8,099.10 and writing off $4,000 in receivables. The financial statements
reflect these results.
ITEM 2. - CHANGES IN SECURITIES
None.
ITEM 3. - DEFAULT UPON SENIOR SECURITIES
None.
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no shareholder meetings and no matters were submitted to a vote of
shareholders during the second quarter of the fiscal year.
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WORLD SERVICES, INC.
PART II. OTHER INFORMATION
(Continued)
ITEM 5. - OTHER INFORMATION
None.
ITEM 6. - EXHIBITS
Exhibit 27 - Financial Data Schedule.
9
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 9, 1998
WORLD SERVICES, INC.
By: /s/ Ronne Tarrell
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Ronne Tarrell, President, Chief
Executive Officer and Principal
Financial Officer
10