** **

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-KSB**

 
| **ý** | **ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|------------|-------------------------------------------------------------------------------------------|

 
|   | **For the  fiscal year ended: December 31, 2001** |
|--------|---------------------------------------------------|

 

**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 number: 0-13499-D**

** **

**WORLD SERVICES, INC.**

(Nameof small business issuer in its charter)

 

| **South Dakota**                                                |   | **46-0355586**                        |
|-----------------------------------------------------------------|--------|---------------------------------------|
| (State  or other jurisdiction of incorporation or organization) |   | (I.R.S.  Employer Identification No.) |
|                                                            |   |                                  |
| **523 Camelot Drive, P.O. Box 4800**                            |
| **Aberdeen, South Dakota 57402**                                |
| (Address  of principal executive offices) Zip Code              |
|                                                            |   |                                  |
| Issuer’s  telephone number: **(605) 229-8899**             |

 

Securitiesregistered under Section 12(b) of the Exchange Act: None

Securitiesregistered under Section 12(g) of the Exchange Act:  Common Stock, $.001 par value

 

Check whether the issuer (1)filed all reports required to be filed by Section 13 or 15(d) of the ExchangeAct during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for at least the past 90 days. Yes  ý           No  o

 

Check if there is nodisclosure of delinquent filers in response to Item 405 of Regulation S-B inthis form, and no disclosure will be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.ý

 

Issuer’s revenues for itsmost recent fiscal year: $87,000

 

Aggregate market value ofvoting stock held by non-affiliates as of December 31, 2001: $-0-. There iscurrently no trading market for the Registrant’s securities.  Number of shares of common stock, $.001 parvalue, outstanding as of December 31, 2001: 2,649,063.

 

Documents incorporated byreference: No documents areincorporated by reference into this annual report on Form 10-KSB, other thanthe exhibits listed in Item 13(c) hereto.

 

 

**WORLD SERVICES, INC.**

**FORM 10-KSB**

 

**PART I**

 

#### **Item 1. Description of Business**

 

(a) *Business Development*.

 

*General*. WorldServices, Inc. (“we” or “World Services”) was incorporated under the laws ofthe State of South Dakota on December 17, 1979 under the name of MidwestManagement & Marketing Corporation. The name was changed in July 1983 toWorld Services, Inc. Currently, our only asset (other than cash andcertificates of deposit) and our principal source of income was derived fromour ownership of approximately 16% of the outstanding stock of Super 8 MotelDevelopers, Inc. (“Developers”), although Developers chose to make nodistributions to its shareholders in 2001.

 

For approximately the lastten years, we have conducted no active business other than maintaining ourstatus as a validly existing South Dakota corporation, collecting receivablesand settling our debts that we incurred by ceasing our active operations, andmaintaining our books and records to allow us to obtain audited financialstatements as necessary.

 

Effective September 10, 2001, after several months of discussion and negotiation, we entered into an agreement with Developers by which we agreed to cooperate with Developers in its completion of an offer to purchase all of our outstanding shares of common stock for $0.85 per share. We amended this agreement in December 2001 to increase the share price offered to our shareholders to $0.90 should Developers acquire more than 70% or to $0.92 for more than 80% of our outstanding common stock.  Developers commenced the tender offer on October 3, 2001.       On February 22, 2002 Developers completed the tender offer by accepting for payment all the properly tendered shares, consisting of just under 79.0% of our outstanding common stock.  As a result, Developers now owns more than a majority of the outstanding shares of World Services common stock and therefore controls World Services.

 

Following the completion of the tender offer, the previous officers and directors of World Services resigned, appointed designees of Developers to fill the vacancies, and the new Board appointed new officers to fill the officer vacancies, all effective as of March 25, 2002.

 

As indicated in its tender offer statement, Developers has advised thatit currently has no definitive plans for the future conduct of any business byWorld Services other than a change in the members of the World Services’ Boardand appointment of new officers.

 

***Note on Forward Looking Statements*****:  Statements contained in this report that arenot historical facts may be forward-looking statements within the meaning offederal law.  Such forward-lookingstatements reflect management’s beliefs and assumptions and are based oninformation currently available to management. The forward-looking statements involve known and unknown risks,uncertainties and other factors that may cause actual results, performance orachievements of World Services to differ materially from those**

 

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**expressed or implied in such statements.  Such factors include, but are not limited tothe following factors: the possibility that we will not be able to complete anyfuture acquisition or transaction on economic terms, if at all or otherwisecommence operations; and if such a transaction or commencement of operationsdoes occur, the possibility that we will not be able to operate the businesssuccessfully.  There can be no assurancethat such factors or other factors will not affect the accuracy of suchforward-looking statements.**

 

(b) *Business of Issuer.*

 

We have been essentiallyinactive since 1988. The only significant income we receive is derived from ourinvestment in Developers, in the form of dividends and interest income from ourdeposits. In the near future, we intend to maintain our investments inDevelopers. In addition, we intend to consider business combinations andfinancing opportunities, although there can be no assurance that we will beable to complete either.

 

In each of 1999 and 2000, wereceived dividend income from Developers of approximately $199,000.  In 2001, we received no dividend income fromDevelopers.  On October 5, 2001, Developersadvised its shareholders, including World Services, that any decision regardingthe payment of a dividend to its “shareholders and the amount of such dividendwill be dependent upon the outcome of the tender offer.”

 

Super 8 Motel Developers,Inc.

 

*Acquisition*.  We currently own 796,952 shares ofDevelopers common stock which we acquired in a series of transactions.  In 1984 we acquired shares of World VentureCapital Corporation, which subsequently changed its name to Super 8 VentureCapital, Inc. (“S8VC”). In May 1986 S8VC was liquidated and its assets,consisting of cash, World Services common stock and common stock of Developerswere distributed to shareholders. As a result of the liquidation and subsequenttransactions, we received 796,952 shares or approximately 16% of Developerscommon stock, $16,689 in cash and 125,000 shares of our own common stock. Wecontinue to own these shares.

 

*Business ofDevelopers*.  Developersis engaged in the acquisition, development and management of budget motels.Developers currently operates franchise budget motels located in Virginia, WestVirginia, Maryland, Delaware and the District of Columbia. Developers acquiredcertain exclusive franchise rights in July 1984 from Super 8 Motels, Inc., for$250,000. The agreement grants Developers certain exclusive rights in theabove-referenced states to construct, own, and operate motels using the “Super8” name and to represent Super 8 Motels, Inc. in the sale of franchises withinthat territory. Developers is not affiliated with Super 8 Motels, Inc. exceptas a franchisee and contracting party under the agreement discussed below.

 

Significant terms of thefranchise agreement with Super 8 Motels, Inc. and amendments thereto are asfollows:

 

1.                                       The term of thefranchise agreement is through 2004;

 

2.                                       Motels that areowned at least 51% by Developers pay a minimum initial

 

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franchise fee of $10,000;

 

3.                                       Developers is toreceive one-third of the franchise fee of each franchise sold by Developers toother parties in the territory; and

 

4.                                       A specifiedpercentage of the annual gross room rentals of each motel unit in the territoryis to be tendered to Super 8 Motels, Inc. as a fee for services rendered androyalties.  Super 8 Motels, Inc. willpay Developers a sub-franchise fee of 25% of the fee it receives from eachmotel unit in the territory for services rendered by Developers. Those paymentsare to continue from the date such motel unit in the territory first commencesmonthly royalty payments for 10 years for motels opened on or before July 11,1990, and for 15 years for motels opened after July 11, 1990. Sub-franchise feeincome to Developers under this agreement was $402,080 during the year endedDecember 31, 2000, and $393,960 during the year ended December 31, 2001.

 

As of December 31, 2001 and2000, Developers had interests in 32 operating motels. The size of the motelsvaries from 43 to 66 units and the motels are, in many instances, locatedadjacent to restaurant facilities.

 

At December 31, 2001 and2000, Developers was also a general partner in five limited partnerships, allof which were formed for the purpose of owning and operating Super 8 franchisedmotels. These limited partnership interests are in addition to the motels ownedby Developers.

 

*Competition*. Developers isin competition with a large number of lower priced, “budget” motel chains, suchas Motel 6, Days Inn, Econolodge, and Red Roof Inn. In addition, there are manyindividually-owned motels which are not part of a chain, or which are membersof a marketing organization such as “Best Western.” Developers generallycompetes with these other motels on pricing, location and advertising.

 

### *Plan of Operations*

 

As of the date of thisfiling, we have not engaged in any business operations. Although the previousBoard of Directors has indicated that it investigated several businessacquisitions, it did not pursue any beyond initial discussion and duediligence. The current Board of Directors has not yet proposed any possiblebusiness combination or other transaction to the shareholders.

 

The current Board ofDirectors has not decided upon an appropriate course for World Services tofollow.  This course could include anyof several alternatives, briefly identified as follows:

 

1.               Dissolution andLiquidation. Pursuant to this alternative, we would seek shareholder approvalfor the liquidation of the company and the distribution of net assets toshareholders on a pro rata basis.

 

2.               Continuation ofWorld Services as a going concern. Pursuant to this alternative, we

 

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wouldseek business opportunities and consider various possibilities ofreorganization for World Services with the intention of allowing us to engagein active business operations.

 

3.               Sale ordistribution of World Services’ minority interest in Developers.  Pursuant to this alternative, we would seeka sale or distribution of World Services’ minority interest in Developers toDevelopers, an affiliate of Developers, or an unrelated third party. This mayrequire shareholder approval.

 

4.               Declare and paya dividend of World Services’ cash and cash equivalents on a pro rata basis toall shareholders.

 

5.               Otheralternatives not contemplated herein.

 

The current Board ofDirectors has not made any determination as to which, if any of the foregoing alternatives,it may pursue or recommend to our shareholders.  As a result of shareholders tendering almost 79.0% of our commonstock to Developers, a change of control has occurred and Developers now hasthe ability to direct the business and operations of World Services. As themajority shareholder, Developers has stated that it does not currently have anydefinitive plans with respect to the business direction of World Services.                However, as disclosed in thetender offer documents,  in theSeptember 10, 2001 Agreement between Developers and World Services, Developersdid agree to certain covenants that provide protection to minorityshareholders.  Generally, such covenantsprohibit Developers from entering into any business transactions or makingdistributions that would treat non-tendering minority shareholders differentlythan the majority shareholder of World Services.  Specifically, these covenants are as follows:

 

(i)                                     Developers will not causeWorld Services to divest or sell any material assets through a distribution,dividend, payment of any sort or to conduct any merger, consolidation, exchangeor other transaction, in a manner which is inconsistent with the fiduciaryduties or other legal obligations that a majority shareholder owes to anyminority shareholders under all applicable state or federal laws;

 

(ii)                                  Developers will not causeWorld Services to make any payment to Developers in exchange for any propertyor services other than at fair market value as determined in good faith by theBoard of Directors of World Services at the time of such transaction;

 

(iii)                               For so long as WorldServices is subject to the Securities Exchange Act of 1934, Developers willcause World Services to comply with financial reporting and other obligationspursuant to such Act, and if Developers determines to take World Servicesprivate through filing a Form 15, engaging in a 13e-3 Transaction, or othermeans, Developers will (and will cause World Services to) comply with allrelevant rules and statutes; and

 

(iv)                              For a period of twenty-four(24) months following the completion of the tender offer,

 

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•                  Developers willnot cause World Services to make any dividend or distribution of cash, stock orother assets or consideration to its shareholders, or conduct any sale, merger,consolidation, exchange or other transaction, pursuant to which Developerswould receive a disproportionate amount of cash, stock or other assets orconsideration on a per share basis in comparison to World Services’ othershareholders;

 

•                  Developers willnot cause World Services to enter into any sale of all or substantially all ofits assets, merger, consolidation, exchange, voluntary dissolution or othertransaction that would have the effect of eliminating the interests of thenon-tendering shareholders and give rise to dissenters’ rights under §47-6-23of the South Dakota business corporations statutes, unless either (i) theper share price to be paid to the non-tendering shareholders is not less thanthe tender offer Price plus interest calculated from the date the tender offeris completed, minus dividends, as provided in §47-33-18(1)(a) of the businesscombinations provisions under the Takeover Act, or (ii) the World ServicesBoard has received a fairness opinion from an independent appraiser indicatingthat the per share price to be paid to the minority shareholders is fair(without applying a minority interest or lack of marketability discounts); and

 

•                  Developers willnot cause World Services to enter into any transaction with Developers or itsaffiliates not giving rise to dissenters’ rights as provided above, other thanat fair market value (as provided above), and if World Services were to enterinto any such transaction Developers would cause the World Services board togive all World Services shareholders notice of the transaction with anexplanation of how the board reached its determination as to the value of theconsideration that is detailed enough for the shareholders to reasonably evaluatethe board’s decision.  Anyshareholder(s) objecting to the amount or nature of the consideration will havethe right to require World Services to have an independent appraisal completed,and

 

(A)                  if the appraised value iswithin 10% of the price set by the board, then the price will stand and WorldServices will pay for the appraisal;

 

(B)                    if the appraised value ismore than 10% higher than the price set by the board, Developers will berequired to pay such additional consideration to World Services and reimburseWorld Services for the reasonable cost of the appraisal; and

 

(C)                    if the appraised value ismore than 10% lower than the price set by the board, the price will stand andthe shareholder(s) requesting the appraisal will reimburse World Services forthe reasonable cost of the appraisal.

 

Any shareholder’s right to require an appraisal under the foregoingprovisions is subject to World Services’ receipt of the prior written agreementof such

 

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shareholder not to disclose any confidential information about WorldServices or Developers contained in the appraisal and to reimburse WorldServices for the appraisal cost if the appraised value is more than 10% lowerthan the price set by the board (or its pro rata share of such cost if multipleshareholders request the appraisal).

### * *

### *Possible Liquidation*

 

To the extent the Board ofDirectors recommends liquidation to the shareholders, it will do so inaccordance with the applicable requirements of South Dakota corporation law andthe requirements of the Securities Exchange Act of 1934. We have attempted tosell our interest in Developers previously; therefore, there can be noassurance that we will be able to do so in connection with any liquidationplan. Furthermore, there can be no assurance that we would be offered a fairprice in connection with any attempt to liquidate our interest in Developers.

 

In the past the previousBoard of Directors contemplated distributing our ownership of Developers’common stock to our shareholders, although now that Developers is thecontrolling shareholder, that is not likely to occur.  Any distribution of our shares of Developer’s stock would becomplicated by compliance with the federal Securities Act of 1933 and theSecurities Exchange Act of 1934, and would likely result in tax consequences toWorld Services and its shareholders.

 

### *Business Combinations*

 

We may attempt to implement abusiness plan to seek, investigate, and, if warranted, to acquire an interestin a business opportunity which management believes may provide a return toWorld Services and its shareholders. We may attempt to do so using our workingcapital, and our unissued common stock, or debt.  Any such issuance of common stock or other equity interest woulddilute the ownership percentage of our existing shareholders. In someinstances, a business opportunity could involve the acquisition of or mergerwith a corporation or business. In other cases it could involve the acquisitionof productive assets.

 

Although we have reviewed thepossibilities mentioned above and the previous Board of Directors has attemptedto implement this portion of our plan of operations over the past five years,the Board has never indicated that it identified a business opportunity foracquisition.

 

The selection of a businessopportunity is a complex process.  Sucha decision will involve a number of risks because potentially availablebusiness opportunities may occur in many different industries and may be invarious stages of development. However, due in part to depressed economicconditions in a number of geographic areas, rapid technological advances beingmade in some industries and shortages of available capital, management believesthat there may be firms seeking either the limited additional capital that wecan offer or the benefits of a public reporting company, or both. The perceivedbenefits of a public reporting company may include facilitating or improvingthe terms upon which additional equity financing may be obtained and facilitatingthe eventual listing of such shares on a national securities exchange orover-the-counter market.

 

In seeking businessopportunities, management’s decision will be based upon the

 

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objective of seekinglong-term capital appreciation from the value of our investment. Current incomewill be a minor factor in any such decisions.

 

Due to our limited financialresources, we believe that we will essentially be limited to one businessventure in the foreseeable future, if we decide to pursue an acquisition. Thislack of diversification would not permit us to offset potential losses from onebusiness opportunity against profits from another, and should be considered anadverse factor affecting any decision to purchase our securities.

 

In some cases, our managementwill have the authority to effect acquisitions without submitting the proposalto the shareholders for their consideration. In some instances, however, theproposed participation in a business opportunity may be submitted to theshareholders for their consideration, either voluntarily by the Board ofDirectors to seek the shareholders’ advice and consent, or because of arequirement of state law. There can be no assurance that we will be able tocomplete any such acquisition.

 

### *Registration Under or Waiverof Investment Company Act*

 

We sold our travel and realestate operations to certain affiliates and our interest in First Savings &Loan Association of South Dakota, Inc. (“First Savings”) in 1989 and 1997,respectively. Although we stated in a proxy statement at that time that ifthese events occurred we intended to elect treatment as a business developmentcompany (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”), wedid not do so because we did not have sufficient working capital to completethe steps necessary for such an election.

 

Currently, we may beconsidered an “investment company” as that term is defined in the 1940 Act. Aninvestment company is generally a company that is engaged in the business ofinvesting, holding, reinvesting, or trading of investment securities.Investment securities are defined by the 1940 Act to include all securitiesexcept United States government obligations, certain other securities and cash wherewe have less than a 50% interest in the issuer. Under that definition, ourDevelopers securities would classify as investment securities.

 

Because these securities havesuch a significant position in our financial statements, it is possible thatthe Securities and Exchange Commission may take the position that we are aninvestment company and should be registered as such under the 1940 Act. Webelieve that if the 1940 Act is applicable at all, we are an inadvertentinvestment company. This status resulted from the sale of our operating assetsin 1988-1989, the 1997 sale of our interest in First Savings, and our inabilityto sell our interest in Developers. We do not intend nor do we have authorityto engage in the business of investing, holding, reinvesting, or trading ofinvestment securities.

 

We intend to vigorouslyresist classification as an investment company, and to take advantage of anyexemptions or exceptions from application of the 1940 Act, which allows anentity a one-time option during any three-year period to claim an exemption asa “transient” investment company. The necessity of asserting any suchresistance, or making any claim of exemption, could be time consuming andcostly, or even prohibitive, given our limited resources.

 

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### *Employees and Consultants*

 

Currently, we do not have anyemployees. Management anticipates that employees and/or consultants will beretained as may be necessary to operate World Services following any businesscombination.

 

#### **Item 2. Description of Property**

 

We have terminated our officespace lease effective March 31,****2002.  Thereafter we intend to conduct business andstore our records at the corporate offices of Developers, which it has agreedto provide at no cost to us. Management believes that this arrangement will besuitable for its needs for the immediate future, until such time as anybusiness combination has been substantially completed or until such time as weengage in any significant operating activities. We do not own any real propertyor material personal property.

 

#### **Item 3. Legal Proceedings**

 

We are not a party to anylegal proceedings, and we know of no such proceedings to be contemplated.

 

**Item 4.Submission of Matters to a Vote of Security Holders**

 

We did not submit any matters to a vote of shareholders during the fourth quarter of the fiscal year.  We held a Special Meeting of Shareholders on February 20, 2002, to satisfy a condition to the completion of Developers’ tender offer.  Were Developers to complete the tender offer before the shareholders adopted the proposed amendment to our articles of incorporation, certain anti-takeover provisions of S.D.C.L. §§47-33-8 through 47-33-16 would have prevented Developers from being able to vote the shares at any subsequent shareholders meeting unless voting rights were approved by the shareholders pursuant to and in accordance with the requirements S.D.C.L §47-33-12.

 

To assure that it would have the right to vote its shares as any other shareholder, Developers conditioned the completion of the tender offer on the shareholders approving and World Services filing an amendment to its articles of incorporation to “opt-out” of the voting restrictions found in S.D.C.L. §§47-33-8 through 47-33-16.

 

At the meeting, our shareholders approved the following amendment to our articles of incorporation that added a new Article Nine as follows:

 

The provisions of the South Dakota Domestic Public Corporation Takeover Act (S.D.C.L. §§47-3-8 through 47-33-16) do not apply: (A) to the acquisition by Developers of World Services common stock pursuant to the tender offer it commenced on October 3, 2001 (including any amendment or extension thereof), or (B) if the acquisition described in clause (A) is completed, to any subsequent acquisition; provided, however, that if the tender offer described in clause (A) is terminated and such acquisition is not completed, the World Services Board of Directors shall have the authority to further amend these articles of incorporation to delete this Article Nine without further action by the shareholders.

 

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The foregoing amendment to the articles of incorporation was approved by shareholders representing more than a majority of shares outstanding as of the record date and was duly filed with the Secretary of State of South Dakota, and became effective on February 21, 2002.

 

**PART II**

 

#### **Item 5. Market for Common Equity and RelatedStockholder Matters**

 

(a)  Market Information.

 

Our common stock is not eligiblefor listing on the NASDAQ system or any national exchange or over-the-countermarket, and trading, if any, has been strictly limited to private transactions.To our knowledge, there has been no significant trading in World Servicescommon stock for a significant period of time.

 

(b)  Holders.

 

(b)(1) The approximate numberof record holders of World Services common stock, $.001 par value, as ofDecember 31, 2001 was 1,750. As of February 22, 2002, following the completionof the tender offer there were approximately 570 record holders.  These figures do not reflect anindeterminable number of shareholders whose shares are held in “street name.”

 

(c)  Dividends.

 

We have not paid a dividendon our common stock and we do not have any current plans to pay a dividend onour common stock in the foreseeable future.

 

#### **Item 6. Management’s Discussion and Analysisor Plan of Operation Results of Operations**

 

##### *Years Ended December 31, 2000 and 2001*

 

As stated above, we have beenessentially inactive since early 1988. Until 1995, our activities consisted ofnothing more than maintaining our investment in Developers, which we continueto maintain, and in First Savings, which we have sold. After 1995, we have beencomplying with applicable administrative and regulatory requirements, and(since 1999) have been considering business opportunities to present to ourshareholders for consideration. Our only earnings in 2000 and 2001 have beenfrom dividends received from our investment in Developers (during 2000 only)and interest earned on deposits.

 

As compared to 2000, ourexpenditures increased in 2001.  Thisincrease is primarily due to greater legal and accounting fees andadministrative expenses stemming from the tender offer commenced by Developers.  We will continue to incur general andadministrative expenses necessary to continue the effectuation of our Plan ofOperations, although our activities may depend upon Developers’ determinationof its next course of action for World Services.  Our available working capital and anticipated dividends fromDevelopers should allow us to continue

 

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our current business of maintaining our public reporting status andinvestigating possible business combinations indefinitely.  Were World Services to acquire a business,however, it is likely that expenses would increase significantly before wewould realize any significant revenues from any new business.

 

Except for dividends thatDevelopers may pay to us (which cannot be assured), and interest from any fundson deposit, we do not currently anticipate any other income. We anticipatecontinuing expenditures during the 2002 fiscal year as World Services continuesto comply with its obligations as a reporting company pursuant to the SecuritiesExchange Act of 1934 and the South Dakota corporations law.  If our outstanding shareholder base dropsbelow 500 shareholders, we may decide to de-register our shares (providing ourtotal assets do not exceed $10,000,000 on the last day of our most recent threefiscal years), thus eliminating our obligation to continue reporting under the1934 Act, but we must comply with certain requirements of the federalsecurities laws to do so.

 

*RecentlyIssued Accounting Pronouncements*

 

On June 30, 2001, the FASB approved the issuance ofSFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and OtherIntangible Assets.  SFAS No. 141 statesthat all business combinations should be accounted for using the purchase methodof accounting; use of pooling-of-interest method is prohibited. Accounting forthe excess of the fair value of net assets over cost (negative goodwill), willbe allocated to certain assets first with any remaining excess recognized as anextraordinary gain.  SFAS No. 141 iseffective for business combinations completed after June 30, 2001.  SFAS No. 142 addresses the accounting forall purchased intangible assets but not the accounting for internally developedintangible assets.  Goodwill will nolonger be amortized and will be reviewed for impairment in accordance with SFASNo. 142. Goodwill will be tested annually and on an interim basis if an eventor circumstance occurs between the annual tests that might reduce the fairvalue of the reporting unit below its carrying value.  SFAS No 142 is effective for fiscal years beginning afterDecember 31, 2001, with early adoption permitted under certaincircumstances.  Goodwill and intangibleassets acquired in a transaction completed after June 30, 2001 but before SFASNo. 142 is initially applied will be accounted for in accordance with SFAS No.142.

 

In June 2001, the FASB approved for issuance SFAS 143Asset Retirement Obligations.  SFAS 143establishes accounting requirements for retirement obligations associated withtangible long-lived assets, including (1) the timing of the liabilityrecognition, (2) initial measurement of the liability, (3) allocation of assetretirement cost to expense, (4) subsequent measurement of the liability and (5)financial statement disclosures.  SFAS143 requires that an asset retirement cost should be capitalized as part of thecost of the related long-lived asset and subsequently allocated to expenseusing a systematic and rational method. The statement is effective forfinancial statements issued for fiscal years beginning after June 15,2002.  The Company does not believe thatthe adoption of the statement will have a material effect on its financialposition, results of operations, or cash flows.

 

In October 2001, the FASB also approved SFAS 144,Accounting for the Impairment or Disposal of Long-Lived Assets.  SFAS 144 replaces SFAS 121, Accounting forthe Impairment of Long-Lived Assets and for Long-Lived Assets to Be DisposedOf.  The new accounting model

 

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for long-livedassets to be disposed of by sale applies to all long-lived assets, includingdiscontinued operations, and replaces the provisions of APB Opinion No. 30,Reporting Results of Operations-Reporting the Effects of Disposal of a Segmentof a Business, for the disposal of segments of a business.  Statement 144 requires that those long-livedassets be measured at the lower of carrying amount or fair value less cost tosell, whether reported in continuing operations or in discontinuedoperations.  Therefore, discontinuedoperations will no longer be measured at net realizable value or includeamounts for operating losses that have not yet occurred.  Statement 144 also broadens the reporting ofdiscontinued operations to include all components of an entity with operationsthat can be distinguished from the rest of the entity and that will beeliminated from the ongoing operations of the entity in a disposaltransaction.  The provisions ofStatement 144 are effective for financial statements issued for fiscal yearsbeginning after December 15, 2001 and, generally, are to be appliedprospectively. These statements are not expected to have a material effect onthe Company’s financial statements.

 

##### *Liquidity and Capital Resources*

 

December 31, 2000 and 2001

 

At the time we ceased activebusiness operations in 1989, we had almost no operating capital remaining andhave been unable to raise any substantial amounts of money since that time. Wereceived approximately $199,000 in dividends from Developers in each of 1999and 2000, and no dividends in2001.  In 1997, we also receivedproceeds of approximately $427,000 from the sale of our investment in FirstSavings to an unaffiliated third party. These proceeds were contributed to ourworking capital.

 

At December 31, 2001, we hadnet working capital of $1,441,000, consisting of accumulated cash dividendsfrom Developers, interest income, and proceeds from the 1997 sale of the FirstSavings common stock. Prior to 1994, we had significant working capitaldeficits.

 

Our most significant asset isour investment in Developers, which is carried at cost on our books. Managementbelieves that the fair market value of this investment is in excess of its bookvalue. However, as a result of Developers’ controlling interest in us, ourminority ownership in Developers and our inability to significantly influencethis entity, the ultimate realization of this investment may be subject toconditions outside of our control. We had previously received monies from ourinvestment in First Savings and will receive no additional dividends from FirstSavings since we sold our entire interest in First Savings in October 1997.

 

During the years endedDecember 31, 2000 and 2001, we used a limited amount of cash in investingactivities solely as a result of purchases of certificates of deposit.

 

#### **Item 7. Financial Statements**

 

World Services’ auditedfinancial statements, described as follows, are appended to the signature pageof this report.

 

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*WorldServices, Inc.:*

 

Independent Auditor’s Report

 

Balance Sheet - December 31,2001

 

Statements of Operations -For the Years Ended December 31, 2001 and 2000

 

Statement of Changes inStockholder’s Equity - For the Period from January 1, 2000 through December 31,2001

 

Statements of Cash Flow - Forthe Years Ended December 31, 2001 and 2000

 

Notes to Financial Statements

 

**Item 8.Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure.**

 

Since inception, we have notfiled a Form 8-K reporting a change of accountants, nor has there been anymaterial disagreement with our accountants on any matter regarding accountingor financial disclosure.

 

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**PART III**

 

**Item 9. Directors, Executive Officers, Promoters and Control Persons;Compliance With Section 16(a) of the Exchange Act**

 

(a)  Identification of Previous and Current Directors and ExecutiveOfficers.

 

In connection with thecompletion of the tender offer discussed in Part I hereof, all of the previousdirectors and officers of World Services resigned and appointed Mr. Harvey D.Aman, Mr. Joel W. Albrecht, and Mr. Ronald J. Rivett to World Services’ Boardof Directors (the “Current Board”) and reduced the number of directors from fiveto three.  The previous directors ofWorld Services resigned and appointed the Current Board on March 25, 2002.  The previous officers of World Servicesresigned on March 25, 2002. On March 25, 2002, the Current Board appointed Mr. Aman to serve as President, Mr. Rivettto serve as Vice President, and Mr. Albrecht to serve as Secretary/ Treasurerof World Services to fill the vacancies left by the resignations of theprevious officers.

 

Previous Officers andDirectors.

 

The following persons werethe previous officers and directors of World Services, serving in suchcapacities set forth after their names from the time of their appointment orelection in the early 1990s until March 25, 2002:

 
| **Name**        |   | **Age** |   | **Previous  Position**          |
|-----------------|--------|---------|--------|---------------------------------|
| Ronne Tarrell   |   | 60      |   | President, Director             |
| Delores Bower   |   | 58      |   | Vice President, Director        |
| David Jorgenson |   | 66      |   | Director                        |
| Delbert Harty   |   | 62      |   | Director                        |
| Terry Heinz     |   | 44      |   | Secretary, Treasurer,  Director |

 

A brief summary of thebusiness experience of each person who was formerly an officer or director ofWorld Services, and such person’s service with World Services until March 25,2002 is as follows:

 

Ronne Tarrell. Mr. Tarrellwas President since 1993 and a director of World Services since 1990. He is alicensed realtor in the State of South Dakota and is currently abroker-associate with Real Estate Associates in Aberdeen, South Dakota; priorto that he owned and operated Tarrell Realty for more than the previous fiveyears.

 

Delores Bower. Ms. Bower wasVice President and a director of World Services since 1990. She has beenfinancial director of Midwest Paint, a privately held company in Aberdeen,South Dakota, for more than the past five years.

 

David Jorgenson. Mr. Jorgensonwas Secretary and Treasurer from 1993 until 1998, and

 

14

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was a director of World Services since 1990. Mr. Jorgenson is manager ofa small business in Aberdeen, South Dakota. For the five prior years, Mr.Jorgenson was a state video lottery inspector for the State of South Dakota LotteryCommission. In addition, Mr. Jorgenson manages his own investments.

 

Delbert Harty. Mr. Harty wasa director of World Services since 1993. He has been retired for more than thelast five years, and currently manages his personal investments. Prior toretirement he was employed as a machinist.

 

Terry Heinz. Mr. Heinz hadbeen a director of World Services since 1993 and Secretary-Treasurer from 1998.At present Mr. Heinz is the account manager at Northwestern Communications,successor to NorCom Advanced Technologies, Inc., a direct marketing firm inAberdeen, South Dakota. From April 1984 until October 1993 he was a salesrepresentative for Dial-Net, a marketing firm in Sioux Falls, South Dakota.

 

None of the foregoing formerdirectors or officers were a director of any other corporation during thefourth quarter of 2001 which had a class of securities registered under theSecurities Exchange Act of 1934.

 

CurrentBoard and Current Officers

 

The following persons arethe Current Board and current officers of World Services, appointed as of March25, 2002:

 
| **Name**         |   | **Age** |   | **Position**                      |
|------------------|--------|---------|--------|-----------------------------------|
| Joel W. Albrecht |   | 45      |   | Director and  Secretary/Treasurer |
| Harvey D. Aman   |   | 60      |   | Director and President            |
| Ronald J. Rivett |   | 61      |   | Director and Vice  President      |

 

A brief summary of the businessexperience of each person who is a member of the Current Board and is a currentofficer of World Services is as follows:

 

*Joel W. Albrecht*  Since January 2002, Mr. Albrecht has been the Chief FinancialOfficer of The Rivett Group, LLC and from June 2000 to January 2002 was theController for The Rivett Group, LLC. The Rivett Group, LLC is a limited liability company that develops, ownsand manages businesses related to hospitality services industry.  From 1988to June 2000, Mr. Albrecht was the Vice President and theSecretary/Treasurer of Developers.

* *

*Harvey D. Aman *Since 1984, Mr. Aman has been the President andChief Operating Officer and a Director of Developers.

* *

*Ronald J. Rivett*  Since 1984, Mr. Rivetthas served as Vice President, a Director and the Chairman of Developers.  Since 1993,Mr. Rivett has also been the Chairman of The Rivett Group, LLC, a limitedliability company that develops, owns and manages businesses related to thehospitality services industry.

 

15

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None of the current officersor directors are a director or officer of any other company with a class ofsecurities registered under the Securities Exchange Act of 1934, as amended.

* *

*Meetings of the Board and Committees*

 

The previous Board ofDirectors held eleven formal meetings, acted by unanimous written consent onetime during the fiscal year ended December 31, 2001, and held one meetingsubsequently through March 25, 2002. Each director attended all of the formalmeetings either in person or by telephone with the exception of Terry Heinz andDelores Bower who attended nine and ten of the Board meetings, respectively,held in the fiscal year ended December 31, 2001. In addition, regularcommunications were maintained throughout the year among all of the officersand directors of the World Services.

 

We do not have a standingaudit, compensation, or nomination committee.

 

(b)  Significant Employees.

 

We have no salaried employeesat the present time. As described below, we paid compensation to our previouspresident, Mr. Tarrell as an independent contractor.

 

(c)  Family Relationships.

 

There are no familyrelationships among any of our officers and/or directors.

 

(d)  Involvement in Certain Legal Proceedings.

 

During the past five years,no current director, executive officer, promoter or control person of WorldServices, nor any director or officer as of December 31, 2001****has:

 

(1)           Filed or has had filed against him or her a petition underthe federal bankruptcy laws or any state insolvency law, nor has a receiver,fiscal agent or similar officer been appointed by a court for the business orproperty of such person, or any partnership in which he or she was a generalpartner, or any corporation or business association of which he or she was anexecutive officer at or within two years before such filings;

 

(2)           Been convicted in a criminal proceeding or is a namedsubject of a pending criminal proceeding (excluding traffic violations andother minor offenses);

 

(3)           Been the subject of any order, judgment, or decree, notsubsequently reversed, suspended or vacated, of any court of competentjurisdiction, permanently or temporarily enjoining such person from, orotherwise limiting, the following activities:

 

(i)            Actingas a futures commission merchant, introducing broker, commodity tradingadvisor, commodity pool operator, floor broker, leverage transaction merchant,any other person regulated by the Commodity Futures Trading Commission, or anassociated person of any of the foregoing, or as an investment adviser,underwriter, broker or dealer in securities, or as an affiliated person,director, or employee of any investment company, bank, savings and loanassociation or insurance company, or engaging in or continuing

 

16

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anyconduct or practice in connection with such activity;

 

(ii)           Engaging in any type of business practice; or

 

(iii)          Engagingin any activity in connection with the purchase or sale of any security orcommodity or in connection with any violation of federal or state securitieslaws or federal commodities laws;

 

(4)           Been the subject of any order, judgment or decree, notsubsequently reversed, suspended or vacated, of any federal or state authoritybarring, suspending or otherwise limiting for more than 60 days the right ofsuch person to engage in any activity described in paragraph (3)(i) above, orto be associated with persons engaged in any such activity; or

 

(5)           Been found by a court of competent jurisdiction in a civilaction or by the Securities and Exchange Commission (the “Commission”) to haveviolated any federal or state securities law, and the judgment in such civilaction or finding by the Commission has not been subsequently reversed,suspended, or vacated.

 

(6)           Been found by a court of competent jurisdiction in a civilaction or by the Commodity Futures Trading Commission to have violated anyfederal commodities law, and the judgment in such civil action or finding bythe Commodity Futures Trading Commission has not been subsequently reversed,suspended or vacated.

 

(e)  Section 16(a) Disclosure

 

Section 16(a) of theSecurities Exchange Act of 1934 (the “Exchange Act”) requires a company’sdirectors and officers and persons who own more than 10% of the company’sequity securities to file reports of ownership and changes in ownership withthe Securities and Exchange Commission (the “SEC”). Directors, officers, andgreater-than-10% shareholders are required by SEC regulation to furnish thecompany with copies of all Section 16(a) reports filed.

 

Based solely on our review ofthe copies of the reports we received from persons required to file, we believethat during the period from January 1, 2000 through December 31, 2001, allfiling requirements applicable to officers, directors, and greater-than-10%shareholders were complied with in accordance with the requirements of Section16(a).

 

#### **Item 10. Executive Compensation**

 

(a)(1) & (2) CashCompensation.

 

The following table setsforth information regarding compensation paid to the previous president ofWorld Services for the three years ended December 31, 2001. No executiveofficer of World Services earned salary and bonus compensation exceeding$100,000 during any of those years.

 

17

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| **Annual compensation**          |   | **Long-term****Compensation Awards** |   |            |   |           |   |
|----------------------------------|--------|--------------------------------------|--------|-----------------|--------|----------------|--------|
|                             |   |                                 |   |            |   |           |   |   |   | **Awards** |   |   |   | **Payout** |   |   |   |
| **Name and  Principal Position** |   | **Fiscal  Year**                     |   | **($)  Salary** |   | **($)  Bonus** |   | **($)  Other(a)** |   | **($)  Restricted Awards** |   | **Securities  Underlying  Options &  SARs (#)** |   | **LTIP  Payout** |   | **All Other****Compensation** | ** ** |
| Ronne Tarrell                    |   | 1999                                 |   | 22,000          |   | 0              |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
| President                        |   | 2000                                 |   | 22,000          |   | 0              |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |
|                             |   | 2001                                 |   | 22,000          |   | 0              |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   |

 

In February 2002, theprevious Board of Directors granted Mr. Tarrell a one-time bonus of $6,000 forhis services in coordinating World Services’ actions in connection withDevelopers’ tender offer.

 

Developers has informed usthat for the foreseeable future it does not intend to cause World Services topay salaries or other compensation to the recently appointed officers of WorldServices or to any other officers who may be appointed who are affiliated withDevelopers; however, the Current Board is considering paying an administrativefee to Developers not to exceed $22,000 per year for its services inadministering the business and operations of World Services.

 

(b)(1) Compensation UnderPlans.

 

We have no stock option plan,stock bonus plan, other compensatory plan or arrangement, or employee benefitplan for employees, consultants, officers, or directors.

 

(c)  Other Compensation.

 

We did not pay any othercompensation to any officer or director of World Services for services renderedto World Services during the 2001 fiscal year.

 

(d)  Compensation of Directors.

 

We have been paying each ofour directors $150 for their services at each meeting he or she attends. Wepaid a total of $1,950 to our directors for three meetings in 2000 and a totalof $7,800 for eleven meetings in 2001. In addition, officers and directors mayreceive reimbursement for out-of-pocket expenses incurred by them in connectionwith the business of World Services. We have no other arrangementspursuant to which any director was compensated during the 2001 fiscal year forservices as a director.

 

Developers has informed usthat for the foreseeable future is does not intend to cause World Services topay directors’ fees to the Current Board or any directors who may be appointedwho are affiliated with Developers.

 

(e)  Termination of Employment and Change in Control.

 

We have no compensation planor arrangement with respect to any executive officer

 

18

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which plan or arrangement results or will result from the resignation,retirement or any other termination of such individual’s employment with WorldServices.           We have no plan orarrangement with respect to any persons (for example, a “golden parachute”),which will result from a change in control of World Services or a change in theindividual’s responsibilities following a change in control.

 

As a result of the successfulcompletion of the tender offer, Developers now owns a majority of theoutstanding shares of our common stock and the previous members of ourBoard  resigned****and appointed the Current Board, who weredesignated by Developers, effective March 25, 2002.** **Developers has theability to elect the Board of Directors and direct the day-to-day management ofWorld Services.

 

**Item 11.Security Ownership of Certain Beneficial Owners and Management**

 

(a) and (b) Security Ownershipof Certain Beneficial Owners and Management

 

The following table setsforth certain information regarding the beneficial ownership of World Servicecommon stock as of March 25, 2002, by: (i) each officer and director of WorldServices as of December 31, 2001; (ii) each member of the Current Board; (iii)each of the current executive officers; (iv) all current executive officers anddirectors of World Services as a group; and (iv) all those known by WorldServices to be beneficial owners of more than five percent of our common stock.The table does not include information regarding shares of common stock held inthe names of certain depositories/clearing agencies as nominee for variousbrokers and individuals. No such broker or individual is believed to holdgreater than 5% of World Services’ common stock.

 

19

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| **Title of Class** |   | **Name and  Address of   Beneficial Owner of Shares**                                                                       |   | **Amount and  Nature   of Beneficial Ownership** |   | **Percent of  Class** |
|--------------------|--------|-----------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|--------|-----------------------|
| Common Stock       |   | Ronne Tarrell (previous  Director and previous President)(1)(7)(8)                                                          |   | None                                             |   | —                |
|               |   |                                                                                                                        |   |                                             |   |                  |
| Common Stock       |   | Delores Bower (previous  Director and previous Vice President)(2)(7)(9)                                                     |   | None                                             |   | —                |
|               |   |                                                                                                                        |   |                                             |   |                  |
| Common Stock       |   | David Jorgenson (previous  Director)(3)(7)                                                                                  |   | None                                             |   | —                |
|               |   |                                                                                                                        |   |                                             |   |                  |
| Common Stock       |   | Delbert Harty (previous  Director)(4)(7)(8)                                                                                 |   | None                                             |   | —                |
|               |   |                                                                                                                        |   |                                             |   |                  |
| Common Stock       |   | Terry Heinz (previous  Director and previous Secretary/Treasurer)(5)(7)                                                     |   | None                                             |   | —                |
|               |   |                                                                                                                        |   |                                             |   |                  |
| Common Stock       |   | Murray Woulfe(6)(10) HCR 70  Box 2206 Lake George, MN 56458                                                                 |   | None                                             |   | —                |
|               |   |                                                                                                                        |   |                                             |   |                  |
| Common Stock       |   | Joel W. Albrecht, Director  and Secretary/Treasurer(11)                                                                     |   | None                                             |   | —                |
|               |   |                                                                                                                        |   |                                             |   |                  |
| Common Stock       |   | Harvey D. Aman, Director  and President(11)(12)                                                                             |   | None                                             |   | —                |
|               |   |                                                                                                                        |   |                                             |   |                  |
| Common Stock       |   | Ronald J. Rivett, Director  and Vice President(11)(12)                                                                      |   | None                                             |   | —                |
|               |   |                                                                                                                        |   |                                             |   |                  |
| Common Stock       |   | Super 8 Motel Developers,  Inc.(13)                                                                                         |   | 2,085,281                                        |   | 78.7%                 |
|               |   |                                                                                                                        |   |                                             |   |                  |
| Common Stock       |   | All members of the Current  Board and current officers (Joel W. Albrecht, Harvey D. Aman, and Ronald J.  Rivett) as a group |   | None                                             |   | —                |

 

----

(1)  Mr. Tarrell tendered 4,070shares of common stock held in his name pursuant to Developers’ tender offer.

 

(2)  Ms. Bower tendered141,033 shares of common stock held in the name of the Delores Bower Trustpursuant to Developers’ tender offer.  This does notinclude 3,471 shares held in the name of Midwest Paint Services, Inc., acorporation in which Mrs. Bower has a minority interest and which is controlledby her husband and adult son.

 

(3)  Mr. Jorgenson tendered 1,824shares of common stock held in his name pursuant to Developers’ tender offer.

 

(4)  Mr. Harty tendered 7,844shares of common stock held in his name pursuant to Developers’ tender offer.

 

(5)  Mr. Heinz tendered 1,040shares of common stock held in his name pursuant to Developers’ tender offer.

 

(6)  Mr. Woulfe tendered 223,450shares of common stock held in his name pursuant to Developers’ tender offer.

 

(7)  The address for theseindividuals is 724 N. Kline, P.O. Box 786, Aberdeen, SD 57402-0786.

 

(8)  Of the shares tendered by Mr. Tarrell andMr. Harty, 3,922 owned by Mr. Tarrell and 7,844 owned by Mr. Harty were held inescrow pursuant to an agreement with the Director of Securities of SouthDakota.  The Director of Securities hasreleased these shares from escrow as a result of the completion of Developers’tender offer.  The original terms of theescrow required them to be held until, if ever, World Services achieved netearnings per share of $0.10 for any three year period, two of which were to beconsecutive.

 

(9)  Of the shares tendered by Ms. Bower on behalf ofthe Delores Bower Trust, 47,059 shares were held in escrow as described inNote 8, above.

 

(10)  Of the shares tendered byMr. Woulfe, 155,883 shares were held in escrow as described in Note 8, above.

 

(11) The address for these individuals is 523 Camelot Drive, P.O. Box4800, Aberdeen, SD  57402-4800.

 

(12) Mr. Aman is the President, Chief Operating Officer and a Directorof Developers and Mr. Rivett is the Vice President, a Director and Chairman ofDevelopers, and in such capacity each has de facto voting and

 

20

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dispositive power over the shares of World Services common stock ownedof record by Developers listed in the table above.  As the co-trustee of The Rivett Family Trust, Mr. Rivett hasvoting and dispositive power with respect to approximately 32.9% of theoutstanding shares of Developers, and as an individual shareholder Mr. Aman hasvoting and dispositive power with respect to approximately 1.9% of theoutstanding shares of Developers.  However,such interests do not increase Messrs. Rivett and Aman’s voting and dispositivepower with regard to World Services’ common stock beyond that which they holdas directors and officers of Developers.

 

(13) Developers acquired these shares on February 22,2002, as a result of completing and paying for these shares in the tender offerat the rate of $0.90 per share.

 

(c)  Changes in Control.

 

Other than the tender offer commenced on October 3, 2001 by Developers and completed on February 22, 2002, which resulted in Developers acquiring control of World Services, and the subsequent appointment of Developers’ designees to constitute the Current Board as of March 25, 2002, we know of no arrangement, the operation of which may, at a subsequent date, result in change in control of World Services.

 

#### **Item 12. Certain Relationships and RelatedTransactions**

 

(a)(b)(c) Transactions withManagement and Others.

 

None

 

(d)  Transactions with Promoters.

 

Not applicable.

 

**Item 13. Exhibits and Reports on Form 8-K.**

 

(a) Exhibits required to befiled are listed below and, except where incorporated by reference, immediatelyfollow the Financial Statements.

 
| **Number** |   | **Description**                                                                                                                                          |
|------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1        |   | Articles of Incorporation, as amended effective February 21, 2002.                                                                                       |
|       |   |                                                                                                                                                     |
| 3.2        |   | Bylaws. (i)                                                                                                                                              |
|       |   |                                                                                                                                                     |
| 10.1       |   | Agreement dated September 10, 2001, by and between World Services,  Inc. and Super 8 Motel Developers, Inc. (ii)                                         |
|       |   |                                                                                                                                                     |
| 10.2       |   | Amendment dated January 2, 2002 to the Agreement dated September 10,  2001 by and between World Services, Inc. and Super 8 Motel Developers, Inc.  (iii) |
|       |   |                                                                                                                                                     |
| 21.1       |   | Subsidiaries of World Services.                                                                                                                          |

 

----

(i)                                     Incorporated byreference to Exhibit 3.2 filed with World Services’ Report on Form 10-KSB forthe fiscal years ended December 31, 1988, 1990, 1991, 1992,

 

21

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1993 and 1994, filed on orabout January 2, 1996 (Commission File No. 0-13499-D).

 

(ii)                                  Incorporated byreference to Exhibit (d) of World Services’ Schedule 14D-9 filed October 4,2001 (Commission File No. 0-13499-D).

 

(iii)                               Incorporated byreference to Exhibit (d)(2) of World Services’ amended Schedule 14D-9filed January 8, 2002 (Commission File No. 0-13499-D).

 

(b) During the last quarterof the period covered by this report World Services filed no reports on Form8-K.  World Services filed a Form 8-K onMarch 5, 2002 describing the change of control pursuant to the completion ofthe tender offer described herein.

 

22

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SIGNATURES

 

Pursuant to the requirementsof Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registranthas duly caused this report to be signed on its behalf by the undersignedthereunto duly authorized.

 
| March 27, 2002 |                      |
|----------------|---------------------------|
|           | WORLD SERVICES, INC.      |
|           |                      |
|           | /s/  Harvey D. Aman  |   |
|           | Harvey D. Aman, President |

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, the following persons on behalf of theRegistrant and in the capacities and on the dates indicated have signed thisreport below.

 
| March 27, 2002 |   | /s/  Harvey D. Aman                                                          |   |
|----------------|--------|-----------------------------------------------------------------------------------|--------|
|           |   | Harvey D. Aman, President,  Principal Executive                                   |
|           |   | Officer, and Director                                                             |
|           |   |                                                                              |
|           |   |                                                                              |
| March 27, 2002 |   | /s/  Joel W. Albrecht                                                        |   |
|           |   | Joel W. Albrecht, Director,  Principal Financial Officer, and Secretary/Treasurer |
|           |   |                                                                              |
|           |   |                                                                              |
| March 27, 2002 |   | /s/  Ronald J. Rivett                                                        |   |
|           |   | Ronald J. Rivett, Director and  Vice President                                    |

 

23

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***World Services, Inc.***

 

 

 

**Financial Statements**

**December 31, 2001 and 2000**

 

 

 

 

 

 

 

F-1

----

 

**INDEX TO FINANCIAL STATEMENTS**

 
| **Independent  Auditor’s Report**                                                                                       | F-3    |
|------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                         |   |
| **Balance  Sheet  — December 31, 2001**                                                                                 | F-4    |
|                                                                                                                         |   |
| **Statements  of Operations — For the Years Ended  December 31, 2001 and 2000**                                         | F-5    |
|                                                                                                                         |   |
| **Statement  of Changes in Stockholders’ Equity —  For the Period from January 1, 2000 through December 31, 2001** | F-6    |
|                                                                                                                         |   |
| **Statements  of Cash Flows — For the Years Ended  December 31, 2001 and 2000**                                         | F-7    |
|                                                                                                                         |   |
| **Notes to Financial  Statements**                                                                                           | F-8    |

 

F-2

----

 

**INDEPENDENT AUDITOR’S REPORT**

 

The Stockholders andBoard of Directors

World Services, Inc.

Aberdeen, South Dakota

 

We have audited theaccompanying balance sheet of World Services, Inc., as of December 31, 2001,and the related statements of operations, changes in stockholders’ equity, andcash flows for the years ended December 31, 2001 and 2000.  These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financialstatements based on our audits.

 

We conducted ouraudits in accordance with auditing standards generally accepted in the UnitedStates of America.  Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement.  An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financialstatements.  An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.  We believe that our audits and the report ofother auditors provides a reasonable basis for our opinion.

 

In our opinion, basedon our audits and the report of other auditors, the financial statementsreferred to above present fairly, in all material respects, the financialposition of World Services, Inc. as of December 31, 2001, and the results ofits operations and its cash flows for the years ended December 31, 2001 and2000, in conformity with accounting principles generally accepted in the UnitedStates of America.

 

/s/ Hein + Associates LLP

HEIN + ASSOCIATES LLP

 

Denver, Colorado

March 19, 2002

 

F-3

----

 

***WORLDSERVICES, INC.***

 

**BALANCE SHEET**

**DECEMBER 31, 2001**

 
|                                                                                                 | **ASSETS**                                    |       |      |   |   |
|------------------------------------------------------------------------------------------------------|-----------------------------------------------|------------|-----------|--------|--------|
| **CURRENT ASSETS**:                                                                                  |                                          |       |      |
| Cash and cash equivalents                                                                            |                                          | $          | 398,000   |   |
| Certificates of deposit                                                                              |                                          | 1,081,000  |      |
| Other                                                                                                |                                          | 14,000     |      |
| Total current assets                                                                                 |                                          | 1,493,000  |      |
|                                                                                                 |                                          |       |      |
| **INVESTMENTS  AND OTHER ASSETS -**                                                                  |                                          |       |      |
| Investment in Super 8 Motel Developers                                                               |                                          | 568,000    |      |
|                                                                                                 |                                          |       |      |
| **TOTAL  ASSETS**                                                                                    |                                          | $          | 2,061,000 |   |
|                                                                                                 |                                          |       |      |
|                                                                                                 | **LIABILITIES AND STOCKHOLDERS’ EQUITY** |       |      |   |   |
|                                                                                                 |                                          |       |      |
| **CURRENT  LIABILITIES**:                                                                            |                                          |       |      |
| Payable to redeemed stockholders                                                                     |                                          | $          | 41,000    |   |
| Other                                                                                                |                                          | 11,000     |      |
| Total current liabilities                                                                            |                                          | 52,000     |      |
|                                                                                                 |                                          |       |      |
| **STOCKHOLDERS’  EQUITY**:                                                                      |                                          |       |      |
| Common stock, par value $.001 per share;  50,000,000 shares authorized, 2,650,000 shares issued |                                          | 3,000      |      |
| Additional paid-in capital                                                                           |                                          | 6,364,000  |      |
| Accumulated deficit                                                                                  |                                          | (4,358,000 | )         |
| Total stockholders’ equity                                                                      |                                          | 2,009,000  |      |
|                                                                                                 |                                          |       |      |
| **TOTAL  LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                 |                                          | $          | 2,061,000 |   |
|                                                                                                      |                                               |            |           |        |        |  |  |  |

 

***See accompanyingnotes to these financial statements.***

 

F-4

----

 

***WORLDSERVICES, INC. AND SUBSIDIARIES***

 

**STATEMENTS OF OPERATIONS**

 
|                                                      |   | **YEARS ENDED********DECEMBER****31,** |    |
|-----------------------------------------------------------|--------|----------------------------------------|---------|
|                                                      |   | **2001**                               |    | **2000** |   |
| **REVENUES**:                                             |   |                                   |    |   |   |
| Interest income and other                                 |   | $                                      | 87,000  |   | $ | 77,000 |   |
| Dividend income                                           |   | —                                 |    | 199,000 |   |
|                                                      |   | 87,000                                 |    | 276,000 |   |
| **EXPENSES**:                                             |   |                                   |    |   |   |
| Legal and accounting                                      |   | 58,000                                 |    | 14,000 |   |
| Other general and administrative expenses                 |   | 52,000                                 |    | 30,000 |   |
|                                                      |   | 110,000                                |    | 44,000 |   |
|                                                      |   |                                   |    |   |   |
| **NET  INCOME (LOSS)**                                    |   | $                                      | (23,000 | ) | $ | 232,000 |   |
|                                                      |   |                                   |    |   |   |
| **INCOME  PER SHARE OF COMMON STOCK (BASIC AND DILUTED)** |   | $                                      | (.01    | ) | $ | .09 |   |
|                                                      |   |                                   |    |   |   |
| **WEIGHTED  AVERAGE NUMBER OF SHARES OUTSTANDING**        |   | 2,650,000                              |    | 2,650,000 |   |

 

***See accompanyingnotes to these financial statements.***

*** ***

F-5

----

 

**STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY**

**FROM JANUARY 1, 2000 THROUGHDECEMBER 31, 2001**

 
|                           |   |              |   |                              |   |                     |   |       |   |
|--------------------------------|--------|-------------------|--------|-----------------------------------|--------|--------------------------|--------|------------|--------|
|                           |   | **common  stock** |   | **Additional  Paid-in   Capital** |   | **Accumulated  Deficit** |   | **Total**  |   |
| **Shares**                     |   | **Amount**        |
| **Balance**, January 1, 2000   |   | 2,650,000         |   | $                                 | 3,000  |                     | $      | 6,364,000  |   | $ | (4,567,000 | ) | $ | 1,800,000 | ** ** |
|                           |   |              |   |                              |   |                     |   |       |   |   | ** ** |
| Net income                     |   | —            |   | —                            |   | —                   |   | 232,000    |   | 232,000 | ** ** |
|                           |   |              |   |                              |   |                     |   |       |   |   | ** ** |
| **Balance**, December 31, 2000 |   | 2,650,000         |   | 3,000                             |   | 6,364,000                |   | (4,335,000 | )      | 2,032,000 | ** ** |
|                           |   |              |   |                              |   |                     |   |       |   |   | ** ** |
| Net loss                       |   | —            |   | —                            |   | —                   |   | (23,000    | )      | (23,000 | ) |
|                           |   |              |   |                              |   |                     |   |       |   |   | ** ** |
| **Balance**, December 31, 2001 |   | 2,650,000         |   | $                                 | 3,000  |                     | $      | 6,364,000  |   | $ | (4,358,000 | ) | $ | 2,009,000 | ** ** |
|                                |        |                   |        |                                   |        |                          |        |            |        |  |  |  |  |  |  |  |

 

***Seeaccompanying notes to these financial statements.***

 

F-6

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***WORLDSERVICES, INC. AND SUBSIDIARIES***

 

**STATEMENTS OF CASH FLOWS**

 
|                                                                                               |   | **YEARS ENDED********DECEMBER****31,** |    |
|----------------------------------------------------------------------------------------------------|--------|----------------------------------------|---------|
|                                                                                               |   | **2001**                               |    | **2000** |   |
| **CASH  FLOWS FROM OPERATING ACTIVITIES**:                                                         |   |                                   |    |   |   |
| Net income (loss)                                                                                  |   | $                                      | (23,000 | ) | $ | 232,000 |   |
| Adjustments to reconcile net income (loss) to  net cash provided by (used in)operating activities: |   |                                   |    |   |   |
| Decrease in other assets                                                                           |   | 14,000                                 |    | (13,000 | ) |
| (Decrease) increase in current liabilities                                                         |   | (1,000                                 | )       | — |   |
| Net cash provided by (used in) operating  activities                                               |   | (10,000                                | )       | 219,000 |   |
|                                                                                               |   |                                   |    |   |   |
| **CASH  FLOWS FROM INVESTING ACTIVITIES**:                                                         |   |                                   |    |   |   |
| Purchase of certificate of deposit                                                                 |   | —                                 |    | (227,000 | ) |
| Redemption of certificate of deposit                                                               |   | 366,000                                |    | — |   |
| Net cash provided by (used in) investing  activities                                               |   | 366,000                                |    | (227,000 | ) |
|                                                                                               |   |                                   |    |   |   |
| **INCREASE  (DECREASE) IN CASH AND CASH EQUIVALENTS**                                              |   | 356,000                                |    | (8,000 | ) |
|                                                                                               |   |                                   |    |   |   |
| **CASH  AND CASH EQUIVALENTS**, at beginning of  period                                            |   | 42,000                                 |    | 50,000 |   |
|                                                                                               |   |                                   |    |   |   |
| **CASH  AND CASH EQUIVALENTS**, at end of period                                                   |   | $                                      | 398,000 |   | $ | 42,000 |   |
|                                                                                               |   |                                   |    |   |   |
| **SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION**:                                            |   |                                   |    |   |   |
| Cash payments for:                                                                                 |   |                                   |    |   |   |
| Income taxes                                                                                       |   | $                                      | —  |   | $ | — |   |
| Interest                                                                                           |   | $                                      | —  |   | $ | — |   |

 

***See accompanyingnotes to these financial statements.***

 

 

F-7

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***WORLDSERVICES, INC. AND SUBSIDIARIES***

*** ***

**NOTES OF FINANACIAL STATEMENTS**

 

1.      **NATURE OF OPERATIONS ANDSUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**:

 

*Nature of Operations* — World Services, Inc. (the“Company”) was incorporated in December 1979 as Midwest Management &Marketing Corporation and was renamed World Services, Inc. in July 1983.  The Company was formed to invest in andmanage companies primarily involved in the insurance, real estate, andfinancial institution industries, along with other service industries.  The Company divested itself of all operatingsubsidiaries by 1989 and currently holds one investment.

 

*Earnings Per Share* — Basic earnings per shareincludes no dilution and is computed by dividing income available to commonshareholders by the weighted average number of common shares outstanding forthe period.  Diluted earnings per sharereflects the potential dilution of securities that could share in the earningsof an entity.  The Company had nopotentially dilutive securities during 2001 or 2000 and as such, basic anddilutive earnings per share are the same for each year.

 

*Comprehensive Income* — Comprehensive income isdefined as all changes in stockholders’ equity, exclusive of transactions withowners, such as capital investments. Comprehensive income includes net income or loss, change in certain assetsand liabilities that are reported directly in equity such as translationadjustments on investments in foreign subsidiaries, and certain changes inminimum pension liabilities.  TheCompany’s comprehensive income was equal to its net income for all periodspresented in these financial statements.

 

*Cash Equivalents* — For purposes of thestatement of cash flows, the Company considers all highly liquid debtinstruments purchased with an original maturity of three months or less to becash equivalents.

 

*Use of Estimates* — The preparation of theCompany’s financial statements in conformity with generally accepted accountingprinciples requires the Company’s management to make estimates and assumptionsthat affect the amounts reported in these financial statements and accompanyingnotes.  Actual results could differ fromthose estimates.

 

*Income Taxes* — The Company accounts forincome taxes under the liability method, which requires recognition of deferredtax assets and liabilities for the expected future tax consequences of eventsthat have been included in the financial statements.  Under this method, deferred tax assets and liabilities aredetermined based on the difference between the financial statements and taxbases of assets and liabilities using enacted tax rates in effect for the yearin which the differences are expected to reverse.

 

*Impairment of Long-Lived Assets* — The Companyhas adopted SFAS No. 121.  In the eventthat facts and circumstances indicate that the cost of long-lived assets may beimpaired, an evaluation of recoverability would be performed.  If an evaluation is required, the estimatedfuture undiscounted cash flows associated with the asset would be compared tothe asset’s carrying amount to determine if a write-down to market value or discountedcash flow value is required.

 

F-8

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*Recently Issued Accounting Pronouncements* — On June 30,2001, the FASB approved the issuance of SFAS No. 141, *Business Combinations*and SFAS No. 142, *Goodwill and Other Intangible Assets*.  SFAS No. 141 states that all businesscombinations should be accounted for using the purchase method of accounting;use of pooling-of-interest method is prohibited. Accounting for the excess ofthe fair value of net assets over cost (negative goodwill), will be allocatedto certain assets first with any remaining excess recognized as anextraordinary gain.  SFAS No. 141 iseffective for business combinations completed after June 30, 2001.  SFAS No. 142 addresses the accounting for allpurchased intangible assets but not the accounting for internally developedintangible assets.  Goodwill will nolonger be amortized and will be reviewed for impairment in accordance with SFASNo. 142. Goodwill will be tested annually and on an interim basis if an eventor circumstance occurs between the annual tests that might reduce the fairvalue of the reporting unit below its carrying value.  SFAS No 142 is effective for fiscal years beginning afterDecember 31, 2001, with early adoption permitted under certaincircumstances.  Goodwill and intangibleassets acquired in a transaction completed after June 30, 2001 but before SFASNo. 142 is initially applied will be accounted for in accordance with SFAS No.142.

 

In June 2001, the FASBapproved for issuance SFAS 143 Asset Retirement Obligations.  SFAS 143 establishes accounting requirementsfor retirement obligations associated with tangible long-lived assets,including (1) the timing of the liability recognition, (2) initial measurementof the liability, (3) allocation of asset retirement cost to expense, (4)subsequent measurement of the liability and (5) financial statementdisclosures.  SFAS 143 requires that anasset retirement cost should be capitalized as part of the cost of the relatedlong-lived asset and subsequently allocated to expense using a systematic andrational method.  The statement iseffective for financial statements issued for fiscal years beginning after June15, 2002.  The Company does not believethat the adoption of the statement will have a material effect on its financialposition, results of operations, or cash flows.

 

In October 2001, the FASBalso approved SFAS 144, Accounting for the Impairment or Disposal of Long-LivedAssets.  SFAS 144 replaces SFAS 121,Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets toBe Disposed Of.  The new accountingmodel for long-lived assets to be disposed of by sale applies to all long-livedassets, including discontinued operations, and replaces the provisions of APBOpinion No. 30, Reporting Results of Operations-Reporting the Effects ofDisposal of a Segment of a Business, for the disposal of segments of abusiness.  Statement 144 requires thatthose long-lived assets be measured at the lower of carrying amount or fairvalue less cost to sell, whether reported in continuing operations or indiscontinued operations.  Therefore,discontinued operations will no longer be measured at net realizable value orinclude amounts for operating losses that have not yet occurred.  Statement 144 also broadens the reporting ofdiscontinued operations to include all components of an entity with operationsthat can be distinguished from the rest of the entity and that will beeliminated from the ongoing operations of the entity in a disposaltransaction.  The provisions ofStatement 144 are effective for financial statements issued for fiscal yearsbeginning after December 15, 2001 and, generally, are to be appliedprospectively.

 

These statements are notexpected to have a material effect on the Company’s financial statements.

 

F-9

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2.                             **INVESTMENT IN SUPER 8 MOTEL DEVELOPERS, INC. (S8MD)**:

 

The Company ownsapproximately 16% of the outstanding common stock of S8MD.  The investment is accounted for under thecost method, which management believes is less than its market value.  S8MD is a privately held company, for whichthe Company does not exercise significant influence.  The Company recorded approximately $0 and $199,000 in dividendincome from S8MD during 2001 and 2000, respectively.  Subsequent to year end, S8MD gained control of World Servicesthrough a tender offer.

 

The financial statements ofS8MD were audited by other auditors. Summarized statements of financial information for S8MD is as follows:

 

**SUMMARIZED FINANCIAL INFORMATION FORS8MD**

**(Amounts in 000’s)**

 

|                            |   | **For the  Years Ended********December  31** |   |
|---------------------------------|--------|----------------------------------------------|--------|
|                            |   | **2001**                                     |   | **2000** |   |
| Total assets                    |   | $                                            | 36,334 |   | $ | 36,372 |   |
|                            |   |                                         |   |   |   |
| Total liabilities               |   | $                                            | 30,718 |   | $ | 31,715 |   |
|                            |   |                                         |   |   |   |
| Total stockholders’ equity |   | $                                            | 5,615  |   | $ | 4,657 |   |
|                            |   |                                         |   |   |   |
| Revenues                        |   | $                                            | 18,178 |   | $ | 17,739 |   |
|                            |   |                                         |   |   |   |
| Expenses                        |   | $                                            | 17,229 |   | $ | 16,256 |   |
|                            |   |                                         |   |   |   |
| Net income                      |   | $                                            | 949    |   | $ | 1,483 |   |

 

3.                             **FAIR VALUE OF FINANCIAL INSTRUMENTS**:

 

The estimated fair values for financial instruments under SFAS No. 107,*Disclosures about Fair value of FinancialInstruments*, are determined at discrete points in time based onrelevant market information.  Theseestimates involve uncertainties and cannot be determined with precision.  The estimated fair value of the Company’scertificates of deposit approximate their carrying value because of the shortmaturity of these instruments.  The fairvalue of the Company’s investment in S8MD is determined on the basis ofcomparisons with similar companies whose shares are publicly traded.  Based on these comparisons, return oninvestment, and percentage ownership in the equity of S8MD management believesits cost basis is less than the market value. However, because of a lack of marketability of the S8MD shares and theCompany’s lack of control over S8MD, management believes it is difficult toprovide an estimate as to the fair value of its S8MD shares.

 

F-10

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4.                             **INCOME TAXES**:

 

The Company’s actual effective income tax rate differs from the U.S.Federal corporate income tax rate of 34% as follows:

 
|                                                                                                                         |   | **December  31,** |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|
|                                                                                                                         |   | **2001**          |   | **2000** |   |
| Statutory rate                                                                                                               |   | 34                | %      | 34 | % |
| Dividend received deduction                                                                                                  |   | 0                 | %      | (22 | )% |
| Use of net operating loss carryforward                                                                                       |   | 0                 | %      | (12 | )% |
| Increase (reduction) in valuation allowance related to net operating  loss carryforwards and change in temporary differences |   | (34               | )%     | 0 | % |
| Effective tax rate                                                                                                           |   | 0                 | %      | 0 | % |

 

Long-term deferred tax assets (liabilities) are comprised of thefollowing:

 
|                                                                     |   | **December  31,** |    |
|--------------------------------------------------------------------------|--------|-------------------|---------|
|                                                                     |   | **2001**          |    | **2000** |   |
| Net operating loss carryforward and investment tax credit  carryforwards |   | $                 | 252,000 |   | $ | 305,000 |   |
|                                                                     |   |              |    |   |   |
| Less valuation allowance                                                 |   | (252,000          | )       | (305,000 | ) |
|                                                                     |   |              |    |   |   |
|                                                                     |   | $                 | —  |   | $ | — |   |

 

As of December 31, 2001, the Company has net operating losscarryforwards for income tax purposes of $679,000 which expire in the years2002 to 2021.  The net operating losscarryforwards may be limited with respect to their availability due to priorownership changes and the consolidated return regulations.  The change in the deferred tax valuation allowancefrom 2000 to 2001 was a decrease of $53,000.

 

5.                             **STOCKHOLDERS’ EQUITY**:

 

In May 1980, the 32 promoters of the Company entered into an escrowagreement restricting the sale of their shares (total of 429,424 shares) untilthe Company generates earnings per share of $.10 (based on approximately 1.1million outstanding shares) for three years, two of which must beconsecutive.  An additional 147,000shares issued to an officer and director, are also restricted under the escrowagreement.  The Division of Securitiesin 1986 released 66,962 shares that were issued to a founder and were sold on abankruptcy auction.  Subsequent toDecember 2001, the remaining 421,286 shares were released in connection withthe tender offer completed by Super 8 Motel Developers, Inc.

 

F-11

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