<PAGE>
 
                    U.S. SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C. 20549

 
                                  FORM 10-QSB
 
(Mark One)
 X      QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
----    ACT OF 1934

For the quarterly period ended  March 31, 1998
                               ------------------

        TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
        ACT
 
For the transition period from _________________ to ________________
 
     Commission file number 04863
                            --------------------------
 
                   Southern Investors Service Company, Inc.
           ---------------------------------------------------------
       (Exact name of small business issuer as specified in its charter)
 
            Delaware                                     74-1223691
--------------------------------------------------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
  incorporation or organization)



2727 North Loop West, Suite 200, Houston, Texas                   77008 
--------------------------------------------------------------------------------
(Address of principal executive offices)                        (Zip Code)

                                (713) 869-7800
                         -----------------------------
                           Issuer's telephone number

                         -----------------------------

    (Former name, former address and former fiscal year, if changed since 
                                 last report)


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.  Yes X   No
                                                              ---     ---  

               APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.  Yes___ No___

                     APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 3,168,929 as of May 13, 1998, Common
Stock $1.00 Par Value Transitional Small Business Disclosure Format (Check One):
 Yes     No  X
    ----   ----
<PAGE>
 
                        PART I - FINANCIAL INFORMATION


Item 1. Financial Statements

  The Consolidated Financial Statements included herein have been prepared by
Southern Investors Service Company, Inc., (the Company), without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission.  Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading.  It is suggested that these Consolidated Financial
Statements be read in conjunction with the Consolidated Financial Statements and
notes thereto included in the Company's latest annual report on Form 10-KSB.  In
the opinion of the management of the Company, all adjustments necessary to
present a fair statement of the results for the interim periods have been made.
<PAGE>
 
           SOUTHERN INVESTORS SERVICE COMPANY, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEET
                                MARCH 31, 1998
                            (Thousands of Dollars)
                                  (Unaudited)

ASSETS
------
 
REAL ESTATE ASSETS:
 Resort development, net                                 $2,463  
 Real estate held for resale or development                  98
 Equity in real estate joint ventures, net                  439
                                                         ------
  Total real estate assets                                3,000
CASH                                                        477
ACCOUNTS RECEIVABLE                                         291
OTHER ASSETS                                                 10
                                                         ------
                                                         $3,778 
                                                         ======

LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
 
LIABILITIES:
 Notes payable                                           $4,915
 Other debt                                                 503
 Accounts payable and accrued expenses                    2,495
 Other liabilities                                          348
                                                         ------
  Total liabilities                                       8,261
                                                         ------
 
COMMITMENTS AND CONTINGENCIES
 
STOCKHOLDERS' DEFICIT:
 Preferred stock, $1 par, 1,000,000
  shares authorized, none issued                             --
 Common stock, $1 par, 10,000,000 shares authorized,
  3,281,331 shares issued                                 3,281
 Additional paid-in capital                               3,031
 Retained deficit                                       (10,669)
 Less treasury stock, 112,402 shares, at cost              (126)
                                                         ------
  Total stockholders' deficit                            (4,483)
                                                         ------
                                                         $3,778
                                                         ======


        The accompanying notes are an integral part of this statement.

                                       2
<PAGE>
 
           SOUTHERN INVESTORS SERVICE COMPANY, INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME
 
                            (Thousands of Dollars)
                                  (Unaudited)
 
                             Three months ended March 31,
                             ----------------------------
                                     1998        1997
                                   ------      ------
 
RESORT REVENUES                    $  748      $  794
 
REAL ESTATE REVENUES                  325         260
                                   ------      ------
 
                                    1,073       1,054
                                   ------      ------
 
RESORT OPERATING EXPENSES             652         700
 
OTHER OPERATING EXPENSES              204         204
                                   ------      ------
 
                                      856         904
                                   ------      ------
 
INCOME FROM OPERATIONS                217         150
 
INTEREST EXPENSE                      (91)        (91)
                                   ------      ------
 
NET INCOME                         $  126      $   59
                                   ======      ======
 
INCOME PER COMMON SHARE            $  .04      $  .02
                                   ======      ======

AVERAGE NUMBER OF
 SHARES OUTSTANDING             3,168,929   3,168,929
                                =========   =========



       The accompanying notes are an integral part of these statements.

                                       3
<PAGE>
 
           SOUTHERN INVESTORS SERVICE COMPANY, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                            (Thousands of Dollars)
                                  (Unaudited)
 
<TABLE> 
<CAPTION> 
                                                                          Three Months
                                                                         Ended March 31,
                                                                         ---------------
                                                                         1998       1997
                                                                         -----     -----
<S>                                                                     <C>        <C> 
Cash flows from operating activities:
 Net income                                                               $126      $ 59
 Adjustments to reconcile net income to net cash
   provided by operating activities:
    Equity in undistributed (income) loss of real
     estate joint ventures                                                   4       (30)
    Distribution from (contributions to) real estate joint ventures        190        (4)
    Gain from sale of assets                                               (94)      ---
    Depreciation and amortization                                           48        50
 Change in assets and liabilities:
   Investments in real estate                                              (81)      (26)
   Decrease in accounts receivable and other assets                         12        12
   Increase in accounts payable, accrued
    expenses and other                                                     100        67
                                                                         -----      ----
 
      Net cash provided by operating activities                            305       128
                                                                         -----      ----
 
Cash flows from investing activities:
  Proceeds from sale of investments                                         94       ---
                                                                         -----      ----
 
Cash flows from financing activities:
 Borrowings (payments) on notes payable and other debt, net                (76)       53
                                                                         -----      ----
 
Net increase in cash                                                       323       181
Beginning cash                                                             154       154
                                                                         -----      ----
 
Ending cash                                                               $477      $335
                                                                         =====      ====
</TABLE>


       The accompanying notes are an integral part of these statements.

                                       4
<PAGE>
 
           SOUTHERN INVESTORS SERVICE COMPANY, INC. AND SUBSIDIARIES
                                        
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  (Unaudited)


(1)  CURRENT BUSINESS CONDITIONS

  Net income of Southern Investors Service Company, Inc. and subsidiaries (the
Company) was $126,000 for the three months ended March 31, 1998, as compared to
$59,000 for the three months ended March 31, 1997.

  The Company has sustained losses from operations for each of the past several
years, and management anticipates that the Company will incur an operating loss
for the remainder of 1998.  Cash flow from operations has not been and will not
be sufficient to meet liquidity needs.  Such losses have depleted the Company's
stockholders' equity.  These factors raise substantial doubt about the Company's
ability to continue as a going concern.

  Debt totaling $5,203,000 has matured and is currently due.  The ability of the
Company to continue as a going concern is dependent upon its ability to settle
or restructure its remaining debt and other obligations and generate positive
cash flow to cover operating expenses and other cash requirements.  Management
is currently reviewing possible options to increase cash flow and settle the
Company's existing liabilities with its limited resources.  These options
include, but are not limited to, continued efforts to reduce operating expenses
(including interest), attempts to increase revenues of the Company's resort
development, continued negotiations with various creditors to settle their
accounts for cash payments at substantially less than the amount due, the
settlement of liabilities through the transfer of assets to creditors in
satisfaction of their claims, and a possible plan of reorganization under
Chapter 11 of the U.S. Bankruptcy Code or liquidation of the Company.  While
management believes that the assumptions relative to the options currently being
considered are reasonable, there is no assurance that actual events will occur
in accordance with such assumptions.  Accordingly, management's assumptions may
need to be revised as actual events occur which differ from such assumptions.
The consolidated financial statements do not include any adjustments relating to
the recoverability of asset carrying amounts or the amount of liabilities, which
adjustments might be necessary if the Company is unable to continue as a going
concern and could be significant.

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  The accompanying unaudited consolidated financial statements have been
prepared in accordance with the significant accounting policies included in the
notes to the Company's latest annual report on Form 10-KSB.  These consolidated
financial statements should be read in conjunction with those notes.

                                       5
<PAGE>
 
Item 2.     Management's Discussion and Analysis or Plan of Operation.

Results of Operations

  The net income for the first three months of 1998 was $126,000 or  $.04 per
share compared to a net income of $59,000 or $.02 per share during the first
quarter of 1997.

  Rental and other revenues from the operation of the Company's resort in west
Texas totaled $748,000 and $794,000 for the three months ended March 31, 1998
and 1997, respectively.  Rental revenue and occupancy statistics for the
Company's resort operations for each of these periods are summarized as follows:
 
                              Three months ended March 31,
                              ----------------------------
                                   1998           1997
                              ------------    ------------
Hotel rooms:
     % Occupancy                        46%             50%
     Average rate                 $  58.71        $  59.71
     Total revenue                $220,000        $240,000
Condominiums:
     % Occupancy                        35%             43%
     Average rate                 $  53.95        $  61.85 
     Total revenue                $ 46,000        $ 55,000 
                                                           
Total rental revenue              $266,000        $295,000 
Restaurant, bar and                                        
  golf course revenue              229,000         240,000 
Other revenues                     253,000         259,000 
                                  --------        -------- 
Total revenues                    $748,000        $794,000 
                                  ========        ========  
 
                                       6
<PAGE>
 
     Real estate revenues were $325,000 for the first three months of 1998
compared to $260,000 last year.  During the first quarter of 1998, the Company
sold its 12.5% interest in Heritage Park Venture II for a gain of $94,000.  This
gain is included in interest and other income.


  Real estate revenues include the following amounts:
 
                                                       Three Months Ended
                                                             March 31,
                                                         ----------------       
                                                          1998       1997
                                                         -------   ------
                                                      (Thousands of Dollars)
 
Management fees                                            $ 189    $218
Interest and other income                                    140      12
Equity in income (loss) of real estate joint ventures         (4)     30
                                                           -----    ----
Total real estate revenues                                 $ 325    $260
                                                           =====    ====

LIQUIDITY AND CAPITAL RESOURCES

     On an annual basis, cash flow from operations has been negative for the
past several years, and management anticipates that cash flow from operations
will not be sufficient to meet the Company's liquidity needs during 1998.  The
financial condition of the Company indicates that, unless operating results and
cash flow improve, the Company will be required to borrow funds or to continue
to sell assets.  It is unlikely that the Company will be able to arrange to
borrow funds from other sources and there is no assurance that the Company could
sell sufficient assets to meet its cash needs.

  Debt totaling $5,203,000 has matured and is currently due.  The ability of the
Company to continue as a going concern is dependent upon its ability to settle
or restructure its remaining debt and other obligations and generate positive
cash flow to cover operating expenses and other cash requirements.  Management
is currently reviewing possible options to increase cash flow and settle the
Company's existing liabilities with its limited resources.  These options
include, but are not limited to, continued efforts to reduce operating expenses
(including interest), attempts to increase revenues of the Company's resort
development, continued negotiations with various creditors to settle their
accounts for cash payments at substantially less than the amount due, the
settlement of liabilities through the transfer of assets to creditors in
satisfaction of their claims, and a possible plan of reorganization under
Chapter 11 of the U.S. Bankruptcy Code or liquidation of the Company.  While
management believes that the assumptions relative to the options currently being
considered are reasonable, there is no assurance that actual events will occur
in accordance with such assumptions.  

                                       7
<PAGE>
 
Accordingly, management's assumptions may need to be revised as actual events
occur which differ from such assumptions. The consolidated financial statements
do not include any adjustments relating to the recoverability of asset carrying
amounts or the amount of liabilities, which adjustments might be necessary if
the Company is unable to continue as a going concern and could be significant.

     With the exception of the improvements located at the Company's resort
development in west Texas, substantially all of the Company's real estate assets
are pledged to banks to secure debt.  Management believes that in a stable
market the values of the properties would exceed the balances of the loans that
they secure.  If the Company were to sell or dispose of its real estate assets
as a result of the maturity or acceleration of the underlying debt or for
reasons other than those arising in the normal course of business, it is
anticipated that sales prices would be significantly less than the current
carrying amount of the assets and that such sales or dispositions would not
generate sufficient funds to retire the related debt.

                                       8
<PAGE>
 
                         PART II  -  OTHER INFORMATION


ITEM 1.   Legal Proceedings

None

ITEM 2.   Changes in Securities

None

ITEM 3.   Default upon Senior Securities

None

ITEM 4.   Submission of Matters to a Vote of Security Holders

None

ITEM 5.   Other Information

None

Item 6.   Exhibits and Reports on Form 8-K

     (27) Financial Data Schedule

                                       9
<PAGE>
 
                                 SIGNATURES
                                 ----------

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



                          SOUTHERN INVESTORS SERVICE COMPANY, INC.



                          /s/ Walter M. Mischer, Jr.
                          -----------------------------------------
                          WALTER M. MISCHER, JR.
                          President - Principal Executive Officer



 

                          /s/ Eric Schumann
                          -------------------------------------------  
                          ERIC SCHUMANN
                          Senior Vice President - Finance
                          Principal Financial and Accounting Officer



                          DATE: May 13, 1998


                                      10