<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  June 30, 1997
                                -------------
 
       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 incorporation           (I.R.S. Employer 
  or organization)                                        Identification No.)


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 August 11, 1997,
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
                                 JUNE 30, 1997
                            (Thousands of Dollars)
                                  (Unaudited)


 
ASSETS
------
 
REAL ESTATE ASSETS:
 Resort development, net                                          2,338   
 Real estate held for resale or development                          98
 Equity in real estate joint ventures, net                          564
                                                               --------
  Total real estate assets                                        3,000
CASH                                                                441
ACCOUNTS RECEIVABLE                                                 170
OTHER ASSETS                                                         11
                                                               --------
                                                               $  3,622 
                                                               ========
 
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
 
LIABILITIES:
 Notes payable                                                    5,036       
 Other debt                                                         483   
 Accounts payable and accrued expenses                            2,249 
 Other liabilities                                                  215    
                                                               --------
  Total liabilities                                               7,983
                                                               --------
 
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                                               (10,547)
 Less treasury stock, 112,402 shares, at cost                   (   126)
                                                               --------
  Total stockholders' deficit                                   ( 4,361)
                                                               --------
                                                               $  3,622
                                                               ========

        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)

<TABLE> 
<CAPTION> 

                                               Three Months Ended         Six Months Ended
                                                   June  30,                 June 30,
                                            -----------------------   ------------------------
                                                1997         1996         1997         1996      
                                            ----------   ----------   ----------    ----------       
<S>                                         <C>          <C>         <C>           <C>                
RESORT REVENUES                             $      735   $      534   $    1,529    $    1,224       
                                                                                                     
REAL ESTATE REVENUES                               421          237          682           463       
                                            ----------   ----------   ----------    ----------       
                                                                                                     
                                                 1,156          771        2,211         1,687       
                                            ----------   ----------   ----------    ----------       
                                                                                                     
RESORT OPERATING EXPENSES                          674          645        1,373         1,319       
                                                                                                     
OTHER OPERATING EXPENSES                           260          223          464           490       
                                            ----------   ----------   ----------    ----------         
 
                                                   934          868        1,837         1,809
                                            ----------   ----------   ----------    ----------       
                                                                                                      
INCOME (LOSS) FROM OPERATIONS                      222          (97)         374          (122)      
                                                                                                      
INTEREST EXPENSE                                   (91)         (94)        (183)         (199)      
                                            ----------   ----------   ----------    ----------       
                                                                                                      
INCOME (LOSS)                                                                                         
   BEFORE EXTRAORDINARY GAIN                       131         (191)         191          (321)      
                                                                                                      
EXTRAORDINARY GAIN ON DEBT                                                                            
    SETTLEMENTS                                    ---          288          ---           696       
                                            ----------   ----------   ----------    ----------       
                                                                                                      
NET INCOME                                  $      131   $       97   $      191    $      375       
                                            ==========   ==========   ==========    ==========       
                                                                                                      
INCOME (LOSS) PER COMMON SHARE:                                                                       
 Income (loss) before extraordinary gain          $.04       ($ .06)        $.06       ($  .10)      
                                            ==========   ==========   ==========    ==========       
 Net income                                       $.04         $.03         $.06    $      .12       
                                            ==========   ==========   ==========    ==========        
 
AVERAGE NUMBER OF
  SHARES OUTSTANDING                         3,168,929    3,168,929    3,168,929     3,168,929
                                            ==========   ==========   ==========    ==========
</TABLE>

       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> 

 
                                                                                   Six Months
                                                                                 Ended June 30,
                                                                                ----------------    
                                                                                 1997      1996
                                                                                ------    ------    

<S>                                                                             <C>        <C>      
Cash flows from operating activities:
 Net income                                                                      $ 191     $ 375
 Adjustments to reconcile net income to net cash
  provided by (used in) by operating activities:
   Equity in undistributed income of real
    estate joint ventures                                                          (61)      (33) 
   Distributions from (contributions to) real estate joint ventures                 (4)       35  
   Extraordinary gain on debt settlements                                           --      (696) 
   Depreciation and amortization                                                    99       114  
 Change in assets and liabilities:                                                                
  Investments in resort development                                                (28)     (123) 
  Decrease in accounts receivable and other assets                                  19        --  
  Increase in accounts payable, accrued                                                           
   expenses and other                                                              107       146  
                                                                                 -----     -----  
      Net cash provided by (used in) operating activities                          323      (182) 
                                                                                 -----     -----  
Cash flows from financing activities:                                                             
 Payments on notes payable and other debt                                          (36)      (55) 
                                                                                 -----     -----  
      Net cash used by financing activities                                        (36)      (55) 
                                                                                 -----     -----  
Net increase (decrease) in cash                                                    287      (237) 
Beginning cash                                                                     154       317  
                                                                                 -----     -----  
Ending cash                                                                      $ 441     $  80  
                                                                                 =====     =====   
</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 $191,000 for the six months ended June 30, 1997, as compared to
$375,000 for the six months ended June 30, 1996.  Included in net income for
1996 are extraordinary gains of $696,000 from the settlement of certain
liabilities for less than the full amount due.

The Company has sustained losses from operations for the past several years, and
management anticipates that the Company may incur an operating loss for the
remainder of 1997.  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.

Liability Settlements

During 1995, a note payable by a joint venture in which the Company was a joint
venturer with an outstanding principal balance of $5.2 million was due and
payable.  The joint venture was unable to repay this note at its maturity.
During January 1996, the venture obtained a new loan from a bank in the original
principal amount of $3.0 million the proceeds of which were used to settle the
$5.2 million loan plus accrued interest in full.  As a condition of the new
loan, the bank required a ten year lease on the entire building to be executed
by the partners in the ratio of their ownership interests.  However, due to the
financial condition of the Company, the bank was not willing to accept the
Company's lease.  In addition, the building was in need of repairs and the
Company would have been required to make an additional capital contribution to
fund these repairs.  The Company also owed the venture approximately $70,000 in
past due rent for periods prior to 1992.  This amount was forgiven in January
1996.  As a result of these obligations, the Company sold its partnership
interest in the joint venture to Hallmark Residential Group, Inc. (Hallmark), a
company controlled by Mr. Mischer (Chairman of the Board of Directors of the
Company).  In exchange, Hallmark assumed the Company's obligations in connection
with this joint venture and entered into the ten year lease.  In connection with
this transaction, the Company retained a 25% cash flow interest in Hallmark's
20% ownership interest.  The Company recognized an extraordinary gain on the
settlement of these obligations of $408,000, during 1996.

In addition, during 1996, the Company settled certain notes payable with
aggregate outstanding principal balance of $345,000 and related accrued interest
of $200,000.  These 

                                       5
<PAGE>
 
obligations were satisfied by the foreclosure of properties which were
collateral for these notes which had an aggregate book value of $227,000 and a
cash payment of $30,000. The Company recognized extraordinary gains on these
settlements of $288,000 during 1996.

Management believes that the debt settlements which have been consummated have
improved the Company's financial condition. However, debt totaling $5,217,000
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, which could be
significant, relating to the recoverability of asset carrying amounts or the
amount of liabilities that might be necessary if the Company is unable to
continue as a going concern.

(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.

                                       6
<PAGE>
 
(3)    REAL ESTATE OPERATIONS

  Real estate revenues include the following amounts:
<TABLE>
<CAPTION>
 
                                                   Three Months Ended    Six Months Ended
                                                        June 30 ,           June 30,
                                                  ------------------- ---------------------
                                                    1997      1996      1997        1996
                                                  --------  --------  --------  -----------
                                                          (Thousands of Dollars)
<S>                                               <C>       <C>       <C>       <C>
 
Equity in income of real estate joint ventures       $  31     $  26     $  61    $  33
Management fees                                        213       208       431      412
Interest and other income                              177         3       190       18
                                                     -----     -----     -----    -----
 
Total real estate revenues                           $ 421     $ 237     $ 682    $ 463
                                                     =====     =====     =====    =====
</TABLE>
The combined condensed statements of income of the real estate joint ventures
accounted for on the equity method are set forth below:
<TABLE>
<CAPTION>
                                                   Three Months Ended    Six Months Ended
                                                        June 30 ,           June 30,
                                                  ------------------- ---------------------
                                                    1997      1996      1997        1996
                                                  --------  --------  --------  -----------
                                                           (Thousands of Dollars)
<S>                                               <C>       <C>       <C>       <C>
REVENUES:
  Sales of real estate                             $  533     $ 574    $ 1,094    $ 1,021
  Cost of sales                                       263       366        566        672
                                                    -----     -----    -------    -------
                                                      270       208        528        349
  Rental and other income                              41        52        105        219
                                                    -----     -----    -------    -------
                                                      311       260        633        568
EXPENSES:
  Operating expenses                                  (25)      (34)       (66)      (191)
  Interest expense                                     --        --         --        (16)
 
Gain on debt settlements                               --        --         --    $ 1,118(a)
                                                    -----     -----    -------    -------
Net income                                         $  286     $ 226    $   567    $ 1,479
                                                    =====     =====    =======    =======
 
Equity of the Company in income of real estate
joint ventures (before extraordinary gain)         $   31     $  26    $    61    $    33
                                                    =====     =====    =======    =======
</TABLE>
(a) The Company's equity in the gain on the debt settlements is reported in the
   accompanying consolidated statements of income as an extraordinary gain.

                                       7
<PAGE>
 
Item 2.     Management's Discussion and Analysis or Plan of Operation.

Results of Operations

        The net income for the first six months of 1997 was $191,000 or $.06 per
share compared to a net income of $375,000 or $.12 per share during the first
six months of 1996. During 1996 the Company recorded extraordinary gains of
$696,000 in connection with the settlement of various obligations at less than
the full amount due.

        Rental and other revenues from the operation of the Company's resort in
west Texas totaled $1,529,000 and $1,224,000 for the six months ended June 30,
1997 and 1996, respectively. The increase in revenues is due to the sales of
several condominium units owned by the Company and increased sales of the
Company's lumber. Rental revenue and occupancy statistics for the Company's
resort operations for each of these periods are summarized as follows:
 
                             Six months ended June 30,
                             ------------------------
                                1997         1996
                             -----------  -----------
Hotel rooms:
     % Occupancy                     52%          49%
     Average rate            $    59.16   $    57.35
     Total revenue           $  505,000   $  463,000
Condominiums:
     % Occupancy                     35%          33%
     Average rate            $    67.21   $    63.20
     Total revenue           $   98,000   $   91,000
 
Total rental revenue         $  603,000   $  554,000
Restaurant, bar and
  golf course revenue           506,000      545,000
Other revenues                  420,000      125,000
                             ----------   ----------
Total revenues               $1,529,000   $1,224,000
                             ==========   ==========

     Real estate revenues were $682,000 for the first six months of 1997
compared to $463,000 last year.  The increase in revenues was due to the sale of
the remainder of the Company's ownership of a former subsidiary and the receipt
of litigation proceeds.

LIQUIDITY AND CAPITAL RESOURCES

     On an annual basis, cash flow from operations not been sufficient to meet
the Company's liquidity needs.  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 

                                       8
<PAGE>
 
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.

     Management believes that the debt settlements which have been consummated
have improved the Company's financial condition.  However, debt totaling
$5,217,000 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, which
could be significant, relating to the recoverability of asset carrying amounts
or the amount of liabilities that might be necessary if the Company is unable to
continue as a going concern.

     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 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.

                                       9
<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

          The Company held its annual meeting of stockholders on May 21, 1997,
          at which time the stockholders elected the Company's directors and
          ratified the appointment of Arthur Andersen LLP independent public
          accountants for the company for the year ending December 31, 1997.
          The results were as follows:
 
                                     Against/            Broker
                             For     Withheld  Abstain  Non-Votes
                          ---------  --------  -------  ---------
Directors:
 
Walter M. Mischer, Sr.    1,736,177        70        -          -
Walter M. Mischer, Jr.    1,736,177        70        -          -
John D. Weil              1,736,177        70        -          -
 
Accountants               1,735,495       102      650          -

ITEM 5.   Other Information

None

Item 6.   Exhibits and Reports on Form 8-K

     (27) Financial Data Schedule

                                       10
<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:         August 13, 1997

                                       11