**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

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**FORM 10-QSB**

 
| **(Mark  One)** |
|-----------------|
|            |   |   |
| **ý**      | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACTION OF  1934** |

 

**For the quarterly period ended June 30, 2002**

 
| **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 NO. 000-13499**

 

**WORLD SERVICES, INC.**

(Exactname of small business issuer as specified 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 786  Aberdeen, South Dakota 57402**                   |
| (Address  of principal executive offices)                                           |
|                                                                                |   |                                  |
| **(605) 229-8899**                                                                  |
| (Issuer’s  telephone number)                                                   |
|                                                                                |   |                                  |
| **(Not Applicable)**                                                                |
| (Former  name, former address and former fiscal year, if changed since last report) |

 

**APPLICABLE ONLY TO ISSUERS INVOLVEDIN BANKRUPTCY**

**PROCEEDINGS DURING THE PRECEDINGFIVE YEARS**

 

Check whether the registrantfiled 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 confirmedby a court.  Yes o  No o

 

 

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**APPLICABLE ONLY TO CORPORATEISSUERS**

 

State the number of sharesoutstanding of each of the issuer’s classes of common equity, as of the latestpracticable date:

 

As of June 30, 2002, therewere 2,649,113 shares of common stock, $.001 par value outstanding.

 

Transitional Small BusinessDisclosure Format (Check one):  Yes o  No ý

 

Check whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter 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  ý     No o

 

2

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INDEX

 
| PART I  | FINANCIAL INFORMATION:                                                                       |
|---------|----------------------------------------------------------------------------------------------|
|    |                                                                                         |
| Item 1. | Balance  Sheet as of June 30, 2002                                                           |
|    |                                                                                         |
|    | Statements  of Operations for  the Quarters Ended   June 30, 2002 and 2001              |
|    |                                                                                         |
|    | Statements  of Operations for the Six Months Ended   June 30, 2002 and 2001                  |
|    |                                                                                         |
|    | Statements  of Cash Flows for the Six Months Ended   June 30, 2002 and 2001                  |
|    |                                                                                         |
|    | Notes to Financial  Statements                                                               |
|    |                                                                                         |
| Item  2 | Management’s  Discussion and Analysis of Financial Condition and Results of Operations: |
|    |                                                                                         |
|    | Past and Future Operations                                                                   |
|    |                                                                                         |
|    | Liquidity and Capital  Resources                                                             |
|    |                                                                                         |
|    | Results  of Operations                                                                       |
|    |                                                                                         |
| PART II | OTHER INFORMATION:                                                                           |
|    |                                                                                         |
| Item 1  | Legal Proceedings                                                                            |
|    |                                                                                         |
| Item  2 | Changes  in Securities and Use of Proceeds                                                   |
|    |                                                                                         |
| Item 3  | Defaults Upon  Senior Securities                                                             |
|    |                                                                                         |
| Item  4 | Submission  of Matters to a Vote of Security Holders                                         |
|    |                                                                                         |
| Item 5  | Other Information                                                                            |
|    |                                                                                         |
| Item 6  | Exhibits and Reports on  Form 8-K                                                            |

 

3

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PART I – FINANCIALINFORMATION

 

**Item 1. Financial Statements.**

 

WORLD SERVICES, INC.

BALANCE SHEET

June 30, 2002

(Unaudited)

 
| ASSETS                                                                                                    |   |          |         |
|-----------------------------------------------------------------------------------------------------------|--------|---------------|--------------|
|                                                                                                      |   |          |         |
| CURRENT ASSETS                                                                                            |   |          |         |
| Cash & Cash  Equivalents                                                                              |   | $             | 855,205.75   |   |
| Certificates of  Deposit                                                                                  |   | 686,068.26    |         |
| Interest  Receivable                                                                                      |   | 16,803.79     |         |
|                                                                                                      |   |          |         |
| TOTAL CURRENT  ASSETS                                                                                     |   | 1,558,077.80  |         |
|                                                                                                      |   |          |         |
| INVESTMENTS AND  OTHER ASSETS                                                                             |   |          |         |
| Investment-Super  8 Developers                                                                            |   | 568,000.00    |         |
|                                                                                                      |   |          |         |
| TOTAL OTHER  ASSETS                                                                                       |   | 568,000.00    |         |
|                                                                                                      |   |          |         |
| TOTAL ASSETS                                                                                              |   | $             | 2,126,077.80 |   |
|                                                                                                      |   |          |         |
| LIABILITIES AND  STOCKHOLDERS EQUITY                                                                      |   |          |         |
|                                                                                                      |   |          |         |
| CURRENT  LIABILITIES                                                                                      |   |          |         |
| Stock Redemption  Payable                                                                                 |   | $             | 40,187.75    |   |
| Accounts Payable                                                                                          |   | 5,501.95      |         |
|                                                                                                      |   |          |         |
| TOTAL CURRENT  LIABILITIES                                                                                |   | 45,689.70     |         |
|                                                                                                      |   |          |         |
| STOCKHOLDERS  EQUITY                                                                                      |   |          |         |
| Common Stock,  par value of $.001 per share: (50,000,000 shares authorized) with 2,649,113  shares issued |   | 2,649.11      |         |
| Additional paid  in capital                                                                               |   | 6,364,420.64  |         |
| Accumulated  Deficit                                                                                      |   | (4,286,681.65 | )            |
|                                                                                                      |   |          |         |
| TOTAL  STOCKHOLDERS EQUITY                                                                                |   | 2,080,388.10  |         |
|                                                                                                      |   |          |         |
| TOTAL  LIABILITIES AND STOCKHOLDERS' EQUITY                                                               |   | $             | 2,126,077.80 |   |

 

4

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WORLD SERVICES, INC.

STATEMENTS OF OPERATIONS

FOR THE QUARTERS ENDEDJUNE 30, 2002 AND 2001

(Unaudited)

 
|                                       |   | **2002**   |       | **2001**  |   |
|--------------------------------------------|--------|------------|------------|-----------|--------|
| REVENUE                                    |   |       |       |      |   |
| Interest Income                            |   | $          | 10,381.60  |      | $      | 22,585.03 |   |
| Dividend Income                            |   | 119,542.80 |       | 0.00      |   |
|                                       |   |       |       |      |   |
| TOTAL REVENUE                              |   | 129,924.40 |       | 22,585.03 |   |
|                                       |   |       |       |      |   |
| EXPENSES                                   |   |       |       |      |   |
| Accounting Fees                            |   | 3,008.00   |       | 5,702.40  |   |
| Administrative  Services                   |   | 6,432.00   |       | 0.00      |   |
| Contract Wages  & Consulting           |   | 0.00       |       | 6,080.00  |   |
| Faxes                                      |   | 0.00       |       | 247.50    |   |
| Legal Fees                                 |   | 5,942.65   |       | 2,470.16  |   |
| Director Fees                              |   | 0.00       |       | 750.00    |   |
| Printing                                   |   | 0.00       |       | 3,591.00  |   |
| Postage                                    |   | 0.00       |       | 3,016.87  |   |
| Supplies                                   |   | 0.00       |       | 91.60     |   |
| Telephone                                  |   | 43.39      |       | 29.83     |   |
| Rent                                       |   | 0.00       |       | 750.00    |   |
| Meeting Expense                            |   | 0.00       |       | 169.65    |   |
| Office Expense                             |   | 1,315.87   |       | 0.00      |   |
| Miscellaneous                              |   | 0.00       |       | 0.00      |   |
|                                       |   |       |       |      |   |
| TOTAL EXPENSES                             |   | 16,741.91  |       | 22,899.01 |   |
|                                       |   |       |       |      |   |
| INCOME (LOSS)  BEFORE INCOME TAXES         |   | 113,182.49 |       | (313.98   | )      |
|                                       |   |       |       |      |   |
| INCOME TAXES                               |   | 0.00       |       | 0.00      |   |
|                                       |   |       |       |      |   |
| NET INCOME  (LOSS)                         |   | $          | 113,182.49 |      | $      | (313.98 | ) |
|                                       |   |       |       |      |   |
| INCOME PER SHARE  (Basic & Diluted)    |   | $          | 0.04       |      | $      | 0.00 |   |
|                                       |   |       |       |      |   |
| WEIGHTED AVERAGE  COMMON SHARE OUTSTANDING |   | 2,649,000  |       | 2,649,000 |   |

 

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WORLD SERVICES, INC.

STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDEDJUNE 30, 2002 AND 2001

(Unaudited)

 
|                                       |   | **2002**   |      | **2001**  |   |
|--------------------------------------------|--------|------------|-----------|-----------|--------|
| REVENUE                                    |   |       |      |      |   |
| Interest Income                            |   | $          | 23,085.67 |      | $      | 49,960.35 |   |
| Dividend Income                            |   | 119,542.80 |      | 0.00      |   |
|                                       |   |       |      |      |   |
| TOTAL REVENUE                              |   | 142,628.47 |      | 49,960.35 |   |
|                                       |   |       |      |      |   |
| EXPENSES                                   |   |       |      |      |   |
| Accounting Fees                            |   | 10,672.10  |      | 9,972.25  |   |
| Administrative  Services                   |   | 17,503.67  |      | 0.00      |   |
| Contract Wages  & Consulting           |   | 0.00       |      | 12,020.00 |   |
| Faxes                                      |   | 0.00       |      | 288.75    |   |
| Legal Fees                                 |   | 27,280.73  |      | 3,832.66  |   |
| Director Fees                              |   | 600.00     |      | 2,100.00  |   |
| Printing                                   |   | 0.00       |      | 3,591.00  |   |
| Postage                                    |   | 0.00       |      | 3,065.99  |   |
| Supplies                                   |   | 0.00       |      | 112.10    |   |
| Telephone                                  |   | 750.51     |      | 29.83     |   |
| Rent                                       |   | 750.00     |      | 1,500.00  |   |
| Meeting Expense                            |   | 1,177.05   |      | 169.65    |   |
| Office Expense                             |   | 11,837.26  |      | 0.00      |   |
| Miscellaneous                              |   | 1,204.08   |      | 0.00      |   |
|                                       |   |       |      |      |   |
| TOTAL EXPENSES                             |   | 71,775.40  |      | 36,682.23 |   |
|                                       |   |       |      |      |   |
| INCOME (LOSS)  BEFORE INCOME TAXES         |   | 70,853.07  |      | 13,278.12 |   |
|                                       |   |       |      |      |   |
| INCOME TAXES                               |   | 0.00       |      | 0.00      |   |
|                                       |   |       |      |      |   |
| NET INCOME  (LOSS)                         |   | $          | 70,853.07 |      | $      | 13,278.12 |   |
|                                       |   |       |      |      |   |
| INCOME PER SHARE  (Basic & Diluted)    |   | $          | 0.03      |      | $      | 0.01 |   |
|                                       |   |       |      |      |   |
| WEIGHTED AVERAGE  COMMON SHARE OUTSTANDING |   | 2,649,000  |      | 2,649,000 |   |

 

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WORLD SERVICES,INC.

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHSENDED JUNE 30, 2002 AND 2001

(Unaudited)

 
|                                                                                     |   | **2002**   |       | **2001**   |   |
|------------------------------------------------------------------------------------------|--------|------------|------------|------------|--------|
| CASH FLOWS FROM OPERATING ACTIVITIES                                                     |   |       |       |       |   |
| Net Income  (loss)                                                                       |   | $          | 70,853.07  |       | $      | 13,278.12 |   |
|                                                                                     |   |       |       |       |   |
| Adjustment to  reconcile net income (loss) to net cash provided in operating activities: |   |       |       |       |   |
| (Increase)  Decrease in:                                                                 |   |       |       |       |   |
| Interest  Receivable                                                                     |   | (2,008.69  | )          | (7,321.01  | )      |
| Increase  (Decrease) in:                                                                 |   |       |       |       |   |
| Stock Redemption  Payable                                                                |   | (771.00    | )          | (125.00    | )      |
| Accounts Payable                                                                         |   | (5,498.05  | )          | 3,413.00   |   |
|                                                                                     |   |       |       |       |   |
| NET CASH  PROVIDED BY OPERATING ACTIVITIES                                               |   | 62,575.33  |       | 9,245.11   |   |
|                                                                                     |   |       |       |       |   |
| CASH FLOWS FROM  INVESTING ACTIVITIES                                                    |   |       |       |       |   |
| Redemption of  Certificates of Deposit                                                   |   | 395,000.00 |       | 263,025.04 |   |
|                                                                                     |   |       |       |       |   |
| NET CASH  PROVIDED BY INVESTING ACTIVITIES                                               |   | 395,000.00 |       | 263,025.04 |   |
|                                                                                     |   |       |       |       |   |
| NET INCREASE  (DECREASE) IN CASH                                                         |   | 457,575.33 |       | 272,270.15 |   |
|                                                                                     |   |       |       |       |   |
| CASH AT  BEGINNING OF PERIOD                                                             |   | 397,630.42 |       | 42,225.10  |   |
|                                                                                     |   |       |       |       |   |
| CASH AT END OF  PERIOD                                                                   |   | $          | 855,205.75 |       | $      | 314,495.25 |   |
|                                                                                     |   |       |       |       |   |
| SUPPLEMENTAL DISCLOSURES                                                                 |   |       |       |       |   |
| Cash payments  for:                                                                      |   |       |       |       |   |
| Income taxes                                                                             |   | $          | 0.00       |       | $      | 0.00 |   |
|                                                                                     |   |       |       |       |   |
| Interest paid                                                                            |   | $          | 0.00       |       | $      | 0.00 |   |

 

7

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WORLDSERVICES, INC.

NOTES TO FINANCIALSTATEMENTS

FORTHE PERIOD ENDED JUNE 30, 2002

 

In the opinion of management of WorldServices, Inc. (the Company), the accompanying unaudited financial statementsreflect all adjustments (consisting of only normal recurring accruals)necessary to present fairly the financial position of the Company as of June30, 2002, and the results of operations and cash flows for the periods endedJune 30, 2002 and 2001.

 

These unaudited financial statements shouldbe read in conjunction with the Company’s annual report on Form 10-KSB for theyear ended December 31, 2001.

 

NOTE 1 – NATURE OF OPERATIONS AND SIGNIFICANTACCOUNTING POLICIES

 

A summary of significant accounting policiesis currently on file with the Securities and Exchange Commission on Form10-KSB.

 

NOTE 2 – INCOME TAXES

 

As of December 31, 2001, the Company had netoperating loss carry forwards for income tax purposes totaling approximately$657,000 which expire in the years 2003 to 2011.  The net operating loss carry forwards may be limited with respectto their availability due to prior ownership changes and the consolidatedreturn regulations.

 

8

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**Item 2. Management’s Discussion and Analysis or Plan of Operation**

 

The following discussion and analysis shouldbe read in conjunction with the Financial Statements and Notes thereto appearing elsewhere in this report.

 

*Past andFuture Operations*

 

World Services, Inc. (“we”or “World Services”) has had no significant operations since 1989.  Since 1995, our activities have consisted ofmaintaining our investment in Super 8 Motel Developers, Inc., a South DakotaCorporation (“Developers”) and complying with applicable administrative andregulatory requirements.  Our onlyearnings since 1995 have been from dividends received from our investment inDevelopers and interest earned on deposits.

 

On February 22, 2002,Developers acquired control of World Services pursuant to the terms of a publictender offer commenced on October 3, 2001. Subsequent to the completion of the tender offer, all previous membersof the Board of Directors resigned, and designees of Developers were appointedto fill the vacant positions.

 

As of the date of thisfiling, our new Board of Directors has not decided upon an appropriate coursefor World Services to follow, but our Board of Directors may decide upon one ofthe following alternatives:

 

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 would seekbusiness opportunities and consider various possibilities of reorganization forWorld Services with the intention of allowing us to engage in active businessoperations.

 

3.                                       Sale ordistribution of World Services’ minority interest in Developers.  Pursuantto this alternative, we would seek a sale or distribution of World Services’minority interest in Developers to Developers, an affiliate of Developers, oran unrelated third party. This may require 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.

 

Our available workingcapital and anticipated dividends from Developers should allow us to continueour current business of maintaining our public reporting status andinvestigating 

 

9

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possible business combinations indefinitely. If World Services acquires a business, however, it is likely that expenseswould increase significantly before we would realize any significant revenuesfrom any new business.  Nevertheless, webelieve that we will have sufficient funds available to meet all our capitalobligations in the foreseeable future.

 

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 we continue to complywith our obligations as a reporting company pursuant to the Securities ExchangeAct of 1934 and the South Dakota corporations law. If our outstandingshareholder base drops below 500 shareholders, we may decide to de-register ourshares (providing our total assets do not exceed $10,000,000 on the last day ofour most recent three fiscal years), thus eliminating our obligation tocontinue reporting under the 1934 Act, but we must comply with certainrequirements of the federal securities laws to do so.

 

*Liquidityand Capital Resource**s – June30, 2002, Compared to December 31, 2001*

 

During the six months endedJune 30, 2002, cash increased approximately $458,000, as a result of redeemingcertificates of deposits and current period operations.  Interest receivable increased from $14,795at December 31, 2001, to $16,804 at June 30, 2002.

 

Primarily as a result ofcurrent period income in excess of expenses, current assets increased by$64,584 from $1,493,494 at December 31, 2001 to $1,558,078 at June 30, 2002.

 

Current liabilitiesdecreased $6,269 from $51,959 at December 31, 2001, to $45,690 at June 30,2002. The decrease is the result of the decrease in accounts payable and stockredemption payable.

 

As a result of the Company’snet income for the six months of $70,853, the accumulated deficit decreased from $4,357,535 at December31, 2001 to $4,286,682 at June 30, 2002. As a result, total stockholders equity increased from $2,009,535 atDecember 31, 2001, to $2,080,388 at June 30, 2002.

 

In August of 1997, theCompany completed a reverse stock split followed by a forward stock split.  Following the reverse stock split, therewere a number of fractional shares, which were redeemed.  Not all of the fractional shares had beensubmitted for payment by December 31, 2001 or June 30, 2002.  As a result, the “current liabilities”portion of the balance sheet reflects a “stock redemption payable.”  During the six months ended June 30, 2002,the Company redeemed outstanding fractional shares with a value ofapproximately $771.  The total number ofoutstanding shares of common stock reflected on the balance sheet does not giveany effect to the fractional shares outstanding.

 

World Services’ mostsignificant asset is its investment in Developers, which is carried at cost onits books. World Services believes that the fair market value of thisinvestment is in excess of its book value. However, as a result of Developers’controlling interest in World Services, World Services’ minority ownership inDevelopers, and World Services’ inability to 

 

10

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significantly influence Developers, theultimate realization of this investment may be subject to conditions outside ofWorld Services’ control.

 

*Resultsof Operation**– Six  Months Ended June 30, 2002 Compared to SixMonths Ended June 30, 2001*

 
|                              |   | **Period  Ended**  |    |
|-----------------------------------|--------|--------------------|---------|
|                              |   | **June 30,  2002** |    | **June 30,  2001** |   |
|                              |   |               |    |   |   |
| Net income (loss)                 |   | $                  | 70,853  |   | $ | 13,278 |   |
|                              |   |               |    |   |   |
| Operating Expenses                |   | 71,775             |    | 36,682 |   |
|                              |   |               |    |   |   |
| Weighted Average Number of Shares |   | 2,649,000          | *  | 2,649,000 | *  |
|                              |   |               |    |   |   |
| Net income per share Less than    |   | $                  | 0.03    |   | $ | 0.01 |   |

 

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*                                         The weightedaverage number of shares has been adjusted for the reverse and forward stocksplits completed in August of 1997 and for the repurchase of the fractionalshares resulting from the reverse stock split, all as described in thecompany’s proxy statement for the shareholders’ meeting in August of 1997.

 

Operating expenses(primarily legal, accounting, and administrative costs) increased during thesecond quarter due to matters associated with the tender offer and relatedparty transactions discussed herein.

 

###### *Related Party Transactions*

 

The Company pays amonthly administrative fee to Super 8 Motel Developers, Inc. and bookkeepingexpenses to a company beneficially owned by Ron Rivett, the Chairman and asignificant shareholder of Super 8 Motel Developers, Inc., to cover such costsas office rent, phone, administrative services, accounting services and generaloffice expenses.  Payments for theseservices totaled $6,507 for the six months ended June 30, 2002.  During the quarter ended June 30, 2002, theCompany received a dividend in the amount of $119,543 from Super 8 MotelDevelopers, Inc.

 

11

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**PART II****– OTHER INFORMATION**

 

**Item 1.     Legal Proceedings**

 

We are not a party to anylegal proceedings, and to the best of our knowledge, no such proceedings havebeen threatened or are contemplated.

 

**Item 2.  Changesin Securities and Use of Proceeds**

 

None.

 

**Item 3. Defaults Upon Senior Securities**

 

None.

 

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

 

None.

 

**Item5.  Other Information**

 

Since Developers’ acquiredcontrol of World Services upon the completion its public tender offer onFebruary 22, 2002, additional World Services shareholders have approachedDevelopers with offers to sell their shares. Developers considered each of these offers on an individual basis, andas of August 8, 2002, Developers had purchased an aggregate of 101,881additional shares from such shareholders in private sales.  As a result of such purchases, Developersowns over 82% of the currently outstanding shares of World Services commonstock.

 

**Item 6. Exhibits and Reports****on Form 8-K**

 

(a)           Exhibits. See Exhibit Index.

 

(b)           Reports on Form 8-K.  No reports on Form 8-K were filed during the quarter ended June30, 2002.

 

12

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SIGNATURES

 

In accordance with therequirements of the Exchange Act, the registrant caused this report to besigned on its behalf by the undersigned, thereunto duly authorized.

 
|                         |   | WORLD SERVICES, INC. |
|------------------------------|--------|----------------------|
|                         |   |                 |   |
| Dated:  August 13, 2002 |   |                 |   |
|                         |   | By                   |   /s/ Joel W. Albrecht |   |
|                         |   |                 | Joel W. Albrecht |
|                         |   |                 | Secretary/Treasurer |

 

EXHIBITINDEX

 
| **Exhibit No.** |   | **Description**                                                                                |
|-----------------|--------|------------------------------------------------------------------------------------------------|
| 99.1            |   | Certification Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) |

 

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