<PAGE>
 
                                 United States

                       Securities and Exchange Commission

                            Washington, D.C.  20549

                                  FORM 10-QSB

                                   (MARK ONE)

[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period Ended June 30, 1998
                                       or
[   ] Transition Report Pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934 For the Transition Period 
From ____________ to ______________

                       Commission File number  333-40621

============================================================================

                           SOUTHERN VENTURES, INC.

             (Exact name of Registrant as specified in its charter)

      NEVADA                                                 63-1185800
(State of Incorporation)                                  (I.R.S. Employer
                                                          Identification No.)

                             1322 Maron Spillway Rd.
                              Elmore, AL  36025
                    (Address of principal executive offices)

                                 (702) 341-7211
                        (Registrant's telephone number)

============================================================================

Check whether the Registrant (1) has filed all reports required to be filed by
Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding
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   

As of June 30, 1998 there were 18,937,000 shares of Common Stock
outstanding.

<PAGE>
 
         INDEX
         -----

PART I.  FINANCIAL INFORMATION (unaudited)

         Item 1.  Balance Sheet as of June 30, 1998
 
                  Statements of Operations for the three-month 
                  periods ended June 30, 1998 and 1997
 
                  Statements of Cash Flows for the six-month periods
                  ended June 30, 1998 and 1997
 
                  Notes to the Financial Statements
 
         Item 2.  Management's Discussion and Analysis of Financial 
                  Condition and Results of Operations
 
PART II.  OTHER INFORMATION
 
         Item 1 - Item 6.

<PAGE>
 
PART I.  FINANCIAL INFORMATION (unaudited)

     Item 1. Financial Statements:

                         Southern Ventures and Subsidiaries 
                           CONSOLIDATED BALANCE SHEET

                                                       June 30,
                                                         1998
                                                      -----------
                                                      (Unaudited)
ASSETS
Current assets:
    Cash and cash equivalents                         $   302,898
    Accounts receivable                                   706,199
    Inventories                                           565,232
    Other current assets                                  101,627
                                                      -----------
Total current assets                                    1,675,957
 
Intangible assets                                          99,000
Notes receivable                                          110,469
Property and equipment, net                             9,816,359
                                                      -----------
Total assets                                          $11,701,784
                                                      ===========
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                   $   171,662
   Accrued compensation and liabilities                   829,007
   Dividend payable - preferred stock                      75,000
   Current portion of notes payable                     2,598,927
                                                      -----------
Total current liabilities                               3,674,596
Long-term liabilities excluding current portion         5,869,885
                                                      -----------
Total liabilities                                       9,544,481
 
Shareholders' equity:
   Common stock                                            18,937
   Preferred stock                                         10,000
   Additional paid-in capital                             540,501
   Retained earnings                                    1,687,866
   Shareholder receivable                                (100,000)
                                                      -----------
Total shareholders' equity                              2,157,304
                                                      -----------
 Total liabilities and shareholders' equity          $ 11,701,784
                                                      ===========

See accompanying notes to unaudited financial statements

<PAGE>
 
                       Southern Ventures and Subsidiaries 
                            STATEMENTS OF OPERATIONS

                                            Three-Month Periods    
                                                Ended June 30,
                                            1998                     1997 
                                  -------------------       ------------------
                                      (Unaudited)                 (Unaudited)
Product sales                         $1,157,301                $ 1,040,392
Cost of sales                            435,764                    344,445
                                  ----------------          ------------------
Gross profit                             721,536                    695,947
 
Operating expenses:
Selling, general and administrative      325,188                    206,486
Interest Expense, net                     72,589                     65,674
Provision for income tax                 129,504                    169,515
                                   ----------------         ------------------
Net income                               194,256                    254,272
                                  =================         ==================
 
Basic and diluted net per share           $(0.01)                    $(0.01)
                                  =================         ==================
 
Shares outstanding                    18,937,000                 18,937,000
                                  =================         ==================

See accompanying notes to unaudited financial statements

<PAGE>
 
                     Southern Ventures and Subsidiaries
                    Consolidated Statement of Cash Flows
                                                            June 30
                                                       1998           1997
                                                   -----------    ----------
Net income                                           308,220        532,125 
Income charges (credit) not affecting cash:           
Depreciation & Depletion                             294,648        196,112 
Amortization                                           3,667         14,850
Changes in certain working capital components:            
Decrease (increase) in inventory                    (100,214)           -   
Decrease (increase) in accounts receivable          (162,610)       (88,193) 
Decrease (increase) in other current assets          (46,530)       (29,728)
Increase (decrease) in accrued payroll               262,076            -
Increase (decrease) in accounts payable                     
    notes payable and accrued liabilities              1,700       (195,352)

Cash provided by operations                          560,956        766,859 

Cash Provided (Used) by Investing Activities
Additions to property, plant and equipment          (335,933)    (1,200,178)
Disposals of property, plant and equipment           240,032            -   
Cash used by investing activities                    (95,901)    (1,200,178)

Cash Provided by Financing Activities
Additions in long-term debt                          316,356        850,991 
Reductions in long-term debt                        (660,198)      (138,149)
Distributions to shareholders                           -          (325,590)
Cash provided by financing activities               (343,842)       387,252 

Net increase (decrease) in cash                      121,214        (46,066) 
Cash at beginning of year                            181,685        167,258 
Cash at end of peroid                                302,898        121,192 

See accompanying notes to unaudited financial statements

<PAGE>
 
Southern Ventures,Inc.

NOTES TO THE FINANCIAL STATEMENTS, (UNAUDITED)

     1.   BASIS OF PRESENTATION

     The accompanying unaudited financial statements of Southern Ventures,
Inc. (the "Company"), have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instruction for Form 10-QSB Item 310b and Article 10 of regulation S-X.  The
balance sheet as of June 30, 1998, and the statements of operations for the
three month periods ended June 30, 1998 and 1997 and the statements of cash
flows for the six-month period ended June 30, 1998 and 1997 are unaudited but 
include all adjustments (consisting only of normal recurring adjustments)
which the Company considers necessary for a fair presentation of the
 financial position at such date and the operating results and cash flows for
those periods.  Although the Company believes that the disclosures in these
financial statements are adequate to make the information presented not
misleading, certain information normally included in financial statements and
related footnotes prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission

     Results for any interim period are not necessarily indicative of results
for any other interim period or for the entire year.

    2.   USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions.  These assumptions affect the reported amounts of assets and
liabilities, the  disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from these estimates.

     3.   INVENTORIES

    Inventories are stated at the lower of cost or market, determined by using 
the last-in, first-out (LIFO) method. 

     4.   INCOME TAXES

    Pro forma income tax provision gives effect to income tax considerations
assuming that each of the subsidiary entities had been a "C" Corp. for the
reported period.  No income is reflected on a pro forma basis for the Starch
and Gluten Plant since the acquired plant has been closed since 8/15/96 and
that management plans to operate the assets in a materially different manner
than the prior owner.

     5.   CONSOLIDATION
    
    On June 30, 1998, the Company's mining subsidiaries, Elmore Sand & Gravel,
Inc. and Tuskegee Sand & Gravel, Inc., where merged together to form a single
corporate entity.  Elmore Sand & Gravel, Inc. was the surviving corporation. 

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS:

     The following discussion should be read in conjunction with the unaudited
financial statements and notes thereto included in Part I - Item 1 of this
Quarterly Report and the audited financial statements and notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's prospectus.

RESULTS OF OPERATIONS
    The following table sets forth, as a percentage of net sales, certain
items included in the Company's Income Statements for the periods indicated:

                                                 Quarter ended June 30, 
                                                  1997           1996 
                                                  ----           ----
Statements of Income Data:
         Net sales.........................      100.0%         100.0%
         Cost of sales.....................       37.7           33.1
         Gross profit......................       62.3           66.9
         Operating expenses................       28.1           19.8
         Income from operations............       34.2           47.0
         Other income (expense)............       (6.3)          (6.3)
         Income before income taxes........       28.0           40.7
         Provision for income taxes........       11.2           16.3
         Net income.........................      16.8           24.4

Quarter Ended June 30, 1996 Compared to Quarter Ended June 30, 1997

     Revenue consists of gross revenue less product returns.  In the three
months ended June 30, 1998, substantially all of the Company's revenue was
derived from the sale of its subsidiary, Elmore Sand & Gravel, Inc. products.
Revenue for the three months ended June 30, 1998 increased to $1,157,301 from
$1,040,392 for the three months ended June 30, 1997.  Revenue was up from the
previous year due to a increase demand from local contractors.  The management
believes that this demand was cause by the usual weather conditions which
impacted the local area during the winter months.  Weather has not been a
significant factor in prior years and management does not anticipate similar
conditions in the future.  In addition, current shortage of railcars has affect
out of area sells.  The company has development additional means of
transportation.


     Cost of sales consists primarily of the cost to manufacture the Company's
products.  Cost of sales increased to $435,764 in the three months ended June
30, 1998 from $344,446 for the three months ended June 30, 1997.  This
difference was the result of lower than normal maintenance costs during the 2nd
quarter of 1997, which was the result of higher than normal maintenance costs
which where accrued during the first quarter of 1997. 

General and administrative expense consists of general management and
finance personnel costs, occupancy expense, accounting expense and legal
expense.  General and administrative expenses increased to $325,188 for the
three months ended June 30, 1998 from $206,486 for the three months ended June
30, 1997.  The increases were primarily the result of additional legal,
accounting and start-up cost associated the Companies' Riverside Grain Products
subsidiary.

Liquidity and Capital Resources:

The company's anticipates satisfying $2,000,000 of its outstanding
current liabilities through the issuance of common stock.  The company is
currently satisfying its working capital need from its mining subsidiary, Elmore
Sand & Gravel.  The company anticipates meeting all future working capital needs
by operating its starch and gluten facility in Thunder Bay, Canada.

PART II.  OTHER INFORMATION

ITEM 1.   Legal Proceedings
          None

ITEM 2.   Changes in Securities
          None

ITEM 3.   Defaults upon Senior Securities
          None

ITEM 4.   Submission of Matters to a vote of Shareholders
          None

ITEM 5.   Other Information
          None

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K
          None

                                   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 Ventures, Inc.


                            /s/ Chester Wright III
                            Chief Financial Officer
                            (Principal Financial and Accounting Officer)