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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended March 31, 1996 or
--------------
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ___________________ to___________________
Commission file number 0-19949
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THE SOUTHSHORE CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Colorado 84-1153522
- - ---------------------------- ----------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
10750 East Briarwood, Englewood, Colorado 80112
- - ----------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 649-9875
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
None None
------ ------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - $.001 Par Value
--------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 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_____ No X
The aggregate market value of the voting stock held by
non-affiliates of the Registrant as of June 15, 1996 was approximately
$222,000.
The number of shares outstanding of the Registrant's $.001 par
value common stock as of June 15, 1996 was 2,590,475 shares.
INDEX
Page No.
PART I
Item 1. Business 2
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Submission of matters to a vote of
security holders 5
Item 5. Market for the company's common stock
and related stockholder matters 5
Item 6. Selected financial data 6
Item 7. Management's discusstion and analysis
of financial condition and results of
operations 7
Item 8. Financial statements and supplementary
data 9
Item 9. Changes in and disaggreements with
accountants on accounting and financial
disclosure 9
Item 10. Directors and executive officers of the
company 10
Item 11. Executive compensation 10
Item 12. Security ownership of certain beneficial
owners and management 13
Item 13. Certain relationships and related
transactions 14
Item 14. Exhibits, financial statement schedules,
and reports on form 8-K 14
Signatures 16
Index to Financial Statements F-1
PART I
ITEM 1. BUSINESS
- - -----------------
General
The Company was incorporated under the laws of Colorado on
March 26, 1990. It has broad corporate powers; however, since
inception the Company has been engaged in the development,
construction and operation of a water park to be located in the
Southeast Denver Metropolitan Area. The park was completed in 1992
and it operates from Memorial Day Weekend through Labor Day Weekend
annually.
Southshore Water Park - Arapahoe County, Colorado
The 16-acre park, located near I-25 and East Arapahoe Road in
Southeast Metro Denver, includes a Children's Pool, Wave Pool, and
various Water Slides. The Wave Pool covers approximately 23,000
square feet and the six water slides are up to 350 feet long. The
park also contains a volleyball area, miniature golf course, covered
group pavilion areas, picnic areas, gift shop, video arcade and food
service facilities. Free parking for approximately 700 cars is
provided. The Company uses local radio and television for
advertisement and also makes use of coupons for reduced admission
charges.
General Park Policy for Operations
Management stresses park safety and cleanliness. The Company
utilized the latest design engineering with respect to construction of
rides and attractions with safety as a prime consideration. The park
is operated with trained certified lifeguards and park security
personnel in adequate numbers to keep accidents, disruptive activity
and similar incidents at a minimum. The park maintains a first aid
station for treatment of minor injuries.
Construction Creditor Matters Resolved
In the Fall of 1992, the Company experienced a financial crisis
due to construction cost overruns of approximately $1,000,000 and the
lack of funds to pay many of the contractors and subcontractors which
provided materials and labor to construct the Company's water park.
Construction creditors of the Company filed documents with the
Arapahoe County, Colorado clerk and recorder relating to approximately
$900,000 in claims under the Colorado mechanic's lien provisions.
During fiscal 1996, the Company resolved the remainder of these
creditor matters and obtained releases of liens on its park property.
Adverse Current Ratio
At March 31, 1996, the Company's current liabilities exceeded its
current assets by $1,362,589. At March 31, 1996, the Company was
2
partially delinquent in paying its property taxes, which were
$384,275. The Company's auditors state in their report at June 6,
1996 that the working capital deficiency raises substantial doubt as
to the Company's ability to continue as a going concern.
Default on Indenture of Trust
During the quarter ended September 30, 1992, the Company sold
$975,000 in 10% secured promissory notes to 27 persons pursuant to an
indenture of trust. Subject to the first lien on a portion of the
Company's water park property securing a $121,122 note to the person
from whom the Company acquired the property, the water park property
is collateral under the indenture of trust to secure payment of the
10% promissory notes.
The indenture of trust provides in pertinent part that it will
constitute an event of default to fail to keep the Company's water
park property free and clear of liens of contractors, subcontractors,
mechanics, laborers and materialmen. The filing of documents by
construction creditors of the Company as described above under the
caption "Financial Crisis" constitutes a default. In November 1994
the trustee under the indenture resigned and no successor trustee has
been selected.
The Company has made all required payments on the notes except
principal payments for June 30, 1994 and June 30, 1995, for which
payments the Company has obtained waivers through June 30, 1997 from
noteholders holding $852,500 in such notes. The remaining $117,500
of these notes are in default and accounted for as current
liabilities.
Changes in Control
In February and April 1995, Kenneth M. Dalton, President of the
Company, purchased 424,250 shares and 75,750 shares, respectively, of
common stock of the Company at $1.00 per share. At June 15, 1996 he
owned 668,419 shares of the Company's common stock.
Government Regulation and Approvals
The Tri-County Health Department administers extensive
regulations relating to safety and sanitation aspects of operating the
water parks public swimming areas (i.e., chlorinated water testing,
pool personnel and bather controls). The Company's water facilities
as well as its food concession areas are subject to inspection by Tri-
County Health Department officials. Such regulations are often
complex, subject to differing interpretations and expensive to comply
with; however, the Company is committed to operating a clean, safe
park and thus intends to fully comply with these requirements.
3
Competition and Marketing Plans
In general, the Company will be in competition for entertainment
dollars in the Denver Metro Area. There are various broad forms of
such entertainment, at various costs, appealing to a broad mass of the
some 2,200,000 people who live in the area and tens of thousands of
summer visitors. These include warm weather activities such as
amusement parks, Lakeside and Elitch's, water recreation areas such as
Cherry Creek Reservoir and Chatfield Recreation Area, many local
swimming pools, golf, tennis and similar activities. However, the
most significant direct competition is expected to be from Water
World, a 60-acre water park located in the north part of the Denver
Metro Area approximately 21 miles from the Company's park.
Water World is owned and operated by Hyland Hills Metropolitan
Parks and Recreation District. It typically operates from Memorial
Day Weekend through Labor Day Weekend, and reported average attendance
in the past five summers through 1993 of approximately 350,000, with
1994 attendance at approximately 500,000. For the 1996 season it is
charging $15.95 for children ages 4 to 12 years, $16.95 for adults and
admits free of charge children under 4 years of age and senior
citizens. It also offers family and individual season passes.
Residents of the Hyland Hills Park and Recreation District and the
cities of Westminster and Federal Heights may obtain admission to
Water World at discounted prices, $8.00 for children and $9.00 for
adults. Water World advertises through television, radio and
newspaper media in the Denver area and offers a variety of group
discount programs. Thus the Company faces competition from an
established larger water facility which has more attractions than
those offered by the Company.
Notwithstanding the foregoing the Company believes it can find a
niche in this competitive arena. It utilizes admission charges of
$11.95 for adults and $9.95 for children which are less than those of
Water World. In addition, it has various discount programs, including
discounts for rainy and/or cloudy days, and group sales. In addition
the Company intends to operate a first rate park in terms of safety,
maintenance of rides, park cleanliness, friendliness and competence of
park staff. The Company also offers quality food and beverages at
competitive prices. Further, an assortment of beach items such as
swim wear, towels, suntan lotion, sunglasses, hats, t-shirts and
souvenirs are offered to patrons. Management believes that the
foregoing in addition to convenience of location to residents of the
southern Denver Metro Area will be sufficient to permit the Company to
generate sufficient revenues for profitable operations, however there
is no assurance that such will be the case.
Personnel
At March 31, 1996, the Company had two full time employees, the
Company's in-house accountant and the general manager. The Company's
President serves in a part-time, as needed position. Approximately
eighty full and part-time seasonal personnel, depending upon
4
attendance, including park manager, lifeguards, merchandise sales,
groundskeepers, cash control, security and emergency medical
personnel, are employed. The Company does not expect there to be a
shortage of the required labor force. Seasonal personnel are expected
to come largely from the ranks of college and high school students on
summer break from school. It is not expected that any employees will
be covered by a collective bargaining agreement.
Liability Insurance
The Company maintains a liability insurance policy with coverage
in the amount of $1,000,000 per incident to cover possible claims for
injury and damages from accidents.
Weather Patterns
The Company's business is significantly affected by Denver Area
weather patterns since park attendance is expected to be reduced when
temperatures do not exceed 75 degrees, there is rainfall, cloudy skies
prevail, or there is low relative humidity. Other than offering
discount tickets and other promotions to enhance attendance and
reducing personnel on rainy or cloudy days, the Company can do little
to offset the effect on operations from such weather patterns.
ITEM 2. PROPERTIES
- - -------------------
The Company owns 16 acres of real estate at approximately East
Arapahoe Road and South Havana in the Southeast Denver metro area.
The Company's water park, adjacent parking area and administrative
offices are located on this property.
ITEM 3. LEGAL PROCEEDINGS
- - --------------------------
During the quarter ended December 31, 1992, approximately forty
construction creditors of the Company filed documents with the Clerk
and Recorder in Arapahoe County, Colorado under the Colorado
mechanic's lien provisions relating to claims in excess of $900,000.
At March 31, 1996, all lien creditors' claims had been satisfied.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- - ------------------------------------------------------------
No matters were submitted to a vote of shareholders during the
quarter ended March 31, 1996.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
- - ----------------------------------------------------------
The Company's common stock was included on the NASDAQ Small-Cap
Market until December 4, 1995. Thereafter, it was included on the
NASD's Electronic Bulletin Board. Below are high and low bid prices
for the calendar quarters indicated as reported by NASDAQ through
5
December 4, 1995. The prices for the quarters ended December 31, 1995
and March 31, 1996 have been obtained from sources believed to be
reliable.
Low High
Quarters Ended Bid Bid
------------------ ---- ----
June 30, 1994 1.50 1.62
September 30, 1994 .62 1.50
December 31, 1994 .62 1.00
March 31, 1995 .50 1.00
June 30, 1995 .37 1.00
September 30, 1995 .25 .78
December 31, 1995 .25 .50
March 31, 1996 .25 .50
Prices may not be an indication of actual transactions and do not
necessarily include mark-ups, mark-downs or interdealer discounts.
The Company is informed that there has been very little volume in
trading of its common stock during the past year.
On June 1, 1996, the Company had 188 shareholders of record, and
management estimates there are an additional approximate 170
beneficial holders of Company shares.
Dividend Policy
The Company has never paid dividends on its common stock, and the
Company's Board of Directors plans on distributing no dividends in the
foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
- - --------------------------------
Following is a summary of selected financial data. See the
financial statements included herein for more complete information.
Summary Balance Sheet Data:
As of As of As of As of As of
3/31/96 3/31/95 3/31/94 3/31/93 3/31/92
------- ------- ------- ------- -------
Total
Assets..... $ 3,028,190 $ 3,649,607 $ 3,991,676 $ 4,279,819 $ 2,598,540
Total
Liabilities.$ 2,322,158 $ 2,724,957 $ 2,545,949 $ 2,438,857 $ 216,032
Working
Capital.... $(1,362,589) $(2,556,580) $(2,306,874 $(1,260,173) $ 1,898,785
Stockholders'
Equity..... $ 706,032 $ 924,650 $ 1,447,727 $1,840,962 $ 2,382,508
Summary Operating Data:
Year Year Year Year Year
Ended Ended Ended Ended Ended
3/31/96 3/31/95 3/31/94 3/31/93 3/31/92
------- ------- ------- ------- -------
Sales......... $ 855,618 $1,021,747 $ 838,098 $ 52,658 $ -0-
Net Loss...... $ 693,474 $1,023,077 $1,334,382 $(630,005) $(75,035)
Net loss
Per Share..... $ (.29) $ (.57) $ (.79) $ (.54) $ (.12)
6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- - --------------------------------------------------------------------
Financial Condition
At March 31, 1996, working capital was a negative $1,362,589 as
compared to a negative $2,556,580 at March 31, 1995, a decrease of
nearly $1,200,000.
The principal items contributing to the working capital shortfall
are operating losses, currently due promissory notes to affiliates,
and currently due property taxes.
At March 31, 1996, the Company's shareholders' equity was
$706,032, down from $924,650 at March 31, 1995, due primarily to
operating losses for fiscal 1996.
Results of Operations - Fiscal 1996 Compared to Fiscal 1995
Revenues for fiscal 1996 were lower than fiscal 1995 by $166,129
largely because the Company contracted its food service for 1996 with
an outside vendor and merely received a fee for the sale of food of
$173,453, compared to $353,709 for food sales by the Company for 1995.
However, substantial savings on the cost of sales ($11,078 for 1996
vs. $78,181 for 1995) and salaries ($270,938 for 1996 vs. $348,318 for
1995) justifies the decision which resulted in lower total revenues.
Gross profits for 1996 were approximately $100,000 less than 1995 and
total operating expenses for 1996 were nearly $300,000 less than 1995.
Thus, net loss for 1996 was approximately $330,000 less than the loss
for 1995. Of the loss of $693,474 for 1996, $560,511 represents a non-
cash item, depreciation. Most of the Company's current park
facilities will be fully depreciated in 1998.
The month of June, 1995, which is approximately one-third of the
water park's operating period, was one of the coldest, rainiest Junes
ever recorded for the Denver area. This was devastating to park
revenues. Thus far for June, 1996, the Denver area has experienced
more typical June weather, with highs usually in the 80's and low
90's. The Company expects this to have a favorable impact on fiscal
1997 revenues.
Consulting and professional fees have shown a steady decline from
fiscal 1994 through fiscal 1996 as the Company's use of lawyers and
other professionals has been reduced following the finalization of
work-out arrangements with the Company's creditors. The Company
expects such fees to remain relatively low for fiscal 1997.
Interest expense reduction and interest expense forgiven for 1996
reflect results of settlements and pay-offs of construction creditors.
See Note 6 to the financial statements for further explanation.
7
Results of Operations - Fiscal 1995 Compared to Fiscal 1994
Revenues for fiscal 1995 were up $183,000 or 22% and gross profit
was up $179,000 or 23%. Total operating expenses were nearly the same
for the two years. Among the operating expenses, advertising more
than doubled as the Company sought more public awareness for its water
park; consulting and professional fees were over $100,000 lower in
fiscal 1994 as legal and related costs were lower. Utilities were
somewhat lower in 1995 due to more efficiencies in operations and use
of less gas to heat water because of warmer 1994 summer weather.
Interest expense was higher because the Company increased its
borrowing to pay current debt and operating expenses.
Approximately 55% of the Company's 1995 losses, or $560,000,
represents depreciation, a non-cash item.
Results of Operations - Fiscal 1994 Compared to Fiscal 1993
Fiscal 1994 was the first year in which the Company had
significant revenues from Operations. During the previous fiscal
year, the park was open for only a few days.
Management believes that "Outside Services" expense of $223,314
is high for the period primarily due to legal services for litigation
involving creditor claims. It believes that most of these expenses
are nonrecurring and should not be as high in subsequent corresponding
periods.
Management believes that sales of $838,098 for the inaugural year
of the park are disappointing and can be improved in 1994. It is
management's position that a combination of cool summertime weather,
the Company's financial crises, and the difficulties encountered in
the start-up of a new business, including lack of name recognition,
contributed to relatively low attendance numbers at the park.
Management believes that with more aggressive marketing and one year's
experience in the business, attendance should be enhanced in 1994.
The operating loss of $1,134,382 for Fiscal 1994 is somewhat
tempered by the fact that $551,304 of the total operating expenses
relate to depreciation and amortization which is a non-cash item. In
addition Management believes that consulting and professional fees for
1994 are approximately $125,000 higher than they are expected to be
for fiscal 1995.
Liquidity and Capital Resources
At March 31, 1996, the Company had $2,322,158 in current
obligations, which include notes payable of $609,262, property taxes
of $384,275 and amounts due trade creditors of $141,968.
Except for utility companies who are creditors of the Company,
most trade creditors of the Company are non-essential and can be
replaced by other vendors of similar products. Many of the Company's
8
vendors require payment on delivery of goods and services and it is
expected that such practices will continue so long as the Company
remains in a financially weak position. Most of the Company's
vendors, including the utility companies which still supply power, gas
and water, continue to work with the Company notwithstanding delays in
being paid or fully paid. Obviously, there is no assurance creditors
will continue in their credit leniency.
The Company is appealing its property tax assessment with county
officials; however, there is no assurance it will be successful in
reducing this item.
The Company has been able to continue, notwithstanding past
financial difficulties, only as a result of sales of common stock to
and loans primarily from management and affiliated entities. While
the Company believes that these persons and entities may again be
sources of funding in the future, there is no assurance of such
availability nor are any terms assured.
Although the Company has made substantial inroads toward
establishing financial stability, it has not yet achieved it.
Management's objectives for fiscal 1997 are for the Company to
experience positive cash flow, if not profitable operations, and to
restructure its short-term debt and other obligations. There is no
assurance that these objectives will be achievable, and failure to
obtain refinancing and to meet its obligations could result action
against the Company by creditors. In general, the Company is on good
terms with its creditors.
Trends
The industry in which the Company operates depends considerably
on disposable income of potential park patrons and is thus more
affected by the condition of the local and, to a very limited extent
the national economy. The economy in the Denver area is currently
relatively strong, which means that more disposable monies would be
available for recreational activities such as those available at the
Company's facilities. Based on this economic indication, management
is hopeful the local economy will provide a good environment for the
Company to operate.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- - ----------------------------------------------------
Attached hereto are financial statements responsive to this Item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
- - ------------------------------------------------------
None.
9
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
- - ---------------------------------------------------------
Set forth below are all directors and executive officers of the
Company. Officers serve at the pleasure of the Board of Directors.
Kenneth M. Dalton, age 48. President of the Company since
October, 1993. Director of the Company since March 16, 1992.
President of Meridian Medical Corp., an Englewood, Colorado
distributor of medical products (1985-March 1994). In March 1994 the
assets of Meridian were sold to Lincare, Inc. of Clearwater, Florida,
and Mr. Dalton has been the Denver Metro Area Manager of Lincare,
Inc., which provides medical home health care and supplies. On April
1, 1994 the Board of Directors authorized a salary of $15,000 per year
for Mr. Dalton, who provides services on an as needed basis.
Rod K. Barksdale, age 47. Vice President of the Company since
october, 1993. Director of the Company since March 16, 1992.
Employed as an administrator for Public Service Company of Colorado,
Glenwood, Springs, Colorado (1977-Present). Mr. Barksdale receives no
salary from the Company and provides services on an as needed basis.
Ren Berggren, age 47. Secretary of the Company since October,
1993. Director of the Company since March 16, 1992. Employed as Vice
President of Vancol Industries, Inc., Denver, Colorado, a distributor
of beverages (1988-Present). Controller of Worldwide Corporate
Services, a Denver, Colorado company engaged in support services for
automobile dealerships (1985-1988). Mr. Berggren receives no salary
from the Company and provides services on an as needed basis.
Arthur K. Biddle, age 56. Director of the Company since June,
1995. Assistant City Attorney, Denver, Colorado (1987-1995).
Assistant General Attorney, AMAX Inc., Golden, Colorado (1970-1987).
Key Personnel
Eric Nelson is the Company's principal accounting and financial
officer. He has been employed by the Company since 1994 and
previously was employed in as controller with Meridian Medical Corp.,
Englewood, Colorado (1988-1994). He is a graduate of Colorado State
University, with a degree in accounting.
John Janness is the Company's general manager. He worked on the
construction of the park in 1991 and was in charge of park maintenance
from 1992 to 1995, when he was promoted to general manager.
ITEM 11. EXECUTIVE COMPENSATION
- - --------------------------------
The following tabular information includes all plan and non-plan
compensation paid to the Company's president and to all other
executive officers whose total annual salary and bonus is $100,000 or
more.
10
Summary Compensation
Annual Compensation Long-Term Compensation
------------------- ----------------------
Awards Payouts
Other ------------------ -------------
Name Annual Restricted All Other
and Compen- Stock LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- - -------- ---- ------ ----- ------- -------- --------- ------- ------
Kenneth M. 1996 15,000 -0- -0- -0- -0- -0-
Dalton 1995 15,000 -0- -0- -0- 30,000 -0- -0-
President(1) shares at
$2.50 per
share
177,777
shares at
$2.25 per
share
61,250
shares at
$1.10 per
share
(1) Mr. Dalton became President of the Company in October,
1993.
The Company's Board of Directors has no compensation committee.
Stock Options Held by Executive Officers
and Value Thereof at June 1, 1995
Value of
Unexercised
Number of In-the-Money
Unexercised Options at
Shares Options 6/1/96
Acquired Value 6/1/96 All All
Name on Exercise (#) Realized($) Exercisable Exercisable(1)
- - ----------------- --------------- ----------- ----------- --------------
Kenneth M. Dalton, -0- -0- 279,027 -0-
President
Rod K. Barksdale, -0- -0- 5,000 -0-
Vice President
(1) Based on the average closing bid price of the Company's
common stock at June 1, 1996 of $.25 as reflected on the
NASD's Electronic Bulletin Board.
11
Director's Fees
The Company has authorized director's fees of $100 per meeting
for each director who is not a salaried officer of the Company,
however no director's fees were paid during the year ended March 31,
1996.
Incentive Stock Option Plan
Effective January 7, 1991, the Company adopted an Incentive Stock
Option Plan (the "Plan"). The purpose of the Plan is to secure and
retain key employees of the Company. The Plan authorizes the granting
of options to officers, directors and employees of the Company to
purchase 200,000 shares of the Company's $.001 par value common stock
subject to adjustment for various forms of recapitalization that may
occur. No option may be granted after January 7, 2001, and the fair
value of an option to each optionee cannot exceed $100,000 per year.
An employee must have six months of continuous employment with the
Company before he or she may exercise an option granted under the
Plan. The option exercise price may not be less than 100% of the fair
market value of the shares at the time of the granting of such options
except in the case of an option granted to a stockholder who owns 10%
or more of the Company's shares at the time of the grant in which case
the option price must be at least 110% of the fair market value of the
shares at the time of the grant of such option, and options must be
exercised within five years after the date of grant. Options granted
under the Plan are non-assignable and terminate three months after
employment by the optionee ceases, except in the case of employment
termination due to disability of the optionee, in which event the
option expires twelve months from the date employment ceases. The
Plan is to be administered by a committee selected by the Company's
Board of Directors.
It may be expected that any option granted will be exercised only
if it is advantageous to the option holder. It may also be expected
that if any option granted is exercised, and the book value is below
the exercise price, the book value of the Company's stock held by the
Company's then shareholders will be minimally increased; however, the
voting power of the then shareholders will be decreased. If the book
value of the stock is above the exercise price, then exercise of the
option will dilute the book value to other shareholders. One option
for 61,250 shares exercisable at $1.10 per share has been granted
under the Company's Incentive Stock Option Plan to the Company's
President.
The Company has no other bonus, profit sharing, pension,
retirement, stock option, stock purchase, deferred compensation or
other incentive plans nor present plans with respect to these matters;
however, it is possible that the Board of Directors will adopt such
plans in the future.
12
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
- - ---------------------------------------------------------
Beneficial ownership of any person or persons means direct or
indirect voting or investment power and does not include shares which
may be acquired pursuant to warrants, stock options or similar rights.
(See "Stock Options" below). The following table sets forth the name
and business address of each officer and director and each person
whose ownership of the Company's common stock exceeds 5% based on
2,590,475 shares outstanding at June 15, 1996:
Name of Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership of Class
- - ------------------ -------------------- ----------
Kenneth M. Dalton(1)(2) 668,419 25.8%
26 Tamarade Drive
Littleton, CO 80127
Rod K. Barksdale(1)(2) 84,882 3.3%
2921 Sopris Avenue
Glenwood Springs, CO 81601
Ren Berggren(1)(2)(3) 0 0%
1700 E. 68th Ave.
Denver, CO 80229
Arthur K. Biddle(1) 115,000(4) 4.4%
1905 Zinnia
Golden, CO 80401
James F. Silliman, M.D. 192,142 7.4%
7408 Greenbriar
Dallas, TX 75225
Keith A. Lowery 145,629 5.6%
7477 Singing Hills Drive
Boulder, CO 80301
Officers and Directors 887,610(5) 34.3%
as a Group (5 Persons)
____________________
(1) Directors of the Company.
(2) Officers of the Company
(3) Mr. Berggren is an officer, director and shareholder of Vancol
Industries, Inc. which company owns 44,309 shares of common stock
of the Company. He disclaims personal beneficial ownership of
the shares of common stock of the Company owned by Vancol
Industries, Inc.
(4) Included in this amount are 60,000 shares held by Biddle
Investments, a partnership of which Mr. Biddle is a general
partner.
13
(5) For purposes hereof the shares held by Vancol Industries, Inc.
(19,309) are included in the calculation.
Stock Options
The control reflected in the foregoing table may be subject to
further changes by reason of exercise of certain stock options. Keith
Lowery, formerly President of the Company, holds an option for up to
30,000 shares at $3.00 per share through January 25, 1998. Rod K.
Barksdale holds a similar option for 5,000 shares. Dr. Silliman holds
an option for 29,375 shares at $1.75 per share through June 30, 1997,
which option is subject to adjustment by reason of certain anti-
dilution provisions. Mr. Dalton holds an option to purchase 30,000
shares at $2.50 per share through September 30, 1996. Mr. Dalton also
holds a $400,000 convertible note of the Company whereby he can
convert the note balance to up to 177,777 shares of common stock at
$2.25 per share. Mr. Dalton also holds an option to purchase 61,250
shares at $1.10 per share through December 25, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- - --------------------------------------------------------
In April, 1994, the Company issued a $400,000 convertible
promissory note to Mr. Dalton pursuant to an arrangement whereby Mr.
Dalton personally obtain a $400,000 bank line of credit, the proceeds
of which were made available to the Company. The note is convertible
into up to 177,777 shares of common stock of the Company at $2.25 per
share. At March 31, 1996, the balance on the note was $400,000. Mr.
Dalton was also granted an option to acquire 30,000 shares at $2.50
per share through September 30, 1996.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
- - -------------------------------------------------------
(a) (1) Financial Statements:
Report of Independent Accountants:
Balance Sheets at March 31, 1996 and 1995
Statements of Operations for Years Ended
March 31, 1996, 1995 and 1994
Statements of Shareholders' Equity
Statements of Cash Flows for Years Ended
March 31, 1996, 1995 and 1994
Notes to Financial Statements
14
(b) Exhibits:
3.1 Articles of Incorporation(1)
3.2 Bylaws(1)
10.1 Underwriter's Warrants to Purchase Common Stock(1)
10.3 Incentive Stock Option Plan(1)
10.11 Warranty Deed and Deed of Trust - Park Site(2)
10.12 Indenture of Trust and 10% Secured Promissory Note(3)
10.25 Promissory Note - Vancol Industries, Inc.(4)
10.26 Convertible Promissory Note for $400,000 -
Kenneth M. Dalton(5)
10.27 Stock Option for 30,000 shares - Kenneth M.
Dalton(5)
EX-27 Financial Data Schedule
______________________
(1) Incorporated by reference to Form S-18 Registration Statement,
File No. 33-42730-D, filed September 11, 1991
(2) Incorporated by reference to Form 10-K for the year ended March
31, 1992 filed June 29, 1992, SEC File No. 0-19949
(3) Incorporated by reference to Form 10-K for year ended March 31,
1993 filed July 16, 1993, File No. 0-19949
(4) Incorporated by reference to Form S-1, SEC File No. 33-73774,
filed February 9, 1994
(5) Incorporated by reference to Form 8-K, SEC File No. 0-19949,
filed May 6, 1994
(c) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended March
31, 1996.
15
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities
Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) THE SOUTHSHORE CORPORATION
BY (Signature) /s/ Kenneth M. Dalton
(Date) June 25, 1996
(Name and Title) Kenneth M. Dalton, President
and Principal Executive Officer
BY (Signature) /s/ Eric Nelson
(Date) June 25, 1996
(Name and Title) Eric Nelson, Principal
Accounting Officer and
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
BY (Signature) /s/ Kenneth M. Dalton
(Date) June 25, 1996
(Name and Title) Kenneth M. Dalton, Director
BY (Signature) Rod K. Barksdale
(Date) June 25, 1996
(Name and Title) Rod K. Barksdale, Director
BY (Signature) /s/ Ren Berggren
(Date) June 25, 1996
(Name and Title) Ren Berggren, Director
BY (Signature) /s/ Arthur K. Biddle
(Date) June 25, 1996
(Name and Title) Arthur K. Biddle, Director
(ss10k.96)
16
INDEX TO FINANCIAL STATEMENTS
THE SOUTHSHORE CORPORATION
FINANCIAL STATEMENTS
with
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
March 31, 1996 and 1995
Page
Report of Independent Certified Public Accountants F-2
Financial Statements:
Balance Sheets F-3
Statements of Operations F-4
Statement of Changes in Stockholders' Equity F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
The Southshore Corporation
Englewood, CO
We have audited the accompanying balance sheets of The Southshore
Corporation as of March 31, 1995 and 1996, and the related
statements of operations, changes in stockholders' equity and
cash flows for the three years ended March 31, 1996. These
financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of The Southshore Corporation as of March 31, 1995 and 1996, and
the results of its operations, its cash flows and its changes in
stockholders' equity for the three years ended March 31, 1996, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed
in Note 7 to the financial statements, the Company has suffered
recurring losses from operations and has a working capital
deficiency that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to
these matters are also described in Note 7. The financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
Schumacher & Associates, Inc.
12835 East Arapahoe Road
Tower II, Suite 110
Englewood, CO 80112
June 6, 1996
F-2
THE SOUTHSHORE CORPORATION
BALANCE SHEETS
March 31,
1996 1995
--------------------------
Current Assets
Cash $ 1,625 $ 539
Other 4,846 22,207
----------- -----------
Total Current Assets 6,471 22,746
----------- -----------
Other Assets
Property and equipment, net of
accumulated depreciation (Note 2) 2,943,837 3,526,169
Deposits 48,485 50,245
Debt and other offering costs, net
of accumulated amortization 29,397 50,447
--------- ---------
Total Other Assets 3,021,719 3,626,861
----------- -----------
Total Assets $ 3,028,190 $ 3,649,607
=========== ===========
Current Liabilities
Notes payable, current portion (Note 3) $ 609,262 $ 1,389,055
Notes and advances payable,
officer 153,400 92,400
Property taxes payable (Note 8) 384,275 297,181
Accrued interest 49,164 166,573
Accounts payable and accrued expenses 141,968 252,152
Accounts payable, construction
contractors - 368,472
Deferred income 30,991 13,492
--------- ---------
Total Current Liabilities 1,369,060 2,579,325
Notes payable, net of current portion (Note 3) 953,098 145,632
--------- ---------
Total Liabilities 2,322,158 2,724,957
--------- ---------
Commitments and contingencies (Notes 3, 4,
and 7) - -
Stockholders' Equity
Preferred stock, $.01 par value
25,000,000 shares authorized,
none issued and outstanding - -
Common stock, $.001 par value
100,000,000 shares authorized,
2,610,470 issued and outstanding
as of March 31, 1996 and 2,137,613
shares as of March 31, 1995 2,611 2,138
Additional paid-in capital 4,377,574 3,903,191
Accumulated (deficit) (3,674,153) (2,980,679)
----------- -----------
Total Stockholders' Equity 706,032 924,650
----------- -----------
Total Liabilities and Stockholders'
Equity $ 3,028,190 $ 3,649,607
=========== ===========
The accompanying notes are an integral part of the financial statements.
F-3
THE SOUTHSHORE CORPORATION
STATEMENTS OF OPERATIONS
Years Ended March 31,
1996 1995 1994
Revenue ------- ------- --------
Sales - gate admissions $ 682,165 $ 668,038 $ 559,861
Sales - food, beverages and
merchandise 173,453 353,709 278,237
--------- --------- -------
Total sales 855,618 1,021,747 838,098
Cost of sales - food,
beverages and merchandise 11,078 78,181 73,652
--------- -------- --------
Gross Profit 844,540 943,566 764,446
---------- --------- ---------
Operating Expenses
Salaries 270,938 348,318 305,223
Advertising 125,425 139,443 57,086
Depreciation 560,511 560,091 551,304
Consulting and professional fees 42,037 120,292 223,314
Other 390,342 514,080 551,678
--------- ---------- ---------
Total Operating Expenses 1,389,253 1,682,224 1,688,605
---------- ---------- ----------
Net (loss) before other income
(expense) (544,713) (738,658) (924,159)
Interest expense forgiven (Note 6) 57,540 - -
Interest (expense) (185,251) (263,369) (189,173)
Amortization of debt offering
costs (21,050) (21,050) (21,050)
---------- --------- --------
Net (loss) $(693,474) $(1,023,077) $(1,134,382)
========== ============ =============
Per Share (Note 6) $ (.29) $ (.57) $ (.79)
=========== ============ ===========
Weighted Average Number of
Shares Outstanding 2,374,042 1,804,280 1,433,937
========= ========= =========
The accompanying notes are an integral part of the financial statements.
F-4
THE SOUTHSHORE CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
From March 31, 1993 through March 31, 1996
Additional
Number of Common l Paid- Deficit
Shares Stock in capital Accumulated Total
--------- ------- ---------- ----------- -------
Balance at
March 31,
1993 $1,230,261 $1,230 $2,586,640 $(823,220) $1,764,650
Stock
issued 407,352 408 817,051 - 817,459
(Loss)
for the
year
ended
March
31, 1994 - - - (1,134,382) (1,134,382)
Balance
at March 31,
1994 1,637,613 1,638 3,403,691 (1,957,602) 1,447,727
Stock issued 500,000 500 499,500 - 500,000
(Loss) for
the year
ended March
31, 1995
- - - (1,023,077) (1,023,077)
----------- --------- ---------- ---------- -----------
Balance at
March 31,
1995 2,137,613 2,138 3,903,191 (2,980,679) 924,650
Stock issued 472,857 473 474,383 - 474,856
(Loss)
for the year
ended March
31, 1996 - - - (693,474) (693,474)
----------- -------- ---------- --------- ---------
Balance at
March 31,
1996 $2,610,470 $2,611 $4,377,574 $(3,674,15) $706,032
========== ====== ========== =========== ========
The accompanying notes are an integral part of the financial statements.
F-5
THE SOUTHSHORE CORPORATION
STATEMENTS OF CASH FLOWS
Years Ended March 31,
1996 1995 1994
------------ ------------ --------------
Cash Flows from Operating
Activities:
Net (loss) $(693,474) $(1,023,077) $(1,134,382)
Adjustments to Reconcile
Net Income to
Net Cash (Used in)
Operating 560,511 560,091 551,304
Activities:
Depreciation
Amortization debt
offering cost 21,050 21,050 21,050
and bond discount
Increase (decrease)
in accounts payable
and accrued expenses (109,326) 152,611 418,183
and other Net Cash --------- --------- ----------
(Used in) Operating
Activities (221,239) (289,325) (143,845)
Cash Flow from Investing ----------- ----------- -----------
Activities: - - 4,214
Deposits (paid)
returned
Land, property and
equipment
acquired 9,941 (200,853) (339,190)
(Decrease) in
accounts
payable,
construction (368,472) (339,451) (491,317)
-------- -------- --------
Net Cash (Used in)
Investing
Activities (358,531) (540,304) (826,293)
Cash Flows from -------- -------- --------
Financing
Activities:
Advances and loans from 71,000 - 179,629
related
parties
Proceeds from notes 55,000 433,550 -
payable
Payments made on notes (20,000) (107,733) (15,019)
payable
Issuance of stock and
warrants, net
of offering costs 474,856 500,000 806,329
Net Cash Provided ------- ------- -------
by Financing
Activities 580,856 825,817 970,939
------- ------- -------
Increase (Decrease) in Cash 1,086 (3,812) 801
Cash, Beginning of Period
539 4,351 3,550
------- ------- -------
Cash, End of Period $1,625 $539 $4,351
======= ======= ======
Income Taxes Paid $ - $ - $ -
======== ======== ========
Interest Paid $113,101 $113,605 $229,375
======== ======== ========
The accompanying notes are an integral part of the financial statements.
F-6
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------
Organization
------------
The Southshore Corporation (the "Company") was incorporated under the
laws of the state of Colorado on March 26, 1990. The Company owns 16
acres of land in Arapahoe County, Colorado, upon which it has constructed
and is operating a water park. The Company has selected March 31 as its
fiscal year end.
Property and Equipment and Related Depreciation
-----------------------------------------------
Property and equipment are carried at cost. The cost of property and
equipment is depreciated on a straight-line basis over the estimated
useful lives of the related assets, which are 20 years for buildings and
7 years for the remaining assets which consist principally of equipment
and facilities.
Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized. When property and equipment is
sold or otherwise disposed of, the asset and related accumulated
depreciation account is relieved, and any gain or loss is included in
operations.
Concentrations of Credit Risk
-----------------------------
The Company has no material amounts or concentrations of credit risks.
Debt Offering Costs
-------------------
The Company incurred $105,250 in debt offering costs related
to a successful private placement of secured notes. These
offering costs are being amortized on a straight-line basis
over the five year term of the notes.
Per Share Information
----------------------
Per share information is computed based upon a weighted average number
of shares outstanding.
Geographic Area of Operations and Interest Rates
------------------------------------------------
The Company operates a water park in Englewood, Colorado. The potential
for severe financial impact can result from negative effects of economic
conditions within the market or geographic area. Since the Company's
business is in one area, this concentration of operations results in an
associated risk and uncertainty.
F-7
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
----------------------------------------------------------------------
Use of Estimates in the Preparation of Financial Statements
------------------------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
Advertising Costs
-----------------
Advertising costs are expensed as incurred.
2. PROPERTY AND EQUIPMENT
----------------------
Property and equipment is summarized as follows:
March 31,
-------------------
1996 1995
-------- -------
Buildings $ 743,978 $ 740,682
Recreational park facilities 3,614,157 3,638,184
Office furniture and equipment 10,284 10,284
Equipment 101,367 101,367
Land 435,173 435,173
Vehicles - 2,615
--------- ---------
4,904,959 4,928,305
Less accumulated depreciation 1,961,122 1,402,136
----------- -----------
$ 2,943,837 $ 3,526,169
3. NOTES PAYABLE
-------------
Notes payable are summarized as follows:
March 31,
------------------
1996 1995
---- ----
Note payable to individual,
collateralized by 7 1/2 acres
of real estate, $2,957 per
month with interest at 8%,
due March 20, 2000 $ 121,122 $ 145,833
Note payable, interest at prime,
renewable annually (see below *). 400,000 400,000
F-8
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
3. NOTES PAYABLE, Continued
Various notes payable, interest rate
of 12% per annum, collateralized
junior liens on real property, due
September, 1996 55,000 -
Notes payable, interest at 10%
payable semiannually, due in
three installments, $10,000
due June 30, 1995 and 1996, and
$13,550 due June 30, 1997. 23,550 33,550
Notes payable, private offering
of $970,000, collateralized
through an indenture of trust
by all of the Company's real
property and improvements
subject to a second deed of
trust on the 7 1/2 acres above,
interest at 10% payable quarterly
which commenced June 30, 1993
and four equal installments of
principal which were scheduled
to commencing June 30, 1994
net of unamortized discount of
$7,312 at March 31, 1996
and $14,696 at March 31,
1994 (see below **) 962,688 955,304
--------- ---------
1,562,360 1,534,687
Less current portion (609,262) (1,389,055)
---------- -----------
Long-term portion $ 953,098 $ 145,632
========= ==========
* In April, 1994, the Company issued a $400,000 convertible promissory
note to the Company's President pursuant to an arrangement whereby the
President personally obtained a bank line of credit, the proceeds of
which were made available to the Company. The note is convertible into
up to 177,777 shares of common stock of the Company at $2.25 per share.
Maturities of notes payable after giving effect to the default
provisions are summarized as follows:
1996 $ 609,262
1997 887,721
1998 31,388
1999 33,989
F-9
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENS(continued)
3. NOTES PAYABLE, continued
------------------------
** The provisions of indenture relating to the 10% secured notes contain
various covenants pertaining to limitations on restricted payments (such
as dividens, aggregate officers' compensation in excess of defined limits,
ect.) based on maintenence of working capital and tangible stockholders'
equity parameters. There are also limitations on total debt allowed.
Also, the Company failed to make required 25% repayments of the $970,000
of notes payable outstanding in 1994 and 1995. The Company was able to
obtain extension agreements on $852,500 of these notes until September,
1997. The remaining $117,500 and accounted for as current liabilities.
As of March 31, 1995, prior to obtaining extension agreements, the entire
balance of these notes payable were shown as a current liability in the
financial statements.
4. STOCKHOLDERS' EQUITY
--------------------
Common Stock Options
--------------------
A shareholder of the Company has loaned $153,400 to the Company with
interest rates ranging from prime to 12% per annum. Of the note payable
$97,400 is convertible at the shareholders option into common stock of
the Company since the balance was not paid when due. The remaining
$56,000 is due September 30, 1996. The payable to the shareholders
are uncollateralized.
The President was granted an option to acquire 30,000 shares at $2.50
per share through September 30, 1996, and an option for 61,250 shares at
$1.10 through October 28, 1999.
Warrants Issued with 10% Secured Notes
--------------------------------------
The Company sold 195 units of $5,000 each of 10% secured notes in a
private placement. Each unit also included 625 warrants. Each warrant
entitles the holder to purchase one restricted common share at $6.00
per share through June 30, 1997. The Company has reserved 121,875
common shares for issuance for the exercise of these warrants. The
warrants were deemed to have an aggregate value of $36,563 which was
recorded upon their issuance as additional paid in capital and as a
discount on the notes payable. As of March 31, 1996, 7,917 warrants
have been exercised through the issuance of 27,146 shares of restricted
common stock after adjustment for dilution.
F-10
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
4. STOCKHOLDERS' EQUITY, Continued
-------------------------------
Incentive Stock Option Plan
---------------------------
During January of 1991, the Company adopted an incentive stock option
plan for employees of the Company. The Company reserved 200,000 shares
of its common stock for this plan. The option price shall be determined
by the Company but shall not be less than fair market value on the
date of grant. Options may be granted under the plan for terms up to
January of 2001.
Stock Options and Warrants Outstanding
--------------------------------------
In addition to other options and warrants described elsewhere in the
notes to the financial statements, the Company at March 31, 1996, had
outstanding the following stock options and warrants:
No. of Shares Exercise Price Expiration Date
------------- -------------- ----------------
50,000* $7.30 October 11, 1996
30,000** $3.00 January 25, 1998
5,000*** $3.00 January 25, 1998
*Granted to the underwriter of the public offering
**Granted to the former President of the Company
***Granted to a director of the Company
5. INCOME TAXES
The Company uses the straight-line depreciation method for financial
reporting purposes over 20 and 7 year estimated useful lives. The
Company has elected to use the straight-line method over the Modified
Accelerated Cost Recovery System ("MACRS") recovery periods of 31.5
and 7 years for income tax reporting purposes.
As of March 31, 1996, there are no current or deferred income taxes
payable. As of March 31, 1996, the Company has total deferred tax assets
of approximately $1,286,000 due to operating loss carryforwards and the
depreciation timing differences described above. However, because of
the uncertainty of potential realization of these tax assets, the
Company has provided a valuation allowance for the entire $1,286,000.
Thus, no tax assets have been recorded in the financial statements as
of March 31, 1996.
F-11
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
5. INCOME TAXES
------------
The Company has available at March 31, 1996, unused operating loss
carryforwards of approximately $3,675,000 which may be applied against
future taxable income, expiring in various years through 2011.
6. RENEGOTIATED DEBT AND INTEREST
------------------------------
During the year ended March 31, 1996 the Company renegotiated the
balance of a debt and accrued interest to a creditor downward from
$278,214 to $190,000, an adjustment of $88,214. Of this amount $30,674
was principal and $57,540 of accrued interest. The $30,674 reduction
of principal was accounted for as a reduction in the cost of the related
constructed property asset and the $57,540 reduction in accrued interest
was accounted for as other income in the statement of operations and
amounted to a reduction of the net loss per share of $.02. The source
of the repayment of the renegotiated debt was principally from proceeds
of notes payable to shareholders and others.
7. CONTINGENCIES, GOING CONCERN
----------------------------
As of March 31, 1996, the Company has accumulated losses aggregating
$3,674,153 and had a working capital deficiency of $1,362,589. The
Company has negotiated payment terms and settlement agreements with
certain creditors and is in the process of seeking additional capital
from its shareholders. Management believes that this additional funding
plus results of negotiations with creditors will allow the continued
operation of the park and the revenue generated from the subsequent
seasonal operations of the park will allow the Company to continue as a
going concern. The Company's ability to continue as a going concern
depends upon its success in raising additional capital, increasing its
debt financing and/or improving its operating results. There is no
assurance that the Company will be successful in these efforts. Thus,
there is substantial doubt about the Company's ability to continue
as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
8. DELINQUENT PROPERTY TAXES
-------------------------
As of March 31, 1996 the Company had $384,275 property taxes payable,
the majority which are delinquent. In addition, included with other
accrued interest in the financial statements is $43,101 of accrued
interest on delinquent property taxes. Failure to pay these taxes and
accrued interest could eventually result in loss of ownership of the
property.
F-12