Back to GetFilings.com
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, 1997 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
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 20, 1997 was approximately $860,000.
The number of shares outstanding of the Registrant's $.001 par value
common stock as of June 20, 1997 was 2,610,475 shares.
THE SOUTHSHORE CORPORATION
INDEX
PAGE
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 6
PART II
ITEM 5 MARKET FOR THE COMPANY'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS 6
ITEM 6 SELECTED FINANCIAL DATA 6
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 7
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA 9
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE 10
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS
OF THE COMPANY 10
ITEM 11 EXECUTIVE COMPENSATION 11
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 13
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 14
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K 15
SIGNATURES 17
FINANCIAL DATA SCHEDULE 31
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, 1997, the Company's current liabilities exceeded its
current assets by $2,167,098. At March 31, 1997, the Company was
2
partially delinquent in paying its property taxes, which were
$483,651. The Company's auditors state in their report at June __,
1997 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 $94,360 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 September 30, 1997
from noteholders holding $852,500 in such notes. The remaining
$117,500 of these notes are in default. The Company currently is
engaged in efforts to obtain funds to retire this obligation; however,
there is no assurance such funds will be available or, if available,
on terms that are economically feasible. Failure to retire this debt
could result in foreclosure proceedings on the property.
Delinquent Property Taxes
At March 31, 1997, $483,651 was due to Arapahoe County, Colorado
for property taxes, most of which is delinquent. It is expected that
during the fall of 1997 a tax lien certificate sold on the Company's
property in 1994 will mature under Colorado law thus permitting the
holder to acquire the property by tendering all delinquent taxes. The
Company is engaged in efforts to obtain funds to pay property taxes
prior to the maturity of the tax lien certificate; however, there is
no asurance that such funding will be available, of if available, on
terms that are economically feasible.
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-
3
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.
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 1996 of approximately 350,000, with
1996 attendance at approximately 500,000. For the 1997 season it is
charging $16.95 for children ages 4 to 12 years, $17.95 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, $9.00 for children and $10.00 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 a 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
$12.50 for adults and $10.50 for children 3 years to 48 inches tall,
which are less than those of Water World. In addition, it has various
discount programs, including half day rates of $5.50, discounts for
rainy and/or cloudy days, group sales and season passes. 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.
4
Personnel
At March 31, 1997, 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
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.
Haunted House
During the fall of 1996 the Company entered into a joint venture
arrangement with Phantoms, LLC to operate a haunted house at the water
park facility during October 1996. The venture resulted in a loss of
$61,000 for the Company. The Company has no plans to operae a haunted
house on its park facility in the future.
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
- --------------------------
Currently there are no material legal proceedings pending or
threatened against the Company or its assets. However, the tax liens
and note holder lien could result in proceedings involving title to
the park property.
5
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, 1997.
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
December 4, 1995. The prices for the quarters December 31, 1995
through March 31, 1997 have been obtained from sources believed to be
reliable.
Low High
Quarters Ended Bid Bid
-------------- --- ---
June 30, 1995 .37 1.00
September 30, 1995 .25 .78
December 31, 1995 .25 .50
March 31, 1996 .25 .50
June 30, 1996 .25 .50
September 30, 1996 .50 .50
December 31, 1996 .50 .50
March 31, 1997 .50 .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.
As of June 20, 1997, the Company had 191 shareholders of record,
and management estimates there are an additional approximate 180
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.
6
Summary Balance Sheet Data:
As of As of As of
3/31/97 3/31/96 3/31/95
----------- ----------- -----------
Total Assets................. $ 2,447,939 $ 3,028,190 $ 3,649,607
Total Liabilities............ $ 2,244,548 $ 2,322,158 $ 2,724,957
Working Capital...... ........$(2,167,098) $(1,362,589) $(2,556,580)
Stockholders' Equity. ........$ 203,391 $ 706,032 $ 924,650
Summary Balance Sheet Data:
As of As of
3/31/94 3/31/93
------------ -----------
Total Assets................... $ 3,991,676 $ 4,279,819
Total Liabilities.............. $ 2,545,949 $ 2,438,857
Working Capital................ $(2,306,874) $(1,260,173)
Stockholders' Equity........... $ 1,447,727 $ 1,840,962
Summary Operating Data:
Year Year Year
Ended Ended Ended
3/31/97 3/31/96 3/31/95
---------- ----------- ----------
Sales.................... $1,085,465 $ 855,618 $1,021,747
Net Loss................. $ 502,641 $ 693,474 $1,023,077
Net loss Per Share....... $ (.19) $ (.29) $ (.57)
Summary Operating Data:
Year Year
Ended Ended
3/31/94 3/31/93
---------- -----------
Sales.................. $ 838,098 $ 52,658
Net Loss............... $1,334,382 $(630,005)
Net loss Per Share..... $ (.79) $ (.54)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------
Financial Condition
At March 31, 1997, working capital was a negative $2,167,098 as
compared to a negative $1,362,589 at March 31, 1996, an increase of
approximately $800,000.
The principal items contributing to the working capital shortfall
are operating losses, currently due promissory notes and currently due
property taxes.
At March 31, 1997, the Company's shareholders' equity was
$203,391, down from $706,032 at March 31, 1996, due primarily to
operating losses for fiscal 1997.
Results of Operations - Fiscal 1997 Compared to Fiscal 1996
Revenues for 1997 were up 27% over 1996 with increases in both
gate admissions and food and beverage. The Company continued to
contract out its food and beverage service for a percentage of the
sales. Expense amounts for 1997 by items were approximately the same
as 1996 except for professional and consulting fees which showed
further reduction as the Company's requirements for legal and other
services declined 76% and advertising expenses were 27% lower.
Elimination of depreciation of $559,751, a non-cash item, would result
in profitable operations for fiscal 1997. As a percentage of gross
profit, operating expenses, exclusive of depreciation and interest,
declined from 98% in fiscal 1996 to 74% in fiscal 1997.
7
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. For June, 1996, the Denver area experienced more typical
June weather, with highs usually in the 80's and low 90's.
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.
Interest expense reduction and interest expense forgiven for 1996
reflect results of settlements and pay-offs of construction creditors.
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.
8
Liquidity and Capital Resources
At March 31, 1997, the Company had $2,179,171 in current
obligations, which include notes payable of $1,529,471, property taxes
of $483,651 and amounts due trade creditors of $37,503.
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
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.
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 two main objectives for fiscal 1997 were for the Company
to experience positive cash flow, and restructure its short-term debt
and other obligations. It was able to achieve positive cash flow.
For fiscal 1998 its objectives are to eliminate, restructure or reduce
its debt, pay its property taxes and strive to produce profitable
operations. There is no assurance that these objectives will be
achievable. The failure to pay its taxes or restructure or pay its
debt could result in loss of its water park property.
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.
9
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
- ------------------------------------------------------
None.
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 49. 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,
which provides medical home health care and supplies.
Rod K. Barksdale, age 48. 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 48. 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 57. Director of the Company since June,
1995. Assistant City Attorney, Denver, Colorado (1987-1995).
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.
10
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 $100,000 or
more.
Summary Compensation
Annual Compensation Long-Term Compensation
------------------- ----------------------
Awards Payouts
Other ---------- ----------
Name Annual Restricted All Other
and Compen- Stock LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- -------- --- ------ ----- ------- -------- --------- ------- -------
Kenneth M. 1997 18,000 -0- -0- -0- -0- -0-
Dalton 1996 15,000 -0- -0- -0- -0- -0-
President 1995 15,000 -0- -0- -0- 30,000 -0- -0-
shares at
$2.50 per
share
177,777
shares at
$2.25 per
share
61,250
shares at
$1.10 per
share
Mr. Dalton became President of the Company in October, 1993.
The Company's Board of Directors has no compensation committee.
11
Stock Options Held by Executive Officers
and Value Thereof at June 1, 1997
Value of
Unexercised
Number of In-the-Money
Unexercised Options at
Shares Options 6/1/97
Acquired Value 6/1/97 All All
Name on Exercise (#) Realized($) Exercisable Exercisable
- ---------- --------------- ----------- ----------- ----------------
Kenneth M.
Dalton, -0- -0- 279,027 -0-
President
Rod K.
Barksdale, -0- -0- 5,000 -0-
Vice President
_____________________
Based on the average closing bid price of the Company's common
stock at June 20, 1997 of $.50 as reflected on the NASD's Electronic Bulletin
Board.
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,
1997.
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
12
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.
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
2,610,475 shares outstanding at June 20, 1997:
Name of Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership of Class
- ---------------- -------------------- ----------
Kenneth M. Dalton 668,419 25.6%
26 Tamarade Drive
Littleton, CO 80127
Rod K. Barksdale 88,007 3.3%
2921 Sopris Avenue
Glenwood Springs, CO 81601
Ren Berggren 0 0%
1700 E. 68th Ave.
Denver, CO 80229
Arthur K. Biddle 115,000 4.4%
1905 Zinnia
Golden, CO 80401
13
James F. Silliman, M.D. 192,142 7.4%
7408 Greenbriar
Dallas, TX 75225
Keith A. Lowery 144,734 5.5%
7477 Singing Hills Drive
Boulder, CO 80301
Officers and Directors 927,592 35.5%
as a Group (5 Persons)
____________________
Directors of the Company.
Officers of the Company
Mr. Berggren is an officer, director and shareholder of Vancol
Industries, Inc. which company owns 56,166 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.
Included in this amount are 60,000 shares held by Biddle
Investments, a partnership of which Mr. Biddle is a general partner.
For purposes hereof the shares held by Vancol Industries, Inc. 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, 1997, the balance on the note was $356,000. Mr.
Dalton was also granted an option to acquire 30,000 shares at $2.50
per share through September 30, 1996.
14
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, 1997 and 1996
Statements of Operations for Years Ended March 31,
1997, 1996 and 1995
Statements of Shareholders' Equity
Statements of Cash Flows for Years Ended March 31,
1997, 1996 and 1995
Notes to Financial Statements
(b) Exhibits:
3.1 Articles of Incorporation
3.2 Bylaws
10.1 Underwriter's Warrants to Purchase Common Stock
10.3 Incentive Stock Option Plan
10.11 Warranty Deed and Deed of Trust - Park Site
10.12 Indenture of Trust and 10% Secured Promissory Note
10.25 Promissory Note - Vancol Industries, Inc.
10.26 Convertible Promissory Note for $400,000 - Kenneth M.
Dalton
10.27 Stock Option for 30,000 shares - Kenneth M. Dalton
10.28 Convertible Promissory Note for $104,500 - Kenneth M.
Dalton
10.29 Stock Option for 61,250 shares - Kenneth M. Dalton
10.30 Commercial Lease - Phantoms, LLC
27.1 Financial Data Schedule
15
______________________
Incorporated by reference to Form S-18 Registration Statement, File
No. 33-42730-D, filed September 11, 1991
Incorporated by reference to Form 10-K for the year ended March 31,
1992 filed June 29, 1992, SEC File No. 0-19949
Incorporated by reference to Form 10-K for year ended March 31, 1993
filed July 16, 1993, File No. 0-19949
Incorporated by reference to Form S-1, SEC File No. 33-73774, filed
February 9, 1994
Incorporated by reference to Form 8-K, SEC File No. 0-19949, filed
May 6, 1994
Incorporated by reference to form 8-K, SEC File No. 0-19949, filed
December 30, 1994
Incorporated by reference to Form 10-Q, SEC File No. 0-19949, filed
October 24, 1996.
(c) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended March
31, 1997.
16
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 27, 1997
(Name and Title) Kenneth M. Dalton, President
and Principal Executive Officer
BY(Signature) /s/ Eric Nelson
(Date) June 27, 1997
(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 27, 1997
(Name and Title) Kenneth M. Dalton, Director
BY(Signature)
(Date) June 27, 1997
(Name and Title) Rod K. Barksdale, Director
BY(Signature) /s/ Ren Berggren
(Date) June 27, 1997
(Name and Title) Ren Berggren, Director
BY(Signature) /s/ Arthur K. Biddle
(Date) June 27, 1997
(Name and Title) Arthur K. Biddle, Director
17
INDEX TO FINANCIAL STATEMENTS
THE SOUTHSHORE CORPORATION
FINANCIAL STATEMENTS
with
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
March 31, 1997 and 1996
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, 1997 and 1996, and the related statements
of operations, changes in stockholders' equity and cash flows for the
three years ended March 31, 1997. 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, 1997 and 1996, and the results
of its operations, its cash flows and its changes in stockholders'
equity for the three years ended March 31, 1997, 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.
BY(Signature) Schumacher & Associates, Inc.
Schumacher & Associates, Inc.
12835 East Arapahoe Road
Tower II, Suite 110
Englewood, CO 80112
(Date) June 6, 1997
F-2
THE SOUTHSHORE CORPORATION
BALANCE SHEETS
March 31,
1997 1996
Current Assets ----------- ---------
Cash $ 3,035 $ 1,625
Accounts receivable 2,815 -
Prepaid expenses 6,223 4,846
----------- ----------
Total Current Assets 12,073 6,471
----------- ----------
Other Assets
Property and equipment, net of
accumulated depreciation (Note 2) 2,410,274 2,943,837
Deposits 17,245 48,485
Debt and other offering costs, net
of accumulated amortization 8,347 29,397
Total Other Assets 2,435,866 3,021,719
---------- ----------
Total Assets $2,447,939 $3,028,190
========== ==========
Current Liabilities
Notes payable, current portion (Note 3) $1,432,071 $ 609,262
Notes and advances payable,
officer 97,400 153,400
Property taxes payable (Note 8) 483,651 384,275
Accrued interest 89,390 49,164
Accounts payable and accrued expenses 37,503 141,968
Deferred income 39,156 30,991
--------- ---------
Total Current Liabilities 2,179,171 1,369,060
Notes payable, net of current portion
(Note 3) 65,377 953,098
--------- ---------
Total Liabilities 2,244,548 2,322,158
--------- ---------
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, 1997 and March
31, 1996 2,611 2,611
Additional paid-in capital 4,377,574 4,377,574
Accumulated (deficit) (4,176,794) (3,674,153)
----------- -----------
Total Stockholders' Equity 203,391 706,032
----------- -----------
Total Liabilities and Stockholders'
Equity $2,447,939 $3,028,190
========== ==========
The accompanying notes are an integral part of the financial statements.
F-3
THE SOUTHSHORE CORPORATION
STATEMENTS OF OPERATIONS
Years Ended March 31,
1997 1996 1995
-------- -------- -------
Revenue
Sales - gate admissions $ 820,968 $ 682,165 $ 668,038
Sales - food, beverages and
merchandise 264,497 173,453 353,709
--------- ------- ---------
Total sales 1,085,465 855,618 1,021,747
Cost of sales - food,
beverages and merchandise 23,713 11,078 78,181
--------- ------- -------
Gross Profit 1,061,752 844,540 943,566
--------- ------- -------
Operating Expenses
Salaries 263,272 270,938 348,318
Advertising 92,953 125,425 139,443
Depreciation 559,751 560,511 560,091
Consulting and professional fees 6,999 42,037 120,292
Other 421,681 390,342 514,080
--------- --------- ---------
Total Operating Expenses 1,344,656 1,389,253 1,682,224
--------- --------- ---------
Net (loss) before other income
(expense) (282,904) (544,713) (738,658)
Interest expense forgiven (Note 6) - 57,540 -
Interest (expense) (198,687) (185,251) (263,369)
Amortization of debt offering
costs (21,050) (21,050) (21,050)
--------- ---------- ------------
Net (loss) $(502,641) $(693,474) $(1,023,077)
========== ========== ============
Per Share (Note 6) $ (.19) $ (.29) $ (.57)
========== ========== ============
Weighted Average Number of
Shares Outstanding 2,610,470 2,374,042 1,804,280
========= ========= =========
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, 1994 through March 31, 1997
Additional
Number of Common Paid-in Deficit
Shares Stock Capital Accumulated Total
--------- ----- ------- ----------- -------
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 (3,674,153) 706,032
(Loss) for
the year ended
March 31, 1997 - - - (502,641) (502,641)
--------- ------ ---------- ------------ ----------
Balance at
March 31, 1997 2,610,470 $2,611 $4,377,574 $(4,176,794) $ 203,391
The accompanying notes are an integral part of the financial statements.
F-5
THE SOUTHSHORE CORPORATION
STATEMENTS OF CASH FLOWS
Years Ended March 31,
1997 1996 1995
-------- -------- -------
Cash Flows from Operating
Activities:
Net Loss (502,641) (693,474) (1,023,077)
Adjustments to Reconcile Net Income
to Net Cash Provided by (Used in)
Operating Activities:
Depreciation 559,751 560,511 560,091
Amortization debt offering
cost and bond discount 21,050 21,050 21,050
(Increase) in other current assets (4,192) - -
Increase (decrease) in accounts
payable, accrued expenses & other 48,851 (109,326) 152,611
Net Cash (Used in) Operating
Activities 122,819 (221,239) (289,325)
------- --------- ---------
Cash Flow from Investing Activities:
Deposits (paid) returned 31,240 - -
Land, property and equipment
acquired (25,887) 9,941 (200,853)
(Decrease) in accounts payable,
construction - (368,472) (339,451)
------- --------- ---------
Net Cash (Used in) Investing
Activities 5,353 (358,531) (540,304)
------- --------- ---------
Cash Flows from Financing Activities:
Advances and loans from related
parties - 71,000 -
Proceeds from notes payable 75,000 55,000 433,550
Payments made on notes payable (201,762) (20,000) (107,733)
Issuance of stock and warrants,
net of offering costs - 474,856 500,000
--------- ------- -------
Net Cash Provided by Financing
Activities (126,762) 580,856 825,817
--------- ------- -------
Increase (Decrease) in Cash 1,410 1,086 (3,812)
Cash, Beginning of Period 1,625 539 4,351
-------- ------- -------
Cash, End of Period $ 3,035 $ 1,625 $ 539
========== ========= =========
Income Taxes Paid $ - $ - $ -
========== ========= =========
Interest Paid $ 152,611 $ 113,101 $ 113,605
========== ========= =========
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
-----------------------------------------------------------
This summary of significant accounting policies of The
Southshore Corporation (the Company) is presented to assist
in understanding the Company's financial statements. The
financial statements and notes are representations of the
Company's management who is responsible for their integrity
and objectivity. These accounting policies conform to
generally accepted accounting principles and have been
consistently applied in the preparation of the financial
statements.
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.
F-7
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
Continued
------------------------------------------------------------
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.
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,
1997 1996
----------- -----------
Buildings $ 744,332 $ 743,978
Recreational park facilities 3,638,812 3,614,157
Office furniture and equipment 9,832 10,284
Equipment 102,697 101,367
Land 435,173 435,173
--------- ---------
4,930,846 4,904,959
Less accumulated depreciation 2,520,572 1,961,122
----------- -----------
$ 2,410,274 $ 2,943,837
=========== ===========
F-8
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
3. NOTES PAYABLE
-------------
Notes payable are summarized as follows:
March 31,
------------------------
1997 1996
----------- ----------
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 $ 94,360 $ 121,122
Note payable, interest at prime,
renewable annually (see below *). 356,000 400,000
Various notes payable, interest rate
of 12% per annum, collateralized
junior liens on real property, due
September, 1996 - 55,000
Note payable, interest at 12% per
annum, collateralized by deed of
trust, due September 30, 1997 75,000 -
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. 13,550 23,550
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
$1,462 at March 31, 1997
and $7,312 at March 31,
1996 (see below **) 958,538 962,688
--------- ---------
1,497,448 1,562,360
Less current portion (1,432,071) (609,262)
----------- ----------
Long-term portion $ 65,377 $ 953,098
=========== ===========
F-9
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
3. NOTES PAYABLE, Continued
------------------------
* 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:
1997 $1,432,071
1998 31,388
1999 33,989
** The provisions of indenture relating to the 10% secured
notes contain various covenants pertaining to limitations
on restricted payments (such as dividends, aggregate
officers' compensation in excess of defined limits, etc.)
based on maintenance 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
of notes are in default 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.
F-10
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
4. STOCKHOLDERS' EQUITY, Continued
-------------------------------
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,
1997, 7,917 warrants have been exercised through the
issuance of 27,146 shares of restricted common stock after
adjustment for dilution.
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, 1997, had outstanding the following
stock options and warrants:
No. of Shares Exercise Price Expiration Date
30,000** $3.00 January 25, 1998
5,000*** $3.00 January 25, 1998
**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
F-11
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
5. INCOME TAXES, CONTINUED
-----------------------
income tax reporting purposes.
As of March 31, 1997, there are no current or deferred
income taxes payable. As of March 31, 1997, the Company
has total deferred tax assets of approximately $1,460,000
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 $1,460,000. Thus, no tax assets have been
recorded in the financial statements as of March 31, 1997.
The Company has available at March 31, 1997 certain unused
net operating loss carryforwards which may be applied
against future taxable income expiring in various years
through 2012. The amount which may be carried forward
varies resulting from past and possible future changes in
stock ownership, including warrant and stock options
outstanding. The Company estimates that it has
carryforwards of approximately $2,000,000 currently
available.
6. RENEGOTIATED DEBT AND INTEREST
------------------------------
During the year ended March 31, 1997 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, 1997, the Company has accumulated losses
aggregating $4,176,794 and had a working capital deficiency
of $2,167,098. The Company is attempting to locate funds
to pay or refinance its current debt and delinquent taxes.
Management is hopeful such funding will be available and
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 obtaining additional
funding, 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.
F-12
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
7. CONTINGENCIES, GOING CONCERN, CONTINUED
---------------------------------------
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, 1997 the Company had $483,651 property
taxes payable, the majority of which are delinquent. In
addition, included with other accrued interest in the
financial statements is $85,443 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-13