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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, 1999 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.)
c/o Kenneth M. Dalton, President
26 Tamarade Drive, Englewood, Colorado 80127
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: c/o Kenneth M. Dalton, President
(303) 978-1475
---------------------------------
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 [ X ] No [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of June 20, 1999 was approximately $156,600.
The number of shares outstanding of the Registrant's $.001 par value
common stock as of June 20, 1999 was 2,610,475 shares.
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 1992 through April 21,
1999, the Company had been engaged in the operation of a water park located in
the Southeast Denver Metropolitan Area. The park operated from Memorial Day
Weekend through Labor Day Weekend annually. The park property was sold on
April 21, 1999 for $1,983,000. Currently the Company is engaged in removal of
certain improvements from the property as required by the purchase agreement,
and for which $150,000 of the sale price was withheld pending completion. The
Company estimates it will have the removal completed in July 1999.
Adverse Current Ratio
At March 31, 1999, the Company's current liabilities exceeded its current
assets by $1,858,254. At March 31, 1999, the Company was partially delinquent
in paying its property taxes, which were $644,963. The Company's auditors
state in their report at June 16, 1999 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
At March 31, 1999 the Company was in default on an indenture of trust
secured by the water park property and the 10% promissory notes because it has
not repaid the principal outstanding amount of $955,000 which was due
September 1997 nor paid interest since September 1997. This obligation was
paid in April 1999 pursuant to agreements with the noteholders whereby they
agreed to accept 75% of the face amount of their respective notes.
Delinquent Property Taxes
At March 31, 1999, $879,064 was due to Arapahoe County, Colorado for
property taxes, most of which was delinquent. This obligation was paid in
April 1999.
Personnel
At March 31, 1999, the Company had one part-time employee, the Company's
in-house accountant. The Company's President serves in a part-time, as needed
position. Following the sale of the water park property all employment was
terminated.
ITEM 2. PROPERTIES
- -------------------
At March 31, 1999 the Company owned 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 were located on this property. On April 21, 1999 the
property was sold to Bedford Property Investors of Lafayette, California.
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
Currently there are no material legal proceedings pending or threatened
against the Company or its assets.
2
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
On April 16, 1999 the shareholders of the Company, at a meeting called
for the purpose of approving the sale of the water park property, approved
that proposal with approximately 73% of the outstanding shares voting in favor
of the sale.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
- ------------------------------------------------------------------------------
The Company's common stock has been included on the NASD's Electronic
Bulletin Board since December 1995. The prices included below have been
obtained from sources believed to be reliable.
Low High
Quarters Ended Bid Bid
-------------- --- ---
June 30, 1997 .37 .50
September 30, 1997 .37 .50
December 31, 1997 .25 .25
March 31, 1998 .12 .21
June 30, 1998 .12 .21
September 30, 1998 .06 .37
December 31, 1998 .03 .03
March 31, 1999 .03 .03
On June 28, 1999, the bid price of the Company's common stock was $.06.
Prices may not be an indication of actual transactions and do not
necessarily include mark-ups, mark-downs or interdealer discounts. The
Company is informed that there has been very little volume in trading of its
common stock during the past year.
As of June 20, 1999, the Company had 165 shareholders of record, and
management estimates there are an additional approximate 200 beneficial
holders of Company shares.
Dividend Policy
The Company has never paid dividends on its common stock, and the
Company's Board of Directors plans on distributing no dividends in the
foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
Following is a summary of selected financial data. See the financial
statements included herein for more complete information.
Summary Balance Sheet Data:
As of As of As of As of As of
3/31/99 3/31/98 3/31/97 3/31/96 3/31/95
Total Assets.$ 1,427,656 $ 1,910,724 $ 2,478,613 $ 3,028,190 $ 3,649,607
Total
Liabilities. $ 1,942,591 $ 2,105,540 $ 2,244,548 $ 2,322,158 $ 2,724,957
Long Term
Obligations. $ 0 $ 37,864 $ 65,377 $ 953,098 $ 145,632
Working
Capital..... $(1,858,254) $(2,059,228) $(2,167,098) $(1,362,589) $(2,556,580)
Stock-
holders'
Equity...... $ (514,915) $ (194,816) $ 203,391 $ 706,032 $ 924,650
3
Summary Operating Data:
Year Year Year Year Year
Ended Ended Ended Ended Ended
3/31/99 3/31/98 3/31/97 3/31/96 3/31/95
---------- ----------- ---------- ---------- -----------
Sales....... $1,010,418 $ 999,710 $1,085,465 $ 855,618 $ 1,021,747
Net Loss.... $ (320,099) $ (428,881) $ (502,641) $ (693,474) $(1,023,077)
Net loss
Per Share... $ (.12) $ (.16) $ (.19) $ (.28) $ (.57)
Net Loss
Before
Extra-
ordinary
Items...... $ (320,099) $ (428,881) $ (502,641) $ (751,014)
Net Loss
Per Share
Before
Extra-
ordinary
Items...... $ (.12) $ (.16) $ (.19) $ (.32)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- -----------------------------------------------------------
Financial Condition
At March 31, 1999, working capital was a negative $1,858,254 as compared
to a negative $2,059,225 at March 31, 1998, a decrease of approximately
$200,974.
The principal items contributing to the working capital shortfall are
operating losses, currently due promissory notes and currently due property
taxes.
At March 31, 1999, the Company's shareholders' equity was a negative
$(514,915), down from $(194,816) at March 31, 1998, due primarily to operating
losses for fiscal 1999.
Results of Operations - Fiscal 1999 Compared to Fiscal 1998
Revenues for 1999 were up slightly over 1998. Expenses for 1999 were
$216,581 higher (18%) than in 1998. The most significant increase in expenses
related to salaries which were up $232,672 from 1998 or 98% and included
bonuses totaling $241,262 for the Company's President, the wife of the
President, the Principal Accounting Officer and the Park Manager. Ken Dalton
worked for the Company for the past three years at an annual salary of $18,000
and his wife worked for no compensation. Chief Accounting Officer, Eric
Nelson, and Park Manager, John Jannes, worked nearly every day during the
Company's operating season, often 10 or more hours per day, all without extra
compensation and without a raise over the past five years. The bonuses were
approved by the Board of Directors conditioned upon the sale of the park
property.
Advertising expense of $65,803 was only 54% of the amount spent for this
item last year as the Company found less expensive ways to attract potential
customers. Interest expense was lower by $41,374 as the Company's debt was
reduced during fiscal 1999.
Net loss for the year was $108,782 less than 1998 and includes a non-cash
expense item of $561,832. An extraordinary item contributed $274,866 to the
Company's operating results due to renegotiation of debt and debt
forgiveness. Absent this item, losses for 1999 would have been $594,965.
Results of Operations - Fiscal 1998 Compared to Fiscal 1997
Revenues for 1998 were down slightly over 1997 with decreases in both
gate admissions and food and beverage due primarily to the affect of an
4
unseasonably cold June 1997 on park attendance. The Company contracts out its
food and beverage service for a percentage of the sales. Expense amounts for
1998 by items were slightly less than in 1997. Elimination of depreciation of
$558,672, a non-cash item, would result in profitable operations for fiscal
1998. As a percentage of gross profit, operating expenses, exclusive of
depreciation and interest, declined from 98% in fiscal 1996 to 74% in fiscal
1997 to 72% in fiscal 1998.
Interest expense for fiscal 1998 was $58,266 less than fiscal 1997 due to
reduction in outstanding indebtedness of approximately $340,000 and lower
interest rates on one note to the Company's president. Amortization of debt
offering costs was only $9,809 for fiscal 1998 because it was the last period
in which such expense was allocable and the $9,809 was all that remained.
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.
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 arrangemen
ts with the Company's creditors.
Interest expense reduction and interest expense forgiven for 1996 reflect
results of settlements and pay-offs of construction creditors.
Liquidity and Capital Resources
At March 31, 1999, the Company had $1,942,571 in current obligations and
$84,317 in current assets. Obligations include notes payable of $847,681 and
property taxes of $644,963.
5
The Company has been able to continue, notwithstanding past financial
difficulties, only as a result of sales of 920,000 shares of common stock at
$1.00 and $482,000 in loans during fiscal 1995 and 1996. The Company's
President purchased 500,000 shares of such stock and was the source of
$400,000 in loans. Vancol Industries, Inc., a major shareholder, purchased
25,000 shares of stock and loaned the Company $82,400. Rod Barksdale, a
director, purchased 25,000 shares of stock. Arthur T. Biddle, a former
director, and a Biddle family partnership purchased 40,000 shares of common
stock.
As indicated by the Statement of Cash Flows (page F-6), the Company has
not obtained funding in the past three years from the sale of its common
stock. Rather it has relied primarily upon revenues from operations and a
bank line of credit of its President to provide funds for operations. The
Company has never been able to achieve profitable operations.
The Company's plan during the past year has been to sell its water park
property for sufficient funds to retire its debt. On April 16, 1999 the
Company sold its water park property for nearly $2 million. The sale proceeds
and other proceeds from the sale of water park features and equipment were
sufficient to pay all of the Company's obligations.
Year 2000
Since the Company sold its water park property and is attempting to
locate another business opportunity, of which there is none under
consideration, the Company is not able to meaningfully make any plans or
disclosures about how Year 2000 issues may affect the Company or its
operations, if any.
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.
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 51. 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 50. 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 50. 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,
6
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.
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 was the Company's general manager until September 1998. 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 $100,000 or more.
Summary Compensation
Annual Compensation Long-Term Compensation
Awards Payouts
Other
Name Annual Restricted All Other
and Compen- Stock LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- -------- ---- ------ ----- ------ -------- -------- ------- --------
Kenneth M. 1999 18,000 $80,421 -0- -0- 61,250 -0- -0-
Dalton 1998 18,000 -0- -0- -0- shares a -0- -0-
President 1997 18,000 -0- -0- -0- $1.10 per -0- -0-
(1) share
____________________
(1) Mr. Dalton became President of the Company in October, 1993.
The Company's Board of Directors has no compensation committee.
Stock Options Held by Executive Officers
and Value Thereof at June 1, 1999
Value of
Unexercised
Number of In-the-Money
Unexercised Options at
Shares Options 6/1/98
Acquired Value 6/1/99 All All
Name on Exercise (#) Realized($) Exercisable Exercisable(1)
- ---- --------------- ----------- ----------- --------------
Kenneth M. Dalton, -0- -0- 61,250 -0-
President
_____________________
(1) Based on the average closing bid price of the Company's common stock
at June 20, 1999 of $.06 as reflected on the NASD's Electronic Bulletin Board.
7
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, 1999.
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.
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, 1999:
Name of Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership of Class
Kenneth M. Dalton(1)(2) 668,419 25.6%
26 Tamarade Drive
Littleton, CO 80127
8
Rod K. Barksdale 88,007 3.3%
2921 Sopris Avenue
Glenwood Springs, CO 81601
Ren Berggren(1)(2)(3) 0 0%
1700 E. 68th Ave.
Denver, CO 80229
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
Michael McCallum 244,879 9.8%
2200 Grand Avenue
Glenwood Springs, CO 81601
Officers and Directors 812,592(4) 31.1%
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 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.
(4)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. Mr. Dalton held 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. This note
was paid during fiscal 1999. Mr. Dalton 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 Company paid the interest on the bank line of credit which
is the bank's prime rate. The bank line of credit was secured by assets owned
by the president. The note was convertible into up to 177,777 shares of
common stock of the Company at $2.25 per share. At March 31, 1999, the
balance on the note had been paid in full.
9
INDEX TO FINANCIAL STATEMENTS
THE SOUTHSHORE CORPORATION
FINANCIAL STATEMENTS
with
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
March 31, 1999 and 1998
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 (Deficit) 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, 1999 and 1998, and the related
statements of operations, changes in stockholders' equity
(deficit) and cash flows for the three years ended March 31,
1999. 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, 1999 and 1998, and
the results of its operations, its cash flows and its changes in
stockholders' equity (deficit) for the three years ended March
31, 1999, 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, has a working capital
deficiency and has subsequent to March 31, 1999 sold its assets,
which 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 16, 1999
F-2
THE SOUTHSHORE CORPORATION
BALANCE SHEETS
March 31,
1999 1998
------ ------
Current Assets
Cash$ 84,317 $ 1,841
Prepaid expenses - 6,607
------ -----
Total Current Assets 84,317 8,448
------ -----
Other Assets
Property and equipment, net of
accumulated depreciation (Note 2) 1,326,094 1,885,031
Deposits 17,245 17,245
--------- ---------
Total Other Assets 1,343,339 1,902,276
--------- ----------
Total Assets$ 1,427,656 $1,910,724
========= ==========
Current Liabilities
Notes payable, current portion (Note 3) $ 770,881 $1,201,567
Notes and advances payable,
officer 76,800 97,400
Property taxes payable (Note 8) 644,963 566,762
Accrued interest 234,100 151,176
Accounts payable and accrued expenses 214,827 18,926
Deferred income 1,000 31,845
--------- ---------
Total Current Liabilities 1,942,571 2,067,676
--------- ---------
Notes payable, net of current portion
(Note 3) - 37,864
--------- ---------
Total Liabilities 1,942,571 2,105,540
--------- ---------
Commitments and contingencies (Notes 3, 4,
7, 8 and 9) - -
Stockholders' Equity (Deficit)
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 2,611 2,611
Additional paid-in capital 4,377,574 4,377,574
Accumulated (deficit) (4,895,100) (4,575,001)
----------- -----------
Total Stockholders' Equity (Deficit) (514,915) (194,816)
----------- -----------
Total Liabilities and Stockholders'
Equity (Deficit) $1,427,656 $1,910,724
========== ==========
The accompanying notes are an integral part of the financial statements.
F-3
THE SOUTHSHORE CORPORATION
STATEMENTS OF OPERATIONS
Years Ended March 31,
1999 1998 1997
------ ------ ------
Revenue
Sales - gate admissions $ 777,847 $ 767,508 $ 820,968
Sales - food, beverages and
merchandise 232,571 232,202 264,497
--------- --------- ---------
Total sales 1,010,418 999,710 1,085,465
Cost of sales - food,
beverages and merchandise
(exclusive of depreciation
shown separately below) 24,283 22,889 23,713
Gross Profit 986,135 976,821 1,061,752
--------- --------- ---------
Operating Expenses
Salaries 469,851 237,229 263,272
Advertising 65,803 121,595 92,953
Depreciation 561,832 558,672 559,751
Other 384,567 347,976 428,680
--------- --------- ---------
Total Operating Expenses 1,482,053 1,265,472 1,344,656
--------- --------- ---------
Net (loss) before other income
(expense) and extraordinary items (495,918) (288,651) (282,904)
Interest (expense) (99,047) (140,421) (198,687)
Amortization of debt offering
costs - (9,809) (21,050)
Renegotiated debt and interest
expense forgiven (Note 6) 274,866 - -
Other - 10,000 -
-------- -------- -------
Net (Loss) $(320,099) $(428,881) $(502,641)
========== ========== ==========
Net (Loss) Per Share $ (.12) $ (.16) $ (.19)
========== ========== ==========
Weighted Average Number of
Shares Outstanding 2,610,470 2,610,470 2,610,470
========= ========= =========
The accompanying notes are an integral part of the financial statements.
F-4
THE SOUTHSHORE CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
From March 31, 1996 through March 31, 1999
Additional
Number of Common Paid-in Deficit
Shares Stock Capital Accumulated Total
--------- ------ ---------- ----------- ---------
Balance at
March 31, 1996 2,610,470 $2,611 $4,377,574 $(3,643,479) $ 736,706
(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 (4,146,120) 234,065
(Loss) for the
year ended
March 31, 1998 - - - (428,881) (428,881)
--------- ------ --------- --------- --------
Balance at
March 31, 1998 2,610,470 2,611 4,377,574 (4,575,001) (194,816)
(Loss) for the
year ended
March 31, 1999 - - - (320,099) (320,099)
--------- ------ --------- --------- --------
Balance at
March 31, 1999 2,610,470 $2,611 $ 4,377,574 $(4,895,100) $(514,915)
========= ====== =========== ============ =========
F-5
The accompanying notes are an integral part of the financial statements.
THE SOUTHSHORE CORPORATION
STATEMENTS OF CASH FLOWS
Years Ended March 31,
1999 1998 1997
---------- ---------- ----------
Cash Flows from Operating Activities:
Net (Loss) $ (320,099) $ (428,881) $ (502,641)
Adjustments to Reconcile Net (Loss)
to Net Cash Provided by Operating
Activities:
Depreciation 561,832 558,672 559,751
Amortization debt offering cost and
bond discount - 9,809 21,050
(Increase) decrease in other
current assets 6,607 (384) (4,192)
Increase (decrease) in accounts
payable, accrued expenses and other 326,181 107,335 48,851
-------- -------- -------
Net Cash Provided by (Used in)
Operating Activities 574,521 246,551 122,819
-------- -------- -------
Cash Flow from Investing Activities:
Deposits (paid) returned - - 31,240
Land, property and equipment
(acquired) disposed of (2,895) 272 (25,887)
(Decrease) in accounts payable,
construction - - -
-------- ------- -------
Net Cash (Used in) Investing
Activities (2,895) 272 5,353
------- ------ -------
Cash Flows from Financing Activities:
(Repayments) on loans from related
parties (20,600) - -
Proceeds from notes payable - - 75,000
Payments made on notes payable (193,684) (248,017) (201,762)
Renegotiation of notes payable (274,866) - -
-------- ------- -------
Net Cash Provided by Financing
Activities (489,150) (248,017) (126,762)
-------- -------- -------
Increase (Decrease) in Cash 82,476 (1,194) 1,410
Cash, Beginning of Period 1,841 3,035 1,625
------- ------- -------
Cash, End of Period $ 84,317 $ 1,841 $ 3,035
======== ======= =======
Income Taxes Paid $ - $ - $ -
======== ======= =======
Interest Paid $ 10,360 $78,635 $152,611
======== ======= ========
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 as of March 31, 1999, owned 16 acres of land in
Arapahoe County, Colorado, upon which it had constructed and
was operating a water park. See Note 9 for a description of
the disposition of assets. 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 were amortized on a straight-line basis over
the five year term of the notes.
F-7
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
------------------------------------------------------------
Continued
---------
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.
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,
1999 1998
Buildings $ 744,332 $ 744,332
Recreational park facilities 3,673,082 3,673,082
Office furniture and equipment 9,832 9,832
Equipment 101,724 98,829
Land 435,173 435,173
--------- --------
4,964,143 4,961,248
Less accumulated depreciation 3,638,049 3,076,217
--------- ---------
$ 1,326,094 $ 1,885,031
========= =========
F-8
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
3. NOTES PAYABLE
Notes payable are summarized as follows:
March 31,
1999 1998
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 $ 54,631 $ 72,841
Note payable, interest at prime,
renewable annually (see below *). - 136,590
Note payable, interest at 12% per
annum, collateralized by deed of
trust, due September 30, 1997 - 75,000
Notes payable, private offering
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 commence June 30, 1994
net of unamortized discount of
$1,462 at March 31, 1997
(see below**) 716,250 955,000
-------- ---------
770,881 1,239,431
Less current portion (770,881) (1,201,567)
---------- ----------
Long-term portion $ - $ 37,864
========== =========
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 was convertible into up
to 177,777 shares of common stock of the Company at $2.25
per share. As of March 31, 1999, there was no balance
payable on this note.
Maturities of notes payable after giving effect to the
default provisions are summarized as follows:
1999 $ 770,881
** 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. The Company failed to
make required repayments on the notes payable outstanding.
As of March 31, 1999, the entire balance of these notes
payable have been shown as a current liability in the
financial statements since the notes are in default. See
Note 6.
4. STOCKHOLDERS' EQUITY
--------------------
Common Stock Options
--------------------
A shareholder of the Company has loaned $97,400 to the
Company with interest rates ranging from prime to 12% per
annum. As of March 31, 1999, the shareholders agreed to a
$20,600 reduction in the amount of this obligation. The
balance of the note payable of $76,800 is convertible at
the shareholders option into common stock of the Company
since the balance was not paid when due. The payable to
the shareholders is uncollateralized.
The President was granted an option to acquire 61,250
shares at $1.10 through December 25, 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 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,
1999, 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.
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, 1999, there are no current or deferred
income taxes payable. As of March 31, 1999, the Company
has total deferred tax assets of approximately $1,700,000
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 $1,700,000. Thus, no tax assets have been
recorded in the financial statements as of March 31, 1999.
F-11
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
5. INCOME TAXES, CONTINUED
-----------------------
The Company has available at March 31, 1999 certain unused
net operating loss carryforwards which may be applied
against future taxable income expiring in various years
through 2014. 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 $2,500,000 currently
available.
6. RENEGOTIATED DEBT AND INTEREST
------------------------------
During the year ended March 31, 1999 the Company
renegotiated the balance of a debt and accrued interest to
creditors downward by $274,866. This amounted to $.11 less
loss per share.
7. CONTINGENCIES, GOING CONCERN
----------------------------
As of March 31, 1999, the Company had accumulated losses
aggregating $4,895,100 and had a working capital deficiency
of $1,858,254. As more fully described in Note 9, the
Company sold its assets and is therefore no longer in the
operation of a water park business. Since the Company no
longer has any operating business and minimal assets, 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, 1999 the Company had $644,963 property
taxes payable, the majority of which are delinquent. In
addition, included with other accrued interest in the
financial statements is $234,100 of accrued interest on
delinquent property taxes. On April 21, 1999, the
delinquent property taxes and accrued interest were paid in
full through the sale of the property.
F-12
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
9. SUBSEQUENT EVENT
-----------------
On April 21, 1999, the real property of the Company was
sold for $1,972,680. The following schedule summarizes the
balance sheet proforma effect of the sale transaction.
March 31, Sale of
1999 Assets Proforma
--------- ------- --------
Current Assets $ 84,317 $ 63,630 $ 147,947
Property and Equipment 1,326,094 (1,326,094) -
Escrow Account - 150,000 150,000
Other Assets 17,245 - 17,245
--------- --------- --------
$1,427,656 $(1,112,464) $ 315,192
========= ========== ========
Current Liabilities $1,942,571 $(1,654,432) $ 288,139
Stockholders Equity (Deficit) (514,915) 541,968 27,053
--------- -------- --------
$1,427,656 $(1,112,464) $ 315,192
========== ========== =========
The foregoing does not take into account the sale of
equipment and water park features which occurred after
April 21, 1999.
F-13
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, 1999 and 1998
Statements of Operations for Years Ended March 31, 1999,
1998 and 1997
Statements of Shareholders' Equity
Statements of Cash Flows for Years Ended March 31, 1999,
1998 and 1997
Notes to Financial Statements
(b) Exhibits:
3.1 Articles of Incorporation(1)
3.2 Bylaws(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)
10.28 Convertible Promissory Note for $104,500 - Kenneth M. Dalton(6)
10.29 Stock Option for 61,250 shares - Kenneth M. Dalton(6)
10.30 Purchase Agreement and Escrow Instructions - Bedford Property
Investors, Inc.(7)
27.1 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
10
(6) Incorporated by reference to form 8-K, SEC File No. 0-19949,
filed December 30, 1994
(7) Incorporated by reference to Proxy Statement of March 12, 1999
(c) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended March 31, 1999;
however, on April 29, 1999 a Form 8-K was filed reporting the sale of the
Company's water park property on April 21, 1999.
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
(Date) June 28, 1999
By:(Signature) /s/ Kenneth M. Dalton
(Name and Title) Kenneth M. Dalton, President
and Principal Executive Officer
(Date) June 28, 1999
By:(Signature) /s/ Eric L. Nelson
(Name and Title) Eric L. 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.
Date: June 28, 1999 By: /s/ Kenneth M. Dalton
Kenneth M. Dalton, Director
Date: _______, 1999 By: _____________________________
Rod K. Barksdale, Director
Date: June 28, 1999 By: /s/ Ren Berggren
Ren Berggren, Director
11