<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________
Commission File Number 0-19949
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THE SOUTHSHORE CORPORATION
--------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-1153522
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10750 East Briarwood Avenue, Englewood, Colorado 80112
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(Address of principal executive offices)
(303) 649-9875
---------------
(Registrant's telephone number, including area code)
________________________________________________________________
(Former name, former address and former fiscal year, if changed
since last report)
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___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the last practicable date.
The registrant had 2,610,470 shares of its $.001 par value common stock
outstanding as of June 30, 1996.
PART I -FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
THE SOUTHSHORE CORPORATION
BALANCE SHEET (Unaudited)
<TABLE>
<CAPTION>
March 31 June 30
1996 1996
CURRENT ASSETS
<S> <C> <C>
Cash 1,625 26,153
Acounts Receivable 0 32,710
Inventory 0 4,943
____________ ____________
Total Current Assets 1,625 63,806
OTHER ASSETS
Land 435,173 435,173
Property and Equipment,
-net of accum depr. of
$1,961,122 and $2,100,877 Respect. 2,508,664 2,396,376
Deposits 48,485 17,265
Prepaids 4,846 11,570
Debt Offering Costs,
-net of accum amort 29,397 24,134
____________ ____________
Total Assets 3,028,190 2,948,324
CURRENT LIABILITIES
Notes Payable -Current 326,762 360,850
Notes Payable -Related Parties 153,400 138,400
Payroll Taxes Payable (775) 9,685
Property Taxes Payable 384,275 411,548
Accrued Interest 49,164 59,738
Accounts Payable -Trade 142,743 151,164
Deferred Credits 30,991 89,164
Accrued Payroll 0 10,853
Sales Tax Payable 0 180
____________ ____________
Total Current Liabilities 1,086,560 1,231,583
Notes Payable
-net of current portion 835,598 815,018
Notes Payable -Related Parties
-net of current portion 400,000 388,500
____________ ____________
Total Liabilities 2,322,158 2,435,100
STCOCKHOLDERS' 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
and Outstanding Respectively 2,611 2,611
Additional Paid-In Capital 4,377,574 4,377,574
Retained Earnings (3,674,153) (3,866,961)
____________ ____________
Total Stockholders' Equity 706,032 513,224
Total Liabilities and
Stockholders' Equity 3,028,190 2,948,324
</TABLE>
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THE SOUTHSHORE CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended June 30, Ended June 30,
1996 1995
Revenue
<S> <C> <C>
Sales -Admissions 195,563 107,567
Sales -Food, Merchandise 55,093 21,694
Sales -Other 2,326 4
Corporate Sponsorships 23,250 13,707
___________ ___________
Total Sales 276,232 142,972
Cost of Sales 8,205 1,906
___________ ___________
Gross Profit 268,028 141,066
Operating Expenses
Salaries 85,346 82,475
Payroll Taxes 11,696 11,739
Operating Supplies 8,403 8,045
Chemicals 6,883 5,930
Repairs & Maintenance 12,968 11,099
Advertising 61,167 76,388
Outside Services 13,740 20,435
Utilities 30,082 31,887
Equipment Rental 0 710
Insurance 9,616 10,208
Depreciation & Amort 139,755 140,165
Property Taxes 30,154 31,279
Other 1,809 1,537
___________ ___________
Total Operating Exp 411,619 431,898
Excess of Expense Over
Revenue (Before Other
Income/Expense) (143,591) (290,832)
Other Income 3,565 2,541
Interest Expense (Net) (47,519) 12,958
Amort. of Debt Offering (5,263) (5,263)
___________ ___________
Net Profit(Loss) (192,808) (280,595)
Loss Per Share (0.07) (0.11)
</TABLE>
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THE SOUTHSHORE CORPORATION
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
(Unaudited) Three Months Three Months
Ending June 30 Ending June 30
1996 1995
Cash flows from Operating Activities
<S> <C> <C>
Net Profit(Loss) (192,808) (280,595)
Adjustments to Reconcile
Net(Loss) to Net Cash (Used In)
Operating Activities
Amortization and Depreciation 145,018 145,428
(Increase) in Accounts Receivable (32,710) (7,848)
(Increase) in Inventory (4,943) (5,701)
(Decrease) in Accounts Payable
and Accrued Expenses 67,536 (370,070)
Other, net 51,674 14,058
__________ __________
Net Cash (Used In)
Operating Activities 33,768 (504,728)
Cash flows from Investing Activities
Deposits 31,220 (180)
Land, Property, Equipment (27,468) 21,907
__________ __________
Net Cash (Used In)
Investing Activities 3,752 21,727
Cash flows from Financing Activities
Increase(Decrease) Debt (12,992) (994)
Issuance of Stock, Net of Offering Costs 459,548
__________ __________
Net Cash Provided by
Financing Activities (12,992) 458,554
__________ __________
Increase(Decrease) in Cash 24,528 (24,448)
Cash, Beginning of Period 1,625 539
Cash, End of Period 26,153 (23,909)
__________ __________
Income Taxes Paid 0 0
Interest Paid 36,945 37,247
</TABLE>
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THE SOUTHSHORE CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
From March 31, through June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Retained
Number of Common Additional Earnings
Date Shares Stock Paid-In Capital (Deficit) Total
<S> <C> <C> <C> <C> <C>
Balance at
March 31, 1996 2,610,470 2,611 4,377,574 (3,674,153) 706,032
Net Loss
3 Months Ended
June 30, 1996 (192,808) (192,808)
Balance at
June 30, 1996 2,610,470 2,611 4,377,574 (3,866,961) 513,224
</TABLE>
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THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
(1) Summary of Accounting Policies
------------------------------
A summary of significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:
(a) General
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The Southshore Corporation ("Company") was incorporated under the laws of
Colorado on March 26, 1990 for the purpose of engaging in any lawful
business. The company operates a waterpark in southeast Denver metro area.
(b) Unaudited Financial Statements
------------------------------
The accompanying financial statements have been prepared by the registrant
without audit and are the responsibility of the Company's management.
Management is of the opinion that all adjustments that should be made to the
accompanying financial statements in order for them to present fairly the
financial position, results of operations and cash flows for the periods
presented have been made.
Management has elected to omit substantially all the footnote disclosures
required by generally accepted accounting principles.
The accompanying financial statements should be read in conjunction with
the Company's audited financial statements as of March 31, 1996. The results
of operation for the period ended June 30, 1996 are not indicative of the
operating results for the full year.
(c) Property and Equipment
----------------------
Property and equipment are stated at cost. The original park water
features are depreciated using a straight line method based on a 7 year
estimated useful life.A 20 year estimated useful life on a straight line
basis is utilized on the buildings. Park improvements since 1994 have been
depreciated using a modified accelerated cost recovery method over 31.5
years for buildings and 7 years for equipment.
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(2) Liquidity and Capital Resources
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See Management's Discussion for disclosure related to liquidity and capital
and the related contingencies and commitments.
(3) Net Profit and Loss Per Common Share
------------------------------------
Net profit and loss per common share for the three month period ended
June 30, 1996 and 1995 has been computed based on the weighted number of
shares outstanding during the respective periods.
(4) Bank Line of Credit -Note to President
--------------------------------------
On April 25, 1994, the Company issued a five year promissory note in the
amount of $400,000 to its President. The note was issued pursuant to an
arrangement whereby the President became personally obligated and personally
secured a $400,000 bank line of credit, the proceeds of which were made
available to the Company. The Company is required to pay interest on the
line at the bank's prime rate. The Company's President has the right to
purchase common stock at $2.25 per share in an amount equal to what he is
at risk on the bank line of credit. On default of the note he may convert
the outstanding balance to common stock at $1.00 per share. At June 30,
1996, the balance was $388,500.
(5) 10% Secured Notes -$970,000
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The Company was required to pay down the principal balance of its
outstanding 10% Secured Notes by 25% on September 30, 1994 and June 30,
1995, respectively. The Company failed to make these payments, however it
has obtained deferrals from holders of $735,000 in these notes as to
payments of principal through June 30, 1997. Additionally, the trustee
under the Indenture relating to these notes resigned as trustee effective
November 4, 1994.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
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Financial Condition
At June 30, 1996, working capital was a negative $1,167,777 as compared to a
negative $1,084,635 at March 31, 1996. The principal reasons for the working
capital shortfall are unpaid and accrued property taxes of $411,548, trade
payables, and undeferred noteholders of $235,000. The increase in negative
working capital is primarily due to short term loans prior to the season to
finance the 1996 seasonal start up costs. See "Liquidity and Capital
Resources" below.
At June 30, 1996, the Company's shareholders' equity was $513,224, down
from $706,032 at March 31, 1996, due entirely to quarterly losses.
Results of Operations -Three Months Ended June 30, 1996 Compared to Three
Months Ended June 30, 1995
Revenues for the current three months were up over 93% compared to the
comparable period in 1995. This increase in revenue is due to more favorable
weather conditions in June 1996 as compared to June 1995, as well as increased
exposure to our product in the community.
Overall operating expenses, even with the dramatic increase in revenues,
declined almost 5%. Salaries did increase by slightly over 3%, however
payroll taxes essentially remained the same. Advertising decreased by 20%.
Expenditures for outside services declined 33% as the Company's need for
legal services and other outside consultants has declined substantially.
Depreciation and amortization remained basically the same for the two periods.
Interest expense of $47,519 is consistent with the Company's debt. The
negative interest expense for 1994 was an anomoly due to aggressive
negotiation by management in the lien construction settlements.
The net loss for the operating quarter is $192,808 as compared to the loss
of $280,595 for the same quarter in 1995 and is due primarily to increased
revenues for the quarter. In both quarters, depreciation and amortization,
a non-cash item, accounted for approximately $145,000 of these losses. The
remainder of these losses are accounted for by off-season and seasonal
start-up costs.
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Liquidity and Capital Resources
At June 30, 1996, the Company had $1,231,583 in current obligations,
primarily composed of notes payables, and accrued and past due property taxes.
Most of the notes payables are due to affiliates and other parties friendly to
the Company, while the trade payables are composed of almost entirely
professional fees with firms not currently pressing for payment and/or are
willing to accept terms over an extended period of time.
The accrued and past due property taxes are currently on appeal and are not
subject to foreclosure until November 1997. The Company has an appeal in
process with Arapahoe County, Colorado in hopes of reducing its annual
property tax assessment, however there is no assurance that it will be
successful.
Management is considering possible long-term financing of its short-term
debt and the inclusion of additional debt in a new debt package to finance
additional park facilities.
The Company continues to rely on its principal shareholders for capital
infusion and short-term loans to fund some of the Company's operating
expenses and pay creditors. Failure to have these or similar funding
available in the future could result in short-term cash flow and creditor
problems.
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PART II -OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------------------
(a) Exhibits
3.1 Articles of Incorporation(1)
3.2 Bylaws(1)
10.1 Underwriter's Warrants to Purchase Common Stock(1)
10.3 Incentive Stock Option Plan(1)
10.12 Indenture of Trust and 10% Secured Promissory Note(2)
10.25 Promissory Note -Vancol Industries, Inc.(3)
10.26 Convertible Promissory Note -Kenneth M. Dalton(4)
10.27 Stock Option -Kenneth M. Dalton(4)
10.28 Convertible Promissory Note $104,500 -Kenneth M. Dalton(5)
10.29 Stock Option 61,250 shares -Kenneth M. Dalton(5)
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 year ended March 31, 1993
filed July 16, 1993 File No. 0-19949
(3) Incorporated by reference to Amendment No. 1 to the Form S-1, File No.
33-73774 filed February 9, 1994
(4) Incorporated by reference to Form 8-K filed May 5, 1994, File No.
0-19949
(5) Incorporated by reference to Form 8-K filed December 30, 1994, File No.
0-19949
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(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended June 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE SOUTHSHORE CORPORATION
August 9, 1996 By /s/ Kenneth M. Dalton
- -------------- -------------------------
Date Kenneth M. Dalton, President
and Principal Executive Officer
August 9, 1996 By /s/ Eric L. Nelson
- -------------- ----------------------
Date Eric L. Nelson
Principal Accounting Officer
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 26,153
<SECURITIES> 0
<RECEIVABLES> 32,710
<ALLOWANCES> 0
<INVENTORY> 4,943
<CURRENT-ASSETS> 63,806
<PP&E> 4,507,253
<DEPRECIATION> 2,100,887
<TOTAL-ASSETS> 2,948,324
<CURRENT-LIABILITIES> 1,231,583
<BONDS> 0
2,610,470
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,948,324
<SALES> 276,232
<TOTAL-REVENUES> 276,232
<CGS> 8,205
<TOTAL-COSTS> 411,619
<OTHER-EXPENSES> 5,263
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,519
<INCOME-PRETAX> (192,808)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (192,808)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
