<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 December 31, 1996
[ ] 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 of (I.R.S. Employer
incorporation or organization) Identification No.)
10750 East Briarwood Avenue, Englewood, Colorado 80112
--------------------------------------------------------
(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 December 31, 1996.
<PAGE>
INDEX
Contents: Pages
- ---------- -----
PART 1 - Financial Information
Balance Sheet 1
Statement of Operations 2-3
Satement of Changes in Stockholders Equity 4
Statement of Cash Flows 5
Notes to Financial Statements 6-10
PART 2 - Other Information
Exhibits and Reports on Form 8-K 11
Signatures 12
Financial Data Schedule 13
<PAGE>
PART I -FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
THE SOUTHSHORE CORPORATION
BALANCE SHEET (Unaudited)
<TABLE>
<CAPTION>
March 31 Dec 31
1996 1996
CURRENT ASSETS
<S> <C> <C>
Cash 1,625 (29,543)
Acounts Receivable 0 1,374
Notes Receivable 0 0
Inventory 0 0
________ _______
Total Current Assets 1,625 (28,169)
OTHER ASSETS
Land 435,173 435,173
Property and Equipment,
-net of accum depr. of
$1,961,122 and $2,380,913
Respect. 2,508,664 2,115,212
Deposits 48,485 17,185
Prepaids 4,846 15,964
Debt Offering Costs,
-net of accum amort 29,397 13,609
--------- --------
Total Assets 3,028,190 2,568,974
CURRENT LIABILITIES
Notes Payable -Current 326,762 1,004,649
Notes Payable -Related
Parties 153,400 97,400
Payroll Taxes Payable (775) 3,698
Property Taxes Payable 384,275 462,476
Accrued Interest 49,164 76,186
Accounts Payable -Trade 142,743 27,565
Deferred Credits 30,991 12,230
Accrued Payroll 0 0
Sales Tax Payable 0 0
-------- -------
Total Current Liabilities 1,086,560 1,684,203
Notes Payable
-net of current portion 835,598 72,841
Notes Payable -Related
Parties
-net of current portion 400,000 340,000
--------- ---------
Total Liabilities 2,322,158 2,097,045
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 Respect-
ively 2,611 2,611
Additional Paid-In Capita l4,377,574 4,377,574
Retained Earnings (3,674,153) (3,908,256)
---------- ----------
Total Stockholders' Equity 706,032 471,929
Total Liabilities and
Stockholders' Equity 3,028,190 2,568,974
</TABLE>
-1-
<PAGE>
THE SOUTHSHORE CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Dec 31, Ended Dec 31,
1996 1995
-------------- --------------
Revenue
<S> <C> <C>
Sales -Admissions 820,968 682,166
Sales -Food, Merchandise 221,950 156,593
Sales -Other 12,940 0
Corporate Sponsorships 25,050 14,307
------- -------
Total Sales 1,080,908 853,066
Cost of Sales 23,714 11,028
--------- -------
Gross Profit 1,057,194 842,038
Operating Expenses
Salaries 241,447 249,938
Payroll Taxes 37,489 47,367
Operating Supplies 16,415 15,452
Chemicals 13,106 10,936
Repairs & Maintenance 20,269 18,056
Advertising 91,198 114,882
Outside Services 10,857 53,142
Utilities 90,981 105,599
Equipment Rental 0 1,359
Insurance 28,675 32,548
Depreciation & Amort 419,791 420,462
Property Taxes 90,461 93,288
Other 15,339 9,711
------- -------
Total Operating Exp 1,076,027 1,172,741
Excess of Revenue over
Expense
(Before Other Income/
Expense) (18,833) ( 330,703)
Other Income 3,869 547
Extraordinary Loss (60,966) 0
Interest Expense (Net) (142,385) (78,035)
Amort. of Debt Offering (15,788) (15,788)
Federal Tax Penalties 0 (760)
------- ------
Net Profit(Loss) (234,102) (424,738)
Gain (Loss) Per Share (0.09) (0.16)
</TABLE>
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<PAGE>
THE SOUTHSHORE CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Dec 31, Ended Dec 31,
1996 1995
Revenue
<S> <C> <C>
Sales -Admissions 208 228
Sales -Food, Merchandise 216 60
Sales -Other 388 0
Corporate Sponsorships 0 0
----- ----
Total Sales 812 288
Cost of Sales 285 55
---- ----
Gross Profit 527 233
Operating Expenses
Salaries 20,294 21,052
Payroll Taxes 759 5,530
Operating Supplies 1,582 913
Chemicals 0 90
Repairs & Maintenance (1,120) 337
Advertising 235 15,041
Outside Services (9,527) 4,645
Utilities 3,488 7,710
Equipment Rental 0 0
Insurance 9,724 13,653
Depreciation & Amort 140,035 140,138
Property Taxes 30,154 31,216
Other 2,545 1,934
------- -------
Total Operating Exp 198,168 242,258
Excess of Expense Over
Revenue (Before Other
Income/Expense) (197,641) (242,025)
Other Income 304 2,038
Extraordinary Loss (60,966) 0
Interest Expense (Net) (45,008) (44,284)
Amort. of Debt Offering (5,263) (5,263)
Federal Tax Penalties (760)
------ ------
Net Profit(Loss) (308,574) (290,293)
Net Profit (Loss) Per Share (0.12) (0.11)
</TABLE>
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THE SOUTHSHORE CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
From March 31, through December 31, 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
9 Months
Ended
December 31,
1996 (234,102) (234,102)
Balance at
December 31,
1996 2,610,470 2,611 4,377,574 (3,908,256) 471,929
--------- ----- --------- --------- -------
</TABLE>
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<PAGE>
THE SOUTHSHORE CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ending Dec 31 Ending Dec 31
1996 1995
Cash flows from Operating Activities
<S> <C> <C>
Net Profit(Loss) (234,102) (424,738)
Adjustments to Reconcile Net(Loss)
to Net Cash (Used In) Operating
Activities
Amortization and Depreciation 435,579 436,250
(Increase) in Accounts Receivable (1,374) 0
(Increase) in Inventory 0 0
(Decrease) in Accounts Payable
and Accrued Expenses (5,708) (536,228)
Other, net (29,654) 12,976
------- --------
Net Cash (Used In) Operating
Activities 164,741 (511,741)
Cash flows from Investing Activities
Deposits 31,300 (25)
Land, Property, Equipment (26,340) 21,733
Net Cash (Used In) Investing
Activities 4,961 21,708
Cash flows from Financing
Activities
Increase(Decrease) Debt (200,870) 36,653
Issuance of Stock, Net of
Offering Costs 0 459,548
------- -------
Net Cash Provided by Financing
Activities (200,870) 496,201
Increase(Decrease) in Cash (31,168) 6,168
Cash, Beginning of Period 1,625 539
Cash, End of Period (29,543) 6,707
-------- ------
Income Taxes Paid 0 0
Interest Paid 109,299 72,838
</TABLE>
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<PAGE>
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 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
-------
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 December 31, 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.
-6-
<PAGE>
(2) Liquidity and Capital Resources
-------------------------------
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 and six month period
ended December 31, 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 December 31, 1996,
the balance was $340,000.
(5) 10% Secured Notes -$970,000
---------------------------
The Company was required to pay down the principal balance of its
outstanding 10% Secured Notes by 25% on September 30, 1994, June 30, 1995 and
June 30, 1996 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 September 30, 1997. Additionally, the
trustee under the Indenture relating to these notes resigned as trustee
effective November 4, 1994.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Financial Condition
At December 31, 1996, working capital was a negative $1,712,372 as
compared to a negative $1,084,935 at March 31, 1996. The principal reasons
for the working capital shortfall are unpaid and accrued property taxes of
$411,548, trade payables, and $970,000 in notes due on or before September
30, 1997. The increase in negative working capital is primarily due to the
reclassification of $735,000 of notes payable due September 30, 1997 from
long-term liabilities to current liabilities. See "Liquidity and Capital
Resources" below.
At December 31, 1996, the Company's shareholders' equity was $471,929,
down from $706,032 at March 31, 1996, due entirely to operating losses.
Results of Operations -Nine Months Ended December 31, 1996 Compared to Nine
Months Ended December 31, 1995
Revenues for the current nine months were up over 26 % compared to the
same period in 1995. This increased is accounted for by increased attendance,
increased ticket price, the park's increased lease percentage of concession
and catering expeditures by the changing of our food service provider and
more favorable weather conditions during June 1996 as compared to June 1995.
Total operating expenses were down 8.2% as compared to the comparable
period in 1995. Salaries were down over 3%. Payroll taxes decreased almost
21%. Advertising expenditures were down over 20% and the cost of outside
services was down a whopping 79.5%. Depreciation and amortization remained
basically the same for the two periods. The interest expense for period in
1996 is consistent with the debt. The relative low interest expense for the
period 1995 was an anomoly due to aggressive negotiation by management in
the lien construction settlements.
Management expects the Company to experience an additional approximate
$270,000 in operating expenses (including depreciation and amortization) and
interest expenses during the remainder of the fiscal year ended March 31,
1997. A non-cash item, $145,000 in depreciation and amortization constitutes
approximately 54% of these operating expenses and interest expenses.
Property taxes of $30,000 and interest expense of $45,000 constitute
approximately 11% and 17% of such anticipated expenses.
Results of Operations -Three Months Ended December 31, 1996 Compared to Three
Months Ended December 31, 1995
Revenues for the current three months and the comparable period in 1995
were both insignificant, as both periods are in the off-season of the
corporation's core business.
Overall operating expenses for the period declined over 18%. Salaries
decreased by 3.6%, and payroll taxes declined by over 86%. Advertising
decreased for the period by 98%,
-8-
<PAGE>
as more favorable terms and advertising efficiencies are being explored.
Expenditures for outside services net a negative for the period as legal fees
payable by the Company have been relieved. Depreciation and amortization
remained basically the same for the two periods. Interest expense of
$45,008 is consistent with the Company's debt.
The net loss for the operating quarter is $308,574 as compared to the
loss of $290,293 for the same quarter in 1995. The increase in net loss is
primarily due to an extraordinary charge of $60,966 taken by the Company
through its interest in a haunted house on the waterpark's premises during
October 1996. The Company shared with its leasee and haunted house operator
(Phantoms, LLC) the operating loss of the venture as per agreement. The
Company has no intention at this time of operating, have interest in, or
participating in similar ventures in the future. In both quarters,
depreciation and amortization, a non-cash item, accounted for approximately
$145,000 of these losses.
-9-
<PAGE>
Liquidity and Capital Resources
At December 31, 1996, the Company had $1,684,203 in current obligations,
primarily composed of notes payables, and accrued and past due property taxes.
Notes payable of $235,000 are due June 30, 1997, while $735,000 are due
September 30, 1997. These notes are secured by a first mortgage on portions
of the waterpark property. The past due property taxes with interest will
become due and payable and subject to foreclosure in November 1997.
The Company has appealed its property tax evaluations with Arapahoe
County, Colorado and the State of Colorado without much success. The Company
will continue appeals in the future in hopes of reducing its annual property
tax assessment, however there is no assurance that it will be successful.
Management is currently considering financing alternatives to relieve
its current obligations and also provide capital to finance future 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.
-10-
<PAGE>
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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<PAGE>
(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.
(Registrant) THE SOUTHSHORE CORPORATION
BY(Signature) /s/ Kenneth M. Dalton
(Date) January 20, 1996
(Name and Title) Kenneth M. Dalton, President
and Principal Executive Officer
BY(Signature) /s/ Eric L. Nelson
(Date) January 20, 1996
(Name and Title) Eric L. Nelson
Principal Accounting Officer
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> (29,543)
<SECURITIES> 0
<RECEIVABLES> 1,374
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> (28,169)
<PP&E> 4,496,125
<DEPRECIATION> 2,380,913
<TOTAL-ASSETS> 2,568,974
<CURRENT-LIABILITIES> 1,684,203
<BONDS> 0
2,610,470
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,568,974
<SALES> 812
<TOTAL-REVENUES> 812
<CGS> 285
<TOTAL-COSTS> 198,168
<OTHER-EXPENSES> 110,933
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,008
<INCOME-PRETAX> (308,574)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (308,574)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
