<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, 1997
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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
THE SOUTHSHORE CORPORATION
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(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
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(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, 1997.
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INDEX
PAGE
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ITEM 1. FINANCIAL STATEMENTS
Balance Sheet for March 31, 1997
and June 30, 1997 (Unaudited) 2
Statement of Operations for Three Months
Ended June 30, 1997 and Three Months
Ended June 30, 1996 (Unaudited) 3
Statement of Changes in Stockholders' Equity 4
Statement of Cash Flows for Three Months
Ended June 30, 1997 and Three Months Ended
June 30, 1996 5
Notes to Financial Statements 6
Management's Discussion and Ananlysis of
Financial Condition and Results of Operations 8
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 11
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PART I -FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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THE SOUTHSHORE CORPORATION
BALANCE SHEET (Unaudited)
<TABLE>
<CAPTION>
March 31 June 30
1997 1997
<S> <C> <C>
CURRENT ASSETS
Cash 3,035 18,628
Acounts Receivable 2,815 14,371
Notes Receivable 0 0
Inventory 0 9,557
___________ ___________
Total Current Assets 5,850 42,556
OTHER ASSETS
Land 435,173 435,173
Property and Equipment,
-net of accum depr. of
$2,520,572 and $2,660,364 Respect. 1,975,101 1,838,711
Deposits 17,245 17,525
Prepaids 6,223 14,781
Debt Offering Costs,
-net of accum amort 8,347 3,084
___________ ____________
Total Assets 2,447,939 2,351,830
CURRENT LIABILITIES
Notes Payable -Current 1,432,071 1,383,104
Notes Payable -Related Parties 97,400 97,400
Payroll Taxes Payable 4,868 5,089
Property Taxes Payable 483,651 500,879
Accrued Interest 89,390 103,808
Accounts Payable -Trade 30,276 70,116
Deferred Income 39,156 112,684
Accrued Payroll 0 13,026
Other Accrued Expenses 2,360 21,820
Sales Tax Payable 0 0
__________ ____________
Total Current Liabilities 2,179,172 2,307,924
Notes Payable
-net of current portion 65,377 57,764
Notes Payable -Related Parties
-net of current portion 0 0
__________ ___________
Total Liabilities 2,244,548 2,365,688
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
respectively 2,611 2,611
Additional Paid-In Capital 4,377,574 4,377,574
Retained Earnings (4,176,794) (4,394,043)
___________ ___________
Total Stockholders' Equity 203,391 (13,858)
Total Liabilities and
Stockholders' Equity 2,447,939 2,351,830
</TABLE>
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<PAGE>
THE SOUTHSHORE CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended June 30, Ended June 30,
1997 1996
<S> <C> <C>
Revenue
Sales -Admissions 198,276 195,563
Sales -Food, Merchandise 50,938 55,093
Sales -Other 326 2,326
Corporate Sponsorships 10,250 23,250
_________ _________
Total Sales 259,790 276,232
Cost of Sales 5,621 8,205
_________ _________
Gross Profit 254,169 268,028
Operating Expenses
Salaries 83,254 85,346
Payroll Taxes 6,564 11,696
Operating Supplies 5,471 8,403
Chemicals 6,752 6,883
Repairs & Maintenance 11,760 12,968
Advertising 79,072 61,167
Outside Services 8,099 13,740
Utilities 38,173 30,082
Insurance 9,843 9,616
Depreciation & Amort 139,792 139,755
Property Taxes 28,254 30,154
Other 3,701 1,809
_________ _________
Total Operating Exp 420,734 411,619
Excess of Expense Over
Revenue (Before Other
Income/Expense) (166,565) (143,591)
Other Income 2,917 3,565
Extraordinary Loss 0 0
Interest Expense (Net) (48,304) (47,519)
Amort. of Debt Offering (5,263) (5,263)
_________ __________
Net Profit(Loss) (217,215) (192,808)
Net Profit (Loss) Per Share (0.08) (0.07)
</TABLE>
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THE SOUTHSHORE CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
From March 31, through June 30, 1997
(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, 1997 2,610,470 2,611 4,377,574 (4,176,828) 203,357
Net Loss 3 Months
Ended June 30,
1997 (217,215) (217,215)
Balance at June
30, 1997 2,610,470 2,611 4,377,574 (4,394,043) (13,858)
</TABLE>
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<PAGE>
THE SOUTHSHORE CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ending June 30 Ending June 30
1997 1996
<S> <C> <C>
Cash flows from Operating Activities
Net Profit(Loss) (217,215) (192,808)
Adjustments to Reconcile Net(Loss)
to Net Cash (Used In) Operating
Activities
Amortization and Depreciation 145,055 145,018
(Increase) in Accounts Receivable (11,556) (32,710)
(Increase) in Inventory (9,557) (4,943)
(Decrease) in Accounts Payable
and Accrued Expenses 177,721 67,536
Other, net (8,592) 51,674
_________ ___________
Net Cash (Used In) Operating Activities 75,856 33,768
Cash flows from Investing Activities
Deposits (280) 31,220
Land, Property, Equipment (3,402) (27,468)
_________ _________
Net Cash (Used In) Investing Activities (3,682) 3,752
Cash flows from Financing Activities
Increase(Decrease) Debt (56,581) (12,992)
Issuance of Stock, Net of Offering
Costs 0 0
_________ ___________
Net Cash Provided by Financing
Activities (56,581) (12,992)
_________ __________
Increase(Decrease) in Cash 15,593 24,528
Cash, Beginning of Period 3,035 1,625
Cash, End of Period 18,628 26,153
________ _________
Income Taxes Paid 0 0
Interest Paid 33,623 36,945
</TABLE>
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<PAGE>
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(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, 1997. The results
of operation for the period ended June 30, 1997 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-
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(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 month period ended
June 30, 1997 and 1996 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, 1997,
the balance was $325,000.
(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,
June 30, 1996 and June 30, 1997 respectively. The Company failed to make
most of 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
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RESULTS OF OPERATIONS
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Financial Condition
At June 30, 1997, working capital was a negative $2,265,368 as compared
to a negative $2,173,322 at March 31, 1997. The principal reasons for the
working capital shortfall are unpaid and accrued property taxes of $500,879,
accrued interest on property taxes, trade payables, and $955,000 in notes due
on or before September 30, 1997. See "Liquidity and Capital Resources" below.
At June 30, 1997, the Company's shareholders' equity was a negative
$13,858, down from $203,391 at March 31, 1997, due entirely to operating
losses.
Results of Operations -Three Months Ended June 30, 1997 Compared to Three
Months Ended June 30, 1996.
Revenues for the current three months were down almost 6 % compared to
the same period in 1996. This decrease is accounted for almost entirely by
the payment of corporate sponsorships for the period, as admissions revenues
did increase for the period and other sales were only off slightly.
Management expects corporate sponsorship payments to increase in the next
quarter.
Total operating expenses were up a modest 2.2% as compared to the
comparable period in 1996. Salaries were down over 2.5%. Payroll taxes
decreased almost 44% due to adjustments from the previous year's worker's
compensation audit. Advertising expenditures were up over 29% as management
attempts to increase exposure of the park. The cost of outside services was
down 41% as the companys need for legal services has declined. Depreciation
and amortization remained basically the same for the two periods. The
interest expense for period in 1997 is consistent with the debt.
Management expects the Company to experience an additional approximate
$1,090,000 in operating expenses (including depreciation and amortization)
and interest expenses during the remainder of the fiscal year ended March 31,
1998. A non-cash item, $435,000 in depreciation and amortization constitutes
approximately 40% of these operating expenses and interest expenses.
Property taxes of $85,000 and interest expense of $145,000 constitute
approximately 8% and 13% of such anticipated expenses.
-8-
<PAGE>
Liquidity and Capital Resources
At June 30, 1997, the Company had $2,307,924 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.
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<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)
10.3 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,
1997.
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) July 25, 1997
(Name and Title) Kenneth M. Dalton, President
and Principal Executive Officer
(BY)Signature) /s/ Eric L. Nelson
(Date) July 25, 1997
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> JUN-30-1997
<CASH> 18,628
<SECURITIES> 0
<RECEIVABLES> 14,371
<ALLOWANCES> 0
<INVENTORY> 9,557
<CURRENT-ASSETS> 42,556
<PP&E> 4,359,283
<DEPRECIATION> 2,520,572
<TOTAL-ASSETS> 2,351,830
<CURRENT-LIABILITIES> 2,307,924
<BONDS> 0
0
0
<COMMON> 2,610,470
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,351,832
<SALES> 259,790
<TOTAL-REVENUES> 259,790
<CGS> 5,621
<TOTAL-COSTS> 420,734
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,304
<INCOME-PRETAX> (217,215)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (217,215)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
