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PRELIMINARY PROXY
P R O X Y
THE SOUTHSHORE CORPORATION
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Kenneth M. Dalton and Eric Nelson,
proxies, with the power to appoint a substitute, and hereby authorizes them
to represent and to vote as designated below, all the shares of common stock
of The Southshore Corporation held of record by the undersigned on July 24,
1998, at the Special Meeting of Shareholders to be held on September __, 1998,
or any adjournment thereof.
1. The sale of substantially all the Company's assets pursuant to
a Real Estate Purchase and Sale Agreement for $1,985,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. The sale of substantially all of the Company's assets to a back-
up purchaser, South Suburban Park & Recreation District, in the event
there is no closing on the Contract to Buy and Sell Real Estate.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To transact such other business as may properly come before the
meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN
ACCORDANCE WITH THE SHAREHOLDER'S SPECIFICATIONS ABOVE. THIS PROXY
CONFERS DISCRETIONARY AUTHORITY IN RESPECT TO MATTERS NOT KNOWN OR
DETERMINED AT THE TIME OF THE MAILING OF THE NOTICE OF THE ANNUAL MEETING
OF SHAREHOLDERS TO THE UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Shareholders, Proxy Statement and Form 10-K Annual Report for year
ended March 31, 1998.
Dated: _____________, 1998.
________________________________________
________________________________________
Signature(s) of Shareholder(s)
Signature(s) should agree with the name(s) stenciled hereon. Executors,
administrators, trustees, guardians and attorneys should indicate when
signing. Attorneys should submit powers of attorney.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
SOUTHSHORE CORPORATION. PLEASE SIGN AND RETURN THIS PROXY IN THE
ENCLOSED PRE-ADDRESSED ENVELOPE. THE GIVING OF A PROXY WILL NOT
AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
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PRELIMINARY PROXY STATEMENT
THE SOUTHSHORE CORPORATION
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of The Southshore Corporation
PLEASE TAKE NOTICE, that a Special Meeting of Shareholders
of The Southshore Corporation will be held on September ___, 1998,
at 10:00 a.m. at 10750 East Briarwood, Englewood, Colorado, for
the following purposes:
1. To consider the sale of substantially all the
Company's assets pursuant to a Real Estate Purchase
and Sale Agreement.
2. To consider the sale of substantially all of the
Company's assets to a back-up purchaser, South Suburban Park
& Recreation District, in the event there is no closing on
the Contract to Buy and Sell Real Estate.
3. To transact such other business as may properly
come before the meeting.
Accompanying this notice is a Proxy and Proxy Statement with
respect to these matters.
Whether or not you expect to be present at the meeting,
please sign and date the Proxy and return it in the enclosed
envelope provided for that purpose. The Proxy may be revoked at
any time prior to the time that it is voted. Only shareholders
of record at the close of business on July 24, 1998, will be
entitled to vote at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Kenneth M. Dalton
President
August ___, 1998
IT IS IMPORTANT THAT YOU SIGN THE ENCLOSED PROXY AND
RETURN IT TO THE COMPANY IMMEDIATELY.
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PRELIMINARY PROXY STATEMENT
THE SOUTHSHORE CORPORATION
10750 East Briarwood
Englewood, Colorado 80112
PROXY STATEMENT
Special Meeting of Shareholders - September __, 1998
GENERAL
A Special Meeting of the Shareholders of The Southshore
Corporation (the "Company") is scheduled for September __, 1998, for
the purpose of considering the sale of substantially all of the
Company's assets, pursuant to a Real Estate Purchase and Sale Agreement
("Purchase Agreement") with John C. Botdorf (the "Buyer"), dated August
13, 1998.
The enclosed Proxy is solicited by the Board of Directors of
the Company. This solicitation is being made by mail, and may also
be made by directors, officers and employees of the Company. Any
Proxy given pursuant to this solicitation may be revoked by the
shareholder at any time prior to the voting of the Proxy.
Shares represented by Proxies will be voted as specified in
such Proxies. In the absence of specific instructions. Proxies
received by the Board of Directors will be voted in favor of all
the proposals.
All of the expenses involved in preparing, assembling and
mailing this Proxy Statement and the material enclosed herewith
will be paid by the Company. The Company may reimburse banks,
brokerage firms and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending proxy material to
beneficial owners of stock. This Proxy Statement and accompanying
form of Proxy are being mailed to shareholders on or about August __,
1998.
PROPOSAL TO SELL SUBSTANTIALLY ALL THE COMPANY'S ASSETS
Recommendation of Board of Directors. The Company's Board of
Directors unanimously recommends to the shareholders that the
shareholders approve the sale of substantially all the Company's
assets to Buyers pursuant to the Purchase Agreement as described
herein, and approve a sale to a possible back-up purchaser on
similar terms. See "Possible Back-Up Purchaser" below.
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The Purchase Agreement. The Company has entered into a
Real Estate Purchase and Sale Agreement dated August 13, 1998 with the
Buyer who is a non-affiliate of the Company. John C. Botdorf is
businessman with offices in Denver, Colorado. A copy of the Agreement
and a letter from his finacial partner, ORIX Real Estate Equities, Inc.
are attached as Appendix 1.
Sale of Assets. Pursuant to the Purchase Agreement, the
Company has agreed to sell the Company's 16 acre water park
property to Buyer which constitutes substantially all of its
assets. Included within the assets sold are the real property
owned by the Company, as well as each and all of the Company's
personal property located on the real property (collectively "the
Property").
Purchase Price. As a result of arms'-length bargaining, Buyer has
agreed to pay to the Company the sum of $1,985,000 million and utilily
obligations needed to service the property under maximim buildout. The
obtaining of satisfactory financing is not a condition. The Company's
obligation is subject to approval of the shareholders of the Company.
The Purchase Agreement contains provisions standard in typical real estate
contracts for title, inspection and survey.
Closing. The Purchase Agreement contemplates a closing within
75 days of execution of the Purchase Agreement.
Pior to and as a condition of closing, the Company must call a
special meeting of its shareholders for the purpose of seeking
approval of the sale transaction. The Company's management, Board
of Directors and certain other persons have indicated they intend
to vote for the sale of assets at the special meeting of
shareholders. See "Required Vote of Shareholders."
The Buyer. According to the Purchase Agreement, the Buyer is a
is licensed real estate broker purchasing the Property for his
own account. Thee Buyer is not a shareholder, director or
officer of the Company.
Background and Reasons for the Sale Transaction. During the
past approximate two years, management of the Company has actively
sought, without success, to refinance its debt, including its past
due property taxes and principal debt of $955,000 which is secured
by a lien on the Property which became due in mid-1997. All
Company debt, including past due property taxes, approached or
exceeded $2 million during the period and is all currently due. At
June 30, 1998, the Company's current debt of $1,454,018 and
property taxes of $566,762 was due.
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Refinancing was not available because of the history of losses from
the Property, exceeding $4,575,000 from the Company's inception in
1991. At the same time the Company was seeking to refinance its
debt, it also tested the waters with respect to selling the 16 acre
water park. During 1997 the Company listed the Property with a
local commercial realtor, placed ads in trade publications and at
water park conventions, and initiated contacts with approximately ten
possible prospective purchasers. The Company had material negotiations with
five possible purchasers, including two Colorado recreation districts.
All material discussions related to a purchase price in the $2 million
range. Sale of the Property to a recreation district requires approval
by the county commissioners in each of the counties in which the
recreation district owns of operates property.
The principal reasons why a proposed sale of the Property was
undertaken were:
(1) That refinancing of debt or obtaining of additional
financing was not available;
(2) The Company had five consecutive years of operating
losses from its water park for accumulated loss of $4,575,000
at March 31, 1998;
(3) The Property is subject to a tax lien certificate
issued by Arapahoe County, Colorado, to a New Jersey bank for
failure to pay property taxes since the 1993 tax year for an
aggregate of approximately $566,000, including accrued
interest and which permits the holder at anytime to apply for
an Arapahoe County Treasurer's Deed to the Property;
(4) Management considered the fact that no firm offers
to acquire the Property involving cash consideration exceeding
that of the Buyer and South Suburban Park & Recreation
District, Littleton, Colorado (possible Back-Up Purchaser -
see below) had been received by the Company, even though it
has publicly announced that the Company was exploring the
possibility of making a sale of the Property, and had listed
the Property for sale and made other efforts to sell the
Property;
(5) Management considered favorably the structure of the
offer by Buyer as a cash transaction beacause of the need to
have cash to pay liens and deleiver marketable title;
(6) Management considered favorably that the Buyer did
not condition the proposed sale on the obtaining of acceptable
financing and appeared to have financing available at the time
of the execution of the Purchase Agreement;
(7) Management believed that a possible sale to the
District was a riskier undertakeing because of the approvals
required by the three affected counties and their reluctance to
permit the district to compete with a private party in any
purchase; and
(8) Management comsidered the fact that the terms of the
Purchase Agreement were the result of arms length negotiations.
In view of the wide variety of factors considered in
connection with its evaluation of the sale of the Company's assets,
management found it impractical to and therefore did not quantify
or otherwise attempt to assign relative weights to the various
factors considered in reaching a decision to approve and recommend
to the shareholders the sale of the Company's principal asset
pursuant to the Purchase Agreement.
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The Company has not obtained an independent appraisal on the
Property; and does not have access to any appraisals obtained by
prosective purchasers; however, the Property was listed with a
commercial real estate broker, CB Richard Ellis Commercial,
during the past year and the Company was advised by the broker
that the 16 acre tract had an estimated fair market value of $1.2
million to $1.4 million if purchased for general use. Management
believes the $2 million purchase price to be paid by Buyer is due
in part to the water park facilities on the Property. The Company
did not utilize a real estate broker in the Agreement to sell the
Property, However it has agreed to pay a sales commission of $50,000 to
the Purchaser's broker, CB Richard Ellis Commercial. Buyer indicated
interest in the Property in the past but only recently made the offer for
$1,985,000.
Required Vote of Shareholders. The Purchase Agreement
is subject to approval of the sale by the vote of the holders of the
Company's shares of common stock. In addition, pursuant to the
Colorado Business Corporation Act, Section 7-112-102, a shareholder
vote is required for the sale, transfer or other disposition of all
or substantially all of a Colorado corporation's property and
assets, including its goodwill, not in the usual and regular course
of its business. APPROVAL BY A MAJORITY OF THE SHARES ENTITLED TO
VOTE ON THIS MATTER IS REQUIRED.
Release of Lien Securing 10% notes. In order to sell the
Property the Company must obtain a release of a lien securing
repayment of $955,000 in 10% promissory notes. The Company has
obtained agreements from 27 of the 30 holders of such notes
representing nearly $900,000.
Possible Back-Up Purchaser. Since April, 1998 South Suburban
Park & Recreation District ("District") has been interested in
acquiring the Property, has held public hearings, inspected the
Property, obtained an appraisal and environmental audit. The
District has indicated it is interested in contracting for the
purchase of the Property if there is no closing on the current
Purchase Contract and if no private party is interested in
purchasing the property because the District does not wish to
compete with private industry. See Letter from District attached as
Appendix 2. Thus, the Company is soliciting authority to sell the Property
to the District if the contract with the Buyer does not close.
The purchase price under negotiation with the District was also $2
million. The authority to sell to the District is limited to a
price of at least $2 million and County Commissioner approval in three
Colorado counties in which the District operates would be required.
Public hearings pursuant to advance notice would be required in each
county. Thus the process could easily take several months and there is no
assurance that a majority of the Commissioners in each affected county would
approve the purchase.
Company officers and directors holding directly or indirectly
the power to vote 812,592 shares, or 31.1% of the outstanding
shares, have indicated they intend to vote their shares in favor of
the sale transaction. No proxies nor agreements relating to shares
held by management have been entered into by members of management.
Officers and directors of the Company are not affiliated or
associated with the Buyer and will have no position at the water
park operation, if any, in the future. The Buyer has indicated he
intends to operate the water park for at least the 1999 season.
RIGHTS OF DISSENTING SHAREHOLDERS
IF THE SHAREHOLDERS APPROVE THE DISSOLUTION AND LIQUIDATION OF
THE COMPANY AS PROPOSED, THEN, AS PROVIDED IN THE COLORADO BUSINESS
CORPORATION, ACT, SECTION 7-112-102, DISSENTERS' RIGHTS ARE
AVAILABLE.
Shareholders of the Company are entitled to exercise
dissenters' rights pursuant to the provisions of Sections 7-113-102
and 7-113-103 of the Colorado Business Corporation Act (the
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"CBCA"), copies of which sections are included with this proxy
statement as Appendix 3. In accordance with these sections, the
Company's shareholders have the right to dissent from the sale of
the Company's assets and to be paid the "fair value" of their
common stock. (See, CBCA Section 7-113-102) In this context, the
term "fair value" means the value of a shareholder's common stock
immediately before the Closing Date of the sale. Holders of
options to purchase Company common stock have no similar rights of
appraisal under applicable Colorado law.
Under Section 7-113-102 of the CBCA, where a sale of
substantially all the corporation's property and assets is to be
submitted for approval at a meeting of shareholders, the
corporation must notify each of its shareholders of the right to
dissent and must include in the notice a copy of Sections
7-113-101-103, 201-209 and 301-302 of the CBCA. This Proxy
Statement constitutes this notice to the shareholders of the
Company. The applicable statutory provisions of the CBCA are
attached as Appendix 3.
The following discussion is not a complete statement of the
law pertaining to a dissenting shareholder's rights under the CBCA
and is qualified in its entirety by the full text of the Sections
attached as Appendix 3. Any shareholder who wishes to exercise the
right to dissent and demand the fair value of his or her shares, or
who wishes to preserve the right to do so, should review the
following discussion and Appendix 3 carefully because failure to
timely and properly comply with the procedures will result in the
loss of a shareholder's right to dissent under the CBCA.
A shareholder of the Company wishing to exercise the right to
demand payment for his or her common stock must first file, before
the vote of shareholders is taken at the Special Meeting, a written
notice of intent to demand payment for his or her common stock and
must, in addition, not vote in favor of the sale of substantially
all the Company's assets pursuant to the Purchase Agreement.
Because a proxy which does not contain voting instructions will,
unless revoked, be voted FOR the sale of substantially all the
Company's assets, a shareholder who votes by proxy and who wishes
to exercise dissenter's rights must (i) vote AGAINST the resolution
to sell, or (ii) ABSTAIN from voting on this resolution. A vote
against the resolution, in person or by proxy, will not in and of
itself constitute a written notice of intent to demand payment for
a shareholder's common stock satisfying the requirements of Section
7-113-204 of the CBCA.
A demand for payment must be executed by or for the
shareholder pursuant to a Dissenters' Notice provided by the
Company within 10 days after the Special Meeting. If the common
stock is owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, the demand must be executed by the
fiduciary. If the common stock is owned of record by more than one
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person, as in a joint tenancy or tenancy in common, the demand must
be executed by all joint owners. An authorized agent, including an
agent for two or more joint owners, may execute the Dissenters'
Notice for a shareholder of record; however, the agent must
identify the record owner and expressly disclose the fact that, in
exercising the demand, he is acting as agent for the record owner.
A record owner who holds shares as a nominee for others, such
as a broker, may demand payment for the shares held for all, or
fewer than all, of the beneficial owners of such shares. In such
a case, the Dissenters' Notice should set forth the number of
shares to which it relates. When no number of shares is expressly
mentioned, the Dissenters' Notice will be presumed to cover all
shares standing in the name of the record owner. Beneficial owners
of common stock who are not record owners and who intend to
exercise payment rights should instruct the record owner to comply
with the statutory requirements with respect to the exercise of
payment rights before the date of the applicable Special Meeting.
Within 10 days after the Special Meeting in which the sale
pursuant to the Purchase Agreement is authorized, the Company will
cause to be mailed to each shareholder who has properly asserted
dissenter's rights a Dissenters' Notice that contains (i) the
address to which a demand for payment and stock certificates must
be sent in order to receive payment; and (ii) a form to be used by
the shareholder who dissents, and to demand payment and the date by
which such demand must be made. To receive the fair value of his
or her common stock a dissenting shareholder must demand payment
and deposit his or her certificates within 30 days after the
aforesaid notice is given.
After the Company receives a valid demand for payment, it will
cause to be remitted to each dissenting shareholder who has
properly asserted dissenter's rights the fair value of his or her
shares of Common Stock, with interest at the legal rate computed
from the Closing Date. Payment will be accompanied by (i) the
financial statements of the Company for its most recently completed
fiscal year; (ii) an estimate of the fair value of the common
shares with respect to which dissenters' rights have been exercised
and a brief description of the method used to reach the estimate;
and (iii) an statement of the dissenter's right to demand payment
if he or she is dissatisfied with the payment made as provided in
Section 7-113-209 and a copy of the dissenter's provisions in
Sections 7-113-101-103, 201-209 and 301-302 of the CBCA.
If a dissenting shareholder believes that the amount remitted
by the Company is less than the fair value of his or her common
shares plus interest, the dissenting shareholder may give written
notice to the Company of his or her own estimate of the fair value
for the common shares plus interest and demand a supplemental
payment for the difference. Any written demand for supplemental
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payment must be made within 30 days after the Company mailed its
original remittance.
Within 60 days after receiving a demand for supplemental
payment, the Company must either pay the amount of the supplemental
payment demanded (or agreed to between the dissenting shareholder
and the Company) or file a petition in the state courts of Colorado
requesting that the court determine the fair value of the common
shares plus interest. Any petition so filed must name as parties
all dissenting shareholders who have demanded supplemental payments
and who have been unable to reach an agreement with the Company
concerning the fair value of their common shares. The court may
appoint appraisers, with such power and authority as the court
deems proper, to receive evidence on and recommend the amount of
fair value of the common shares. The jurisdiction of the court is
plenary and exclusive, and the fair value as determined by the
court is binding on all shareholders, wherever located. A
dissenting shareholder, if successful, is entitled to a judgment
for the amount by which the fair value of his or her common shares
as determined by the court exceeds the amount originally remitted
by the Company.
Generally the costs and expenses associated with a court
proceeding to determine the fair value of the Company's common
stock will be borne by the Company, unless the court finds that a
dissenting shareholder has demanded supplemental payment in a
manner which is arbitrary, vexatious or not in good faith. Similar
costs and expenses may also be assessed in instances where the
Company has failed to comply with the procedures in Section
7-113-302 pertaining to dissenters' rights discussed above. The
court may award attorneys' fees to an attorney representing
dissenting shareholders out of any amount awarded to such
dissenters if the court finds such services were substantial.
Failure to follow the steps required by the CBCA for asserting
dissenters' rights may result in the loss of a shareholder's rights
to demand the fair value of his or her shares of the Company's
common stock. Shareholders considering seeking appraisal should
realize that the fair value of their shares, as determined under
the CBCA in the manner outlined above, could be more than, the same
as or less than the value of the cash and assumption of liabilities
they would be entitled to as a result of the sale if they did not
seek appraisal of their shares.
ACTIVITIES OF THE COMPANY FOLLOWING THE PROPOSED SALE
Following the proposed sale of the Property, the Company's
assets are expected to consist of refunds of prepaid deposits and
cash to the extent that such have not been utilized to pay debt and
past due and accrued property taxes without adjustment for
operating results through closing of the Purchase Agreement. In
view of the fact that the net sale price, approximately $1,930,000
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net, is expected to be approximately $200,000 less than the amount
due creditors and to pay property taxes, the Company has
negotiated with its principal creditors for them to accept less
than the full amount due them. Obviously there is no assurance
that such negotiations will be successful; however, the fact that
the issuance of an Arapahoe County Treasurer's Deed on the property
would effectively eliminate the Property as a source of funds to
pay creditors, except Arapahoe County, should likely provide
incentive to creditors to accept less than full payment for their
respective claims. At August 13, 1998, 27 of the 30 holders of the 10%
notes securing the $955,000 lien on the Property (representing
nearly $900,000) had agreed to accept 75% of the face amount of
each of their respective notes.
If and when the Company completes the sale of the water park
property and eliminates all or most of its liabilities, management
intends to seek out an appropriate operating privately-held entity
which is seeking to become a publicly-held company and hopefully
effect a business combination with such entity. The Company has not
made any contacts in that respect, nor established any criteria for
such entity, nor engaged any agents for the purpose of locating
such an entity. No activities in that respect are expected to
occur until after closing on the Purchase Agreement. Obviously,
there is no assurance that a suitable entity for a proposed
business combination will be located or, if located, that such
business combination can be negotiated on terms acceptable to the
parties. The Company intends to pursue such course of action in
order to provide its shareholders with an opportunity through
new assets and new operations in the Company.
FEDERAL INCOME TAX CONSEQUENCES
In General. The following summary of the anticipated federal
income tax consequences to the Company of the proposed sale of
assets is not intended as tax advice and is not intended to be a
complete description of the federal income tax consequences of the
proposed transactions. This summary is based upon the Internal
Revenue Code of 1986 (the "Code"), as presently in effect, the
rules and regulations promulgated thereunder, current
administrative interpretations and court decisions. No assurance
can be given that future legislation, regulations, administrative
interpretations or court decisions will not significantly change
these authorities (possibly with retroactive effect).
No rulings have been requested or received from the Internal
Revenue Service ("IRS") as to the matters discussed and there is no
intent to seek any such ruling. Accordingly, no assurance can be
given that the IRS will not challenge the tax treatment of certain
matters discussed or, if it does challenge the tax treatment, that
it will not be successful.
The discussion of federal income tax consequences set forth
below is directed primarily toward individual taxpayers who are
citizens or residents of the United States. However, because of
the complexities of federal, state and local income tax laws, it is
recommended that the Company's shareholders consult their own tax
advisors concerning the federal, state and local tax consequences
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of the proposed transactions to them. Further, persons who are
trusts, tax-exempt entities, corporations subject to specialized
federal income tax rules (for example, insurance companies) or
non-U.S. citizens or residents are particularly cautioned to
consult their tax advisors in considering the tax consequences of
the proposed transactions.
Federal Income Tax Consequences to the Company. The sale of
substantially all of the assets of the Company pursuant to the
Purchase Agreement will be a taxable sale by the Company upon which
gain or loss may be recognized by the Company. The amount of gain
or loss recognized by the Company with respect to the sale of a
particular asset will be measured by the difference between the
amount realized by the Company on the sale of that asset and the
Company's tax basis in that asset. The amount realized by the
Company on the sale of substantially all of its assets will include
the amount of cash received, the fair market value of any other
property received. For purposes of determining the amount realized
by the Company with respect to specific assets, the total amount
realized by the Company will generally be allocated among the
assets according to the rules prescribed under the Code. The
Company's basis in its assets is generally equal to their cost, as
adjusted for certain items, such as depreciation.
The determination of whether gain or loss is recognized by the
Company will be made with respect to each of the assets to be sold.
Accordingly, the Company may recognize gain on the sale of certain
assets and loss on the sale of certain others, depending on the
amount of consideration allocated to an asset as compared with the
basis of that asset. The gains and losses may offset, except that
capital losses may be used to offset only capital gains. The
Company may recognize a net gain as a result of the sale of all its
assets. Nevertheless, the Company believes its net operating loss
carryover and its capital loss carryover to the year of sale are
sufficient to offset gain, if any. Therefore, the Company believes
it will incur no federal income tax liability as a result of the
sale of its assets.
MARKET INFORMATION ON THE COMPANY'S COMMON STOCK
The Company's common stock is traded on the NASD Electronic
Bulletin Board. The range of high and low bid prices set forth
below have been obtained from sources believed to be reliable based
on reports from the National Association of Securities Dealers.
Calendar 1996 Calendar 1997 Calendar 1998
------------- ------------- -------------
Quarter Low High Low High Low High
------- --- ---- --- ---- --- ----
First .25 .50 .50 .50 .12 .21
Second .25 .50 .37 .50 .06 .37
Third .50 .50 .37 .50
Fourth .50 .50 .25 .50
On August 18, 1998 the bid price was $.16. Management is
informed that after the sale of the water park property the common
stock should continue to be eligible for inclusion on the Bulletin
Board.
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The Company is informed there has been very little volume in
trading of its common stock during the above periods.
The Company has never paid dividends on its common stock. As
of July 24, 1998 the Company had approximately 200 shareholders of
record, and it is estimated there are approximately 180 additional
beneficial holders of the Company's shares of common stock.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The common stock, par value $.01 per share, of the Company is
the only class of stock entitled to vote at the meeting. As of
July 24, 1998, the Company had issued and outstanding 2,610,475
shares of common stock. Each shareholder will be entitled to cast
one vote in person or by proxy for each share of common stock held
by him. Only shareholders of record at the close of business on
July 24, 1998 will be entitled to vote at the meeting.
Information as to the name, address and holdings of each
person known by the Company to be the beneficial owner of more than
5% of its common stock as of July 24, 1998, is set forth below.
Beneficial ownership of common stock has been determined for
purposes of this table based on Rule 13d-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange
Act of 1934. Under this rule, a person is, in general, deemed to
be the beneficial owner of a security if the person has or shares
voting power or investment power in respect of such security or has
the right to acquire beneficial ownership of the security within
sixty (60) days.
Members of management intend to vote all shares of common
stock held by them respectively FOR the sale of all the Company's
assets pursuant to the Contract to Buy and Sell Real Estate and FOR
such sale of all the Company's assets to South Suburban Park and
Recreation District as a back-up purchaser.
Amount of
Name and Address Common Stock Percent
of Beneficial Owner Beneficially Owned of Class
------------------- ------------------ --------
Kenneth M. Dalton (1)(2) 668,419 25.6%
26 Tamarade Drive
Littleton, CO 80127
Rod K. Barksdale (1)(2) 88,007 3.3%
2921 Sopris Avenue
Glenwood Springs, CO 81601
Ren Berggren (1)(2)(3) 0 0%
1700 East 68th Avenue
Denver, CO 80229
James F. Silliman, M.D. 192,142 7.4%
7408 Greenbriar
Dallas, TX 75225
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Keith A. Lowery 144,734 5.5%
7477 Singing Hills Drive
Boulder, CO 80301
Officers and Directors 812,592(4) 31.1%
as a Group (3 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.
FINANCIAL AND OTHER INFORMATION
Pro Forma Financial Information. The following unaudited
Pro Forma Balance Sheet at June 30, 1998 gives effect to the
proposed sale of substantially all the assets of the Company, as
if the proposed October 27, 1998 transaction had occurred on June
30, 1998. No pro forma statement of operations has been
presented. Since after the sale there will be no operations, a
pro forma statement of operations would show no material revenue
and no material expenses assuming the sale of the Company's
assets. The Company's operating season with the water park
property will be completed September 7, 1998, except for closing
and winterizing. Scheduled closing on the Purchase Contract is
October 27, 1998. The Company will retain all operating revenues
and pay all operating expenses of the water park through closing,
including prorated property taxes for 1998. The Company is not
in a position to predict operating results for the 1998 season
with a reasonable degree of accuracy. Readers are referred to
historical financial operating data included herein.
-12-
<PAGE>
PRO FORMA BALANCE SHEET
<TABLE>
(CAPTION>
BALANCE SHEET (Unaudited) 6/30/98 Adjustment As Adjusted
------- ----------- -------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash 44,346 1,930,000 (1) 23,859
(1,950,487)(2)
Other current assets 19,373 0 19,373
--------- ---------
Total Current Assets 63,719 43,232
--------- ---------
OTHER ASSETS
Property and Equipment,
-net of accumulated
depreciation 1,774,814 (1,744,814)(1) 0
Other assets 44,424 0 44,424
--------- ---------
1,789,238 44,424
Total Assets 1,852,957 87,656
CURRENT LIABILITIES
Notes Payable-Current 1,066,520 (1,066,520)(2) 238,750
Notes Payable-Related Parties 196,820 (196,820)(2) 0
Property Taxes Payable 581,284 (581,284)(2) 0
Accrued Interest 165,929 (165,929)(2) 0
Accounts Payable-Trade 70,134 (70,134)(2) 0
Deferred Income 82,806 (82,806)(2) 0
--------- ---------
Total Current Liabilities 2,163,493 238,750
Notes Payable
-net of current portion 25,744 (25,744)(3) 0
--------- ---------
Total Liabilities 2,189,237 238,750
--------- ---------
</TABLE>
-13-
<PAGE>
BALANCE SHEET (Unaudited 6/30/98 Adjustment As Adjusted
--------- ------------ -----------
STOCKHOLDERS' EQUITY
Preferred Stock, $.01 Par Value
25,000,000 Shares Authorized;
None Issued and Outstanding
Common Stock, $.001 Par Value
100,000,000 Shares Authorized;
2,610,470 Issued and
Outstanding 2,611 0 2,611
Additional Paid-In Capital 4,377,574 0 4,377,574
Retained Earnings (4,716,465) (185,186)(1) (4,531,279)
---------- ---------
Total Stockholders'
(Deficit) (336,279) (151,094)
Total Liabilities and
Stockholders' (Deficit) 1,852,957 87,656
========= =========
____________________
Notes to Pro Forma Financial Statements
(1) To record proposed sale of property assuming net proceeds from the
sale of $1,930,000.
(2) To record payment of liabilities.
-14-
<PAGE>
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, 1998 and 1997, and the related
statements of operations, changes in stockholders' equity
(deficit) and cash flows for the three years ended March 31,
1998. 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, 1998 and 1997, and
the results of its operations, its cash flows and its changes in
stockholders' equity (deficit) for the three years ended March
31, 1998, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed
in Note 7 to the financial statements, the Company has suffered
recurring losses from operations and has a working capital
deficiency that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to
these matters are also described in Note 7. The financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/Schumacher & Associates, Inc.
Schumacher & Associates, Inc.
12835 East Arapahoe Road
Tower II, Suite 110
Englewood, CO 80112
May 11, 1998
-15-
<PAGE>
THE SOUTHSHORE CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
1998 1997
---------------------------
<S> <C> <C>
Current Assets
Cash $ 1,841 $ 3,035
Accounts receivable - 2,815
Prepaid expenses 6,607 6,223
--------- ---------
Total Current Assets 8,448 12,073
--------- ---------
Other Assets
Property and equipment, net of
accumulated depreciation (Note 2) 1,885,031 2,440,948
Deposits 17,245 17,245
Debt and other offering costs, net
of accumulated amortization - 8,347
--------- ---------
Total Other Assets 1,902,276 2,466,540
--------- ---------
Total Assets $1,910,724 $2,478,613
--------- ---------
Current Liabilities
Notes payable, current portion (Note 3) $1,201,567 $1,432,071
Notes and advances payable,
officer 97,400 97,400
Property taxes payable (Note 8) 566,762 483,651
Accrued interest 151,176 89,390
Accounts payable and accrued expenses 18,926 37,503
Deferred income 31,845 39,156
--------- ---------
Total Current Liabilities 2,067,676 2,179,171
Notes payable, net of current portion (Note 3) 37,864 65,377
--------- ---------
Total Liabilities 2,105,540 2,244,548
--------- ---------
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) (4,575,001) (4,146,120)
--------- ---------
Total Stockholders' Equity (Deficit) (194,816) 234,065
--------- ---------
Total Liabilities and Stockholders'
Equity (Deficit) $1,910,724 $2,478,613
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-16-
<PAGE>
THE SOUTHSHORE CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended March 31,
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Revenue
Sales - gate admissions $ 767,508 $ 820,968 $ 682,165
Sales - food, beverages and
merchandise 232,202 264,497 173,453
------- --------- -------
Total sales 999,710 1,085,465 855,618
Operating Expenses
Salaries 237,229 263,272 270,938
Advertising 121,595 92,953 125,425
Depreciation 558,672 559,751 560,511
Other 370,865 452,393 443,457
--------- --------- ---------
Total Operating Expenses 1,288,361 1,368,369 1,400,331
--------- --------- ---------
Net (loss) before other income
(expense) and extraordinary items (288,651) (282,904) (544,713)
Interest (expense) (140,421) (198,687) (185,251)
Amortization of debt offering
costs (9,809) (21,050) (21,050)
Other 10,000 - -
-------- ------- ------
Net (loss) before extraordinary
items (428,881) (502,641) (751,014)
Renegotiated debt and interest
expense forgiven (Note 6) - - 88,214
--------- --------- ---------
Net (Loss) $(428,881) $(502,641) $(662,800)
========= ========= =========
Net (Loss) Per Share Excluding
extraordinary items $ (.16) $ (.19) $ (.32)
========= ========= =========
Net Income Per Share from
extraordinary item $ - $ - $ .04
========= ========= =========
Net (Loss) Per Share (.16) (.19) (.28)
========= ========= =========
Weighted Average Number of
Shares Outstanding 2,610,470 2,610,470 2,374,042
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-17-
<PAGE>
THE SOUTHSHORE CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
From March 31, 1995 through March 31, 1998
<TABLE>
<CAPTION>
Additional
Number of Common Paid-in Deficit
Shares Stock Capital Accumulated Total
---------- ------- -------- ----------- -------
<S> <C> <C> <C> <C> <C>
Balance at
March 31, 1995 2,137,613 $2,138 $3,903,191 $(2,980,679) $924,650
Stock issued 472,857 473 474,383 - 474,856
(Loss) for the year
ended March 31,
1996 - - - (662,800) (662,800)
--------- ----- --------- ----------- ---------
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)
========= ====== ========== ============ ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-18-
<PAGE>
THE SOUTHSHORE CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended March 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net (Loss) $ (428,881) $ (502,641) $ (662,800)
Adjustments to Reconcile Net (Loss)
to Net Cash Provided by Operating
Activities:
Depreciation 558,672 559,751 560,511
Amortization debt offering cost and
bond discount 9,809 21,050 21,050
(Increase) in other current assets (384) (4,192) -
Increase (decrease) in accounts
payable, accrued expenses and
other 107,335 48,851 (140,000)
------- ------ ---------
Net Cash Provided by (Used in)
Operating Activities 246,551 122,819 (221,239)
------- ------- ---------
Cash Flow from Investing Activities:
Deposits (paid) returned - 31,240 -
Land, property and equipment
acquired (disposed of) 272 (25,887) 9,941
(Decrease) in accounts payable,
construction - - (368,472)
------ ------ ---------
Net Cash (Used in) Investing
Activities 272 5,353 (358,531)
------ ------ ---------
Cash Flows from Financing Activities:
Advances and loans from related
parties - - 71,000
Proceeds from notes payable - 75,000 55,000
Payments made on notes payable (248,017) (201,762) (20,000)
Issuance of stock and warrants, net of
offering costs - - 474,856
--------- --------- -------
Net Cash Provided by Financing Activities (248,017) (126,762) 580,856
--------- --------- -------
Increase (Decrease) in Cash (1,194) 1,410 1,086
Cash, Beginning of Period 3,035 1,625 539
------- ------- -------
Cash, End of Period $ 1,841 $ 3,035 $ 1,625
======= ======== ========
Income Taxes Paid $ - $ - $ -
======= ======== ========
Interest Paid $78,635 $152,611 $113,101
======= ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-19-
<PAGE>
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
--------------------------------------------------
This summary of significant accounting policies of The
Southshore Corporation (the Company) is presented to assist in
understanding the Company's financial statements. The
financial statements and notes are representations of the
Company's management who is responsible for their integrity
and objectivity. These accounting policies conform to
generally accepted accounting principles and have been
consistently applied in the preparation of the financial
statements.
Organization
------------
The Southshore Corporation (the "Company") was incorporated
under the laws of the state of Colorado on March 26, 1990. The
Company owns 16 acres of land in Arapahoe County, Colorado,
upon which it has constructed and is operating a water park.
The Company has selected March 31 as its fiscal year end.
Property and Equipment and Related Depreciation
-----------------------------------------------
Property and equipment are carried at cost. The cost of
property and equipment is depreciated on a straight-line basis
over the estimated useful lives of the related assets, which
are 20 years for buildings and 7 years for the remaining
assets which consist principally of equipment and facilities.
Maintenance and repairs are charged to operations when
incurred. Betterments and renewals are capitalized. When
property and equipment is sold or otherwise disposed of, the
asset and related accumulated depreciation account is
relieved, and any gain or loss is included in operations.
Concentrations of Credit Risk
-----------------------------
The Company has no material amounts or concentrations of
credit risks.
Debt Offering Costs
-------------------
The Company incurred $105,250 in debt offering costs related
to a successful private placement of secured notes. These
offering costs were amortized on a straight-line basis over
the five year term of the notes.
Per Share Information
---------------------
Per share information is computed based upon a weighted
average number of shares outstanding.
-20-
<PAGE>
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES, Continued
--------------------------------------------------
Geographic Area of Operations and Interest Rates
The Company operates a water park in Englewood, Colorado. The
potential for severe financial impact can result from negative
effects of economic conditions within the market or
geographic area. Since the Company's business is in one area,
this concentration of operations results in an associated risk
and uncertainty.
Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those
estimates.
Advertising Costs
-----------------
Advertising costs are expensed as incurred.
Revenue Recognition
-------------------
The Company recognizes revenue, principally consisting of
gate admissions and food and merchandise sales, as earned as
customers are admitted to the facility and as food and
merchandise are sold to customers.
Impairment Policy for Long-lived Assets
---------------------------------------
The Company reviews its long-lived assets periodically, and
at least annually, to determine if there is any impairment
in the carrying values. If management determines that
impairments exist, adjustments would be made to the carrying
values. As of March 31, 1998 there were no impairment
adjustments.
-21-
<PAGE>
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
2. PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
March 31,
1998 1997
----------- -----------
Buildings $ 744,332 $ 744,332
Recreational park facilities 3,673,082 3,669,486
Office furniture and equipment 9,832 9,832
Equipment 98,829 102,697
Land 435,173 435,173
--------- ---------
4,961,248 4,961,520
Less accumulated depreciation 3,076,217 2,520,572
----------- -----------
$ 1,885,031 $ 2,440,948
=========== ===========
3. NOTES PAYABLE
Notes payable are summarized as follows:
March 31,
1998 1997
------ ------
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 $ 72,841 $ 94,360
Note payable, interest at prime,
renewable annually (see below *). 136,590 356,000
Note payable, interest at 12% per
annum, collateralized by deed of
trust, due September 30, 1997 75,000 75,000
Notes payable, interest at 10%
payable semiannually, was due in
three installments, $10,000
due June 30, 1995 and 1996, and
$13,550 due June 30, 1997. - 13,550
-22-
<PAGE>
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
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 commencing June 30, 1994
net of unamortized discount of
$1,462 at March 31, 1997
(see below**) 955,000 958,538
--------- ---------
1,239,431 1,497,448
Less current portion (1,201,567) (1,432,071)
----------- -----------
Long-term portion $ 37,864 $ 65,377
=========== ===========
3. NOTES PAYABLE, Continued
* In April, 1994, the Company issued a $400,000 convertible
promissory note to the Company's President pursuant to an
arrangement whereby the President personally obtained a
bank line of credit, the proceeds of which were made
available to the Company. The note is convertible into up
to 177,777 shares of common stock of the Company at $2.25
per share.
Maturities of notes payable after giving effect to the
default provisions are summarized as follows:
1998 $1,239,431
1999 37,864
The fair market value of notes payable is estimated to be
equivalent to the unpaid balance of the notes payable since
the interest rates and terms appear to be reasonable and
appropriate under the circumstances.
-23-
<PAGE>
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
** The provisions of indenture relating to the 10% secured
notes contain various covenants pertaining to limitations
on restricted payments (such as dividends, aggregate
officers' compensation in excess of defined limits, etc.)
based on maintenance of working capital and tangible
stockholders' equity parameters. There are also
limitations on total debt allowed. Also, the Company
failed to make required 25% per year repayments of the
$955,000 of notes payable outstanding. A note holder with
a principal balance of $100,000 has threatened litigation
against the Company. As of March 31, 1998, the entire
balance of these notes payable have been shown as a current
liability in the financial statements since the notes are
in default.
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, 1998, none of the amounts loaned
has been repaid. $82,400 of the balance of the notes
payable of $97,400 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. The President
also has an option to purchasd 177,777 shares. See Note 3
above.
4. STOCKHOLDERS' EQUITY, Continued
-------------------------------
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.
-24-
<PAGE>
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
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, 1998, there are no current or deferred
income taxes payable. As of March 31, 1998, the Company
has total deferred tax assets of approximately $1,600,000
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 $1,600,000. Thus, no tax assets have been
recorded in the financial statements as of March 31, 1998.
The Company has available at March 31, 1998 certain unused
net operating loss carryforwards which may be applied
against future taxable income expiring in various years
through 2012. The amount which may be carried forward
varies resulting from past and possible future changes in
stock ownership, including warrant and stock options
outstanding. The Company estimates that it has
carryforwards of approximately $2,500,000 currently
available.
6. RENEGOTIATED DEBT AND INTEREST
------------------------------
During the year ended March 31, 1996 the Company
renegotiated the balance of a debt and accrued interest to
a creditor downward from $278,214 to $190,000, an
adjustment of $88,214. Of this amount $30,674 was
principal and $57,540 of accrued interest. The $88,214
renegotiated debt and interest expense was accounted for as
an extraordinary item in the statement of operations and
amounted to a reduction of the net loss per share of $.04.
The source of the repayment of the renegotiated debt was
principally from proceeds of notes payable to shareholders
and others.
-25-
<PAGE>
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
7. CONTINGENCIES, GOING CONCERN
----------------------------
As of March 31, 1998, the Company has accumulated losses
aggregating $4,575,001 and had a working capital deficiency
of $2,059,228. The Company is attempting to sell
substantially all of its assets to pay its current debt and
delinquent taxes. Management is hopeful such a sale will
materialize and allow the Company to continue as a going
concern. The Company's ability to continue as a going
concern depends upon its success in obtaining additional
funding, increasing its debt financing and/or improving its
operating results, or the sale of its assets. There is no
assurance that the Company will be successful in these
efforts. Thus, there is substantial doubt about the
Company's ability to continue as a going concern. 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, 1998 the Company had $566,762 property
taxes payable, the majority of which are delinquent. In
addition, included with other accrued interest in the
financial statements is $140,120 of accrued interest on
delinquent property taxes. Failure to pay these taxes and
accrued interest could eventually result in loss of
ownership of the property.
9. SUBSEQUENT EVENT
----------------
A special meeting of the shareholders of the Company is
scheduled for August, 1998 for the purpose of considering
the sale of substantially all the Company's assets for
$2,000,000.
-26-
<PAGE>
THE SOUTHSHORE CORPORATION
BALANCE SHEET (Unaudited)
<TABLE>
<CAPTION>
March 31 June 30
1998 1998
CURRENT ASSETS
<S> <C> <C>
Cash 1,841 44,346
Acounts Receivable 0 14,109
Notes Receivable 0 0
Inventory 0 5,264
________ ________
Total Current Assets 1,841 63,719
OTHER ASSETS
Land 435,173 435,173
Property and Equipment,
-net of accum depr. of
$3,076,217 and $3,216,434 Respect. 1,449,858 1,309,641
Deposits 17,245 17,285
Prepaids 6,607 27,139
Debt Offering Costs,
-net of accum amort 0 0
________ ________
Total Assets 1,910,724 1,852,957
CURRENT LIABILITIES
Notes Payable -Current 1,068,852 1,066,520
Notes Payable -Related Parties 233,990 196,820
Payroll Taxes Payable 1,649 8,028
Property Taxes Payable 566,762 581,284
Accrued Interest 151,176 165,929
Accounts Payable -Trade 17,048 59,197
Deferred Income 31,845 82,806
Accrued Payroll 227 2,909
Other Accrued Expenses 0 0
__________ ________
Total Current Liabilities 2,071,550 2,163,493
Notes Payable
-net of current portion 33,989 25,743
Notes Payable -Related Parties
-net of current portion 0 0
_________ _________
Total Liabilities 2,105,539 2,189,237
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 (4,575,000) (4,716,465)
__________ _________
Total Stockholders' Equity (194,815) (336,279)
Total Liabilities and
Stockholders' Equity 1,910,724 1,852,957
</TABLE>
-27-
<PAGE>
THE SOUTHSHORE CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended June 30, Ended June 30,
1998 1997
Revenue
<S> <C> <C>
Sales -Admissions 179,713 198,276
Sales -Food, Merchandise 46,382 50,938
Sales -Other 2,515 326
Corporate Sponsorships 5,750 10,250
________ ________
Total Sales 234,360 259,790
Cost of Sales 5,703 5,621
________ _________
Gross Profit 228,657 254,169
Operating Expenses
Salaries 71,634 83,254
Payroll Taxes 8,144 6,564
Operating Supplies 6,489 5,471
Chemicals 6,437 6,752
Repairs & Maintenance 11,400 11,760
Advertising 44,626 79,072
Outside Services 11,788 8,099
Utilities 14,174 38,173
Insurance 10,102 9,843
Depreciation & Amort 140,217 139,792
Property Taxes 24,270 28,254
Other 2,282 3,701
_______ ________
Total Operating Exp 351,561 420,734
Excess of Expense Over
Revenue (Before Other
Income/Expense) (122,904) (166,565)
Other Income 5,525 2,917
Interest Expense (Net) (24,085) (48,304)
Amort. of Debt Offering 0 (5,263)
________ ________
Net Profit(Loss) (141,464) (217,215)
Net Profit (Loss) Per Share (0.05) (0.08)
</TABLE>
-28-
<PAGE>
THE SOUTHSHORE CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
From March 31, through June 30, 1998
(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, 1998 2,610,470 2,611 4,377,574 (4,575,000) (194,815)
Net Profit(Loss)
3 Months Ended
June 30, 1998 (141,464) (141,464)
Balance at June
30, 1998 2,610,470 2,611 4,377,574 (4,716,464) (336,279)
</TABLE>
-29-
<PAGE>
THE SOUTHSHORE CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ending June 30 Ending June 30
1998 1997
Cash flows from Operating Activities
<S> <C> <C>
Net Profit(Loss) (141,464) (217,215)
Adjustments to Reconcile Net(Loss)
to Net Cash (Used In) Operating
Activities
Amortization and Depreciation 140,217 145,055
(Increase) in Accounts Receivable (14,109) (11,556)
(Increase) in Inventory (5,264) (9,557)
Increase in Accounts Payable
and Accrued Expenses 80,485 177,721
Other, net 30,429 (8,592)
________ ________
Net Cash (Used In) Operating Activities 90,293 75,856
Cash flows from Investing Activities
Deposits (40) (280)
Land, Property, Equipment 0 (3,402)
_______ _______
Net Cash (Used In) Investing Activities (40) (3,682)
Cash flows from Financing Activities
Increase(Decrease) Debt (47,748) (56,581)
Issuance of Stock, Net of Offering Costs 0 0
______ _______
Net Cash Provided by Financing Activities (47,748) (56,581)
_______ ______
Increase(Decrease) in Cash 42,505 15,593
Cash, Beginning of Period 1,841 3,035
Cash, End of Period 44,346 18,628
_______ ________
Income Taxes Paid 0 0
Interest Paid 2,119 33,623
</TABLE>
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<PAGE>
THE SOUTHSHORE CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(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, 1998. The
results of operation for the period ended June 30, 1998 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
-------------------------------
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, 1998 and 1997 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, 1998, the balance was $99,420.
(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. The Company failed to make these payments
due September 30, 1997. Additionally, the trustee under the Indenture
relating to these notes resigned as trustee effective November 4, 1994.
(6) Property Tax Lien
-----------------
First Union National Bank (New Jersey) holds a property tax certificate
from Arapahoe County, Colorado in the amount of $581,284 plus interest
of $156,325, at June 30, 1998, on the Company's 16-acre water park
property. The tax certificate draws interest at 13% per annum and may
be converted into a tax deed at the request of First Union. The
Company would have the right to redeem the certificate for a period of
approximately four months from the time First Union requests a deed by
paying the full amount of the property tax certificate plus accrued
interest (a total of $737,609 at June 30, 1998). As of the date of
this report First Union had not requested Arapahoe County to issue a
tax deed.
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<PAGE>
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
3/31/98 3/31/97 3/31/96
----------- ----------- -----------
Total Assets......... $ 1,910,724 $ 2,478,613 $ 3,028,190
Total Liabilities.... $ 2,105,540 $ 2,244,548 $ 2,322,158
Long Term Obligations $ 37,864 $ 65,377 $ 953,098
Working Capital...... $(2,059,228) $(2,167,098) $(1,362,589)
Stockholders' Equity. $ (194,816) $ 203,391 $ 706,032
As of As of
3/31/95 3/31/94
----------- -----------
Total Assets......... $ 3,649,607 $ 3,991,676
Total Liabilities.... $ 2,724,957 $ 2,545,949
Long Term Obligations $ 145,632 $ 129,058
Working Capital...... $(2,556,580) $(2,306,874
Stockholders' Equity. $ 924,650 $ 1,447,727
Summary Operating Data:
Year Year Year
Ended Ended Ended
3/31/98 3/31/97 3/31/96
---------- ----------- -----------
Sales................ $ 999,710 $1,085,465 $ 855,618
Net Loss............. $ (428,881) $ (502,641) $ (693,474)
Net loss Per Share... $ (.16) $ (.19) $ (.29)
Net Loss Before
Extraordinary Items $ (428,881) $ (502,641) $ (751,014)
Net Loss Per Share
Before Extraordinary
Items................. $ (.16) $ (.19) $ (.32)
Year Year
Ended Ended
3/31/95 3/31/94
----------- -----------
Sales................ $ 1,021,747 $ 838,098
Net Loss............. $(1,023,077) $(1,334,382)
Net loss Per Share... $ (.57) $ (.79)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- -----------------------------------------------------------
Financial Condition
At March 31, 1998, working capital was a negative $2,059,228
as compared to a negative $2,167,098 at March 31, 1997, a
decrease of approximately $108,000.
The principal items contributing to the working capital
shortfall are operating losses, currently due promissory notes
and currently due property taxes.
At March 31, 1998, the Company's shareholders' equity was a
negative $(194,816), down from $234,065 at March 31, 1997, due
primarily to operating losses for fiscal 1997.
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 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
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<PAGE>
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 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 arrangements with the Company's
creditors.
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<PAGE>
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, 1998, the Company had $2,067,676 in current
obligations and $8,448 in current assets. Obligations include
notes payable of $1,239,431 and property taxes of $566,762.
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 19), the
Company has not obtained funding in the past two 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. Operating expenses
have been reduced each of the past three years; however the
Company is yet unable to achieve profitable operations.
Although the Company has made substantial inroads toward
establishing financial stability, it has not yet achieved it.
1998 was the second consecutive year the Company was able to
achieve positive cash flow except for payment of real estate taxes.
For fiscal 1998 its objectives were to eliminate, restructure or
reduce its debt, pay its property taxes and strive to produce
profitable operations. These objectives were not achieved.
The failure to pay its taxes or restructure or pay its debt could
result in loss of the Company's water park property.
The Company's plan recently has been to sell its water park
property for sufficient funds to retire its debt. On June 16,
1998, the Company signed a contract for sale of the property for
$2 million. The Company believes the sale proceeds would be
sufficient to pay all of the Company's obligations. The Company
also has engaged in lengthy negotiations with a local recreation
district which has interest in acquiring the property in event
the current contract does not close. See Item 1. Business and
Proposed Sale of the Company's Water Park. See also Note 7 to
financial statements.
Trends
The industry in which the Company operates depends
considerably on disposable income of potential park patrons and
is thus more affected by the condition of the local and, to a
very limited extent the national economy. The economy in the
Denver area is currently relatively strong, which means that more
disposable monies would be available for recreational activities
such as those available at the Company's facilities. Based on
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<PAGE>
this economic indication, management is hopeful the local economy
will provide a good environment for the Company to operate.
Year 2000
- -------------
Since the Company expects to sell its water park property soon
and attempt 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.
-36-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Quarter Ended June 30, 1998
---------------------------
Financial Condition
At June 30, 1998, working capital was a negative $2,099,774 as compared
to a negative $2,069,709 at March 31, 1998. The principal reasons for the
working capital shortfalls are unpaid and accrued property taxes of $581,284,
accrued interest on property taxes, trade payables, and $955,000 in notes
currently in default. See "Liquidity and Capital Resources" below.
At June 30, 1998, the Company's shareholders' equity was negative
$336,279, down from a negative $194,815 at March 31, 1998, due entirely to
operating losses from startup costs for the summer of 1998.
Results of Operations -Three Months Ended June 30, 1998 Compared to Three
Months Ended June 30, 1997.
Revenues for the current three months were down 10% compared to the same
period in 1997. This decrease is accounted for by early season rain, cool
conditions and delaying the opening date of the facility a week in an effort
to reduce startup costs for the summer.
Total operating expenses were down 16% as compared to the comparable
period in 1997. Salaries were down 14%. Advertising expenditures decreased
44% as management of advertising were brought in-house to save on agency fees
and production costs for the season. The cost of operating supplies,
chemicals and utilities was down 46% as the company continues to refine its
need for these products and services. Depreciation and amortization remained
basically the same for the two periods. The interest expense for current
period reflects suspension of interest payments to some of its creditors as
work-out arrangements are made with, debtors, subject to sale of the Company's
waterpark property and satisfaction of these obligations. (see Liquidity and
Capital Resources)
Liquidity and Capital Resources
At June 30, 1998, the Company had $2,163,493 in current obligations,
primarily composed of notes payables and accrued and past due property taxes.
Notes payable of $220,000 due June 30, 1997 and $735,000 due September 30,
1997 are currently in default. These notes are secured by a first mortgage
on portions of the waterpark property. The Company's waterpark property is
subject to a property tax lien that was recently issued to a banking
institution in New Jersey. The Company could be in a position in the near
future where it would have to pay the full amount of this lien or loose title
to the property.
Although the Company has made substantial inroads toward financial
stability, it has not yet achieved it. The Company recently has been
attempting to sell its water park property for sufficient funds to retire
its debt. On June 16, 1998, the Company signed a contract for sale of
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<PAGE>
the property for $2 million, subject to certain conditions, including that
the buyers be able to obtain financing On July 27, 1998 the Buyers
terminated the contract due to inability to obtain financing. The Company
has also engaged in lengthy negotiations with a local recreation district
which has interest in acquiring the property in event the current contract
does not close.
As of June 30, 1998, the company has accumulated losses aggregating
$4,716,465 and had a working capital deficiency of $2,099,774. The company
is attempting to sell substantially all of its assets to pay its current debt
and delinquent taxes. Management is hopeful such a sale will materialize and
allow the Company to continue as a going concern. The Company's ability
to continue as a going concern depends upon its success in obtaining
additional funding, increasing its debt financing and/or improving its
operating results, or the sale of its assets. There is no assurance that the
Company will be successful in these efforts. Thus, there is substantial
doubt about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
A special meeting of the shareholders of the Company has been scheduled
tenatively for the purpose of considering the sale of substantially all the
Company's assets for $2,000,000. However, it will be delayed until the
Company has the property under contract for sale, of which there is no
assurance.
-38-
<PAGE>
DESCRIPTION OF BUSINESS AND PROPERTY
The Company is engaged in one business only, that is the ownership
and operation of one water park located in the southeast part of the
Denver Metro Area. The park is on 16 acres, has various water features,
including a wave pool, kiddie pool and various water slides. It also
has volleyball courts and offers food and beverages through concession
facilities. The facility is open only from Memorial Day through Labor
Day, weather permitting. The property is encumbered with a tax lien
certificate and two liens securing indebtedness which are currently in
default. The auditor's report dated May 11, 1998 raises substantial doubt
about the Company's ability to continue as a going concern. See
Financial Statements and Management's Discussion and Analysis of Results
of Operations for the year ended March 31, 1998 and the quarter ended
June 30, 1998 herein for further details.
AUDITORS
Schumacher & Associates, Inc. served as independent auditors of the
Company during the fiscal year ended March 31, 1998. A representative
of Schumacher & Associates, Inc., who will have an opportunity to make
a statement if he so desires, will be present at the meeting and will be
available to respond to appropriate questions.
FORM 10-K ANNUAL REPORT
Included with this Proxy Statement is a copy of the Company's Form
10-K Annual Report for the year ended March 31, 1998 as filed with the
U.S. Securities and Exchange Commission.
OTHER MATTERS
The Board of Directors does not intend to bring before the meeting
any business other than as set forth in this Proxy Statement, and has
not been informed that any other business is to be presented to the
meeting. However, if any matters other than those referred to above
should properly come before the meeting, it is the intention of the
persons named in the enclosed Proxy to vote such proxy in accordance
with their best judgment.
Please sign and return promptly the enclosed Proxy in the envelope
provided. The signing of a Proxy will not prevent your attending the
meeting and voting in person.
BY ORDER OF THE BOARD OF DIRECTORS
Kenneth M. Dalton
President
Dated: August __, 1998
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<PAGE>
APPENDIXES
Appendix 1 Real Estate Purchase and Sale Agreement - John C.
Botdorf and letter form ORIX Real Estate Equities,
Inc.
Appendix 2 Letter from South Suburban Park & Recreation District
Appendix 3 Sections 7-113-101-103, 301-209 and 301-302 of the
Colorado Business Corporation Act
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<PAGE>
APPENDIX 1
REAL ESTATE PURCHASE AND SALE AGREEMENT
John C. Botdorf ("Purchaser") hereby offers to purchase the
Southshore Water Park including all of the assets described below
along with the real estate consisting of approximately 15.89
acres of land from The Southshore Corporation, hereinafter called
the Seller ("Seller"). The property is located in the NW 1/4 of
Sec. 26, T5S, R67W of the 6th P.M., Arapahoe County, Colorado and
is commonly known as the Southshore Water Park. The Property is
further described and depicted on Exhibit A attached hereto.
Purchaser has provided to Seller on execution of this Offer
("Offer") a letter from Purchaser's financial partner verifying
Purchaser's capability to consummate the terms of this
transaction. Seller shall agree to hold the letter in confidence
and shall agree not to distribute or release Purchaser's
financial information to any parties not related to the Seller.
1. Terms of Purchase.
Purchaser shall agree to provide up to the sum of $1,985,000
in cash at the closing to acquire the assets of The
Southshore Corporation, retire its obligations, and fund the
reserve requirements for the Property. Purchaser's funds
shall be allocated as follows:
A) $40,000 after opening escrow, within 8 days
of execution hereof
B) $35,000 additional deposit upon removal of
contingencies or September 28, 1998 whichever
occurs earlier
C) $1,910,000 at closing
Total $1,985,000 cash consideration from Purchaser
==========
The purchase price shall include all of the following:
a) 15.89 acres in fee delivered free and clear except
the 1998 real estate taxes and approved
exceptions.
b) All the rights, title, and interest vested in the
Southshore Water Park.
c) All Personal property and improvements, including
but not limited to all the pools, equipment,
slides, pumps, tables, chairs, kitchen equipment,
utensils, computers, lockers, supplies, rafts,
tubes, gift shop inventory, tools, registers,
locks, keys, plans, studies, data and any other
information or personal property now occupied and
1
<PAGE>
used in connection with the operation of the
Property.
d) All vested water and mineral rights.
Purchaser and Seller shall complete an inventory list of the
above personal property which shall be attached hereto as
Exhibit B.
2. Escrow/Due Diligence Period.
Purchaser and Seller shall agree to open escrow at Stewart
Title Co., Denver, Colorado on acceptance of this Offer.
The provisions of this Offer shall constitute joint
instructions to the escrow holder; provided, however, that
the parties shall execute such additional instructions as
requested by the escrow holder not inconsistent with the
provisions of this Offer. Purchaser shall have until
September 28, 1998 to approve in writing the contingencies
described in Paragraph (9). If Purchaser does not approve
the conditions in Paragraph (9) prior to September 28, 1998,
Purchaser shall be entitled to a refund of the deposit plus
all interest. Purchaser shall deposit the sum of $40,000,
which deposit plus interest shall be credited at the closing
as earnest money deposit by August 21, 1998 and an
additional $35,000 by September 28, 1998 or when the
contingencies are removed whichever is earlier in an
interest bearing account with Stewart Title Co. on execution
hereof. This deposit shall become non-refundable upon
removal of all contingencies. Financing shall not be a
contingency.
Closing shall be 75 days from the date hereof, or sooner by
mutual agreement or 30 days from removal of contingencies.
3. Costs.
A. Seller.
Seller to pay for standard coverage owner's policy of
title insurance with said escrow company in the amount
of the purchase price; Seller's legal fees and
expenses; one-half of the escrow fees; any documentary
or transfer taxes or fees; deed preparation charges;
and all other costs and expenses incurred by Seller.
B. Purchaser.
Purchaser to pay for Purchaser's legal fees and
expenses; one-half of the escrow fees; deed recording
charges; and all other costs or expenses incurred by
Purchaser.
-2-
<PAGE>
4. Proration.
Premiums on insurance policies (except the patron liability
policy) and operating expenses shall be prorated as of the
date of recordation of the deed of Purchaser. Property tax
shall be prorated to the date of closing.
5. Title.
As soon as reasonably possible following acceptance, Seller
shall furnish to Purchaser, at no cost to Purchaser, a
preliminary title report and a ALTA survey on the Property,
together with full copies of all documents of record
reflected therein, including, but not limited to, covenants,
conditions, restrictions, reservations, easements, rights
and rights of way of record, liens and other matters of
record. Purchaser shall have until September 28, 1998 to
approve title.
In the event of disapproval of title by Purchaser, Seller
shall, at its option, have ten (10) business days from
receipt of said notice of disapproval within which to
attempt to obtain the elimination for any such disapproved
exceptions. In the event that such disapproval items are
not so eliminated, the escrow shall be terminated. Failure
of Purchaser to approve in writing any exceptions within the
time limit specified above shall be deemed to be an
automatic disapproval of said Preliminary Title Report in
its entirety. Any extensions of said time periods set forth
above must be in writing and approved by Purchaser and
Seller.
6. Seller Representations.
Seller hereby warrants to the best of Seller's knowledge:
(A) it has no knowledge of any latent or patent defects in
the title to the land or the real and personal property
improvement therein; (B) it has not received nor is aware of
any notification from the Department of Building and Safety,
the Tri-county Health Department, or any other city, county,
or state authority having jurisdiction, requiring any work
to be done on the subject Property, or advising Seller it is
in violation of existing laws, ordinances or regulations.
Seller represents and warrants to the best of Seller's
knowledge that the Property is free and clear of all
hazardous materials, asbestos, petroleum and related
products and underground storage tanks.
Seller represents there are no outstanding contractor,
vendor, supplier, or service provider claim of any kind
against the business or Property that will survive the close
of escrow. In the event any prior claim shall surface after
the closing of escrow, Seller shall be responsible for any
payments owed.
-3-
<PAGE>
Seller warrants and represents to the best of its knowledge that
the financial results attached hereto as Exhibit C and prepared
by Seller are true and accurate and that the results reasonably
reflect the operating history of the Southshore Water Park.
In the event any such notice or notices are received by
Seller prior to the close of escrow and Seller is unable to
or does not elect to perform the work required in said
notice or remedy the violation, at Seller's sole cost and
expense, said notices shall be submitted to Purchaser for
his examination and written approval. Should Purchaser
disapprove such notices, then this Offer shall become null
and void, the escrow shall be canceled. The parties agree,
however, that in deciding whether or not to proceed with the
transaction contemplated herein, Purchaser shall rely solely
on its own due diligence inspection and not on any
representations by the Seller.
7. Seller's Contingencies.
Closing shall be specifically contingent upon Seller
obtaining approval from a majority of the shareholders of
Seller at a meeting duly called to consider such matter.
Management of Seller will use their best efforts to obtain
such approval and does not view such approval as
problematic.
8. Executed Offer Governs.
Upon execution of this Offer by all parties hereto, the
contract resulting from such execution supersedes any and
all prior arrangements, verbal discussions, and
representations and warranties between the parties hereto or
their agents regarding the subject Property. Neither
Purchaser, Seller or Broker shall be bound by any
understanding, agreement, promise, representation or
stipulation, expressed or implied, nor specified herein.
9. Conditions of Offer.
Purchaser shall have until September 28, 1998 to approve in
its absolute and sole discretion the following:
A. Review and approval of title reports, survey and soils,
zoning restrictions, etc.
B. Review and approval of pertinent correspondence with
governmental agencies.
C. Inspection of the pools, equipment, and operating
systems.
D. Approval by Purchaser of all infrastructure and utility
-4-
<PAGE>
obligations needed to service the Property under
maximum build out.
In the event the above contingencies are not satisfied,
eliminated or waived, then the parties hereto shall have no
further liabilities to each other, and this Offer shall
become null and void.
10. Delivery of Property.
Upon close of escrow, Seller shall deliver possession of the
subject Property to Purchaser. Seller shall cooperate with
Purchaser to provide assistance in turning over operation of
the business. Seller shall agree to provide Purchaser basic
operating information in written form regarding the
operation of the wave pool and children's pool.
11. Time of Acceptance.
This Offer shall expire unless accepted by Seller and such
acceptance is delivered to Purchaser on or before August 14,
1998.
12. Time is of the Essence.
It is expressly understood by all parties hereto that time
is of the essence of this Offer.
13. Consideration.
Should for any reason the Purchaser fail to purchase the
Property, all of the work product as a result of the
Purchaser's efforts, i.e., site plans, approvals, M.O.U.
with the city regarding fees, etc. will be assigned to the
Seller free from any obligations or liabilities.
14. Commissions.
Seller shall pay a real estate commission of $50,000 to CB
Richard Ellis Commercial which shall be due and payable at
closing.
15. Due Diligence.
Seller will furnish to Purchaser the commitment documents,
topographical survey, annual audited financial statements
and quarterly financial statements for the past 3 years on
the operations of the water park and has made the Property
available for Purchaser's inspection.
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Purchaser shall conduct its Due Diligence Inspections of the
Property and shall determine by the end of the Due Diligence
Period (as per paragraph 2 above) whether it wishes to
consummate the contemplated purchase and sale transaction.
Seller shall cooperate with Purchaser in conducting its Due
Diligence Inspections of the Property. In this regard,
Seller shall allow representatives of Purchaser reasonable
opportunities to review relevant documentation relating to
the Property in Seller's possession and Seller shall permit
Purchaser's agents and representatives reasonable access to
the Property to conduct reasonable tests and inspections.
Purchaser further agrees to indemnify, defend and hold
Seller harmless from any and all liability, claims, losses
and expenses of any type which may arise directly or
indirectly from Purchaser's entry onto the Property and/or
Purchaser's Due Diligence Inspections of the Property,
except as may result solely from Seller's willful misconduct
or gross negligence. Purchaser shall, at its sole expense,
return the property to its original, pre-inspection state,
including without limitation, prompt repair of any damage to
the Property caused by Purchaser, its agents, servants,
employees, and/or consultants.
Purchaser shall, at all times, keep the Property free from
liens of any type which may arise as the result of
Purchaser's Due Diligence Inspections. Purchaser further
agrees that it shall keep confidential all information
belonging to Seller which Purchaser may review or receive in
the course of its Due Diligence Inspections, unless Seller
specifically agrees otherwise.
16. Colorado Brokerage Disclosure.
Seller acknowledges that Purchaser holds a valid Colorado
Real Estate license and is acting as principal in this
transaction.
17. Execution.
The parties to this Agreement acknowledge that they have
read, accepted and approved the terms and conditions of this
Offer and have the authority to enter into this contract.
Purchaser and Seller agree to cooperate with each other to
enter into any additional agreements that may be required in
order to consummate this transaction.
PURCHASER:
Date: August 13, 1998 /s/ John C. Botdorf
John C. Botdorf
1777 South Harrison St., #805
Denver, Colorado 80210
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ACCEPTED AND AGREED:
SELLER:
The Southshore Corporation
10750 East Briarwood Ave.
Englewood, Colorado 80112
Date: August 13, 1998 By: /s/ Kenneth M. Dalton
Kenneth M. Dalton, President
WITNESS:
/s/ Eric Nelson
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EXHIBIT A
DESCRIPTION OF REAL PROPERTY
Lot 1, Block 1, Southshore
Subdivision Filing No. One,
County of Arapahoe, State of
Colorado
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