<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________
Commission File Number 0-19949
THE SOUTHSHORE CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-1153522
------------------------------ --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10750 East Briarwood Avenue, Englewood, Colorado 80112
---------------------------------------------------------
(Address of principal executive offices)
(303) 649-9875
--------------------------------------------------
(Registrant's telephone number, including area code)
________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes_X_ No___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the last practicable date.
The registrant had 2,610,470 shares of its $.001 par value common stock
outstanding as of June 30, 1998.
Page-1
<PAGE>
PART I -FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
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 Capita l4,377,574 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>
Page-2
<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>
Page-3
<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>
Page-4
<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>
Page-5
<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.
Page-6
<PAGE>
(2) Liquidity and Capital Resources
-------------------------------
See Management's Discussion for disclosure related to liquidity and
capital and the related contingencies and commitments.
(3) Net Profit and Loss Per Common Share
------------------------------------
Net profit and loss per common share for the three 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.
Page-7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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
Page-8
<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.
Page-9
<PAGE>
PART II -OTHER INFORMATION
ITEM 5 OTHER INFORMATION
- -----------------------------
On June 16, 1998, the Company entered into a contract to sell its water
park property for $2 million to three individuals, subject to certain
conditions customary in real estate sales, including financing for the
buyers. On July 27, 1998 the Buyers informed the Company that they will be
unable to obtain financing of $1,400,000 and therefore terminated the
contract.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------------------
(a) Exhibits
3.1 Articles of Incorporation(1)
3.2 Bylaws(1)
10.3 Incentive Stock Option Plan(1)
10.12 Indenture of Trust and 10% Secured Promissory Note(2)
10.25 Promissory Note -Vacuole Industries, Inc.(3)
10.26 Convertible Promissory Note -Kenneth M. Dayton(4)
10.27 Stock Option -Kenneth M. Dayton(4)
10.28 Convertible Promissory Note $104,500 -Kenneth M. Dalton(5)
10.29 Stock Option 61,250 shares -Kenneth M. Dalton(5)
10.30 Contract to Buy and Sell Real Estate -
Marc L. Logan, Robb MacMillan and Jack Wasserman, M.D.
a professional Corporation (6)
27.1 Financial Data Schedule
___________________________
(1) Incorporated by reference to Form S-18 Registration Statement,
File No. 33-42730-D, filed September 11, 1991
(2) Incorporated by reference to Form 10-K for year ended March
31, 1993 filed July 16, 1993 File No. 0-19949
(3) Incorporated by reference to Amendment No. 1 to the Form S-1,
File No. 33-73774 filed February 9, 1994
Page-10
<PAGE>
(4) Incorporated by reference to Form 8-K filed May 5, 1994, File
No. 0-19949
(5) Incorporated by reference to Form 8-K filed December 30, 1994,
File No. 0-19949
(6) Incorporated by reference to schedule 14A filed June 22, 1998,
File No. 0-19949
(b) Reports on Form 8-K:
Reports on Form 8-K were filed during the quarter ended June 30,
1998, relating to the contract tosell the Company's water park property
to Hyland Hills Park and Recreation District and the subsequent termination
of such contact.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
(Registrant) THE SOUTHSHORE CORPORATION
(Date) August 5, 1998
By:(Signature) /s/ Kenneth M. Dalton
(Name and Title) Kenneth M. Dalton, President
and Principal Executive Officer
(Date) August 5, 1998
By:(Signature) /s/ Eric L. Nelson
(Name and Title) Eric L. Nelson
Principal Accounting Officer
Page-11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 44,346
<SECURITIES> 0
<RECEIVABLES> 14,109
<ALLOWANCES> 0
<INVENTORY> 5,264
<CURRENT-ASSETS> 63,719
<PP&E> 4,526,075
<DEPRECIATION> 3,216,434
<TOTAL-ASSETS> 1,852,957
<CURRENT-LIABILITIES> 2,163,493
<BONDS> 0
0
0
<COMMON> 2,610,470
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,852,957
<SALES> 234,360
<TOTAL-REVENUES> 234,360
<CGS> 5,703
<TOTAL-COSTS> 351,561
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,685
<INCOME-PRETAX> (141,464)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (141,464)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
