-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HoIz580XcxNOD/2ymCIVOmZ+y4BDc1hiKAAqK7LwVY7Ub4wnwpF/u0n0mVtJlYFg RbA/6JG3AYe3pHZTdYkZQA== 0000859747-98-000009.txt : 19980626 0000859747-98-000009.hdr.sgml : 19980626 ACCESSION NUMBER: 0000859747-98-000009 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980625 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHSHORE CORP /CO CENTRAL INDEX KEY: 0000859747 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 841153522 STATE OF INCORPORATION: CO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-19949 FILM NUMBER: 98653720 BUSINESS ADDRESS: STREET 1: 10750 E BRIARWOOD AVE CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3036499875 MAIL ADDRESS: STREET 1: 10750 EAST BRIARWOOD CITY: ENGLEWOOD STATE: CO ZIP: 80112 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended March 31, 1998 or -------------- [ ] 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 (I.R.S. Employer of incorporation or organization) Identification No.) 10750 East Briarwood, Englewood, Colorado 80112 - ----------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (303) 649-9875 -------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None ---------------- ----------------- Securities registered pursuant to Section 12(g) of the Act: Common Stock - $.001 Par Value - ----------------------------------------------------------------------------- (Title of class) 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 No X The aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 20, 1998 was approximately $546,000. The number of shares outstanding of the Registrant's $.001 par value common stock as of June 20, 1998 was 2,610,475 shares. PART I ITEM 1. BUSINESS - ----------------- General The Company was incorporated under the laws of Colorado on March 26, 1990. It has broad corporate powers; however, since inception the Company has been engaged in the development, construction and operation of a water park to be located in the Southeast Denver Metropolitan Area. The park was completed in 1992 and it operates from Memorial Day Weekend through Labor Day Weekend annually. Southshore Water Park - Arapahoe County, Colorado The 16-acre park, located near I-25 and East Arapahoe Road in Southeast Metro Denver, includes a Children's Pool, Wave Pool, and various Water Slides. The Wave Pool covers approximately 23,000 square feet and the six water slides are up to 350 feet long. The park also contains a volleyball area, miniature golf course, covered group pavilion areas, picnic areas, gift shop, video arcade and food service facilities. Free parking for approximately 700 cars is provided. The Company uses local radio and direct mail for advertisement and also makes use of coupons for reduced admission charges. General Park Policy for Operations Management stresses park safety and cleanliness. The Company utilized the latest design engineering with respect to construction of rides and attractions with safety as a prime consideration. The park is operated with trained certified lifeguards and park security personnel in adequate numbers to keep accidents, disruptive activity and similar incidents at a minimum. The park maintains a first aid station for treatment of minor injuries. The Company has not experienced circumstances which have materially adversely impacted it concerning these matters. Proposed Sale of the Company's Water Park On June 16, 1998 the Company entered into a contract to sell its water ark property to three individual joint buyers for $2 million. Each of the buyers is non-affiliated with the Company. The contract is subject to certain conditions including the buyers' obtaining financing of at least $1,400,000, title considerations, inspection of the property and approval of the sale by the Company's shareholders. South Suburban Park and Recreation District, which operates in three suburban counties in the south portion of the Denver Metro area, has also indicated an interest in purchasing the property, has held public hearings 2 before its board of directors and is in favor of acquiring the property. Arapahoe County, Jefferson County and Douglas County, through their respective commissioners, must any purchase by the District. Because of the protracted approval process the Company elected to proceed with the private buyers. However, the District has indicated by letter it still has an interest in purchasing the Property for $2 million if the current contract does not close. Adverse Current Ratio At March 31, 1998, the Company's current liabilities exceeded its current assets by $1,904,228. At March 31, 1998, the Company was partially delinquent in paying its property taxes, which were $566,762. The Company's auditors state in their report at May 11, 1998 that the working capital deficiency raises substantial doubt as to the Company's ability to continue as a going concern. Default on Indenture of Trust During the quarter ended September 30, 1992, the Company sold $975,000 in 10% secured promissory notes to 27 persons pursuant to an indenture of trust. Subject to the first lien on a portion of the Company's water park property securing a $72,841 note to the person from whom the Company acquired the property, the water park property is collateral under the indenture of trust to secure payment of the 10% promissory notes. The Company is in default on the indenture of trust and the 10% promissory notes because it has not repaid the principal outstanding amount of $955,000 which was due September 1997 nor paid interest since September 1997. The Company currently is engaged in efforts to obtain funds to retire this obligation through sale of its water park property; however, there is no assurance such funds will be available or, if available, on terms that are economically feasible. Failure to retire this debt could result in foreclosure proceedings on the property. Delinquent Property Taxes At March 31, 1998, $566,762 was due to Arapahoe County, Colorado for property taxes, most of which is delinquent. It is expected that during mid-1998 the holder of a tax lien certificate sold on the Company's property will begin the process to attempt to acquire the property by requesting an Arapahoe County Treasurer's deed. The Company is engaged in efforts to sell the property to obtain funds to pay property taxes prior to the issuance of a Treasurer's deed; however, there is no assurance that such funding will be available, of if available, on terms that are economically feasible. 3 Government Regulation and Approvals The Tri-County Health Department administers extensive regulations relating to safety and sanitation aspects of operating the water parks public swimming areas (i.e., chlorinated water testing, pool personnel and bather controls). The Company's water facilities as well as its food concession areas are subject to inspection by Tri-County Health Department officials. Such regulations are often complex, subject to differing interpretations and expensive to comply with; however, the Company is committed to operating a clean, safe park and thus intends to fully comply with these requirements. Competition and Marketing Plans In general, the Company will be in competition for entertainment dollars in the Denver Metro Area. There are various broad forms of such entertainment, at various costs, appealing to a broad mass of the some 2,200,000 people who live in the area and tens of thousands of summer visitors. These include warm weather activities such as amusement parks, Lakeside and Elitch's, water recreation areas such as Cherry Creek Reservoir and Chatfield Recreation Area, many local swimming pools, golf, tennis and similar activities. However, the most significant direct competition is expected to be from Water World, a 60-acre water park located in the north part of the Denver Metro Area approximately 21 miles from the Company's park. Water World is owned and operated by Hyland Hills Metropolitan Parks and Recreation District. It typically operates from Memorial Day Weekend through Labor Day Weekend, and reported average attendance in the past five summers through 1997 of approximately 400,000, with 1997 attendance at approximately 420,000. For the 1998 season it is charging $18.95 for children ages 4 to 12 years, $19.95 for adults and admits free of charge children under 4 years of age and senior citizens. It also offers family and individual season passes. Residents of the Hyland Hills Park and Recreation District and the cities of Westminster and Federal Heights may obtain admission to Water World at discounted prices, $9.00 for children and $10.00 for adults. Water World advertises through television, radio and newspaper media in the Denver area and offers a variety of group discount programs. Thus the Company faces competition from a larger water facility which has more attractions than those offered by the Company. Notwithstanding the foregoing the Company believes it can find a niche in this competitive arena. It utilizes admission charges of $12.95 for adults and $10.95 for children 3 years to 48 inches tall, which are less than those of Water World. In addition, it has various discount programs, including half day rates of $6.00, group sales and season passes. In addition the 4 Company intends to operate a first rate park in terms of safety, maintenance of rides, park cleanliness, friendliness and competence of park staff. The Company also offers quality food and beverages at competitive prices. Further, an assortment of beach items such as swim wear, towels, suntan lotion, sunglasses, hats, t-shirts and souvenirs are offered to patrons. Management believes that the foregoing in addition to convenience of location to residents of the southern Denver Metro Area will be sufficient to permit the Company to generate sufficient revenues for profitable operations, however there is no assurance that such will be the case. Personnel At March 31, 1998, the Company had one part-time employee and one full-time employee, the Company's in-house accountant and the general manager, respectively. The Company's President serves in a part-time, as needed position. Approximately one hundred full and part-time seasonal personnel, depending upon attendance, including maintenance personnel, lifeguards, guest relations, groundskeepers, cash control and emergency medical personnel, are employed. The Company does not expect there to be a shortage of the required labor force. Seasonal personnel are expected to come largely from the ranks of college and high school students on summer break from school. It is not expected that any employees will be covered by a collective bargaining agreement. Liability Insurance The Company maintains a liability insurance policy with coverage in the amount of $1,000,000 per incident to cover possible claims for injury and damages from accidents. Weather Patterns The Company's business is significantly affected by Denver Area weather patterns since park attendance is expected to be reduced when temperatures do not exceed 75 degrees, there is rainfall, cloudy skies prevail, or there is low relative humidity. Other than offering discount tickets and other promotions to enhance attendance and reducing personnel on rainy or cloudy days, the Company can do little to offset the effect on operations from such weather patterns. ITEM 2. PROPERTIES - ------------------- The Company owns 16 acres of real estate at approximately East Arapahoe Road and South Havana in the Southeast Denver metro area. The Company's water park, adjacent parking area and administrative offices are located on this property. 5 ITEM 3. LEGAL PROCEEDINGS - -------------------------- Currently there are no material legal proceedings pending or threatened against the Company or its assets other than a threat of litigation by a holder of $150,000 in secured notes. Further, there is a tax lien and a note holder lien on the Company's principal asset which could result in proceedings involving title to the property. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ No matters were submitted to a vote of shareholders during the quarter ended March 31, 1998. PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS - ---------------------------------------------------------- The Company's common stock has been included on the NASD's Electronic Bulletin Board since December 1995. The prices included below have been obtained from sources believed to be reliable. Low High Quarters Ended Bid Bid -------------- --- ---- June 30, 1996 .25 .50 September 30, 1996 .50 .50 December 31, 1996 .50 .50 March 31, 1997 .50 .50 June 30, 1997 .37 .50 September 30, 1997 .37 .50 December 31, 1997 .25 .25 March 31, 1998 .12 .21 Prices may not be an indication of actual transactions and do not necessarily include mark-ups, mark-downs or interdealer discounts. The Company is informed that there has been very little volume in trading of its common stock during the past year. As of June 20, 1998, the Company had 193 shareholders of record, and management estimates there are an additional approximate 180 beneficial holders of Company shares. Dividend Policy The Company has never paid dividends on its common stock, and the Company's Board of Directors plans on distributing no dividends in the foreseeable future. 6 ITEM 6. 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 $ 2,447,939 $ 3,028,190 Total Liabilities.... $ 2,105,540 $ 2,244,548 $ 2,322,158 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 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) 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 $180,000. 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 7 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. 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. 8 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. 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. 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 9 this economic indication, management is hopeful the local economy will provide a good environment for the Company to operate. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ---------------------------------------------------- Attached hereto are financial statements responsive to this Item. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE - ------------------------------------------------------ None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY - --------------------------------------------------------- Set forth below are all directors and executive officers of the Company. Officers serve at the pleasure of the Board of Directors. Kenneth M. Dalton, age 50. President of the Company since October, 1993. Director of the Company since March 16, 1992. President of Meridian Medical Corp., an Englewood, Colorado distributor of medical products (1985-March 1994). In March 1994 the assets of Meridian were sold to Lincare, Inc. of Clearwater, Florida, which provides medical home health care and supplies. Rod K. Barksdale, age 49. Vice President of the Company since october, 1993. Director of the Company since March 16, 1992. Employed as an administrator for Public Service Company of Colorado, Glenwood, Springs, Colorado (1977-Present). Mr. Barksdale receives no salary from the Company and provides services on an as needed basis. Ren Berggren, age 49. Secretary of the Company since October, 1993. Director of the Company since March 16, 1992. Employed as Vice President of Vancol Industries, Inc., Denver, Colorado, a distributor of beverages (1988-Present). Controller of Worldwide Corporate Services, a Denver, Colorado company engaged in support services for automobile dealerships (1985- 1988). Mr. Berggren receives no salary from the Company and provides services on an as needed basis. Key Personnel Eric Nelson is the Company's principal accounting and financial officer. He has been employed by the Company since 1994 and previously was employed in as controller with Meridian Medical Corp., Englewood, Colorado (1988-1994). He is a graduate of Colorado State University, with a degree in accounting. 10 John Janness is the Company's general manager. He worked on the construction of the park in 1991 and was in charge of park maintenance from 1992 to 1995, when he was promoted to general manager. ITEM 11. EXECUTIVE COMPENSATION - -------------------------------- The following tabular information includes all plan and non- plan compensation paid to the Company's president and to all other executive officers whose total annual salary and bonus is $100,000 or more. Summary Compensation Annual Compensation Long-Term Compensation --------------------- -------------------------------- Awards Payouts -------------- ------------ Other Name Annual Restricted All Other and Compen- Stock LTIP Compen- Principal Salary Bonus sation Award(s) Options/ Payouts sation Position Year ($) ($) ($) ($) SARs(#) ($) ($) - --------- ---- ------ ----- ----- -------- ------- ------- ----- Kenneth M. 1998 18,000 -0- -0- -0- -0- -0- Dalton 1997 18,000 -0- -0- -0- -0- -0- President 1996 15,000 -0- -0- -0- 177,777 -0- -0- (1) shares at $2.25 per share 61,250 shares at $1.10 per share ____________________ (1) Mr. Dalton became President of the Company in October, 1993. The Company's Board of Directors has no compensation committee. 11 Stock Options Held by Executive Officers and Value Thereof at June 1, 1998 Value of Unexercised Number of In-the-Money Unexercised Options at Shares Options 6/1/98 Acquired Value 6/1/98 All All Name on Exercise (#) Realized($) Exercisable Exercisable(1) - ----------- --------------- ---------- ----------- -------------- Kenneth M. Dalton, -0- -0- 279,027 -0- President _____________________ (1) Based on the average closing bid price of the Company's common stock at June 20, 1998 of $.21 as reflected on the NASD's Electronic Bulletin Board. Director's Fees The Company has authorized director's fees of $100 per meeting for each director who is not a salaried officer of the Company, however no director's fees were paid during the year ended March 31, 1998. Incentive Stock Option Plan Effective January 7, 1991, the Company adopted an Incentive Stock Option Plan (the "Plan"). The purpose of the Plan is to secure and retain key employees of the Company. The Plan authorizes the granting of options to officers, directors and employees of the Company to purchase 200,000 shares of the Company's $.001 par value common stock subject to adjustment for various forms of recapitalization that may occur. No option may be granted after January 7, 2001, and the fair value of an option to each optionee cannot exceed $100,000 per year. An employee must have six months of continuous employment with the Company before he or she may exercise an option granted under the Plan. The option exercise price may not be less than 100% of the fair market value of the shares at the time of the granting of such options except in the case of an option granted to a stockholder who owns 10% or more of the Company's shares at the time of the grant in which case the option price must be at least 110% of the fair market value of the shares at the time of the grant of such option, and options must be exercised within five years after the date of grant. Options granted under the Plan are non-assignable and terminate three months after employment by the optionee ceases, except in the case of employment termination due to disability of the optionee, in which event the option expires twelve months from the date employment ceases. The Plan is to be 12 administered by a committee selected by the Company's Board of Directors. It may be expected that any option granted will be exercised only if it is advantageous to the option holder. It may also be expected that if any option granted is exercised, and the book value is below the exercise price, the book value of the Company's stock held by the Company's then shareholders will be minimally increased; however, the voting power of the then shareholders will be decreased. If the book value of the stock is above the exercise price, then exercise of the option will dilute the book value to other shareholders. One option for 61,250 shares exercisable at $1.10 per share has been granted under the Company's Incentive Stock Option Plan to the Company's President. The Company has no other bonus, profit sharing, pension, retirement, stock option, stock purchase, deferred compensation or other incentive plans nor present plans with respect to these matters; however, it is possible that the Board of Directors will adopt such plans in the future. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - --------------------------------------------------------- Beneficial ownership of any person or persons means direct or indirect voting or investment power and does not include shares which may be acquired pursuant to warrants, stock options or similar rights. (See "Stock Options" below). The following table sets forth the name and business address of each officer and director and each person whose ownership of the Company's common stock exceeds 5% based on 2,610,475 shares outstanding at June 20, 1998: Name of Amount and Nature of Percentage Beneficial Owner Beneficial Ownership 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 E. 68th Ave. Denver, CO 80229 13 Name of Amount and Nature of Percentage Beneficial Owner Beneficial Ownership of Class - ---------------- -------------------- ----------- James F. Silliman, M.D. 192,142 7.4% 7408 Greenbriar Dallas, TX 75225 Keith A. Lowery 144,734 5.5% 7477 Singing Hills Drive Boulder, CO 80301 Officers and Directors 927,592(4) 31.1% as a Group (5 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. Stock Options The control reflected in the foregoing table may be subject to further changes by reason of exercise of certain stock options. Mr. Dalton holds a $400,000 convertible note of the Company whereby he can convert the note balance to up to 177,777 shares of common stock at $2.25 per share. Mr. Dalton also holds an option to purchase 61,250 shares at $1.10 per share through December 25, 1999. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------------------------------------------------------- In April, 1994, the Company issued a $400,000 convertible promissory note to Mr. Dalton pursuant to an arrangement whereby Mr. Dalton personally obtain a $400,000 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. At March 31, 1998, the balance on the note was $136,590. 14 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K - ------------------------------------------------------- (a) (1) Financial Statements: Report of Independent Accountants: Balance Sheets at March 31, 1998 and 1997 Statements of Operations for Years Ended March 31, 1998, 1997 and 1996 Statements of Shareholders' Equity Statements of Cash Flows for Years Ended March 31, 1998, 1997 and 1996 Notes to Financial Statements (b) Exhibits: 3.1 Articles of Incorporation(1) 3.2 Bylaws(1) 10.3 Incentive Stock Option Plan(1) 10.11 Warranty Deed and Deed of Trust - Park Site(2) 10.12 Indenture of Trust and 10% Secured Promissory Note(3) 10.25 Promissory Note - Vancol Industries, Inc.(4) 10.26 Convertible Promissory Note for $400,000 - Kenneth M. Dalton(5) 10.28 Convertible Promissory Note for $104,500 - Kenneth M. Dalton(6) 10.29 Stock Option for 61,250 shares - Kenneth M. Dalton(6) 10.30 Contract to Buy and Sell Real Estate - Marc L. Logan, Robb MacMillan and Jack Wasserman, m.D. a Professional Corporation 27.1 Financial Data Schedule ______________________ 15 (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 the year ended March 31, 1992 filed June 29, 1992, SEC File No. 0-19949 (3) Incorporated by reference to Form 10-K for year ended March 31, 1993 filed July 16, 1993, File No. 0-19949 (4) Incorporated by reference to Form S-1, SEC File No. 33- 73774, filed February 9, 1994 (5) Incorporated by reference to Form 8-K, SEC File No. 0-19949, filed May 6, 1994 (6) Incorporated by reference to form 8-K, SEC File No. 0-19949, filed December 30, 1994 (c) Reports on Form 8-K: Reports on Form 8-K were filed during the quarter ended March 31, 1998 and subsequent thereto relating to a contract for the purchase of the Company's water park by Hyland Hills Park & Recreation District and the subsequent termination of the contract. 16 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) THE SOUTHSHORE CORPORATION (Date) June 22, 1998 BY(Signature) /s/ Kenneth M. Dalton (Name and Title) Kenneth M. Dalton, President and Principal Executive Officer (Date) June 22, 1998 BY(Signature) /s/ Eric L. Nelson (Name and Title) Eric L. Nelson, Principal Accounting Officer and Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. (Date) June 22, 1998 BY(Signature) /s/ Kenneth M. Dalton (Name and Title) Kenneth M. Dalton, Director (Date) June 22, 1998 BY(Signature) /s/Rod K. Barksdale (Name and Title) Rod K. Barksdale, Director (Date) June 22, 1998 BY(Signature) /s/ Ren Berggren (Name and Title) Ren Berggren, Director 17 INDEX TO FINANCIAL STATEMENTS THE SOUTHSHORE CORPORATION FINANCIAL STATEMENTS with REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS March 31, 1998 and 1997 Page ---- Report of Independent Certified Public Accountants F-2 Financial Statements: Balance Sheets F-3 Statements of Operations F-4 Statement of Changes in Stockholders' Equity (Deficit) F-5 Statements of Cash Flows F-6 Notes to Financial Statements F-7 1 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 F-2 THE SOUTHSHORE CORPORATION BALANCE SHEETS
March 31, 1998 1997 --------------------------- 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 ========== ==========
The accompanying notes are an integral part of the financial statements. F-3 THE SOUTHSHORE CORPORATION STATEMENTS OF OPERATIONS
Years Ended March 31, 1998 1997 1996 --------- --------- --------- 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 Cost of sales - food, beverages and merchandise (exclusive of depreciation shown separately below) 22,889 23,713 11,078 ------- --------- ------- Gross Profit 976,821 1,061,752 844,540 ------- --------- ------- Operating Expenses Salaries 237,229 263,272 270,938 Advertising 121,595 92,953 125,425 Depreciation 558,672 559,751 560,511 Other 347,976 428,680 432,379 --------- --------- --------- Total Operating Expenses 1,265,472 1,344,656 1,389,253 --------- --------- --------- 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 ========= ========= =========
The accompanying notes are an integral part of the financial statements. THE SOUTHSHORE CORPORATION STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) From March 31, 1995 through March 31, 1998
Additional Number of Common Paid-in Deficit Shares Stock Capital Accumulated Total ---------- ------- -------- ----------- ------- 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) ========= ====== ========== ============ ==========
The accompanying notes are an integral part of the financial statements. F-5 THE SOUTHSHORE CORPORATION STATEMENTS OF CASH FLOWS
Years Ended March 31, 1998 1997 1996 ---- ---- ---- 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 ======= ======== ========
The accompanying notes are an integral part of the financial statements. F-6 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. F-7 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. 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 =========== ============ F-8 THE SOUTHSHORE CORPORATION NOTES TO FINANCIAL STATEMENTS (Continued) 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 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 =========== =========== F-9 THE SOUTHSHORE CORPORATION NOTES TO FINANCIAL STATEMENTS (Continued) 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 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 purchase 177,777 shares. See Note 3 above. F-10 THE SOUTHSHORE CORPORATION NOTES TO FINANCIAL STATEMENTS (Continued) 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. 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. F-11 THE SOUTHSHORE CORPORATION NOTES TO FINANCIAL STATEMENTS (Continued) 5. INCOME TAXES, CONTINUED ----------------------- 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. 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. F-12 THE SOUTHSHORE CORPORATION NOTES TO FINANCIAL STATEMENTS (Continued) 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. F-13 EX-10.30 2 APPENDIX 1 THIS FORM HAS IMPORTANT LEGAL CONSEQUENCES AND THE PARTIES SHOULD CONSULT LEGAL AND TAX OR OTHER COUNSEL BEFORE SIGNING COMMERCIAL CONTRACT TO BUY AND SELL REAL ESTATE June 12, 1998 1) PARTIES AND PROPERTY. Marc W. Logan, Robb MacMillan and Jack Wasserman, M.D. a Professional Corporation Buyer(s) , agree to buy, and the undersigned seller, The Southshore Corporation, agrees to sell, on the terms and conditions set forth in this contract, the following described real estate in the County of Arapaho, Colorado, to wit: See attached Exhibit "A": known as 10750 East Briarwood Avenue, Englewood, Colorado 80112, together with all interest of Seller in vacated streets and alleys adjacent thereto, all assessments and other appurtenances thereto, all improvements thereon and all attached fixtures thereon, except as herein excluded (collectively the Property). 2) INCLUSIONS/EXCLUSIONS. The purchase price includes the following items (a) if attached to the Property on the date of this contract: lighting, heating, softeners, smoke/fire/burglar alarms, security devices, inside telephone wiring and connecting blocks/jacks, plants, mirrors, floor coverings, intercom systems, built-in kitchen appliances, sprinkler systems and controls; (b) if on the Property whether attached or not on the date of this contract: storm windows, storm doors, window and porch shades, awnings, blinds, screens, curtain rods, drapery rods, all keys and (c) all personal property owned by the Seller presently located on the Property used in the operation or maintenance of the Property in its "as is" condition. The Above-described included items (Inclusions) are to be conveyed to Buyer by Seller by bill of sale at the closing, free and clear of all taxes, liens and encumbrances, except as provided in Section 12. The following attached fixtures are excluded from this sale:\ NONE 3) PURCHASE PRICE AND TERMS. The purchase price shall be $2,000,000.00, payable in U.S. dollars by Buyer as follows: (Complete the applicable terms below.) (a) Earnest Money. $75,000.00 in the form of cash, bank cashier s check or bank wire transfer, as earnest money deposit and part payment of the purchase -1- price, payable to and held by Stewart Title in it s trust account on behalf of both Seller and Buyer. Stewart Title is authorized to deliver the earnest money deposit and any accrued interest to the closing agent, if any, at or before closing. The balance of $1,925,000.00 (purchase price less earnest money) shall be paid as follows: (b) Cash at Closing. $1,925,000.00, plus closing costs, to be paid by Buyer at Closing in Funds which comply with all applicable Colorado laws, which include cash, electronic transfer funds, certified check, savings and loan teller s check, and cashier s check (Good Funds). (c) New Loan. [See Section 4] (d) Assumption. N/A 4. FINANCING CONDITIONS AND OBLIGATIONS. This offer is specifically contingent on Buyer s ability to obtain a loan of $1,400,000.00 at an interest rate not to exceed 10% for a term no less than 15 years, and an amortization rate no less than 25 years and with origination fees no greater than 3% within 45 days of CDMEC. Buyer shall deliver to seller a true copy of the financing commitment from seller s lender. 5. APPRAISAL PROVISION. (Check only one box.) This Section 5 ________shall apply __X_____shall not apply If this Section 5 applies, as indicated above, Buyer shall have the sole option and election to terminate this contract if the purchase price exceeds the Property s valuation as determined by an appraiser engaged by Buyer. The contract shall be terminated by the Buyer causing the Seller to receive written notice from lender which confirms the Property s valuation is less than the purchase price, on or notice of termination on or before the appraisal deadline, Buyer waives any right to terminate under this section. 6. COST OF APPRAISAL. Cost of any appraisal to be obtained after the date of this contract shall be timely paid by Buyer. 7. ASSIGNABLE. This contract shall be assignable by Buyer with Seller s prior written consent; such consent shall not be unreasonably withheld. It is anticipated that Buyer s will be organizers, incorporators or founders of a business entity, such as a corporation or limited liability company formed to hold title to the Southshore Property. Except as so restricted, this contract shall inure to the benefit of and be binding upon the heirs, personal representatives, successors and assigns of the parties. -2- 8. EVIDENCE OF TITLE. Seller shall furnish to Buyer, at Seller s expense, a current commitment for owner s title insurance policy in an amount equal to the purchase price on or before 14 CDMEC (Title Deadline). Buyer may require of Seller that copies of instruments listed in the schedule of exceptions (Exceptions) in the title insurance commitment also be furnished to Buyer at Seller s expense. This requirement shall pertain only to instruments shown of record in the office of the clerk and recorder of the designated county or counties. The title insurance commitment, together with any copies of instruments furnished pursuant to this Section 8, constitute the title documents (Title Documents). Buyer, or Buyer s designee, must request Seller, in writing, to furnish copies of instruments listed in the schedule of exceptions no later than 10 calendar days after title Deadline. Seller will pay the premium at closing and have the title insurance policy delivered to Buyer as soon as practicable after closing. 9. TITLE. (a)Title Review. Buyer shall have the right to inspect the title Documents. Written notice by Buyer of unmerchantability of title or of any other unsatisfactory title condition shown by the Title Documents shall be signed by or on behalf of Buyer and given to Seller on or before 10 calendar days after Title Deadline, or within five (5) calendar days after receipt by Buyer of any Title Document(s) or endorsement (s) adding new Exception(s) to the title commitment together with a copy of the Title Document adding new Exception(s) to title. If seller does not receive Buyer s notice by the date(s) specified above, Buyer accepts the condition of title as disclosed by the Title Documents as satisfactory. (b)Matters Not Shown by the Public Records. Seller shall deliver to Buyer, on or before the Title Deadline set forth in Section 8, true copies of all lease(s) and survey(s) in Seller s possession pertaining to the Property and shall disclose to Buyer all easements, liens or other title matters not shown by the public records of which Seller has actual knowledge. Buyer shall have the right to inspect the Property to determine if any third party(s) has any right in the Property not shown by the public records (such as an unrecorded easement, unrecorded lease, or boundary line discrepancy). Written notice of any unsatisfactory condition (s) disclosed by Seller or revealed by such inspection shall be signed by or on behalf of Buyer and given to Seller on or before 30 CDMEC. If Seller does not receive Buyer s notice by said date, Buyer accepts title subject to such rights, if any, of third parties of which Buyer has actual knowledge. (c)Right to Cure. If Seller receives notice of unmerchantability of title or any other unsatisfactory title condition(s) as provided in subsection (a) or (b) above, Seller shall use reasonable effort to correct said unsatisfactory title condition(s) on or before the date of closing, this contract shall -3- then terminate; provided, however, Buyer may, by written notice received by Seller, on or before closing, waive objection to said unsatisfactory title conditional(s). 10. INSPECTION. Buyer or any designee shall have the right to have inspection(s) of the physical condition of the Property and Inclusions at Buyer s expense. If written notice of any unsatisfactory condition, signed by or on behalf of Buyer, is not received by Seller on or before 45 CDMEC (Objection Deadline), the physical condition of the Property and Inclusions shall be deemed to be satisfactory to Buyer. If such notice is received by Seller as set forth above, and if Buyer and Seller have not agreed, in writing, to a settlement thereof on or before 60 CDMEC (Resolution Deadline), this contract shall terminated three calendar days following the Resolution Deadline, and the Deposit shall be returned; unless, within the three calendar days, Seller receives written notice from Buyer waiving objection to any unsatisfactory conditions. Buyer is responsible for and shall pay for any damage which occurs to the Property and Inclusions as a result of such inspection. 11. DATE OF CLOSING. The date of closing shall be 90 CDMEC, or by mutual agreement at an earlier date. The place of closing shall be at Stewart Title, 50 South Steele Street, Suite 600, Denver, Colorado, at an hour to be mutually agreed upon. 12. TRANSFER OF TITLE. Subject to tender or payment at closing as required herein and compliance by Buyer with the other terms and provisions hereof, Seller shall execute and deliver a good and sufficient General Warranty deed to Buyer, on closing, conveying the Property free and clear of all taxes except the general taxes for the year of closing, and except none other. Title shall be conveyed free and clear of all liens for special improvements installed as of the date of Buyer s signature hereon, whether assessed or not, except (I) distribution utility assessments (including cable TV), (ii) those matters reflected by the Title Documents accepted by Buyer in accordance with subsection 9(a), (iii) those rights, if any, of third parties in the property not shown by the public records in accordance with subsection 9(b), (iv) inclusion of the Property within any special taxing district, and (v) subject to building and zoning regulations. 13. PAYMENT OF ENCUMBRANCES. Any encumbrance required to be paid shall be paid by Seller at or before closing from the proceeds of this transaction or from any other source. 14. CLOSING COSTS, DOCUMENTS AND SERVICES. Buyer and Seller shall pay, in Good Funds, their respective closing costs and all other items required to be paid at closing, except as otherwise provided herein. Buyer and Seller shall sign and complete all customary or required documents at or before closing. Fees for real estate closing services shall not exceed $400.00 and shall be paid at -4- closing by Buyer and Seller equally. The local transfer tax,if any, shall be paid at closing by Seller. Any sales and use tax that may accrue because of this transaction shall be paid when due by Buyer. 15. PRORATIONS. General taxes for the year of closing, based on the most recent levy and the most recent assessment, rents, water and sewer charges, owner s association dues, and other similar items shall be prorated to date of closing. 16. POSSESSION. Possession of the Property shall be delivered to Buyer as follows: On date of delivery of deed at the Closing. If Seller, after closing, fails to deliver possession on the date herein specified, Seller shall be subject to eviction and shall be additionally liable to Buyer for payment of $1,000 per day from the date of agreed possession until possession is delivered. 17. CONDITION OF AND DAMAGE TO PROPERTY. Except as otherwise provided in this contract, the Property and Inclusions shall be delivered in the condition existing as of the date of this contract, ordinary wear and tear excepted. In the event the Property shall be damaged by fire or other casualty prior to time of closing, in an amount of not more than ten percent of the total purchase price, Seller shall be obligated to repair the same before the date of closing. In the event such damage is not repaired within said time or if the damages exceed such sum, this contract may be terminated at the option of Buyer and all Deposits shall be immediately returned. Should Buyer elect to carry out this contract despite such damage, Buyer shall be entitled to credit for all the insurance proceeds resulting from such damage to the Property and Inclusions, not exceeding, however, the total purchase price. Should any Inclusion(s) or Service(s) fail or be damaged between the date of this contract and the date of closing or the date of possession, whichever shall be earlier, then Seller shall be liable for the repair or replacement of such Inclusion(s) or service(s) with a unit of similar size, age and quality, or an equivalent credit, less any insurance proceeds received by Buyer covering such repair or replacement. 18. TIME OF ESSENCE/REMEDIES. Time is of the essence hereof. If any note or check received as earnest money hereunder or any other payment due hereunder is not paid, honored or tendered when due, or if any other obligation hereunder is not performed or waived as herein provided, there shall be the following remedies: (a) IF BUYER IS IN DEFAULT: (Check one box only.) (1) Specific Performance. N/A -5- (2) Liquidated Damages. All payments and things of value received hereunder shall be forfeited by Buyer and retained on behalf of Seller and both parties shall thereafter be released from all obligations hereunder. It is agreed that such payments and things of value are LIQUIDATED DAMAGES and (except as provided in subsection (c) are SELLER S SOLE AND ONLY REMEDY for Buyer s failure to perform the obligations of this contract. Seller expressly waives the remedies of specific performance and additional damages. (b) IF SELLER IS IN DEFAULT: Buyer may elect to treat this contract as cancelled, in which case all payments and things of value received hereunder shall be returned and Buyer may recover such damages as may be proper, or Buyer may elect to treat this contract as being in full force and effect and Buyer shall have the right to specific performance or damages, or both. (c) COSTS AND EXPENSES: Anything to the contrary herein notwithstanding, in the event of any arbitration or litigation arising out of this contract, the arbitrator or court shall award to the prevailing party all reasonable costs and expenses, including attorney fees. 19. EARNEST MONEY DISPUTE. Notwithstanding any termination of this contract, Buyer and Seller agree that, in the event of any controversy regarding the earnest money and things of value held by broker or closing agent, unless mutual written instructions are received by the holder of the earnest money and things of value, broker or closing agent shall not be required to take any action but may await any proceeding, or at broker s or closing agent s option and sole discretion, may interplead all parties and deposit any moneys or things of value into a court of competent jurisdiction and shall recover court costs and reasonable attorney fees. 20. ALTERNATIVE DISPUTE RESOLUTION: MEDIATION. If a dispute arises relating to this contract, and is not resolved, the parties involved in such dispute (Disputants) shall first proceed in good faith to submit the matter to mediation. The Disputants will jointly appoint an acceptable mediator and will share equally in the cost of such mediation. In the event the entire dispute is not resolved within thirty (30) calendar days from the date written notice requesting mediation is sent by one Disputant to the other(s), the mediation, unless otherwise agree, shall terminate. This section shall not alter any date in this contract, unless otherwise agreed. 21. ADDITIONAL PROVISIONS: (The language of these additional provisions has not been approved by the Colorado Real Estate Commission.) -6- See attached Addendum for Additional Provisions, Paragraphs a) through o). 22. RECOMMENDATION OF LEGAL COUNSEL. By signing this document, Buyer and Seller acknowledge that the Selling Company or the Listing Company has advised that this document has important legal consequences and has recommended the examination of title and consultation with legal and tax or other counsel before signing this contract. 23. TERMINATION. In the event this contract is terminated, all payments and things of value received hereunder shall be returned and the parties shall be relieved of all obligations hereunder, subject to Section 19. 24. SELLING COMPANY BROKER RELATIONSHIP. The selling broker, (none), and its salespersons have been engaged as (none). Selling Company has previously disclosed in writing to the Buyer that different relationships are available which include buyer agency, seller agency, subagency, or transaction-broker. 25. NOTICE TO BUYER. Any notice to Buyer shall be effective when received by Buyer, or if this box is checked ______ when received by Selling Company. 26. NOTICE TO SELLER. Any notice to Seller shall be effective when received by Seller or Listing Company. 27. MODIFICATION OF THIS CONTRACT. No subsequent Modification of any of the Terms of this contract shall be valid, binding upon the parties, or enforceable unless made in writing and signed by the parties. 28. ENTIRE AGREEMENT. This contract, along with the attached ADDENDUM, paragraphs a) through p), constitutes the entire contract between the parties relating to the subject hereof, and any prior agreements pertaining thereto, whether oral or written, have been merged and integrated into this contract. 29. NOTICE OF ACCEPTANCE: COUNTERPARTS. This proposal shall expire unless accepted in writing, by Buyer and Seller, as evidenced by their signatures below, and the offering party receives notice of such acceptance on or before June 16, 1998 at 5:30 P. M. MST (Acceptance Deadline). If accepted, this document shall become a contract between Seller and Buyer. A copy of this document may be executed by each party, separately, and when each party has executed a copy thereof, such copies taken together shall be deemed to be a full and complete contract between the parties. -7- Marc W. Logan Robb MacMillan Jack Wasserman, M.D. a Professional Corporation 9361 S. Princeton Lane Highlands Ranch, Colorado 80126 BUYER: /s/ Marc W. Logan DATE: 6/16/98 By: Marc W. Logan BUYER: /s/ Robb MacMillan DATE: 6/16/98 By: Robb MacMillan BUYER: /s/ Jack Waserman, M.D. DATE: 6/16/98 By: Jack Wasserman, M.D. a Professional Corporation SOUTHSHORE CORPORATION 10750 East Briarwood Avenue Englewood, Colorado 80112 SELLER: /s/ Kenneth M. Dalton DATE: 6/16/98 By: Kenneth M. Dalton, President -8- ADDENDUM To that certain Commercial Contract to Buy and Sell Real Estate dated June 12, 1998 by and between Marc W. Logan, Robb MacMillan and Jack Wasserman, M.D. a Professional Corporation as Buyer, and Southshore Corporation, as Seller, concerning certain real property located at 10750 East Briarwood Avenue, Englewood, Colorado. If any provision in the printed form of said contract is inconsistent with any provision contained herein, then and in that event the provision contained in this Addendum shall control. 21. ADDITIONAL PROVISIONS: a)Hazardous Materials/ADA Disclosure. The parties acknowledge that various materials utilized in the construction of any improvements situated on the Property may contain materials that may have been or may be in the future determined to be toxic, hazardous or undesirable ("Hazardous Materials"), and may need to be specifically treated or removed. In addition, the land ("Land") upon which the Property is situated may have been subjected to underground sources. Current and future federal, state and local laws may require the cleanup of the Hazardous Materials at the expense of those parties who have been in the chain of title of ownership of the Property. The parties further acknowledge that the Property may be subject to the Americans With Disabilities Act ("ADA"), a federal law, which requires, among other matters, that tenants and/or owners of "public accommodations" remove barriers in order to make the Property accessible by disabled persons and provide auxiliary aids and services for hearing, vision or speech impaired persons. Seller warrants that a Phase I Environmental Report has been prepared in the last 60 days and that no hazards of any kind were shown. b)Inspection. Section 10 shall be amended by the addition of the following language: The term "inspection" shall include but not be limited to an inspection of the roof, walls, structural integrity of the Property, and inspection of the inclusions, and a determination of the existence or nonexistence of asbestos and urea formaldehyde insulation or lead-based paint, PCB transformers, radon gas, hazardous or toxic substances, and/or underground storage tanks in or on the Property and all books, records, maintenance agreements, construction documents or any other documents relating to the waterpark, it s finances or operation. The Buyer shall not permit any mechanic s or materialmen s liens to be filed against the Property and hereby indemnifies and holds the Seller harmless from and against any liability, damage, expense or cost which may be incurred by the Seller in connection with any mechanic s or materialmen s liens which may be filed against the Property as a result of the provisions of this contract. This indemnity shall specifically include attorneys fees and any costs incurred by the Seller to enforce this indemnity. -9- c)Calendar Days. In the event any date called for herein falls on a Saturday, Sunday or Federal or State holiday, said date shall be extended to the next business day following such Saturday, Sunday or Federal or State holiday. d)CDMEC. As used in this contract, the term "CDMEC" shall be defined as calendar days from mutual execution of this contract. e)Survey. On or before sixty (60) calendar days from the waiver or satisfaction of the contingencies set forth in Section 10 and 21 (e), Seller shall furnish to Buyer, at Seller s expense, a current monumented or pinned Improvement Survey Plat ("Survey") prepared by a land surveyor licenses in the State of Colorado. The Survey shall be verified to Seller, Buyer, and the title insurance company and performed on the Property and shall show thereon the correct legal description, acreage and square footage; location of all fences, hedges or walls on or within two (2) feet of all sides of all boundaries of the Property; all boundary line dimensions; the dimension and location of all improvements; any and all ditches, easements, rights-of-way, and adjacent roadways, if any; and the location of all visible utilities on the Property and all underground utilities for which there is visible surface Property and all underground utilities for which there is visible surface evidence. The Survey shall reflect all exceptions to title (where applicable) as reflected on the title commitment and shall disclose that a physical inspection on the Property revealed no improvements situated upon or adjacent to the Property are the subject of any encroachments, and that no easements or rights-of-way have been physically violated in any respect. In the event the items reflected in the Survey are not in conformance with the provisions of this paragraph and written notice of Buyer s objections is received by Seller within seven (7) calendar days from the date of receipt of said Survey by Buyer, Seller shall have a period of seven (7) calendar days from the date of receipt of said notice in which to cure any such defects. In the event such defects are not cured within said seven (7) calendar-day period, this contract shall terminate at Buyer s option. If said written notice of Buyer s objections to the Survey is not received by Seller or if Buyer elects to waive the objections to the Survey, the Survey shall be accepted and this contract shall remain in full force and effect. Seller shall deliver to Buyer the foregoing items, in Seller s possession, within seven (7) calendar days from mutual execution of this contract. If Buyer is not satisfied with the results of said examination and written notice thereof is received by Seller within thirty (30) calendar days from the mutual execution of this contract, this contract shall terminate. If said written notice is not received by the Seller within the time period specified above, this contingency shall be waived and the contract shall remain in full force and effect. -10- f)Health and Hospitals Notice. Seller represents that as of this date no notices, either written or verbal, have been received from the Department of Health and Hospitals or from any local, county, state or federal governmental agency requiring corrective measures to the Property. If any such notices are received prior to closing, Seller agrees to disclose the same, in writing, to Buyer immediately upon receipt thereof. Upon the receipt of any notice, Seller shall have a period of thirty (30) calendar days in which to correct and cure the defect. The closing shall take place five (5) calendar days after said 30-calendar-day period expires, unless such date falls on a Saturday, Sunday or Federal or State holiday, in which event the closing shall take place on the next business day following such Saturday, Sunday or Federal or State holiday or on the date of closing a set forth in the contract, whichever is later. However, in the event the defect is not cured within said 30-calendar-day period, this contract shall terminate at Buyer option. If Buyer is not satisfied with Seller s cure of any defects and written notice thereof is received by Seller within two (2) calendar days after said 30-calendar-day period expires, this contract shall terminate. If said written notice is not received by Seller within the time period specified above, the provisions of this paragraph shall be waived and this contract shall remain in full force and effect. g)Management and Maintenance. Seller agrees to continue reasonable management and maintenance of the improvements on the Property from and after the date of mutual execution of this contract to the closing date, to commit no waste or nuisance and not to knowingly violate any zoning ordinance or building permit. Seller agrees that all insurance shall be kept in effect by the Seller until the closing date. Seller further agrees to maintain the Property in good repair and in the same condition, ordinary wear and tear excepted, as of this date and not to remove any personal property from the Property. Seller further agrees to assign to Buyer on the closing date all existing contractors or manufacturers warranties on the Property, if any. Seller shall complete replacement of all stairways. h)Notice Provision. All notices, demands and requests required to be given by either party to the other shall be in writing and shall either be hand mail, return receipt requested, postage prepaid, addressed to the parties at the addresses set forth herein or at such other addresses as the parties may designate in writing delivered pursuant to this provision. Any notice when given as provided herein shall be deemed to have been delivered on the date personally served or transmitted by facsimile, or two (2) calendar days subsequent to the date that said notice was deposited with the United States Postal Service. i)Fax Transmittals. The Buyer and Seller agree that a facsimile transmittal of this contract shall be considered as an originally executed document and shall be binding upon the parities hereto. -11- The Buyer and Seller further agree that each, originally executed contract which was transmitted by facsimile shall be delivered to the appropriate party via U.S. mail, messenger, or other acceptable delivery service within seven (7) calendar days from the date of said facsimile transmittal. j)Indemnification. Seller shall not permit any mechanic s or materialmen s liens to be filed against the Property and hereby indemnifies and holds the Buyer harmless from and against any liability, damage, expense or cost which may be incurred by the Buyer in connection with any mechanic s or materialmen s liens which may be filed against the Property as a result of the provisions of this contract. This indemnity shall specifically include attorney s fees and any costs incurred by the Buyer to enforce this indemnity. k)Lien Release. This contract is contingent upon Seller obtaining agreement with the approximately 35 holders of $955,000 in 10% notes secured by the indenture which is security for the loan. l)Shareholder Approval. The proposed sale of the Southshore Property is subject to a vote of shareholders of Southshore at a meeting duly called for that purpose and pursuant to a Proxy Statement or Information Statement to be filed with and cleared by the U.S. Securities and Exchange Commission as soon as possible and prior to closing. If such shareholder approval is not forthcoming and Buyer is ready, willing and able to perform under the terms and conditions of this contract, Seller will immediately reimburse Buyer for all actual and documented costs and expenses of Due Diligence of the Southshore Property incurred by principals, excluding any fees or salaries paid to principles. These costs shall not exceed $75,000.00. Seller shall receive all copies of reports and Due Diligence if Board approval is not obtained and upon reimbursement of expenses to Buyer. m)Seller acknowledges that Buyers are licensed Real Estate Brokers acting on their own behalf as principles. n)Buyers acknowledge that Seller has obtained a backup purchase arrangement for the Southshore Property from South Suburban Parks and Recreation District, subject to approval by Arapahoe, Jefferson and Douglas Counties. Buyers agree that neither they nor their agents, employees, attorneys, nor assigns will interfere, directly or indirectly, in any process, hearing or decision making procedure whereby the foregoing counties consider or decide said matter. o)Buyer agrees that Seller may, at it s option, deem this contract terminated on the 45th day of CDMEC if buyer has not delivered to Seller a financing commitment letter. The deposit -12- will be returned in full to Buyer at that time. Seller thereafter shall be free to contract with South Suburban Park and Recreation District. -13- EX-27 3
5 YEAR MAR-31-1998 MAR-31-1998 1,841 0 0 0 0 8,448 4,961,248 3,076,217 1,910,724 2,067,676 0 0 0 2,610,470 0 1,910,724 999,710 999,710 22,889 1,265,472 9,809 0 140,421 (428,881) 0 0 0 0 0 (428,881) (.16) (.16)
-----END PRIVACY-ENHANCED MESSAGE-----