Waterside Announces Financial Results for 2007

Sep 13, 2007, 01:00 ET from Waterside Capital Corporation

    NORFOLK, Va., Sept. 13 /PRNewswire-FirstCall/ -- Waterside Capital
 reported financial results for the full year and six months ended June 30,
     Fiscal 2007
     The company's net decrease in stockholders' equity resulting from
 operations (which includes net operating income plus realized and
 unrealized gains or losses on investments) was $5,358,601 or $2.80 per
 share for the year ended June 30, 2007, compared to $2,668,000 or $1.74 per
 share for the year ended June 30, 2006. The decreases for 2007 are
 primarily attributed to the following:
     1. Net operating losses of ($1,352,575) or ($0.71) per share for the year
        ended June 30, 2007 compared to a net operating loss of ($390,465) or
        ($0.25) per share for the year ended June 30, 2006. This increase was
        in large part due to attorney fees involved in various litigation
     2. Realized loss on investments recognized during the year of $1,332,737,
        the majority is attributable to the complete write-off of Lakeview
        Technologies Solutions, Inc investment amounting to $2,337,794. This
        loss was partially offset by realized gains on six other investments.
     3. Unrealized investment valuation loss on the company's investments of
        $2,673,289 due primarily to a write down in New Dominion Pictures, LLC
        of $3,647,758. This loss was partially offset by gains in other
     At June 30, 2007, Waterside's loans and investments had a fair value of
 $21.2 million compared with $30.2 million reported at June 30, 2006. The
 company originated new investments of $5.3 million for the year ended June
 30, 2007 compared to $300 thousand for the year ended June 30, 2006.
 Proceeds received from the sales of investments, principal collected on
 debt securities, and proceeds from collection of notes receivable was $10.5
 million. The net asset value of the common shares declined to $4.95 per
 share at June 30, 2007 from the $7.75 reported at June 30 2006. The decline
 in net asset value was due to the above mentioned $5.4 million decrease in
 shareholders equity resulting from operations.
     Six Months 2007
     The company reported a net decrease in stockholders' equity resulting
 from operations of $3,651,315 or $1.91 per share for the six months ended
 June 30, 2007, compared to a decrease of $1,224,000 or $0.76 per share for
 the six months ended June 30, 2006.
     Changes at Waterside Capital Corporation
     Waterside Capital Corporation is in the process of transition of both
 management and operations. Franklin (Lin) Earley joined the company in
 August 2006 as a business development officer and became the CEO in April
 of 2007. Earley, age 60, retired from Bank of America with 37 years
 experience in commercial lending, risk management and capital markets and
 regional president. Julie Stroh has replaced retiring Gerald McDonald as
 CFO in August of 2007. Stroh is a CPA and has 7 years experience with the
 SBA in the SBIC program. Management has been focusing on expense control,
 harvesting investments, and ramping up business development activities to
 generate new, risk appropriate investments. Subsequent to 6/30/07 we have
 prepaid $5.3 million of SBA debenture debt average 8.4% interest rate,
 which will reduce our interest expense and improve operating performance.
 Litigation expense has been curtailed and should be much reduced for FYE
 2008. Salary expenses are being reduced. We have ample liquidity to fund
 the planned growth in investments for FYE 2008.
     New Dominion Pictures LLC, as noted above, was devalued at 6/30/07.
 Over the past 18 months several independent valuations have been performed,
 and these valuations show a wide range of results. Although the methods and
 conclusions of each of the valuations are supportable, it is increasingly
 clear that it is extremely difficult to narrow down the value of this
 company. Primary differences are in the values assigned to the film library
 assets. Inherent in the valuation process of privately held entities are
 wide variations based on a number of subjective factors. Based on the
 information that we have regarding the status and operations of New
 Dominion Pictures we believe that the valuation in our report appropriately
 represents the intrinsic value of the company as it stands. Consequently we
 arrived at the value by averaging all the valuations developed to this
 point (with the exception of the one yielding the highest figure). The
 average of the five remaining valuations is $14.5 million, which we feel to
 be an adequate number for the company under the circumstances. Waterside
 Capital's ownership interest is valued at $3.4 million. The SBA has
 valuation guidelines, which we have adopted as our valuation policy, but
 the SBA has not opined to any of our 6/30/07 investment valuations.
     About Waterside Capital Corporation
     Waterside Capital Corporation is a Small Business Investment Company
 (SBIC), headquartered in Norfolk, Virginia with a portfolio of
 approximately $21 million of loans and investments in twenty companies
 located primarily in the Mid-Atlantic region.
     Visit Waterside's web site at http://www.watersidecapital.com.
     Except for historical information, all of the statements, expectations
 and assumptions contained in the foregoing are "forward-looking statements"
 including Waterside's optimism regarding the growth of its portfolio
 companies (within the meaning of the Private Securities Litigation Reform
 Act of 1995) that involve a number of risks and uncertainties. It is
 possible that the assumptions made by management -- including, but not
 limited to, investment opportunities, results, performance or expectations
 -- may not materialize. Actual results may differ materially from those
 projected or implied in any forward-looking statements. In addition to the
 above factors, other important factors including the risks associated with
 the performance of the Company's portfolio companies, dependencies on key
 employees, delays, interest rates, the level of economic activity, and
 competition, as well as other risks described from time to time in the
 Company's filings with the Securities Exchange Commission, press releases,
 and other communications.
                            WATERSIDE CAPITAL CORPORATION
                                  Financial Summary
                         (In thousands except per share data)
                                               Six Months
                                                 Ended            Year Ended
                                                June 30,           June 30,
                                             2007      2006      2007     2006
       Statement of Operations data:
       Total operating income              $1,058    $1,261    $2,133   $2,530
       Interest expense                       842       842     1,697    1,697
       Other operating expenses             1,025       708     2,144    1,223
       Recovery Related to Investee
        Litigation (net)                      355        --       355       --
       Net operating income (loss)           (454)     (289)   (1,353)    (390)
       Realized gain (loss) on
        investments                          (254)      144    (1,333)  (1,175)
       Change in unrealized appreciation
        (depreciation) on investments      (2,943)   (1,079)   (2,673)  (1,103)
       Net increase in stockholders'
       resulting from operations          $(3,651)  $(1,224)  $(5,359) $(2,668)
       Per share data (basic):
        Net operating income (loss)        $(0.24)   $(0.18)   $(0.71)  $(0.25)
        Net increase (decrease) in
         stockholders' equity
         resulting from operations          (1.91)    (0.76)    (2.80)   (1.74)
                                                    At June 30,  At June 30,
       Balance Sheet data:                            2007         2006
       Cash                                          $9,569       $5,239
       Loans and investments, at fair value
         Debt securities                              9,332        8,104
         Equity securities                            5,966        8,099
         Options and warrants                         2,343        6,032
         Notes receivable and other                   3,571        7,922
           Total loans and investments               21,212       30,157
       Debentures payable                            21,400       21,400
       Stockholders' equity                           9,489       14,848
       Net asset value per common share               $4.95        $7.75

SOURCE Waterside Capital Corporation