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Item 8. Financial Statements and Supplementary Data

2018-04-12 compared with 2002-09-27 · 371 added, 181 removed, 0 unchanged (100% of the section changed)

Financial Statements and Supplementary Data

The Financial Statements of the Company, including notes thereto, are presented in the Annual Report and are incorporated herein by reference.

Changes in and Disagreements with Accountants

With the exception of the equity compensation plan information contained in Item 12 below, the information required by Part

III, Items 10, 11, 12, and 13 has been incorporated herein by reference to the Companys 2002 Proxy Statement as set forth below, in accordance with General Instruction G(3) of Form 10-K.

The 2002 Proxy Statement has been filed within 120 days after the end of the Companys 2002 fiscal year, as required by General Instruction G(3).

Directors and Executive Officers of the Registrant;

Section 16(a)

Information relating to directors of the Company and compliance with Section 16(a) of the Exchange Act is set forth in the sections

entitled Election of Directors and Section 16(a) Beneficial Ownership Reporting Compliance in the Companys 2002 Proxy Statement and is incorporated herein by reference.

Pursuant to General Instruction G(3) of Form 10-K,

certain information concerning the executive officers of the Company is set forth under the caption entitled Executive Officers of the Company in Part I, Item 1, of this Form 10-K.

Executive Compensation

Information regarding compensation of officers and directors of the Company is set forth in the section entitled Executive Compensation in the Companys 2002 Proxy Statement and is incorporated herein by reference.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information regarding ownership of certain of the Companys securities is set forth in the section

entitled Security Ownership of Management and Certain Beneficial Owners in the Companys 2002 Proxy Statement and is incorporated herein by reference.

Equity Compensation Plan Information

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plan (excluding securities

reflected in column (a))

Equity compensation plans approved by security holders

Equity compensation plans not approved by security holders

Consists entirely of shares of common stock underlying previously granted stock options that have not been exercised.

All of these options were granted pursuant

to the Companys 1998 Employee Stock Option Plan.

Certain Relationships and

Related Transactions

Information regarding certain relationships and related transactions with the Company is

set forth in the section entitled Certain Relationships and Related Transactions in the Companys 2002 Proxy Statement and is incorporated herein by reference.

Financial Statement Schedules, and Reports on Form 8-K

Documents filed as part of this Report:

Financial Statements

The Financial Statements of the Company and the Auditors Report thereon, are incorporated herein by reference.

Financial Statements:

Independent Auditors Report of KPMG LLP

Balance Sheets at June 30, 2001 and 2002

Statements of Operations for the Years ended June 30, 2000, 2001 and 2002

Statements of Changes in Stockholders Equity for the Years ended June 30, 2000, 2001 and 2002

Statements of Cash Flows for the Years ended June 30, 2000, 2001 and 2002

Notes to Financial

Financial Statement Schedule

The information required by Schedule IInvestments in Securities of Unaffiliated Issuers is included in the Schedule of Portfolio Investments which is an integral part of the financial statements.

The information

required by Schedule VIIValuation and Qualifying Accounts is included in this report as Schedule VII.

other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

The exhibits listed on the accompanying Exhibit Index are filed or incorporated by reference as part of this Form 10-K and such Exhibit Index is incorporated herein by reference.

Reports on Form 8-K (filed during the fourth quarter of 2002):

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the

undersigned, thereunto duly authorized.

W ATERSIDE C APITAL C ORPORATION

Alan Lindauer

President and

Chief Executive Officer

September 27, 2002

In accordance with the Securities Exchange Act of 1934, this Report has been signed by the following persons in the capacities and on the

dates stated.

Each person, in so signing, also makes, constitutes, and appoints J.

Alan Lindauer and Gerald T.

McDonald, and each of them individually, his true and lawful attorney-in-fact in his place and stead, with full power of substitution, to

execute and cause to be filed with the Securities and Exchange Commission, any and all amendments to this Report, including any exhibits or other documents filed in connection therewith.

Alan Lindauer

Director, President and Chief Executive Officer

September 27, 2002

/s/ J AMES E.

September 27, 2002

W HITING C HISMAN ,

Whiting Chisman, Jr.

September 27, 2002

/s/ R OGER L.

September 27, 2002

/s/ M ARVIN S.

September 27, 2002

/s/ E RNEST F.

September 27, 2002

/s/ H ENRY U.

September 27, 2002

/s/ R OBERT I.

September 27, 2002

/s/ P ETER J.

Meredith, Jr.

Chairman of the Board and Director

September 27, 2002

/s/ C HARLES H.

Merriman, III

September 27, 2002

/s/ A UGUSTUS C.

September 27, 2002

S COTT M ORGAN ,

Scott Morgan, Sr.

September 27, 2002

/s/ R ICHARD G.

September 27, 2002

/s/ J ORDAN E.

September 27, 2002

/s/ G ERALD T.

Chief Financial Officer (Principal Accounting and Financial Officer)

September 27, 2002

CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Alan Lindauer, certify that:

I have reviewed this annual report on Form 10-K of Waterside Capital Corporation;

Based on my knowledge, this annual report does not contain any untrue statement of a material

fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

Based on my knowledge, the financial statements, and other financial information included in

this annual report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this annual report.

September 27, 2002

President and Chief Executive Officer

McDonald, certify that:

I have reviewed this annual report on Form 10-K of Waterside Capital Corporation;

Based on my knowledge, this annual report does not contain any untrue statement of a

material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

Based on my knowledge, the financial statements, and other financial information

included in this annual report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this annual report.

September 27, 2002

/s/ G ERALD T.

Chief Financial Officer

CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the Companys chief executive officer and chief financial officer each certify as follows:

(a) This annual report on Form 10-K fully complies with the

requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

(b) The information contained in this annual report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

A LAN L INDAUER

President and Chief Executive Officer

September 27, 2002

/s/ G ERALD T.

Chief Financial Officer

September 27, 2002

Independent Auditors Report on

Financial Statement Schedule

The Stockholders and Board of

Waterside Capital Corporation:

Under date of August 23, 2002, we reported on the balance sheets of Waterside Capital Corporation, including the schedule of portfolio investments, as of June 30, 2001 and 2002 and the related

statements of operations, changes in stockholders equity and cash flows for each of the years in the three-year period ended June 30, 2002, which are incorporated by reference.

In connection with our audits of the aforementioned financial

statements, we also audited the related financial statement schedule.

This financial statement schedule is the responsibility of the Companys management.

Our responsibility is to express an opinion on this financial statement schedule based on

In our opinion, the related financial statement schedule, when considered in relation to the basic

financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

August 23, 2002

Norfolk, Virginia

Waterside Capital Corporation

Valuation and Qualifying Accounts

Years ended June 30, 2000, 2001 and 2002

Balance at beginning of period

Additions charged to costs and expenses

Balance at end of period

Year ended June 30, 2000

Valuation allowance (included net in deferred tax asset) for deferred tax asset

Year ended June 30, 2001

Valuation allowance (included net in deferred tax asset) for deferred tax asset

Year ended June 30, 2002

Valuation allowance (included net in deferred tax asset) for deferred tax asset

EXHIBIT INDEX

Amended and Restated Articles of Incorporation of the Registrant, incorporated by reference to Exhibit 1 to

Financial Statements and Exhibits on Form N-5/A as filed with the Securities and Exchange Commission on January 9, 1999.

Amended and Restated Bylaws of the Registrant, incorporated by reference to Exhibit 2 to Financial Statements and

Exhibits on Form N-5/A as filed with the Securities and Exchange Commission on January 9, 1999.

The Registrants License From the Small Business Administration, incorporated by reference to Exhibit 8 to

Financial Statements and Exhibits on Form N-5/A as filed with the Securities and Exchange Commission on January 9, 1999.

Employment Agreement, dated as of January 1, 2001, between the Registrant and J.

Alan Lindauer, incorporated by

reference to exhibit 10.1 to the Companys Quarterly Report on Form 8-K filed by the registrant on February 14, 2001.

Employment Agreement, dated as of January 1, 2001, between the Registrant and Gerald T.

McDonald, incorporated by

reference to exhibit 10.2 to the Companys Quarterly Report on Form 8-K filed by the registrant on February 14, 2001.

Employment Agreement, dated as of January 1, 2002, between the Registrant and Martin N.

Speroni, incorporated by

reference to exhibit 10.3 to the Companys Quarterly Report on Form 8-K filed by the registrant on February 14, 2002.

Employment Agreement, dated as of January 1, 2002, between the Registrant and Lex W.

Troutman, incorporated by

reference to exhibit 10.4 to the Companys Quarterly Report on Form 8-K filed by the registrant on February 14, 2002.

1998 Employee Stock Option Plan, incorporated by reference to Exhibit B to the proxy statement on Form DEF 14A filed

by the registrant on September 16, 1998.

Annual Report to Shareholders.

The Financial Statements and notes thereto which appear in Waterside Capital Corporation 2002 Annual Report to

Shareholders (filed as Exhibit 13 to this Form 10-K) are incorporated herein by reference.

Filed herewith.

STATEMENTS AND SUPPLEMENTARY DATA

TO FINANCIAL STATEMENTS AND NOTES

of Independent Registered Public Accounting Firm

Sheets as of June 30, 2017 and 2016

of Operations for the years ended June 30, 2017 and 2016

of Stockholders’

Equity (Deficit) for the years ended June 30, 2017 and 2016

of Cash Flows for the years ended June 30, 2017 and 2016

to the Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and Stockholders

Capital Corporation

have audited the balance sheets of Waterside Capital Corporation (the “Company”) as of June 30, 2017 and 2016 and

the related statements of operations, stockholders’

equity (deficit), and cash flows for the years then ended.

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 audit.

conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Those standards

require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material

misstatement.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

Accordingly, we express no such opinion.

An audit also includes examining, on a test

basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and

significant estimates made by management, as well as evaluating the overall financial statement presentation.

We believe that

our audit provides a reasonable basis for our opinion.

our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Waterside

Capital Corporation as of June 30, 2017 and 2016, and the results of its operations and its cash flows for the years then ended,

in conformity with accounting principles generally accepted in the United States of America.

accompanying financial statements have been prepared assuming the Company will continue as a going concern.

As discussed in Note

1 to the financial statements, the Company has experienced liquidity issues and has no working capital.

Further, the Company has

no active business to generate cash flows to repay its current and future obligations.

These conditions raise substantial doubt

about the Company’s ability to continue as a going concern.

Management’s plans in regard to this uncertainty are also

described in Note 1.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Irvine, California

CAPITAL CORPORATION

30, 2017 and 2016

Current Assets

Assets, net of accumulated depreciation

& STOCKHOLDERS EQUITY (DEFICIT)

Interest Payable -SBA

Current Liabilities

Stock par value $1.00, 10,000,000 shares authorized, 1,915,548 shares issued and outstanding

Paid-In Capital

Equity (Deficit)

(10,574,869 )

(10,200,948 )

LIABILITIES & STOCKHOLDERS EQUITY (DEFICIT)

accompanying Notes are an integral part of these Financial Statements.

report of Independent Registered Public Accounting Firm.

CAPITAL CORPORATION

of Operations

the years ended June 30, 2017 and 2016

and Unrealized Loss on Investments

Administrative

Average Number of Common Shares Outstanding –

Basic and Diluted

Net Loss Per Share

accompanying Notes are an integral part of these Financial Statements.

report of Independent Registered Public Accounting Firm.

CAPITAL CORPORATION

of Stockholders’

Equity (Deficit)

the years ended June 30, 2017 and 2016

Net Loss for the year

accompanying Notes are an integral part of these Financial Statements.

report of Independent Registered Public Accounting Firm.

CAPITAL CORPORATION

of Cash Flows

the years ended June 30, 2017 and 2016

Cash flows from operating activities:

Adjustments to reconcile

net loss to net cash used in operating activities:

on investments and other assets

and amortization expense

cash used in operating activities

Cash flows from investing activities:

from sale/settlement of investments

Net cash provided

by investing activities

Cash flows from financing activities:

Net cash used in

financing activities

Net (decrease) increase in cash

Cash, beginning of year

Cash, end of year

Supplemental disclosure of non-cash investing

Conversion of investment

into notes receivable

Transfer of note

receivable to SBA to settle part of accrued interest

accompanying Notes are an integral part of these Financial Statements.

report of Independent Registered Public Accounting Firm.

CAPITAL CORPORATION

TO THE FINANCIAL STATEMENTS

Organization and Operations

Capital Corporation (the “Company”) was incorporated in the Commonwealth of Virginia on July 13, 1993 and was

a closed-end investment company licensed by the Small Business Administration (the “SBA”) as a Small Business Investment

Corporation (“SBIC”).

The Company previously made equity investments in, and provided loans to, small businesses to

finance their growth, expansion, and development.

Under applicable SBA regulations, the Company was restricted to investing only

in qualified small businesses as contemplated by the Small Business Investment Act of 1958.

As a registered investment company

under the Investment Company Act of 1940, as amended (the “Investment Company Act”), the Company’s investment

objective was to provide its shareholders with a high level of income, with capital appreciation as a secondary objective.

Company made its first investment in a small business in October 1996.

May 28, 2014, with the Company’s consent, the court having jurisdiction over the action filed by the SBA (the “

Court ”)

entered a Consent Order and Judgment Dismissing Counterclaim, Appointing Receiver, Granting Permanent Injunctive Relief and Granting

Money Judgment (the “

Order ”).

The Order appointed the SBA receiver of the Company for the purpose of marshaling

and liquidating in an orderly manner all of the Company’s assets and entered judgment in favor of the United States of America,

on behalf of the SBA, against the Company in the amount of $11,770,722.

The Court assumed jurisdiction over the Company and the

SBA was appointed receiver effective May 28, 2014.

Company effectively stopped conducting an active business upon the appointment of the SBA as receiver and the commencement of

the court ordered receivership (the “

Receivership ”).

Over the course of the Receivership the activity of the

Company was limited to the liquidation of the Company’s assets by the receiver and the payment of the proceeds therefrom

to the SBA and for the expenses of the Receivership.

On June 28, 2017 the Receivership was terminated with the entry of

a Final Order by the Court.

The Final Order specifically stated that “Control of Waterside shall be unconditionally transferred

and returned to its shareholders c/o Roran Capital, LLC (“Roran”) upon notification of entry of this Order”.

Upon termination of the Receivership Roran took possession of all books and records made available to it by the SBA, and Roran

expended, and has continued to expend, its own funds to maintain the viability of the Company.

Company has no assets of any value, and the Company no longer has the SBIC license from the SBA.

The Company is clearly no longer

operating as a registered investment company under the Investment Company Act.

The Company will now seek to either (i) enter into

a new business;

or, (ii) merge with, or otherwise acquire, an active business which would benefit from operating as a public entity,

and has undertaken a search to identify the best possible candidate(s) in order to provide value to the shareholders of the Company.

accompanying financial statements of our Company have been prepared in accordance with accounting principles generally accepted

in the United States.

The Company effectively ceased operations and it has net losses through the date of these financial

Our financial statements have been presented on the basis that our business is a going concern, which contemplates

the realization of assets and the satisfaction of liabilities in the normal course of business.

We are subject to the risks and

uncertainties associated with a business with no operating business or assets and no revenue, as well as limitations on our operating

capital resources.

We have incurred operating losses and negative operating cash flows since the Receivership, and we expect to

continue to incur operating losses and negative operating cash flows at least through the near future.

Roran, which is a related

party to the Company, has agreed to advance our Company funding in order to partially meet our most critical cash requirements.

For further discussion of the advances made by Roran, see the section titled “Subsequent Events”.

CAPITAL CORPORATION

TO THE FINANCIAL STATEMENTS

a result of the aforementioned factors, management has concluded that there is substantial doubt about our ability to continue

as a going concern.

Our independent registered public accounting firm, in its report on our 2017 financial statements, raised

substantial doubt about our ability to continue as a going concern.

Our financial statements as of and for the year ended June

30, 2017 do not contain any adjustments for this uncertainty.

Significant Accounting Policies

Company elected 30 June as its fiscal year-end date.

of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

preparation of financial statements in conformity with accounting principles generally accepted in the United States of America

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 dates of the financial statements and the reported amounts of revenues and expenses

during the reporting periods.

CAPITAL CORPORATION

TO THE FINANCIAL STATEMENTS

significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached

to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the

financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about

the carrying values of assets and liabilities that are not readily apparent from other sources.

regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes

in facts and circumstances, historical experience and reasonable assumptions.

After such evaluations, if deemed appropriate, those

estimates are adjusted accordingly.

results could differ from those estimates.

Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure

of related party transactions.

to section 850-10-20 the related parties include (a) affiliates (“Affiliate”

means, with respect to any specified

Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under

common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act) of the Company;

(b) entities for which investments in their equity securities would be required, absent the election of the fair value option

under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing

(c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship

of management;

(d) principal owners of the Company;

e) management of the Company;

(f) other parties with which the Company may

deal if one party controls or can significantly influence the management or operating policies of the other to an extent that

one of the transacting parties might be prevented from fully pursuing its own separate interests;

and (g) other parties

that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest

in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties

might be prevented from fully pursuing its own separate interests.

CAPITAL CORPORATION

TO THE FINANCIAL STATEMENTS

financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense

allowances, and other similar items in the ordinary course of business.

However, disclosure of transactions that are eliminated

in the preparation of consolidated or combined financial statements is not required in those statements.

The disclosures shall

(a) the nature of the relationship(s) involved;

(b) a description of the transactions, including transactions to which

no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other

information deemed necessary to an understanding of the effects of the transactions on the financial statements;

amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the

method of establishing the terms from that used in the preceding period;

and, (d) amounts due from or to related parties as of

the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

and Contingencies

Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies.

conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which

will only be resolved when one or more future events occur or fail to occur.

The Company assesses such contingent liabilities,

and such assessment inherently involves an exercise of judgment.

In assessing loss contingencies related to legal proceedings

that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived

merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected

to be sought therein.

the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability

can be estimated, then the estimated liability would be accrued in the Company’s financial statements.

If the assessment

indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be

estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material,

would be disclosed.

contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would

be disclosed.

Tax Assets and Income Taxes Provision

Company adopted the provisions of paragraph 740-10-25-13 of the FASB Accounting Standards Codification.

Paragraph 740-10-25-13

which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded

in the financial statements.

Under paragraph 740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position

only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on

the technical merits of the position.

The tax benefits recognized in the financial statements from such a position should be measured

based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement.

Paragraph 740-10-25-13 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting

in interim periods and requires increased disclosures.

The Company had no material adjustments to its liabilities for unrecognized

income tax benefits according to the provisions of paragraph 740-10-25-13.

CAPITAL CORPORATION

TO THE FINANCIAL STATEMENTS

estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying

balance sheets, as well as tax credit carry-backs and carry-forwards.

The Company periodically reviews the recoverability of deferred

tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.

makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous

estimates of tax liability.

In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in

these jurisdictions.

In management’s opinion, adequate provisions for income taxes have been made for all years.

taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

years that remain subject to examination by major tax jurisdictions are generally the prior three (3) years for federal purposes,

and the prior four (4) years for state purposes;

however, as a result of the Company’s operating losses, all tax years remain

subject to examination by tax authorities.

Loss Per Common Share

Company computes net income or loss per share in accordance with ASC 260 Earnings Per Share.

Under the provisions of the Earnings

per Share Topic ASC, basic net loss per share is computed by dividing the net loss available to common stockholders for the period

by the weighted average number of shares of common stock outstanding during the period.

The calculation of diluted net loss per

share gives effect to common stock equivalents;

however, potential common shares are excluded if their effect is anti-dilutive.

CAPITAL CORPORATION

TO THE FINANCIAL STATEMENTS

Issued Accounting Pronouncements

time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company

as of the specified effective date.

Unless otherwise discussed, we believe that the impact of recently issued standards that are

not yet effective will not have a material impact on our financial position or results of operations upon adoption.

Investments and Notes Receivable

Company’s legacy assets primarily consisted of prior investments that were composed of equity and debt securities.

the years ended June 30, 2016 and 2017, the investments were either in default or distressed in nature.

The Receiver liquidated

the assets through negotiations and the investments are written down to their estimated net realizable value through recognizing

other-than-temporary impairment losses.

The activity in the investment account is as follows:

Balance at June 30, 2015

Cash proceeds collected

Exchange for Note Receivable

Balance at June 30, 2016

Cash proceeds collected

June 30, 2017

part of a settlement on an investment, during the year ended June 30, 2016 the Receiver exchanged part of an investment for two

$75,000 notes receivable with consecutive 1 year terms.

The first note receivable was repaid in fiscal 2017.

The other $75,000

note receivable was transferred to the SBA to settle part of the accrued interest outstanding on the SBA judgment.

Notes Payable

March 30, 2010, the SBA notified the Company that its account had been transferred to liquidation status and that the then

outstanding debentures of $16.1 million plus accrued interest (the “Debentures”) were due and payable within

fifteen days of the date of the letter.

The Company did not possess adequate liquid assets to make this payment.

The Company negotiated

terms of a settlement agreement with the SBA effective September 1, 2010, which allowed the Company’s management

to liquidate the portfolio so long as there are no events of default.

The Debentures were repurchased by the SBA in September

2010, represented by a Note Agreement between the SBA and the Company.

The Note Agreement had a maturity of March 31, 2013.

In the event of a default, the SBA had the ability to seek receivership.

May 24, 2012 the SBA delivered to the Company a notice of an event of default for failure to meet the principal repayment

schedule under the Note Agreement (the “

Notice ”).

Under the terms of the Notice and the Note Agreement the

SBA maintained a continuing right to terminate the Note Agreement and appoint a receiver to manage the Company’s assets.

CAPITAL CORPORATION

TO THE FINANCIAL STATEMENTS

November 20, 2013 the SBA filed a complaint in the United States District Court for the Eastern District of Virginia seeking,

among other things, receivership for the Company and a judgment in the amount outstanding under the Note Agreement plus continuing

The complaint alleged that as of October 31, 2013 there remained an outstanding balance of $11,762,634 under

the Note Agreement, including interest, which continued to accrue at the rate of $2,021 per day.

The SBA, in filing the complaint,

requested that the court take exclusive jurisdiction of the Company and all of its assets wherever located and appoint the SBA

as permanent receiver of the Company for the purpose of liquidating all of the Company’s assets and satisfying the claims

of its creditors in the order of priority as determined by the court.

Company initially took steps to contest the legal action initiated by the SBA and to oppose the receivership action.

29, 2014 the Board of Directors of the Company, as then constituted (the “

Board ”), met to reconsider

the decision to contest the SBA’s legal action.

In light of developments occurring since December of 2013, including projections

of its portfolio companies and discussions with the SBA, the Board determined, after consultation with and advice of its counsel,

that it was not in the best interests of the Company and its shareholders to continue to contest the legal action.

informed of this determination.

The Board also decided to consent to the receivership process.

May 28, 2014, with the Company’s consent, the court having jurisdiction over the action filed by the SBA (the “

Court ”)

entered a Consent Order and Judgment Dismissing Counterclaim, Appointing Receiver, Granting Permanent Injunctive Relief and Granting

Money Judgment (the “

Order ”).

The Order appointed the SBA receiver of the Company for the purpose of marshaling

and liquidating in an orderly manner all of the Company’s assets and entered judgment in favor of the United States of America,

on behalf of the SBA, against the Company in the amount of $11,770,722.

Such amount represents $11,700,000 in principal and $70,722

in accrued interest.

The Court assumed jurisdiction over the Company and the SBA was appointed receiver effective May 28,

Subsequent Events

Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were

issued to determine if they must be reported.

On September 19, 2017 the Company entered into a Convertible Loan Agreement

with Roran (the “Loan Agreement”).

Pursuant to the Loan Agreement, Roran agreed to loan to the Company an amount not

to exceed a total of $150,000 in principal over 18-months.

Each advance under the Loan Agreement will be documented under a Convertible

Promissory Note issued by the Company in favor Roran (the “Note”).

The Note bears interest at the rate of 12%

per annum and is due in 18-months.

Roran has the right to convert all or any portion of the Note into shares of the Company’s

common stock at a conversion price equal to 60% of the share price.

IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

were no disagreements with our accountants on accounting or financial disclosure matters during 2017 and 2016, respectively.

the past the Company was not required to engage an independent registered public accounting firm due to its status as a

registered investment company.

Since the Company is no longer a registered investment company, it engaged the services of Haskell

& White, LLP in January 2018 to serve as the Company’s independent registered public accounting firm.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data