What changed in this filing

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Item 1. Business

2019-09-30 compared with 2018-09-05 · 157 added, 112 removed, 174 unchanged (61% of the section changed)

Organizational

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.

The Company made its first investment

in a small business in October 1996.

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

debentures of $16.1 million plus accrued interest (the “

Debentures ”) were due and payable within fifteen days

of the date of the letter.

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 Act, the Company’s

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

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

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

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 ”).

Company negotiated terms of a settlement agreement with the SBA effective September 1, 2010.

The Debentures were

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

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.

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 $11,762,634.58 under the

Note Agreement, including interest, which continued to accrue at the rate of $2,021.93 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.

The SBA was 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 “

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

Court ”) seeking, among other things, receivership for the Company and a judgment in the amount outstanding under

the Note Agreement plus continuing interest.

The complaint alleged that as of October 31, 2013 there remained an outstanding balance

of $11,762,634.58 under the Note Agreement, including interest, which continued to accrue at the rate of $2,021.93 per day.

SBA, in filing the complaint, requested that the District 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 District

May 28, 2014 the District 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 $11,770,722.31.

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

$70,722.31 in accrued interest.

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

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

the court ordered receivership (the “

The Order appointed the SBA as receiver of the

Company, and the SBA designated Charles Fulford as its principal agent to act on its behalf as the receiver (the “Receiver”).

The Order authorized the Receiver to act for the purpose of marshaling and liquidating in an orderly manner all of the Company’s

The Order also served to enter judgment in favor of the United States of America, on behalf of the SBA, against the

Company in the amount of $11,770,722.31.

Such amount represented $11,700,000 in principal and $70,722.31 in accrued interest.

The District 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 receivership ordered by the District Court (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.

SBIC license granted to the Company by the SBA was revoked by the SBA effective March 20, 2017, in conjunction with the entry

by the court of the Order Approving the Procedures for Winding Up and Terminating the Receivership Estate.

On June 28, 2017 the

Receivership was terminated with the entry of a Final Order by the Court (the “

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.

SBIC license granted to the Company by the SBA was revoked by the SBA effective March 20, 2017, in conjunction with the

entry by the District Court of the Order Approving the Procedures for Winding Up and Terminating the Receivership Estate.

28, 2017, the Receivership was terminated pursuant to the entry of a Final Order by the District Court further discharged all

claims and obligations of the Company other than the judgment held by SBA (the “

Final Order ”).

The Final Order

to the Final Order the Receiver provided notice to all shareholders of the Company.

The Receiver also initiated separate

contact with the largest shareholders of the Company in an attempt to identify a shareholder willing to assume responsibility

for the control of the Company on behalf of the Company’s shareholders.

Roran Capital, LLC (“Roran”)

was the only shareholder willing to assume such control.

As such, at the direction of the Receiver, paragraph 4 of 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”.

At that time the Company had, and continues

to have, effectively zero (0) assets, and a liability owed to the SBA in an amount exceeding $10,000,000.

of Receivership

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.

The termination of the Receivership also

caused a new board of directors to be appointed (the “

At that time Roran owned 51,000 shares

of the Company which represented 2.7% of the issued and outstanding common stock at that time (and owns 81,000 shares currently

as a result of open market purchases of 30,000 shares on May 17, 2019 made by Roran, which represents 4.2% of the issued and outstanding

shares of the Company at this time).

99% of the equity interests in Roran were at the time, and remain, beneficially owned

by Yitzhak Zelmanovitch.

At the time of the Final Order, the Company had no assets, and a remaining sole liability

owed to the SBA in an amount exceeding $10,000,000.

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

The termination

of the Receivership, and the termination of the power and authority of the Receiver, left the Company with no Board of

Directors and no officers.

It was impossible to convene a shareholders meeting as there were no corporate officers or directors

to provide (i) notice, or (ii) the administrative oversight required for such a meeting.

Upon the advice of former counsel, Roran,

in reliance on and in compliance with the Final Order, sought to appoint a new board of directors (the “

New Board ”).

The New Board considered a variety of options

for the Company, including bankruptcy.

The New Board determined that such action made scant sense as the Receivership had the

same basic result as bankruptcy.

Another option was to merely liquidate and legally dissolve the Company, which would result in

the complete loss of investment by all shareholders.

Roran provided assurances that it would fund reasonable expenses of the Company

so long as progress was being made to reorganize the Company and to identify either (i) a new business to undertake;

an existing business with which to merge or otherwise acquire.

The New Board has continued to work toward achieving that goal.

With no assets and no SBIC license from the SBA, no income, and liabilities in excess of $10,000,000, the New Board concluded

that continuing to operate as a registered investment company was impossible.

the entry of the Final Order (June 28, 2017) and the termination of the Receivership the Company has been maintained for the benefit

of its shareholders and pursuant to the Final Order.

The Company has no assets of any value, and the Company no longer has the

SBIC license from the SBA.

The Company is no longer operating as a registered investment company under the Investment Company

While it would have been easy for the Company to merely dissolve, the Company has instead decided to attempt to reconstitute

itself as a viable business.

The Company has engaged, and intends to continue to engage, qualified professionals and personnel

in order to bring the Company current in its SEC filings and audits.

Roran paid for the Company to file all delinquent SEC filings

as a registered investment company.

The Company believes that as of June 28, 2017 it ceased to be a registered investment company

under the Investment Company Act so it did not file as a registered investment company for the period ended June 30, 2017.

the Company filed Form 10-K for that period, and subsequently has filed all required forms 10-Q and this form 10-K in a timely

Prior to the filing of the 10-K for the year ended June 30, 2017, the Company filed with the SEC an Application pursuant

to Section 8(f) of the Investment Company Act for an order declaring that the Company has ceased to be a registered investment

continued and current status of the Company is consistent with the Company’s pronounced intention of converting from a registered

investment company to an operating company.

Although the Company may historically have operated as a registered investment company,

the result of the Receivership is that the Company can no longer operate as a registered investment company.

The only chance for

the shareholders of the Company to recognize any value from their investment in the Company is to allow the Company to change

the nature of its business such that it should no longer be a registered investment company under the Investment Company Act.

Without a New Board, the Company would be unable to operate as a viable business, and appointment by Roran was the only

manner in which the New Board could be constituted.

expended a good faith effort to seek out qualified third parties to serve on the New Board.

Because of the liability exposure

inherent in serving on the board of a public company, the Company’s lack of financial resources, and the Company’s

loss of its SBIC license, Roran was unable to locate any qualified individuals to serve on the New Board and thus appointed

Zindel Zelmanovitch, the father of Yitzhak Zelmanovitch, as the sole director and officer of the Company.

experienced business person who has previously served as the CEO and director of a public company, thus although related to the

99% owner of Roran, he has objectively acceptable qualifications to serve in this dual position.

Zindel Zelmanovitch has never

owned any shares of stock of the Company and has not been compensated for any of his services as a director or officer

of the Company to date.

his capacity as the sole director and officer of the Company, Zindel Zelmanovitch considered a variety of options for the

Company, including bankruptcy and liquidation, neither of which would have yielded any economic benefit for the Company’s

shareholders.

Thus, Zindel Zelmanovitch negotiated with Roran to provide a loan or loans to fund reasonable expenses of the

Company, on arm’s length terms, so long as progress was being made to reorganize the Company and to identify

either (i) a new business to enter into;

or, (ii) an active business with which to merge or otherwise acquire, which would benefit

from operating as a public entity.

The New Board (Zindel Zelmanovitch) has continued to work toward achieving that goal.

no assets and no SBIC license from the SBA, no income, and liabilities in excess of $10,000,000 (which has now been forgiven in

full as stated below), the New Board (Zindel Zelmanovitch) concluded that continuing to operate as a registered investment

company was impossible;

furthermore, the consistent feedback from third parties with which the New Board has sought to consummate

a transaction to commence a new business or acquire or merge a new business into the Company, has been that until the

Company’s Application Pursuant to Section 8(f) of the Investment Company Act of 1940 for an order declaring that the Company

has ceased to be an Investment Company is approved, no such transaction is feasible.

Unresolved Staff Comments.

the entry of the Final Order (June 28, 2017) and the termination of the Receivership, the Company has been maintained for

the benefit of its shareholders and pursuant to, and in compliance with, the Final Order.

The Company has no assets, and

the Company no longer has the SBIC license from the SBA.

The Company is no longer operating as a registered investment

company under the Investment Company Act.

While it would have been possible for the Company to merely dissolve, the

Company has instead decided to endeavor to reconstitute itself as a viable business.

The Company has engaged, and intends

to continue to engage, qualified professionals and personnel in order to bring the Company current in its SEC filings and

The Company has filed all delinquent SEC filings as a registered investment company.

The Company believes

that as of June 28, 2017 it ceased to be a registered investment company under the Investment Company Act so it did not file as

a registered investment company for the period ended June 30, 2017.

Instead, the Company filed Form 10-K for that period,

and has subsequently timely filed all periodic reports on Forms 10-Q and Form 10-K.

Company’s outstanding judgment payable owed to the SBA was purchased by Roran from

the SBA in July 2017.

As such, all amounts due under the outstanding judgment payable

were owed to Roran rather than the SBA.

Upon purchase, the Company began to accrue interest

that was due under the original terms of the judgment payable.

The statutory interest

rate is 0.094%.

The Company has accrued $163,991 in interest on the judgment payable

as of March 31, 2019.

On May 16, 2019, Roran forgave the entire principal amount and

interest due thereon of $10,609,635.

September 19, 2017, the Company entered into a Convertible Loan Agreement with Roran (the “Loan Agreement”).

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 of

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.

As a result of the advances made pursuant to the Loan Agreement, the Company has incurred total obligations of

$154,338 as of March 31, 2019.

The Company has extended the maturity date of the note September 19, 2019 and the maximum principal

amount of the note to $200,000.

The use of proceeds of this loan has been and continues to be the payment by the Company of its

reasonable operational expenses payable to third party service providers (consisting solely of third party expenses such as legal,

accounting, transfer agent and edgarization costs, all at the actual cost for such services), and the loan is not a senior

or a secured instrument.

Company is currently authorized to issue twenty five thousand

(25,000) shares of preferred stock, with a par value of $1.00 per share.

There are zero (0) shares of preferred stock issued.

The Company is also authorized to issue ten million (10,000,000) shares of common stock, with a par value of $1.00 per

As of October 29, 2018 and currently, 1,915,548 shares of common stock of the Company were outstanding.

are quoted over the counter with Pink OTC Markets Inc.

under the ticker symbol “WSCC”

and are held by 320 shareholders

of record, as of October 29, 2018 and currently.

The Company does not have any other equity securities outstanding.

Business Strategy and Operations

9 unchanged sentences

The Company has satisfied its filing obligations under the Securities

Exchange Act of 1934, as amended (the “Exchange Act”) for the last fiscal year, and is a mandatory filer under

the Exchange Act.

Exchange Act of 1934, as amended (the “Exchange Act”) for the last fiscal year, and is a mandatory filer under the

Exchange Act.

It will continue to list its common stock on the Pink OTC Markets for the benefit of its shareholders.

result of these efforts, the Company is and holds itself out as being engaged primarily in the business of seeking either (i)

a new business to enter into;

of these efforts, the Company is and holds itself out as being engaged primarily in the business of seeking either (i) a new business

to enter into;

or, (ii) merger or acquisition candidates which would benefit from being public.

152 unchanged sentences

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 1. Business