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Item 8. Financial Statements and Supplementary Data

2020-09-25 compared with 2019-09-30 · 108 added, 109 removed, 311 unchanged (41% of the section changed)

2 unchanged sentences

Report of Independent Registered Public Accounting Firm

Sheets as of June 30, 2019 and 2018

of Operations for the years ended June 30, 2019 and 2018

of Stockholders’

Balance Sheets as of June 30, 2020 and 2019

Statements of Income (Loss) for the years ended June 30, 2020 and 2019

Statements of Stockholders’

Deficit for the years ended June 30, 2020 and 2019

of Cash Flows for the years ended June 30, 2019 and 2018

Statements of Cash Flows for the years ended June 30, 2020 and 2019

Notes to the Financial Statements

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have audited the accompanying balance sheets of Waterside Capital Corporation (the “Company”) as of June 30, 2020,

and 2018 and the related statements of operations, stockholders’

equity (deficit), and cash flows for each of the two years

in the period ended June 30, 2019, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of

June 30, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended June

and 2019 and the related statements of income (loss), stockholders’

deficit, and cash flows for each of the two years in

the period ended June 30, 2020, and the related notes (collectively referred to as the “financial statements”).

our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June

30, 2020, and 2019, and the results of its operations and its cash flows for each of the two years in the period ended June 30,

2020, 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.

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

As discussed in Note

1 to the financial statements, the Company has experienced liquidity issues and does not have working capital.

The Company’s

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.

Further information and management’s plans in regard

to this uncertainty are also described in Note 1.

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.

Further information and 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

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Accrued Interest Payable

Judgment Payable

Total Current Liabilities

Total Liabilities

Common Stock, $1.00 par value, 10,000,000 authorized,

1,915,548 shares issued and outstanding

Stockholders Deficit

Common Stock, $1.00 par value, 10,000,000 shares authorized, 6,082,214 and

1,915,548 shares issued and outstanding, as of June 30, 2020 and June 30, 2019, respectively

Additional Paid-In Capital

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(17,685,223 )

(10,655,587 )

TOTAL LIABILITIES & EQUITY

Total Stockholders Deficit

TOTAL LIABILITIES & STOCKHOLDERS DEFICIT

accompanying Notes are an integral part of these Financial Statements.

1 unchanged sentence

CAPITAL CORPORATION

of Operations

of Income (Loss)

the Years Ended June 30, 2020 and 2019

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Total Expense

Net Loss from Operations

Gain on Extinguishment of Debt

Net Income (Loss)

Net Loss (Income)

Weighted Average Number of Common Shares Outstanding- Basic and Diluted

Net Income (Loss) Per Share- Basic and Diluted

Net Loss (Income) Per Share- Basic and Diluted

accompanying Notes are an integral part of these Financial Statements.

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Beneficial conversion feature

Net loss for the period

Net income for the year

Balance at June 30, 2019

(17,685,223 )

(10,655,587 )

Beneficial conversion feature

Net Income for the period

Conversion of note payable and accrued interest

Net loss for the year

Balance at June 30, 2020

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Cash Flow from Operating Activities

Net income (loss)

Adjustments to reconcile Net income (loss) to net

cash used in operations:

Amortization of interest

Net loss (income)

Adjustments to reconcile net loss (income) to net cash used:

Amortization of debt discount

Gain on extinguishment of debt

6 unchanged sentences

Proceeds from convertible note payable

Net cash provided by financing

Net cash increase for period

Cash at beginning of period

Net cash provided by financing activities

Net cash increase for year

Cash at beginning of year

Cash at end of period

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Intrinsic value of embedded beneficial conversion feature on convertible note payable

Conversion of note payable and accrued interest to common stock

accompanying Notes are an integral part of these Financial Statements.

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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 “

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

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.

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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.

spent and has continued to spend its funds to maintain the viability of the Company.

Company has no operating 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.

Company has filed with the SEC an Application pursuant to Section 8(f) of the Investment Company Act of 1940 for an order declaring

that the Company has ceased to be a registered investment company.

In response to that filing, the SEC issued to the Company comments

in a letter dated May 16, 2018.

The Company responded to those comments with the filing of an Amended Application on June 4, 2018

and most recently on August 26, 2019.

As of the date of this Annual Statement, the Company was still working through comments

from the SEC in regard to the Amended Application.

On April 22, 2020,

the SEC issued an order declaring that the Company has ceased to be an investment company.

As a result the Company is now a reporting

company under the Securities Exchange Act of 1934, as amended.

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

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Roran, which is a related

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

cash requirements.

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

For further discussion of the advances made by Roran, see Notes 3 and 4.

3 unchanged sentences

as a going concern.

Our independent registered public accounting firm, in its report on our 2019 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, 2019 do not contain any adjustments for this uncertainty.

Our independent registered public accounting firm, in its report on our 2020 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, 2020, do not contain any adjustments for this uncertainty.

SIGNIFICANT ACCOUNTING POLICIES

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(“BCF”), which arises when a debt or equity security is issued with an embedded conversion option that is not bifurcated

and is beneficial to the investor or in the money at inception because the conversion option has an effective strike price

that is less than the market price of the underlying stock at the commitment date.

The Company recognized the BCF by allocating

the intrinsic value of the conversion option, which is the number of shares of common stock available upon conversion multiplied

by the difference between the effective conversion price per share and the fair value of common stock per share on the commitment

and is beneficial to the investor or in the money at inception because the conversion option has an effective strike price that

is less than the market price of the underlying stock at the commitment date.

The Company recognized the BCF by allocating the

intrinsic value of the conversion option, which is the number of shares of common stock available upon conversion multiplied by

the difference between the effective conversion price per share and the fair value of common stock per share on the commitment

date, resulting in a discount on the convertible debt (recorded as a component of additional paid in capital).

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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.

The disclosures shall include:

(a) the nature of the relationship(s)

(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;

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

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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 income (loss) per share is computed by dividing the net income (loss)

available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the

The calculation of diluted net income (loss) per share gives effect to common stock equivalents;

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

Basic net income (loss) per share

is computed by dividing the net income (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 income (loss) per share gives effect to common

stock equivalents;

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

Issued Accounting Pronouncements

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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.

due to 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 was 0.094%.

Company satisfied the judgment in full as Roran agreed to forgive the judgment and as of June 30, 2019, recognized

a gain on extinguishment of debt of $10,584,254 which is fully offset by NOLs for income tax purposes.

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.

On June 17, 2019, the Company amended its Loan Agreement and Promissory Note with Roran Capital as follows:

the total amount to be loaned was increased to $200,000, and (ii) the maturity date was extended to September 19, 2019, and a

further extension is being negotiated.

a result of the advances made pursuant to the Loan Agreement, the Company has incurred total obligations of $169,338 as

of June 30, 2019.

The Company recorded a BCF due the conversion option of $106,800 and the unamortized balance at June

30, 2019 is $7,500.

The amount is netted against the note payable balance as a debt discount with the corresponding entry

to additional paid-in capital.

The Company satisfied the

judgment in full as Roran agreed to forgive the judgment and as of June 30, 2019, recognized a gain on extinguishment of debt

of $10,584,254, which is fully offset by NOLs for income tax purposes.

September 19, 2017, the Company issued a Convertible Promissory Note in an amount up to $150,000 in favor of Roran which was increased

to $200,000 on June 17, 2019 and $250,000 on December 13, 2019 (the “

Note ”).

The Note was issued pursuant to

a Convertible Loan Agreement with Roran (the “

Loan Agreement ”).

All outstanding principal and accrued interest

on the Note is due and payable on the maturity date, which was March 19, 2019 and then extended to September 19, 2019 and then

June 19, 2020 and a further extension is being negotiated.

Amounts borrowed under the Note bear interest at 12% per annum.

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 $104,838 as of June 30, 2020 (exclusive of accrued interest).

During the year ended June 30, 2020, the total advances

were $60,000.

The Company recorded a BCF due the conversion option of $40,000, and the unamortized balance at June 30, 2020 is

The amount is netted against the note payable balance as a debt discount with the corresponding entry to additional paid-in

The debt discount has been amortized as interest expense through the maturity date.

4 - RELATED PARTY TRANSACTIONS

following individuals and entities have been identified as related parties based on their family affiliation with our CEO

and Chairman of the Board:

following individuals and entities have been identified as related parties based on their family affiliation with our CEO and

Chairman of the Board:

following amounts were owed to related parties, affiliated with the CEO and Chairman of the Board, at the dates indicated:

Interest on Convertible Note

June 30, 2020

Convertible Note Payable

Interest on Convertible Note Payable

June 8, 2020, Roran Capital converted $124,500 principal amount of its promissory note with Waterside Capital Corporation

(the “Company”) and $25,500 of accrued and unpaid interest thereon, totaling $150,000, into 4,166,666 shares of

Company Common Stock at the stated conversion price per share of $0.036.

The remaining balance due on the promissory note,

as of the conversion date, was $104,838 in principal and $19,988 in interest, and the Company has not yet amended its

Loan Agreement and Promissory Note with Roran Capital to extend the maturity date, which expired on June 19, 2020.

5 - SUBSEQUENT EVENTS

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were no disagreements with our accountants on accounting or financial disclosure matters during 2020 and 2019, respectively.

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

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

investment company.

2 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 8. Financial Statements and Supplementary Data