Media Coverage

SBIC gets extension for financials
Waterside’s CFO retires and replacement settles in

By Michael Schwartz, Inside Business - Hampton Roads, September 10, 2007

As usual, there’s never a dull moment at Waterside Capital Corp.

“There’s always something going on here,” said Lin Earley, Waterside’s CEO.

The latest is the retirement of Gerald McDonald, its CFO, and the quick transition of his replacement, Julie Stroh.

That transition prompted the Norfolk-based publicly traded small business investment company to ask the Securities and Exchange Commission for more time to file its year-end financial statement.

Stroh is officially Waterside’s acting CFO; however Earley said there will be some overlap between Stroh and McDonald while Stroh settles in.

McDonald will work for Waterside on a part-time advisory basis, Earley said.

The year-end figures will also be delayed as the company is “currently awaiting an updated appraisal of one of its portfolio companies,” its SEC filing stated.

Valuation was in question in a lawsuit Waterside recently ended against New Dominion Pictures, a Suffolk-based television production company in which Waterside has invested approximately $3 million.

But Earley said other valuations were part of the reason.

“We were waiting on a couple of valuation decisions,” he said.

The valuations of its investment companies have proven to be complicated as both sides must agree on a dollar amount.

“The year-end values are particularly important,” Earley said.

As an investment company, Waterside is not required to file quarterly 10-Qs and annual 10-Ks. Waterside instead twice a year files form N-SAR, the semi-annual report for registered investment companies. The form 12B-25 is filed when a company cannot file certain documents without unreasonable effort or expense and thus relief is granted.

McDonald’s decision to retire may have been a bit sudden. When asked if it came as a surprise, Earley said the word surprise is a bit of an overstatement. McDonald has been Waterside’s CFO since 1998.

It’s also proxy and annual meeting season for Waterside. Earley said the timing of McDonald’s decision, having to bring a new CFO into the mix during this time of year, makes things difficult.

“It’s a busy time of year,” Earley said, “perhaps not the best timing in the world.”

The year-end figures were also made more complicated by some recent material events.

“We had several transactions right at the year-end time frame,” Earley said. “Getting those washed through the system takes a bit longer.”

Those transactions included exiting its investment in a New Jersey-based call center company and increasing its investment in an Indiana-based fireproofing and security company.

Stroh, who started at Waterside at the beginning of August, previously worked at the Small Business Administration. Waterside is an SBA-licensed SBIC, Earley said, so Stroh has that part covered.

“What we’ve got to do is get her up to speed on the SEC side,” Earley said.

Earley said Waterside’s annual figures should be filed Thursday.

The company’s proxy and annual report to shareholders, along with its annual shareholders meeting, will be moved back. The meeting, which had been tentatively set Oct. 22, will be held at a later date, Earley said.

He didn’t specify why the meeting is being pushed back.

“There are some things strategically that I want to do to prepare for the meeting,” Earley said.

As required, the proxy will be filed with regulators and sent to shareholders a certain number of days before the annual meeting.

Waterside’s shares closed at $4.62 at press time. IB