Media Coverage

Waterside Capital | Annual Report
Company's profitability hinges on adding capital

By Tom Shean, The Virginian-Pilot - 10/28/2008

NORFOLK
Waterside Capital Corp. has slashed expenses and stepped up its pursuit of new deals but still needs additional capital to become profitable, the company said in its annual report for the fiscal year ended

June 30.

Waterside, which specializes in investing in small businesses, wants to raise at least $5 million of fresh capital this fiscal year, Franklin "Lin" Earley, its chief executive officer, said in the report. The Norfolk-based company "cannot grow and reach acceptable operating levels without new capital," he said in a letter to shareholders.

Earley, who joined Waterside two years ago after a 36-year career with Bank of America, expressed confidence in the company's future but acknowledged that raising new capital will dilute the equity of existing shareholders.

Waterside's shares have been trading at a fraction of their $3.84 net asset value as of June 30. On Monday, they fell to 38 cents before closing at 45 cents, off 9 cents for the day.

As part of a turnaround effort that Earley launched after becoming CEO in April 2007, Waterside cut litigation expenses and reduced its interest expense.

However, the hoped-for recovery was hindered during the past fiscal year by a $2.9 million write-down on an investment that soured, Earley said.

For the fiscal year ended June 30, Waterside reported an operating loss of $309,232. That was down from an operating loss of $1.35 million in fiscal 2007.

Waterside shareholders saw their equity whittled away in recent years by heavy litigation expenses and losses on several investments made during the past decade. At the end of June, its shareholders' equity totaled $7.35 million, down 22 percent from a year earlier and off 53 percent from June 30, 2005.

Tom Shean, (757) 446-2379, tom.shean@pilotonline.com