As previously disclosed, Waterside Capital Corporation (the "Company") is party to a Loan Agreement (the "Loan Agreement") with the United States Small Business Administration (the "SBA"). Under the terms of the Loan Agreement, the Company's then existing debentures were repurchased effective September 1, 2010 by the SBA and a new debt instrument was put into place. The Company's debt to the SBA matured March 31, 2013.
Also as previously disclosed, on 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 Loan Agreement (the "Notice"). Under the terms of the Notice and the Loan Agreement the SBA has maintained a continuing right to terminate the Loan Agreement and appoint a receiver to manage the Company's assets.
On November 28, 2013, the Company learned that on 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 Loan 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 Loan Agreement, including interest, which continues 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.
The Company does not intend to contest this action and anticipates that the court will appoint the SBA as a receiver of the Company and, at such time, the officers and directors of the Company will be dismissed.
Now they are contesting it. Might as well spend whats left of shareholder monies.
In the Form 8-K, the Company stated that it did not intend to contest the actions of the SBA. The Board of Directors of the Company has now further studied the Complaint. Moreover, as a result of discussions with the SBA, a review of the Company's actions since 2010, and additional substantive discussions with its advisors, the Company has re-evaluated its initial position. As a result, the Company will take steps to contest the Complaint. There can be no assurance that the Company will be successful in contesting the Complaint or otherwise impacting the timing, circumstances or consequences of the SBA's request that it be named permanent receiver of the Company for the purpose of liquidating all of the Company's assets and satisfying the claims of its creditors.